SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 0-24556
MARKER INTERNATIONAL
(Exact name of registrant as specified in its charter)
Utah 87-0372759
(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation)
1070 West 2300 South
Salt Lake City, Utah 84119
(Address of principal executive offices)
(801) 972-2100
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filings
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock Outstanding at August 13, 1997
Common Stock, $0.01 par value 11,129,327
<PAGE>
MARKER INTERNATIONAL
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements Page
----
Condensed Consolidated Balance Sheets
As of June 30, 1997 and March 31, 1997 3
Condensed Consolidated Statements of Operations
For the Three Months Ended
June 30, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended
June 30, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II - Other Information
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
<PAGE>
PART I - FINANCIAL INFORMATION
MARKER INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
June 30, March 31,
1997 1997
CURRENT ASSETS:
Cash and cash equivalents $ 5,560 $13,532
Accounts receivable, net of allowance for
doubtful accounts of $1,264 and $2,139,
respectively 23,488 26,279
Inventories 47,408 33,849
Prepaid and other current assets 7,232 4,611
------- -------
Total current assets 83,688 78,271
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Land 1,050 1,050
Building and improvements 7,462 7,356
Machinery and equipment 18,393 25,302
Furniture, fixtures and office equipment 4,442 4,511
------- -------
31,347 38,219
Less accumulated depreciation and amortization (14,552) (18,941)
------- -------
Net property, plant and equipment 16,795 19,278
INTANGIBLE ASSETS, net of accumulated amortization 17,131 17,475
---------- ---------
OTHER ASSETS 2,156 2,116
------- -------
$ 119,770 $ 117,140
========== ==========
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.
3
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, March 31,
1997 1997
------- --------
CURRENT LIABILITIES:
Notes payable to banks $50,244 $38,930
Current maturities of long-term debt 3,024 3,038
Accounts payable 5,955 5,393
Other current liabilities 7,052 9,785
------- -------
Total current liabilities 66,275 57,146
------- -------
LONG-TERM DEBT, net of current maturities 15,975 16,487
------- -------
SERIES A BONDS, issued to a related party 10,000 10,000
------- -------
MINORITY INTEREST 1,572 1,810
------- -------
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 5,000,000
shares authorized and none issued - -
Common stock, $0.01 par value, 25,000,000
shares authorized; 11,129,127 issued and
outstanding 111 111
Additional paid-in capital 36,293 36,293
Retained earnings (deficit) (4,197) 858
Cumulative foreign currency translation
adjustments (6,259) (5,565)
---------- ----------
Total shareholders' equity 25,948 31,697
---------- ----------
$119,770 $117,140
========== ==========
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.
4
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
For the Three Months
Ended June 30,
--------------------
1997 1996
------ ------
NET SALES $2,271 $1,624
COST OF SALES 2,088 843
------ ------
GROSS PROFIT 183 781
------ ------
OPERATING EXPENSES:
Selling 2,859 2,341
General and administrative 3,059 2,537
Research and development 992 661
Warehousing and shipping 439 314
Amortization of goodwill and intagibles 227 -
------ ------
7,576 5,853
OPERATING LOSS (7,393) (5,072)
------- ------
OTHER INCOME (EXPENSE):
Interest expense (1,114) (1,021)
Equity in losses of unconsolidated subsidiary - (80)
Other, net 384 (14)
------ ------
(730) (1,115)
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (8,123) (6,187)
BENEFIT FOR INCOME TAXES 2,844 2,227
MINORITY INTEREST 224 -
------ ------
NET LOSS $(5,055) $(3,960)
======== ========
NET LOSS PER COMMON SHARE $(0.45) $(0.46)
====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING 11,129,127 8,563,207
========== =========
Theaccompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
5
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
For the Three Months
Ended June 30,
---------------------
1997 1996
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,055) $(3,960)
Adjustments to reconcile net income to net cash
used in operating activities:
Minority interest in loss (224) -
Gain on sale of property, plant and equipment (88) -
Depreciation and amortization 1,286 784
Equity in earnings of unconsolidated subsidiary - 80
Change in assets and liabilities:
Decrease in accounts receivable, net 2,917 3,478
Increase in inventories (13,921) (14,124)
Increase in prepaid and other assets (2,546) (3,560)
Increase (decrease) in accounts payable 1,156 (483)
Decrease in other current liabilities (2,930) (273)
------ ------
NET CASH USED IN OPERATING ACTIVITIES (19,405) (18,058)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (2,404) (717)
Proceeds from disposition of equipment 3,571 -
------ ------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 1,167 (717)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on notes payable to banks 11,675 17,429
Issuance of common stock from stock options
exercised - 9
Principal payments on long-term debt (685) (601)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,990 16,837
------ ------
Effect of foreign exchange rate changes on cash (724) (43)
------ ------
Net decrease in cash and cash equivalents (7,972) (1,981)
Cash and cash equivalents at beginning of period 13,532 6,189
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,560 $4,208
====== ======
Theaccompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
6
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Interim Financial Statements
The accompanying condensed consolidated financial statements include the
accounts of Marker International and its subsidiaries (the "Company"). The
condensed consolidated financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (the "SEC").
Certain information and footnote disclosures normally required in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. The financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary to fairly
present the financial position, results of operations and cash flows for the
periods presented.
The results of operations for the three months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the full fiscal year.
It is suggested that these condensed consolidated financial statements be read
in conjunction with the financial statements and notes thereto included in the
Company's latest Annual Report on Form 10-K.
Note 2. Cash and Cash Equivalents
Cash and cash equivalents include investments in certificates of deposit
with original maturities of less than 30 days and restricted cash. The Company
has granted a security interest in a $2.0 million time deposit held in the
Company's name at a United States branch of a German bank. This deposit is
restricted for use as collateral on borrowings from such bank.
Note 3. Inventories
Inventories include direct materials, direct labor and manufacturing
overhead costs and are recorded at the lower of cost (using the first-in,
first-out method) or market. The major classes of inventories are as follows (in
thousands):
June 30, 1997 March 31, 1997
------------- --------------
Raw materials $ 605 $ 1,054
Work in process 3,655 2,739
Finished goods 43,148 30,056
------- -------
$47,408 $33,849
======= =======
7
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 4. Investment in DNR Sportsystem
On June 30, 1995, the Company acquired 25% of the common shares of DNR
Sportsystem Ltd. ("DNR"), a Swiss Corporation. On June 26, 1996, the Company
acquired an additional 55% of the common shares of DNR, thus bringing the
Company's total ownership of DNR to 80%. Prior to its 80% ownership, the Company
accounted for its then 25% investment in DNR using the equity method of
accounting.
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and DNR as if the Company had
owned 80% of DNR at the beginning of fiscal years ending March 31, 1998 and
1997. Pro forma adjustments have been made to give effect to amortization of
goodwill, interest expense on acquisition debt and certain other adjustments.
The pro forma results have been prepared for comparative purposes only. They do
not purport to be indicative of the results of operations which actually would
have resulted had the Company owned 80% of DNR for the entire first quarter of
fiscal years ending March 31, 1998 and 1997, or of future results of operations
of the consolidated entities.
<TABLE>
<CAPTION>
(Unaudited and in thousands except per share amounts) For the Quarter ended June 30,
1997 1996
---- ----
<S> <C> <C>
Net Sales $ 2,271 $ 4,832
Operating Loss (7,393) (6,471)
Net Loss (5,055) (5,349)
Loss per Common Share $ (0.45) $ (0.48)
</TABLE>
Note 5. Intangible Assets
Intangible assets consist of goodwill, trade names and licenses resulting
from the Company's acquisition of DNR. Intangible assets are amortized using the
straight-line method over lives ranging from 5 to 30 years. At June 30, 1997 and
March 31, 1997 accumulated amortization of goodwill and intangible assets
totaled approximately $0.8 million and $0.6 million, respectively.
8
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Note 6. Earnings per Share
In February 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share". This statement specifies the computation, presentation and disclosure
requirements for earnings per share ("EPS") for financial statements issued for
all periods ending after December 15, 1997. Early adoption is prohibited and
upon adoption, all prior period EPS data presented must be restated. SFAS 128
simplifies the standards for computing EPS in comparison to APB Opinion No. 15
and replaces the presentations of Primary EPS and Fully Diluted EPS with a
presentation of Basic EPS and Diluted EPS. The Company believes that SFAS 128
will not have a material impact when adopted.
Note 7. Other Matters
Disclosures about Derivative Financial Instruments.
The SEC has issued final rules governing disclosure requirements for
financial instruments, including derivatives. Derivative financial instruments
held by the Company are generally used to manage well-defined foreign exchange
and interest rate risks which occur in the normal course of business. Forward
foreign exchange contracts are used by the Company to reduce the potential
impact of unfavorable fluctuations in foreign exchange rates. The Company has
off balance sheet commitments to buy and sell foreign currencies relating to
foreign exchange contracts in order to hedge against future currency
fluctuations.
Gains and losses on foreign currency contracts not intended to be used to
hedge operating requirements are reported currently in other income. Gains and
losses on foreign currency contracts intended to meet firm commitments are
deferred and recognized as part of the cost of the underlying transaction being
hedged. At June 30, 1997, all of the Company's foreign currency contracts are
being used to hedge operating requirements. Counterparties to the foreign
exchange contracts are typically major international financial institutions. The
Company's theoretical risk in these transactions is the cost of replacing, at
current market rates, these contracts in the event of default by the
counterparty. Management believes the risk of incurring such losses is remote.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report.
General
Marker International is a leading designer, developer, manufacturer and
marketer of alpine ski bindings in the United States and throughout the world.
The Company is a holding company which operates through its subsidiaries, Marker
Deutschland GmbH ("Marker Germany"), Marker USA, Marker Japan Co., Ltd. ("Marker
Japan"), Marker Austria GmbH ("Marker Austria") and Marker Canada, Ltd. ("Marker
Canada"). Substantially all of the Company's ski bindings are manufactured by
Marker Germany, which also distributes bindings in Germany, to subsidiaries of
the Company, and to independent distributors in countries where the Company does
not have a distribution subsidiary. Marker USA and Marker Japan each has its own
sales force and marketing departments for sales and marketing of bindings and
related parts directly to retailers in the United States, and to both retailers
and wholesalers in Japan, respectively. Marker Austria distributes the Company's
ski bindings into Austria through an independent sales force. Marker Canada
distributes the Company's ski bindings into Canada which are then sold through
an independent distributor. Marker Ltd., also a subsidiary of the Company,
designs, distributes and sells to retailers the Company's clothing, gloves and
luggage products for skiing and other recreational activities. The principal
markets for the Company's products are North America, Europe and Asia.
In addition, Marker International, through its 80% owned subsidiary, DNR
Sportsystem Ltd. ("DNR"), and its newly created and wholly-owned subsidiaries,
DNR USA, Inc.("DNR USA"), DNR North America, Inc. ("DNR North America") and DNR
Japan Co., Ltd. ("DNR Japan"), is a leading designer, developer, manufacturer
and marketer of snowboards, Interface Step-in SYSTEMS(TM), traditional snowboard
bindings and snowboard boots. DNR designs, develops and distributes snowboards
and related products throughout the world. DNR USA manufactures snowboards for
distribution worldwide. DNR North America and DNR Japan, through their own sales
force market snowboards, Interface Step-in Systems(TM), snowboard bindings and
boots directly to retailers in the United States and Japan, respectively.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (continued)
Marker Germany receives payment primarily in German marks ("Marks") for
ski bindings sold. For subsidiaries of the Company (principally Marker USA and
Marker Japan), Marker Germany may allow payment for ski bindings sold to be made
in the functional currency of the subsidiary. Marker Germany or the distribution
subsidiary, as applicable, routinely enters into forward foreign exchange
contracts with financial institutions in order to fix the cost of converting the
functional currency to Marks. Sales prices for the ski bindings offered to the
subsidiaries and ultimately the price the subsidiaries offer for the sale of the
ski bindings to their customers is based upon, among other things, the rate
afforded by the forward foreign exchange contracts and market conditions.
Accordingly, the relationship of the exchange rate between the functional
currency of the subsidiary and the Mark has a direct impact on the cost of the
products sold by the distribution subsidiary. Due to the nominal amount of sales
activity routinely recorded by the Company during its first fiscal quarter,
currency fluctuations against forward foreign exchange contracts had an
insignificant effect upon the operating results of the Company during the fiscal
quarter ended June 30, 1997.
Each of the Company's distribution subsidiaries operates and maintains its
accounting records in the functional currency of the country in which it
operates. In accordance with United States generally accepted accounting
principles, upon consolidation of these subsidiaries in the Company's
consolidated financial statements, the assets, liabilities, revenues and
expenses of each of the Company's foreign subsidiaries are translated at the
appropriate exchange rate prevailing during the period. Therefore, the Company's
assets, liabilities and results of operations are subject to fluctuations in
forward foreign exchange contract rates and translation effects which can vary
as a result of fluctuations in the exchange rates between the functional
currencies of such foreign subsidiaries and the United States dollar ("Dollar").
For the three months ended June 30, 1997, average exchange rates between
the Dollar and the Mark, the Dollar and the Japanese yen ("Yen") and the Dollar
and the Swiss franc ("Franc") resulted in an effective decrease in the value of
the Mark against the Dollar, the Yen against the Dollar and the Franc against
the Dollar of approximately 13%, 11% and 16%, respectively, compared to the
corresponding period of the prior year. Such currency exchange activity resulted
in corresponding fluctuations in the value of the revenues and expenses of
Marker Germany, Marker Japan and Marker AG, as well as DNR Sportsystem and DNR
Japan, when converted to Dollars, compared to the corresponding period of the
prior fiscal year.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (continued)
The Company's business is seasonal in nature. Consistent with this
seasonal nature and the ski and snowboard industries in general, the Company
historically records a relatively small percentage of its annual net sales
during its first fiscal quarter. The Company historically records a majority of
its sales during its second and third fiscal quarters and to a lesser extent
during its fourth fiscal quarter.
Results of Operations
Comparison of the three months ended June 30, 1997 with the three months ended
June 30, 1996
Consistent with the seasonal nature of the Company and the ski industry in
general, the Company has historically recorded a small percentage of its annual
net sales during its first fiscal quarter. These sales amounts have historically
represented less than 2% of the Company's annual net sales and are primarily
attributable to close-out products sold late in the ski season. As such, sales
results and gross profit margins are not necessarily indicative of the results
to be expected for the full year.
Gross profit for the three months ended June 30, 1997 decreased to $0.2
million compared to $0.8 million for the corresponding period of the prior
fiscal year. The decrease in gross profit was primarily a result of negative
margins caused by underutilization of the Company's snowboard manufacturing
facility.
Operating expenses for the three months ended June 30, 1997 increased to
$7.6 million, compared to $5.9 million for the same period of the prior fiscal
year. Approximately $1.6 million of the increase was a result of the
consolidation of DNR's operating expenses in the first quarter of fiscal 1998,
which were not consolidated in the first quarter of fiscal 1997. DNR's operating
expenses include approximately $0.4 million of non-recurring legal fees related
to arbitration proceedings (see Part II, Item 1. Legal Proceedings herein). In
addition, the Company recorded amortization of goodwill and intangibles of
approximately $0.2 million during the first quarter of fiscal 1998 which was not
recorded during the first quarter of fiscal 1997. The overall increase in
operating expenses of the Company was offset in part by a decrease in the
operating expenses of the Company's foreign subsidiaries, which resulted from
fluctuations in exchange rates used to translate the subsidiaries functional
currencies to Dollars, when compared to the same period of the prior fiscal
year.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (continued)
Interest expense for the three months ended June 30, 1997 increased to
$1.1 million, compared to $1.0 million for the corresponding period of the prior
fiscal year. The increase in interest expense resulted primarily from higher
borrowings relating to the purchase of stock in DNR. The increase was offset in
part by a corresponding decrease in interest expense resulting from a lower
outstanding balance of the Company's Series A Bonds, lower interest rates on
various other borrowings and the effect of the foreign exchange rates used for
consolidation.
The income tax benefit recognized for the three months ended June 30, 1997
and 1996 was calculated using the estimated consolidated annual effective tax
rate which considers the effective tax rates of domestic and foreign tax
jurisdictions.
Liquidity and Capital Resources
The Company's primary cash requirements are for raw materials inventory
for production, finished goods inventory, funding of accounts receivable,
capital expenditures and strategic business acquisitions. Historically, the
Company's primary sources of cash for its business activities have been cash
flows from operations and borrowings under its lines of credit and term loans.
At June 30, 1997, the Company had working capital of $17.4 million,
compared to $21.1 million at March 31, 1997. The decrease in working capital is
primarily the result of routine seasonal borrowing on the Company's credit lines
to finance the purchase and production of inventory and to fund operating
expenses during the Company's seasonally low revenue first quarter. In addition,
the Company used working capital in the current period to sustain growth and
finance a portion of its current expansion into the snowboard market with the
creation of DNR USA, DNR North America and DNR Japan.
On June 26, 1997, the Company entered into a sale-leaseback agreement.
Under the arrangement, the Company sold approximately $3.0 million of various
machinery and equipment and leased it back for a period of 7 years. The
leaseback has been accounted for as an operating lease. The gain of
approximately $0.2 million realized in this transaction has been deferred and
will be amortized to income in proportion to rental expense over the term of the
lease.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (continued)
At June 30, 1997, the Company's primary sources of liquidity consisted of
cash and short-term investments and available borrowings under lines of credit.
The Company has approximately $60.5 million in short-term credit facilities, of
which approximately $50.2 million had been borrowed as of June 30, 1997.
Substantially all of the Company's credit lines are secured by inventory and
receivables. The Company believes that it will have adequate bank lines to meet
its cash flow demands during fiscal 1998.
Recent Events
On July 1, 1997, arbitration hearings began between DNR, the Company's 80%
owned subsidiary, and Thomas P. Sims ("Sims"). On July 30, 1997, arbitration
hearings closed with a briefing schedule extending into September 1997. In the
arbitration, Sims has filed a claim against DNR for breach of a licensing
agreement (the "License") between the two parties for the production and
distribution of snowboards and related products bearing the Sims trademark
outside of the United States and Canada. DNR has filed a counterclaim against
Sims for wrongful termination of the License and for breach of the right of
first refusal in the License. Sims had previously filed an action (the "Action")
in the Superior Court of California for the County of Santa Barbara (the
"Superior Court") against the Company and DNR and, on November 27, 1996, was
granted a preliminary injunction against the Company and DNR , preventing DNR
from manufacturing, shipping, selling or distributing snowboard products with
the Sims trademark, pending the outcome of the arbitration.
The preliminary injunction is not a final judgment and factual findings
made by the Superior Court in the preliminary injunction proceeding are not
binding upon the arbitrator. Under the terms of the License, the arbitrator's
award is binding on the parties and is not subject to appeal or further court
review except for extraordinary circumstances. Although only Sims and DNR are
parties to the arbitration, the arbitrator's decision could conclude many of the
disputes that are the subject of the Action, which has been stayed while the
Arbitration is pending.
"Safe Harbor" Statement Under the Private Securities Litigation Reform
Act of 1995
With the exception of historical information (information relating to the
Company's financial condition and results of operations at historical dates or
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (continued)
for historical periods), the matters discussed in this Management's Discussion
and Analysis of Financial Condition and Results of Operations are
forward-looking statements that necessarily are based on certain assumptions and
are subject to certain risks and uncertainties. These forward-looking statements
are based on management's expectations as of the date hereof, and the Company
does not undertake any responsibility to update any of these statements in the
future. Actual future performance and results could differ from that contained
in or suggested by these forward-looking statements as a result of the factors
set forth in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, the Business Risks described in the Company's Report
on Form 10-K for the year ended March 31, 1997 and elsewhere in the Company's
filings with the Securities and Exchange Commission.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See the description set forth in Part I of this Quarterly Report on Form
10-Q under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Recent Events." Such description updates
the "Legal Proceedings" set forth in the Company's Annual Report on Form 10-K
for the year ended March 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
10.25 Sale/Leaseback Agreement with Zions Credit Corporation for
$3,000,000 of machinery and equipment related to the Company's
snowboard manufacturing subsidiary dated June 26, 1997. *
27 Financial Data Schedule. *
b) Reports Filed on Form 8-K:
1. Current Report on Form 8-K dated July 22, 1997, including the
news release relating to a collaborative arrangement between
Marker International and NIKE, Inc. relating to snowboarding
products.
- ----------------------
* Filed herewith.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARKER INTERNATIONAL
Registrant
Dated: August 13, 1997 /s/ Henry E. Tauber
--------------------
Henry E. Tauber
Chairman of the Board,
President and Chief
Executive Officer
Dated: August 13, 1997 /s/ Terry J. Tuttle
--------------------
Terry J. Tuttle
Chief Financial Officer
16
MASTER FINANCE LEASE ZIONS CREDIT CORPORATION Lease No. 7403
(T) P. O. Box 3954 Date: June 26, 1997
Salt Lake City, Utah 84110-3954
ZIONS CREDIT CORPORATION (hereinafter "LESSOR"), a Utah corporation, with
offices at 37 West 100 South, Salt Lake City, Utah and DNR USA, Inc. and Marker
International as Co-Lessees (hereinafter "LESSEE"), with offices at 2300 South
1070 West West Valley, UT 84119 in consideration of the mutual covenants and
promises hereinafter set forth agree as follows:
1. LEASE. Lessor hereby leases to Lessee and Lessee hereby leases from Lessor
(for commercial and business purposes only) the property described and
referred to in any Equipment Schedule or Schedules now or hereafter
executed by the parties hereto (hereinafter "Equipment" or "Item of
Equipment"). The terms and conditions hereof shall be deemed to form a part
of each Equipment Schedule. Each Equipment Schedule shall constitute a
separate lease agreement incorporating all of the terms and conditions
hereof.
2. TERM, RENTAL. The lease term and rental payments are specified in said
Equipment Schedule. Lessee's obligation to make rental and other payments
is unconditional and rental payments shall be paid without defense, offset,
or counterclaim. The term shall commence on the date indicated on each
Equipment Schedule. All rents shall be paid at the office of Lessor in Salt
Lake City or at such other place as Lessor may hereafter designate.
3. EQUIPMENT SCHEDULES. Lessor, in its sole discretion, from time to time, and
by mutual consent with Lessee, may lease other Equipment to Lessee, subject
to the terms and conditions contained in this Lease for such term and
rental payments as may be agreed, by execution of subsequent Equipment
Schedules. Lessor retains the right for any reason to decline any Equipment
transaction proposed by Lessee.
4. OWNERSHIP. Title to the Equipment shall at all times remain in Lessor
except as set forth in this Lease or the Equipment Schedule. The Equipment
is and shall remain personal property, notwithstanding that the Equipment
or any part thereof may be or hereafter become in any manner affixed to or
attached to any real property or any building thereon. Lessor may require
Lessee, at Lessee's expense, to affix and keep affixed in a prominent place
on Equipment labels, plates, or other markings stating that the Equipment
is owned by Lessor. Lessee agrees to keep the Equipment at the location set
forth above or at such other location as specified in the applicable
Equipment Schedule, and will notify Lessor promptly in writing of and prior
to any change in the location of the Equipment within such State, but will
not remove the Equipment from such State without the prior written consent
of Lessor. Lessee shall pay to Lessor an amount equal to all taxes paid,
payable or required to be collected by Lessor, however designated, which
are levied or based on the monthly rental or on the possession, use,
operation, control, or value of the Equipment, including, without
limitation, state and local privilege or excise taxes, sales and use taxes,
property taxes, and taxes or charges based on gross revenue, excluding
taxes based on Lessor's net income. Lessor shall invoice Lessee for all
such taxes and Lessee shall promptly remit to Lessor all such taxes and
charges upon receipt of such invoice from Lessor. Lessee agrees to pay all
penalties and interest resulting from its failure to timely remit such
taxes to Lessor. Charges for penalties and interest shall be promptly paid
by Lessee when invoiced by Lessor.
5. DISCLAIMER, WARRANTIES, DEFECTS, SHIPPING CHARGES. Lessor warrants that
during the term of this Lease, if no Event of Default has
occurred, Lessee's use of the Equipment shall not be interrupted
Initial Here by Lessor or anyone claiming solely through or under Lessor.
The warranty set forth in the preceding sentence is in lieu of
/s/TJT all other warranties of Lessor, whether written, oral, or
- ------- implied; and Lessor shall not, by virtue of having leased the
Equipment or delivered any bill or bills of sale pursuant to this
Lease, or for any other reason be deemed to have made, and Lessor
Initial Here hereby DISCLAIMS, ANY OTHER REPRESENTATION OR WARRANTY, EITHER
EXPRESSED OR IMPLIED, AS TO ANY MATTER WHATSOEVER, WITHOUT
/s/BF LIMITATION. The seller, method of shipment, make, model,
- ------- specifications, performance capacities, and all other matters
relating to the ordering, delivery, operation, and performance
of each Item of Equipment have been selected and determined by
Lessee and Lessee agrees:
(i) ALL EQUIPMENT IS LEASED IN AN "AS IS" CONDITION. THE ENTIRE RISK AS
TO THE QUALITY AND PERFORMANCE OF THE EQUIPMENT IS WITH LESSEE. THIS
DISCLAIMER AND WARRANTY AGREEMENT IS EXPRESSLY IN LIEU OF ANY AND ALL
REPRESENTATIONS AND WARRANTIES EXPRESS OR IMPLIED, INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR CONCERNING THE DESIGN OR CONDITION OF THE EQUIPMENT,
WHETHER ARISING FROM STATUTE, COMMON LAW, CUSTOM, OR OTHERWISE. NO
PERSON SHALL HAVE ANY AUTHORITY TO BIND LESSOR TO ANY REPRESENTATION
OR WARRANTY, INCLUDING THOSE REGARDING ANY TAX BENEFITS TO WHICH
LESSEE MAY OR MAY NOT BE ENTITLED, OTHER THAN THIS DISCLAIMER AND
WARRANTY. LESSOR SHALL NOT BE LIABLE FOR ANY INDIRECT OR
CONSEQUENTIAL DAMAGES INCLUDING LOSS OF BUSINESS, RESULTING FROM THE
USE OF THE EQUIPMENT OR CAUSED BY ANY DEFECT, FAILURE, OR MALFUNCTION
OF THE EQUIPMENT WHETHER A CLAIM FOR SUCH DAMAGE IS BASED UPON
WARRANTY, CONTRACT, STRICT LIABILITY, NEGLIGENCE, OR OTHERWISE.
(ii) TO INDEMNIFY AND SAVE LESSOR HARMLESS FROM ANY AND ALL LIABILITY
ATTRIBUTABLE TO THE SELLER OF ANY ITEM OF EQUIPMENT.
(iii)TO PAY ALL SHIPPING CHARGES AND OTHER EXPENSES INCURRED IN
CONNECTION WITH THE SHIPMENT OF THE EQUIPMENT BY THE SELLER TO
LESSEE AND TO BEAR ALL RISK OF LOSS THEREOF FROM AND AFTER THE DATE
OF THIS LEASE.
(iv) LESSOR SHALL NOT BE LIABLE FOR AND LESSEE WILL BE LIABLE FOR LOSS OR
DAMAGE OCCASIONED BY ANY CAUSE, CIRCUMSTANCE, OR EVENT OF WHATSOEVER
NATURE, ARISING OUT OF THE ORDERING, MANUFACTURING, DELIVERY,
OPERATION, MAINTENANCE, OR PERFORMANCE OF THE EQUIPMENT, INCLUDING
BUT NOT LIMITED TO THE FACT THAT LESSOR HAS NOT INSPECTED THE
EQUIPMENT. Nothing herein contained shall be construed to deprive
the Lessee of whatever rights Lessee may have against parties other
than the Lessor such as the supplier and the manufacturer of any
Equipment and Lessee agrees to look solely to such third parties
with respect to any and all claims concerning the Equipment. So long
as Lessee is not in breach or default of this Lease, Lessee may
pursue such claims for the mutual benefit of Lessor and Lessee.
6. LESSEE'S INSPECTION AND ACCEPTANCE. Execution of the delivery and
acceptance notice by Lessee shall conclusively establish that Lessee has
irrevocably accepted Equipment, that it is in full compliance with the
terms of this Lease, and that it is in good condition and repair.
7. LESSOR'S INSPECTION. Upon the request of Lessor, Lessee shall advise Lessor
as to the location of each Item of Equipment and shall, at any reasonable
time, make the Equipment available to Lessor for inspection at the place
where it is ordinarily located, and shall make Lessee's records pertaining
to the Equipment available to Lessor for inspection.
8. SUBLEASE AND ASSIGNMENT. Lessee will NOT SUBLET, LEND, OR OTHERWISE
RELINQUISH POSSESSION OF THE EQUIPMENT (directly or indirectly through
change in ownership of Lessee by Lessee's owners) OR ASSIGN this Lease or
any of its rights hereunder without the prior written consent of Lessor. In
no event shall any sublease, lending arrangement, or other relinquishment
of possession of the Equipment, or any assignment by Lessee of this Lease
or any of its rights hereunder, whether or not done with the knowledge or
approval of Lessor, cause Lessee's obligations under this Lease to be
discharged or diminished to any extent. Lessor may assign this Lease and
any or all rights it has hereunder without Lessee's consent. Lessee hereby
waives and agrees not assert against assignee of Lessor any defense,
set-off, recoupment claim or counterclaim which Lessee has or may at any
time have against Lessor for any reason whatsoever. Any such assignment by
Lessor shall not materially change the Lessor's duty nor materially
increase the burden or risk imposed on the Lessee under this Lease. For
purposes of the Lease, the term "Lessor" shall include any assignee of
Lessor of this Lease or Lessor's rights in the Equipment, and such assignee
shall have all of the rights but none of the obligations under this Lease.
9. MAINTENANCE, USE, AND COMPLIANCE WITH LAWS. Lessee, at its own cost and
expense, shall repair and maintain the Equipment and comply with the
Equipment manufacturer's operating procedures and warranty requirements so
as to keep the Equipment in good operating condition, ordinary wear and
tear excepted. Lessee shall arrange and pay for any repairs necessary in
order to the manufacture or qualified maintenance organization to accept
the Equipment under contract maintenance at the applicable standard rates.
Lessee may from time to time add parts or accessories to any Item of
Equipment provided that such addition does not impair the value or utility
of such Item of Equipment. Any parts or accessories added will become part
of the Equipment and will be the property of Lessor. Any parts or
accessories removed by or on behalf of Lessee from the Equipment shall be
replaced with compatible parts or accessories in better condition than the
part or accessory so removed. Lessee shall use the Equipment solely in the
conduct of its business and shall use and maintain the Equipment in
conformity with all governmental laws, ordinances, regulations,
requirements, and rules and in accordance with general industry standards
for the maintenance of the equipment.
10. MORTGAGE, LIENS, ETC. Lessee will not directly or indirectly create, incur,
assume, or suffer to exist any mortgage, security interest, pledge, lien,
charge, encumbrance, or claim on or with respect to the Equipment, title
thereto, or any interest therein (and Lessee will promptly, at its own
expense, take such action as may be necessary to duly discharge any such
mortgage, security interest, pledge, lien, charge, encumbrance, or claim)
except (a) the respective rights of Lessor and Lessee as herein provided,
(b) liens or encumbrances which result from claims against Lessor (other
than liens and encumbrances arising from failure of Lessee to perform any
of Lessee's obligations hereunder), (c) liens for taxes either not yet due
or being contested in good faith and by appropriate proceedings, (d)
inchoate materialmen's, mechanics', workmen's, repairmen's, employee's, or
other like liens arising in the ordinary course of business and not
delinquent.
11. LOSS, DAMAGE, OR REPLACEMENT. In the event any Item of Equipment shall be
lost, stolen, destroyed, damaged beyond repair, or rendered permanently
unfit for use, Lessee shall remain obligated under this Lease, and this
Lease will continue in full force and effect. In such an event, Lessee may
discharge its covenant to pay rent by paying to Lessor within 30 days of
loss, all rent plus all other sums due under this Lease, together with the
termination value of such Equipment, which is the anticipated fair market
value at the end of the lease term, less the amount of recovery, if any,
actually received by Lessor from any insurance or otherwise resulting from
such Equipment being lost, stolen, destroyed, damaged beyond repair, or
rendered permanently unfit for use. If any one or more of the events
enumerated in the first sentence of this section occur, or if any Item of
Equipment is replaced, Lessee shall immediately notify Lessor in writing.
If any Item of Equipment is damaged, but not beyond repair, Lessee,
Page 1 of 4
<PAGE>
at its own cost and expense, shall promptly repair such Item of Equipment
so that it will be in the same or better condition as it was before the
damage occurred. In the event that any Item of Equipment is replaced for
any reason it must be with the prior written approval of Lessor and with
comparable equipment in quality and workmanship to the original Equipment.
All new Equipment replacing any original Item of Equipment shall become the
property of Lessor and subject to this Lease and the applicable Equipment
Schedule. Lessee agrees to execute any documentation required by Lessor to
protect Lessor's ownership in the new Equipment. All costs of the new
Equipment will be borne by Lessee and Lessee warrants to Lessor free and
clear title to the new Equipment.
12. INSURANCE. Lessee shall, at its own expense, maintain at all times from the
time Lessee has an insurable interest, public liability, property damage,
and physical damage insurance in amounts satisfactory to Lessor and with
insurance companies protecting Lessor as an additional insured and loss
payee thereunder, and providing for 30 day's written notice to Lessor
before any policy shall be altered or canceled. Lessee shall immediately
deliver to Lessor evidence of such insurance coverage satisfactory to
Lessor. Lessee covenants, warrants, and represents that Lessee will not do
any act or voluntarily suffer any act to be done whereby any insurance
required hereunder shall or may be suspended, impaired, or defeated and
that Lessee in no circumstances will suffer or permit any Item of Equipment
to be used or operated during any period under this Lease when Lessor may
be at risk for the risks protected against by the above-described insurance
without all said insurance being fully in effect. Lessee shall make and
file timely all claims, and Lessee may, unless Lessee is then in default,
settle and adjust all such claims. In the event of default by Lessee,
Lessee hereby irrevocably authorizes Lessor to make, settle, and adjust
claims under such policy or policies and to endorse the name of Lessee on
any check or another item of payment for the proceeds thereof.
13. INDEMNITY.
(a) Lessee agrees and covenants to indemnify, protect, save harmless, and
defend Lessor and its employees, officers, directors, agents, and
servants from any and all claims, actions, suits, liabilities,
damages, losses, costs, and expenses, including reasonable attorney's
fees, incurred or asserted against Lessor in any way relating to,
arising out of, or as the result of the manufacture, purchase,
acceptance or rejection, ownership, delivery, lease, possession, use,
condition, maintenance, sale, return, or other disposition hereunder
of the Equipment. The scope of this indemnity includes, but is not
limited to, all claims based on negligence, excluding lessors acts or
ommissions, breach of contract, breach of warranty, or strict
liability. Specifically, without limiting the foregoing, Lessee shall
indemnify and hold Lessor harmless against all claims of trademark,
patent and copyright infringement, and of the wrongful use of trade
secrets or proprietary information in any form, against all claims for
property damage, personal injury or wrongful death, and against all
claims that the Equipment or any part thereof is or has become a
fixture with respect to any real property. Lessee's obligations
hereunder will survive the expiration of the Lease with respect to
events occurring or alleged to have occurred prior to the return of
the Equipment to Lessor at the end of the term of the applicable
Equipment Schedules.
(b) Deleted
/s/TJT
- ------
/s/BF
- ------
(c) Notwithstanding anything to the contrary set forth in paragraph (b) of
this Section, Lessee shall have no liability to Lessor under paragraph
(b) of this Section for any loss which results from:
(i) an act or failure to act by Lessor, which act or failure to act
causes Lessor to lose the depreciation;
(ii) Lessor having insufficient income to benefit from the
depreciation.
(d) Lessor agrees to notify Lessee promptly of any claim made by the
Internal Revenue Service against Lessor in respect to the disallowance
of such depreciation deductions or the recapture of depreciation which
relates to information which may be particularly within the knowledge
of Lessor. Lessor further agrees that, should all or any portion of
the said depreciation deductions be disallowed or such depreciation be
recaptured as aforesaid, Lessor will contest (including appeals of
administrative determinations and adverse court decisions and
defending appeals of favorable decisions) the disallowance or
recapture if so requested by Lessee, provided that Lessee agrees to
indemnify and provide adequate security to Lessor for such
indemnification obligation for all Lessor's costs and expenses,
including reasonable attorney's fees, in connection with such contest.
14. SURRENDER. Upon the expiration or termination of this Lease, Lessee shall,
at its own cost and expense (not to exceed $100,000.00), deinstall,
package, load, insure, and return Equipment unencumbered to Lessor at the
address specified by Lessor within Salt Lake County, in the same condition
as received, reasonable wear and tear excepted, except as otherwise
indicated in the applicable Equipment Schedule. If requested by Lessor,
Lessee agrees (a) that Lessor may use, without cost to Lessor, Lessee's
place of business for the purpose of owning, displaying, selling, leasing
or otherwise disposing of all or any of the Equipment for up to 90 days
after termination or expiration of the applicable Equipment Schedule, and
(b) to act as Lessor's agent to lease or sell the Equipment pursuant to
written instruction of Lessor. In the event that Lessee retains possession
of the Equipment and with the consent of Lessor, after expiration of the
applicable Equipment Schedule term, this Lease shall be deemed to be in
effect on a month to month basis. Except as provided in this paragraph all
terms and conditions of this Lease shall continue. Rent payments shall
continue at the rate set forth in the Equipment Schedule or Schedules
pertaining to the Equipment retained by Lessee. Rent paid on a month to
month basis shall not create any ownership rights in the Lessee in the
Equipment. Lessee shall arrange and pay for any repairs necessary in order
for the manufacturer or qualified maintenance organization to accept the
Equipment under contract maintenance at the applicable standard rates.
15. DEFAULT AND REMEDIES.
(a) Time is of the essence and the following events shall constitute
Events of Default:
(i) Lessee shall fail to make any rent or other payment hereunder
including payment of insurance, personal property taxes, other
taxes, fees, or assessments within 10 days after the same shall
become due; or
(ii) Lessee shall fail to perform or observe any other covenant,
condition, or agreement to be performed or observed by it under
this Lease or any Equipment Schedules or amendments thereto; or
(iii) Lessee shall make any representation or warranty to Lessor under
this Lease or any Equipment Schedules or amendments thereto, or
furnish any document or certificate to Lessor in connection
therewith that shall prove to be incorrect in any material
respect at the time made; or
(iv) Lessee does not generally pay its debts as they become due,
ceases to do business as a going concern, or shall admit in
writing its inability to pay its debts; or shall make an
assignment for benefit of creditors; or shall commence, or have
commenced against it, any case, proceeding, or action seeking to
have an order for relief entered on its behalf or against it as a
debtor or to adjudicate it as bankrupt or insolvent or seeking
reorganization, arrangement, adjustment, liquidation,
dissolution, or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of
debtors, or seeking appointment of a receiver, trustee,
custodian, or other similar official for it or for all or any
part of its property; or to take any action in contemplation of
or to authorize any of the above actions; or
(v) The occurrence of any event described in (i), (ii), (iii), or
(iv) with respect to any guarantor or with respect to any other
party liable to Lessor in the event of Lessee's nonpayment or
nonperformance of this Lease, or any Equipment Schedules or
amendments thereto; or
(vi) The breach, termination, or adverse modification of any
instrument, agreement, or document by which such guarantor or
other party is liable to Lessor; or
(vii) Lessee shall fail to discharge any mortgage, security interest,
pledge, lien, charge, encumbrance, or claim as described in
section 10; or
(viii)Lessee is in default pursuant to the provisions of any other
agreement by and between Lessor and Lessee; or
(ix) Lessee or any such guarantor is in default, and any applicable
cure period has expired, under any material agreement for the
payment of money; or
(x) The death or incapacity of Lessee or any guarantor, if an
individual, or the merger, consolidation, acquisition,
liquidation, termination or dissolution of Lessee or any such
guarantor, if a corporation, partnership or other business
association, or if Lessee or any such guarantor shall sell or
turn over the management or operation of all or any substantial
portion of this property, assets or business to any other person,
corporation, partnership, or other business associations; or
Page 2 of 4
<PAGE>
(b) In the Event of Default, Lessor at its sole option shall have the
right to exercise concurrently or separately any one or more of the
following remedies, and without any election of remedies being deemed
to have been made:
(i) With or without notice or demand, declare the present value of
the remaining payments plus the present value of the purchase
option along with applicable taxes and late fees to be
immediately due and payable;
(ii) With or without notice or demand and with or without legal
process, enter into the premises where any or all Items of
Equipment may be located and take possession of and remove the
same. Any such taking of possession shall not constitute
termination of this Lease as to any or all Items of Equipment
unless Lessor expressly notifies Lessee in writing to that
effect. In the event of entry and repossession, Lessee hereby
expressly waives all rights to possession and all claims for
damages or loss by reason of such entry and repossession;
(iii)Terminate this Lease and any Equipment Schedules or amendments
thereto and retain as damages all rents or other amounts paid by
Lessee;
(iv) Lessor may lease the Equipment to any third party, upon such
commercially reasonable terms and conditions as Lessor shall
determine, or may sell the Equipment at private or public sale,
at which sale Lessor may be the purchaser. In either of such
events, there shall be due from Lessee and Lessee shall
immediately pay to Lessor the present value of the rentals plus
all other sums provided to be paid herein together with the
present value of the Purchase Option less the net proceeds of the
sale or re-lease, net proceeds being defined as follows: the cost
basis of the new lease to any third person or the purchase price
at said sale, as the case may be, less all costs and expenses of
Lessor in repossessing, holding, re-leasing, transporting,
repairing, selling, or otherwise handling the Equipment;
(v) Proceed by appropriate action either at law or in equity or
bankruptcy to enforce performance by Lessee of the applicable
covenants of this Lease or to recover damages for breach thereof;
(vi) Use, without cost to Lessor, Lessee's place of business for the
purpose of storing, displaying, selling, leasing, or otherwise
disposing of all or any portion of the Equipment; and
(vii)Pursue any other remedy available to Lessor at law or in equity.
(c) Upon the occurrence of an Event of Default all amounts remaining
unpaid shall accrue interest at the rate of fourteen percent (14%) per
annum both before and after judgment.
16. COLLECTION CHARGES, RIGHT OF SET-OFF. Should Lessee fail to pay when due
any part of the rent herein provided or any other sum required to be paid
to Lessor by Lessee, Lessee shall pay to Lessor a reasonable late charge
of five percent (5%) of all payments due, together with all other
expenses necessarily incurred by reason of Lessee's default. Upon the
occurrence of any Event of Default, Lessor is hereby authorized at any
time and from time to time, without notice to Lessee (any such notice
being expressly waived by Lessee), to set off and apply any and all
deposits at any time held to any obligation of Lessee under this Lease
and any Equipment Schedules. In the event that this Lease or any
Equipment Schedule is assigned by Lessor, the assignee thereof shall be
entitled to the same rights of set off as Lessor for any and all deposits
(general or special, time or demand, provisional of final) at any time
held by such assignee against any obligations of Lessee.
17. ADDITIONAL FEES. In addition to the rent provided herein, Lessee agrees
to pay to Lessor reasonable fees for preparation of documents, filing
and/or recording fees, plus all other costs and expenses incurred by
Lessor in recovering possession of the Equipment of in negotiating,
preparing, enforcing, or protecting Lessor's rights under this Lease or
any Equipment Schedules, including but not limited to, all attorney's
fees, all costs and expenses of obtaining abstracts and title reports,
title insurance, appraisals, foreclosure reports, and all costs incurred
in preserving, recovering, storing, or selling any Item of Equipment.
Further, Lessor may charge a Lease origination fee which shall be
disclosed to Lessee prior to the execution of this Lease, or any
Equipment Schedules.
18. PERFORMANCE OF LESSEE'S OBLIGATIONS BY LESSOR. In the event that Lessee
shall fail duly and promptly to perform any of its obligations under this
Lease or any Equipment Schedule, Lessor may, at its option, immediately
or at any time thereafter perform the same for the account of Lessee
without thereby waiving such default, and any amount paid for expenses or
liability incurred by Lessor in such performance, together with interest
thereon at a rate of fourteen percent (14%) per annum, shall be payable
by Lessee upon demand as additional rent for the Equipment.
19. NOTICES, REMEDIES, WAIVERS, SUCCESSORS. All notices relating to this
Lease or to any Equipment Schedule shall be delivered in person to an
office of Lessor or Lessee or shall be mailed by United States mail
postage prepaid to Lessor or Lessee at its respective address shown above
or at any later address last known to the sender. All remedies of Lessor
hereunder are cumulative and not alternative. A waiver of a default shall
not be a waiver of any other subsequent default. This Lease shall be
binding upon Lessor and Lessee and Lessee's heirs, executors,
administrators, successors, and assigns and shall inure to the benefit of
the successor and assigns of Lessor.
20. ARBITRATION DISCLOSURES.
(i) Arbitration is usually final and binding on the parties and
subject to only very limited review by a court.
(ii) The parties are waiving their right to litigate in court,
including their right to a jury trial.
(iii)Pre-arbitration discovery is generally more limited and different
from court proceedings.
(iv) Arbitrators' awards are not required to include factual findings
or legal reasoning and any party's right to appeal or to seek
modification of rulings by arbitrators is strictly limited.
(v) A panel of arbitrators might include an arbitrator who is or was
affiliated with the banking industry.
ARBITRATION PROCEDURES:
(a) Any controversy or claim between or among the parties, including but
not limited to those arising out of or relating to this Agreement or
any agreements or instruments relating hereto or delivered in
connection herewith, AND including but not limited to a claim based
on or arising from an alleged tort, shall at the request of any party
be determined by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association.
Arbitration proceedings shall be conducted in Salt Lake City, Utah.
The arbitrator(s) shall have the qualifications set forth in
subparagraph (c) hereto. All statutes of limitations which would
otherwise be applicable in a judicial action brought by a party shall
apply to any arbitration or reference proceeding hereunder.
(b) In any judicial action or proceeding arising out of or relating to
this Lease or any agreements or instruments relating hereto or
delivered in connection herewith, including but not limited to a
claim based on or arising from an alleged tort, if the controversy or
claim is not submitted to arbitration as provided and limited in
subparagraph (a) hereto, all decisions of fact and law shall be
determined by a reference in accordance with Rule 53 of the Federal
Rules of Civil Procedure or Rule 53 of the Utah Rules of Civil
Procedure or other comparable, applicable reference procedure. The
parties shall designate to the court the referee(s) selected under
the auspices of the American Arbitration Association in the same
manner as arbitrators are selected in Association-sponsored
arbitration proceedings. The referee(s) shall have the qualifications
set forth in subsection (c) hereto.
(c) The arbitrator(s) or referee(s) shall be selected in accordance with
the rules of the American Arbitration Association from panels
maintained by the Association. A single arbitrator or referee shall
be knowledgeable in the subject matter of the dispute. Where three
arbitrators or referees conduct an arbitration or reference
proceeding, the claim shall be decided by a majority vote of the
three arbitrators or referees, at least one of whom must be
knowledgeable in the subject matter of the dispute and at least one
of whom must be a practicing attorney. The arbitrator(s) or
referee(s) shall award recovery of all costs and fees (including
attorneys' fees, administrative fees, arbitrators' fees, and court
costs). The arbitrator(s) or referee(s) also may grant provisional or
ancillary remedies such as, for example, injunctive relief,
attachment, or the appointment of a receiver, either during the
pendency of the arbitration or reference proceeding or as part of the
arbitration or reference award.
(d) Judgment upon an arbitration or reference award may be entered in any
court having jurisdiction, subject to the following limitation: the
arbitration or reference award is binding upon the parties only if
the amount does not exceed Four Million Dollars ($4,000,000.00); if
the award exceeds that limit, either party may commence legal action
for a court trial de novo; such legal action must be filed within
thirty (30) days following the date of the arbitration or reference
award; if such legal action is not filed within that time period, the
amount of the arbitration or reference award shall be binding. The
computation of the total amount of an arbitration or reference award
shall include amounts awarded for arbitration fees, attorneys' fees,
and all other related costs.
(e) At the Bank's option, foreclosure under a deed of trust or mortgage
may be accomplished either by exercise of a power of sale under the
deed of trust or mortgage or by judicial foreclosure. The institution
and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the
right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such
action for judicial relief.
(f) Notwithstanding the applicability of other law to any other provision
of this Lease or any Equipment Schedule, the Federal Arbitration Act,
9 U.S.C. section 1 et seg., shall apply to the construction and
interpretation of this arbitration section.
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21. GOVERNING LAWS. This agreement shall be deemed to have been made and
executed in UTAH regardless of the order in which the signatures of the
parties shall be affixed hereto and shall be interpreted and the rights
and liabilities of the parties hereto determined in accordance with the
laws of the State of UTAH except as may be provided in Section 20.
22. CONFLICT OF APPLICABLE LAW. If any provision of this Lease or any
Equipment Schedule is contrary to, prohibited by, or deemed invalid under
applicable laws or regulations of any jurisdiction in which it is sought
to be enforced, then such provision shall be deemed inapplicable and
deemed omitted but shall not invalidate the remaining provisions hereof.
23. STATEMENTS. Lessee will furnish Lessor within 90 days after the close of
each fiscal year of Lessee, a balance sheet and profit and loss statement
as of the end of such year and, within 60 days after the close of each
quarter, quarterly financial statements, all prepared in accordance with
generally accepted accounting principles, and such other information
respecting the financial condition and operations of Lessee as Lessor may
from time to time reasonably request.
24. UNIFORM COMMERCIAL CODE. At Lessor's request, Lessee shall execute and
deliver to Lessor any document Lessor believes will protect Lessor's
ownership interest in the Equipment under the Uniform Commercial Code as
adopted by the State of Utah or any other state where Equipment is to be
located. The execution and/or filing of any such document shall not alter
the parties' respective interest in and rights to the Equipment. Without
limiting the foregoing, Lessee hereby authorizes and irrevocably appoints
Lessor as Lessee's attorney in fact, with full power of substitution, to
execute and file any financing statement and other documents in all
places where necessary to protect Lessor's interest in the Equipment.
25. LESSEE REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants,
and shall be deemed to have made all of the representations and warranties
as of the date each respective Equipment Schedule is executed and
delivered by Lessee, as follows:
(i) Lessee is a corporation, duly organized, validly existing, and in
good standing under the laws of the state of its incorporation
and in all jurisdictions where the Equipment will be located or
operated under the Lease.
(ii) Lessee has all requisite power and authority to conduct its
business, to own and lease its properties and to enter into and
perform all of its obligations under the Lease.
(iii) This Lease has been duly authorized by Lessee and constitutes the
valid, legal, and binding obligation of Lessee and is enforceable
in accordance with its terms.
(iv) No event has occurred or is continuing which constitutes an event
of default under the Lease. There is no judicial or
administrative action, suit, order, or proceeding pending or
threatened against or affecting Lessee or any guarantor before or
by any court, administrative agency or other governmental
authority which brings into question the validity of the
transaction contemplated by the Lease (or any guarantee thereof)
or which might materially impair the ability of Lessee or any
such guarantor to perform its obligations under the Lease or
guarantee thereof.
(v) Lessee has no contingent or disputed liabilities or unrealized or
anticipated losses which in the aggregate are material or any
material commitments of an unusual or burdensome character;
(vi) In addition to notices required herein, Lessee shall immediately
give notice in writing to Lessor of (a) the occurrence of an
Event of Default, or any condition, event or act which with the
giving of notice, failure to cure or the passage of time or all
the foregoing would constitute such an Event of Default; and (b)
any change in the name of business of Lessee, any change in its
form, management or organizational structure and any change in
Lessee's address of principal location(s) of business.
26. ENTIRE AGREEMENT. This Lease contains the entire agreement between the
parties and may not be changed, modified, terminated, or
Initial Here discharged except in writing and may not be contradicted by
evidence of any alleged prior on contemporaneous oral agreement.
/s/TJT There are no promises, terms, conditions, or obligations other
- ------- than those contained herein; and this Lease shall supersede all
previous communications, representations, or agreements, either
Initial Here verbal or written, between the parties hereto. This
agreement is, and is intended to be a lease, and Lessee does not
/s/BF acquire hereby any right, title, or interest whatsoever, legal or
- ------- equitable, in or to any of the Equipment or the proceeds of the
sale of any Equipment, except its interest as a lessee hereunder.
Each of Lessee's obligations hereunder shall survive the
expiration of this Lease or any Equipment Schedule thereto.
By execution hereof, the signer hereby certifies that he has
read four pages of this Agreement, and that he/she is duly
authorized to execute this Lease on behalf of the Lessee.
Executed this day of , 1997.
---- -----------------
DNR USA, Inc. and Marker International as Co-Lessees
----------------------------------------------------
Lessee
DNR USA, Inc.
/s/Stacey Speechley By /s/Bob Frey General Manager
- --------------------------- ------------------------------------------------
Witness to Lessee Signature Authorized Signature Title
BOB FREY
------------------------------------------------
Print Name of Signatory
State of Utah )
)ss
County of Salt Lake )
Subscribed and sworn to before me
this 7 day of July, 1997. /s/Stacy Speechley
--- ---- ----------------------------------------
Notary Public
Salt Lake
----------------------------------------
Residing at
Marker International
/s/Stacey Speechley
- --------------------------- By /s/Terry Tuttle CFO
Witness to Lessee Signature ------------------------------------------------
Authorized Signature Title
TERRY TUTTLE
------------------------------------------------
Print Name of Signatory
State of Utah )
)ss
County of Salt Lake )
Subscribed and sworn to before me
this 7 day of July, 1997. /s/Stacey Speechley
--- ---- --------------------------------------
Notary Public
Salt Lake
--------------------------------------
Residing at
Accepted this day of , 1997.
--- -----
ZIONS CREDIT CORPORATION
- ------------------------------------
Lessor
By
----------------------------------
Norman Weldon
Title: Vice President
------------------------------
Rev: 4-15-97 THIS LEASE CANNOT BE CANCELLED
Page 4 of 4
Lease No: 7403
EQUIPMENT SCHEDULE Lease Date: June 26, 1997
(T) Schedule No: 1
Schedule Date: June 26, 1997
ZIONS CREDIT CORPORATION (hereinafter "Lessor"), a Utah corporation, with
offices at 37 West 100 South, Salt Lake City, Utah and DNR USA, Inc. and Marker
International as Co-Lessees (hereinafter "Lessee") with offices at 2300 South
1070 West West Valley, UT 84119 have entered into a Master Finance Lease No.
7403 dated June 26, 1997 (the "Master Lease") pursuant to which Lessor has
agreed to lease to Lessee, and Lessee has agreed to lease from Lessor, the
equipment described in one or more Equipment Schedules to the Lease.
NOW, THEREFORE, Lessee by executing this Equipment Schedule and Lessor by
accepting it hereby agree as follows:
1. Master Lease. The terms and conditions of the Master Lease are by this
reference incorporated herein as if fully set forth herein and together
with the terms and conditions hereof, and of all schedules, riders,
addenda and/or exhibits that are attached or refer to this Equipment
Schedule, constitute a single and severable agreement of lease (this
"Lease").
2. Equipment. The Lessor hereby leases to Lessee and Lessee hereby leases
from Lessor the property described in the Attached Schedule "A"
("Equipment") upon the terms and conditions of the Lease except as
expressly provided herein.
3. Lessee shall pay all rents to Lessor at the office of Lessor in Salt
Lake City, Utah or at such other place as Lessor may hereafter
designate. Rent payments are due monthly in advance commencing , 1997,
and subsequently on the same day of each month thereafter for a period
of 84 months. The total advance rental of $35,166.38 (representing the
first months payment(s)) is due at the time of signing this Equipment
Schedule. The rental amount is as follows:
Rent 42 @: $35,166.38
Use Tax (0.0%): 0.00 (or applicable rate at time rental is due)
----
TOTAL RENT: $35,166.38
==========
Rent 42 @: $42,981.13
Use Tax (0.0%): 0.00 (or applicable rate at time rental is due)
----
TOTAL RENT: $42,981.13
==========
4. Lease Term. The term of this Lease with respect to the Equipment
described herein commences on _____________ , 1997, and unless earlier
terminated in accordance with the provisions of the Lease, expires on
________________ , 2004.
5. Property Taxes. Lessor is the owner of the Equipment. With the
exception of titled vehicles, Lessor will declare the Equipment with
the taxing authorities, obtain and pay the tax bill, and then invoice
Lessee for the property taxes. If Lessee believes any of the Equipment
is property tax exempt, Lessee must inform Lessor prior to commencing
the Lease.
6. Lessee irrevocably authorizes Lessor to insert the commencement and
expiration date of the Lease term and the commencement date of the
Lease payments on this Equipment Schedule and the serial number(s) of
the Equipment on the attached Schedule "A".
7. Counterparts. The Equipment Schedule evidencing this Lease may be
executed in more than one original counterpart. However, only the
counterpart designated below as "Counterpart No. 1" shall evidence the
monetary obligation of Lessee with respect to this Lease. To the
extent, if any, that this Lease constitutes "chattel paper," as that
term is defined in Utah Uniform Commercial Code, no security interest
in this Lease may be created or perfected by the transfer or possession
of any counterpart hereof other than "Counterpart No. 1."
Executed this 1 day of July , 1997.
--- ---- --
DNR USA, Inc. and Marker International as Co-Lessees
----------------------------------------------------
Lessee
DNR USA, Inc.
By: /s/Bob Frey
---------------------------------------------
Title: General Manager
---------------------------------------------
Marker International
By: /s/Terry Tuttle
---------------------------------------------
Title: CFO
---------------------------------------------
Accepted this day of , 19 .
--- --------- --
ZIONS CREDIT CORPORATION
- -----------------------------------------
Lessor
By:
------------------------------------
Norman Weldon
Title: Vice President
------------------------------------
Rev: 11/18/96
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3193
<SECURITIES> 2367
<RECEIVABLES> 24752
<ALLOWANCES> (1264)
<INVENTORY> 47408
<CURRENT-ASSETS> 83688
<PP&E> 31347
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<BONDS> 10000
0
0
<COMMON> 111
<OTHER-SE> 25837
<TOTAL-LIABILITY-AND-EQUITY> 119770
<SALES> 2271
<TOTAL-REVENUES> 2271
<CGS> 2088
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<OTHER-EXPENSES> (384)
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<INTEREST-EXPENSE> 1114
<INCOME-PRETAX> (8123)
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<INCOME-CONTINUING> (5055)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5055)
<EPS-PRIMARY> (0.45)
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</TABLE>
