<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1997
REGISTRATION NO. 333-23591
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MONACO COACH CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3711 35-1880244
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
91320 INDUSTRIAL WAY
COBURG, OREGON 97408
(541) 686-8011
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
KAY L. TOOLSON
CHIEF EXECUTIVE OFFICER AND CHAIRMAN
MONACO COACH CORPORATION
91320 INDUSTRIAL WAY
COBURG, OREGON 97408
(541) 686-8011
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
Henry P. Massey, Jr., Esq. Geoffrey P. Leonard, Esq.
Steven L. Berson, Esq. Scott D. Elliott, Esq.
Gregory T. Cox, Esq. Jeffrey R. Brown, Esq.
Bradley A. Bugdanowitz, Esq. Orrick, Herrington & Sutcliffe LLP
Wilson Sonsini Goodrich & Rosati Old Federal Reserve Bank Bldg.
Professional Corporation 400 Sansome Street
650 Page Mill Road San Francisco, CA 94111
Palo Alto, CA 94304 (415) 392-1122
(415) 493-9300
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING
OF SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2)
<S> <C> <C> <C>
Common Stock, $.01 par value......................... 2,415,000 shares $20.375 $49,205,625.00
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, $.01 par value......................... $14,910.80(3)
</TABLE>
(1) Includes 255,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee.
(3) Previously paid on March 19, 1997.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 22, 1997
PROSPECTUS
1,700,000 SHARES
[LOGO]
COMMON STOCK
---------
Of the 1,700,000 shares of Common Stock, par value $.01 per share, offered
hereby (the "Offering"), 800,000 shares are being sold by Monaco Coach
Corporation (the "Company") and 900,000 shares are being sold by certain
stockholders (the "Selling Stockholders"). See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
the Common Stock by the Selling Stockholders.
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "MCCO." The last reported sale price of the Company's Common Stock on the
Nasdaq National Market on May 21, 1997 was $21.25 per share. See "Price Range of
Common Stock."
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND PROCEEDS TO TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share $ $ $ $
Total(3) $ $ $ $
</TABLE>
(1) For information concerning indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses estimated at $475,000 payable by the Company.
(3) Certain of the Selling Stockholders have granted the Underwriters a
30-day option to purchase up to 255,000 additional shares of Common Stock
to cover over-allotments, if any. See "Underwriting." If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Selling Stockholders will be $ ,
$ and $ , respectively.
--------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock will be available for delivery on or about , 1997, at
the office of Smith Barney Inc., 333 West 34th Street, New York, New York 10001.
--------------
SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
A.G. EDWARDS & SONS, INC.
, 1997
<PAGE>
[PHOTO OF MONACO MOTOR COACH WITH MONACO COACH CORPORATION LOGO OVERLAY]
"Aluma-Lite," "Dynasty," "Endeavor," "The Executive," "Holiday Rambler,"
"Vacationer" and "Windsor" are among the registered trademarks of the Company.
This Prospectus also includes other trade names and trademarks of the Company as
well as other companies.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."
2
<PAGE>
[ARTWORK A]
Monaco Coach Corporation is a leading manufacturer of premium Class A
motor coaches, fifth wheel trailers and travel trailers sold under the well
known ""Monaco'' and ""Holiday Rambler'' brand names.
[Five photos consisting of; (i) Holiday Rambler Alumascape Travel
Trailer, (ii) Company employee using computer aided design program, (iii)
Company employee installing electrical wiring, (iv) inside of manufacturing
facility and (v) Monaco Signature Series Motor Coach. Also A drawing of the
Monaco Roadmaster chassis.]
<PAGE>
[ARTWORK B]
The Company fosters brand loyalty through its innovative designs,
emphasis on quality and responsive and professional customer service
[Five photos consisting of; (i) Holiday Rambler Imperial Motor Coach,
(ii) inside of Monaco Signature Series motor coach, (iii) Holiday Rambler
Imperial Fifth Wheel Trailer, (iv) man and woman at barbeque in front of motor
coaches, (v) man with dog in chair in front of motor coaches.]
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS SET FORTH IN THE FINANCIAL STATEMENTS
AND NOTES THERETO APPEARING ELSEWHERE HEREIN, INFORMATION IN THIS PROSPECTUS
ASSUMES: (I) THE CONVERSION OF THE 65,217 SHARES OF REDEEMABLE SERIES A
CONVERTIBLE PREFERRED STOCK (THE "REDEEMABLE PREFERRED STOCK") ACQUIRED BY HR,
LLC, A COMPANY OWNED BY HARLEY-DAVIDSON, INC. ("HARLEY-DAVIDSON"), IN CONNECTION
WITH THE HOLIDAY ACQUISITION (AS HEREINAFTER DEFINED) INTO 230,767 SHARES OF
COMMON STOCK AND THE SALE OF SUCH 230,767 SHARES OF COMMON STOCK IN THE
OFFERING; AND (II) NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THE
COMPANY'S FISCAL YEAR CONSISTS OF THREE 13-WEEK QUARTERS AND A FOURTH QUARTER
ENDING ON THE SATURDAY CLOSEST TO THE END OF THE CALENDAR YEAR. REFERENCES TO
1994, 1995 AND 1996 REFER TO THE FISCAL YEARS ENDED DECEMBER 31, 1994, DECEMBER
30, 1995 AND DECEMBER 28, 1996, RESPECTIVELY.
THE COMPANY
The Company is a leading manufacturer of premium Class A motor coaches and
towable recreational vehicles. The Company's product line consists of ten models
of motor coaches and five models of fifth wheel trailers and travel trailers
(collectively, "towables") under the well known "Monaco" and "Holiday Rambler"
brand names. The Company's products, which are typically priced at the high end
of their respective product categories, range in suggested retail price from
$60,000 to $750,000 for motor coaches and from $15,000 to $70,000 for towables.
The Company has achieved significant market positions in the high end price
range of the market segments in which it competes. Based upon retail
registrations in 1996, the Company believes it had a 25% share of the market for
High-Line Class A motor coaches (units with retail prices above $120,000), an
11% share of the market for high end fifth wheel trailers (units with retail
prices above $24,000) and a 48% share of the market for high end travel trailers
(units with retail prices above $20,000). The Company's products are sold
through an extensive network of 168 dealerships located primarily in the United
States and Canada.
Prior to March 1996, the Company's product line consisted exclusively of
High-Line Class A motor coaches. In March 1996, the Company acquired Holiday
Rambler, a manufacturer of a full line of Class A motor coaches and towables.
The Holiday Acquisition: (i) more than doubled the Company's net sales; (ii)
provided the Company with a significantly broader range of products, including
complementary High-Line Class A motor coaches and the Company's first product
offerings of fifth wheel trailers, travel trailers and entry-level to mid-range
motor coaches; and (iii) lowered the price threshold for first-time buyers of
the Company's products, thus making them more affordable for a significantly
larger base of potential customers. The Company believes that developing
relationships with a broader base of first-time buyers, coupled with the
Company's strong emphasis on quality, customer service and design innovation,
will foster brand loyalty and increase the likelihood that, over time, more
customers will trade-up through the Company's line of products. Attracting
larger numbers of first-time buyers is important to the Company because of the
Company's belief that many recreational vehicle customers purchase multiple
recreational vehicles during their lifetime.
The Company's strategy is to increase sales and earnings by attracting new
customers in both the Class A motor coach and towables market segments and
providing these customers with additional products to choose from when they
trade-up to a higher priced product category. Principal elements of this
strategy include: (i) continuing to offer high quality, premium products in both
the Class A motor coach and towables market segments; (ii) introducing new Class
A motor coach and towable products to broaden the price range of the Company's
products within each market segment; (iii) expanding production capacity while
maximizing manufacturing efficiencies in an effort to better meet market demand
as well as lower costs and improve operating margins; (iv) maintaining and
expanding the Company's dealer network, primarily by adding more towables
dealers with greater geographic coverage; (v) emphasizing new product design and
innovation; and (vi) promoting customer satisfaction and brand loyalty.
3
<PAGE>
The recreational vehicle industry is currently experiencing favorable
demographic trends. Recreational vehicles are purchased by adults in all age
ranges, with the highest market penetration in the 45 to 74 age group. According
to the Census Bureau of the U.S. Department of Commerce, the number of adults
between the ages of 45 and 74 is projected to increase by approximately 41% from
1995 through the year 2010, compared with a projected increase of approximately
13% for the overall population, thereby representing an expanded potential
consumer market for recreational vehicle sales. In 1996, according to the
Recreation Vehicle Industry Association (the "RVIA"), recreational vehicle
manufacturers shipped units (excluding conversion vehicles) with an aggregate
retail value of approximately $6.3 billion.
The principal office of the Company is located at 91320 Industrial Way,
Coburg, Oregon 97408, and its telephone number is (541) 686-8011. The Company
has manufacturing facilities in Coburg, Oregon, Elkhart, Indiana and Wakarusa,
Indiana. The Company maintains websites for both the "Monaco" and "Holiday
Rambler" brand names on the World Wide Web. Information contained in the
Company's websites will not be deemed to be a part of this Prospectus.
Unless the context otherwise requires, (i) the term "Holiday Acquisition"
when used in this Prospectus means the Company's acquisition on March 4, 1996 of
Harley-Davidson's Holiday Rambler LLC Recreational Vehicle Manufacturing
Division ("Holiday Rambler") and ten retail dealerships (the "Holiday World
Dealerships") owned by an affiliate of Harley-Davidson; (ii) the term "Company"
when used in this Prospectus refers to Monaco Coach Corporation, its Predecessor
(as hereinafter defined) and, after March 4, 1996, the combined operations of
the Company, Holiday Rambler and the Holiday World Dealerships; and (iii) the
term "Monaco" refers to the Company's Monaco Division.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company............. 800,000 shares
Common Stock Offered by the Selling 900,000 shares
Stockholders..................................
Total Common Stock Offered...................... 1,700,000 shares
Common Stock to be Outstanding after the 5,473,279 shares(1)
Offering......................................
Use of Proceeds................................. For repayment of debt, working capital,
general corporate purposes, and potential
acquisitions
Nasdaq National Market Symbol................... MCCO
</TABLE>
- ------------------------
(1) Excludes: (i) 525,000 shares reserved for issuance under the Company's 1993
Incentive Stock Option Plan (the "Option Plan"), under which options to
purchase 225,260 shares were outstanding as of the date of this Prospectus;
and (ii) 40,000 shares reserved for issuance under the Company's 1993
Director Option Plan (the "Director Plan"), under which options to purchase
12,800 shares were outstanding as of the date of this Prospectus. See
"Capitalization."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND CONSOLIDATED OPERATING DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ---------------------------
---------------------------------------- MARCH 30, MARCH 29,
1994 1995 1996(1) 1996(1) 1997(1)
------------ ------------ ------------ ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Net sales............................................. $ 107,300 $ 141,611 $ 365,638 $ 61,164 $ 109,023
Gross profit.......................................... 17,406 17,019 47,729(2) 6,727(2) 15,042
Operating income...................................... 9,633 8,355 13,741 1,930 5,389
Interest expense...................................... 69 298 3,914 863 821
Net income............................................ 5,941 4,898 5,909 634 2,695
Earnings per common share............................. $ 1.33 $ 1.09 $ 1.26(3) $ .14(3) $ .57
Weighted average common shares outstanding............ 4,473 4,475 4,678 4,540 4,747
CONSOLIDATED OPERATING DATA:
Units sold (4):
Motor coaches....................................... 717 982 2,733 441 809
Towables............................................ -- -- 1,977 200 682
Dealerships at end of period.......................... 48 49 159 164 168
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 29, 1997
-------------------------
ACTUAL AS ADJUSTED(5)
--------- --------------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital....................................................................... $ 1,806 $ 17,354
Total assets.......................................................................... 149,189 153,465
Long-term borrowings, less current portion............................................ 15,875 15,875
Redeemable Preferred Stock............................................................ 2,735 --
Total stockholders' equity............................................................ 46,528 64,811
</TABLE>
- ------------------------------
(1) Includes the operations of Holiday Rambler and the Holiday World Dealerships
from March 4, 1996. The Holiday World Dealerships generated net sales of
$25.0 million in fiscal 1996 and $5.3 million and $3.5 million in the three
months ended March 30, 1996 and March 29, 1997, respectively. These amounts
represent the sale of 820 units during fiscal 1996 and 193 units and 98
units in the three months ended March 30, 1996 and March 29, 1997,
respectively, that were either previously owned or not Holiday Rambler
units, as well as service revenues. The Company sold seven Holiday World
Dealerships in fiscal 1996, one in the first three months of 1997, and
intends to sell the two remaining dealerships.
(2) Includes a $645,000 increase in the three months ended March 30, 1996 and a
$1.7 million increase in fiscal 1996 to cost of sales resulting from the
sale of inventory that was written up to fair value at the date of the
Holiday Acquisition.
(3) Earnings per common share for fiscal 1996 and for the three months ended
March 29, 1997 are fully diluted earnings per share. Includes a one-time
charge of $.08 per share for the three months ended March 30, 1996 and $0.22
per share for fiscal 1996, net of tax effect, related to the inventory
write-up described in Note 2 above. Excluding this charge, fully diluted
earnings per common share in the three months ended March 30, 1996 and in
fiscal 1996 would have been $.22 and $1.48 per share, respectively.
(4) Excludes units sold by the Holiday World Dealerships that were either
previously owned or not Holiday Rambler units.
(5) Adjusted for the sale by the Company of 800,000 shares of Common Stock
offered hereby at an assumed public offering price of $21.25 per share, the
application of the estimated net proceeds therefrom as described under "Use
of Proceeds" and the conversion of the 65,217 shares of Redeemable Preferred
Stock into 230,767 shares of Common Stock.
5
<PAGE>
RISK FACTORS
THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN,
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), INCLUDING STATEMENTS
THAT INCLUDE THE WORDS "BELIEVES," "EXPECTS" OR "ANTICIPATES" OR SIMILAR
EXPRESSIONS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED
BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE RISK
FACTORS DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS AND IN DOCUMENTS WHICH
ARE INCORPORATED BY REFERENCE HEREIN. IN ANALYZING AN INVESTMENT IN THE
SECURITIES OFFERED HEREBY, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER,
TOGETHER WITH THE OTHER MATTERS REFERRED TO HEREIN, THE RISK FACTORS DESCRIBED
BELOW. THE COMPANY CAUTIONS THE READER, HOWEVER, THAT THIS LIST OF RISK FACTORS
MAY NOT BE EXHAUSTIVE.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company's net sales, gross margin and operating results may fluctuate
significantly from period to period due to factors such as the mix of products
sold, the ability to utilize and expand manufacturing resources efficiently, the
introduction and consumer acceptance of new models offered by the Company,
competition, the addition or loss of dealers, the timing of trade shows and
rallies, and factors affecting the recreational vehicle industry as a whole. In
addition, the Company's overall gross margin on its products may decline in
future periods to the extent the Company increases its sales of lower gross
margin towable products or if the mix of motor coaches shifts to lower gross
margin units. Due to the relatively high selling prices of the Company's
products (in particular, its High-Line Class A motor coaches), a relatively
small variation in the number of recreational vehicles sold in any quarter can
have a significant effect on sales and operating results for that quarter.
Demand in the overall recreational vehicle industry generally declines during
the winter months, while sales and revenues are generally higher during the
spring and summer months. With the broader range of recreational vehicles now
offered by the Company as a result of the Holiday Acquisition, seasonal factors
could have a significant impact on the Company's operating results in the
future. In addition, unusually severe weather conditions in certain markets
could delay the timing of shipments from one quarter to another.
CYCLICALITY
The recreational vehicle industry has been characterized by cycles of growth
and contraction in consumer demand, reflecting prevailing economic, demographic
and political conditions that affect disposable income for leisure-time
activities. Unit sales of recreational vehicles (excluding conversion vehicles)
reached a peak of approximately 259,000 units in 1994 and declined to
approximately 247,000 units in 1996. Although unit sales of High-Line Class A
motor coaches have increased in each year since 1989, there can be no assurance
that this trend will continue. Furthermore, as a result of the Holiday
Acquisition, the Company offers a much broader range of recreational vehicle
products and will likely be more susceptible to recreational vehicle industry
cyclicality than in the past. Factors affecting cyclicality in the recreational
vehicle industry include fuel availability and fuel prices, prevailing interest
rates, the level of discretionary spending, the availability of credit and
overall consumer confidence. In particular, interest rates rose significantly in
1994 and while recent interest rates have not had a material adverse effect on
the Company's business, no assurances can be given that an increase in interest
rates would not have a material adverse effect on the Company's business,
results of operations and financial condition.
MANAGEMENT OF GROWTH
As a result of the Holiday Acquisition, the Company has experienced
significant growth in the number of its employees, in the size of its
manufacturing operations and in the scope of its business. This growth has
resulted in the addition of new management personnel, increased responsibilities
for existing management personnel, and has placed added pressure on the
Company's operating, financial and management
6
<PAGE>
information systems. While management believes it has substantially completed
the integration of Holiday Rambler's operations and personnel into the Company,
due to the large size of the Holiday Acquisition relative to the Company, there
can be no assurance that the Company will not encounter problems in the future
associated with the integration of the acquisition or that the anticipated
benefits of the Holiday Acquisition will be fully realized. In addition, there
can be no assurance that the Company will adequately support and manage the
growth of its business and the failure to do so could have a material adverse
effect on the Company's business, results of operations and financial condition.
MANUFACTURING EXPANSION
The Company significantly increased its manufacturing capacity in 1995 by
expanding its Elkhart, Indiana facility and opening its Coburg, Oregon facility.
In order to meet market demand and realize manufacturing efficiencies, the
Company is just completing construction of a new motor coach manufacturing
facility in Wakarusa, Indiana, and is in the process of relocating its Elkhart,
Indiana motor coach production to the new Wakarusa facility, and has just opened
a Springfield, Oregon facility to manufacture towables. The integration of the
Company's facilities and the expansion of the Company's manufacturing operations
involve a number of risks including unexpected production difficulties. In 1995,
the Company experienced start-up inefficiencies in manufacturing the Windsor
model, and, beginning in 1996 and continuing in the first quarter of 1997, the
Company has experienced difficulty in increasing production rates of motor
coaches at its Coburg facility. There can be no assurance that the Company will
successfully integrate its manufacturing facilities or that it will achieve the
anticipated benefits and efficiencies from its expanded manufacturing
operations. In addition, the Company's operating results could be materially and
adversely affected if sales of the Company's products do not increase at a rate
sufficient to offset the Company's increased expense levels resulting from this
expansion.
The set-up of the new facilities involves risks and costs associated with
the development and acquisition of new production lines, molds and other
machinery, the training of employees, and compliance with environmental, health
and safety and other regulatory requirements. The inability of the Company to
commence full-scale commercial production at its Wakarusa and Springfield
facilities in a timely manner could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
at such time as the Company commences production at these new facilities, it may
from time to time experience lower than anticipated yields or production
constraints that may adversely affect its ability to satisfy customer orders.
Any prolonged inability to satisfy customer demand could have a material adverse
effect on the Company's business, results of operations and financial condition.
CONCENTRATION OF SALES TO CERTAIN DEALERS
Although the Company's products were offered by 168 dealerships located
primarily in the United States and Canada at March 29, 1997, a significant
percentage of the Company's sales have been and will continue to be concentrated
among a relatively small number of independent dealers. Although no single
dealer accounted for as much as 10.0% of the Company's net sales in 1996, the
top three dealers accounted for approximately 22.5% of the Company's net sales
in that period. The loss of a significant dealer or a substantial decrease in
sales by such a dealer could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Business--Sales
and Marketing."
POTENTIAL LIABILITY UNDER REPURCHASE AGREEMENTS
As is common in the recreational vehicle industry, the Company enters into
repurchase agreements with the financing institutions used by its dealers to
finance their purchases. These agreements obligate the Company to repurchase a
dealer's inventory under certain circumstances in the event of a default by the
dealer to its lender. In 1993, the Company's then third largest dealer went into
default with its lenders, and the Company was required to repurchase 16 motor
coaches. Although the Company was able to resell these motor coaches within
three months, the Company incurred expenses of approximately $291,000 in
7
<PAGE>
connection with this dealer's default. Additionally, the need to resell these
motor coaches and the loss of that dealer temporarily limited the Company's
sales of new motor coaches. If the Company were obligated to repurchase a
significant number of its products in the future, it could have a material
adverse effect on the Company's financial condition, business and results of
operations. The Company's contingent obligations under repurchase agreements
vary from period to period and totaled approximately $137.0 million as of March
29, 1997, with approximately 7.0% concentrated with one dealer. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Note 17 of Notes to the
Company's Consolidated Financial Statements.
AVAILABILITY AND COST OF FUEL
An interruption in the supply, or a significant increase in the price or tax
on the sale, of diesel fuel or gasoline on a regional or national basis could
have a material adverse effect on the Company's business, results of operations
and financial condition. Diesel fuel and gasoline have, at various times in the
past, been difficult to obtain, and there can be no assurance that the supply of
diesel fuel or gasoline will continue uninterrupted, that rationing will not be
imposed, or that the price of or tax on diesel fuel or gasoline will not
significantly increase in the future, any of which could have a material adverse
effect on the Company's business, results of operations and financial condition.
DEPENDENCE ON CERTAIN SUPPLIERS
A number of important components for certain of the Company's products are
purchased from single or limited sources, including its turbo diesel engines
(Cummins Engine Company, Inc. ("Cummins")), substantially all of its
transmissions (Allison Transmission Division of General Motors Corporation
("Allison")), axles for all diesel motor coaches other than the Holiday Rambler
Endeavor Diesel model (Eaton Corporation ("Eaton")), and chassis for certain of
its Holiday Rambler products (the Chevrolet Motor Division of General Motors
Corporation ("Chevrolet"), the Ford Motor Company ("Ford") and Freightliner
Custom Chassis Corporation ("Freightliner")). The Company has no long term
supply contracts with these suppliers or their distributors, and there can be no
assurance that these suppliers will be able to meet the Company's future
requirements for these components. Although the Company believes that adequate
alternative suppliers exist for each of these components, an extended delay or
interruption in the supply of any of the components currently obtained from a
single source supplier or limited supplier could have a material adverse effect
on the Company's business, results of operations and financial condition. See
"Business--Manufacturing."
NEW PRODUCT INTRODUCTIONS
To address changing consumer preferences, the Company modifies and improves
its products each model year and typically redesigns each model every three or
four years. The Company believes that the introduction of new features and new
models will be critical to its future success. Delays in the introduction of new
models or product features, a lack of market acceptance of new models or
features, or quality problems with new models or features could have a material
adverse effect on the Company's business, results of operations and financial
condition. For example, in the third quarter of 1995 the Company incurred
unexpected costs associated with three model changes introduced in that quarter
which adversely affected the Company's gross margin. There also can be no
assurance that product introductions in the future will not divert revenues from
existing models and adversely affect the Company's business, results of
operations and financial condition.
COMPETITION
The market for the Company's products is highly competitive. The Company
currently competes with a number of other manufacturers of motor coaches, fifth
wheel trailers and travel trailers, some of which have significantly greater
financial resources and more extensive marketing capabilities than the Company.
There can be no assurance that either existing or new competitors will not
develop products that are superior to, or that achieve better consumer
acceptance than, the Company's products, or that the Company will continue to
remain competitive. See "Business--Competition."
8
<PAGE>
RISKS OF LITIGATION
The Company is subject to litigation arising in the ordinary course of its
business, including a variety of product liability and warranty claims typical
in the recreational vehicle industry. In addition, as a result of the Holiday
Acquisition, the Company assumed most of the liabilities of Holiday Rambler,
including product liability and warranty claims. Although the Company does not
believe that the outcome of any pending litigation, net of insurance coverage,
will have a material adverse effect on the business, results of operations or
financial condition of the Company, due to the inherent uncertainties associated
with litigation, there can be no assurance in this regard.
To date, the Company has been successful in obtaining product liability
insurance on terms the Company considers acceptable. The Company's current
policies jointly provide coverage against claims based on occurrences within the
policy periods up to a maximum of $26.0 million for each occurrence and $27.0
million in the aggregate. There can be no assurance that the Company will be
able to obtain insurance coverage in the future at acceptable levels or that the
costs of insurance will be reasonable. Furthermore, successful assertion against
the Company of one or a series of large uninsured claims, or of one or a series
of claims exceeding any insurance coverage, could have a material adverse effect
on the Company's business, results of operations and financial condition.
ENVIRONMENTAL REGULATION AND REMEDIATION
REGULATION
The Company's recreational vehicle manufacturing operations are subject to a
variety of federal and state environmental regulations relating to the use,
generation, storage, treatment and disposal of hazardous materials. These laws
are often revised and made more stringent, and it is likely that future
amendments to these laws will impact the Company's operations.
The Company has submitted applications for "Title V" air permits for its
cabinet making facility in Nappanee, Indiana and its operations in Elkhart,
Indiana and Wakarusa, Indiana, including the new motor coach production facility
in Wakarusa, and is in the process of preparing such applications for its
facility in Coburg, Oregon. The Company has provided the relevant state agency
with a schedule of completion for the Coburg application, which will be filed
after the regulatory deadline, and the agency has indicated to the Company that
the schedule will be acceptable.
The Company does not currently anticipate that any additional air pollution
control equipment will be required as a condition of receiving new air permits,
although new regulations and their interpretation may change over time, and
there can be no assurance that additional expenditures will not be required.
While the Company has in the past provided notice to the relevant state
agencies that air permit violations have occurred at its facilities, the Company
has resolved all such issues with those agencies, and the Company believes that
there are no ongoing violations of any of its existing air permits at any of its
owned or leased facilities at this time. However, the failure of the Company to
comply with present or future regulations could subject the Company to: (i)
fines; (ii) potential civil and criminal liability; (iii) suspension of
production or cessation of operations; (iv) alterations to the manufacturing
process; or (v) costly clean-up or capital expenditures, any of which could have
a material adverse effect on the Company's business, results of operations and
financial condition.
REMEDIATION
The Company has identified petroleum and/or solvent ground contamination at
the Elkhart, Indiana manufacturing facility, and the Wakarusa, Indiana
manufacturing facility and Leesburg, Florida dealership acquired in the Holiday
Acquisition. The Company has remediated the Elkhart site and recommended to the
relevant Indiana regulatory authority that no further action be taken because
the remaining contaminants are below the state's clean-up standards. The Company
currently expects that the regulatory
9
<PAGE>
authority will concur with this finding, although there is no assurance that
such approval will be forthcoming or that the regulatory authority will not
require additional investigation and/or remediation. The Company is
investigating the Wakarusa site and expects soon to recommend to the relevant
regulatory authority that no further action be taken at that site based on its
consultant's view that there is a limited risk associated with the remaining
contamination. It is unclear whether the regulatory authority will concur in
this finding or whether additional remediation will be required. In Florida, the
Company and its consultants are conducting investigations to determine the
appropriate remediation program to recommend to the relevant Florida regulatory
authority for the contamination associated with former underground storage tanks
at the Leesburg dealership. With regard to the Wakarusa and Leesburg sites, the
Company is indemnified by Harley-Davidson for investigation and remediation
costs incurred by the Company (subject to a $300,000 deductible in the case of
the Wakarusa site and subject to a $10 million maximum in the case of the
Wakarusa site and a $5 million maximum in the case of the Leesburg site for
matters, such as these, that were identified at the closing of the Holiday
Acquisition).
The Company does not believe that any costs it will bear with respect to
continued investigation or remediation of the foregoing locations and other
facilities currently or formerly owned or occupied by the Company will have a
material adverse effect upon the Company's business, results of operations or
financial condition. Nevertheless, there can be no assurance that the Company
will not discover additional environmental problems or that the cost to the
Company of the remediation activities will not exceed the Company's
expectations.
OTHER REGULATORY MATTERS
The Company, its products and its manufacturing operations are subject to a
variety of federal, state and local regulations, including the National Traffic
and Motor Vehicle Safety Act and numerous state consumer protection laws and
regulations relating to the operation of motor vehicles, including so-called
"Lemon Laws." Amendments to these regulations and laws and the implementation of
new regulations and laws could significantly increase the costs of
manufacturing, purchasing, operating or selling the Company's products and could
have a material adverse effect on the Company's business, results of operations
and financial condition. The failure of the Company to comply with present or
future regulations and laws could subject the Company to fines, potential civil
and criminal liability, suspension of production or cessation of operations. See
"Business--Government Regulation."
Certain U.S. tax laws currently afford favorable tax treatment for the
purchase and sale of recreational vehicles that are financed through mortgage
loans. These laws and regulations have historically been amended frequently, and
it is likely that further amendments and additional laws and regulations will be
applicable to the Company and its business in the future. Amendment or repeal of
these laws and regulations and the implementation of new laws and regulations
could have a material adverse effect on the Company's business, results of
operations and financial condition.
The Company is subject to regulations that may require the Company to recall
products with safety defects. Product defects may also result in a large number
of product liability or warranty claims. The Company has on occasion voluntarily
recalled certain products. The occurrence of a major product recall or the
incurrence of warranty claims in excess of warranty reserves in any period could
have a material adverse effect on the Company's business, results of operations
and financial condition.
DEPENDENCE ON KEY PERSONNEL
The Company's future prospects depend upon its key management personnel,
including Kay L. Toolson, the Company's Chief Executive Officer. The loss of one
or more of these key management personnel could adversely affect the Company's
business. The prospects of the Company also depend in part on its ability to
attract and retain qualified technical, manufacturing, managerial and marketing
10
<PAGE>
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company will be successful in attracting and retaining such
personnel. See "Business--Employees" and "Management."
CONCENTRATION OF STOCK OWNERSHIP
Based upon the shares of Common Stock that will be outstanding upon
completion of the Offering (assuming no exercise of the Underwriters'
over-allotment option), the Company's directors and executive officers, as a
group, will beneficially own approximately 30.6% of the Company's outstanding
Common Stock. As a result, these stockholders will have the ability to strongly
influence the actions of the Board of Directors and the outcome of actions that
are brought before the stockholders for approval. Such a high level of ownership
may have the effect of delaying or preventing a change in control of the Company
and may adversely affect the voting and other rights of the holders of Common
Stock. See "Management" and "Principal and Selling Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Substantial sales of the Company's Common Stock in the public market after
the Offering could adversely affect the market price of the Common Stock. All of
the 5,473,279 shares which will be outstanding after the Offering will be freely
tradeable in the public market, subject in some cases to compliance with certain
volume limitations under Rule 144 and to "lock-up" agreements under which
certain holders have agreed not to sell or otherwise dispose of any of their
shares for 90 days from the date of this Prospectus without the prior written
consent of Smith Barney Inc. In addition, the holders of 1,701,605 shares of
Common Stock (1,446,605 shares if the Underwriters' over-allotment option is
exercised in full) are entitled to certain rights with respect to registration
of such shares of Common Stock for offer or sale to the public, which can be
exercised after the lock-up agreements have terminated. Furthermore, as of the
date of this Prospectus, there were options outstanding under the Company's
stock option plans to purchase 238,060 shares of Common Stock, of which 88,598
shares have vested and are eligible for sale upon exercise. See "Description of
Capital Stock," "Shares Eligible for Future Sale" and "Underwriting."
POSSIBLE VOLATILITY OF STOCK PRICE
The Company believes that the market price of the Company's Common Stock
could be subject to wide fluctuations in response to quarter-to-quarter
variations in operating results, changes in earnings estimates by investment
analysts, announcements of new products by the Company or its competitors,
general economic conditions and conditions in the recreational vehicle market
and other events or factors. In addition, the stocks of many recreational
vehicle companies have experienced price and volume fluctuations that have not
necessarily been directly related to the companies' operating performance, and
the market price of the Company's Common Stock could experience similar
fluctuations. See "Price Range of Common Stock."
ANTI-TAKEOVER PROTECTIONS
The Company's Certificate of Incorporation and Bylaws provide for a
classified Board of Directors and authorize the Board of Directors to issue
without stockholder approval Preferred Stock with such terms as the Board may
determine. These provisions could delay or prevent a change in control of the
Company or could impede a merger, consolidation, takeover or other business
combination involving the Company or discourage a potential acquiror from making
a tender offer or otherwise attempting to obtain control of the Company. The
Company is also afforded the protections of Section 203 of the Delaware General
Corporation Law, which could have similar effects. See "Description of Capital
Stock--Preferred Stock" and "--Delaware Anti-Takeover Law and Certain Charter
Provisions."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be $15.5
million, assuming a public offering price of $21.25 per share and after
deducting underwriting discounts and commissions and the estimated expenses of
the Offering.
The Company will use a portion of the net proceeds from the sale of the
shares offered by the Company to retire the outstanding balance under its
revolving line of credit. At May 20, 1997, a balance of $6.1 million was
outstanding under the revolving line of credit, which bears interest at prime
rate plus 1.25% and matures in March 2001. See Note 7 of Notes to the Company's
Consolidated Financial Statements. The balance, if any, of the net proceeds will
be used for working capital and general corporate purposes. The Company may use
an unspecified portion of the net proceeds from the Offering to acquire other
businesses having product lines that are compatible with the Company's business.
In addition, any such acquisitions may be financed with additional indebtedness
and may involve the issuance of the Company's capital stock. Such issuances of
additional capital stock could result in dilution of ownership interests in the
Company. The Company is not involved in any ongoing negotiations related to any
material acquisition at the present time, and there can be no assurance that any
acquisition will be made. Pending such uses, the Company intends to invest the
net proceeds from the Offering in short-term, investment-grade, interest-bearing
instruments. The Company will not receive any proceeds from the sale of shares
of Common Stock by the Selling Stockholders.
DIVIDEND POLICY
The Company currently intends to retain any earnings for reinvestment in its
business and does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future. The Company's existing credit facilities prohibit the
payment of dividends on the Common Stock, and future borrowing agreements may
contain similar restrictions. Any future determinations to pay dividends will be
at the discretion of the Company's Board of Directors and will be dependent upon
the Company's results of operations, financial condition, contractual
restrictions and other factors deemed relevant by the Board of Directors.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "MCCO." The following table sets forth for the periods indicated the high
and low sale prices for the Common Stock as reported on the Nasdaq National
Market.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1995
First Quarter......................................................... $16.50 $14.00
Second Quarter........................................................ 16.50 13.75
Third Quarter......................................................... 16.00 12.25
Fourth Quarter........................................................ 13.00 8.25
1996
First Quarter......................................................... 14.25 8.50
Second Quarter........................................................ 14.00 11.50
Third Quarter......................................................... 14.625 10.625
Fourth Quarter........................................................ 16.50 12.25
1997
First Quarter......................................................... 22.50 15.50
Second Quarter (through May 21, 1997)................................. 21.75 16.00
</TABLE>
On May 21, 1997 the last reported sale price of the Company's Common Stock
on the Nasdaq National Market was $21.25. As of May 20, 1997, there were
approximately 105 holders of record of the Company's Common Stock.
12
<PAGE>
CAPITALIZATION
The following table sets forth short-term borrowings and the capitalization
of the Company as of March 29, 1997 and as adjusted to give effect to: (i) the
conversion of the 65,217 shares of Redeemable Preferred Stock into 230,767
shares of Common Stock; and (ii) the sale of the 800,000 shares of Common Stock
offered by the Company hereby at an assumed public offering price of $21.25 per
share, after deducting underwriting discounts and commissions and estimated
expenses of the Offering, and the application of the net proceeds therefrom as
described in "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 29, 1997
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings:
Bank line of credit..................................................................... $ 11,272 $ --
Flooring agreements..................................................................... 4,182 4,182
Current portion of long-term note payable................................................. 2,250 2,250
--------- -----------
Total................................................................................. $ 17,704 $ 6,432
--------- -----------
--------- -----------
Long-term note payable, less current portion.............................................. $ 15,875 $ 15,875
Redeemable Series A Convertible Preferred Stock, $.01 par value; redemption value of
$3,005,000; 100,000 shares designated; 65,217 shares issued and outstanding, actual; no
shares issued and outstanding, as adjusted.............................................. 2,735 --
Stockholders' equity:
Preferred Stock, $.01 par value: 2,000,000 shares authorized, actual; 1,934,783 shares
authorized, as adjusted; no shares issued and outstanding, actual and as adjusted..... -- --
Common Stock, $.01 par value: 20,000,000 shares authorized; 4,438,217 shares issued and
outstanding, actual; 5,468,984 shares issued and outstanding, as adjusted(1).......... 44 55
Additional paid-in capital.............................................................. 25,504 43,776
Retained earnings....................................................................... 20,980 20,980
--------- -----------
Total stockholders' equity............................................................ 46,528 64,811
--------- -----------
Total capitalization................................................................ $ 65,138 $ 80,686
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Excludes: (i) 525,000 shares reserved for issuance under the Option Plan,
under which options to purchase 178,445 shares were outstanding as of March
29, 1997; and (ii) 40,000 shares reserved for issuance under the Director
Plan, under which options to purchase 12,800 shares were outstanding as of
March 29, 1997. Also excludes the following activity that occurred after
March 29, 1997 and prior to the date of this Prospectus: (i) the grant of
options under the Option Plan to purchase 52,600 shares; (ii) the exercise
of options under the Option Plan to purchase 4,295 shares; and (iii) the
forfeiture of options under the Option Plan to purchase 1,490 shares.
13
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The Consolidated Statements of Income Data set forth below with respect to
fiscal years 1994, 1995 and 1996 and the Consolidated Balance Sheet Data at
December 30, 1995 and December 28, 1996, are derived from, and should be read in
conjunction with, the audited Consolidated Financial Statements and Notes
thereto of the Company included in this Prospectus. The Consolidated Statements
of Income Data set forth below with respect to fiscal years 1992 and 1993 and
the Consolidated Balance Sheet Data at January 2, 1993, January 1, 1994 and
December 31, 1994 are derived from audited financial statements of the
Predecessor and the Company, respectively, not included in this Prospectus. The
Consolidated Statements of Income Data and the Consolidated Balance Sheet Data
set forth below with respect to the three months ended March 30, 1996 and March
29, 1997 are derived from unaudited financial statements of the Company included
in this Prospectus that have been prepared on the same basis as the audited
financial statements and, in the opinion of management, contain all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position, results of operations and cash flows for
such periods. Results for interim periods are not necessarily indicative of
results for the entire year. The Company's fiscal year consists of three 13-week
quarters and a fourth quarter ending on the Saturday closest to the end of the
calendar year. References to 1994, 1995 and 1996 refer to the fiscal years ended
December 31, 1994, December 30, 1995 and December 28, 1996, respectively.
The data set forth in the following table should be read in conjunction
with, and are qualified in their entirety by, Management's Discussion and
Analysis of Financial Condition and Results of Operations, the Company's
Consolidated Financial Statements and the Notes thereto appearing elsewhere in
this Prospectus, the Company's Unaudited Condensed Consolidated Financial
Statements and the Notes thereto appearing elsewhere in this Prospectus, and the
Unaudited Pro Forma Combined Statements of Income.
14
<PAGE>
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR(1) ----------------------------------------------------------------------------
---------------------
TWO MONTHS TEN MONTHS THREE MONTHS
ENDED ENDED ENDED
---------- ---------- FISCAL YEAR -------------------------
MARCH 4, JAN. 1, -------------------------------- MARCH 30, MARCH 29,
1992 1993 1994 1994 1995 1996(2) 1996(2) 1997(2)
------- ---------- ---------- -------- -------- -------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND CONSOLIDATED OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
INCOME DATA:
Net sales.................. $64,338 $12,026 $65,964 $107,300 $141,611 $365,638 $61,964 $109,023
Cost of sales.............. 54,310 10,202 56,141 89,894 124,592 317,909(3) 55,237(3) 93,981
------- ---------- ---------- -------- -------- -------- ---------- ----------
Gross profit........... 10,028 1,825 9,823 17,406 17,019 47,729 6,727 15,042
Selling, general and
administrative
expenses................. 3,922 1,202 4,036 7,184 8,075 33,299 4,650 9,476
Management fees to
stockholders............. 800 159 205 72 72 72 18 18
Amortization of goodwill... -- -- 431 517 517 617 129 159
------- ---------- ---------- -------- -------- -------- ---------- ----------
Operating income....... 5,306 464 5,151 9,633 8,355 13,741 1,930 5,389
Other expense (income),
net...................... (8) (5) (11) (153) 40 (244) (7) (39)
Interest expense........... 163 5 1,308 69 298 3,914 863 821
------- ---------- ---------- -------- -------- -------- ---------- ----------
Income before provision
for income taxes..... 5,151 464 3,855 9,717 8,017 10,071 1,074 4,607
Provision for income
taxes.................... -- -- 1,553 3,776 3,119 4,162 440 1,912
Pro forma provision for
income taxes............. 1,999(4) 181(4) -- -- -- -- -- --
------- ---------- ---------- -------- -------- -------- ---------- ----------
Net income............. 3,152 283 2,302(5) 5,941 4,898 5,909 634 2,695
Redeemable Preferred Stock
dividends................ -- -- -- -- -- (75) -- (23)
Accretion of Redeemable
Preferred Stock.......... -- -- -- -- -- (84) -- (25)
------- ---------- ---------- -------- -------- -------- ---------- ----------
Net income attributable to
common stock............. $ 3,152 $ 283 $ 2,302(5) $ 5,941 $ 4,898 $ 5,750 $ 634 $ 2,647
------- ---------- ---------- -------- -------- -------- ---------- ----------
------- ---------- ---------- -------- -------- -------- ---------- ----------
Earnings per common
share.................... -- -- $ 0.67(5) $ 1.33 $ 1.09 $ 1.26(6) $ .14(6) $ .57
---------- -------- -------- -------- ---------- ----------
---------- -------- -------- -------- ---------- ----------
Weighted average common
shares outstanding....... -- -- 3,416 4,473 4,475 4,678 4,540 4,747
CONSOLIDATED OPERATING
DATA:
Units sold: (7)
Motor coaches............ 477 87 463 717 982 2,733 441 809
Towables................. -- -- -- -- -- 1,977 200 682
Dealerships at end of
period................... 34 34 37 48 49 159 164 168
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- ---------------------------------------------------------------
JAN. 2, JAN. 1, DEC. 31, DEC. 30, DEC. 28, MARCH 29,
1993 1994 1994 1995 1996 1997
------------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................. $ 5,577 $ 2,918 $ 5,910 $ 3,795 $ 4,502 $ 1,806
Total assets..................................... 11,092 40,052 48,219 68,502 135,368 149,189
Long-term borrowings, less current portion....... -- -- -- 5,000 16,500 15,875
Redeemable Preferred Stock....................... -- -- -- -- 2,687 2,735
Total stockholders' equity....................... 6,431 26,951 32,945 37,930 43,807 46,528
</TABLE>
- ----------------------------------
(1) The Company commenced operations on March 5, 1993 by acquiring substantially
all of the assets and liabilities of the Predecessor. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
(2) Includes the operations of Holiday Rambler and the Holiday World Dealerships
from March 4, 1996. The Holiday World Dealerships generated net sales of
$25.0 million in fiscal 1996 and $5.3 million and $3.5 million in the three
months ended March 30, 1996 and March 29, 1997, respectively. These amounts
represent the sale of 820 units in fiscal 1996 and 193 units and 98 units
for the three months ended March 30, 1996 and March 29, 1997, respectively,
that were either previously owned or not Holiday Rambler units, as well as
service revenues. The Company sold seven Holiday World Dealerships in fiscal
1996, one in the first three months of 1997, and intends to sell the two
remaining dealerships.
(3) Includes a $645,000 increase in the three months ended March 30, 1996 and a
$1.7 million increase in fiscal 1996 to cost of sales resulting from the
sale of inventory that was written up to fair value at the date of the
Holiday Acquisition.
(4) The Predecessor was an S Corporation not subject to federal and certain
state income taxes during the periods indicated. The pro forma provision for
income taxes reflects the effect of the federal and state income taxes as if
the Predecessor had been a C Corporation, based on the effective tax rates
that would have been in effect during these periods.
(5) Excludes an extraordinary charge of $558,000, net of tax effect, or $0.16
per share.
(6) Earnings per common share for fiscal 1996 and the three months ended March
29, 1997 are fully diluted earnings per common share. Includes a one-time
charge of $.08 for the three months ended March 30, 1996 and $0.22 per share
for fiscal 1996, net of tax effect, related to the inventory write-up
described in Note 3 above. Excluding this charge, fully diluted earnings per
common share in the three months ended March 30, 1996 and in fiscal 1996
would have been $.22 and $1.48 per share, respectively.
(7) Excludes units sold by the Holiday World Dealerships that were either
previously owned or not Holiday Rambler units.
15
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
The Unaudited Pro Forma Combined Statements of Income for 1996 present the
results of operations of the Company as if the Holiday Acquisition had occurred
on December 30, 1995. This unaudited pro forma information is based on the
historical Consolidated Financial Statements of the Company for the period from
December 30, 1995 to December 28, 1996, adjusted to give effect to the
assumptions and adjustments set forth in the accompanying notes. Company results
include the results of Holiday Rambler and the Holiday World Dealerships for the
period from March 4, 1996 to December 28, 1996. Historical results for Holiday
Rambler and the Holiday World Dealerships consist of the results of Holiday
Rambler and the Holiday World Dealerships from January 1, 1996 to March 3, 1996.
The Unaudited Pro Forma Combined Statements of Income have been prepared by
management of the Company and are not necessarily indicative of the Company's
results of operations had the Holiday Acquisition been consummated at December
30, 1995, nor are they necessarily indicative of the Company's results of
operations for any future period. This unaudited pro forma combined financial
data should be read in conjunction with the historical Consolidated Financial
Statements and related Notes thereto of the Company included elsewhere in this
Prospectus and Management's Discussion and Analysis of Financial Condition and
Results of Operations.
16
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 28, 1996
---------------------------------------------------------------------
HOLIDAY RAMBLER HOLIDAY ACQUISITION PRO FORMA FOR
AND HOLIDAY WORLD ADJUSTMENTS INCOME THE HOLIDAY
COMPANY DEALERSHIPS(1) (EXPENSE) ACQUISITION
----------- ------------------- -------------------- -------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales............................................ $ 365,638 $ 53,802 $ -- $ 419,440
Cost of sales........................................ 317,909(2) 46,349 -- 364,258
----------- ------- ------ -------------
Gross profit..................................... 47,729 7,453 -- 55,182
Selling, general and administrative expenses......... 33,299 8,477 68(3) 41,708
Management fees to stockholders...................... 72 -- -- 72
Amortization of goodwill............................. 617 -- (20)(4) 637
----------- ------- ------ -------------
Operating income (loss).......................... 13,741 (1,024) 48 12,765
Other expense (income), net.......................... (244) 31 -- (213)
Interest expense and debt issuance costs............. 3,914 1,879 (460)(5) --
-- -- (100)(6) --
-- -- 1,434(7) 4,919
----------- ------- ------ -------------
Income (loss) before provision (benefit) for
income taxes................................... 10,071 (2,934) 922 8,059
Provision (benefit) for income taxes................. 4,162 (1,170) (368)(8) 3,360
----------- ------- ------ -------------
Net income (loss).................................. 5,909 (1,764) 554 4,699
----------- ------- ------ -------------
Redeemable Preferred Stock dividends................. (75) -- (15)(9) (90)
Accretion of Redeemable Preferred Stock.............. (84) -- (16)(9) (100)
----------- ------- ------ -------------
Net income (loss) attributable to common stock....... $ 5,750 $ (1,764) $ 523 $ 4,509
----------- ------- ------ -------------
----------- ------- ------ -------------
Earnings per share:
Primary............................................ $ 1.28 $ 1.01
Fully diluted...................................... $ 1.26 $ 1.00
Weighted average common shares outstanding:
Primary............................................ 4,474,791 4,474,791
Fully diluted...................................... 4,678,111 41,262(10) 4,719,373
</TABLE>
- ------------------------------
(1) For the period beginning January 1, 1996 and ended March 3, 1996.
(2) Includes a $1.7 million increase to cost of sales resulting from the sale of
inventory that was written up to fair value at the date of the Holiday
Acquisition.
(3) Elimination of depreciation expense for the Holiday World Dealerships
held-for-sale.
(4) Amortization of goodwill over the useful life of 20 years.
(5) Interest expense on the approximately $39.4 million of acquisition-related
indebtedness.
(6) Amortization of debt issuance costs of $2.1 million related to the
incurrence of debt to be amortized over a five-year term.
(7) Elimination of interest expense related to affiliated companies of Holiday
Rambler and the Holiday World Dealerships. No intercompany debt of Holiday
Rambler and the Holiday World Dealerships was assumed by the Company in the
Holiday Acquisition.
(8) Pro forma effect on income taxes based on pro forma adjustments.
(9) The issuance of 65,217 shares of the Redeemable Preferred Stock, which are
convertible into 230,767 shares of Common Stock, is excluded from the
calculation of primary earnings per share because the Redeemable Preferred
Stock does not meet the conditions of common stock equivalents. However,
dividends of $90,000 per year and accretion to redemption value of $100,000
per year related to the Redeemable Preferred Stock are subtracted from net
income in determining primary earnings per share. The total accretion to
redemption value of the Redeemable Preferred Stock to be recognized is
$401,000.
(10) The fully diluted share adjustment of 41,262 shares is necessary to reflect
common shares outstanding as if the Redeemable Preferred Stock had been
converted into Common Stock as of December 30, 1995.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is the successor to a company formed in 1968 and commenced
operations on March 5, 1993 by acquiring substantially all of the assets and
liabilities of the Predecessor (the "Predecessor Acquisition"). The
Predecessor's management and the manufacturing of its High-Line Class A motor
coaches were largely unaffected by the Predecessor Acquisition. However, the
Company's consolidated financial statements for fiscal years 1994, 1995 and 1996
and quarters ended March 30, 1996 and March 29, 1997 all contain Predecessor
Acquisition-related expenses, consisting primarily of the amortization of
acquired goodwill.
On March 4, 1996, the Company acquired from Harley-Davidson certain assets
of Holiday Rambler in exchange for $21.5 million in cash, 65,217 shares of
Redeemable Preferred Stock (which is currently convertible into 230,767 shares
of Common Stock), and the assumption of most of the liabilities of Holiday
Rambler. Concurrently, the Company acquired ten Holiday World Dealerships for
$13.0 million, including a $12.0 million subordinated promissory note, and the
assumption of certain liabilities. The Company sold seven Holiday World
Dealerships in 1996 and one in the first quarter of 1997, retired the $12.0
million note from the proceeds of these sales, and intends to sell the remaining
two dealerships. The Holiday Acquisition was accounted for using the purchase
method of accounting.
Beginning on March 4, 1996, the acquired operations were included in the
Company's consolidated financial statements. The Company's consolidated
financial statements for the fiscal year ended December 28, 1996 and the three
months ended March 30, 1996 contain expenses related to the Holiday Acquisition,
primarily consisting of a $1.7 million increase in cost of sales resulting from
the sale of inventory in 1996 (of which $645,000 occurred in the first quarter
of 1996) that was written up to fair value at the date of the Holiday
Acquisition, interest expense, the amortization of debt issuance costs and
Holiday Acquisition goodwill.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 29, 1997 COMPARED TO THREE MONTHS ENDED MARCH 30,
1996
Net sales increased 75.9% to $109.0 million in the first three months of
1997 compared to $62.0 million for the same period last year. The primary reason
for this increase was the inclusion in the 1997 period of three months of
Holiday Rambler operations compared to one month in the 1996 period. The
Company's overall unit sales more than doubled from 641 units in the first three
months of 1996 to 1,491 units in the first three months of 1997 (excluding units
that were sold by the Company's Holiday World Dealerships that were either
previously owned or not Holiday Rambler units). On a pro forma basis, assuming
the Company had acquired Holiday Rambler at the beginning of 1996, wholesale
sales dollars would have been up 7.4%, with motorized products up 4.1% and
towables up 26.9% in the first three months of 1997 compared to the first three
months of 1996. The substantial increase in towable sales was primarily due to
sales of the Company's Alumascape model which was introduced in the third
quarter of 1996. The Company's average unit selling price dropped to $71,684 in
the first quarter of 1997 from $92,650 in the first quarter of 1996. Due to the
inclusion of Holiday Rambler's generally lower priced products, the Company
expects its overall average selling price to remain under $100,000.
Gross profit for the first three months of 1997 increased to $15.0 million,
up $8.3 million from $6.7 million in the first three months of 1996, and gross
margin increased to 13.8% in the first three months of 1997 from 10.9% in the
first three months of 1996. Gross margin in the first quarter of 1996 was
limited by a $645,000 increase in cost of sales resulting from an inventory
write-up to fair value arising from the Holiday Acquisition. Without this
charge, gross margin in the first quarter of 1996 would have been 11.9%. Gross
margin in the first three months of 1997 was adversely affected by a combination
of factors. The
18
<PAGE>
Company had abnormally high costs stemming from the ramp up of production in the
Coburg, Oregon plant from 8 to 10 units per week. Additionally, the Company took
some modest inventory write-downs in anticipation of model changes coming up in
the second quarter. One of the Company's objectives continues to be to improve
individual model gross margins, primarily through additional purchasing and
manufacturing synergies anticipated to be derived from the Holiday Acquisition.
The Company's overall gross margin may fluctuate in future periods if the mix of
products shifts from higher to lower gross margin units or if the Company
encounters unexpected manufacturing difficulties or competitive pressures.
Selling, general, and administrative expenses increased from $4.7 million in
the first three months of 1996 to $9.5 million in the first three months of 1997
and increased as a percentage of net sales from 7.5% in the first three months
of 1996 to 8.7% in the first three months of 1997. The increase in selling,
general, and administrative expenses in dollars and as a percentage of net sales
was primarily due to the inclusion of a full quarter of Holiday Rambler
operations in the 1997 period versus only one month in the 1996 period. Holiday
Rambler has historically spent more for selling, general, and administrative
expense as a percentage of net sales than Monaco. The Company has reduced and
plans to continue lowering the level of spending by Holiday Rambler for selling,
general, and administrative expenses as a percentage of net sales. However, the
Company's overall selling, general, and administrative expenses as a percentage
of net sales are expected to remain higher than the level prior to the Holiday
Acquisition.
Amortization of goodwill was $159,000 in the first three months of 1997
compared to $129,000 in the same period of 1996. At March 29, 1997, goodwill,
net of accumulated amortization, was $21.0 million.
Operating income was $5.4 million in the first three months of 1997, a $3.5
million increase over $1.9 million in the first three months of 1996. The
improvement in the Company's gross margin was greater than the increase in
selling, general, and administrative expense as a percentage of net sales,
resulting in an increase in operating margin from 3.1% in the first quarter of
1996 to 4.9% in the first quarter of 1997. The Company's operating margin in the
first quarter of 1996 was adversely affected by a $645,000 expense related to an
inventory write-up to fair value as a result of the Holiday Acquisition. Without
that charge, the Company's operating margin in the first quarter of 1996 would
have been 4.1%.
Net interest expense was $821,000 in the first three months of 1997 compared
to $863,000 in the comparable 1996 period. The Company capitalized $146,000 of
interest expense in the first quarter of 1997 relating to the construction in
progress for a new motorized manufacturing facility in Wakarusa, Indiana, and
capitalized $34,000 of interest expense in the first quarter of 1996 stemming
from the construction of the Coburg, Oregon facility. The Company's interest
expense included $153,000 in the 1997 period and $209,000 in the 1996 period
relating to floor plan financing at the retail stores. Additionally, 1997 first
quarter interest expense included $103,000 related to the amortization of $2.1
million in debt issuance costs recorded in conjunction with the Holiday
Acquisition. These costs are being written off over a five-year period.
The Company reported a provision for income taxes of $1.9 million, or an
effective tax rate of 41.5%, in the first three months of 1997, compared to
$440,000, or an effective tax rate of 41%, for the comparable 1996 period.
Net income increased by $2.1 million from $634,000 in the first three months
of 1996 to $2.7 million in the first three months of 1997, primarily due to the
substantial increases in net sales and operating income resulting from the
Holiday Acquisition.
1996 COMPARED WITH 1995
Net sales increased 158.2% from $141.6 million in 1995 to $365.6 million in
1996, primarily due to the Holiday Acquisition. Excluding the Holiday
Acquisition, net sales of Monaco motor coaches decreased 3.4% from $141.6
million in 1995 to $136.8 million in 1996, primarily due to difficulties in
achieving higher production rates of motor coaches at its Coburg facility, which
commenced operations in late 1995. Net
19
<PAGE>
sales in 1996 also included $25.0 million of sales of units that were either
previously owned or not Holiday Rambler units and service revenues generated by
the Holiday World Dealerships. The Company's overall unit sales increased almost
five-fold from 982 units in 1995 to 4,710 units in 1996 (excluding 820 units
sold by the Holiday World Dealerships that were either previously owned or not
Holiday Rambler units). The Company's overall average unit selling price
declined from $145,600 in 1995 to $66,500 in 1996, primarily as a result of the
Company selling a significantly large number of lower priced Holiday Rambler
products, particularly towable products.
Gross profit increased by $30.7 million from $17.0 million in 1995 to $47.7
million in 1996 and gross margin increased from 12.0% in 1995 to 13.1% in 1996.
The increase in gross profit and gross margin was limited by a $1.7 million
increase in cost of sales as a result of an inventory write-up to fair value
arising from the Holiday Acquisition. Without this charge, gross margin would
have been 13.5% for 1996. Gross margin in 1995 was depressed primarily due to
start-up inefficiencies relating to the Windsor model and unexpected costs
associated with making three model changes simultaneously.
Selling, general and administrative expenses increased by $25.2 million from
$8.1 million in 1995 to $33.3 million in 1996 and increased as a percentage of
net sales from 5.7% in 1995 to 9.1% in 1996. The increase in selling, general
and administrative expenses in dollars and as a percentage of net sales in 1996
was primarily attributable to the addition of the Holiday Rambler operations
that have traditionally had higher selling, general and administrative expenses
as a percentage of net sales than Monaco. In addition, the Company's selling,
general and administrative expenses in 1995 were unusually low, both in dollars
and as a percentage of net sales, in part because of lower than normal
incentive-based compensation.
Amortization of goodwill was $617,000 in 1996 compared with $517,000 in
1995. At December 28, 1996, goodwill arising from the Predecessor Acquisition,
net of accumulated amortization, was $18.7 million, which is currently being
amortized on a straight-line basis over 40 years. Goodwill of approximately $2.2
million was acquired in the Holiday Acquisition and is being amortized over 20
years.
Operating income was $13.7 million in 1996, a $5.4 million increase over the
$8.4 million in 1995. The increase in the Company's gross margin was less than
the increase in selling, general and administrative expenses as a percentage of
net sales, resulting in a decline in operating margin from 5.9% in 1995 to 3.8%
in 1996. The Company's operating margin was adversely affected in 1996 by a $1.7
million expense related to an inventory write-up to fair value as a result of
the Holiday Acquisition. Without that charge, the Company's operating margin
would have been 4.2% for the year.
Interest expense increased substantially from $298,000 in 1995 to $3.9
million in 1996. The Company's 1996 interest expense included approximately
$992,000 of floor plan interest expense relating to the Holiday World
Dealerships. Additionally, 1996 interest expense included $343,000 related to
the amortization of $2.1 million in debt issuance costs recorded in conjunction
with the Holiday Acquisition. These costs are being written off over a five-year
period. The Company capitalized approximately $244,000 of interest expense in
1996 primarily due to the purchase of the Holiday World Dealerships and
construction in progress at the manufacturing facility in Wakarusa, Indiana. The
Company capitalized $625,000 of interest expense in 1995 related to the
expansion of its Coburg, Oregon facility.
The Company reported a provision for income taxes of $4.2 million, or an
effective tax rate of 41%, for 1996 compared to $3.1 million, or an effective
tax rate of 39%, for the comparable period in 1995.
Net income increased by $1.0 million from $4.9 million in 1995 to $5.9
million in 1996 due to substantial increases in net sales and operating income
that more than offset increases in interest and amortization expense.
1995 COMPARED WITH 1994
Net sales for 1995 increased by $34.3 million from $107.3 million in 1994 to
$141.6 million in 1995, a 32.0% increase. The increase was attributable
primarily to net sales of the Company's Windsor model
20
<PAGE>
motor coach, which was introduced in 1994 and, to a lesser extent, net sales of
its Dynasty model motor coach, offset by decreases in the net sales of its
Signature and Executive model motor coaches. Total unit net sales for 1995 were
up 37.0% over 1994 while the Company's average unit selling price decreased
3.7%, with a 6.0% increase for same models being offset by a shift in the mix of
motor coaches sold towards the Company's lower priced models, Windsor and
Dynasty.
Gross profit for 1995 decreased $388,000, or 2.2%, and gross margin
decreased to 12.0% from 16.2% in the prior year. The decrease in gross margin in
1995 was attributable to several factors. In the first half of 1995, the Company
experienced start-up inefficiencies related to the Windsor model resulting in
lower than projected gross margins. In addition, the Company encountered many
unexpected costs in making three model changes simultaneously during the third
quarter. These costs, combined with a sales mix that included a
lower-than-anticipated percentage of higher margin Signature and Executive motor
coaches, significantly lowered the Company's gross margin for the year.
Selling, general, and administrative expenses increased by $890,000, or
12.4%, in 1995, but decreased as a percentage of net sales to 5.7% in 1995 from
6.7% in 1994. The decline in selling, general, and administrative expenses as a
percentage of net sales was due to a combination of marketing and administrative
efficiencies related to the Company's increased sales level and a significant
decline, both in dollars and as a percentage of net sales, in incentive-based
compensation.
Amortization of goodwill arising from the Predecessor Acquisition was
$517,000 in 1995, the same as in 1994.
Operating income for 1995 was $8.4 million, a $1.3 million decrease from
1994. The Company's lower gross margin resulted in a decline in operating margin
from 9.0% in 1994 to 5.9% in 1995.
Interest expense increased from $69,000 in 1994 to $298,000 in 1995 due to
higher outstanding borrowings. The Company capitalized approximately $625,000 of
interest expense paid in 1995 that was incurred in connection with the
construction of a new manufacturing facility in Coburg, Oregon.
Net income of $4.9 million in 1995 was $1.0 million lower than that reported
for 1994. The decline was attributable to the substantial increase in net sales
being more than offset by the reduction in gross margin, lower operating income
and higher interest expense.
INFLATION
The Company does not believe that inflation has had a material impact on its
results of operations for the periods presented.
21
<PAGE>
UNAUDITED QUARTERLY RESULTS
The following table sets forth certain unaudited financial and operating
data for each of the Company's most recent nine fiscal quarters. The financial
data for each of these quarters include, in the opinion of management, all
adjustments (consisting only of normal and recurring adjustments) necessary for
a fair presentation of the results of operations for such periods. The results
for any quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
--------------------------------------------------------------------------------------------------
1995 1996(1)
-------------------------------------------------- ----------------------------------------------
APR. 1 JULY 1 SEPT. 30 DEC. 30 MAR. 30 JUNE 29 SEPT. 28 DEC. 28
----------- ----------- ----------- ----------- ----------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AND UNITS SOLD DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales....................... $ 38,015 $ 35,082 $ 36,726 $ 31,788 $ 61,964 $ 106,729 $ 102,065 $ 94,880
Gross profit.................... 5,342 4,650 3,255 3,772 6,727 12,408 14,944 13,650
Operating income................ 2,726 2,632 1,269 1,728 1,930 2,934 4,109 4,768
Net income...................... 1,662 1,606 705 925 634 891 1,957 2,427
----------- ----------- ----------- ----------- ----------- --------- --------- -----------
----------- ----------- ----------- ----------- ----------- --------- --------- -----------
Net income per fully diluted
share......................... $ 0.37 $ 0.36 $ 0.16 $ 0.20 $ 0.14 $ 0.19 $ 0.42 $ 0.51
----------- ----------- ----------- ----------- ----------- --------- --------- -----------
----------- ----------- ----------- ----------- ----------- --------- --------- -----------
Other data:
Gross sales(2):
Motor coaches............... $ 38,513 $ 35,409 $ 37,146 $ 31,933 $ 51,806 $ 81,159 $ 82,420 $ 80,057
Towables.................... -- -- -- -- 6,000 15,800 14,800 16,300
Units sold(2):
Motor coaches............... 265 252 252 213 441 796 787 709
Towables.................... -- -- -- -- 200 585 530 662
<CAPTION>
1997
---------
MAR. 29
---------
<S> <C>
Net sales....................... $ 109,023
Gross profit.................... 15,042
Operating income................ 5,389
Net income...................... 2,695
---------
---------
Net income per fully diluted
share......................... $ 0.57
---------
---------
Other data:
Gross sales(2):
Motor coaches............... $ 90,273
Towables.................... 17,700
Units sold(2):
Motor coaches............... 809
Towables.................... 682
</TABLE>
- ------------------------------
(1) Includes operations of Holiday Rambler and the Holiday World Dealerships
from March 4, 1996.
(2) Excludes units sold by the Holiday World Dealerships that were either
previously owned or not Holiday Rambler units.
The following table sets forth certain unaudited financial data expressed as
a percentage of net sales for each of the most recent nine fiscal quarters.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
-------------------------------------------------------------------------------------------
1995 1996(1)
------------------------------------------------- ----------------------------------------
APR. 1 JULY 1 SEPT. 30 DEC. 30 MAR. 30 JUNE 29 SEPT. 28
---------- ---------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit............... 14.1 13.3 8.9 11.9 10.9 11.6 14.6
Operating income........... 7.2 7.5 3.5 5.4 3.1 2.7 4.0
Net income................. 4.4 4.6 1.9 2.9 1.0 0.8 1.9
<CAPTION>
1997
------------
DEC. 28 MAR. 29
----------- ------------
<S> <C> <C>
Net sales.................. 100.0% 100.0%
Gross profit............... 14.4 13.8
Operating income........... 5.0 4.9
Net income................. 2.6 2.5
</TABLE>
- ------------------------------
(1) Includes operations of Holiday Rambler and the Holiday World Dealerships
from March 4, 1996.
The Company's net sales, gross margin and operating results may fluctuate
significantly from period to period due to factors such as the mix of products
sold, the ability to utilize and expand manufacturing resources efficiently, the
introduction and consumer acceptance of new models offered by the Company,
competition, the addition or loss of dealers, the timing of trade shows and
rallies, and factors affecting the recreational vehicle industry as a whole. In
addition, the Company's overall gross margin on its products may decline in
future periods to the extent the Company increases its sales of lower gross
margin towable products or if the mix of motor coaches shifts to lower gross
margin units. Due to the relatively high selling prices of the Company's
products (in particular, its High-Line Class A motor coaches), a relatively
small variation in the number of recreational vehicles sold in any quarter can
have a significant effect on sales
22
<PAGE>
and operating results for that quarter. Demand in the overall recreational
vehicle industry generally declines during the winter months, while sales and
revenues are generally higher during the spring and summer months. With the
broader range of recreational vehicles now offered by the Company as a result of
the Holiday Acquisition, seasonal factors could have a significant impact on the
Company's operating results in the future. In addition, unusually severe weather
conditions in certain markets could delay the timing of shipments from one
quarter to another.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are internally generated cash
from operations and available borrowings under its credit facilities. During
1996, the Company generated net cash from operations of $26.7 million. Net
income and non-cash expenses such as depreciation and amortization generated
approximately $9.0 million of this amount and the balance was generated by
increases in accrued expenses and income taxes payable combined with a decrease
in trade receivables and inventories, primarily from the sale of seven Holiday
World Dealerships, which more than offset a reduction in deferred income taxes.
During the first quarter of 1997, the Company had a cash outflow of $6.8 million
from operations. A large increase in trade receivables, arising primarily from a
trade show in March, combined with payments that reduced income taxes payable
more than offset the $3.5 million generated from net income and non-cash
expenses such as depreciation and amortization, as well as increases in accounts
payable and accrued expenses. The increase in trade receivables was temporary
and the Company's trade receivable balance has since returned to a more normal
level.
In connection with the Holiday Acquisition, on March 4, 1996, the Company
replaced its bank line of credit with new credit facilities consisting of a term
loan of $20.0 million (the "Term Loan") and a revolving line of credit of up to
$45.0 million (the "Revolving Loans"). The Term Loan bears interest at various
rates based upon the prime lending rate announced from time to time by Banker's
Trust Company (the "Prime Rate") or LIBOR and is due and payable in full on
March 1, 2001. The Term Loan requires monthly interest payments, quarterly
principal payments and certain mandatory prepayments. The mandatory prepayments
consist of: (i) an annual payment on April 30 of each year, beginning April 30,
1997, of seventy-five percent (75%) of the Company's defined excess cash flow
for the then most recently ended fiscal year; and (ii) subsequent to repayment
by the Company of the $12.0 million note issued in conjunction with the purchase
of the Holiday World Dealerships (which was repaid in full in the third quarter
of 1996), a payment, within two days of the sale of any dealership, of the net
cash proceeds received by the Company from such sale. At the election of the
Company, the Revolving Loans bear interest at variable interest rates based on
the Prime Rate or LIBOR. At March 29, 1997, the effective interest rates on the
Revolving Loans and the Term Loan were 9.75% and 8.53%, respectively. The
Revolving Loans are due and payable in full on March 1, 2001, and require
monthly interest payments. As of March 29, 1997, $18.1 million was outstanding
under the Term Loan and $11.3 million was outstanding under the Revolving Loans.
The Term Loan and the Revolving Loans are collateralized by a security interest
in all of the assets of the Company and include various restrictions and
financial covenants. Because borrowings under the Revolving Loans have been less
than originally anticipated, the Company is currently in the process of
negotiating new terms relating to the amount available under the Revolving Loans
and the interest rates, covenants and restrictions relating to both loans. The
Company does not expect any adverse changes to the credit facilities as a result
of these discussions. The Company also has various loans outstanding to finance
retail inventory at the two remaining Holiday World Dealerships which amounted
to approximately $4.2 million at March 29, 1997 and which bear interest at
various rates based on the prime rate and are collateralized by certain assets
of the Company.
The Company's principal working capital requirements are for purchases of
inventory and, to a lesser extent, financing of trade receivables. The Company's
dealers typically finance product purchases under wholesale floor plan
arrangements with third parties as described below. At March 29, 1997, the
Company had working capital of approximately $1.8 million, a decrease of $2.7
million from working capital of $4.5
23
<PAGE>
million at December 28, 1996. The Company used short-term credit facilities to
finance the construction in progress on the new Wakarusa facility. The Company
primarily used long-term debt and the Redeemable Preferred Stock to finance the
Holiday Acquisition.
The Company's capital expenditures were $7.3 million in 1996 and $3.8
million in the first quarter of 1997, primarily for expansion of manufacturing
facilities. In the first quarter of 1996, the Company completed spending on the
new Coburg, Oregon manufacturing facility started in 1995. During the second
half of 1996, construction began on the new manufacturing facility and
administrative offices in Wakarusa, Indiana which will enable the Company to
increase its production capacity of motor coaches. The total cost of the
Wakarusa facility is now estimated to be approximately $15.0 million, and the
plant is expected to be operational by the end of the second quarter of 1997.
The Company believes that cash flow from operations, funds available under
its credit facilities and the proceeds of the Offering will be sufficient to
meet the Company's liquidity requirements for the next 12 months. The Company
anticipates capital expenditures in 1997 will total approximately $17.0 to $20.0
million, of which an estimated $10.0 million will be used to finish construction
of the Wakarusa facility, $1.0 million will be used to set up the Springfield,
Oregon facility and up to $2.0 million will be used to upgrade the Company's
management information systems, including software to handle the "Year 2000"
issue. The Company may, however, require additional equity or debt financing to
address working capital and facilities expansion needs, particularly if the
Company further expands its operations to address greater than anticipated
growth in the market for its products. The Company may also from time to time
seek to acquire businesses that would complement the Company's current business,
and any such acquisition could require additional financing. There can be no
assurance that additional financing will be available if required or on terms
deemed favorable by the Company.
As is typical in the recreational vehicle industry, many of the Company's
retail dealers, including the Holiday World Dealerships, utilize wholesale floor
plan financing arrangements with third party lending institutions to finance
their purchases of the Company's products. Under the terms of these floor plan
arrangements, institutional lenders customarily require the recreational vehicle
manufacturer to agree to repurchase any unsold units if the dealer fails to meet
its commitments to the lender, subject to certain conditions. The Company has
agreements with several institutional lenders under which the Company currently
has repurchase obligations. The Company's contingent obligations under these
repurchase agreements are reduced by the proceeds received upon the sale of any
repurchased units. The Company's obligations under these repurchase agreements
vary from period to period. At March 29, 1997, approximately $137.0 million of
products sold by the Company to independent dealers were subject to potential
repurchase under existing floor plan financing agreements, with approximately
7.0% concentrated with one dealer. If the Company were obligated to repurchase a
significant number of products under any repurchase agreement, its business,
operating results and financial condition could be adversely affected
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings Per Share", which is
required to be adopted for periods ending after December 15, 1997. The following
table presents unaudited pro forma earnings per share, calculated in accordance
with the provisions of this new standard:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
MARCH 30, 1996 MARCH 29, 1997
----------------- -----------------
<S> <C> <C>
Basic........................................................ $ 0.14 $ 0.60
Diluted...................................................... $ 0.14 $ 0.57
</TABLE>
24
<PAGE>
BUSINESS
The Company is a leading manufacturer of premium Class A motor coaches and
towable recreational vehicles. The Company's product line consists of ten models
of motor coaches and five models of fifth wheel trailers and travel trailers
under the well known "Monaco" and "Holiday Rambler" brand names. The Company's
products, which are typically priced at the high end of their respective product
categories, range in suggested retail price from $60,000 to $750,000 for motor
coaches and from $15,000 to $70,000 for towables. The Company has achieved
significant market positions in the high end price range of the market segments
in which it competes. Based upon retail registrations in 1996, the Company
believes it had a 25% share of the market for High-Line Class A motor coaches
(units with retail prices above $120,000), an 11% share of the market for high
end fifth wheel trailers (units with retail prices above $24,000) and a 48%
share of the market for high end travel trailers (units with retail prices above
$20,000). The Company's products are sold through an extensive network of 168
dealerships located primarily in the United States and Canada.
Prior to March 1996, the Company's product line consisted exclusively of
High-Line Class A motor coaches. In March 1996, the Company acquired Holiday
Rambler, a manufacturer of a full line of Class A motor coaches and towables.
The Holiday Acquisition: (i) more than doubled the Company's net sales; (ii)
provided the Company with a significantly broader range of products, including
complementary High-Line Class A motor coaches and the Company's first product
offerings of fifth wheel trailers, travel trailers and entry-level to mid-range
motor coaches; and (iii) lowered the price threshold for first-time buyers of
the Company's products, thus making them more affordable for a significantly
larger base of potential customers. The Company believes that developing
relationships with a broader base of first-time buyers, coupled with the
Company's strong emphasis on quality, customer service and design innovation,
will foster brand loyalty and increase the likelihood that, over time, more
customers will trade-up through the Company's line of products. Attracting
larger numbers of first-time buyers is important to the Company because of the
Company's belief that many recreational vehicle customers purchase multiple
recreational vehicles during their lifetime.
INDUSTRY AND DEMOGRAPHIC DATA
Recreational vehicles are broadly classified as "motor coaches" (full-size
Class A motorhomes, Class B motorhomes (or van campers), Class C mini-motorhomes
and van conversions) and "towables" (fifth wheel trailers, travel trailers,
truck campers and folding camping trailers). Set forth below is a brief
description of the principal segments of the recreational vehicle market.
MOTOR COACHES
The RVIA defines a "motorhome," also known as a "motor coach," as a
self-propelled recreational vehicle chassis with permanently installed living
systems, including cooking, refrigeration, toilet, water and other systems.
CLASS A MOTOR COACHES are designed for full-time living. They include a
living room, kitchen, dining room, bedroom and bathroom. These vehicles
typically are equipped with a wide range of kitchen and bathroom appliances,
stereo, television and other amenities, including deluxe carpeting and fabrics,
couches, air conditioner, closets and other luxury options. Class A motor
coaches are built on specially designed heavy duty motor vehicle chassis to
provide safety and stability. The category of Class A motor coaches can be
further divided into two groups according to price points: High-Line Class A
motor coaches (defined as units with retail prices above $120,000) and
entry-level to mid-range Class A motor coaches (defined as units with retail
prices between $40,000 and $120,000). According to the RVIA, the 1996 industry
average retail price for Class A motor coaches was $78,965.
CLASS B MOTOR COACHES, also known as van campers, are automotive vans that
are converted by the recreational vehicle manufacturer to provide sleeping,
kitchen and toilet facilities. According to the RVIA, the 1996 industry average
retail price for Class B motor coaches was $42,953.
25
<PAGE>
CLASS C MOTOR COACHES are constructed on van chassis. Retaining the cab
section of the chassis, the recreational vehicle manufacturer adds the body
section with complete living quarters, including bathroom, kitchen, bedroom and
various appliances. According to the RVIA, the 1996 industry average retail
price for Class C motor coaches was $47,060.
TOWABLES
FIFTH WHEEL TRAILERS are transported by a pickup truck equipped with a
device known as a fifth wheel hitch. They are distinguished by their raised
forward section that extends over the bed of the pickup truck to form a spacious
and functional bi-level floor plan. According to the RVIA, the 1996 industry
average retail price for fifth wheel trailers was $22,673.
TRAVEL TRAILERS are towed by a bumper or frame hitch attached to the towing
vehicle. They are constructed with solid sidewalls and solid interior walls that
include beds, dinettes and fully functional kitchens. According to the RVIA, the
1996 industry average retail price for travel trailers was $14,213.
TRUCK CAMPERS slide into the bed of a pickup truck. They can be unloaded and
parked at home or at the campsite, enabling owners to use the truck with or
without the camper. According to the RVIA, the 1996 industry average retail
price for truck campers was $11,083.
FOLDING CAMPING TRAILERS are constructed with collapsible "tent" sidewalls
which fold for easy towing. When opened, camping trailers provide many of the
comforts of travel trailers, with beds, dinettes and fully functional kitchens.
According to the RVIA, the 1996 industry average retail price for folding
camping trailers was $4,957.
The following table shows the retail sales in dollars of Class A motor
coaches, fifth wheel trailers, travel trailers and the total recreational
vehicle market (excluding conversion vehicles), based on vehicle registration
data prepared by the RVIA.
INDUSTRY RETAIL SALES
<TABLE>
<CAPTION>
COMPOUND
ANNUAL
GROWTH
1992 1993 1994 1995 1996 RATE
--------- --------- --------- --------- --------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Class A motor coaches......................................... $ 1,748 $ 1,966 $ 2,555 $ 2,737 $ 2,882 13.3%
Fifth wheel trailers.......................................... $ 750 $ 810 $ 956 $ 950 $ 1,100 10.0%
Travel trailers............................................... $ 773 $ 834 $ 956 $ 977 $ 1,072 8.5%
Total recreational vehicle market............................. $ 4,282 $ 4,712 $ 5,690 $ 5,895 $ 6,327 10.3%
</TABLE>
Customers purchase recreational vehicles for a variety of purposes,
including camping, traveling, sightseeing, vacationing, retirement and enjoyment
of outdoor activities and sporting events. Recreational vehicle purchasers are
also often attracted to the "recreational vehicle lifestyle" as a way to enjoy
the outdoors in comfort and to join others in the comradery of recreational
vehicle activities. Thousands of campgrounds and recreational vehicle parks are
available through the U.S. Forest Service, other governmental agencies and
private organizations such as Coast-to-Coast Resorts, Kampgrounds of America,
Inc., Thousand Trails, Inc., Outdoor Resorts of America, Inc. and Fort
Wilderness, which is owned by The Walt Disney Company. These sites offer
electrical and water hook-ups in a wide variety of settings ranging from rugged
wilderness areas to exclusive country club-style resorts. Recreational vehicle
owners can also participate in the social aspects of the recreational vehicle
lifestyle by joining a recreational vehicle club, by attending any of the
numerous gatherings, known as "rallies," sponsored by the clubs or recreational
vehicle associations, or by attending tailgate parties at sporting events. Two
of the larger recreational vehicle clubs, the Good Sam Club and the Family Motor
Coach Association, have over 900,000 and 100,000 members, respectively. Rallies
sponsored by these associations can attract thousands of recreational vehicle
owners to a single location. These clubs also offer emergency road-side
services, publish magazines and offer group affinity benefits such as credit
cards and insurance.
26
<PAGE>
According to a 1994 study sponsored by the RVIA, approximately 8.2 million
households owned recreational vehicles (including conversion vehicles) in 1993,
up from 7.7 million households in 1988 and 5.8 million households in 1980.
Recreational vehicles are purchased by adults in all age ranges, but the highest
market penetration is with those individuals between the ages of 45 to 74.
According to the Census Bureau of the U.S. Department of Commerce, the number of
adults between the ages of 45 and 74 is projected to grow by approximately 41%
from 1995 through the year 2010, compared with a projected increase of
approximately 13% for the overall population, thereby representing an expanded
potential consumer market for recreational vehicle sales.
BUSINESS STRATEGY
The Company's strategy is to increase sales and earnings by attracting new
customers in both the Class A motor coach and towables market segments and
providing these customers with additional products as they choose to trade-up to
a higher priced product. Principal elements of this strategy include:
- CONTINUING TO OFFER HIGH QUALITY, PREMIUM PRODUCTS
Historically, the Company has targeted its motor coach and towable products
at the high end of each market segment in which it competes and has achieved
a significant market share in each of these market segments. With its focus
on the high end, the Company has gained a reputation for high quality,
premium products. By continuing to offer premium products in each of its
market segments, the Company is able to take advantage of the growing number
of its target customers, which the Company believes may be more affluent and
may retire earlier than prior generations. Additionally, the Company
believes that directing its product offerings towards the high end of each
market segment generally offers the opportunity to achieve higher gross
margins.
- INTRODUCING NEW PRODUCTS TO OFFER A BROADER PRICE RANGE
The Company intends to capitalize on its reputation as a high quality
manufacturer of premium motor coaches and towables to broaden the price
range of its products. By increasing the number of price points available to
potential customers, the Company plans to attract a wider range of buyers in
order to be better positioned to capture their trade-up business. The
Company believes that many recreational vehicle customers purchase multiple
recreational vehicles during their lifetime. The Company significantly
increased the price range of its product offerings with the Holiday
Acquisition by expanding its Class A motor coach line to include
complementary High-Line and entry-level to mid-range motor coaches and by
adding its first towable products. The Company plans to continue to broaden
the price range of its product offerings through selective new product
introductions. For example, the Company recently entered the mid-range fifth
wheel and travel trailer markets with the introduction of its Alumascape
models.
- EXPANDING PRODUCTION CAPACITY WHILE MAXIMIZING MANUFACTURING
EFFICIENCIES
In recent years, the Company has been capacity constrained in its High-Line
Class A motor coach production. As a result, the Company believes it has
lost sales opportunities. The Company expects that a portion of the new,
three line, motor coach production facility adjoining its existing Wakarusa,
Indiana facility will be operational by the end of the second quarter of
1997, which should almost double its motor coach manufacturing capacity. As
part of this process, the Company intends to relocate its Elkhart, Indiana
motor coach production to the Wakarusa facility which it believes will
increase production efficiencies and improve gross margins on its motor
coach products. Furthermore, this consolidation into the new facility will
make available space in the Elkhart facility that may be used to produce
additional towable products. In addition, the Company has leased a facility
in Springfield, Oregon to manufacture towable products which is expected to
be operational in the second quarter of 1997 and which should substantially
increase the Company's towable products manufacturing capacity.
27
<PAGE>
- MAINTAINING AND EXPANDING THE DEALER NETWORK
The Company has an extensive dealer network in the United States and Canada.
This dealer network provides customers with more accessible post-sales
service, affords the Company more direct customer communication and provides
the Company with a broad geographic presence in the market. The recreational
vehicle market is highly fragmented, with over 3,000 dealers in the United
States. There has been a recent trend toward consolidation in the industry
with the creation of larger "megadealers" which carry a broader product
range and emphasize superior quality and customer service. The Company
believes this trend is favorable to the Company due to its broad product
offerings, longstanding relationships with many of the leading dealers, and
the Company's focus on product quality, design innovation and customer
service.
The Company's strategy is to expand further its dealer network by adding
dealers that are more focused on selling entry-level to mid-range products
and expanding into currently underpenetrated markets including the West
Coast and Canada. To accomplish this, the Company plans to selectively grow
the number of motor coach dealers to increase geographic coverage and
density, and to aggressively add new dealers for its towable products. To
support this strategy, the Company recently added five account executives to
focus exclusively on towable products.
- EMPHASIZING NEW PRODUCT DESIGN AND INNOVATION
The Company has successfully introduced a number of industry-leading
product design innovations that the Company believes have been important
elements in differentiating its products from those of its competitors.
These products include its Roadmaster semi-monocoque chassis (which enhances
ride stability and performance), kitchen suite slide (which expands the
living space in the kitchen/ dining area), flat-floored coaches and
one-piece windshields. The Company believes its innovative designs and its
emphasis on the quality and value of each model have supported the Company's
penetration of the high end of various product categories. The Company's
focus on product innovation has led to a series of successful new product
introductions and model redesigns in the last eight years. To maintain its
product innovation and brand quality, the Company modifies and improves each
model yearly and typically redesigns models at least every three to four
years to meet changing consumer preferences. The Company also focuses on the
vertical integration of its manufacturing process, which allows the Company
to more quickly introduce new designs in response to changes in consumer
preferences.
- PROMOTING CUSTOMER SATISFACTION AND BRAND LOYALTY
The Company believes that customer satisfaction is vitally important in the
recreational vehicle market because of the large number of repeat customers
and the rapid communication of business reputations among recreational
vehicle enthusiasts. The Company believes that a significant number of its
customers are repeat customers and that this is largely due to the high
quality of the Company's products and its emphasis on customer satisfaction.
The Company also believes that responsive and professional customer service
is necessary to promote customer satisfaction and brand loyalty. The
Company's approximately 180-person service and warranty staff provides
support to both the Company's retail customers and its dealer network. The
Company maintains individualized production records and a computerized
warranty tracking system which enables the Company's service personnel to
identify problems quickly and to provide individualized customer service.
Another important element in promoting customer satisfaction and brand
loyalty is the Company's advertising and marketing activities. The Company
advertises regularly in trade journals and magazines and participates in
more than 150 recreational vehicle trade shows and rallies each year. The
Company provides its customers complimentary service for minor repairs at
several of these trade shows and rallies. The Company also attempts to
foster brand loyalty by sponsoring clubs for the owners of its products so
that the owners can share experiences and enjoy the comradery of other
Monaco and Holiday Rambler owners.
28
<PAGE>
PRODUCTS
The Company currently manufactures ten motor coach and five towable models,
each of which has distinct features and attributes designed to target the model
to a particular suggested retail price range. The Company's product offerings
currently target three segments of the recreational vehicle market: Class A
motor coaches, fifth wheel trailers and travel trailers. The Company does not
currently compete, and has no present plans to compete, in any other segment of
the recreational vehicle industry. The following table highlights the Company's
product offerings as of the date of this Prospectus:
COMPANY MOTOR COACH PRODUCTS
<TABLE>
<CAPTION>
CURRENT SUGGESTED
MODEL RETAIL PRICE RANGE BRAND
- -------------------------------------------------- -------------------- -------------------
<S> <C> <C>
Royale Coach...................................... $550,000-$750,000 Monaco
Signature Series.................................. $300,000-$400,000 Monaco
Executive......................................... $250,000-$300,000 Monaco
Navigator......................................... $250,000-$300,000 Holiday Rambler
Dynasty........................................... $205,000-$240,000 Monaco
Imperial.......................................... $190,000-$210,000 Holiday Rambler
Windsor........................................... $150,000-$175,000 Monaco
Endeavor-Diesel................................... $130,000-$145,000 Holiday Rambler
Endeavor-Gasoline................................. $ 80,000-$ 95,000 Holiday Rambler
Vacationer........................................ $ 60,000-$ 85,000 Holiday Rambler
</TABLE>
COMPANY TOWABLE PRODUCTS
<TABLE>
<CAPTION>
CURRENT SUGGESTED
MODEL RETAIL PRICE RANGE BRAND
- ----------------------------------------------------- ------------------ -------------------
<S> <C> <C>
Imperial Fifth Wheel................................. $50,000-$70,000 Holiday Rambler
Aluma-Lite Fifth Wheel............................... $35,000-$50,000 Holiday Rambler
Alumascape Fifth Wheel............................... $20,000-$35,000 Holiday Rambler
Aluma-Lite Travel Trailer............................ $25,000-$45,000 Holiday Rambler
Alumascape Travel Trailer............................ $15,000-$25,000 Holiday Rambler
</TABLE>
In the first quarter of 1997, the average unit wholesale selling prices of
the Company's motor coaches, fifth wheel trailers and travel trailers were
approximately $111,500, $34,800 and $20,800, respectively.
The Company's recreational vehicles are designed to offer all the comforts
of home within a 190 to 400 square foot area. Accordingly, the interior of the
recreational vehicle is designed to maximize use of available space. The
Company's products are designed with five general areas, all of which are
smoothly integrated to form comfortable and practical mobile accommodations. The
five areas are the living room, kitchen, dining room, bathroom and bedroom. For
each model, the Company offers a variety of interior layouts.
29
<PAGE>
An interior layout for a Signature Series motor coach is shown below:
[Drawing of interior floorplan of Signature Series motor coach]
An interior layout for an Imperial Fifth Wheel Trailer (with double
slide-outs) is shown below:
[Drawing of interior floorplan of Imperial Fifth Wheel Trailer]
An interior layout for an Alumascape Travel Trailer (with a slide-out) is
shown below:
[Drawing of interior floorplan of Alumascape Travel Trailer]
Each of the Company's recreational vehicles comes fully equipped with a wide
range of kitchen and bathroom appliances, audio and visual electronics,
communication devices, and other amenities, including couches, dining tables,
closets and storage spaces. All of the Company's recreational vehicles
incorporate products from well-recognized suppliers, including stereos, video
cassette recorders and televisions from Quasar and Sony, microwave ovens from
Sharp and General Electric, stoves and ranges from KitchenAid and Modern Maid,
and refrigerators from Dometic and Norcold. The Company's high end products
offer
30
<PAGE>
top-of-the-line amenities, including 20" Sony stereo televisions, fully
automatic DSS (satellite) systems, Corian kitchen and bath countertops, imported
ceramic tile and leather furniture.
PRODUCT DESIGN
To address changing consumer preferences, the Company modifies and improves
its products each model year and typically redesigns each model every three or
four years. The Company's designers work with the Company's marketing,
manufacturing and service departments to design a product that is appealing to
consumers, practical to manufacture and easy to service. The designers try to
maximize the quality and value of each model at the strategic retail price point
for that model. The marketing and sales staffs suggest features or
characteristics that they believe could be integrated into the various models to
differentiate the Company's products from those of its competitors. By working
with manufacturing personnel, the Company's product designers engineer the
recreational vehicles so that they can be built efficiently and with high
quality. Service personnel suggest ideas to improve the serviceability and
reliability of the Company's products and give the designers feedback on the
Company's past designs.
The exteriors of the Company's recreational vehicles are designed to be
aesthetically appealing to consumers, aerodynamic in shape for fuel efficiency
and practical to manufacture. Larry Shinoda, who is credited with designing the
1963 Corvette Stingray automobile, assists as a consultant to the Company in the
design process. The Company also has an experienced team of
computer-aided-design personnel to complete the product design and produce
prints from which the products will be manufactured.
SALES AND MARKETING
DEALERS
Over the past five years, the Company has expanded its dealer network from
34 dealerships in 1992 to 168 dealerships primarily located in the United States
and Canada at March 29, 1997, including 116 dealerships added as a result of the
Holiday Acquisition. The Company's dealerships generally sell either Monaco
motor coaches or Holiday Rambler motor coaches and towables. The Company intends
to expand its dealer network, primarily by adding towables-only dealers. The
Company maintains an internal sales organization consisting of 17 account
executives who service the Company's dealer network, including five recently
hired account executives who will be focusing exclusively on the towables
market.
The Company analyzes and selects new dealers on the basis of such criteria
as location, marketing ability, sales history, financial strength and the
capability of the dealer's repair services. The Company provides its dealers
with a wide variety of support services, including advertising subsidies and
technical training, and offers certain model pricing discounts to dealers who
exceed wholesale purchase volume milestones. The Company's sales staff is also
available to educate dealers about the characteristics and advantages of the
Company's recreational vehicles compared with competing products. The Company
offers dealers geographic exclusivity to carry a particular model. While the
Company's dealership contracts have renewable one or two-year terms,
historically the Company's dealer turnover rate has been low.
Dealers typically finance their inventory through revolving credit
facilities established with asset-based lending institutions, including
specialized finance companies and banks. It is industry practice that such
"floor plan" lenders require recreational vehicle manufacturers to agree to
repurchase (for a period of 12 to 18 months from the date of the dealer's
purchase) motor coaches and towables previously sold to the dealer in the event
the dealer defaults on its financing agreements. The Company's contingent
obligations under these repurchase agreements are reduced by the proceeds
received upon the sale of any repurchased units. See "Management's Discussion
and Analysis of Financial Conditions and Results of Operations-- Liquidity and
Capital Resources", and Note 17 of Notes to the Company's Consolidated Financial
Statements. The Company was not required to repurchase any of its products in
1996 pursuant to these repurchase agreements.
31
<PAGE>
As a result of the Holiday Acquisition, the Company acquired ten Holiday
World Dealerships. The Company sold seven of these Holiday World Dealerships in
1996 and one in the first quarter of 1997 and plans to sell the remaining two
dealerships.
ADVERTISING AND PROMOTION
The Company advertises regularly in trade journals and magazines,
participates in cooperative advertising programs with its dealers, and produces
color brochures depicting its models' performance features and amenities. The
Company also promotes its products with direct incentive programs to dealer
sales personnel linked to sales of particular models.
A critical marketing activity for the Company is its participation in the
more than 150 recreational vehicle trade shows and rallies each year. National
trade shows and rallies, which can attract as many as 40,000 attendees, are an
integral part of the Company's marketing process because they enable dealers and
potential retail customers to compare and contrast all the products offered by
the major recreational vehicle manufacturers. Setting up attractive display
areas at major trade shows to highlight the newest design innovations and
product features of its products is critical to the Company's success in
attracting and maintaining its dealer network and in generating enthusiasm at
the retail customer level. The Company also provides complimentary service for
minor repairs to its customers at several rallies and trade shows.
The Company attempts to encourage and reinforce customer loyalty through
clubs for the owners of its products so that they may share experiences and
communicate with each other. The Company's clubs currently have more than 13,000
members. The Company publishes magazines to enhance its relations with these
clubs and holds rallies for clubs to meet periodically to view the Company's new
models and obtain maintenance and service guidance. Attendance at
Company-sponsored rallies can be as high as 1,800 recreational vehicles. The
Company frequently receives support from its dealers and suppliers to host these
rallies.
CUSTOMER SERVICE
The Company believes that customer satisfaction is vitally important in the
recreational vehicle market because of the large number of repeat customers and
the rapid communication of business reputations among recreational vehicle
enthusiasts. The Company also believes that service is an integral part of the
total product the Company delivers and that responsive and professional customer
service is consistent with the premium image the Company strives to convey in
the marketplace.
The Company offers a warranty to all purchasers of its new vehicles. The
Company's current warranty covers its products for one year. In addition,
customers are protected by the warranties of major component suppliers such as
those of Cummins (diesel engines), Eaton (axles), Allison (transmissions) and
Chevrolet, Ford and Freightliner (chassis). The Company's warranty covers all
manufacturing-related problems and part and system failures, regardless of
whether the repair is made at a Company facility or by one of the Company's
dealers or authorized service centers. As of March 29, 1997, the Company had 168
dealerships providing service to owners of the Company's products. In addition,
owners of the Company's diesel products have access to the entire Cummins dealer
network, which includes more than 750 repair centers.
The Company operates service centers in Coburg, Oregon and Elkhart and
Wakarusa, Indiana. The Company currently has approximately 180 employees in
customer service. The Company maintains individualized production records and a
computerized warranty tracking system which enable the Company's service
personnel to identify problems quickly and to provide individualized customer
service. While many problems can be resolved on the telephone, the customer may
be referred to a nearby dealer or service center. The Company believes that
dedicated customer service phone lines are an ideal way to interact directly
with the Company's customers and to quickly address their technical problems.
32
<PAGE>
MANUFACTURING
The Company currently operates manufacturing facilities in Coburg, Oregon,
where it manufactures Signature Series, Executive, Dynasty and Navigator motor
coaches; in Elkhart, Indiana, where it manufactures Dynasty and Windsor motor
coaches and Alumascape fifth wheel and travel trailers; and in Wakarusa,
Indiana, where it manufactures Imperial, Endeavor and Vacationer motor coaches
and Imperial and Aluma-Lite fifth wheel and travel trailers. The Company also
operates its Royale Coach bus conversion facility in Elkhart, Indiana. The
Company's current motor coach production capacity is three units per day at its
Coburg facility, and a combined 11.5 units per day at its Wakarusa and Elkhart
facilities. The Company's production of motor coaches has been limited by
capacity constraints in recent years. The Company's current towables production
capacity is a combined 16 units per day at its Wakarusa and Elkhart facilities.
The Company is in the process of expanding its manufacturing capacity at its
Wakarusa location and has leased an additional facility in Springfield, Oregon.
The new Wakarusa facility, which is expected to be operational by the end of the
second quarter of 1997, will enable the Company to consolidate Indiana motor
coach production in Wakarusa, freeing up existing space at the Elkhart facility
which may be used to increase production of towable products. As part of the new
Wakarusa facility, the Company may construct a new paint facility in order to
take advantage of the benefits of vertical integration and reduce production
costs. The Springfield towables facility is expected to be operational in the
second quarter of 1997. Upon completion of the expansion of its manufacturing
capacity, the Company should have motor coach production capacity of 25 units
per day in Wakarusa, and three units per day in Coburg, and towables production
capacity of a combined 16 units per day in its Elkhart and Wakarusa facilities,
and eight units per day in Springfield. In addition, if the Company decides to
use all the existing free space at the Elkhart facility to produce towable
products, towables production capacity at the Elkhart and Wakarusa facilities
would increase to a combined 24 units per day. The Company believes that this
expanded manufacturing capacity will free the Company from capacity constraints
on its motor coaches and allow the Company to gradually increase its overall
production volumes for motor coaches and towables, consistent with anticipated
market demand.
The Company believes that its manufacturing process is one of the most
vertically integrated in the recreational vehicle industry. By manufacturing a
variety of items, including the Roadmaster semi-monocoque chassis, plastic
components, some of its cabinetry and fiberglass parts, as well as many
subcomponents, the Company maintains increased control over scheduling,
component production and overall product quality. In addition, vertical
integration enables the Company to be more responsive to market dynamics.
Each facility has several stations for manufacturing, organized into four
broad categories: chassis manufacturing, body manufacturing, painting and
finishing. It takes from three weeks to two months to build each unit, depending
on the product. The Company keeps a detailed log book during the manufacture of
each product and has a computerized service tracking system.
Each unit is given an inspection during which its appliances and plumbing
systems are thoroughly tested. As a final quality control check, each motor
coach is given a road test. To further ensure both dealer and end-user
satisfaction, the Company pays a unit fee per recreational vehicle to its
dealers so that they will thoroughly inspect each product upon delivery, and
return a detailed report form.
The Company purchases raw materials, parts, subcomponents, electronic
systems, and appliances from approximately 750 vendors. These items are either
directly mounted in the vehicle or are utilized in subassemblies which the
Company assembles before installation in the vehicle. The Company attempts to
minimize its level of inventory by ordering most parts as it needs them. Certain
key components that require longer purchasing lead times are ordered based on
planned needs. Examples of these components are diesel engines, axles,
transmissions, chassis and interior designer fabrics. The Company has a variety
of major suppliers, including Allison, Chevrolet, Cummins, Eaton, Ford and
Freightliner. The Company does
33
<PAGE>
not have any long-term supply contracts with these suppliers or their
distributors, but believes it has good relationships with them. To minimize the
risks associated with reliance on a single-source supplier, the Company
typically keeps a 60-day supply of axles, engines, chassis and transmissions in
stock or available at the suppliers' facilities and believes that, in an
emergency, other suppliers could fill the Company's needs on an interim basis.
However, there can be no assurance that these suppliers will be able to meet the
Company's future requirements for these components. An extended delay or
interruption in the supply of any components obtained from a single or limited
source supplier could have a material adverse effect on the Company's business,
results of operations and financial condition.
BACKLOG
The Company's products are generally manufactured against orders from the
Company's dealers. As of March 29, 1997, the Company's backlog of orders was
$78.6 million compared with $68.9 million at March 30, 1996. The Company
includes in its backlog all accepted purchase orders from dealers shippable
within the next six months. Orders in backlog can be canceled at the option of
the purchaser at any time without penalty and, therefore, backlog should not be
used as a measure of future sales.
FACILITIES
The Company is headquartered in Coburg, Oregon, approximately 100 miles from
Portland, Oregon. The following table summarizes the Company's current and
planned manufacturing facilities:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
MANUFACTURING FACILITY OWNED/LEASED FOOTAGE PRODUCTS MANUFACTURED
- ----------------------------------------------- -------------------- ------------ -----------------------------
<S> <C> <C> <C>
Coburg, Oregon................................. Owned 300,000 Motor Coaches
Elkhart, Indiana............................... Owned 325,000 Motor Coaches, Towables
Elkhart, Indiana............................... Leased 28,000 Bus Conversions
Wakarusa, Indiana.............................. Owned/Leased(1) 516,000 Motor Coaches, Towables
Wakarusa, Indiana(2)........................... Owned 500,000 Motor Coaches
Springfield, Oregon(3)......................... Leased 100,000 Towables
</TABLE>
- ------------------------
(1) The Company leases approximately 110,510 square feet of this facility.
(2) Includes approximately 400,000 square feet. Expected to be operational by
the end of the second quarter of 1997.
(3) Expected to be operational in the second quarter of 1997.
As of the date of this Prospectus, the Company's production of motor coaches
is capacity constrained. After the new Wakarusa, Indiana and Springfield, Oregon
plants are operational and the transfer of the Elkhart, Indiana motor coach
production has been successfully completed, the Company believes that its
existing facilities will be sufficient to meet its production requirements for
the foreseeable future. Should the Company require increased production capacity
in the future, the Company believes that additional or alternative space
adequate to serve the Company's foreseeable needs would be available on
commercially reasonable terms.
COMPETITION
The market for recreational vehicles is highly competitive. The Company
currently encounters significant competition at each price point for its
recreational vehicle products. The Company believes that the principal
competitive factors that affect the market for the Company's products include
product quality, product features, reliability, performance, quality of support
and customer service, loyalty of customers, brand recognition and price. The
Company believes that it competes favorably against its competitors with respect
to each of these factors. The Company's competitors include, among others:
Coachmen Industries, Inc., Fleetwood Enterprises, Inc., National R.V. Holdings,
Inc., Skyline Corporation,
34
<PAGE>
SMC Corporation, Thor Industries, Inc. and Winnebago Industries, Inc. Some of
the Company's competitors have significantly greater financial resources and
more extensive marketing capabilities than the Company. There can be no
assurance that either existing or new competitors will not develop products that
are superior to or that achieve better consumer acceptance than the Company's
products, or that the Company will continue to remain competitive.
GOVERNMENT REGULATION
The manufacture and operation of recreational vehicles are subject to a
variety of federal, state and local regulations, including the National Traffic
and Motor Vehicle Safety Act and safety standards for recreational vehicles and
their components that have been promulgated by the Department of Transportation.
These standards permit the National Highway Traffic Safety Administration to
require a manufacturer to repair or recall vehicles with safety defects or
vehicles that fail to conform to applicable safety standards. Because of its
sales in Canada, the Company is also governed by similar laws and regulations
promulgated by the Canadian government. The Company has on occasion voluntarily
recalled certain products. The Company's operating results could be adversely
affected by a major product recall or if warranty claims in any period exceed
warranty reserves.
The Company is a member of the RVIA, a voluntary association of recreational
vehicle manufacturers and suppliers, which promulgates recreational vehicle
safety standards. Each of the products manufactured by the Company has an RVIA
seal affixed to it to certify that such standards have been met.
Many states regulate the sale, transportation and marketing of recreational
vehicles. The Company is also subject to state consumer protection laws and
regulations, which in many cases require manufacturers to repurchase or replace
chronically malfunctioning recreational vehicles. Some states also legislate
additional safety and construction standards for recreational vehicles.
The Company is subject to regulations promulgated by the Occupational Safety
and Health Administration ("OSHA"). The Company's plants are periodically
inspected by federal or state agencies, such as OSHA, concerned with workplace
health and safety.
The Company believes that its products and facilities comply in all material
respects with the applicable vehicle safety, consumer protection, RVIA and OSHA
regulations and standards. Amendments to any of the foregoing regulations and
the implementation of new regulations could significantly increase the cost of
manufacturing, purchasing, operating or selling the Company's products and could
materially and adversely affect the Company's net sales and operating results.
The failure of the Company to comply with present or future regulations could
result in fines being imposed on the Company, potential civil and criminal
liability, suspension of production or cessation of operations.
The Company is subject to product liability and warranty claims arising in
the ordinary course of business. To date, the Company has been successful in
obtaining product liability insurance on terms the Company considers acceptable.
The Company's current policies jointly provide coverage against claims based on
occurrences within the policy periods up to a maximum of $26.0 million for each
occurrence and $27.0 million in the aggregate. There can be no assurance that
the Company will be able to obtain insurance coverage in the future at
acceptable levels or that the costs of insurance will be reasonable.
Furthermore, successful assertion against the Company of one or a series of
large uninsured claims, or of one or a series of claims exceeding any insurance
coverage, could have a material adverse effect on the Company's business,
operating results and financial condition.
Certain U.S. tax laws currently afford favorable tax treatment for the
purchase and sale of recreational vehicles. These laws and regulations have
historically been amended frequently, and it is likely that further amendments
and additional laws and regulations will be applicable to the Company and its
products in the future. Furthermore, no assurance can be given that any increase
in personal income tax rates will not have a material adverse effect on the
Company's business, operating results and financial condition.
35
<PAGE>
ENVIRONMENTAL REGULATION AND REMEDIATION
REGULATION
The Company's recreational vehicle manufacturing operations are subject to a
variety of federal and state environmental regulations relating to the use,
generation, storage, treatment and disposal of hazardous materials. These laws
are often revised and made more stringent, and it is likely that future
amendments to these laws will impact the Company's operations.
The Company has submitted applications for "Title V" air permits for its
cabinet making facility in Nappanee, Indiana and its operations in Elkhart,
Indiana and Wakarusa, Indiana, including the new motor coach production facility
in Wakarusa, and is in the process of preparing such applications for its
facility in Coburg, Oregon. The Company has provided the relevant state agency
with a schedule of completion for the Coburg application, which will be filed
after the regulatory deadline, and the agency has indicated to the Company that
the schedule will be acceptable.
The Company does not currently anticipate that any additional air pollution
control equipment will be required as a condition of receiving new air permits,
although new regulations and their interpretation may change over time, and
there can be no assurance that additional expenditures will not be required.
While the Company has in the past provided notice to the relevant state
agencies that air permit violations have occurred at its facilities, the Company
has resolved all such issues with those agencies, and the Company believes that
there are no ongoing violations of any of its existing air permits at any of its
owned or leased facilities at this time. However, the failure of the Company to
comply with present or future regulations could subject the Company to: (i)
fines; (ii) potential civil and criminal liability; (iii) suspension of
production or cessation of operations; (iv) alterations to the manufacturing
process; or (v) costly clean-up or capital expenditures, any of which could have
a material adverse effect on the Company's business, results of operations and
financial condition.
REMEDIATION
The Company has identified petroleum and/or solvent ground contamination at
the Elkhart, Indiana manufacturing facility, and the Wakarusa, Indiana
manufacturing facility and Leesburg, Florida dealership acquired in the Holiday
Acquisition. The Company has remediated the Elkhart site and recommended to the
relevant Indiana regulatory authority that no further action be taken because
the remaining contaminants are below the state's clean-up standards. The Company
currently expects that the regulatory authority will concur with this finding,
although there is no assurance that such approval will be forthcoming or that
the regulatory authority will not require additional investigation and/or
remediation. The Company is investigating the Wakarusa site and expects soon to
recommend to the relevant regulatory authority that no further action be taken
at that site based on its consultant's view that there is a limited risk
associated with the remaining contamination. It is unclear whether the
regulatory authority will concur in this finding or whether additional
remediation will be required. In Florida, the Company and its consultants are
conducting investigations to determine the appropriate remediation program to
recommend to the relevant Florida regulatory authority for the contamination
associated with former underground storage tanks at the Leesburg dealership.
With regard to the Wakarusa and Leesburg sites, the Company is indemnified by
Harley-Davidson for investigation and remediation costs incurred by the Company
(subject to a $300,000 deductible in the case of the Wakarusa site and subject
to a $10 million maximum in the case of the Wakarusa site and a $5 million
maximum in the case of the Leesburg site for matters, such as these, that were
indentified at the closing of the Holiday Acquisition).
The Company does not believe that any costs it will bear with respect to
continued investigation or remediation of the foregoing locations and other
facilities currently or formerly owned or occupied by the Company will have a
material adverse effect upon the Company's business, results of operations or
financial condition. Nevertheless, there can be no assurance that the Company
will not discover additional
36
<PAGE>
environmental problems or that the cost to the Company of the remediation
activities will not exceed the Company's expectations.
EMPLOYEES
As of March 29, 1997, the Company had 2,244 employees, including 1,798 in
production, 50 in sales, 180 in service and 216 in management and
administration. The Company's employees are not represented by any collective
bargaining organization, and the Company has never experienced a work stoppage.
The Company believes its relations with its employees are good.
LEGAL PROCEEDINGS
The Company is involved in legal proceedings arising in the ordinary course
of its business, including a variety of product liability and warranty claims
typical in the recreational vehicle industry. In addition, in connection with
the Holiday Acquisition, the Company assumed most of the liabilities of that
business, including product liability and warranty claims. The Company does not
believe that the outcome of its pending legal proceedings will have a material
adverse effect on the business, results of operations or financial condition of
the Company.
37
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
March 29, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Kay L. Toolson......................... 54 Chairman, Chief Executive Officer and President
John W. Nepute......................... 45 Vice President of Finance and Chief Financial Officer
D. Page Robertson...................... 58 President of Monaco Division
James V. Sheldon....................... 56 President of Holiday Rambler Division and Chief Operating Officer,
Indiana Operations
Richard E. Bond........................ 43 Vice President, Secretary and General Counsel
Michael J. Kluger...................... 40 Director
Carl E. Ring, Jr.(1)(2)................ 59 Director
Richard A. Rouse(1)(2)................. 51 Director
Roger A. Vandenberg(2)................. 49 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee of the Board of Directors
(2) Member of the Compensation Committee of the Board of Directors
MR. TOOLSON has served as President and Chief Executive Officer of the
Company and the Predecessor since 1986 and as Chairman of the Company since July
1993. From September 1982 to August 1986, Mr. Toolson served as Executive Vice
President of Executive Industries, Inc., a motor coach manufacturer. Prior to
joining Executive Industries, Mr. Toolson served from 1973 until 1982 as Vice
President of Kings Highway Mobile Industries, Inc., a motor coach manufacturer.
He holds a B.S. degree in Business Administration and Computer Science and an
M.B.A. degree, both from Utah State University.
MR. NEPUTE has served the Company and the Predecessor in his current
capacity as Vice President of Finance and Chief Financial Officer since January
1991. From January 1988 until January 1991 he served the Predecessor as
Controller. From 1977 to 1988, Mr. Nepute served as Controller of Tiffany Drug
Stores, Inc., a privately-held retail chain. Mr. Nepute holds a B.S. degree in
Industrial Management from Georgia Institute of Technology and an M.B.A. degree
in Finance from the University of Oregon.
MR. ROBERTSON has served as the President of the Monaco Division since
January 1997. From October 1995 until January 1997, Mr. Robertson served as
President of the Company. Mr. Robertson also served the Company and its
Predecessor as Vice President of Sales and Marketing from January 1991 to August
1995. From January 1988 until January 1991, he served the Company's predecessor
as National Sales Manager. Mr. Robertson attended Western Carolina College and
Louisburg College, where he studied business administration and marketing.
MR. SHELDON has served as the President of the Holiday Rambler Division and
Chief Operating Officer, Indiana Operations of the Company since March 1996.
From 1971 to 1995, Mr. Sheldon held several key management positions with the
Recreational Group of Fleetwood Enterprises, including Plant General Manager,
Director of Sales, Director of Product Development, Director of Marketing, and
Managing Director of European Operations. Mr. Sheldon holds a B.S. degree in
Economics from Georgetown University and an M.B.A. degree in Marketing from
George Washington University.
MR. BOND has served as Vice President, Secretary and General Counsel of the
Company since February 1997 and has been an employee of the Company since
January 1997. From 1987 to December 1996 he served as Vice President, Secretary
and General Counsel of Holiday Rambler. He also served
38
<PAGE>
as Holiday Rambler's Vice President and Assistant General Counsel from 1984 to
1987. Prior to that and from 1979, Mr. Bond was engaged in the private practice
of law in Oregon and Indiana. Mr. Bond holds an A.B. in Economics and History
from Indiana University and a J.D. from Willamette University College of Law.
MR. KLUGER has served as a director of the Company since March 1993. He is a
founding partner of Liberty Partners, L.P., whose general partner is Liberty
Capital Partners, Inc., a New York investment management firm, where he has
served as Managing Director since September 1992. For five years prior thereto,
Mr. Kluger was a Director and Senior Vice President of Merrill Lynch
Interfunding Inc., a subsidiary of Merrill Lynch & Co., an investment banking
and brokerage firm. Mr. Kluger is also a director and stockholder of Liberty
Capital Partners, Inc.
MR. RING has served as a director of the Company since March 1993. He is a
founding partner of Liberty Partners, L.P., whose general partner is Liberty
Capital Partners, Inc., a New York investment management firm, where he has
served as Managing Director since September 1992. From June 1991 to September
1992 he was President of Eden, Miller & Co., Incorporated, an investment banking
firm. For more than five years prior thereto, Mr. Ring was a Managing Director
of Lehman Brothers, an investment banking and brokerage firm. Mr. Ring is also a
director and stockholder of Liberty Capital Partners, Inc.
MR. ROUSE has served as a director of the Company since July 1993. He
currently serves as Chairman of Emergency Road Service, Inc., a privately-held
nationwide roadside assistance company, which position he has held since July
1991. From July 1988 to July 1991, he was President of Trailer Life Enterprises,
Inc., a publisher and sponsor of recreational vehicle publications and clubs.
MR. VANDENBERG has served as a director of the Company since March 1993. He
currently serves as the President of Cariad Capital, Inc., which he founded in
January 1992, and as a Managing Director of Narragansett Capital, Inc., a
private investment firm, a position he has held since June 1986. Mr. Vandenberg
is also a general partner of the general partner of Narragansett Capital
Partners -A and - B, L.P. ("NCPAB"), related venture capital funds, and a
general partner of the general partner of Narragansett First Fund, a venture
capital fund. One of the portfolio companies with which NCPAB is affiliated
filed for protection under Federal bankruptcy laws in 1993, although it has
subsequently emerged from bankruptcy and is operating profitably. Mr. Vandenberg
served as the President and a director of this portfolio company, Glasstech
Industries, Inc., and as a director and vice chairman of its operating company
subsidiary, Glasstech, Inc. ("Glasstech"), from 1989 to December 1994. Glasstech
manufactures equipment for bending and tempering glass. Mr. Vandenberg is also a
director of Wellman, Inc., a polyester fiber manufacturer, and a general partner
of Monaco Capital Partners.
The Board of Directors is divided into two classes with each director
serving a two year term and one class being elected at each year's annual
meeting of stockholders. Directors Kluger and Toolson are in the class of
directors whose term expires at the 1998 Annual Meeting of Stockholders and
Directors Ring, Rouse and Vandenberg are in the class of directors whose term
expires at the 1997 Annual Meeting of Stockholders.
All executive officers serve at the discretion of the Board of Directors.
There are no family relationships between any of the directors or executive
officers of the Company.
STOCKHOLDERS' AGREEMENT
In March 1993, all the holders of the shares of Common Stock then
outstanding and the Company entered into a Stockholders Agreement, which was
amended in August 1993 (the "Stockholders Agreement"). The stockholders subject
to the Stockholders Agreement are obligated to vote for two nominees to the
Company's Board of Directors presented by Liberty Investment Partners II, two
nominees presented by Monaco Capital Partners, and one nominee chosen by the
Company's executive officers from among the executive officers. The Stockholders
Agreement also provides that so long as Mr. Toolson is the Company's
39
<PAGE>
Chief Executive Officer, he will serve as the nominee of the executive officers.
The Stockholders Agreement will terminate upon the closing of the Offering.
REGISTRATION RIGHTS
Monaco Capital Partners, Liberty Investment Partners II and certain members
of the Company's management have the right to require the Company to register
their shares of Common Stock under the Securities Act under certain
circumstances. See "Description of Capital Stock--Registration Rights."
40
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of May 20, 1997 (except as
otherwise indicated), and as adjusted to reflect the sale of the 1,700,000
shares offered by this Prospectus, by: (i) each person who is known by the
Company to own beneficially more than five percent of the Common Stock, (ii)
each of the Company's directors, (iii) each of the Company's executive officers,
(iv) all directors and executive officers as a group, and (v) each Selling
Stockholder. Except as indicated in the footnotes to this table, the persons
named in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING
--------------------------- SHARES ---------------------------
NAME SHARES PERCENTAGE(1) TO BE SOLD(2) SHARES PERCENTAGE(1)
- ---------------------------------------------------- ---------- --------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Liberty Partners Holdings 2, L.L.C. (3) ............ 1,276,931 28.7% 441,717 835,214 15.3%
c/o Liberty Capital Partners, Inc.
1177 Avenue of the Americas
New York, N.Y. 10036
Michael J. Kluger (4) .............................. 1,277,931 28.8% 441,717 836,214 15.3%
c/o Liberty Capital Partners, Inc.
1177 Avenue of the Americas
New York, N.Y. 10036
Carl E. Ring, Jr. (5) .............................. 1,276,931 28.7% 441,717 835,214 15.3%
c/o Liberty Capital Partners, Inc.
1177 Avenue of the Americas
New York, N.Y. 10036
Kay L. Toolson (6) ................................. 637,107 14.3% 125,000 512,107 9.3%
c/o Monaco Coach Corporation
91320 Industrial Way
Coburg, OR 97408
Roger A. Vandenberg (7) ............................ 271,683 6.1% 30,000 241,683 4.4%
c/o Cariad Capital, Inc.
1 Turks Head Place
Providence, R.I. 02903
Bass Management Trust (8) .......................... 251,000 5.6% -- 251,000 4.6%
201 Main St., Suite 3200
Fort Worth, TX 76102
D. Page Robertson (6)............................... 67,990 1.5% 20,000 47,990 *
John W. Nepute (6).................................. 44,750 1.0% 10,000 34,750 *
Richard A. Rouse (6)................................ 12,800 * -- 12,800 *
James V. Sheldon (6)................................ 1,748 * -- 1,748 *
Richard E. Bond (6)................................. 240 * -- 240 *
All directors and executive officers as a group (9
persons) (4)(5)(6)(7)............................. 2,314,249 51.7% 626,717 1,687,532 30.6%
<CAPTION>
OTHER SELLING STOCKHOLDERS
- ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
HR, LLC (9)......................................... 230,767 4.9% 230,767 -- --
Andreas P. Graham (10).............................. 53,689 1.2% 28,689 25,000 *
B. Ray Mehaffey (6)................................. 47,973 1.1% 10,000 37,973 *
Mary A. Ferreira.................................... 7,846 * 3,846 4,000 *
Monaco Capital Partners (7)......................... 100 * 100 -- --
</TABLE>
- ------------------------
* Less than one percent.
41
<PAGE>
(1) Applicable percentage of beneficial ownership both before and after the
Offering is based on 4,442,512 shares of Common Stock outstanding as of May
20, 1997 together with applicable options for each stockholder. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission, and includes voting and investment power with respect
to shares. Shares of Common Stock subject to options currently exercisable
or exercisable within 60 days after May 20, 1997 are deemed outstanding for
purposes of computing the percentage ownership of the person holding such
options, but are not deemed outstanding for computing the percentage of any
other stockholder. Beneficial ownership after the Offering also reflects the
issuance of the 230,767 shares of Common Stock upon conversion of the 65,217
shares of Redeemable Preferred Stock held by HR, LLC.
(2) Assumes no exercise of the Underwriters' over-allotment option. If the
over-allotment option is exercised in full, the following Selling
Stockholders will sell the additional shares (and will beneficially own the
percentages) indicated: Liberty Partners Holdings 2, L.L.C., 175,000 shares
(12.1%); Kay L. Toolson, 40,000 shares (8.6%); Roger A. Vandenberg, 20,000
shares (4.1%); D. Page Robertson, 10,000 shares (less than 1.0%); B. Ray
Mehaffey, 5,000 shares (less than 1.0%); and John W. Nepute, 5,000 shares
(less than 1.0%).
(3) Liberty Partners Holdings 2, L.L.C., a Delaware limited liability company,
holds 1,276,931 shares of Common Stock. The members of Liberty Partners
Holdings 2, L.L.C. are Liberty Investments 5, Inc., which is beneficially
owned by the State Board of Administration of Florida, and Liberty
Investment Partners II, which is beneficially owned by, among others,
Directors Michael J. Kluger and Carl E. Ring, Jr., as well as Peter E.
Bennet and Paul J. Huston. The Manager of Liberty Partners Holdings 2,
L.L.C., which has sole voting and investment power over the shares of Common
Stock, is Liberty Partners, L.P. Liberty Capital Partners, Inc. is the
general partner of Liberty Partners, L.P. Michael J. Kluger, Carl E. Ring,
Jr., Peter E. Bennett and Paul J. Huston are directors and stockholders of
Liberty Capital Partners, Inc.
(4) Includes 1,000 shares held by Mr. Kluger directly. Also includes the shares
held of record by Liberty Partners Holdings 2, L.L.C. See Note (3) above.
(5) Includes the shares held of record by Liberty Partners Holdings 2, L.L.C.
See Note (3) above.
(6) Includes the number of shares subject to options which are exercisable
within 60 days of May 20, 1997 by the following persons: Mr. Toolson (6,000
shares), Mr. Rouse (4,800 shares), Mr. Nepute (12,120 shares), Mr. Robertson
(12,220 shares), Mr. Sheldon (500 shares), Mr. Bond (240 shares) and Mr.
Mehaffey (12,120 shares).
(7) Includes 100 shares held of record by Monaco Capital Partners, all of which
will be sold in the Offering. Mr. Vandenberg, as the managing general
partner of Monaco Capital Partners, has the sole right to direct the voting
and disposition of securities of the Company held by Monaco Capital
Partners, except for 19 shares, as to which Mr. Graham directs the voting
but does not have the right to direct the disposition thereof. See Note (9)
below. Mr. Vandenberg may therefore be deemed to be a beneficial owner of
all of the 100 shares held of record by Monaco Capital Partners. Cariad
Capital, Inc., of which Mr. Vandenberg is President, currently receives
consulting and management fees of $72,000 per year from the Company pursuant
to the terms of a management contract scheduled to expire on September 23,
1998.
(8) Includes the shares held by the following entities: The Bass Management
Trust ("BMT"), Sid R. Bass Management Trust ("SRBMT"), Lee M. Bass ("LMB"),
Edward P. Bass ("EPB"), Wesley Guylay Capital Management ("WGCM") and Terry
Guylay ("TG"), who may be deemed to constitute a "group" within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. The
above parties note that neither the fact of their filing with the Commission
a Schedule 13D on which the following information as to beneficial
ownership, voting and dispositive power of the shares
42
<PAGE>
was disclosed nor anything contained therein shall be deemed to be an
admission by them that a group exists. Each of the following entities has
reported shared voting or dispositive power over none of the shares over
which they hold beneficial ownership. The following entities have sole
voting and dispositive power over the following shares: BMT, 33,537; NLB, 0;
SRBMT, 33,437; LMB, 33,537; EPB, 24,489; WGCM, 125,000; TG, 1,000.
(9) HR, LLC presently holds 65,217 shares of Redeemable Preferred Stock which
will be converted into 230,767 shares of Common Stock that will be sold in
the Offering. HR, LLC is a company owned by Harley-Davidson, Inc.
(10) Includes 19 shares held of record by Monaco Capital Partners, as to which
Mr. Graham directs the voting but does not have the right to direct the
disposition. Mr. Graham was a director of the Company from March 1993 to May
1996.
43
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the Offering, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, $.01 par value, and
1,934,783 shares of Preferred Stock, $.01 par value, after giving effect to the
conversion of the 65,217 shares of Redeemable Preferred Stock held by HR, LLC
into 230,767 shares of Common Stock.
The following summary of certain provisions of the Common Stock does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Company's Certificate of Incorporation which is included as an
exhibit to the Registration Statement of which this Prospectus is a part, and by
the provisions of applicable law.
COMMON STOCK
As of May 20, 1997, there were 4,442,512 shares of Common Stock outstanding
that were held of record by approximately 105 stockholders.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior liquidation
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable, and the
shares of Common Stock to be issued upon completion of the Offering will be
fully paid and non-assessable.
PREFERRED STOCK
Effective upon the closing of the Offering, the Board of Directors will have
the authority, without any further vote or action by the stockholders, to
provide for the issuance of up to 1,934,783 shares of Preferred Stock from time
to time in one or more series with such designations, rights, preferences and
limitations as the Board of Directors may determine, including the consideration
received therefor, the number of shares comprising each series, dividend rates,
redemption provisions, liquidation preferences, sinking fund provisions,
conversion rights and voting rights, all without approval by the holders of
Common Stock. Although it is not possible to state the effect that any issuance
of Preferred Stock might have on the rights of holders of Common Stock, the
issuance of Preferred Stock may have one or more of the following effects: (i)
restrict Common Stock dividends if Preferred Stock dividends have not been paid;
(ii) dilute the voting power and equity interest of holders of Common Stock to
the extent that any Preferred Stock series has voting rights or is convertible
into Common Stock; or (iii) prevent current holders of Common Stock from
participating in the Company's assets upon liquidation until any liquidation
preferences granted to holders of Preferred Stock are satisfied. In addition,
the issuance of Preferred Stock may, under certain circumstances, have the
effect of discouraging a change in control of the Company by, for example,
granting voting rights to holders of Preferred Stock that require approval by
the separate vote of the holders of Preferred Stock for any amendment to the
Certificate of Incorporation or any reorganization, consolidation or merger (or
other similar transaction involving the Company). As a result, the issuance of
such Preferred Stock may discourage bids for the Company's Common Stock at a
premium over the market price therefor and could have a material adverse effect
on the market value of the Common Stock. The Board of Directors does not
presently intend to issue any shares of Preferred Stock.
44
<PAGE>
REGISTRATION RIGHTS
After the Offering, the holders (or their permitted transferees) of
1,701,605 shares of Common Stock (or 1,446,605 shares if the Underwriters'
over-allotment option is exercised in full), will be entitled to certain rights
with respect to the registration of such shares under the Securities Act. Under
the terms of agreements between the Company and such holders, if the Company
proposes to register any of its securities under the Securities Act, either for
its own account or the account of other security holders exercising registration
rights, the holders are entitled to notice of such registration and are entitled
to include shares of Common Stock therein; provided, among other conditions,
that the underwriters of any offering have the right to limit or exclude such
shares from registration. In addition, the holders of 835,214 shares of Common
Stock (or 660,214 shares if the Underwriters' over-allotment option is exercised
in full) may require the Company on not more than three occasions to file a
registration statement under the Securities Act with respect to such shares, and
the Company is required to use its reasonable best efforts to effect such
registration, subject to certain conditions and limitations, and is required to
pay the expenses incurred in connection with such registrations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Certain provisions of Delaware law and the Company's Certificate of
Incorporation could make more difficult the acquisition of the Company by means
of a tender offer, a proxy contest or otherwise and the removal of incumbent
officers and directors. These provisions are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of the Company to first negotiate
with the Company. The Company believes that the benefits of increased protection
of the Company's potential ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to acquire or restructure the Company
outweigh the disadvantages of discouraging such proposals because, among other
things, negotiation of such proposals could result in an improvement of their
terms.
The Company is subject to the provisions of Section 203 of the Delaware law.
In general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
the stockholder. Generally, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years prior, did
own) 15% or more of the corporation's voting stock. This provision may have the
effect of delaying, deferring or preventing a change in control of the Company
without further action by the stockholder.
The Company's Certificate of Incorporation provides that the Board of
Directors is divided into two classes, with staggered two-year terms. As a
result, only one class of directors will be elected at each annual meeting of
stockholders of the Company, with the other class continuing for the remainder
of its respective two-year term. The classification of the Board of Directors
makes it more difficult for the Company's existing stockholders to replace the
Board of Directors as well as for another party to obtain control of the Company
by replacing the Board of Directors. Since the Board of Directors has the power
to retain and discharge officers of the Company, these provisions could also
make it more difficult for existing stockholders or another party to effect a
change in management.
The Company's Certificate of Incorporation provides that stockholder action
can be taken only at an annual or special meeting of stockholders and may not be
taken by written consent. The Bylaws provide that special meetings of
stockholders can be called only by the Chairman of the Board, the President or
the Board of Directors. Stockholders are not permitted to call a special meeting
or to require that the Board of Directors call a special meeting of the
stockholders. Moreover, the business permitted to be conducted at
45
<PAGE>
any special meeting of stockholders is limited to the business brought before
the meeting by the Chairman of the Board, the President or the Board of
Directors. The Bylaws set forth an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors and with regard to business to be brought
before an annual meeting of stockholders of the Company.
The Company's Certificate of Incorporation and the Bylaws contain provisions
requiring the affirmative vote of the holders of at least two-thirds of the
voting stock of the Company to amend the foregoing provisions of the Certificate
of Incorporation and Bylaws.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is Norwest
Bank Minnesota, N.A.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of the Offering, the Company will have 5,473,279 shares of
Common Stock outstanding, all of which will be freely tradeable without
restriction under the Securities Act, unless they are held by "affiliates" of
the Company as that term is used under the Securities Act. The shares held by
affiliates of the Company are "restricted securities" as defined in Rule 144
under the Securities Act (the "Restricted Shares"), and are eligible for resale,
subject to the volume limitations of Rule 144, as hereinafter described.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned his or her restricted
securities (as that term is defined in Rule 144) for at least one year is
entitled to sell, within any three-month period, a number of such securities
that does not exceed the greater of 1% of the then outstanding shares of the
Company's Common Stock (approximately 54,733 shares immediately after the
Offering) or the average weekly trading volume during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. A person who is not an
affiliate, has not been an affiliate within three months prior to the sale and
has beneficially owned the restricted securities for at least two years is
entitled to sell such shares under Rule 144(k) without regard to any of the
limitations described above. In meeting the one year and two year holding
periods described above, a holder of Restricted Shares may include the holding
period of a prior owner who is not an affiliate of the Company.
As of the date of this Prospectus, options to purchase an aggregate of
238,060 shares of Common Stock were outstanding under the Company's stock option
plans, of which 88,598 shares have vested and are eligible for sale upon
exercise.
Certain holders of Restricted Shares have the right, after termination of
the lock-up agreements, to cause the Company to register the sale of their
shares under the Securities Act. If such registration rights are exercised, the
shares can be sold without any holding period or sales volume limitation. See
"Description of Capital Stock--Registration Rights."
46
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company and the Selling Stockholders have agreed to
sell to such Underwriter, the number of shares of Common Stock set forth
opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- -------------------------------------------------------------------------------- ------------
<S> <C>
Smith Barney Inc................................................................
William Blair & Company, L.L.C..................................................
A.G. Edwards & Sons, Inc........................................................
------------
Total....................................................................... 1,700,000
------------
------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all of the shares of Common
Stock offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc., William Blair & Company,
L.L.C. and A.G. Edwards & Sons, Inc. are acting as the Representatives, propose
to offer part of the shares directly to the public at the public offering price
set forth on the cover page of this Prospectus and part of the shares to certain
dealers at a price which represents a concession not in excess of $ per
share under the public offering price. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to certain
other dealers. After the initial offering of the shares to the public, the
public offering price and such concessions may be changed by the
Representatives.
Certain of the Selling Stockholders have granted to the Underwriters an
option, exercisable for 30 days from the date of this Prospectus, to purchase up
to 255,000 additional shares of Common Stock at the price to public set forth on
the cover page of this Prospectus minus the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, in connection with the offering of the shares
offered hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.
The Company, its officers and directors, the Selling Stockholders, and
certain other stockholders of the Company designated by the Representatives,
have agreed that, for a period of 90 days from the date of this Prospectus, they
will not, without the prior written consent of Smith Barney Inc., offer, sell,
contract to sell, or otherwise dispose of, any shares of Common Stock of the
Company or any securities convertible into, or exercisable or exchangeable for,
Common Stock of the Company.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the Offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to
47
<PAGE>
reduce a short position incurred by the Underwriters in connection with the
Offering. A "penalty bid" is an arrangement permitting the Representatives to
reclaim the selling concession otherwise accruing to an Underwriter or syndicate
member in connection with the Offering if the Common Stock originally sold by
such Underwriter or syndicate member is purchased by the Representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such Underwriter or syndicate member. The Representatives have advised the
Company that such transactions may be effected on the Nasdaq National Market or
otherwise and, if commenced, may be discontinued at any time.
As permitted by Rule 103 under the Exchange Act, Underwriters or prospective
Underwriters that are market makers ("passive market makers") in the Common
Stock may make bids for or purchases of Common Stock on the Nasdaq National
Market until such time, if any, when a stabilizing bid for such securities has
been made. Rule 103 generally provides that: (i) a passive market maker's net
daily purchases of the Common Stock may not exceed 30% of its average daily
trading volume in such securities for the two full consecutive calendar months
(or any 60 consecutive days ending within the 10 days) immediately preceding the
filing date of the registration statement of which this Prospectus forms a part;
(ii) a passive market maker may not effect transactions or display bids for the
Common Stock at a price that exceeds the highest independent bid for the Common
Stock by persons who are not passive market makers; and (iii) bids made by
passive market makers must be identified as such.
From time to time, Smith Barney Inc. has provided, and may continue to
provide, investment banking services to the Company.
LEGAL MATTERS
The validity of Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Certain legal matters in
connection with this offering will be passed upon for the Underwriters by
Orrick, Herrington & Sutcliffe LLP, San Francisco, California.
EXPERTS
The consolidated balance sheets as of December 30, 1995 and December 28,
1996 and the consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 28, 1996 of
Monaco Coach Corporation and subsidiaries included in this Prospectus have been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, on the authority of that firm as experts in accounting
and auditing.
The combined balance sheets of Holiday Rambler LLC Recreational Vehicle
Manufacturing Division and certain Holiday World Retail Operations at December
31, 1994 and 1995 and for each of the three years in the period ended December
31, 1995 appearing in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected without charge at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048, and copies of all or any part of such material can also be obtained
from such offices upon payment
48
<PAGE>
of the fees prescribed by the Commission. In addition, the Commission maintains
a World Wide Web site on the Internet at www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. Quotations relating to the
Company's Common Stock appear on the Nasdaq National Market and such reports,
proxy statements and other information concerning the Company can also be
inspected at the offices of the Nasdaq Stock Market, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission in Washington, D.C. a registration
statement (herein together with all amendments thereto called the "Registration
Statement") under the Securities Act, with respect to the securities covered by
this Prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain items of which are contained in or
incorporated by reference as exhibits to the Registration Statement as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement, including the exhibits filed or incorporated as a
part thereof. Statements contained herein concerning the provisions of documents
filed with, or incorporated by reference in, the Registration Statement as
exhibits are necessarily summaries of such documents and each such statement is
qualified in its entirety by reference to the copy of the applicable documents
filed with the Commission. Copies of the Registration Statement, including
exhibits, may be obtained from the Commission upon payment of a prescribed fee,
or may be examined without charge at the offices of the Commission as described
above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated by reference herein: (i) the Company's Annual
Report on Form 10-K for the year ended December 28, 1996 and Quarterly Report on
Form 10-Q for the period ended March 29, 1997 and (ii) all other reports and
other documents filed by the Company pursuant to Sections 13(a), 14 and 15(d) of
the Exchange Act since the end of the fiscal year covered by the Annual Report
referred to above and prior to the date of this Prospectus.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to the extent
that a statement contained in the Registration Statement or in this Prospectus
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered (including any beneficial owner),
upon the written or oral request of any such person, a copy of any or all of the
documents referred to above or elsewhere herein which have been incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to John W. Nepute, Vice President of
Finance and Chief Financial Officer, 91320 Industrial Way, Coburg, Oregon 97408.
Telephone requests may be directed to Mr. Nepute at (541) 686-8011.
49
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
MONACO COACH CORPORATION--CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants......................................................................... F-2
Consolidated Balance Sheets as of December 30, 1995 and December 28, 1996................................. F-3
Consolidated Statements of Income for the Fiscal Years Ended December 31, 1994, December 30, 1995 and
December 28, 1996....................................................................................... F-4
Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended December 31, 1994, December 30,
1995 and December 28, 1996.............................................................................. F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended December 31, 1994, December 30, 1995 and
December 28, 1996....................................................................................... F-6
Notes to Consolidated Financial Statements................................................................ F-8
Condensed Consolidated Balance Sheets as of December 31, 1996 and March 29, 1997 (Unaudited).............. F-23
Condensed Consolidated Statements of Income for the Three Months Ended March 30, 1996 and March 29, 1997
(Unaudited)............................................................................................. F-24
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 30, 1996 and March 29,
1997 (Unaudited)........................................................................................ F-25
Notes to Condensed Consolidated Financial Statements (Unaudited).......................................... F-26
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION AND CERTAIN HOLIDAY WORLD RETAIL
OPERATIONS--COMBINED FINANCIAL STATEMENTS:
Report of Independent Accountants......................................................................... F-30
Combined Balance Sheets as of December 31, 1994 and 1995.................................................. F-31
Combined Statements of Operations and Deficiency in Net Assets for the Years Ended December 31, 1993, 1994
and 1995................................................................................................ F-32
Combined Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995.................... F-33
Notes to Combined Financial Statements.................................................................... F-34
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Monaco Coach Corporation:
We have audited the accompanying consolidated balance sheets of Monaco Coach
Corporation and its subsidiaries (the "Company") as of December 30, 1995 and
December 28, 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 28, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Monaco Coach
Corporation and its subsidiaries as of December 30, 1995 and December 28, 1996,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 28, 1996 in conformity with
generally accepted accounting principles.
/S/ COOPERS & LYBRAND L.L.P.
Eugene, Oregon
January 31, 1997
F-2
<PAGE>
MONACO COACH CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Trade receivables, net of $31 and $140, respectively............................... $ 7,071 $ 14,891
Inventories........................................................................ 19,591 46,930
Prepaid expenses................................................................... 447 1,343
Deferred income taxes.............................................................. 575 8,278
Notes receivable................................................................... -- 1,064
Assets held for sale............................................................... -- 1,383
------------ ------------
Total current assets............................................................. 27,684 73,889
Notes receivable..................................................................... -- 636
Debt issuance costs, net of accumulated amortization of $343......................... -- 1,760
Property and equipment, net.......................................................... 21,587 38,309
Goodwill, net of accumulated amortization of $1,466 and $2,084, respectively......... 19,231 20,774
------------ ------------
Total assets..................................................................... $ 68,502 $ 135,368
------------ ------------
------------ ------------
LIABILITIES
Current liabilities:
Book overdraft..................................................................... $ 516 $ 2,455
Short-term borrowings:
Bank line of credit.............................................................. 9,845 3,789
Flooring agreements.............................................................. -- 6,202
Current portion of long-term note payable.......................................... 2,000 2,000
Accounts payable................................................................... 8,459 24,218
Income taxes payable............................................................... 221 7,362
Accrued expenses and other liabilities............................................. 2,848 23,361
------------ ------------
Total current liabilities........................................................ 23,889 69,387
Note payable, less current portion................................................... 5,000 16,500
Deferred income tax liabilities...................................................... 1,483 2,787
Deferred income...................................................................... 200 200
------------ ------------
Total liabilities................................................................ 30,572 88,874
------------ ------------
Redeemable Series A Convertible Preferred Stock, $.01 par value; redemption value of
$3,005; 100,000 shares authorized; 65,217 shares issued and outstanding (Note 9)... -- 2,687
------------ ------------
Commitments and contingencies (Notes 12 and 17)...................................... -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,900,000 shares authorized; no shares issued and
outstanding........................................................................
Common stock, $.01 par value, 20,000,000 shares authorized; 4,410,889 and 4,430,467
shares issued and outstanding, respectively........................................ 44 44
Additional paid-in capital........................................................... 25,303 25,430
Retained earnings.................................................................... 12,583 18,333
------------ ------------
Total stockholders' equity....................................................... 37,930 43,807
------------ ------------
Total liabilities and stockholders' equity....................................... $ 68,502 $ 135,368
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
MONACO COACH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................................................. $ 107,300 $ 141,611 $ 365,638
Cost of sales.............................................................. 89,894 124,592 317,909
---------- ---------- ----------
Gross profit........................................................... 17,406 17,019 47,729
Selling, general and administrative expenses............................... 7,184 8,075 33,299
Management fees to stockholders............................................ 72 72 72
Amortization of goodwill................................................... 517 517 617
---------- ---------- ----------
Operating income....................................................... 9,633 8,355 13,741
Other expense (income), net................................................ (153) 40 (244)
Interest expense........................................................... 69 298 3,914
---------- ---------- ----------
Income before income taxes............................................. 9,717 8,017 10,071
Provision for income taxes................................................. 3,776 3,119 4,162
---------- ---------- ----------
Net income............................................................. 5,941 4,898 5,909
Preferred stock dividends.................................................. -- -- (75)
Accretion of redeemable preferred stock.................................... -- -- (84)
---------- ---------- ----------
Net income attributable to common stock................................ $ 5,941 $ 4,898 $ 5,750
---------- ---------- ----------
---------- ---------- ----------
Earnings per common share:
Primary................................................................ $ 1.33 $ 1.09 $ 1.28
Fully diluted.......................................................... $ 1.33 $ 1.09 $ 1.26
---------- ---------- ----------
---------- ---------- ----------
Weighted average common shares outstanding:
Primary................................................................ 4,469,734 4,473,383 4,474,791
Fully diluted.......................................................... 4,473,098 4,475,229 4,678,111
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
MONACO COACH CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1994................................ 4,394,548 $ 44 $ 25,163 $ 1,744 $ 26,951
Issuance of common stock................................. 6,549 0 34 -- 34
Tax benefit of stock options exercised................... -- -- 19 -- 19
Net income............................................... -- -- -- 5,941 5,941
---------- --- ----------- --------- ---------
Balances, December 31, 1994.............................. 4,401,097 44 25,216 7,685 32,945
Issuance of common stock................................. 9,792 0 58 -- 58
Tax benefit of stock options exercised................... -- -- 29 -- 29
Net income............................................... -- -- -- 4,898 4,898
---------- --- ----------- --------- ---------
Balances, December 30, 1995.............................. 4,410,889 44 25,303 12,583 37,930
Issuance of common stock................................. 19,578 0 89 -- 89
Tax benefit of stock options exercised................... -- -- 38 -- 38
Preferred stock accretion................................ -- -- -- (84) (84)
Preferred stock dividends................................ -- -- -- (75) (75)
Net income............................................... -- -- -- 5,909 5,909
---------- --- ----------- --------- ---------
Balances, December 28, 1996.............................. 4,430,467 $ 44 $ 25,430 $ 18,333 $ 43,807
---------- --- ----------- --------- ---------
---------- --- ----------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
MONACO COACH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH:
Cash flows of operating activities:
Net income..................................................................... $ 5,941 $ 4,898 $ 5,909
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................ 812 1,077 3,005
Loss on disposal of equipment................................................ 2 60 79
Deferred income taxes........................................................ 269 273 (6,399)
Change in assets and liabilities, net of effects of business combination:
Trade receivables.......................................................... (431) (3,440) 1,266
Inventories................................................................ (3,549) (4,180) 9,702
Prepared expenses.......................................................... (96) (15) (810)
Accounts payable........................................................... 1,911 745 (457)
Accrued expenses and other current liabilities............................. 1,070 (218) 7,246
Income taxes payable....................................................... (169) 140 7,141
Deferred income............................................................ -- 200 --
--------- --------- ---------
Net cash provided by (used in) operating activities...................... 5,760 (460) 26,682
--------- --------- ---------
Cash flows of investing activities:
Additions to property and equipment............................................ (4,399) (13,864) (7,327)
Payment for business acquisition (Note 1)...................................... -- -- (24,645)
Proceeds from sale of retail stores, collections on notes receivable, net of
closing costs................................................................ -- -- 11,749
Other.......................................................................... (188) -- 40
--------- --------- ---------
Net cash used in investing activities.................................... (4,587) (13,864) (20,183)
--------- --------- ---------
Cash flows of financing activities:
Book overdraft................................................................. -- 516 1,939
Borrowings (payments) on line of credit, net................................... (1,095) 6,487 (6,056)
Payments on subordinated note.................................................. -- (12,000)
Borrowings on long-term notes payable.......................................... -- 7,000 20,000
Debt issuance costs............................................................ -- -- (2,060)
Payments on long-term notes payable............................................ (163) -- (8,500)
Other.......................................................................... 53 87 178
--------- --------- ---------
Net cash provided by (used in) financing activities...................... (1,205) 14,090 (6,499)
--------- --------- ---------
Net decrease in cash............................................................. (32) (234) 0
Cash at beginning of period...................................................... 266 234 0
--------- --------- ---------
Cash at end of period............................................................ $ 234 $ 0 $ 0
--------- --------- ---------
--------- --------- ---------
</TABLE>
Continued
F-6
<PAGE>
MONACO COACH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest, net of amount capitalized of $69 in 1994, $625 in 1995 and $244 in
1996............................................................................ $ 61 $ 273 $ 3,679
Income taxes...................................................................... 3,670 2,731 3,382
Business acquisition:
Fair value of assets acquired..................................................... $ 92,143
Less liabilities assumed........................................................ 52,899
Less issuance of subordinated debt.............................................. 12,000
Less issuance of preferred stock................................................ 2,599
---------
Net cash paid at the acquisition.............................................. $ 24,645
---------
---------
Sale of retail stores:
Notes receivable obtained from the sale of retail stores.......................... $ 2,730
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS
Monaco Coach Corporation and its subsidiaries (the "Company") manufacture a
line of premium motor coaches, bus conversions and towable recreational vehicles
at manufacturing facilities in Oregon and Indiana. These products are sold
primarily to independent dealers throughout the United States and Canada.
CONSOLIDATION POLICY
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany
transactions and balances have been eliminated.
FISCAL PERIOD
The Company follows a 52/53 week fiscal year period ending on the Saturday
closest to December 31. Interim periods also end on the Saturday closest to the
calendar quarter end.
REVENUE RECOGNITION
The Company recognizes revenue from the sale of recreational vehicles (i)
upon shipment or dealer/ customer pick-up (most of the dealers finance their
purchases under flooring arrangements with banks or finance companies; for these
sales, the flooring is completed before the vehicles are shipped), or (ii) when
the dealer has floor planned the vehicle and the vehicle is available for
delivery but has been set aside and held at the request of the dealer, generally
for a few days, until pick-up or delivery.
ESTIMATES AND INDUSTRY FACTORS
ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK--The Company distributes its products through
an independent dealer network for recreational vehicles. Sales to one customer
were approximately 19%, 17% and 7% of net revenues for the fiscal years ended
December 31, 1994, December 30, 1995 and December 28, 1996, respectively. Sales
to a second customer were approximately 28%, 23% and 9% of net revenues for the
fiscal years ended December 31, 1994, December 30, 1995 and December 28, 1996,
respectively. No other individual dealers represented over 10% of net revenues.
The loss of a significant dealer or a substantial decrease in sales by such a
dealer could have a material adverse effect on the Company's business, results
of operations and financial results.
Concentrations of credit risk exist for accounts receivable and repurchase
agreements (see Note 17), primarily for the Company's largest dealers. The
Company sells to dealers throughout the United States and there is no geographic
concentration of credit risk.
WARRANTY CLAIMS--Estimated warranty costs are provided for at the time of
sale of products with warranties covering the products for up to one year.
F-8
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INVENTORIES
Inventories consist of raw materials, work-in-process and finished
recreational vehicles and are stated at the lower of cost (first-in, first-out)
or market. Cost of work-in-process and finished recreational vehicles includes
material, labor and manufacturing overhead costs. Holiday World retail
inventory, including new and used units, is valued at the lower of specific cost
or market.
PROPERTY AND EQUIPMENT
Property and equipment, including significant improvements thereto, are
stated at cost less accumulated depreciation and amortization. Cost includes
expenditures for major improvements replacements and renewals and the net amount
of interest cost associated with significant capital additions during periods of
construction. Capitalized interest was $69 in 1994, $625 in 1995, and $48 in
1996. Maintenance and repairs are charged to expense as incurred. Replacements
and renewals are capitalized. When assets are sold, retired or otherwise
disposed of, the cost and accumulated depreciation are removed from the accounts
and any resulting gain or loss is reflected in income.
The cost of plant and equipment is depreciated using the straight-line
method over the estimated useful lives of the related assets. Buildings are
generally depreciated over 39 years and equipment is depreciated over 3 to 10
years. Leasehold improvements are amortized under the straight-line method based
on the shorter of the lease periods or the estimated useful lives.
GOODWILL AND DEBT ISSUANCE COSTS
Goodwill represents the excess of the cost of acquisition over the fair
value of net assets acquired. The goodwill arising from the acquisition of the
assets and operations of the Company's Predecessor in March 1993 is being
amortized on a straight-line basis over 40 years and, at December 28, 1996, the
unamortized amount was $18,713. The goodwill arising from the acquisition of
Holiday Rambler (as hereinafter defined) and Holiday World (as hereinafter
defined) is being amortized on a straight-line basis over 20 years; at December
28, 1996, the unamortized amount was $2,061. At each balance sheet date,
management assesses whether there has been permanent impairment in the value of
goodwill and the amount of such impairment by comparing anticipated undiscounted
future cash flows from operating activities with the carrying value of the
goodwill. The factors considered by management in performing this assessment
include current operating results, trends and prospects, as well as the effects
of obsolescence, demand, competition and other economic factors.
Unamortized debt issuance costs of $1,760 at December 28, 1996 arising from
the Holiday Acquisition are being amortized over the term of the loan.
INCOME TAXES
Deferred taxes are recognized based on the difference between the financial
statement and tax bases of assets and liabilities at enacted tax rates in effect
in the years in which the differences are expected to reverse. Deferred tax
expense represents the change in deferred tax asset/liability balances. A
valuation allowance is established for deferred tax assets when it is more
likely than not that the deferred tax asset will not be realized.
F-9
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ADVERTISING COSTS
The Company expenses advertising costs as incurred, except for prepaid show
costs which are expensed when the event takes place.
At December 30, 1995 and December 28, 1996, total advertising reported in
prepaid expenses was $185 and $51, respectively. During the fiscal year 1996,
approximately $5,483 ($1,136 in 1994 and $1,539 in 1995) of advertising costs
were expensed.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to expense as incurred and were
$3,205 for 1996. These costs were insignificant in 1995 and 1994.
2. HOLIDAY ACQUISITION:
On March 4, 1996, the Company acquired certain assets of the Holiday Rambler
LLC Recreational Vehicle Manufacturing Division ("Holiday Rambler") and ten
retail dealerships ("Holiday World") from an affiliate of Harley-Davidson, Inc.
("Harley-Davidson"). The acquisition was accounted for as a purchase.
The purchase price for Holiday Rambler and Holiday World was comprised of:
<TABLE>
<S> <C>
Cash, including transaction costs of $2,131........................ $ 24,645
Preferred stock (Note 9)........................................... 2,599
Subordinated debt.................................................. 12,000
---------
$ 39,244
---------
---------
</TABLE>
The purchase price was allocated to the assets acquired and liabilities
assumed based on estimated fair values at March 4, 1996, as follows:
<TABLE>
<S> <C>
Receivables....................................................... $ 9,536
Inventories....................................................... 61,269
Property and equipment............................................ 11,592
Prepaids and other assets......................................... 86
Assets held for sale.............................................. 7,499
Goodwill.......................................................... 2,161
Notes payable..................................................... (21,784)
Accounts payable.................................................. (16,851)
Accrued liabilities............................................... (14,264)
---------
$ 39,244
---------
---------
</TABLE>
The allocation of the purchase price and the related goodwill of $2,161 is
subject to adjustment upon resolution of preacquisition contingencies. The
effects of resolution of preacquisition contingencies occurring: (i) within one
year of the acquisition date will be reflected as an adjustment of the
allocation of
F-10
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
2. HOLIDAY ACQUISITION: (CONTINUED)
the purchase price and of goodwill, and (ii) after one year will be recognized
in the determination of net income.
The ten acquired Holiday World retail store properties were classified as
"assets held for sale". Seven of the stores were sold during 1996 at a gain of
$1,402, which has been reflected as an adjustment of goodwill. The remaining
three stores are still held for sale. The Company's 1996 results of operations
and cash flows include Holiday World for the period March 4, 1996 through
December 28, 1996, as the operating activities of Holiday World are not clearly
distinguishable from other continuing operations. Net sales of the Holiday World
retail stores subsequent to the purchase were approximately $25,000.
The following unaudited pro forma information presents the consolidated
results as if the acquisition had occurred at the beginning of the period and
giving effect to the adjustments for the related interest on financing the
purchase price, goodwill and depreciation. The pro forma information does not
necessarily reflect results that would have occurred nor is it necessarily
indicative of future operating results.
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Net sales........................................................ $ 441,850 $ 419,440
Net income (loss)................................................ (5,376) 4,699
Earnings (loss) per common share................................. $ (1.15) $ 1.00
</TABLE>
3. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Raw materials.................................................... $ 8,069 $ 16,844
Work-in-process.................................................. 10,136 17,592
Finished units................................................... 1,386 3,998
Holiday World retail inventory................................... -- 8,496
------------ ------------
$ 19,591 $ 46,930
------------ ------------
------------ ------------
</TABLE>
F-11
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Land............................................................. $ 1,708 $ 5,440
Buildings........................................................ 16,783 23,358
Equipment........................................................ 2,416 4,085
Furniture and fixtures........................................... 1,069 1,958
Vehicles......................................................... 106 748
Leasehold improvements........................................... 263 312
Construction in progress......................................... 276 5,542
------------ ------------
22,621 41,443
Less accumulated depreciation and amortization................... 1,034 3,134
------------ ------------
$ 21,587 $ 38,309
------------ ------------
------------ ------------
</TABLE>
5. NOTES RECEIVABLE:
The Company acquired notes receivable from the sale of certain Holiday World
retail stores. The notes provide for the periodic collection of principal, with
interest ranging from 8% to 10% and mature though September 2001. The
outstanding balance at December 28, 1996 was $1,700, with $1,064 expected to be
collected in 1997.
6. ACCRUED EXPENSES AND OTHER LIABILITIES:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------- ------------
<S> <C> <C>
Payroll, vacation and related accruals........................... $ 1,100 $ 5,132
Payroll and property taxes....................................... 326 1,424
Provision for warranty claims.................................... 1,037 8,791
Provision for product liability claims........................... 100 4,507
Promotional and advertising...................................... 9 818
Other............................................................ 276 2,689
------ ------------
$ 2,848 $ 23,361
------ ------------
------ ------------
</TABLE>
7. SHORT-TERM BORROWINGS:
In connection with the acquisition of Holiday Rambler and Holiday World, on
March 5, 1996, the Company replaced its bank line of credit with new credit
facilities consisting, in part, of a revolving line of credit of up to $45,000,
with interest payable monthly at varying rates based on the Company's interest
coverage ratio and interest payable monthly on the unused available portion of
the line at 0.5%. There were outstanding borrowings of $3,789 at December 28,
1996, with an effective interest rate of 9.5%. The weighted average interest
rate on the outstanding borrowings under the revolving line of credit at
December 28, 1996 was 10.8% (8.4% at December 30, 1995). The revolving line of
credit expires on
F-12
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
7. SHORT-TERM BORROWINGS: (CONTINUED)
March 1, 2001 and would be collateralized by all the assets of the Company in
the event the Company is in default under the loan agreement. The agreement
contains restrictive covenants as to EBITDA (earnings before interest, taxes,
depreciation and amortization), interest coverage ratio, leverage ratio and
capital expenditures.
Holiday World retail stores have various flooring agreements outstanding to
finance retail inventory at the dealerships which amounted to $6,202 at December
28, 1996, with interest at the prime rate plus 1% (prime rate at December 28,
1996 was 8.25%). The loans are collateralized by the assets of a subsidiary.
8. LONG-TERM BORROWINGS:
The Company obtained a term loan of $20,000 primarily to finance the
acquisition of Holiday Rambler and Holiday World on March 5, 1996, with interest
payable monthly at various rates based on the Company's interest coverage ratio,
expiring on March 1, 2001. The term loan requires quarterly principal payments
and certain mandatory payments. At December 28, 1996, there were outstanding
borrowings of $18,500, with $500 at an effective interest rate of 9.75% and
$18,000 at 8.59% under a LIBOR arrangement. The term loan would be
collateralized by all the assets of the Company in the event the Company is in
default under the loan agreement. The agreement contains restrictive covenants
as to EBITDA, interest coverage ratio, leverage ratio and capital expenditures.
The principal on the long-term debt is payable as follows:
<TABLE>
<S> <C>
1997............................................................... $ 2,000
1998............................................................... 3,750
1999............................................................... 5,000
2000............................................................... 5,500
2001............................................................... 2,250
---------
$ 18,500
---------
---------
</TABLE>
9. PREFERRED STOCK:
The Company has authorized "blank check" preferred stock (2,000,000 shares
authorized, $.01 par value) ("Preferred Stock"), which may be issued from time
to time in one or more series upon authorization by the Company's Board of
Directors. The Board of Directors, without further approval of the stockholders,
is authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and any other
rights, preferences, privileges and restrictions applicable to each series of
the Preferred Stock. There were no shares of Preferred Stock outstanding as of
December 28, 1996, except as described below.
The Company has designated 100,000 shares of its Preferred Stock as
redeemable Series A Convertible Preferred Stock ("Series A") at $.01 par value.
The Company issued 65,217 shares of Series A in connection with the acquisition
of Holiday Rambler and Holiday World. Shares of Series A may be redeemed by its
holders at established dates at the stated value of $46 per share plus any
accrued but unpaid dividends. Dividends are cumulative and accrue annually at a
rate of $1.38 per share through February 28, 1997, at which time the dividend
rate may vary based on the average closing market price of
F-13
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
9. PREFERRED STOCK: (CONTINUED)
the Company's Common Stock for the thirty days prior to March 1, June 1,
September 1 and December 1. The rate for such period will be: (i) if such
average is less than $10 per share, $2.30 per share per annum, or (ii) if such
average is more than or equal to $10 per share, $1.38 per share per annum. The
holders of Series A have preference over holders of Common Stock as to payment
of dividends or in the event of liquidation. Each share of Series A is
convertible into approximately 3.54 shares of Common Stock.
The excess of redemption value over the carrying value of Series A is being
accreted by periodic charges to retained earnings. For the year ended December
28, 1996, the accretion charge was $84.
The accrual of Series A dividends was $75 ($70 was paid in 1996) for the
year ended December 28, 1996, the unpaid portion of which was included in the
carrying amount of preferred stock.
The holders of Series A may require the Company to redeem the holder's
outstanding shares at the stated value as follows:
<TABLE>
<S> <C>
March 4, 1998....................................................... $ 1,000
March 4, 1999....................................................... 1,500
March 4, 2000....................................................... 500
---------
$ 3,000
---------
---------
</TABLE>
In addition, the holders of Series A may accelerate their redemption rights
upon the occurrence of certain events, such as a secondary offering of the
Company's Common Stock or dispositions of substantially all of the Company's
assets. The redemption value is 100% of issue price plus any accumulated
dividends.
10. INCOME TAXES:
The provision for income taxes for the years ended December 31, 1994,
December 30, 1995 and December 28, 1996 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Current:
Federal......................................... $ 2,774 $ 2,382 $ 8,563
State........................................... 733 464 1,998
------ ------ ------
3,507 2,846 10,561
Deferred:
Federal......................................... 219 211 (5,245)
State........................................... 50 62 (1,154)
------ ------ ------
Provision for income taxes.................... $ 3,776 $ 3,119 $ 4,162
------ ------ ------
------ ------ ------
</TABLE>
F-14
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
10. INCOME TAXES: (CONTINUED)
The reconciliation of the provision of income taxes at the U.S. federal
statutory rate to the Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Expected U.S. federal income taxes at statutory
rates........................................... $ 3,304 $ 2,726 $ 3,525
State and local income taxes, net of federal
benefit......................................... 484 366 541
Other............................................. (12) 27 96
------ ------ ------
$ 3,776 $ 3,119 $ 4,162
------ ------ ------
------ ------ ------
</TABLE>
The components of the current net deferred tax asset and long-term net
deferred tax liability are:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------- -------------
<S> <C> <C>
Current deferred income tax assets:
Warranty liability............................................. $ 404 $ 3,519
Product liability.............................................. 40 1,802
Other accruals................................................. 56 1,454
Contingent dealer rebates...................................... 108 841
Payroll and related............................................ 85 781
Prepared expenses.............................................. (118) (119)
------ ------
$ 575 $ 8,278
------ ------
------ ------
Long-term deferred income tax liabilities:
Depreciation................................................... $ 206 $ 189
Amortization................................................... 1,277 2,598
------ ------
$ 1,483 $ 2,787
------ ------
------ ------
</TABLE>
Management believes that the temporary differences which gave rise to the
deferred income tax assets will be reversed in the foreseeable future and that
the benefit thereof will be realized as a reduction in the provision for current
income taxes.
11. EARNINGS PER SHARE:
Earnings per common share is based on the weighted average number of shares
outstanding during the period after consideration of the dilutive effect of
stock options and the Series A Convertible Preferred
F-15
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
11. EARNINGS PER SHARE: (CONTINUED)
Stock. The weighted average number of common shares used in the computation of
earnings per common share for the years ended December 31, 1994, December 30,
1995 and December 28, 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Primary:
Issued and outstanding shares (weighted
average)...................................... 4,397,282 4,407,327 4,422,187
Stock options................................... 72,452 66,056 52,604
------------ ------------ ------------
Weighted average number of shares............. 4,469,734 4,473,383 4,474,791
------------ ------------ ------------
------------ ------------ ------------
Fully Diluted:
Issued and outstanding shares (weighted
average)...................................... 4,397,282 4,407,327 4,422,187
Stock options................................... 75,816 67,902 66,419
Convertible preferred stock..................... -- -- 189,505
------------ ------------ ------------
Weighted average number of shares............. 4,473,098 4,475,229 4,678,111
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
12. LEASES:
The Company leases equipment under operating leases that expire May 1997 and
September 1998, respectively.
The Company leases administrative and production facilities under operating
leases that expire 2001 and has the option to renew the leases annually for the
two subsequent years. Lease terms, upon renewal, will be adjusted for changes in
the Consumer Price Index since the date of occupancy. Total rental expense for
the fiscal years ended December 31, 1994, December 30, 1995 and December 28,
1996 related to operating leases amounted to approximately $327, $375 and $570,
respectively.
Approximate future minimum rental commitments under these leases at December
28, 1996 are summarized as follows:
<TABLE>
<S> <C>
1997................................................................. $ 268
1998................................................................. 133
1999................................................................. 125
2000................................................................. 25
2001................................................................. 4
</TABLE>
13. BONUS PLAN:
The Company has a discretionary bonus plan for certain key employees. Bonus
expense included in selling, general and administrative expenses for the years
ended December 31, 1994, December 30, 1995 and December 28, 1996 was $1,765,
$1,140 and $2,938, respectively.
F-16
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
14. STOCK PURCHASE PLANS:
The Company has an Employee Stock Purchase Plan (the "Purchase Plan")--1993,
a Nonemployee Director Stock Option Plan (the "Director Plan")--1993, and an
Incentive Stock Option Plan (the "Option Plan")--1993:
STOCK PURCHASE PLAN
The Company's 1993 Employee Stock Purchase Plan (the "Purchase Plan")
qualifies under Section 423 of the Internal Revenue Code. The Company has
reserved 135,000 shares of Common Stock for issuance under the Purchase Plan.
During the years ended December 30, 1995 and December 28, 1996, 2,857 shares and
5,450 shares, respectively, were purchased under the Purchase Plan. The
weighted-average fair value of those purchase rights granted in 1995 and 1996
was $15.09 and $10.66, respectively. Under the Purchase Plan, an eligible
employee may purchase shares of Common Stock from the Company through payroll
deductions of up to 10% of base compensation, at a price per share equal to 85%
of the lesser of the fair market value of the Company's Common Stock as of the
first day or the last day of each six-month offering period under the Purchase
Plan.
The Purchase Plan is administered by a committee appointed by the Board. Any
employee who is customarily employed for at least 20 hours per week and more
than five months in a calendar year by the Company, or by any majority-owned
subsidiary designated from time to time by the Board, and who does not own 5% or
more of the total combined voting power or value of all classes of the Company's
outstanding capital stock, is eligible to participate in the Purchase Plan.
DIRECTORS' OPTION PLAN
The Board of Directors and the stockholders have authorized a total of
40,000 shares of Common Stock for issuance pursuant to the Company's 1993
Director's Option Plan (the "Director Plan"), which is currently administered by
the Board. Under the Director Plan, each non-employee director of the Company,
other than directors affiliated with Liberty Partners, L.P. or Monaco Capital
Partners, is entitled to participate. Each eligible director will receive a
nonstatutory option to purchase 8,000 shares of the Company's Common Stock. In
connection with the effective date of the initial public offering, the Company
granted options to purchase 8,000 shares of Common Stock to a director. In
addition, as of September 30, 1994, each eligible director was granted an
additional nonstatutory option to purchase 1,600 shares of Common Stock on
September 30 of each year if, on such date, they have served on the Board of
Directors for at least six months. Unless terminated sooner, the Director Plan
will terminate in 2003. The exercise price of each option granted under the
Director Plan is equal to the fair market value of a share of the Company's
Common Stock on the date of grant. The initial option granted to each eligible
director has a ten-year term and vests ratably over five years. Subsequent
options granted under the Plan vest at the end of five years. As of December 28,
1996, no options have been exercised and options to purchase 12,800 shares of
Common Stock were outstanding.
OPTION PLAN
The Company's 1993 Incentive Stock Option Plan (the "Option Plan") provides
for the grant to employees of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
for the grant to employees and consultants of the Company of nonstatutory stock
options. A total of 525,000 shares of Common Stock have been reserved for
issuance
F-17
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
14. STOCK PURCHASE PLANS: (CONTINUED)
under the Option Plan. As of December 28, 1996, options to purchase 186,196
shares of Common Stock were outstanding. These options vest over five years
commencing March 5, 1993, October 29, 1993, April 1, 1994, November 2, 1994,
April 1, 1995 and April 1, 1996, respectively. Options to purchase 6,935 and
14,128 shares of Common Stock at $3.35 per share were exercised during the years
ended December 30, 1995 and December 28, 1996, respectively.
The exercise price of all incentive stock options granted under the Option
Plan must be at least equal to the fair market value of a share of the Company's
Common Stock on the date of grant. With respect to any participant possessing
more than 10% of the voting power of the Company outstanding capital stock, the
exercise price of any option granted must equal at least 110% of the fair market
value on the grant date, and the maximum term of the option must not exceed five
years. The terms of all other options granted under the Option Plan may not
exceed ten years.
Transactions involving the Director Plan and the Option Plan are summarized
as follows:
<TABLE>
<CAPTION>
1995 1996
---------------------- ----------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Outstanding at beginning of year..................................... 141,884 $ 7.36 179,249 $ 9.68
Granted............................................................ 46,600 16.06 56,000 13.97
Exercised.......................................................... (6,935) 3.35 (14,128) 3.35
Forfeited.......................................................... (2,300) 14.92 (22,125) 10.26
--------- ----- --------- -----------
Outstanding at end of year........................................... 179,249 $ 9.68 198,996 $ 11.27
--------- ---------
--------- ---------
</TABLE>
The following table summarizes information about the stock options
outstanding at December 28, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ --------------------------
NUMBER OF WEIGHTED- NUMBER OF
OUTSTANDING AVERAGE WEIGHTED- EXERCISABLE WEIGHTED-
AT REMAINING AVERAGE AT AVERAGE
DECEMBER 28, CONTRACTUAL EXERCISE DECEMBER 28, EXERCISE
RANGE OF EXERCISE PRICES 1996 LIFE PRICE 1996 PRICE
- --------------------------------------------------------- ------------ --------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
$3.35.................................................... 59,546 6.3 $ 3.35 19,570 $ 3.35
$11.50-12.75............................................. 4,800 8.4 12.29 800 11.50
$13.00-15.00............................................. 84,550 8.3 13.96 10,950 13.75
$15.26-17.60............................................. 50,100 6.7 16.03 4,900 16.11
------------ ------
198,996 36,220
------------ ------
------------ ------
</TABLE>
The Company adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation", and thus no compensation cost has
been recognized for the Director Plan, the Option Plan or the Purchase Plan. Had
compensation cost for the three stock-based compensation plans been determined
based on the fair value of options at the date of grant consistent with the
provisions of SFAS
F-18
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
14. STOCK PURCHASE PLANS: (CONTINUED)
No. 123, the Company's pro forma net income and pro forma earnings per share
would have been as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Net income--as reported.................................................... $ 4,898 $ 5,909
Net income--pro forma...................................................... 4,741 5,624
Earnings per share--as reported............................................ $ 1.09 $ 1.26
Earnings per share--pro forma.............................................. 1.07 1.20
</TABLE>
The pro forma effect on net income for 1995 and 1996 is not representative
of the pro forma effect in future years because compensation expense related to
grants made in prior years is not considered. For purposes of the above pro
forma information, the fair value of each option grant was estimated at the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Risk-free interest rate.................................................. 7.20% 6.33%
Expected life (in years)................................................. 7.50 7.50
Expected volatility...................................................... 60.60% 60.60%
Expected dividend yield.................................................. 0.00% 0.00%
</TABLE>
15. 401(K) DEFINED CONTRIBUTION PLAN:
The Company sponsors a 401(k) defined contribution plan covering
substantially all full-time employees. The plan has a one-quarter match of
participants' contributions up to 4% of compensation. ln addition, contributions
may be made at the discretion of the Company's Board of Directors and are
allocated ratably based on each participant's compensation to total
compensation. Participants may make salary deferral contributions up to the
lesser of 15% of their regular monthly compensation or the statutory limit.
Company contributions to the plan totaled $370 in 1996 ($49 in 1995 and $40 in
1994).
16. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The fair value of the Company's financial instruments are presented below.
The estimates require subjective judgments and are approximate. Changes in
methodologies and assumptions could significantly affect estimates.
LONG-TERM RECEIVABLES--The estimated fair value approximates the carrying
value of $1,700 at December 28, 1996.
LONG-TERM BORROWINGS--The estimated fair values of long-term borrowings were
determined by discounting estimated future cash flows using the Company's
incremental borrowing rate. Based on this calculation, the estimated fair value
approximates the carrying value of $7,000 and $18,500 at December 30, 1995 and
December 28, 1996, respectively.
SHORT-TERM BORROWINGS--The carrying amount outstanding against the revolving
line of credit is $9,845 and $3,789 at December 30, 1995 and December 28, 1996,
respectively, which approximates the estimated
F-19
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
16. FAIR VALUE OF FINANCIAL INSTRUMENTS: (CONTINUED)
fair value. The carrying amount on the various outstanding loans of $6,202 at
December 28, 1996 also approximates market.
17. COMMITMENTS AND CONTINGENCIES:
REPURCHASE AGREEMENTS
Substantially all of the Company's sales to independent dealers are made on
terms requiring cash on delivery. The Company does not finance dealer purchases.
However, most purchases are financed on a "floor plan" basis by a bank or
finance company which lends the dealer all or substantially all of the wholesale
purchase price and retains a security interest in the vehicles. Upon request of
a lending institution financing a dealer's purchases of the Company's product,
the Company will execute a repurchase agreement. These agreements provide that,
for up to 18 months after a unit is shipped, the Company will repurchase a
dealer's inventory in the event of a default by a dealer to its lender.
The Company's liability under repurchase agreements is limited to the unpaid
balance owed to the lending institution by reason of its extending credit to the
dealer to purchase its vehicles, reduced by the resale value of vehicles which
may be repurchased. The risk of loss is spread over numerous dealers and
financial institutions.
The Company does not anticipate any significant losses will be incurred
under these agreements. No such charge was recorded during the years ended
December 31, 1994, December 30, 1995 and December 28, 1996. The approximate
amount subject to contingent repurchase obligations arising from these
agreements at December 28, 1996 is $105,660. If the Company were obligated to
repurchase a significant number of recreational vehicles in the future, losses
and reduction in new recreational vehicle sales could result.
OBLIGATION TO PURCHASE CONSIGNED INVENTORIES
The Company obtains vehicle chassis for certain of its recreational and
specialized vehicle products directly from automobile manufacturers under
converter pool agreements. The agreements generally provide that the
manufacturer will provide a supply of chassis at the Company's various
production facilities under the terms and conditions as set forth in the
agreement. Chassis are accounted for as consigned inventory until either
assigned to a unit in the production process or 90 days have passed. At the
earlier of these dates, the Company is obligated to purchase the chassis and it
is recorded as inventory. At December 28, 1996, chassis inventory, accounted for
as consigned inventory, approximated $3,000. No such obligation existed at
December 30, 1995.
WARRANTY AND PRODUCT LIABILITY
The Company is subject to regulations that may require the Company to recall
products with design or safety defects, and such recall could have a material
adverse effect on the Company's business, results of operations and financial
condition.
The Company has from time to time been subject to product liability claims.
To date, the Company has been successful in obtaining product liability
insurance on terms the Company considers acceptable. The terms of the policy
contain a self-insured retention amount per occurrence and an annual aggregate
F-20
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
17. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
"stop loss" amount. In addition, the Company has obtained excess umbrella
policies. There can be no assurance that the Company will be able to obtain
insurance coverage in the future at acceptable levels or that the cost of
insurance will be reasonable. Furthermore, successful assertion against the
Company of one or a series of large uninsured claims, or of one or a series of
claims exceeding any insurance coverage, could have a material adverse effect on
the Company's business, results of operations and financial condition.
LITIGATION
The Company is involved in various legal proceedings which are incidental to
the industry and for which certain matters are covered in whole or in part by
insurance or, otherwise, the Company has recorded accruals for estimated
settlements. Management believes that any liability which may result from these
proceedings will not have a material adverse effect on the Company's
consolidated financial statements.
OTHER COMMITMENTS
In 1996, the Company began construction of a new manufacturing facility in
Indiana. The new facility is expected to be completed in 1997 at a total
estimated cost of $15,000. At December 28, 1996, the Company had incurred
approximately $5,000 in expenditures related to construction in progress on the
facility.
F-21
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
18. QUARTERLY RESULTS (UNAUDITED):
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
--------- ---------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 30, 1995:
Net sales.......................................................... $ 38,015 $ 35,082 $ 36,726 $ 31,788
Gross profit....................................................... 5,342 4,650 3,255 3,772
Operating income before management fees and amortization........... 2,873 2,779 1,416 1,877
Operating income................................................... 2,726 2,632 1,269 1,728
Net income......................................................... 1,662 1,606 705 925
--------- ---------- ---------- ---------
Earnings per common share.......................................... $ 0.37 $ 0.36 $ 0.16 $ 0.20
--------- ---------- ---------- ---------
</TABLE>
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
--------- ---------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 28, 1996(A):
Net sales.......................................................... $ 61,964 $ 106,729 $ 102,065 $ 94,880
Gross profit....................................................... 6,727 12,408 14,944 13,650
Operating income before management fees and amortization........... 2,077 3,131 4,307 4,915
Operating income................................................... 1,930 2,934 4,109 4,768
Net income......................................................... 634 891 1,957 2,427
Net income attributable to common stock............................ 634 828 1,894 2,394
--------- ---------- ---------- ---------
Earnings per common share:
Primary.......................................................... $ 0.14 $ 0.19 $ 0.42 $ 0.53
Fully diluted.................................................... $ 0.14 $ 0.19 $ 0.42 $ 0.51
--------- ---------- ---------- ---------
</TABLE>
- ------------------------
(a) Includes results of operations of Holiday Rambler and Holiday World after
March 4, 1996.
F-22
<PAGE>
MONACO COACH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 28,
1996
------------ MARCH 29,
1997
-----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Trade receivables................................................................... $ 14,891 $ 27,642
Inventories......................................................................... 46,930 45,249
Prepaid expenses.................................................................... 1,343 532
Deferred tax assets................................................................. 8,278 8,278
Notes receivable.................................................................... 1,064 177
Assets held for sale................................................................ 1,383 908
------------ -----------
Total current assets.............................................................. 73,889 82,786
Notes receivable...................................................................... 636 2,093
Debt issuance costs, net of accumulated amortization of $343 and $446, respectively... 1,760 1,666
Property, plant and equipment, net.................................................... 38,309 41,589
Goodwill, net of accumulated amortization of $2,084 and $2,243, respectively.......... 20,774 21,014
Other................................................................................. -- 41
------------ -----------
Total assets...................................................................... $ 135,368 $ 149,189
------------ -----------
------------ -----------
LIABILITIES
Current liabilities:
Book overdraft...................................................................... $ 2,455 $ 6,150
Short-term borrowings............................................................... 9,991 15,454
Current portion of long-term note payable........................................... 2,000 2,250
Accounts payable.................................................................... 24,218 28,322
Accrued expenses and other liabilities.............................................. 23,361 25,318
Income taxes payable................................................................ 7,362 3,486
------------ -----------
Total current liabilities......................................................... 69,387 80,980
Deferred income....................................................................... 200 200
Note payable, less current portion.................................................... 16,500 15,875
Deferred tax liability................................................................ 2,787 2,871
------------ -----------
88,874 99,926
------------ -----------
Redeemable convertible preferred stock, redemption value of $3,005.................... 2,687 2,735
------------ -----------
Commitments and contingencies (Note 9)
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 20,000,000 shares authorized, 4,438,217 shares
(4,430,467 shares at December 28, 1996) issued and outstanding...................... 44 44
Additional paid-in capital............................................................ 25,430 25,504
Retained earnings..................................................................... 18,333 20,980
------------ -----------
Total stockholders' equity........................................................ 43,807 46,528
------------ -----------
Total liabilities and stockholders' equity........................................ $ 135,368 $ 149,189
------------ -----------
------------ -----------
</TABLE>
See accompanying notes.
F-23
<PAGE>
MONACO COACH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
MARCH 30, MARCH 29,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
Net sales............................................................................. $ 61,964 $ 109,023
Cost of sales......................................................................... 55,237 93,981
------------ ------------
Gross profit........................................................................ 6,727 15,042
Selling, general and administrative expenses.......................................... 4,650 9,476
Management fees....................................................................... 18 18
Amortization of goodwill.............................................................. 129 159
------------ ------------
Operating income.................................................................... 1,930 5,389
Other (income), net................................................................... (7) (39)
Interest expense...................................................................... 863 821
------------ ------------
Income before income taxes.......................................................... 1,074 4,607
Provision for income taxes............................................................ 440 1,912
------------ ------------
Net income.......................................................................... 634 2,695
Preferred stock dividends............................................................. -- (23)
Accretion of redeemable preferred stock............................................... -- (25)
------------ ------------
Net income attributable to common stock............................................. $ 634 $ 2,647
------------ ------------
------------ ------------
Earnings per common share:
Primary............................................................................. $ .14 $ .59
Fully Diluted....................................................................... $ .14 $ .57
Weighted average shares outstanding:
Primary............................................................................. 4,465,903 4,516,215
Fully Diluted....................................................................... 4,540,236 4,747,083
</TABLE>
See accompanying notes.
F-24
<PAGE>
MONACO COACH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 30, MARCH 29,
1996 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
Increase (Decrease) in Cash:
Cash flows from operating activities:
Net income.............................................................................. $ 634 $ 2,695
Adjustments to reconcile net income to net cash provided by (used in) by operating
activities:
Depreciation and amortization......................................................... 566 786
Deferred income taxes................................................................. 84 84
Changes in working capital accounts, net of effect of business acquisition and sale of
retail stores:
Trade receivables................................................................... (4,637) (12,735)
Inventories......................................................................... 8,592 (611)
Prepaid expenses.................................................................... (84) 811
Accounts payable.................................................................... 3,880 4,104
Accrued expenses and other current liabilities...................................... 1,129 1,957
Income taxes payable................................................................ 172 (3,876)
---------- ----------
Net cash provided by (used in) operating activities............................... 10,336 (6,785)
---------- ----------
Cash flows from investing activities:
Additions to property, plant and equipment.............................................. (329) (3,780)
Payment for business acquisition (see note 2)........................................... (25,350) --
Proceeds from sale of retail stores, collections on notes receivable, net of closing
costs................................................................................. -- 206
---------- ----------
Net cash used in investing activities................................................. (25,679) (3,574)
---------- ----------
Cash flows from financing activities:
Book overdraft.......................................................................... (516) 3,695
Borrowings on lines of credit, net...................................................... 5,837 7,483
Payments on floor financing, net........................................................ (356) (468)
Borrowings on long-term notes payable................................................... 20,000 --
Debt issuance costs..................................................................... (2,024) --
Payments on long-term notes............................................................. (7,000) (375)
Other................................................................................... 37 24
---------- ----------
Net cash provided by financing activities............................................. 15,978 10,359
---------- ----------
Net increase in cash...................................................................... 635 0
Cash at beginning of period............................................................... 0 0
---------- ----------
Cash at end of period..................................................................... $ 635 $ 0
---------- ----------
---------- ----------
Supplemental disclosure
Amount of capitalized interest.......................................................... 34 146
</TABLE>
See accompanying notes.
F-25
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
1. BASIS OF PRESENTATION
The interim financial statements have been prepared by Monaco Coach
Corporation (the "Company") without audit. In the opinion of management, the
accompanying unaudited financial statements contain all adjustments necessary to
present fairly the financial position of the Company as of December 28, 1996 and
March 29, 1997, and the results of operations and cash flows of the Company for
the quarters ended March 30, 1996 and March 29, 1997. The condensed consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiary, and all significant intercompany accounts and transactions have been
eliminated in consolidation. These interim financial statements should be read
in conjunction with the audited financial statements and notes thereto appearing
in the Company's Annual Report to Stockholders for the year ended December 28,
1996.
2. HOLIDAY ACQUISITION
On March 4, 1996, the Company acquired certain assets of the Holiday Rambler
LLC Recreational Vehicle Manufacturing Division ("Holiday Rambler") and ten
retail dealerships ("Holiday World") from an affiliate of Harley-Davidson, Inc.
("Harley-Davidson"). The acquisition (the "Holiday Acquisition") was accounted
for as a purchase.
The purchase price for Holiday Rambler and Holiday World was comprised of:
<TABLE>
<S> <C>
Cash, including transaction costs of $2,131, net of $836
received from Harley-Davidson................................ $ 24,645
Preferred stock................................................ 2,599
Subordinated debt.............................................. 12,000
-----------
$ 39,244
-----------
-----------
</TABLE>
The purchase price was allocated to the net assets acquired based on
estimated fair values at March 4, 1996, as follows:
<TABLE>
<S> <C>
Receivables.................................................... $ 9,536
Inventories.................................................... 61,269
Property and equipment......................................... 11,592
Prepaids and other assets...................................... 86
Assets held for sale........................................... 7,100
Goodwill....................................................... 2,560
Notes payable.................................................. (21,784)
Accounts payable............................................... (16,851)
Accrued liabilities............................................ (14,264)
-----------
$ 39,244
-----------
-----------
</TABLE>
The allocation of the purchase price and the related goodwill of $2,161 was
subject to adjustment upon resolution of pre-Holiday Acquisition contingencies.
The effects of resolution of pre-Holiday Acquisition contingencies occuring: (i)
within one year of the acquisition date were reflected as an
F-26
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
2. HOLIDAY ACQUISITION (CONTINUED)
adjustment of the allocation of the purchase price and of goodwill, and (ii)
after one year will be recognized in the determination of net income.
The ten acquired Holiday World retail store properties were classified as
"assets held for sale". Seven of the stores were sold during 1996 at a gain of
$1,402, which has been reflected as an adjustment of goodwill. One store was
sold during the first quarter of 1997 at a loss of $399, which also has adjusted
goodwill. The remaining two stores are held for sale. The Company's results of
operations and cash flows include Holiday World since March 4, 1996, as the
operating activities of Holiday World are not clearly distinguishable from other
continuing operations. Net sales of Holiday World stores subsequent to the
purchase and included in the quarters ended March 30, 1996 and March 29, 1997
were $9.6 million and $2.9 million, respectively.
The following unaudited pro forma information presents the consolidated
results as if the Holiday Acquisition had occurred at the beginning of the
quarter and giving effect to the adjustments for the related interest on
financing the purchase price, goodwill and depreciation. The pro forma
information does not necessarily reflect actual results that would have occurred
nor is it necessarily indicative of future operating results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 30, 1996
-------------------
<S> <C>
Net sales................................................................ $ 115,766
Net loss................................................................. 733
Loss per common share.................................................... 0.16
</TABLE>
3. INVENTORIES
Inventories are stated at lower of cost (first-in, first-out) or market. The
composition of inventory is as follows:
<TABLE>
<CAPTION>
DECEMBER 28, MARCH 29,
1996 1997
------------ -----------
<S> <C> <C>
Raw materials....................................................... $ 16,844 $ 15,945
Work-in-process..................................................... 17,592 17,139
Finished units...................................................... 3,998 6,449
Holiday World retail inventory...................................... 8,496 5,716
------------ -----------
$ 46,930 $ 45,249
------------ -----------
------------ -----------
</TABLE>
4. GOODWILL
Goodwill represents the excess of the cost of acquisition over the fair
value of net assets acquired. The goodwill arising from the acquisition of the
assets and operations of the Company's Predecessor in March 1993 is being
amortized on a straight-line basis over 40 years and, at March 29, 1997, the
unamortized amount was $18.6 million. The goodwill arising from the Holiday
Acquisition is being amortized on a straight-line basis over 20 years; at March
29, 1997 the unamortized amount was $2.4
F-27
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
4. GOODWILL (CONTINUED)
million. Management assesses whether there has been permanent impairment in the
value of goodwill and the amount of such impairment by comparing anticipated
undiscounted future cash flows from operating activities with the carrying value
of the goodwill. The factors considered by management in performing this
assessment include current operating results, trends and prospects, as well as
the effects of obsolescence, demand, competition and other economic factors.
5. SHORT-TERM BORROWINGS
In connection with the Holiday Acquisition, the Company replaced its bank
line of credit with new credit facilities consisting, in part, of a revolving
line of credit of up to $45,000, with interest payable monthly at varying rates
based on the Company's interest coverage ratio and interest payable monthly on
the unused available portion of the line at 0.5%. There were outstanding
borrowings of approximately $11,272 at March 29, 1997. The revolving line of
credit expires March 1, 2001 and is collateralized by all the assets of the
Company. The newly acquired Holiday World subsidiary has various loans
outstanding to finance retail inventory at the dealerships which amounted to
approximately $4,182 at March 29, 1997, which bear interest at various rates
based on the prime rate and are collateralized by the assets of the subsidiary.
6. LONG-TERM BORROWINGS
The Company has a term loan of $18,125 outstanding as of March 29, 1997
which was obtained in connection with the Holiday Acquisition. The term loan
bears interest at various rates based on the Company's interest coverage ratio,
and expires on March 1, 2001. The term loan requires monthly interest payments,
quarterly principal payments and certain mandatory prepayments, and is
collateralized by all the assets of the Company.
7. EARNINGS PER SHARE
Earnings per share is based on the weighted average number of shares
outstanding during the period after consideration of the dilutive effect of
stock options and convertible preferred stock. Common shares issued and options
granted by the Company are considered outstanding for the period presented,
using the treasury stock method. The weighted average number of common shares
used in the computation of earnings per common share are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------
MARCH 30, 1996 MARCH 29, 1997
---------------------- ----------------------
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Issued and outstanding (weighted
average)................................ 4,414,254 4,414,254 4,435,703 4,435,703
Stock options............................. 51,649 60,020 80,512 80,512
Convertible preferred stock............... 65,962 -- 230,868
---------- ---------- ---------- ----------
4,465,903 4,540,236 4,516,215 4,747,083
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
F-28
<PAGE>
MONACO COACH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
8. NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings Per Share", which is
required to be adopted for periods ending after December 15, 1997. The following
table presents unaudited pro forma earnings per share, calculated in accordance
with the provisions of this new standard:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
MARCH 30, 1996 MARCH 29, 1997
----------------- -----------------
<S> <C> <C>
Basic........................................................ $ .14 $ .60
Diluted...................................................... $ .14 $ .57
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
REPURCHASE AGREEMENTS
Substantially all of the Company's sales to independent dealers are made on
terms requiring cash on delivery. The Company does not finance dealer purchases.
However, most dealers are financed on a "floor plan" basis by a bank or finance
company which lends the dealer all or substantially all of the wholesale
purchase price and retains a security interest in the vehicles. Upon request of
a lending institution financing a dealer's purchases of the Company's product,
the Company will execute a repurchase agreement. These agreements provide that,
for up to 18 months after a unit is shipped, the Company will repurchase a
dealer's inventory in the event of default by a dealer to its lender.
The Company's liability under repurchase agreements is limited to the unpaid
balance owed to the lending institution by reason of its extending credit to the
dealer to purchase its vehicles. The Company does not anticipate any significant
losses will be incurred under these agreements in the foreseeable future.
LITIGATION
The Company is involved in legal proceedings arising in the ordinary course
of its business, including a variety of product liability and warranty claims
typical in the recreational vehicle industry. In addition, in connection with
the Holiday Acquisition, the Company assumed most of the liabilities of that
business, including product liability and warranty claims. The Company does not
believe that the outcome of its pending legal proceedings, in excess of
insurance coverage and accruals recorded for estimated settlements, will have a
material adverse effect on the business, financial condition or results of
operations of the Company.
OTHER COMMITMENTS
In 1996, the Company began construction of a new manufacturing facility in
Wakarusa, Indiana. The new facility is expected to be completed in 1997 at a
total estimated cost of $15 million. At March 29, 1997, the Company had incurred
approximately $8.2 million in expenditures related to construction in progress
on the facility.
10. SUBSEQUENT EVENT
On March 19, 1997, the Company filed a registration statement with the
United States Securities and Exchange Commission to register for sale to the
public 800,000 shares of its Common Stock. The Company intends to use a portion
of the net proceeds from the offering to retire the outstanding balance under
its revolving line of credit. The balance of the proceeds are expected to be
used for working capital and general corporate purposes.
F-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Harley-Davidson, Inc.
We have audited the accompanying combined balance sheets of Holiday Rambler
LLC Recreational Vehicle Manufacturing Division and certain Holiday World Retail
Operations (as described in Note 1) as of December 31, 1994 and 1995, and the
related combined statements of operations and deficiency in net assets and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the management of Holiday Rambler
LLC. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Recreational Vehicle Manufacturing Division and Holiday World Retail
Operations are part of Holiday Rambler LLC, which is ultimately a wholly owned
subsidiary of Harley-Davidson, Inc. As more fully described in Note 8, the
Recreational Vehicle Manufacturing Division has significant notes payable to
Harley-Davidson, Inc.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Holiday
Rambler LLC Recreational Vehicle Manufacturing Division and certain Holiday
World Retail Operations at December 31, 1994 and 1995, and the combined results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
January 20, 1996
F-30
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 2,200 $ 675
Accounts Receivable, net of allowance for doubtful accounts (NOTE 3).................... 18,052 14,665
Inventories (NOTE 3).................................................................... 64,264 61,893
Deferred income taxes................................................................... 6,302 4,764
Prepaid expenses........................................................................ 615 535
---------- ----------
Total current assets.................................................................. 91,433 82,532
Due from affiliates (NOTE 8).............................................................. 7,832 --
Property, plant and equipment, at cost, less accumulated depreciation (NOTE 3)............ 32,851 33,430
Other assets.............................................................................. 1,729 2,254
---------- ----------
$ 133,845 $ 118,216
---------- ----------
---------- ----------
LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Notes payable (NOTE 4).................................................................. $ 12,718 $ 17,225
Accounts payable........................................................................ 20,541 12,926
Accrued expenses and other liabilities.................................................. 16,026 17,005
---------- ----------
Total current liabilities............................................................. 49,285 47,156
Due to Harley-Davidson, Inc. (NOTE 8)..................................................... 102,259 93,466
Deferred income taxes..................................................................... -- 666
Due to affiliates (NOTE 8)................................................................ -- 4,587
Commitments and contingencies (NOTE 6).................................................... -- --
Deficiency in net assets (NOTES 1 AND 8).................................................. (17,699) (27,659)
---------- ----------
$ 133,845 $ 118,216
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
F-31
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
COMBINED STATEMENTS OF OPERATIONS AND DEFICIENCY IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................................... $ 190,980 $ 271,474 $ 300,239
Cost of goods sold........................................................... 162,050 230,678 258,796
---------- ---------- ----------
Gross margin................................................................. 28,930 40,796 41,443
Selling and administrative expenses.......................................... 40,145 42,757 47,426
Goodwill charges (NOTE 2).................................................... 46,401 -- --
---------- ---------- ----------
Loss from operations......................................................... (57,616) (1,961) (5,983)
Other income................................................................. 598 537 542
Interest expense............................................................. (13,635) (9,920) (9,591)
---------- ---------- ----------
Loss before income tax benefit............................................... (70,653) (11,344) (15,032)
Income tax benefit (NOTE 5).................................................. 8,250 6,093 5,072
---------- ---------- ----------
Net loss..................................................................... (62,403) (5,251) (9,960)
Deficiency in net assets, beginning of year.................................. (14,277) (76,680) (17,699)
Capital contribution (NOTE 8)................................................ -- 64,232 --
---------- ---------- ----------
Deficiency in net assets, end of year........................................ $ (76,680) $ (17,699) $ (27,659)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes.
F-32
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss....................................................................... $ (62,403) $ (5,251) $ (9,960)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................ 5,375 3,237 2,728
Deferred income taxes........................................................ 90 (6,750) 2,204
Write-off of goodwill........................................................ 46,401 -- --
Changes in operating assets and liabilities:
Receivables................................................................ 7,799 (10,597) 3,387
Inventories................................................................ (7,213) (20,324) 2,371
Prepaid expenses and other assets.......................................... 1,601 (500) (445)
Accounts payable and accrued expenses...................................... 16,025 11,412 (6,636)
---------- ---------- ---------
Total adjustments.............................................................. 70,078 (23,522) 3,609
---------- ---------- ---------
Net cash provided by (used in) operating activities............................ 7,675 (28,773) (6,351)
INVESTING ACTIVITIES
Capital expenditures........................................................... (944) (1,363) (3,307)
Other.......................................................................... 673 -- --
---------- ---------- ---------
Net cash used in investing activities.......................................... (271) (1,363) (3,307)
FINANCING ACTIVITIES
Net change in notes payable.................................................... (527) 46 4,507
Net change in due to Harley-Davidson, Inc...................................... (280) 20,413 (8,793)
Other.......................................................................... 77 (126) --
Net change in due to/from affiliates........................................... (9,824) 11,166 12,419
---------- ---------- ---------
Net cash provided by (used in) financing activities............................ (10,554) 31,499 8,133
---------- ---------- ---------
Net increase (decrease) in cash and cash equivalents........................... (3,150) 1,363 (1,525)
Cash and cash equivalents at beginning of year................................. 3,987 837 2,200
---------- ---------- ---------
Cash and cash equivalents at end of year....................................... $ 837 $ 2,200 $ 675
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See accompanying notes.
F-33
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. BASIS OF PRESENTATION
On January 21, 1996, an asset purchase agreement was entered into between
Harley-Davidson, Inc. ("Harley-Davidson"), Holiday Rambler LLC and State Road
Properties L.P. (collectively, the "Company") and Monaco Coach Corporation
("Monaco") wherein Monaco agreed to purchase certain assets and liabilities of
Holiday Rambler LLC's Recreational Vehicle Manufacturing Division and certain
real estate owned by State Road Properties L.P. In addition, Monaco signed a
letter of intent to purchase certain assets and liabilities of the retail sales
operation of Holiday World Stores, a subsidiary of Holiday Holding Corp. Holiday
Rambler LLC and Holiday Holding Corp. are ultimately wholly owned by
Harley-Davidson. State Road Properties L.P. is 67% ultimately owned by
Harley-Davidson.
The purpose of the combined financial statements is to present the
historical financial position and results of operations of the businesses Monaco
intends to purchase. Accordingly, the accompanying combined financial statements
include the accounts of the Holiday Rambler LLC Recreational Vehicle
Manufacturing Division, certain real estate used in the Holiday Rambler
operations which is owned by State Road Properties, L.P. and ten retail sales
operations. These retail sales operations are located in Elkhart, Indiana;
Everett, Washington; Tacoma, Washington; Houston, Texas (North and South
operations); Mesquite, Texas; Camarillo, California; Leesburg, Florida;
Albuquerque, New Mexico; and Portland, Oregon.
Although the Company is owned by nontaxable pass-through entities, because
the entities' operations were included in Harley-Davidson's consolidated federal
tax return, all tax accounts are presented as if the Company were taxable.
The combined financial statements are not intended to be complete
presentations of the consolidated financial statements of Holiday Rambler LLC.
All significant interdivisional accounts and transactions are eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The Holiday Rambler LLC Recreational Vehicle Manufacturing Division produces
and distributes recreational motor vehicles, which are sold through dealers,
including Holiday World retail operations.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist primarily of cash and cash equivalents, trade
receivables and notes payable, the carrying values of which are considered to
approximate their respective fair values.
F-34
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are valued at the lower of cost or market. All inventories are
valued using the last-in, first-out (LIFO) method except for used recreational
vehicles and other miscellaneous inventories ($8.1 million in 1994 and $9.9
million in 1995), which are valued using the first-in, first-out (FIFO) method.
DEPRECIATION
Depreciation of plant and equipment is determined on the straight-line basis
over the estimated useful lives of the assets. Accelerated methods are used for
income tax purposes.
PRODUCT WARRANTY
Product warranty costs are charged to operations as revenues are recorded
based upon the estimated historical warranty cost per unit sold.
GOODWILL
During 1993, Holiday Rambler LLC recorded a $46.4 million charge to
operations resulting from the write-off of the remaining goodwill associated
with the purchase of Holiday Rambler LLC by Harley-Davidson in 1986. Since 1986,
the markets in which Holiday Rambler LLC operates have become increasingly
competitive, resulting in lower profitability than initially anticipated.
Holiday Rambler LLC considered these factors, as well as estimated future
operating results, during the fourth quarter of 1993 in concluding that an
impairment had occurred. The Company measured the impairment and, based on the
results of that measurement, recorded a $46.4 million charge against earnings.
In measuring the impairment, Holiday Rambler LLC calculated the discounted value
of its estimated cash flows, over the approximate remaining goodwill
amortization period, using a targeted cost of capital discount rate.
Prior to its write-off in 1993, goodwill was being amortized over 25 years
using the straight-line method.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
ENVIRONMENTAL LIABILITIES
Environmental loss contingencies are accrued when it is probable that a
liability has been incurred and the amount can be reasonably estimated.
Environmental loss contingencies are not believed to be material to the
financial position of the combined operations at December 31, 1995.
F-35
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
3. ADDITIONAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Allowance for doubtful accounts included in accounts receivable......... $ 162 $ 212
--------- ---------
--------- ---------
Inventories:
Components at the lower of FIFO cost, or market:
Raw materials....................................................... $ 17,074 $ 15,699
Work in process..................................................... 12,461 8,285
Finished goods...................................................... 38,171 42,710
--------- ---------
67,706 66,694
Excess of FIFO over LIFO inventories.................................... 3,442 4,801
--------- ---------
$ 64,264 $ 61,893
--------- ---------
--------- ---------
Property, plant and equipment:
Land.................................................................. $ 9,657 $ 9,565
Buildings and improvements............................................ 20,897 23,581
Machinery and equipment............................................... 21,150 21,985
--------- ---------
51,704 55,131
Less accumulated depreciation......................................... 18,853 21,701
--------- ---------
Total............................................................. $ 32,851 $ 33,430
--------- ---------
--------- ---------
Accrued expenses and other liabilities:
Payroll, bonuses and related expenses................................. $ 5,864 $ 4,636
Dealer incentives..................................................... 1,935 2,101
Other taxes........................................................... 1,610 1,827
Product liability..................................................... 1,277 1,707
Product warranty...................................................... 2,303 3,561
Interest.............................................................. 115 166
Other current liabilities............................................. 2,922 3,007
--------- ---------
Total............................................................. $ 16,026 $ 17,005
--------- ---------
--------- ---------
</TABLE>
4. NOTES PAYABLE
Notes payable represent floor plan obligations of the Holiday World retail
operations which are secured by specific units held for sale (approximately
$20.3 million of finished goods inventory at December 31, 1995). The floor plan
obligations are primarily with Eaglemark Financial Services, Inc., which is a
wholly owned subsidiary of Harley-Davidson.
F-36
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
5. INCOME TAXES
Deferred income taxes result from timing differences in the recognition of
revenues and expenses for financial statements and tax returns. The principal
sources of these differences and the related effect of each on the provision
(benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accruals not yet deductible.............................................. $ 1,511 $ 2,188
Legal reorganization..................................................... 2,912 --
Inventory adjustments.................................................... 691 940
Other, net............................................................... 1,188 1,636
--------- ---------
6,302 4,764
Deferred tax liabilities:
Fixed assets, book tax basis difference.................................. -- (666)
--------- ---------
Net deferred tax asset................................................. $ 6,302 $ 4,098
--------- ---------
--------- ---------
</TABLE>
The income tax benefit differs from the amount which would be provided by
applying the statutory U.S. corporate income tax rate due to the following
items:
<TABLE>
<CAPTION>
1993 1994 1995
---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Benefit at statutory rate.................................... $ (24,729) $ (3,970) $ (5,151)
Write-off of goodwill........................................ 16,251 -- --
Legal reorganization......................................... -- (2,282) --
Other........................................................ 228 159 79
---------- --------- ---------
Income tax benefit........................................... $ (8,250) $ (6,093) $ (5,072)
---------- --------- ---------
---------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax benefit:
Current.................................................... $ (5,118) $ 657 $ (7,276)
Deferred................................................... (3,132) (6,750) 2,204
---------- --------- ---------
$ (8,250) $ (6,093) $ (5,072)
---------- --------- ---------
---------- --------- ---------
</TABLE>
The Company's 1994 tax provision includes a one-time benefit of $2.3 million
related to the legal reorganization of the Company.
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1995, Holiday Rambler LLC estimates that it is contingently
liable under repurchase agreements for an approximate maximum of $76.9 million
to lending institutions that provide wholesale
F-37
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
floor plan financing to its dealers. These agreements are customary in the
recreational vehicle industry. Holiday Rambler LLC's loss exposure on repurchase
is limited to the difference between the net realized resale value of the
vehicle and the amount required to be paid to the lending institution at the
time of repurchase.
Holiday Rambler LLC has not incurred any material losses from the repurchase
or guaranty agreements and currently anticipates no material losses.
Various claims and litigation are pending, including claims with respect to
warranties and product liability. Prior to June 30, 1995, product liability
losses were fully self-insured. Beginning on July 1, 1995, product liability
losses in the United States are self-insured up to $3 million (catastrophic
coverage is maintained for individual claims in excess of $3 million, up to $25
million). Holiday Rambler LLC accrues for claim exposures which are probable of
occurrence and can be reasonably estimated.
7. EMPLOYEE RETIREMENT PLAN
Holiday Rambler LLC sponsors a retirement plan (the "Plan") covering
substantially all full-time employees. The Plan is funded partly by employee
wage deferrals in accordance with Section 401(k) of the Internal Revenue Code.
Holiday Rambler LLC matches employee contributions up to 3% of compensation.
Matching is discretionary and subject to certain net worth measurements. Holiday
Rambler LLC's contributions for 1993, 1994 and 1995 were $0 million, $1.0
million and $1.1 million, respectively.
8. RELATED-PARTY TRANSACTIONS
The Company has amounts due to Harley-Davidson, its parent company, of
$107.1 million and $98.3 million at December 31, 1994 and 1995, respectively.
Interest is charged at rates between 9% and 10%. Interest expense on this debt
was $12.7 million, $8.4 million and $9.0 million for the years ended 1993, 1994
and 1995, respectively. During 1994, Harley-Davidson contributed capital of
$64.2 million to the Company in the form of debt forgiveness in a non-cash
transaction.
The Company provides management information systems, human resources and
other administrative services to certain affiliated entities. Certain affiliated
companies transfer all excess operating cash to the Company. The net advances
to/from affiliates represents the net of the operating cash transfers with the
affiliates. These advances are non-interest-bearing. General and administrative
costs of $1.2 million, $1.2 million and $1.4 million for the years ended 1993,
1994 and 1995, respectively, have been allocated to the affiliated entities and
are, therefore, not included in the general and administrative costs presented
in these financial statements.
F-38
<PAGE>
[Inside Back Cover]
[Monaco Coach Corporation logo next to picture of Monaco Dynasty motor
coach; Holiday Rambler logo next to Holiday Rambler Vacationer motor coach;
Royale Coach by Monaco logo next to picture of Royale Coach by Monaco bus
conversion; picture of Company's Coburg, Oregon headquarters with motor
coaches in front.]
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 12
Dividend Policy................................ 12
Price Range of Common Stock.................... 12
Capitalization................................. 13
Selected Historical Consolidated Financial
Data......................................... 14
Unaudited Pro Forma Combined Statements of
Income....................................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 18
Business....................................... 25
Management..................................... 38
Principal and Selling Stockholders............. 41
Description of Capital Stock................... 44
Shares Eligible for Future Sale................ 46
Underwriting................................... 47
Legal Matters.................................. 48
Experts........................................ 48
Available Information.......................... 48
Incorporation of Certain Documents By
Reference.................................... 49
Index to Financial Statements.................. F-1
</TABLE>
1,700,000 SHARES
[LOGO]
COMMON STOCK
------
PROSPECTUS
, 1997
---------
SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
A.G. EDWARDS & SONS, INC.
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
Registration Fee.................................................................. $ 14,911
NASD Filing Fee................................................................... 5,421
Nasdaq National Market Listing Fee................................................ 17,500
Printing.......................................................................... 150,000
Legal Fees and Expenses........................................................... 150,000
Accounting Fees and Expenses...................................................... 110,000
Blue Sky Fees and Expenses........................................................ 10,000
Transfer Agent and Registrar Fees................................................. 10,000
Miscellaneous..................................................................... 24,668
-----------
Total......................................................................... $ 475,000
-----------
-----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the Delaware General Corporation Law (the "DGCL") provides
in relevant part that "a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful." With respect to
derivative actions, Section 145(b) of the DGCL provides in relevant part that
"[a] corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor . . . [by
reason of his service in one of the capacities specified in the preceding
sentence] against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper."
The Company's Certificate of Incorporation provides that any director,
officer or employee of the Company may be indemnified by the Company to the full
extent permitted by the DGCL or any other applicable laws. Such Certificate of
Incorporation also provides that no amendment or repeal of such Certificate
shall apply to or have any effect on the right to indemnification permitted
thereunder for or with respect to claims asserted before or after such amendment
or repeal arising from acts or omissions occurring before the effective date of
such amendment or repeal.
II-1
<PAGE>
The Company's Bylaws provide that the Company shall indemnify to the full
extent authorized by law any person made or threatened to be made a party to any
action or proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that he, his testator or intestate was or is a director,
officer, employee or agent of the Company or any predecessor of the Company or
serves or served any other enterprise as a director, officer, employee or agent
at the request of the Company or any predecessor of the Company.
The Company has entered into indemnification agreements with its directors
and each of its executive officers. In addition, the registration rights
agreements between the Company and each of its current stockholders provide for
cross indemnification for certain liabilities under the Securities Act of 1933,
as amended (the "Act") or otherwise.
The Company has purchased and maintains insurance on behalf of any person
who is or was a director or officer against any loss arising from any claim
asserted against him and incurred by him in any such capacity, subject to
certain exclusions.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the
Underwriters of the Registrant and its directors, executive officers and other
persons for certain liabilities, including liabilities arising under the Act.
See also the undertakings set out in response to Item 17 herein.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement.
2.1(1) Asset Purchase Agreement dated February 4, 1993 between the Registrant, Warrick
Industries, Inc., William L. Warrick, Arlen J. Paul, Kay L. Toolson, Jay M.
DeVoss and James A. Krider.
2.2(1) First Amendment to Asset Purchase Agreement dated March 5, 1993 between the
Registrant, Warrick Industries, Inc., William L. Warrick, Arlen J. Paul, Kay L.
Toolson, Jay M. DeVoss and James A. Krider.
2.3(1) Assumption Agreement dated March 5, 1993 between the Registrant and Warrick
Industries, Inc.
2.4(1) Letter Agreement dated August 10, 1993 between the Registrant, Warrick
Industries, Inc., William L. Warrick, Arlen J. Paul, Jay M. DeVoss, James A.
Krider and Kay L. Toolson.
2.5(2) Asset Purchase Agreement dated as of January 21, 1996 among Harley-Davidson,
Inc., Holiday Rambler LLC, State Road Properties L.P., and Monaco Coach
Corporation (the "HR Asset Purchase Agreement").
2.6(2) Amendment No. 1 to the HR Asset Purchase Agreement dated as of March 4, 1996
among Harley-Davidson, Inc., Holiday Rambler LLC, State Road Properties L.P., and
Monaco Coach Corporation.
2.7(2) Asset Purchase Agreement dated as of March 4, 1996 among Harley-Davidson, Inc.,
Holiday Holiday Corp., Holiday World, Inc., a California corporation, Holiday
World, Inc., a Texas corporation, Holiday World, Inc., a Florida corporation,
Holiday World, Inc., an Oregon corporation, Holiday World, Inc., an Indiana
corporation, Holiday World, Inc., a Washington corporation, Holiday World, Inc.,
a New Mexico corporation, Monaco Coach Corporation and MCC Acquisition
Corporation.
2.8(2) Subordinated Promissory Note, dated as of March 4, 1996, issued to Holiday
Holding Corp. by MCC Acquisition Corporation.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.1(1) Stockholders Agreement dated August 10, 1993 between the Registrant, Liberty
Investment Partners II, the State Board of Administration of Florida ("SBA"),
Monaco Capital Partners, Tucker Anthony Holding Corporation, Kay L. Toolson, Page
Robertson, Ed Kinney, Ray Mehaffey, Enoch Hutchcraft, Gary Smith, John Nepute,
Miki Scheer and C.D. Smith.
10.2(1) Form of Indemnification Agreement for directors and executive officers.
10.3(1) 1993 Incentive Stock Option Plan and form of option agreement thereunder.
10.4(1) 1993 Director Option Plan.
10.5(1) 1993 Employee Stock Purchase Plan and form of subscription agreement thereunder.
10.6(1) Amended and Restated Management Agreement dated August 10, 1993 between the
Registrant and Cariad Capital, Inc.
10.7A(1) Letter Agreement dated March 5, 1993 between the Registrant, Cariad Capital, Inc.
and Liberty Partners, L.P.
10.7B(1) Amendment to Letter Agreement dated August 12, 1993 between the Registrant and
Liberty Partners, L.P.
10.8(1) Registration Agreement dated March 5, 1993 between the Registrant, Liberty
Investment Partners II and SBA.
10.9(1) Registration Agreement dated March 5, 1993 among the Registrant, Monaco Capital
Partners, Tucker Anthony Holding Corporation and certain other stockholders of
the Registrant.
10.10(2) Credit Agreement dated as of March 5, 1996 among BT Commercial Corporation,
Deutsche Financial Services Corporation, Nationsbank of Texas, N.A., LaSalle
National Bank and Monaco Coach Corporation.
10.11(2) Registration Rights Agreement dated as of March 4, 1996 among Holiday Rambler LLC
and Monaco Coach Corporation.
10.12 Agreement of Lease dated March 4, 1996, with First Amendment dated as of March 4,
1996, pertaining to 3 State Road 19, Wakarusa, Indiana 46573.
10.13 Agreement of Lease dated March 4, 1996, with First Amendment dated as of March 4,
1996, pertaining to 5 State Road 19, Wakarusa, Indiana 46573.
10.14 Agreement of Lease dated March 4, 1996, with First Amendment dated as of March 4,
1996, pertaining to 6 State Road 19, Wakarusa, Indiana 46573.
10.15 Agreement of Lease dated March 4, 1996, with First Amendment dated as of March 4,
1996, pertaining to 7 State Road 19, Wakarusa, Indiana 46573.
10.16 Agreement of Lease dated March 4, 1996 pertaining to 8 State Road 19, Wakarusa,
Indiana 46573.
10.17 Form of Lease dated as of April 1, 1997 pertaining to 5280 High Banks Road,
Springfield, Oregon.
10.18 Lease Agreement dated April 1, 1995 pertaining to 1330 Wade Drive, Elkhart,
Indiana.
10.19 Form of Termination Agreement and Release between Liberty Investment Partners II,
SBA, Monaco Capital Partners, Tucker Anthony Holding Corporation, Kay L. Toolson,
Page Robertson, Ed Kinney, Ray Mehaffey, Enoch Hutchcraft, Gary Smith, John
Nepute, Miki Scheer, C.D. Smith, Roger A. Vandenberg, Andreas P. Graham,
Geraldine M. McNulty and Mary A. Ferreira.
11.1* Computation of earnings per share (See Note 11 of Notes to Consolidated Financial
Statements).
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
23.3 Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney.
27 Financial Data Schedule.
</TABLE>
- ------------------------
(1) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
33-67374) declared effective on September 23, 1993.
(2) Incorporated by reference to exhibits filed in response to Item 7,
"Financial Statements and Exhibits," of the Company's Current Report on Form
8-K dated March 4, 1996.
* Previously filed.
ITEM 17. UNDERTAKINGS
1. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's Annual
Report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
2. Insofar as indemnification by the Registrant for liabilities arising
under the Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referenced in Item 14 of this
Registration Statement or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered hereunder,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
3. The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
Registration Statement on Form S-2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Coburg, State of Oregon,
on this 21st day of May, 1997.
<TABLE>
<S> <C> <C>
MONACO COACH CORPORATION
BY: /S/ KAY L. TOOLSON
-----------------------------------------
Kay L. Toolson
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman Of The Board,
/s/ KAY L. TOOLSON Chief Executive Officer
- ------------------------------ and President (Principal May 21, 1997
(Kay L. Toolson) Executive Officer)
Vice President of Finance
/s/ JOHN W. NEPUTE* and Chief Financial
- ------------------------------ Officer (Principal May 21, 1997
(John W. Nepute) Financial and Accounting
Officer)
/s/ MICHAEL J. KLUGER*
- ------------------------------ Director May 21, 1997
(Michael J. Kluger)
/s/ CARL E. RING, JR.*
- ------------------------------ Director May 21, 1997
(Carl E. Ring, Jr.)
/s/ RICHARD A. ROUSE*
- ------------------------------ Director May 21, 1997
(Richard A. Rouse)
/s/ ROGER A. VANDENBERG*
- ------------------------------ Director May 21, 1997
(Roger A. Vandenberg)
</TABLE>
*By: Kay L. Toolson
Attorney-in-fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------------------------------- -------------
<S> <C> <C>
1.1 Form of Underwriting Agreement.
2.1(1) Asset Purchase Agreement dated February 4, 1993 between the Registrant, Warrick
Industries, Inc., William L. Warrick, Arlen J. Paul, Kay L. Toolson, Jay M. DeVoss and
James A. Krider.
2.2(1) First Amendment to Asset Purchase Agreement dated March 5, 1993 between the Registrant,
Warrick Industries, Inc., William L. Warrick, Arlen J. Paul, Kay L. Toolson, Jay M.
DeVoss and James A. Krider.
2.3(1) Assumption Agreement dated March 5, 1993 between the Registrant and Warrick Industries,
Inc.
2.4(1) Letter Agreement dated August 10, 1993 between the Registrant, Warrick Industries, Inc.,
William L. Warrick, Arlen J. Paul, Jay M. DeVoss, James A. Krider and Kay L. Toolson.
2.5(2) Asset Purchase Agreement dated as of January 21, 1996 among Harley-Davidson, Inc.,
Holiday Rambler LLC, State Road Properties L.P., and Monaco Coach Corporation (the "HR
Asset Purchase Agreement").
2.6(2) Amendment No. 1 to the HR Asset Purchase Agreement dated as of March 4, 1996 among
Harley-Davidson, Inc., Holiday Rambler LLC, State Road Properties L.P., and Monaco Coach
Corporation.
2.7(2) Asset Purchase Agreement dated as of March 4, 1996 among Harley-Davidson, Inc., Holiday
Holiday Corp., Holiday World, Inc., a California corporation, Holiday World, Inc., a
Texas corporation, Holiday World, Inc., a Florida corporation, Holiday World, Inc., an
Oregon corporation, Holiday World, Inc., an Indiana corporation, Holiday World, Inc., a
Washington corporation, Holiday World, Inc., a New Mexico corporation, Monaco Coach
Corporation and MCC Acquisition Corporation.
2.8(2) Subordinated Promissory Note, dated as of March 4, 1996, issued to Holiday Holding Corp.
by MCC Acquisition Corporation.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1(1) Stockholders Agreement dated August 10, 1993 between the Registrant, Liberty Investment
Partners II, the State Board of Administration of Florida ("SBA"), Monaco Capital
Partners, Tucker Anthony Holding Corporation, Kay L. Toolson, Page Robertson, Ed Kinney,
Ray Mehaffey, Enoch Hutchcraft, Gary Smith, John Nepute, Miki Scheer and C.D. Smith.
10.2(1) Form of Indemnification Agreement for directors and executive officers.
10.3(1) 1993 Incentive Stock Option Plan and form of option agreement thereunder.
10.4(1) 1993 Director Option Plan.
10.5(1) 1993 Employee Stock Purchase Plan and form of subscription agreement thereunder.
10.6(1) Amended and Restated Management Agreement dated August 10, 1993 between the Registrant
and Cariad Capital, Inc.
10.7A(1) Letter Agreement dated March 5, 1993 between the Registrant, Cariad Capital, Inc. and
Liberty Partners, L.P.
10.7B(1) Amendment to Letter Agreement dated August 12, 1993 between the Registrant and Liberty
Partners, L.P.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------------------------------- -------------
<S> <C> <C>
10.8(1) Registration Agreement dated March 5, 1993 between the Registrant, Liberty Investment
Partners, II and SBA.
10.9(1) Registration Agreement dated March 5, 1993 among the Registrant, Monaco Capital
Partners, Tucker Anthony Holding Corporation and certain other stockholders of the
Registrant.
10.10(2) Credit Agreement dated as of March 5, 1996 among BT Commercial Corporation, Deutsche
Financial Services Corporation, Nationsbank of Texas, N.A., LaSalle National Bank and
Monaco Coach Corporation.
10.11(2) Registration Rights Agreement dated as of March 4, 1996 among Holiday Rambler LLC and
Monaco Coach Corporation.
10.12 Agreement of Lease dated March 4, 1996, with First Amendment dated as of March 4, 1996,
pertaining to 3 State Road 19, Wakarusa, Indiana 46573.
10.13 Agreement of Lease dated March 4, 1996, with First Amendment dated as of March 4, 1996,
pertaining to 5 State Road 19, Wakarusa, Indiana 46573.
10.14 Agreement of Lease dated March 4, 1996, with First Amendment dated as of March 4, 1996,
pertaining to 6 State Road 19, Wakarusa, Indiana 46573.
10.15 Agreement of Lease dated March 4, 1996, with First Amendment dated as of March 4, 1996,
pertaining to 7 State Road 19, Wakarusa, Indiana 46573.
10.16 Agreement of Lease dated March 4, 1996 pertaining to 8 State Road 19, Wakarusa, Indiana
46573.
10.17 Form of Lease dated as of April 1, 1997 pertaining to 5280 High Banks Road, Springfield,
Oregon.
10.18 Lease Agreement dated April 1, 1995 pertaining to 1330 Wade Drive, Elkhart, Indiana.
10.19 Form of Termination Agreement and Release between Liberty Investment Partners II, SBA,
Monaco Capital Partners, Tucker Anthony Holding Corporation, Kay L. Toolson, Page
Robertson, Ed Kinney, Ray Mehaffey, Enoch Hutchcraft, Gary Smith, John Nepute, Miki
Scheer, C.D. Smith, Roger A. Vandenberg, Andreas P. Graham, Geraldine M. McNulty and
Mary A. Ferreira.
11.1* Computation of earnings per share (See Note 11 of Notes to Consolidated Financial
Statements).
23.1 Consent of Coopers & Lybrand, Independent Accountants.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
23.3 Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney.
27 Financial Data Schedule.
</TABLE>
- ------------------------
(1) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
33-67374) declared effective on September 23, 1993.
(2) Incorporated by reference to exhibits filed in response to Item 7,
"Financial Statements and Exhibits," of the Company's Current Report on Form
8-K dated March 4, 1996.
* Previously filed.
<PAGE>
EXHIBIT 1.1
1,700,000 Shares
MONACO COACH CORPORATION
Common Stock
UNDERWRITING AGREEMENT
June , 1997
SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
A.G. EDWARDS & SONS, INC.
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Monaco Coach Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell an aggregate of 800,000 shares of its common
stock, $.01 par value per share, to the several Underwriters named in
Schedule II hereto (the "Underwriters") and the persons named in Part A of
Schedule I hereto (the "Selling Stockholders") propose to sell to the several
Underwriters an aggregate of 900,000 shares of common stock of the Company.
The Company and the Selling Stockholders are hereinafter sometimes referred
to as the "Sellers". The Company's common stock, $.01 par value, is
hereinafter referred to as the "Common Stock" and the 800,000 shares of
Common Stock to be issued and sold to the Underwriters by the Company and the
900,000 shares of Common Stock to be sold to the Underwriters by the Selling
Stockholders are hereinafter referred to as the "Firm Shares". The Selling
Stockholders listed in Part B of Schedule I hereto also propose to sell to
the Underwriters, upon the terms and conditions set forth in Section 2
hereof, up to an additional 255,000 shares (the "Additional Shares") of
Common Stock. The Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "Shares".
The Company and the Selling Stockholders wish to confirm as follows
their respective agreements with you (the "Representatives") and the other
several Underwriters on whose behalf you are acting, in connection with the
several purchases of the Shares by the Underwriters.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the
<PAGE>
Commission thereunder (collectively, the "Act"), a registration statement on
Form S-2 under the Act (the "registration statement"), including a prospectus
subject to completion, relating to the Shares. The term "Registration
Statement" as used in this Agreement means the registration statement
(including all financial schedules and exhibits), as amended at the time it
becomes effective, or, if the registration statement became effective prior
to the execution of this Agreement, as supplemented or amended prior to the
execution of this Agreement; provided, however, that such term shall also
include, (i) all Rule 430A information deemed to be included in such
registration statement at the time such registration statement becomes
effective as provided by Rule 430A under the Act, and (ii) a registration
statement, if any, filed pursuant to Rule 462(b) under the Act relating to
the Common Stock. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the registration statement will
be filed and must be declared effective before the offering of the Shares may
commence, the term "Registration Statement" as used in this Agreement means
the registration statement as amended by said post-effective amendment. The
term "Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the
Act and such information is included in a prospectus filed with the
Commission pursuant to Rule 424(b) under the Act, the term "Prospectus" as
used in this Agreement means the prospectus in the form included in the
Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus filed with the Commission pursuant to
Rule 424(b). The term "Prospectus" shall also include a term sheet as
described in Rules 434 and 424(b) under the Act, in the form it is first
filed with the Commission pursuant to Rule 424(b), together with the
Prepricing Prospectus included in the Registration Statement when it became
effective. The term "Prepricing Prospectus" as used in this Agreement means
the prospectus subject to completion in the form included in the registration
statement at the time of the initial filing of the registration statement
with the Commission, and as such prospectus shall have been amended from time
to time prior to the date of the Prospectus. Any reference in this Agreement
to the registration statement, the Registration Statement, any Prepricing
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-2
under the Act. As used herein, the term "Incorporated Documents" means the
documents which are incorporated by reference into the registration
statement, the Registration Statement, any Prepricing Prospectus, the
Prospectus, or any amendment or supplement thereto.
2. AGREEMENTS TO SELL AND PURCHASE. Subject to such adjustments as
you may determine in order to avoid fractional shares, the Company hereby
agrees, subject to all the terms and conditions set forth herein, to issue
and sell to each Underwriter and, upon the basis of the representations,
warranties and agreements of the Company and the Selling Stockholders herein
contained and subject to all the terms and conditions set forth herein, each
Underwriter agrees, severally and not jointly, to purchase from the Company,
at a purchase price of $________ per Share (the "purchase price per share"),
the number of Firm Shares which bears the same proportion to the aggregate
number of Firm Shares to be issued and sold by the Company as the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule II
hereto (or such number of Firm Shares increased as set forth in Section 12
hereof)
2
<PAGE>
bears to the aggregate number of Firm Shares to be sold by the Company and the
Selling Stockholders.
Subject to such adjustments as you may determine in order to avoid
fractional shares, each Selling Stockholder agrees, subject to all the terms and
conditions set forth herein, to sell to each Underwriter and, upon the basis of
the representations, warranties and agreements of the Company and the Selling
Stockholders herein contained and subject to all the terms and conditions set
forth herein, each Underwriter, severally and not jointly, agrees to purchase
from each Selling Stockholder at the purchase price per share that number of
Firm Shares which bears the same proportion to the number of Firm Shares set
forth opposite the name of such Selling Stockholder in Part A of Schedule I
hereto as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule II hereto (or such number of Firm Shares increased as
set forth in Section 12 hereof) bears to the aggregate number of Firm Shares to
be sold by the Company and the Selling Stockholders.
The Selling Stockholders listed in Part B of Schedule I hereto also
agree, subject to all the terms and conditions set forth herein, to sell to
the Underwriters, and, upon the basis of the representations, warranties and
agreements of the Company and the Selling Stockholders herein contained and
subject to all the terms and conditions set forth herein, the Underwriters
shall have the right to purchase from the Selling Stockholders listed in Part
B of Schedule I hereto, at the purchase price per share, pursuant to an
option (the "over-allotment option") which may be exercised at any time and
from time to time prior to 9:00 P.M., New York City time, on the 30th day
after the date of the Prospectus (or, if such 30th day shall be a Saturday or
Sunday or a holiday, on the next business day thereafter when the New York
Stock Exchange is open for trading), up to an aggregate of 255,000 Additional
Shares from the Selling Stockholders listed in Part B of Schedule I hereto
(the maximum number of Additional Shares which each of them agrees to sell
upon the exercise by the Underwriters of the over-allotment option is set
forth opposite their respective names in Part B of Schedule I). Additional
Shares may be purchased only for the purpose of covering over-allotments made
in connection with the offering of the Firm Shares. The number of Additional
Shares which the Underwriters elect to purchase upon any exercise of the
over-allotment option shall be provided by each Selling Stockholder who has
agreed to sell Additional Shares in proportion to the respective maximum
numbers of Additional Shares which each such Selling Stockholder has agreed
to sell. Upon any exercise of the over-allotment option, each Underwriter,
severally and not jointly, agrees to purchase from each Selling Stockholder
who has agreed to sell Additional Shares the number of Additional Shares
(subject to such adjustments as you may determine in order to avoid
fractional shares) which bears the same proportion to the number of
Additional Shares to be sold by each Selling Stockholder who has agreed to
sell Additional Shares as the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule II hereto (or such number of Firm Shares
increased as set forth in Section 12 hereof) bears to the aggregate number of
Firm Shares to be sold by the Company and the Selling Stockholders.
Certificates in transferable form for the Shares (including any Additional
Shares) which each of the Selling Stockholders agrees to sell pursuant to this
Agreement have been placed in custody with Norwest Bank Minnesota, N.A. (the
"Custodian") for delivery under this
3
<PAGE>
Agreement pursuant to a Custody Agreement and Power of Attorney (the "Custody
Agreement") executed by each of the Selling Stockholders appointing
Kay L. Toolson and John W. Nepute as agents and attorneys-in-fact (the
"Attorneys-in-Fact"). Each Selling Stockholder agrees that (i) the Shares
represented by the certificates held in custody pursuant to the Custody
Agreement are subject to the interests of the Underwriters, the Company and
each other Selling Stockholder, (ii) the arrangements made by the Selling
Stockholders for such custody are, except as specifically provided in the
Custody Agreement, irrevocable, and (iii) the obligations of the Selling
Stockholders hereunder and under the Custody Agreement shall not be
terminated by any act of such Selling Stockholder or by operation of law,
whether by the death or incapacity of any Selling Stockholder or the
occurrence of any other event. If any Selling Stockholder shall die or be
incapacitated or if any other event shall occur before the delivery of the
Shares hereunder, certificates for the Shares of such Selling Stockholder
shall be delivered to the Underwriters by the Attorneys-in-Fact in accordance
with the terms and conditions of this Agreement and the Custody Agreement as
if such death or incapacity or other event had not occurred, regardless of
whether or not the Attorneys-in-Fact or any Underwriter shall have received
notice of such death, incapacity or other event. Each Attorney-in-Fact is
authorized, on behalf of each of the Selling Stockholders, to execute this
Agreement and any other documents necessary or desirable in connection with
the sale of the Shares to be sold hereunder by such Selling Stockholder, to
make delivery of the certificates for such Shares, to receive the proceeds of
the sale of such Shares, to give receipts for such proceeds, to pay therefrom
any expenses to be borne by such Selling Stockholder in connection with the
sale and public offering of such Shares, to distribute the balance thereof to
such Selling Stockholder, and to take such other action as may be necessary
or desirable in connection with the transactions contemplated by this
Agreement. Each Attorney-in-Fact agrees to perform his duties under the
Custody Agreement.
3. TERMS OF PUBLIC OFFERING. The Sellers have been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Shares upon the terms set forth in the Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
counsel for the Underwriters, at 10:00 A.M., New York City time, on June ,
1997 (the "Closing Date"). The place of closing for the Firm Shares and the
Closing Date may be varied by agreement among you, the Company and the
Attorneys-in-Fact.
Delivery to the Underwriters of and payment for any Additional Shares to be
purchased by the Underwriters shall be made at the aforementioned office of
counsel for the Underwriters at such time on such date (the "Option Closing
Date"), which may be the same as the Closing Date but shall in no event be
earlier than the Closing Date nor earlier than two nor later than ten business
days after the giving of the notice hereinafter referred to, as shall be
specified in a written notice from you on behalf of the Underwriters to the
Company and the Attorneys-in-Fact of the Underwriters' determination to purchase
a number, specified in such
4
<PAGE>
notice, of Additional Shares. The place of closing for any Additional Shares
and the Option Closing Date for such Shares may be varied by agreement among
you, the Company and the Attorneys-in-Fact.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor in immediately available funds.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Company will endeavor to cause the Registration Statement or such post-effective
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event, which makes any statement of a material fact made in the
Registration Statement or the Prospectus (as then amended or supplemented)
untrue or which requires the making of any additions to or changes in the
Registration Statement or the Prospectus (as then amended or supplemented) in
order to state a material fact required by the Act or the regulations thereunder
to be stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus (as then
amended or supplemented) to comply with the Act or any other law. If at any
time the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal of such order at the earliest possible time.
5
<PAGE>
(c) The Company will furnish to you, without charge, (i) four signed
copies of the registration statement as originally filed with the Commission and
of each amendment thereto, including financial statements and all exhibits to
the registration statement, (ii) such number of conformed copies of the
registration statement as originally filed and of each amendment thereto, but
without exhibits, as you may request, (iii) such number of copies of the
Incorporated Documents, without exhibits, as you may request, and (iv) four
copies of the exhibits to the Incorporated Documents.
(d) The Company will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which you
shall not previously have been advised or to which you shall object after being
so advised or (ii) so long as, in the opinion of counsel for the Underwriters, a
Prospectus is required to be delivered in connection with sales by any
Underwriter or dealer, file any information, documents or reports pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act") without
delivering a copy of such information, documents or reports to you, as
representatives of the Underwriters, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you have
requested, copies of each form of the Prepricing Prospectus. The Company
consents to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by dealers, prior to the date of the Prospectus,
of each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer, the Company will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may request. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer. If during such
period of time any event shall occur that in the judgment of the Company or in
the opinion of counsel for the Underwriters is required to be set forth in the
Prospectus (as then amended or supplemented) or should be set forth therein in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Prospectus to comply with the Act or any other law, the Company will
forthwith prepare and, subject to the provisions of paragraph (d) above, file
with the Commission an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Underwriters and dealers a reasonable number of
copies thereof. In the event that the Company and you, as Representatives of
the several Underwriters, agree that the Prospectus should be amended or
supplemented, the Company, if
6
<PAGE>
requested by you, will promptly issue a press release announcing or disclosing
the matters to be covered by the proposed amendment or supplement.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Shares, in any jurisdiction where it is not now so
subject.
(h) The Company will make generally available to its security holders
a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
(i) During the period of five years hereafter, the Company will
furnish to you (i) as soon as available, a copy of each report of the Company
mailed to stockholders or filed with the Commission, and (ii) from time to time
such other information concerning the Company as you may request.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 12 hereof or by notice given by you terminating this
Agreement pursuant to Section 12 or Section 13 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company or the Selling Stockholders to comply with the terms or
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the Representatives for all out-of-pocket expenses (including fees and expenses
of counsel for the Underwriters) incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the sale of the
Shares to be sold by it hereunder substantially in accordance with the
description set forth in the Prospectus.
(l) If Rule 430A of the Act is employed, the Company will timely file
the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.
(m) Except as provided in this Agreement, the Company will not sell,
contract to sell or otherwise dispose of any Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or grant any
options or warrants to purchase Common Stock, except pursuant to its 1993
Employee Stock Purchase Plan, 1993
7
<PAGE>
Incentive Stock Option Plan and 1993 Director Stock Option Plan, for a period of
90 days after the date of the Prospectus, without the prior written consent of
Smith Barney Inc.
(n) The Company has furnished or will furnished to you "lock-up"
letters, in form and substance satisfactory to you, signed by each of its
current officers and directors and each of its stockholders designated by you.
(o) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(p) The Company will use its best efforts to have the shares of
Common Stock which it agrees to sell under this Agreement listed, subject to
notice of issuance, on the Nasdaq National Market on or before the Closing Date.
6. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each of the Selling
Stockholders agrees with the several Underwriters as follows:
(a) Such Selling Stockholder will cooperate to the extent necessary
to cause the registration statement or any post-effective amendment thereto to
become effective at the earliest possible time.
(b) Such Selling Stockholder will pay all Federal and other taxes, if
any on the transfer or sale of the Shares being sold by the Selling Stockholder
to the Underwriters.
(c) Such Selling Stockholder will do or perform all things required
to be done or performed by the Selling Stockholder prior to the Closing Date or
any Option Closing Date, as the case may be, to satisfy all conditions precedent
to the delivery of the Shares pursuant to this Agreement.
(d) Such Selling Stockholder has executed or will execute a "lock-up"
letter as provided in Section 5(n) above and will not sell, contract to sell or
otherwise dispose of any Common Stock, except for the sale of Shares to the
Underwriters pursuant to this Agreement, prior to the expiration of 90 days
after the date of the Prospectus, without the prior written consent of Smith
Barney Inc.
(e) Except as stated in this Agreement and in the Prepricing
Prospectus and the Prospectus, such Selling Stockholder will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(f) Such Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of time
referred to in Section 5(f) hereof, of any change in the information relating to
such Selling Stockholder stated in the
8
<PAGE>
Registration Statement or the Prospectus (as then amended or supplemented) that
suggests that such information relating to such Selling Stockholder is or may be
untrue in any material respect.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the provisions of the Act. The Commission has not issued
any order preventing or suspending the use of any Prepricing Prospectus.
(b) The Company meets the requirements for the use of Form S-2 under
the Act. The registration statement in the form in which it became or becomes
effective and also in such form as it may be when any post-effective amendment
thereto shall become effective and the prospectus and any supplement or
amendment thereto when filed with the Commission under Rule 424(b) under the
Act, complied or will comply in all material respects with the provisions of the
Act and did not or will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except that this
representation and warranty does not apply to statements in or omissions from
the registration statement or the prospectus made in reliance upon and in
conformity with information relating to any Underwriter furnished to the Company
in writing by or on behalf of any Underwriter through you expressly for use
therein.
(c) The Incorporated Documents, when they were filed (or, if any
amendment with respect to any such document was filed, when such amendment was
filed), complied in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.
(d) All the outstanding shares of Common Stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws and are
free of any preemptive or similar rights; the Shares to be issued and sold by
the Company have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms hereof, will
be validly issued, fully paid and nonassessable and free of any preemptive or
similar rights; the capital stock of the Company conforms to the description
thereof in the Registration Statement and the Prospectus; except as disclosed in
or contemplated by the Prospectus and the financial statements of the Company,
and the related notes thereto, included in the Prospectus or the Incorporated
Documents, the Company does not have outstanding any options or warrants to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
warrants, rights,
9
<PAGE>
convertible securities or obligations; and the description of the Company's
stock option and other stock plans or arrangements, and the options or other
rights granted and exercised thereunder, set forth in the Prospectus or the
Incorporated Documents accurately and fairly presents the information required
to be shown with respect to such plans, arrangements, options and rights.
(e) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business and
is in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not
have a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the Company and
the Subsidiaries (as hereinafter defined), taken as a whole.
(f) All the Company's subsidiaries (collectively, the "Subsidiaries")
are listed in an exhibit to the Company's Annual Report on Form 10-K which is
incorporated by reference into the Registration Statement. Each Subsidiary is a
corporation duly organized, validly existing and in good standing in the
jurisdiction of its incorporation, with full corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement and the Prospectus, and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify does not have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of the Company and the Subsidiaries, taken as a whole; all the outstanding
shares of capital stock of each of the Subsidiaries have been duly authorized
and validly issued, are fully paid and nonassessable, and are owned by the
Company directly, or indirectly through one of the other Subsidiaries, free and
clear of any lien, adverse claim, security interest, equity or other
encumbrance.
(g) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or to which
any of their respective properties is subject, that are required to be described
in the Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed as required by the Act or
the Exchange Act.
(h) Neither the Company nor any of the Subsidiaries is in violation
of its certificate or articles of incorporation or by-laws, or other
organizational documents, or, in any respect that has a material adverse effect
on the condition (financial or other), business, properties, net worth or
results of operations of the Company and the Subsidiaries, taken as a
10
<PAGE>
whole, of any law, ordinance, administrative or governmental rule or regulation
applicable to the Company or any of the Subsidiaries or any decree of any court
or governmental agency or body having jurisdiction over the Company or any of
the Subsidiaries, or in default in any material respect in the performance of
any obligation, agreement or condition contained in any bond, debenture, note or
any other evidence of indebtedness or in any material agreement, indenture,
lease or other instrument to which the Company or any of the Subsidiaries is a
party or by which any of them or any of their respective properties may be
bound.
(i) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby (i) requires any consent,
approval, authorization or other order of or registration or filing with, any
court, regulatory body, administrative agency or other governmental body, agency
or official (except such as may be required for the registration of the Shares
under the Act and compliance with the securities or Blue Sky laws of various
jurisdictions, all of which have been or will be effected in accordance with
this Agreement) or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles of
incorporation or bylaws, or other organizational documents, of the Company or
any of the Subsidiaries or (ii) conflicts or will conflict with or constitutes
or will constitute a breach of, or a default under, any agreement, indenture,
lease or other instrument to which the Company or any of the Subsidiaries is a
party or by which any of them or any of their respective properties may be
bound, or violates or will violate any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to the Company or any of the
Subsidiaries or any of their respective properties, or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to the terms of any
agreement or instrument to which any of them is a party or by which any of them
may be bound or to which any of the property or assets of any of them is
subject.
(j) The accountants, Coopers & Lybrand L.L.P., and Ernst & Young LLP,
who have certified or shall certify the financial statements included or
incorporated by reference in the Registration Statement and the Prospectus (or
any amendment or supplement thereto) are independent public accountants as
required by the Act.
(k) The financial statements, together with related schedules and
notes, included or incorporated by reference in the Registration Statement and
the Prospectus (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company and the Subsidiaries on the basis stated in the
Registration Statement at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; the other financial and statistical information and data included or
incorporated by reference in the Registration Statement and the Prospectus (and
any amendment or supplement thereto) are accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company and the Subsidiaries; no other financial statements or schedules are
required to be
11
<PAGE>
included in the Registration Statement; and the pro forma financial statements
and other pro forma information included in the Prospectus present fairly the
information shown therein, have been prepared in accordance with generally
accepted accounting principles and the Commission's rules and guidelines with
respect to pro forma financial statements and other pro forma information, have
been properly compiled on the pro forma basis described therein, and, in the
opinion of the Company, the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate under the
circumstances.
(l) The execution and delivery of, and the performance by the Company
of its obligations under, this Agreement have been duly and validly authorized
by the Company, and this Agreement has been duly executed and delivered by the
Company and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution hereunder may be limited by federal or state
securities laws.
(m) Except as disclosed in or contemplated by the Registration
Statement and the Prospectus (or any amendment or supplement thereto),
subsequent to the respective dates as of which such information is given in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), neither the Company nor any of the Subsidiaries has incurred any
liability or obligation, direct or contingent, or entered into any transaction,
not in the ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any change in the capital
stock, or material increase in the short-term debt or long-term debt, of the
Company or any of the Subsidiaries, or any material adverse change, or any
development involving or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial or other),
business, net worth or results of operations of the Company and the Subsidiaries
taken as a whole.
(n) Each of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Prospectus as being
owned by it, free and clear of all liens, claims, security interests or other
encumbrances except such as are described in the Registration Statement and the
Prospectus or in a document filed as an exhibit to the Registration Statement
and all the property described in the Prospectus as being held under lease by
each of the Company and the Subsidiaries is held by it under valid, subsisting
and enforceable leases.
(o) The Company has not distributed and, prior to the later to occur
of (i) the Closing Date and (ii) completion of the distribution of the Shares,
will not distribute any offering material in connection with the offering and
sale of the Shares other than the Registration Statement, the Prepricing
Prospectus, the Prospectus or other materials, if any, permitted by the Act.
(p) The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own its respective properties and to
conduct its business in the manner described in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus; the
12
<PAGE>
Company and each of the Subsidiaries has fulfilled and performed all its
material obligations with respect to such permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the rights
of the holder of any such permit, in each case if such revocation,
termination or impairment would have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of the Company and the Subsidiaries, taken as a whole, subject in
each case to such qualification as may be set forth in the Prospectus; and,
except as described in the Prospectus, none of such permits contains any
restriction that is materially burdensome to the Company or any of the
Subsidiaries.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(r) To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any employee or agent of the Company or any Subsidiary has made
any payment of funds of the Company or any Subsidiary or received or retained
any funds in violation of any law, rule or regulation, which payment, receipt or
retention of funds is of a character required to be disclosed in the Prospectus.
(s) The Company and each of the Subsidiaries have filed all tax
returns required to be filed, which returns are complete and correct, and
neither the Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with respect
thereto.
(t) Except as disclosed in the Prospectus or the Incorporated
Documents, no holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the Company or
preemptive rights or similar rights to purchase Common Stock because of the
filing of the registration statement or consummation of the transactions
contemplated by this Agreement; and holders of any registration rights or
preemptive or similar rights have waived such rights with respect to the
offering being made by the Prospectus.
(u) The Company and the Subsidiaries own or possess all patents,
trademarks, trademark registration, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by them or any of them or necessary
for the conduct of their respective businesses, and the Company is not aware of
any claim to the contrary or any challenge by any other person to the rights of
the Company and the Subsidiaries with respect to the foregoing.
13
<PAGE>
(v) The Company is not now, and after sale of the Shares to be sold
by it hereunder and application of the net proceeds from such sale as described
in the Prospectus under the caption "Use of Proceeds" will not be, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(w) The Company has complied with all provisions of Florida Statutes,
Section 517.075, relating to issuers doing business with Cuba.
(x) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or otherwise,
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(y) Except as disclosed in the Prospectus, (1) to the best of the
Company's knowledge, the Company is in compliance with all applicable
federal, state and local environmental laws, regulations and ordinances
governing its business, properties or assets, except where failure to be so
in compliance would not have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of
operations of the Company and its Subsidiaries, taken as a whole; (2) to the
best of the Company's knowledge, all material licenses, permits or
registrations required for the business of the Company as presently conducted
and proposed to be conducted under federal, state and local environmental
laws, regulations or ordinances have been secured; (3) to the best of the
Company's knowledge, no reportable quantities (as set forth in Title 40, Code
of Federal Regulations Section 302) of any hazardous or toxic substance,
pollutant or waste which is regulated by any federal, state or local
governmental authority (collectively, "HAZARDOUS MATERIAL") are located in
the soil, groundwater, surface water, or waterways at or under any property
owned, leased or operated by the Company in quantities or concentrations
sufficient to require removal or remediation under federal, state or local
laws, regulations and ordinances; and (4) to the best of the Company's
knowledge, no hazardous materials, including but not limited to asbestos, are
present in buildings presently leased, owned, or otherwise occupied by the
Company in amounts or concentrations that could, under current law, have a
material adverse effect upon the Company's financial position if such
hazardous materials were required to be removed.
(z) The Company maintains insurance of the types and in the
amounts which it deems adequate for its business, including, but not limited
to, general liability insurance, products liability insurance and insurance
covering all real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and
effect.
8. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder represents and warrants to each Underwriter that:
(a) Such Selling Stockholder now has, and on the Closing Date and any
Option Closing Date will have, valid and marketable title to the Shares to be
sold by such
14
<PAGE>
Selling Stockholder, free and clear of any lien, claim, security interest or
other encumbrance, including, without limitation, any restriction on transfer.
(b) Such Selling Stockholder now has, and on the Closing Date and any
Option Closing Date will have, full legal right, power and authorization, and
any approval required by law, to sell, assign transfer and deliver such Shares
in the manner provided in this Agreement, and upon delivery of and payment for
such Shares hereunder, the several Underwriters will acquire valid and
marketable title to such Shares free and clear of any lien, claim, security
interest, or other encumbrance.
(c) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of such Selling Stockholder
and are the valid and binding agreements of such Selling Stockholder enforceable
against such Selling Stockholder in accordance with their terms.
(d) Neither the execution and delivery of this Agreement or the
Custody Agreement by or on behalf of such Selling Stockholder nor the
consummation of the transactions herein or therein contemplated by or on behalf
of such Selling Stockholder requires any consent, approval, authorization or
order of, or filing or registration with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except
such as may be required under the Act or such as may be required under state
securities or Blue Sky laws governing the purchase and distribution of the
Shares) or conflicts or will conflict with or constitutes or will constitute a
breach of, or default under, or violates or will violate, any agreement,
indenture or other instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder is or may be bound or to which any of such
Selling Stockholder's property or assets is subject, or any statute, law, rule,
regulation, ruling, judgment, injunction, order or decree applicable to such
Selling Stockholder or to any property or assets of such Selling Stockholder.
(e) The Registration Statement and the Prospectus, insofar as they
relate to such Selling Stockholder, do not and will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(f) Such Selling Stockholder does not have any actual knowledge that
the Registration Statement or the Prospectus (or any amendment or supplement
thereto) contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(g) The representations and warranties of such Selling Stockholder in
the Custody Agreement are, and on the Closing Date and any Option Closing Date
will be, true and correct.
(h) Such Selling Stockholder has not taken, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or
15
<PAGE>
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares, except for the lock-up arrangements described in the Prospectus.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and Kay L.
Toolson, John W. Nepute and D. Page Robertson (each an "Indemnifying Selling
Stockholder" and collectively, the "Indemnifying Selling Stockholders"),
jointly and severally, agree to indemnify and hold harmless each of you and
each other Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act from and against any and all losses, claims, damages, liabilities and
expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact contained in any Prepricing Prospectus or in the Registration Statement
or the Prospectus or in any amendment or supplement thereto, or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses arising out of or based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein
or omitted therefrom in reliance upon and in conformity with the information
relating to such Underwriter furnished in writing to the Company by or on
behalf of any Underwriter through you expressly for use in connection
therewith; provided, however, that the indemnification contained in this
paragraph (a) with respect to any Prepricing Prospectus shall not inure to
the benefit of any Underwriter (or to the benefit of any person controlling
such Underwriter) on account of any such loss, claim, damage, liability or
expense arising from the sale of the Shares by such Underwriter to any person
if a copy of the Prospectus shall not have been delivered or sent to such
person within the time required by the Act and the regulations thereunder,
and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such Prepricing Prospectus was
corrected in the Prospectus, provided that the Company has delivered the
Prospectus to the several Underwriters in requisite quantity on a timely
basis to permit such delivery or sending. The foregoing indemnity agreement
shall be in addition to any liability which the Company or any Indemnifying
Selling Stockholder may otherwise have. Notwithstanding the foregoing
provisions of this paragraph (a), no Indemnifying Selling Stockholder shall
be required to make any payment under this Section 9 with respect to any
losses, claims, damages, liabilities or expenses for which any Underwriter or
any person controlling any Underwriter is entitled to indemnification under
this Section 9, unless (i) such Underwriter or controlling person shall have
first requested payment from the Company with respect to such losses, claims,
damages, liabilities or expenses, (ii) such Underwriter or controlling person
shall have given substantially contemporaneous notice of such request for
payment to such Indemnifying Selling Stockholder and (iii) the Company shall
not have made such requested payment in full within 45 days after the date of
such request.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company or any Selling Stockholder, such
Underwriter or such controlling person shall promptly notify the parties against
whom indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the indemnifying parties have agreed in
writing to pay such fees and expenses, (ii) the indemnifying parties have failed
to assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and the indemnifying parties and such
Underwriter or such controlling person shall have been advised by its counsel
that
16
<PAGE>
representation of such indemnified party and any indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying parties shall not be liable
for any settlement of any such action, suit or proceeding effected without their
written consent, but if settled with such written consent, or if there be a
final judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless any Underwriter, to
the extent provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(c) Each Selling Stockholder, other than the Indemnifying Selling
Stockholders set forth in paragraph (a) above, agrees, severally and not
jointly, to indemnify and hold harmless each of you and each other Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, the Company, its
directors, its officers who sign the Registration Statement, and any person who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act to the same extent as the foregoing indemnity from the
Company and the Indemnifying Selling Stockholders to each Underwriter, but only
with respect to the information relating to such Selling Stockholder furnished
in writing by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against any Underwriter, any such controlling person of any Underwriter,
the Company, any of its directors, any such officer, or any such controlling
person of the Company, based on the Registration Statement, the Prospectus or
any Prepricing Prospectus or any amendment or supplement thereto, and in respect
of which indemnity may be sought against any Selling Stockholder pursuant to
this paragraph (c), such Selling Stockholder shall have the rights and duties
given to the Company by paragraph (b) above (except that if the Company shall
have assumed the defense thereof such Selling Stockholder shall not be required
to do so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at such Selling
Stockholder's expense), and each Underwriter, each such controlling person of
any Underwriter, the Company, its directors, any such officer, and any such
controlling person of the Company shall have the rights and duties given to the
Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be
in addition to any liability which any Selling Stockholder may otherwise have.
The liability of each Selling Stockholder under
17
<PAGE>
paragraphs (a) and (e) and this paragraph (c) shall be limited to an amount
equal to the net proceeds received by such Selling Stockholder (before deducting
expenses) from the sale of the Shares by such Selling Stockholder.
(d) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, each Selling Stockholder, and any person who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company and
the Selling Stockholders to each Underwriter, but only with respect to
information relating to such Underwriter furnished in writing by or on behalf of
such Underwriter through you expressly for use in the Registration Statement,
the Prospectus or any Prepricing Prospectus, or any amendment or supplement
thereto. If any action, suit or proceeding shall be brought against the
Company, any of its directors, any such officer, any Selling Stockholder, or any
such controlling person based on the Registration Statement, the Prospectus or
any Prepricing Prospectus, or any amendment or supplement thereto, and in
respect of which indemnity may be sought against any Underwriter pursuant to
this paragraph (d), such Underwriter shall have the rights and duties given to
the Company by paragraph (b) above (except that if the Company shall have
assumed the defense thereof such Underwriter shall not be required to do so, but
may employ separate counsel therein and participate in the defense thereof, but
the fees and expenses of such counsel shall be at such Underwriter's expense),
and the Company, its directors, any such officer, the Selling Stockholder, and
any such controlling person shall have the rights and duties given to the
Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be
in addition to any liability which any Underwriter may otherwise have.
(e) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under paragraphs (a), (c) or (d) hereof
in respect of any losses, claims, damages, liabilities or expenses referred
to therein, then an indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, the Selling Stockholders and the
Underwriters from the offering of the Shares, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company,
the Selling Stockholders and the Underwriters in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, the Selling
Stockholders and the Underwriters shall be deemed to be in the same
proportion, in the case of the Company and the Selling Stockholders, as the
total net proceeds from the offering (before deducting expenses) received by
the Company and the Selling Stockholders bear to the total price to public
set forth in the table on the cover page of the Prospectus, and in the case
of the Underwriters, as the underwriting discounts and commissions received
by the Underwriters bears to the total price to public set forth in the table
on the cover page of the Prospectus; provided that, in the event that the
Underwriters shall have purchased any Additional Shares hereunder, any
determination of the relative
18
<PAGE>
benefits received by the Company, the Selling Stockholders or the
Underwriters from the offering of the Shares shall include the net proceeds
(before deducting expenses) received by the Company and the Selling
Stockholders, and the underwriting discounts and commissions received by the
Underwriters, from the sale of such Additional Shares, in each case computed
on the basis of the respective amounts set forth in the notes to the table on
the cover page of the Prospectus. The relative fault of the Company, the
Selling Stockholders and the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Stockholders or
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(f) The Company, the Selling Stockholders and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
9 were determined by a pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (e) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
paragraph (e) above shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating any claim or defending any such action,
suit or proceeding. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price of the Shares underwritten by it and distributed to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several in proportion to the respective numbers of Firm Shares set
forth opposite their names in Schedule II hereto (or such numbers of Firm Shares
increased as set forth in Section 12 hereof) and not joint.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(h) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Company and the Selling Stockholders set
forth in this Agreement shall remain operative and in full force and effect,
19
<PAGE>
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or the Selling Stockholders or any person controlling the Company, (ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter or any person
controlling any Underwriter, or to the Company, its directors or officers, or
any person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
9.
10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
timely made; no stop order suspending the effectiveness of the registration
statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the registration statement or the prospectus or
otherwise) shall have been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Prospectus, which in your opinion, as
Representatives of the several Underwriters, would materially adversely affect
the market for the Shares, or (ii) any event or development relating to or
involving the Company or any officer or director of the Company or any Selling
Stockholder which makes any statement made in the Prospectus untrue or which, in
the opinion of the Company and its counsel or the Underwriters and their
counsel, requires the making of any addition to or change in the Prospectus in
order to state a material fact required by the Act or any other law to be stated
therein or necessary in order to make the statements therein not misleading, if
amending or supplementing the Prospectus to reflect such event or development
would, in your opinion, as Representatives of the several Underwriters,
materially adversely affect the market for the Shares.
(c) You shall have received on the Closing Date, an opinion of
Wilson Sonsini Goodrich & Rosati, counsel for the Company and the Selling
Stockholders, dated the Closing Date, and addressed to you, as
Representatives of the several Underwriters, to the effect that:
20
<PAGE>
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware with corporate power and authority to own its properties and conduct
its business as described in the Prospectus; and the Company has been duly
qualified to do business as a foreign corporation under the corporation law of,
and is in good standing as such in, every jurisdiction where the ownership or
leasing of property, or the conduct of its business requires such qualification
except where the failure so to qualify would not have a material adverse effect
upon the condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries taken as a whole;
(ii) An opinion to the same general effect as clause (i) of
this subparagraph (c) in respect of the Subsidiaries;
(iii) All of the issued and outstanding capital stock of the
Subsidiaries has been duly authorized, validly issued and is fully paid and
nonassessable, and the Company owns directly or indirectly all of the
outstanding capital stock of its Subsidiaries, and to the best knowledge of
such counsel, such stock is owned free and clear of any claims, liens,
encumbrances or security interests;
(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth under the caption "Capitalization" in the
Prospectus;
(v) The issued and outstanding capital stock of the Company
has been duly authorized and validly issued and is fully paid and
nonassessable;
(vi) The Shares have been duly authorized; the certificates
for the Shares to be delivered hereunder are in due and proper form under
Delaware law, and when duly countersigned by the Company's transfer agent and
delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of this Agreement
the Shares represented thereby will be validly issued, fully paid and
nonassessable and will conform in all material respects as to legal matters
to the description thereof contained in the Prospectus, and there are no
preemptive rights or other rights to subscribe for or to purchase any of the
Shares pursuant to the Company's certificate of incorporation or bylaws or,
to the knowledge of such counsel, pursuant to any agreement or other
instrument to which the Company is a party or by which it is bound;
(vii) The Registration Statement has become effective under
the 1933 Act, and, to the knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and the Registration Statement (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable), the Prospectus and
each amendment or supplement thereto (except for the financial statements and
the notes thereto and the schedules and other statistical or financial data
included therein as to which such counsel need express no opinion) comply as
to form in all material respects with the requirements of the Act; each of
the Incorporated Documents
21
<PAGE>
(except for the financial statements and the notes thereto and the schedules
and other financial and statistical data included therein as to which such
counsel need not express any opinion) complies as to form in all material
respects with the Exchange Act and the rules and regulations of the
Commission thereunder; any required filing of the Prospectus and any
supplement thereto pursuant to Rule 424(b) has been made in the manner and
within the time period required by such Rule 424(b); such counsel have no
reason to believe that either the Registration Statement (including the
Incorporated Documents and the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A(b),
if applicable) or the Prospectus, or the Registration Statement or the
Prospectus as amended or supplemented (except as aforesaid), as of their
respective effective or issue dates, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Prospectus as amended or supplemented, if applicable, as of the Closing
Date or the Option Closing Date, as the case may be, contained any untrue
statement of a material fact or omitted to state any material fact necessary
to make the statements therein not misleading in light of the circumstances
under which they were made; and such counsel does not know of any legal or
governmental proceedings pending or threatened against the Company required
to be described in the Prospectus which are not described as required, nor of
any contracts or documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not described or filed, as required;
(viii) The statements under the captions "Description of
Capital Stock" and "Shares Eligible for Future Sale" in the Prospectus,
insofar as such statements constitute a summary of documents referred to
therein or matters of law, are accurate summaries and fairly and correctly
present, in all material respects, the information called for with respect to
such documents and matters;
(ix) The Company has full corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the Underwriters
the Shares to be issued and sold by it hereunder; this Agreement and the
performance of the Company's obligations hereunder have been duly authorized
by all necessary corporate action and this Agreement has been duly executed
and delivered by and on behalf of the Company, and is a legal, valid and
binding agreement of the Company, except as enforceability of the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights and by the exercise of judicial
discretion in accordance with general principles applicable to equitable and
similar remedies and except as to those provisions relating to indemnities
for liabilities arising under the 1933 Act as to which no opinion need be
expressed; and no approval, authorization or consent of any public board,
agency, or instrumentality of the United States or of any state or other
jurisdiction is necessary in connection with the issue or sale of the Shares
by the Company pursuant to this Agreement (other than such as have been
obtained and are in full force and effect under the 1933 Act, and such as may
be required under applicable blue sky laws and the rules of the NASD) or the
consummation by the Company of any other transactions contemplated hereby;
22
<PAGE>
(x) The execution and performance of this Agreement will not
contravene any of the provisions of, or result in a default under, any
agreement, franchise, license, indenture, mortgage, deed of trust, or other
instrument known to such counsel, of the Company or its Subsidiaries or by which
the property of any of them is bound and which contravention or default would be
material to the Company and its Subsidiaries taken as a whole; or violate any of
the provisions of the charter or bylaws of the Company or its Subsidiaries or,
so far as is known to such counsel, violate any statute, order, rule or
regulation of any regulatory or governmental body having jurisdiction over the
Company or its Subsidiaries;
(xi) Except as disclosed in or specifically contemplated in
the Prospectus, to the knowledge of such counsel, there are no outstanding
options, warrants or other rights calling for the issuance of, and no
commitments, plans or arrangements to issue, any shares of capital stock of
the Company or any security convertible into or exchangeable for capital
stock of the Company; and
(xii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus or disclosed in the Incorporated Documents
(including their exhibits), no holders of Common Stock or other securities of
the Company have registration rights with respect to securities of the Company
and, except as set forth in the Registration Statement and Prospectus, all
holders of securities of the Company having rights to registration of shares of
Common Stock, or other securities, because of the filing of the Registration
Statement by the Company have, with respect to the offering contemplated hereby,
waived such rights or such rights have expired by reason of lapse of time
following notification of the Company's intent to file the Registration
Statement.
(xiii) This Agreement and the Custody Agreement have each been
duly executed and delivered by or on behalf of each of the Selling Stockholders
and are valid and binding agreements of each Selling Stockholder enforceable
against each Selling Stockholder in accordance with their terms;
(xiv) To the knowledge of such counsel, each Selling Stockholder
has full legal right, power and authorization, and any approval required by
law, to sell, assign, transfer and deliver good and marketable title to the
Shares which such Selling Stockholder has agreed to sell pursuant to this
Agreement;
(xv) The execution and delivery of this Agreement and the
Custody Agreement by the Selling Stockholders and the consummation of the
transactions contemplated hereby and thereby will not conflict with, violate,
result in a breach of or constitute a default under the terms or provisions
of any agreement, indenture, mortgage or other instrument known to such
counsel to which any Selling Stockholder is a party or by which any of them
or any of their assets or property is bound, or any court order or decree or
any law, rule, or regulation applicable to any Selling Stockholder or to any
of the property or assets of any Selling Stockholder; and
23
<PAGE>
(xvi) Upon delivery of the Shares pursuant to this Agreement
and payment therefor as contemplated herein the Underwriters will acquire good
and marketable title to the Shares free and clear of any lien, claim, security
interest, or other encumbrance, restriction on transfer or other defect in
title.
Insofar as such counsel's opinion under clause (vii) above relates to
the accuracy and completeness of the Prospectus and Registration Statement, it
is based upon a general review with the Company's representatives and
independent accountants of the information contained therein, without
independent verification by such counsel of the accuracy or completeness of such
information. In rendering their opinion as aforesaid, counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel retained by
them or the Company as to laws of any jurisdiction other than the United States
or the State of New York, provided that (1) each such local counsel is
acceptable to the Representatives, (2) such reliance is expressly authorized by
each opinion so relied upon and a copy of each such opinion is delivered to the
Representatives and is, in form and substance satisfactory to them and their
counsel, and (3) counsel shall state in their opinion that they believe that
they and the Underwriters are justified in relying thereon.
(d) You shall have received on the Closing Date, an opinion of
Orrick, Herrington & Sutcliffe LLP, counsel for the Underwriters, to the
effect that:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(ii) The Shares to be issued by the Company pursuant to the
terms of this Agreement will be, upon issuance and delivery against payment
therefor in accordance with the terms hereof, duly authorized and validly issued
and fully paid and nonassessable, and the stockholders of the Company have no
preemptive rights pursuant to the Certificate of Incorporation of the Company.
(iii) This Agreement has been duly authorized, executed and
delivered by the Company.
(iv) The Registration Statement has become effective under
the Act and, to our knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the 1933
Act.
(v) The Registration Statement and the Prospectus (except
the financial statements and schedules and other financial and statistical
data included therein, as to which such counsel need not express any
opinion), as of their respective effective or issue date, complied as to form
in all material respects with the Act.
24
<PAGE>
(vi) Nothing has come to the attention of such counsel to cause
such counsel to believe that the Registration Statement, at the time it became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus, at its issue date or
as of the date hereof, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such counsel have not been requested to and do not make any comment in this
paragraph with respect to the financial statements and schedules and other
financial and statistical information contained in the Registration Statement or
the Prospectus).
(e) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Coopers & Lybrand L.L.P., and Ernst & Young LLP, independent
certified public accountants, substantially in the forms heretofore approved by
you.
(f)(i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there
shall not have been any change in the capital stock of the Company nor any
material increase in the short-term or long-term debt of the Company (other
than in the ordinary course of business) from that set forth or contemplated
in the Registration Statement or the Prospectus (or any amendment or
supplement thereto); (iii) there shall not have been, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), except as may otherwise
be stated in the Registration Statement and Prospectus (or any amendment or
supplement thereto), any material adverse change in the condition (financial
or other), business, prospects, properties, net worth or results of
operations of the Company and the Subsidiaries taken as a whole; (iv) the
Company and the Subsidiaries shall not have any liabilities or obligations,
direct or contingent (whether or not in the ordinary course of business),
that are material to the Company and the Subsidiaries, taken as a whole,
other than those reflected in the Registration Statement or the Prospectus
(or any amendment or supplement thereto); and (v) all the representations and
warranties of the Company contained in this Agreement shall be true and
correct on and as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date, and signed by the chief executive
officer and the chief financial officer of the Company (or such other
officers as are acceptable to you), to the effect set forth in this Section
10(f) and in Section 10(g) hereof.
(g) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder at or
prior to the Closing Date.
25
<PAGE>
(h) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on and as
of the date hereof and on and as of the Closing Date as if made on and as of
the Closing Date, and you shall have received a certificate, dated the Closing
Date, and signed by or on behalf of the Selling Stockholders to the effect set
forth in this Section 10(h) and in Section 10(i) hereof.
(i) The Selling Stockholders shall not have failed at or prior
to the Closing Date to have performed or complied with any of their
agreements herein contained and required to be performed or complied with by
them hereunder at or prior to the Closing Date.
(j) Prior to the Closing Date, the Shares of Common Stock which
the Company agrees to sell pursuant to this Agreement shall have been listed,
subject to notice of issuance, on the Nasdaq National Market.
(k) The Sellers shall have furnished or caused to be furnished to
you such further certificates and documents as you shall have requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to you and your counsel.
Any certificate or document signed by any officer of the Company or
any Attorney-in-Fact or any Selling Stockholder and delivered to you, as
Representatives of the Underwriters, or to counsel for the Underwriters, shall
be deemed a representation and warranty by the Company, the Selling Stockholders
or the particular Selling Stockholder, as the case may be, to each Underwriter
as to the statements made therein.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of any Option
Closing Date of the conditions set forth in this Section 10, except that, if
any Option Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (h) shall be dated
the Option Closing Date in question and the opinions called for by paragraphs
(c) and (d) shall be revised to reflect the sale of Additional Shares.
11. EXPENSES. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by them of their
obligations hereunder: (i) the preparation, printing or reproduction, and filing
with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, the Incorporated Documents, and all
amendments or supplements to any of them,
26
<PAGE>
as may be reasonably requested for use in connection with the offering and sale
of the Shares; (iii) the preparation, printing, authentication, issuance and
delivery of certificates for the Shares, including any stamp taxes in connection
with the original issuance and sale of the Shares; (iv) the printing (or
reproduction) and delivery of this Agreement, the preliminary and supplemental
Blue Sky Memoranda and all other agreements or documents printed (or reproduced)
and delivered in connection with the offering of the Shares; (v) the listing of
the Shares on the Nasdaq National Market; (vi) the registration or qualification
of the Shares for offer and sale under the securities or Blue Sky laws of the
several states as provided in Section 5(g) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Underwriters relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and qualification); (vii)
the filing fees and the fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc.; and (viii) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Company and the Selling Stockholders.
12. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time
as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company and the Selling Stockholders.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date, each non-defaulting Underwriter shall
be obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule II hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase. If any one or more of the Underwriters shall fail or
refuse to purchase Shares which it or they are obligated to purchase on the
Closing Date and the aggregate number of Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Shares which
the Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting Underwriters or other party or parties approved by you and
the Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case which does not result in termination of this
Agreement, either you or the
27
<PAGE>
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule II hereto who, with your approval and the approval of the Company,
purchases Shares which a defaulting Underwriter is obligated, but fails or
refuses, to purchase.
Any notice under this Section 12 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
13. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or any Selling Stockholder, by notice to the Company,
if prior to the Closing Date or any Option Closing Date (if different from the
Closing Date and then only as to the Additional Shares), as the case may be, (i)
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York or California shall have been declared by either federal or state
authorities, or (iii) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in your judgment,
impracticable or inadvisable to commence or continue the offering of the Shares
at the offering price to the public set forth on the cover page of the
Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the Company by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
14. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set
forth in the last paragraph on the cover page, the stabilization legend on
the inside cover page, and the statements in the first, second, third, seventh
and eighth paragraphs under the caption "Underwriting" in any Prepricing
Prospectus and in the Prospectus, constitute the only information furnished
by or on behalf of the Underwriters through you as such information is
referred to in Sections 7(b) and 9 hereof.
15. MISCELLANEOUS. Except as otherwise provided in Sections 5, 12 and 13
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company or the Selling
Stockholders, at the office of the Company at 91320 Industrial Way, Coburg,
Oregon 97408, Attention: John W. Nepute, Vice President of Finance and Chief
Financial Officer; or (ii) if to you, as Representatives of the several
Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New York, New
York 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Company, its directors and officers, and the other controlling
persons referred to in Section 9 hereof and their respective successors and
assigns, to the extent
28
<PAGE>
provided herein, and no other person shall acquire or have any right under or by
virtue of this Agreement. Neither the term "successor" nor the term
"successors and assigns" as used in this Agreement shall include a purchaser
from any Underwriter of any of the Shares in his status as such purchaser.
16. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
29
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
MONACO COACH CORPORATION
By
-------------------------------------------
Chief Executive Officer
Each of the Selling Stockholders
named in Schedule I hereto
By
-------------------------------------------
Attorney-in-Fact
By
-------------------------------------------
Attorney-in-Fact
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule II
hereto.
SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
A.G. EDWARDS & SONS, INC.
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By
--------------------------
Managing Director
30
<PAGE>
SCHEDULE I
MONACO COACH CORPORATION
PART A - FIRM SHARES
- --------------------
NUMBER OF
SELLING STOCKHOLDERS FIRM SHARES
--------------------- -----------
Liberty Partners Holding 2 LLC . . . . . . . . . . . . . . . . . . . .441,717
HR, LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .230,767
Kay L. Toolson . . . . . . . . . . . . . . . . . . . . . . . . . . . .125,000
Roger A. Vandenberg. . . . . . . . . . . . . . . . . . . . . . . . . . 29,900
Andreas P. Graham. . . . . . . . . . . . . . . . . . . . . . . . . . . 28,670
D. Page Robertson. . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
B. Ray Mehaffey. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
John W. Nepute . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Mary A. Ferreira . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,846
Monaco Capital Partners. . . . . . . . . . . . . . . . . . . . . . . . . .100
----------
TOTAL 900,000
PART B - ADDITIONAL SHARES
- --------------------------
NUMBER OF
SELLING STOCKHOLDERS ADDITIONAL SHARES
------------------- -----------------
Liberty Partners Holding 2 LLC . . . . . . . . . . . . . . . . . . . .175,000
Kay L. Toolson . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Roger A. Vandenberg. . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
D. Page Robertson. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
B. Ray Mehaffey. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,000
John W. Nepute . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,000
----------
TOTAL 255,000
I
<PAGE>
SCHEDULE II
MONACO COACH CORPORATION
NUMBER OF
UNDERWRITER FIRM SHARES
- ----------- ------------
Smith Barney Inc.. . . . . . . . . . . . . . . . . . . . . . . .
William Blair & Company. . . . . . . . . . . . . . . . . . . . .
A.G. Edwards & Sons, Inc.. . . . . . . . . . . . . . . . . . . .
----------
TOTAL 1,700,000
----------
II
<PAGE>
EXHIBIT 5.1
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
TELEPHONE 415-493-9300 FACSIMILE 415-493-6811
WWW.WSGR.COM
May 22, 1997
Monaco Coach Corporation
91320 Industrial Way
Coburg, Oregon 97408
RE: REGISTRATION STATEMENT NO. 333-23591 ON FORM S-2
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-2 filed under the
Securities Act of 1933, as amended (the "1933 Act"), by Monaco Coach
Corporation, a Delaware corporation (the "Company"), with the Securities and
Exchange Commission on March 19, 1997, as amended by Amendment No. 1 thereto,
dated as of May 22, 1997 (collectively, the "Registration Statement"),
relating to the registration under the 1933 Act, of up to 1,955,000 shares of
the Company's common stock, $.01 par value (the "Stock") (including 255,000
shares subject to the underwriters' over-allotment option) which are to be
offered and sold by the Company and the selling stockholders (the "Selling
Stockholders"). We understand that the Stock is to be sold to the
underwriters named in the Registration Statement for resale to the public. As
counsel to the Company, we have examined the proceedings taken, and are
familiar with the proceedings proposed to be taken, in connection with the
issuance and sale by the Company and the Selling Stockholders of the Stock.
We are of the opinion that the shares of stock to be offered and sold by
the Company and the Selling Stockholders have been duly authorized and
legally issued and are fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the prospectus constituting a part thereof and any amendments
thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A G R E E M E N T O F L E A S E
STATE ROAD PROPERTIES L.P.,
Landlord
MONACO COACH CORPORATION,
Tenant
March 4, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.12
[TOWABLES]
AGREEMENT OF LEASE, dated this 4th day of March, 1996, between STATE ROAD
PROPERTIES L.P., a Delaware Limited Partnership having an office at 3700 West
Juneau Road, Milwaukee, Wisconsin, 53208 ("LANDLORD") and MONACO COACH
CORPORATION, a Delaware corporation having an office at 1809 West Hively, P.O.
Box 4313, Elkhart, Indiana 46517 ("TENANT").
ARTICLE 1
PREMISES; TERM
1.01. Subject to and in accordance with all of the covenants and
conditions of this Lease, Landlord hereby leases to Tenant and Tenant hereby
hires from Landlord the improvements (together with the heating, ventilating and
air conditioning systems located therein, the "BUILDING") more particularly
described on Exhibit A attached hereto together with the land on which the
Building is located, more particularly described on Exhibit B attached hereto
(the "LAND"; the Land and the Building, collectively, the "LEASED PROPERTY").
1.02. The Leased Property shall be leased for a term (together with any
Extension Term, the "TERM") commencing on March 4, 1996 (the "COMMENCEMENT
DATE") and expiring on the date (the "EXPIRATION DATE") immediately preceding
the first anniversary of the Commencement Date, unless the Term shall terminate
sooner pursuant to any of the terms of this Lease or pursuant to law and subject
to the following provisions of this Section 1.02. Tenant shall have two
successive options to extend the Expiration Date for one year (each such one
year extension period, an "EXTENSION TERM"). If the first such option is
exercised as provided herein, the Expiration Date shall be the date immediately
preceding the second anniversary of the Commencement Date. If the first such
option and the second such option are exercised as provided herein, the
Expiration Date shall be the date immediately preceding the third anniversary of
the Commencement Date. Any such extension option shall be exercised by written
notice to Landlord no later than 120 days prior to the Expiration Date as in
effect prior to the exercise of such option. If the first such option is not
exercised, Tenant shall have no rights with respect to the second such option.
During the last six months of any Extension Term, Tenant shall have the right to
terminate this Lease on thirty days' written notice to Landlord. Such
termination shall be effective as of the first day of the calendar month
beginning at least thirty days after the sending of such notice. On such
effective termination date, the Term shall end with the same effect as if such
effective termination date were the Expiration Date originally set forth herein.
ARTICLE 2
CONDITION OF LEASED PROPERTY
Tenant has inspected the Leased Property and is thoroughly acquainted with
its condition. As a condition of Landlord's agreement hereunder, Tenant agrees
to take possession of and accept each
<PAGE>
portion of the Leased Property in its "as is" condition as at the date of this
Lease. Landlord shall have no obligation to do any work or perform any services
with respect to the Leased Property except as specifically set forth in this
Lease.
ARTICLE 3
RENT
3.01.(a) Tenant covenants and agrees to pay to Landlord a fixed minimum
rent ("FIXED RENT") during the Term of this Lease, equal to $168,062.04 per
annum (pro rated in the case of partial years), payable in equal monthly
installments of $14,005.17.
(b) Monthly installments of Fixed Rent shall be payable without
notice or demand in advance on the first day of each month during the Term. If
the date on which Fixed Rent first becomes payable hereunder occurs on a day
other than the first day of a calendar month, Fixed Rent for such calendar month
shall be pro-rated on a PER DIEM basis.
3.02. All adjustments of rent, costs, charges, expenses and reimbursements
and all other sums of money which Tenant is obligated to pay to Landlord
pursuant to this Lease shall be deemed additional rent ("ADDITIONAL RENT") which
Tenant covenants to pay when due. Except as otherwise specified in this Lease,
all Additional Rent shall be due from and payable by Tenant on the twentieth
(20th) day after Landlord has rendered its bill therefor. Landlord shall have
all the rights and remedies with respect to nonpayment of Additional Rent as are
provided herein for nonpayment of Fixed Rent.
3.03. All Fixed Rent and Additional Rent shall be payable by Tenant to
Landlord in lawful money of the United States of America at the office of
Landlord or at such other place as Landlord may designate from time to time
without offset, abatement counterclaim or deduction in lawful money of the
United States of America. All Fixed Rent and Additional Rent shall be paid by
either (i) a good and sufficient check drawn on a bank which is a member of a
nationally recognized clearing house association or (ii) a wire transfer of
immediately available funds to Landlord's account.
3.04. If any installment of Fixed Rent or any Additional Rent is not paid
when due Tenant shall also pay interest thereon (which interest shall be
immediately due and payable and shall constitute Additional Rent) at a rate (the
"DEFAULT RATE") equal to ten percent (10%) per annum, computed from the date
such payment was first due through the date paid. Notwithstanding the
imposition of such interest, Tenant shall be in default under this Lease if any
or all payments required to be made by Tenant are not made at the time herein
stipulated, and neither the demand for, nor collection by Landlord of, such
interest shall be construed as a curing of such default on the part of Tenant.
-2-
<PAGE>
ARTICLE 4
TAXES
4.01. Landlord shall pay all taxes, assessments and fees levied upon the
Leased Property or the rents collected therefrom, by any Governmental Authority
based upon the ownership, leasing, renting or operation of the Leased Property,
including all costs and expenses of protesting any such taxes, assessments or
fees ("TAXES").
ARTICLE 5
USE
5.01. Tenant shall use and occupy the Leased Property, for the purposes
shown on Exhibit C and for no other purpose and only as permitted by any
applicable law, rule or regulation or determination (a "LEGAL REQUIREMENT") of
the federal government, any state or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government (any of the foregoing, a "GOVERNMENTAL
AUTHORITY").
5.02. Tenant shall not use, occupy or permit the Leased Property (or any
part thereof) to be used in any manner, or permit anything to be brought into or
kept within the Leased Property, which, in Landlord's judgment, would
(i) violate the Certificate of Occupancy issued for the Building, (ii) violate
the provisions of any Superior Lease or Superior Mortgage, (iii) cause injury or
damage to the Leased Property or any part thereof, (iv) interfere with or impair
the Building's systems and equipment or the proper and economical maintenance
and operation of the Leased Property, (v) change the character of the Building,
(vi) violate any Legal Requirement or any requirements of any insurance policy
covering or applicable to all or any part of the Leased Property or the use
thereof, all requirements of the issuer of any such policy and all orders,
rules, regulations, recommendations and other requirements of any organization
of fire underwriters or the Insurance Service Office or any other body
exercising the same or similar functions and having jurisdiction or cognizance
of all or any part of the Leased Property (collectively, "INSURANCE
REQUIREMENTS"), (vii) violate any applicable Environmental Law or (viii) or
cause the presence of any Hazardous Material on or under the Land or within the
Building in violation of any applicable Environmental Law.
5.03. If any license or permit from any Governmental Authority shall be
required for the proper and lawful occupancy of the Leased Property and if
failure to secure such license or permit would in any way adversely affect
Landlord or the Leased Property, then Tenant, at its sole expense, shall procure
and deliver a copy of such license or permit to Landlord and thereafter maintain
such license or permit. Tenant shall at all times comply with the provisions of
each such license and permit.
-3-
<PAGE>
ARTICLE 6
MAINTENANCE AND REPAIR
6.01. Tenant shall be solely responsible for the cost and performance of
all maintenance, service, repair and replacement of any portion of the Building,
it being understood and agreed that Landlord shall have no general duty (either
to Tenant or to third parties) to keep the Leased Property in good order and
repair and that Landlord shall have no obligation to perform or pay for the cost
of any such maintenance, service, repair or replacement except to the extent
expressly provided for in this Article 6. As long as this Lease is in full force
and effect Landlord shall promptly upon request by Tenant reimburse Tenant for
the cost of any repair or replacement of any heating, ventilating and
air-conditioning system or structural or other similar portion of the Building
or Building system that becomes unusable such that the operation of Tenant's
business for the purposes described in Section 5.01 shall be materially
impaired; PROVIDED, that written notice, given reasonably in advance considering
the nature of the repair, shall have been provided to Landlord, which notice
shall set forth, in reasonable detail, the nature and scope of the repair and
the estimated cost thereof and PROVIDED further, that Landlord will be obligated
to reimburse Tenant only to the extent reasonably necessary such that Tenant's
business for the purposes described in Section 5.01 shall no longer be so
materially impaired. Tenant agrees and acknowledges that Landlord's
reimbursement obligation as set forth above is being undertaken by Landlord as
an accommodation to Tenant due to the short-term nature of this Lease. Tenant
agrees and acknowledges that it is Tenant's duty and obligation to inspect the
Leased Property from time to time, to conduct day-to-day maintenance of the
Leased Property and to perform any repairs and replacements that are required
either for Tenant's operations or for the health and safety of persons present
at the Leased Property.
6.03 Except as expressly provided above in this Article 6, Landlord shall
have no obligations to repair or maintain the Leased Property or to provide
other services to Tenant or to pay for any of the costs thereof. Tenant
acknowledges that, except as otherwise set forth herein, Tenant is solely
responsible for cleaning, security, maintenance and operation of the Building's
systems and the costs thereof.
ARTICLE 7
UTILITY SERVICE
Tenant shall obtain and pay for the supply of electric current, water
supply, sewerage service and any other utility services to the Leased Property
by direct application to and arrangement with the respective public utility
companies servicing the Building. Tenant shall be responsible for direct
payment for all such utilities and shall abide by all rules and regulations
imposed by any such utility company.
-4-
<PAGE>
ARTICLE 8
SUBORDINATION; ESTOPPEL CERTIFICATE
8.01. This Lease and all rights of Tenant hereunder are subject and
subordinate to all mortgages which may now or hereafter affect Landlord's
interest in the Leased Property or any part thereof (all such mortgages,
collectively, the "SUPERIOR MORTGAGES"), and to all renewals, modifications,
consolidations, replacements and extensions of Superior Mortgages. This Section
shall be self-operative and no further instrument of subordination shall be
required .In confirmation of such subordination, Tenant agrees to promptly
execute and deliver at Tenant's sole cost and expense any instrument (in
recordable form, if requested) that Landlord or the holder of any Superior
Mortgage (a "SUPERIOR MORTGAGEE") may request to evidence such subordination.
8.02. If the interests of Landlord under this Lease are transferred by
reason of, or assigned in lieu of, foreclosure or other proceedings for
enforcement of any such Superior Mortgage then Tenant shall, at the option of
such purchaser or assignee, as the case may be, (x) attorn to such party and
perform for its benefit all the terms, covenants and conditions of this Lease on
Tenant's part to be performed with the same force and effect as if such party
were the landlord originally named in this Lease, or (y) enter into a new lease
with such party, as landlord, for the remaining Term and otherwise on the same
terms and conditions of this Lease except that such successor landlord shall not
be (i) liable for any previous act, omission or negligence of Landlord under
this Lease; (ii) subject to any counterclaim, defense or offset which
theretofore shall have accrued to Tenant against Landlord; (iii) bound by any
previous modification or amendment of this Lease or by any previous prepayment
of more than one month's rent, unless such modification, amendment or prepayment
shall have been approved in writing by the Superior Mortgagee through or by
reason of which such successor landlord shall have succeeded to the rights of
Landlord under this Lease; (iv) obligated to repair the Leased Property or any
part thereof in the event of total or substantial damage, beyond such repair as
can reasonably be accomplished from the net proceeds of insurance actually made
available to such successor landlord; (v) obligated to repair the Leased
Property or any part thereof in the event of partial condemnation, beyond such
repair as can reasonably be accomplished from the net proceeds of any award
actually made available to such successor landlord, as consequential damages
allocable to the part of the Leased Property not taken; nor (vi) obligated to
perform any work to prepare or finish the Leased Property for occupancy by
Tenant. Nothing contained in this Section shall be construed to impair any
right otherwise exercisable by any such owner, holder or lessee. Landlord shall
use reasonable efforts to obtain from the holder of any Superior Mortgage and
the landlord under any Superior Lease a written recognition agreement providing
that in the event of the foreclosure of such Superior Mortgage or termination of
such Superior Lease, so long as no default by Tenant shall have occurred and be
continuing hereunder, Tenant's rights of occupancy shall not be disturbed and
Tenant shall receive all of its rights provided for under this Lease.
8.03. If any act or omission by Landlord would give Tenant the right,
immediately or after lapse of time, to cancel or terminate this Lease or to
claim a partial or total eviction, abatement of rent, setoff or counterclaim,
Tenant will not exercise any such right until (i) it has given written notice of
such act or omission to each Superior Mortgagee whose name and address shall
have previously been furnished to Tenant, by delivering notice of such act or
omission addressed to each such party at
-5-
<PAGE>
its last address so furnished, (ii) Landlord shall have failed to cure the same
within the time limits set forth in this Lease, and (iii) following the giving
of such notice, no Superior Mortgagee shall have remedied such act or omission
(x) in the case of an act or omission which is capable of being remedied without
possession of the Building, within the cure period available to Landlord under
this Lease plus sixty (60) days and (y) in the case of any act or omission which
is incapable of being remedied without possession of the Building, within sixty
(60) days following the date on which possession is obtained, PROVIDED a
Superior Mortgagee has promptly commenced action to obtain possession and shall
diligently pursue such action to completion and PROVIDED FURTHER that such
Superior Mortgagee shall, with reasonable diligence, give Tenant notice of its
intention to, and commence and continue to, remedy such act or omission or cause
the same to be remedied.
8.04. If any Superior Mortgagee or prospective Superior Mortgagee shall
request modifications of this Lease as a condition to the provision, continuance
or renewal of any such financing, Tenant will not unreasonably withhold, delay
or defer its consent thereto, provided that such modifications do not materially
adversely increase the obligations of Tenant hereunder or materially diminish
Tenant's rights under this Lease.
8.05. Tenant agrees, at any time and from time to time, upon not less than
fifteen (15) days' prior notice from Landlord to execute, acknowledge and
deliver to Landlord or such other person that Landlord may designate a written
certification stating (a) that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), (b) that Tenant has accepted
possession of the Leased Property, (c) the dates to which the Fixed Rent and
Additional Rent have been paid, (d) whether or not there exists any default on
the part of Landlord under this Lease, and, if so, specifying each such default
and (e) such further information with respect to this Lease or the Leased
Property that Landlord may reasonably request. Landlord agrees, at any time and
from time to time, upon not less than fifteen (15) days' prior notice from
Tenant to execute, acknowledge and deliver to Tenant a written certification
stating (a) that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), (b) the dates to which the Fixed Rent
and Additional Rent have been paid, (c) whether or not there exists any default
on the part of Tenant under this Lease, and, if so, specifying each such default
and (e) such further information with respect to this Lease that Tenant may
reasonably request.
ARTICLE 9
ASSIGNMENT AND SUBLETTING PROHIBITED
9.01. Tenant, its legal representatives and successors in interest, shall
not by operation of law or otherwise, assign (in whole or in part), mortgage,
pledge, encumber or otherwise transfer this Lease or any part hereof or any
interest of Tenant herein or in the Leased Property by reason hereof, or sublet
the Leased Property, without Landlord's prior written consent. No assignment of
this Lease shall be effective unless the assignee shall execute, acknowledge and
deliver to Landlord an agreement, in form satisfactory to Landlord, whereby the
assignee assumes all obligations of Tenant
-6-
<PAGE>
under this Lease, and agrees that the provisions of this Article 9 shall
continue to be binding upon it in respect of all future assignments and deemed
assignments of this Lease. No assignment of this Lease shall release the
assignor from its continuing obligations to Landlord under this Lease and Tenant
and any subsequent assignor shall continue to remain jointly and severally
liable (as primary obligor) for all Tenant's obligations hereunder.
9.02. The consent by Landlord to any assignment or subletting shall not be
a waiver of or constitute a diminution of Landlord's right to withhold its
consent to any other assignment or subletting and shall not be construed to
relieve Tenant from obtaining Landlord's express written consent to any other or
further assignment or subletting.
ARTICLE 10
ENTRY; RIGHT TO CHANGE THE BUILDING
10.01. Landlord and Landlord's agents or designees shall have the right to
enter the Leased Property, during Business Hours upon notice given reasonably in
advance to Tenant, and in case of emergency without notice and at all other
times, without incurring any liability to Tenant therefor, for the following
purposes: (a) to perform any obligations of Landlord or to exercise any right
reserved to Landlord in this Lease, (b) to exhibit the Leased Property and any
parts thereof to any prospective purchaser, or to any present or prospective
mortgagee or ground lessor, or to the authorized representative of any
Governmental Authority or organization of fire underwriters, or, during the last
twelve months of the Term to any prospective tenant of the Leased Property (or
any part thereof), (c) to make or cause to be made such repairs, alterations or
improvements, or to permit electrical or other utility meters to be read, or to
perform such maintenance, including the maintenance of Building equipment, as
Landlord may deem necessary or desirable or as may be required pursuant to any
Legal Requirements or Insurance Requirements, and (d) to take into and store
upon the Leased Property all materials that may be required in connection with
any such repairs, alterations, improvements or maintenance. The taking of
materials into, and storing of such materials at the Leased Property in
accordance with the provisions of this Section 10.01 shall not constitute an
eviction of Tenant in whole or in part and the Fixed Rent and Additional Rent
reserved herein shall not abate while such repairs or alterations are being
made. In connection with any such entry by Landlord and Landlord's agents, all
reasonable security measures of Tenant shall be complied with and all reasonable
efforts shall be made so as to minimize any disruption of Tenant's operations.
ARTICLE 11
COMPLIANCE WITH LAWS
11.01. Tenant shall, at its expense, comply with all Legal Requirements
and Insurance Requirements. Without limiting the generality of the foregoing,
Tenant shall be obligated to reimburse Landlord for the cost of any alteration
of the Leased Property which shall be (a) necessitated by a condition which has
been created by Tenant, (b) attributable to the use or manner of use to which
Tenant puts the Leased Property, (c) required by reason of a breach of Tenant's
obligations hereunder, or (d) occasioned, in whole or in part, by any act,
omission or
-7-
<PAGE>
negligence of Tenant or any person claiming by, through or under Tenant, or any
of their assignees, subtenants, employees, agents, contractors, invitees or
licensees. Tenant shall pay all costs, expenses, fines, penalties and damages
which may be imposed upon Landlord or any Superior Mortgagee by reason of or
arising out of Tenant's failure fully and promptly to comply with the provisions
of this Section.
11.02. Notwithstanding anything to the contrary contained elsewhere in
this Lease and without limiting any other provision of this Lease by
implication, if any Governmental Authority promulgating or enforcing any Legal
Requirements or the Insurance Service Office, organization of fire underwriters
or any other body exercising the same or similar functions and having
jurisdiction or cognizance of all or any part of the Leased Property requires
that any changes, modifications, alterations or additional sprinkler heads or
other equipment be made or supplied in the Building sprinkler system or any
other portion of the Leased Property, Landlord shall make all such changes,
modifications, alterations and additions, the cost thereof shall be shared
equally by Landlord and Tenant, and Tenant shall pay its share of the cost
thereof to Landlord as Additional Rent within 5 Business Days after demand.
11.03. If Tenant receives written notice of any violation of any Legal
Requirement or Insurance Requirement, it shall give prompt notice thereof to
Landlord.
ARTICLE 12
HAZARDOUS MATERIALS
12.01. Without limiting the generality of Article 11, Tenant shall:
(a) comply with all applicable Environmental Laws and obtain and
comply with and maintain any and all licenses, approvals, registrations or
permits required by applicable Environmental Laws;
(b) refrain from storing, disposing of or releasing Hazardous
Materials in the Building or on the Land in violation of Environmental Laws;
(c) to the extent due to the release, emission or disposal of
Hazardous materials in or about the Leased Property during the Term hereof by
any action or inaction of Tenant or Tenant's employees, agents, licensees or
invitees, conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all orders and directives of all
Governmental Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not be reasonably expected to have a
material adverse effect on the business, operations, property, condition
(financial or otherwise) or prospects of the Tenant;
-8-
<PAGE>
(d) promptly notify Landlord in writing and in reasonable detail of
(i) any release or discharge of any Hazardous material by Tenant or any
affiliate thereof required to be reported under Environmental Laws to any
Governmental Authority; (ii) any condition, circumstance, occurrence or event
that could result in a material liability of Landlord, Tenant or any of their
respective affiliates under Environmental Laws or could result in the imposition
of any lien or other restriction on the title, ownership or transferability of
any of the Leased Property; and (iii) any proposed action to be taken by or on
behalf of the Tenant or any affiliate thereof that could subject the Tenant or
any affiliate thereof or the Leased Property or any portion thereof to any
material additional or different requirements or liabilities under any
Environmental Law; and
(e) defend, indemnify and hold harmless Landlord and its employees,
agents, officers, directors, successors and assigns from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs, and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to any violation of, noncompliance with
or liability under any Environmental Laws or any orders, requirements or demands
of Governmental Authority related thereto (including, without limitation,
attorneys' and consultants' fees, investigation and laboratory fees, response
costs, court costs and litigation expenses) by Tenant or Tenant's employees,
agents, licensees or invitees during the Term hereof, except to the extent that
any of the foregoing arise out of the negligence or willful misconduct of the
party seeking indemnification therefor. This indemnity shall continue in full
force and effect regardless of the termination of this Lease.
12.02. For purposes of this Lease, the following terms shall have the
following meanings:
"ENVIRONMENTAL LAWS" shall mean any and all Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority, any and all Legal
Requirements and any and all common law requirements, rules and bases of
liability regulating, relating to or imposing liability or standards of conduct
concerning pollution or protection of human health or the environment, as now or
may at any time hereafter be in effect.
"HAZARDOUS MATERIALS" shall mean any hazardous or toxic substances,
materials or wastes, defined, listed, classified or regulated as such in or
under any Environmental Laws, including, without limitation, asbestos, petroleum
or petroleum products (including gasoline, crude oil or any fraction thereof),
polychlorinated biphenyls, and urea-formaldehyde insulation.
ARTICLE 13
ALTERATIONS PROHIBITED
Tenant shall make no alterations, modifications, replacements or other
changes to the Leased Property without Landlord's prior written consent,
provided, that Tenant may construct, at Tenant's sole cost and expense,
nonstructural alterations, additions and improvements to the Leased Property
without Landlord's prior written consent so long as the aggregate cost thereof
shall not exceed $50,000.00.
-9-
<PAGE>
ARTICLE 14
LANDLORD'S RIGHTS TO PERFORM
TENANT'S OBLIGATIONS
If Tenant shall default in the performance of any term or covenant on its
part to be performed under this Lease, Landlord, without being under any
obligation to do so and without thereby waiving such default, may upon the
expiration of the period allowed for the cure of such default, if any, provided
by this Lease (or with or without such expiration in case of emergency) remedy
such default. Tenant shall reimburse Landlord on demand for all costs and
expenses incurred by Landlord in the performance of Tenant's obligations
hereunder.
ARTICLE 15
LIABILITY OF LANDLORD; INDEMNIFICATION
15.01. Landlord and Landlord's agents have made no representations or
promises with respect to the Building, the Land or the Leased Property except as
herein expressly set forth. No rights, easements or licenses are acquired by
Tenant by implication or otherwise, except as expressly set forth in the
provisions of this Lease.
15.02.(a) Neither Landlord, any Superior Mortgagee nor any of their
respective employees, directors, officers and agents shall be liable for any
injury or damage to persons or property unless caused by or solely due to the
proven gross negligence or willful misconduct of Landlord, its agents or
employees. Landlord, its employees, directors, officers and agents shall in no
event be liable for any such damage, or for any injury, damage to or loss (by
theft or otherwise) of any property of Tenant, caused by other tenants or
persons in the Building.
(b) In no event shall Landlord be liable for incidental,
indirect, consequential, or special damages arising out of or in connection with
this Lease, including, without limitation, lost profits.
15.03. During the existence of any Superior Lease, the term "Landlord"
wherever used in this Lease shall be limited to mean and include only the owner
or owners at the time in question of the lessee's interest in the Land and the
Building pursuant to any such Superior Lease, so that in the event of any sale,
assignment or transfer, by operation of law or otherwise, of Landlord's interest
in the Land and the Building, such seller, assignor or transferor thereupon
automatically shall be released and discharged from all covenants, conditions
and agreements of Landlord hereunder; but, subject to the provisions of
Section 8.02 above, such covenants, conditions and agreements shall be deemed to
have been assumed by and be binding upon each new owner, assignee or transferee
for the time being of Landlord's interest in the Land and the Building, until
sold, assigned or transferred.
15.04.(a) Tenant shall indemnify and save harmless Landlord and its
agents and all Superior Mortgagees and their respective officers, directors,
agents and employees (collectively, the
-10-
<PAGE>
"INDEMNIFIED PARTIES" and each an "INDEMNIFIED PARTY") against and from (a) any
and all claims, actions and proceedings (i) arising from (x) the use and
occupancy of the Leased Property, or (y) any work or thing whatsoever done, or
any condition created by or on behalf of Tenant (other than by Landlord for
Landlord's account) in or about the Leased Property during the Term of this
Lease or during the period of time, if any, prior to the Commencement Date that
Tenant may have been given access to the Leased Property, or (ii) arising from
any negligent or otherwise wrongful act or omission of Tenant or any of its
subtenants or licensees or invitees or its or their employees, agents or
contractors, or (iii) arising from any breach or failure to observe any term,
covenant or condition of this Lease by Tenant or its agents or anyone claiming
by or through Tenant, and (b) all costs, expenses and liabilities incurred in or
in connection with each such claim, action or proceeding brought thereon
(including reasonable attorneys' fees and disbursements), except to the extent
that any of the foregoing arises out of the negligence or willful misconduct of
Landlord, its agents or employees or any breach of this Lease by Landlord or its
agents or anyone claiming by or through Landlord. In case any action or
proceeding be brought against any Indemnified Party by reason of any such claim,
Tenant, upon notice from Landlord or such Indemnified Party (if other than
Landlord), shall cause such action or proceeding to be defended at Tenant's
expense by counsel reasonably acceptable to Landlord.
(b) Landlord shall indemnify and save harmless Tenant and its
officers, directors, agents and employees (collectively, the "TENANT INDEMNIFIED
PARTIES" and each a "TENANT INDEMNIFIED PARTY") against and from (a) any and all
claims, actions and proceedings (i) arising from any negligent or otherwise
wrongful act or omission of Landlord or any of its licensees or invitees,
employees, agents or contractors, or (ii) arising from any breach or failure to
observe any term, covenant or condition of this Lease by Landlord or its agents
or anyone claiming by or through Landlord, and (b) all costs, expenses and
liabilities incurred in or in connection with each such claim, action or
proceeding brought thereon (including reasonable attorneys' fees and
disbursements), except to the extent that any of the foregoing arises out of the
negligence or willful misconduct of Tenant, its agents or employees or any
breach of this Lease by Tenant or its agents or anyone claiming by or through
Tenant. In case any action or proceeding be brought against any Tenant
Indemnified Party by reason of any such claim, Landlord, upon notice from Tenant
or such Tenant Indemnified Party (if other than Tenant), shall cause such action
or proceeding to be defended at Landlord's expense by counsel reasonably
acceptable to Tenant.
ARTICLE 16
INSURANCE
16.01.(a) Tenant shall, at its sole cost and expense, obtain and maintain
in full force and effect during the Term of this Lease, including any renewal
thereof, comprehensive general liability insurance protecting against personal
injury and property damage. Any basic policy and any umbrella policy evidencing
Tenant's liability insurance shall be written:
(i) in an aggregate amount of not less than $5,000,000 combined
single limit per occurrence;
-11-
<PAGE>
(ii) with contractual liability coverage for Tenant's
liability (including indemnifications) under this Lease;
(iii) with an endorsement naming Landlord and, if required,
Landlord's agents, all Superior Mortgagees as additional insured; and
(iv) with an endorsement naming Tenant's employees as
insureds.
(b) Landlord shall, at its sole cost and expense, obtain and maintain
in full force and effect during the Term of this Lease, including any renewal
thereof, property insurance protecting against fire and other casualty covering
all of the Leased Property. Any policy evidencing Landlord's property insurance
shall be written with endorsements for extended coverage, vandalism and
malicious mischief and insuring full replacement value.
16.02. Tenant's liability insurance and Landlord's property insurance
shall be written by insurers of recognized financial standing which are
authorized to do an insurance business in the State of Indiana. Such insurance
may be evidenced by blanket insurance policies of Tenant or Landlord, as the
case may be, provided property insurance policies shall specifically allocate to
the Leased Property amounts of insurance adequate to meet the requirements of
Section 16.01(b) above. Tenant may not self-insure without Landlord's prior
written consent. Landlord or Tenant, as the case may be, shall cause to be
included in each policy a provision to the effect that the insurance evidenced
thereby shall be noncancellable except upon at least 60 days' prior written
notice to Landlord or Tenant, as the case may be. Tenant's liability insurance
shall not provide for deductibles in excess of $100,000. Landlord's property
insurance shall not provide for deductibles in excess of $500,000.
16.03. Landlord and Tenant each hereby releases and waives all right of
recovery against the other, and its respective agents, employees, partners,
officers, directors, shareholders and anyone claiming through or under each of
them by way of subrogation or otherwise for any loss or damage caused by fire or
casualty, whether or not such fire or casualty shall have been caused by the
fault or negligence of the other party. Landlord and Tenant shall each secure
an appropriate clause in, or an endorsement upon, each fire and extended
coverage policy obtained by it covering the Building, the Leased Property or the
Fixtures or the Special Tenant Improvements, as applicable, located therein
pursuant to which their respective insurance companies waive subrogation to the
full extent of such party's release of the other pursuant to the immediately
preceding sentence. If such waiver of subrogation shall be procurable only by
payment of an additional premium, the party in whose favor such waiver of
subrogation is obtained shall bear the cost thereof.
16.04. Tenant shall not do or permit to be done any act or thing in or
upon the Land or in the Building which will invalidate or be in conflict with
the terms of any insurance policies covering the Building and the fixtures and
property therein. Tenant shall comply with all rules, orders, regulations or
requirements of the any organization of fire underwriters or any other similar
body having jurisdiction, and shall not do or permit anything to be done in or
upon the Land or the Building or bring or keep anything therein or use the
Leased Property in a manner which would increase the rate of insurance upon the
Leased Property over the rate in effect at the commencement of the Term of
-12-
<PAGE>
this Lease or which would result in the cancellation of any policy of such
insurance or the assertion of any defense by the insurer to any claim under any
policy of insurance maintained by or for the benefit of Landlord.
ARTICLE 17
DAMAGE BY FIRE OR OTHER CAUSE
17.01. If the Leased Property shall be damaged by fire or other cause,
Tenant shall promptly notify Landlord thereof. If the damage is of such an
extent as to interfere materially with Tenant's ability to conduct its
operations at the Building, Landlord shall, at Tenant's option as determined by
Tenant by written notice to Landlord given not more than 60 days following such
fire or other casualty, either (a) repair and restore any damaged portions of
the Leased Property to a condition suitable for Tenant's use, as promptly as
reasonably practicable, to the extent of and subject to receipt of insurance
proceeds from Landlord's insurer (plus an amount equal to the amount of any
applicable deductible) sufficient to pay the cost of such repair and
restoration, it being agreed that Landlord's obligation to so repair and restore
is expressly conditioned upon the receipt and sufficiency of such insurance
proceeds (plus an amount equal to any applicable deductible) and to the extent
such insurance proceeds are unavailable or insufficient, Tenant shall be solely
responsible for the cost (or the balance of the cost, as the case may be) to so
repair and restore, or (b) terminate this Lease by written notice to Tenant sent
not later than 60 days following such fire or other casualty, in which event the
Term shall expire upon the thirtieth day following such notice and Tenant shall
vacate the Leased Property and surrender the same to Landlord on or before the
date this Lease shall so terminate. Fixed Rent and Additional Rent shall be
abated for the portion of the Leased Property which is not usable by Tenant in
the ordinary conduct of its business from the date of such damage or destruction
until the date on which the Leased Property become usable by Tenant for the
ordinary conduct of its business. There shall be no abatement of Fixed Rent or
Additional Rent for any period of time for that portion of the Leased Property
which Tenant continues to occupy or has reoccupied. If there shall be any delay
in the process of restoration and repair due to any act or omission on the part
of Tenant, Fixed Rent and Additional Rent shall commence on the date the Leased
Property would have otherwise been completed but for such delay, as shall be
determined by Landlord in its judgment reasonably exercised. No penalty or
damage shall accrue for delays which may arise by reason of adjustment of
insurance on the part of Landlord, or for delays on account of Force Majeure.
Upon termination of this Lease in accordance with this Section 17.01, Tenant's
liability for rent shall cease, subject, however, to any claim by Landlord for
Fixed Rent and/or Additional Rent accruing on or before such date.
17.02. No damage, compensation or claims shall be payable by Landlord for
inconvenience, loss of business or annoyance to Tenant arising from any damage
by fire or other casualty or from any repair or restoration of any portion of
the Leased Property or of the Building but Landlord shall use reasonable efforts
to effect promptly any such repairs as may be undertaken by Landlord pursuant to
this Lease.
-13-
<PAGE>
17.03. Notwithstanding the provisions of Section 17.01, if, by reason of
some action or inaction on the part of Tenant or any of its employees, agents,
licensees or contractors, Landlord, or any Superior Mortgagee shall be unable to
collect all of the insurance proceeds (including rent insurance proceeds)
applicable to damage or destruction of the Leased Property by fire or other
casualty, then, without prejudice to any other remedy which may be available
against Tenant, the abatement of rent provided for in said Section 17.01 shall
not be effective to the extent of the uncollected insurance proceeds.
ARTICLE 18
CONDEMNATION
18.01. In the event that the whole or any portion of the Leased Property
the loss of which would materially interfere with Tenant's customary operations
at the Leased Property shall be condemned or taken in any manner for any public
or quasi-public use, this Lease and the Term and estate hereby granted shall
forthwith cease and terminate as of the date of the vesting of title in the
condemning authority. In the event of any such termination, this Lease and the
Term and estate hereby granted shall expire as of the date of such termination
with the same effect as if that were the date hereinbefore set for the
expiration of the Term, and the rent hereunder shall be apportioned as of such
date. In the event that only a part of the Leased Property the loss of which
does not materially interfere with Tenant's customary operations at the Leased
Property shall be so condemned or taken, then this Lease shall be and remain
unaffected by such condemnation or taking, except that, effective as of the date
of the vesting of title in the condemning authority, the Fixed Rent and
Additional Rent hereunder for such part shall be equitably abated and this Lease
shall continue as to such part not so taken.
18.02. In the event of any condemnation or taking hereinabove mentioned of
all or a part of the Leased Property, Landlord shall be entitled to receive the
entire award in the condemnation proceeding, including any award made for the
value of this Lease and for any unexpired portion of the Term, and Tenant hereby
expressly assigns to Landlord any and all right, title and interest of Tenant
now or hereafter arising in or to any such award or any part thereof and Tenant
shall not be entitled to receive any part of such award. Tenant shall have no
claim for the value of any unexpired term of this Lease. Tenant may separately
prosecute any claim it may have for Tenant's trade fixtures and its moving
expenses (if they are compensable) provided such prosecution does not interfere
with or reduce Landlord's claim.
ARTICLE 19
BANKRUPTCY
19.01. If a trustee in bankruptcy shall assume this Lease and shall
propose to assign the same pursuant to the provisions of the Bankruptcy Code,
11 U.S.C. 101 et seq. (the "BANKRUPTCY CODE") to any person or entity who shall
have made a bona fide offer to accept an assignment of this Lease on terms
acceptable to such trustee notice of such proposed assignment, setting forth
(i) the name and
-14-
<PAGE>
address of such person, (ii) all of the terms and conditions of such offer, and
(iii) the adequate assurance to be provided Landlord to assure such person's
future performance under this Lease, including, without limitation, the
assurance referred to in section 365(b)(3) of the Bankruptcy Code, shall be
given to Landlord by such trustee no later than twenty (20) days after receipt
by such trustee, but in any event no later than ten (10) days prior to the date
that such trustee shall make application to a court of competent jurisdiction
for authority and approval to enter into such assignment and assumption, and
Landlord shall thereupon have the prior right and option, to be exercised by
notice to Tenant given at any time prior to the effective date of such proposed
assignment, to accept an assignment of this Lease upon the same terms and
conditions and for the same consideration, if any, as the bona fide offer made
by such person, less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this Lease.
19.02. Any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall, upon demand,
execute and deliver to Landlord an instrument in recordable form confirming such
assumption.
ARTICLE 20
DEFAULT
20.01. (a) If (i) Tenant shall fail to pay Fixed Rent or Additional Rent
when due and such default continues for a period of five (5) days after written
notice thereof from Landlord; or (ii) Tenant shall default in fulfilling any of
the covenants of this Lease, other than the covenants for the payment of Fixed
Rent and Additional Rent, and such default continues for a period of twenty (20)
days after written notice from Landlord to Tenant specifying the nature of said
default, except that if the said default shall be of such a nature that the same
cannot, with reasonable diligence, be completely cured or remedied within said
twenty (20) days then Tenant shall not be deemed in default if Tenant diligently
commences curing such default within such twenty (20) day period, and shall
thereafter with diligence and in good faith proceed to remedy or cure such
default, but, in any event, Tenant shall complete such cure prior to the date on
which Landlord (A) would be subject to prosecution for a crime or (B) would be
in default of any Superior Mortgage or Superior Lease or (iii) any event shall
occur or any contingency shall arise whereby this Lease or the estate hereby
granted or the unexpired balance of the Term would, by operation of law or
otherwise, devolve upon or pass to any person other than Tenant, then in any of
the events described in the foregoing clauses (i), (ii) or (iii), Landlord may
serve a written three (3) day notice of cancellation of this Lease upon Tenant,
and upon the expiration of said three (3) days, this Lease and the Term
hereunder shall end and expire as fully and completely as if the date of
expiration of such three (3) day period were the Expiration Date of this Lease,
and Tenant shall then quit and surrender the Leased Property to Landlord but
Tenant shall remain liable as hereinafter provided.
(b) In the event of a breach or threatened breach by Tenant of
any of the covenants or provisions hereof, Landlord shall also have the right of
injunction.
-15-
<PAGE>
20.02. If the three (3) day notice provided for in Section 20.01 shall
have been given:
(a) Landlord and Landlord's agents may, without notice, re-enter
the Leased Property or any part thereof, and by summary proceedings or
otherwise, dispossess Tenant or the legal representative of Tenant or other
occupant of the Leased Property and remove their effects without liability for
damage thereto and hold the Leased Property as if this Lease had not been made
but Tenant shall remain liable hereunder as hereinafter provided; and
(b) Landlord may, at its option, relet the whole or any part or
parts of the Leased Property from time to time, either in the name of Landlord
or otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Expiration Date, at such rental or rentals and upon such other
conditions, which may include concessions and free rent periods, as Landlord in
its sole discretion may determine. Landlord shall have no obligation to relet
the Leased Property or any part thereof and shall in no event be liable for
refusal or failure to relet the Leased Property or any part thereof, or, in the
event of any such reletting, for refusal or failure to collect any rent upon any
such reletting, and no such refusal or failure shall operate to relieve Tenant
of any liability under this Lease or otherwise to affect any such liability.
Landlord, at Landlord's option, may make such repairs, improvements,
alterations, additions, decorations and other physical changes in and to the
Leased Property as Landlord, in its sole discretion, considers advisable or
necessary in connection with any such reletting or proposed reletting, without
relieving Tenant of any liability under this Lease or otherwise affecting any
such liability.
20.03. If this Lease shall terminate or if Landlord shall re-enter the
Leased Property as provided in this Article:
(a) Tenant shall pay to Landlord all rent to the date upon which
this Lease shall have been terminated or to the date of re-entry upon the Leased
Property by Landlord, as the case may be;
(b) Landlord shall be entitled to retain all monies, if any,
paid by Tenant to Landlord, whether as advance rent, security or otherwise, but
such monies shall be credited by Landlord against any rent due at the time of
such termination or re-entry or, at Landlord's option, against any damages
payable by Tenant;
(c) Tenant shall be liable for and shall pay to Landlord, as
damages, any deficiency between the rent payable hereunder for the period which
otherwise would have constituted the unexpired portion of the Term (conclusively
presuming the Additional Rent to be the same as was payable for the year
immediately preceding such termination or re-entry) and the net amount, if any,
of rents collected under any reletting effected pursuant to the provisions of
Section 20.02(b) for any part of such period (first deducting from the rents
collected under any such reletting all of Landlord's expenses in connection with
the termination of this Lease or Landlord's re-entry upon the Leased Property
and in connection with such reletting including all repossession costs,
brokerage commissions, legal expenses, alteration costs and other expenses of
preparing the Leased Property for such reletting);
-16-
<PAGE>
(d) Any deficiency in accordance with subsection (c) above shall be
paid in monthly installments by Tenant on the days specified in this Lease for
the payment of installments of Fixed Rent. Landlord shall be entitled to
recover from Tenant each monthly deficiency as the same shall arise and no suit
to collect the amount of the deficiency for any month shall prejudice Landlord's
right to collect the deficiency for any prior or subsequent month by a similar
proceeding. Alternatively, suit or suits for the recovery of such deficiencies
may be brought by Landlord from time to time at its election;
(e) Whether or not Landlord shall have collected any monthly
deficiencies as aforesaid, Landlord shall be entitled to recover from Tenant,
and Tenant shall pay Landlord, on demand, as and for liquidated and agreed final
damages and not as a penalty, a sum equal to the amount by which the Fixed Rent
and Additional Rent payable hereunder for the period to the Expiration Date from
the latest of the date of termination of this Lease, the date of re-entry or the
date through which monthly deficiencies shall have been paid in full
(conclusively presuming the Additional Rent for each year thereof to be the same
as that which was payable for the year immediately preceding such termination or
re-entry) exceeds the then fair and reasonable rental value of the Leased
Property for the same period, both discounted at the rate of 7% per annum to
present worth.
(f) In no event shall Tenant be entitled (i) to receive any excess of
any rent under subdivision (c) over the sums payable by Tenant to Landlord
hereunder or (ii) in any suit for the collection of damages pursuant to this
Section 20.03, to a credit in respect of any rent from a reletting except to the
extent that such rent is actually received by Landlord prior to the commencement
of such suit. If the Leased Property or any part thereof should be relet in
combination with other space, then proper apportionment on a square foot area
basis shall be made of the rent received from such reletting and the expenses of
reletting.
(g) If this Lease shall terminate or if the Landlord shall re-enter
the Leased Property:
(1) The Leased Property shall be, upon such earlier termination
or re-entry, in the same condition as that in which Tenant has agreed to
surrender them to Landlord on the Expiration Date;
(2) Tenant, on or before the occurrence of any default
hereunder, shall have performed every covenant contained in this Lease for the
making of any improvement or for repairing any part of the Leased Property and
(3) For the breach of either subdivision (a) or (b) of this
subsection, or both, Landlord shall be entitled immediately, without notice or
other action by Landlord, to recover, and Tenant shall pay, as and for agreed
damages therefor, the then cost of performing such covenants, plus interest
thereon at the Default Rate for the period from the date of the occurrence of
any default to the date of payment.
-17-
<PAGE>
(4) Each and every covenant contained in this subsection (g)
shall be deemed separate and independent and not dependent on any other term of
this Lease for the use and occupation of the Leased Property by Tenant, and the
performance of any such term shall not be considered to be rent or other payment
for the use of said Leased Property. It is understood that the consideration
for the covenants in this subsection (g) is the making of this Lease, and the
damages for failure to perform the same shall be in addition to and separate and
independent of the damages accruing by reason of default in observing any other
term of this Lease.
20.04. The remedies and rights provided for in this Lease are cumulative.
Mention in this Lease of any particular remedy shall not preclude Landlord from
pursuing any other remedy at law or equity.
20.05. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws.
20.06. The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease,
shall not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt or acceptance by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. No
provision of this Lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord. No endorsement or statement on
any check or any letter accompanying any check or payment as rent shall be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy in this Lease.
20.07. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease. Tenant shall
not interpose any counterclaim in any summary proceeding commenced by Landlord.
ARTICLE 21
QUIET ENJOYMENT
Landlord covenants and agrees that, as long as Tenant shall comply with
all obligations on its part to be performed hereunder, Tenant may peaceably
and quietly enjoy the Leased Property, subject to the terms and conditions of
this Lease.
ARTICLE 22
SURRENDER OF PREMISES
-18-
<PAGE>
22.01. Upon the expiration or sooner termination of this Lease or upon
re-entry by Landlord upon the Leased Property, Tenant shall at Tenant's expense
quit and surrender the Leased Property and deliver the same to Landlord in good
order, condition and repair, ordinary wear and tear and damage by fire or other
casualty excepted. Tenant shall pay to Landlord any insurance proceeds received
by Tenant attributable to damage to the Leased Property to the extent such
proceeds have not been used to restore such items in accordance with this Lease.
22.02. Any items which shall remain in the Leased Property after the
Expiration Date, or after an earlier termination date, may, at the option of
Landlord, be deemed to have been abandoned, and in such case such items may be
retained by Landlord as its property or disposed of by Landlord, without
accountability, in such manner as Landlord shall determine at Tenant's expense.
Tenant's obligation to reimburse Landlord for its costs so incurred shall
survive expiration or termination of this Lease.
22.03. If Tenant remains in possession of the Leased Property after the
termination of this Lease without the execution of a new lease, the parties
recognize and agree that the damage to Landlord will be substantial, will exceed
the amount of monthly Fixed Rent and Additional Rent theretofore payable
hereunder and will be impossible to measure accurately. Tenant, therefore, at
the option of Landlord, shall be deemed to be occupying the Leased Property as a
tenant from month to month, at a monthly rental equal to two and one-half times
the Fixed Rent and Additional Rent payable during the last month of the Term,
subject to all of the other terms of this Lease insofar as the same are
applicable to a month-to-month tenancy. Further, Tenant hereby indemnifies
Landlord against liability resulting from delay by Tenant in so surrendering the
Leased Property, including (a) any claims made by any purchaser or prospective
purchaser, succeeding tenant or prospective tenant founded upon such delay,
(b) any payment or rent concession which Landlord may be required to make to any
purchaser or prospective purchaser, succeeding or prospective tenant for all or
any part of the Premises in order to induce such purchaser or tenant not to
terminate its purchase agreement or lease, as the case may be, or its
negotiation therefor by reason of Tenant's delay in so surrendering the Leased
Property and (c) any loss suffered if a purchaser or prospective purchaser or
succeeding or prospective tenant shall terminate its purchase agreement or
lease, as the case may be, or not proceed to close on a purchase or execute and
deliver its purchase agreement or lease, as the case may be, by reason of
Tenant's delay in so surrendering the Leased Property. Nothing herein contained
shall be deemed to permit Tenant to remain in possession of the Leased Property
after the expiration or sooner termination of the term of this Lease.
22.04. No agreement to accept a surrender of all or any part of the Leased
Property or this Lease shall be valid unless in writing and signed by Landlord.
No delivery of keys shall operate as a termination of this Lease or a surrender
of the Leased Property or this Lease.
ARTICLE 23
NOTICES
-19-
<PAGE>
All notices and communications permitted or required to be given pursuant
to this Lease shall given in the manner, and to the addresses, provided in the
Asset Purchase Agreement dated as of January 21, 1996 (the "AGREEMENT"), in
connection with which this Lease is being executed.
ARTICLE 24
MISCELLANEOUS
24.01. This Lease with its annexed Exhibits and the Agreement contain the
entire agreement between Landlord and Tenant, all prior negotiations and
agreements are merged into this Lease and any agreement hereafter made between
Landlord and Tenant shall be ineffective to change, modify, waive, release,
discharge or terminate or effect an abandonment of this Lease, in whole or in
part, unless such agreement shall be in writing and executed by the party to be
charged.
24.02. If any term, covenant, condition or provision of this Lease shall
be invalid or unenforceable to any extent, the remaining terms, covenants,
conditions and provisions of this Lease shall not be affected thereby. This
lease shall be construed without regard to any presumption or other rule
requiring construction against the party causing this lease to be drafted. Each
covenant, agreement, obligation or other provision of this lease on Tenant's
part to be performed, shall be deemed and construed as a separate and
independent covenant of Tenant, not dependent on any other provision of this
Lease.
24.03. Nothing contained in this Lease shall be deemed to confer upon any
person other than the parties hereto and their respective successors and assigns
(to the extent assignment is permitted pursuant to Article 9 hereof) any right
or benefit, including any right to insist upon, or to enforce against Landlord
or Tenant, the performance of such party's obligations hereunder.
24.04. Whenever this Lease requires an approval or consent by either
Landlord or Tenant, unless another standard is expressly stated, such approval
or consent and any conditions imposed thereby shall be reasonable and shall not
be unreasonably withheld or delayed and, in exercising any right or remedy
hereunder, each party shall at all times act reasonably and in good faith. Any
expenditure by a party permitted or required under this Lease for which such
party is entitled to demand reimbursement shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred and shall
be substantiated, upon request, by documentary evidence.
24.05. The submission by Landlord to Tenant of this Lease in draft form
shall be deemed submission solely for Tenant's consideration and not for
acceptance and execution. Such submission shall have no binding force and
effect, shall not constitute an option for the leasing of the Leased Property,
and shall not confer any rights or impose any obligations upon either party.
The submission by Landlord of this Lease for execution by Tenant and the actual
execution and delivery thereof by Tenant to Landlord shall similarly have no
binding force and effect on Landlord unless and until Landlord shall have
executed this Lease and a counterpart thereof shall have been delivered to
Tenant and all consents required pursuant to any Superior Mortgage or Superior
Lease have been received.
-20-
<PAGE>
24.06. This Lease shall bind and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
24.07. Tenant shall not record or file this Lease or any memorandum or
other notation thereof in any public records.
24.08. Tenant shall have access to driveways, parking lots, sidewalks and
similar surface improvements on Landlord's immediately adjoining property for
parking and ingress and egress to and from the Leased Property, provided, that
Landlord reserves the right to limit such access to the extent Landlord
reasonably determines the same poses security concerns, provided further, that
there shall be no material interference with Tenant's reasonable access to and
use of the Leased Premises for the purposes described in Section 5.01.
-21-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease on the date first above written.
STATE ROAD PROPERTIES L.P.
By: HR LEASING CORP., its General Partner
By: /s/ James L. Ziemer
-------------------
Name: James L. Ziemer
Title: VP
MONACO COACH CORPORATION
By: /s/ John W. Nepute
------------------
Name: John W. Nepute
Title: VP Finance
-22-
<PAGE>
PHYSICAL ADDRESS
- ----------------
3 S.R. 19
Wakarusa, Indiana 46573
[Graphic: drawing of building 3]
-23-
<PAGE>
EXHIBIT B
---------
LEGAL DESCRIPTION OF LAND
-------------------------
Deliberately Omitted
<PAGE>
EXHIBIT C
PERMITTED USES
The design, manufacture, marketing, wholesale sale and factory servicing of
recreational vehicles and related parts and accessories.
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF LEASE
-------------------------------------
THIS FIRST AMENDMENT TO AGREEMENT OF LEASE is made and entered into
effective as of March 4, 1996 by and between State Road Properties L.P., a
Delaware limited partnership ("Landlord") and Monaco Coach Corporation, a
Delaware corporation ("Tenant").
WITNESSETH:
A. Landlord and Tenant are parties to that certain Agreement of Lease
dated March 4, 1996 (the "Lease") regarding certain land and improvements
described in the Lease as located at 3 State Road 19, Wakarusa, Indiana 46573
and commonly known as Plant 3 (the "Leased Property"). Capitalized terms used
but not defined herein shall have the meanings given such terms in the Lease.
B. Landlord and Tenant have agreed to amend the Lease so as to correct a
mutual mistake concerning rent as set forth in the Lease and so as to reflect
the agreed upon rent as actually paid from Tenant to Landlord.
NOW, THEREFORE, Landlord and Tenant hereby agrees as follows:
25 Section 3.01(a) of the Lease is hereby deleted in its entirety and
replaced by the following:
"3.01(a) Tenant covenants and agrees to pay to Landlord a fixed
minimum rent ("FIXED RENT") during the Term of this Lease, equal
to $162,683.64 per annum (pro rated in the case of partial
years), payable in equal monthly installments of $13,556.97."
26 Except as specifically amended hereby, all of the terms of the Lease
are and shall remain in full force and effect and hereby ratified and confirmed.
The capitalized term "Lease" as used in the Lease shall be deemed to mean and
refer to the Lease, as amended by this First Amendment to Agreement of Lease.
-2-
<PAGE>
IN WITNESS WHEREOF, this First Amendment to Agreement of Lease has been
duly executed by Landlord and Tenant as of the date first above written.
STATE ROAD PROPERTIES, L.P.
By: HR LEASING CORP.,
its General Partner
By: /s/ James Ziemer
------------------------------------
Title: Vice President
---------------------------------
MONACO COACH CORPORATION
By: /s/ Kay Toolson
------------------------------------
Title: Chief Executive Officer
---------------------------------
-3-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A G R E E M E N T O F L E A S E
STATE ROAD PROPERTIES L.P.,
Landlord
MONACO COACH CORPORATION,
Tenant
March 4, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.13
[TOWABLES]
AGREEMENT OF LEASE, dated this 4th day of March, 1996, between STATE ROAD
PROPERTIES L.P., a Delaware Limited Partnership having an office at 3700 West
Juneau Road, Milwaukee, Wisconsin, 53208 ("LANDLORD") and MONACO COACH
CORPORATION, a Delaware corporation having an office at 1809 West Hively, P.O.
Box 4313, Elkhart, Indiana 46517 ("TENANT").
ARTICLE 1
PREMISES; TERM
1.01. Subject to and in accordance with all of the covenants and
conditions of this Lease, Landlord hereby leases to Tenant and Tenant hereby
hires from Landlord the improvements (together with the heating, ventilating and
air conditioning systems located therein, the "BUILDING") more particularly
described on Exhibit A attached hereto together with the land on which the
Building is located, more particularly described on Exhibit B attached hereto
(the "LAND"; the Land and the Building, collectively, the "LEASED PROPERTY").
1.02. The Leased Property shall be leased for a term (together with any
Extension Term, the "TERM") commencing on March 4, 1996 (the "COMMENCEMENT
DATE") and expiring on the date (the "EXPIRATION DATE") immediately preceding
the first anniversary of the Commencement Date, unless the Term shall terminate
sooner pursuant to any of the terms of this Lease or pursuant to law and subject
to the following provisions of this Section 1.02. Tenant shall have two
successive options to extend the Expiration Date for one year (each such one
year extension period, an "EXTENSION TERM"). If the first such option is
exercised as provided herein, the Expiration Date shall be the date immediately
preceding the second anniversary of the Commencement Date. If the first such
option and the second such option are exercised as provided herein, the
Expiration Date shall be the date immediately preceding the third anniversary of
the Commencement Date. Any such extension option shall be exercised by written
notice to Landlord no later than 120 days prior to the Expiration Date as in
effect prior to the exercise of such option. If the first such option is not
exercised, Tenant shall have no rights with respect to the second such option.
During the last six months of any Extension Term, Tenant shall have the right to
terminate this Lease on thirty days' written notice to Landlord. Such
termination shall be effective as of the first day of the calendar month
beginning at least thirty days after the sending of such notice. On such
effective termination date, the Term shall end with the same effect as if such
effective termination date were the Expiration Date originally set forth herein.
ARTICLE 2
CONDITION OF LEASED PROPERTY
Tenant has inspected the Leased Property and is thoroughly acquainted with
its condition. As a condition of Landlord's agreement hereunder, Tenant agrees
to take possession of and accept each
<PAGE>
portion of the Leased Property in its "as is" condition as at the date of this
Lease. Landlord shall have no obligation to do any work or perform any services
with respect to the Leased Property except as specifically set forth in this
Lease.
ARTICLE 3
RENT
3.01.(a) Tenant covenants and agrees to pay to Landlord a fixed minimum
rent ("FIXED RENT") during the Term of this Lease, equal to $71,017.56 per annum
(pro rated in the case of partial years), payable in equal monthly installments
of $5,918.13.
(b) Monthly installments of Fixed Rent shall be payable without
notice or demand in advance on the first day of each month during the Term. If
the date on which Fixed Rent first becomes payable hereunder occurs on a day
other than the first day of a calendar month, Fixed Rent for such calendar month
shall be pro-rated on a PER DIEM basis.
3.02. All adjustments of rent, costs, charges, expenses and
reimbursements and all other sums of money which Tenant is obligated to pay to
Landlord pursuant to this Lease shall be deemed additional rent ("ADDITIONAL
RENT") which Tenant covenants to pay when due. Except as otherwise specified in
this Lease, all Additional Rent shall be due from and payable by Tenant on the
twentieth (20th) day after Landlord has rendered its bill therefor. Landlord
shall have all the rights and remedies with respect to nonpayment of Additional
Rent as are provided herein for nonpayment of Fixed Rent.
3.03. All Fixed Rent and Additional Rent shall be payable by Tenant to
Landlord in lawful money of the United States of America at the office of
Landlord or at such other place as Landlord may designate from time to time
without offset, abatement counterclaim or deduction in lawful money of the
United States of America. All Fixed Rent and Additional Rent shall be paid by
either (i) a good and sufficient check drawn on a bank which is a member of a
nationally recognized clearing house association or (ii) a wire transfer of
immediately available funds to Landlord's account.
3.04. If any installment of Fixed Rent or any Additional Rent is not
paid when due Tenant shall also pay interest thereon (which interest shall be
immediately due and payable and shall constitute Additional Rent) at a rate (the
"DEFAULT RATE") equal to ten percent (10%) per annum, computed from the date
such payment was first due through the date paid. Notwithstanding the
imposition of such interest, Tenant shall be in default under this Lease if any
or all payments required to be made by Tenant are not made at the time herein
stipulated, and neither the demand for, nor collection by Landlord of, such
interest shall be construed as a curing of such default on the part of Tenant.
-2-
<PAGE>
ARTICLE 4
TAXES
4.01. Landlord shall pay all taxes, assessments and fees levied upon
the Leased Property or the rents collected therefrom, by any Governmental
Authority based upon the ownership, leasing, renting or operation of the Leased
Property, including all costs and expenses of protesting any such taxes,
assessments or fees ("TAXES").
ARTICLE 5
USE
5.01. Tenant shall use and occupy the Leased Property, for the purposes
shown on Exhibit C and for no other purpose and only as permitted by any
applicable law, rule or regulation or determination (a "LEGAL REQUIREMENT") of
the federal government, any state or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government (any of the foregoing, a "GOVERNMENTAL
AUTHORITY").
5.02. Tenant shall not use, occupy or permit the Leased Property (or
any part thereof) to be used in any manner, or permit anything to be brought
into or kept within the Leased Property, which, in Landlord's judgment, would
(i) violate the Certificate of Occupancy issued for the Building, (ii) violate
the provisions of any Superior Lease or Superior Mortgage, (iii) cause injury or
damage to the Leased Property or any part thereof, (iv) interfere with or impair
the Building's systems and equipment or the proper and economical maintenance
and operation of the Leased Property, (v) change the character of the Building,
(vi) violate any Legal Requirement or any requirements of any insurance policy
covering or applicable to all or any part of the Leased Property or the use
thereof, all requirements of the issuer of any such policy and all orders,
rules, regulations, recommendations and other requirements of any organization
of fire underwriters or the Insurance Service Office or any other body
exercising the same or similar functions and having jurisdiction or cognizance
of all or any part of the Leased Property (collectively, "INSURANCE
REQUIREMENTS"), (vii) violate any applicable Environmental Law or (viii) or
cause the presence of any Hazardous Material on or under the Land or within the
Building in violation of any applicable Environmental Law.
5.03. If any license or permit from any Governmental Authority shall be
required for the proper and lawful occupancy of the Leased Property and if
failure to secure such license or permit would in any way adversely affect
Landlord or the Leased Property, then Tenant, at its sole expense, shall procure
and deliver a copy of such license or permit to Landlord and thereafter maintain
such license or permit. Tenant shall at all times comply with the provisions of
each such license and permit.
-3-
<PAGE>
ARTICLE 6
MAINTENANCE AND REPAIR
6.01. Tenant shall be solely responsible for the cost and performance
of all maintenance, service, repair and replacement of any portion of the
Building, it being understood and agreed that Landlord shall have no general
duty (either to Tenant or to third parties) to keep the Leased Property in good
order and repair and that Landlord shall have no obligation to perform or pay
for the cost of any such maintenance, service, repair or replacement except to
the extent expressly provided for in this Article 6. As long as this Lease is in
full force and effect Landlord shall promptly upon request by Tenant reimburse
Tenant for the cost of any repair or replacement of any heating, ventilating and
air-conditioning system or structural or other similar portion of the Building
or Building system that becomes unusable such that the operation of Tenant's
business for the purposes described in Section 5.01 shall be materially
impaired; PROVIDED, that written notice, given reasonably in advance considering
the nature of the repair, shall have been provided to Landlord, which notice
shall set forth, in reasonable detail, the nature and scope of the repair and
the estimated cost thereof and PROVIDED further, that Landlord will be obligated
to reimburse Tenant only to the extent reasonably necessary such that Tenant's
business for the purposes described in Section 5.01 shall no longer be so
materially impaired. Tenant agrees and acknowledges that Landlord's
reimbursement obligation as set forth above is being undertaken by Landlord as
an accommodation to Tenant due to the short-term nature of this Lease. Tenant
agrees and acknowledges that it is Tenant's duty and obligation to inspect the
Leased Property from time to time, to conduct day-to-day maintenance of the
Leased Property and to perform any repairs and replacements that are required
either for Tenant's operations or for the health and safety of persons present
at the Leased Property.
6.03 Except as expressly provided above in this Article 6, Landlord
shall have no obligations to repair or maintain the Leased Property or to
provide other services to Tenant or to pay for any of the costs thereof. Tenant
acknowledges that, except as otherwise set forth herein, Tenant is solely
responsible for cleaning, security, maintenance and operation of the Building's
systems and the costs thereof.
ARTICLE 7
UTILITY SERVICE
Tenant shall obtain and pay for the supply of electric current, water
supply, sewerage service and any other utility services to the Leased Property
by direct application to and arrangement with the respective public utility
companies servicing the Building. Tenant shall be responsible for direct
payment for all such utilities and shall abide by all rules and regulations
imposed by any such utility company.
-4-
<PAGE>
ARTICLE 8
SUBORDINATION; ESTOPPEL CERTIFICATE
8.01. This Lease and all rights of Tenant hereunder are subject and
subordinate to all mortgages which may now or hereafter affect Landlord's
interest in the Leased Property or any part thereof (all such mortgages,
collectively, the "SUPERIOR MORTGAGES"), and to all renewals, modifications,
consolidations, replacements and extensions of Superior Mortgages. This Section
shall be self-operative and no further instrument of subordination shall be
required .In confirmation of such subordination, Tenant agrees to promptly
execute and deliver at Tenant's sole cost and expense any instrument (in
recordable form, if requested) that Landlord or the holder of any Superior
Mortgage (a "SUPERIOR MORTGAGEE") may request to evidence such subordination.
8.02. If the interests of Landlord under this Lease are transferred by
reason of, or assigned in lieu of, foreclosure or other proceedings for
enforcement of any such Superior Mortgage then Tenant shall, at the option of
such purchaser or assignee, as the case may be, (x) attorn to such party and
perform for its benefit all the terms, covenants and conditions of this Lease on
Tenant's part to be performed with the same force and effect as if such party
were the landlord originally named in this Lease, or (y) enter into a new lease
with such party, as landlord, for the remaining Term and otherwise on the same
terms and conditions of this Lease except that such successor landlord shall not
be (i) liable for any previous act, omission or negligence of Landlord under
this Lease; (ii) subject to any counterclaim, defense or offset which
theretofore shall have accrued to Tenant against Landlord; (iii) bound by any
previous modification or amendment of this Lease or by any previous prepayment
of more than one month's rent, unless such modification, amendment or prepayment
shall have been approved in writing by the Superior Mortgagee through or by
reason of which such successor landlord shall have succeeded to the rights of
Landlord under this Lease; (iv) obligated to repair the Leased Property or any
part thereof in the event of total or substantial damage, beyond such repair as
can reasonably be accomplished from the net proceeds of insurance actually made
available to such successor landlord; (v) obligated to repair the Leased
Property or any part thereof in the event of partial condemnation, beyond such
repair as can reasonably be accomplished from the net proceeds of any award
actually made available to such successor landlord, as consequential damages
allocable to the part of the Leased Property not taken; nor (vi) obligated to
perform any work to prepare or finish the Leased Property for occupancy by
Tenant. Nothing contained in this Section shall be construed to impair any
right otherwise exercisable by any such owner, holder or lessee. Landlord shall
use reasonable efforts to obtain from the holder of any Superior Mortgage and
the landlord under any Superior Lease a written recognition agreement providing
that in the event of the foreclosure of such Superior Mortgage or termination of
such Superior Lease, so long as no default by Tenant shall have occurred and be
continuing hereunder, Tenant's rights of occupancy shall not be disturbed and
Tenant shall receive all of its rights provided for under this Lease.
8.03. If any act or omission by Landlord would give Tenant the right,
immediately or after lapse of time, to cancel or terminate this Lease or to
claim a partial or total eviction, abatement of rent, setoff or counterclaim,
Tenant will not exercise any such right until (i) it has given written notice of
such act or omission to each Superior Mortgagee whose name and address shall
have previously been furnished to Tenant, by delivering notice of such act or
omission addressed to each such party at
-5-
<PAGE>
its last address so furnished, (ii) Landlord shall have failed to cure the same
within the time limits set forth in this Lease, and (iii) following the giving
of such notice, no Superior Mortgagee shall have remedied such act or omission
(x) in the case of an act or omission which is capable of being remedied without
possession of the Building, within the cure period available to Landlord under
this Lease plus sixty (60) days and (y) in the case of any act or omission which
is incapable of being remedied without possession of the Building, within sixty
(60) days following the date on which possession is obtained, PROVIDED a
Superior Mortgagee has promptly commenced action to obtain possession and shall
diligently pursue such action to completion and PROVIDED FURTHER that such
Superior Mortgagee shall, with reasonable diligence, give Tenant notice of its
intention to, and commence and continue to, remedy such act or omission or cause
the same to be remedied.
8.04. If any Superior Mortgagee or prospective Superior Mortgagee shall
request modifications of this Lease as a condition to the provision, continuance
or renewal of any such financing, Tenant will not unreasonably withhold, delay
or defer its consent thereto, provided that such modifications do not materially
adversely increase the obligations of Tenant hereunder or materially diminish
Tenant's rights under this Lease.
8.05. Tenant agrees, at any time and from time to time, upon not less
than fifteen (15) days' prior notice from Landlord to execute, acknowledge and
deliver to Landlord or such other person that Landlord may designate a written
certification stating (a) that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), (b) that Tenant has accepted
possession of the Leased Property, (c) the dates to which the Fixed Rent and
Additional Rent have been paid, (d) whether or not there exists any default on
the part of Landlord under this Lease, and, if so, specifying each such default
and (e) such further information with respect to this Lease or the Leased
Property that Landlord may reasonably request. Landlord agrees, at any time and
from time to time, upon not less than fifteen (15) days' prior notice from
Tenant to execute, acknowledge and deliver to Tenant a written certification
stating (a) that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), (b) the dates to which the Fixed Rent
and Additional Rent have been paid, (c) whether or not there exists any default
on the part of Tenant under this Lease, and, if so, specifying each such default
and (e) such further information with respect to this Lease that Tenant may
reasonably request.
ARTICLE 9
ASSIGNMENT AND SUBLETTING PROHIBITED
9.01. Tenant, its legal representatives and successors in interest,
shall not by operation of law or otherwise, assign (in whole or in part),
mortgage, pledge, encumber or otherwise transfer this Lease or any part hereof
or any interest of Tenant herein or in the Leased Property by reason hereof, or
sublet the Leased Property, without Landlord's prior written consent. No
assignment of this Lease shall be effective unless the assignee shall execute,
acknowledge and deliver to Landlord an agreement, in form satisfactory to
Landlord, whereby the assignee assumes all obligations of Tenant
-6-
<PAGE>
under this Lease, and agrees that the provisions of this Article 9 shall
continue to be binding upon it in respect of all future assignments and deemed
assignments of this Lease. No assignment of this Lease shall release the
assignor from its continuing obligations to Landlord under this Lease and Tenant
and any subsequent assignor shall continue to remain jointly and severally
liable (as primary obligor) for all Tenant's obligations hereunder.
9.02. The consent by Landlord to any assignment or subletting shall not
be a waiver of or constitute a diminution of Landlord's right to withhold its
consent to any other assignment or subletting and shall not be construed to
relieve Tenant from obtaining Landlord's express written consent to any other or
further assignment or subletting.
ARTICLE 10
ENTRY; RIGHT TO CHANGE THE BUILDING
10.01. Landlord and Landlord's agents or designees shall have the right
to enter the Leased Property, during Business Hours upon notice given reasonably
in advance to Tenant, and in case of emergency without notice and at all other
times, without incurring any liability to Tenant therefor, for the following
purposes: (a) to perform any obligations of Landlord or to exercise any right
reserved to Landlord in this Lease, (b) to exhibit the Leased Property and any
parts thereof to any prospective purchaser, or to any present or prospective
mortgagee or ground lessor, or to the authorized representative of any
Governmental Authority or organization of fire underwriters, or, during the last
twelve months of the Term to any prospective tenant of the Leased Property (or
any part thereof), (c) to make or cause to be made such repairs, alterations or
improvements, or to permit electrical or other utility meters to be read, or to
perform such maintenance, including the maintenance of Building equipment, as
Landlord may deem necessary or desirable or as may be required pursuant to any
Legal Requirements or Insurance Requirements, and (d) to take into and store
upon the Leased Property all materials that may be required in connection with
any such repairs, alterations, improvements or maintenance. The taking of
materials into, and storing of such materials at the Leased Property in
accordance with the provisions of this Section 10.01 shall not constitute an
eviction of Tenant in whole or in part and the Fixed Rent and Additional Rent
reserved herein shall not abate while such repairs or alterations are being
made. In connection with any such entry by Landlord and Landlord's agents, all
reasonable security measures of Tenant shall be complied with and all reasonable
efforts shall be made so as to minimize any disruption of Tenant's operations.
ARTICLE 11
COMPLIANCE WITH LAWS
11.01. Tenant shall, at its expense, comply with all Legal Requirements
and Insurance Requirements. Without limiting the generality of the foregoing,
Tenant shall be obligated to reimburse Landlord for the cost of any alteration
of the Leased Property which shall be (a) necessitated by a condition which has
been created by Tenant, (b) attributable to the use or manner of use to which
Tenant puts the Leased Property, (c) required by reason of a breach of Tenant's
obligations hereunder, or (d) occasioned, in whole or in part, by any act,
omission or
-7-
<PAGE>
negligence of Tenant or any person claiming by, through or under Tenant, or any
of their assignees, subtenants, employees, agents, contractors, invitees or
licensees. Tenant shall pay all costs, expenses, fines, penalties and damages
which may be imposed upon Landlord or any Superior Mortgagee by reason of or
arising out of Tenant's failure fully and promptly to comply with the provisions
of this Section.
11.02. Notwithstanding anything to the contrary contained elsewhere in
this Lease and without limiting any other provision of this Lease by
implication, if any Governmental Authority promulgating or enforcing any Legal
Requirements or the Insurance Service Office, organization of fire underwriters
or any other body exercising the same or similar functions and having
jurisdiction or cognizance of all or any part of the Leased Property requires
that any changes, modifications, alterations or additional sprinkler heads or
other equipment be made or supplied in the Building sprinkler system or any
other portion of the Leased Property, Landlord shall make all such changes,
modifications, alterations and additions, the cost thereof shall be shared
equally by Landlord and Tenant, and Tenant shall pay its share of the cost
thereof to Landlord as Additional Rent within 5 Business Days after demand.
11.03. If Tenant receives written notice of any violation of any Legal
Requirement or Insurance Requirement, it shall give prompt notice thereof to
Landlord.
ARTICLE 12
HAZARDOUS MATERIALS
12.01. Without limiting the generality of Article 11, Tenant shall:
(a) comply with all applicable Environmental Laws and obtain and
comply with and maintain any and all licenses, approvals, registrations or
permits required by applicable Environmental Laws;
(b) refrain from storing, disposing of or releasing Hazardous
Materials in the Building or on the Land in violation of Environmental Laws;
(c) to the extent due to the release, emission or disposal of
Hazardous materials in or about the Leased Property during the Term hereof by
any action or inaction of Tenant or Tenant's employees, agents, licensees or
invitees, conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all orders and directives of all
Governmental Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not be reasonably expected to have a
material adverse effect on the business, operations, property, condition
(financial or otherwise) or prospects of the Tenant;
-8-
<PAGE>
(d) promptly notify Landlord in writing and in reasonable detail of
(i) any release or discharge of any Hazardous material by Tenant or any
affiliate thereof required to be reported under Environmental Laws to any
Governmental Authority; (ii) any condition, circumstance, occurrence or event
that could result in a material liability of Landlord, Tenant or any of their
respective affiliates under Environmental Laws or could result in the imposition
of any lien or other restriction on the title, ownership or transferability of
any of the Leased Property; and (iii) any proposed action to be taken by or on
behalf of the Tenant or any affiliate thereof that could subject the Tenant or
any affiliate thereof or the Leased Property or any portion thereof to any
material additional or different requirements or liabilities under any
Environmental Law; and
(e) defend, indemnify and hold harmless Landlord and its employees,
agents, officers, directors, successors and assigns from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs, and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to any violation of, noncompliance with
or liability under any Environmental Laws or any orders, requirements or demands
of Governmental Authority related thereto (including, without limitation,
attorneys' and consultants' fees, investigation and laboratory fees, response
costs, court costs and litigation expenses) by Tenant or Tenant's employees,
agents, licensees or invitees during the Term hereof, except to the extent that
any of the foregoing arise out of the negligence or willful misconduct of the
party seeking indemnification therefor. This indemnity shall continue in full
force and effect regardless of the termination of this Lease.
12.02. For purposes of this Lease, the following terms shall have the
following meanings:
"ENVIRONMENTAL LAWS" shall mean any and all Federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority, any and all Legal
Requirements and any and all common law requirements, rules and bases of
liability regulating, relating to or imposing liability or standards of conduct
concerning pollution or protection of human health or the environment, as now or
may at any time hereafter be in effect.
"HAZARDOUS MATERIALS" shall mean any hazardous or toxic
substances, materials or wastes, defined, listed, classified or regulated as
such in or under any Environmental Laws, including, without limitation,
asbestos, petroleum or petroleum products (including gasoline, crude oil or any
fraction thereof), polychlorinated biphenyls, and urea-formaldehyde insulation.
ARTICLE 13
ALTERATIONS PROHIBITED
Tenant shall make no alterations, modifications, replacements or other
changes to the Leased Property without Landlord's prior written consent,
provided, that Tenant may construct, at Tenant's sole cost and expense,
nonstructural alterations, additions and improvements to the Leased Property
without Landlord's prior written consent so long as the aggregate cost thereof
shall not exceed $50,000.00.
-9-
<PAGE>
ARTICLE 14
LANDLORD'S RIGHTS TO PERFORM
TENANT'S OBLIGATIONS
If Tenant shall default in the performance of any term or covenant on its
part to be performed under this Lease, Landlord, without being under any
obligation to do so and without thereby waiving such default, may upon the
expiration of the period allowed for the cure of such default, if any, provided
by this Lease (or with or without such expiration in case of emergency) remedy
such default. Tenant shall reimburse Landlord on demand for all costs and
expenses incurred by Landlord in the performance of Tenant's obligations
hereunder.
ARTICLE 15
LIABILITY OF LANDLORD; INDEMNIFICATION
15.01. Landlord and Landlord's agents have made no representations or
promises with respect to the Building, the Land or the Leased Property except as
herein expressly set forth. No rights, easements or licenses are acquired by
Tenant by implication or otherwise, except as expressly set forth in the
provisions of this Lease.
15.02. (a) Neither Landlord, any Superior Mortgagee nor any of their
respective employees, directors, officers and agents shall be liable for any
injury or damage to persons or property unless caused by or solely due to the
proven gross negligence or willful misconduct of Landlord, its agents or
employees. Landlord, its employees, directors, officers and agents shall in no
event be liable for any such damage, or for any injury, damage to or loss (by
theft or otherwise) of any property of Tenant, caused by other tenants or
persons in the Building.
(b) In no event shall Landlord be liable for incidental,
indirect, consequential, or special damages arising out of or in connection with
this Lease, including, without limitation, lost profits.
15.03. During the existence of any Superior Lease, the term "Landlord"
wherever used in this Lease shall be limited to mean and include only the owner
or owners at the time in question of the lessee's interest in the Land and the
Building pursuant to any such Superior Lease, so that in the event of any sale,
assignment or transfer, by operation of law or otherwise, of Landlord's interest
in the Land and the Building, such seller, assignor or transferor thereupon
automatically shall be released and discharged from all covenants, conditions
and agreements of Landlord hereunder; but, subject to the provisions of
Section 8.02 above, such covenants, conditions and agreements shall be deemed to
have been assumed by and be binding upon each new owner, assignee or transferee
for the time being of Landlord's interest in the Land and the Building, until
sold, assigned or transferred.
15.04. (a) Tenant shall indemnify and save harmless Landlord and its
agents and all Superior Mortgagees and their respective officers, directors,
agents and employees (collectively, the
-10-
<PAGE>
"INDEMNIFIED PARTIES" and each an "INDEMNIFIED PARTY") against and from (a) any
and all claims, actions and proceedings (i) arising from (x) the use and
occupancy of the Leased Property, or (y) any work or thing whatsoever done, or
any condition created by or on behalf of Tenant (other than by Landlord for
Landlord's account) in or about the Leased Property during the Term of this
Lease or during the period of time, if any, prior to the Commencement Date that
Tenant may have been given access to the Leased Property, or (ii) arising from
any negligent or otherwise wrongful act or omission of Tenant or any of its
subtenants or licensees or invitees or its or their employees, agents or
contractors, or (iii) arising from any breach or failure to observe any term,
covenant or condition of this Lease by Tenant or its agents or anyone claiming
by or through Tenant, and (b) all costs, expenses and liabilities incurred in or
in connection with each such claim, action or proceeding brought thereon
(including reasonable attorneys' fees and disbursements), except to the extent
that any of the foregoing arises out of the negligence or willful misconduct of
Landlord, its agents or employees or any breach of this Lease by Landlord or its
agents or anyone claiming by or through Landlord. In case any action or
proceeding be brought against any Indemnified Party by reason of any such claim,
Tenant, upon notice from Landlord or such Indemnified Party (if other than
Landlord), shall cause such action or proceeding to be defended at Tenant's
expense by counsel reasonably acceptable to Landlord.
(b) Landlord shall indemnify and save harmless Tenant and its
officers, directors, agents and employees (collectively, the "TENANT INDEMNIFIED
PARTIES" and each a "TENANT INDEMNIFIED PARTY") against and from (a) any and all
claims, actions and proceedings (i) arising from any negligent or otherwise
wrongful act or omission of Landlord or any of its licensees or invitees,
employees, agents or contractors, or (ii) arising from any breach or failure to
observe any term, covenant or condition of this Lease by Landlord or its agents
or anyone claiming by or through Landlord, and (b) all costs, expenses and
liabilities incurred in or in connection with each such claim, action or
proceeding brought thereon (including reasonable attorneys' fees and
disbursements), except to the extent that any of the foregoing arises out of the
negligence or willful misconduct of Tenant, its agents or employees or any
breach of this Lease by Tenant or its agents or anyone claiming by or through
Tenant. In case any action or proceeding be brought against any Tenant
Indemnified Party by reason of any such claim, Landlord, upon notice from Tenant
or such Tenant Indemnified Party (if other than Tenant), shall cause such action
or proceeding to be defended at Landlord's expense by counsel reasonably
acceptable to Tenant.
ARTICLE 16
INSURANCE
16.01. (a) Tenant shall, at its sole cost and expense, obtain and
maintain in full force and effect during the Term of this Lease, including any
renewal thereof, comprehensive general liability insurance protecting against
personal injury and property damage. Any basic policy and any umbrella policy
evidencing Tenant's liability insurance shall be written:
(i) in an aggregate amount of not less than $5,000,000 combined
single limit per occurrence;
-11-
<PAGE>
(ii) with contractual liability coverage for Tenant's
liability (including indemnifications) under this Lease;
(iii) with an endorsement naming Landlord and, if required,
Landlord's agents, all Superior Mortgagees as additional insured; and
(iv) with an endorsement naming Tenant's employees as
insureds.
(b) Landlord shall, at its sole cost and expense, obtain and
maintain in full force and effect during the Term of this Lease, including any
renewal thereof, property insurance protecting against fire and other casualty
covering all of the Leased Property. Any policy evidencing Landlord's property
insurance shall be written with endorsements for extended coverage, vandalism
and malicious mischief and insuring full replacement value.
16.02. Tenant's liability insurance and Landlord's property insurance
shall be written by insurers of recognized financial standing which are
authorized to do an insurance business in the State of Indiana. Such insurance
may be evidenced by blanket insurance policies of Tenant or Landlord, as the
case may be, provided property insurance policies shall specifically allocate to
the Leased Property amounts of insurance adequate to meet the requirements of
Section 16.01(b) above. Tenant may not self-insure without Landlord's prior
written consent. Landlord or Tenant, as the case may be, shall cause to be
included in each policy a provision to the effect that the insurance evidenced
thereby shall be noncancellable except upon at least 60 days' prior written
notice to Landlord or Tenant, as the case may be. Tenant's liability insurance
shall not provide for deductibles in excess of $100,000. Landlord's property
insurance shall not provide for deductibles in excess of $500,000.
16.03. Landlord and Tenant each hereby releases and waives all right of
recovery against the other, and its respective agents, employees, partners,
officers, directors, shareholders and anyone claiming through or under each of
them by way of subrogation or otherwise for any loss or damage caused by fire or
casualty, whether or not such fire or casualty shall have been caused by the
fault or negligence of the other party. Landlord and Tenant shall each secure
an appropriate clause in, or an endorsement upon, each fire and extended
coverage policy obtained by it covering the Building, the Leased Property or the
Fixtures or the Special Tenant Improvements, as applicable, located therein
pursuant to which their respective insurance companies waive subrogation to the
full extent of such party's release of the other pursuant to the immediately
preceding sentence. If such waiver of subrogation shall be procurable only by
payment of an additional premium, the party in whose favor such waiver of
subrogation is obtained shall bear the cost thereof.
16.04. Tenant shall not do or permit to be done any act or thing in or
upon the Land or in the Building which will invalidate or be in conflict with
the terms of any insurance policies covering the Building and the fixtures and
property therein. Tenant shall comply with all rules, orders, regulations or
requirements of the any organization of fire underwriters or any other similar
body having jurisdiction, and shall not do or permit anything to be done in or
upon the Land or the Building or bring or keep anything therein or use the
Leased Property in a manner which would increase the rate of insurance upon the
Leased Property over the rate in effect at the commencement of the Term of
-12-
<PAGE>
this Lease or which would result in the cancellation of any policy of such
insurance or the assertion of any defense by the insurer to any claim under any
policy of insurance maintained by or for the benefit of Landlord.
ARTICLE 17
DAMAGE BY FIRE OR OTHER CAUSE
17.01. If the Leased Property shall be damaged by fire or other cause,
Tenant shall promptly notify Landlord thereof. If the damage is of such an
extent as to interfere materially with Tenant's ability to conduct its
operations at the Building, Landlord shall, at Tenant's option as determined by
Tenant by written notice to Landlord given not more than 60 days following such
fire or other casualty, either (a) repair and restore any damaged portions of
the Leased Property to a condition suitable for Tenant's use, as promptly as
reasonably practicable, to the extent of and subject to receipt of insurance
proceeds from Landlord's insurer (plus an amount equal to the amount of any
applicable deductible) sufficient to pay the cost of such repair and
restoration, it being agreed that Landlord's obligation to so repair and restore
is expressly conditioned upon the receipt and sufficiency of such insurance
proceeds (plus an amount equal to any applicable deductible) and to the extent
such insurance proceeds are unavailable or insufficient, Tenant shall be solely
responsible for the cost (or the balance of the cost, as the case may be) to so
repair and restore, or (b) terminate this Lease by written notice to Tenant sent
not later than 60 days following such fire or other casualty, in which event the
Term shall expire upon the thirtieth day following such notice and Tenant shall
vacate the Leased Property and surrender the same to Landlord on or before the
date this Lease shall so terminate. Fixed Rent and Additional Rent shall be
abated for the portion of the Leased Property which is not usable by Tenant in
the ordinary conduct of its business from the date of such damage or destruction
until the date on which the Leased Property become usable by Tenant for the
ordinary conduct of its business. There shall be no abatement of Fixed Rent or
Additional Rent for any period of time for that portion of the Leased Property
which Tenant continues to occupy or has reoccupied. If there shall be any delay
in the process of restoration and repair due to any act or omission on the part
of Tenant, Fixed Rent and Additional Rent shall commence on the date the Leased
Property would have otherwise been completed but for such delay, as shall be
determined by Landlord in its judgment reasonably exercised. No penalty or
damage shall accrue for delays which may arise by reason of adjustment of
insurance on the part of Landlord, or for delays on account of Force Majeure.
Upon termination of this Lease in accordance with this Section 17.01, Tenant's
liability for rent shall cease, subject, however, to any claim by Landlord for
Fixed Rent and/or Additional Rent accruing on or before such date.
17.02. No damage, compensation or claims shall be payable by Landlord
for inconvenience, loss of business or annoyance to Tenant arising from any
damage by fire or other casualty or from any repair or restoration of any
portion of the Leased Property or of the Building but Landlord shall use
reasonable efforts to effect promptly any such repairs as may be undertaken by
Landlord pursuant to this Lease.
-13-
<PAGE>
17.03. Notwithstanding the provisions of Section 17.01, if, by reason of
some action or inaction on the part of Tenant or any of its employees, agents,
licensees or contractors, Landlord, or any Superior Mortgagee shall be unable to
collect all of the insurance proceeds (including rent insurance proceeds)
applicable to damage or destruction of the Leased Property by fire or other
casualty, then, without prejudice to any other remedy which may be available
against Tenant, the abatement of rent provided for in said Section 17.01 shall
not be effective to the extent of the uncollected insurance proceeds.
ARTICLE 18
CONDEMNATION
18.01. In the event that the whole or any portion of the Leased Property
the loss of which would materially interfere with Tenant's customary operations
at the Leased Property shall be condemned or taken in any manner for any public
or quasi-public use, this Lease and the Term and estate hereby granted shall
forthwith cease and terminate as of the date of the vesting of title in the
condemning authority. In the event of any such termination, this Lease and the
Term and estate hereby granted shall expire as of the date of such termination
with the same effect as if that were the date hereinbefore set for the
expiration of the Term, and the rent hereunder shall be apportioned as of such
date. In the event that only a part of the Leased Property the loss of which
does not materially interfere with Tenant's customary operations at the Leased
Property shall be so condemned or taken, then this Lease shall be and remain
unaffected by such condemnation or taking, except that, effective as of the date
of the vesting of title in the condemning authority, the Fixed Rent and
Additional Rent hereunder for such part shall be equitably abated and this Lease
shall continue as to such part not so taken.
18.02. In the event of any condemnation or taking hereinabove mentioned
of all or a part of the Leased Property, Landlord shall be entitled to receive
the entire award in the condemnation proceeding, including any award made for
the value of this Lease and for any unexpired portion of the Term, and Tenant
hereby expressly assigns to Landlord any and all right, title and interest of
Tenant now or hereafter arising in or to any such award or any part thereof and
Tenant shall not be entitled to receive any part of such award. Tenant shall
have no claim for the value of any unexpired term of this Lease. Tenant may
separately prosecute any claim it may have for Tenant's trade fixtures and its
moving expenses (if they are compensable) provided such prosecution does not
interfere with or reduce Landlord's claim.
ARTICLE 19
BANKRUPTCY
19.01. If a trustee in bankruptcy shall assume this Lease and shall
propose to assign the same pursuant to the provisions of the Bankruptcy Code,
11 U.S.C. 101 et seq. (the "BANKRUPTCY CODE") to any person or entity who shall
have made a bona fide offer to accept an assignment of this Lease on terms
acceptable to such trustee notice of such proposed assignment, setting forth
(i) the name and
-14-
<PAGE>
address of such person, (ii) all of the terms and conditions of such offer, and
(iii) the adequate assurance to be provided Landlord to assure such person's
future performance under this Lease, including, without limitation, the
assurance referred to in section 365(b)(3) of the Bankruptcy Code, shall be
given to Landlord by such trustee no later than twenty (20) days after receipt
by such trustee, but in any event no later than ten (10) days prior to the date
that such trustee shall make application to a court of competent jurisdiction
for authority and approval to enter into such assignment and assumption, and
Landlord shall thereupon have the prior right and option, to be exercised by
notice to Tenant given at any time prior to the effective date of such proposed
assignment, to accept an assignment of this Lease upon the same terms and
conditions and for the same consideration, if any, as the bona fide offer made
by such person, less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this Lease.
19.02. Any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall, upon demand,
execute and deliver to Landlord an instrument in recordable form confirming such
assumption.
ARTICLE 20
DEFAULT
20.01. (a) If (i) Tenant shall fail to pay Fixed Rent or Additional Rent
when due and such default continues for a period of five (5) days after written
notice thereof from Landlord; or (ii) Tenant shall default in fulfilling any of
the covenants of this Lease, other than the covenants for the payment of Fixed
Rent and Additional Rent, and such default continues for a period of twenty (20)
days after written notice from Landlord to Tenant specifying the nature of said
default, except that if the said default shall be of such a nature that the same
cannot, with reasonable diligence, be completely cured or remedied within said
twenty (20) days then Tenant shall not be deemed in default if Tenant diligently
commences curing such default within such twenty (20) day period, and shall
thereafter with diligence and in good faith proceed to remedy or cure such
default, but, in any event, Tenant shall complete such cure prior to the date on
which Landlord (A) would be subject to prosecution for a crime or (B) would be
in default of any Superior Mortgage or Superior Lease or (iii) any event shall
occur or any contingency shall arise whereby this Lease or the estate hereby
granted or the unexpired balance of the Term would, by operation of law or
otherwise, devolve upon or pass to any person other than Tenant, then in any of
the events described in the foregoing clauses (i), (ii) or (iii), Landlord may
serve a written three (3) day notice of cancellation of this Lease upon Tenant,
and upon the expiration of said three (3) days, this Lease and the Term
hereunder shall end and expire as fully and completely as if the date of
expiration of such three (3) day period were the Expiration Date of this Lease,
and Tenant shall then quit and surrender the Leased Property to Landlord but
Tenant shall remain liable as hereinafter provided.
(b) In the event of a breach or threatened breach by Tenant of
any of the covenants or provisions hereof, Landlord shall also have the right of
injunction.
-15-
<PAGE>
20.02. If the three (3) day notice provided for in Section 20.01 shall
have been given:
(a) Landlord and Landlord's agents may, without notice, re-enter
the Leased Property or any part thereof, and by summary proceedings or
otherwise, dispossess Tenant or the legal representative of Tenant or other
occupant of the Leased Property and remove their effects without liability for
damage thereto and hold the Leased Property as if this Lease had not been made
but Tenant shall remain liable hereunder as hereinafter provided; and
(b) Landlord may, at its option, relet the whole or any part or
parts of the Leased Property from time to time, either in the name of Landlord
or otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Expiration Date, at such rental or rentals and upon such other
conditions, which may include concessions and free rent periods, as Landlord in
its sole discretion may determine. Landlord shall have no obligation to relet
the Leased Property or any part thereof and shall in no event be liable for
refusal or failure to relet the Leased Property or any part thereof, or, in the
event of any such reletting, for refusal or failure to collect any rent upon any
such reletting, and no such refusal or failure shall operate to relieve Tenant
of any liability under this Lease or otherwise to affect any such liability.
Landlord, at Landlord's option, may make such repairs, improvements,
alterations, additions, decorations and other physical changes in and to the
Leased Property as Landlord, in its sole discretion, considers advisable or
necessary in connection with any such reletting or proposed reletting, without
relieving Tenant of any liability under this Lease or otherwise affecting any
such liability.
20.03. If this Lease shall terminate or if Landlord shall re-enter the
Leased Property as provided in this Article:
(a) Tenant shall pay to Landlord all rent to the date upon which
this Lease shall have been terminated or to the date of re-entry upon the Leased
Property by Landlord, as the case may be;
(b) Landlord shall be entitled to retain all monies, if any,
paid by Tenant to Landlord, whether as advance rent, security or otherwise, but
such monies shall be credited by Landlord against any rent due at the time of
such termination or re-entry or, at Landlord's option, against any damages
payable by Tenant;
(c) Tenant shall be liable for and shall pay to Landlord, as
damages, any deficiency between the rent payable hereunder for the period which
otherwise would have constituted the unexpired portion of the Term (conclusively
presuming the Additional Rent to be the same as was payable for the year
immediately preceding such termination or re-entry) and the net amount, if any,
of rents collected under any reletting effected pursuant to the provisions of
Section 20.02(b) for any part of such period (first deducting from the rents
collected under any such reletting all of Landlord's expenses in connection with
the termination of this Lease or Landlord's re-entry upon the Leased Property
and in connection with such reletting including all repossession costs,
brokerage commissions, legal expenses, alteration costs and other expenses of
preparing the Leased Property for such reletting);
-16-
<PAGE>
(d) Any deficiency in accordance with subsection (c) above shall be
paid in monthly installments by Tenant on the days specified in this Lease for
the payment of installments of Fixed Rent. Landlord shall be entitled to
recover from Tenant each monthly deficiency as the same shall arise and no suit
to collect the amount of the deficiency for any month shall prejudice Landlord's
right to collect the deficiency for any prior or subsequent month by a similar
proceeding. Alternatively, suit or suits for the recovery of such deficiencies
may be brought by Landlord from time to time at its election;
(e) Whether or not Landlord shall have collected any monthly
deficiencies as aforesaid, Landlord shall be entitled to recover from Tenant,
and Tenant shall pay Landlord, on demand, as and for liquidated and agreed final
damages and not as a penalty, a sum equal to the amount by which the Fixed Rent
and Additional Rent payable hereunder for the period to the Expiration Date from
the latest of the date of termination of this Lease, the date of re-entry or the
date through which monthly deficiencies shall have been paid in full
(conclusively presuming the Additional Rent for each year thereof to be the same
as that which was payable for the year immediately preceding such termination or
re-entry) exceeds the then fair and reasonable rental value of the Leased
Property for the same period, both discounted at the rate of 7% per annum to
present worth.
(f) In no event shall Tenant be entitled (i) to receive any excess of
any rent under subdivision (c) over the sums payable by Tenant to Landlord
hereunder or (ii) in any suit for the collection of damages pursuant to this
Section 20.03, to a credit in respect of any rent from a reletting except to the
extent that such rent is actually received by Landlord prior to the commencement
of such suit. If the Leased Property or any part thereof should be relet in
combination with other space, then proper apportionment on a square foot area
basis shall be made of the rent received from such reletting and the expenses of
reletting.
(g) If this Lease shall terminate or if the Landlord shall re-enter
the Leased Property:
(1) The Leased Property shall be, upon such earlier termination
or re-entry, in the same condition as that in which Tenant has agreed to
surrender them to Landlord on the Expiration Date;
(2) Tenant, on or before the occurrence of any default
hereunder, shall have performed every covenant contained in this Lease for the
making of any improvement or for repairing any part of the Leased Property and
(3) For the breach of either subdivision (a) or (b) of this
subsection, or both, Landlord shall be entitled immediately, without notice or
other action by Landlord, to recover, and Tenant shall pay, as and for agreed
damages therefor, the then cost of performing such covenants, plus interest
thereon at the Default Rate for the period from the date of the occurrence of
any default to the date of payment.
-17-
<PAGE>
(4) Each and every covenant contained in this
subsection (g) shall be deemed separate and independent and not dependent on any
other term of this Lease for the use and occupation of the Leased Property by
Tenant, and the performance of any such term shall not be considered to be rent
or other payment for the use of said Leased Property. It is understood that the
consideration for the covenants in this subsection (g) is the making of this
Lease, and the damages for failure to perform the same shall be in addition to
and separate and independent of the damages accruing by reason of default in
observing any other term of this Lease.
20.04. The remedies and rights provided for in this Lease are
cumulative. Mention in this Lease of any particular remedy shall not preclude
Landlord from pursuing any other remedy at law or equity.
20.05. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws.
20.06. The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease,
shall not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt or acceptance by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. No
provision of this Lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord. No endorsement or statement on
any check or any letter accompanying any check or payment as rent shall be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy in this Lease.
20.07. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease. Tenant shall
not interpose any counterclaim in any summary proceeding commenced by Landlord.
ARTICLE 21
QUIET ENJOYMENT
Landlord covenants and agrees that, as long as Tenant shall comply with all
obligations on its part to be performed hereunder, Tenant may peaceably and
quietly enjoy the Leased Property, subject to the terms and conditions of this
Lease.
ARTICLE 22
SURRENDER OF PREMISES
-18-
<PAGE>
22.01. Upon the expiration or sooner termination of this Lease or upon
re-entry by Landlord upon the Leased Property, Tenant shall at Tenant's expense
quit and surrender the Leased Property and deliver the same to Landlord in good
order, condition and repair, ordinary wear and tear and damage by fire or other
casualty excepted. Tenant shall pay to Landlord any insurance proceeds received
by Tenant attributable to damage to the Leased Property to the extent such
proceeds have not been used to restore such items in accordance with this Lease.
22.02. Any items which shall remain in the Leased Property after the
Expiration Date, or after an earlier termination date, may, at the option of
Landlord, be deemed to have been abandoned, and in such case such items may be
retained by Landlord as its property or disposed of by Landlord, without
accountability, in such manner as Landlord shall determine at Tenant's expense.
Tenant's obligation to reimburse Landlord for its costs so incurred shall
survive expiration or termination of this Lease.
22.03. If Tenant remains in possession of the Leased Property after the
termination of this Lease without the execution of a new lease, the parties
recognize and agree that the damage to Landlord will be substantial, will exceed
the amount of monthly Fixed Rent and Additional Rent theretofore payable
hereunder and will be impossible to measure accurately. Tenant, therefore, at
the option of Landlord, shall be deemed to be occupying the Leased Property as a
tenant from month to month, at a monthly rental equal to two and one-half times
the Fixed Rent and Additional Rent payable during the last month of the Term,
subject to all of the other terms of this Lease insofar as the same are
applicable to a month-to-month tenancy. Further, Tenant hereby indemnifies
Landlord against liability resulting from delay by Tenant in so surrendering the
Leased Property, including (a) any claims made by any purchaser or prospective
purchaser, succeeding tenant or prospective tenant founded upon such delay,
(b) any payment or rent concession which Landlord may be required to make to any
purchaser or prospective purchaser, succeeding or prospective tenant for all or
any part of the Premises in order to induce such purchaser or tenant not to
terminate its purchase agreement or lease, as the case may be, or its
negotiation therefor by reason of Tenant's delay in so surrendering the Leased
Property and (c) any loss suffered if a purchaser or prospective purchaser or
succeeding or prospective tenant shall terminate its purchase agreement or
lease, as the case may be, or not proceed to close on a purchase or execute and
deliver its purchase agreement or lease, as the case may be, by reason of
Tenant's delay in so surrendering the Leased Property. Nothing herein contained
shall be deemed to permit Tenant to remain in possession of the Leased Property
after the expiration or sooner termination of the term of this Lease.
22.04. No agreement to accept a surrender of all or any part of the
Leased Property or this Lease shall be valid unless in writing and signed by
Landlord. No delivery of keys shall operate as a termination of this Lease or a
surrender of the Leased Property or this Lease.
-19-
<PAGE>
ARTICLE 23
NOTICES
All notices and communications permitted or required to be given pursuant
to this Lease shall given in the manner, and to the addresses, provided in the
Asset Purchase Agreement dated as of January 21, 1996 (the "AGREEMENT"), in
connection with which this Lease is being executed.
ARTICLE 24
MISCELLANEOUS
24.01. This Lease with its annexed Exhibits and the Agreement contain
the entire agreement between Landlord and Tenant, all prior negotiations and
agreements are merged into this Lease and any agreement hereafter made between
Landlord and Tenant shall be ineffective to change, modify, waive, release,
discharge or terminate or effect an abandonment of this Lease, in whole or in
part, unless such agreement shall be in writing and executed by the party to be
charged.
24.02. If any term, covenant, condition or provision of this Lease shall
be invalid or unenforceable to any extent, the remaining terms, covenants,
conditions and provisions of this Lease shall not be affected thereby. This
lease shall be construed without regard to any presumption or other rule
requiring construction against the party causing this lease to be drafted. Each
covenant, agreement, obligation or other provision of this lease on Tenant's
part to be performed, shall be deemed and construed as a separate and
independent covenant of Tenant, not dependent on any other provision of this
Lease.
24.03. Nothing contained in this Lease shall be deemed to confer upon
any person other than the parties hereto and their respective successors and
assigns (to the extent assignment is permitted pursuant to Article 9 hereof) any
right or benefit, including any right to insist upon, or to enforce against
Landlord or Tenant, the performance of such party's obligations hereunder.
24.04. Whenever this Lease requires an approval or consent by either
Landlord or Tenant, unless another standard is expressly stated, such approval
or consent and any conditions imposed thereby shall be reasonable and shall not
be unreasonably withheld or delayed and, in exercising any right or remedy
hereunder, each party shall at all times act reasonably and in good faith. Any
expenditure by a party permitted or required under this Lease for which such
party is entitled to demand reimbursement shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred and shall
be substantiated, upon request, by documentary evidence.
24.05. The submission by Landlord to Tenant of this Lease in draft form
shall be deemed submission solely for Tenant's consideration and not for
acceptance and execution. Such submission shall have no binding force and
effect, shall not constitute an option for the leasing of the Leased Property,
and shall not confer any rights or impose any obligations upon either party.
The submission by Landlord of this Lease for execution by Tenant and the actual
execution and delivery thereof by Tenant to Landlord shall similarly have no
binding force and effect on Landlord unless and until Landlord shall have
executed this Lease and a counterpart thereof shall have been delivered to
Tenant and all consents required pursuant to any Superior Mortgage or Superior
Lease have been received.
-20-
<PAGE>
24.06. This Lease shall bind and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
24.07. Tenant shall not record or file this Lease or any memorandum or
other notation thereof in any public records.
24.08. Tenant shall have access to driveways, parking lots, sidewalks
and similar surface improvements on Landlord's immediately adjoining property
for parking and ingress and egress to and from the Leased Property, provided,
that Landlord reserves the right to limit such access to the extent Landlord
reasonably determines the same poses security concerns, provided further, that
there shall be no material interference with Tenant's reasonable access to and
use of the Leased Premises for the purposes described in Section 5.01.
-21-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease on the date first above written.
STATE ROAD PROPERTIES L.P.
By: HR LEASING CORP., its General Partner
By: /s/ James L. Ziemer
--------------------------------------
Name: James L. Ziemer
Title: VP
MONACO COACH CORPORATION
By: /s/ John W. Nepute
--------------------------------------
Name: John W. Nepute
Title: VP Finance
-22-
<PAGE>
PHYSICAL ADDRESS
5 S.R. 19
Wakarusa, Indiana 46573
[Graphic: drawing of building 5]
-23-
<PAGE>
EXHIBIT B
---------
LEGAL DESCRIPTION OF LAND
-------------------------
Deliberately Omitted
-24-
<PAGE>
EXHIBIT C
---------
PERMITTED USES
--------------
The design, manufacture, marketing, wholesale sale and factory servicing of
recreational vehicles and related parts and accessories.
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF LEASE
-------------------------------------
THIS FIRST AMENDMENT TO AGREEMENT OF LEASE is made and entered into
effective as of March 4, 1996 by and between State Road Properties L.P., a
Delaware limited partnership ("Landlord") and Monaco Coach Corporation, a
Delaware corporation ("Tenant").
WITNESSETH:
A. Landlord and Tenant are parties to that certain Agreement of Lease
dated March 4, 1996 (the "Lease") regarding certain land and improvements
described in the Lease as located at 5 State Road 19, Wakarusa, Indiana 46573
and commonly known as Plant 3 (the "Leased Property"). Capitalized terms used
but not defined herein shall have the meanings given such terms in the Lease.
B. Landlord and Tenant have agreed to amend the Lease so as to correct a
mutual mistake concerning rent as set forth in the Lease and so as to reflect
the agreed upon rent as actually paid from Tenant to Landlord.
NOW, THEREFORE, Landlord and Tenant hereby agrees as follows:
25 Section 3.01(a) of the Lease is hereby deleted in its entirety and
replaced by the following:
"3.01(a) Tenant covenants and agrees to pay to Landlord a
fixed minimum rent ("FIXED RENT") during the Term of this
Lease, equal to $70,482.96 per annum (pro rated in the case
of partial years), payable in equal monthly installments of
$5,873.58."
26 Except as specifically amended hereby, all of the terms of the Lease
are and shall remain in full force and effect and hereby ratified and confirmed.
The capitalized term "Lease" as used in the Lease shall be deemed to mean and
refer to the Lease, as amended by this First Amendment to Agreement of Lease.
-2-
<PAGE>
IN WITNESS WHEREOF, this First Amendment to Agreement of Lease has been
duly executed by Landlord and Tenant as of the date first above written.
STATE ROAD PROPERTIES, L.P.
By: HR LEASING CORP.,
its General Partner
By: /s/ James Ziemer
-------------------------------
Title: VICE PRESIDENT
----------------------------
MONACO COACH CORPORATION
By: /s/ Kay Toolson
-------------------------------
Title: CHIEF EXECUTIVE OFFICER
----------------------------
-3-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A G R E E M E N T O F L E A S E
STATE ROAD PROPERTIES L.P.,
Landlord
MONACO COACH CORPORATION,
Tenant
March 4, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.14
[TOWABLES]
AGREEMENT OF LEASE, dated this 4th day of March, 1996, between STATE ROAD
PROPERTIES L.P., a Delaware Limited Partnership having an office at 3700 West
Juneau Road, Milwaukee, Wisconsin, 53208 ("LANDLORD") and MONACO COACH
CORPORATION, a Delaware corporation having an office at 1809 West Hively, P.O.
Box 4313, Elkhart, Indiana 46517 ("TENANT").
ARTICLE 1
PREMISES; TERM
1.01. Subject to and in accordance with all of the covenants and
conditions of this Lease, Landlord hereby leases to Tenant and Tenant hereby
hires from Landlord the improvements (together with the heating, ventilating and
air conditioning systems located therein, the "BUILDING") more particularly
described on Exhibit A attached hereto together with the land on which the
Building is located, more particularly described on Exhibit B attached hereto
(the "LAND"; the Land and the Building, collectively, the "LEASED PROPERTY").
1.02. The Leased Property shall be leased for a term (together with any
Extension Term, the "TERM") commencing on March 4, 1996 (the "COMMENCEMENT
DATE") and expiring on the date (the "EXPIRATION DATE") immediately preceding
the first anniversary of the Commencement Date, unless the Term shall terminate
sooner pursuant to any of the terms of this Lease or pursuant to law and subject
to the following provisions of this Section 1.02. Tenant shall have two
successive options to extend the Expiration Date for one year (each such one
year extension period, an "EXTENSION TERM"). If the first such option is
exercised as provided herein, the Expiration Date shall be the date immediately
preceding the second anniversary of the Commencement Date. If the first such
option and the second such option are exercised as provided herein, the
Expiration Date shall be the date immediately preceding the third anniversary of
the Commencement Date. Any such extension option shall be exercised by written
notice to Landlord no later than 120 days prior to the Expiration Date as in
effect prior to the exercise of such option. If the first such option is not
exercised, Tenant shall have no rights with respect to the second such option.
During the last six months of any Extension Term, Tenant shall have the right to
terminate this Lease on thirty days' written notice to Landlord. Such
termination shall be effective as of the first day of the calendar month
beginning at least thirty days after the sending of such notice. On such
effective termination date, the Term shall end with the same effect as if such
effective termination date were the Expiration Date originally set forth herein.
ARTICLE 2
CONDITION OF LEASED PROPERTY
Tenant has inspected the Leased Property and is thoroughly acquainted with
its condition. As a condition of Landlord's agreement hereunder, Tenant agrees
to take possession of and accept each
<PAGE>
portion of the Leased Property in its "as is" condition as at the date of this
Lease. Landlord shall have no obligation to do any work or perform any services
with respect to the Leased Property except as specifically set forth in this
Lease.
ARTICLE 3
RENT
3.01.(a) Tenant covenants and agrees to pay to Landlord a fixed minimum
rent ("FIXED RENT") during the Term of this Lease, equal to $49,361.40 per annum
(pro rated in the case of partial years), payable in equal monthly installments
of $4,113.45.
(b) Monthly installments of Fixed Rent shall be payable without
notice or demand in advance on the first day of each month during the Term. If
the date on which Fixed Rent first becomes payable hereunder occurs on a day
other than the first day of a calendar month, Fixed Rent for such calendar month
shall be pro-rated on a PER DIEM basis.
3.02. All adjustments of rent, costs, charges, expenses and
reimbursements and all other sums of money which Tenant is obligated to pay to
Landlord pursuant to this Lease shall be deemed additional rent ("ADDITIONAL
RENT") which Tenant covenants to pay when due. Except as otherwise specified in
this Lease, all Additional Rent shall be due from and payable by Tenant on the
twentieth (20th) day after Landlord has rendered its bill therefor. Landlord
shall have all the rights and remedies with respect to nonpayment of Additional
Rent as are provided herein for nonpayment of Fixed Rent.
3.03. All Fixed Rent and Additional Rent shall be payable by Tenant to
Landlord in lawful money of the United States of America at the office of
Landlord or at such other place as Landlord may designate from time to time
without offset, abatement counterclaim or deduction in lawful money of the
United States of America. All Fixed Rent and Additional Rent shall be paid by
either (i) a good and sufficient check drawn on a bank which is a member of a
nationally recognized clearing house association or (ii) a wire transfer of
immediately available funds to Landlord's account.
3.04. If any installment of Fixed Rent or any Additional Rent is not
paid when due Tenant shall also pay interest thereon (which interest shall be
immediately due and payable and shall constitute Additional Rent) at a rate (the
"DEFAULT RATE") equal to ten percent (10%) per annum, computed from the date
such payment was first due through the date paid. Notwithstanding the
imposition of such interest, Tenant shall be in default under this Lease if any
or all payments required to be made by Tenant are not made at the time herein
stipulated, and neither the demand for, nor collection by Landlord of, such
interest shall be construed as a curing of such default on the part of Tenant.
-2-
<PAGE>
ARTICLE 4
TAXES
4.01. Landlord shall pay all taxes, assessments and fees levied upon
the Leased Property or the rents collected therefrom, by any Governmental
Authority based upon the ownership, leasing, renting or operation of the Leased
Property, including all costs and expenses of protesting any such taxes,
assessments or fees ("TAXES").
ARTICLE 5
USE
5.01. Tenant shall use and occupy the Leased Property, for the purposes
shown on Exhibit C and for no other purpose and only as permitted by any
applicable law, rule or regulation or determination (a "LEGAL REQUIREMENT") of
the federal government, any state or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government (any of the foregoing, a "GOVERNMENTAL
AUTHORITY").
5.02. Tenant shall not use, occupy or permit the Leased Property (or
any part thereof) to be used in any manner, or permit anything to be brought
into or kept within the Leased Property, which, in Landlord's judgment, would
(i) violate the Certificate of Occupancy issued for the Building, (ii) violate
the provisions of any Superior Lease or Superior Mortgage, (iii) cause injury or
damage to the Leased Property or any part thereof, (iv) interfere with or impair
the Building's systems and equipment or the proper and economical maintenance
and operation of the Leased Property, (v) change the character of the Building,
(vi) violate any Legal Requirement or any requirements of any insurance policy
covering or applicable to all or any part of the Leased Property or the use
thereof, all requirements of the issuer of any such policy and all orders,
rules, regulations, recommendations and other requirements of any organization
of fire underwriters or the Insurance Service Office or any other body
exercising the same or similar functions and having jurisdiction or cognizance
of all or any part of the Leased Property (collectively, "INSURANCE
REQUIREMENTS"), (vii) violate any applicable Environmental Law or (viii) or
cause the presence of any Hazardous Material on or under the Land or within the
Building in violation of any applicable Environmental Law.
5.03. If any license or permit from any Governmental Authority shall be
required for the proper and lawful occupancy of the Leased Property and if
failure to secure such license or permit would in any way adversely affect
Landlord or the Leased Property, then Tenant, at its sole expense, shall procure
and deliver a copy of such license or permit to Landlord and thereafter maintain
such license or permit. Tenant shall at all times comply with the provisions of
each such license and permit.
-3-
<PAGE>
ARTICLE 6
MAINTENANCE AND REPAIR
6.01. Tenant shall be solely responsible for the cost and performance
of all maintenance, service, repair and replacement of any portion of the
Building, it being understood and agreed that Landlord shall have no general
duty (either to Tenant or to third parties) to keep the Leased Property in good
order and repair and that Landlord shall have no obligation to perform or pay
for the cost of any such maintenance, service, repair or replacement except to
the extent expressly provided for in this Article 6. As long as this Lease is in
full force and effect Landlord shall promptly upon request by Tenant reimburse
Tenant for the cost of any repair or replacement of any heating, ventilating and
air-conditioning system or structural or other similar portion of the Building
or Building system that becomes unusable such that the operation of Tenant's
business for the purposes described in Section 5.01 shall be materially
impaired; PROVIDED, that written notice, given reasonably in advance considering
the nature of the repair, shall have been provided to Landlord, which notice
shall set forth, in reasonable detail, the nature and scope of the repair and
the estimated cost thereof and PROVIDED further, that Landlord will be obligated
to reimburse Tenant only to the extent reasonably necessary such that Tenant's
business for the purposes described in Section 5.01 shall no longer be so
materially impaired. Tenant agrees and acknowledges that Landlord's
reimbursement obligation as set forth above is being undertaken by Landlord as
an accommodation to Tenant due to the short-term nature of this Lease. Tenant
agrees and acknowledges that it is Tenant's duty and obligation to inspect the
Leased Property from time to time, to conduct day-to-day maintenance of the
Leased Property and to perform any repairs and replacements that are required
either for Tenant's operations or for the health and safety of persons present
at the Leased Property.
6.03. Except as expressly provided above in this Article 6, Landlord
shall have no obligations to repair or maintain the Leased Property or to
provide other services to Tenant or to pay for any of the costs thereof. Tenant
acknowledges that, except as otherwise set forth herein, Tenant is solely
responsible for cleaning, security, maintenance and operation of the Building's
systems and the costs thereof.
ARTICLE 7
UTILITY SERVICE
Tenant shall obtain and pay for the supply of electric current, water
supply, sewerage service and any other utility services to the Leased Property
by direct application to and arrangement with the respective public utility
companies servicing the Building. Tenant shall be responsible for direct
payment for all such utilities and shall abide by all rules and regulations
imposed by any such utility company.
-4-
<PAGE>
ARTICLE 8
SUBORDINATION; ESTOPPEL CERTIFICATE
8.01. This Lease and all rights of Tenant hereunder are subject and
subordinate to all mortgages which may now or hereafter affect Landlord's
interest in the Leased Property or any part thereof (all such mortgages,
collectively, the "SUPERIOR MORTGAGES"), and to all renewals, modifications,
consolidations, replacements and extensions of Superior Mortgages. This Section
shall be self-operative and no further instrument of subordination shall be
required .In confirmation of such subordination, Tenant agrees to promptly
execute and deliver at Tenant's sole cost and expense any instrument (in
recordable form, if requested) that Landlord or the holder of any Superior
Mortgage (a "SUPERIOR MORTGAGEE") may request to evidence such subordination.
8.02. If the interests of Landlord under this Lease are transferred by
reason of, or assigned in lieu of, foreclosure or other proceedings for
enforcement of any such Superior Mortgage then Tenant shall, at the option of
such purchaser or assignee, as the case may be, (x) attorn to such party and
perform for its benefit all the terms, covenants and conditions of this Lease on
Tenant's part to be performed with the same force and effect as if such party
were the landlord originally named in this Lease, or (y) enter into a new lease
with such party, as landlord, for the remaining Term and otherwise on the same
terms and conditions of this Lease except that such successor landlord shall not
be (i) liable for any previous act, omission or negligence of Landlord under
this Lease; (ii) subject to any counterclaim, defense or offset which
theretofore shall have accrued to Tenant against Landlord; (iii) bound by any
previous modification or amendment of this Lease or by any previous prepayment
of more than one month's rent, unless such modification, amendment or prepayment
shall have been approved in writing by the Superior Mortgagee through or by
reason of which such successor landlord shall have succeeded to the rights of
Landlord under this Lease; (iv) obligated to repair the Leased Property or any
part thereof in the event of total or substantial damage, beyond such repair as
can reasonably be accomplished from the net proceeds of insurance actually made
available to such successor landlord; (v) obligated to repair the Leased
Property or any part thereof in the event of partial condemnation, beyond such
repair as can reasonably be accomplished from the net proceeds of any award
actually made available to such successor landlord, as consequential damages
allocable to the part of the Leased Property not taken; nor (vi) obligated to
perform any work to prepare or finish the Leased Property for occupancy by
Tenant. Nothing contained in this Section shall be construed to impair any
right otherwise exercisable by any such owner, holder or lessee. Landlord shall
use reasonable efforts to obtain from the holder of any Superior Mortgage and
the landlord under any Superior Lease a written recognition agreement providing
that in the event of the foreclosure of such Superior Mortgage or termination of
such Superior Lease, so long as no default by Tenant shall have occurred and be
continuing hereunder, Tenant's rights of occupancy shall not be disturbed and
Tenant shall receive all of its rights provided for under this Lease.
8.03. If any act or omission by Landlord would give Tenant the right,
immediately or after lapse of time, to cancel or terminate this Lease or to
claim a partial or total eviction, abatement of rent, setoff or counterclaim,
Tenant will not exercise any such right until (i) it has given written notice of
such act or omission to each Superior Mortgagee whose name and address shall
have previously been furnished to Tenant, by delivering notice of such act or
omission addressed to each such party at
-5-
<PAGE>
its last address so furnished, (ii) Landlord shall have failed to cure the same
within the time limits set forth in this Lease, and (iii) following the giving
of such notice, no Superior Mortgagee shall have remedied such act or omission
(x) in the case of an act or omission which is capable of being remedied without
possession of the Building, within the cure period available to Landlord under
this Lease plus sixty (60) days and (y) in the case of any act or omission which
is incapable of being remedied without possession of the Building, within sixty
(60) days following the date on which possession is obtained, PROVIDED a
Superior Mortgagee has promptly commenced action to obtain possession and shall
diligently pursue such action to completion and PROVIDED FURTHER that such
Superior Mortgagee shall, with reasonable diligence, give Tenant notice of its
intention to, and commence and continue to, remedy such act or omission or cause
the same to be remedied.
8.04. If any Superior Mortgagee or prospective Superior Mortgagee shall
request modifications of this Lease as a condition to the provision, continuance
or renewal of any such financing, Tenant will not unreasonably withhold, delay
or defer its consent thereto, provided that such modifications do not materially
adversely increase the obligations of Tenant hereunder or materially diminish
Tenant's rights under this Lease.
8.05. Tenant agrees, at any time and from time to time, upon not less
than fifteen (15) days' prior notice from Landlord to execute, acknowledge and
deliver to Landlord or such other person that Landlord may designate a written
certification stating (a) that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), (b) that Tenant has accepted
possession of the Leased Property, (c) the dates to which the Fixed Rent and
Additional Rent have been paid, (d) whether or not there exists any default on
the part of Landlord under this Lease, and, if so, specifying each such default
and (e) such further information with respect to this Lease or the Leased
Property that Landlord may reasonably request. Landlord agrees, at any time and
from time to time, upon not less than fifteen (15) days' prior notice from
Tenant to execute, acknowledge and deliver to Tenant a written certification
stating (a) that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), (b) the dates to which the Fixed Rent
and Additional Rent have been paid, (c) whether or not there exists any default
on the part of Tenant under this Lease, and, if so, specifying each such default
and (e) such further information with respect to this Lease that Tenant may
reasonably request.
ARTICLE 9
ASSIGNMENT AND SUBLETTING PROHIBITED
9.01. Tenant, its legal representatives and successors in interest,
shall not by operation of law or otherwise, assign (in whole or in part),
mortgage, pledge, encumber or otherwise transfer this Lease or any part hereof
or any interest of Tenant herein or in the Leased Property by reason hereof, or
sublet the Leased Property, without Landlord's prior written consent. No
assignment of this Lease shall be effective unless the assignee shall execute,
acknowledge and deliver to Landlord an agreement, in form satisfactory to
Landlord, whereby the assignee assumes all obligations of Tenant
-6-
<PAGE>
under this Lease, and agrees that the provisions of this Article 9 shall
continue to be binding upon it in respect of all future assignments and deemed
assignments of this Lease. No assignment of this Lease shall release the
assignor from its continuing obligations to Landlord under this Lease and Tenant
and any subsequent assignor shall continue to remain jointly and severally
liable (as primary obligor) for all Tenant's obligations hereunder.
9.02. The consent by Landlord to any assignment or subletting shall not
be a waiver of or constitute a diminution of Landlord's right to withhold its
consent to any other assignment or subletting and shall not be construed to
relieve Tenant from obtaining Landlord's express written consent to any other or
further assignment or subletting.
ARTICLE 10
ENTRY; RIGHT TO CHANGE THE BUILDING
10.01. Landlord and Landlord's agents or designees shall have the right
to enter the Leased Property, during Business Hours upon notice given reasonably
in advance to Tenant, and in case of emergency without notice and at all other
times, without incurring any liability to Tenant therefor, for the following
purposes: (a) to perform any obligations of Landlord or to exercise any right
reserved to Landlord in this Lease, (b) to exhibit the Leased Property and any
parts thereof to any prospective purchaser, or to any present or prospective
mortgagee or ground lessor, or to the authorized representative of any
Governmental Authority or organization of fire underwriters, or, during the last
twelve months of the Term to any prospective tenant of the Leased Property (or
any part thereof), (c) to make or cause to be made such repairs, alterations or
improvements, or to permit electrical or other utility meters to be read, or to
perform such maintenance, including the maintenance of Building equipment, as
Landlord may deem necessary or desirable or as may be required pursuant to any
Legal Requirements or Insurance Requirements, and (d) to take into and store
upon the Leased Property all materials that may be required in connection with
any such repairs, alterations, improvements or maintenance. The taking of
materials into, and storing of such materials at the Leased Property in
accordance with the provisions of this Section 10.01 shall not constitute an
eviction of Tenant in whole or in part and the Fixed Rent and Additional Rent
reserved herein shall not abate while such repairs or alterations are being
made. In connection with any such entry by Landlord and Landlord's agents, all
reasonable security measures of Tenant shall be complied with and all reasonable
efforts shall be made so as to minimize any disruption of Tenant's operations.
ARTICLE 11
COMPLIANCE WITH LAWS
11.01. Tenant shall, at its expense, comply with all Legal Requirements
and Insurance Requirements. Without limiting the generality of the foregoing,
Tenant shall be obligated to reimburse Landlord for the cost of any alteration
of the Leased Property which shall be (a) necessitated by a condition which has
been created by Tenant, (b) attributable to the use or manner of use to which
Tenant puts the Leased Property, (c) required by reason of a breach of Tenant's
obligations hereunder, or (d) occasioned, in whole or in part, by any act,
omission or
-7-
<PAGE>
negligence of Tenant or any person claiming by, through or under Tenant, or any
of their assignees, subtenants, employees, agents, contractors, invitees or
licensees. Tenant shall pay all costs, expenses, fines, penalties and damages
which may be imposed upon Landlord or any Superior Mortgagee by reason of or
arising out of Tenant's failure fully and promptly to comply with the provisions
of this Section.
11.02. Notwithstanding anything to the contrary contained elsewhere in
this Lease and without limiting any other provision of this Lease by
implication, if any Governmental Authority promulgating or enforcing any Legal
Requirements or the Insurance Service Office, organization of fire underwriters
or any other body exercising the same or similar functions and having
jurisdiction or cognizance of all or any part of the Leased Property requires
that any changes, modifications, alterations or additional sprinkler heads or
other equipment be made or supplied in the Building sprinkler system or any
other portion of the Leased Property, Landlord shall make all such changes,
modifications, alterations and additions, the cost thereof shall be shared
equally by Landlord and Tenant, and Tenant shall pay its share of the cost
thereof to Landlord as Additional Rent within 5 Business Days after demand.
11.03. If Tenant receives written notice of any violation of any Legal
Requirement or Insurance Requirement, it shall give prompt notice thereof to
Landlord.
ARTICLE 12
HAZARDOUS MATERIALS
12.01. Without limiting the generality of Article 11, Tenant shall:
(a) comply with all applicable Environmental Laws and obtain and
comply with and maintain any and all licenses, approvals, registrations or
permits required by applicable Environmental Laws;
(b) refrain from storing, disposing of or releasing Hazardous
Materials in the Building or on the Land in violation of Environmental Laws;
(c) to the extent due to the release, emission or disposal of
Hazardous materials in or about the Leased Property during the Term hereof by
any action or inaction of Tenant or Tenant's employees, agents, licensees or
invitees, conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all orders and directives of all
Governmental Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not be reasonably expected to have a
material adverse effect on the business, operations, property, condition
(financial or otherwise) or prospects of the Tenant;
-8-
<PAGE>
(d) promptly notify Landlord in writing and in reasonable detail of
(i) any release or discharge of any Hazardous material by Tenant or any
affiliate thereof required to be reported under Environmental Laws to any
Governmental Authority; (ii) any condition, circumstance, occurrence or event
that could result in a material liability of Landlord, Tenant or any of their
respective affiliates under Environmental Laws or could result in the imposition
of any lien or other restriction on the title, ownership or transferability of
any of the Leased Property; and (iii) any proposed action to be taken by or on
behalf of the Tenant or any affiliate thereof that could subject the Tenant or
any affiliate thereof or the Leased Property or any portion thereof to any
material additional or different requirements or liabilities under any
Environmental Law; and
(e) defend, indemnify and hold harmless Landlord and its employees,
agents, officers, directors, successors and assigns from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs, and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to any violation of, noncompliance with
or liability under any Environmental Laws or any orders, requirements or demands
of Governmental Authority related thereto (including, without limitation,
attorneys' and consultants' fees, investigation and laboratory fees, response
costs, court costs and litigation expenses) by Tenant or Tenant's employees,
agents, licensees or invitees during the Term hereof, except to the extent that
any of the foregoing arise out of the negligence or willful misconduct of the
party seeking indemnification therefor. This indemnity shall continue in full
force and effect regardless of the termination of this Lease.
12.02. For purposes of this Lease, the following terms shall have the
following meanings:
"ENVIRONMENTAL LAWS" shall mean any and all Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority, any and all Legal
Requirements and any and all common law requirements, rules and bases of
liability regulating, relating to or imposing liability or standards of conduct
concerning pollution or protection of human health or the environment, as now or
may at any time hereafter be in effect.
"HAZARDOUS MATERIALS" shall mean any hazardous or toxic substances,
materials or wastes, defined, listed, classified or regulated as such in or
under any Environmental Laws, including, without limitation, asbestos, petroleum
or petroleum products (including gasoline, crude oil or any fraction thereof),
polychlorinated biphenyls, and urea-formaldehyde insulation.
ARTICLE 13
ALTERATIONS PROHIBITED
Tenant shall make no alterations, modifications, replacements or other
changes to the Leased Property without Landlord's prior written consent,
provided, that Tenant may construct, at Tenant's sole cost and expense,
nonstructural alterations, additions and improvements to the Leased Property
without Landlord's prior written consent so long as the aggregate cost thereof
shall not exceed $50,000.00.
-9-
<PAGE>
ARTICLE 14
LANDLORD'S RIGHTS TO PERFORM
TENANT'S OBLIGATIONS
If Tenant shall default in the performance of any term or covenant on its
part to be performed under this Lease, Landlord, without being under any
obligation to do so and without thereby waiving such default, may upon the
expiration of the period allowed for the cure of such default, if any, provided
by this Lease (or with or without such expiration in case of emergency) remedy
such default. Tenant shall reimburse Landlord on demand for all costs and
expenses incurred by Landlord in the performance of Tenant's obligations
hereunder.
ARTICLE 15
LIABILITY OF LANDLORD; INDEMNIFICATION
15.01. Landlord and Landlord's agents have made no representations or
promises with respect to the Building, the Land or the Leased Property except as
herein expressly set forth. No rights, easements or licenses are acquired by
Tenant by implication or otherwise, except as expressly set forth in the
provisions of this Lease.
15.02. (a) Neither Landlord, any Superior Mortgagee nor any of their
respective employees, directors, officers and agents shall be liable for any
injury or damage to persons or property unless caused by or solely due to the
proven gross negligence or willful misconduct of Landlord, its agents or
employees. Landlord, its employees, directors, officers and agents shall in no
event be liable for any such damage, or for any injury, damage to or loss (by
theft or otherwise) of any property of Tenant, caused by other tenants or
persons in the Building.
(b) In no event shall Landlord be liable for incidental, indirect,
consequential, or special damages arising out of or in connection with this
Lease, including, without limitation, lost profits.
15.03. During the existence of any Superior Lease, the term "Landlord"
wherever used in this Lease shall be limited to mean and include only the owner
or owners at the time in question of the lessee's interest in the Land and the
Building pursuant to any such Superior Lease, so that in the event of any sale,
assignment or transfer, by operation of law or otherwise, of Landlord's interest
in the Land and the Building, such seller, assignor or transferor thereupon
automatically shall be released and discharged from all covenants, conditions
and agreements of Landlord hereunder; but, subject to the provisions of
Section 8.02 above, such covenants, conditions and agreements shall be deemed to
have been assumed by and be binding upon each new owner, assignee or transferee
for the time being of Landlord's interest in the Land and the Building, until
sold, assigned or transferred.
15.04. (a) Tenant shall indemnify and save harmless Landlord and its
agents and all Superior Mortgagees and their respective officers, directors,
agents and employees (collectively, the
-10-
<PAGE>
"INDEMNIFIED PARTIES" and each an "INDEMNIFIED PARTY") against and from (a) any
and all claims, actions and proceedings (i) arising from (x) the use and
occupancy of the Leased Property, or (y) any work or thing whatsoever done, or
any condition created by or on behalf of Tenant (other than by Landlord for
Landlord's account) in or about the Leased Property during the Term of this
Lease or during the period of time, if any, prior to the Commencement Date that
Tenant may have been given access to the Leased Property, or (ii) arising from
any negligent or otherwise wrongful act or omission of Tenant or any of its
subtenants or licensees or invitees or its or their employees, agents or
contractors, or (iii) arising from any breach or failure to observe any term,
covenant or condition of this Lease by Tenant or its agents or anyone claiming
by or through Tenant, and (b) all costs, expenses and liabilities incurred in or
in connection with each such claim, action or proceeding brought thereon
(including reasonable attorneys' fees and disbursements), except to the extent
that any of the foregoing arises out of the negligence or willful misconduct of
Landlord, its agents or employees or any breach of this Lease by Landlord or its
agents or anyone claiming by or through Landlord. In case any action or
proceeding be brought against any Indemnified Party by reason of any such claim,
Tenant, upon notice from Landlord or such Indemnified Party (if other than
Landlord), shall cause such action or proceeding to be defended at Tenant's
expense by counsel reasonably acceptable to Landlord.
(b) Landlord shall indemnify and save harmless Tenant and its
officers, directors, agents and employees (collectively, the "TENANT INDEMNIFIED
PARTIES" and each a "TENANT INDEMNIFIED PARTY") against and from (a) any and all
claims, actions and proceedings (i) arising from any negligent or otherwise
wrongful act or omission of Landlord or any of its licensees or invitees,
employees, agents or contractors, or (ii) arising from any breach or failure to
observe any term, covenant or condition of this Lease by Landlord or its agents
or anyone claiming by or through Landlord, and (b) all costs, expenses and
liabilities incurred in or in connection with each such claim, action or
proceeding brought thereon (including reasonable attorneys' fees and
disbursements), except to the extent that any of the foregoing arises out of the
negligence or willful misconduct of Tenant, its agents or employees or any
breach of this Lease by Tenant or its agents or anyone claiming by or through
Tenant. In case any action or proceeding be brought against any Tenant
Indemnified Party by reason of any such claim, Landlord, upon notice from Tenant
or such Tenant Indemnified Party (if other than Tenant), shall cause such action
or proceeding to be defended at Landlord's expense by counsel reasonably
acceptable to Tenant.
ARTICLE 16
INSURANCE
16.01. (a) Tenant shall, at its sole cost and expense, obtain and
maintain in full force and effect during the Term of this Lease, including any
renewal thereof, comprehensive general liability insurance protecting against
personal injury and property damage. Any basic policy and any umbrella policy
evidencing Tenant's liability insurance shall be written:
(i) in an aggregate amount of not less than $5,000,000
combined single limit per occurrence;
-11-
<PAGE>
(ii) with contractual liability coverage for Tenant's
liability (including indemnifications) under this Lease;
(iii) with an endorsement naming Landlord and, if required,
Landlord's agents, all Superior Mortgagees as additional insured; and
(iv) with an endorsement naming Tenant's employees as
insureds.
(b) Landlord shall, at its sole cost and expense, obtain and maintain
in full force and effect during the Term of this Lease, including any renewal
thereof, property insurance protecting against fire and other casualty covering
all of the Leased Property. Any policy evidencing Landlord's property insurance
shall be written with endorsements for extended coverage, vandalism and
malicious mischief and insuring full replacement value.
16.02. Tenant's liability insurance and Landlord's property insurance
shall be written by insurers of recognized financial standing which are
authorized to do an insurance business in the State of Indiana. Such insurance
may be evidenced by blanket insurance policies of Tenant or Landlord, as the
case may be, provided property insurance policies shall specifically allocate to
the Leased Property amounts of insurance adequate to meet the requirements of
Section 16.01(b) above. Tenant may not self-insure without Landlord's prior
written consent. Landlord or Tenant, as the case may be, shall cause to be
included in each policy a provision to the effect that the insurance evidenced
thereby shall be noncancellable except upon at least 60 days' prior written
notice to Landlord or Tenant, as the case may be. Tenant's liability insurance
shall not provide for deductibles in excess of $100,000. Landlord's property
insurance shall not provide for deductibles in excess of $500,000.
16.03. Landlord and Tenant each hereby releases and waives all right of
recovery against the other, and its respective agents, employees, partners,
officers, directors, shareholders and anyone claiming through or under each of
them by way of subrogation or otherwise for any loss or damage caused by fire or
casualty, whether or not such fire or casualty shall have been caused by the
fault or negligence of the other party. Landlord and Tenant shall each secure
an appropriate clause in, or an endorsement upon, each fire and extended
coverage policy obtained by it covering the Building, the Leased Property or the
Fixtures or the Special Tenant Improvements, as applicable, located therein
pursuant to which their respective insurance companies waive subrogation to the
full extent of such party's release of the other pursuant to the immediately
preceding sentence. If such waiver of subrogation shall be procurable only by
payment of an additional premium, the party in whose favor such waiver of
subrogation is obtained shall bear the cost thereof.
16.04. Tenant shall not do or permit to be done any act or thing in or
upon the Land or in the Building which will invalidate or be in conflict with
the terms of any insurance policies covering the Building and the fixtures and
property therein. Tenant shall comply with all rules, orders, regulations or
requirements of the any organization of fire underwriters or any other similar
body having jurisdiction, and shall not do or permit anything to be done in or
upon the Land or the Building or bring or keep anything therein or use the
Leased Property in a manner which would increase the rate of insurance upon the
Leased Property over the rate in effect at the commencement of the Term of
-12-
<PAGE>
this Lease or which would result in the cancellation of any policy of such
insurance or the assertion of any defense by the insurer to any claim under any
policy of insurance maintained by or for the benefit of Landlord.
ARTICLE 17
DAMAGE BY FIRE OR OTHER CAUSE
17.01. If the Leased Property shall be damaged by fire or other cause,
Tenant shall promptly notify Landlord thereof. If the damage is of such an
extent as to interfere materially with Tenant' s ability to conduct its
operations at the Building, Landlord shall, at Tenant's option as determined by
Tenant by written notice to Landlord given not more than 60 days following such
fire or other casualty, either (a) repair and restore any damaged portions of
the Leased Property to a condition suitable for Tenant's use, as promptly as
reasonably practicable, to the extent of and subject to receipt of insurance
proceeds from Landlord's insurer (plus an amount equal to the amount of any
applicable deductible) sufficient to pay the cost of such repair and
restoration, it being agreed that Landlord's obligation to so repair and restore
is expressly conditioned upon the receipt and sufficiency of such insurance
proceeds (plus an amount equal to any applicable deductible) and to the extent
such insurance proceeds are unavailable or insufficient, Tenant shall be solely
responsible for the cost (or the balance of the cost, as the case may be) to so
repair and restore, or (b) terminate this Lease by written notice to Tenant sent
not later than 60 days following such fire or other casualty, in which event the
Term shall expire upon the thirtieth day following such notice and Tenant shall
vacate the Leased Property and surrender the same to Landlord on or before the
date this Lease shall so terminate. Fixed Rent and Additional Rent shall be
abated for the portion of the Leased Property which is not usable by Tenant in
the ordinary conduct of its business from the date of such damage or destruction
until the date on which the Leased Property become usable by Tenant for the
ordinary conduct of its business. There shall be no abatement of Fixed Rent or
Additional Rent for any period of time for that portion of the Leased Property
which Tenant continues to occupy or has reoccupied. If there shall be any delay
in the process of restoration and repair due to any act or omission on the part
of Tenant, Fixed Rent and Additional Rent shall commence on the date the Leased
Property would have otherwise been completed but for such delay, as shall be
determined by Landlord in its judgment reasonably exercised. No penalty or
damage shall accrue for delays which may arise by reason of adjustment of
insurance on the part of Landlord, or for delays on account of Force Majeure.
Upon termination of this Lease in accordance with this Section 17.01, Tenant's
liability for rent shall cease, subject, however, to any claim by Landlord for
Fixed Rent and/or Additional Rent accruing on or before such date.
17.02. No damage, compensation or claims shall be payable by Landlord
for inconvenience, loss of business or annoyance to Tenant arising from any
damage by fire or other casualty or from any repair or restoration of any
portion of the Leased Property or of the Building but Landlord shall use
reasonable efforts to effect promptly any such repairs as may be undertaken by
Landlord pursuant to this Lease.
-13-
<PAGE>
17.03. Notwithstanding the provisions of Section 17.01, if, by reason of
some action or inaction on the part of Tenant or any of its employees, agents,
licensees or contractors, Landlord, or any Superior Mortgagee shall be unable to
collect all of the insurance proceeds (including rent insurance proceeds)
applicable to damage or destruction of the Leased Property by fire or other
casualty, then, without prejudice to any other remedy which may be available
against Tenant, the abatement of rent provided for in said Section 17.01 shall
not be effective to the extent of the uncollected insurance proceeds.
ARTICLE 18
CONDEMNATION
18.01. In the event that the whole or any portion of the Leased Property
the loss of which would materially interfere with Tenant's customary operations
at the Leased Property shall be condemned or taken in any manner for any public
or quasi-public use, this Lease and the Term and estate hereby granted shall
forthwith cease and terminate as of the date of the vesting of title in the
condemning authority. In the event of any such termination, this Lease and the
Term and estate hereby granted shall expire as of the date of such termination
with the same effect as if that were the date hereinbefore set for the
expiration of the Term, and the rent hereunder shall be apportioned as of such
date. In the event that only a part of the Leased Property the loss of which
does not materially interfere with Tenant's customary operations at the Leased
Property shall be so condemned or taken, then this Lease shall be and remain
unaffected by such condemnation or taking, except that, effective as of the date
of the vesting of title in the condemning authority, the Fixed Rent and
Additional Rent hereunder for such part shall be equitably abated and this Lease
shall continue as to such part not so taken.
18.02. In the event of any condemnation or taking hereinabove mentioned
of all or a part of the Leased Property, Landlord shall be entitled to receive
the entire award in the condemnation proceeding, including any award made for
the value of this Lease and for any unexpired portion of the Term, and Tenant
hereby expressly assigns to Landlord any and all right, title and interest of
Tenant now or hereafter arising in or to any such award or any part thereof and
Tenant shall not be entitled to receive any part of such award. Tenant shall
have no claim for the value of any unexpired term of this Lease. Tenant may
separately prosecute any claim it may have for Tenant's trade fixtures and its
moving expenses (if they are compensable) provided such prosecution does not
interfere with or reduce Landlord's claim.
ARTICLE 19
BANKRUPTCY
19.01. If a trustee in bankruptcy shall assume this Lease and shall
propose to assign the same pursuant to the provisions of the Bankruptcy Code,
11 U.S.C. 101 et seq. (the "BANKRUPTCY CODE") to any person or entity who shall
have made a bona fide offer to accept an assignment of this Lease on terms
acceptable to such trustee notice of such proposed assignment, setting forth
(i) the name and
-14-
<PAGE>
address of such person, (ii) all of the terms and conditions of such offer, and
(iii) the adequate assurance to be provided Landlord to assure such person's
future performance under this Lease, including, without limitation, the
assurance referred to in section 365(b)(3) of the Bankruptcy Code, shall be
given to Landlord by such trustee no later than twenty (20) days after receipt
by such trustee, but in any event no later than ten (10) days prior to the date
that such trustee shall make application to a court of competent jurisdiction
for authority and approval to enter into such assignment and assumption, and
Landlord shall thereupon have the prior right and option, to be exercised by
notice to Tenant given at any time prior to the effective date of such proposed
assignment, to accept an assignment of this Lease upon the same terms and
conditions and for the same consideration, if any, as the bona fide offer made
by such person, less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this Lease.
19.02. Any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall, upon demand,
execute and deliver to Landlord an instrument in recordable form confirming such
assumption.
ARTICLE 20
DEFAULT
20.01. (a) If (i) Tenant shall fail to pay Fixed Rent or Additional Rent
when due and such default continues for a period of five (5) days after written
notice thereof from Landlord; or (ii) Tenant shall default in fulfilling any of
the covenants of this Lease, other than the covenants for the payment of Fixed
Rent and Additional Rent, and such default continues for a period of twenty (20)
days after written notice from Landlord to Tenant specifying the nature of said
default, except that if the said default shall be of such a nature that the same
cannot, with reasonable diligence, be completely cured or remedied within said
twenty (20) days then Tenant shall not be deemed in default if Tenant diligently
commences curing such default within such twenty (20) day period, and shall
thereafter with diligence and in good faith proceed to remedy or cure such
default, but, in any event, Tenant shall complete such cure prior to the date on
which Landlord (A) would be subject to prosecution for a crime or (B) would be
in default of any Superior Mortgage or Superior Lease or (iii) any event shall
occur or any contingency shall arise whereby this Lease or the estate hereby
granted or the unexpired balance of the Term would, by operation of law or
otherwise, devolve upon or pass to any person other than Tenant, then in any of
the events described in the foregoing clauses (i), (ii) or (iii), Landlord may
serve a written three (3) day notice of cancellation of this Lease upon Tenant,
and upon the expiration of said three (3) days, this Lease and the Term
hereunder shall end and expire as fully and completely as if the date of
expiration of such three (3) day period were the Expiration Date of this Lease,
and Tenant shall then quit and surrender the Leased Property to Landlord but
Tenant shall remain liable as hereinafter provided.
(b) In the event of a breach or threatened breach by Tenant of any of
the covenants or provisions hereof, Landlord shall also have the right of
injunction.
-15-
<PAGE>
20.02. If the three (3) day notice provided for in Section 20.01 shall
have been given:
(a) Landlord and Landlord's agents may, without notice, re-enter the
Leased Property or any part thereof, and by summary proceedings or otherwise,
dispossess Tenant or the legal representative of Tenant or other occupant of the
Leased Property and remove their effects without liability for damage thereto
and hold the Leased Property as if this Lease had not been made but Tenant shall
remain liable hereunder as hereinafter provided; and
(b) Landlord may, at its option, relet the whole or any part or parts
of the Leased Property from time to time, either in the name of Landlord or
otherwise, to such tenant or tenants, for such term or terms ending before, on
or after the Expiration Date, at such rental or rentals and upon such other
conditions, which may include concessions and free rent periods, as Landlord in
its sole discretion may determine. Landlord shall have no obligation to relet
the Leased Property or any part thereof and shall in no event be liable for
refusal or failure to relet the Leased Property or any part thereof, or, in the
event of any such reletting, for refusal or failure to collect any rent upon any
such reletting, and no such refusal or failure shall operate to relieve Tenant
of any liability under this Lease or otherwise to affect any such liability.
Landlord, at Landlord's option, may make such repairs, improvements,
alterations, additions, decorations and other physical changes in and to the
Leased Property as Landlord, in its sole discretion, considers advisable or
necessary in connection with any such reletting or proposed reletting, without
relieving Tenant of any liability under this Lease or otherwise affecting any
such liability.
20.03. If this Lease shall terminate or if Landlord shall re-enter the
Leased Property as provided in this Article:
(a) Tenant shall pay to Landlord all rent to the date upon which this
Lease shall have been terminated or to the date of re-entry upon the Leased
Property by Landlord, as the case may be;
(b) Landlord shall be entitled to retain all monies, if any, paid by
Tenant to Landlord, whether as advance rent, security or otherwise, but such
monies shall be credited by Landlord against any rent due at the time of such
termination or re-entry or, at Landlord's option, against any damages payable by
Tenant;
(c) Tenant shall be liable for and shall pay to Landlord, as damages,
any deficiency between the rent payable hereunder for the period which otherwise
would have constituted the unexpired portion of the Term (conclusively presuming
the Additional Rent to be the same as was payable for the year immediately
preceding such termination or re-entry) and the net amount, if any, of rents
collected under any reletting effected pursuant to the provisions of
Section 20.02(b) for any part of such period (first deducting from the rents
collected under any such reletting all of Landlord's expenses in connection with
the termination of this Lease or Landlord's re-entry upon the Leased Property
and in connection with such reletting including all repossession costs,
brokerage commissions, legal expenses, alteration costs and other expenses of
preparing the Leased Property for such reletting);
-16-
<PAGE>
(d) Any deficiency in accordance with subsection (c) above shall be
paid in monthly installments by Tenant on the days specified in this Lease for
the payment of installments of Fixed Rent. Landlord shall be entitled to
recover from Tenant each monthly deficiency as the same shall arise and no suit
to collect the amount of the deficiency for any month shall prejudice Landlord's
right to collect the deficiency for any prior or subsequent month by a similar
proceeding. Alternatively, suit or suits for the recovery of such deficiencies
may be brought by Landlord from time to time at its election;
(e) Whether or not Landlord shall have collected any monthly
deficiencies as aforesaid, Landlord shall be entitled to recover from Tenant,
and Tenant shall pay Landlord, on demand, as and for liquidated and agreed final
damages and not as a penalty, a sum equal to the amount by which the Fixed Rent
and Additional Rent payable hereunder for the period to the Expiration Date from
the latest of the date of termination of this Lease, the date of re-entry or the
date through which monthly deficiencies shall have been paid in full
(conclusively presuming the Additional Rent for each year thereof to be the same
as that which was payable for the year immediately preceding such termination or
re-entry) exceeds the then fair and reasonable rental value of the Leased
Property for the same period, both discounted at the rate of 7% per annum to
present worth.
(f) In no event shall Tenant be entitled (i) to receive any excess of
any rent under subdivision (c) over the sums payable by Tenant to Landlord
hereunder or (ii) in any suit for the collection of damages pursuant to this
Section 20.03, to a credit in respect of any rent from a reletting except to the
extent that such rent is actually received by Landlord prior to the commencement
of such suit. If the Leased Property or any part thereof should be relet in
combination with other space, then proper apportionment on a square foot area
basis shall be made of the rent received from such reletting and the expenses of
reletting.
(g) If this Lease shall terminate or if the Landlord shall re-enter
the Leased Property:
(1) The Leased Property shall be, upon such earlier
termination or re-entry, in the same condition as that in which Tenant has
agreed to surrender them to Landlord on the Expiration Date;
(2) Tenant, on or before the occurrence of any default
hereunder, shall have performed every covenant contained in this Lease for the
making of any improvement or for repairing any part of the Leased Property and
(3) For the breach of either subdivision (a) or (b) of this
subsection, or both, Landlord shall be entitled immediately, without notice or
other action by Landlord, to recover, and Tenant shall pay, as and for agreed
damages therefor, the then cost of performing such covenants, plus interest
thereon at the Default Rate for the period from the date of the occurrence of
any default to the date of payment.
-17-
<PAGE>
(4) Each and every covenant contained in this subsection (g)
shall be deemed separate and independent and not dependent on any other term of
this Lease for the use and occupation of the Leased Property by Tenant, and the
performance of any such term shall not be considered to be rent or other payment
for the use of said Leased Property. It is understood that the consideration
for the covenants in this subsection (g) is the making of this Lease, and the
damages for failure to perform the same shall be in addition to and separate and
independent of the damages accruing by reason of default in observing any other
term of this Lease.
20.04. The remedies and rights provided for in this Lease are
cumulative. Mention in this Lease of any particular remedy shall not preclude
Landlord from pursuing any other remedy at law or equity.
20.05. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws.
20.06. The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease,
shall not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt or acceptance by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. No
provision of this Lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord. No endorsement or statement on
any check or any letter accompanying any check or payment as rent shall be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy in this Lease.
20.07. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease. Tenant shall
not interpose any counterclaim in any summary proceeding commenced by Landlord.
ARTICLE 21
QUIET ENJOYMENT
Landlord covenants and agrees that, as long as Tenant shall comply with all
obligations on its part to be performed hereunder, Tenant may peaceably and
quietly enjoy the Leased Property, subject to the terms and conditions of this
Lease.
ARTICLE 22
SURRENDER OF PREMISES
-18-
<PAGE>
22.01. Upon the expiration or sooner termination of this Lease or upon
re-entry by Landlord upon the Leased Property, Tenant shall at Tenant's expense
quit and surrender the Leased Property and deliver the same to Landlord in good
order, condition and repair, ordinary wear and tear and damage by fire or other
casualty excepted. Tenant shall pay to Landlord any insurance proceeds received
by Tenant attributable to damage to the Leased Property to the extent such
proceeds have not been used to restore such items in accordance with this Lease.
22.02. Any items which shall remain in the Leased Property after the
Expiration Date, or after an earlier termination date, may, at the option of
Landlord, be deemed to have been abandoned, and in such case such items may be
retained by Landlord as its property or disposed of by Landlord, without
accountability, in such manner as Landlord shall determine at Tenant's expense.
Tenant's obligation to reimburse Landlord for its costs so incurred shall
survive expiration or termination of this Lease.
22.03. If Tenant remains in possession of the Leased Property after the
termination of this Lease without the execution of a new lease, the parties
recognize and agree that the damage to Landlord will be substantial, will exceed
the amount of monthly Fixed Rent and Additional Rent theretofore payable
hereunder and will be impossible to measure accurately. Tenant, therefore, at
the option of Landlord, shall be deemed to be occupying the Leased Property as a
tenant from month to month, at a monthly rental equal to two and one-half times
the Fixed Rent and Additional Rent payable during the last month of the Term,
subject to all of the other terms of this Lease insofar as the same are
applicable to a month-to-month tenancy. Further, Tenant hereby indemnifies
Landlord against liability resulting from delay by Tenant in so surrendering the
Leased Property, including (a) any claims made by any purchaser or prospective
purchaser, succeeding tenant or prospective tenant founded upon such delay,
(b) any payment or rent concession which Landlord may be required to make to any
purchaser or prospective purchaser, succeeding or prospective tenant for all or
any part of the Premises in order to induce such purchaser or tenant not to
terminate its purchase agreement or lease, as the case may be, or its
negotiation therefor by reason of Tenant's delay in so surrendering the Leased
Property and (c) any loss suffered if a purchaser or prospective purchaser or
succeeding or prospective tenant shall terminate its purchase agreement or
lease, as the case may be, or not proceed to close on a purchase or execute and
deliver its purchase agreement or lease, as the case may be, by reason of
Tenant's delay in so surrendering the Leased Property. Nothing herein contained
shall be deemed to permit Tenant to remain in possession of the Leased Property
after the expiration or sooner termination of the term of this Lease.
22.04. No agreement to accept a surrender of all or any part of the
Leased Property or this Lease shall be valid unless in writing and signed by
Landlord. No delivery of keys shall operate as a termination of this Lease or a
surrender of the Leased Property or this Lease.
ARTICLE 23
NOTICES
-19-
<PAGE>
All notices and communications permitted or required to be given pursuant
to this Lease shall given in the manner, and to the addresses, provided in the
Asset Purchase Agreement dated as of January 21, 1996 (the "AGREEMENT"), in
connection with which this Lease is being executed.
ARTICLE 24
MISCELLANEOUS
24.01. This Lease with its annexed Exhibits and the Agreement contain
the entire agreement between Landlord and Tenant, all prior negotiations and
agreements are merged into this Lease and any agreement hereafter made between
Landlord and Tenant shall be ineffective to change, modify, waive, release,
discharge or terminate or effect an abandonment of this Lease, in whole or in
part, unless such agreement shall be in writing and executed by the party to be
charged.
24.02. If any term, covenant, condition or provision of this Lease shall
be invalid or unenforceable to any extent, the remaining terms, covenants,
conditions and provisions of this Lease shall not be affected thereby. This
lease shall be construed without regard to any presumption or other rule
requiring construction against the party causing this lease to be drafted. Each
covenant, agreement, obligation or other provision of this lease on Tenant's
part to be performed, shall be deemed and construed as a separate and
independent covenant of Tenant, not dependent on any other provision of this
Lease.
24.03. Nothing contained in this Lease shall be deemed to confer upon
any person other than the parties hereto and their respective successors and
assigns (to the extent assignment is permitted pursuant to Article 9 hereof) any
right or benefit, including any right to insist upon, or to enforce against
Landlord or Tenant, the performance of such party's obligations hereunder.
24.04. Whenever this Lease requires an approval or consent by either
Landlord or Tenant, unless another standard is expressly stated, such approval
or consent and any conditions imposed thereby shall be reasonable and shall not
be unreasonably withheld or delayed and, in exercising any right or remedy
hereunder, each party shall at all times act reasonably and in good faith. Any
expenditure by a party permitted or required under this Lease for which such
party is entitled to demand reimbursement shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred and shall
be substantiated, upon request, by documentary evidence.
24.05. The submission by Landlord to Tenant of this Lease in draft form
shall be deemed submission solely for Tenant's consideration and not for
acceptance and execution. Such submission shall have no binding force and
effect, shall not constitute an option for the leasing of the Leased Property,
and shall not confer any rights or impose any obligations upon either party.
The submission by Landlord of this Lease for execution by Tenant and the actual
execution and delivery thereof by Tenant to Landlord shall similarly have no
binding force and effect on Landlord unless and until Landlord shall have
executed this Lease and a counterpart thereof shall have been delivered to
Tenant and all consents required pursuant to any Superior Mortgage or Superior
Lease have been received.
-20-
<PAGE>
24.06. This Lease shall bind and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
24.07. Tenant shall not record or file this Lease or any memorandum or
other notation thereof in any public records.
24.08. Tenant shall have access to driveways, parking lots, sidewalks
and similar surface improvements on Landlord's immediately adjoining property
for parking and ingress and egress to and from the Leased Property, provided,
that Landlord reserves the right to limit such access to the extent Landlord
reasonably determines the same poses security concerns, provided further, that
there shall be no material interference with Tenant's reasonable access to and
use of the Leased Premises for the purposes described in Section 5.01.
-21-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease on the date first above written.
STATE ROAD PROPERTIES L.P.
By: HR LEASING CORP., its General Partner
By: /s/ James L. Ziemer
-------------------------------------
Name: James L. Ziemer
Title: VP
MONACO COACH CORPORATION
By: /s/ John W. Nepute
-------------------------------------
Name: John W. Nepute
Title: VP Finance
-22-
<PAGE>
PHYSICAL ADDRESS
6 S.R. 19
Wakarusa, Indiana 46573
[Graphic: drawing of building 6]
-23-
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION OF LAND
Deliberately Omitted
<PAGE>
EXHIBIT C
PERMITTED USES
The design, manufacture, marketing, wholesale sale and factory servicing of
recreational vehicles and related parts and accessories.
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF LEASE
THIS FIRST AMENDMENT TO AGREEMENT OF LEASE is made and entered into
effective as of March 4, 1996 by and between State Road Properties L.P., a
Delaware limited partnership ("Landlord") and Monaco Coach Corporation, a
Delaware corporation ("Tenant").
WITNESSETH:
A. Landlord and Tenant are parties to that certain Agreement of Lease
dated March 4, 1996 (the "Lease") regarding certain land and improvements
described in the Lease as located at 6 State Road 19, Wakarusa, Indiana 46573
and commonly known as Plant 3 (the "Leased Property"). Capitalized terms used
but not defined herein shall have the meanings given such terms in the Lease.
B. Landlord and Tenant have agreed to amend the Lease so as to correct a
mutual mistake concerning rent as set forth in the Lease and so as to reflect
the agreed upon rent as actually paid from Tenant to Landlord.
NOW, THEREFORE, Landlord and Tenant hereby agrees as follows:
25 Section 3.01(a) of the Lease is hereby deleted in its entirety and
replaced by the following:
"3.01(a) Tenant covenants and agrees to pay to Landlord a
fixed minimum rent ("FIXED RENT") during the Term of this
Lease, equal to $48,000.60 per annum (pro rated in the case
of partial years), payable in equal monthly installments of
$4,000.05."
26 Except as specifically amended hereby, all of the terms of the Lease
are and shall remain in full force and effect and hereby ratified and confirmed.
The capitalized term "Lease" as used in the Lease shall be deemed to mean and
refer to the Lease, as amended by this First Amendment to Agreement of Lease.
-2-
<PAGE>
IN WITNESS WHEREOF, this First Amendment to Agreement of Lease has been
duly executed by Landlord and Tenant as of the date first above written.
STATE ROAD PROPERTIES, L.P.
By: HR LEASING CORP.,
its General Partner
By: /s/ James Ziemer
--------------------------------
Title: Vice President
-----------------------------
MONACO COACH CORPORATION
By: /s/ Kay Toolson
--------------------------------
Title: Chief Executive Officer
-----------------------------
-3-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT OF LEASE
STATE ROAD PROPERTIES L.P.,
Landlord
MONACO COACH CORPORATION,
Tenant
March 4, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.15
[TOWABLES]
AGREEMENT OF LEASE, dated this 4th day of March, 1996, between STATE ROAD
PROPERTIES L.P., a Delaware Limited Partnership having an office at 3700 West
Juneau Road, Milwaukee, Wisconsin, 53208 ("LANDLORD") and MONACO COACH
CORPORATION, a Delaware corporation having an office at 1809 West Hively, P.O.
Box 4313, Elkhart, Indiana 46517 ("TENANT").
ARTICLE 1
PREMISES; TERM
1.01. Subject to and in accordance with all of the covenants and
conditions of this Lease, Landlord hereby leases to Tenant and Tenant hereby
hires from Landlord the improvements (together with the heating, ventilating and
air conditioning systems located therein, the "BUILDING") more particularly
described on Exhibit A attached hereto together with the land on which the
Building is located, more particularly described on Exhibit B attached hereto
(the "LAND"; the Land and the Building, collectively, the "LEASED PROPERTY").
1.02. The Leased Property shall be leased for a term (together with any
Extension Term, the "TERM") commencing on March 4, 1996 (the "COMMENCEMENT
DATE") and expiring on the date (the "EXPIRATION DATE") immediately preceding
the first anniversary of the Commencement Date, unless the Term shall terminate
sooner pursuant to any of the terms of this Lease or pursuant to law and subject
to the following provisions of this Section 1.02. Tenant shall have two
successive options to extend the Expiration Date for one year (each such one
year extension period, an "EXTENSION TERM"). If the first such option is
exercised as provided herein, the Expiration Date shall be the date immediately
preceding the second anniversary of the Commencement Date. If the first such
option and the second such option are exercised as provided herein, the
Expiration Date shall be the date immediately preceding the third anniversary of
the Commencement Date. Any such extension option shall be exercised by written
notice to Landlord no later than 120 days prior to the Expiration Date as in
effect prior to the exercise of such option. If the first such option is not
exercised, Tenant shall have no rights with respect to the second such option.
During the last six months of any Extension Term, Tenant shall have the right to
terminate this Lease on thirty days' written notice to Landlord. Such
termination shall be effective as of the first day of the calendar month
beginning at least thirty days after the sending of such notice. On such
effective termination date, the Term shall end with the same effect as if such
effective termination date were the Expiration Date originally set forth herein.
ARTICLE 2
CONDITION OF LEASED PROPERTY
Tenant has inspected the Leased Property and is thoroughly acquainted with
its condition. As a condition of Landlord's agreement hereunder, Tenant agrees
to take possession of and accept each
<PAGE>
portion of the Leased Property in its "as is" condition as at the date of this
Lease. Landlord shall have no obligation to do any work or perform any services
with respect to the Leased Property except as specifically set forth in this
Lease.
ARTICLE 3
RENT
3.01. (a) Tenant covenants and agrees to pay to Landlord a fixed minimum
rent ("FIXED RENT") during the Term of this Lease, equal to $73,042.56 per annum
(pro rated in the case of partial years), payable in equal monthly installments
of $60,086.88.
(b) Monthly installments of Fixed Rent shall be payable without
notice or demand in advance on the first day of each month during the Term. If
the date on which Fixed Rent first becomes payable hereunder occurs on a day
other than the first day of a calendar month, Fixed Rent for such calendar month
shall be pro-rated on a PER DIEM basis.
3.02. All adjustments of rent, costs, charges, expenses and
reimbursements and all other sums of money which Tenant is obligated to pay to
Landlord pursuant to this Lease shall be deemed additional rent ("ADDITIONAL
RENT") which Tenant covenants to pay when due. Except as otherwise specified in
this Lease, all Additional Rent shall be due from and payable by Tenant on the
twentieth (20th) day after Landlord has rendered its bill therefor. Landlord
shall have all the rights and remedies with respect to nonpayment of Additional
Rent as are provided herein for nonpayment of Fixed Rent.
3.03. All Fixed Rent and Additional Rent shall be payable by Tenant to
Landlord in lawful money of the United States of America at the office of
Landlord or at such other place as Landlord may designate from time to time
without offset, abatement counterclaim or deduction in lawful money of the
United States of America. All Fixed Rent and Additional Rent shall be paid by
either (i) a good and sufficient check drawn on a bank which is a member of a
nationally recognized clearing house association or (ii) a wire transfer of
immediately available funds to Landlord's account.
3.04. If any installment of Fixed Rent or any Additional Rent is not
paid when due Tenant shall also pay interest thereon (which interest shall be
immediately due and payable and shall constitute Additional Rent) at a rate (the
"DEFAULT RATE") equal to ten percent (10%) per annum, computed from the date
such payment was first due through the date paid. Notwithstanding the
imposition of such interest, Tenant shall be in default under this Lease if any
or all payments required to be made by Tenant are not made at the time herein
stipulated, and neither the demand for, nor collection by Landlord of, such
interest shall be construed as a curing of such default on the part of Tenant.
-2-
<PAGE>
ARTICLE 4
TAXES
4.01. Landlord shall pay all taxes, assessments and fees levied upon
the Leased Property or the rents collected therefrom, by any Governmental
Authority based upon the ownership, leasing, renting or operation of the Leased
Property, including all costs and expenses of protesting any such taxes,
assessments or fees ("TAXES").
ARTICLE 5
USE
5.01. Tenant shall use and occupy the Leased Property, for the purposes
shown on Exhibit C and for no other purpose and only as permitted by any
applicable law, rule or regulation or determination (a "LEGAL REQUIREMENT") of
the federal government, any state or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government (any of the foregoing, a "GOVERNMENTAL
AUTHORITY").
5.02. Tenant shall not use, occupy or permit the Leased Property (or
any part thereof) to be used in any manner, or permit anything to be brought
into or kept within the Leased Property, which, in Landlord's judgment, would
(i) violate the Certificate of Occupancy issued for the Building, (ii) violate
the provisions of any Superior Lease or Superior Mortgage, (iii) cause injury or
damage to the Leased Property or any part thereof, (iv) interfere with or impair
the Building's systems and equipment or the proper and economical maintenance
and operation of the Leased Property, (v) change the character of the Building,
(vi) violate any Legal Requirement or any requirements of any insurance policy
covering or applicable to all or any part of the Leased Property or the use
thereof, all requirements of the issuer of any such policy and all orders,
rules, regulations, recommendations and other requirements of any organization
of fire underwriters or the Insurance Service Office or any other body
exercising the same or similar functions and having jurisdiction or cognizance
of all or any part of the Leased Property (collectively, "INSURANCE
REQUIREMENTS"), (vii) violate any applicable Environmental Law or (viii) or
cause the presence of any Hazardous Material on or under the Land or within the
Building in violation of any applicable Environmental Law.
5.03. If any license or permit from any Governmental Authority shall be
required for the proper and lawful occupancy of the Leased Property and if
failure to secure such license or permit would in any way adversely affect
Landlord or the Leased Property, then Tenant, at its sole expense, shall procure
and deliver a copy of such license or permit to Landlord and thereafter maintain
such license or permit. Tenant shall at all times comply with the provisions of
each such license and permit.
-3-
<PAGE>
ARTICLE 6
MAINTENANCE AND REPAIR
6.01. Tenant shall be solely responsible for the cost and performance
of all maintenance, service, repair and replacement of any portion of the
Building, it being understood and agreed that Landlord shall have no general
duty (either to Tenant or to third parties) to keep the Leased Property in good
order and repair and that Landlord shall have no obligation to perform or pay
for the cost of any such maintenance, service, repair or replacement except to
the extent expressly provided for in this Article 6. As long as this Lease is in
full force and effect Landlord shall promptly upon request by Tenant reimburse
Tenant for the cost of any repair or replacement of any heating, ventilating and
air-conditioning system or structural or other similar portion of the Building
or Building system that becomes unusable such that the operation of Tenant's
business for the purposes described in Section 5.01 shall be materially
impaired; PROVIDED, that written notice, given reasonably in advance considering
the nature of the repair, shall have been provided to Landlord, which notice
shall set forth, in reasonable detail, the nature and scope of the repair and
the estimated cost thereof and PROVIDED further, that Landlord will be obligated
to reimburse Tenant only to the extent reasonably necessary such that Tenant's
business for the purposes described in Section 5.01 shall no longer be so
materially impaired. Tenant agrees and acknowledges that Landlord's
reimbursement obligation as set forth above is being undertaken by Landlord as
an accommodation to Tenant due to the short-term nature of this Lease. Tenant
agrees and acknowledges that it is Tenant's duty and obligation to inspect the
Leased Property from time to time, to conduct day-to-day maintenance of the
Leased Property and to perform any repairs and replacements that are required
either for Tenant's operations or for the health and safety of persons present
at the Leased Property.
6.03 Except as expressly provided above in this Article 6, Landlord
shall have no obligations to repair or maintain the Leased Property or to
provide other services to Tenant or to pay for any of the costs thereof. Tenant
acknowledges that, except as otherwise set forth herein, Tenant is solely
responsible for cleaning, security, maintenance and operation of the Building's
systems and the costs thereof.
ARTICLE 7
UTILITY SERVICE
Tenant shall obtain and pay for the supply of electric current, water
supply, sewerage service and any other utility services to the Leased Property
by direct application to and arrangement with the respective public utility
companies servicing the Building. Tenant shall be responsible for direct
payment for all such utilities and shall abide by all rules and regulations
imposed by any such utility company.
-4-
<PAGE>
ARTICLE 8
SUBORDINATION; ESTOPPEL CERTIFICATE
8.01. This Lease and all rights of Tenant hereunder are subject and
subordinate to all mortgages which may now or hereafter affect Landlord's
interest in the Leased Property or any part thereof (all such mortgages,
collectively, the "SUPERIOR MORTGAGES"), and to all renewals, modifications,
consolidations, replacements and extensions of Superior Mortgages. This Section
shall be self-operative and no further instrument of subordination shall be
required .In confirmation of such subordination, Tenant agrees to promptly
execute and deliver at Tenant's sole cost and expense any instrument (in
recordable form, if requested) that Landlord or the holder of any Superior
Mortgage (a "SUPERIOR MORTGAGEE") may request to evidence such subordination.
8.02. If the interests of Landlord under this Lease are transferred by
reason of, or assigned in lieu of, foreclosure or other proceedings for
enforcement of any such Superior Mortgage then Tenant shall, at the option of
such purchaser or assignee, as the case may be, (x) attorn to such party and
perform for its benefit all the terms, covenants and conditions of this Lease on
Tenant's part to be performed with the same force and effect as if such party
were the landlord originally named in this Lease, or (y) enter into a new lease
with such party, as landlord, for the remaining Term and otherwise on the same
terms and conditions of this Lease except that such successor landlord shall not
be (i) liable for any previous act, omission or negligence of Landlord under
this Lease; (ii) subject to any counterclaim, defense or offset which
theretofore shall have accrued to Tenant against Landlord; (iii) bound by any
previous modification or amendment of this Lease or by any previous prepayment
of more than one month's rent, unless such modification, amendment or prepayment
shall have been approved in writing by the Superior Mortgagee through or by
reason of which such successor landlord shall have succeeded to the rights of
Landlord under this Lease; (iv) obligated to repair the Leased Property or any
part thereof in the event of total or substantial damage, beyond such repair as
can reasonably be accomplished from the net proceeds of insurance actually made
available to such successor landlord; (v) obligated to repair the Leased
Property or any part thereof in the event of partial condemnation, beyond such
repair as can reasonably be accomplished from the net proceeds of any award
actually made available to such successor landlord, as consequential damages
allocable to the part of the Leased Property not taken; nor (vi) obligated to
perform any work to prepare or finish the Leased Property for occupancy by
Tenant. Nothing contained in this Section shall be construed to impair any
right otherwise exercisable by any such owner, holder or lessee. Landlord shall
use reasonable efforts to obtain from the holder of any Superior Mortgage and
the landlord under any Superior Lease a written recognition agreement providing
that in the event of the foreclosure of such Superior Mortgage or termination of
such Superior Lease, so long as no default by Tenant shall have occurred and be
continuing hereunder, Tenant's rights of occupancy shall not be disturbed and
Tenant shall receive all of its rights provided for under this Lease.
8.03. If any act or omission by Landlord would give Tenant the right,
immediately or after lapse of time, to cancel or terminate this Lease or to
claim a partial or total eviction, abatement of rent, setoff or counterclaim,
Tenant will not exercise any such right until (i) it has given written notice of
such act or omission to each Superior Mortgagee whose name and address shall
have previously been furnished to Tenant, by delivering notice of such act or
omission addressed to each such party at
-5-
<PAGE>
its last address so furnished, (ii) Landlord shall have failed to cure the same
within the time limits set forth in this Lease, and (iii) following the giving
of such notice, no Superior Mortgagee shall have remedied such act or omission
(x) in the case of an act or omission which is capable of being remedied without
possession of the Building, within the cure period available to Landlord under
this Lease plus sixty (60) days and (y) in the case of any act or omission which
is incapable of being remedied without possession of the Building, within sixty
(60) days following the date on which possession is obtained, PROVIDED a
Superior Mortgagee has promptly commenced action to obtain possession and shall
diligently pursue such action to completion and PROVIDED FURTHER that such
Superior Mortgagee shall, with reasonable diligence, give Tenant notice of its
intention to, and commence and continue to, remedy such act or omission or cause
the same to be remedied.
8.04. If any Superior Mortgagee or prospective Superior Mortgagee shall
request modifications of this Lease as a condition to the provision, continuance
or renewal of any such financing, Tenant will not unreasonably withhold, delay
or defer its consent thereto, provided that such modifications do not materially
adversely increase the obligations of Tenant hereunder or materially diminish
Tenant's rights under this Lease.
8.05. Tenant agrees, at any time and from time to time, upon not less
than fifteen (15) days' prior notice from Landlord to execute, acknowledge and
deliver to Landlord or such other person that Landlord may designate a written
certification stating (a) that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), (b) that Tenant has accepted
possession of the Leased Property, (c) the dates to which the Fixed Rent and
Additional Rent have been paid, (d) whether or not there exists any default on
the part of Landlord under this Lease, and, if so, specifying each such default
and (e) such further information with respect to this Lease or the Leased
Property that Landlord may reasonably request. Landlord agrees, at any time and
from time to time, upon not less than fifteen (15) days' prior notice from
Tenant to execute, acknowledge and deliver to Tenant a written certification
stating (a) that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), (b) the dates to which the Fixed Rent
and Additional Rent have been paid, (c) whether or not there exists any default
on the part of Tenant under this Lease, and, if so, specifying each such default
and (e) such further information with respect to this Lease that Tenant may
reasonably request.
ARTICLE 9
ASSIGNMENT AND SUBLETTING PROHIBITED
9.01. Tenant, its legal representatives and successors in interest,
shall not by operation of law or otherwise, assign (in whole or in part),
mortgage, pledge, encumber or otherwise transfer this Lease or any part hereof
or any interest of Tenant herein or in the Leased Property by reason hereof, or
sublet the Leased Property, without Landlord's prior written consent. No
assignment of this Lease shall be effective unless the assignee shall execute,
acknowledge and deliver to Landlord an agreement, in form satisfactory to
Landlord, whereby the assignee assumes all obligations of Tenant
-6-
<PAGE>
under this Lease, and agrees that the provisions of this Article 9 shall
continue to be binding upon it in respect of all future assignments and deemed
assignments of this Lease. No assignment of this Lease shall release the
assignor from its continuing obligations to Landlord under this Lease and Tenant
and any subsequent assignor shall continue to remain jointly and severally
liable (as primary obligor) for all Tenant's obligations hereunder.
9.02. The consent by Landlord to any assignment or subletting shall not
be a waiver of or constitute a diminution of Landlord's right to withhold its
consent to any other assignment or subletting and shall not be construed to
relieve Tenant from obtaining Landlord's express written consent to any other or
further assignment or subletting.
ARTICLE 10
ENTRY; RIGHT TO CHANGE THE BUILDING
10.01. Landlord and Landlord's agents or designees shall have the right
to enter the Leased Property, during Business Hours upon notice given reasonably
in advance to Tenant, and in case of emergency without notice and at all other
times, without incurring any liability to Tenant therefor, for the following
purposes: (a) to perform any obligations of Landlord or to exercise any right
reserved to Landlord in this Lease, (b) to exhibit the Leased Property and any
parts thereof to any prospective purchaser, or to any present or prospective
mortgagee or ground lessor, or to the authorized representative of any
Governmental Authority or organization of fire underwriters, or, during the last
twelve months of the Term to any prospective tenant of the Leased Property (or
any part thereof), (c) to make or cause to be made such repairs, alterations or
improvements, or to permit electrical or other utility meters to be read, or to
perform such maintenance, including the maintenance of Building equipment, as
Landlord may deem necessary or desirable or as may be required pursuant to any
Legal Requirements or Insurance Requirements, and (d) to take into and store
upon the Leased Property all materials that may be required in connection with
any such repairs, alterations, improvements or maintenance. The taking of
materials into, and storing of such materials at the Leased Property in
accordance with the provisions of this Section 10.01 shall not constitute an
eviction of Tenant in whole or in part and the Fixed Rent and Additional Rent
reserved herein shall not abate while such repairs or alterations are being
made. In connection with any such entry by Landlord and Landlord's agents, all
reasonable security measures of Tenant shall be complied with and all reasonable
efforts shall be made so as to minimize any disruption of Tenant's operations.
ARTICLE 11
COMPLIANCE WITH LAWS
11.01. Tenant shall, at its expense, comply with all Legal Requirements
and Insurance Requirements. Without limiting the generality of the foregoing,
Tenant shall be obligated to reimburse Landlord for the cost of any alteration
of the Leased Property which shall be (a) necessitated by a condition which has
been created by Tenant, (b) attributable to the use or manner of use to which
Tenant puts the Leased Property, (c) required by reason of a breach of Tenant's
obligations hereunder, or (d) occasioned, in whole or in part, by any act,
omission or
-7-
<PAGE>
negligence of Tenant or any person claiming by, through or under Tenant, or any
of their assignees, subtenants, employees, agents, contractors, invitees or
licensees. Tenant shall pay all costs, expenses, fines, penalties and damages
which may be imposed upon Landlord or any Superior Mortgagee by reason of or
arising out of Tenant's failure fully and promptly to comply with the provisions
of this Section.
11.02. Notwithstanding anything to the contrary contained elsewhere in
this Lease and without limiting any other provision of this Lease by
implication, if any Governmental Authority promulgating or enforcing any Legal
Requirements or the Insurance Service Office, organization of fire underwriters
or any other body exercising the same or similar functions and having
jurisdiction or cognizance of all or any part of the Leased Property requires
that any changes, modifications, alterations or additional sprinkler heads or
other equipment be made or supplied in the Building sprinkler system or any
other portion of the Leased Property, Landlord shall make all such changes,
modifications, alterations and additions, the cost thereof shall be shared
equally by Landlord and Tenant, and Tenant shall pay its share of the cost
thereof to Landlord as Additional Rent within 5 Business Days after demand.
11.03. If Tenant receives written notice of any violation of any Legal
Requirement or Insurance Requirement, it shall give prompt notice thereof to
Landlord.
ARTICLE 12
HAZARDOUS MATERIALS
12.01. Without limiting the generality of Article 11, Tenant shall:
(a) comply with all applicable Environmental Laws and obtain and
comply with and maintain any and all licenses, approvals, registrations or
permits required by applicable Environmental Laws;
(b) refrain from storing, disposing of or releasing Hazardous
Materials in the Building or on the Land in violation of Environmental Laws;
(c) to the extent due to the release, emission or disposal of
Hazardous materials in or about the Leased Property during the Term hereof by
any action or inaction of Tenant or Tenant's employees, agents, licensees or
invitees, conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all orders and directives of all
Governmental Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not be reasonably expected to have a
material adverse effect on the business, operations, property, condition
(financial or otherwise) or prospects of the Tenant;
-8-
<PAGE>
(d) promptly notify Landlord in writing and in reasonable detail
of (i) any release or discharge of any Hazardous material by Tenant or any
affiliate thereof required to be reported under Environmental Laws to any
Governmental Authority; (ii) any condition, circumstance, occurrence or event
that could result in a material liability of Landlord, Tenant or any of their
respective affiliates under Environmental Laws or could result in the imposition
of any lien or other restriction on the title, ownership or transferability of
any of the Leased Property; and (iii) any proposed action to be taken by or on
behalf of the Tenant or any affiliate thereof that could subject the Tenant or
any affiliate thereof or the Leased Property or any portion thereof to any
material additional or different requirements or liabilities under any
Environmental Law; and
(e) defend, indemnify and hold harmless Landlord and its
employees, agents, officers, directors, successors and assigns from and against
any claims, demands, penalties, fines, liabilities, settlements, damages, costs,
and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to any violation of,
noncompliance with or liability under any Environmental Laws or any orders,
requirements or demands of Governmental Authority related thereto (including,
without limitation, attorneys' and consultants' fees, investigation and
laboratory fees, response costs, court costs and litigation expenses) by Tenant
or Tenant's employees, agents, licensees or invitees during the Term hereof,
except to the extent that any of the foregoing arise out of the negligence or
willful misconduct of the party seeking indemnification therefor. This
indemnity shall continue in full force and effect regardless of the termination
of this Lease.
12.02. For purposes of this Lease, the following terms shall have the
following meanings:
"ENVIRONMENTAL LAWS" shall mean any and all Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority, any and all Legal
Requirements and any and all common law requirements, rules and bases of
liability regulating, relating to or imposing liability or standards of conduct
concerning pollution or protection of human health or the environment, as now or
may at any time hereafter be in effect.
"HAZARDOUS MATERIALS" shall mean any hazardous or toxic substances,
materials or wastes, defined, listed, classified or regulated as such in or
under any Environmental Laws, including, without limitation, asbestos, petroleum
or petroleum products (including gasoline, crude oil or any fraction thereof),
polychlorinated biphenyls, and urea-formaldehyde insulation.
ARTICLE 13
ALTERATIONS PROHIBITED
Tenant shall make no alterations, modifications, replacements or other
changes to the Leased Property without Landlord's prior written consent,
provided, that Tenant may construct, at Tenant's sole cost and expense,
nonstructural alterations, additions and improvements to the Leased Property
without Landlord's prior written consent so long as the aggregate cost thereof
shall not exceed $50,000.00.
-9-
<PAGE>
ARTICLE 14
LANDLORD'S RIGHTS TO PERFORM
TENANT'S OBLIGATIONS
If Tenant shall default in the performance of any term or covenant on its
part to be performed under this Lease, Landlord, without being under any
obligation to do so and without thereby waiving such default, may upon the
expiration of the period allowed for the cure of such default, if any, provided
by this Lease (or with or without such expiration in case of emergency) remedy
such default. Tenant shall reimburse Landlord on demand for all costs and
expenses incurred by Landlord in the performance of Tenant's obligations
hereunder.
ARTICLE 15
LIABILITY OF LANDLORD; INDEMNIFICATION
15.01. Landlord and Landlord's agents have made no representations or
promises with respect to the Building, the Land or the Leased Property except as
herein expressly set forth. No rights, easements or licenses are acquired by
Tenant by implication or otherwise, except as expressly set forth in the
provisions of this Lease.
15.02. (a) Neither Landlord, any Superior Mortgagee nor any of their
respective employees, directors, officers and agents shall be liable for any
injury or damage to persons or property unless caused by or solely due to the
proven gross negligence or willful misconduct of Landlord, its agents or
employees. Landlord, its employees, directors, officers and agents shall in no
event be liable for any such damage, or for any injury, damage to or loss (by
theft or otherwise) of any property of Tenant, caused by other tenants or
persons in the Building.
(b) In no event shall Landlord be liable for incidental,
indirect, consequential, or special damages arising out of or in connection with
this Lease, including, without limitation, lost profits.
15.03. During the existence of any Superior Lease, the term "Landlord"
wherever used in this Lease shall be limited to mean and include only the owner
or owners at the time in question of the lessee's interest in the Land and the
Building pursuant to any such Superior Lease, so that in the event of any sale,
assignment or transfer, by operation of law or otherwise, of Landlord's interest
in the Land and the Building, such seller, assignor or transferor thereupon
automatically shall be released and discharged from all covenants, conditions
and agreements of Landlord hereunder; but, subject to the provisions of
Section 8.02 above, such covenants, conditions and agreements shall be deemed to
have been assumed by and be binding upon each new owner, assignee or transferee
for the time being of Landlord's interest in the Land and the Building, until
sold, assigned or transferred.
15.04. (a) Tenant shall indemnify and save harmless Landlord and its
agents and all Superior Mortgagees and their respective officers, directors,
agents and employees (collectively, the
-10-
<PAGE>
"INDEMNIFIED PARTIES" and each an "INDEMNIFIED PARTY") against and from (a) any
and all claims, actions and proceedings (i) arising from (x) the use and
occupancy of the Leased Property, or (y) any work or thing whatsoever done, or
any condition created by or on behalf of Tenant (other than by Landlord for
Landlord's account) in or about the Leased Property during the Term of this
Lease or during the period of time, if any, prior to the Commencement Date that
Tenant may have been given access to the Leased Property, or (ii) arising from
any negligent or otherwise wrongful act or omission of Tenant or any of its
subtenants or licensees or invitees or its or their employees, agents or
contractors, or (iii) arising from any breach or failure to observe any term,
covenant or condition of this Lease by Tenant or its agents or anyone claiming
by or through Tenant, and (b) all costs, expenses and liabilities incurred in or
in connection with each such claim, action or proceeding brought thereon
(including reasonable attorneys' fees and disbursements), except to the extent
that any of the foregoing arises out of the negligence or willful misconduct of
Landlord, its agents or employees or any breach of this Lease by Landlord or its
agents or anyone claiming by or through Landlord. In case any action or
proceeding be brought against any Indemnified Party by reason of any such claim,
Tenant, upon notice from Landlord or such Indemnified Party (if other than
Landlord), shall cause such action or proceeding to be defended at Tenant's
expense by counsel reasonably acceptable to Landlord.
(b) Landlord shall indemnify and save harmless Tenant and its
officers, directors, agents and employees (collectively, the "TENANT INDEMNIFIED
PARTIES" and each a "TENANT INDEMNIFIED PARTY") against and from (a) any and all
claims, actions and proceedings (i) arising from any negligent or otherwise
wrongful act or omission of Landlord or any of its licensees or invitees,
employees, agents or contractors, or (ii) arising from any breach or failure to
observe any term, covenant or condition of this Lease by Landlord or its agents
or anyone claiming by or through Landlord, and (b) all costs, expenses and
liabilities incurred in or in connection with each such claim, action or
proceeding brought thereon (including reasonable attorneys' fees and
disbursements), except to the extent that any of the foregoing arises out of the
negligence or willful misconduct of Tenant, its agents or employees or any
breach of this Lease by Tenant or its agents or anyone claiming by or through
Tenant. In case any action or proceeding be brought against any Tenant
Indemnified Party by reason of any such claim, Landlord, upon notice from Tenant
or such Tenant Indemnified Party (if other than Tenant), shall cause such action
or proceeding to be defended at Landlord's expense by counsel reasonably
acceptable to Tenant.
ARTICLE 16
INSURANCE
16.01. (a) Tenant shall, at its sole cost and expense, obtain and
maintain in full force and effect during the Term of this Lease, including any
renewal thereof, comprehensive general liability insurance protecting against
personal injury and property damage. Any basic policy and any umbrella policy
evidencing Tenant's liability insurance shall be written:
(i) in an aggregate amount of not less than $5,000,000
combined single limit per occurrence;
-11-
<PAGE>
(ii) with contractual liability coverage for Tenant's
liability (including indemnifications) under this Lease;
(iii)with an endorsement naming Landlord and, if required,
Landlord's agents, all Superior Mortgagees as additional insured; and
(iv) with an endorsement naming Tenant's employees as
insureds.
(b) Landlord shall, at its sole cost and expense, obtain and
maintain in full force and effect during the Term of this Lease, including any
renewal thereof, property insurance protecting against fire and other casualty
covering all of the Leased Property. Any policy evidencing Landlord's property
insurance shall be written with endorsements for extended coverage, vandalism
and malicious mischief and insuring full replacement value.
16.02. Tenant's liability insurance and Landlord's property insurance
shall be written by insurers of recognized financial standing which are
authorized to do an insurance business in the State of Indiana. Such insurance
may be evidenced by blanket insurance policies of Tenant or Landlord, as the
case may be, provided property insurance policies shall specifically allocate to
the Leased Property amounts of insurance adequate to meet the requirements of
Section 16.01(b) above. Tenant may not self-insure without Landlord's prior
written consent. Landlord or Tenant, as the case may be, shall cause to be
included in each policy a provision to the effect that the insurance evidenced
thereby shall be noncancellable except upon at least 60 days' prior written
notice to Landlord or Tenant, as the case may be. Tenant's liability insurance
shall not provide for deductibles in excess of $100,000. Landlord's property
insurance shall not provide for deductibles in excess of $500,000.
16.03. Landlord and Tenant each hereby releases and waives all right of
recovery against the other, and its respective agents, employees, partners,
officers, directors, shareholders and anyone claiming through or under each of
them by way of subrogation or otherwise for any loss or damage caused by fire or
casualty, whether or not such fire or casualty shall have been caused by the
fault or negligence of the other party. Landlord and Tenant shall each secure
an appropriate clause in, or an endorsement upon, each fire and extended
coverage policy obtained by it covering the Building, the Leased Property or the
Fixtures or the Special Tenant Improvements, as applicable, located therein
pursuant to which their respective insurance companies waive subrogation to the
full extent of such party's release of the other pursuant to the immediately
preceding sentence. If such waiver of subrogation shall be procurable only by
payment of an additional premium, the party in whose favor such waiver of
subrogation is obtained shall bear the cost thereof.
16.04. Tenant shall not do or permit to be done any act or thing in or
upon the Land or in the Building which will invalidate or be in conflict with
the terms of any insurance policies covering the Building and the fixtures and
property therein. Tenant shall comply with all rules, orders, regulations or
requirements of the any organization of fire underwriters or any other similar
body having jurisdiction, and shall not do or permit anything to be done in or
upon the Land or the Building or bring or keep anything therein or use the
Leased Property in a manner which would increase the rate of insurance upon the
Leased Property over the rate in effect at the commencement of the Term of
-12-
<PAGE>
this Lease or which would result in the cancellation of any policy of such
insurance or the assertion of any defense by the insurer to any claim under any
policy of insurance maintained by or for the benefit of Landlord.
ARTICLE 17
DAMAGE BY FIRE OR OTHER CAUSE
17.01. If the Leased Property shall be damaged by fire or other cause,
Tenant shall promptly notify Landlord thereof. If the damage is of such an
extent as to interfere materially with Tenant' s ability to conduct its
operations at the Building, Landlord shall, at Tenant's option as determined by
Tenant by written notice to Landlord given not more than 60 days following such
fire or other casualty, either (a) repair and restore any damaged portions of
the Leased Property to a condition suitable for Tenant's use, as promptly as
reasonably practicable, to the extent of and subject to receipt of insurance
proceeds from Landlord's insurer (plus an amount equal to the amount of any
applicable deductible) sufficient to pay the cost of such repair and
restoration, it being agreed that Landlord's obligation to so repair and restore
is expressly conditioned upon the receipt and sufficiency of such insurance
proceeds (plus an amount equal to any applicable deductible) and to the extent
such insurance proceeds are unavailable or insufficient, Tenant shall be solely
responsible for the cost (or the balance of the cost, as the case may be) to so
repair and restore, or (b) terminate this Lease by written notice to Tenant sent
not later than 60 days following such fire or other casualty, in which event the
Term shall expire upon the thirtieth day following such notice and Tenant shall
vacate the Leased Property and surrender the same to Landlord on or before the
date this Lease shall so terminate. Fixed Rent and Additional Rent shall be
abated for the portion of the Leased Property which is not usable by Tenant in
the ordinary conduct of its business from the date of such damage or destruction
until the date on which the Leased Property become usable by Tenant for the
ordinary conduct of its business. There shall be no abatement of Fixed Rent or
Additional Rent for any period of time for that portion of the Leased Property
which Tenant continues to occupy or has reoccupied. If there shall be any delay
in the process of restoration and repair due to any act or omission on the part
of Tenant, Fixed Rent and Additional Rent shall commence on the date the Leased
Property would have otherwise been completed but for such delay, as shall be
determined by Landlord in its judgment reasonably exercised. No penalty or
damage shall accrue for delays which may arise by reason of adjustment of
insurance on the part of Landlord, or for delays on account of Force Majeure.
Upon termination of this Lease in accordance with this Section 17.01, Tenant's
liability for rent shall cease, subject, however, to any claim by Landlord for
Fixed Rent and/or Additional Rent accruing on or before such date.
17.02. No damage, compensation or claims shall be payable by Landlord
for inconvenience, loss of business or annoyance to Tenant arising from any
damage by fire or other casualty or from any repair or restoration of any
portion of the Leased Property or of the Building but Landlord shall use
reasonable efforts to effect promptly any such repairs as may be undertaken by
Landlord pursuant to this Lease.
-13-
<PAGE>
17.03. Notwithstanding the provisions of Section 17.01, if, by reason of
some action or inaction on the part of Tenant or any of its employees, agents,
licensees or contractors, Landlord, or any Superior Mortgagee shall be unable to
collect all of the insurance proceeds (including rent insurance proceeds)
applicable to damage or destruction of the Leased Property by fire or other
casualty, then, without prejudice to any other remedy which may be available
against Tenant, the abatement of rent provided for in said Section 17.01 shall
not be effective to the extent of the uncollected insurance proceeds.
ARTICLE 18
CONDEMNATION
18.01. In the event that the whole or any portion of the Leased Property
the loss of which would materially interfere with Tenant's customary operations
at the Leased Property shall be condemned or taken in any manner for any public
or quasi-public use, this Lease and the Term and estate hereby granted shall
forthwith cease and terminate as of the date of the vesting of title in the
condemning authority. In the event of any such termination, this Lease and the
Term and estate hereby granted shall expire as of the date of such termination
with the same effect as if that were the date hereinbefore set for the
expiration of the Term, and the rent hereunder shall be apportioned as of such
date. In the event that only a part of the Leased Property the loss of which
does not materially interfere with Tenant's customary operations at the Leased
Property shall be so condemned or taken, then this Lease shall be and remain
unaffected by such condemnation or taking, except that, effective as of the date
of the vesting of title in the condemning authority, the Fixed Rent and
Additional Rent hereunder for such part shall be equitably abated and this Lease
shall continue as to such part not so taken.
18.02. In the event of any condemnation or taking hereinabove mentioned
of all or a part of the Leased Property, Landlord shall be entitled to receive
the entire award in the condemnation proceeding, including any award made for
the value of this Lease and for any unexpired portion of the Term, and Tenant
hereby expressly assigns to Landlord any and all right, title and interest of
Tenant now or hereafter arising in or to any such award or any part thereof and
Tenant shall not be entitled to receive any part of such award. Tenant shall
have no claim for the value of any unexpired term of this Lease. Tenant may
separately prosecute any claim it may have for Tenant's trade fixtures and its
moving expenses (if they are compensable) provided such prosecution does not
interfere with or reduce Landlord's claim.
ARTICLE 19
BANKRUPTCY
19.01. If a trustee in bankruptcy shall assume this Lease and shall
propose to assign the same pursuant to the provisions of the Bankruptcy Code,
11 U.S.C. 101 et seq. (the "BANKRUPTCY CODE") to any person or entity who shall
have made a bona fide offer to accept an assignment of this Lease on terms
acceptable to such trustee notice of such proposed assignment, setting forth
(i) the name and
-14-
<PAGE>
address of such person, (ii) all of the terms and conditions of such offer, and
(iii) the adequate assurance to be provided Landlord to assure such person's
future performance under this Lease, including, without limitation, the
assurance referred to in section 365(b)(3) of the Bankruptcy Code, shall be
given to Landlord by such trustee no later than twenty (20) days after receipt
by such trustee, but in any event no later than ten (10) days prior to the date
that such trustee shall make application to a court of competent jurisdiction
for authority and approval to enter into such assignment and assumption, and
Landlord shall thereupon have the prior right and option, to be exercised by
notice to Tenant given at any time prior to the effective date of such proposed
assignment, to accept an assignment of this Lease upon the same terms and
conditions and for the same consideration, if any, as the bona fide offer made
by such person, less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this Lease.
19.02. Any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall, upon demand,
execute and deliver to Landlord an instrument in recordable form confirming such
assumption.
ARTICLE 20
DEFAULT
20.01. (a) If (i) Tenant shall fail to pay Fixed Rent or Additional Rent
when due and such default continues for a period of five (5) days after written
notice thereof from Landlord; or (ii) Tenant shall default in fulfilling any of
the covenants of this Lease, other than the covenants for the payment of Fixed
Rent and Additional Rent, and such default continues for a period of twenty (20)
days after written notice from Landlord to Tenant specifying the nature of said
default, except that if the said default shall be of such a nature that the same
cannot, with reasonable diligence, be completely cured or remedied within said
twenty (20) days then Tenant shall not be deemed in default if Tenant diligently
commences curing such default within such twenty (20) day period, and shall
thereafter with diligence and in good faith proceed to remedy or cure such
default, but, in any event, Tenant shall complete such cure prior to the date on
which Landlord (A) would be subject to prosecution for a crime or (B) would be
in default of any Superior Mortgage or Superior Lease or (iii) any event shall
occur or any contingency shall arise whereby this Lease or the estate hereby
granted or the unexpired balance of the Term would, by operation of law or
otherwise, devolve upon or pass to any person other than Tenant, then in any of
the events described in the foregoing clauses (i), (ii) or (iii), Landlord may
serve a written three (3) day notice of cancellation of this Lease upon Tenant,
and upon the expiration of said three (3) days, this Lease and the Term
hereunder shall end and expire as fully and completely as if the date of
expiration of such three (3) day period were the Expiration Date of this Lease,
and Tenant shall then quit and surrender the Leased Property to Landlord but
Tenant shall remain liable as hereinafter provided.
(b) In the event of a breach or threatened breach by Tenant of
any of the covenants or provisions hereof, Landlord shall also have the right of
injunction.
-15-
<PAGE>
20.02. If the three (3) day notice provided for in Section 20.01 shall
have been given:
(a) Landlord and Landlord's agents may, without notice, re-enter
the Leased Property or any part thereof, and by summary proceedings or
otherwise, dispossess Tenant or the legal representative of Tenant or other
occupant of the Leased Property and remove their effects without liability for
damage thereto and hold the Leased Property as if this Lease had not been made
but Tenant shall remain liable hereunder as hereinafter provided; and
(b) Landlord may, at its option, relet the whole or any part or
parts of the Leased Property from time to time, either in the name of Landlord
or otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Expiration Date, at such rental or rentals and upon such other
conditions, which may include concessions and free rent periods, as Landlord in
its sole discretion may determine. Landlord shall have no obligation to relet
the Leased Property or any part thereof and shall in no event be liable for
refusal or failure to relet the Leased Property or any part thereof, or, in the
event of any such reletting, for refusal or failure to collect any rent upon any
such reletting, and no such refusal or failure shall operate to relieve Tenant
of any liability under this Lease or otherwise to affect any such liability.
Landlord, at Landlord's option, may make such repairs, improvements,
alterations, additions, decorations and other physical changes in and to the
Leased Property as Landlord, in its sole discretion, considers advisable or
necessary in connection with any such reletting or proposed reletting, without
relieving Tenant of any liability under this Lease or otherwise affecting any
such liability.
20.03. If this Lease shall terminate or if Landlord shall re-enter the
Leased Property as provided in this Article:
(a) Tenant shall pay to Landlord all rent to the date upon which
this Lease shall have been terminated or to the date of re-entry upon the Leased
Property by Landlord, as the case may be;
(b) Landlord shall be entitled to retain all monies, if any,
paid by Tenant to Landlord, whether as advance rent, security or otherwise, but
such monies shall be credited by Landlord against any rent due at the time of
such termination or re-entry or, at Landlord's option, against any damages
payable by Tenant;
(c) Tenant shall be liable for and shall pay to Landlord, as
damages, any deficiency between the rent payable hereunder for the period which
otherwise would have constituted the unexpired portion of the Term (conclusively
presuming the Additional Rent to be the same as was payable for the year
immediately preceding such termination or re-entry) and the net amount, if any,
of rents collected under any reletting effected pursuant to the provisions of
Section 20.02(b) for any part of such period (first deducting from the rents
collected under any such reletting all of Landlord's expenses in connection with
the termination of this Lease or Landlord's re-entry upon the Leased Property
and in connection with such reletting including all repossession costs,
brokerage commissions, legal expenses, alteration costs and other expenses of
preparing the Leased Property for such reletting);
-16-
<PAGE>
(d) Any deficiency in accordance with subsection (c) above shall
be paid in monthly installments by Tenant on the days specified in this Lease
for the payment of installments of Fixed Rent. Landlord shall be entitled to
recover from Tenant each monthly deficiency as the same shall arise and no suit
to collect the amount of the deficiency for any month shall prejudice Landlord's
right to collect the deficiency for any prior or subsequent month by a similar
proceeding. Alternatively, suit or suits for the recovery of such deficiencies
may be brought by Landlord from time to time at its election;
(e) Whether or not Landlord shall have collected any monthly
deficiencies as aforesaid, Landlord shall be entitled to recover from Tenant,
and Tenant shall pay Landlord, on demand, as and for liquidated and agreed final
damages and not as a penalty, a sum equal to the amount by which the Fixed Rent
and Additional Rent payable hereunder for the period to the Expiration Date from
the latest of the date of termination of this Lease, the date of re-entry or the
date through which monthly deficiencies shall have been paid in full
(conclusively presuming the Additional Rent for each year thereof to be the same
as that which was payable for the year immediately preceding such termination or
re-entry) exceeds the then fair and reasonable rental value of the Leased
Property for the same period, both discounted at the rate of 7% per annum to
present worth.
(f) In no event shall Tenant be entitled (i) to receive any
excess of any rent under subdivision (c) over the sums payable by Tenant to
Landlord hereunder or (ii) in any suit for the collection of damages pursuant to
this Section 20.03, to a credit in respect of any rent from a reletting except
to the extent that such rent is actually received by Landlord prior to the
commencement of such suit. If the Leased Property or any part thereof should be
relet in combination with other space, then proper apportionment on a square
foot area basis shall be made of the rent received from such reletting and the
expenses of reletting.
(g) If this Lease shall terminate or if the Landlord shall
re-enter the Leased Property:
(1) The Leased Property shall be, upon such earlier
termination or re-entry, in the same condition as that in which Tenant has
agreed to surrender them to Landlord on the Expiration Date;
(2) Tenant, on or before the occurrence of any default
hereunder, shall have performed every covenant contained in this Lease for the
making of any improvement or for repairing any part of the Leased Property and
(3) For the breach of either subdivision (a) or (b) of this
subsection, or both, Landlord shall be entitled immediately, without notice or
other action by Landlord, to recover, and Tenant shall pay, as and for agreed
damages therefor, the then cost of performing such covenants, plus interest
thereon at the Default Rate for the period from the date of the occurrence of
any default to the date of payment.
-17-
<PAGE>
(4) Each and every covenant contained in this
subsection (g) shall be deemed separate and independent and not dependent on any
other term of this Lease for the use and occupation of the Leased Property by
Tenant, and the performance of any such term shall not be considered to be rent
or other payment for the use of said Leased Property. It is understood that the
consideration for the covenants in this subsection (g) is the making of this
Lease, and the damages for failure to perform the same shall be in addition to
and separate and independent of the damages accruing by reason of default in
observing any other term of this Lease.
20.04. The remedies and rights provided for in this Lease are
cumulative. Mention in this Lease of any particular remedy shall not preclude
Landlord from pursuing any other remedy at law or equity.
20.05. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws.
20.06. The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease,
shall not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt or acceptance by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. No
provision of this Lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord. No endorsement or statement on
any check or any letter accompanying any check or payment as rent shall be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy in this Lease.
20.07. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease. Tenant shall
not interpose any counterclaim in any summary proceeding commenced by Landlord.
ARTICLE 21
QUIET ENJOYMENT
Landlord covenants and agrees that, as long as Tenant shall comply with all
obligations on its part to be performed hereunder, Tenant may peaceably and
quietly enjoy the Leased Property, subject to the terms and conditions of this
Lease.
ARTICLE 22
SURRENDER OF PREMISES
-18-
<PAGE>
22.01. Upon the expiration or sooner termination of this Lease or upon
re-entry by Landlord upon the Leased Property, Tenant shall at Tenant's expense
quit and surrender the Leased Property and deliver the same to Landlord in good
order, condition and repair, ordinary wear and tear and damage by fire or other
casualty excepted. Tenant shall pay to Landlord any insurance proceeds received
by Tenant attributable to damage to the Leased Property to the extent such
proceeds have not been used to restore such items in accordance with this Lease.
22.02. Any items which shall remain in the Leased Property after the
Expiration Date, or after an earlier termination date, may, at the option of
Landlord, be deemed to have been abandoned, and in such case such items may be
retained by Landlord as its property or disposed of by Landlord, without
accountability, in such manner as Landlord shall determine at Tenant's expense.
Tenant's obligation to reimburse Landlord for its costs so incurred shall
survive expiration or termination of this Lease.
22.03. If Tenant remains in possession of the Leased Property after the
termination of this Lease without the execution of a new lease, the parties
recognize and agree that the damage to Landlord will be substantial, will exceed
the amount of monthly Fixed Rent and Additional Rent theretofore payable
hereunder and will be impossible to measure accurately. Tenant, therefore, at
the option of Landlord, shall be deemed to be occupying the Leased Property as a
tenant from month to month, at a monthly rental equal to two and one-half times
the Fixed Rent and Additional Rent payable during the last month of the Term,
subject to all of the other terms of this Lease insofar as the same are
applicable to a month-to-month tenancy. Further, Tenant hereby indemnifies
Landlord against liability resulting from delay by Tenant in so surrendering the
Leased Property, including (a) any claims made by any purchaser or prospective
purchaser, succeeding tenant or prospective tenant founded upon such delay,
(b) any payment or rent concession which Landlord may be required to make to any
purchaser or prospective purchaser, succeeding or prospective tenant for all or
any part of the Premises in order to induce such purchaser or tenant not to
terminate its purchase agreement or lease, as the case may be, or its
negotiation therefor by reason of Tenant's delay in so surrendering the Leased
Property and (c) any loss suffered if a purchaser or prospective purchaser or
succeeding or prospective tenant shall terminate its purchase agreement or
lease, as the case may be, or not proceed to close on a purchase or execute and
deliver its purchase agreement or lease, as the case may be, by reason of
Tenant's delay in so surrendering the Leased Property. Nothing herein contained
shall be deemed to permit Tenant to remain in possession of the Leased Property
after the expiration or sooner termination of the term of this Lease.
22.04. No agreement to accept a surrender of all or any part of the
Leased Property or this Lease shall be valid unless in writing and signed by
Landlord. No delivery of keys shall operate as a termination of this Lease or a
surrender of the Leased Property or this Lease.
ARTICLE 23
NOTICES
-19-
<PAGE>
All notices and communications permitted or required to be given pursuant
to this Lease shall given in the manner, and to the addresses, provided in the
Asset Purchase Agreement dated as of January 21, 1996 (the "AGREEMENT"), in
connection with which this Lease is being executed.
ARTICLE 24
MISCELLANEOUS
24.01. This Lease with its annexed Exhibits and the Agreement contain
the entire agreement between Landlord and Tenant, all prior negotiations and
agreements are merged into this Lease and any agreement hereafter made between
Landlord and Tenant shall be ineffective to change, modify, waive, release,
discharge or terminate or effect an abandonment of this Lease, in whole or in
part, unless such agreement shall be in writing and executed by the party to be
charged.
24.02. If any term, covenant, condition or provision of this Lease shall
be invalid or unenforceable to any extent, the remaining terms, covenants,
conditions and provisions of this Lease shall not be affected thereby. This
lease shall be construed without regard to any presumption or other rule
requiring construction against the party causing this lease to be drafted. Each
covenant, agreement, obligation or other provision of this lease on Tenant's
part to be performed, shall be deemed and construed as a separate and
independent covenant of Tenant, not dependent on any other provision of this
Lease.
24.03. Nothing contained in this Lease shall be deemed to confer upon
any person other than the parties hereto and their respective successors and
assigns (to the extent assignment is permitted pursuant to Article 9 hereof) any
right or benefit, including any right to insist upon, or to enforce against
Landlord or Tenant, the performance of such party's obligations hereunder.
24.04. Whenever this Lease requires an approval or consent by either
Landlord or Tenant, unless another standard is expressly stated, such approval
or consent and any conditions imposed thereby shall be reasonable and shall not
be unreasonably withheld or delayed and, in exercising any right or remedy
hereunder, each party shall at all times act reasonably and in good faith. Any
expenditure by a party permitted or required under this Lease for which such
party is entitled to demand reimbursement shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred and shall
be substantiated, upon request, by documentary evidence.
24.05. The submission by Landlord to Tenant of this Lease in draft form
shall be deemed submission solely for Tenant's consideration and not for
acceptance and execution. Such submission shall have no binding force and
effect, shall not constitute an option for the leasing of the Leased Property,
and shall not confer any rights or impose any obligations upon either party.
The submission by Landlord of this Lease for execution by Tenant and the actual
execution and delivery thereof by Tenant to Landlord shall similarly have no
binding force and effect on Landlord unless and until Landlord shall have
executed this Lease and a counterpart thereof shall have been delivered to
Tenant and all consents required pursuant to any Superior Mortgage or Superior
Lease have been received.
-20-
<PAGE>
24.06. This Lease shall bind and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
24.07. Tenant shall not record or file this Lease or any memorandum or
other notation thereof in any public records.
24.08. Tenant shall have access to driveways, parking lots, sidewalks
and similar surface improvements on Landlord's immediately adjoining property
for parking and ingress and egress to and from the Leased Property, provided,
that Landlord reserves the right to limit such access to the extent Landlord
reasonably determines the same poses security concerns, provided further, that
there shall be no material interference with Tenant's reasonable access to and
use of the Leased Premises for the purposes described in Section 5.01.
-21-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease on the date first above written.
STATE ROAD PROPERTIES L.P.
By: HR LEASING CORP., its General Partner
By: /s/ James L. Ziemer
------------------------------
Name: James L. Ziemer
Title: VP
MONACO COACH CORPORATION
By: /s/ John W. Nepute
------------------------------
Name: John W. Nepute
Title: VP Finance
-22-
<PAGE>
PHYSICAL ADDRESS
- ----------------
7 S.R. 19
Wakarusa, Indiana 46573
[Graphic: drawing of building 7]
-23-
<PAGE>
Exhibit B
---------
LEGAL DESCRIPTION OF LAND
-------------------------
Deliberately Omitted
<PAGE>
Exhibit C
---------
PERMITTED USES
--------------
The design, manufacture, marketing, wholesale sale and factory servicing of
recreational vehicles and related parts and accessories.
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF LEASE
-------------------------------------
THIS FIRST AMENDMENT TO AGREEMENT OF LEASE is made and entered into
effective as of March 4, 1996 by and between State Road Properties L.P., a
Delaware limited partnership ("Landlord") and Monaco Coach Corporation, a
Delaware corporation ("Tenant").
WITNESSETH:
A. Landlord and Tenant are parties to that certain Agreement of Lease
dated March 4, 1996 (the "Lease") regarding certain land and improvements
described in the Lease as located at 7 State Road 19, Wakarusa, Indiana 46573
and commonly known as Plant 3 (the "Leased Property"). Capitalized terms used
but not defined herein shall have the meanings given such terms in the Lease.
B. Landlord and Tenant have agreed to amend the Lease so as to correct a
mutual mistake concerning rent as set forth in the Lease and so as to reflect
the agreed upon rent as actually paid from Tenant to Landlord.
NOW, THEREFORE, Landlord and Tenant hereby agrees as follows:
25 Section 3.01(a) of the Lease is hereby deleted in its entirety and
replaced by the following:
"3.01(a) Tenant covenants and agrees to pay to Landlord a
fixed minimum rent ("FIXED RENT") during the Term of this
Lease, equal to $70,936.56 per annum (pro rated in the case
of partial years), payable in equal monthly installments of
$5,911.38."
26 Except as specifically amended hereby, all of the terms of the Lease
are and shall remain in full force and effect and hereby ratified and confirmed.
The capitalized term "Lease" as used in the Lease shall be deemed to mean and
refer to the Lease, as amended by this First Amendment to Agreement of Lease.
-2-
<PAGE>
IN WITNESS WHEREOF, this First Amendment to Agreement of Lease has been
duly executed by Landlord and Tenant as of the date first above written.
STATE ROAD PROPERTIES, L.P.
By: HR LEASING CORP.,
its General Partner
By: /s/ James Ziemer
------------------------------
Title: Vice President
-----------------------------
MONACO COACH CORPORATION
By: /s/ Kay Toolson
------------------------------
Title: Chief Executive Officer
-----------------------------
-3-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A G R E E M E N T O F L E A S E
STATE ROAD PROPERTIES L.P.,
Landlord
MONACO COACH CORPORATION,
Tenant
March 4, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.16
[TOWABLES]
AGREEMENT OF LEASE, dated this 4th day of March, 1996, between STATE ROAD
PROPERTIES L.P., a Delaware Limited Partnership having an office at 3700 West
Juneau Road, Milwaukee, Wisconsin, 53208 ("LANDLORD") and MONACO COACH
CORPORATION, a Delaware corporation having an office at 1809 West Hively, P.O.
Box 4313, Elkhart, Indiana 46517 ("TENANT").
ARTICLE 1
PREMISES; TERM
1.01. Subject to and in accordance with all of the covenants and
conditions of this Lease, Landlord hereby leases to Tenant and Tenant hereby
hires from Landlord the improvements (together with the heating, ventilating and
air conditioning systems located therein, the "BUILDING") more particularly
described on Exhibit A attached hereto together with the land on which the
Building is located, more particularly described on Exhibit B attached hereto
(the "LAND"; the Land and the Building, collectively, the "LEASED PROPERTY").
1.02. The Leased Property shall be leased for a term (together with any
Extension Term, the "TERM") commencing on March 4, 1996 (the "COMMENCEMENT
DATE") and expiring on the date (the "EXPIRATION DATE") immediately preceding
the first anniversary of the Commencement Date, unless the Term shall terminate
sooner pursuant to any of the terms of this Lease or pursuant to law and subject
to the following provisions of this Section 1.02. Tenant shall have two
successive options to extend the Expiration Date for one year (each such one
year extension period, an "EXTENSION TERM"). If the first such option is
exercised as provided herein, the Expiration Date shall be the date immediately
preceding the second anniversary of the Commencement Date. If the first such
option and the second such option are exercised as provided herein, the
Expiration Date shall be the date immediately preceding the third anniversary of
the Commencement Date. Any such extension option shall be exercised by written
notice to Landlord no later than 120 days prior to the Expiration Date as in
effect prior to the exercise of such option. If the first such option is not
exercised, Tenant shall have no rights with respect to the second such option.
During the last six months of any Extension Term, Tenant shall have the right to
terminate this Lease on thirty days' written notice to Landlord. Such
termination shall be effective as of the first day of the calendar month
beginning at least thirty days after the sending of such notice. On such
effective termination date, the Term shall end with the same effect as if such
effective termination date were the Expiration Date originally set forth herein.
ARTICLE 2
CONDITION OF LEASED PROPERTY
Tenant has inspected the Leased Property and is thoroughly acquainted with
its condition. As a condition of Landlord's agreement hereunder, Tenant agrees
to take possession of and accept each
<PAGE>
portion of the Leased Property in its "as is" condition as at the date of this
Lease. Landlord shall have no obligation to do any work or perform any services
with respect to the Leased Property except as specifically set forth in this
Lease.
ARTICLE 3
RENT
3.01.(a) Tenant covenants and agrees to pay to Landlord a fixed minimum
rent ("FIXED RENT") during the Term of this Lease, equal to $5,948.64 per annum
(pro rated in the case of partial years), payable in equal monthly installments
of $495.72.
(b) Monthly installments of Fixed Rent shall be payable without
notice or demand in advance on the first day of each month during the Term. If
the date on which Fixed Rent first becomes payable hereunder occurs on a day
other than the first day of a calendar month, Fixed Rent for such calendar month
shall be pro-rated on a PER DIEM basis.
3.02. All adjustments of rent, costs, charges, expenses and
reimbursements and all other sums of money which Tenant is obligated to pay to
Landlord pursuant to this Lease shall be deemed additional rent ("ADDITIONAL
RENT") which Tenant covenants to pay when due. Except as otherwise specified in
this Lease, all Additional Rent shall be due from and payable by Tenant on the
twentieth (20th) day after Landlord has rendered its bill therefor. Landlord
shall have all the rights and remedies with respect to nonpayment of Additional
Rent as are provided herein for nonpayment of Fixed Rent.
3.03. All Fixed Rent and Additional Rent shall be payable by Tenant to
Landlord in lawful money of the United States of America at the office of
Landlord or at such other place as Landlord may designate from time to time
without offset, abatement counterclaim or deduction in lawful money of the
United States of America. All Fixed Rent and Additional Rent shall be paid by
either (i) a good and sufficient check drawn on a bank which is a member of a
nationally recognized clearing house association or (ii) a wire transfer of
immediately available funds to Landlord's account.
3.04. If any installment of Fixed Rent or any Additional Rent is not
paid when due Tenant shall also pay interest thereon (which interest shall be
immediately due and payable and shall constitute Additional Rent) at a rate (the
"DEFAULT RATE") equal to ten percent (10%) per annum, computed from the date
such payment was first due through the date paid. Notwithstanding the
imposition of such interest, Tenant shall be in default under this Lease if any
or all payments required to be made by Tenant are not made at the time herein
stipulated, and neither the demand for, nor collection by Landlord of, such
interest shall be construed as a curing of such default on the part of Tenant.
-2-
<PAGE>
ARTICLE 4
TAXES
4.01. Landlord shall pay all taxes, assessments and fees levied upon
the Leased Property or the rents collected therefrom, by any Governmental
Authority based upon the ownership, leasing, renting or operation of the Leased
Property, including all costs and expenses of protesting any such taxes,
assessments or fees ("TAXES").
ARTICLE 5
USE
5.01. Tenant shall use and occupy the Leased Property, for the purposes
shown on Exhibit C and for no other purpose and only as permitted by any
applicable law, rule or regulation or determination (a "LEGAL REQUIREMENT") of
the federal government, any state or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government (any of the foregoing, a "GOVERNMENTAL
AUTHORITY").
5.02. Tenant shall not use, occupy or permit the Leased Property (or
any part thereof) to be used in any manner, or permit anything to be brought
into or kept within the Leased Property, which, in Landlord's judgment, would
(i) violate the Certificate of Occupancy issued for the Building, (ii) violate
the provisions of any Superior Lease or Superior Mortgage, (iii) cause injury or
damage to the Leased Property or any part thereof, (iv) interfere with or impair
the Building's systems and equipment or the proper and economical maintenance
and operation of the Leased Property, (v) change the character of the Building,
(vi) violate any Legal Requirement or any requirements of any insurance policy
covering or applicable to all or any part of the Leased Property or the use
thereof, all requirements of the issuer of any such policy and all orders,
rules, regulations, recommendations and other requirements of any organization
of fire underwriters or the Insurance Service Office or any other body
exercising the same or similar functions and having jurisdiction or cognizance
of all or any part of the Leased Property (collectively, "INSURANCE
REQUIREMENTS"), (vii) violate any applicable Environmental Law or (viii) or
cause the presence of any Hazardous Material on or under the Land or within the
Building in violation of any applicable Environmental Law.
5.03. If any license or permit from any Governmental Authority shall be
required for the proper and lawful occupancy of the Leased Property and if
failure to secure such license or permit would in any way adversely affect
Landlord or the Leased Property, then Tenant, at its sole expense, shall procure
and deliver a copy of such license or permit to Landlord and thereafter maintain
such license or permit. Tenant shall at all times comply with the provisions of
each such license and permit.
-3-
<PAGE>
ARTICLE 6
MAINTENANCE AND REPAIR
6.01. Tenant shall be solely responsible for the cost and performance
of all maintenance, service, repair and replacement of any portion of the
Building, it being understood and agreed that Landlord shall have no general
duty (either to Tenant or to third parties) to keep the Leased Property in good
order and repair and that Landlord shall have no obligation to perform or pay
for the cost of any such maintenance, service, repair or replacement except to
the extent expressly provided for in this Article 6. As long as this Lease is in
full force and effect Landlord shall promptly upon request by Tenant reimburse
Tenant for the cost of any repair or replacement of any heating, ventilating and
air-conditioning system or structural or other similar portion of the Building
or Building system that becomes unusable such that the operation of Tenant's
business for the purposes described in Section 5.01 shall be materially
impaired; PROVIDED, that written notice, given reasonably in advance considering
the nature of the repair, shall have been provided to Landlord, which notice
shall set forth, in reasonable detail, the nature and scope of the repair and
the estimated cost thereof and PROVIDED further, that Landlord will be obligated
to reimburse Tenant only to the extent reasonably necessary such that Tenant's
business for the purposes described in Section 5.01 shall no longer be so
materially impaired. Tenant agrees and acknowledges that Landlord's
reimbursement obligation as set forth above is being undertaken by Landlord as
an accommodation to Tenant due to the short-term nature of this Lease. Tenant
agrees and acknowledges that it is Tenant's duty and obligation to inspect the
Leased Property from time to time, to conduct day-to-day maintenance of the
Leased Property and to perform any repairs and replacements that are required
either for Tenant's operations or for the health and safety of persons present
at the Leased Property.
6.03 Except as expressly provided above in this Article 6, Landlord
shall have no obligations to repair or maintain the Leased Property or to
provide other services to Tenant or to pay for any of the costs thereof. Tenant
acknowledges that, except as otherwise set forth herein, Tenant is solely
responsible for cleaning, security, maintenance and operation of the Building's
systems and the costs thereof.
ARTICLE 7
UTILITY SERVICE
Tenant shall obtain and pay for the supply of electric current, water
supply, sewerage service and any other utility services to the Leased Property
by direct application to and arrangement with the respective public utility
companies servicing the Building. Tenant shall be responsible for direct
payment for all such utilities and shall abide by all rules and regulations
imposed by any such utility company.
-4-
<PAGE>
ARTICLE 8
SUBORDINATION; ESTOPPEL CERTIFICATE
8.01. This Lease and all rights of Tenant hereunder are subject and
subordinate to all mortgages which may now or hereafter affect Landlord's
interest in the Leased Property or any part thereof (all such mortgages,
collectively, the "SUPERIOR MORTGAGES"), and to all renewals, modifications,
consolidations, replacements and extensions of Superior Mortgages. This Section
shall be self-operative and no further instrument of subordination shall be
required .In confirmation of such subordination, Tenant agrees to promptly
execute and deliver at Tenant's sole cost and expense any instrument (in
recordable form, if requested) that Landlord or the holder of any Superior
Mortgage (a "SUPERIOR MORTGAGEE") may request to evidence such subordination.
8.02. If the interests of Landlord under this Lease are transferred by
reason of, or assigned in lieu of, foreclosure or other proceedings for
enforcement of any such Superior Mortgage then Tenant shall, at the option of
such purchaser or assignee, as the case may be, (x) attorn to such party and
perform for its benefit all the terms, covenants and conditions of this Lease on
Tenant's part to be performed with the same force and effect as if such party
were the landlord originally named in this Lease, or (y) enter into a new lease
with such party, as landlord, for the remaining Term and otherwise on the same
terms and conditions of this Lease except that such successor landlord shall not
be (i) liable for any previous act, omission or negligence of Landlord under
this Lease; (ii) subject to any counterclaim, defense or offset which
theretofore shall have accrued to Tenant against Landlord; (iii) bound by any
previous modification or amendment of this Lease or by any previous prepayment
of more than one month's rent, unless such modification, amendment or prepayment
shall have been approved in writing by the Superior Mortgagee through or by
reason of which such successor landlord shall have succeeded to the rights of
Landlord under this Lease; (iv) obligated to repair the Leased Property or any
part thereof in the event of total or substantial damage, beyond such repair as
can reasonably be accomplished from the net proceeds of insurance actually made
available to such successor landlord; (v) obligated to repair the Leased
Property or any part thereof in the event of partial condemnation, beyond such
repair as can reasonably be accomplished from the net proceeds of any award
actually made available to such successor landlord, as consequential damages
allocable to the part of the Leased Property not taken; nor (vi) obligated to
perform any work to prepare or finish the Leased Property for occupancy by
Tenant. Nothing contained in this Section shall be construed to impair any
right otherwise exercisable by any such owner, holder or lessee. Landlord shall
use reasonable efforts to obtain from the holder of any Superior Mortgage and
the landlord under any Superior Lease a written recognition agreement providing
that in the event of the foreclosure of such Superior Mortgage or termination of
such Superior Lease, so long as no default by Tenant shall have occurred and be
continuing hereunder, Tenant's rights of occupancy shall not be disturbed and
Tenant shall receive all of its rights provided for under this Lease.
8.03. If any act or omission by Landlord would give Tenant the right,
immediately or after lapse of time, to cancel or terminate this Lease or to
claim a partial or total eviction, abatement of rent, setoff or counterclaim,
Tenant will not exercise any such right until (i) it has given written notice of
such act or omission to each Superior Mortgagee whose name and address shall
have previously been furnished to Tenant, by delivering notice of such act or
omission addressed to each such party at
-5-
<PAGE>
its last address so furnished, (ii) Landlord shall have failed to cure the same
within the time limits set forth in this Lease, and (iii) following the giving
of such notice, no Superior Mortgagee shall have remedied such act or omission
(x) in the case of an act or omission which is capable of being remedied without
possession of the Building, within the cure period available to Landlord under
this Lease plus sixty (60) days and (y) in the case of any act or omission which
is incapable of being remedied without possession of the Building, within sixty
(60) days following the date on which possession is obtained, PROVIDED a
Superior Mortgagee has promptly commenced action to obtain possession and shall
diligently pursue such action to completion and PROVIDED FURTHER that such
Superior Mortgagee shall, with reasonable diligence, give Tenant notice of its
intention to, and commence and continue to, remedy such act or omission or cause
the same to be remedied.
8.04. If any Superior Mortgagee or prospective Superior Mortgagee shall
request modifications of this Lease as a condition to the provision, continuance
or renewal of any such financing, Tenant will not unreasonably withhold, delay
or defer its consent thereto, provided that such modifications do not materially
adversely increase the obligations of Tenant hereunder or materially diminish
Tenant's rights under this Lease.
8.05. Tenant agrees, at any time and from time to time, upon not less
than fifteen (15) days' prior notice from Landlord to execute, acknowledge and
deliver to Landlord or such other person that Landlord may designate a written
certification stating (a) that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), (b) that Tenant has accepted
possession of the Leased Property, (c) the dates to which the Fixed Rent and
Additional Rent have been paid, (d) whether or not there exists any default on
the part of Landlord under this Lease, and, if so, specifying each such default
and (e) such further information with respect to this Lease or the Leased
Property that Landlord may reasonably request. Landlord agrees, at any time and
from time to time, upon not less than fifteen (15) days' prior notice from
Tenant to execute, acknowledge and deliver to Tenant a written certification
stating (a) that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), (b) the dates to which the Fixed Rent
and Additional Rent have been paid, (c) whether or not there exists any default
on the part of Tenant under this Lease, and, if so, specifying each such default
and (e) such further information with respect to this Lease that Tenant may
reasonably request.
ARTICLE 9
ASSIGNMENT AND SUBLETTING PROHIBITED
9.01. Tenant, its legal representatives and successors in interest,
shall not by operation of law or otherwise, assign (in whole or in part),
mortgage, pledge, encumber or otherwise transfer this Lease or any part hereof
or any interest of Tenant herein or in the Leased Property by reason hereof, or
sublet the Leased Property, without Landlord's prior written consent. No
assignment of this Lease shall be effective unless the assignee shall execute,
acknowledge and deliver to Landlord an agreement, in form satisfactory to
Landlord, whereby the assignee assumes all obligations of Tenant
-6-
<PAGE>
under this Lease, and agrees that the provisions of this Article 9 shall
continue to be binding upon it in respect of all future assignments and deemed
assignments of this Lease. No assignment of this Lease shall release the
assignor from its continuing obligations to Landlord under this Lease and Tenant
and any subsequent assignor shall continue to remain jointly and severally
liable (as primary obligor) for all Tenant's obligations hereunder.
9.02. The consent by Landlord to any assignment or subletting shall not
be a waiver of or constitute a diminution of Landlord's right to withhold its
consent to any other assignment or subletting and shall not be construed to
relieve Tenant from obtaining Landlord's express written consent to any other or
further assignment or subletting.
ARTICLE 10
ENTRY; RIGHT TO CHANGE THE BUILDING
10.01. Landlord and Landlord's agents or designees shall have the right
to enter the Leased Property, during Business Hours upon notice given reasonably
in advance to Tenant, and in case of emergency without notice and at all other
times, without incurring any liability to Tenant therefor, for the following
purposes: (a) to perform any obligations of Landlord or to exercise any right
reserved to Landlord in this Lease, (b) to exhibit the Leased Property and any
parts thereof to any prospective purchaser, or to any present or prospective
mortgagee or ground lessor, or to the authorized representative of any
Governmental Authority or organization of fire underwriters, or, during the last
twelve months of the Term to any prospective tenant of the Leased Property (or
any part thereof), (c) to make or cause to be made such repairs, alterations or
improvements, or to permit electrical or other utility meters to be read, or to
perform such maintenance, including the maintenance of Building equipment, as
Landlord may deem necessary or desirable or as may be required pursuant to any
Legal Requirements or Insurance Requirements, and (d) to take into and store
upon the Leased Property all materials that may be required in connection with
any such repairs, alterations, improvements or maintenance. The taking of
materials into, and storing of such materials at the Leased Property in
accordance with the provisions of this Section 10.01 shall not constitute an
eviction of Tenant in whole or in part and the Fixed Rent and Additional Rent
reserved herein shall not abate while such repairs or alterations are being
made. In connection with any such entry by Landlord and Landlord's agents, all
reasonable security measures of Tenant shall be complied with and all reasonable
efforts shall be made so as to minimize any disruption of Tenant's operations.
ARTICLE 11
COMPLIANCE WITH LAWS
11.01. Tenant shall, at its expense, comply with all Legal Requirements
and Insurance Requirements. Without limiting the generality of the foregoing,
Tenant shall be obligated to reimburse Landlord for the cost of any alteration
of the Leased Property which shall be (a) necessitated by a condition which has
been created by Tenant, (b) attributable to the use or manner of use to which
Tenant puts the Leased Property, (c) required by reason of a breach of Tenant's
obligations hereunder, or (d) occasioned, in whole or in part, by any act,
omission or
-7-
<PAGE>
negligence of Tenant or any person claiming by, through or under Tenant, or any
of their assignees, subtenants, employees, agents, contractors, invitees or
licensees. Tenant shall pay all costs, expenses, fines, penalties and damages
which may be imposed upon Landlord or any Superior Mortgagee by reason of or
arising out of Tenant's failure fully and promptly to comply with the provisions
of this Section.
11.02. Notwithstanding anything to the contrary contained elsewhere in
this Lease and without limiting any other provision of this Lease by
implication, if any Governmental Authority promulgating or enforcing any Legal
Requirements or the Insurance Service Office, organization of fire underwriters
or any other body exercising the same or similar functions and having
jurisdiction or cognizance of all or any part of the Leased Property requires
that any changes, modifications, alterations or additional sprinkler heads or
other equipment be made or supplied in the Building sprinkler system or any
other portion of the Leased Property, Landlord shall make all such changes,
modifications, alterations and additions, the cost thereof shall be shared
equally by Landlord and Tenant, and Tenant shall pay its share of the cost
thereof to Landlord as Additional Rent within 5 Business Days after demand.
11.03. If Tenant receives written notice of any violation of any Legal
Requirement or Insurance Requirement, it shall give prompt notice thereof to
Landlord.
ARTICLE 12
HAZARDOUS MATERIALS
12.01. Without limiting the generality of Article 11, Tenant shall:
(a) comply with all applicable Environmental Laws and obtain and
comply with and maintain any and all licenses, approvals, registrations or
permits required by applicable Environmental Laws;
(b) refrain from storing, disposing of or releasing Hazardous
Materials in the Building or on the Land in violation of Environmental Laws;
(c) to the extent due to the release, emission or disposal of
Hazardous materials in or about the Leased Property during the Term hereof by
any action or inaction of Tenant or Tenant's employees, agents, licensees or
invitees, conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all orders and directives of all
Governmental Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not be reasonably expected to have a
material adverse effect on the business, operations, property, condition
(financial or otherwise) or prospects of the Tenant;
-8-
<PAGE>
(d) promptly notify Landlord in writing and in reasonable detail of
(i) any release or discharge of any Hazardous material by Tenant or any
affiliate thereof required to be reported under Environmental Laws to any
Governmental Authority; (ii) any condition, circumstance, occurrence or event
that could result in a material liability of Landlord, Tenant or any of their
respective affiliates under Environmental Laws or could result in the imposition
of any lien or other restriction on the title, ownership or transferability of
any of the Leased Property; and (iii) any proposed action to be taken by or on
behalf of the Tenant or any affiliate thereof that could subject the Tenant or
any affiliate thereof or the Leased Property or any portion thereof to any
material additional or different requirements or liabilities under any
Environmental Law; and
(e) defend, indemnify and hold harmless Landlord and its employees,
agents, officers, directors, successors and assigns from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs, and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to any violation of, noncompliance with
or liability under any Environmental Laws or any orders, requirements or demands
of Governmental Authority related thereto (including, without limitation,
attorneys' and consultants' fees, investigation and laboratory fees, response
costs, court costs and litigation expenses) by Tenant or Tenant's employees,
agents, licensees or invitees during the Term hereof, except to the extent that
any of the foregoing arise out of the negligence or willful misconduct of the
party seeking indemnification therefor. This indemnity shall continue in full
force and effect regardless of the termination of this Lease.
12.02. For purposes of this Lease, the following terms shall have the
following meanings:
"ENVIRONMENTAL LAWS" shall mean any and all Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority, any and all Legal
Requirements and any and all common law requirements, rules and bases of
liability regulating, relating to or imposing liability or standards of conduct
concerning pollution or protection of human health or the environment, as now or
may at any time hereafter be in effect.
"HAZARDOUS MATERIALS" shall mean any hazardous or toxic substances,
materials or wastes, defined, listed, classified or regulated as such in or
under any Environmental Laws, including, without limitation, asbestos, petroleum
or petroleum products (including gasoline, crude oil or any fraction thereof),
polychlorinated biphenyls, and urea-formaldehyde insulation.
ARTICLE 13
ALTERATIONS PROHIBITED
Tenant shall make no alterations, modifications, replacements or other
changes to the Leased Property without Landlord's prior written consent,
provided, that Tenant may construct, at Tenant's sole cost and expense,
nonstructural alterations, additions and improvements to the Leased Property
without Landlord's prior written consent so long as the aggregate cost thereof
shall not exceed $50,000.00.
-9-
<PAGE>
ARTICLE 14
LANDLORD'S RIGHTS TO PERFORM
TENANT'S OBLIGATIONS
If Tenant shall default in the performance of any term or covenant on its
part to be performed under this Lease, Landlord, without being under any
obligation to do so and without thereby waiving such default, may upon the
expiration of the period allowed for the cure of such default, if any, provided
by this Lease (or with or without such expiration in case of emergency) remedy
such default. Tenant shall reimburse Landlord on demand for all costs and
expenses incurred by Landlord in the performance of Tenant's obligations
hereunder.
ARTICLE 15
LIABILITY OF LANDLORD; INDEMNIFICATION
15.01. Landlord and Landlord's agents have made no representations or
promises with respect to the Building, the Land or the Leased Property except as
herein expressly set forth. No rights, easements or licenses are acquired by
Tenant by implication or otherwise, except as expressly set forth in the
provisions of this Lease.
15.02. (a) Neither Landlord, any Superior Mortgagee nor any of their
respective employees, directors, officers and agents shall be liable for any
injury or damage to persons or property unless caused by or solely due to the
proven gross negligence or willful misconduct of Landlord, its agents or
employees. Landlord, its employees, directors, officers and agents shall in no
event be liable for any such damage, or for any injury, damage to or loss (by
theft or otherwise) of any property of Tenant, caused by other tenants or
persons in the Building.
(b) In no event shall Landlord be liable for incidental, indirect,
consequential, or special damages arising out of or in connection with this
Lease, including, without limitation, lost profits.
15.03. During the existence of any Superior Lease, the term "Landlord"
wherever used in this Lease shall be limited to mean and include only the owner
or owners at the time in question of the lessee's interest in the Land and the
Building pursuant to any such Superior Lease, so that in the event of any sale,
assignment or transfer, by operation of law or otherwise, of Landlord's interest
in the Land and the Building, such seller, assignor or transferor thereupon
automatically shall be released and discharged from all covenants, conditions
and agreements of Landlord hereunder; but, subject to the provisions of Section
8.02 above, such covenants, conditions and agreements shall be deemed to have
been assumed by and be binding upon each new owner, assignee or transferee for
the time being of Landlord's interest in the Land and the Building, until sold,
assigned or transferred.
15.04. (a) Tenant shall indemnify and save harmless Landlord and its
agents and all Superior Mortgagees and their respective officers, directors,
agents and employees (collectively, the
-10-
<PAGE>
"INDEMNIFIED PARTIES" and each an "INDEMNIFIED PARTY") against and from (a) any
and all claims, actions and proceedings (i) arising from (x) the use and
occupancy of the Leased Property, or (y) any work or thing whatsoever done, or
any condition created by or on behalf of Tenant (other than by Landlord for
Landlord's account) in or about the Leased Property during the Term of this
Lease or during the period of time, if any, prior to the Commencement Date that
Tenant may have been given access to the Leased Property, or (ii) arising from
any negligent or otherwise wrongful act or omission of Tenant or any of its
subtenants or licensees or invitees or its or their employees, agents or
contractors, or (iii) arising from any breach or failure to observe any term,
covenant or condition of this Lease by Tenant or its agents or anyone claiming
by or through Tenant, and (b) all costs, expenses and liabilities incurred in or
in connection with each such claim, action or proceeding brought thereon
(including reasonable attorneys' fees and disbursements), except to the extent
that any of the foregoing arises out of the negligence or willful misconduct of
Landlord, its agents or employees or any breach of this Lease by Landlord or its
agents or anyone claiming by or through Landlord. In case any action or
proceeding be brought against any Indemnified Party by reason of any such claim,
Tenant, upon notice from Landlord or such Indemnified Party (if other than
Landlord), shall cause such action or proceeding to be defended at Tenant's
expense by counsel reasonably acceptable to Landlord.
(b) Landlord shall indemnify and save harmless Tenant and its
officers, directors, agents and employees (collectively, the "TENANT INDEMNIFIED
PARTIES" and each a "TENANT INDEMNIFIED PARTY") against and from (a) any and all
claims, actions and proceedings (i) arising from any negligent or otherwise
wrongful act or omission of Landlord or any of its licensees or invitees,
employees, agents or contractors, or (ii) arising from any breach or failure to
observe any term, covenant or condition of this Lease by Landlord or its agents
or anyone claiming by or through Landlord, and (b) all costs, expenses and
liabilities incurred in or in connection with each such claim, action or
proceeding brought thereon (including reasonable attorneys' fees and
disbursements), except to the extent that any of the foregoing arises out of the
negligence or willful misconduct of Tenant, its agents or employees or any
breach of this Lease by Tenant or its agents or anyone claiming by or through
Tenant. In case any action or proceeding be brought against any Tenant
Indemnified Party by reason of any such claim, Landlord, upon notice from Tenant
or such Tenant Indemnified Party (if other than Tenant), shall cause such action
or proceeding to be defended at Landlord's expense by counsel reasonably
acceptable to Tenant.
ARTICLE 16
INSURANCE
16.01. (a) Tenant shall, at its sole cost and expense, obtain and
maintain in full force and effect during the Term of this Lease, including any
renewal thereof, comprehensive general liability insurance protecting against
personal injury and property damage. Any basic policy and any umbrella policy
evidencing Tenant's liability insurance shall be written:
(i) in an aggregate amount of not less than $5,000,000 combined
single limit per occurrence;
-11-
<PAGE>
(ii) with contractual liability coverage for Tenant's liability
(including indemnifications) under this Lease;
(iii) with an endorsement naming Landlord and, if required,
Landlord's agents, all Superior Mortgagees as additional insured; and
(iv) with an endorsement naming Tenant's employees as insureds.
(b) Landlord shall, at its sole cost and expense, obtain and maintain
in full force and effect during the Term of this Lease, including any renewal
thereof, property insurance protecting against fire and other casualty covering
all of the Leased Property. Any policy evidencing Landlord's property insurance
shall be written with endorsements for extended coverage, vandalism and
malicious mischief and insuring full replacement value.
16.02. Tenant's liability insurance and Landlord's property insurance
shall be written by insurers of recognized financial standing which are
authorized to do an insurance business in the State of Indiana. Such insurance
may be evidenced by blanket insurance policies of Tenant or Landlord, as the
case may be, provided property insurance policies shall specifically allocate to
the Leased Property amounts of insurance adequate to meet the requirements of
Section 16.01(b) above. Tenant may not self-insure without Landlord's prior
written consent. Landlord or Tenant, as the case may be, shall cause to be
included in each policy a provision to the effect that the insurance evidenced
thereby shall be noncancellable except upon at least 60 days' prior written
notice to Landlord or Tenant, as the case may be. Tenant's liability insurance
shall not provide for deductibles in excess of $100,000. Landlord's property
insurance shall not provide for deductibles in excess of $500,000.
16.03. Landlord and Tenant each hereby releases and waives all right of
recovery against the other, and its respective agents, employees, partners,
officers, directors, shareholders and anyone claiming through or under each of
them by way of subrogation or otherwise for any loss or damage caused by fire or
casualty, whether or not such fire or casualty shall have been caused by the
fault or negligence of the other party. Landlord and Tenant shall each secure
an appropriate clause in, or an endorsement upon, each fire and extended
coverage policy obtained by it covering the Building, the Leased Property or the
Fixtures or the Special Tenant Improvements, as applicable, located therein
pursuant to which their respective insurance companies waive subrogation to the
full extent of such party's release of the other pursuant to the immediately
preceding sentence. If such waiver of subrogation shall be procurable only by
payment of an additional premium, the party in whose favor such waiver of
subrogation is obtained shall bear the cost thereof.
16.04. Tenant shall not do or permit to be done any act or thing in or
upon the Land or in the Building which will invalidate or be in conflict with
the terms of any insurance policies covering the Building and the fixtures and
property therein. Tenant shall comply with all rules, orders, regulations or
requirements of the any organization of fire underwriters or any other similar
body having jurisdiction, and shall not do or permit anything to be done in or
upon the Land or the Building or bring or keep anything therein or use the
Leased Property in a manner which would increase the rate of insurance upon the
Leased Property over the rate in effect at the commencement of the Term of
-12-
<PAGE>
this Lease or which would result in the cancellation of any policy of such
insurance or the assertion of any defense by the insurer to any claim under any
policy of insurance maintained by or for the benefit of Landlord.
ARTICLE 17
DAMAGE BY FIRE OR OTHER CAUSE
17.01. If the Leased Property shall be damaged by fire or other cause,
Tenant shall promptly notify Landlord thereof. If the damage is of such an
extent as to interfere materially with Tenant' s ability to conduct its
operations at the Building, Landlord shall, at Tenant's option as determined by
Tenant by written notice to Landlord given not more than 60 days following such
fire or other casualty, either (a) repair and restore any damaged portions of
the Leased Property to a condition suitable for Tenant's use, as promptly as
reasonably practicable, to the extent of and subject to receipt of insurance
proceeds from Landlord's insurer (plus an amount equal to the amount of any
applicable deductible) sufficient to pay the cost of such repair and
restoration, it being agreed that Landlord's obligation to so repair and restore
is expressly conditioned upon the receipt and sufficiency of such insurance
proceeds (plus an amount equal to any applicable deductible) and to the extent
such insurance proceeds are unavailable or insufficient, Tenant shall be solely
responsible for the cost (or the balance of the cost, as the case may be) to so
repair and restore, or (b) terminate this Lease by written notice to Tenant sent
not later than 60 days following such fire or other casualty, in which event the
Term shall expire upon the thirtieth day following such notice and Tenant shall
vacate the Leased Property and surrender the same to Landlord on or before the
date this Lease shall so terminate. Fixed Rent and Additional Rent shall be
abated for the portion of the Leased Property which is not usable by Tenant in
the ordinary conduct of its business from the date of such damage or destruction
until the date on which the Leased Property become usable by Tenant for the
ordinary conduct of its business. There shall be no abatement of Fixed Rent or
Additional Rent for any period of time for that portion of the Leased Property
which Tenant continues to occupy or has reoccupied. If there shall be any delay
in the process of restoration and repair due to any act or omission on the part
of Tenant, Fixed Rent and Additional Rent shall commence on the date the Leased
Property would have otherwise been completed but for such delay, as shall be
determined by Landlord in its judgment reasonably exercised. No penalty or
damage shall accrue for delays which may arise by reason of adjustment of
insurance on the part of Landlord, or for delays on account of Force Majeure.
Upon termination of this Lease in accordance with this Section 17.01, Tenant's
liability for rent shall cease, subject, however, to any claim by Landlord for
Fixed Rent and/or Additional Rent accruing on or before such date.
17.02. No damage, compensation or claims shall be payable by Landlord
for inconvenience, loss of business or annoyance to Tenant arising from any
damage by fire or other casualty or from any repair or restoration of any
portion of the Leased Property or of the Building but Landlord shall use
reasonable efforts to effect promptly any such repairs as may be undertaken by
Landlord pursuant to this Lease.
-13-
<PAGE>
17.03. Notwithstanding the provisions of Section 17.01, if, by reason of
some action or inaction on the part of Tenant or any of its employees, agents,
licensees or contractors, Landlord, or any Superior Mortgagee shall be unable to
collect all of the insurance proceeds (including rent insurance proceeds)
applicable to damage or destruction of the Leased Property by fire or other
casualty, then, without prejudice to any other remedy which may be available
against Tenant, the abatement of rent provided for in said Section 17.01 shall
not be effective to the extent of the uncollected insurance proceeds.
ARTICLE 18
CONDEMNATION
18.01. In the event that the whole or any portion of the Leased Property
the loss of which would materially interfere with Tenant's customary operations
at the Leased Property shall be condemned or taken in any manner for any public
or quasi-public use, this Lease and the Term and estate hereby granted shall
forthwith cease and terminate as of the date of the vesting of title in the
condemning authority. In the event of any such termination, this Lease and the
Term and estate hereby granted shall expire as of the date of such termination
with the same effect as if that were the date hereinbefore set for the
expiration of the Term, and the rent hereunder shall be apportioned as of such
date. In the event that only a part of the Leased Property the loss of which
does not materially interfere with Tenant's customary operations at the Leased
Property shall be so condemned or taken, then this Lease shall be and remain
unaffected by such condemnation or taking, except that, effective as of the date
of the vesting of title in the condemning authority, the Fixed Rent and
Additional Rent hereunder for such part shall be equitably abated and this Lease
shall continue as to such part not so taken.
18.02. In the event of any condemnation or taking hereinabove mentioned
of all or a part of the Leased Property, Landlord shall be entitled to receive
the entire award in the condemnation proceeding, including any award made for
the value of this Lease and for any unexpired portion of the Term, and Tenant
hereby expressly assigns to Landlord any and all right, title and interest of
Tenant now or hereafter arising in or to any such award or any part thereof and
Tenant shall not be entitled to receive any part of such award. Tenant shall
have no claim for the value of any unexpired term of this Lease. Tenant may
separately prosecute any claim it may have for Tenant's trade fixtures and its
moving expenses (if they are compensable) provided such prosecution does not
interfere with or reduce Landlord's claim.
ARTICLE 19
BANKRUPTCY
19.01. If a trustee in bankruptcy shall assume this Lease and shall
propose to assign the same pursuant to the provisions of the Bankruptcy Code, 11
U.S.C. 101 et seq. (the "BANKRUPTCY CODE") to any person or entity who shall
have made a bona fide offer to accept an assignment of this Lease on terms
acceptable to such trustee notice of such proposed assignment, setting forth (i)
the name and
-14-
<PAGE>
address of such person, (ii) all of the terms and conditions of such offer, and
(iii) the adequate assurance to be provided Landlord to assure such person's
future performance under this Lease, including, without limitation, the
assurance referred to in section 365(b)(3) of the Bankruptcy Code, shall be
given to Landlord by such trustee no later than twenty (20) days after receipt
by such trustee, but in any event no later than ten (10) days prior to the date
that such trustee shall make application to a court of competent jurisdiction
for authority and approval to enter into such assignment and assumption, and
Landlord shall thereupon have the prior right and option, to be exercised by
notice to Tenant given at any time prior to the effective date of such proposed
assignment, to accept an assignment of this Lease upon the same terms and
conditions and for the same consideration, if any, as the bona fide offer made
by such person, less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this Lease.
19.02. Any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall, upon demand,
execute and deliver to Landlord an instrument in recordable form confirming such
assumption.
ARTICLE 20
DEFAULT
20.01. (a) If (i) Tenant shall fail to pay Fixed Rent or Additional Rent
when due and such default continues for a period of five (5) days after written
notice thereof from Landlord; or (ii) Tenant shall default in fulfilling any of
the covenants of this Lease, other than the covenants for the payment of Fixed
Rent and Additional Rent, and such default continues for a period of twenty (20)
days after written notice from Landlord to Tenant specifying the nature of said
default, except that if the said default shall be of such a nature that the same
cannot, with reasonable diligence, be completely cured or remedied within said
twenty (20) days then Tenant shall not be deemed in default if Tenant diligently
commences curing such default within such twenty (20) day period, and shall
thereafter with diligence and in good faith proceed to remedy or cure such
default, but, in any event, Tenant shall complete such cure prior to the date on
which Landlord (A) would be subject to prosecution for a crime or (B) would be
in default of any Superior Mortgage or Superior Lease or (iii) any event shall
occur or any contingency shall arise whereby this Lease or the estate hereby
granted or the unexpired balance of the Term would, by operation of law or
otherwise, devolve upon or pass to any person other than Tenant, then in any of
the events described in the foregoing clauses (i), (ii) or (iii), Landlord may
serve a written three (3) day notice of cancellation of this Lease upon Tenant,
and upon the expiration of said three (3) days, this Lease and the Term
hereunder shall end and expire as fully and completely as if the date of
expiration of such three (3) day period were the Expiration Date of this Lease,
and Tenant shall then quit and surrender the Leased Property to Landlord but
Tenant shall remain liable as hereinafter provided.
(b) In the event of a breach or threatened breach by Tenant of any of
the covenants or provisions hereof, Landlord shall also have the right of
injunction.
-15-
<PAGE>
20.02. If the three (3) day notice provided for in Section 20.01 shall
have been given:
(a) Landlord and Landlord's agents may, without notice, re-enter the
Leased Property or any part thereof, and by summary proceedings or otherwise,
dispossess Tenant or the legal representative of Tenant or other occupant of the
Leased Property and remove their effects without liability for damage thereto
and hold the Leased Property as if this Lease had not been made but Tenant shall
remain liable hereunder as hereinafter provided; and
(b) Landlord may, at its option, relet the whole or any part or parts
of the Leased Property from time to time, either in the name of Landlord or
otherwise, to such tenant or tenants, for such term or terms ending before, on
or after the Expiration Date, at such rental or rentals and upon such other
conditions, which may include concessions and free rent periods, as Landlord in
its sole discretion may determine. Landlord shall have no obligation to relet
the Leased Property or any part thereof and shall in no event be liable for
refusal or failure to relet the Leased Property or any part thereof, or, in the
event of any such reletting, for refusal or failure to collect any rent upon any
such reletting, and no such refusal or failure shall operate to relieve Tenant
of any liability under this Lease or otherwise to affect any such liability.
Landlord, at Landlord's option, may make such repairs, improvements,
alterations, additions, decorations and other physical changes in and to the
Leased Property as Landlord, in its sole discretion, considers advisable or
necessary in connection with any such reletting or proposed reletting, without
relieving Tenant of any liability under this Lease or otherwise affecting any
such liability.
20.03. If this Lease shall terminate or if Landlord shall re-enter the
Leased Property as provided in this Article:
(a) Tenant shall pay to Landlord all rent to the date upon which this
Lease shall have been terminated or to the date of re-entry upon the Leased
Property by Landlord, as the case may be;
(b) Landlord shall be entitled to retain all monies, if any, paid by
Tenant to Landlord, whether as advance rent, security or otherwise, but such
monies shall be credited by Landlord against any rent due at the time of such
termination or re-entry or, at Landlord's option, against any damages payable by
Tenant;
(c) Tenant shall be liable for and shall pay to Landlord, as damages,
any deficiency between the rent payable hereunder for the period which otherwise
would have constituted the unexpired portion of the Term (conclusively presuming
the Additional Rent to be the same as was payable for the year immediately
preceding such termination or re-entry) and the net amount, if any, of rents
collected under any reletting effected pursuant to the provisions of Section
20.02(b) for any part of such period (first deducting from the rents collected
under any such reletting all of Landlord's expenses in connection with the
termination of this Lease or Landlord's re-entry upon the Leased Property and in
connection with such reletting including all repossession costs, brokerage
commissions, legal expenses, alteration costs and other expenses of preparing
the Leased Property for such reletting);
-16-
<PAGE>
(d) Any deficiency in accordance with subsection (c) above shall be
paid in monthly installments by Tenant on the days specified in this Lease for
the payment of installments of Fixed Rent. Landlord shall be entitled to
recover from Tenant each monthly deficiency as the same shall arise and no suit
to collect the amount of the deficiency for any month shall prejudice Landlord's
right to collect the deficiency for any prior or subsequent month by a similar
proceeding. Alternatively, suit or suits for the recovery of such deficiencies
may be brought by Landlord from time to time at its election;
(e) Whether or not Landlord shall have collected any monthly
deficiencies as aforesaid, Landlord shall be entitled to recover from Tenant,
and Tenant shall pay Landlord, on demand, as and for liquidated and agreed final
damages and not as a penalty, a sum equal to the amount by which the Fixed Rent
and Additional Rent payable hereunder for the period to the Expiration Date from
the latest of the date of termination of this Lease, the date of re-entry or the
date through which monthly deficiencies shall have been paid in full
(conclusively presuming the Additional Rent for each year thereof to be the same
as that which was payable for the year immediately preceding such termination or
re-entry) exceeds the then fair and reasonable rental value of the Leased
Property for the same period, both discounted at the rate of 7% per annum to
present worth.
(f) In no event shall Tenant be entitled (i) to receive any excess of
any rent under subdivision (c) over the sums payable by Tenant to Landlord
hereunder or (ii) in any suit for the collection of damages pursuant to this
Section 20.03, to a credit in respect of any rent from a reletting except to the
extent that such rent is actually received by Landlord prior to the commencement
of such suit. If the Leased Property or any part thereof should be relet in
combination with other space, then proper apportionment on a square foot area
basis shall be made of the rent received from such reletting and the expenses of
reletting.
(g) If this Lease shall terminate or if the Landlord shall re-enter
the Leased Property:
(1) The Leased Property shall be, upon such earlier termination
or re-entry, in the same condition as that in which Tenant has agreed to
surrender them to Landlord on the Expiration Date;
(2) Tenant, on or before the occurrence of any default
hereunder, shall have performed every covenant contained in this Lease for the
making of any improvement or for repairing any part of the Leased Property and
(3) For the breach of either subdivision (a) or (b) of this
subsection, or both, Landlord shall be entitled immediately, without notice or
other action by Landlord, to recover, and Tenant shall pay, as and for agreed
damages therefor, the then cost of performing such covenants, plus interest
thereon at the Default Rate for the period from the date of the occurrence of
any default to the date of payment.
-17-
<PAGE>
(4) Each and every covenant contained in this subsection (g)
shall be deemed separate and independent and not dependent on any other term of
this Lease for the use and occupation of the Leased Property by Tenant, and the
performance of any such term shall not be considered to be rent or other payment
for the use of said Leased Property. It is understood that the consideration
for the covenants in this subsection (g) is the making of this Lease, and the
damages for failure to perform the same shall be in addition to and separate and
independent of the damages accruing by reason of default in observing any other
term of this Lease.
20.04. The remedies and rights provided for in this Lease are
cumulative. Mention in this Lease of any particular remedy shall not preclude
Landlord from pursuing any other remedy at law or equity.
20.05. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws.
20.06. The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease,
shall not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt or acceptance by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. No
provision of this Lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord. No endorsement or statement on
any check or any letter accompanying any check or payment as rent shall be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy in this Lease.
20.07. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease. Tenant shall
not interpose any counterclaim in any summary proceeding commenced by Landlord.
ARTICLE 21
QUIET ENJOYMENT
Landlord covenants and agrees that, as long as Tenant shall comply with all
obligations on its part to be performed hereunder, Tenant may peaceably and
quietly enjoy the Leased Property, subject to the terms and conditions of this
Lease.
ARTICLE 22
SURRENDER OF PREMISES
-18-
<PAGE>
22.01. Upon the expiration or sooner termination of this Lease or upon
re-entry by Landlord upon the Leased Property, Tenant shall at Tenant's expense
quit and surrender the Leased Property and deliver the same to Landlord in good
order, condition and repair, ordinary wear and tear and damage by fire or other
casualty excepted. Tenant shall pay to Landlord any insurance proceeds received
by Tenant attributable to damage to the Leased Property to the extent such
proceeds have not been used to restore such items in accordance with this Lease.
22.02. Any items which shall remain in the Leased Property after the
Expiration Date, or after an earlier termination date, may, at the option of
Landlord, be deemed to have been abandoned, and in such case such items may be
retained by Landlord as its property or disposed of by Landlord, without
accountability, in such manner as Landlord shall determine at Tenant's expense.
Tenant's obligation to reimburse Landlord for its costs so incurred shall
survive expiration or termination of this Lease.
22.03. If Tenant remains in possession of the Leased Property after the
termination of this Lease without the execution of a new lease, the parties
recognize and agree that the damage to Landlord will be substantial, will exceed
the amount of monthly Fixed Rent and Additional Rent theretofore payable
hereunder and will be impossible to measure accurately. Tenant, therefore, at
the option of Landlord, shall be deemed to be occupying the Leased Property as a
tenant from month to month, at a monthly rental equal to two and one-half times
the Fixed Rent and Additional Rent payable during the last month of the Term,
subject to all of the other terms of this Lease insofar as the same are
applicable to a month-to-month tenancy. Further, Tenant hereby indemnifies
Landlord against liability resulting from delay by Tenant in so surrendering the
Leased Property, including (a) any claims made by any purchaser or prospective
purchaser, succeeding tenant or prospective tenant founded upon such delay, (b)
any payment or rent concession which Landlord may be required to make to any
purchaser or prospective purchaser, succeeding or prospective tenant for all or
any part of the Premises in order to induce such purchaser or tenant not to
terminate its purchase agreement or lease, as the case may be, or its
negotiation therefor by reason of Tenant's delay in so surrendering the Leased
Property and (c) any loss suffered if a purchaser or prospective purchaser or
succeeding or prospective tenant shall terminate its purchase agreement or
lease, as the case may be, or not proceed to close on a purchase or execute and
deliver its purchase agreement or lease, as the case may be, by reason of
Tenant's delay in so surrendering the Leased Property. Nothing herein contained
shall be deemed to permit Tenant to remain in possession of the Leased Property
after the expiration or sooner termination of the term of this Lease.
22.04. No agreement to accept a surrender of all or any part of the
Leased Property or this Lease shall be valid unless in writing and signed by
Landlord. No delivery of keys shall operate as a termination of this Lease or a
surrender of the Leased Property or this Lease.
ARTICLE 22
NOTICES
-19-
<PAGE>
All notices and communications permitted or required to be given pursuant
to this Lease shall given in the manner, and to the addresses, provided in the
Asset Purchase Agreement dated as of January 21, 1996 (the "AGREEMENT"), in
connection with which this Lease is being executed.
ARTICLE 24
MISCELLANEOUS
24.01. This Lease with its annexed Exhibits and the Agreement contain
the entire agreement between Landlord and Tenant, all prior negotiations and
agreements are merged into this Lease and any agreement hereafter made between
Landlord and Tenant shall be ineffective to change, modify, waive, release,
discharge or terminate or effect an abandonment of this Lease, in whole or in
part, unless such agreement shall be in writing and executed by the party to be
charged.
24.02. If any term, covenant, condition or provision of this Lease shall
be invalid or unenforceable to any extent, the remaining terms, covenants,
conditions and provisions of this Lease shall not be affected thereby. This
lease shall be construed without regard to any presumption or other rule
requiring construction against the party causing this lease to be drafted. Each
covenant, agreement, obligation or other provision of this lease on Tenant's
part to be performed, shall be deemed and construed as a separate and
independent covenant of Tenant, not dependent on any other provision of this
Lease.
24.03. Nothing contained in this Lease shall be deemed to confer upon
any person other than the parties hereto and their respective successors and
assigns (to the extent assignment is permitted pursuant to Article 9 hereof) any
right or benefit, including any right to insist upon, or to enforce against
Landlord or Tenant, the performance of such party's obligations hereunder.
24.04. Whenever this Lease requires an approval or consent by either
Landlord or Tenant, unless another standard is expressly stated, such approval
or consent and any conditions imposed thereby shall be reasonable and shall not
be unreasonably withheld or delayed and, in exercising any right or remedy
hereunder, each party shall at all times act reasonably and in good faith. Any
expenditure by a party permitted or required under this Lease for which such
party is entitled to demand reimbursement shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred and shall
be substantiated, upon request, by documentary evidence.
24.05. The submission by Landlord to Tenant of this Lease in draft form
shall be deemed submission solely for Tenant's consideration and not for
acceptance and execution. Such submission shall have no binding force and
effect, shall not constitute an option for the leasing of the Leased Property,
and shall not confer any rights or impose any obligations upon either party.
The submission by Landlord of this Lease for execution by Tenant and the actual
execution and delivery thereof by Tenant to Landlord shall similarly have no
binding force and effect on Landlord unless and until Landlord shall have
executed this Lease and a counterpart thereof shall have been delivered to
Tenant and all consents required pursuant to any Superior Mortgage or Superior
Lease have been received.
-20-
<PAGE>
24.06. This Lease shall bind and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
24.07. Tenant shall not record or file this Lease or any memorandum or
other notation thereof in any public records.
24.08. Tenant shall have access to driveways, parking lots, sidewalks
and similar surface improvements on Landlord's immediately adjoining property
for parking and ingress and egress to and from the Leased Property, provided,
that Landlord reserves the right to limit such access to the extent Landlord
reasonably determines the same poses security concerns, provided further, that
there shall be no material interference with Tenant's reasonable access to and
use of the Leased Premises for the purposes described in Section 5.01.
-21-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease on the date first above written.
STATE ROAD PROPERTIES L.P.
By: HR LEASING CORP., its General Partner
By: /s/ James L. Ziemer
--------------------------------------
Name: James L. Ziemer
Title: VP
MONACO COACH CORPORATION
By: /s/ John W. Nepute
--------------------------------------
Name: John W. Nepute
Title: VP Finance
-22-
<PAGE>
Physical Address
- ----------------
8 S.R. 19
Wakarusa, Indiana 46573
[Graphic: drawing of building 8]
-23-
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION OF LAND
Deliberately Omitted
<PAGE>
EXHIBIT C
PERMITTED USES
The design, manufacture, marketing, wholesale sale and factory servicing of
recreational vehicles and related parts and accessories.
<PAGE>
- --------------------------------------------------------------------------------
LEASE
- --------------------------------------------------------------------------------
In consideration of the rent and other charges to be paid by Tenant, and of the
other covenants and agreements hereinafter set forth to be kept and performed by
Tenant, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the Leased Premises (as hereinafter defined) on the terms and conditions stated
in this Lease.
1. BASIC LEASE PROVISIONS AND DEFINITIONS
1.1 LANDLORD: RONALD MAJOR DEFOE and KARLA K. DEFOE
LANDLORD'S ADDRESS: WITH A COPY TO:
c/o Major's Sports Center Wilson C. Muhlheim
307 Q Street Muhlheim Palmer Zennache & Wade
Springfield, Oregon 97477 800 Willamette Street, Suite 700
Fax: 541-726-8035 Eugene, Oregon 97401
Fax: 541-687-4780
1.2 TENANT: MONACO COACH CORPORATION, a Delaware corporation
TENANT'S ADDRESS: WITH A COPY TO:
Legal Department Patricia E. Lockary
Attn: Richard E. Bond Gleaves Swearingen Larsen
1028 E. Waterford Street Potter Scott & Smith LLP
PO Box 465 PO Box 1147
Wakarusa, IN 46573 Eugene, Oregon 97440-1147
Fax: 219-862-7313 Fax: 541-345-2034
1.3 LEASED PREMISES. The real property located at 5280 High Banks Road,
Springfield, Oregon, more particularly described on Exhibit A attached
hereto and incorporated herein by this reference. The Leased Premises
include land ("Land"), a building containing approximately 100,000
square feet of manufacturing space and approximately 3,700 square feet
of office space ("Building"), and all other improvements and
appurtenances to the real property described on Exhibit A. The Leased
Premises shall include all Tenant Improvements, as defined in
Section 1.10 and the fixtures and personal property described on
Exhibit B.
- --------------------------------------------------------------------------------
LEASE Page 1
<PAGE>
1.4 COMMENCEMENT DATE. April 1, 1997, provided that all of the following
have occurred (or have been waived by Tenant):
1.4.1 Landlord's general site cleanup of the Leased Premises, at
Landlord's sole cost and expense, has been completed. This
shall mean that the interior of the Leased Premises has been
cleaned to a broom clean standard and all personal property
that is not a part of the Leased Premises, all debris and
all other extraneous matter shall be removed from the
exterior of the Leased Premises. If the site cleanup has
not been completed on or before April 1, 1997, the Tenant
may complete the cleanup and offset Tenant's actual and
reasonable costs of cleanup against the rent reserved
hereunder.
1.4.2 Tenant has obtained, with the reasonable cooperation of
Landlord but otherwise at Tenant's sole cost and expense and
utilizing Tenant's best efforts, all necessary governmental
permits and approvals in connection with its use of the
Leased Premises under the Lease, including but not limited
to an air operating permit and any necessary building permit
or similar permits in connection with the construction and
installation of the Tenant Improvements described in
Exhibit C. If Tenant has not obtained the permits and
approvals on or before April 1, 1997, then Tenant may elect
to terminate this Lease as of April 1, 1997.
1.4.3 Landlord has obtained, at Landlord's sole cost and expense,
and Tenant has approved, a written report of a "phase one"
or "level one" environmental study of the Leased Premises,
conforming to standards established by the American Society
for Testing and Materials (ASTM E-1527-94), performed by a
certified consultant chosen by Landlord and reasonably
approved by Tenant, showing that there are no Hazardous
Materials (as that term is defined in Section 7.2.3) or
other environmental conditions at or affecting the Leased
Premises that Tenant (as a tenant or purchaser of the Leased
Premises) could be required to remove, abate, clean up or
otherwise remediate pursuant to applicable environmental
laws (including but not limited to the laws referred to in
Section 7.2.3). If Landlord has not obtained and Tenant has
not approved the report on or before April 1, 1997, then
Tenant may elect to terminate this Lease as of April 1,
1997.
1.4.4 Landlord has obtained, at Landlord's sole cost and expense,
nondisturbance agreements, in form and substance reasonably
satisfactory to Tenant, from persons holding liens or other
security interests in all or any part of the Leased
Premises, providing for Tenant's continued occupancy of the
Leased Premises and continued entitlement to exercise all of
Tenant's rights and remedies under the Lease, including but
not limited to rights under Sections 2.3 and 32, undisturbed
and without regard to any foreclosure or other exercise of a
right
- --------------------------------------------------------------------------------
LEASE Page 2
<PAGE>
or remedy of the lien or security interest holder, for so
long as there is no uncured Event of Default under this
Lease. If Landlord has not obtained such agreements on or
before April 1, 1997, then Tenant may elect to terminate
this Lease as of April 1, 1997.
1.5 TERMINATION DATE. The ending date of the Lease term, which shall be
six (6) years from the Commencement Date, unless earlier terminated or
extended in accordance with other provisions of this Lease.
1.6 MONTHLY BASIC RENT. Twenty-Three Thousand and no/ 100 Dollars
($23,000.00) per month for the first 36 months (April 1, 1997 through
March 31, 2000) and Twenty-Six Thousand Five Hundred and no/ 100
Dollars ($26,500.00) for the next 36 months (April 1, 2000 through
March 31, 2003). In addition, in exchange for Tenant's agreement
hereunder to make any repairs and maintenance of the parking areas and
roadway on the Leased Premises that Tenant deems necessary or
appropriate (pursuant to Section 8.2), Tenant shall be entitled to a
credit in an amount equal to, and shall not make, the payment of
Monthly Basic Rent for the 36th month.
1.7 RENT COMMENCEMENT DATE. April 1, 1997.
1.8 PERMITTED USE. The manufacture of recreational vehicles (including
but not limited to motor homes, travel trailers and fifth wheel
trailers), utility trailers and commercial delivery vehicles, related
component manufacture, and processes or methods or subassembly
operations related thereto, and any other similar manufacture,
component or subassembly operations, together with distribution and
sale activities related thereto and office uses related thereto.
1.9 LANDLORD IMPROVEMENTS. The Building and all other improvements to the
Leased Premises installed prior to the Commencement Date, other than
Tenant Improvements.
1.10 TENANT IMPROVEMENTS. Improvements to or alterations of the Leased
Premises described in Exhibit C to be installed or made pursuant to
Section 6 of this Lease at Tenant's expense, and any other
improvements to or alterations of the Leased Premises installed or
made pursuant to Section 6.
1.11 LEASE YEAR. A period of 12 consecutive months, the first such period
commencing on the Commencement Date and subsequent periods beginning
on each consecutive anniversary thereof.
1.12 EXHIBITS. The following Exhibits are attached to this Lease and are
incorporated herein by this reference:
- --------------------------------------------------------------------------------
LEASE Page 3
<PAGE>
EXHIBIT A: Legal Description of Leased Premises (Real
Property)
EXHIBIT B: List of Fixtures and Personal Property
Included in Leased Premises
EXHIBIT C: Description of Certain Tenant Improvements
EXHIBIT D: Site Drawing
2. TERM
2.1 COMMENCEMENT DATE. The term of this Lease shall begin on the
Commencement Date (as defined in Section 1.4).
2.2 TERMINATION DATE. The term of this Lease shall end on the Termination
Date (as specified in Section 1.5) unless Tenant exercises one or more
of the options to extend the Termination Date pursuant to Section 2.3.
2.3 EXTENSION OPTION. Tenant shall have two (2) options (each, an
"Extension Option") to extend the Termination Date with respect to
all, but not less than all, of the Leased Premises for successive
periods of two (2) years each, by giving Landlord written notice of
Tenant's intent to exercise its Extension Option at least one hundred
twenty (120) days prior to the Termination Date (with respect to the
Second Extension Option, as such Termination Date may have been
extended pursuant to the valid exercise of the first Extension
Option). Notwithstanding the foregoing, in no event may Tenant
exercise an Extension Option, and any purported exercise of an
Extension Option shall be null and void, if Tenant is in default of
the Lease at the time of exercise or at the start of the Extension
Option period or if the Lease has been terminated (by reason of an
event of default or otherwise) prior to the date on which the
Extension Option period would have commenced. If an Extension Option
is exercised, all terms, covenants, conditions and other provisions of
this Lease shall apply except that the Monthly Basic Rent shall be
$27,500 during the first Extension Option period and $28,500 during
the second Extension Option period.
3. RENT
3.1 MONTHLY BASIC RENT. Effective on the Rent Commencement Date, Tenant
shall pay to Landlord the Monthly Basic Rent specified in Section 1.6.
3.2 MANNER OF PAYMENT. Except as otherwise provided below in Section 3.4,
all installments of Monthly Basic Rent shall be paid by Tenant to
Landlord in lawful money of the United States of America, without
demand and without deduction or offset, in advance on or before the
first day of the first Lease Year and on or before
- --------------------------------------------------------------------------------
LEASE Page 4
<PAGE>
the first day of each month thereafter, at Landlord's address
designated in Section 1.1, or at such other place as may be designated
by Landlord. If the Rent Commencement Date or Termination Date occurs
on a day other than the first or last day of a month, respectively,
then the Monthly Basic Rent payable for the first or last month of the
Lease term shall be prorated on the basis of a 30-days' month.
3.3 ADVANCES BY LANDLORD. Landlord has the right, but shall not be
obligated, to pay or otherwise advance on behalf of Tenant any amounts
payable by Tenant pursuant to this Lease. Any payment or advance by
Landlord pursuant to this Section 3.3 shall be reimbursed by Tenant,
immediately upon Landlord's demand, and shall be in addition to, and
not in limitation of, any other rights or remedies available to
Landlord under this Lease, at law or in equity.
3.4 THIRD PARTY PAYMENTS. Landlord currently owes delinquent Taxes (as
defined below in Section 4.2) to Lane County in the amount of
approximately $140,925.95 (not including interest and penalties).
Landlord shall be obligated to pay the full amount of such delinquent
Taxes and all interest and penalties thereon. However, until the
earlier of July 1, 1998 or the date on which the delinquency in Taxes
(including any interest and penalties accrued to date or that will
accrue thereon in the future) has been paid in full, then
notwithstanding the provisions of Section 3.2 to the contrary, Tenant
shall pay $2,150 of each installment of Monthly Basic Rent directly to
Lane County in reduction of Landlord's delinquent Taxes and the
interest and penalties thereon. If the delinquency in Taxes
(including any interest and penalties) has not been paid in full on or
before July 1, 1998, Tenant may pay off the delinquency, in one or
more installments, and offset such payment(s) against Monthly Basic
Rent payable hereunder. In addition, if amounts paid by Tenant
pursuant to this Section 3.4, when added to any amounts paid by Tenant
pursuant to Section 4.1 that Lane County may apply to reduce the
amount of delinquent Taxes, are not sufficient to pay in full the
delinquency in the 1994-1995 Taxes prior to the commencement of
foreclosure proceedings by Lane County with respect thereto, Tenant
may pay off the delinquency in the 1994-1995 Taxes, in one or more
installments, and may offset such payments against Monthly Basic Rent
payable hereunder commencing May 1, 1998.
4. TAXES
4.1 TENANT'S OBLIGATION TO PAY TAXES. In addition to Monthly Basic Rent,
Tenant shall pay, without deduction or offset all Taxes (as defined in
Section 4.2) for the tax year during which the Commencement Date
occurs and thereafter all Taxes (as defined in Section 4.2) for the
tax years or portion thereof during which the remainder of the Lease
term occurs. Tenant's obligation to pay Taxes for the first and last
year of the term of this Lease shall be equitably prorated between
Landlord and Tenant as of the Commencement Date and Termination Date,
respectively. Tenant shall pay all Taxes accruing for periods
following the Commencement Date directly to the taxing
- --------------------------------------------------------------------------------
LEASE Page 5
<PAGE>
authority as and when due, prior to delinquency, and shall promptly
provide Landlord with copies of receipts showing that Taxes have been
paid by Tenant as and when required by this Lease. The parties
acknowledge that Lane County may apply the payments of current Taxes
made by Tenant pursuant to this Section 4.1 to amounts owed with
respect to the delinquent Taxes described in Section 3.4 above. The
parties agree that if Tenant's payments of Taxes pursuant to this
Section 4.1 are applied toward delinquent amounts described above in
Section 3.4, then: (a) notwithstanding such application by the
County, as between Landlord and Tenant, the payments shall not be
deemed to have been applied to the delinquent Taxes (or interest or
penalties thereon) and shall not be taken into account in determining
the respective rights and obligations of Landlord and Tenant pursuant
to Section 3.4, and (b) Tenant shall be deemed to have complied in
full with Tenant's obligation to pay current Taxes as provided in this
Section 4.1 to the extent that Tenant's payments would otherwise have
kept Taxes current but for the delinquent Taxes described above.
4.2 "TAXES" DEFINED. "Taxes" means all taxes, service payments in lieu of
taxes, general or special assessments, excise taxes, transit charges,
charges for street, sidewalk or other improvements, parking
assessments, utility assessments or charges, housing fund assessments
and any and all other charges, levies, fees, costs or charges, general
or special, ordinary or extraordinary, unforeseen as well as foreseen,
of any kind which are assessed, levied, charged, confirmed or imposed
by or at the direction of, or resulting from, laws, rules or
regulations of any federal, state or local governmental authority upon
the Leased Premises, or based upon or imposed in connection with this
Lease or with the use, occupancy or operations of the Leased Premises,
or upon any personal property used in the operation of the Leased
Premises, or with respect to services or utilities in connection with
the use, occupancy, or operations of the Leased Premises, or upon
Landlord with respect to the Leased Premises, or in connection with
the business of renting space within the Leased Premises. Taxes
include, but are not limited to, state and local ad valorem real
property taxes, levies and assessments; any tax, fee or other excise,
however described, which may be levied or assessed in lieu of, or as a
substitute, in whole or in part, for, or as an addition to, any other
Taxes, and any interest or penalties charged on account of such Taxes;
any business rental tax or similar excise or other tax on Landlord's
receipt of, or right to receive, rents; and costs and disbursements
incurred in connection with proceedings to contest, determine or
reduce any Taxes. Taxes also include, but are not limited to, those
taxes that are: (i) imposed upon, measured by or reasonably
attributable to the cost or value of Tenant's equipment, furniture,
fixtures and other personal property located in the Leased Premises or
the cost or value of any improvements made in or to the Leased
Premises by or for Tenant, regardless of whether title to such
improvements shall be in Tenant or Landlord; (ii) imposed upon,
measured by or reasonably attributable to the Monthly Basic Rent and
all additional payments payable by Tenant pursuant to this Lease,
including, without limitation, any gross income tax or excise tax
levied by the City or County in which the Leased
- --------------------------------------------------------------------------------
LEASE Page 6
<PAGE>
Premises are located, the State of Oregon, the federal government or
any other governmental body or agency with respect to receipt of such
rent; or (iii) imposed upon or with respect to the possession,
leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Leased Premises, or any portion thereof.
Taxes shall not include: (a) inheritance or estate taxes imposed upon
or assessed against Landlord (or any of its members or partners) in
connection with the Leased Premises, or any part thereof or interest
therein; or (b) taxes computed upon the basis of the net income
derived from the Leased Premises by Landlord or the owner of any
interest therein, unless, due to a change in the method of taxation,
any of such taxes are levied or assessed against Landlord in lieu of,
or as a substitute, in whole or in part, for, or as an addition to,
any other charge which would otherwise constitute Taxes; or (c) taxes
computed and imposed upon a gain or profit realized by Landlord in
connection with the sale or other disposition of its interest in the
Leased Premises.
5. UTILITY CHARGES
Tenant shall be responsible for and shall pay the charges for all utilities
to be furnished to the Leased Premises, including, without limitation, all
charges, assessments, and service fees for telephone, garbage collection
and removal, water, sewer, and electricity.
6. TENANT IMPROVEMENTS
6.1 TENANT IMPROVEMENTS. Tenant may, at Tenant's sole cost and expense,
construct and install the Tenants Improvements specified in Exhibit C.
6.2 OTHER TENANT IMPROVEMENTS. Except pursuant to Section 6.1, above,
Tenant shall not make or cause to be made any alterations, additions
or improvements or install or cause to be installed any fixtures,
exterior signs, floor covering, interior or exterior lighting,
plumbing fixtures, shades or awnings or make any changes to the Leased
Premises or the Building without first obtaining Landlord's written
approval thereof and of the means of installing same. Tenant shall
present to the Landlord plans and specifications for such work at the
time approval is sought.
6.3 OWNERSHIP AND REMOVAL OF TENANT IMPROVEMENTS. All alterations,
decorations, additions and improvements made by or at the expense of
Tenant shall be deemed Tenant Improvements, and shall remain the
property of Tenant for the term of the Lease. At the Termination Date
or earlier termination of this Lease, Tenant may remove any or all of
its Tenant Improvements (other than real property improvements to the
Building or Land that do not constitute fixtures or trade fixtures),
provided that Tenant shall restore the Leased Premises as provided in
Section 16. At the Termination Date or earlier termination of this
Lease, all Tenant Improvements that are not removed by Tenant shall
become the property of Landlord.
- --------------------------------------------------------------------------------
LEASE Page 7
<PAGE>
6.4 LIENS FOR TENANT IMPROVEMENTS. Tenant shall not cause or permit liens
of any kind, type or description to attach to or be imposed on the
Leased Premises, or any part thereof, unless Tenant has a good faith
dispute over Tenant's obligation to pay and as long as Tenant shall,
within ten (10) days after learning of the filing of a lien with
respect to the good faith dispute, either secure the discharge of the
lien or post a sufficient bond or other surety reasonably satisfactory
to Landlord in an amount that would be sufficient to discharge the
lien plus reasonable costs, attorney fees and other charges that could
reasonably be anticipated to accrue as a result of the enforcement of
the lienor's rights and foreclosure of the lien on the Lease Premises.
If Tenant causes or permits any lien to attach to or be imposed on the
Leased Premises in violation of this Section 6.4, then Landlord may,
at Landlord's election, exercise any rights or remedies provided in
Section 13, or may satisfy such lien and be reimbursed therefor by
Tenant upon demand. If Landlord elects to pay the lien, and Tenant
fails to reimburse Landlord therefor within 10 days after demand, such
failure shall constitute an Event of Default under this Lease by
Tenant.
7. USE OF PREMISES
7.1 USES PERMITTED. Tenant shall occupy and use the Leased Premises for
the purpose specified in Section 1.8 and for no other purpose without
Landlord's written consent, which consent shall not be unreasonably
withheld. Landlord reserves the right to prescribe the weight,
location, position and manner of installation of all heavy equipment
or other personal property to be placed in or attached to the Leased
Premises. Tenant shall be responsible for all structural engineering
to determine and evaluate the structural load. Tenant shall:
7.1.1 Use the Leased Premises in a careful, safe and proper
manner, and not in violation of any covenants, conditions
and restrictions of record or in violation of a Certificate
of Occupancy or temporary Certificate of Occupancy, or in
violation of a requirement imposed by any governmental
authority having jurisdiction;
7.1.2 Pay on demand for any damage to the Leased Premises caused
by misuse or abuse of the Leased Premises by Tenant, its
agents or employees, or by any other person entering upon
the Leased Premises under express or implied invitation of
Tenant;
7.1.3 Maintain the Leased Premises in good condition, subject to
reasonable wear and tear occasioned by normal use for the
permitted purposes;
7.1.4 Comply with all applicable laws and regulations of public
authorities affecting the Leased Premises and their use, and
at Tenant's expense correct any failure of compliance which
is the fault of Tenant or is the result of Tenant's use;
- --------------------------------------------------------------------------------
LEASE Page 8
<PAGE>
7.1.5 Not use or permit the Leased Premises to be used for any
purpose prohibited by the laws of the United States or the
State of Oregon or the ordinances of the city and county in
which the Leased Premises are located; and
7.1.6 Not commit waste, not suffer or permit waste to be
committed, not cause or permit any nuisance on or in the
Leased Premises.
7.2 HAZARDOUS MATERIAL. Without limiting the generality of the foregoing,
Tenant shall not cause or permit any Hazardous Material (as
hereinafter defined) to be brought upon, kept or used in or about the
Leased Premises by Tenant, or Tenant's agents, employees, contractors,
subtenants, or invitees, or by any other person, unless such Hazardous
Material is necessary or useful to business operations permitted to be
conducted, and being conducted at the Leased Premises. Tenant shall
assure that all such Hazardous Material is used, kept and stored in a
manner that complies with all laws, rules, ordinances and regulations
relating to the storage and use of the Hazardous Material. If Tenant
breaches the obligations stated herein, or if the presence of
Hazardous Material on the Leased Premises caused or permitted by
Tenant results in any contamination of the Leased Premises or any
other private or public property, including, without limitation,
sewers or streets, or if contamination of the Leased Premises by
Hazardous Material otherwise occurs for which Tenant is legally liable
to Landlord or to any third party for damages resulting therefrom,
then:
7.2.1 Tenant shall indemnify, defend and hold Landlord harmless
from and against any and all claims, judgments, damages,
penalties, fines, costs, expenses, liabilities and losses
(including, without limitation, diminution in value of the
Leased Premises, damages for the loss or restriction on use
of rentable or usable space or of any amenity of the Leased
Premises, damages arising from any adverse impact on
marketing the Leased Premises and sums paid in settlement of
claims, attorneys' fees, consultant fees and expert fees)
that arise during or after the term of this Lease, as a
result of or in connection with such contamination. The
foregoing indemnification of Landlord by Tenant includes,
without limitation, costs incurred in connection with any
investigation of site conditions or any clean-up, remedial,
removal or restoration work required or recommended by any
federal, state or local governmental agency or political
subdivision because of Hazardous Material present in the
soil or groundwater on or under the Leased Premises, or any
public facilities, if the presence of the Hazardous Material
is the result of activities of Tenant or Tenant's agents,
employees, contractors, subtenants, or invitees.
7.2.2 Tenant shall promptly take any and all actions, at its sole
cost and expense, as are necessary or appropriate to return
the Leased Premises or other private or public facilities to
the condition existing prior to the introduction of any
Hazardous Material to the Leased Premises. Duplicate copies
of all reports
- --------------------------------------------------------------------------------
LEASE Page 9
<PAGE>
and findings made by all contractors, laboratories and
engineering firms chosen by Tenant to undertake any remedial
action that may be necessary or appropriate on or about the
Leased Premises or other private or public facilities shall
be delivered to Landlord concurrently with their delivery to
Tenant.
7.2.3 As used herein, the term "Hazardous Material" means any
hazardous or toxic substance, material or waste that is or
becomes regulated by any local governmental authority, the
State of Oregon, or the United States Government. The term
"Hazardous Material" includes, without limitation, any
material or substance which is designated as a hazardous
substance pursuant to the Water Pollution Control Act
(33 USC Section 1317); or defined as hazardous waste
pursuant to the Resource Conservation and Recovery Act
(42 USC Section 6901 et seq.); or defined as a hazardous
substance pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
(42 USC Section 9601 et seq.); or defined as a hazardous
material pursuant to Article 90 of the Uniform Fire Code, as
adopted by the City in which the Leased Premises are
located, as amended from time to time.
7.2.4 Tenant shall not be responsible for and shall have no
obligations under this Section 7.2 for any Hazardous
Material brought upon, kept or used in or about the Leased
Premises by Landlord or its agents, employees and
contractors, or for any Hazardous Material brought upon the
Leased Premises after termination or expiration of the
Lease.
7.3 LANDLORD'S COVENANTS REGARDING HAZARDOUS MATERIAL. Landlord
represents and warrants to Tenant that, except as disclosed in the
environmental report approved pursuant to Section 1.4.3:
7.3.1 NO CONTAMINATION. There does not currently exist any actual
or potential contamination of the soil, subsoil, groundwater
or any other portion or of any parcel of the Leased Premises
by a Hazardous Material or any constituent thereof.
7.3.2 COMPLIANCE WITH ENVIRONMENTAL LAWS. Landlord (and
Landlord's other tenants) have complied at all times with
all applicable federal, state and local environmental laws
and regulations, including, without limitation, the
Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"), the Resource
Conservation and Recovery Act, as amended ("RCRA"), the
Toxic Substance Control Act ("TSCA"), any of the regulations
thereunder, and any other federal statute and any state
statue or municipal ordinance creating liability for the
treatment, storage or disposal or
- --------------------------------------------------------------------------------
LEASE Page 10
<PAGE>
the arranging therefore, or the existence on the Leased
Premises of any Hazardous Material, including any
constituent thereof.
7.3.3 NO UNDERGROUND STORAGE TANKS. There are no underground
storage tanks on the Leased Premises.
7.3.4 NO VIOLATIONS. The Leased Premises are not subject to any
federal, state or local "superfund" lien, proceedings,
claim, liability or action, or the threat or likelihood
thereof, for the cleanup, removal or remediation of any
Hazardous Material from the Leased Premises.
7.3.5 INDEMNITY. If Landlord is in breach of any of the foregoing
representations or warranties, or if the presence of
Hazardous Material on the Leased Premises caused or
permitted by Landlord (or any of Landlord's other tenants)
has resulted or results in any contamination of the Leased
Premises or any other private or public property, including,
without limitation, sewers or streets, or if contamination
of the Leased Premises by Hazardous Material otherwise
occurs for which Landlord is legally liable to Tenant or to
any third party for damages resulting therefrom, then
Landlord shall indemnify, defend and hold Tenant harmless
from and against any and all claims, judgments, damages,
penalties, fines, costs, expenses, liabilities and losses
(including, without limitation, diminution in value of the
Leased Premises, damages for the loss or restriction on use
of rentable or usable space or of any amenity of the Leased
Premises, damages arising from any adverse impact on
marketing the Leased Premises and sums paid in settlement of
claims, attorneys' fees, consultant fees and expert fees)
that arise during or after the term of this Lease, as a
result of or in connection with such contamination. The
foregoing indemnification of Tenant by Landlord includes,
without limitation, costs incurred in connection with any
investigation of site conditions or any clean-up, remedial,
removal or restoration work required or recommended by any
federal, state or local governmental agency or political
subdivision because of Hazardous Material present in the
soil or groundwater on or under the Leased Premises, or any
public facilities, if the presence of the Hazardous Material
is the result of activities of Landlord or Landlord's
agents, employees, contractors, subtenants, or invitees.
8. MAINTENANCE
8.1 TENANT'S OBLIGATIONS. Tenant shall maintain in good order, condition
and repair (ordinary wear and tear excepted), at Tenant's cost and
expense, the Building's water, sewer, gas, electrical and plumbing
systems from the point of entry into the Building, the heating,
ventilating and air conditioning system (provided that such system is
in good working order and repair at the Commencement Date), the
interior
- --------------------------------------------------------------------------------
LEASE Page 11
<PAGE>
of the Leased Premises, the doors and windows of the Leased Premises,
the exterior lighting at the Leased Premises, the backflow device on
the fire protection system and the pump station, and any portions of
the Leased Premises damaged by Tenant's negligence. If Tenant refuses
or neglects to maintain and repair as required by this Lease, and to
the reasonable satisfaction of Landlord as soon as reasonably possible
after written demand, Landlord may effect the maintenance and repair
without liability for loss or damage which may accrue to Tenant or
Tenant's property, and Tenant shall promptly pay Landlord's costs for
the maintenance and repair, plus interest on such costs at the rate of
10% per annum from the date of completion by Landlord.
8.2 LANDLORD'S OBLIGATION. Landlord shall maintain in good order,
condition and repair (ordinary wear and tear excepted) at Landlord's
cost and expense, the exterior of the Building, including the roof,
gutters and exterior walls, the water, sewer, gas, electrical and
plumbing systems up to the point of entry into the Building, and any
other items of maintenance or repair that Tenant is not required to
make (except that Landlord shall not be obligated to repair or
maintain the parking areas and roadway on the Leased Premises, which
shall be repaired and maintained by Tenant as and to the extent deemed
necessary or appropriate by Tenant). In addition, it shall be
Landlord's obligation to provide that the plumbing, heating,
ventilating and air conditioning system is in good working order and
repair at the Commencement Date.
9. ASSIGNMENT AND SUBLETTING
Tenant shall not assign this Lease in whole or in part, nor sublet all or
any part of the Leased Premises, without the prior written consent of
Landlord in each instance, which will not be unreasonably withheld,
conditioned or delayed. The consent by Landlord to any assignment or
subletting shall not constitute a waiver of the necessity for such consent
to any subsequent assignment or subletting. This prohibition against
assignment and subletting shall include a prohibition against any
assignment or subletting by operation of law. If this Lease is assigned,
or if the Leased Premises or any part thereof are sublet or occupied by
anyone other than Tenant, Landlord may, during the existence of any Event
of Default, collect rent and other charges from the assignee, subtenant or
occupant, and apply the net amount collected to the rent and other charges
herein reserved, but no such assignment, subletting occupancy or collection
shall be deemed a waiver of this covenant, or the acceptance of the
assignee, subtenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of this Lease. If Tenant requests Landlord's
consent to an assignment or sublease to a proposed assignee or sublessee
who appears financially capable of performing the obligations of the Tenant
that are assigned or sublet, Landlord shall consent to the assignment or
sublease. If Tenant's interest in this Lease is assigned, then
notwithstanding the consent of the Landlord to the assignment the right of
first refusal granted pursuant to Section 33 shall be terminated and upon
such assignment Section 33 shall be of no further force or effect.
- --------------------------------------------------------------------------------
LEASE Page 12
<PAGE>
10. TITLE INSURANCE
Landlord and Tenant shall each pay one-half of the premium for the issuance
of a standard leasehold policy of title insurance, insuring Tenant's
interest under this Lease and showing title vested in landlord's name,
subject only to exceptions numbers 6 through 16 as shown in the Preliminary
Report issued by Cascade Title Co., dated December 12, 1996 (as of
November 27, 1996) issued under Report No. CT-209834.
11. INSURANCE
11.1 CASUALTY INSURANCE. Tenant, at Tenant's sole cost and expense, shall
keep in full force and effect a policy insuring the Leased Premises
against fire and other casualty, with extended coverage, and against
such other risks and perils as Landlord may reasonably require
("Casualty Insurance"). The amount of the Casualty Insurance coverage
shall be no less than the replacement value of the improvements
included in the Leased Premises. The Casualty Insurance policy or
policies shall be issued for the benefit of, and with loss payable to,
Tenant and Landlord as their interests may appear at the time of loss.
The insured persons shall, at Landlord's election, also include the
holder of any mortgage or deed of trust covering the Leased Premises,
in which case all such policies shall, in addition to fulfilling the
other requirements of this Section 11, be issued by an insurer
satisfactory to (and provide insurance against such risks and in such
amounts as may be required by) the holder of the senior mortgage or
deed of trust on the Leased Premises.
11.2 LIABILITY INSURANCE. Tenant, at Tenant's sole cost and expense, shall
keep in full force and effect a policy of public liability and
property damage insurance (insuring both Tenant and Landlord) with
respect to the Leased Premises and the business operated by Tenant in
the Leased Premises in which the limits of public liability coverage
shall be at least $1,000,000.00 per occurrence, insuring against
damages to person or property on or outside of the Leased Premises
resulting from the use or possession thereof by Tenant, Tenant's
agents, employees, officers, contractors, vendors, invitees or
licensees.
11.3 TENANT'S PROPERTY INSURANCE. Tenant, at Tenant's sole cost and
expense, shall maintain insurance in Tenant's name covering Tenant's
furniture, trade fixtures, equipment, inventory items, spare parts,
supplies, and other personal property, and the personal property of
others in Tenant's possession at the Leased Premises.
11.4 POLICY REQUIREMENTS; MUTUAL WAIVER OF SUBROGATION. A certificate
issued by the insurance carrier for each policy of insurance required
by this Lease shall be delivered to Landlord at the Commencement Date
and within 10 days prior to the expiration of the term of each policy.
Each certificate and policy of insurance required by this Lease shall
expressly evidence insurance coverage as
- --------------------------------------------------------------------------------
LEASE Page 13
<PAGE>
required by this Lease (including the waiver of subrogation rights as
required by this section) and shall contain an endorsement or
provision requiring at least 10 days' written notice to Landlord prior
to the expiration, cancellation, diminution in the perils insured
against, or reduction in the amount of coverage of the policy.
Landlord and Tenant shall obtain from each insurer of the Leased
Premises a written waiver for the benefit of the other of all rights
of subrogation which the insurer might otherwise have against the
other party.
12. CASUALTY DAMAGE
12.1 If the Leased Premises shall be damaged by fire, the elements,
unavoidable accident or other casualty, but are not thereby rendered
untenantable in whole or in part, then:
12.1.1 The rent shall not be abated.
12.1.2 To the extent of any insurance proceeds recoverable by
either party, the damage shall be promptly repaired by the
insured party.
12.1.3 To the extent that insurance proceeds recoverable for the
damage are not sufficient to pay the costs of repair, the
damage shall be promptly repaired by Tenant.
12.2 If, by reason of such damage, the Leased Premises are rendered
untenantable only in part, then:
12.2.1 The Monthly Basic Rent payable by Tenant shall be abated
commensurately with the loss of or interference with
Tenant's use of the Leased Premises.
12.2.2 Repair of the damage shall be made as provided in
Section 12.1.
12.3 If, by reason of such damage, the Leased Premises are rendered wholly
untenantable, then either party shall have the elective right to
terminate the Lease as of the date the Leased Premises became
untenantable by giving written notice to the other within ninety (90)
days of the damage; provided, however, that if Landlord shall elect to
terminate the Lease, Tenant shall have thirty (30) days following
Landlord's written termination notice to exercise the Option to
purchase the Leased Premises on the terms, covenants, conditions, and
other provisions of Section 32 (other than Section 32.1 relating to
the time for exercising the Option), with the "fair market
value" determined as of the date of the damage to the Leased Premises,
as so damaged. All insurance proceeds recoverable for the damage to
the Leased Premises shall be the property of Landlord; provided, that
Tenant shall be entitled to an amount equal to the incremental value
added to the Leased Premises by Tenant, in accordance with Section 36;
and further provided that, if the Option is exercised, the "fair
market
- --------------------------------------------------------------------------------
LEASE Page 14
<PAGE>
value" and the purchase price shall be determined based on the
Leased Premises as damaged and unrestored. If both parties elect to
continue the Lease, their rights and obligations respecting repair and
restoration of the Leased Premises and abatement of rent and taxes
following the damage shall be as they may then mutually agree.
13. DEFAULT BY TENANT
13.1 Tenant shall be in breach of this Lease if at any time during the term
of the Lease (and regardless of the pendency of any bankruptcy,
reorganization, receivership, insolvency or other proceedings in law,
in equity or before any administrative tribunal, which might have the
effect of preventing Tenant from complying with the terms of this
Lease) any one of the following events occurs (each of which shall be
deemed an "Event of Default"):
13.1.1 Tenant fails to make payment of any monthly installment of
rent or of any other charge to be paid by Tenant, and such
failure is not cured within 10 days after Landlord has given
written notice to Tenant of such failure of payment
(provided, however, that it shall be an Event of Default if
Tenant fails to make payment of any monthly installment of
rent or of any other charge to be paid by Tenant with ten
(10) days of the due date therefor if Landlord has given
Tenant written notice pursuant to this Section 13.1.1 two or
more times in the twelve (12) preceding calendar months); or
13.1.2 Tenant fails in a material manner or to a material extent to
perform any of its other obligations hereunder and such
failure is not cured within 30 days after Landlord has given
written notice to Tenant of such failure; provided, however,
that if the nature of Tenant's obligation is such that more
than 30 days are required for performance, then Tenant shall
not be in breach if Tenant commences performance within 10
days after such notice and thereafter diligently prosecutes
the cure to completion; or
13.1.3 Tenant becomes insolvent, or makes a transfer in fraud of
its creditors, or makes an assignment for the benefit of its
creditors; or
13.1.4 Tenant voluntarily files or has filed against it, a petition
under any provision of the United States Bankruptcy Act, as
amended, or under any similar law or statute of the United
States or any state, and (in the case of a voluntary
petition) such petition is not dismissed within 30 days
thereafter, or Tenant is adjudged bankrupt or insolvent in a
proceeding filed by or against Tenant; or
13.1.5 A receiver or trustee is appointed for all or substantially
all of Tenant's assets.
- --------------------------------------------------------------------------------
LEASE Page 15
<PAGE>
13.2 If Tenant breaches this Lease and abandons the Leased Premises before
the end of the term or any extension thereof, or if Tenant's right to
possession is terminated by Landlord because of an Event of Default,
then, except as provided in Section 13.3, the Lease shall
automatically terminate and Landlord may recover from Tenant:
13.2.1 The worth at the time of award of the unpaid rent which had
been earned at the time of termination; plus
13.2.2 The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination
until the time of award exceeds the amount of rental loss
for such period which could have been reasonably avoided by
Landlord's diligence; plus
13.2.3 The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of
award exceeds the amount of rental loss for such period
which could be reasonably avoided by Landlord's diligence;
plus
13.2.4 Any other amount necessary to compensate Landlord for all
damage proximately caused by Tenant's breach of its
obligations under this Lease, or which in the ordinary
course of events would be likely to result therefrom,
including but not limited to taxes, insurance premiums,
maintenance and other obligations of Tenant for the balance
of the term to the extent such losses could not be
reasonably avoided by Landlord's diligence.
13.3 In the event Tenant has breached this Lease and abandoned the Leased
Premises, the Lease shall continue in full force and effect so long as
Landlord does not terminate Tenant's right to possession of the
premises, and Landlord may enforce all of its rights and remedies
under the Lease, including the right to recover rent as it becomes
due. For purposes of this section, the following acts by Landlord
shall not constitute termination of Tenant's right to possession of
the premises:
13.3.1 Acts of maintenance or preservation or efforts to relet the
Leased Premises.
13.3.2 The appointment of a receiver upon the initiative of
Landlord to protect Landlord's interest under this Lease or
in the Leased Premises.
13.4 If Landlord elects to reenter the Leased Premises or to take
possession pursuant to legal proceedings or pursuant to any notice
provided by law, Landlord may either terminate this Lease or may from
time to time without terminating this Lease make such alterations and
repairs as may be necessary in order to relet the premises, and may
relet the premises or any part thereof for such term or terms (which
may be for a term extending beyond the term of this Lease) and at such
rental or rentals and upon
- --------------------------------------------------------------------------------
LEASE Page 16
<PAGE>
such other terms and conditions as Landlord in its sole discretion may
deem advisable. Upon each such reletting all rental received by
Landlord from such reletting shall be applied as follows: first, to
the payment of any costs and expenses of such reletting, including
brokerage fees, attorneys' fees, and the costs of such alterations and
repairs; second, to the payment of any indebtedness other than rent
due hereunder from Tenant to Landlord; third, to the payment of rent
due and unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of future rent as the same may become
due and payable hereunder. If rental income received from such
reletting during any month is less than that to be paid during that
month by Tenant hereunder, Tenant shall immediately pay the deficiency
to Landlord. The deficiency shall be calculated and paid monthly. No
reentry or taking possession of the premises by Landlord shall be
construed as an election to terminate this Lease unless a written
notice of such election is given by Landlord to Tenant or unless the
termination be decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination, Landlord may at any
time thereafter elect to terminate this Lease for the previous breach.
If Landlord at any time terminates this Lease for any breach, then
Landlord may (in addition to exercising any other remedies Landlord
may have under other provisions of this Lease or otherwise) recover
from Tenant all damages Landlord may incur by reason of such breach,
including the cost of recovering the Leased Premises, plus reasonable
attorneys' fees, and plus the worth at the time of such termination of
the excess, if any, of the amount of rent and other charges reserved
in this Lease for the remainder of the stated term over the then
reasonable rental value of the Leased Premises for the remainder of
the stated term, all of which amounts shall be immediately due and
payable from Tenant to Landlord.
13.5 DEFINITIONS AND INCIDENTAL RIGHTS
13.5.1 The "worth at the time of award" of amounts referred to in
Sections 13.2.1 and 13.2.2 shall be computed by allowing
interest at the rate of 10% per annum. The "worth at the
time of award" of the amount referred to in Section 13.2.3,
and the "worth at the time of such termination" of the
amount referred to in Section 13.4 shall each be computed by
discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco in effect at the time of award
or termination, as the case may be.
13.5.2 The "damage proximately caused by Tenant's breach" referred
to in Section 13.2.4 shall include, without limitation, any
and all broker's commissions and other expenses reasonably
incurred in reletting the Leased Premises.
13.5.3 Any efforts by Landlord to mitigate the damages caused by
Tenant's breach of this Lease shall not constitute a waiver
of Landlord's right to recover the damages stated above.
Landlord shall be under no obligation to do any
- --------------------------------------------------------------------------------
LEASE Page 17
<PAGE>
remodeling of the Leased Premises at a cost exceeding $2,500
in order to relet even if such remodeling is necessary to
obtain a new tenant, and Tenant shall make no claim that
Landlord failed to mitigate its damages by refusing to relet
if remodeling was required in order to do so. Should
Landlord elect to remodel the Leased Premises in order to
relet the same, the reasonable costs of such remodeling
shall be recoverable from Tenant. In no case shall the
Landlord be guilty of trespass, or liable for any other
damages to Tenant for Landlord's reasonable acts and
omissions in connection with repossession of the Leased
Premises, or in rendering the Leased Premises fit for
occupancy by any other tenant.
13.5.4 No provision of this Section 13 and no action or election by
Landlord pursuant to this Section 13 shall operate or be
construed to affect the provisions of this Lease regarding
Landlord's right to indemnification from Tenant for
liability accruing as a result of events, acts, or omissions
prior to the termination of this Lease. All of Tenant's
such indemnification obligations shall survive the
expiration or other termination of this Lease.
13.5.5 No right or remedy conferred upon or reserved to Landlord in
this Lease is intended to be exclusive of any other right or
remedy granted to Landlord by statute or common law, and
each and every such right and remedy shall be cumulative.
13.5.6 For purposes of this Section 13, the rent payable by Tenant
after an Event of Default shall include Monthly Basic Rent,
all Taxes and insurance, and all other monetary obligations
of Tenant under this Lease.
14. EMINENT DOMAIN
14.1 If the whole of the Leased Premises shall be acquired or condemned by
eminent domain for any public or quasi-public use or purpose, then the
term of this Lease shall cease and terminate as of the date of the
earlier of title vesting or possession taken in such proceeding, and
all rent, Taxes accruing after the Commencement Date and other
obligations of Tenant under this Lease shall be paid up to that date
and Tenant shall have no claim against Landlord for the value of any
unexpired term of this Lease.
14.2 If only a part of the Leased Premises shall be acquired or condemned
by eminent domain for any public or quasi-public use or purpose, and
if such partial taking or condemnation shall render the Leased
Premises unsuitable for the business of the Tenant, then the term of
this Lease shall cease and terminate as of the date of the earlier of
title vesting or possession taken in such proceeding, and Tenant shall
have no claim against Landlord for the value of any unexpired term of
this Lease. If the partial taking or condemnation is not extensive
enough to render the Leased Premises
- --------------------------------------------------------------------------------
LEASE Page 18
<PAGE>
unsuitable for the business of Tenant, then Landlord shall promptly
restore the Leased Premises to a condition comparable to their
condition at the time of the condemnation less the portion lost in the
taking, and this Lease shall continue in full force and effect as to
the remainder of the Leased Premises, with the Monthly Basic Rent
thereafter payable by Tenant being reduced by a percentage equal to
the percentage reduction, if any, in the total value of the Leased
Premises.
14.3 In the event of any condemnation or taking, whether whole or partial,
and except as otherwise provided below in Section 14.4, Tenant shall
not be entitled to receive any part of the award, as damages or
otherwise, for such condemnation and Landlord is to receive the full
amount of the award, the Tenant hereby expressly waiving any right or
claim to any part thereof.
14.4 In the event of any condemnation or taking, whether whole or partial,
Tenant shall be entitled to a portion of the award or compensation
that is equal to the incremental value added to the Leased Premises by
Tenant, in accordance with Section 36, and Tenant shall have the right
to claim and recover from the condemning authority, but not from
Landlord, such compensation as may be separately awarded or
recoverable by Tenant in Tenant's own right on account of any and all
damage to Tenant's business by reason of the condemnation, and for or
on account of any cost or loss which Tenant may incur in removing
Tenant Improvements that Tenant elects to remove and Tenant's
furniture, fixtures, trade fixtures, equipment, and other personal
property.
15. INDEMNIFICATION OF LANDLORD
Tenant shall indemnify Landlord and save Landlord harmless from and against
any and all claims, actions, damages, liability and expense in connection
with loss of life, personal injury or damage to property arising out of the
occupancy or use by Tenant of the Leased Premises, or occasioned wholly or
in part by any act or omission of Tenant, its agents, contractors,
employees or servants. If Landlord shall, without fault on Landlord's
part, be made a party to any litigation commenced by or against Tenant,
then Tenant shall defend and hold harmless Landlord, and shall pay all
costs, expenses and reasonable attorney's fees incurred or paid by Landlord
in connection with such litigation.
16. SURRENDER OF LEASED PREMISES
At the expiration or other termination of this Lease, Tenant shall
surrender the Leased Premises in good order, condition and state of repair,
except for reasonable wear and tear and for damage caused by insured
casualty. Before surrendering the Leased Premises, Tenant shall be
entitled to remove all of Tenant's personal property, trade fixtures and
other fixtures and any Tenant Improvements to be removed by Tenant pursuant
to Section 6.3, and shall repair any damage to the Leased Premises caused
by the removal. Tenant's obligations under this Section 16 shall survive
the expiration or other termination of this Lease.
- --------------------------------------------------------------------------------
LEASE Page 19
<PAGE>
17. TRANSFER OF TITLE
In the event of any transfer or conveyance of title to the Leased Premises,
Landlord herein named (and, in case of any subsequent transfer or
conveyance, the then grantor) shall from and after the date of the transfer
or conveyance be automatically released from all liability for the
performance of any covenants or obligations on the part of Landlord
contained in this Lease thereafter to be performed. However, Landlord or
the then grantor shall not be relieved of any liability which shall have
accrued prior to the transfer or conveyance by reason of the failure of
Landlord or the then grantor to perform obligations of the Landlord
hereunder; and Landlord or the then grantor shall not cease to be liable
under any covenant, condition or obligation imposed upon Landlord or the
then grantor by this Lease unless and until Landlord or the then grantor
shall have caused the vendee or transferee to execute, acknowledge and
deliver to Tenant a written instrument under which the vendee or grantee
assumes and agrees to perform all of the terms on the part of Landlord to
be performed and to comply with and be bound by all the terms, covenants
and conditions of this Lease for and during the period from and after the
date of the transfer or conveyance.
18. SUBORDINATION OF LEASE
Except as provided in Section 1.4.4, at Landlord's election, this Lease
shall be subordinated to any mortgage, deed of trust, or other encumbrance
now or hereafter placed upon the Leased Premises, and to any and all
advances, whether obligatory or optional, made on the security thereof, and
to all renewals, modifications, consolidations, replacements and extensions
thereof. Tenant shall attorn to any purchaser at any foreclosure sale, or
to any grantee or transferee designated in any deed given in lieu of
foreclosure. Tenant agrees to execute any documents required to effectuate
a subordination and, failing to do so within 10 days after Landlord's
written demand to Tenant, does hereby irrevocably appoint Landlord as
Tenant's attorney-in-fact and authorize Landlord in Tenant's name so to do.
However, any such subordination by Tenant shall include a covenant
providing for Tenant's occupancy to continue undisturbed under the Lease.
19. ESTOPPEL CERTIFICATES
19.1 Tenant shall, within seven days after written request from Landlord,
execute, acknowledge and deliver to Landlord a statement in writing
(herein called "Estoppel Certificate"):
19.1.1 Certifying that this Lease is unmodified and in full force
and effect, or, if modified, stating the nature of the
modifications and certifying that this Lease, as so
modified, is in full force and effect and the date to which
the rent and other charges are paid in advance, if any; and
19.1.2 Acknowledging that Tenant does not know of any uncured
default on the part of Landlord, or specifying any defaults
that are claimed.
- --------------------------------------------------------------------------------
LEASE Page 20
<PAGE>
19.2 The Estoppel Certificate may be conclusively relied upon by Landlord
and by any prospective purchaser or encumbrancer of the Leased
Premises.
19.3 Tenant's failure to deliver an Estoppel Certificate within the time
above stated shall be conclusive upon Tenant:
19.3.1 That this Lease is in full force and effect, without
modification except as may be represented by Landlord;
19.3.2 That there are no uncured defaults in Landlord's
performance; and
19.3.3 That not more than one month's rent has been paid in
advance.
19.4 If Landlord desires to finance, refinance or sell the Leased Premises
or any interest therein, Tenant shall at Landlord's request deliver to
Landlord and to any prospective lender or purchaser designated by
Landlord such financial statements of Tenant as may be reasonably
required by the lender or purchaser. Tenant's financial statements
shall be received by Landlord in confidence and shall be used only for
the purposes herein stated. At Tenant's request, Landlord and any
other person to whom Tenant's financial statements may be delivered
shall execute and deliver to Tenant a confidentiality agreement
relating thereto, in such form as may be prescribed by Tenant.
20. ATTORNEYS' FEES
If Landlord shall commence any action to recover rent or other charges
payable by Tenant, or if Landlord shall commence any judicial proceeding
for eviction of Tenant for a claimed default under this Lease, or if either
Landlord or Tenant shall commence any action against the other for
enforcement of or to recover damages for the breach of any provision of
this Lease, then the prevailing party shall be entitled to collect, and the
other party shall pay, in addition to costs and disbursements allowed by
law, the prevailing party's reasonable attorney fees in the action or
proceeding, including proceedings on appeal, as may be fixed by the court.
Such sum shall include an amount estimated by the court as the reasonable
costs and fees to be incurred by the prevailing party in collecting any
monetary judgment or award or otherwise enforcing each order, judgment or
decree entered in the action or proceeding.
21. ACCESS BY LANDLORD
Landlord and its agents shall have the right to enter and examine the
Leased Premises at all reasonable times, and to show them to prospective
purchasers or tenants.
- --------------------------------------------------------------------------------
LEASE Page 21
<PAGE>
22. HOLDING OVER
Any holding over by Tenant after the expiration of the term with Landlord's
consent shall unless otherwise agreed in writing, constitute a tenancy from
month to month on the terms and conditions herein specified, except that
the Monthly Basic Rent payable during the holdover tenancy shall be 125% of
the amount of the Monthly Basic Rent that was payable for the month
immediately prior to the expiration of the term.
23. COVENANT OF QUIET ENJOYMENT
Upon Tenant's timely payment of the rents and other Charges herein
provided, and performance of all other obligations under this Lease, Tenant
shall, subject to the terms and conditions of this Lease, peaceably and
quietly hold and enjoy the Leased Premises for the term of the Lease
without hindrance or interruption by Landlord or any person claiming by,
through or under Landlord.
24. USE OF PRONOUN
The use of the neuter singular pronoun to refer to Tenant and Landlord
shall be deemed a proper reference even though Tenant or Landlord may be an
individual, a partnership, a corporation, a limited liability company, or a
group of two or more individuals or other entities. The necessary
grammatical changes required to make the provisions of this Lease apply in
the plural sense where there is more than one Tenant and Landlord and to
either corporations, associations, partnerships, limited liability
companies, or individuals, males or females, shall in all instances be
assumed as though in each case fully expressed.
25. PARTIAL INVALIDITY
If any term, covenant or condition of this Lease or the application thereof
to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
term, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby
and each term, covenant or condition of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
26. RECORDING
At Tenant's request, Landlord shall join with Tenant in executing a
memorandum of this Lease (including express reference to the option
described in Section 32), in recordable form, which Tenant may cause to be
recorded in the real property records of Lane County, Oregon. If the Lease
or a memorandum thereof is so recorded, Tenant shall promptly upon written
request from Landlord execute and deliver any documents required to
effectuate a subordination of
- --------------------------------------------------------------------------------
LEASE Page 22
<PAGE>
the Lease as provided in Section 18, and, following expiration or other
termination of the Lease, any documents reasonably required to evidence
such expiration or termination.
27. NONWAIVER OF BREACH
The waiver by Landlord of a breach of any term, covenant or condition of
this Lease shall not be deemed a waiver of the term, covenant or condition
or of any subsequent breach of the same or any other term, covenant or
condition. The acceptance of rent hereunder by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant
or condition of this Lease, other than the failure of Tenant to pay the
particular rent so accepted, regardless of Landlord's knowledge of the
preceding breach at the time of acceptance of the rent. No covenant, term
or condition of this Lease shall be deemed to have been waived by Landlord
unless the waiver is in writing and signed by Landlord.
28. ACCORD AND SATISFACTION
Except as provided in Section 13.4, any payment by Tenant of a lesser
amount than the total rent then due shall be applied toward payment of the
earliest rent then due and unpaid. No endorsement or statement on any
check or any letter accompanying any check or payment as rent or other
charges shall be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of the rent and other charges or pursue any other remedy provided
in this Lease.
29. CAPTIONS
The captions appearing at headings of sections in this Lease are provided
for convenience of reference only and shall not be used to construe or
interpret the meaning of this Agreement.
30. AMENDMENTS
No modification, alteration, amendment, change or addition to this Lease
shall be binding upon Landlord or Tenant unless reduced to writing and
signed by the party to be bound.
31. NOTICES
Any notice, request, or demand required or permitted to be given under this
Lease shall be seemed to have been given only when it is in writing, has
been hand delivered or deposited in the United States mail, with postage
prepaid, to be forwarded by certified or registered mail, and is addressed
to Tenant or to Landlord at the address as specified in Section 1, or at
such other address as a party may for itself designate from time to time by
giving written notice to the other party. A copy of the notice, request,
or demand shall concurrently be transmitted by facsimile to the copy
addressees specified in Section 1.
- --------------------------------------------------------------------------------
LEASE Page 23
<PAGE>
32. OPTION TO PURCHASE.
So long as Tenant is not in default under the terms of this Lease and this
Lease has not expired or terminated, Landlord hereby grants to Tenant an
option to purchase the Leased Premises on the following terms and
conditions ("Option").
32.1 The Option is exercisable at any time during thirteenth (13th) through
eighteenth (18th) months of the second Extension Option period (that
is, from April 1, 2006 through September 30, 2006). The Option may be
exercised only by written notice of exercise given by Tenant to
Landlord pursuant to this Lease.
32.2 If Tenant has duly exercised the Option, the sale of the Leased
Premises to Tenant shall close one hundred eighty (180) days after the
date on which Tenant gives Landlord written notice of the exercise of
the Option or as soon thereafter as is reasonably practicable, and
this Agreement shall thereupon terminate.
32.3 Landlord shall convey title to the Leased Premises to Tenant by
statutory warranty deed free and clear of all liens and encumbrances
other than the lien of current taxes and assessments that are not
delinquent, easements, covenants, restrictions and other similar
matters of record at the date hereof. Landlord shall provide to
Tenant, at Landlord's expense, a standard owner's policy of title
insurance, in the amount of the purchase price, insuring Tenant that
fee title is vested in Tenant, subject only to the standard printed
exceptions and the lien of real property taxes not yet delinquent. In
paying the title insurance premium, Landlord shall be entitled to
utilize any available credit that the title company may give by reason
of the issuance of the leasehold policy described in Section 10,
above. In all other respects, the Leased Premises shall be sold,
transferred and conveyed to Tenant in its condition "as-is" at the
time of the closing.
32.4 Landlord and Tenant shall each pay one-half of closing escrow fees,
recording fees and other similar costs of closing.
32.5 The purchase price shall be paid in cash or by such other method as
Landlord and Tenant may agree, and shall be equal to the then "fair
market value" of the Leased Premises. For purposes of this Option,
the "fair market value" of the Leased Premises shall be determined as
if unencumbered by (and without regard to the income or other stream
of payments flowing from) this Lease, and shall have deducted
therefrom an amount equal to the incremental value added to the Leased
Premises by Tenant, in accordance with Section 36. Within thirty (30)
days of the exercise of the Option, Landlord and Tenant shall agree as
to the fair market value (as defined above). If the parties do not
agree within that thirty (30) day period, then Landlord and Tenant
shall each employ the services of a Lane County MAI appraiser to
complete an MAI appraisal of the fair market value (as defined above).
If the difference in value
- --------------------------------------------------------------------------------
LEASE Page 24
<PAGE>
between the two appraisal is ten percent (10%) or less, the purchase
price shall be the average of the two opinions of value set forth in
the two MAI appraisals. If the difference in value between the two
appraisals is greater than ten percent (10%), the two MAI
appraisers shall select a third Lane County MAI appraiser. If the
two appraisers are unable to agree upon a third appraiser, an
appraiser located in Lane County will be selected by the then
President or, in the President's absence, the Vice President of the
Local Chapter of MAI appraisers. The appraisal of fair market value
(as defined above) of the third appraiser will be averaged with the
appraisal of the closest in value of the other two appraisals, whether
higher or lower, and the average thereof shall be the purchase price.
Compensation of the third appraiser shall be borne equally by the
Landlord and Tenant.
32.6 If the Option is exercised, Tenant shall give Landlord Tenant's
reasonable cooperation with respect to the Landlord's intent to
complete an Internal Revenue Code Section 1031 tax deferred exchange.
Tenant will reasonably cooperate with the Landlord and the Landlord's
accommodator toward this exchange process, provided that Tenant shall
not incur any liability or cost related to this exchange process, and
that Tenant shall not be obligated to take title to any other suffer
any delay in closing. Tenant's purchase of the Leased Property is not
subject to the Landlord's completion of this exchange.
32.7 Tenant shall have the right to record a memorandum of this Option in
the real property records of Lane County, Oregon. If the Tenant
records a memorandum of option, Tenant shall promptly, upon written
request from Landlord, execute and deliver any documents required to
effectuate a subordination of the Lease as provided in Section 18 and,
following expiration or other termination of the Lease, any documents
reasonably required to evidence such expiration or termination.
32.8 The Option may not be assigned separately from the Lease as a whole,
and then only in accordance with Section 9 of this Lease.
33. RIGHT OF FIRST REFUSAL
33.1 Landlord agrees not to sell, transfer, exchange, grant an option to
purchase, lease, or otherwise dispose of the Leased Premises, or any
interest therein, without first offering the Leased Premises to Tenant
on the terms and conditions set forth in this Lease.
33.1.1 If Landlord receives from a third party ("Third-Party
Offeror") a bona fide offer to purchase the Leased Premises
and Landlord intends to accept such offer, Landlord shall
give Tenant written notice ("Notice") of the price, terms,
and conditions of the offer and deliver a copy of the offer
("Offer") to Tenant.
- --------------------------------------------------------------------------------
LEASE Page 25
<PAGE>
33.1.2 When Tenant receives the Notice and a copy of the Offer,
Tenant shall have the prior and preferential right to
purchase the Leased Premises at the same price and on the
same terms and conditions as are contained in the Offer,
except that if Tenant exercises the right of first refusal
by electing to purchase the Leased Premises then: (1) the
closing of the transaction contemplated by the Offer Shall
take place no earlier than 90 days after the date that
Tenant elects to exercise the right of first refusal, and
(2) Tenant shall receive a credit against the sale price of
the Leased Premises in an amount equal to any brokerage
commission that Landlord may save by selling the Leased
Premises to Tenant rather than the Third-Party Offeror.
33.1.3 Tenant shall have thirty (30) days from the date Tenant
receives the Notice and a copy of the Offer to notify
Landlord whether Tenant elects to purchase the Leased
Premises pursuant to the terms of the Offer. If Tenant
elects to exercise its right to purchase the Leased
Premises, then, in addition to giving Landlord written
notice of its election with the 30-day period, Tenant also
shall tender an amount equal to the earnest money deposit,
if any, specified in the Offer, which will be held and used
in accordance with the terms of the Offer.
33.1.4 If Tenant fails to timely exercise its right to purchase the
Leased Premises pursuant to the terms of the Lease, then
landlord shall be entitled to sell the Leased Premises
according to the terms of the Offer to the Third-Party
Offeror, subject to the terms of Section 32, above.
33.1.5 If Tenant fails to timely exercise its right to purchase the
Leased Premises pursuant to the terms of this Lease, and for
any reason Landlord shall not sell or convey the Leased
Premises to the Third-Party Offeror on the terms contained
in the Offer within six months of Tenant's election not to
purchase, then Landlord must resubmit the Offer as well as
any other offer to Tenant before selling the Leased
Premises, and such offers shall be subject to Tenant's right
of first refusal under this Lease
33.2 TERM. The term of this right of first refusal commences as of the
date of this Lease and terminates on the earlier to occur of: (1) the
expiration of this Lease for any reason or (2) the consummation of a
sale of the Leased Premises to the Third Party Offeror as described
above. Tenant shall cooperate in providing Landlord with any
instruments that Landlord reasonably may require for the purpose of
removing from the public record any cloud on title to the Leased
Premises attributable in any manner to the grant or existence of this
right of first refusal, pursuant to Paragraph 33.5.
33.3 EXCLUDED TRANSFERS. The right of first refusal created by this Lease
shall not apply to any sale or conveyance of the Leased Premises by
Landlord to any
- --------------------------------------------------------------------------------
LEASE Page 26
<PAGE>
partnership, limited partnership, joint venture, corporation, or other
entity in which Landlord owns and controls at least a fifty percent
(50%) interest.
33.4 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. This right of first refusal may
not be assigned by Tenant, either separately from or as a part of the
Lease as a whole, in accordance with Section 9 of this Lease.
33.5 RECORDING. Upon request of Tenant, Landlord agrees to join in
executing a memorandum of this Lease to be filed for recording in the
Official Records of Lane County, Oregon, to give notice to the public
of the right of first refusal of Tenant under this Lease. Tenant
shall pay the cost of recording the memorandum. The memorandum shall
note the date this Agreement expires and Tenant shall join in
executing a termination agreement when this Agreement has expired or
terminated, failing which, Landlord may execute the termination
agreement on behalf of Tenant.
33.6 STATUTORY DISCLAIMER: THIS INSTRUMENT WILL NOT ALLOW USE OF THE
PROPERTY DESCRIBED IN THIS INSTRUMENT IN VIOLATION OF APPLICABLE LAND
USE LAWS AND REGULATIONS. BEFORE SIGNING OR ACCEPTING THIS
INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD
CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO
VERIFY APPROVED USES.
34. SECONDARY ACCESS. Landlord shall give Tenant Landlord's reasonable
cooperation if Tenant desires to provide for secondary access to the Leased
Premises. This reasonable cooperation shall include, but shall not be
limited to, entering into a perpetual reciprocal easement with the owner of
property adjoining the Leased Premises if the purpose of the perpetual
reciprocal easement is to provide for ingress and egress by the owners and
tenants of the respective properties, if Tenant agrees to make the initial
installation of road improvements, and if the future maintenance and repair
obligations with respect to any secondary access road improvements is
apportioned between the easement holders in accordance with their
respective use.
35. POND FILL RIGHTS AND OBLIGATIONS. On or before March 31, 2000, Landlord
shall obtain all governmental permits, licenses or approvals necessary to
allow Tenant to fill the pond on the southerly portion of the Leased
Premises that is shown on the drawing attached as Exhibit D. If Landlord
has not obtained all necessary governmental permits, licenses or approvals
on or before March 31, 2000, Tenant may do so and may offset against
Monthly Basic Rent Tenant's actual and reasonable costs of so doing. After
all such permits, licenses and approvals have been obtained, Tenant shall
have the right, but not the obligation, to fill the pond and to improve the
surface of the filled pond for roadway, parking and similar purposes, at
Tenant's sole cost and expense.
- --------------------------------------------------------------------------------
LEASE Page 27
<PAGE>
36. CHANGE IN VALUE RESULTING FROM TENANT IMPROVEMENTS. At several places in
this Lease the parties are required to adjust their respective rights to
give the Tenant credit for the "incremental value added to the Leased
Premises by Tenant." Only Tenant Improvements permitted by Sections 1.10
and 6.2 shall be included in determining such incremental value or the
amount of credit to be given. Tenant's fixtures and trade fixtures to be
removed at the end of the Lease, as described in Section 6.3, shall not be
included in determining such incremental value or the amount of credit to
be given. However, the amount by which the Leased Premises increase in
value as a result of the creation of any secondary access, pursuant to
Section 34, shall be included in determining such incremental value or the
amount of credit to be given to Tenant. If the parties cannot agree on the
incremental value added to the Leased Premises by Tenant, the value shall
be determined by MAI appraisers using the same process described in
Section 32.5, except that such appraisers will be asked to determine the
incremental value added to the Leased Premises by Tenant rather than, or in
addition to, fair market value.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease effective as of
__________________, 1997.
TENANT: LANDLORD:
MONACO COACH CORPORATION, a
Delaware corporation -----------------------------------------
Ronald Major Defoe
By:
--------------------------------
Its: -----------------------------------------
---------------------------- Karla K. Defoe
- --------------------------------------------------------------------------------
LEASE Page 28
<PAGE>
LEASE AGREEMENT
THIS INDENTURE, made and entered into this 1st day of May, 1995, by and
between SK REALTY, of Elkhart County, Indiana, and hereinafter referred to as
"LESSOR"; and ROYALE COACH BY MONACO, INC., a Indiana corporation, with its
principal place of business situate in Elkhart County, Indiana, and hereinafter
referred to as "LESSEE".
WITNESSETH:
That the said LESSOR in consideration of the covenants of the said LESSEE
as hereinafter more specifically set forth, doth by these presence, lease to
LESSEE, the following described real estate situate in Elkhart County, State of
Indiana, to-wit:
Please see "EXHIBIT A" attached hereto and made a
part hereof by reference thereto for leased
premises and which real estate is commonly known
as 1330 Wade Drive, Elkhart, Indiana.
terms and conditions of this agreement.
1. To have and hold the same to LESSEE from the lst day of April, 1995,
to the 31st day of March, 2000, which period is hereinafter referred to as the
"rental period".
2. The LESSEE represents it will use said premises for manufacturing,
warehousing and office purposes only, all in conformity with applicable
ordinances, laws and regulations.
3. LESSEE agrees to pay and the LESSOR agrees to accept as rent for the
leased premises the following, to-wit:
(a) The sum of Seven Thousand and 00/100 ($7,000.00) dollars, upon
the execution of this agreement, receipt of which is hereby acknowledged by
LESSOR and which sum
<PAGE>
represents payment of the monthly rental for the leased premises for the first
month's rental; and LESSEE agrees to pay to LESSOR, the sum of Seven Thousand
and 00/100 ($7,000.00) dollars, on the lst day of May, 1995, for the next
month's rental, and the sum of Seven Thousand and 00/100 ($7,000.00) dollars, is
due and payable on the 1st day of each succeeding consecutive month thereafter
to and including the lst day of March, 1997; LESSEE agrees to pay to LESSOR, the
sum of Seven Thousand Six Hundred Fifty and 00/100 ($7,650.00) dollars, on the
1st day of April, 1997, and the sum of Seven Thousand Six Hundred Fifty and
00/100 ($7,650.00) dollars, is due and payable on the lst day of each succeeding
consecutive month thereafter to and including the 1st day of March, 2000.
(b) It is understood and agreed between the parties hereto that
LESSOR shall pay all real estate taxes and special assessments as levied against
the real estate being leased by LESSEE. LESSOR shall inform LESSEE of the
amount of such real estate taxes and all special assessments and LESSEE agrees
to promptly reimburse the LESSOR for said real estate taxes and/or special
assessments.
PROVIDED, HOWEVER, it is understood and agreed by and between the parties
hereto that LESSOR shall be responsible for any assessments for improvements
made prior to the execution of this Lease Agreement.
(c) It is understood and agreed between the Parties hereto that
LESSOR shall obtain a fire and extended coverage insurance policy relative to
the buildings situate on the subject premises. Such insurance policy shall
insure the buildings located on the subject real estate from fire, hail, and
windstorm, and the usual extended coverage insurance policy. LESSOR shall
inform
-2-
<PAGE>
LESSEE of the amount of such insurance premium and LESSEE agrees to promptly
reimburse LESSOR for the insurance premium paid by LESSOR.
(d) It is further understood and agreed between the Parties hereto
that LESSOR shall have no responsibility for any insurance relative to LESSEE'S
personal property situate in, on or upon the buildings located on the subject
real estate or upon the real estate adjacent to such buildings; as all insurance
for risk of loss relative to LESSEE'S personal property is the sole
responsibility of LESSEE.
(e) It is further understood and agreed between the Parties hereto
that the costs of maintaining the buildings and grounds leased to LESSEE by
LESSOR under the terms and conditions of this agreement, both interior and
exterior, and keeping said buildings and grounds and any improvements made
thereon in as good a condition as said improvements are presently in, normal
wear and tear excepted, is the responsibility of LESSEE.
PROVIDED, HOWEVER, it is agreed by and between the parties hereto that
LESSOR shall be responsible for the structural maintenance of the buildings
situate on the subject real estate being leased by LESSEE from LESSOR.
(f) The cash rent shall be paid in advance on the 1st day of each
calendar month of the rental period as hereinbefore provided, and such cash rent
shall be paid to LESSOR at its place of residence, or at such other place or
places, as LESSOR may, from time to time, in writing, so designate.
(g) The LESSOR will pay all water, sewage, electric, power, gas and
heating bills taxed, levied or charged against the premises during the term of
this lease. Upon LESSOR notifying the LESSEE of the amount of said bills, the
LESSEE agrees to promptly reimburse the LESSOR for
-3-
<PAGE>
the said charges relative to all water, sewage, electric, power, gas and heating
bills taxed, levied or charged against the premises for and during the term of
this lease.
(h) The parties hereto do hereby further agree that all sums payable
to LESSOR under this Lease Agreement shall be payable, together with interest,
at the rate of eighteen percent (18%) per annum, computed monthly, on any and
all arrearages.
4. The LESSEE does further agree as follows:
(a) Not to make any alterations, changes, or additions to said leased
premises without first obtaining LESSOR'S written consent to make the same, and
LESSOR shall not unreasonably withhold such consent. In the event of any such
alterations, changes or additions that LESSEE shall make, that the same shall be
made at LESSEE'S expense, and LESSEE agrees to promptly pay for all costs
involved in making the same. LESSEE shall not permit any liens, claims or
demands of any nature to exist against the LESSOR or the leased premises In the
event of any lien, claim or demand, or any action for enforcing the same shall
be filed or made against the LESSOR, or said premises, the LESSEE shall defend
the same at its expense, and LESSEE hereby agrees to indemnify and hold harmless
the LESSOR from any and all liability or expenses arising by virtue of such
claim, demand or lien or any action filed to enforce the same. Any such
alterations, changes or additions shall when made, become a part of said leased
premises and remain thereon as the property of the LESSOR at the termination of
this Lease Agreement.
(b) That it will pay for the rent for the said premises, as herein
stated, for the term covered by this lease, at the time and in the manner
hereinbefore stated, without relief from valuation and appraisement laws, and
with attorney's fees, and all other expenses and costs occasioned by the
nonpayment thereof.
-4-
<PAGE>
(c) That the LESSEE has examined and knows the conditions of said
premises and acknowledge that the same are received in good order and repair,
and that no representations as to the condition or repair thereof, have been
made by the LESSOR or their representative, prior to or at the execution of this
Lease; and that LESSEE will keep the interior and exterior of said premises in
good repair, including, but not limited to because of specification, the roof
and walls, replacing all broken glass with glass of the same size and quality as
that broken, and will keep said premises and appurtenances, as well as all
eaves, down spouting, catch basins, drains, stools, lavatory, sidewalks and all
other facilities and equipment in connection with said premises in a clean and
healthy condition, according to all applicable ordinances, during the term of
this lease, at LESSEE'S expense; and upon the termination of this lease
agreement in any manner, will yield up said premises to LESSOR in good condition
and repair, and that normal wear and tear excepted, and will deliver the keys to
said premises to LESSOR.
(d) To use and occupy the leased premises in a careful, safe and
proper manner, and not commit or suffer any waste thereof.
(e) That it will keep all drains, toilets and other plumbing fixtures
in a clean, sanitary and healthful condition.
(f) LESSOR shall not be liable or be in any way responsible for any
injury or damage to the property of the LESSEE or any other persons, firms or
corporations, or for any loss or damage sustained by the LESSEE, its employees,
agents or any other persons located upon said real estate, caused by the failure
of LESSEE to maintain the leased premises as herein provided, or from any loss
or damage resulting from, or occasioned by water, snow or ice coming upon said
real estate, or as a result of any act or neglect of the occupants of any
adjacent building or part thereof.
-5-
<PAGE>
The LESSOR shall not be liable for any injuries to the property of the
LESSEE or for any loss or damages sustained by it as a result of any negligent,
unlawful or criminal conduct by any of LESSEE'S servants, agents, or
representatives, unless the damage sustained by the LESSEE is caused by the
negligence of the LESSOR.
LESSEE hereby agrees to indemnify, save and hold harmless LESSOR against
all such loss, claims, suits and actions of every kind and nature relative to
the above, including LESSOR'S expenses in connection therewith which includes
reasonable attorney fees and which indemnification excludes such losses which
occur as a result of the negligence of LESSOR.
LESSEE agrees to pay insurance premiums relative to a liability insurance
policy on said real estate and for the benefit of the LESSOR in the sum of One
Million and 00/100 ($1,000,000.00) dollars, per person, and Two Million and
00/100 ($2,000,000.00) dollars, per occurrence, and agrees to furnish LESSOR
with a copy of said insurance policy or policies, as the case may be, which
policy or policies shall indicate the parties interest in said real estate.
(g) It will not assign this lease, nor sublet the above described
premises, or any part thereof, without first having obtained the written consent
thereto of the LESSOR, and that an assignment or transfer of this lease by
operation of law or by an assignee hereof, shall be understood to be included in
the above prohibition. LESSOR hereby agrees not to unreasonably withhold such
written consent to assign or sublet this lease agreement.
(h) The LESSEE will so conduct and carry on the business which it is
permitted to conduct and carry on in the above described premises that the
reputation of said premises will not be injured, and in accordance with all
ordinances of the County of Elkhart, Indiana, all laws of the State of Indiana,
and all other lawful rules and regulations which are now or may hereafter be in
effect.
-6-
<PAGE>
(i) The LESSOR by and through its designated representatives, shall
have the right at all reasonable times, to enter upon the leased premises for
the purpose of examining, or inspecting the leased premises. LESSOR may exhibit
and place "For Sale" signs or "For Rent" signs or notices on the exterior of
said premises, for a period of not more than one hundred eighty (180) days prior
to the termination hereof by lapse of time or otherwise.
(j) LESSEE shall promptly pay and discharge all store license tax or
special license fees that may be assessed or levied by any lawful authority
against the property of LESSEE on, against, or by virtue of the business
conducted in or on the demised premises during the term of this lease.
5. The LESSOR agrees as follows, to-wit:
(a) So long as the LESSEE is not in default in the performance of any
of the conditions or provisions hereof, it may peaceably hold and enjoy the
possession of said premises without any interruption from the LESSOR, or any
person, firm or corporation lawfully claiming through it.
(b) Upon the termination of this lease, by lapse of time or
otherwise, the LESSEE may remove all fixtures and equipment which it may have
installed on the leased premises and shall repair any damages to the premises
occasioned by such removal.
(c) The LESSEE may use the leased premises for any lawful purpose
under the applicable zoning ordinances.
(d) The LESSEE may erect and maintain signs on the leased premises in
keeping with the applicable zoning ordinances.
-7-
<PAGE>
6. In the event that the LESSEE shall fail to perform each and every of
the terms, covenants and conditions hereof, on its part to be performed, at the
time and in the manner herein provided for their performance, time being the
essence of this Agreement, or in the event that the LESSEE shall hereafter be
adjudicated a bankrupt, or a receiver shall be appointed for it or for its
property, or it shall make an assignment for the benefit of its creditors, then
the LESSOR may at his option, and upon written notice to the LESSEE, provided
each default in the performance of any of the provisions hereof by LESSEE,
stated in said notice, does not cease to exist upon the expiration of a period
of ten (10) days after the service of said written notice, cancel and terminate
this lease and re-enter the above described premises, either with or without
process of law and dispossess the LESSEE therefrom and thereafter retain
possession of said premises, but without any prejudice to any remedy or right of
action which may then exist, or thereafter accrue in favor of the LESSOR, in
respect to the breach by the LESSEE of any of the terms, covenants and
conditions hereof.
PROVIDED, HOWEVER, the LESSEE will have only a ten (10) day grace period
with regard to rental payments. The rights of LESSOR as set forth hereinabove
shall commence upon the expiration of ten (10) days from the date such rental is
due from LESSEE to LESSOR.
The failure of the LESSOR to cancel and terminate this Lease by reason of
the breach of any of the provisions hereof by the LESSEE shall not estop the
LESSOR from thereafter canceling and terminating the same by reason of any
subsequent breach of any of the provisions hereof.
The LESSOR shall have the right to receive and retain any rent due,
notwithstanding the fact that it may have instituted a suit of possession of the
leased premises, or obtained a judgment for the possession thereof, and for
damages, and the receipt and retention of said rent or of said damages
-8-
<PAGE>
shall not, in any manner, whatsoever, have any effect upon said notice, the
institution of said suit or said judgment.
7. In the event fifty percent (50%) or more of the leased premises, or
any part thereof, shall at any time hereafter, be destroyed or damaged by
casualty, unless caused by LESSEE'S neglect, so that the same, or any part
thereof shall be unfit for use by the LESSEE, then the cash rent or a fair and
just proportionate part thereof, according to the nature and extent of the
damage to said leased premises so resulting therefrom, shall be suspended and
abated and cease to be payable until said leased premises shall have been
repaired, rebuilt and made fit for use.
LESSOR must give to LESSEE written notice within thirty (30) days of said
casualty as to whether or not LESSOR will rebuild the subject premises. In the
event LESSOR shall elect not to rebuild the subject premises, then, and in that
event, this Lease Agreement shall be null and void and of no further force and
effect. In the event LESSOR shall elect to rebuild the subject premises, then,
and in that event, the subject premises must be completed and ready for
occupancy by the LESSEE within ninety (90) days from the date of said notice.
PROVIDED, HOWEVER, the rental for the subject real estate shall be
suspended and abated and cease to be payable until said leased premises shall
have been repaired, rebuilt and made fit for LESSEE'S use.
PROVIDED FURTHER, HOWEVER, in the event that less than fifty percent (50%)
of the leased premises shall be at any time hereafter destroyed or damaged by
casualty, unless caused by LESSEE'S neglect, then, and in that event, the LESSEE
shall continue to use the premises until the LESSOR shall have repaired and made
fit for use that portion so destroyed, the rental amount for said
-9-
<PAGE>
premises shall be decreased in accordance with the percentage of the leased
premises which cannot be used by LESSEE due to such destruction.
8. If, upon the termination of the lease either by lapse of time or
otherwise, the LESSEE shall fail to yield immediate possession of the leased
premises to the LESSOR, then the LESSEE agrees to pay to the LESSOR, as
liquidated damages for its failure to do so, the sum of Five Hundred and 00/100
($500.00) dollars, per day, but the provisions of this paragraph for the payment
of said sum shall not be held to be a waiver of any of the rights of the LESSOR
to bring, maintain, and prosecute to effect, an action for possession of the
leased premises.
9. The LESSOR and LESSEE, and all parties claiming by, under or through
them, hereby mutually release and discharge each other from all claims and
liabilities arising from or caused by any hazard covered by insurance on the
leased premises, or covered by insurance in connection with the property on, or
activities conducted on the leased property, regardless of the cause of the
damage or loss.
10. At any time prior to One Hundred eighty (180) days before the
expiration of the term of this lease, provided that LESSEE shall then have
complied with and performed all of the agreements to be performed by LESSEE
herein, LESSEE shall have the option to renew this lease agreement for an
additional term of two (2) one (1) year option periods. LESSEE shall exercise
said option by giving LESSOR as hereinafter provided, notice by certified mail,
return receipt requested, and which notice shall be mailed to LESSOR no later
than One Hundred eighty (180) days before the expiration of the term of this
lease agreement. In the event LESSEE fails to serve notice of the exercise of
its option to renew this lease as herein provided, said option shall expire and
be of no further force and effect.
-10-
<PAGE>
In the event said option is exercised the said first one (1) year option to
renew shall be on the same terms and conditions as this lease agreement, with
the exception of the monthly rental for rental period commencing on the 1st day
of April, 2000, to and including the payment due on the lst day of March, 2001,
will be in the sum of $7,650 dollars, together with the increase, if any, in the
cost of living for 1995 compounded each year, to the date of the renewal of this
lease agreement, based on the "Revised Consumer Price Index - United States
(1967 equals 100)". All Items and Major Group Figures for Urban Wages Earners
and Clerical Works (Including Single Workers), hereinafter called "Index",
published by the Bureau of Labor Statistics of the United States Department of
Labor as hereinafter more particularly provided, and which payments will
commence with the monthly rental due LESSOR from LESSEE on the 1st day of April,
2000, in the sum of $7,650 Dollars, together with such Index increase, if any,
and continuing to be due and payable on the 1st day of each succeeding
consecutive month thereafter, to and including the 1st day of March, 2001. In
the event LESSEE shall exercise its said second one (1) year option to renew,
then, and in that event, the rental increase will be based upon the same formula
as set forth hereinabove for the first option renewal. In no event shall the
monthly rental due LESSOR from LESSEE be in an amount less than $7,650 dollars.
In the event LESSEE shall not exercise its option to renew this Lease
Agreement during the term hereinabove more particularly provided, such option to
renew shall be null and void, and of no further force and effect.
11. In the event the leased premises or any material portion thereof shall
be acquired or condemned by eminent domain for any public or quasi-public use or
purposes, LESSOR may terminate this lease in which event said lease shall
terminate and cease on the date upon which the
-11-
<PAGE>
condemning authority shall take possession of the leased premises so condemned,
LESSEE shall continue to perform the obligations imposed upon it by the terms of
this lease until said date.
Further, in the event of any such acquisition or condemnation by eminent
domain, LESSEE shall have no claim against the LESSOR or the condemning
authority for the value of the unexpired term of this lease and LESSEE shall not
be entitled to any part of the award paid for the condemnation or acquisition of
the leased premises, it being agreed that LESSOR shall be entitled to receive
the full amount of such award and it being further agreed that LESSEE hereby
expressly waives any right or claim against any portion of said award. LESSEE
shall have the right to claim and recover from the condemning authority, but not
from the LESSOR, such compensation as may be separately awarded or recoverable
by the LESSEE in LESSEE'S own right on account of any and all damages to
LESSEE'S business by reason of such acquisition or condemnation and for or on
account of any cost to which LESSEE might be put in removing LESSEE'S equipment,
fixtures, inventory and other property from the leased premises.
In the event there is a condemnation of a substantial portion of the leased
premises, then, and in that event, LESSEE shall have the option to terminate
this Lease Agreement. LESSEE must give LESSOR written notice of its option to
terminate this Lease Agreement as a result of such condemnation. In the event
of a partial condemnation of the leased premises, then, and in that event, there
will be a prorata rent abatement to LESSEE based upon the partial condemnation
and the total square footage of the leased premises and the amount so condemned.
The prorata rent abatement will then be in full force and effect from the time
of such condemnation and the date such condemned premises are not available to
LESSEE to use in accordance with this Lease Agreement.
-12-
<PAGE>
12. LESSEE agrees to notify LESSOR, in writing, of any hazardous materials
(whether legal or illegal) which LESSEE is using in connection with its business
being conducted on the subject real estate. LESSEE further agrees to notify
LESSOR, in writing, of the method of removal of said hazardous materials and to
furnish LESSOR, in writing, with all information concerning the deposit,
storage, and collection of such hazardous materials and the removal thereof.
LESSEE further shall not place or construct any underground improvements,
including, but not limited to, treatment or storage tanks, on the real estate.
The LESSEE hereby agrees that all known hazardous substances that LESSEE is
using in connection with its business on the subject real estate will be safely
contained and removed by a certified waste removal company and not disposed of
in any manner whatsoever in the real estate adjacent to the building being
leased by the LESSEE from the LESSOR. In this regard, LESSEE agrees to notify,
in writing, the LESSOR of the name of the certified waste removal company and
LESSEE hereby expressly authorizes LESSOR to check LESSEE'S records of the
disposal of such hazardous substances at LESSOR'S option at any time during
business hours and as exclusively determined by LESSOR.
In the event LESSEE should desire to do any environmental studies on the
subject real estate, then, and in that event, LESSEE must obtain LESSOR'S
consent to do so. Upon obtaining LESSOR'S consent so to do, LESSEE shall
furnish to LESSOR a copy of all such environmental studies and/or reports,
including all details relative thereto.
13. From and after the signing of this Lease, the LESSEE agrees to
indemnify and hold LESSOR harmless from and against all claims, damages, losses,
costs, expenses (including, without limitation, reasonable attorneys' fees),
actions and liabilities arising out of or as a proximate result of
-13-
<PAGE>
the treatment, storage, disposal or the arranging therefore or the existence on
the leased premises of any hazardous or toxic substance or the discharge into
the environment by LESSEE of any hazardous or toxic substance, including without
limitation, claims or natural resource damage, personal injury, property damage
or response or remedial costs, whether at common law or under any domestic or
foreign law, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Research Conservation
and Recovery Act ("RCRA"), the Toxic Substance Control Act, and any state or
federal statute or municipal ordinance creating liability for the treatment,
storage or disposal, or the arranging therefore, the existence on property of
hazardous or toxic substances. This indemnity shall only be for claims that are
based on LESSEE'S use of the premises prior to the date and during the term of
this agreement.
The above representations in paragraph 13, and the indemnity shall survive
the signing of this Lease.
14. LESSEE may terminate this lease agreement, by giving to LESSOR, six
months written notice of its intent to terminate this lease agreement, and which
termination notice shall apply to the last six (6) months of this Lease
Agreement or to the last six (6) months of any option to renew term contained
herein, as the case may be. Such notice shall be sent to LESSOR at its address
via United States certified mail, postage prepaid.
-14-
<PAGE>
STATE OF INDIANA )
) ss:
COUNTY OF ELKHART )
Before me, a Notary Public, in and for said County and State personally
appeared, STEPHEN L. KASH, d/b/a SK REALTY, a partnership, and who acknowledged
the execution of the above and foregoing Agreement to be his own free and
voluntary act and deed.
DATED, this 1st day of May, 1995.
My Commission Expires:
July 28, 1998
/s/ Janet J. Gilbert
--------------------
Notary Public
Residing in Elkhart County,
Indiana
STATE OF INDIANA )
) ss:
COUNTY OF ELKHART )
Before me, a Notary Public, in and for said County and State personally
appeared, ROYALE COACH BY MONACO, INC., by /s/ Kay L. Toolson , its
President, and who for and on behalf of said corporation, acknowledged the
execution of the above and foregoing Agreement to be said corporation's free and
voluntary act and deed; and that he is duly authorized to enter into said
Agreement.
DATED, this 9th day of May, 1995.
My Commission Expires:
12-8-1998
/s/ Nancy L. Aguilar
--------------------
Notary Public
Residing in Elkhart County,
Indiana
This instrument was prepared by Michael A. Cosentino, Lawyer, 115 West
Lexington Avenue, P.0. Box 1866, Elkhart, Indiana 46515 1866.
-15-
<PAGE>
EXHIBIT 10.19
TERMINATION AGREEMENT AND MUTUAL RELEASE
Reference is made to that certain Stockholders Agreement (the
"Stockholders Agreement") dated as of March 5, 1993 between Monaco Coach
Corporation, a Delaware corporation ("Monaco"), Liberty Investment Partners
II, a Florida general partnership ("Liberty"), the State Board of
Administration of Florida, a public agency of the State of Florida ("SBA"),
Monaco Capital Partners, a Rhode Island general partnership ("MCP"), Tucker
Anthony Holding Corporation, a Massachusetts corporation ("Tucker") and
certain other executives appearing on the signature page thereto. Reference
is further made to that certain instrument of accession (the "Instrument of
Accession") dated as of July 21, 1994 between Monaco and Roger A. Vandenberg,
Andreas P. Graham, Geraldine M. McNulty and Mary A. Ferreira (the parties to
the Instrument of Accession and the parties to the Stockholders Agreement
collectively, the "Parties") by which the parties thereto became parties to
the Stockholders Agreement.
This Termination Agreement and Mutual Release (the "Agreement") is made
by and between the Parties regarding the Stockholders Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Parties agree as follows:
1. TERMINATION AND MUTUAL RELEASE. The Parties agree that the
Stockholders Agreement is hereby rendered void and, except as set forth
herein, no obligations of the Parties shall survive. The Parties agree that
the foregoing consideration, as well as such other good and valuable
consideration received by the Parties pursuant hereto, represents settlement
in full of all outstanding obligations owed by any of the Parties to any of
the Parties, on behalf of themselves, and on behalf of all their past and
present shareholders, successors, assigns, transferees, and all subsidiary,
parent, and affiliated companies, jointly and severally, and fully and
forever release each other, and their stockholders, successors, assigns,
transferees and all subsidiary, parent and affiliated companies, and all of
their insurers and sureties, of and from any claim, duty, obligation or cause
of action relating to the Stockholders Agreement. The Parties agree that the
release set forth in this section shall be and remain in effect in all
respects as a complete general release as to the matters released. This
release does not extend to any obligations incurred under this Agreement.
2. NO REPRESENTATIONS: Each of the Parties to this Agreement represents
that it has had the opportunity to consult with an attorney, and has
carefully read and understands the scope and effect of the provisions of this
Agreement. Neither party has relied upon any representations or statements
made by the other party hereto which are not specifically set forth in this
Agreement.
3. GOVERNING LAW: This Agreement shall be governed by the laws of the
State of Delaware.
4. EFFECTIVE DATE: This Agreement is effective on the date when it has
been signed by all the Parties.
1
<PAGE>
5. NO ORAL MODIFICATIONS: This Agreement shall not be modified in any
way except in writing executed by the party or parties to be bound thereby.
12. SEVERABILITY: If any provision or provisions contained herein shall
contravene or be invalid under applicable law, such contravention or
invalidity shall not invalidate the whole Agreement, but the Agreement shall
be construed as not containing the particular provision or provisions held to
be invalid and the rights and obligations of the parties shall be construed
and enforced accordingly.
13. VOLUNTARY EXECUTION OF AGREEMENT: This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf
of the Parties hereto, with the full intent of releasing all claims. The
Parties acknowledge that:
(a) They have read this Agreement;
(b) They have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;
(c) They understand the terms and consequences of this Agreement
and of the releases it contains;
(d) They are fully aware of the legal and binding effect of this
Agreement.
14. COUNTERPARTS: This Agreement may be executed in counterparts, and
each counterpart shall have the same force and effect as an original and
shall constitute an effective, binding Agreement on the part of each of the
Undersigned.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
respective dates set forth below.
MONACO COACH CORPORATION
Dated: May __, 1997 By:
------------------------------------
Name:
Title:
2
<PAGE>
LIBERTY INVESTMENT PARTNERS II
Dated: May __, 1997 By:
------------------------------------
Name:
Title:
STATE BOARD OF ADMINISTRATION
OF FLORIDA
Dated: May __, 1997 By:
------------------------------------
Name:
Title:
MONACO CAPITAL PARTNERS
Dated: May __, 1997 By:
------------------------------------
Name:
Title:
TUCKER ANTHONY HOLDING CORPORATION
Dated: May __, 1997 By:
------------------------------------
Name:
Title:
Dated: May __, 1997
---------------------------------------
Kay L. Toolson
Dated: May __, 1997
---------------------------------------
Page Robertson
Dated: May __, 1997
---------------------------------------
Ed Kinney
3
<PAGE>
Dated: May __, 1997
---------------------------------------
Ray Mehaffey
Dated: May __, 1997
---------------------------------------
Enoch Hutchcraft
Dated: May __, 1997
---------------------------------------
Gary Smith
Dated: May __, 1997
---------------------------------------
John Nepute
Dated: May __, 1997
---------------------------------------
Miki Scheer
Dated: May __, 1997
---------------------------------------
C.D. Smith
Dated: May __, 1997
---------------------------------------
Roger A. Vandenberg
Dated: May __, 1997
---------------------------------------
Andreas P. Graham
4
<PAGE>
Dated: May __, 1997
---------------------------------------
Geraldine M. McNulty
Dated: May __, 1997
---------------------------------------
Mary A. Ferreira
5
<PAGE>
EXHIBIT 23.1
CONSENT OF COOPERS & LYBRAND L.L.P., INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-2 (File
No. 333-23591) of our report, dated January 31, 1997, on our audits of the
consolidated financial statements of Monaco Coach Corporation as of December 30,
1995 and December 28, 1996, and for the years ended December 31, 1994, December
30, 1995 and December 28, 1996. We also consent to the reference to our firm
under the caption "Experts".
COOPERS & LYBRAND L.L.P.
Eugene, Oregon
May 22, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 20, 1996, with respect to the combined
financial statements of Holiday Rambler LLC Recreational Vehicle Manufacturing
Division and Certain Holiday World Retail Operations included in the
Registration Statement (Form S-2) and related Prospectus of Monaco Coach
Corporation for the registration of 2,415,000 shares of its common stock.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
May 22, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME OF MONACO COACH CORPORATION
AS OF AND FOR THE QUARTER ENDED MARCH 29, 1997, 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-27-1997
<PERIOD-END> MAR-29-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 27,783
<ALLOWANCES> 141
<INVENTORY> 45,249
<CURRENT-ASSETS> 82,786
<PP&E> 45,227
<DEPRECIATION> 3,638
<TOTAL-ASSETS> 149,189
<CURRENT-LIABILITIES> 80,980
<BONDS> 15,875
2,735
0
<COMMON> 44
<OTHER-SE> 46,528
<TOTAL-LIABILITY-AND-EQUITY> 149,189
<SALES> 109,023
<TOTAL-REVENUES> 109,023
<CGS> 93,981
<TOTAL-COSTS> 103,634
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 821
<INCOME-PRETAX> 4,607
<INCOME-TAX> 1,912
<INCOME-CONTINUING> 2,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,695
<EPS-PRIMARY> .59
<EPS-DILUTED> .57
</TABLE>
