CAPITAL LEASE AGREEMENT
THIS CAPITAL LEASE AGREEMENT ("Lease") is made as of the 21st day of
December, 1996, by and between ROYAL GRIP, INC., a Nevada corporation, having
its principal executive offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
("Lessor"), and ACUSHNET RUBBER COMPANY, INC., a Massachusetts corporation,
having its principal executive offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("Lessee").
RECITALS
A. The parties desire that Lessor lease to Lessee certain specialized
manufacturing equipment (the "Units" and, individually, a "Unit") used in the
production of non-cord golf grips ("Grips").
B. Lessee is willing to lease the Units from Lessor and Lessor is
willing to lease the Units to Lessee upon the terms and conditions hereinafter
set forth.
C. As of the date hereof, Lessor and Lessee are also entering into a
manufacturing and sales agreement (the "MSA Agreement") pursuant to which Lessee
will become the exclusive supplier of Grips to Lessor and it is intended will
become the exclusive supplier of cord grips..
D. This Agreement and the MSA Agreement have been negotiated by Lessor
and Lessee at arm's length and in good faith for the purpose of achieving the
parties' commercial expectations.
NOW, THEREFORE, in consideration of the covenants and mutual agreements
set forth herein and in the MSA Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in reliance upon the representations and warranties contained herein, the
parties agree as follows:
ARTICLE I
PROCUREMENT, DELIVERY, AND ACCEPTANCE
1.1 Business of Lessor and Lessee; MSA Agreement. Lessor is in the business of
selling and manufacturing Grips. Lessee manufactures rubber-based materials.
Lessor and Lessee have entered into that certain MSA Agreement, whereby Lessor,
among other things, agrees that, following a transition period, it will purchase
from Lessee, during the term of the MSA Agreement, one hundred percent (100%) of
Lessee's total production of Grips as the exclusive provider of Grips to Lessor,
and Lessee agrees to sell to Lessor one hundred percent (100%) of Lessee's
production of Grips. In order to produce the Grips required by Lessor, Lessee
will acquire the Units, which Lessor is willing to provide subject to the terms
of this Lease.
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1.2 Shipment of Equipment. Lessor hereby grants to Lessee access to Lessor's
current manufacturing facility located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "Facility") to allow Lessee, at its expense, to disassemble the Units
currently located at the Facility and to prepare them for shipment. Lessor shall
ship all such Units to Lessee F.O.B. for delivery to the dock at Lessee's plant
(the "Plant"). In addition, Lessee shall cause all Units which are currently
subject to purchase agreements between Lessor and the manufacturer of such
Unit(s) to be delivered F.O.B. the dock at the Plant. Lessee shall, at its
expense, install and set up all Units at the Plant.
1.3 Additional Deliveries. Contemporaneously herewith, Lessee shall, at its sole
expense, deliver to Lessor the following documents, in form and substance
satisfactory to Lessor:
(a) UCC financing statements executed by Lessee; and
(b) any other documents specified in the Appendix and such other
documents as Lessor may reasonably request.
ARTICLE II
TERM, RENT, AND PAYMENT
2.1 Term. The term of this Lease as to each Unit shall commence upon the date
hereof and continue as specified in the Appendix.
2.2 Rent. Lessee shall pay to Lessor rent for each Unit in the amounts and at
the times set forth in the Appendix.
2.3 Payment of Rent. Rent and all other sums due Lessor hereunder shall be paid
at the office of Lessor set forth above.
2.4 Abatement; No Termination Upon Certain Events. This Lease is a net lease and
Lessee shall not be entitled to any abatement or reduction of rent or any setoff
against rent, whether arising by reason of any past, present or future claim of
any nature by Lessee against Lessor or otherwise. Except as otherwise expressly
provided herein, this Lease shall not terminate, nor shall the obligations of
Lessor or Lessee be otherwise affected by reason of (a) any defect in, damage
to, loss of possession or use or destruction of any Unit, however caused, (b)
the attachment of any lien, encumbrance, security interest or other right or
claim of any third party to any Unit, except when such third party is a creditor
of Lessor attempting to collect a debt or obligation of Lessor, (c) any
prohibition or restriction of or interference with Lessee's use of any Unit by
any person or entity, except when such person or entity is a creditor of Lessor
attempting to collect a debt or obligation of Lessor, (d) (except as otherwise
provided herein) the insolvency of or the commencement by or against Lessee of
any bankruptcy, reorganization or similar proceeding, or (e) any other cause,
whether similar or dissimilar to the foregoing, any present or future law to the
contrary notwithstanding. Except as otherwise provided herein, it is the
intention of the
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parties that all rent and other amounts payable by Lessee hereunder shall be
payable in all events in the manner and at the times herein provided unless
Lessee's obligations in respect thereof have been terminated pursuant to the
express provisions of this Lease.
2.5 Order of Payments. Payments shall be applied in the following order: (a)
expenses, including attorneys' fees; (b) interest on late payments; and (c) rent
and all other sums due thereunder.
ARTICLE III
NO WARRANTIES BY LESSOR
3.1 Acknowledgment by Lessee. LESSEE ACKNOWLEDGES AND AGREES THAT (a) LESSEE IS
SATISFIED THAT EACH UNIT IS SUITABLE FOR ITS PURPOSES; (b) LESSOR IS NOT A
MANUFACTURER THEREOF NOR A DEALER IN PROPERTY OF SUCH KIND; (c) EXCEPT AS
OTHERWISE PROVIDED HEREIN LESSOR HAS NOT MADE, AND DOES NOT HEREBY MAKE, ANY
REPRESENTATION, WARRANTY OR COVENANT EXPRESS OR IMPLIED AS TO ANY MATTER
INCLUDING, WITHOUT LIMITATION, THE TITLE, MERCHANTABILITY, CONDITION, QUALITY,
DESCRIP TION, DURABILITY, FITNESS FOR PURPOSE OR SUITABILITY OF ANY UNIT IN ANY
RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES AND USES OF LESSEE; (d) LESSOR
SHALL NOT BE REQUIRED TO PROVIDE ANY MECHANICAL SERVICES TO LESSEE INCLUDING,
WITHOUT LIMITATION, ANY MAINTENANCE, REPAIR, SHIPPING OR INSPECTIONS; AND (e) AS
AGAINST LESSOR, ALL UNITS SHALL BE ACCEPTED IN "AS IS" CONDITION.
3.2 Assignment of Warranties. Lessor hereby assigns to Lessee, to the extent
assignable, any warranties, covenants and representations of Vendor with respect
to any Unit, but any action taken by Lessee by reason thereof shall be at
Lessee's expense and shall be consistent with Lessee's obligations under Article
II.
ARTICLE IV
POSSESSION, USE, AND MAINTENANCE
4.1 Possession and Use. Lessee shall not (i) use, operate, maintain or store any
Unit improperly, carelessly or in violation of any applicable law or regulation
of any governmental authority or the manufacturer's recommended operating
procedures, standards and warranty requirements, (ii) abandon any Unit, (iii)
sublease any Unit or permit its use by anyone other than Lessee without the
prior written consent of Lessor, not to be unreasonably withheld, (iv) permit
any Unit to be removed from the state specified in the Schedule without the
prior written consent of Lessor, (v) sell, assign or transfer, or directly or
indirectly create, incur or suffer to exist any lien, claim, security interest
or encumbrance of any kind on any of its rights hereunder or in any Unit.
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4.2 Maintenance. Lessee shall at its expense at all times during the term of
this Lease maintain the Units in good operating order, repair, condition and
appearance and in accordance with the manufacturer's recommended procedures,
operating standards and warranty requirements.
4.3 Alterations. Lessee may alter any Unit or affix or place any accessory,
equipment or device on any Unit. If an Event of Default has occurred and is
continuing, and any Units are recovered and/or delivered to Lessor by Lessee,
all parts accessories, equipment or deliveries attached to such Units shall be
deemed the property of Lessor.
4.4 Inspection by Lessor. Upon prior notice to Lessee, Lessor and its designees
shall have the right at all reasonable times to inspect any Unit, observe its
use and inspect records related thereto.
ARTICLE V
GENERAL TAX INDEMNITY
5.1 Impositions. Lessee shall pay or reimburse Lessor for, and indemnify, defend
and hold Lessor harmless for, from, and against all fees (including, but not
limited to, license, documentation, recording or registration fees), and all
sales, use, privilege, excise, property, or other taxes, levies, imposts,
duties, assessments, charges or withholdings of any nature whatsoever, together
with any penalties, fines or additions to tax, or interest thereon (all of the
foregoing being hereafter referred to as "Impositions"), arising at any time
before or during the term of this Lease, or upon any termination of this Lease
or return of the Units to Lessor, and levied or imposed on Lessor, directly or
otherwise, by any federal, state or local government or taxing authority in the
United States or by any foreign country or foreign or international taxing
authority on or with respect to (a) any Unit, (b) the exportation, importation,
registration, purchase, ownership, delivery, leasing, possession, use,
operation, storage, maintenance, repair, transportation, return, sale, transfer
of title or other disposition thereof, (c) the rents, receipts, or earnings
arising from any Unit, or (d) this Lease or any payment made hereunder,
excluding, however, taxes measured by Lessor's net income imposed or levied by
the United States or any state thereof but not excluding any such net income
taxes that by the terms of the statute imposing such tax expressly relieve
Lessee from the payment of any Impositions Lessee would otherwise have been
obligated to pay, reimburse or indemnify.
5.2 Payment of Impositions by Lessor. Lessor shall pay directly all Impositions
for which Lessor is primarily responsible and as to which Lessor gives Lessee
notice that Lessor will pay directly; and Lessee shall promptly reimburse Lessor
for such Impositions so paid (except any Impositions excluded by Section 5.1)
upon presentation of a ▇▇▇▇ therefor.
5.3 Payment of Impositions by Lessee. Lessee shall pay on or before the time or
times prescribed by law any Impositions for which Lessee is primarily
responsible under applicable law and any other Impositions (except any
Impositions excluded by Section 5.1) not payable by Lessor pursuant to Section
5.2, but Lessee shall have no obligation to pay any such Imposition while
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Lessee is contesting such Imposition in good faith and by appropriate legal
proceedings and the nonpayment thereof does not, in the opinion of Lessor,
adversely affect the title, property, use, disposition or other rights of Lessor
with respect to the Units or result in any enforcement, collection, foreclosure
or forfeiture proceeding or any levy or execution which remains unstayed for a
period of fifteen (15) days. Lessee shall furnish on Lessor's request proof of
payment of any Imposition paid by Lessee.
5.4 Tax Returns. Lessor shall prepare and file all required personal property
tax reports or returns as "Owner" of the Units but Lessee must timely provide
Lessor with all information available to Lessee that Lessor requires to prepare
properly any such report or return. Lessee shall report the Units as "Equipment
Leased from Others" on any property tax reports or returns required to be filed
by Lessee. Lessee shall furnish on Lessor's request copies of reports or returns
so filed.
5.5 Certain Economic Benefits. Lessor acknowledges that Lessee has the right to
claim certain economic benefits available to it under the Internal Revenue Code
of 1986, as amended from time to time (the "Code"), and/or under equivalent
state income tax laws, based upon depreciable lives of the Units, averaging
conventions, methods of depreciation and other such methods as Lessee elects for
income tax purposes (the "MACRS Deductions").
5.6 No Indemnification. Notwithstanding what may otherwise be provided herein,
the indemnifications described in this Section 5 shall not be applicable to the
extent of the gross negligence or intentional misconduct of Lessor, its
employees, agents, representatives or assigns.
ARTICLE VI
RISK OF LOSS; WAIVER AND INDEMNITY
6.1 Casualty Occurrence. If any Unit is worn out, stolen, destroyed, or
irreparably damaged, from any cause whatsoever, or taken or requisitioned by
condemnation or otherwise (any such occurrence being hereinafter called a
"Casualty Occurrence") before or during the term of this Lease as to such Unit,
Lessee shall give Lessor prompt notice thereof. On the first rent payment date
after the Casualty Occurrence or, if there is no such rent payment date, thirty
(30) days after the Casualty Occurrence, Lessee shall pay to Lessor an amount
equal to the rent payment in respect of such Unit, if any, due on such date plus
a sum equal to the corresponding Ending Financed Balance described on Exhibit A
(the "Casualty Value") for all of the Units as of such date. In the event of a
Casualty Occurrence, the Casualty Occurrence shall be deemed to have affected
all of the Units.
Upon the making of such payment by Lessee in respect of the Units, the
Rent for the Units shall cease to accrue and this Lease shall terminate. If
Lessor receives the Casualty Value for the Units, Lessee shall be entitled to
the proceeds of any recovery in respect of the Unit(s) from insurance or
otherwise.
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6.2 Indemnification. With respect to a Unit, so long as such Unit is in the
possession of and/or under the control of Lessee, Lessee hereby waives and
releases any claim now or hereafter existing against Lessor, any company
controlled by, controlling, or under common control with Lessor and all of their
directors, officers, employees, agents, attorneys, successors and assigns (each,
an "Indemnified Person") on account of, and shall indemnify, reimburse and hold
each Indemnified Person harmless for, from, and against any and all claims
(including, but not limited to, claims based on or relating to copyright,
trademark or patent infringement, environmental liability, negligence, strict
liability in tort, statutory liability or violation of laws), losses, damages,
obligations, penalties, liabilities, demands, suits, judgments or causes of
action, and all legal proceedings, and any reasonable costs or expenses in
connection therewith, including reasonable attorneys' fees, including reasonable
allocated time charges of internal counsel, in each case imposed on, incurred by
or asserted against the Indemnified Person in any way relating to or arising in
any manner out of (a) the registration, purchase, or the ownership, delivery,
condition, lease, assignment, storage, transportation, possession, use,
operation, return, repossession, sale or other disposition of, any Unit, before
or during the term of this Lease as to the Unit; (b) any alleged or actual
defect in any Unit (whether arising from the material or any article used
therein, the design, testing, use, maintenance, service, repair, or overhaul
thereof or otherwise), regardless of when such defect is discovered or alleged
and no matter where it is located; or (c) any violation of any applicable local,
state or federal environmental law or regulation.
ARTICLE VII
INSURANCE
7.1 Insurance. Lessee shall maintain insurance in accordance with Section 6.6 of
the MSA Agreement.
ARTICLE VIII
COVENANTS
8.1 Financial Information. Lessor and Lessee agree to provide each other with
the following information:
(a) As soon as available but in any event within forty-five (45) days
after the end of each of the first three calendar quarters in each fiscal year,
unaudited consolidated financial statements, including statements of operations
and cash flows for such quarter and for the period from the beginning of the
fiscal year to the end of such quarter and balance sheets as of the end of such
quarter, setting forth in each case comparisons to the corresponding period in
the preceding fiscal year, and all such statements will be prepared in
accordance with generally accepted accounting principles, consistently applied,
subject to normal year-end audit adjustments and excluding footnote disclosures;
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(b) As soon as available but in any event within ninety (90) days after
the end of each fiscal year, audited consolidated financial statements,
including statements of operations and cash flows for such fiscal year and
balance sheets as of the end of such fiscal year, setting forth in each case
comparisons to the corresponding period in the preceding fiscal year, and all
such statements will be prepared in accordance with generally accepted
accounting principles, consistently applied.
(c) With reasonable promptness, such other information and data
concerning such party as the other party may reasonably request.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
As of the date hereof, each party represents and warrants to the other
party the following:
9.1 Organization and Qualification. The party is a corporation duly organized,
validly existing, and in good standing under the laws of its state of
incorporation, and has the requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted in every
jurisdiction where the failure to do so would have a material adverse effect on
its business, properties, or ability to conduct the business currently conducted
by it.
9.2 Authority Relative to this Agreement. The party has the requisite power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement by such party and the
consummation by such party of the transactions contemplated hereby have been
duly authorized by such party, and no other corporate proceedings on the part of
such party are necessary to authorize this Agreement and such transactions. This
Agreement has been duly executed and delivered by such party and constitutes a
valid and binding obligation of such party, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
9.3 No Conflicts. The party is not subject to, or obligated under, any provision
of (i) its Certificate of Incorporation or Bylaws, (ii) any material agreement,
arrangement, or understanding, (iii) any material license, franchise, or permit,
or (iv) any law, regulation, order, judgment, or decree, which would be breached
or violated, or in respect of which a right of termination or acceleration would
arise, or pursuant to which any encumbrance on any of its or any of its
subsidiaries' material assets would be created, by its execution, delivery, and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby.
9.4 No Consents. No authorization, consent, or approval of, or filing with, any
public body, court, or authority is necessary on the part of the party for the
consummation by such party of the transactions contemplated by this Agreement.
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9.5 Financial Statements. The party has provided to the other party unaudited
financial statements for and as of the period ended September 30, 1996, and
audited financial statements for and as of the period ended December 31, 1995,
all of which financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved and fairly present the financial position of
such party as of the dates thereof and the results of its operations and cash
flows for the periods then ended, subject in the case of unaudited financial
statements to normal year-end adjustments in the absence of complete footnote
disclosure.
9.6 No Litigation. The party is not subject to any legal, administrative,
arbitration or other suit, proceeding, claim, action, investigation, or inquiry
pending or, to the knowledge of such party, threatened against or involving such
party which could have a material adverse effect upon its ability to perform
this Agreement or upon its results of operations or financial condition, or
which questions the validity of this Agreement or any action taken or to be
taken by such party pursuant to this Agreement and, to the knowledge of such
party, there is no valid basis for any such suit, proceeding, claim, action,
investigation or inquiry.
9.7 No Liens or Encumbrances. Lessor warrants and represents that Lessor has
good and marketable title to the Units free and clear of any liens and
encumbrances.
ARTICLE X
DEFAULTS; REMEDIES
10.1 Events of Default. The following shall constitute events of default
("Events of Default") hereunder:
(a) Lessee fails to make any payment to Lessor within ten (10) days
after written notice thereof to Lessee.
(b) Any representation or warranty of Lessee contained herein or in any
document furnished to Lessor in connection herewith is incorrect or misleading
in any material respect when made;
(c) Lessee fails to observe or perform any other covenant, agreement or
warranty made by Lessee hereunder and such failure continues for thirty (30)
days after written notice thereof to Lessee;
(d) Lessee makes an assignment for the benefit of creditors or files
any petition or action under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of, or relating to,
debtors;
(e) Any involuntary petition is filed under any bankruptcy statute
against Lessee, or any receiver, trustee, custodian or similar official is
appointed to take possession of the properties
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of Lessee, any guarantor of this Lease or any general partner of Lessee, unless
such petition or appointment is set aside or withdrawn or ceases to be in effect
within one-hundred twenty (120) days from the date of the filing or appointment;
(f) Lessee elects to totally liquidate its assets and/or dissolve;
(g) Lessee merges or consolidates with any other entity except that
Lessee may merge or consolidate with its parent or any subsidiary of Lessee;
provided, that, in each case, immediately after giving effect to such proposed
transaction no Event of Default would exist; and provided further that, in the
case of a merger or consolidation with a subsidiary of Lessee, the Lessee is the
surviving corporation; or
(h) Lessee commits a material breach (which is not cured within any
applicable grace period) under the MSA Agreement.
10.2 Lessor's Remedies. If any Event of Default occurs, Lessor, at its option,
without notice to or demand upon Lessee except as otherwise provided in this
Section 10.2, may:
(a) Terminate this Lease and/or Lessee's rights of possession and use
of all or any portion of the Units under the Lease;
(b) Take possession of all or any portion of the Units, wherever
located, or render the same unusable;
(c) Require the Lessee to assemble and return all or any portion of the
Units to Lessor (as more fully specified in Section 11 hereof);
(d) Retain, hold, sell, lease or otherwise dispose of all or any
portion of the Units, in a public or private transaction, without demand upon or
notice to Lessee, and any such sale, lease or other disposition shall be free
and clear of any rights of Lessee;
(e) Recover other and further damages, which shall include but not be
limited to payment by Lessee immediately upon demand of the following, each
bearing interest until paid in full at the Default Rate (as defined in the
Appendix) from the earlier of (A) the date such demand is made or (B) the date
otherwise due and payable:
(i) all accrued and unpaid rent payments payable under all or
any of the Leases and all other costs, charges, fees and amounts
payable thereunder or hereunder,
(ii) all of Lessor's costs and expenses in connection with
Lessee's breach of this Lease, or the enforcement of this lease
(including reasonable attorneys' fees and expenses), or associated with
the repossession, reconditioning and sale, lease or other disposition
of the Units; and Lessor's remedies hereinabove specified are
cumulative, and may be
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exercised by Lessor in any order or manner, as to the Lease and Units
or only a portion thereof, all as Lessor shall determine in its sole
discretion. No exercise of any remedy available to Lessor shall
constitute any election foreclosing Lessor from the subsequent exercise
of any other remedy. In furtherance of its remedies, Lessor may and is
hereby irrevocably authorized by Lessee (and Lessee, at its sole cost
and expense, shall cause Lessor to be duly authorized by all necessary
parties) to enter without trespass or liability upon any premises on
which the Units or any portion thereof may be located. In the event
that Lessor, at its option, shall give Lessee notice of any proposed
sale or other disposition of the Units or any part thereof, Lessee
hereby agrees that written notice given to Lessee in accordance with
the terms of this Lease at least ten (10) days prior to any such sale
or other disposition shall be and be deemed to be commercially
reasonable notice.
10.3 Payments by Lessor on Behalf of Lessee. If Lessee fails to timely make
(within all grace and/or cure periods) any payment or to do any act required
hereunder, than Lessor shall have the right, but not the obligation, to do the
act or make the payment, without further notice to, or demand on Lessee and
without releasing Lessee from any contractual obligation, and to pay, purchase,
contest or compromise any encumbrance, charge or lien which Lessor judges (in
its reasonable discretion) to affect the Unit or Lessor's rights therein. In
exercising such right, Lessor may incur any liability and expend any amount
which in its reasonable discretion it deems necessary. All sums Lessor so incurs
or spends shall be, without demand, immediately due and payable by Lessee to
Lessor and shall bear interest from the date so incurred or spent, whichever is
earlier, until paid in full to Lessor at the Default Rate.
ARTICLE XI
BANKRUPTCY
11.1 Bankruptcy of Lessor.
(a) Lessor represents, warrants and covenants that it does not
presently intend to file or solicit its creditors to file on Lessor's behalf for
protection or reorganization under the bankruptcy laws of the United States. If
there shall be filed by or against the Lessor a petition (whether voluntary or
involuntary) under any Chapter of the United States Bankruptcy Code (the "Code")
on or after the date hereof, it is the intention of the Lessor and the Lessee
that the Lessee shall have the immediate right, at its option, to elect one of
the following alternatives:
(i) provided that Lessee has terminated the MSA Agreement and
this Lease, return all of the Units to Lessor F.O.B. at such location
in the metropolitan area of Phoenix as directed by Lessor (in the event
Lessor fails or refuses to provide for a delivery site, Lessee shall
have the unqualified right to deliver the Units to a storage facility
and Lessor shall be liable for any and all storage expenses incurred
thereby); or
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(ii) provided that Lessee reaffirms its obligations under the
MSA Agreement and this Lease, Lessee shall have the immediate right to
exercise the purchase option described in the Appendix or to continue
the Lease.
Lessor and Lessee acknowledge that the remedies of the Lessee set forth in this
Section 11.1 are the sole and exclusive remedies of Lessee (in lieu of all other
remedies) arising from the bankruptcy of Lessor and are therefore fair and
equitable. The purpose of this Lease (as to Lessee) is to provide Lessee with
the machinery necessary to fulfill its obligations under the MSA Agreement.
Lessor's bankruptcy may result in a reduction in the volume of Grips purchased
by Lessor and therefore the commercial value of both the MSA Agreement and this
Lease will be materially reduced. Lessor hereby agrees not to object to, nor to
request a trustee in bankruptcy to attempt to, petition the Bankruptcy Court to
set aside the provisions of this Section 11.1.
11.2 Bankruptcy of Lessee. Lessee represents, warrants and covenants that it
does not presently intend to file or solicit its creditors to file on Lessor's
behalf for protection or reorganization under the Bankruptcy Laws of the United
States or to make any assignment for the benefit of creditors under any state
laws. If there shall be filed by or against the Lessee a petition (whether
voluntary or involuntary) under any chapter of the Code, on or after the date
hereof, it is the intention of the Lessor and Lessee that the Lessor shall have
immediate right to terminate this Lease, enter upon the Plant, and disassemble
and remove the Units. The MSA Agreement shall thereafter be deemed terminated
and all obligations of Lessee and Lessor hereunder shall immediately terminate.
Lessor and Lessee acknowledge that the rights and remedies of Lessor set forth
in this Section 11.2 are the sole and exclusive remedies of Lessor (in lieu of
all other remedies) arising from the bankruptcy of Lessor and are therefore fair
and equitable. The purpose of this Lease (as to Lessor) is to provide Lessor
with an acceptable manufacturer to fulfill 100% of Lessor's needs for Grips (of
the quality required by Lessor). Lessee's bankruptcy may result in a material
reduction in the commercial value of both the MSA Agreement and this Lease.
Lessee hereby agrees not to object to, nor to request a trustee in bankruptcy
to, attempt to petition the Bankruptcy Court to set aside the conditions of this
Section 11.
ARTICLE XII
MISCELLANEOUS
12.1 Assignment. Lessor may not assign or transfer all or any of the right,
title or interest of Lessor in and to the Units without the prior written
consent of Lessee, but may assign the rights, benefits and advantages of Lessor
under the Lease hereunder, including the rights to receive payment of rent or
any other payment hereunder. No assignment of this lease or any right or
obligation hereunder may be made by Lessee or any assignee of Lessee without the
prior written consent of Lessor.
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12.2 Further Assurances. Lessee and Lessor confirm there is no pending
litigation, tax claim, proceeding or dispute that may adversely affect its
financial condition or impair its ability to perform its obligations hereunder.
Lessee will, at its expense, maintain its legal existence in good standing (and
authorized to do business in any applicable state) and do any further act and
execute, acknowledge, deliver, file, register and record any further documents
Lessor may reasonably request in order to protect Lessor's title to the Units
and Lessor's rights and benefits under this Lease.
12.3 Late Payments. Lessee shall pay to Lessor, on demand, interest at the rate
set forth in the Appendix on the amount of any payment not made when due
hereunder from the date due until payment is made.
12.4 Effect of Waiver. No delay or omission to exercise any right, power or
remedy accruing to Lessor upon any breach or default of Lessee hereunder shall
impair any such right, power or remedy nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein or of or in any
similar breach or default thereafter occurring, nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of Lessor of any breach or default under this
Lease must be in writing specifically set forth.
12.5 Survival of Covenants. All obligations of Lessee and Lessor (as applicable)
under Articles 1, 2, 4, 5, 6, 7, 8, 11 and 12.1 and the Appendix shall survive
the expiration or termination of this Lease to the extent required for their
full observance and performance.
12.6 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the state of Massachusetts (excluding its, or any
other jurisdiction's, choice of law principles).
12.7 Severability. Should any part of any provision of this Lease be held
invalid or unenforceable, the invalid or unenforceable part or provision shall
be replaced with a provision which accomplishes, to the extent possible, the
original business purpose and economic intent of such part or provision in a
valid and enforceable manner, and the remainder of this Lease shall remain
binding upon the parties hereto.
12.8 Financial Information. Lessee shall keep its books and records in
accordance with generally accepted accounting principles and practices
consistently applied and shall deliver to Lessor such financial statements and
information as Lessor may reasonably request. Credit information relating to
Lessee may be disseminated among Lessor and any of its affiliates and any of
their respective successors and assigns.
- 12 -
12.9 Notices.
(a) All notices and demands of any kind which either party may be
required or desire to serve upon the other under the terms of this Lease shall
be in writing and shall be sent by registered mail, return receipt requested, or
by facsimile with confirming copy by registered mail to the receiving party at
the address of the receiving party set forth below:
If to Lessor: Royal Grip, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President
If to Lessee: Acushnet Rubber Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Operating Officer
(b) Either party may change such address upon written notice to the
other party hereto in the manner set forth in this Section 12.9. All notices or
demands shall be deemed to have been given when received by the party to whom
such notice is sent as evidenced by a receipt signed and dated by a
representative of the receiving party.
12.10 Dispute Resolution. Any dispute among the parties hereto shall be resolved
in accordance with the dispute resolution procedures attached hereto in the
Appendix ; provided, that, nothing herein shall preclude any party from seeking
or obtaining equitable relief, such as an injunction, or from enforcing any
order or judgement of an arbitrator through judicial process.
12.11 Counterparts. Two counterparts of this Lease have been executed by the
parties hereto. One counterpart has been prominently marked "Lessor's Copy". One
counterpart has been prominently marked "Lessee's Copy". Only the counterpart
marked "Lessor's Copy" shall evidence a monetary obligation of Lessee.
12.12 Transaction Costs. If the negotiation or drafting of lease documents is
required, the Lessee shall be responsible for its own legal costs and expenses
and Lessor shall be responsible for its own legal costs.
12.13 Audits. Lessee will allow Lessor and its agents to inspect Lessee's
records regarding the Units and make copies of books and records at any
reasonable time and upon reasonable notice.
- 13 -
12.14 Effect and Modification of Lease. This Lease exclusively and completely
states the rights of Lessor and Lessee with respect to the leasing of the Units
and supersedes all prior agreements, oral or written, with respect thereto. No
variation or modification of this Lease shall be valid unless in writing.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives on the date
and year first written above.
ROYAL GRIP, INC., a Nevada corporation ACUSHNET RUBBER COMPANY, INC., a
Massachusetts corporation
By: /s/ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇, ▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------- -----------------------------------
Name: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇, ▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President Title: Executive Vice President and
Chief Operating Officer
- 14 -
APPENDIX to LEASE AGREEMENT dated as of December 21, 1996,
between Royal Grip, Inc. and Acushnet Rubber Company, Inc..
Units.
------
The Unit(s) to be leased hereunder consist(s) of used and new
fabrication machines and related equipment for the manufacture of Grips as more
particularly described in Schedule 1 attached hereto and made part hereof and
all modifications, replacements and substitutions. Some of the Units are
currently under the possession and control of Lessor and some of the Units are
subject to purchase orders between Lessor and the respective manufacturer
thereof.
Fair Market Value
-----------------
"Fair Market Value" with respect to the Units means the Ending Financed
Balance set forth on Exhibit "A".
Term.
-----
The term of this Lease shall begin on the date hereof and, unless
sooner terminated, shall end on December 31, 2006, at which time Lessor shall
deliver to Lessee and Lessee shall accept from Lessor a ▇▇▇▇ of Sale for all of
the Units.
Location.
---------
The Units shall be located in the state of Massachusetts and the
Schedule relating to each Unit shall set forth the state, county and city in
which such Unit is to be principally located. Lessee shall give Lessor notice of
any change in the location within the state no later than ten (10) days after
such change.
Rent.
-----
Lessee shall pay to Lessor rent for the Units in the total amount of
$4,508,384.56 comprised of $3,122,000 (the Fair Market Value of the Units as of
the date hereof plus fifty percent (50%) of the rigging and freight costs
incurred by Lessor for the F.O.B. delivery described in Section 1.2 hereof) plus
$1,386,384.56 (which equals the fair market value of the units times 7.8125% per
annum over 10 years) payable in 120 consecutive monthly installments, with the
first such installment due on the first day of the first month following the
date hereof, each Rent installment to be (subject to adjustment as provided in
the Lease) $37,569.87.
-1-
Default Rate.
-------------
Lessee shall pay Lessor interest on late payments at the rate
of twelve percent (12%) per annum.
Reimbursement for Shipping Costs.
---------------------------------
The Rent due to Lessor hereunder shall be in addition to the
credits against the shipping costs described in Section 3.4 of the MSA
Agreement.
Purchase Option.
----------------
If no Event of Default exists, Lessee may at any time during
the term of this Lease, by written notice delivered to Lessor, elect to purchase
all (but not less than all) of the Units for a purchase price (the "Capital
Lease Option Balance") equal to corresponding "End of Month Payoff Balance"
described in the attached Exhibit A. The option to purchase described herein
shall be completed as of the last day of the immediately succeeding calendar
month at which time Lessor shall deliver to Lessee a ▇▇▇▇ of sale for all of the
Units together with a UCC-2 Termination Statement.
Security Deposit.
-----------------
Lessee shall deposit with Lessor, as security $ -0-.
-2-
Dispute Resolution Procedures.
------------------------------
All claims, disputes and other matters in controversy (herein called
"dispute") arising directly or indirectly out of or related to this Lease, or
the breach thereof, whether contractual or noncontractual, and whether during
the term or after the termination of this Agreement, shall be resolved
exclusively according to the procedures set forth in this Appendix.
A. Negotation. The parties shall attempt to settle disputes arising out
of or relating to this Lease or the breach thereof by a meeting of two
designated representatives of each party within five (5) days after a request by
either of the parties to the other party asking for the same.
B. Mediation. If such dispute cannot be settled at such meeting, either
party, within five (5) days of such meeting may give a written notice (a
"Dispute Notice") to the other party setting forth the nature of the dispute.
The parties shall attempt in good faith to resolve the dispute by mediation in
Phoenix, Arizona, under the Commercial Mediation Rules of the American
Arbitration Association ("AAA") in effect on the date of the Dispute Notice. The
parties shall select a person who will act as the mediator under this Paragraph
B within 60 days of the date of the Lease. If the dispute has not been resolved
by mediation as provided above within thirty (30) days after delivery of the
Dispute Notice, then the dispute shall be determined by arbitration in
accordance with the provisions of Paragraph C hereof.
C. Arbitration. Any dispute that is not settled through mediation as
provided in Paragraph B above shall be resolved by arbitration in Phoenix,
Arizona, governed by the Federal Arbitration Act, 9 U.S.C. ss. 1 et seq, and
administered by the AAA under its Commercial Arbitration Rules in effect on the
date of the Dispute Notice, as modified by the provisions of this Section C, by
a single arbitrator. The arbitrator selected, in order to be eligible to serve,
shall be a lawyer with at least 15 years experience specializing in either
general commercial litigation or general corporate and commercial matters. In
the event the parties cannot agree on a mutually acceptable single arbitrator
from the list submitted by the AAA, the AAA shall appoint the arbitrator who
shall meet the foregoing criteria. The arbitrator shall base the award on
applicable law and judicial precedent and, unless both parties agree otherwise,
shall include in such award the findings of fact and conclusions of law upon
which the award is based. Judgment on the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof. The award may only be
made for compensatory damages, and if any other damages (whether exemplary,
punitive, consequential, statutory or other) are included, the award shall be
vacated and remanded, or modified or corrected, as appropriate to promote this
damage limitation.
Notwithstanding the foregoing:
(a) Upon the application by either party to a court for an
order confirming, modifying or vacating the award, the court shall have the
power to review whether, as a matter of law based on the findings of fact
determined by the arbitrator, the award should be confirmed, modified or vacated
in order to correct any errors of law made by the arbitrator. In order to
effectuate such judicial review limited to issues of law, the parties agree (and
shall stipulate to the
-3-
court) that the findings of fact made by the arbitrator shall be final and
binding on the parties and shall serve as the facts to be submitted to and
relied on by the court in determining the extent to which the award should be
confirmed, modified or vacated.
(b) Either party shall have the right to apply to any court
for an order to enforce any of the ownership and confidentiality provisions
contained in the Agreement.
D. Costs and Attorneys' Fees. If either party fails to proceed with
mediation or arbitration as provided herein or unsuccessfully seeks to stay such
mediation or arbitration, or fails to comply with any arbitration award, or is
unsuccessful in vacating or modifying the award pursuant to a petition or
application for judicial review, the other party shall be entitled to be awarded
costs, including reasonable attorneys' fees, paid or incurred by such other
party in successfully compelling such arbitration or defending against the
attempt to stay, vacate or modify such arbitration award and/or successfully
defending or enforcing the award.
E. Tolling of Statute of Limitations. All applicable statutes of
limitations and defenses based upon the passage of time shall be tolled while
the procedures specified herein are pending. The parties will take such action,
if any, required to effectuate such tolling.
ROYAL GRIP, INC. , a Nevada ACUSHNET RUBBER COMPANY,
corporation INC., a Massachusetts corporation
By: /s/ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇, ▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------- -----------------------------------
Name: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇, ▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President Title: Executive Vice President and
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Chief Operating Officer
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
-4-
SCHEDULE 1
A complete description of the Units has been provided to Lessee.
-5-
EXHIBIT A
Capital Lease Schedule
----------------------
Amount Financed Through Capital Lease $ 3,122,000
Finance Rate % 7.8125
Term in Months 120
Payment due date 21 st of each month
Beginning Paydown Ending
Period Financed Imputed of Financed Financed
Ending Balance Payment Interest Balance Balance
------ ------- ------- -------- ------- -------
1/21/97 3,122,000.00 37,569.87 20,325.52 17,244.35 3,104,755.65
2/21/97 3,104,755.65 37,569.87 20,213.25 17,356.62 3,087,399.03
3/21/97 3,087,399.03 37,569.87 20,100.25 17,469.62 3,069,929.42
4/21/97 3,069,929.42 37,569.87 19,986.52 17,583.35 3,052,346.07
5/21/97 3,052,346.07 37,569.87 19,872.04 17,697.83 3,034,648.24
6/21/97 3,034,648.24 37,569.87 19,756.82 17,813.05 3,016,835.20
7/21/97 3,016,835.20 37,569.87 19,640.85 17,929.02 2,998,906.18
8/21/97 2,998,906.18 37,569.87 19,524.13 18,045.74 2,980,860.44
9/21/97 2,980,860.44 37,569.87 19,406.64 18,163.23 2,962,697.21
10/21/97 2,962,697.21 37,569.87 19,288.39 18,281.48 2,944,415.74
11/21/97 2,944,415.74 37,569.87 19,169.37 18,400.50 2,926,015.24
12/21/97 2,926,015.24 37,569.87 19,049.58 18,520.29 2,907,494.95
1/21/98 2,907,494.95 37,569.87 18,929.00 18,640.87 2,888,854.08
2/21/98 2,888,854.08 37,569.87 18,807.64 18,762.23 2,870,091.86
3/21/98 2,870,091.86 37,569.87 18,685.49 18,884.38 2,851,207.48
4/21/98 2,851,207.48 37,569.87 18,562.55 19,007.32 2,832,200.16
5/21/98 2,832,200.16 37,569.87 18,438.80 19,131.07 2,813,069.09
6/21/98 2,813,069.09 37,569.87 18,314.25 19,255.62 2,793,813.47
7/21/98 2,793,813.47 37,569.87 18,188.89 19,380.98 2,774,432.49
8/21/98 2,774,432.49 37,569.87 18,062.71 19,507.16 2,754,925.33
9/21/98 2,754,925.33 37,569.87 17,935.71 19,634.16 2,735,291.18
10/21/98 2,735,291.18 37,569.87 17,807.89 19,761.98 2,715,529.19
11/21/98 2,715,529.19 37,569.87 17,679.23 19,890.64 2,695,638.55
12/21/98 2,695,638.55 37,569.87 17,549.73 20,020.14 2,675,618.41
1/21/99 2,675,618.41 37,569.87 17,419.39 20,150.48 2,655,467.93
2/21/99 2,655,467.93 37,569.87 17,288.20 20,281.67 2,635,186.26
3/21/99 2,635,186.26 37,569.87 17,156.16 20,413.71 2,614,772.55
4/21/99 2,614,772.55 37,569.87 17,023.26 20,546.61 2,594,225.94
5/21/99 2,594,225.94 37,569.87 16,889.49 20,680.38 2,573,545.56
6121/99 2,573,545.56 37,569.87 16,754.85 20,815.02 2,552,730.55
7/21/99 2,552,730.55 37,569.87 16,619.34 20,950.53 2,531,780.02
8/21/99 2,531,780.02 37,569.87 16,482.94 21,086.93 2,510,693.09
9/21/99 2,510,693.09 37,569.87 16,345.66 21,224.21 2,489,468.88
10/21/99 2,489,468.88 37,569.87 16,207.48 21,362.39 2,468,106.49
11/21/99 2,468,106.49 37,569.87 16,068.40 21,501.47 2,446,605.02
12/21/99 2,446,605.02 37,569.87 15,928.42 21,641.45 2,424,963.57
1/21/00 2,424,963.57 37,569.87 15,787.52 21,782.35 2,403,181.22
2/21/00 2,403,181.22 37,569.87 15,645.71 21,924.16 2,381,257.06
Page 1
EXHIBIT A
Capital Lease Schedule
----------------------
Amount Financed Through Capital Lease $ 3,122,000
Finance Rate % 7.8125
Term in Months 120
Payment due date 21st of each month
Beginning Paydown Ending
Period Financed Imputed of Financed Financed
Ending Balance Payment Interest Balance Balance
------ ------- ------- -------- ------- -------
3/21/00 2,381,257.06 37,569.87 15,502.98 22,066.89 2,359,190.17
4/21/00 2,359,190.17 37,569.87 15,359.31 22,210.56 2,336,979.61
5/21/00 2,336,979.61 37,569.87 15,214.71 22,355.16 2,314,624.45
6/21/00 2,314,624.45 37,569.87 15,069.17 22,500.70 2,292,123.75
7/21/00 2,292,123.75 37,569.87 14,922.68 22,647.19 2,269,476.56
8/21/00 2,269,476.56 37,569.87 14,775.24 22,794.63 2,246,681.93
9/21/00 2,246,681.93 37,569.87 14,626.84 22,943.03 2,223,738.89
10/21/00 2,223,738.89 37,569.87 14,477.47 23,092.40 2,200,646.49
11/21/00 2,200,646.49 37,569.87 14,327.13 23,242.74 2,177,403.74
12/21/00 2,177,403.74 37,569.87 14,175.81 23,394.06 2,154,009.68
1/21/01 2,154,009.68 37,569.87 14,023.50 23,546.37 2,130,463.31
2/21/01 2,130,463.31 37,569.87 13,870.20 23,699.67 2,106,763.64
3/21/01 2,106,763.64 37,569.87 13,715.91 23,853.96 2,082,909.68
4/21/01 2,082,909.68 37,569.87 13,560.61 24,009.26 2,058,900.42
5/21/01 2,058,900.42 37,569.87 13,404.30 24,165.57 2,034,734.85
6/21/01 2,034,734.85 37,569.87 13,246.97 24,322.90 2,010,411.95
7/21/01 2,010,411.95 37,569.87 13,088.62 24,481.25 1,985,930.70
8/21/01 1,985,930.70 37,569.87 12,929.24 24,640.63 1,961,290.07
9/21/01 1,961,290.07 37,569.87 12,768.82 24,801.05 1,936,489.02
10/21/01 1,936,489.02 37,569.87 12,607.35 24,962.52 1,911,526.50
11/21/01 1,911,526.50 37,569.87 12,444.83 25,125.04 1,886,401.46
12121/01 1,886,401.46 37,569.87 12,281.26 25,288.61 1,861,112.85
1/21/02 1,861,112.85 37,569.87 12,116.62 25,453.25 1,835,659.60
2/21102 1,835,659.60 37,569.87 11,950.91 25,618.96 1,810,040.64
3/21102 1,810,040.64 37,569.87 11,784.12 25,785.75 1,784,254.89
4/21/02 1,784,254.89 37,569.87 11,616.24 25,953.63 1,758,301.26
5/21/02 1,758,301.26 37,569.87 11,447.27 26,122.60 1,732,178.66
6/21/02 1,732,178.66 37,569.87 11,277.20 26,292.67 1,705,886.00
7/21102 1,705,886.00 37,569.87 11,106.03 26,463.84 1,679,422.16
8/21/02 1,679,422.16 37,569.87 10,933.74 26,636.13 1,652,786.03
9/21/02 1,652,786.03 37,569.87 10,760.33 26,809.54 1,625,976.48
10/21/02 1,625,976.48 37,569.87 10,585.78 26,984.09 1,598,992.40
11/21/02 1,598,992.40 37,569.87 10,410.11 27,159.76 1,571,832.63
12/21/02 1,571,832.63 37,569.87 10,233.29 27,336.58 1,544,496.05
1/21/03 1,544,496.05 37,569.87 10,055.31 27,514.56 1,516,981.49
2/21/03 1,516,981.49 37,569.87 9,876.18 27,693.69 1,489,287.80
3/21/03 1,489,287.80 37,569.87 9,695.88 27,873.99 1,461,413.82
4/21/03 1,461,413.82 37,569.87 9,514.41 28,055.46 1,433,358.36
Page 2
EXHIBIT A
Capital Lease Schedule
----------------------
Amount Financed Through Capital Lease $ 3,122,000
Finance Rate % 7.8125
Term in Months 120
Payment due date 21st of each month
Beginning Paydown Ending
Period Financed Imputed of Financed Financed
Ending Balance Payment Interest Balance Balance
------ ------- ------- -------- ------- -------
5/21/03 1,433,358.36 37,569.87 9,331.76 28,238.11 1,405,120.25
6/21103 1,405,120.25 37,569.87 9,147.92 28,421.95 1,376,698.30
7/21/03 1,376,698.30 37,569.87 8,962.88 28,606.99 1,348,091.31
8/21/03 1,348,091.31 37,569.87 8,776.64 28,793.23 1,319,298.07
9/21/03 1,319,298.07 37,569.87 8,589.18 28,980.69 1,290,317.38
10/21/03 1,290,317.38 37,569.87 8,400.50 29,169.37 1,261,148.02
11/21/03 1,261,148.02 37,569.87 8,210.60 29,359.27 1,231,788.75
12/21/03 1,231,788.75 37,569.87 8,019.46 29,550.41 1,202,238.33
1/21/04 1,202,238.33 37,569.87 7,827.07 29,742.80 1,172,495.54
2/21/04 1,172,495.54 37,569.87 7,633.43 29,936.44 1,142,559.10
3/21/04 1,142,559.10 37,569.87 7,438.54 30,131.33 1,112,427.77
4/21/04 1,112,427.77 37,569.87 7,242.37 30,327.50 1,082,100.27
5/21/04 1,082,100.27 37,569.87 7,044.92 30,524.95 1,051,575.32
6/21/04 1,051,575.32 37,569.87 6,846.19 30,723.68 1,020,851.64
7/21/04 1,020,851.64 37,569.87 6,646.17 30,923.70 989,927.94
8/21/04 989,927.94 37,569.87 6,444.84 31,125.03 958,802.92
9/21/04 958,802.92 37,569.87 6,242.21 31,327.66 927,475.25
10/21/04 927,475.25 37,569.87 6,038.25 31,531.62 895,943.63
11/21/04 895,943.63 37,569.87 5,832.97 31,736.90 864,206.73
12/21/04 864,206.73 37,569.87 5,626.35 31,943.52 832,263.20
1/21/05 832,263.20 37,569.87 5,418.38 32,151.49 800,111.71
2/21/05 800,111.71 37,569.87 5,209.06 32,360.81 767,750.91
3/21/05 767,750.91 37,569.87 4,998.38 32,571.49 735,179.41
4/21105 735,179.41 37,569.87 4,786.32 32,783.55 702,395.87
5/21/05 702,395.87 37,569.87 4,572.89 32,996.98 669,398.89
6/21/05 669,398.89 37,569.87 4,358.07 33,211.80 636,187.08
7/21/05 636,187.08 37,569.87 4,141.84 33,428.03 602,759.06
8/21/05 602,759.06 37,569.87 3,924.21 33,645.66 569,113.40
9/21/05 569,113.40 37,569.87 3,705.17 33,864.70 535,248.69
10/21/05 535,248.69 37,569.87 3,484.69 34,085.18 501,163.52
11/21/05 501,163.52 37,569.87 3,262.78 34,307.09 466,856.43
12/21/05 466,856.43 37,569.87 3,039.43 34,530.44 432,325.99
1/21/06 432,325.99 37,569.87 2,814.62 34,755.25 397,570.74
2/21/06 397,570.74 37,569.87 2,588.35 34,981.52 362,589.22
3/21/06 362,589.22 37,569.87 2,360.61 35,209.26 327,379.96
4/21/06 327,379.96 37,569.87 2,131.38 35,438.49 291,941.47
5/21/06 291,941.47 37,569.87 1,900.66 35,669.21 256,272.26
6/21/06 256,272.26 37,569.87 1,668.44 35,901.43 220,370.83
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EXHIBIT A
Capital Lease Schedule
----------------------
Amount Financed Through Capital Lease $ 3,122,000
Finance Rate % 7.8125
Term in Months 120
Payment due date 21st of each month
Beginning Paydown Ending
Period Financed Imputed of Financed Financed
Ending Balance Payment Interest Balance Balance
------ ------- ------- -------- ------- -------
7/21/06 220,370.83 37,569.87 1,434.71 36,135.16 184,235.67
8/21/06 184,235.67 37,569.87 1,199.45 36,370.42 147,865.25
9/21/06 147,865.25 37,569.87 962.66 36,607.21 111,258.04
10/21/06 111,258.04 37,569.87 724.34 36,845.53 74,412.51
11/21/06 74,412.51 37,569.87 484.46 37,085.41 37,327.09
12/21/06 37,327.09 37,570.11 243.01 37,327.10 (0.00)
Page 4