EQUIPMENT LEASE AGREEMENT
This Lease Agreement is made and entered into at Logan, Utah effective
the 1st day of December, 1999, by and between PVC, Incorporated, a Utah
corporation with principal offices in Logan, Utah (hereinafter "Lessor"), and
NACO INDUSTRIES, INC., a Utah corporation with principal offices in Logan, Utah
(hereinafter "Lessee").
l. LEASE. Lessor hereby leases to Lessee, and the Lessee rents from
the Lessor, all of that certain personal property and equipment described in
Exhibit "A", which is attached hereto and incorporated by this reference as
though fully set forth herein (hereinafter the "Equipment").
2. TERM. This lease shall continue for the term of five (5) years,
commencing on December 1, 1999 and continuing thereafter through November 30,
2004, or until earlier terminated as set forth herein. However, in the event
that Lessee shall notify Lessor in writing of its intention to renew this lease,
which notice must be given not less than ninety (90) days prior to the
expiration of the initial term hereof, then this lease shall be renewed under
the same terms as set forth herein, including the annual adjustments of the
rentals hereunder, for an additional period of sixty (60) months.
3. RENTAL. Rental payments shall become due and payable hereunder on a
monthly basis, payable in advance, commencing on the first day of December, 1999
and continuing on the first day of each month thereafter until November 1, 2004,
when the last of such monthly rental payments shall be paid. Rental payments
shall initially commence at the rate of $9,500.00 per month; and, upon each
annual anniversary date of this lease agreement, the monthly rentals shall be
adjusted by the amount of any increase in the Consumer Price Index over the
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immediately preceding year. Rentals shall be payable to the Lessor at its
office, or to such person or at such other place as the Lessor may from time to
time designate in writing.
4. SELECTION OF EQUIPMENT. The Lessee has selected and inspected the
Equipment and accepts the Equipment AS IS, in its present condition.
THE LESSOR MAKES NO WARRANTY, DIRECTLY OR INDIRECTLY, EXPRESS OR
IMPLIED, AS TO THE EQUIPMENT OR ANY PART THEREOF, AS TO ITS DURABILITY,
CONDITION, MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR PURPOSE
EXCEPT THAT THE LESSOR WARRANTS THAT IT HAS TITLE TO OR PROPER
AUTHORIZATION TO LEASE EACH ITEM OF EQUIPMENT AS OF THE DATE HEREOF.
The parties agree that the Lessee may from time to time wish to
replace, or add to, the Equipment leased hereunder. Any such replacement or
addition shall occur only upon the prior written agreement of the parties
hereto, and the amount of the monthly rental payments shall be increased
accordingly, pursuant to the mutual agreement of the parties hereto. Consent to
make such replacements or additions, however, shall not be unreasonably withheld
by Lessor.
5. CREDIT AND FINANCIAL INFORMATION. The Lessee warrants that all
credit and financial information submitted to the Lessor herewith or at any
other time during the term of this lease is true and correct in all details and
complete for the purpose of inducing the Lessor to enter into this lease, or
consent to the addition or replacement of Equipment.
6. LESSEE'S INSPECTION AND ACCEPTANCE. Lessee acknowledges receipt of
the Equipment in good condition and working order and as satisfactory in all
respects for the purpose of this lease.
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7. INSTALLMENT, MAINTENANCE AND REPAIR. Neither the Lessor nor its
assignee shall have any obligation to install, erect, test, adjust, or service
the equipment. The Lessee, at its own cost and expense shall:
(a) Pay all charges in connection with the maintenance and
operation of the equipment;
(b) Comply with all laws, ordinances, regulations,
requirements, and rules with respect to the use, maintenance, and operation of
the equipment;
(c) Take good and proper care of the equipment and make all
repairs and replacements necessary to maintain, preserve, and keep the equipment
in good condition and working order. The Lessee shall not make any alterations,
additions, or improvements to the equipment without the prior written consent of
the Lessor. All repairs, replacements, parts, devices, accessories, and
improvements of whatsoever kind or nature furnished or affixed to the equipment
shall belong to and become part of the property of the Lessor.
8. INSURANCE AND INDEMNITY. The Lessee assumes the entire risk of loss,
theft, or damage to the equipment, whether or not covered by insurance, and no
such loss, theft, or damage shall relieve the Lessee of its obligations
hereunder except as set forth in paragraph 12. The Lessee agrees to and does
hereby indemnify and hold the Lessor harmless of, from, and against all claims,
costs, expenses, damages, and liabilities, including reasonable attorney's fees
resulting from or incident to the use, operation, or storage of the equipment
during the term of this lease. While the equipment is in the possession or
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control of the Lessee, the Lessee agrees, at its own cost and expense, to keep
the equipment insured to protect all interests of the lessor, against all risks
of loss, theft, or damage from every cause whatsoever for not less than the then
current value of the equipment and in addition shall purchase insurance in an
amount reasonable under the circumstances to cover the liability of the Lessor
for public liability and property damage. The Lessor shall be named as an
insured in all such policies and as loss payee thereunder. Each insurer shall
agree by endorsement upon the policy or policies issued by it, that it will give
the Lessor 30 days prior written notice of the effective date of any alteration
or cancellation. The proceeds of such insurance, whether resulting from loss,
theft, or damage or return premium or otherwise, shall be applied toward the
replacement or repair of the equipment or the payment of the obligations of the
Lessee hereunder at the option of the Lessor. The Lessee hereby appoints the
Lessor as Lessee's attorney-in-fact to make claim for, receive payment of, and
execute or endorse all documents, checks, or drafts for loss or damage or return
premium under any insurance policy issued on the equipment.
9. LOSS, THEFT OR DAMAGE. In the event of loss, theft, or damage to
the equipment in whole or in part, the Lessee shall promptly so notify the
Lessor and, at the Lessor's option shall:
(a) Place such equipment in good condition and working
order; or
(b) Replace such equipment with like equipment in good
condition and working order and furnish the Lessor with necessary documents to
vest good and marketable title thereto in the Lessor; or
(c) If the Lessor determines that any item of equipment is
beyond repair, pay to the Lessor, within ten days of such notification, the loss
value thereof which shall be an amount equal to the sum of:
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(1) All rents and other amounts due and owing under
this lease thereon at the time of such payment; plus;
(2) The sum of the rents and other amounts to become
payable for same during the balance of the lease, plus;
(3) The reversionary value of such item of equipment
at the end of the lease had such loss not occurred. Upon such payment the lease
shall terminate with respect to the item of equipment so paid for and the Lessee
shall thereupon become the owner thereof.
10. OWNERSHIP. The equipment shall at all times remain the property of
the Lessor and the Lessee shall have no right or property interest therein but
only the right to use the same under this lease. The Lessor shall have the right
to display notice of its ownership by affixing to the equipment an identifying
plate, stencil, or other indicia of ownership. Nevertheless, in order to protect
the interest of the Lessor, Lessee agrees to execute UCC-1 Forms as a protective
measure, conferring a Security Interest in the Equipment to Lessor.
11. PERSONAL PROPERTY. The equipment shall at all times remain personal
property regardless of the manner affixed to the realty. The Lessee shall
maintain each item so that it may be removed from any building in which it is
placed without damaging such building.
12. USE, LOCATION, REMOVAL AND INSPECTION. The equipment shall be used
only in the lawful business of the Lessee and located at Lessee's place of
business as approved by Lessor. The Lessee, without the written consent of the
Lessor, shall not remove the equipment from such location nor part with
possession or control thereof. The Lessor, upon prior reasonable notice to the
Lessee, shall have the right to inspect the equipment during the Lessee's normal
business hours.
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13. TAXES AND LICENSES. The Lessee shall pay all taxes, license fees,
and assessments, levied on the equipment, or relating to this lease, exclusive
of franchise taxes and taxes measured by the income of the Lessor. The Lessee
shall file all returns required therefor and furnish copies thereof to the
Lessor. The Lessor will cooperate with the Lessee and furnish the Lessee with
any information available to the Lessor in connection with the Lessee's
obligations under this paragraph.
14. LESSOR'S PAYMENT. In the case of the failure of the Lessee to
procure or maintain the required insurance, pay taxes, license fees, or
assessments as required or to keep the equipment in good condition and working
order as hereinbefore specified, the Lessor shall have the right, but not the
obligation to effect such insurance, pay such taxes, license fees, and
assessments and keep the equipment in good condition and working order, as the
case may be. In such event, the costs thereof shall be repayable by the Lessee
to the Lessor with the next installment of rent, and failure to do so shall
carry the same consequence as failure to pay any installment of rent when due
hereunder.
15. LATE CHARGES. Should the Lessee fail to pay any rental or other
charges provided for in this lease when due, there shall be imposed a late fee
of 5% of such late payment, and such payment and late fee shall thereafter bear
interest at 1 1/2% per month (18 month per annum).
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16. ENCUMBRANCES. Lessee shall keep the equipment free and clear of all
levies, liens and encumbrances.
17. RETURN OF EQUIPMENT, REPOSSESSION. Upon termination of this lease
for any reason, the Lessee, at its own expense, will forthwith return the
equipment to the Lessor at Lessor's property in Logan, Utah. Should the Lessee
fail or refuse to so return and deliver the equipment, the Lessor shall have the
right without notice or demand, to enter the premises where the equipment may be
found and take possession of and remove any equipment without legal process. The
Lessee hereby releases any claim or right of action for trespass arising from
such entry or removal. The equipment, upon its return, will be in good condition
and working order.
18. ASSIGNMENT. Without the Lessor's prior written consent, the Lessee
shall not assign, transfer, pledge, hypothecate, or otherwise dispose of this
lease or any interest therein or sublet or lend the equipment or permit it to be
used by anyone other than the Lessee and Lessee's employees.
19. DEFAULT. Any of the following events or conditions shall constitute
a default of the Lessee under this lease:
(a) Default in the payment of rent or
any other sums due hereunder for a period of ten days after the same becomes
due;
(b) Any other breach of the terms and conditions of this
lease;
(c) If any writ or order of attachment, execution, or other
legal action against the Lessee is levied on any or all equipment and not
released or satisfied within ten days;
(d) Death or judicial incompetency of the Lessee if an
individual;
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(e) The institution of a proceeding in bankruptcy,
receivership, or insolvency against the Lessee or its property or if the Lessee
shall enter into an agreement or composition with its creditors;
(f) The occurrence of any event described in subdivisions (d)
or (e) of this paragraph with respect to any guarantor of the Lessee;
(g) If any certificate, statement, representation, or warranty
furnished by the Lessee or any of the Lessee's guarantors proves to be false in
any material respect; or
(h) If the condition of the affairs of the Lessee or any of
the Lessee's guarantors shall so change as to, in the sole opinion of the
Lessor, impair the Lessor's security or increase the credit risk involved.
20. REMEDIES. Upon the happening of any event of default as set forth
in paragraph 19, the Lessor shall have the right to do the following without
demand or notice of any kind:
(a) Declare due, xxx for, and receive from the Lessee the sum
of all rents and other amounts due and owing under this lease plus the sum of
the rents and other amounts to become payable during the balance of the term of
this lease;
(b) Retake possession of any and all equipment without any
court order or other process of law. For such purpose, the Lessor may enter upon
any premises where such equipment is located and remove the same therefrom
without being liable to any suit, action, or other proceedings by the Lessee.
The Lessor may, at its option, sell the equipment at public or private sale for
cash or on credit and by itself become the purchaser at such sale. The Lessee
shall be liable for arrears of rent, if any, the expense of retaking possession,
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and the removal of the equipment, court costs, in addition to the balance of the
rentals provided for herein, or in any renewal hereof, less the net proceeds of
the sale of the equipment, if any, after deducting all costs of taking, storage,
repair and sale and reasonable attorney's fees.
THE LESSEE WAIVES ANY AND ALL RIGHTS TO NOTICE AND TO A JUDICIAL
HEARING WITH RESPECT TO THE REPOSSESSION OF THE EQUIPMENT BY THE
LESSOR.
(c) Terminate this lease as to any or all equipment.
(d) Terminate any other lease between the Lessor and Lessee;
or
(e) Pursue any other remedy at law or in equity.
21. CONCURRENT REMEDIES. The rights granted to the Lessor under
paragraph 20 shall be cumulative and action on one shall not be deemed to
constitute an election or waiver of any other right to which the Lessor may be
entitled. The Lessee waives trial by jury in any action or proceeding arising
hereunder.
22. NOTICE AND WAIVERS. All notices relating hereto shall be delivered
in person to an officer of the Lessor or Lessee or shall be mailed certified or
registered to the Lessor or Lessee at their respective addresses or at any other
address hereinafter furnished by notice given in like manner. A waiver of a
specific default shall not be a waiver of any other or subsequent default. No
waiver by the Lessor or any provisions hereof shall constitute a waiver of any
other matter and all waivers shall be in writing and executed by an officer of
the Lessor. No failure on the part of the Lessor to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof.
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23. ENTIRE AGREEMENT. This instrument constitutes the entire agreement
between the parties and may not be modified except by a written instrument
signed by the parties. Any representation or statement made by the Lessor or
Lessee not stated herein shall not be binding.
24. ADDITIONAL DOCUMENTS. At the request of the Lessor, the Lessee
shall execute and deliver to the Lessor such documents as the Lessor shall deem
necessary or desirable for the purpose of recording or filing.
25. MISCELLANEOUS. Any provision of this instrument prohibited by law
in any state shall, as to such state, be ineffective to the extent of such
prohibition without invalidating the remaining provisions of this instrument.
This instrument shall be governed and construed in accordance with the laws of
the State of Utah.
IN WITNESS WEHREOF, the parties hereto have set their hands as of the
date and year first set forth above.
LESSOR:
By/s/PVC, Inc.
--------------
PVC, Inc.
LESSEE:
By/s/NACO INDUSTRIES, Inc.
--------------------------
Naco Industries, Inc.
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EXHIBIT "A"
List of Personal Property and Equipment Subject to Lease
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