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<SEC-DOCUMENT>0000076267-02-000009.txt : 20020531
<SEC-HEADER>0000076267-02-000009.hdr.sgml : 20020531
<ACCEPTANCE-DATETIME>20020531163541
ACCESSION NUMBER: 0000076267-02-000009
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 21
CONFORMED PERIOD OF REPORT: 20020303
FILED AS OF DATE: 20020531
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PARK ELECTROCHEMICAL CORP
CENTRAL INDEX KEY: 0000076267
STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672]
IRS NUMBER: 111734643
STATE OF INCORPORATION: NY
FISCAL YEAR END: 0228
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-04415
FILM NUMBER: 02668064
BUSINESS ADDRESS:
STREET 1: 5 DAKOTA DR
CITY: LAKE SUCCESS
STATE: NY
ZIP: 11042
BUSINESS PHONE: 5163544100
MAIL ADDRESS:
STREET 1: 5 DAKOTA DR
CITY: LAKE SUCCESS
STATE: NY
ZIP: 11042
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>ed10k02.txt
<DESCRIPTION>FORM 10-K
<TEXT>
10K.02-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 10549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 3, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to _______
Commission file number 1-4415
Park Electrochemical Corp.
(Exact Name of Registrant as Specified in Its Charter)
New York 11-1734643
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification
No.)
5 Dakota Drive, Lake Success, New 11042
York (Zip Code)
(Address of Principal Executive
Offices)
Registrant's telephone number, including area code
(516) 354-4100
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange
on Which Registered
Common Stock, par value $.10 per New York Stock
share Exchange
Preferred Stock Purchase Rights New York Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 filing
requirements for the past 90 days.
Yes [X] No [ ]
[cover page 1 of 2 pages]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X}
State the aggregate market value of the voting and non-
voting common equity held by non-affiliates of the registrant.
The aggregate market value shall be computed by reference to the
price at which the common equity was sold, or the average bid and
asked prices of such common equity, as of a specified date within
60 days prior to the date of filing.
As of Close of
Title of Class Aggregate Market Business On
Value
Common Stock,
par value $.10 per $577,617,597* May 24, 2002
share
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Shares As of Close of
Title of Class Outstanding Business On
Common Stock,
par value $.10 per 19,514,108 May 24, 2002
share
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders to be held
July 17, 2002 incorporated by reference into Part III of this
Report.
*Included in such amount are 1,442,298 shares of common stock
valued at $29.60 per share and held by Jerry Shore, the
Registrant's Chairman of the Board and a member of the
Registrant's Board of Directors.
[cover page 2 of 2 pages]
TABLE OF CONTENTS
Page
PART I
Item 1. Business 4
Item 2. Properties 15
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security
Holders 16
Executive Officers of the Registrant 16
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 18
Item 6. Selected Financial Data 18
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 20
Factors That May Affect Future Results 30
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 32
Item 8. Financial Statements and Supplementary Data 33
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 58
PART III
Item 10. Directors and Executive Officers of the
Registrant 58
Item 11. Executive Compensation 58
Item 12. Security Ownership of Certain Beneficial
Owners and Management 58
Item 13. Certain Relationships and Related Transactions 58
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 59
SIGNATURES 60
FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts 61
EXHIBIT INDEX 62
PART I
Item 1. Business.
General
Park Electrochemical Corp. ("Park"), through its
subsidiaries (unless the context otherwise requires, Park and its
subsidiaries are hereinafter called the "Company"), is primarily
engaged in the design, production and marketing of advanced
electronic materials used to fabricate complex multilayer printed
circuit boards and other electronic interconnection systems. Park
specializes in advanced materials for high layer count circuit
boards and high-speed digital broadband telecommunications,
internet and networking applications. Park's electronic materials
business operates under the "Nelco" name through fully integrated
business units in Asia, Europe and North America. The Company's
electronic materials manufacturing facilities are located in
Singapore, China, Germany, France, England, New York, Arizona and
California.
The Company is also engaged in the design, production and
marketing of advanced composite materials through its FiberCote
Industries subsidiary in Waterbury, Connecticut and specialty
adhesive tapes and films through its Dielectric Polymers
subsidiary in Holyoke, Massachusetts for the electronics,
aerospace and industrial markets.
Park was founded in 1954 by Jerry Shore, the Company's
Chairman of the Board and largest shareholder.
Unless otherwise indicated, all information in this Report
has been adjusted to give effect to the Company's three-for-two
stock split in the form of a stock dividend, which was
distributed November 8, 2000 to shareholders of record at the
close of business on October 20, 2000.
In the fiscal year ended February 27, 2000, the Company's
business was divided into two industry segments: (1) electronic
materials and (2) engineered materials and plumbing hardware.
However, during the fourth quarter of the 2000 fiscal year, the
Company decided to close and liquidate the plumbing hardware
portion of its engineered materials and plumbing hardware
business segment. See Note 16 of the Notes to Consolidated
Financial Statements in Item 8 of this Report for information
concerning the closure of the plumbing hardware business. In
addition, in the fiscal years ended February 25, 2001 and March
3, 2002, the engineered materials and plumbing hardware
businesses comprised less than 10% of the Company's consolidated
revenues, earnings and assets, and the Company considered itself
to operate in one business segment. See Note 14 of the Notes to
Consolidated Financial Statements in Item 8 of this Report for
information concerning the Company's business segments.
The sales and long-lived assets of the Company's operations
by geographic area for the last three fiscal years are set forth
in Note 14 of the Notes to Consolidated Financial Statements in
Item 8 of this Report. The Company's foreign operations are
conducted principally by the Company's subsidiaries in Singapore,
China, Germany, France and England. The Company's foreign
operations are subject to the impact of foreign currency
fluctuations. See Note 1 of the Notes to Consolidated Financial
Statements in Item 8 of this Report.
Electronic Materials Operations
The Company is a leading global designer and producer of
advanced electronic materials used to fabricate complex
multilayer printed circuit boards and other electronic
interconnect systems, such as multilayer back-planes, wireless
packages, high-speed/low-loss multilayers and high density
interconnects ("HDIs"). The Company's multilayer printed circuit
materials include copper-clad laminates and prepregs. The Company
has long-term relationships with its major customers, which
include leading independent printed circuit board fabricators,
electronic manufacturing service companies, electronic contract
manufacturers and major electronic original equipment
manufacturers ("OEMs"). Multilayer printed circuit boards and
interconnect systems are used in virtually all advanced
electronic equipment to direct, sequence and control electronic
signals between semiconductor devices (such as microprocessors
and memory and logic devices), passive components (such as
resistors and capacitors) and connection devices (such as infra-
red couplings, fiber optics and surface mount connectors).
Examples of end uses of the Company's printed circuit materials
include high speed routers and servers, supercomputers, laptops,
satellite switching equipment, cellular telephones and
transceivers and wireless personal digital assistants ("PDAs").
The Company has developed long-term relationships with major
customers as a result of its leading edge products, extensive
technical and engineering service support and responsive
manufacturing capabilities.
Park believes it founded the modern day printed circuit
industry in 1957 by inventing a composite material consisting of
an epoxy resin substrate reinforced with fiberglass cloth which
was laminated together with sheets of thin copper foil. This
epoxy-glass copper-clad laminate system is still used to
construct the large majority of today's advanced printed circuit
products. The Company also believes that in 1962 it invented the
first multilayer printed circuit materials system used to
construct multilayer printed circuit boards. The Company also
pioneered vacuum lamination and many other manufacturing
technologies used in the industry today. In addition, the
Company's subsidiary, Dielektra GmbH in Germany, which the
Company acquired in 1997, owns a patented process for con
tinuously producing thin copper-clad laminates for printed
circuit board applications. The Company believes it is one of the
industry's technological leaders.
As a result of its leading edge products, extensive
technical and engineering service support and responsive
manufacturing capabilities, the Company expects to continue to
take advantage of several industry trends. These trends include
the increasing global demand for electronic products and
technology, the increasingly advanced electronic materials
required for interconnect performance and manufacturability, the
increasing miniaturization and portability of advanced electronic
equipment, the consolidation of the printed circuit board
fabrication industry and the time-to-market and time-to-volume
pressures requiring closer collaboration with materials
suppliers.
The Company believes that it is one of the world's largest
manufacturers of multilayer printed circuit materials and the
market leader in North America and Southeast Asia. It also
believes that it is the only significant independent manufacturer
of multilayer printed circuit materials in the world. The Company
was the first manufacturer in the printed circuit materials
industry to establish manufacturing presences in the three major
global markets of North America, Europe and Asia, with facilities
established in Europe in 1969 and Asia in 1986.
Industry Background
The electronic materials manufactured by the Company and its
competitors are used to construct and fabricate complex
multilayer printed circuit boards and other advanced electronic
interconnect systems. Multilayer printed circuit materials
consist of prepregs and copper-clad laminates, as well as semi-
finished multilayer printed circuit board panels. Prepregs are
chemically and electrically engineered plastic resin systems
which are impregnated into and reinforced by a specially
manufactured fiberglass cloth product or other woven or non-woven
reinforcing fiber. This insulating dielectric substrate is .030
inch to .002 inch in thickness or less in some cases. These resin
systems are usually based upon an epoxy chemistry. One or more
plies of prepreg are laminated together to form an insulating
dielectric substrate to support the copper circuitry patterns of
a multilayer printed circuit board. Copper-clad laminates consist
of one or more plies of prepreg laminated together with specialty
thin copper foil laminated on the top and bottom. Copper foil is
specially formed in thin sheets which may vary from .0030 inch to
...0002 inch in thickness and normally have a thickness of .0014
inch or .0007 inch. The Company supplies both copper-clad
laminates and prepregs to its customers, which use these products
as a system to construct multilayer printed circuit boards.
The printed circuit board fabricator processes copper-clad
laminates to form the inner layers of a multilayer printed
circuit board. The fabricator photoimages these laminates with a
dry film or liquid photoresist. After development of the
photoresist, the copper surfaces of the laminate are etched to
form the circuit pattern. The fabricator then assembles these
etched laminates by inserting one or more plies of dielectric
prepreg between each of the inner layer etched laminates and also
between an inner layer etched laminate and the outer layer copper
plane, and then laminating the entire assembly in a press.
Prepreg serves as the insulator between the multiple layers of
copper circuitry patterns found in the multilayer circuit board.
When the multilayer configuration is laminated, these plies of
prepreg form an insulating dielectric substrate supporting and
separating the multiple inner and outer planes of copper
circuitry. The fabricator drills vertical through-holes or vias
in the multilayer assembly and then plates the through-holes or
vias to form vertical conductors between the multiple layers of
circuitry patterns. These through holes or vias combine with the
conductor paths on the horizontal circuitry planes to create a
three-dimensional electronic interconnect system. In specialized
applications, an additional set of microvia layers (2 or 4,
typically) may be added through a secondary lamination process to
provide increased density and functionality to the design. The
outer two layers of copper foil are then imaged and etched to
form the finished multilayer printed circuit board. The completed
multilayer board is a three-dimensional interconnect system with
electronic signals traveling in the horizontal planes of multiple
layers of copper circuitry patterns, as well as the vertical
plane through the plated holes or vias.
The global market for advanced electronic products has grown
in recent years as a result of technological change and frequent
new product introductions. This growth is principally
attributable to increased sales and more complex electronic
content of newer products, such as cellular telephones, pagers,
personal computers and portable computing devices, and greater
use of electronics in other products, such as automobiles.
Further, large, almost completely untapped markets for advanced
electronic equipment have emerged in such areas as India and
China and other areas of the Pacific Rim. During its 2002 fiscal
year, the Company established a business center in Wuxi, China,
in the Shanghai-Nanjing corridor, which is an emerging region for
advanced multilayer printed circuit fabrication in China.
Semiconductor manufacturers have introduced successive
generations of more powerful microprocessors and memory and logic
devices. Electronic equipment manufacturers have designed these
advanced semiconductors into more compact and often portable
products. High performance computing devices in these smaller
portable platforms require greater reliability, closer
tolerances, higher component and circuit density and increased
overall complexity. As a result, the interconnect industry has
developed smaller, lighter, faster and more cost-effective
interconnect systems, including advanced multilayer printed
circuit boards
Advanced interconnect systems require higher technology
printed circuit materials to insure the performance of the
electronic system and to improve the manufacturability of the
interconnect platform. The growth of the market for more advanced
printed circuit materials has outpaced the market growth for
standard printed circuit materials in recent years. Printed
circuit board fabricators and electronic equipment manufacturers
require advanced printed circuit materials that have increasingly
higher temperature tolerances and more advanced electrical
properties in order to support high-speed computing in a
miniaturized and often portable environment.
With the very high density circuit demands of miniaturized
high performance interconnect systems, the uniformity, purity,
consistency, performance predictability, dimensional stability
and production tolerances of printed circuit materials have
become successively more critical. High density printed circuit
boards and interconnect systems often involve higher layer count
multilayer circuit boards where the multiple planes of circuitry
and dielectric insulating substrates are very thin (dielectric
insulating substrate layers may be .002 inch or less) and the
circuit line and space geometries in the circuitry plane are very
narrow (.002 inch or less). In addition, advanced surface mount
interconnect systems are typically designed with very small pad
sizes and very narrow plated through holes or vias which
electrically connect the multiple layers of circuitry planes.
High density interconnect systems must utilize printed circuit
materials whose dimensional characteristics and purity are
consistently manufactured to very high tolerance levels in order
for the printed circuit board fabricator to attain and sustain
acceptable product yields.
Shorter product life cycles and competitive pressures have
induced electronic equipment manufacturers to bring new products
to market and increase production volume to commercial levels
more quickly. These trends have highlighted the importance of
front-end engineering of electronic products and have increased
the level of collaboration among system designers, fabricators
and printed circuit materials suppliers. As the complexity of
electronic products increases, materials suppliers must provide
greater technical support to interconnect systems fabricators on
a timely basis regarding manufacturability and performance of new
materials systems.
Products and Services
The Company produces a broad line of advanced printed
circuit materials used to fabricate complex multilayer printed
circuit boards and other electronic interconnect systems,
including backplanes, wireless packages, high speed/low loss
multilayers and high density interconnects ("HDIs"). The
Company's subsidiary, Dielektra GmbH in Germany, also
manufactures semi-finished multilayer printed circuit board
panels. The Company's diverse advanced printed circuit materials
product line is designed to address a wide array of end-use
applications and performance requirements.
The Company's electronic materials products have been
developed internally and through long-term development projects
with its principal suppliers and, to a lesser extent, through
licensing arrangements. The Company focuses its research and
development efforts on developing industry leading product
technology to meet the most demanding product requirements and
has designed its product line with a focus on the higher
performance, higher technology end of the materials spectrum. All
of the Company's existing electronic materials products have been
introduced since 1990.
Most of the Company's research and development expenditures
are attributable to the efforts of its electronic materials
operations. In response to the rapid technological changes in the
electronic materials business, these expenditures on research and
product development have increased over the past several years.
The Company's products include high-speed, low-loss, digital
broadband engineered formulations, high-temperature modified
epoxies, bismaleimide triazine epoxies ("BT epoxy"), non-MDA
polyimides, enhanced polyimides, high performance epoxy
Thermountr materials ("Thermount" is a registered trademark of
E.I. duPont de Nemours & Co.), APPE resin technology (a licensed
product of Asahi Chemical Industry Co., Ltd.), SIT (Signal
Integrity) products, cyanate esters and polytetrafluoroethylene
("PTFE") formulations for RF/microwave applications.
The Company has developed long-term relationships with
select customers through broad-based technical support and
service, as well as manufacturing proximity and responsiveness at
multiple levels of the customer's organization. The Company
focuses on developing a thorough understanding of its customer's
business, product lines, processes and technological challenges.
The Company seeks customers which are industry leaders committed
to maintaining and improving their industry leadership positions
and which are committed to long-term relationships with their
suppliers. The Company also seeks business opportunities with the
more advanced printed circuit fabricators and electronic
equipment manufacturers which are interested in the full value of
products and services provided by their suppliers. The Company
believes its proactive and timely support in assisting its
customers with the integration of advanced materials technology
into new product designs further strengthens its relationships
with its customers.
The Company's emphasis on service and close relationships
with its customers is reflected in its short lead times. The
Company has developed its manufacturing processes and customer
service organizations to provide its customers with printed
circuit materials products on a just-in-time basis. The Company
believes that its ability to meet its customers quick-turn-around
("QTA") requirements is one of its unique strengths.
The Company has located its advanced printed circuit
materials manufacturing operations in strategic locations
intended to serve specific regional markets. By situating its
facilities in close geographical proximity to its customers, the
Company is able to rapidly adjust its manufacturing processes to
meet customers' new requirements and respond quickly to
customers' technical needs. The Company has technical staffs
based at each of its manufacturing locations, which allows the
rapid dispatch of technical personnel to a customer's facility to
assist the customer in quickly solving design, process,
production or manufacturing problems.
During the 2002 fiscal year, the Company established a
business center in Wuxi, China to support the rapidly growing
customer demand for advanced multilayer printed circuitry
materials in China.
Customers and End Markets
The Company's customers for its advanced electronic
materials include the leading independent printed circuit board
fabricators, electronic manufacturing service companies,
electronic contract manufacturers and major electronic original
equipment manufacturers ("OEMs") in the computer, networking,
telecommunications, transportation, aerospace and instrumentation
industries located throughout North America, Europe and Asia. The
Company seeks to align itself with the larger, more
technologically-advanced and better capitalized independent
printed circuit board fabricators and major electronic equipment
manufacturers which are industry leaders committed to maintaining
and improving their industry leadership positions and to building
long-term relationships with their suppliers. The Company's
selling effort typically involves several stages and relies on
the talents of Company personnel at different levels, from
management to sales personnel and quality engineers. In recent
years, the Company has augmented its traditional sales personnel
with an OEM marketing team and product technology specialists.
The Company's strategy emphasizes the use of multiple facilities
established in market areas in close proximity to its customers.
During the Company's 2002 fiscal year, approximately 18.1%
of the Company's total worldwide sales were to Sanmina
Corporation, a leading electronics contract manufacturer and
manufacturer of printed circuit boards and approximately 11.3% of
the Company's total worldwide sales were to Tyco Printed Circuit
Group L.P., a leading manufacturer of printed circuit boards.
During the Company's 2001 fiscal year, approximately 25.1% of the
Company's total worldwide sales were to Sanmina Corporation.
During the Company's 1998 fiscal year and for several years
prior thereto, more than 10% of the Company's total worldwide
sales were to Delco Electronics Corporation, a subsidiary of
General Motors Corp. However, in March 1998 the Company was
informed by Delco that Delco planned to close its printed circuit
board fabrication plant and exit the printed circuit board
manufacturing business. After the plant closure, Delco purchased
all of its printed circuit boards from outside suppliers and
Delco was no longer a customer of the Company's. After that time,
the Company marketed its semi-finished multilayer circuit board
material manufacturing capability to leading printed circuit
board fabricators, contract assemblers and electronic original
equipment manufacturers in North America. The Company had not
previously marketed this capability as its semi-finished
multilayer capacity had been largely committed to supplying Delco
Electronics. Although the Company's electronic materials business
was not dependent on this single customer, the loss of this
customer had a material adverse effect on the business in the
fiscal years ended February 27, 2000, February 25, 2001 and March
3, 2002. In the first quarter of the fiscal year ended March 3,
2002, the Company sold the assets and business of its subsidiary
in Arizona that conducted the mass lamination business and
recorded non-recurring, pre-tax charges of approximately $15.7
million in its 2002 fiscal year first quarter ended May 27, 2001
in connection with the sale and the closure of a related support
facility to the mass lamination business also located in Arizona.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Item 7 of this Report for a
discussion of the significant pre-tax losses incurred during the
2000 fiscal year by the Company's Arizona based business unit
which formerly supplied Delco Electronics Corporation with semi-
finished circuit boards; and see Item 3 of this Report for a
discussion of legal proceedings initiated by the Company against
Delco Electronics Corporation.
Although the electronic materials business is not dependent
on any single customer, the loss of a major customer or of a
group of customers could have a material adverse effect on the
electronic materials business.
The Company's electronic materials products are marketed by
sales personnel in industrial centers in North America, Europe
and Asia. Such personnel include both salaried employees and
independent sales representatives who work on a commission basis.
Manufacturing
The process for manufacturing multilayer printed circuit
materials is capital intensive and requires sophisticated
equipment as well as clean-room environments. The key steps in
the Company's manufacturing process include: the impregnation of
specially designed fiberglass cloth with a resin system and the
partial curing of that resin system; the assembling of laminates
consisting of single or multiple plies of prepreg and copper foil
in a clean-room environment; the vacuum lamination of the copper-
clad assemblies under simultaneous exposure to heat, pressure and
vacuum; and the finishing of the laminates to customer
specifications.
Prepreg is manufactured in a treater. A treater is a roll-to-
roll continuous machine which sequences specially designed
fiberglass cloth or other reinforcement fabric into a resin tank
and then sequences the resin-coated cloth through a series of
ovens which partially cure the resin system into the cloth. This
partially cured product or prepreg is then sheeted or paneled and
packaged by the Company for sale to customers, or used by the
Company to construct its copper-clad laminates.
The Company manufacturers copper-clad laminates by first
setting up in a clean room an assembly of one or more plies of
prepreg stacked together with a sheet of specially manufactured
copper foil on the top and bottom of the assembly. This assembly,
together with a large quantity of other laminate assemblies, is
then inserted into a large, multiple opening vacuum lamination
press. The laminate assemblies are then laminated under
simultaneous exposure to heat, pressure and vacuum. After the
press cycle is complete, the laminates are removed from the press
and sheeted, paneled and finished to customer specifications. The
product is then inspected and packaged for shipment to the
customer. In addition, the Company manufactures very thin copper-
clad laminates utilizing Dielektra's unique, patented continuous
lamination technology.
The Company manufactures multilayer printed circuit
materials at eight fully integrated facilities located in the
United States, Europe and Southeast Asia. The Company opened its
California facility in 1965, its England facility in 1969, its
first Arizona and France facilities in 1984, its Singapore
facility in 1986 and its second France facility in 1992, and in
1997, the Company acquired Dielektra GmbH with a fully integrated
facility in Cologne, Germany. The Company services the North
America market principally through its United States
manufacturing facilities, the European market principally through
its manufacturing facilities in England, France and Germany, and
the Asian market principally through its Singapore manufacturing
facility. During its 2002 fiscal year, the Company established a
business center in China to supply the demand for advanced
multilayer printed circuitry materials in China. The Company has
located its manufacturing facilities in its important markets. By
maintaining technical and engineering staffs at each of its
manufacturing facilities, the Company is able to deliver fully-
integrated products and services on a timely basis.
The Company has been expanding the manufacturing capacity of
its electronic materials facilities in recent years. During the
2000 fiscal year, the Company completed expansions of its
electronic materials operations in Singapore and France, acquired
additional manufacturing capacity in California, and commenced
significant additional expansions of its electronic materials
operations in California and New York, which it completed in its
2002 fiscal year. During the 2001 fiscal year, the Company
commenced a significant expansion of its higher technology
product line manufacturing facility in Arizona, which the Company
completed during the first quarter of its 2002 fiscal year.
During the 2002 fiscal year, the Company established a business
center in China, redesigned its German electronic materials
business to focus its efforts and capabilities on its unique
DatlamT automated continuous lamination and paneling technology
and on the marketing and manufacturing of high technology, higher
layer count mass lamination product, and established the
capability to manufacture PTFE materials for RF/microwave
applications at its Neltec high performance materials facility in
Tempe, Arizona, augmenting the Company's PTFE manufacturing
capability in Lannemezan, France.
Materials and Sources of Supply
The principal materials used in the manufacture of the
Company's electronic products are specially manufactured copper
foil, fiberglass cloth and synthetic reinforcements, and
specially formulated resins and chemicals. The Company attempts
to develop and maintain close working relationships with
suppliers of those materials who have dedicated themselves to
complying with the Company's stringent specifications and
technical requirements. While the Company's philosophy is to work
with a limited number of suppliers, the Company has identified
alternate sources of supply for each of these materials. However,
there are a limited number of qualified suppliers of these
materials, substitutes for these materials are not readily
available, and, in the recent past, the industry has experienced
shortages in the market for certain of these materials. While the
Company has not experienced significant problems in the delivery
of these materials and considers its relationships with its
suppliers to be strong, a disruption of the supply of materials
could materially adversely affect the business, financial
condition and results of operations of the Company. Significant
increases in the cost of materials purchased by the Company could
also have a material adverse effect on the Company's business,
financial condition and results of operations if the Company were
unable to pass such price increases through to its customers.
Competition
The multilayer printed circuit materials industry is
characterized by intense competition and ongoing consolidation.
The Company's competitors are primarily divisions of subsidiaries
of very large, diversified multinational manufacturers which are
substantially larger and have greater financial resources than
the Company and, to a lesser degree, smaller regional producers.
Because the Company focuses on the higher technology segment of
the electronic materials market, technological innovation,
quality and service, as well as price, are significant
competitive factors.
The Company believes that there are approximately ten
significant multilayer printed circuit materials manufacturers in
the world and many of these competitors have or are developing
significant presences in the three major global markets of North
America, Europe and Asia. The Company believes that the
multilayer printed circuit materials industry is rapidly becoming
more global and that the remaining smaller regional manufacturers
will find it increasingly difficult to remain competitive. The
Company believes that it is currently one of the world's largest
multilayer printed circuit materials manufacturers. The Company
further believes it is the only significant independent
manufacturer of multilayer printed circuit materials in the world
today.
The markets in which the Company's electronic materials
operations compete are characterized by rapid technological
advances, and the Company's position in these markets depends
largely on its continued ability to develop technologically
advanced and highly specialized products. Although the Company
believes it is an industry technology leader and directs a
significant amount of its time and resources toward maintaining
its technological competitive advantage, there is no assurance
that the Company will be technologically competitive in the
future, or that the Company will continue to develop new products
that are technologically competitive.
Advanced Composites and Specialty Tape Operations
For many years, the Company was also engaged in the advanced
composite materials and specialty adhesive tape businesses and
the plumbing hardware business. However, during the fourth
quarter of the 2000 fiscal year, the Company decided to close and
liquidate its plumbing hardware business. See Notes 14 and 16 of
the Notes to Consolidated Financial Statements in Item 8 of this
Report for information concerning the Company's business segments
and the closure of the plumbing hardware business.
FiberCote Industries, Inc., the Company's composite
materials business, develops and produces engineered composite
materials for the aerospace, rocket motor, electronics, radio
frequency ("RF") and specialty industrial markets. Dielectric
Polymers, Inc., the Company's specialty adhesive tape and film
business, produces tapes and bonding films for a variety of
applications including joining industrial components together.
Marketing and Customers
The Company's advanced composite materials and specialty
adhesive tape customers, substantially all of which are located
in the United States, include manufacturers in the automotive,
graphic arts, aerospace, rocket motor, electronics, RF and
specialty industrial industries. Such materials are marketed by
sales personnel including both salaried employees and independent
sales representatives who work on a commission basis.
While no single advanced composite materials or specialty
adhesive tape customer accounted for 10% or more of the Company's
total sales during the last fiscal year, the loss of a major
customer or of a group of some of the largest customers of the
advanced composite materials and specialty adhesive tape business
could have a material adverse effect upon the business.
Manufacturing and Sources of Supply
The Company's advanced composite materials manufacturing
facility is located in Waterbury, Connecticut, and its specialty
adhesive tape and film business is located in Holyoke,
Massachusetts.
The Company designs and manufactures its advanced composite
materials and industrial tapes and films to its own
specifications and to the specifications of its customers.
Product development efforts are devoted toward the conforming of
the Company's advanced composites to the specifications of, and
the obtaining of approvals from, the Company's customers. The
materials used in the manufacture of these engineered materials
include graphite and carbon fibers and fabrics, Kevlarr ("Kevlar"
is a registered trademark of E.I. du Pont de Nemours & Co.),
quartz, fiberglass, polyester, chemicals, resins, films,
plastics, adhesives and certain other synthetic materials. The
Company purchases these materials from several suppliers.
Although satisfactory substitutes for many of these materials are
not readily available, the Company has experienced no
difficulties in obtaining such materials.
Competition
The Company has many competitors in the advanced composite
materials and specialty adhesive tape businesses, including some
major corporations which have substantially greater financial
resources than the Company. The Company competes for business on
the basis of product performance and development, product
qualification and approval, the ability to manufacture and
deliver products in accordance with customers' needs and
requirements, and price.
Backlog
The Company records an item as backlog when it receives a
purchase order specifying the number of units to be purchased,
the purchase price, specifications and other customary terms and
conditions. At May 5, 2002, the unfilled portion of all purchase
orders received by the Company and believed by it to be firm was
approximately $4,807,000, compared to $9,696,000 at April 29,
2001. The decline in backlog at May 5, 2002 compared to April 29,
2001 was due primarily to the continuing slump in the Company's
business that began during the first two months of its 2002
fiscal year resulting from the severe downturn and correction in
the global electronics industry.
Various factors contribute to the size of the Company's
backlog. Accordingly, the foregoing information may not be
indicative of the Company's results of operations for any period
subsequent to the fiscal year ended March 3, 2002.
Patents and Trademarks
The Company holds several patents and trademarks or licenses
thereto. In the Company's opinion, some of these patents and
trademarks are important to its products. Generally, however, the
Company does not believe that an inability to obtain new, or to
defend existing, patents and trademarks would have a material
adverse effect on the Company.
Employees
At March 3, 2002, the Company had approximately 1,700
employees. Of these employees, 1,525 were engaged in the
Company's electronic materials operations, 120 in its specialty
adhesive tape and advanced composite materials operations and 55
consisted of executive personnel and general administrative
staff. As a result of a severe correction and downturn in the
global electronics industry and, consequently, in the Company's
electronic materials business, the Company reduced its total
number of employees during the first two months of its 2002
fiscal year from approximately 2,850 total employees to
approximately 2,330 total employees at April 30, 2001, and during
the remainder of the 2002 fiscal year the Company's total number
of employee`s declined to approximately 1,700. None of the
Company's employees are subject to a collective bargaining
agreement. Management considers its employee relations to be
good.
Environmental Matters
The Company is subject to stringent environmental regulation
of its use, storage, treatment and disposal of hazardous
materials and the release of emissions into the environment. The
Company believes that it currently is in substantial compliance
with the applicable federal, state and local environmental laws
and regulations to which it is subject and that continuing
compliance therewith will not have a material effect on its
capital expenditures, earnings or competitive position. The
Company does not currently anticipate making material capital
expenditures for environmental control facilities for its
existing manufacturing operations during the remainder of its
current fiscal year or its succeeding fiscal year. However,
developments, such as the enactment or adoption of even more
stringent environmental laws and regulations, could conceivably
result in substantial additional costs to the Company.
The Company and certain of its subsidiaries have been named
by the Environmental protection Agency (the "EPA") or a
comparable state agency under the Comprehensive Environmental
Response, Compensation and Liability Act (the "Superfund Act") or
similar state law as potentially responsible parties in
connection with alleged releases of hazardous substances at nine
sites. In addition, a subsidiary of the Company has received cost
recovery claims under the Superfund Act from other private
parties involving two other sites and has received requests from
the EPA under the Superfund Act for information with respect to
its involvement at three other sites. Under the Superfund Act and
similar state laws, all parties who may have contributed any
waste to a hazardous waste disposal site or contaminated area
identified by the EPA or comparable state agency may be jointly
and severally liable for the cost of cleanup. Generally, these
sites are locations at which numerous persons disposed of
hazardous waste. In the case of the Company's subsidiaries,
generally the waste was removed from their manufacturing
facilities and disposed at the waste sites by various companies
which contracted with the subsidiaries to provide waste disposal
services. Neither the Company nor any of its subsidiaries have
been accused of or charged with any wrongdoing or illegal acts in
connection with any such sites. The Company believes it maintains
an effective and comprehensive environmental compliance program.
Management believes the ultimate disposition of known
environmental matters will not have a material adverse effect
upon the Company.
See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Environmental Matters"
included in Item 7 of this Report and Note 13 of the Notes to
Consolidated Financial Statements included in Item 8 of this
Report.
Item 2. Properties.
Set forth below are the locations of the significant
properties owned and leased by the Company, the businesses which
use the properties, and the size of each such property. All of
such properties, except for the Lake Success, New York property,
are used principally as manufacturing, warehouse and assembly
facilities.
<table>
<caption>
Owned Size
Location or Use (Square
Leased Footage)
<s> <c> <c> <c>
Lake Success, NY Leased Administrative 7,000
Offices
Walden, NY Owned Electronic 51,000
Materials
Newburgh, NY Leased Electronic 171,000
Materials
Fullerton, CA Leased Electronic 95,000
Materials
Anaheim, CA Leased Electronic 26,000
Materials
Anaheim, CA Leased Electronic 41,000
Materials
Tempe, AZ Leased Electronic 14,000
Materials
Tempe, AZ Leased Electronic 81,000
Materials
Tempe, AZ Leased Electronic 6,000
Materials
Mirebeau, France Owned Electronic 81,000
Materials
Lannemezan, Owned Electronic 29,000
France Materials
Cologne, Germany Owned Electronic 193,000
Materials
Skelmersdale, Owned Electronic 54,000
England Materials
Singapore Leased Electronic 53,000
Materials
Singapore Leased Electronic 15,000
Materials
Singapore Leased Electronic 10,000
Materials
Wuxi, China Leased Electronic 12,000
Materials
Holyoke, MA Leased Specialty
Adhesive
Tapes and Films 46,000
Waterbury, CT Leased Advanced
Composites 100,000
</table>
The Company believes its facilities and equipment to be in
good condition and reasonably suited and adequate for its current
needs. During the 2002 fiscal year, certain of the Company's
electronic manufacturing facilities were utilized at less than
50% of their capacity.
Item 3. Legal Proceedings.
In May 1998, the Company and its Nelco Technology, Inc.
("NTI") subsidiary in Arizona filed a complaint against Delco
Electronics Corporation and the Delphi Automotive Systems unit of
General Motors Corp. in the United States District Court for the
District of Arizona. The complaint alleged, among other things,
that Delco breached its contract to purchase semi-finished
multilayer printed circuit boards from NTI and that Delphi
interfered with NTI's contract with Delco, that Delco breached
the covenant of good faith and fair dealing implied in the
contract, that Delco engaged in negligent misrepresentation and
that Delco fraudulently induced NTI to enter into the contract.
The Company and NTI sought substantial compensatory and punitive
damages.
On November 29, 2000, after a five day trial in Phoenix,
Arizona, a jury awarded damages to NTI in the amount of
$32,280,000, and on December 12, 2000 the judge in the United
States District Court entered judgment for NTI on its claim of
breach of the implied covenant of good faith and fair dealing
with damages in the amount of $32,280,000. Both parties filed
motions for post-judgment relief and a new trial, all of which
the judge denied, and both parties have appealed the decision to
the United States Court of Appeals for the Ninth Circuit in San
Francisco. The appeal has been fully briefed and the parties
await oral argument, which the Ninth Circuit has not yet
scheduled.
Park announced in March 1998 that it had been informed by
Delco Electronics that Delco planned to close its printed circuit
board fabrication plant and exit the printed circuit board
manufacturing business. After the plant closure, Delco purchased
all of its printed circuit boards from outside suppliers and
Delco was no longer a customer of the Company's. As a result, the
Company's sales to Delco declined significantly during the three-
month period ended May 31, 1998, were negligible during the three-
month period ended August 30, 1998 and have been nil since that
time. During the Company's 1999 fiscal year first quarter and
during its 1998 fiscal year and for several years prior thereto,
more than 10% of the Company's total worldwide sales were to
Delco Electronics Corporation; and the Company had been Delco's
principal supplier of semi-finished multilayer printed circuit
board materials for more than ten years. These materials were
used by Delco to produce finished multilayer printed circuit
boards. See "Business-Electronic Materials Operations-Customers
and End Markets" in Item 1 of this Report, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7 of this Report and "Factors That May Affect
Future Results" after Item 7 of this Report.
In the first quarter of the fiscal year ended March 3, 2002,
the Company sold the assets and business of NTI and recorded non-
recurring, pre-tax charges of approximately $15.7 million in its
2002 fiscal year first quarter ended May 27, 2001 in connection
with the sale of NTI and the closure of a related support
facility also located in Arizona. See Notes 10 and 11 of the
Notes to Consolidated Financial Statements in Item 8 of this
Report.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Executive Officers of the Registrant.
Name Title Age
Brian E. Shore Chief Executive Officer,
President and a Director 50
Stephen E. Senior Vice President,
Gilhuley Secretary and General Counsel 57
Emily J. Groehl Senior Vice President, Sales
and Marketing 55
John Jongebloed Senior Vice President, Global 45
Logistics
Thomas T. Spooner Senior Vice President,
Corporate and Technology 65
Development
Murray O. Stamer Senior Vice President, 44
Finance
Gary M. Watson Senior Vice President,
Engineering and Technology 54
Brian Shore has served as a Director of the Company for more
than the past five years. Brian Shore was elected a Vice
President of the Company in January 1993, Executive Vice
President in May 1994, President effective March 4, 1996, the
first day of the Company's 1997 fiscal year, and Chief Executive
Officer in November 1996. Brian Shore also served as General
Counsel of the Company from April 1988 until April 1994.
Mr. Gilhuley has been General Counsel of the Company since
April 1994 and Secretary since July 1996. He was elected a Senior
Vice President in March 2001.
Ms. Groehl has been with one of Park's "Nelco" business
units for more than the past five years. She was elected Vice
President of New England Laminates Co., Inc. in 1988 and was Vice
President, Marketing and Sales of Nelco International Corporation
from 1993 until June 1999, when Nelco International Corporation
merged into Park Electrochemical Corp. She was elected Senior
Vice President of Park in May 1999.
Mr. Jongebloed has been employed by one of Park's "Nelco"
business units for more than the past ten years. He was Vice
President and General Manager of New England Laminates Co., Inc.
from January 1992 to May 1999, and he has been President and
General Manager of New England Laminates Co., Inc. since May 4,
1999. He was elected Senior Vice President of Park in July 2001.
Mr. Spooner has been employed by one of Park's "Nelco"
business units for more than the past five years. He was Vice
President, Technology of Nelco International Corporation from
1993 until June 1999, when Nelco International Corporation merged
into Park Electrochemical Corp. He was elected Senior Vice
President, Technology of Park in May 1999. His title was changed
to Senior Vice President, Corporate and Technology Development in
May 2001.
Mr. Stamer has been employed by the Company since 1989 and
served as the Company's Corporate Controller from 1993 to May
1999, when he was elected Treasurer. He was elected Senior Vice
President, Finance in March 2001.
Mr. Watson was elected Senior Vice President, Engineering in
June 2000. His title was changed to Senior Vice President,
Engineering and Technology in May 2001. Prior to June 2000, Mr.
Watson was Senior Director, Manufacturing Process Technology of
Fort James Corporation since March 1999; Vice President, Research
and Development of Boise Cascade Corporation from 1992 to March
1999; and Business Division Technology Manager of Weyerhauser
Company from 1986 to 1992.
There are no family relationships between the directors or
executive officers of the Company, except that Brian Shore is the
son of Jerry Shore, who is the Chairman of the Board and a
Director of the Company and who also served as President of the
Company for more than five years until March 4, 1996 and as Chief
Executive Officer of the Company for more than five years until
November 19, 1996.
The term of office of each executive officer of the Company
expires upon the election and qualification of his successor.
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters.
The Company's Common Stock is listed and trades on the New
York Stock Exchange (trading symbol PKE). (The Common Stock also
trades on the Midwest Stock Exchange.) The following table sets
forth, for each of the quarterly periods indicated, the high and
low sales prices for the Common Stock as reported on the New York
Stock Exchange Composite Tape and dividends declared on the
Common Stock, all as adjusted for the three-for-two stock split
in the form of a stock dividend distributed November 8, 2000 to
stockholders of record at the close of business on October 20,
2000.
For the Fiscal Year Stock Price Dividends
Ended March 3, 2002 High Low Declared
First Quarter $35.45 $20.03 $.060
Second Quarter 26.73 21.22 $.060
Third Quarter 26.50 19.06 $.060
Fourth Quarter 27.97 24.30 $.060
For the Fiscal Year Stock Price Dividends
Ended February 25, 2001 High Low Declared
First Quarter $17.89 $14.87 $.053
Second Quarter 27.53 15.69 $.053
Third Quarter 49.72 26.45 $.060
Fourth Quarter 43.10 20.50 $.060
As of May 21, 2002, there were approximately 1,520 holders
of record of Common Stock.
The Company expects, for the immediate future, to continue
to pay regular cash dividends.
Item 6. Selected Financial Data.
The following selected consolidated financial data of Park
and its subsidiaries is qualified by reference to, and should be
read in conjunction with, the consolidated financial statements,
related notes, and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained elsewhere
herein. Insofar as such consolidated financial information
relates to the five fiscal years ended March 3, 2002 and is as of
the end of such periods, it is derived from the consolidated
financial statements for such periods and as of such dates
audited by Ernst & Young LLP, independent auditors. The
Consolidated financial statements as of March 3, 2002 and
February 25, 2001 and for the three years ended March 3, 2002,
together with the independent auditors' report for the three
years ended March 3, 2002, appear in Item 8 of this Report.
<table>
<caption>
Fiscal Year Ended
(In thousands, except per share amounts)
Mar. 3, Feb. 25, Feb. 27, Feb. 28, Mar. 1,
2002 2001 2000 1999 1998
<s> <c> <c> <c> <c> <c>
STATEMENTS OF EARNINGS
INFORMATION:
Net sales $230,060 $522,197 $425,261 $387,634 $376,158
Cost of sales 218,265 404,527 351,841 328,884 301,968
Gross profit 11,795 117,670 73,420 58,750 74,190
Selling, general and
administrative expenses 34,360 49,897 45,508 41,279 39,418
Loss on sale of NTI and
closure of related support
facility (Note 10) 15,707 - - - -
Restructuring and
severance charges (Note 11) 3,727 - - - -
Closure of plumbing
hardware business(Note 16) - - 4,464 - -
(Loss)/profit from
operations (41,999) 67,773 23,448 17,471 34,772
Other income:
Interest and other
income, net 5,543 8,419 6,654 7,642 8,382
Interest expense - 5,593 5,720 5,400 5,468
Total other income 5,543 2,826 934 2,242 2,914
(Loss)/earnings before
income taxes (36,456) 70,599 24,382 19,713 37,686
Income tax
(benefit)/provision (10,937) 21,180 6,085 4,337 12,436
Net (loss)/earnings $(25,519) $ 49,419 $ 18,297 $ 15,376 $ 25,250
(Loss)/earnings per
share:
Basic $ (1.31) $ 3.10 $ 1.16 $ .93 $ 1.48
Diluted $ (1.31) $ 2.65 $ 1.12 $ .92 $ 1.38
Weighted average number
of common Shares
outstanding:
Basic 19,535 15,932 15,761 16,470 17,030
Diluted 19,535 20,002 19,643 16,707 20,922
Cash dividends per
common share $ .24 $ .23 $ .21 $ .21 $ .21
BALANCE SHEET
INFORMATION:
Working capital $167,000 $188,511 $176,113 $166,840 $176,553
Total assets 360,644 430,581 365,252 351,698 359,329
Long-term debt - 97,672 100,000 100,000 100,000
Stockholders' equity 292,546 228,906 179,118 164,646 166,404
<fn>
See Notes 10,11 and 16 of the Notes to Consolidated Financial Statements in
Item 8 of this Report.
</table>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
General:
Park is a leading global designer and producer of advanced
electronic materials used to fabricate complex multilayer printed
circuit boards and other electronic interconnect systems. The
Company's customers include leading independent printed circuit
board fabricators, electronic manufacturing service companies,
electronic contract manufacturers and major electronic original
equipment manufacturers in the computer, telecommunications,
transportation, aerospace and instrumentation industries.
The sales and earnings growth that the Company achieved
during its 2001 and 2000 fiscal years halted in the 2002 fiscal
year as a result of a severe correction and downturn in the
global electronics industry. The Company's sales declined
dramatically in the fiscal year ended March 3, 2002, with steep
declines in sales by the Company's North American, European and
Asian operations. The Company's sales volumes during the 2002
fiscal year were less than one half of the sales levels during
the 2001 fiscal year, and the Company reported a substantial loss
in the 2002 fiscal year.
The Company's sales growth during the 2001 and 2000 fiscal
years was attributable to increased sales of electronic materials
in North America, excluding the loss of sales to Delco
Electronics, discussed below, and in Europe and Asia. The
Company's ongoing efforts to expand its higher technology, higher
margin product lines were significant factors in the growth of
the Company's sales of electronic materials.
The Company's earnings increased during each of the 2001 and
2000 fiscal years, despite the significant losses in the 2000
fiscal year incurred by the Company's mass lamination business in
Arizona which formerly supplied Delco Electronics and despite the
significant charges related to the closure and the write-down of
the assets of the plumbing hardware business and the 2000 fiscal
year operating loss of that business. In the 2001 fiscal year,
the Company's earnings reached record levels as a result of the
surge in demand for the Company's electronic materials products
throughout the global electronics markets served by the Company
and the Company's continuing emphasis on its higher technology
product lines.
Growth of the Company's electronic materials business was
constrained during the 2001 and 2000 fiscal years by the
Company's available manufacturing capacity, although the Company
has been expanding the manufacturing capacity of its electronic
materials facilities in recent years. Nevertheless, all the
Company's electronic materials facilities were operating at full
capacity during the 2001 fiscal year. During the 2000 fiscal
year, the Company completed expansions of its electronic
materials operations in Singapore and France, acquired additional
manufacturing capacity in California, and commenced significant
additional expansions of its electronic materials operations in
California and New York, which it completed in its 2002 fiscal
year. During the 2001 fiscal year, the Company commenced a
significant expansion of its higher technology product line
manufacturing facility in Arizona, which it completed in the 2002
fiscal year first quarter.
During the Company's 1998 fiscal year and for several years
prior thereto, more than 10% of the Company's total worldwide
sales were to Delco Electronics Corporation, a subsidiary of
General Motors Corp., and the Company's wholly owned subsidiary,
Nelco Technology, Inc. ("NTI") located in Tempe, Arizona, had
been Delco's principal supplier of semi-finished multilayer
printed circuit board materials, commonly known as mass
lamination, which were used by Delco to produce finished
multilayer printed circuit boards. However, in March 1998, the
Company was informed by Delco that Delco planned to close its
printed circuit board fabrication plant and exit the printed
circuit board manufacturing business. As a result, the Company's
sales to Delco declined during the three-month period ended May
31, 1998, were negligible during the remainder of the 1999 fiscal
year and have been nil since that time.
In May 1998, the Company and NTI filed a complaint against
Delco Electronics Corporation and the Delphi Automotive Systems
unit of General Motors Corp. in the United States District Court
for the District of Arizona. The complaint alleged, among other
things, that Delco breached its contract to purchase semi-
finished multilayer printed circuit boards from NTI and that
Delphi interfered with NTI's contract with Delco, that Delco
breached the covenant of good faith and fair dealing implied in
the contract, that Delco engaged in negligent misrepresentation
and that Delco fraudulently induced NTI to enter into the
contract. The Company and NTI sought substantial compensatory and
punitive damages. In November 2000, a jury awarded damages to NTI
in the amount of $32,280,000, and in December 2000 the judge in
the United States District Court for the District of Arizona
entered judgment for NTI on its claim of breach of the implied
covenant of good faith and fair dealing with damages in the
amount of $32,280,000. Both parties filed motions for post-
judgment relief and a new trial, all of which the judge denied,
and both parties have appealed the decision to the United States
Court of Appeals for the Ninth Circuit in San Francisco.
After March 1998, the business of NTI languished and its
performance was unsatisfactory due primarily to the absence of
the unique, high-volume, high-quality business that had been
provided by Delco Electronics and the absence of any other
customer in the North American electronic materials industry with
a similar demand for the large volumes of semi-finished
multilayer printed circuit board materials that Delco purchased
from NTI. Although NTI's business experienced a resurgence in the
2001 fiscal year as the North American market for printed circuit
materials became extremely strong and demand exceeded supply for
the electronic materials manufactured by the Company, the
Company's internal expectations and projections for the NTI
business were for continuing volatility in the business'
performance over the foreseeable future. Consequently, the
Company commenced efforts to sell the business in the second half
of its 2001 fiscal year; and in April 2001, the Company sold the
assets and business of NTI and closed a related support facility,
also located in Tempe, Arizona. In connection with the sale and
closure, the Company recorded non-recurring, pre-tax charges of
$15.7 million in its 2002 fiscal year first quarter ended May 27,
2001. As a result of this sale, the Company exited the mass
lamination business in North America.
Although the Company's electronic materials business was not
dependent on this single customer, the loss of this customer had
a material adverse effect on this business in the last three
fiscal years.
The Company is not engaged in any related party transactions
involving relationships or transactions with persons or entities
that derive benefits from their non-independent relationship with
the Company or the Company's related parties, or in any
transactions with parties with whom the Company or its related
parties have a relationship that enables the parties to negotiate
terms of material transactions that may or would not be available
from other, more clearly independent parties on an arm's-length
basis, or in any trading activities involving non-exchange traded
commodity or other contracts that are accounted for at fair value
or otherwise or in any energy trading or risk management
activities, other than certain limited foreign currency contracts
intended to hedge the Company's contractual commitments to pay
certain obligations or to realize certain receipts in foreign
currencies.
Fiscal Year 2002 Compared with Fiscal Year 2001:
The Company experienced a sharp decline in its results of
operations for the fiscal year ended March 3, 2002 as the North
American, European and Asian markets for sophisticated printed
circuit materials experienced severe downturns during such
periods.
In addition to its severely depressed results of operations,
during the 2002 fiscal year first quarter, the Company incurred
non-recurring, pre-tax charges of $15.7 million in connection
with the sale of the assets and business of NTI and the closure
of a related support facility in Arizona and $0.7 million in
connection with workforce reductions at the Company's continuing
operations. The Company also incurred pre-tax charges during the
2002 fiscal year third quarter totaling $2.9 million in
connection with the realignment of the operations of its German
subsidiary, Dielektra GmbH, the Company's electronic materials
business located in Cologne, Germany. The realignment included
the closure of Dielektra's conventional lamination line to enable
it to better focus its efforts and capabilities on its unique
DatlamT automated continuous lamination and paneling
manufacturing technology and the reduction of the size of its
mass lamination operations in order to focus on the marketing and
manufacturing of high technology, higher layer count mass
lamination product. The Company incurred an additional $125,000
in pre-tax charges during the third quarter for a workforce
reduction at another business unit.
The significant reduction in the Company's sales of
electronic materials was largely responsible for the severe
decline in the Company's results of operations for the fiscal
year ended March 3, 2002. The North American, European and Asian
markets for sophisticated printed circuit materials collapsed
during the 2002 fiscal year, and the Company's electronic
materials operations located in each region suffered as a result,
although the Company believes it gained market share with certain
of its electronic materials customers.
The Company's results of operations and margins declined in
the 2002 fiscal year principally as a result of the electronic
material business' decrease in sales of all products and the
concomitant operation of the Company's facilities at levels far
below their designed manufacturing capacity.
Operating results of the Company's specialty adhesive tape
and advanced composite materials businesses also declined during
the 2002 fiscal year. This decline was attributable to lower
volumes of products sold.
While the Company's sales volumes during the 2002 fiscal
year were only about 44% of the robust sales volumes achieved by
the Company during the 2001 fiscal year, the Company has
experienced a small improvement in its sales levels during the
months of January through April 2002 compared to the preceding
seven months. The Company believes this improvement is
attributable to market share gains and to improvements in the
business of the Company's customers. However, the Company cannot
predict whether this small improvement is sustainable or to
ascertain whether the global electronics industry is in fact
beginning to recover.
Results of Operations
Net sales for the fiscal year ended March 3, 2002 declined
56% to $230.1 million from $522.2 million for the fiscal year
ended February 25, 2001. This decline in sales was the result of
lower unit volumes of materials shipped and the absence of sales
by NTI, which, as described above, the Company sold in the 2002
fiscal year first quarter.
Although the net sales of NTI during the 2001 fiscal year
were material relative to the Company's consolidated net sales
during such year, the operations of NTI were not material to the
Company's consolidated financial position, results of operations,
capital resources or liquidity, and the sale of NTI is not
expected to have any material effect on the Company's future
operating results, financial position, capital resources,
liquidity or continuing operations.
The Company's foreign operations accounted for $97.5 million
of sales, or 42% of the Company's total sales worldwide, during
the 2002 fiscal year, compared with $209.3 million of sales, or
40% of total sales worldwide, during the 2001 fiscal year. Sales
by the Company's foreign operations during the 2002 fiscal year
decreased 54% from the 2001 fiscal year. The decrease in sales by
the Company's foreign operations in the 2002 fiscal year was due
to decreases in sales in both Asia and Europe.
The overall gross margin as a percentage of net sales for
the Company's worldwide operations was 5.1% during the 2002
fiscal year compared with 22.5% during the 2001 fiscal year. The
deterioration in the gross margin was attributable to the
significant declines in sales volumes from the 2001 fiscal year,
the absence of growth in sales of higher technology, higher
margin products, which was only slightly offset by increases in
market share with certain key electronic materials customers and
inefficiencies caused by operating certain facilities at levels
below their designed manufacturing capacity. Although the
Company's cost of sales decreased significantly as a result of
lower production volumes and cost reduction measures implemented
by the Company, including significant workforce reductions, the
reduction of overtime and the decision to not implement annual
salary increases, the declines in sales and production volumes
resulted in lower volumes to absorb fixed overhead costs and,
consequently, an increase in the cost of sales as a percentage of
net sales in the 2002 fiscal year.
Although selling, general and administrative expenses
declined by $15.5 million, or by 31%, during the 2002 fiscal year
compared with the 2001 fiscal year, these expenses, measured as a
percentage of sales, were 14.9% during the 2002 fiscal year
compared with 9.5% during the 2001 fiscal year. The increase in
selling, general and administrative expenses as a percentage of
sales in the 2002 fiscal year resulted from proportionately lower
sales compared to the 2001 fiscal year.
For the reasons set forth above, for the 2002 fiscal year,
income from operations, including the non-recurring, pre-tax
charges, described above, related to the realignment of the
operations of the Company's German business unit, the sale of NTI
and the closure of a related support facility and severance for
workforce reductions at the Company's continuing operations,
declined to a loss of $42.0 million, and income from operations,
before the non-recurring, pre-tax charges, declined to a loss of
$22.6 million, in both cases compared to a profit of $67.8
million for the 2001 fiscal year.
Interest and other income, net, principally investment
income, declined 34% to $5.5 million for the 2002 fiscal year
from $8.4 million for the 2001 fiscal year. The decrease in
investment income was attributable to the reduction in cash
available for investment and lower prevailing interest rates
during the 2002 fiscal year. The Company's investments were
primarily short-term taxable instruments. The Company incurred no
interest expense during the 2002 fiscal year compared with $5.6
million during the 2001 fiscal year. The Company's interest
expense was related primarily to its $100 million principal
amount of 5.5% Convertible Subordinated Notes due 2006, issued in
1996, $2,328,000 principal amount of which was converted into
82,750 shares of the Company's common stock prior to February
25,2001, the end of the Company's 2001 fiscal year, $95,934,000
of which was converted into 3,410,908 shares of the Company's
common stock on March 1, 2001, and $1,738,000 of which was
redeemed by the Company for cash on March 2, 2001. See "Liquidity
and Capital Resources" elsewhere in this Item 7.
The Company's effective income tax rate was 30.0% for the
2002 fiscal year and the 2001 fiscal year.
Net earnings for the 2002 fiscal year, including the non-
recurring, pre-tax charges, described above, related to the
realignment of the operations of the Company's German business
unit, the sale of NTI and the closure of a related support
facility and severance for workforce reductions at the Company's
continuing operations, declined to a net loss of $25.5 million,
and net earnings, before the non-recurring, pre-tax charges,
declined to a net loss of $11.9 million, in both cases from net
earnings of $49.4 million for the 2001 fiscal year.
Basic and diluted earnings per share decreased from $3.10
and $2.65, respectively, for the 2001 fiscal year to a loss per
share of $1.31 including the non-recurring, pre-tax charges and
to a loss per share of $0.61 before the non-recurring, pre-tax
charges for the 2002 fiscal year.
The declines in net earnings and earnings per share were
primarily attributable to the decline in the profit from
operations and the charge for the closure of the business unit in
Arizona which formerly supplied Delco Electronics Corporation
with semi-finished multilayer circuit boards.
Fiscal Year 2001 Compared with Fiscal Year 2000:
The Company's electronic materials business was largely
responsible for the dramatic improvement in the Company's results
of operations for the fiscal year ended February 25, 2001. The
North American, Asian and European markets for sophisticated
printed circuit materials were extremely strong during the 2001
fiscal year, and the Company's electronic materials operations
located in all three geographic areas performed well as a result.
The Company's results of operations and margins improved in
the 2001 fiscal year principally as a result of the optimal
utilization of the electronic materials business' manufacturing
resources and the business' increase in its market share with
certain key customers and increase in its sales of higher
technology, higher margin products.
Results of Operations
Net sales for the fiscal year ended February 25, 2001
increased 23% to $522.2 million from $425.3 million for the
fiscal year ended February 27, 2000. This increase in sales was
principally the result of higher volume of materials shipped and
an increase in sales of higher technology products.
The Company's foreign operations accounted for $209.3
million of sales, or 40% of the Company's total sales worldwide,
during the 2001 fiscal year compared with $159.1 million of
sales, or 37% of total sales worldwide, during the 2000 fiscal
year. Sales by the Company's foreign operations during the 2001
fiscal year increased 32% from the 2000 fiscal year. The increase
in sales by the Company's foreign operations in the 2001 fiscal
year was due to increases in sales by both the Asian and European
operations of the Company.
The gross margin for the Company's continuing worldwide
operations was 22.5% during the 2001 fiscal year compared with
17.3% for the 2000 fiscal year. The increase in the gross margin
was attributable to efficiencies achieved by operating facilities
at levels close to their designed capacity in the 2001 fiscal
year, the continuing growth in sales of higher technology, higher
margin products as a percentage of total sales and increases in
market share with certain key electronic materials customers.
Selling, general and administrative expenses, measured as a
percentage of sales, were 9.5% during the 2001 fiscal year
compared with 10.7% during the 2000 fiscal year. This decrease
was a result of the partially fixed nature of these expenses and
the Company's increased sales in the 2001 fiscal year.
For the reasons set forth above, profit from operations for
the 2001 fiscal year increased 190% to $67.8 million from $23.4
million for the 2000 fiscal year.
Interest and other income, principally investment income,
increased 25% to $8.4 million for the 2001 fiscal year from $6.7
million for the 2000 fiscal year. The increase in investment
income was attributable to increased cash available for
investment and higher prevailing interest rates during the 2001
fiscal year. The Company's investments were primarily short-term
taxable instruments and government securities. Interest expense
for the 2001 fiscal year was $5.6 million compared with $5.7
million during the 2000 fiscal year. The Company's interest
expense was related primarily to its $100 million principal
amount of 5.5% Convertible Subordinated Notes due 2006 issued in
February 1996. See "Liquidity and Capital Resources" elsewhere in
this Item 7.
The Company's effective income tax rate for the 2001 fiscal
year was 30.0% compared with 25.0% for the 2000 fiscal year. This
increase in the effective tax rate was primarily the result of a
change in the Company's income mix among the tax jurisdictions in
which the Company does business.
Net earnings for the 2001 fiscal year increased 170% to
$49.4 million from $18.3 million for the 2000 fiscal year. Basic
and diluted earnings per share increased to $3.10 and $2.65,
respectively, for the 2001 fiscal year from $1.16 and $1.12,
respectively, for the 2000 fiscal year. This increase in net
earnings and earnings per share was primarily attributable to the
increase in the profit from operations offset, in part, by the
higher effective tax rate.
Liquidity and Capital Resources:
At March 3, 2002, the Company's cash and temporary
investments were $151.4 million compared with $155.7 million at
February 25, 2001, the end of the Company's 2001 fiscal year. The
decrease in the Company's cash and investment position at March
3, 2002 was attributable to reduced cash provided from operating
activities and cash used for the purchase of fixed assets, as
discussed below. The Company's working capital (which includes
cash and temporary investments) was $167.0 million at March 3,
2002 compared with $188.5 million at February 25, 2001. The
decrease at March 3, 2002 compared with February 25, 2001 was due
principally to lower cash and temporary investments, accounts
receivable and inventories, offset in part by lower current
liabilities. The decrease in accounts receivable, inventories and
current liabilities at March 3, 2002 compared with February 25,
2001 was a result principally of reduced operating activity in
support of lower sales volumes. The Company's current ratio (the
ratio of current assets to current liabilities) was 4.9 to 1 at
March 3, 2002 compared with 3.4 to 1 at February 25, 2001.
During the 2002 fiscal year, cash provided by the Company's
operations, before depreciation and amortization and before non-
cash losses related to the sale and impairment of fixed assets,
of $4.3 million was enhanced by a significant net reduction in
working capital items, resulting in $23.4 million of cash
provided from operating activities. A major portion of the 2002
fiscal year's capital expenditures related to the expansions of
the Company's electronic materials facilities in Arizona,
California and New York. These expansions increased the Company's
capacity and capability for the production of sophisticated
printed circuit materials. Net expenditures for property, plant
and equipment were $22.8 million, $51.8 million and $27.7 million
in the 2002, 2001 and 2000 fiscal years, respectively. The
Company expects the capital expenditures in the 2003 fiscal year
to be less than the expenditures in the 2002 fiscal year and in
the 2001 fiscal year.
At March 3, 2002, the Company had no long-term debt. During
the Company's 2001 fiscal year, $2,328,000 principal amount of
Notes was converted into 82,750 shares of the Company's common
stock, and immediately after the end of the 2001 fiscal year,
$95,934,000 principal amount of Notes was converted into
3,410,908 shares of the Company's common stock, all at a
conversion price of $28.125 per share. On March 2, 2001, the
Company redeemed $1,738,000 principal amount of Notes for a
redemption price of $1,000.15 (including accrued interest) for
each $1,000 principal amount Note pursuant to a previous
announcement that on March 2, 2001 it would redeem all of the
outstanding Notes that were not converted on or before March 1,
2001. See Note 6 of the Notes to Consolidated Financial
Statements in Item 8 of this Report.
The Company believes its financial resources will be
sufficient, for the foreseeable future, to provide for continued
investment in working capital and property, plant and equipment
and for general corporate purposes. Such resources would also be
available for appropriate acquisitions and other expansions of
the Company's business.
The Company is not aware of any circumstances or events that
are reasonably likely to occur that could materially affect its
liquidity.
The Company's liquidity is not dependent on the use of, and
the Company is not engaged in, any off-balance sheet financing
arrangements, such as securitization of receivables or obtaining
access to assets through special purpose entities.
The Company's contractual obligations and other commercial
commitments to make future payments under contracts, such as
lease agreements, consist only of the operating lease commitments
described in Note 13 of the Notes to Consolidated Financial
Statements included elsewhere in this Report. The Company has no
long-term debt, capital lease obligations, unconditional purchase
obligations or other long-term obligations, standby letters of
credit, guarantees, standby repurchase obligations or other
commercial commitments or contingent commitments, other than a
standby letter of credit in the amount of $1,042,000 to secure
the Company's obligations under its workers' compensation
insurance program.
Environmental Matters:
The Company is subject to various federal, state and local
government requirements relating to the protection of the
environment. The Company believes that, as a general matter, its
policies, practices and procedures are properly designed to
prevent unreasonable risk of environmental damage and that its
handling, manufacture, use and disposal of hazardous or toxic
substances are in accord with environmental laws and regulations.
However, mainly because of past operations and operations of
predecessor companies, which were generally in compliance with
applicable laws at the time of the operations in question, the
Company, like other companies engaged in similar businesses, is a
party to claims by government agencies and third parties and has
incurred remedial response and voluntary cleanup costs associated
with environmental matters. Additional claims and costs involving
past environmental matters may continue to arise in the future.
It is the Company's policy to record appropriate liabilities for
such matters when remedial efforts are probable and the costs can
be reasonably estimated.
In the 2002, 2001 and 2000 fiscal years, the Company charged
approximately $0.2 million, $0.3 million and $0.2 million,
respectively, against pre-tax income for remedial response and
voluntary cleanup costs (including legal fees). While annual
expenditures have generally been constant from year to year, and
may increase over time, the Company expects it will be able to
fund such expenditures from cash flow from operations. The timing
of expenditures depends on a number of factors, including
regulatory approval of cleanup projects, remedial techniques to
be utilized and agreements with other parties. At March 3, 2002,
the recorded liability in accrued liabilities for environmental
matters was $4.0 million compared with $4.4 million at February
25, 2001.
Management does not expect that environmental matters will
have a material adverse effect on the liquidity, capital
resources, business or consolidated financial position of the
Company. See Note 13 of the Notes to Consolidated Financial
Statements included in Item 8 of this Report for a discussion of
the Company's commitments and contingencies, including those
related to environmental matters.
Critical Accounting Policies and Estimates:
In response to financial reporting release, FR-
60,"Cautionary Advice Regarding Disclosure About Critical
Accounting Policies", issued by the Securities and Exchange
Commission in December 2001, the following information is
provided regarding critical accounting policies that are
important to the Consolidated Financial Statements and that
entail, to a significant extent, the use of estimates,
assumptions and the application of management's judgment.
General
The Company's discussion and analysis of its financial
condition and results of operations are based upon the Company's
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements
requires the Company to make estimates, assumptions and judgments
that affect the reported amounts of assets, liabilities, revenues
and expenses and the related disclosure of contingent
liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to sales allowances, bad
debts, inventories, valuation of long-lived assets, income taxes,
restructuring, pensions and other employee benefit programs, and
contingencies and litigation. The Company bases its estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
The Company believes the following critical accounting
policies affect its more significant judgments and estimates used
in the preparation of its consolidated financial statements.
Sales Allowances
The Company provides for the estimated costs of sales
allowances at the time such costs can be reasonably estimated.
The Company is focused on manufacturing the highest quality
electronic materials and other products possible and employs
stringent manufacturing process controls and works with raw
material suppliers who have dedicated themselves to complying
with the Company's specifications and technical requirements.
However, if the quality of the Company's products declined, the
Company may incur higher sales allowances.
Bad Debt
The Company maintains allowances for doubtful accounts for
estimated losses resulting from the inability of its customers to
make required payments. If the financial condition of the
Company's customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional
allowances may be required.
Inventory
The Company writes down its inventory for estimated
obsolescence or unmarketability based upon the age of the
inventory and assumptions about future demand for the Company's
products and market conditions. If actual demand or market
conditions are less favorable than those projected by management,
additional inventory write-downs may be required.
Valuation of Long-lived Assets
The Company assesses the impairment of long-lived assets
whenever events or changes in circumstances indicate that the
carrying value of such assets may not be recoverable. Important
factors that could trigger an impairment review include, but are
not limited to, significant negative industry or economic trends
and significant changes in the use of the Company's assets or
strategy of the overall business.
Income Taxes
Carrying value of the Company's net deferred tax assets
assumes that the Company will be able to generate sufficient
future taxable income in certain tax jurisdictions, based on
estimates and assumptions. If these estimates and assumptions
change in the future, the Company may be required to record
additional valuation allowances against its deferred tax assets
resulting in additional income tax expense in the Company's
consolidated statement of operations. Management evaluates the
realizability of the deferred tax assets quarterly and assesses
the need for additional valuation allowances quarterly.
Restructuring
During the fiscal year ended March 3, 2002, the Company
recorded significant reserves in connection with the
restructuring relating to the sale of Nelco Technology, Inc., the
closure of a related support facility and the realignment of
Dielektra, GmbH. These reserves include estimates pertaining to
employee separation costs and the settlements of contractual
obligations resulting from the Company's actions. Although the
Company does not anticipate significant changes, the actual costs
incurred by the Company may differ from these estimates.
Contingencies and Litigation
The Company is subject to a small number of proceedings,
lawsuits and other claims related to environmental, employment,
product and other matters. The Company is required to assess the
likelihood of any adverse judgments or outcomes in these matters
as well as potential ranges of probable losses. A determination
of the amount of reserves required, if any, for these
contingencies is made after careful analysis of each individual
issue. The required reserves may change in the future due to new
developments in each matter or changes in approach such as a
change in settlement strategy in dealing with these matters.
Pension and Other Employee Benefit Programs
The Company's subsidiary in Europe has significant pension
costs that are developed from actuarial valuations. Inherent in
these valuations are key assumptions including discount rates and
wage inflation rates. The Company is required to consider current
market conditions, including changes in interest rates and wage
costs, in selecting these assumptions. Changes in the related
pension costs may occur in the future in addition to changes
resulting from fluctuations in the Company's related headcount
due to changes in the assumptions.
The Company's obligations for workers' compensation claims
and employee-health care benefits are effectively self-insured.
The Company uses an insurance company administrator to process
all such claims and benefits. The Company accrues its workers'
compensation liability based upon the claim reserves established
by the third-party administrator and historical experience. The
Company's employee health insurance benefit liability is based on
its historical claims experience.
The Company and certain of its subsidiaries have a non-
contributory profit sharing retirement plan covering their
regular full-time employees. In addition, the Company's
subsidiaries have various bonus and incentive compensation
programs, most of which are determined at management's
discretion.
The Company's reserves associated with these self-insured
liabilities and benefit programs are reviewed by management for
adequacy at the end of each reporting period.
Factors That May Affect Future Results.
The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for forward-looking statements to
encourage companies to provide prospective information about
their companies without fear of litigation so long as those
statements are identified as forward-looking and are accompanied
by meaningful cautionary statements identifying important factors
that could cause actual results to differ materially from those
projected in the statement. Certain portions of this Report which
do not relate to historical financial information may be deemed
to constitute forward-looking statements that are subject to
various factors which could cause actual results to differ
materially from Park's expectations or from results which might
be projected, forecasted, estimated or budgeted by the Company in
forward-looking statements. Accordingly, the Company hereby
identifies the following important factors which could cause the
Company's actual results to differ materially from any such
results which might be projected, forecast, estimated or budgeted
by the Company in forward-looking statements.
. The Company's customer base is concentrated, in
part, because the Company's business strategy has been
to develop long-term relationships with a select group
of customers. During the Company's fiscal year ended
March 3, 2002, the Company's ten largest customers
accounted for approximately 59% of net sales. The
Company expects that sales to a relatively small number
of customers will continue to account for a significant
portion of its net sales for the foreseeable future. A
loss of one or more of such key customers could affect
the Company's profitability. See "Business-Electronic
Materials Operations-Customers and End Markets" in Item
1 of this Report, "Legal Proceedings" in Item 3 of this
Report and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Item 7
of this Report for discussions of the loss of a key cus
tomer early in the 1999 fiscal year.
. The Company's business is dependent on certain
aspects of the electronics industry, which is a cyclical
industry and which has experienced recurring downturns.
The downturns, such as occurred in the first quarter of
the Company's fiscal year ended March 2, 1997 and in the
first quarter of the Company's fiscal year ended March
3, 2002, can be unexpected and have often reduced demand
for, and prices of, electronic materials.
. The Company's operating results are affected by a
number of factors, including various factors beyond the
Company's control. Such factors include economic
conditions in the electronics industry, the timing of
customer orders, product prices, process yields, the mix
of products sold and maintenance-related shutdowns of
facilities. Operating results also can be influenced by
development and introduction of new products and the
costs associated with the start-up of new facilities.
. The Company's production processes require the use
of substantial amounts of gas and electricity, the cost
and available supply of which are beyond the control of
the Company. Changes in the cost or availability of gas
or electricity could materially increase the Company's
cost of operations.
. Rapid technological advances in semiconductors and
electronic equipment have placed rigorous demands on the
electronic materials manufactured by the Company and
used in printed circuit board production. The Company's
operating results will be affected by the Company's
ability to maintain and increase its technological and
manufacturing capability and expertise in this rapidly
changing industry.
. The electronic materials industry is intensely
competitive and the Company competes worldwide in the
market for materials used in the production of complex
multilayer printed circuit boards. The Company's
principal competitors are substantially larger and have
greater financial resources than the Company, and the
Company's operating results will be affected by its
ability to maintain its competitive position in the
industry.
. There are a limited number of qualified suppliers
of the principal materials used by the Company in its
manufacture of electronic materials products.
Substitutes for these products are not readily
available, and in the recent past there have been
shortages in the market for certain of these materials.
. The Company typically does not obtain long-term
purchase orders or commitments. Instead, it relies
primarily on continual communication with its customers
to anticipate the future volume of purchase orders. A
variety of conditions, both specific to the individual
customer and generally affecting the customer's
industry, can cause a customer to reduce or delay orders
previously anticipated by the Company.
. The Company, from time to time, is engaged in the
expansion of certain of its manufacturing facilities for
electronic materials. The anticipated costs of such
expansions cannot be determined with precision and may
vary materially from those budgeted. In addition, such
expansions will increase the Company's fixed costs. The
Company's future profitability depends upon its ability
to utilize its manufacturing capacity in an effective
manner.
. The Company's business is capital intensive and, in
addition, the introduction of new technologies could
substantially increase the Company's capital
expenditures. In order to remain competitive the Company
must continue to make significant investments in capital
equipment and expansion of operations. This may require
that the Company continue to be able to access capital
on terms acceptable to the Company.
. The Company may acquire businesses, product lines
or technologies that expand or complement those of the
Company. The integration and management of an acquired
company or business may strain the Company's management
resources and technical, financial and operating
systems. In addition, implementation of acquisitions can
result in large one-time charges and costs. A given
acquisition, if consummated, may materially affect the
Company's business, financial condition and results of
operations.
. The Company's international operations are subject
to risks, including unexpected changes in regulatory
requirements, exchange rates, tariffs and other
barriers, political and economic instability and
potentially adverse tax consequences.
. A portion of the sales and costs of the Company's
international operations are denominated in currencies
other than the U.S. dollar and may be affected by
fluctuations in currency exchange rates.
. The Company's success is dependent upon its
relationship with key management and technical
personnel.
. The Company's future success depends in part upon
its intellectual property which the Company seeks to
protect through a combination of contract provisions,
trade secret protections, copyrights and patents.
. The Company's production processes require the use,
storage, treatment and disposal of certain materials
which are considered hazardous under applicable
environmental laws and the Company is subject to a
variety of regulatory requirements relating to the
handling of such materials and the release of emissions
and effluents into the environment. Other possible
developments, such as the enactment or adoption of
additional environmental laws, could result in
substantial costs to the Company.
. The market price of the Company's securities can be
subject to fluctuations in response to quarter to
quarter variations in operating results, changes in
analysts' earnings estimates, market conditions in the
electronic materials industry, as well as general
economic conditions and other factors external to the
Company.
. The Company's results could be affected by changes
in the Company's accounting policies and practices or
changes in the Company's organization, compensation and
benefit plans, or changes in the Company's material
agreements or understandings with third parties.
Item 7A.Quantitative and Qualitative Disclosures About Market
Risk.
The Company is exposed to market risks for changes in
foreign currency exchange rates and interest rates. The Company's
primary foreign currency exchange exposure relates to the
translation of the financial statements of foreign subsidiaries
using currencies other than the U.S. dollar as their functional
currency. The Company does not believe that a 10% fluctuation in
foreign exchange rates would have had a material impact on its
consolidated results of operations or financial position. The
exposure to market risks for changes in interest rates relates to
the Company's short-term investment portfolio. This investment
portfolio is managed by outside professional managers in
accordance with guidelines issued by the Company. These
guidelines are designed to establish a high quality fixed income
portfolio of government and highly rated corporate debt
securities with a maximum weighted maturity of less than one
year. The Company does not use derivative financial instruments
in its investment portfolio. Based on the average maturity of the
investment portfolio at the end of the 2002 fiscal year a 10%
increase in short term interest rates would not have had a
material impact on the consolidated results of operations or
financial position of the Company.
Item 8. Financial Statements and Supplementary Data.
The Company's Financial Statements begin on the next
page.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Park Electrochemical Corp.
Lake Success, New York
We have audited the accompanying consolidated balance sheets of
Park Electrochemical Corp. and subsidiaries as of March 3, 2002
and February 25, 2001 and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the
three years in the period ended March 3, 2002. Our audits also
included the financial statement schedule listed in the Index at
Item 14(a)(2). These financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Park Electrochemical Corp. and subsidiaries
as of March 3, 2002 and February 25, 2001 and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended March 3, 2002, in conformity with
accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material
respects the information set forth therein.
ERNST & YOUNG LLP
New York, New York
April 22, 2002
<table>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<caption>
March 3, February 25,
2002 2001
<s> <c> <c>
ASSETS
Current assets:
Cash and cash equivalents $99,492 $123,726
Marketable securities (Note 2) 51,917 32,017
Accounts receivable, less
allowance for doubtful accounts
of $1,817 and $2,074, respectively 33,628 71,105
Inventories (Note 3) 13,242 32,307
Prepaid expenses and other
(Note 7) 12,082 9,456
--------- ---------
Total current assets 210,361 268,611
Property, plant and equipment,
net of accumulated depreciation
and amortization (Notes 4, 10
and 11) 149,810 159,309
Other assets (Note 7) 473 2,661
Total $360,644 $430,581
========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 14,098 $ 29,481
Accrued liabilities (Notes 5
and 13) 27,862 39,052
Income taxes payable 1,401 11,567
-------- --------
Total current liabilities 43,361 80,100
Long-term debt (Note 6) - 97,672
Deferred income taxes (Note 7) 13,054 12,679
Deferred pension liability and
other (Note 12) 11,683 11,224
Commitments and contingencies
(Notes 12 and 13)
Stockholders' equity (Notes 6,
8, 9 and 12):
Preferred stock, $1 par value
per share-authorized, 500,000
shares; issued, none - -
Common stock, $.10 par value
per share-authorized, 60,000,000
shares; issued, 20,369,986 shares 2,037 2,037
Additional paid-in capital 131,138 57,318
Retained earnings 172,953 203,150
Accumulated other non-owner changes (7,890) (5,764)
-------- --------
298,238 256,741
Less treasury stock, at cost,
877,163 and 4,441,359
shares, respectively (5,692) (27,835)
-------- ---------
Total stockholders' equity 292,546 228,906
--------- ---------
Total $360,644 $430,581
========= =========
See notes to consolidated financial statements.
<fn>
</table>
<table>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<caption>
Fiscal Year Ended
March 3, February 25, February 27,
2002 2001 2000
<s> <c> <c> <c>
Net sales $230,060 $522,197 $425,261
Cost of sales 218,265 404,527 351,841
--------- --------- --------
Gross profit 11,795 117,670 73,420
Selling, general and
administrative expenses 34,360 49,897 45,508
Loss on sale of NTI and
closure of related
support facility (Note 10) 15,707 - -
Restructuring and
severance charges (Note 11) 3,727 - -
Closure of plumbing
hardware business (Note 16) - - 4,464
-------- -------- --------
(Loss)/profit from
operations (41,999) 67,773 23,448
-------- -------- --------
Other income:
Interest and other
income, net 5,543 8,419 6,654
Interest expense (Note 6) - 5,593 5,720
-------- -------- --------
Total other income 5,543 2,826 934
-------- -------- --------
(Loss)/earnings before
income taxes (36,456) 70,599 24,382
Income taxes (Note 7) (10,937) 21,180 6,085
--------- --------- --------
Net (loss)/earnings $(25,519) $ 49,419 $ 18,297
========= ========= =========
(Loss)/earnings per share
(Note 9):
Basic $(1.31) $3.10 $1.16
Diluted $(1.31) $2.65 $1.12
<fn>
See notes to consolidated financial statements.
</table>
<table>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share amounts)
<caption>
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings
<s> <c> <c> <c> <c>
Balance, February 28, 1999 20,369,986 $2,037 $52,429 $142,336
Net earnings 18,297
Exchange rate changes
Change in pension
liability adjustment
Market revaluation
Stock options exeercised 1,686
Cash dividends ($.21
per share) (3,325)
Comprehensive income __________ ______ _______ _________
Balance, February 27, 2000 20,369,986 2,037 54,115 157,308
Net earnings 49,419
Exchange rate changes
Change in pension
liability adjustment
Market revaluation
Conversion of long-term debt 1,810
Stock options exercised 1,393
Purchase of treasury stock
Cash dividends ($.23
per share) (3,577)
Comprehensive income __________ ______ _______ _________
Balance, February 25, 2001 20,369,986 2,037 57,318 203,150
Net loss (25,519)
Exchange rate changes
Change in pension
liability adjustment
Market revaluation
Conversion of long-term debt 72,634
Stock options exercised 1,186
Purchase of treasury stock
Cash dividends ($.24
per share) (4,678)
Comprehensive loss
__________ ______ ________ _________
Balance, March 3, 2002 20,369,986 $2,037 $131,138 $172,953
<fn>
See notes to consolidated financial
statements.
</table>
<table>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share amounts)
<caption>
Accumulated
Other Non- Comprehen-
Owner Treasury Stock sive
Changes Shares Amount Income
<s> <c> <c> <c> <c>
Balance, February 28, 1999 $(1,802) 4,887,569 $(30,354)
Net earnings $ 18,297
Exchange rate changes (3,407) (3,407)
Change in pension
liability adjustment 149 149
Market revaluation (231) (231)
Stock options exercised (215,339) 1,303
Cash dividends ($.21 _________
per share)
Comprehensive income ________ _________ ________ $ 14,808
Balance, February 27, 2000 (5,291) 4,672,230 (29,051) =========
Net earnings $49,419
Exchange rate changes (2,255) (2,255)
Change in pension
liability adjustment 1,481 1,481
Market revaluation 301 301
Conversion of long-term debt (82,750) 519
Stock options exercised (156,666) 978
Purchase of treasury stock 8,545 (281)
Cash dividends ($.23 _________
per share)
Comprehensive income ________ _________ _______ $ 48,946
Balance, February 25, 2001 (5,764) 4,441,359 (27,835) =========
Net loss $(25,519)
Exchange rate changes (1,257) (1,257)
Change in pension
liability adjustment (802) (802)
Market revaluation (67) (67)
Conversion of long-term debt (3,411,204) 21,381
Stock options exercised (162,830) 1,027
Purchase of treasury stock 9,838 (265)
Cash dividends ($.24 _________
per share)
Comprehensive loss $(27,645)
________ __________ __________ =========
Balance, March 3, 2002 $(7,890) 877,163 $ (5,692)
<fn>
See notes to consolidated financial
statements.
</table>
<table>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<caption>
Fiscal Year Ended
March 3, February 25, February 27.
2002 2001 2000
<s> <c> <c> <c>
Cash flows from operating
activities:
Net (loss)/earnings $(25,519) $ 49,419 $ 18,297
Adjustments to reconcile net
(loss)/earnings to net cash
provided by operating activities:
Depreciation and amortization 16,257 16,724 16,264
Loss on sale of fixed assets 10,636 - -
Provision for plumbing business closure - - 3,230
Provision for impairment of fixed assets 2,959 1,146 1,234
Provision for doubtful accounts
receivable 123 228 725
Provision for deferred income taxes (4,690) 2,781 600
Other, net (63) (1,026) 107
Changes in operating assets and
liabilities:
Accounts receivable 36,907 (4,324) (13,722)
Inventories 18,793 (5,410) (2,831)
Prepaid expenses and other current assets 4,511 (3,404) 292
Other assets and liabilities 29 (476) 1,281
Accounts payable (13,617) 5,004 (5,140)
Accrued liabilities (9,744) 10,599 3,922
Income taxes payable (13,176) 6,141 (2,777)
Net cash provided by operating
activities 23,406 77,402 21,482
Cash flows from investing activities:
Purchases of property, plant and
equipment (25,786) (55,011) (27,846)
Proceeds from sales of property,
plant and equipment 2,986 3,250 117
Purchases of marketable securities (47,355) (70,144) (127,677)
Proceeds from sales and maturities
of marketable securities 27,036 117,245 152,388
Net cash used in investing activities (43,119) (4,660) (3,018)
Cash flows from financing activities:
Redemption of long term debt (1,738) - -
Dividends paid (4,678) (3,577) (3,325)
Proceeds from exercise of stock options 1,959 1,722 2,478
Net cash used in financing activities (4,457) (1,855) (847)
(Decrease)/increase in cash and cash
equivalents before effect of
exchange rate changes (24,170) 70,887 17,617
Effect of exchange rate changes on
cash and cash equivalents (64) (314) (1,146)
(Decrease)/increase in cash and cash
equivalents (24,234) 70,573 16,471
Cash and cash equivalents, beginning
of year 123,726 53,153 36,682
Cash and cash equivalents, end of year $ 99,492 $123,726 $ 53,153
<fn>
See notes to consolidated financial
statements.
</table>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended March 3, 2002
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Park Electrochemical Corp. ("Park"), through its
subsidiaries (collectively, the "Company"), is a leading global
designer and producer of advanced electronic materials used to
fabricate complex multilayer printed circuit boards and other
electronic interconnection systems. The Company's multilayer
printed circuit board materials include copper-clad laminates and
prepregs. Multilayer printed circuit boards and interconnection
systems are used in virtually all advanced electronic equipment
to direct, sequence and control electronic signals between
semiconductor devices and passive components. The Company also
designs and manufactures specialty adhesive tapes and advanced
composite materials for the electronics, aerospace and industrial
markets.
a. Principles of Consolidation - The consolidated
financial statements include the accounts of Park and
its subsidiaries. All significant intercompany balances
and transactions have been eliminated.
b. Use of Estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the amounts
reported in the financial statements and accompanying
notes. Actual results may differ from those estimates.
See "Critical Accounting Policies and Estimates" under
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Item 8 of this
Report.
c. Accounting Period - The Company's fiscal year is the 52
or 53 week period ending the Sunday nearest to the last
day of February. The 2002, 2001 and 2000 fiscal years
ended on March 3, 2002 February 25, 2001 and February
27, 2000, respectively. Fiscal year 2002 consisted of
53 weeks and fiscal years 2001 and 2000 consisted of 52
weeks.
d. Marketable Securities - All marketable securities are
classified as available-for-sale and are carried at
fair value, with the unrealized gains and losses, net
of tax, included in comprehensive income. Realized
gains and losses, amortization of premiums and
discounts, and interest and dividend income are
included in other income. The cost of securities sold
is based on the specific identification method.
e. Inventories - Inventories are stated at the lower of
cost (first-in, first-out method) or market.
f. Revenue Recognition - Revenues are recognized at the time
product is shipped to the customer.
g. Product Warranties - The Company accrues for defective
products at the time the existence of the defect is known
and the amount is reasonably determinable. The Company's
products are made to specific customer order specifications,
and there are no future performance requirements for the
Company's products other than the products' meeting the
agreed specifications. The amounts of returns and
allowances resulting from defective or damaged products
have been approximately 0.5% of sales for each of the
Company's last three fiscal years.
h. Shipping Costs - The amounts paid to third-party shippers
for transporting products to customers are classified as
selling expenses. The amounts included in selling, general
and administrative expenses were approximately $4,034,000,
$6,485,000 and $6,483,000 for fiscal years 2002, 2001
and 2000, respectively.
i. Depreciation and Amortization - Depreciation and
amortization are computed principally by the straight-
line method over the estimated useful lives of the
related assets or, with respect to leasehold
improvements, the terms of the leases, if shorter.
j. Deferred Charges - Costs incurred in connection with
the issuance of debt are deferred and included in other
assets and amortized, using the effective interest
method, over the debt repayment period.
k. Income Taxes - Deferred income taxes are provided for
temporary differences in the reporting of certain
items, primarily depreciation, for income tax purposes
as compared with financial accounting purposes.
United States ("U.S.") Federal income taxes have not
been provided on the undistributed earnings
(approximately $95,300,000 at March 3, 2002) of the
Company's foreign subsidiaries, because it is
management's practice and intent to reinvest such
earnings in the operations of such subsidiaries.
l. Foreign Currency Translation - Assets and liabilities
of foreign subsidiaries using currencies other than the
U.S. dollar as their functional currency are translated
into U.S. dollars at fiscal year-end exchange rates,
and income and expense items are translated at average
exchange rates for the period. Gains and losses
resulting from translation are recorded as currency
translation adjustments in comprehensive income.
m. Consolidated Statements of Cash Flows - The Company
considers all money market securities and investments
with maturities at the date of purchase of 90 days or
less to be cash equivalents.
Supplemental cash flow information:
<table>
<caption>
Fiscal Year
2002 2001 2000
<s> <c> <c> <c>
Cash paid during the year for:
Interest $2,700,000 $5,593,000 $5,524,000
Income taxes 6,847,000 12,281,000 7,976,000
</table>
2. MARKETABLE SECURITIES
<table>
The following is a summary of available-for-sale securities:
<caption>
Gross Gross
Unrealized Unrealized Estimated
Amortized Gains Losses Fair Value
Cost
<s> <c> <c> <c> <c>
March 3, 2002:
U.S. Treasury and
other government securities $29,956,000 $ 76,000 $ 72,000 $29,960,000
U.S. corporate debt
securities 21,853,000 80,000 49,000 21,884,000
Total debt securities 51,809,000 156,000 121,000 51,844,000
Equity securities 5,000 68,000 - 73,000
$51,814,000 $224,000 $121,000 $51,917,000
February 25, 2001:
U.S. Treasury and
other government securities $ 1,007,000 $ 11,000 $ - $ 1,018,000
U.S. corporate debt
securities 30,800,000 231,000 102,000 30,929,000
Total debt securities 31,807,000 242,000 102,000 31,947,000
Equity securities 5,000 65,000 - 70,000
$31,812,000 $307,000 $102,000 $32,017,000
</table>
The gross realized gains on the sales of securities were $0,
$26,000 and $9,000 for fiscal years 2002, 2001 and 2000,
respectively, and the gross realized losses were $60,000,
$0, and $11,000 for fiscal years 2002, 2001 and 2000,
respectively.
The amortized cost and estimated fair value of the debt and
marketable equity securities at March 3, 2002, by
contractual maturity, are shown below:
<table>
<caption>
Estimated
Fair
Cost Value
<s> <c> <c>
Due in one year or less $ 9,123,000 $ 9,208,000
Due after one year through
five years 42,686,000 42,636,000
51,809,000 51,844,000
Equity securities 5,000 73,000
$51,814,000 $51,917,000
</table>
3. INVENTORIES
<table>
<caption>
March 3, February 25,
2002 2001
<s> <c> <c>
Raw materials $ 4,996,000 $14,988,000
Work-in-process 2,916,000 5,075,000
Finished goods 4,784,000 11,319,000
Manufacturing supplies 546,000 925,000
$13,242,000 $32,307,000
</table>
4. PROPERTY, PLANT AND EQUIPMENT
<table>
<caption>
March 3, February 25,
2002 2001
<s> <c> <c>
Land, buildings and improvements $ 60,689,000 $ 48,501,000
Machinery, equipment, furniture
and fixtures 203,476,000 233,078,000
------------ ------------
264,165,000 281,579,000
Less accumulated depreciation
and amortizationn 114,355,000 122,270,000
------------ ------------
$149,810,000 $159,309,000
</table>
Depreciation and amortization expense relating to property,
plant and equipment was $16,257,000, $16,724,000 and
$16,200,000 for fiscal years 2002, 2001 and 2000,
respectively. Pretax charges of $2,959,000, $1,146,000 and
$1,234,000 were recorded in fiscal years 2002, 2001 and
2000, respectively, for the write-down of impaired operating
equipment to its estimated net realizable value (see Notes
10, 11 and 16 below). Interest expense capitalized to
property, plant and equipment was $0, $239,000 and $93,000
for fiscal years 2002, 2001 and 2000, respectively.
5. ACCRUED LIABILITIES
<table>
<caption>
March 3, February 25,
2002 2001
<s> <c> <c>
Payroll and payroll related $ 9,000,000 $12,067,000
Taxes, other than income taxes 471,000 1,139,000
Interest - 2,700,000
Employee benefits 5,525,000 7,275,000
Environmental reserve 3,975,000 4,431,000
Other 8,891,000 11,440,000
----------- -----------
$27,862,000 $39,052,000
</table>
6. LONG-TERM DEBT
On February 28, 1996, the Company issued $100,000,000
principal amount of 5.5% Convertible Subordinated Notes due
2006 (the "Notes") with interest payable semiannually on
March 1 and September 1 of each year, commencing September
1, 1996. The Notes were unsecured and subordinated to other
long-term debt and were convertible at the option of the
holder at any time prior to maturity, unless previously
redeemed or repurchased, into shares of the Company's common
stock at $28.125 per share, subject to adjustment under
certain conditions. The Notes were not redeemable at the
option of the Company prior to March 1, 1999; at any time on
or after such date, the Notes were redeemable at the option
of the Company, in whole or in part, initially at 102.75% of
the principal amount of such Notes redeemed and thereafter
at prices declining to 100% on March 1, 2001, together with
accrued interest. On March 1, 2001, $95,934,000 principal
amount of the Notes was converted into 3,410,908 shares of
the Company's common stock, and the remaining $1,738,000
principal amount of the Notes was redeemed by the Company
for cash. Prior to February 25, 2001, $2,328,000 principal
amount of the Notes was converted into 82,750 shares of the
Company's common stock. At February 25, 2001, the fair value
of the Notes approximated $109,220,000.
Foreign lines of credit totaled $2,228,000 at March 3, 2002,
all of which is available to the Company's foreign
subsidiaries.
7. INCOME TAXES
The income tax (benefit)/provision includes the following:
<table>
<caption>
Fiscal Year
2002 2001 2000
<s> <c> <c> <c>
Current:
Federal $(5,901,000) $ 8,367,000 $2,445,000
State and local 18,000 1,509,000 339,000
Foreign (364,000) 8,523,000 2,587,000
(6,247,000) 18,399,000 5,371,000
Deferred:
Federal (4,345,000) 1,722,000 (869,000)
State and local (729,000) 259,000 (46,000)
Foreign 384,000 800,000 1,629,000
(4,690,000) 2,781,000 714,000
$(10,937,000) $21,180,000 $6,085,000
</table>
The Company's effective income tax rate differs from the
statutory U.S. Federal income tax rate as a result of the
following:
<table>
Fiscal Year
2002 2001 2000
<s> <c> <c> <c>
Statutory U.S. Federal tax rate 35.0% 35.0% 35.0%
State and local taxes, net
of Federal benefit 1.3 1.6 0.8
Foreign tax rate differentials (5.5) (8.3) (9.3)
Reversal of reserves no
longer required - - (3.1)
Other, net (0.8) 1.7 1.6
------ ------ ------
30.0% 30.0% 25.0%
</table>
The Company had foreign net operating loss carryforwards of
approximately $58,500,000 and $31,600,000 in fiscal years
2002 and 2001, respectively. Most of the net operating loss
carryforwards were acquired in fiscal year 1998 when the
Company purchased the capital stock of Dielektra GmbH
("Dielektra"), a German corporation located in Cologne,
Germany. During fiscal year 2002, an audit of Dielektra's
tax filings relating to tax periods prior to its acquisition
by the Company was completed. The audit resulted in an
increase in pre-acquisition net operating losses of
approximately $25.0 million. Long-term deferred tax assets
arising from these net operating loss carryforwards were
valued at $0 at both March 3, 2002 and February 25, 2001,
net of valuation reserves of approximately $22,217,000 and
$11,400,000, respectively. None of the acquired net
operating loss carryforwards relate to goodwill or other
intangible assets.
Approximately $1,600,000 of the foreign net operating loss
carryforwards expire in varying amounts from fiscal year
2003 through fiscal year 2005, and the remainder have an
indefinite expiration.
At March 3, 2002 and February 25, 2001, current deferred tax
assets of $7,006,000 and $1,844,000, respectively, which
were primarily attributable to expenses not currently
deductible, were included in other current assets. The long-
term deferred tax liabilities consisted primarily of timing
differences relating to depreciation.
8. STOCKHOLDERS' EQUITY
a. Stock Split and Number of Authorized Shares - On October 10,
2000, the Company's Board of Directors approved a three-for-two
stock split in the form of a stock dividend. The stock dividend
was distributed November 8, 2000 to stockholders of record on
October 20, 2000. All share and per share data for prior periods
has been retroactively restated to reflect the stock split. In
addition, on October 10, 2000, the Company's stockholders
approved an increase in the number of authorized shares of common
stock from 30,000,000 to 60,000,000 shares.
b. Stock Options - Under the 1992 Stock Option Plan (the
"Plan") approved by the Company's stockholders, directors and key
employees may be granted options to purchase shares of common
stock of the Company exercisable at prices not less than the fair
market value at the date of grant. Options become exercisable 25%
one year from the date of grant, with an additional 25%
exercisable each succeeding anniversary of the date of grant. On
July 12, 2000, the Company's stockholders approved an amendment
to the Plan to increase the aggregate number of shares of Common
Stock authorized for issuance under the Plan by 450,000 shares.
Options to purchase a total of 2,625,000 shares of common stock
were authorized for grant under such Plan. The authority to grant
additional options under the Plan expired on March 24, 2002.
The Company has elected the disclosure provisions of
Statement of Financial Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), and continues to
apply Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"),
and related interpretations in accounting for the Plan.
Under APB 25, because the exercise price of the granted
options is not less than the market price at the date of
the grant, no compensation expense is recognized.
The weighted averaged fair value for options was
estimated at the date of grant using the Black-Scholes
option-pricing model to be $8.09 for fiscal year 2002,
$8.40 for fiscal year 2001 and $5.77 for fiscal year
2000, with the following weighted average assumptions:
risk free interest rate of 4.0% for fiscal year 2002,
5.0% for fiscal year 2001 and 5.5% for fiscal year 2000;
expected volatility factors of 41%, 39% and 40% for
fiscal years 2002, 2001 and 2000, respectively; expected
dividend yield of 1.0% for fiscal year 2002, 1.5% for
fiscal year 2001 and 2% for fiscal year 2000; and
estimated option lives of 4.0 years for fiscal years 2002
and 2001 and 3.6 years for fiscal year 2000. For the
purpose of pro forma disclosures, the effect of applying
SFAS 123 on net (loss)/income and (loss)/earnings per
share for fiscal years 2002, 2001 and 2000 would
approximate the amounts shown below (in thousands, except
EPS data):
<table>
<caption>
2002 2001 2000
As Pro As Pro As Pro
Reported forma Reported forma Reported forma
<s> <c> <c> <c> <c> <c> <c>
Net (loss)/income $(25,519) $(26,923) $49,419 $47,935 $18,297 $17,303
(loss)/income
EPS-basic $ (1.31) $ (1.38) $ 3.10 $ 3.01 $ 1.16 $ 1.10
EPS-diluted $ (1.31) $ (1.38) $ 2.65 $ 2.58 $ 1.12 $ 1.07
</table>
<table>
Information with respect to the Plan follows:
<caption>
Weighted
Range of Average
Exercise Outstanding Exercise
Prices Options Price
<s> <c> <c> <c>
Balance, February 28, 1999 $ 3.67 - $18.42 1,141,238 $12.67
Granted 16.37 - 23.96 346,350 16.71
Exercised 3.67 - 16.42 (217,589) 11.61
Cancelled 8.75 - 16.54 (54,205) 15.91
Balance, February 27, 2000 $ 3.67 - $23.96 1,215,794 $13.87
Granted 15.92 - 43.63 360,075 23.71
Exercised 3.67 - 18.42 (156,667) 12.79
Cancelled 4.54 - 16.54 (61,050) 16.16
Balance, February 25, 2001 $ 3.67 - $43.63 1,358,152 $16.50
Granted 22.62 - 26.77 275,725 23.62
Exercised 3.67 - 23.96 (162,831) 13.06
Cancelled 3.67 - 43.63 (227,339) 21.92
Balance, March 3, 2002 $ 4.67 - $43.63 1,243,707 $17.53
Exercisable, March 3, 2002 $ 4.67 - $43.63 645,645 $ 9.56
</table>
The following table summarizes information concerning
currently outstanding and exercisable options.
<table>
<caption>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Number of Remaining Average Number of Average
Range of Options Contractual Exercise Options Exercise
Exercise Prices Outstanding Life Price Exercisable Price
(Years)
<s> <c> <c> <c> <c> <c> <c>
$ 4.67 -$ 9.99 166,725 1.62 $ 6.56 166,725 $ 6.56
10.00 - 19.99 731,932 6.48 15.76 454,920 15.56
20.00 - 43.63 345,050 9.19 26.61 24,000 34.38
--------- -------
1,243,707 645,645
</table>
Stock options available for future grant under the Plan at
March 3, 2002 and February 25, 2001 were 688,710 and
737,096, respectively.
c. Stockholders' Rights Plan - On February 2, 1989, the
Company adopted a stockholders' rights plan designed
to protect stockholder interests in the event the
Company is confronted with coercive or unfair takeover
tactics. Under the terms of the plan, as amended on
July 12, 1995, each share of the Company's common
stock held of record on February 15, 1989 or issued
thereafter received one right. In the event that a
person has acquired, or has the right to acquire, 15%
(25% in certain cases) or more of the then outstanding
common stock of the Company (an "Acquiring Person") or
tenders for 15% or more of the then outstanding common
stock of the Company, such rights will become
exercisable, unless the Board of Directors otherwise
determines. Upon becoming exercisable as aforesaid,
each right will entitle the holder thereof to purchase
one one-hundredth of a share of Series A Preferred
Stock for $75, subject to adjustment (the "Purchase
Price"). In the event that any person becomes an
Acquiring Person, each holder of an unexercised
exercisable right, other than an Acquiring Person,
shall have the right to purchase, at a price equal to
the then current Purchase Price, such number of shares
of the Company's common stock as shall equal the then
current Purchase Price divided by 50% of the then
market price per share of the Company's common stock.
In addition, if after a person becomes an Acquiring
Person, the Company engages in any of certain business
combination transactions as specified in the plan, the
Company will take all action to ensure that, and will
not consummate any such business combination unless,
each holder of an unexercised exercisable right, other
than an Acquiring Person, shall have the right to
purchase, at a price equal to the then current
Purchase Price, such number of shares of common stock
of the other party to the transaction for each right
held by such holder as shall equal the then current
Purchase Price divided by 50% of the then market price
per share of such other party's common stock. The
Company may redeem the rights for a nominal
consideration at any time, and after any person
becomes an Acquiring Person, but before any person
becomes the beneficial owner of 50% or more of the
outstanding common stock of the Company, the Company
may exchange all or part of the rights for shares of
the Company's common stock at a one-for-one exchange
ratio. Unless redeemed, exchanged or exercised
earlier, all rights expire on July 12, 2005.
d. Reserved Common Shares - At March 3, 2002, 1,932,417
shares of common stock were reserved for issuance upon
exercise of stock options.
e. Accumulated Other Non-Owner Changes - Accumulated balances
related to each component of other comprehensive income (loss)
were as follows:
<table>
<caption> March 3, February 25,
2002 2001
<s> <c> <c>
Currency translation adjustment $(7,112) $(5,855)
Pension liability adjustment (845) (43)
Unrealized gains on investment 67 134
Accumulated balance $(7,890) $(5,764)
</table>
9. (LOSS)/EARNINGS PER SHARE
The following table sets forth the calculation of basic and
diluted (loss)/earnings per share for the fiscal years:
<table>
<caption>
2002 2001 2000
<s> <c> <c> <c>
Net (loss)/income for basic EPS $(25,519,000) $49,419,000 $18,297,000
Add interest on 5.5%
Convertible Subordinated Notes,
net of taxes - 3,585,000 3,702,000
Net (loss)/income for dilted EPS $(25,519,000) $53,004,000 $21,999,000
Weighted average common shares
outstanding for basic EPS 19,535,000 15,932,000 15,761,000
Net effect of dilutive options * 548,000 327,000
Assumed conversion of 5.5%
Convertible Subordinated Notes - 3,522,000 3,555,000
Weighted average shares
outstanding for diluted EPS 19,535,000 20,002,000 19,643,000
Basic (loss)/earnings per share $(1.31) $3.10 $1.16
Diluted (loss)/earnings per share $(1.31) $2.65 $1.12
*For the fiscal year ended March 3, 2002, the effect of employee
stock options was not considered because it was antidilutive.
</table>
The net loss for fiscal year 2002, in the above table,
includes a $15,707,000 loss on the sale of Nelco Technology,
Inc.(see Note 10 below) and a related support facility and a
$3,727,000 charge for restructuring and severance costs (see
Note 11 below).
During the first half of the 2001 fiscal year, the Company
closed and liquidated its plumbing hardware business. The net
income shown above includes losses of $25,000 and $5,022,000
for the 2001 and 2000 fiscal years, respectively, for the
discontinued plumbing hardware business. The weighted average
number of shares outstanding and the earnings per share for
each year have been adjusted to give retroactive effect to the
three-for-two split of the Company's common stock declared
October 10, 2000 payable November 8, 2000 to stockholders of
record on October 20, 2000.
10. SALE OF NELCO TECHNOLOGY, INC.
During the Company's 1998 fiscal year and for several years
prior thereto, more than 10% of the Company's total worldwide
sales were to Delco Electronics Corporation, a subsidiary of
General Motors Corp., and the Company's wholly owned
subsidiary, Nelco Technology, Inc. ("NTI") located in Tempe,
Arizona, had been Delco's principal supplier of semi-finished
multilayer printed circuit board materials, commonly known as
mass lamination, which were used by Delco to produce finished
multilayer printed circuit boards. However, in March 1998, the
Company was informed by Delco that Delco planned to close its
printed circuit board fabrication plant and exit the printed
circuit board manufacturing business. As a result, the
Company's sales to Delco declined during the three-month
period ended May 31, 1998, were negligible during the
remainder of the 1999 fiscal year and were nil during the
2000, 2001 and 2002 fiscal years.
After March 1998, the business of NTI languished and its
performance was unsatisfactory due primarily to the absence of
the unique, high-volume, high-quality business that had been
provided by Delco Electronics and the absence of any other
customer in the North American electronic materials industry
with a similar demand for the large volumes of semi-finished
multilayer printed circuit board materials that Delco
purchased from NTI. Although NTI's business experienced a
resurgence in the 2001 fiscal year as the North American
market for printed circuit materials became extremely strong
and demand exceeded supply for the electronic materials
manufactured by the Company, the Company's internal
expectations and projections for the NTI business were for
continuing volatility in the business' performance over the
foreseeable future. Consequently, the Company commenced
efforts to sell the business in the second half of its 2001
fiscal year; and in April 2001, the Company sold the assets
and business of NTI and closed a related support facility,
also located in Tempe, Arizona. As a result of this sale, the
Company exited the mass lamination business in North America.
In connection with the sale of NTI and the closure of the
related support facility, the Company recorded non-recurring,
pre-tax charges of $15,707,000 in its fiscal year 2002 first
quarter ended May 27, 2001. The components of these charges
and the related liability balances and activity from the May
27, 2001 balance sheet date to the March 3, 2002 balance sheet
date are set forth below.
<TABLE>
<CAPTION>
Charges 3/3/02
Closure Incurred or Remaining
Charges Paid Reversals Liabilities
<s> <c> <c> <c> <c>
NTI charges:
Loss on sale of assets
and business $10,580,000 $10,580,000 $ - $ -
Severance payments 387,000 387,000 - -
Medical and other
costs 95,000 95,000 - -
Support facility
charges:
Impairment of long
lived assets 2,058,000 2,058,000 - -
Write down accounts
receivable 350,000 304,000 31,000 15,000
Write down inventory 590,000 590,000 - -
Severance payments 688,000 688,000 - -
Medical and other
costs 133,000 123,000 - 10,000
Lease payments, taxes,
utilities, maint. 781,000 202,000 - 579,000
utilities, maint.
Other 45,000 45,000 - -
----------- ----------- ------- --------
$15,707,000 $15,072,000 $31,000 $604,000
=========== =========== ======= ========
</TABLE>
The severance payments and medical and other costs incurred in
connection with the sale of NTI and the closure of the related
support facility were for the termination of hourly and
salaried, administrative, manufacturing and support employees,
all of whom were terminated during the first and second fiscal
quarters ended May 27, 2001 and August 26, 2001, respectively,
and substantially all of the severance payments and related
costs for such terminated employees (totaling $1,303,000) were
paid during such quarters. The lease obligations will be paid
through August 2004 pursuant to the related lease agreements.
NTI did not have a material effect on Park's consolidated
financial position, results of operations, capital resources,
liquidity or continuing operations, and the sale of NTI is not
expected to have a material effect on the Company's future
operating results.
11. RESTRUCTURING AND SEVERANCE CHARGES
The Company recorded non-recurring, pre-tax charges of
$2,921,000 in its fiscal year 2002 third quarter ended
November 25, 2001 in connection with the closure of the
conventional lamination line of Dielektra GmbH ("Dielektra"),
its electronic materials business located in Cologne, Germany,
and the reduction of the size of Dielektra's mass lamination
operations to enable Dielektra to focus on its DatlamT
automated continuous lamination and paneling technology and on
the marketing and manufacturing of high technology, higher
layer count mass lamination product. The charges included
$2,020,000 for severance payments and related costs for
terminated employees. In addition, the Company recorded non-
recurring, pre-tax severance charges of $681,000 in its fiscal
2002 first quarter ended May 27, 2001 and $125,000 in its
third quarter ended November 25, 2001 for severance payments
and related costs for terminated employees at the Company's
continuing operations. The components of these charges and the
related liability balances and activity from the November 25,
2001 and May 27, 2001 balance sheet dates to the March 3, 2002
balance sheet date are set forth below.
<TABLE>
<CAPTION>
Charges 3/3/02
Closure Incurred or Remaining
Charges Paid Reversals Liabilities
<s> <c> <c> <c> <c>
Dielektra GmbH
charges:
Impairment of long
lived assets $ 378,000 $ 378,000 $ - $ -
Write down of assets 523,000 523,000 - -
Severance payments 2,020,000 808,000 - 1,212,000
and related costs ---------- ---------- --------- ----------
2,921,000 1,709,000 1,212,000
Other severance
payments and related
costs 806,000 806,000 - -
---------- ---------- -------- ----------
$3,727,000 $2,515,000 $ - $1,212,000
========== ========== ======== ==========
</TABLE>
The charge for fixed asset impairments was comprised of
$378,000 to write off the net book value of machinery and
equipment and $523,000 to write down related land and building
that are no longer used as a result of the close-down of the
conventional lamination line of Dielektra. The machinery and
equipment have no residual value. The land and building that
previously housed the closed operations are being held for
sale and have been written down to their estimated net
realizable value of $2,050,000.
As stated above in this Note and in the preceding Note 10, the
Company incurred charges (totaling $4,129,000) for severance
payments and related costs for employees whose employment was
terminated by the Company as follows: $2,020,000 for employees
terminated in Germany during the third quarter ended November
25, 2001; $681,000 and $125,000 for employees terminated at
its continuing operations in Asia, Europe and North America
during the first quarter ended May 27, 2001 and third quarter
ended August 26, 2001, respectively; and $1,303,000 for
employees terminated in connection with the sale of NTI and
the closure of a related support facility in Arizona during
the first fiscal quarter ended May 27, 2001.
All the terminated employees were hourly and salaried,
administrative, manufacturing and support employees, all such
employees were terminated during the first, second and third
fiscal quarters ended May 27, 2001, August 26, 2001 and
November 25, 2001, respectively, and substantially all the
severance payments and related costs for such terminated
employees (totaling $4,129,000) were paid during such
quarters, except payments and costs of $1,212,000 in Germany
all of which are expected to be paid in installments to
terminated employees in Germany during the Company's 2003
fiscal year first and second quarters ending June 2, 2002 and
September 1, 2002, respectively. All the severance payments
and related costs for the employees terminated in connection
with the sale of NTI and the closure of the related support
facility (totaling $1,303,000) were included in the
$15,707,000 of charges in connection with the sale of NTI and
the closure of the related support facility.
As a result of the foregoing employee terminations and other
less significant employee terminations in connection with
business contractions and in the ordinary course of business
and substantial numbers of employee resignations and
retirements in the ordinary course of business, the total
number of employees employed by the Company declined to
approximately 1,700 as of March 3, 2002 from approximately
3,000 as of February 25, 2001, the end of the Company's 2001
fiscal year.
12. EMPLOYEE BENEFIT PLANS
a. Profit Sharing Plan - Park and certain of its subsidiaries
have a non-contributory profit sharing retirement plan covering
their regular full-time employees. The plan may be modified or
terminated at any time, but in no event may any portion of the
contributions revert back to the Company. The Company's contribu
tions under the plan amounted to $791,000, $4,597,000 and
$2,269,000 for fiscal years 2002, 2001 and 2000, respectively.
Contributions are discretionary and may not exceed the amount
allowable as a tax deduction under the Internal Revenue Code. In
addition, the Company sponsors a 401(k) savings plan, pursuant to
which the contributions of employees of certain subsidiaries were
partially matched by the Company in the amounts of $527,000,
$751,000 and $848,000 in fiscal years 2002, 2001 and 2000,
respectively.
b. Pension Plans - The domestic subsidiary of the Company which
conducted the plumbing hardware business had two pension plans,
neither of which are active, covering its union employees. On
February 27, 2000, the two plans were merged in order to simplify
the administration of the plans. The Company's funding policy was
to contribute annually the amounts necessary to satisfy
applicable funding standards. There were no changes made to
funding levels or retiree benefits as a result of the merger of
the two plans. However, in connection with the closure of the
plumbing hardware business, the Company terminated the combined
plan and purchased annuity contracts to fund the pension
liability.
A subsidiary of the Company in Europe has a non-contributory
defined benefit pension plan which covers certain employees.
Under the terms of this plan, participants may not accrue
additional service time after December 31, 1987. The
Company's policy with respect to this plan is to contribute
annually the amounts necessary to meet current payment
obligations of the plan. The Company recorded deferred
pension liabilities relating to this plan in the amounts of
$8,908,000 and $8,678,000 at March 3, 2002 and February 25,
2001, respectively, in accordance with SFAS 87. The effect
on the Company's consolidated financial statements in
recording the liability was to record a corresponding
reduction to accumulated non-owner changes of $845,000 and
$43,000 at those same dates.
Net pension costs included the following components:
<table>
<caption>
Fiscal Year
Changes in Benefit Obligations 2002 2001
<s> <c> <c>
Benefit obligation at beginning of year $ 9,408,000 $14,130,000
Service cost 82,000 96,000
Interest cost 533,000 839,000
Actuarial loss 108,000 148,000
Currency translation (gain)/loss (439,000) (633,000)
Benefits paid (542,000) (871,000)
Payment for annuities - (4,301,000)
------------ ------------
Benefit obligation at end of Year $ 9,150,000 $ 9,408,000
Changes in Plan Assets
Fair value of plan assets at
beginning of year $ - $ 3,213,000
Actual return on plan assets - 169,000
Employer contributions 542,000 1,831,000
Benefits paid (542,000) (871,000)
Payment for annuities - (4,301,000)
Administrative expenses paid - (41,000)
------------ ------------
Fair value of plan assets $ - $ -
Underfunded status $(9,150,000) $(9,408,000)
Unrecognized net loss 1,317,000 1,000,000
------------ ------------
Net accrued pension cost $(7,833,000) $(8,408,000)
</table>
<table>
<caption>
Fiscal Year
Components of Net Periodic 2002 2001 2000
Benefit Cost
<s> <c> <c> <c>
Service cost - benefits earned
during the period $ 82,000 $ 96,000 $ 97,000
Interest cost on projected 533,000 839,000 953,000
benefit obligation
Expected return on plan assets - (252,000) (262,000)
Amortization of unrecognized
transition obligation - - 17,000
Amortization of prior service cost - - 14,000
Recognized net actuarial loss - 38,000 58,000
Effect of curtailment - 1,761,000 144,000
-------- ---------- ----------
Net periodic pension cost $615,000 $2,482,000 $1,021,000
</table>
The projected benefit obligation for the terminated domestic
plan was determined using an assumed discount rate of 7.50%
for fiscal year 2000 and the assumed long-term rate of
return on plan assets was 8%. Projected wage increases are
not applicable as benefits pursuant to the plan are based
upon years of service without regard to levels of
compensation.
The projected benefit obligation for the foreign plan was
determined using an assumed discount rate of 6% for fiscal
years 2002 and 2001. Projected wage increases of 3.5% and
2.1% and inflation factors of 2.0% and 1.5% were also
assumed for fiscal years 2002 and 2001, respectively. As
previously stated, the Company's funding policy with respect
to this plan is to contribute annually the amounts necessary
to meet current payment obligations of the plan.
13. COMMITMENTS AND CONTINGENCIES
a.Lease Commitments - The Company conducts certain of its
operations in leased facilities, which include several
manufacturing plants, warehouses and offices, and land
leases. The leases on facilities are for terms of up to 10
years, the latest of which expires in 2006. Many of the
leases contain renewal options for periods ranging from one
to ten years and require the Company to pay real estate
taxes and other operating costs. The latest land lease
expiration is 2013 and this land lease contains renewal
options of up to 35 years.
These non-cancelable operating leases have the following
payment schedule.
Fiscal Year Amount
2003 $2,794,000
2004 1,799,000
2005 1,102,000
2006 557,000
2007 180,000
Thereafter 819,000
----------
$7,251,000
Rental expense, inclusive of real estate taxes and other
costs, amounted to $3,933,000, $3,711,000 and $3,424,000 for
fiscal years 2002, 2001 and 2000, respectively
b. Environmental Contingencies - The Company and certain of its
subsidiaries have been named by the Environmental Protection
Agency (the "EPA") or a comparable state agency under the
Comprehensive Environmental Response, Compensation and
Liability Act (the "Superfund Act") or similar state law as
potentially responsible parties in connection with alleged
releases of hazardous substances at nine sites. In addition,
a subsidiary of the Company has received cost recovery
claims under the Superfund Act from other private parties
involving two other sites and has received requests from the
EPA under the Superfund Act for information with respect to
its involvement at three other sites.
Under the Superfund Act and similar state laws, all parties
who may have contributed any waste to a hazardous waste
disposal site or contaminated area identified by the EPA or
comparable state agency may be jointly and severally liable
for the cost of cleanup. Generally, these sites are
locations at which numerous persons disposed of hazardous
waste. In the case of the Company's subsidiaries, generally
the waste was removed from their manufacturing facilities
and disposed at waste sites by various companies which
contracted with the subsidiaries to provide waste disposal
services. Neither the Company nor any of its subsidiaries
have been accused of or charged with any wrongdoing or
illegal acts in connection with any such sites. The Company
believes it maintains an effective and comprehensive environ
mental compliance program.
The insurance carriers that provided general liability
insurance coverage to the Company and its subsidiaries for
the years during which the Company's subsidiaries' waste was
disposed at these sites have agreed to pay, or reimburse the
Company and its subsidiaries for, 100% of their legal
defense and remediation costs associated with three of these
sites and 25% of such costs associated with another three of
these sites.
The total costs incurred by the Company and its subsidiaries
in connection with these sites, including legal fees
incurred by the Company and its subsidiaries and their
assessed share of remediation costs and excluding amounts
paid or reimbursed by insurance carriers, were approximately
$200,000, $300,000 and $200,000 in fiscal years 2002, 2001
and 2000, respectively. The recorded liabilities included in
accrued liabilities for environmental matters were
$3,975,000, $4,431,000 and $4,350,000 for fiscal years 2002,
2001 and 2000, respectively.
Included in cost of sales are charges for actual
expenditures and accruals, based on estimates, for certain
environmental matters described above. The Company accrues
estimated costs associated with known environmental matters,
when such costs can be reasonably estimated and when the
outcome appears probable. The Company believes that the
ultimate disposition of known environmental matters will not
have a material adverse effect on the liquidity, capital
resources, business or consolidated financial position of
the Company. However, one or more of such environmental mat
ters could have a significant negative impact on the
Company's consolidated financial results for a particular
reporting period.
14. BUSINESS SEGMENTS
The Company's specialty adhesive tape and film business,
advanced composite business and plumbing hardware business
were previously aggregated into the engineered materials and
plumbing hardware segment. During fiscal year 2001, the
Company closed and liquidated its plumbing hardware business
(see Note 16 below). In fiscal years 2001, 2000 and 1999,
the specialty adhesive tape, advanced composite and plumbing
hardware businesses comprised less than 10% of the Company's
consolidated revenues and assets, and the Company considered
itself to operate in one business segment. The Company's
electronic materials products are marketed primarily to
leading independent printed circuit board fabricators,
electronic manufacturing service companies, electronic
contract manufacturers and major electronic original
equipment manufacturers ("OEMs") located throughout North
America, Europe and Asia. The Company's specialty adhesive
tape and advanced composite customers, the majority of which
are located in the United States, include OEMs, independent
firms and distributors in the electronics, aerospace and
industrial industries.
Sales are attributed to geographic region based upon the
region from which the materials were shipped to the
customer. Intersegment sales and sales between geographic
areas were not significant.
Financial information regarding the Company's operations by
geographic area follows (in thousands):
<table>
<caption>
Fiscal Year
2002 2001 2000
<s> <c> <c> <c>
United States $132,520 $312,851 $266,158
Europe 55,507 121,329 95,812
Asia 42,033 88,017 63,291
-------- -------- --------
Total sales $230,060 $522,197 $425,261
United States $104,386 $108,804 $ 74,846
Europe 22,954 24,657 27,484
Asia 22,943 26,596 24,092
-------- -------- --------
Total long-lived assets $150,283 $160,057 $126,422
</table>
15. CUSTOMER AND SUPPLIER CONCENTRATIONS
a. Customers - Sales to Sanmina Corporation were 18.1% and
25.1% of the Company's total worldwide sales for fiscal years
2002 and 2001, respectively. Sales to Tyco Printed Circuit Group
L.P. were 11.3% of the Company's total worldwide sales for fiscal
year 2002.
While no other customer accounted for 10% or more of the
Company's total worldwide sales in fiscal year 2002, and the
Company is not dependent on any single customer, the loss of
a major electronic materials customer or of a group of
customers could have a material adverse effect on the
Company's business and results of operations.
b.Sources of Supply - The principal materials used in the
manufacture of the Company's electronic materials products
are specially manufactured copper foil, fiberglass cloth and
synthetic reinforcements, and specially formulated resins
and chemicals. Although there are a limited number of
qualified suppliers of these materials, the Company has
nevertheless identified alternate sources of supply for each
of such materials. While the Company has not experienced
significant problems in the delivery of these materials and
considers its relationships with its suppliers to be strong,
a disruption of the supply of material from a principal
supplier could adversely affect the Company's electronic
materials business. Furthermore, substitutes for these
materials are not readily available and an inability to
obtain essential materials, if prolonged, could materially
adversely affect the Company's electronic materials
business.
16.CLOSURE OF PLUMBING HARDWARE BUSINESS
In the fourth quarter of the 2000 fiscal year, the Company
decided to close and liquidate its plumbing hardware
business. The pre-tax charges to earnings for the 2000 fiscal
year related to the closure of the plumbing hardware business
totaled $4,464,000, including $1,234,000 for the impairment
of long-lived assets, $1,111,000 for other asset write-offs,
and $2,119,000 for facility and other costs related to the
closure.
During the 2001 fiscal year, the Company closed and
liquidated its plumbing hardware business. In the fourth
quarter of the 2001 fiscal year, the Company realized
$1,262,000 in gains from the sale of real estate and other
plumbing hardware business assets, collected $290,000 more of
accounts receivable than originally anticipated, and reversed
$600,000 of liabilities accrued in fiscal year 2000 for other
costs to close the business, which were no longer required.
In the fourth quarter of the 2001 fiscal year, an expense of
$1,149,000 was incurred for the purchase of annuity contracts
to fund the liability of the pension plan that was
terminated.
At March 3, 2002, the remaining accrued liability relating to
the closure and liquidation of the plumbing hardware business
consisted of $669,000 for environmental issues and $150,000
for workers' compensation claims. At February 25, 2001, these
amounts were $675,000 and $200,000, respectively. Although
the plan for the closure and liquidation of the Company's
plumbing hardware business was implemented during the
Company's 2001 fiscal year, the Company cannot reasonably
estimate when the environmental issues and workers'
compensation claims will be resolved.
The operating results of the plumbing hardware business
included in the Consolidated Statement of Operations are as
follows (in thousands):
<table>
<caption>
Fiscal Year Ended
February 25, February 27,
2001 2000
<s> <c> <c>
Net sales $1,883 $13,491
Cost of sales 1,001 11,486
Gross profit 882 2,005
Selling, general and
administrative expenses 907 2,563
(Loss) profit from
operations $ (25) $ (558)
</table>
17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<table>
<caption>
Quarter
First Second Third Fourth
(In thousands, except per share
amounts)
<s> <c> <c> <c> <c>
Fiscal 2002:
Net sales $ 69,102 $ 51,743 $ 52,625 $ 56,590
Gross profit 3,266 1,422 1,539 5,568
Net loss (14,612) (3,779) (6,117) (1,011)
Loss per share:
Basic $(.75) $(.19) $(.31) $(.05)
Diluted $(.75) $(.19) $(.31) $(.05)
Weighted average
common shares outstanding:
Basic 19,420 19,545 19,559 19,612
Diluted 19,420 19,545 19,559 19,612
Fiscal 2001:
Net sales $120,159 $129,902 $142,608 $129,528
Gross profit 23,695 28,393 34,116 31,466
Net earnings 8,829 11,655 14,827 14,108
Earnings per share:
Basic $.56 $.73 $.93 $.88
Diluted $.50 $.63 $.78 $.74
Weighted average
common shares outstanding:
Basic 15,858 15,882 15,940 16,047
Diluted 19,602 19,939 20,217 20,249
</table>
(Loss)/earnings per share is computed separately for each
quarter. Therefore, the sum of such quarterly per share
amounts may differ from the total for the years. The weighted
average number of shares outstanding and the (loss)/earnings
per share for each period, have been adjusted to give
retroactive effect to the three-for-two split of the
Company's common stock declared October 10, 2000 payable
November 8, 2000 to stockholders of record on October 20,
2000.
18.RECENTLY ISSUED ACCOUNTING PROUNOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141,
"Business Combinations", and Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible
Assets", effective for fiscal years beginning after December
15, 2001. Under the new rules set forth in these Statements,
goodwill and other intangible assets deemed to have
indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be
amortized over their useful lives. In addition, Statement 141
eliminates the pooling-of-interests method of accounting for
business combinations, except for qualifying business
combinations that were initiated prior to July 1, 2001. The
Company will apply the new rules on accounting for goodwill
and other intangible assets beginning in the first quarter of
its fiscal year ending March 2, 2003. The Company does not
have any goodwill on its balance sheet, has virtually no
intangible assets, and is not engaged in any transactions
that are affected by the Statements; and, therefore, the
Company believes that application of the non-amortization
provisions of the Statements will not have a material adverse
effect on the Company's consolidated results of operations or
financial position.
In August 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations" ("SFAS 143")
effective for fiscal years beginning after June 15, 2002.
SFAS 143 requires the fair value of liabilities for asset
retirement obligations to be recognized in the period in
which the obligations are incurred if a reasonable estimate
of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the
long-lived asset. The Company has not yet determined what
effect SFAS 143 will have on the Company's consolidated
results of operations or financial position.
In October 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"), which supercedes Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). Although
it retains the basic requirements of SFAS 121 regarding when
and how to measure an impairment loss, SFAS 144 provides
additional implementation guidance. SFAS 144 is effective for
all fiscal years beginning after December 15, 2001. The
Company has not yet determined what effect SFAS 144 will have
on the Company's consolidated results of operations or
financial position.
*******
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information called for by this item (except for
information as to the Company's executive officers, which
information appears elsewhere in this Report) is incorporated by
reference to the Company's definitive proxy statement for the
2002 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
Item 11. Executive Compensation.
The information called for by this Item is incorporated by
reference to the Company's definitive proxy statement for the
2002 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information called for by this Item is incorporated by
reference to the Company's definitive proxy statement for the
2002 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
Item 13. Certain Relationships and Related Transactions.
The information called for by this Item is incorporated by
reference to the Company's definitive proxy statement for the
2002 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Page
Reports on Form 8-K.
(a) Documents filed as a part of this Report
(1)Financial Statements:
The following Consolidated Financial
Statement of the Company are included in
Part II, Item 8:
Report of Ernst & Young LLP, independent 34
auditors
Balance Sheets 35
Statements of Operations 36
Statements of Stockholders' Equity 37
Statements of Cash Flows 38
Notes to Consolidated Financial Statement 39
(1-18)
(2)Financial Statement Schedules:
The following additional information should
be read in conjunction with the
Consolidated Financial Statements of the
Registrant described in item 14(a)(1)
above:
Schedule II - Valuation and Qualifying 61
Accounts
All other schedules have been omitted
because they are not applicable or not
required, or the information is included
elsewhere in the financial statements or
notes thereto.
(3)Exhibits:
The information required by this Item
relating to Exhibits to this Report is
included in the Exhibit Index on pages 62
to 66 hereof.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed
during the fiscal quarter ended March 3,
2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: May 29, 2002 PARK ELECTROCHEMICAL CORP.
By:/s/Brian E. Shore
Brian E. Shore,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Title Date
President and Chief
/s/Brian E. Shore Executive Officer and
Brian E. Shore Director May 29, 2002
(principal executive
officer)
Senior Vice President,
/s/Murray O. Stamer Finance
Murray O. Stamer (principal financial and May 29, 2002
accounting officer)
/s/Jerry Shore Chairman of the Board and
Jerry Shore Director May 29, 2002
/s/Mark S. Ain
Mark S. Ain Director May 29, 2002
/s/Anthony Chiesa
Anthony Chiesa Director May 29, 2002
/s/Lloyd Frank
Lloyd Frank Director May 29, 2002
Schedule II
<table>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
<caption>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C
Balance at Charged to
Beginning Cost and
Description of Period Expenses
<s> <c> <c>
ALLOWANCE FOR
DOUBTFUL ACCOUNTS:
53 weeks ended March 3 2002 $2,074,000 $ 123,000
52 weeks ended February 25, 2001 $2,388,000 $ 228,000
52 weeks ended February 27, 2000 $2,030,000 $ 725,000
<fn>
(A) Uncollectable accounts, net of recoveries.
</table>
Schedule II (continued)
<table>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
<caption>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column A Column D Column E
Other
Accounts Balance at
Written Translation End of
Description Off Adjustment Period
<s> <c> <c> <c>
(A)
ALLOWANCE FOR
DOUBTFUL ACCOUNTS:
53 weeks ended March 3 2002 $(366,000) $ (14,000 $1,817,000
52 weeks ended February 25, 2001 $(477,000) $ (65,000) $2,074,000
52 weeks ended February 27, 2000 $(332,000) $ (35,000) $2,388,000
<fn>
(A) Uncollectable accounts, net of recoveries.
</table>
EXHIBIT INDEX
Exhibit
Numbers Description Page
3.01 Restated Certificate of Incorporation, dated
March 28, 1989, filed with the Secretary of State
of the State of New York on April 10, 1989, as
amended by Certificate of Amendment of the
Certificate of Incorporation, increasing the
number of authorized shares of Common stock from
15,000,000 to 30,000,000 shares, dated July 12,
1995, filed with the Secretary of State of the
State of New York on July 17, 1995, and by
Certificate of Amendment of the Certificate of
Incorporation, amending certain provisions
relating to the rights, preferences and
limitations of the shares of a series of
Preferred Stock, date August 7, 1995, filed with
the Secretary of State of the State of New York
on August 16, 1995
........................................
3.02 Certificate of Amendment of the Certificate of
Incorporation, increasing the number of
authorized shares of Common Stock from 30,000,000
to 60,000,000 shares, dated October 10, 2000,
filed with the Secretary of State of the State of -
New York on October 11,
2000......................
3.03 By-Laws, as amended May 21,
2002...........................
4.01 Amended and Restated Rights Agreement, dated as
of July 12, 1995, between the Company and
Registrar and Transfer Company, as Rights Agent,
relating to the Company's Preferred Stock
Purchase Rights. (Reference is made to Exhibit 1
to Amendment No. 1 on Form 8-A/A filed on August
10, 1995, Commission File No. 1-4415, which is -
incorporated herein by
reference.)......................................
10.01 Lease dated December 12, 1989 between Nelco
Products, Inc. and James Emmi regarding real
property located at 1100 East Kimberly Avenue,
Anaheim, California and letter dated December 29,
1994 from Nelco Products, Inc. to James Emmi exer
cising its option to extend such
Lease................
10.02 Lease dated December 12, 1989 between Nelco
Products, Inc. and James Emmi regarding real
property located at 1107 East Kimberly Avenue,
Anaheim, California and letter dated December 29,
1994 from Nelco Products, Inc. to James Emmi exer
cising its option to extend such
Lease................
10.03 Lease Agreement dated August 16, 1983 and Exhibit
C, First Addendum to Lease, between Nelco
Products, Inc. and TCLW/Fullerton regarding real
property located at 1411 E. Orangethorpe Avenue,
Fullerton, California.................
10.03(a)Second Addendum to Lease dated January 26, 1987
to Lease Agreement dated August 16, 1983 (see
Exhibit 10.03 hereto) between Nelco Products,
Inc. and TCLW/Fullerton regarding real property
located at 1421 E. Orangethorpe Avenue,
Fullerton,
California......................................
10.03(b)Third Addendum to Lease dated January 7, 1991 and
Fourth Addendum to Lease dated January 7, 1991 to
Lease Agreement dated August 16, 1983 (see
Exhibit 10.03 hereto) between Nelco Products,
Inc. and TCLW/Fullerton regarding real property
located at 1411, 1421 and 1431 E. Orangethorpe
Avenue, Fullerton, California. (Reference is made
to Exhibit 10.03(b) of the Company's Annual
Report on Form 10-K for the fiscal year ended -
March 2, 1997, Commission File No. 1-4415, which
is incorporated herein by reference.)....
10.03(c)Fifth Addendum to Lease dated July 5, 1995 to
Lease dated August 16, 1983 (see Exhibit 10.03
hereto) between Nelco Products, Inc. and
TCLW/Fullerton regarding real property located at
1411 E. Orangethorpe Avenue, Fullerton,
California.......................................
..........
10.04 Lease Agreement dated May 26, 1982 between Nelco
Products Pte. Ltd. (lease was originally entered
into by Kiln Technique (Private) Limited, which
subsequently assigned this lease to Nelco
Products Pte. Ltd.) and the Jurong Town Cor
poration regarding real property located at 4 Gul
Crescent, Jurong,
Singapore........................................
..
10.04(a)Deed of Assignment, dated April 17, 1986 between
Nelco Products Pte. Ltd., Kiln Technique
(Private) Limited and Paul Ma, Richard Law, and
Michael Ng, all of Peat Marwick & Co., of the
Lease Agreement dated May 26, 1982 (see Exhibit
10.04 hereto) between Kiln Technique (Private)
Limited and the Jurong Town Corporation regarding
real property located at 4 Gul Crescent, Jurong,
Singapore.......................
10.05(b)1992 Stock Option Plan of the Company, as amended
by First Amendment thereto. (Reference is made to
Exhibit 10.06(b) of the Company's Annual Report
on Form 10-K for the fiscal year ended March 1,
1998, Commission File No. 1-4415, which is
incorporated herein by reference. This exhibit is
a management contract or compensatory plan or -
arrangement.)....................................
..........
10.06 Amended and Restated Employment Agreement dated
February 28, 1994 between the Company and Jerry
Shore. (This exhibit is a management contract or
compensatory plan or
arrangement.)....................................
..........
10.06(a) Amendment No. 1 dated March 1, 1995 to the
Amended and Restated Employment Agreement dated
February 28, 1994 (see Exhibit 10.06 hereto)
between the Company and Jerry Shore. (This
exhibit is a management contract or compensatory
plan or arrangement.)............................
10.06(b)Amendment No. 2 dated December 5, 1996 to the
Amended and Restated Employment Agreement dated -
February 28, 1994 (see Exhibit 10.06 hereto)
between the Company and Jerry Shore. (Reference
is made to Exhibit 10.07(b) of the Company's
Annual Report on Form 10-K for the fiscal year
ended March 2, 1997, Commission File No. 1-4415,
which is incorporated herein by reference. This
exhibit is a management contract or compensatory
plan or arrangement.)......................
10.06(c)Amendment No. 3 dated October 14, 1997 to the
Amended and Restated Employment Agreement dated
February 28, 1994 (see Exhibit 10.06 hereto)
between the Company and Jerry Shore. (Reference
is made to Exhibit 10.07(c) of the Company's
Annual Report on Form 10-K for the fiscal year
ended March 1, 1998, Commission File No. 1-4415,
which is incorporated herein by reference. This -
exhibit is a management contract or compensatory
plan or arrangement.)......................
10.07 Lease dated April 15, 1988 between FiberCote
Industries, Inc. (lease was initially entered
into by USP Composites, Inc., which subsequently
changed its name to FiberCote Industries, Inc.)
and Geoffrey Etherington, II regarding real
property located at 172 East Aurora Street,
Waterbury, Connecticut..................
10.07(a)Amendment to Lease dated December 21, 1992 to
Lease dated April 15, 1988 (see Exhibit 10.07
hereto) between FiberCote Industries, Inc. and
Geoffrey Etherington II regarding real property
located at 172 East Aurora Street, Waterbury, Con
necticut.........................................
..........
10.07(b)Letter dated June 30, 1997 from FiberCote
Industries, Inc. to Geoffrey Etherington II
extending the Lease dated April 15, 1988 (see
Exhibit 10.07 hereto) between FiberCote
Industries, Inc. and Geoffrey Etherington II
regarding real property located at 172 East
Aurora Street, Waterbury Connecticut. (Reference
is made to Exhibit 10.08(b) of the Company's
Annual Report on Form 10-K for the fiscal year -
ended March 1, 1998, Commission File No. 1-4415,
which is incorporated herein by
reference.).........................
10.08 Lease dated August 31, 1989 between Nelco
Technology, Inc. and Cemanudi Associates
regarding real property located at 1104 West
Geneva Drive, Tempe, Arizona.....................
10.08(a)First Amendment to Lease dated October 21, 1994
to Lease dated August 31, 1989 (see Exhibit 10.08
hereto) between Nelco Technology, Inc. and
Cemanudi Associates regarding real property
located at 1104 West Geneva Drive, Tempe,
Arizona..........................................
10.10 Lease dated December 12, 1990 between Neltec,
Inc. and NZ Properties, Inc. regarding real -
property located at 1420 W. 12th Place, Tempe,
Arizona. (Reference is made to Exhibit 10.13 of
the Company's Annual Report on Form 10-K for the
fiscal year ended March 2, 1997, Commission File
No. 1-4415, which is incorporated herein by
reference.)..........
10.10(a)Letter dated January 8, 1996 from Neltec, Inc. to
NZ Properties, Inc. exercising its option to
extend the Lease dated December 12, 1990 (see
Exhibit 10.10 hereto) between Neltec, Inc. and NZ
Properties, Inc. regarding real property located
at 1420 W. 12th Place, Tempe, Arizona. (Reference
is made to Exhibit 10.13(a) of the Company's
Annual Report on Form 10-K for the fiscal year
ended March 2, 1997, Commission File No. 1-4415, -
which is incorporated herein by
reference.)......................................
10.12 Tenancy Agreement dated October 8, 1992 between
Nelco Products Pte. Ltd. and Jurong Town
Corporation regarding real property located at 36
Gul Lane, Jurong Town, Singapore. (Reference is
made to Exhibit 10.18 of the Company's Annual
Report on Form 10-K for the fiscal year ended
February 28, 1993, Commission File No. 1-4415, -
which is incorporated herein by
reference.)......................................
10.12(a)Tenancy Agreement dated November 3, 1995 between
Nelco Products Pte. Ltd. and Jurong Town
Corporation regarding real property located at 36
Gul Lane, Jurong Town, Singapore. (Reference is
made to Exhibit 10.16(a) of the Company's Annual
Report on Form 10-K for the fiscal year ended
March 2, 1997, Commission File No. 1-4415, which -
is incorporated herein by
reference.).........................
10.13 Lease Contract dated February 26, 1988 between
the New York State Department of Transportation
and the Edgewater Stewart Company regarding real
property located at 15 Governor Drive in the
Stewart International Airport Industrial Park,
New Windsor, New York.....................
10.13(a)Assignment and Assumption of Lease dated February
16, 1995 between New England Laminates Co., Inc.
and the Edgewater Stewart Company regarding the
assignment of the Lease Contract (see Exhibit
10.13 hereto) for the real property located at 15
Governor Drive in the Stewart International
Airport Industrial Park, New Windsor, New
York.............
10.13(b)Lease Amendment No. 1 dated February 17, 1995
between New England Laminates Co., Inc. and the
New York State Department of Transportation to
Lease Contract dated February 26, 1988 (see
Exhibit 10.13 hereto) regarding the real property
located at 15 Governor Drive in the Stewart
International Airport Industrial Park, New
Windsor, New York.............
10.14 Sale and Purchase Agreement dated 29 October 1997
between Dieter G. Weiss, Lothar Hubert Reinartz,
Nelco International Corporation and Park
Electrochemical Corp. relating to the sale and
purchase of shares of capital in Dielektra GmbH.
(Reference is made to Exhibit 10.01 of the
Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended November 30, 1997, -
Commission File No. 1-4415, which is incorporated
herein by reference.)..........
21.01 Subsidiaries of the
Company................................
23.01 Consent of Ernst & Young
LLP...............................
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>3
<FILENAME>ex303.txt
<DESCRIPTION>EXHIBIT
<TEXT>
Exhibit 3.03
BY-LAWS
OF
PARK ELECTROCHEMICAL CORP.
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of
the Corporation shall be in the City and State of New York.
Section 2. Other Offices. The Corporation may also have
offices at such other place or places within and without the
State of New York as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
Section 1. Annual Meetings. The annual meeting of
shareholders of the Corporation shall be held on the fourth
Wednesday in June of each year (or if said day be a legal holi
day, then on the next succeeding day not a legal holiday), at ten
o'clock A.M., at the principal office of the Corporation in the
State of New York, or at such other place within or without the
State of New York and at such other time and on such other date
as may be determined by the Board of Directors and as shall be
designated in the notice of said meeting, for the purpose of
electing directors and for the transaction of such other business
as may properly be brought before the meeting.
Section 2. Special-Meetings. Special Meetings of the
stockholders shall be held at the principal office of the
Corporation in the State of New York, or at such other place
within the State of New York as may be designated in the notice
of said meeting, by resolution of the Board of Directors, and
shall be called by the Chairman of the Board, the President or
the Secretary at the request in writing of stockholders owning of
record at least eighty percent (80%) of the issued and
outstanding shares of stock of the Corporation entitled to vote
thereat.
Section 3. Notice of Purpose of Meetings. Written notice
of the purpose or purposes and of the time and place of every
meeting of shareholders shall be given by the Chairman of the
Board, the President, the Secretary or an Assistant Secretary
either personally or by mail or by any other lawful means of
communication not less than ten nor more than fifty days before
the meeting to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be directed to each
shareholder at his address as it appears on the stock book unless
he shall have filed with the Secretary of the Corporation a
written request that notices intended for him be mailed to some
other address, in which case it shall be mailed or transmitted to
the address designated in such request. Except where otherwise
required by law, notice of any adjourned meeting of the share
holders of the Corporation shall not be required to be given.
Section 4. Quorum. A quorum at all meetings of stock
holders shall consist of the holders of record of a majority of
the shares of stock of the Corporation, issued and outstanding,
entitled to vote at the meeting, present in person or by proxy,
except as otherwise provided by law or by the Certificate of
Incorporation. In the absence of a quorum at any meeting or any
adjournment thereof, a majority of those present in person or by
proxy and entitled to vote may adjourn such meeting from time to
time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted
at the meeting as originally called.
Section 5. Organization. Meetings of the stockholders
shall be presided over by the Chairman of the Board, or if he is
not present, by the President, or if neither the Chairman of the
Board nor the President is present, by any Vice President, or in
the absence of such officers, by a chairman to be chosen by a
majority of the stockholders entitled to vote who are present in
person or by proxy at the meeting. The Secretary of the Corpora
tion, or in his absence, an Assistant Secretary, shall act as
secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present, the meeting shall choose any
person present to act as secretary of the meeting.
Section 6. Voting. Except as otherwise provided in the
Certificate of Incorporation or by law, at every meeting of the
stockholders each stockholder of record entitled to vote at such
meeting shall have one vote in person or by proxy for each share-
of stock having voting rights held by him and registered in his
name on the books of the Corporation. Any vote on shares of
stock of the Corporation may be given by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in,
writing, subscribed by such stockholder or by his attorney
thereunto authorized and delivered to the secretary of the
meeting. Except as otherwise required by law, by the Certificate
of Incorporation or these By-Laws, all matters coming before any
meeting of the stockholders shall be decided by the vote of the
holders of a majority of the shares of stock present in person or
by proxy at such meeting, a quorum being present. At all elec
tions of directors the voting may but need not be by ballot.
Section 7. Inspectors of Election. At all elections of
directors, or in any other case in which inspectors may act, two
inspectors of election shall be appointed by the chairman of the
meeting, except as otherwise provided by law. The inspectors of
election shall take and subscribe an oath faithfully to execute
the duties of inspectors at such meeting with strict impartiali
ty, and according to the best of their ability, and shall take
charge of the polls and after the vote shall have been taken
shall make a certificate of the result thereof, but no director
or candidate for the office of director shall be appointed as
such inspector. If there be a failure to appoint inspectors or
if any inspector appointed be absent or refuse to act, or if his
office become vacant, the stockholders present at the meeting may
choose the required number of temporary inspectors.
Section 8. Fixing Record Date. For the purpose of
determining the shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meet
ing, or for the purpose of determining the shareholders entitled
to receive payment of any dividend or the allotment of any
rights, or for the purpose of any other action, the Board of
Directors may fix, in advance, a date as the record date for any
such determination of shareholders. Such date shall not be more
than sixty nor less than ten days before the date of such meet
ing, nor more than sixty days prior to any other action.
Section 9. Notice of Stockholder Nominees. Only persons
who are nominated in accordance with the following procedures set
forth in these By-Laws shall be eligible for election as direc
tors of the Corporation. Nominations of persons for election to
the Board of Directors may be made at any annual meeting of stock
holders (a) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (b) by any stockholder
of the Corporation (i) who is a stockholder of record on the date
of the giving of the notice provided for in this Section 9 and on
the record date for the determination of stockholders entitled to
vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 9.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must
have given timely notice thereof in proper written form to the
Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary
must be delivered to or mailed and received at the principal
executive offices of the Corporation not less than ninety (90)
days nor more than one hundred twenty (120) days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the
annual meeting is called for a date that is not within thirty
(30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the
day on which notice of the date of the annual meeting was mailed
or public disclosure of the date of the annual meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to
the Secretary must set forth (a) as to each person whom the
stockholder proposes to nominate for election as a director (i)
the name, age, business address and residence address of the per
son, (ii) the principal occupation or employment of the person,
(iii) the class or series and number of shares of capital stock
of the Corporation which are owned beneficially or of record by
the person and (iv) any other information relating to the person
that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated
thereunder; and (b) as to the stockholder giving the notice (i)
the name and record address of such stockholder, (ii) the class
or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such
stockholder, (iii) a description of all arrangements or under
standings between such stockholder and each proposed nominee and
any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv)
a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to nominate the persons
named in its notice and (v) any other information relating to
such stockholder that would be required to be disclosed in a
proxy statement or other filings required to be made in
connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the
rules and regulations promulgated thereunder. Such notice must
be accompanied by a written consent of each proposed nominee to
be named as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the
procedures set forth in this Section 9. If the Chairman of the
annual meeting determines that a nomination was not made in accor
dance with the foregoing procedures, the Chairman shall declare
to the meeting that the nomination was defective and such
defective nomination shall be disregarded.
Section 10. Notice of Stockholder Business. No business
may be transacted at an annual meeting of stockholders, other
than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction
of the Board of Directors (or any duly authorized committee
thereof), (b) otherwise properly brought before the annual
meeting by or at the direction of the Board of Directors (or any
duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any stockholder of the Corpo
ration (i) who is a stockholder of record on the date of the
giving of the notice provided for in this Section 10 and on the
record date for the determination of stockholders entitled to
vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 10.
In addition to any other applicable requirement, for
business to be properly brought before an annual meeting by a
stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corpora
tion.
To be timely, a stockholder's notice to the Secretary
must be delivered to or mailed and received at the principal
executive offices of the Corporation not less than ninety (90)
days nor more than one hundred twenty (120) days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the
annual meeting is called for a date that is not within thirty
(30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the
day on which notice of the date of the annual meeting was mailed
or public disclosure of the date of the annual meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to
the Secretary must set forth as to each matter such stockholder
proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at
the annual meeting, (ii) the name and record address of such
stockholder, (iii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or
of record by such stockholder, (iv) a description of all arrange
ments or understandings between such stockholder and any other
person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material
interest of such stockholder in such business and (v) a
representation that such stockholder intends to appear in person
or by proxy at the annual meeting to bring such business before
the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in
accordance with the procedures set forth in this Section 10,
provided, however, that, once business has been properly brought
before the annual meeting in accordance with such procedures,
nothing in this Section 10 shall be deemed to preclude discussion
by any stockholder of any such business. If the Chairman of an
annual meeting determines that business was not properly brought
before the annual meeting in accordance with the foregoing
procedures, the Chairman shall declare to the meeting that the
business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE III
DIRECTORS
Section 1. Powers, Number, Qualification, Term, Quorum,
Vacancies. The property, affairs and business of the Corporation
shall be managed by its Board of Directors, consisting of not
less than five nor more than fifteen persons. The exact number
of directors within the maximum and minimum limitations specified
shall be fixed from time to time by resolution of the Board of
Directors. Directors need not be stockholders of the Corpora
tion. All directors shall be of full age and at least one shall
be a citizen of the United States and a resident of the State of
New York. Directors shall be elected at the annual meeting and
until their successors, shall be elected and shall qualify.
Section 2. Quorum. A majority of the members of the
Board of Directors then in office, acting at a meeting duly
assembled, shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there
shall be less than a quorum present, a majority of those present
may adjourn the meeting without further notice from time to time
until a quorum shall have been obtained. Any act of a majority
of directors present at a meeting at which there is a quorum
shall be the act of the Board of Directors, except as otherwise
specifically provided in the By-Laws.
Section 3. Vacancies. In case one or more vacancies
shall occur on the Board of Directors by reason of death, resig
nation, increase in the number of directors or otherwise, except
insofar as otherwise provided in these By-Laws, the remaining
directors, although less than a quorum, may, by a majority vote,
elect successor or additional directors. A person so elected
shall serve only until the next annual meeting of stockholders
and until his successor shall be elected and shall qualify.
Section 4. Meetings. Meetings of the Board of Directors
shall be held at the principal office of the Corporation or at
such other place or places within or outside the State of New
York as may be specified in the notice of the meeting. Regular
meetings of the Board of Directors shall be held at such times as
may from time to time be fixed by resolution of the Board of
Directors, and special meetings may be held at any time upon the
call of the Chairman of the Board or the President or any two
directors by oral, telegraphic or written notice duly served on
or sent or mailed to each director not less than two days before
such meeting. A meeting of the Board of Directors may be held
without notice immediately after the annual meeting of stock
holders. Notice need not be given of regular meetings of the
Board of Directors when fixed by resolution as above set forth.
Meetings may be held at any time without notice if all the
directors are present, or if at any time before or after the
meeting those not present waive notice of the meeting in writing.
Section 5. Removal of Directors. At any special meeting
of the stockholders, duly called as provided in these By-Laws,
any director or directors may, by the affirmative vote of the
holders of a majority of the shares of stock issued and
outstanding and entitled to vote for the election of directors,
be removed from office for cause, and his successor or their
successors may be elected at such meeting; or the remaining direc
tors may, to the extent vacancies are not filled by such
election, fill any vacancy or vacancies created by such removal.
Stockholders may not remove directors without cause.
Section 6. Executive Committee. An Executive Committee
of three or more directors may be designated by resolution passed
by a majority of the whole Board of Directors. The act of a
majority of the members of said Committee shall be the act of the
Committee, and said Committee may meet at stated times or on
notice. Whenever the Board of Directors is not in session or
whenever a quorum of the Board of Directors fails to attend any
regular or special meeting of the Board, said Committee shall
advise with and aid the officers of the Corporation in all mat
ters concerning its interests and the management of its business
and affairs, and generally perform such duties and exercise such
powers as may be performed and exercised by the Board of Direc
tors from time to time, and the Executive Committee shall have
the power to authorize the seal of the Corporation to be affixed
to all papers which may require it and, insofar as may be per
mitted by law, exercise the powers and perform the obligations of
the Board of Directors. The Board of Directors may also des
ignate one or more committees in addition to the Executive Com
mittee by resolution or resolutions passed by a majority of the
whole Board of Directors; such committee or committees to consist
of three or more directors of the Corporation, and, to the extent
provided in the resolution or resolutions designating them, shall
have or may exercise the specific powers of the Board of Direc
tors in the management of the business and affairs of the Corpo
ration. Such committee or committees shall have such name or
names as may be determined from time to time by resolution
adopted by the Board of Directors.
Section 7. Compensation of Directors. Directors may by
resolution-of the Board of Directors, be allowed a fixed sum and
expenses for attendance at regular or special meetings of the
Board of Directors; provided that nothing herein contained shall
be construed to preclude any director from serving the Corpora
tion in any other capacity and receiving compensation therefor.
Members of special or standing committees, and others who attend
pursuant to direction, may, by vote of the Board of Directors be
allowed a like fixed sum and expenses for attending committee
meetings.
Section 8. Action by Written Consent in lieu of Meeting.
Any action required or permitted to be taken by the Board of
Directors of the Corporation or of any committee thereof may be
taken without a meeting if all members of the Board of Directors
or of any committee thereof consent in writing to the adoption of
a resolution authorizing the action.
Section 9. Action by Conference Call. Any one or more
members of the Board of Directors of the Corporation or of any
committee thereof may participate in a meeting of said Board or
of any such committee by means of a conference telephone or
similar communications equipment allowing all persons participat
ing in the meeting to hear each other at the same time.
ARTICLE IV
OFFICERS
Section 1. Election. The Board of Directors at its
meeting held immediately after the annual meeting of stockholders
shall elect a Chairman of the Board, a President, one or more
Vice Presidents, a Secretary and a Treasurer. From time to time
the Board of Directors may appoint such Assistant Vice Presi
dents, Assistant Secretaries, Assistant Treasurers and such other
officers, agents and employees as it may deem proper. Any two
offices may be held by the same person. The Chairman of the
Board and the President shall be chosen from among the directors.
Section 2. Term and Removal. The term of office of all
officers shall be one year and until their respective successors
are elected and qualify but any officer may be removed from
office either with or without cause at any time by the affirma
tive vote of a majority of the members of the Board of Directors
then in office. A vacancy in any office arising from any cause
may be filled by the Board of Directors.
Section 3. Chairman of the Board. The Chairman of the
Board shall preside at all meetings of the Board of Directors and
stockholders.
Section 4. President. The President shall, in the
absence of the Chairman of the Board, preside at all meetings of
the Board of Directors and stockholders. He shall have such
other duties and powers as may be assigned to him from time to
time by the Board of Directors.
Section 5. Vice Presidents. The Vice Presidents shall
have such powers and discharge such duties as may be assigned to
them from time to time by the Board of Directors.
Section 6. Treasurer. The Treasurer shall have the
custody of all the funds and securities of the Corporation. When
necessary or proper he shall endorse on behalf of the Corpora
tion, for collection, checks, notes and other obligations and
shall deposit the same to the credit of the Corporation in such
bank or banks, or depositories as may be designated by the Board
of Directors, or by any officer acting under authority conferred
by the Board of Directors. Whenever required by the Board of
Directors, he shall render an account of all his transactions as
Treasurer and of the financial condition of the Corporation. He
shall give bond for the faithful discharge of his duties if the
Board of Directors so requires. He shall do and perform such
other duties as may be assigned to him from time to time by the
Board of Directors.
Section 7. Secretary. The Secretary shall attend all
meetings of the stockholders and all meetings of the Board of
Directors, and record all votes and the minutes of all proceed
ings in a book to be kept for that purpose; and shall perform
like duties for other committees when so required. He shall
give, or cause to be given, notice of all meetings of stockhold
ers and of the Board of Directors and of committees and shall
perform such other duties as may be prescribed by the Board of
Directors. He shall keep in safe custody the seal of the Corpo
ration and affix the same to any instrument whose execution has
been authorized. He shall do and perform such other duties as
may be assigned to him from time to time by the Board of Direc
tors.
Section 8. Assistant Officers. The Assistant Vice
Presidents, the Assistant Secretaries and the Assistant Trea
surers shall, in the order of their respective seniorities, in
the absence or disability of the Vice Presidents, Secretary or
Treasurer, respectively, perform the duties of such officer and
shall perform such other duties as the Board of Directors may
from time to time prescribe.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Form and Transfers. The interest of each
stockholder of the Corporation shall be evidenced by certificates
for shares of stock certifying the number of shares represented
thereby and in such form, not inconsistent with the Certificate
of Incorporation, as the Board of Directors may from time to time
prescribe.
The certificates of stock shall be signed by the Chairman
of the Board or the President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and sealed with the seal of the Corporation.
Such seal may be a facsimile, engraved or printed. Where any
such certificate is signed by a transfer agent, or by a transfer
clerk and registrar, the signature of the Chairman of the Board,
President, Vice President, Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer upon such certificate may be
facsimiles, engraved or printed. In case any such officer who
has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such before such certificate
is issued, it may be issued by the Corporation with the same
effect as if such officer had not ceased to be such at the time
of its issue.
Transfers of shares of stock of the Corporation shall be
made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary of the
Corporation, or with a transfer clerk or a transfer agent
appointed as in section 4 of this Article provided, and on sur
render of the certificate or certificates for such shares prop
erly endorsed and the payment of all taxes thereon. The person
in whose name shares of stock stand on the books of the Corpora
tion shall be deemed the owner thereof for all purposes as
regards the Corporation. The Board of Directors may, from time
to time, make such additional rules and regulations as it may
deem expedient, not inconsistent with these By-Laws, concerning
the issue, transfer and registration of certificates for shares
of stock of the Corporation.
Section 2. Lost, Stolen, Destroyed, or Mutilated
Certificates. No certificate for shares of stock of the Corpo
ration shall be issued in place of any certificate alleged to
have been lost, destroyed or stolen, except on production of such
evidence of such loss, destruction or theft as the Board of
Directors may require and on delivery to the Corporation, if the
Board of Directors shall so require, of a bond of indemnity in
such amount, containing such terms and secured by such surety as
the Board of Directors may in its discretion require. The Board
of Directors shall have the right from time to time to prescribe
such rules and procedures as it shall deem advisable with regard
to lost, stolen, destroyed or mutilated certificates and the
issuance of new shares of this Corporation in place thereof.
Section 3. Transfer Agent and Registrar. The Board of
Directors may appoint one or more registrars, and may require all
certificates for shares of stock to bear the signature or
signatures of any of them.
ARTICLE VI
CORPORATE SEAL
The corporate seal of the Corporation shall consist of
two concentric circles, between which shall be the name of the
Corporation, and in the center shall be inscribed the year of its
incorporation and the words, "Corporate Seal, New York."
ARTICLE VII
AMENDMENTS
These By-Laws may be amended, altered or repealed or
additional By-Laws adopted at any meeting of the Board of Direc
tors by the vote of a majority of the directors then in office.
These By-Laws, and any amendments thereto and new By-Laws added
by the directors may be amended, altered or repealed by the
stockholders at any annual or special meeting of the stockholders
provided notice of such action shall have been contained in the
notice of meeting.
ARTICLE VIII
INDEMNIFICATION
Section 1. Definitions. "Action"' shall mean any
threatened, pending or completed legal action, lawsuit or pro
ceeding, whether civil, criminal, administrative or inves
tigative, including without limitation any action by or in the
right of the Corporation to procure a judgment in its favor.
"Indemnitee" shall mean a person who was or is a party,
or is threatened to be made a party, to an Action by reason of
the fact that such person (or such person's testator or
intestate, in which case both such person and his testator or
intestate shall be deemed the Indemnitee) is or was or has agreed
to become a director or officer of the Corporation, or is or was
serving or has agreed to serve at the request of the Corporation
as a director, officer or trustee of or in a similar capacity
with another corporation, partnership, joint venture, trust, plan
or other enterprise, or by reason of any action alleged to have
been taken or omitted in such capacity.
"Costs" shall mean all amounts actually paid by or on
behalf of an Indemnitee (i) on account of judgments, fines and
penalties incurred in connection with an Action, or (ii) in
settlement of an Action.
"Expenses" shall mean all expenses actually and
reasonably incurred by or on behalf of an Indemnitee in
connection with an Action, whether or not the Indemnitee is
successful on the merits, including without limitation, expenses
of investigation, judicial or administrative proceedings and
appeals, attorneys' fees and disbursements, and expenses of
establishing or defending a right to indemnification under this
Article.
"Act" shall mean Sections 721 through 726 of the Business
Corporation Law of the State of New York or any comparable
provisions of New York law hereafter enacted applicable to the
Corporation.
Section 2. Indemnification and Advances of Expenses. The
Corporation shall indemnify each Indemnitee against all Costs and
Expenses of each Action, unless such indemnification shall be
expressly prohibited by Section 721 of the Act, or unless the
Action (other than an Action instituted pursuant to Section 3 of
this Article VIII) shall have been initiated by the Indemnitee
without the authorization of the Board of Directors of the
Corporation. Expenses for which indemnification is sought under
this Article shall be paid by the Corporation in advance of any
final disposition of the Action at the written request of an
Indemnitee, provided that the Indemnitee shall undertake to repay
amounts advanced to the extent that a court of competent
jurisdiction ultimately determines that the Indemnitee was not
entitled to such indemnification. Except to the extent
prohibited by law, advances of Expenses shall be paid without
reference to the Indemnitee's financial ability to make
repayment, no security shall be required therefor, and such
advances shall not under any circumstances be claimable against
the Indemnitee's spouse, children, estate, heirs, executors or
administrators. The Board of Directors may, by a majority vote
of a quorum consisting of directors who are not parties to an
Action, and upon approval of an Indemnitee, authorize the Corpo
ration's counsel to represent the Indemnitee in an Action.
Section 3. Procedure for Indemnification. Any indem
nification or advance of Expenses under Section 2 of this Article
shall be made promptly, and in any event within 45 days following
the written request of the Indemnitee, unless a determination
that the Indemnitee is not entitled to indemnification because he
has not met the applicable standard of conduct expressly required
by Section 721 of the Act is made (1) by the Board of Directors
by a majority vote of a quorum consisting of directors who are
not parties to such Action, or (2) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or (3) by the shareholders. The right to
indemnification and advances of Expenses under this Article shall
be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or
in part, or if no disposition thereof is made within 45 days. It
shall be a defense to any such action (other than an action
brought to enforce a claim for the advance of Expenses where the
required undertaking, if any, has been received by the Corpora
tion) that the Indemnitee has not met the applicable standard of
conduct expressly required by the Act, but the burden of proving
such defense shall be on the Corporation and neither (i) the
termination of any Action by judgment, order, settlement, con
viction, or upon a plea of nolo contendere or its equivalent, nor
(ii) any determination pursuant to the first sentence of this
Section 2, shall, of itself, create a presumption that the
Indemnitee did not act in accordance with such standard of
conduct.
Section 4. Other Rights and Continuation of Right to
Indemnification. The indemnification provided by this Article
shall not be exclusive of all other rights to which an Indemnitee
seeking indemnification is entitled under any law (common or
statutory), agreement, resolution of shareholders or directors or
otherwise, and nothing contained in this Article shall limit the
right to indemnification or advancement of expenses to which any
person would be entitled from the Corporation in lieu of, in
addition to or in the absence of this Article. The Corporation
is hereby expressly authorized to grant other rights of indemni
fication or advancement of expenses by resolution of shareholders
or directors, agreement or otherwise. The indemnification
provided by this Article shall continue as to an Indemnitee who
has ceased to be a director, officer, trustee, committee member,
employee or agent, and shall inure to the benefit of the estate,
heirs, executors and administrators of each Indemnitee.
Section 5. Insurance. The Corporation shall purchase and
maintain insurance on behalf of any person who is or was or has
agreed to become a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director,
officer or trustee of or in a similar capacity with another
corporation, partnership, joint venture, trust, plan or other
enterprise against any liability asserted against such person and
incurred by such person or on such person's behalf in any such
capacity, or arising out of such persons's status as such,
whether or not the Corporation would have the power to indemnify
such person under the provisions of this Article VIII, provided
that such insurance is available on terms acceptable to a
majority of the entire Board of Directors of the Corporation.
Section 6. Contractual Rights; Conflicts. The provisions
of this Article VIII shall constitute a contract between the
Corporation and each Indemnitee, pursuant to which the
Corporation and each such Indemnitee intend to be legally bound.
No repeal or modification of this Article VIII shall affect any
rights or obligations then existing or thereafter arising with
respect to any state of facts then or theretofore existing. In
the event any rights under this Article VIII are expressly
prohibited by any provision of Article XIV of the Corporation's
Certificate of Incorporation as in effect on the date this Arti
cle VIII is adopted, such provision of the Corporation's Certif
icate of Incorporation shall be controlling unless subsequently
amended to eliminate such prohibition.
Section 7. Severability. If this Article VIII or any
portion hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Corporation shall nevertheless
indemnify each Indemnitee as to Costs and Expenses and make
advancements thereof to the fullest extent permitted by any
applicable portion of this Article VIII that shall not have been
invalidated and to the fullest extent permitted by the Act.
[exhibits-02-3.03]bd
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>4
<FILENAME>ex301.txt
<DESCRIPTION>EXHIBIT
<TEXT>
Exhibit 3.01
RESTATED
CERTIFICATE OF INCORPORATION
OF
PARK ELECTROCHEMICAL CORP.
Under Section 807 of the Business Corporation Law,
The undersigned, being respectively a Vice President and the
Secretary of Park Electrochemical Corp., for the purposes of
changing and restating the Certificate of Incorporation of Park
Electrochemical Corp., pursuant to Section 807 of the Business
Corporation Law of the State of New York, do hereby certify as
follows:
1. (a) The name of the corporation is "PARK
ELECTROCHEMICAL CORP.,
(b) The corporation was originally formed under the name of
"Park Name Plate Inc.".
2. The Certificate of Incorporation of the corporation was
filed by the Department of State on the 31st day of March, 1954.
3. The Certificate of Incorporation of the corporation is
hereby changed to effect the following changes authorized by
paragraph (b) of Section 803 of the Business Corporation Laws.
(a) to change the location of the office of the Corpora
tion from the City of New York, County of New York and State of
New York, to: the County of Nassau and State of New York.
(b) to change the address to which the Secretary of
State of the State of New York in directed to mail a copy of
process in any action or proceeding against the corporation which
may be served upon him from: Parker, Chapin and Flattau, Esqs.,
530 Fifth Avenue, New York 10036 New York, to: Park
Electrochemical Corp., 5 Dakota Drive, Lake Success, New York
11042, Attention: General Counsel.
The text of the Certificate of Incorporation of the corpora-
ion is hereby restated as heretofore amended and as changed
hereby to read in full as set forth in Paragraph 4 hereof.
4. CERTIFICATE OF INCORPORATION
OF
PARK ELECTROCHEMICAL CORP.
I. The name of the corporation shall be PARK ELECTROCHEMICAL
CORP.
II. The purposes for which the corporation is formed are,
A. To carry on the general business of manufacturing and
distributing metal nameplates and decorative trim and other
components and/or products and generally to do all acts and
things which may be necessary or convenient to the further
ance of the aforementioned purposes.
B. To acquire, and pay for in cash, stock or bonds of this
corporation or otherwise, the goodwill, rights, assets and
property, and to undertake or assume the whole or any part
of the obligations or liabilities of any person, firm,
association or corporation.
C. To manufacture, purchase, or otherwise acquire in any
lawful manner, and to hold, own, mortgage, pledge, sell,
transfer, convert, store, import, export or deal in any
other manner, dispose of and to invest, trade, deal in and
deal with all goods, wares, merchandise and property of
every class and description.
D. To acquire, hold, use, sell, assign, lease, grant
licenses in respect of, mortgage or otherwise dispose of
letters patent of the United States or any foreign country
patent rights inventions, improvements and processes, copy
rights, trademarks and trade names, relating to or useful in
connection with any business of this corporation.
E. To acquire by purchase, subscription or otherwise, and
to receive, hold, own, guarantee, sell, assign, exchange,
transfer, mortgage, pledge or otherwise dispose of or deal
in and with any of the shares of the capital stock, or any
voting trust certificates in respect of the shares of
capital stock, scrip, warrants, rights, bonds, debentures,
notes, trust receipts, and other securities, obligations,
choses in action and evidences of indebtedness or interest
issued or created by any corporations, joint stock
companies, syndicates, associations, partnerships, firms,
trusts or persons, public or private, or by the government
of the United States of America, or by any foreign
government, or by any state territory, province,
municipality or other political subdivision or by any
governmental agency, and as owner thereof, to possess and
exercise all the rights do any and all acts and things
necessary or advisable for the preservation, protection,
improvement and enhancement in value thereof.
F. To borrow, or raise moneys for any of the purposes of
the corporation, and, from time to time without limit as to
amount, to draw, make, accept, endorse, execute and issue
promissory notes, drafts,bills of exchange, warrants, bonds,
debentures and other negotiable or non-negotiable
instruments and evidences of indebtedness, and to secure the
payment of any thereof and of the interest thereon by
mortgage upon, pledge, conveyance or assignment in trust of
the whole or any part of the property of the corporation,
whether at the time owned or thereafter acquired, and to
sell, pledge or otherwise dispose of such bonds or other
obligations of the corporation for its Corporate purposes.
To make any guarantee respecting dividends, shares of stock,
bonds, debentures, contracts or other obligations to the
extent that such power may be exercised by corporations
organized under the Stock Corporation Law.
G. To loan to any person, firm, partnership or corporation
any of its surplus funds, either with or without security.
H. To purchase, hold, sell and transfer the shares of its
capital stock; provided it shall not use its funds or
property for the purchase of its own shares of capital stock
when such use would cause any impairment of its capital
except as otherwise permitted by law, and provided further
that shares of its own capital stock belonging to it shall
not be voted upon directly or indirectly.
I. To have one or more offices, to carry on all or any of
its operations and business and without restriction or limit
as to amount to purchase or otherwise acquire, hold, own,
mortgage, sell, convey or otherwise dispose of, real and
personal property of every class and description in any of
the states, districts, territories or colonies of the United
states, and in any and all foreign countries, subject to the
laws of such state, district, territory, colony or country.
J. To enter into, make, perform and carry out contracts of
every kind, which may be necessary for or incidental to the
business of the corporation with any person, firm, corpora
tion, private, public or municipal, body politic, under the
government of the United States, or any territory district,
protectorate, dependency or insular or other possession or
acquisition of the United States, or any foreign governments
so far as, and to the extent that, the same may be done and
performed by a corporation organized under the Stock Corpora
tion Law.
K. To do any and all things necessary, suitable,
convenient or proper for, or in connection with, or
incidental to, the accomplishment of any of the purposes or
the attainment of any one or more of the objects herein
enumerated, or designed directly or indirectly to promote
the interests of the corporation, or to enhance the value of
any of its properties and in general to do any and all
things and exercise any and all powers which it may now or
hereafter be lawful for the corporation to do or to exercise
under any of the laws of the State of New York that may now
or hereafter be applicable to the corporation.
L. The purposes and powers specified in the foregoing
clauses are to be construed both as purposes and powers and
shall, except where otherwise expressed be in no way limited or
restricted by reference to or inference from, the terms of any
other clause in this certificate of incorporation, but the
purposes and powers specified in each of the foregoing clauses of
this article shall be regarded as independent purposes and
powers.
III. The aggregate number of shares which the Corporation shall
have authority to issue shall consist of 15,000,000 shares of
Common Stock of the par value of $.10 per share, And 500,000
shares of Preferred stock of the par value of $1 per share. The
Preferred stock shall be issuable in series with such
designations relative rights, preferences and limitations as may
be fixed from time to time by the Board of Directors.
The designations, relative voting, dividend, liquidation and
other right, preferences and limitations of the Preferred Stock
(unless otherwise fixed by the Board of Directors) and the Common
Stock are as follows:
1. The shares of Preferred Stock may be divided into and
issued in one or more series, and each series shall be so
designated so as to distinguish the shares thereof from the
shares of all other series. All shares of Preferred Stock
shall be identical except in respect of particulars which
may be fixed by the Board of Directors as hereinafter
provided pursuant to authority which is hereby expressly
vested in the Board of Directors. Each share of a series
shall be identical in all respects with all other shares of
such series, except as to the date from which dividends
thereon shall be cumulative on any series as to which
dividends are cumulative. Shares of Preferred Stock of any
series which have been cancelled in any manner, including
shares redeemed or reacquired by the Corporation and shares
which have been converted into or exchanged for shares of
any other class, or any series of the same or any other
class, shall have the status of authorized but unissued
shares of Preferred Stock and may be reissued as shares of
the series of which they were originally a part or may be
issued as shares of a new series or any other series of the
same class.
2. Before any shares of Preferred Stock of any series
shall be issued, the Board of Directors, pursuant to
authority hereby expressly vested in it, shall fix by
resolution or resolutions the following provisions in
respect of the shares of each such series so far as the same
are not inconsistent with the provisions of this Article III
applicable to all series of Preferred Stock.
(a) the distinctive designations of such series
and the number of shares which shall constitute such
Series which number may be increased (except where
otherwise provided by the Board of Directors in
creating such series) or decreased (but not below the
number of shares thereof then outstanding) from time to
time by like action of the Board of Directors.
(b) the annual rate or amount of dividends
payable on shares of such series, whether such
dividends shall be cumulative or noncumulative, the
conditions upon which and/or the dates when such
dividends shall be payable and the date from which
dividends on cumulative series shall accrue and be
cumulative on all shares of such series issued prior to
the payment date for the first dividend of such series;
(c) whether such series shall be redeemable and,
if so, the terms and conditions of such redemption,
including the time or times when and the price or
prices at which shares of such series shall be
redeemed;
(d) the rights of the shares of such series in
the event of liquidation, dissolution or winding up of
the affairs of the Corporation;
(e) whether such series shall be convertible into
or exchangeable for shares of any other class, or any
series of the same or any other class, and, if so, the
terms and conditions thereof, including the date or
dates when such shares shall be convertible into or
exchangeable for shares of any other class, or any
series of the same or any other class, the price or
prices or the rate or rates at which shares of such
series shall be so convertible or exchangeable, and any
adjustments which shall be made, and the circumstances
in which any such adjustments shall be made, in such
conversion or exchange prices or rates;
(f) whether such series shall have any voting
rights in addition to those prescribed by law and, if
so, the terms and conditions of exercise of such voting
rights; and
(g) any other designations, relative rights,
preferences or limitations.
3. (a) So long as any shares of Preferred Stock of
any series shall be outstanding, the Corporation will
not declare or pay any dividends on the Common Stock
(other than dividends payable solely in shares of
Common Stock) or make any distributions of any kind,
either directly or indirectly, in respect of shares of
Common stock, or make any payment on account of the
purchase, redemption or other acquisition of Common
Stock, unless on the payment, distribution or
redemption date, as the case may be, all dividends on
the then outstanding shares of Preferred Stock of all
series for all past dividend periods shall have been
paid to the full extent of the preference, if any, to
which each series of Preferred Stock is entitled.
(b) In case the Corporation shall not pay in full
all stated dividends required to be paid on all shares
of all series of Preferred Stock at the time
outstanding to the full extent of the preference, if
any, to which each such series is entitled, the shares
of all series of Preferred Stock shall share ratably in
the payment of dividends, including accumulations, if
any, in accordance with the sums which would be payable
on such shares if all dividends were declared and aid
in full. Accumulations of dividends shall not bear
interest.
(c) In case the Corporation shall not pay in full
all amounts required to be paid on all shares of all
series of Preferred Stock at the time outstanding in
the event of the liquidation, dissolution or winding up
of the affairs of the Corporation, the shares of all
series of Preferred Stock shall share ratably in the
payment of all amounts payable in the event of such
liquidation, dissolution or winding up in accordance
with the sums which would be payable on such shares if
all amounts payable on such liquidation, dissolution or
winding up were paid in full.
(d) When dividends shall have been paid (or
declared and set aside for payment) on the Preferred
Stock to the full extent of the preference, if any, to
which the Preferred Stock is entitled, dividends on the
remaining class or classes of stock may then be paid
out of the funds of the Corporation which are legally
available therefor.
(e) Subject to the limitations prescribed in this
Article III and any further limitations which may f rom
time to time be prescribed by the Board of Directors in
accordance herewith the holders of Common Stock shall
be entitled to receive dividends on the Common Stock,
when, as and if declared by the Board of Directors out
of the funds of the Corporation which are legally
available therefor.
4. The authorized but unissued shares of Common Stock
and the authorized but unissued shares of Preferred
stock may be issued for such consideration, not less
than the par value thereof, as may be fixed from time
to time by the Board of Directors.
5. (a) Except as otherwise determined pursuant to
authority of the Board of Directors an hereinbefore
provided, or by the Business Corporation Law of the
State of New York, all voting rights shall be vested
exclusively in the holders of the outstanding shares of
Common Stock and each such holder shall be entitled to
one vote per share for all purposes for each share of
Common Stock held of record by him.
(b) Except as otherwise determined pursuant to
authority of the Board of Directors as hereinbefore
provided, or by the Business Corporation Law of the
State of New York, the holders of Preferred Stock shall
not be entitled to vote for any purpose nor shall they
be entitled to notice of meetings of shareholders.
6. The Board of Directors has authorized a series of
Preferred Stock which series shall be designated as
Series A Preferred Stock (the "Series A Preferred
Stock") and this number of shares constituting such
series shall be 150,000.
(a) The holders of record of shares of Series A
Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors or a duly
authorized committee thereof out of funds legally
available for the purpose, dividends in cash at the
rate per share of 5% per annum (calculated an a
percentage of the liquidation value per share of $100).
Dividends shall be payable quarterly, on the dates on
which a quarterly dividend or distribution on the
Common Stock, $.10 par value per share ("Common Stock")
of the Corporation is payable (other than a dividend
payable in Common Stock) (each such date being referred
to herein as a "Dividend Payment Date"), commencing on
the first Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A
Preferred Stock, or, if no such dividends on the Common
Stock are payable then on such quarterly dates
designated by the Board of Directors or a duly
authorized committee thereof. To the extent the Board
of Directors or a duly authorized committee thereof
does not declare the full 5% dividend or, if so
declared, such dividend is not fully paid in cash the
amount not so declared or paid shall accumulate as
provided in paragraph (b) of this Section 6. The Board
of Directors or a duly authorized committee thereof may
fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive
payment of a dividend declared thereon, which record
data shall be not less than 10 days nor more that 50
days prior to the date fixed for the payment thereof.
(b) Dividends on the outstanding shares of Series
A Preferred Stock shall be cumulative from the date of
issue of such shares. Accrued dividends, whether or
not declared, that are not paid shall compound
quarterly at 5% per annum until the date of payment of
such dividends. The amounts with respect to such
compounding shall also constitute accrued dividends.
Accumulated but unpaid dividends may be declared and
paid at any time, without reference to any regular
Dividend Payment Date, to holders of record on such
date, not less than 10 days nor more than 50 days
preceding the payment date thereof, as may be fixed by
the Board of Directors of the Corporation or a duly
authorized committee thereof.
(c) So long as any of the shares of Series A
Preferred Stock are outstanding, no dividends shall be
paid or declared, nor any distribution be made, on the
Common Stock, or any other security junior to the
Series A Preferred Stock, other than a dividend
payable in common stock or such other junior security,
nor shall any shares of Common Stock, or any other
security junior to the Series A Preferred Stock, be
acquired for consideration by the Corporation, unless
all dividends on the Series A Preferred Stock for all
past dividend dates shall have been paid and the full
dividends thereon for the most recent dividend date
shall have been paid or declared and a sum sufficient
for the payment thereof set apart. Subject to the
foregoing provisions, dividends on the Common stock
(payable in cash, stock or otherwise) as may be
determined by the Board of Directors may be declared
and paid from time to time out of the remaining funds
legally available for the payment of dividends, and the
Series A Preferred Stock shall not be entitled to
participate in any such dividends, whether payable in
cash, stock or otherwise.
(d) The holders of record of shares of Series A
Preferred Stock shall not be entitled to any voting
rights, except as otherwise provided by law.
(e) The Corporation may at the discrimination of
a majority of the Continuing Directors (as hereinafter
defined) redeem, at any time, in whole but not in part,
all of the shares and fractional shares of Series A
Preferred stock at a redemption price of $6,060 per
whole share, reduced pro rata for redemptions of
fractional shares, plus accrued and unpaid dividends
thereon (as provided in paragraphs (a), (b) and (c) of
this Section 6 above) to the date fixed for optional
redemption, and adjusted if, and to the extent that,
the price at which the Series A Preferred Stock is
issued is more or less than $6,000 per share.
(f) In the event the Corporation shall redeem the
shares of Series A Preferred Stock, notice of such
redemption shall be given by first class mail, postage
prepaid, mailed not less than 15 days nor more than 60
days prior to the redemption date, to each holder of
record of such shares at such holder's address as the
same appears on the stock register of the Corporation,
provided however, that no failure to mail such notice
nor any defect therein shall affect the validity of the
redemption of the shares of Series A Preferred Stock to
be redeemed. Each such notice shall state: (i) the
redemption date; (ii) the place or places where
certificates for shares are to be surrendered for
payment of the redemption price and (iii) that
dividends on the shares will cease to accrue on such
redemption date.
(g) Notice having been mailed as aforesaid, from
and after the redemption date (unless default shall be
made by the Corporation in providing money for the
payment of the redemption price) dividends on the share
of Series A Preferred stock shall cease to accrue and
all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the
corporation the redemption price and any accrued and
unpaid dividends) shall cease. Upon surrender in
accordance with said notice of the certificates for
shares (properly endorsed or assigned for transfer, if
the Continuing Directors of the Corporation shall so
require and the notice shall so state), such shares
shall be redeemed by the Corporation at the redemption
price aforesaid.
(h) "Continuing Director" shall mean a member of
the Corporation's Board of Directors who was a member
of the Corporation's Board of Directors prior to the
time an Acquiring Person (as hereinafter defined)
became an Acquiring Person, and any successor of a
Continuing Director who is recommended in writing to
succeed a Continuing Director by a majority of
Continuing Directors then on the Corporation's Board of
Directors.
(i) "Acquiring Person" shall mean any person who
or which, together with all affiliates and associates
of such person, is the Beneficial Owner (as hereinafter
defined) of 30% or more of the shares of Common Stock
then outstanding but shall not include the Corporation,
any employee benefit plan of the Corporation or any
person holding shares of Common Stock and which was
organized appointed or established by the Corporation
for or pursuant to the terms of any such plan.
(j) A person shall be deemed the "Beneficial
owner" of, and shall be deemed to "beneficially own"
any securities: (i) which such person or any of such
person's affiliates or associates beneficially owns,
direct or indirectly; (ii) which such person or any of
such person's affiliates or associates has (A) the
right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion
rights,exchange rights, rights, warrants or options,or
otherwise Provided however. that a person shall not be
deemed the "Beneficial owner" of, or to "beneficially
own", securities tendered pursuant to a tender or
exchange of or made by such person or any of such
person's affiliates or associates until such tendered
securities are accepted for purchase or exchanger or
(B) the right to vote pursuant to any agreement,
arrangement or understanding (whether or not in
writing), provided, however, that a person shall not be
deemed the "Beneficial Owner" of, or to "beneficially
own", any security under this clause (3) if the
agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy given
in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the
applicable rules and regulations of the Securities
Exchange Act of 1934, as amended, and (2) is not also
then reportable by such person on Schedule 13D under
said Securities Exchange Act (or any comparable or
successor report); or (iii) which are beneficially
owned, directly or indirectly, by any other person with
which such person or any of such person's affiliates or
associates has or has had any agreement, arrangement or
understanding (whether or not in writing), for the
purpose of acquiring, holding, voting (except pursuant
to a revocable proxy as described in clause (B) of
subparagraph (ii) of this paragraph (j)) or disposing
of any securities of the Corporation.
(k) Any shares of Series A Preferred Stock which
shall have been redeemed shall, after such redemption,
have the status of authorized but unissued shares of
Preferred Stock, without designation as to series until
such shares are once more designated as part of a
particular series by the Board of Directors.
(l) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs
of the CorporatIon, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Corporation available
for distribution to its stockholders an amount in cash
equal to the greater of (i) $100 for each whole share
outstanding, or (ii) an aggregate amount for each whole
share outstanding equal to 100 times the aggregate
amount distributable per share with respect to the
Common Stock; such amount in either case to be reduced
pro rata for any fractional shares outstanding, plus an
amount in cash equal to all accrued but unpaid
dividends thereon (as provided in paragraphs (a), (b)
and (c) of this Section 6 above) to the date fixed for
liquidation, dissolution or winding up before any
payment shall be made or any assets distributed to the
holders of any shares of Common Stock or to the holders
of any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock. If the assets of
the Corporation are not sufficient to pay in full the
liquidation payments payable to the holders of
outstanding shares of series A Preferred Stock, than
the holders of all such shares shall share ratably in
such distribution of assets in accordance with the
amount which would be payable on such distribution if
the amounts to which the holders of outstanding shares
of Series A Preferred Stock are entitled were paid in
full.
(m) For the purposes of this Section 6 neither
the voluntary sale, conveyance, exchange or transfer
(for cash, shares of stock, securities or other
consideration) of all or substantially all the property
or assets of the Corporation nor the consolidation or
merger of the Corporation with one or more other
corporations shall be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary,
unless such voluntary sale, conveyance, exchange or
transfer shall be in connection with a dissolution or
winding up the business of the Corporation.
(n) The Series A Preferred Stock shall be pari
passu to all other series of the Corporation's
Preferred Stock as to the payment of dividends and the
distribution of assets, except to the extent a series
is made junior or subordinate to the Series A Preferred
Stock.
(o) Each fractional share of the Series A
Preferred Stock outstanding shall be entitled to a
ratably proportionate amount of all rights relating to
the shares of the Series A Preferred Stock, including
dividend and voting rights. The liquidation payment or
redemption payment with respect to each fractional
share of Series A Preferred Stock shall be equal to a
ratably proportionate amount of the liquidation payment
or redemption payment with respect to each outstanding
share of Series A Preferred Stock.
IV. The office of the corporation in to be located in the
County of Nassau and State of New York.
V. Its duration in to be perpetual.
VI. The Board of Directors is expressly authorized and
empowered from time to time (a) to fix, by resolution adopted by
a majority of the entire Board, the number of directors which
shall constitute the entire Board of Directors, such number to be
not less than three (3), and (b) to amend or repeal any By-Laws
or adopt any new By-Laws, but any By-Law adopted by the Board of
Directors may be amended or repealed by the shareholders at any
Annual Meeting or at any Special Meeting.
VII. Shares of stock in other corporations held by this
corporation, shall be voted by such officer or officers of this
corporation as the board of directors, by a majority vote shall
designate for this purpose, or by a proxy thereunto duly
authorized by a like vote of said board.
VIII. It is hereby provided, pursuant to section 74 of the
Stock Corporation Law, that this corporation shall have power to
issue the whole or any part of the shares of its capital stock as
partly paid stock, subject to calls thereon until the whole
thereof shall have been paid in.
IX. No contract or other transaction between the
corporation and any other corporation shall be affected, or
invalidated by the fact that any one or more of the directors of
this corporation is or are interested in, or is a director or
officer, or are directors or officers of such other corporation
and any director or directors, individually or jointly, may be a
party or parties to, or may be interested in, any contract or
transaction of this corporation or in which this corporation is
interested) and no contract, act or transaction of this
corporation with any person or persons, firm, or corporations,
shall be affected, or invalidated by the fact that any director
or directors of this corporation is a party, or are parties to or
interested in such contract, act or transaction, or in any way
connected with such person or persons, firm, association or
corporation, and each and every person who may become a director
of this corporation is hereby relieved from any liability that
might otherwise exist from contracting with the corporation for
the benefit of himself or any firm or association or corporation
in which he may be anywise interested.
X. No holder of either class of stock shall be entitled an
of right, to purchase or subscribe for any part of unissued stock
of either class, or any additional stock to be issued by reason
of any increase of the authorized capital stock of the company,
or any bonds, certificates of indebtedness, debentures or other
securities convertible into stock of the corporation, but any
such unissued stock or such additional authorized issue of now
stock, or of other securities convertible into stock may be
issued and disposed of pursuant to resolution of the board of
directors to such persons, firms, corporations or associations
and upon such terms as may be deemed advisable by the board of
directors in the exercise of their discretion.
XI. The corporation shall indemnify any person made a party
to any action, suit or proceeding, by reason of the fact that he,
his testator or intestate, is or was a directors officer or
employee of the corporation, or of any firm, corporation, or
association which he served an such at the request of the corpora
tion, against the reasonable expenses (including attorney's fees
and, to the extent permitted by law, any amount paid in a court
approved settlement) actually and necessarily incurred by him in
connection with the defense of such action, suit or proceeding,
or in connection with any appeal therein, except in relation to
matters as to which it shall be adjudged in such action, suit or
proceeding that such officer, director or employee is liable for
negligence or misconduct in the performance of his duties.
XII. The Secretary of State is designated as agent of the
corporation for the service of process, and directed to mail a
copy of such process to the corporation at the following address:
Park Electrochemical Corp., 5 Dakota Drive, Lake Success, New
York 11042, Attention: General Counsel.
5. The changes set forth in paragraph 3 hereof, and the
restatement of the Certificate Of Incorporation set forth in
Paragraph 4 hereof, were duly authorized by the affirmative vote
of the Board of Directors of the corporation at a duly convened
meeting thereof held the 28th day of March, 1989.
IN WITNESS WHEREOF, we, the undersigned have executed and
subscribed this certificate and do affirm the foregoing as true
under the penalties of perjury this 28th day of March, 1989.
__________________________________
Allen Levine, Vice President
_________________________________
Harry Linzer, Secretary
CERTIFICATE OF AMENDMENT
of the
CERTIFICATE OF INCORPORATION
of
PARK ELECTROCHEMICAL CORP.
Under Section 805 of the Business Corporation Law
The undersigned, being respectively an Executive Vice
President and the Secretary of Park Electrochemical Corp. (a
corporation organized under the laws of the State of New York),
Do Hereby Certify as follows:
(1) The name of the Corporation is Park
Electrochemical Corp. The name under which it was originally
incorporated is Park Name Plate Inc.
(2) The Certificate of Incorporation of the
Corporation was filed by the Department of State of the State of
New York on March 31, 1954. The Restated Certificate of
Incorporation of the Corporation was filed by the Department of
State of the State of New York on April 10, 1989.
(3) The provisions of the Certificate of Incorporation
are hereby amended to increase the aggregate number of the class
of shares designated Common Stock, $.10 par value per share,
which the Corporation shall have authority to issue from
15,000,000 shares to 30,000,000 shares. To effect the foregoing,
the first sentence of the first paragraph of Article III of the
Certificate of Incorporation which states the aggregate number of
shares the Corporation shall have authority to issue is hereby
amended to read as follows:
"The aggregate number of shares which the Corporation
shall have authority to issue shall consist of
30,000,000 shares of Common Stock of the par value of
$.10 per share, and 500,000 shares of Preferred Stock
of the par value of $1 per share."
(4) The foregoing amendment to the Certificate of
Incorporation was authorized by a majority vote of the Board of
Directors of the Corporation followed by the required vote of the
holders of a majority of all outstanding shares of Common Stock
entitled to vote thereon at a meeting of shareholders of the
Corporation duly called and held for such purpose on July 12,
1995.
In Witness Whereof, the undersigned have signed this
certificate this 12th day of July, 1995, and affirm the foregoing
statements as true under the penalties of perjury.
/s/ Brian E. Shore
Brian E. Shore
Executive Vice President
/s/ Allen Levine
Allen Levine
Secretary
CERTIFICATE OF AMENDMENT
of the
CERTIFICATE OF INCORPORATION
of
PARK ELECTROCHEMICAL CORP.
(Under Section 805 of the Business Corporation Law)
It is hereby certified that:
FIRST: The name of the Corporation is PARK ELECTRO
CHEMICAL CORP. and the name under which the Corporation was
formed was PARK NAME PLATE INC.
SECOND: The Certificate of Incorporation of the
Corporation was filed with the Department of State of the State
of New York on March 31, 1954. The Restated Certificate of
Incorporation of the Corporation was filed by the Department of
State of the State of New York on April 10, 1989.
THIRD: The amendment of the Certificate of Incorporation
effected by this Certificate of Amendment is to amend certain
provisions in the Certificate of Incorporation relating to the
relative rights, preferences and limitations of the shares of a
series of Preferred Stock, as fixed by the Board of Directors
pursuant to authority expressly vested in them in the Certificate
of Incorporation.
FOURTH: To accomplish the foregoing amendment, Section 6
of Article IV of the Certificate of Incorporation shall be
deleted and a new Section 6 shall be added to Article IV of the
Certificate of Incorporation which shall read as follows:
"The Board of Directors has authorized a series of
Preferred Stock which series shall be designated as
Series A Preferred Stock (the "Series A Preferred
Stock") and the number of shares constituting such
series shall be 300,000.
(a) The holders of record of shares of Series A
Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors or a duly authorized
committee thereof out of funds legally available for the
purpose, dividends in cash at the rate per share of 5% per
annum (calculated as a percentage of the liquidation value
per share of $100). Dividends shall be payable quarterly,
on the dates on which a quarterly dividend or distribution
on the Common Stock, $.10 par value per share ("Common
Stock") of the Corporation is payable (other than a dividend
payable in Common Stock) (each such date being referred to
herein as a "Dividend Payment Date"), commencing on the
first Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Preferred Stock,
or, if no such dividends on the Common Stock are payable,
then on such quarterly dates designated by the Board of
Directors or a duly authorized committee thereof. To the
extent the Board of Directors or a duly authorized committee
thereof does not declare the full 5% dividend or, if so
declared, such dividend is not fully paid in cash, the
amount not so declared or paid shall accumulate as provided
in paragraph (b) of this Section 6. The Board of Directors
or a duly authorized committee thereof may fix a record date
for the determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a dividend
declared thereon, which record date shall be not less than
10 days nor more than 50 days prior to the date fixed for
the payment thereof.
(b) Dividends on the outstanding share of Series A
Preferred Stock shall be cumulative from the date of issue
of such shares. Accrued dividends, whether or not declared,
that are not paid shall compound quarterly at 5% per annum
until the date of payment of such dividends. The amounts
with respect to such compounding shall also constitute
accrued dividends. Accumulated but unpaid dividends may be
declared and paid at any time, without reference to any
regular Divided Payment Date, to holders of record on such
date, not less than 10 days nor more that 50 days preceding
the payment date thereof, as may be fixed by the Board of
Directors of the Corporation of a duly authorized committee
thereof.
(c) So long as any of the shares of Series A Preferred
Stock are outstanding, no dividends shall be paid or
declared, nor any distribution be made, on the Common Stock,
or any other security junior to the Series A Preferred
Stock, other than a dividend payable in Common Stock or such
other junior security, nor shall any shares of Common Stock,
or any other security junior to the Series A Preferred
Stock, be acquired for consideration by the Corporation,
unless all dividends on the Series A Preferred Stock for all
past dividend dates shall have been paid and the full
dividends thereon for the most recent dividend date shall
have been paid, or declared and a sum sufficient for the
payment thereof set apart. Subject to the foregoing
provisions, dividends on the Common Stock (payable in cash,
stock or otherwise) as may be determined by the Board of
Directors may be declared and paid from time to time out of
the remaining funds legally available for the payment of
dividends, and the Series A Preferred Stock shall not be
entitled to participate in any such dividends, whether
payable; in cash, stock or otherwise.
(d) The holders of record of shares of Series A
Preferred Stock shall not be entitled to any voting rights,
except as otherwise provided by law.
(e) The shares of Series A Preferred Stock shall not
be redeemable.
(f) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of shares of Series A Preferred
Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to
its stockholders an amount in cash equal to the greater of
(i) $100 for each whole share outstanding or (ii) an
aggregate amount for each whole share outstanding equal to
100 times the aggregate amount distributable per share with
respect to the Common Stock; such amount in either case to
be reduced pro rata for any fractional shares outstanding,
plus an amount in cash equal to all accrued by unpaid
dividends thereon (as provided in paragraphs (a), (b) and
(c) of this Section 6 above) to the date fixed for
liquidation, dissolution or winding up before any payment
shall be made or any assets distributed to the holders of
any shares of Common Stock or to the holders of any shares
of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A
Preferred Stock. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable
to the holders of outstanding shares of Series A Preferred
Stock, then the holders of all such shares shall share
ratably in such distribution of assets in accordance with
the amount which would be payable on such distribution if
the amounts to which the holders of outstanding shares of
Series A Preferred Stock are entitled were paid in full.
(g) For the purposes of this Section 6, neither the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all
or substantially all the property or assets of the
Corporation nor the consolidation or merger of the
Corporation with one or more other corporations shall be
deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, unless such voluntary sale,
conveyance, exchange or transfer shall be in connection with
a dissolution or winding up the business of the Corporation.
(h) The Series A Preferred Stock shall be pari passu
to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets,
except to the extent a series is made junior or subordinate
to the Series A Preferred Stock.
(i) Each fractional share of the Series A Preferred
Stock outstanding shall be entitled to a ratably propor
tionate amount of all rights relating to the shares of the
Series A Preferred Stock, including dividend and voting
rights. The liquidation payment or redemption payment with
respect to each fractional share of Series A Preferred Stock
shall be equal to a ratably proportionate amount of the
liquidation payment or redemption payment with respect to
each outstanding share of Series A Preferred Stock.
FIFTH: The foregoing amendment of the Certificate of
Incorporation of the Corporation was authorized by the vote
at a meeting of the Board of Directors of the Corporation.
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the
penalties of perjury as of the 7th day of August, 1995.
/s/ Brian E. Shore
Brian E. Shore
Executive Vice President
/s/ Allen Levine
Allen Levine
Secretary
[exhibits-02-3.01]bd
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>ex1001.txt
<DESCRIPTION>EXHIBIT
<TEXT>
EXHIBIT 10.01
STANDARD INDUSTRIAL LEASE - GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Parties. This Lease, dated, for reference purposes
only, December 12, 1989, is made by and between James Emmi
(herein called "Lessor") and Nelco Products Inc. (herein
called "Lessee").
2. Premises. Lessor hereby leases to Lessee and Lessee
leases from Lessor for the term, at the rental, and upon all
of the conditions set forth herein, that certain real
property situated in the County of Orange, State of
California, commonly known as 1100 East Kimberly Avenue,
Anaheim, CA 92801 and described as approximately 12,800
square foot industrial building on approximately 30,000
square fee of land. Said real property including the land
and all improvements therein, is herein called the
"Premises".
3. Term.
3.1 Term. The term of this Lease shall be for 60
months commencing on June 21, 1990 and ending on June 20,
1995 unless sooner terminated pursuant to any provision
hereof.
3.2 Delay in Possession. Notwithstanding said
commencement date, if for any reason Lessor cannot deliver
possession of the Premises to Lessee on said date, Lessor
shall not be subject to any liability therefor, nor shall
such failure affect the validity of this Lease or the
obligations of Lessee hereunder or extend the term hereof,
but in such case, Lessee shall not be obligated to pay rent
until possession of the Premises is tendered to Lessee;
provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days from said
commencement date, Lessee may, at Lessee's option, by notice
in writing to Lessor within ten (10) days thereafter, cancel
this Lease, in which event the parties shall be discharged
from all obligations hereunder, provided further, however,
that if such written notice of lessee is not received by
Lessor within said ten (10) day period, Lessee's right to
cancel this Lease hereunder shall terminated and be of no
further force or effect.
3.3 Early Possession. If Lessee occupies the Premises
prior to said commencement date, such occupancy shall be
subject to all provisions hereof, such occupancy shall not
advance the termination date, and Lessee shall pay rent for
such period at the initial monthly rates set forth below.
4. Rent. Lessee shall pay to Lessor as rent for the
Premises, monthly payments of $4400.00, in advance, on the 21
day of each month of the term hereof, as rent for monthly
rental rate shall increase or decrease as per C.P.I.
adjustment as defined in addendum (A-1) as well as tax and
insurance adjustments.
Rent for any period during the term hereof which is for less
than one month shall be a pro rata portion of the monthly
installment. Rent shall be payable in lawful money of the
United States to Lessor at the address stated herein or to
such other person or at such other places as Lessor may
designate in writing.
5. Security Deposit. Lessee shall deposit with Lessor upon
execution hereof $ N/A as security for Lessee's faithful
performance of Lessee's obligations hereunder. If Lessee
fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this
Lease, Lessor may use, apply or retain all or any portion of
said deposit for the payment of any rent or other charge in
default or for the payment of any other sum to which Lessor
may become obligated by reason of Lessee's default, or to
compensate Lessor for any loss or damage which Lessor may
suffer thereby. If Lessor so uses or applies all of any
portion of said deposit, Lessee shall within ten (10) days
after written demand therefor deposit cash with Lessor in an
amount sufficient to restore said deposit to the full amount
hereinabove stated and Lessee's failure to do so shall be a
material breach of this Lease. If the monthly rent shall,
from time to time, increase during the term of this Lease,
Lessee shall thereupon deposit with Lessor additional
security deposit so that the amount of security deposit held
by Lessor shall at all times bear the same proportion to
current rent as the original security deposit bears to the
original monthly rent set forth in paragraph 4 hereof.
Lessor shall not be required to keep said deposit separate
from its general accounts. If Lessee performs all of
Lessee's obligations hereunder, said deposit, or so much
thereof as has not theretofore been applied by Lessor shall
be returned, without payment of interest or other increment
for its use, to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest hereunder) at the
expiration of the term hereof, and after Lessee has vacated
the Premises. No trust relationship is created herein
between Lessor and Lessee with respect to said Security
Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only
for manufacturing, warehousing and related services or any
other use which is reasonably comparable and for no other
purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises,
in its state existing on the date that the Lease term
commences, but without regard to the use for which Lessee
will use the Premises, does not violate any covenants or
restrictions of record, or any applicable building code,
regulation or ordinance in effect on such Lease term
commencement date. In the event it is determined that this
warranty has been violated, then it shall be the obligation
of the Lessor, after written notice from Lessee, to promptly,
at Lessor's sole cost and expense, rectify any such
violation. In the event Lessee does not given to Lessor
written notice of the violation of this warranty within six
months from the date that the Lease term commences, the
correction of same shall be the obligation of the Lessee or
Lessee's sole cost. The warranty contained in this paragraph
6.2(a) shall be of no force or effect if, prior to the date
of this Lease, Lessee was the owner or occupant of the
Premises, and, in such event, Lessee shall correct any such
violation effect if, prior to the date of this Lease, Lessee
was the owner or occupant of the Premises, and, in such
event, Lessee shall correct any such violation at Lessee's
sole cost.
(b) Except as provided in paragraph 6.2(a), Lessee
shall, at Lessee's expense, comply promptly with all
applicable statutes, ordinances, rules, regulations, orders,
covenants and restrictions of record, and requirements in
effect during the term or any part of the term hereof,
regulating the use by Lessee of the Premises. Lessee shall
not use nor permit the use of the Premises in any manner that
will tend to create waste or a nuisance or, if there shall be
more than one tenant in the building containing the Premises,
shall tend to disturb such other tenants.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee
clean and free of debris on Lease commencement date (unless
Lessee is already in possession) and Lessor further warrants
to Lessee that the plumbing, lighting, air-conditioning,
heating, and leading doors in the Premises shall be in good
operating condition on the Lease commencement date. In the
event that it is determined that this warranty has been
violated, then it shall be the obligation of Lessor, after
receipt of written notice from Lessee setting forth with
specificity the nature of the violation, to promptly, at
Lessor's sale cost, rectify such violation. Lessee's failure
to give such written notice to Lessor within thirty (30) days
after the Lease commencement date shall cause the conclusive
presumption that Lessor has complied with all of Lessor's
obligations hereunder. The warranty contained in this
paragraph 6.3(a) shall be of no force or effect if prior to
the date of this Lease, Lessee was the owner or occupant of
the Premises.
(b) Except as otherwise provided in this Lease,
Lessee hereby accepts the Premises in their condition
existing as of the Lease commencement date or the date that
Lessee takes possession of the Premises, whichever is
earlier, subject to all applicable zoning, municipal, county
and state laws, ordinances and regulations governing and
regulating the use of the Premises, and any covenants or
restrictions of record, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any
exhibits attached hereto. Lessee acknowledges that neither
Lessor nor Lessor's agent has made any representation or
warranty as to the present or future suitability of the
Premises for the conduct of Lessee's business.
7. Maintenance, Repairs and Alterations.
7.1 Lessor's Obligations. Subject to the provisions of
Paragraphs 6, 7.2 and 9 and except for damage caused by any
negligent or intentional act or omission of Lessee, Lessee's
agents, employees, or invitees in which event Lessee shall
repair the damage, Lessor, at Lessor's expense, shall keep in
good order, condition and repair the foundations, exterior
walls and the exterior roof of the Premises. Lessor shall
not, however, be obligated to paint such exterior, nor shall
Lessor be required to maintain the interior surface of
exterior walls, windows, doors or plate glass. Lessor shall
have no obligation to make repairs under this Paragraph 7.1
until a reasonable time after receipt of written notice of
the need for such repairs, Lessee expressly waives the
benefits of any statute now or hereafter in effect which
would otherwise afford Lessee the right to make repairs at
Lessor's expense or to terminate this Lease because of
Lessor's failure to keep the Premises in good order,
condition and repair.
7.2 Lessee's Obligations.
(a) Subject to the provisions of Paragraph 6, 7.1
and 9, Lessee, at Lessee's expense, shall keep in good order,
condition and repair the Premises and every part thereof
(whether or not the damaged portion of the Premises or the
means of repairing the same are reasonably or readily
accessible to Lessee) including, without limiting the
generality of the foregoing, all plumbing, heating, air
conditioning, (Lessee shall procure and maintain, at Lessee's
expense, an air conditioning system maintenance contract)
ventilating, electrical and lighting facilities and equipment
within the Premises, fixtures, interior walls and interior
surface of exterior walls, ceilings, windows, doors, plate
glass, and skylights, located within the Premises, and all
landscaping, driveways, parking lots, fences and signs
located in the Premises and all sidewalks and parkways
adjacent to the Premises.
(b) If Lessee fails to perform Lessee's
obligations under this Paragraph 7.2 or under any other
paragraph of this Lease, Lessor may at Lessor's option enter
upon the Premises after 10 days' prior written notice to
Lessee (except in the case of emergency, in which case no
notice shall be required), perform such obligations on
Lessee's behalf and put the Premises in good order, condition
and repair, and the cost thereof together with interest
thereon at the maximum rate then allowable by law shall be
due and payable as additional rent to Lessor together with
Lessee's next rental installment.
(c) On the last day of the term hereof, or on any
sooner termination, Lessee shall surrender the Premises to
Lessor in the same condition as received, ordinary wear and
tear excepted, clean and free of debris. Lessee shall repair
any damage to the Premises occasioned by the installation or
removal of its trade fixtures, furnishings and equipment.
Notwithstanding anything to the contrary otherwise stated in
this Lease, Lessee shall leave the air lines, power panels,
electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing and fencing on the
premises in good operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior
written consent make any alterations, improvements,
additions, or Utility Installations in, on or about the
Premises, except for nonstructural alterations not exceeding
$2,500 in cumulative costs during the term of this Lease. In
any event, whether or not in excess of $2,500 in cumulative
cost, Lessee shall make no change or alteration to the
exterior of the Premises nor the exterior of the building(s)
on the Premises without Lessor's prior written consent. As
used in this Paragraph 7.3 the term "Utility Installation"
shall mean carpeting, window coverings, air lines, power
panels, electrical distribution systems, lighting fixtures,
space heaters, air conditioning, plumbing and fencing.
Lessor may require that Lessee remove any or all of said
alterations, improvements, additions or Utility Installations
at the expiration of the term, and restore the Premises to
their prior condition. Lessor may require Lessee to provide
Lessor, at Lessee's sole cost and expense, a lien and
completion bond in an amount equal to one and one-half times
the estimated cost of such improvements, to insure Lessor
against any liability for mechanic's and materialmen's liens
and to insure completion of the work. Should Lessee make any
alterations, improvements, additions or Utility Installations
without the prior approval of Lessor, Lessor may require that
Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or
Utility Installations in, or about the Premises that Lessee
shall desire to make and which requires the consent of the
Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent,
the consent shall be deemed conditioned upon Lessee acquiring
a permit to do so, from appropriate governmental agencies,
the furnishing of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all
conditions of said permit in a prompt and expeditious manner.
(c) (#1) Lessee shall pay, when due, all claims
for labor or materials furnished or alleged to have been
furnished to or for Lessee at or for use in the Premises,
which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10)
days notice prior to the commencement of any work in the
Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law.
If Lessee shall, in good faith, contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall
pay and satisfy any such adverse judgment that may be
rendered thereon before the enforcement thereof against the
Lessor or the Premises, upon the condition that if Lessor
shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested
lien claim or demand indemnifying Lessor against liability
for the same and holding the Premises free from the effect of
such lien or claim. In addition, Lessor may require Lessee
to pay Lessor's attorneys fees and costs in participating in
such action if Lessor shall decide it is to its best interest
to do so.
(d) (#2) Unless Lessor requires their removal, as
set forth in Paragraph 7.3(a), all alterations, improvements,
additions and Utility Installations (whether or not such
Utility Installations constitute trade fixtures of Lessee),
which may be made on the Premises, shall become the property
of Lessor and remain upon and be surrendered with the
Premises at the expiration of the term. Notwithstanding the
provisions of this Paragraph 7.3(d), Lessee's machinery and
equipment, other than that which is affixed to the Premises
so that it cannot be removed without material damage to the
Premises, shall remain the property of Lessee and may be
removed by Lessee subject to the provisions of Paragraph
7.2(c).
8. Insurance; Indemnity.
8.1 Liability Insurance - Lessee. Lessee shall, at
Lessee's expense, obtain and keep in force during the term of
this Lease a policy of Combined Single Limit Bodily Injury
and Property Damage insurance insuring Lessee and Lessor
against any liability arising out of the use, occupancy or
maintenance of the Premises and all other areas appurtenant
thereto. Such insurance shall be in an amount not less than
$500,000 per occurrence. The policy shall insure performance
by Lessee of the indemnity provisions of this Paragraph 8.
The limits of said insurance shall not, however, limit the
liability of Lessee hereunder.
8.2 Liability Insurance - Lessor. Lessor shall obtain
and keep in force during the term of this Lease a policy of
Combined Single Limit Bodily Injury and Property Damage
Insurance, insuring Lessor, but not Lessee, against any
liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto
in an amount not less than $500,000 per occurrence.
8.3 Property Insurance. Lessor shall obtain and keep
in force during the term of this Lease a policy or policies
of insurance covering loss or damage to the Premises, but not
Lessee's fixtures, equipment or tenant improvements in an
amount not to exceed the full replacement value thereof, as
the same may exist from time to time, providing protection
against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, flood
(in the event same is required by a lender having a lien on
the Premises) special extended perils ("all risk", as such
term is used in the insurance industry) but not plate glass
insurance. In addition, the Lessor shall obtain and keep in
force, during the term of this Lease, a policy or rental
value insurance covering a period of one year, with loss
payable to Lessor, which insurance shall also cover all real
estate taxes and insurance costs for said period.
8.4 Payment of Premium Increase.
(a) Lessee shall pay to Lessor, during the term
hereof, in addition to the rent, the amount of any increase
in premiums for the insurance required under Paragraphs 8.2
and 8.3 over and above such premiums paid during the Base
Period, as hereinafter defined, whether such premium increase
shall be the result of the nature of Lessee's occupancy, any
act or omission of Lessee, requirements of the holder of a
mortgage or deed of trust covering the Premises, increased
valuation of the Premises, or general rate increases. IN the
event that the Premises have been occupied previously, the
words "Base Period" shall mean the last twelve months of the
prior occupancy. In the event that the Premises have never
been previously occupied, the premiums during the "Base
Period" shall be deemed to be the lowest premiums reasonably
obtainable for said insurance assuming the most nominal use
of the Premises. Provided, however, in lieu of the Base
Period, the parties may insert a dollar amount at the end of
this sentence which figure shall be considered as the
insurance premium for the Base Period: $1703.00. In no
event, however, shall Lessee be responsible for any portion
of the premium cost attributable to liability insurance
coverage in excess of $1,000,000 procured under paragraph
8.2.
(b) Lessee shall pay any such premium increases to
Lessor within 30 days after receipt by Lessee of a copy of
the premium statement or other satisfactory evidence of the
amount due. If the insurance policies maintained hereunder
cover other improvements in addition to the Premises, Lessor
shall also deliver to Lessee a statement of the amount of
such increase attributable to the Premises and showing in
reasonable detail, the manner in which such amount was
computed. If the term of this Lease shall not expire
concurrently with the expiration of the period covered by
such insurance, Lessee's liability for premium increases
shall be prorated on an annual basis.
(c) If the Premises are part of a larger building,
then Lessee shall not be responsible for paying any increase
in the property insurance premium caused by the acts or
omissions of any other tenant of the building of which the
Premises are a part.
8.5. Insurance Policies. Insurance required hereunder
shall be in companies holding a "General Policyholders
Rating" of at least B plus, or such other rating as may be
required by a lender having a lien on the Premises, as set
forth in the most current issue of "Best's Insurance Guide".
Lessee shall deliver to Lessor copies of policies of
liability insurance required under Paragraph 8.1 or
certificates evidencing the existence and amounts of such
insurance. No such policy shall be cancelable or subject to
reduction of coverage or other modification except after
thirty (30) days prior written notice to Lessor. Lessee
shall, at least thirty (30) days prior to the expiration of
such policies, furnish Lessor with renewals or "binders"
thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable by
Lessee upon demand. Lessee shall not do or permit to be done
anything which shall invalidate the insurance policies
referred to in Paragraph 8.3.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall herein mean
damage or destruction to the Premises to the extent that the
cost of repair is less than 50% of the fair market value of
the Premises immediately prior to such damage or destruction.
"Premises Building Partial Damage" shall herein mean damage
or destruction to the building of which the Premises are a
part to the extent that the cost of repair, is less than 50%
of the fair market value of such building as a whole
immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall herein mean
damage or destruction to the Premises to the extent that the
cost of repair is 50% or more of the fair market value of the
Premises immediately prior to such damage or destruction.
"Premises Building Total Destruction" shall herein mean
damage or destruction to the building of which the Premises
are a part to the extent that the cost of repair is 50% or
more of the fair market value of such building as a whole
immediately prior to such damage or destruction.
(c) "Insured Loss" shall herein mean damage or
destruction which was caused by an event required to be
covered by the insurance described in paragraph 8.
9.2 Partial Damage - Insured Loss. Subject to the
provisions of paragraph 9.4, 9.5 and 9.6, if at any time
during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of
Premises Partial Damage or Premises Building Partial Damage,
then Lessor shall, at Lessor's sole cost, repair such damage,
but not Lessee's fixtures, equipment or tenant improvements,
as soon as reasonably possible and this Lease shall continue
in full force and effect.
9.3 (#3) Partial Damage - Uninsured Loss. Subject to
the provisions of Paragraphs 9.4, 9.5 and 9.6, if at any time
during the term of this Lease there is damage which is not an
Insured Loss and which falls within the classification of
Premises Partial Damage or Premises Building Partial Damage,
unless caused by a negligent or willful act of Lessee (in
which event Lessee shall make the repairs at Lessee's
expense), Lessor may at Lessor's option either (i) repair
such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Lessee
within thirty (30) days after the date of the occurrence of
such damage of Lessor's intention to cancel and terminate
this Lease, as of the date of the occurrence of such damage.
In the event Lessor elects to give such notice of Lessor's
intention to cancel and terminate this Lease, Lessee shall
have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's intention
to repair such damage at Lessee's expense, without
reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed
to make such repairs as soon as reasonably possible. If
Lessee does not give such notice within such 10-day period
this Lease shall be cancelled and terminated as of the date
of the occurrence of such damage.
9.4 Total Destruction. If at any time during the term
of this Lease there is damage, whether or not an Insured
Loss, (including destruction required by any authorized
public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total
Destruction, this Lease shall automatically terminate as of
the date of such total destruction.
9.5 Damage Near End of Term.
(a) If at any time during the last six months of
the term of this Lease there is damage, whether or not an
Insured Loss, which falls within the classification of
Premises Partial Damage, Lessor may at Lessor's option cancel
and terminate this Lease as of the date of occurrence of such
damage by giving written notice to Lessee of Lessor's
election to do so within 30 days after the date of occurrence
of such damage.
(b) Notwithstanding paragraph 9.59(a), in the
event that Lessee has an option to extend or renew this
Lease, and the time within which said option may be exercised
has not yet expired, Lessee shall exercise such option, if it
is to be exercised at all, no later than 20 days after the
occurrence of an Insured Loss falling within the
classification of Premises Partial Damage during the last six
months of the term of this Lease. If Lessee duly exercises
such option during said 20 day period, Lessor shall, at
Lessor's expense, repair such damage as soon as reasonably
possible and this Lease shall continue in full force and
effect. If Lessee fails to exercise such option during said
20 day period, then Lessor may at Lessor's option terminate
and cancel this Lease as of the expiration of said 20 day
period by giving written notice to Lessee of Lessor's
election to do so within 10 days after the expiration of said
20 day period, notwithstanding any term or provision in the
grant of option to the contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in paragraphs
9.2 or 9.3, and Lessor or Lessee repairs or restores the
Premises pursuant to the provisions of this Paragraph 9, the
rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in
proportion to the degree to which Lessee's use of the
Premises is impaired. Except for abatement of rent, if any,
Lessee shall have no claim against Lessor for any damage
suffered by reason of any such damage, destruction, repair or
restoration.
(b) (#4) If Lessor shall be obligated to repair or
restore the Premises under the provisions of this Paragraph 9
and shall not commence such repair or restoration within 90
days after such obligations shall accrue, Lessee may at
Lessee's option cancel and terminate this Lease by giving
Lessor written notice of Lessee's election to do so at any
time prior to the commencement of such repair or restoration.
In such event this Lease shall terminate as of the date of
such notice.
9.7 Termination - Advance Payments. Upon termination
of this Lease pursuant to this Paragraph 9, an equitable
adjustment shall be made concerning advance rent and any
advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.
9.8 Waiver. Lessor and Lessee waive the provisions of
any statutes which relate to termination of leases when
leased property is destroyed and agree that such event shall
be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Tax Increase. Lessor shall pay the real
property tax, as defined in paragraph 10.3, applicable to the
Premises; provided, however, that Lessee shall pay, in
addition to rent, the amount, if any, by which real property
taxes applicable to the Premises increase over the fiscal
real estate tax year 1990-1991. Such payment shall be made
by Lessee within thirty (30) days after receipt of Lessor's
written statement setting forth the amount of such increase
and the computation thereof. If the term of this Lease shall
not expire concurrently with the expiration of the tax fiscal
year, Lessee's liability for increased taxes for the last
partial lease year shall be prorated on an annual basis.
10.2 Additional Improvements. Notwithstanding paragraph
10.1 hereof, Lessee shall pay to Lessor upon demand therefor
the entirety of any increase in real property tax if assessed
solely by reason of additional improvements placed upon the
Premises by Lessee or at Lessee's request.
10.3 Definition of "Real Property Tax". As used herein,
the term "real property tax" shall include any form of real
estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed on the
Premises by any authority having the direct or indirect power
to tax, including any city, state or federal government, or
any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, as against any legal or
equitable interest of Lessor in the Premises or in the real
property of which the Premises are a part, as against
Lessor's right to rent or other income therefrom, and as
against Lessor's business of leasing the Premises. The term
"real property tax" shall also include any tax, fee levy,
assessment or charge (i) in substitution of, partially or
totally, any tax, fee levy, assessment or charge hereinabove
included within the definition of "real property tax," or
(ii) the nature of which was hereinbefore included within the
definition of "real property tax", or (iii) which is imposed
for a service or right not charged prior to June 1, 1978, or,
if previously charged, has been increased since June 1, 1978,
or (iv) which is imposed as a result of a transfer, either
partial or total, of Lessor's interest in the Premises or
which is added to a tax or charge hereinbefore included
within the definition of real property tax by reason of such
transfer, or (v) which is imposed by reason of this
transaction, any modifications or changes hereto, or any
transfers hereof.
10.4 Joint Assessment. If the Premises are not
separately assessed, Lessee's liability shall be an equitable
proportion of the real property taxes for all of the land and
improvements included within the tax parcel assessed, such
proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such
other information as may be reasonably available. Lessor's
reasonable determination thereof, in good faith, shall be
conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures,
furnishings, equipment and all other personal property of
Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause said trade fixtures,
furnishings, equipment and all other personal property to be
assessed and billed separately from the real property of
Lessor.
(b) If any of Lessee's said personal property
shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee within 10 days
after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessee shall pay for all water, gas, heat,
light, power, telephone and other utilities and services
supplied to the Premises, together with any taxes thereon.
If any such services are not separately metered to Lessee,
lessee shall pay a reasonable proportion to be determined by
Lessor or all charges jointed metered with other premises.
12. Assignment and Subletting.
12.1 Lessors's Consent Required. Lessee shall not
voluntarily or by operation of law assign, transfer,
mortgage, sublet, or otherwise transfer or encumber all or
any part of Lessee's interest in this Lease or in the
Premises, without Lessor's prior written consent, which
Lessor shall not unreasonably withhold. Lessor shall respond
to Lessee's request for consent hereunder in a timely manner
and any attempted assignment, transfer, mortgage, encumbrance
or subletting without such consent shall be void, and shall
constitute a breach of this Lease.
12.2 Lessee Affiliate. Notwithstanding the provisions
of paragraph 12.1 hereof, Lessee may assign or sublet the
Premises, or any portion thereof, without Lessor's consent,
to any corporation which controls, is controlled by or is
under common control with Lessee, or to any corporation
resulting from the merger or consolidation with Lessee, or to
any person or entity which acquires all the assets of Lessee
as a going concern of the business that is being conducted on
the Premises, provided that said assignee assumes, in full,
the obligations of Lessee under this Lease. Any such
assignment shall not, in any way, affect or limit the
liability of Lessee under the terms of this Lease even if
after such assignment or subletting the terms of this Lease
are materially changed or altered without the consent of
Lessee, the consent of whom shall not be necessary.
12.3 No Release of Lessee. Regardless of Lessor's
consent, no subletting or assignment shall release Lessee of
Lessee's obligation or alter the primary liability of Lessee
to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a
waiver by Lessor of any provision hereof. Consent to one
assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default
by any assignee of Lessee or any successor of Lessee, in the
performance of any of the terms hereof, Lessor may proceed
directly against Lessee without the necessity of exhausting
remedies against said assignee. Lessor may consent to
subsequent assignments or subletting of this Lease or
amendments or modifications to this Lease with assignees of
Lessee, without notifying Lessee, or any successor of Lessee,
and without obtaining its or their consent thereto and such
action shall not relieve Lessee of liability under this
Lease.
12.4 Attorney's Fees. In the event Lessee shall assign
or sublet the Premises or request the consent of Lessor to
any assignment or subletting or if Lessee shall request the
consent of Lessor for any act Lessee proposes to do then
Lessee shall pay Lessor's reasonable attorneys fees incurred
in connection therewith, such attorneys fees not to exceed
$350.00 for each such request.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of
the following events shall constitute a material default and
breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by
Lessee.
(b) (#5) The failure by Lessee to make any payment
of rent or any other payment required to be made by Lessee
hereunder, as and when due, where such failure shall
continue for a period of three days after written notice
thereof from Lessor to Lessee. In the event that Lessor
serves Lessee with a Notice to Pay Rent or Quit pursuant to
applicable Unlawful Detainer statues such Notice to Pay Rent
or Quit shall also constitute the notice required by this
subparagraph.
(c) The failure by Lessee to observe or perform
any of the covenants, conditions or provisions of this Lease
to be observed or performed by Lessee, other than described
in paragraph (b) above, where such failure shall continue for
a period of 30 days after written notice thereof from Lessor
to Lessee; provided, however, that if the nature of Lessee's
default is such that more than 30 days are reasonably
required for its cure, then Lessee shall not be deemed to be
in default if Lessee commenced such cure within said 30-day
period and thereafter diligently prosecutes such cure to
completion.
(d) (i) The making by Lessee of any general
arrangement or assignment for the benefit of creditors; (ii)
Lessee becomes a "debtor" as defined in 11 U.S.C. 101 or any
successor statue thereto (unless, in the case of a petition
filed against Lessee, the same is dismissed within 60 days);
(iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where
possession is not restored to Lessee within 30 days; or (iv)
the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises
or of Lessee's interest in this Lease, where such seizure is
not discharged within 30 days. Provided, however, in the
event that any provision of this paragraph 13.1(d) is
contrary to any applicable law, such provision shall be of no
force or effect.
(e) The discovery by Lessor that any financial
statement given to Lessor by Lessee, any assignee of Lessee,
any subtenant of Lessee, any successor in interest of Lessee
or any guarantor of Lessee's obligation hereunder, and any of
them, was materially false.
13.2 Remedies. In the event of any such material
default or breach by Lessee, Lessor may at any time
thereafter, with or without notice or demand and without
limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default or breach:
(a) Terminate Lessee's right to possession of the
Premises by any lawful means, in which case this Lease shall
terminate and Lessee shall immediately surrender possession
of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default including, but not
limited to, the cost of recovering possession of the
Premises; expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable
attorney's fees, and any real estate commission actually
paid; the worth at the time of award by the court having
jurisdiction thereof of the amount by which the unpaid rent
for the balance of the term after the time of such award
exceeds the amount of such rental loss for the same period
that Lessee proves could be reasonably avoided; that portion
of the leasing commission paid by Lessor pursuant to
Paragraph 15 applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which
case this Lease shall continue in effect whether or not
Lessee shall have abandoned the Premises. In such event
Lessor shall be entitled to enforce all of Lessor's rights
and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter
available to Lessor under the laws or judicial decisions of
the state wherein the Premises are located. Unpaid
installments of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease shall bear interest from
the date due at the maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default
unless Lessor fails to perform obligations required of Lessor
within a reasonable time, but in no event later than thirty
(30) days after written notice by Lessee to Lessor and to the
holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been
furnished to Lessee in writing, specifying wherein Lessor has
failed to perform such obligation; provided, however, that if
the nature of Lessor's obligation is such that more than
thirty (30) days are required for performance then Lessor
shall not be in default if Lessor commences performance
within such 30-day period and thereafter diligently
prosecutes the same to completion.
13.4 Late Charges. (#6) Lessee hereby acknowledges
that late payment by Lessee to Lessor of rent and other sums
due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but
are not limited to, processing and accounting charges, and
late charges which may be imposed on Lessor by the terms of
any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due
from Lessee shall not be received by Lessor or Lessor's
designee within ten (10) days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to 6% of such overdue
amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor
will incur by reason of late payment by Lessee. Acceptance
or such late charge by Lessor shall in no event constitute a
waiver of Lessee's default with respect to such overdue
amount, nor prevent Lessor from exercising any of the other
rights and remedies granted hereunder. In the event that a
late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of rent, then rent
shall automatically become due and payable quarterly in
advance, rather than monthly, notwithstanding paragraph 4 or
any other provision of this Lease to the contrary.
13.5 Impounds. In the event that a late charge is
payable hereunder, whether or not collected, for three (3)
installments of rent or any other monetary obligation of
Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other
payments required under this Lease, a monthly advance
installment, payable at the same time as the monthly rent, as
estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under
the terms of this Lease. Such fund shall be established to
insure payment when due before delinquency of any or all such
real property taxes and insurance premiums. If the amounts
paid to Lessor by Lessee under the provisions of this
paragraph are insufficient to discharge the obligations of
Lessee to pay such real property taxes and insurance premiums
as the same become due, Lessee shall pay to Lessor, upon
Lessor's demand, such additional sums necessary to pay such
obligations. All moneys paid to Lessor under this paragraph
may be intermingled with other moneys of Lessor and shall not
bear interest. In the event of a default in the obligations
of Lessee to perform under this Lease, then any balance
remaining from funds paid to Lessor under the provisions of
this paragraph may, at the option of Lessor, be applied to
the payment of any monetary default of Lessee in lieu of
being applied to the payment of real property tax and
insurance premiums.
14. Condemnation. (#7) If the Premises or any portion
thereof are taken under the power of eminent domain, or sold
under the threat of the exercise of said power (all of which
are herein called "condemnation"), this Lease shall terminate
as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs.
If more than 10% of the floor area of the building on the
Premises, or more than 25% of the land area of the Premises
which is not occupied by any building, is taken by
condemnation, Lessee may, at Lessee's option, to be exercised
in writing only within ten 910) days after Lessor shall have
given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning
authority shall have taken possession) terminate this Lease
as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in
full force and effect as to the portion of the Premises
remaining, except that the rent shall be reduced in the
proportion that the floor area of the building taken bears to
the total floor area of the building situation on the
Premises. (#8) Any award for the taking of all or any part of
the Premises under the power of eminent domain or any payment
made under the threat of the exercise of such power shall be
the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any award for loss
of or damage to Lessee's trade fixtures and removable
personal property. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall to
the extent of severance damages received by Lessor in
connection with such condemnation, repair any damage to the
Premises caused by such condemnation except to the extent
that Lessee has been reimbursed therefor by the condemning
authority. Lessee shall pay any amount in excess of such
severance damages required to complete such repair.
15. Broker's Fee.
(a) Upon execution of this Lease by both parties,
Lessor shall pay to N/A Licensed real estate broker(s), a fee
as set forth in a separate agreement between lessor and said
broker(s), or in the event there is no separate agreement
between Lessor and said broker(s), the sum of $____, for
brokerage services rendered by said broker(s) to Lessor in
this transaction.
(b) Lessor further agrees that if Lessee exercises
any Option as defined in paragraph 39.1 of this Lease, which
is granted to Lessee under this Lease, or any subsequently
granted option which is substantially similar to an Option
granted to Lessee under this Lease, or if Lessee acquires any
rights to the Premises or other premises described in this
Lease which are substantially similar to what Lessee would
have acquired had an Option herein granted to Lessee been
exercised, or if Lessee remains in possession of the Premises
after the expiration of the term of this Lease after having
failed to exercise an Option, or if said broker(s) are the
procuring cause of any other lease or safe entered into
between the parties pertaining to the Premises and/or any
adjacent property in which Lessor has an interest, then as to
any of said transactions, Lessor shall pay said broker(s) a
fee in accordance with the schedule of said broker(s) in
effect at the time of execution of this Lease.
(c) Lessor agrees to pay said fee not only on
behalf of Lessor but also on behalf of any person,
corporation, association, or other entity having an ownership
interest in said real property or any part thereof, when such
fee is due hereunder. Any transferee of Lessor's interest in
this Lease, whether such transfer is by agreement or by
operation of law, shall be deemed to have assumed Lessor's
obligation under this Paragraph 15. Said broker shall be a
third party beneficiary of the provisions of this Paragraph
15.
16. Estoppel Certificate.
(a) Lessee shall at any time upon not less than
ten (10) days' prior written notice from Lessor execute,
acknowledge and deliver to Lessor a statement in writing (i)
certifying that this Lease is unmodified and in full force
and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified,
is in full force and effect) and the date to which the rent
and other charges are paid in advance if any, and (ii)
acknowledging that there are not, to Lessee's knowledge, any
uncured defaults on the part of Lessor hereunder, or
specifying such defaults if any are claimed. Any such
statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to
deliver such statement within such time shall be a material
breach of this Lease or shall be conclusive upon Lessee (i)
that this Lease is in full force and effect, without
modification, except as may be presented by Lessor, (ii) that
there are no uncured defaults in Lessor's performance, and
(iii) that not more than one month's rent has been paid in
advance or such failure may be considered by Lessor as a
default by Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or
sell the Premises, or any part thereof, Lessee hereby agrees
to deliver to any lender or purchaser designated by Lessor
such financial statements of lessee as may be reasonably
required by such lender or purchaser. Such statements shall
include the past three years' financial statements of Lessee.
All such financial statements shall be received by Lessor and
such lender or purchaser in confidence and shall be used only
for the purposes herein set forth.
17. Lessor's Liability. (#9) The term "Lessor" as used
herein shall mean only the owner or owners at the time in
question of the fee title or a lessee's interest in a ground
lease of the Premises, and except as expressly provided in
Paragraph 15, in the event of any transfer of such title or
interest. Lessor herein named (and in cases of any
subsequent transfers then the grantor) shall be relieved from
and after the date of such transfer of all liability as
respects Lessor's obligations thereafter to be performed,
provided that any funds in the hands of Lessor or the then
grantor at the time of such transfer, in which Lessee has an
interest, shall be delivered to the grantee. The obligations
contained in this Lease to be performed by Lessor shall,
subject as aforesaid, be binding on Lessor's successors and
assigns, only during their respective periods of ownership.
18. Severability. The invalidity of any provision of this
Lease as determined by a court of competent jurisdiction,
shall in no way affect the validity of any other provision
hereof.
19. Interest on Past-due Obligations. Except as expressly
herein provided, any amount due to Lessor not paid when due
shall bear interest at the maximum rate then allowable by law
from the date due. Payment of such interest shall not excuse
or cure any default by Lessee under this Lease, provided,
however, that interest shall not be payable on late charges
incurred by Lessee nor on any amounts upon which late charges
are paid by Lessee.
20. Time of Essence. Time is of the essence.
21. Additional Rent. Any monetary obligations of Lessee to
Lessor under the terms of this Lease shall be deemed to be
rent.
22. Incorporation of Prior Agreements; Amendments. This
Lease contains all agreements of the parties with respect to
any matter mentioned herein. No prior agreement or
understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only,
signed by the parties in interest at the time of the
modification. Except as otherwise stated in this Lease,
Lessee hereby acknowledges that neither the real estate
broker listed in Paragraph 15 hereof nor any cooperating
broker on this transaction nor the Lessor or any employees or
agents of any of said persons has made any oral or written
warranties or representations to Lessee relative to the
condition or use by Lessee of said Premises and Lessee
acknowledges that Lessee assumes all responsibility regarding
the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with
all applicable laws and regulations in effect during the term
of this Lease except as otherwise specifically stated in this
Lease.
23. Notices. Any notice required or permitted to be given
hereunder shall be in writing and may be given by personal
delivery or by certified mail, and if given personally or by
mail, shall be deemed sufficiently given if addressed to
Lessee or to Lessor at the address noted below the signature
of the respective parties, as the case may be. Either party
may by notice to the other specify a different address for
notice purposes except that upon Lessee's taking possession
of the Premises, the Premises shall constitute Lessee's
address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate
by notice to Lessee.
24. Waivers. No waiver by Lessor or any provision hereof
shall be deemed a waiver of any other provision hereof or of
any subsequent breach by Lessee of the same or any other
provision. Lessor's consent to, or approval of any act,
shall not be deemed to render unnecessary the obtaining of
Lessor's consent to or approval of any subsequent act by
Lessee. The acceptance of rent hereunder by Lessor shall not
be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor's knowledge
of such preceding breach at the time of acceptance of such
rent.
25. Holding Over. If Lessee, with Lessor's consent, remains
in possession of the Premises or any part thereof after the
expiration of the term hereof, such occupancy shall be a
tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, but all
options and rights of first refusal, if any granted under the
terms of this Lease shall be deemed terminated and be of no
further effect during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder
shall be deemed exclusive but shall, wherever possible, be
cumulative with all other remedies at law or in equity.
28. Covenants and Conditions. Each provision of this Lease
performable by Lessee shall be deemed both a covenant and a
condition.
29. Binding Effect; Choice of Law. Subject to any
provisions hereof restricting assignment or subletting by
Lessee and subject to the provisions of Paragraph 17, this
Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the
laws of the State wherein the Premises are located.
30. Subordination. (#10)
(a) This Lease, at Lessor's option, shall be
subordinate to any ground lease, mortgage, deed of trust, or
any other hypothecation or security now or hereafter placed
upon the real property of which the Premises are a part and
to any and all advances made on the security thereof and to
all renewals, modifications, consolidations, replacements and
extensions thereof. Notwithstanding such subordination,
Lessee's right to quiet possession of the Premises shall not
be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgages, trustee
or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and
shall given written notice thereof to Lessee, this Lease
shall be deemed prior to such mortgage, deed of trust, or
ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease
or the date of recording thereof.
(b) Lessee agrees to execute any documents
required to effectuate an attornment, a subordination or to
make this Lease prior to the lien or any mortgage, deed of
trust or ground lease, as the case may be. Lessee's failure
to execute such documents within 10 days after written demand
shall constitute a material default by Lessee hereunder, or,
at Lessor's option, Lessor shall execute such documents on
behalf of Lessee as Lessee's attorney-in-fact. Lessee does
hereby make, constitute and irrevocably appoint Lessor as
Lessee's attorney-in-fact and in Lessee's name, place and
stead, to execute such documents in accordance with this
paragraph 30(b).
31. Attorney's Fees. If either party or the broker named
herein brings an action to enforce the terms hereof or
declare rights hereunder, the prevailing party in any such
action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as
fixed by the court. The provisions of this paragraph shall
inure to the benefit of the broker named herein who seeks to
enforce a right hereunder.
32. Lessor's Access. (#11) Lessor and Lessor's agents shall
have the right to enter the Premises at reasonable times for
the purpose of inspecting the same, showing the same to
prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the
Premises or to the building of which they are a part as
Lessor may deem necessary or desirable. Lessor may at any
time place on or about the Premises and ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of
the term hereof place on or about the Premises any ordinary
"For Lease" signs, all without rebate of rent or liability to
Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be
conducted, either voluntarily or involuntarily, any auction
upon the Premises without first having obtained Lessor's
prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining
whether to grant such consent.
34. Signs. (#12) Lessee shall not pace any sign upon the
Premises without Lessor's prior written consent except that
Lessee shall have the right, without the prior permission of
Lessor to place ordinary and usual for rent or sublet signs
thereon.
35. Merger. The voluntary or other surrender of this Lease
by Lessee, or a mutual cancellation thereof, or a termination
by Lessor, shall not work a merger, and shall, at the option
of Lessor, terminate all or any existing subtenancies or may,
at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. Consents. Except for paragraph 33 hereof, wherever in
this Lease the consent of one party is required to an act of
the other party, such consent shall not be unreasonably
withheld.
37. Guarantor. In the event that there is a guarantor of
this Lease, said guarantor shall have the same obligations as
Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the
Premises and observing and performing all of the covenants
and provisions on Lessee's part to be observed and performed
hereunder, Lessee shall have quiet possession of the Premises
for the entire term hereof subject to all of the provisions
of this Lease. The individuals executing this Lease on
behalf of Lessor represent and warrant to Lessee that they
are fully authorized and legally capable of executing this
Lease on behalf of Lessor and that such execution is binding
upon all parties holding an ownership interest in the
Premises.
39. Options.
39.1 Definition. As used in this paragraph the word
"Options" has the following meaning: (1) the right or option
to extend the term of this Lease or to renew this Lease or to
extend or renew any lease that Lessee has on other property
of Lessor; (2) the option or right of first refusal to lease
the Premises or the right of first offer to lease the
Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other
property of Lessor; (3) the right or option to purchase the
Premises, or the right of first refusal to purchase the
Premises, or the right of first offer to purchase the
Premises or the right or option to purchase other property of
Lessor, or the right of first refusal to purchase other
property of Lessor or the right of first offer to purchase
other property of Lessor.
39.2 Options Personal. Options granted to Lessee in
this Lease are personal to Lessee and may not be exercised or
be assigned, voluntarily or involuntarily, by or to any
person or entity other than Lessee, provided, however, the
Option may be exercised by or assigned to any Lessee
Affiliate as defined in paragraph 12.2 of this Lease. The
options herein granted to Lessee are not assignable separate
and apart from this Lease.
39.3 Multiple Options. In the event that Lessee has any
multiple options to extend or renew this Lease a later option
cannot be exercised unless the prior option to extend or
renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an
Option, notwithstanding any provision in the grant of Option
to the contrary, (i) during the time commencing from the date
Lessor gives to Lessee a notice of default pursuant to
paragraph 13.1(b) or 13.1(c) and continuing until the default
alleged in said notice of default is cured, or (ii) during
the period of time commencing on the day after a monetary
obligation to Lessor is due from Lessee and unpaid (without
any necessity for notice thereof to Lessee) continuing until
the obligation is paid, or (iii) at any time after an event
of default described in paragraphs 13.1(a), 13.1(d), or
13.1(e) (without any necessity of Lessor to give notice of
such default to Lessee), or (iv) in the event that Lessor has
given to Lessee three or more notices of default under
paragraph 13.1(b), where a late charge becomes payable under
paragraph 13.4 for each of such defaults, or paragraph
13.1(c), whether or not the defaults are cured, during the 12
month period prior to the time that Lessee intends to
exercise the subject option.
(b) The period of time within which an Option may
be exercised shall not be extended or enlarged by reason of
Lessee's inability to exercise an Option because of the
provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of
an Option shall terminate and be of no further force or
effect, notwithstanding Lessee's due and timely exercise of
the Option, if after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary
obligation of Lessee for a period of 30 days after such
obligation becomes due (without any necessity of Lessor to
give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13.1(c)
within 30 days after the date that Lessor gives notice to
Lessee of such default and/or Lessee fails thereafter to
diligently prosecute said cure to completion, or (iii) Lessee
commits a default described in paragraph 13.1(a), 13.1(d) or
13.1(e) (without any necessity of Lessor to give notice of
such default to Lessee), or (iv) Lessor gives to Lessee three
or more notices of default under paragraph 13.1(b), where a
late charge becomes payable under paragraph 13.4 for each
such default, or paragraph 13.1(c), whether or not the
defaults are cured.
40. Multiple Tenant Building. In the event that the
Premises are part of a larger building or group of buildings
ten Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care and cleanliness
of the building and grounds, the parking of vehicles and the
preservation of good order therein as well as for the
convenience of other occupants and tenants of the building.
The violations of any such rules and regulations shall be
deemed a material breach of this Lease by Lessee.
41. Security Measures. Lessee hereby acknowledges that the
rental payable to Lessor hereunder does not include the cost
of guard service or other security measures, and that Lessor
shall have no obligation whatsoever to provide same. Lessee
assumes all responsibility for the protection of Lessee, its
agents and invitees from acts of third parties.
42. Easements. Lessor reserves to itself the right, from
time to time, to grant such easements, rights and dedications
that Lessor deems necessary or desirable, and to cause the
recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the Use of the Premises by
Lessee. Lessee shall sign any of the aforementioned
documents upon request of Lessor and failure to do so shall
constitute a material breach of this Lease.
43. Performance Under Protest. If at any time a dispute
shall arise as to any amount or sum of money to be paid by
one party to the other under the provisions hereof, the Party
against whom the obligation to pay the money is asserted
shall have the right to make payment "under protect" and such
payment shall not be regarded as a voluntary payment, and
there shall survive the right on the part of said party to
institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of
said party to pay such sum or any part thereof, said party
shall be entitled to recover such sum or so much thereof as
it was not legally required to pay under the provisions of
this Lease.
44. Authority. If Lessee is a corporation, trust, or
general or limited partnership, each individual executing
this Lease on behalf of such entity represents and warrants
that he or she is duly authorized to execute and deliver this
Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days
after execution of this Lease, deliver to Lessor evidence of
such authority satisfactory to Lessor.
45. Conflict. Any conflict between the printed provisions
of this Lease and the typewritten or handwritten provisions
shall be controlled by the typewritten or handwritten
provisions.
46. Addendum. Attached hereto is an addendum or addenda
containing paragraphs A-1 through A-3 which constitutes a
part of this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE
AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY
EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY
CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME
THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE
OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN
PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR HIS
APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR
THE TRANSACTION RELATING THERETO; THE PARTIES SHALL
RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
THIS LEASE.
The parties hereto have executed this Lease on the dates
specified immediately adjacent to their respective
signatures.
Executed at 1411 E. Orangethorpe Ave., Fullerton, CA 92631,
by Ron Hart - President, Nelco Products, Inc.
Address 1009 Dolphin Terrace, Corona del Mar, CA 92625, by
James Emmi - Owner
Modification To Lease
Building Lease between James Emmi, Lessor and
Nelco, Lessee Dated December 12, 1989
1100 E. Kimberly Avenue, Anaheim, CA
#1 - 7.3 (c) Last sentence to read:
In addition, Lessor may require Lessee to pay Lessor's
reasonable attorneys fees and costs in participating in
such action if Lessor shall decide it is to Its best
interest to do so.
#2 - 7.3 (d) Last sentence to read:
Notwithstanding the provisions of this Paragraph 7.3(d),
Lessee's machinery and equipment, including that which
is affixed to the Premises shall remain the property of
Lessee and may be removed by Lessee subject to the
provisions of Paragraph 7.2(c).
#3 - 9.3 First sentence to read:
Subject to the provisions of Paragraphs 9.4. 9.5, and
9.6, if at any time during the term of this Lease there
is damage which is not an Insured Loss and which falls
within the classification of Premises Partial Damage or
Premises Building Partial Damage, unless caused by
negligent or willful act of Lessee (in which event
Lessee shall make the repair at Lessee's expense to the
extent caused by the negligence or willful act of
Lessee......
#4 - 9.6 M First sentence to read:
If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and
shall not complete such repairs within 90 days of
written notice of such occurrence of damage, then Lessee
may terminate or cancel this lease by written notice to
Lessor.
#5 - 13.1 (b) First sentence to read:
The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder,
as and when due, where such failure shall continue for a
period of three business days after written notice
thereof from Lessor to Lessee.
#6 - 13.4 Add to end of paragraph:
To the extent Lesser is entitled to any other recovery
for damages, and late coverage payment which has already
been made shall be
credited against the amount of such damages.
#7 - 14 Second sentence to read:
Any of the floor area of the building on the
Premises.....
#8 - 14 Delete the sentence:
Delete: No reduction of rent shall occur if the only
area taken is that which does not have a building
located thereon.
#9 - 17 Add to end of first sentence:
shall be delivered to grantee conditioned upon the
acceptance of the new owners of the terms and provisions
of this lease.
#10 - 30 Change second sentence to read:
Notwithstanding such subordination, Lessee's right to
quiet possession of the Premises shall not be disturbed
if Lessee is not in material default so long as Lessee
shall pay the rent and be in substantial compliance with
all provisions of this Lease.......
#11 - 32 Add to first sentence:
Lessor and Lessor's agents shall have the right to enter
the Premises at reasonable times after providing Lessee
with 24 hour prior notice for the purpose of inspecting
the same, showing .....
#12 - 34 Add the sentence:
All signs currently in place are deemed to have Lessor's
prior consent.
Ron Hart - Nelco Products, Inc.
James Emmi - Owner
ADDENDUM TO
BUILDING LEASE BETWEEN JAMES EMMI, LESSOR
AND NELCO LESSEE DATED DECEMBER 12, 1989
1100 E. KIMBERLY AVENUE, ANAHEIM, CA
A1. CONSUMER PRICE INDEX ADJUSTMENT:
The monthly rental will be increased in the same
proportion as the percentage of increase of the Los
Angeles/Long Beach/Anaheim area C.P.I. as determined by
the U.S. Department of Labor Statistics. The starting
base for the C.P.I. index will be the index for the
month of April 1990 which will be stipulated at 133.25.
The C.P.I. adjustment will be made effective on each of
the 2nd, 4th, 6th, 8th and 10th anniversary of the
effective starting date of the lease (June 21, 1990).
The bi-annual adjustment will be made every two years
thereafter through the lease option periods if
exercised. The C.P.I. index used for each period will
be the published index for the month of April preceding
the effective adjustment date. In no case will the rate
increase be more than 10% per annum.
A2. ALTERATIONS
As provided for in Item 7.3, the building's original
configuration and improvements shall be deemed to be the
condition of the building when first occupied by the
Lessee under previous leases. Any changes or
modifications having been done subsequent to the
original occupancy shall be subject to change back to
original condition before any termination of lease at
the option of Lessor. Normal wear and tear is excepted.
This building is presently occupied by Lessee and is
acceptable as is.
The Lessee is hereby given approval to install a
"Treater" similar to the one in the 1107 E. Kimberly
building under the terms and conditions as specified in
the lease.
A3. OPTIONS TO EXTEND LEASE PERIOD.
The Lessee is hereby granted the option to extend this
lease for an additional 5 years, June 21, 1995 to June
20, 2000 under the same terms and conditions as the
first 5 years, providing that the Lessee has
substantially complied with all the obligations of said
lease for the first 5 years. Rental rate will continue
to be adjusted as stipulated by C.P.I. adjustment, and
tax and insurance adjustments as provided for in lease.
The Lessee is hereby granted the option to renew this
lease for an additional 5 year period, June 21, 2000 to
June 20, 2005. The rental rate for this period will be
determined by agreement between the Lessor and Lessee
and shall be equal to 90% of the average rental rates in
effect at the time of Lessee's notice of intention to
renew. Average rental rates will be determined by
prevailing and available rental rates in the
Fullerton/Anaheim area for a minimum of 6 or more
buildings of comparable size and location.
In order to exercise the option to extend or renew this
lease, the Lessee must notify Lessor of his intention to
exercise his option before January 1, of the year of the
start of option period.
Ron Hart - Nelco Products, Inc.
James Emmi - Owner
December 29, 1994
Mr. James Emmi
1009 Dolphin Terrace
Corona del Mar, CA 92625
VIA CERTIFIED MAIL
Dear Mr. Emmi,
Writing to you in my dual capacity as Vice President of Nelco
Products, Inc., this letter serves as formal notice on behalf
of Nelco Products, Inc., of their intention to exercise the
June 12, 1995, options to extend the leases of both 1100 and
1107 E. Kimberly Avenue, Anaheim, CA, in accord with
paragraphs A3 in the Addendums dated December 12 1989, to the
Leases also dated December 12, 1989. The options thus
exercised will run until June 20, 2000.
We extend our best wishes for the New Year.
Sincerely,
NELCO, INTERNATIONAL CORPORATION
Lee H. Newton
Vice President Finance
copy: Ron Hart, Nelco Products Inc.
Phil Smoot, Nelco International Corporation
Allen Levine, Park Electrochemical Corp.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>ex1002.txt
<DESCRIPTION>EXHIBIT
<TEXT>
EXHIBIT 10.02
STANDARD INDUSTRIAL LEASE - GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Parties. This Lease, dated, for reference purposes
only, December 12, 1989, is made by and between James Emmi
(herein called "Lessor") and Nelco Products Inc. (herein
called "Lessee").
2. Premises. Lessor hereby leases to Lessee and Lessee
leases from Lessor for the term, at the rental, and upon all
of the conditions set forth herein, that certain real
property situated in the County of Orange, State of
California, commonly known as 1107 East Kimberly Avenue,
Anaheim, CA 92801 and described as approximately 13,200
square foot industrial building on approximately 30,000
square fee of land. Said real property including the land
and all improvements therein, is herein called the
"Premises".
3. Term.
3.1 Term. The term of this Lease shall be for 60
months commencing on June 21, 1990 and ending on June 20,
1995 unless sooner terminated pursuant to any provision
hereof.
3.2 Delay in Possession. Notwithstanding said
commencement date, if for any reason Lessor cannot deliver
possession of the Premises to Lessee on said date, Lessor
shall not be subject to any liability therefor, nor shall
such failure affect the validity of this Lease or the
obligations of Lessee hereunder or extend the term hereof,
but in such case, Lessee shall not be obligated to pay rent
until possession of the Premises is tendered to Lessee;
provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days from said
commencement date, Lessee may, at Lessee's option, by notice
in writing to Lessor within ten (10) days thereafter, cancel
this Lease, in which event the parties shall be discharged
from all obligations hereunder, provided further, however,
that if such written notice of lessee is not received by
Lessor within said ten (10) day period, Lessee's right to
cancel this Lease hereunder shall terminated and be of no
further force or effect.
3.3 Early Possession. If Lessee occupies the Premises
prior to said commencement date, such occupancy shall be
subject to all provisions hereof, such occupancy shall not
advance the termination date, and Lessee shall pay rent for
such period at the initial monthly rates set forth below.
4. Rent. Lessee shall pay to Lessor as rent for the
Premises, monthly payments of $5600.00, in advance, on the
21 day of each month of the term hereof, as rent for monthly
rental rate shall increase or decrease as per C.P.I.
adjustment as defined in addendum (A-1) as well as tax and
insurance adjustments.
Rent for any period during the term hereof which is for less
than one month shall be a pro rata portion of the monthly
installment. Rent shall be payable in lawful money of the
United States to Lessor at the address stated herein or to
such other person or at such other places as Lessor may
designate in writing.
5. Security Deposit. Lessee shall deposit with Lessor
upon execution hereof $ N/A as security for Lessee's
faithful performance of Lessee's obligations hereunder. If
Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this
Lease, Lessor may use, apply or retain all or any portion of
said deposit for the payment of any rent or other charge in
default or for the payment of any other sum to which Lessor
may become obligated by reason of Lessee's default, or to
compensate Lessor for any loss or damage which Lessor may
suffer thereby. If Lessor so uses or applies all of any
portion of said deposit, Lessee shall within ten (10) days
after written demand therefor deposit cash with Lessor in an
amount sufficient to restore said deposit to the full amount
hereinabove stated and Lessee's failure to do so shall be a
material breach of this Lease. If the monthly rent shall,
from time to time, increase during the term of this Lease,
Lessee shall thereupon deposit with Lessor additional
security deposit so that the amount of security deposit held
by Lessor shall at all times bear the same proportion to
current rent as the original security deposit bears to the
original monthly rent set forth in paragraph 4 hereof.
Lessor shall not be required to keep said deposit separate
from its general accounts. If Lessee performs all of
Lessee's obligations hereunder, said deposit, or so much
thereof as has not theretofore been applied by Lessor shall
be returned, without payment of interest or other increment
for its use, to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest hereunder) at the
expiration of the term hereof, and after Lessee has vacated
the Premises. No trust relationship is created herein
between Lessor and Lessee with respect to said Security
Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only
for manufacturing, warehousing and related services or any
other use which is reasonably comparable and for no other
purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in
its state existing on the date that the Lease term
commences, but without regard to the use for which Lessee
will use the Premises, does not violate any covenants or
restrictions of record, or any applicable building code,
regulation or ordinance in effect on such Lease term
commencement date. In the event it is determined that this
warranty has been violated, then it shall be the obligation
of the Lessor, after written notice from Lessee, to
promptly, at Lessor's sole cost and expense, rectify any
such violation. In the event Lessee does not given to
Lessor written notice of the violation of this warranty
within six months from the date that the Lease term
commences, the correction of same shall be the obligation of
the Lessee or Lessee's sole cost. The warranty contained in
this paragraph 6.2(a) shall be of no force or effect if,
prior to the date of this Lease, Lessee was the owner or
occupant of the Premises, and, in such event, Lessee shall
correct any such violation effect if, prior to the date of
this Lease, Lessee was the owner or occupant of the
Premises, and, in such event, Lessee shall correct any such
violation at Lessee's sole cost.
(b) Except as provided in paragraph 6.2(a), Lessee
shall, at Lessee's expense, comply promptly with all
applicable statutes, ordinances, rules, regulations, orders,
covenants and restrictions of record, and requirements in
effect during the term or any part of the term hereof,
regulating the use by Lessee of the Premises. Lessee shall
not use nor permit the use of the Premises in any manner
that will tend to create waste or a nuisance or, if there
shall be more than one tenant in the building containing the
Premises, shall tend to disturb such other tenants.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee
clean and free of debris on Lease commencement date (unless
Lessee is already in possession) and Lessor further warrants
to Lessee that the plumbing, lighting, air-conditioning,
heating, and leading doors in the Premises shall be in good
operating condition on the Lease commencement date. In the
event that it is determined that this warranty has been
violated, then it shall be the obligation of Lessor, after
receipt of written notice from Lessee setting forth with
specificity the nature of the violation, to promptly, at
Lessor's sale cost, rectify such violation. Lessee's
failure to give such written notice to Lessor within thirty
(30) days after the Lease commencement date shall cause the
conclusive presumption that Lessor has complied with all of
Lessor's obligations hereunder. The warranty contained in
this paragraph 6.3(a) shall be of no force or effect if
prior to the date of this Lease, Lessee was the owner or
occupant of the Premises.
(b) Except as otherwise provided in this Lease,
Lessee hereby accepts the Premises in their condition
existing as of the Lease commencement date or the date that
Lessee takes possession of the Premises, whichever is
earlier, subject to all applicable zoning, municipal, county
and state laws, ordinances and regulations governing and
regulating the use of the Premises, and any covenants or
restrictions of record, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any
exhibits attached hereto. Lessee acknowledges that neither
Lessor nor Lessor's agent has made any representation or
warranty as to the present or future suitability of the
Premises for the conduct of Lessee's business.
7. Maintenance, Repairs and Alterations.
7.1 Lessor's Obligations. Subject to the
provisions of Paragraphs 6, 7.2 and 9 and except for damage
caused by any negligent or intentional act or omission of
Lessee, Lessee's agents, employees, or invitees in which
event Lessee shall repair the damage, Lessor, at Lessor's
expense, shall keep in good order, condition and repair the
foundations, exterior walls and the exterior roof of the
Premises. Lessor shall not, however, be obligated to paint
such exterior, nor shall Lessor be required to maintain the
interior surface of exterior walls, windows, doors or plate
glass. Lessor shall have no obligation to make repairs
under this Paragraph 7.1 until a reasonable time after
receipt of written notice of the need for such repairs,
Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Lessee the
right to make repairs at Lessor's expense or to terminate
this Lease because of Lessor's failure to keep the Premises
in good order, condition and repair.
7.2 Lessee's Obligations.
(a) Subject to the provisions of Paragraph 6, 7.1
and 9, Lessee, at Lessee's expense, shall keep in good
order, condition and repair the Premises and every part
thereof (whether or not the damaged portion of the Premises
or the means of repairing the same are reasonably or readily
accessible to Lessee) including, without limiting the
generality of the foregoing, all plumbing, heating, air
conditioning, (Lessee shall procure and maintain, at
Lessee's expense, an air conditioning system maintenance
contract) ventilating, electrical and lighting facilities
and equipment within the Premises, fixtures, interior walls
and interior surface of exterior walls, ceilings, windows,
doors, plate glass, and skylights, located within the
Premises, and all landscaping, driveways, parking lots,
fences and signs located in the Premises and all sidewalks
and parkways adjacent to the Premises.
(b) If Lessee fails to perform Lessee's obligations
under this Paragraph 7.2 or under any other paragraph of
this Lease, Lessor may at Lessor's option enter upon the
Premises after 10 days' prior written notice to Lessee
(except in the case of emergency, in which case no notice
shall be required), perform such obligations on Lessee's
behalf and put the Premises in good order, condition and
repair, and the cost thereof together with interest thereon
at the maximum rate then allowable by law shall be due and
payable as additional rent to Lessor together with Lessee's
next rental installment.
(c) On the last day of the term hereof, or on any
sooner termination, Lessee shall surrender the Premises to
Lessor in the same condition as received, ordinary wear and
tear excepted, clean and free of debris. Lessee shall
repair any damage to the Premises occasioned by the
installation or removal of its trade fixtures, furnishings
and equipment. Notwithstanding anything to the contrary
otherwise stated in this Lease, Lessee shall leave the air
lines, power panels, electrical distribution systems,
lighting fixtures, space heaters, air conditioning, plumbing
and fencing on the premises in good operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior
written consent make any alterations, improvements,
additions, or Utility Installations in, on or about the
Premises, except for nonstructural alterations not exceeding
$2,500 in cumulative costs during the term of this Lease.
In any event, whether or not in excess of $2,500 in
cumulative cost, Lessee shall make no change or alteration
to the exterior of the Premises nor the exterior of the
building(s) on the Premises without Lessor's prior written
consent. As used in this Paragraph 7.3 the term "Utility
Installation" shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems,
lighting fixtures, space heaters, air conditioning, plumbing
and fencing. Lessor may require that Lessee remove any or
all of said alterations, improvements, additions or Utility
Installations at the expiration of the term, and restore the
Premises to their prior condition. Lessor may require
Lessee to provide Lessor, at Lessee's sole cost and expense,
a lien and completion bond in an amount equal to one and one-
half times the estimated cost of such improvements, to
insure Lessor against any liability for mechanic's and
materialmen's liens and to insure completion of the work.
Should Lessee make any alterations, improvements, additions
or Utility Installations without the prior approval of
Lessor, Lessor may require that Lessee remove any or all of
the same.
(b) Any alterations, improvements, additions or
Utility Installations in, or about the Premises that Lessee
shall desire to make and which requires the consent of the
Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent,
the consent shall be deemed conditioned upon Lessee
acquiring a permit to do so, from appropriate governmental
agencies, the furnishing of a copy thereof to Lessor prior
to the commencement of the work and the compliance by Lessee
of all conditions of said permit in a prompt and expeditious
manner.
(c) (#1) Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been
furnished to or for Lessee at or for use in the Premises,
which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10)
days notice prior to the commencement of any work in the
Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law.
If Lessee shall, in good faith, contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall
pay and satisfy any such adverse judgment that may be
rendered thereon before the enforcement thereof against the
Lessor or the Premises, upon the condition that if Lessor
shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested
lien claim or demand indemnifying Lessor against liability
for the same and holding the Premises free from the effect
of such lien or claim. In addition, Lessor may require
Lessee to pay Lessor's attorneys fees and costs in
participating in such action if Lessor shall decide it is to
its best interest to do so.
(d) (#2) Unless Lessor requires their removal, as
set forth in Paragraph 7.3(a), all alterations,
improvements, additions and Utility Installations (whether
or not such Utility Installations constitute trade fixtures
of Lessee), which may be made on the Premises, shall become
the property of Lessor and remain upon and be surrendered
with the Premises at the expiration of the term.
Notwithstanding the provisions of this Paragraph 7.3(d),
Lessee's machinery and equipment, other than that which is
affixed to the Premises so that it cannot be removed without
material damage to the Premises, shall remain the property
of Lessee and may be removed by Lessee subject to the
provisions of Paragraph 7.2(c).
8. Insurance; Indemnity.
8.1 Liability Insurance - Lessee. Lessee shall, at
Lessee's expense, obtain and keep in force during the term
of this Lease a policy of Combined Single Limit Bodily
Injury and Property Damage insurance insuring Lessee and
Lessor against any liability arising out of the use,
occupancy or maintenance of the Premises and all other areas
appurtenant thereto. Such insurance shall be in an amount
not less than $500,000 per occurrence. The policy shall
insure performance by Lessee of the indemnity provisions of
this Paragraph 8. The limits of said insurance shall not,
however, limit the liability of Lessee hereunder.
8.2 Liability Insurance - Lessor. Lessor shall
obtain and keep in force during the term of this Lease a
policy of Combined Single Limit Bodily Injury and Property
Damage Insurance, insuring Lessor, but not Lessee, against
any liability arising out of the ownership, use, occupancy
or maintenance of the Premises and all areas appurtenant
thereto in an amount not less than $500,000 per occurrence.
8.3 Property Insurance. Lessor shall obtain and
keep in force during the term of this Lease a policy or
policies of insurance covering loss or damage to the
Premises, but not Lessee's fixtures, equipment or tenant
improvements in an amount not to exceed the full replacement
value thereof, as the same may exist from time to time,
providing protection against all perils included within the
classification of fire, extended coverage, vandalism,
malicious mischief, flood (in the event same is required by
a lender having a lien on the Premises) special extended
perils ("all risk", as such term is used in the insurance
industry) but not plate glass insurance. In addition, the
Lessor shall obtain and keep in force, during the term of
this Lease, a policy or rental value insurance covering a
period of one year, with loss payable to Lessor, which
insurance shall also cover all real estate taxes and
insurance costs for said period.
8.4 Payment of Premium Increase.
(a) Lessee shall pay to Lessor, during the term
hereof, in addition to the rent, the amount of any increase
in premiums for the insurance required under Paragraphs 8.2
and 8.3 over and above such premiums paid during the Base
Period, as hereinafter defined, whether such premium
increase shall be the result of the nature of Lessee's
occupancy, any act or omission of Lessee, requirements of
the holder of a mortgage or deed of trust covering the
Premises, increased valuation of the Premises, or general
rate increases. IN the event that the Premises have been
occupied previously, the words "Base Period" shall mean the
last twelve months of the prior occupancy. In the event
that the Premises have never been previously occupied, the
premiums during the "Base Period" shall be deemed to be the
lowest premiums reasonably obtainable for said insurance
assuming the most nominal use of the Premises. Provided,
however, in lieu of the Base Period, the parties may insert
a dollar amount at the end of this sentence which figure
shall be considered as the insurance premium for the Base
Period: $2227.00. In no event, however, shall Lessee be
responsible for any portion of the premium cost attributable
to liability insurance coverage in excess of $1,000,000
procured under paragraph 8.2.
(b) Lessee shall pay any such premium increases to
Lessor within 30 days after receipt by Lessee of a copy of
the premium statement or other satisfactory evidence of the
amount due. If the insurance policies maintained hereunder
cover other improvements in addition to the Premises, Lessor
shall also deliver to Lessee a statement of the amount of
such increase attributable to the Premises and showing in
reasonable detail, the manner in which such amount was
computed. If the term of this Lease shall not expire
concurrently with the expiration of the period covered by
such insurance, Lessee's liability for premium increases
shall be prorated on an annual basis.
(c) If the Premises are part of a larger building,
then Lessee shall not be responsible for paying any increase
in the property insurance premium caused by the acts or
omissions of any other tenant of the building of which the
Premises are a part.
8.5. Insurance Policies. Insurance required
hereunder shall be in companies holding a "General
Policyholders Rating" of at least B plus, or such other
rating as may be required by a lender having a lien on the
Premises, as set forth in the most current issue of "Best's
Insurance Guide". Lessee shall deliver to Lessor copies of
policies of liability insurance required under Paragraph 8.1
or certificates evidencing the existence and amounts of such
insurance. No such policy shall be cancelable or subject to
reduction of coverage or other modification except after
thirty (30) days prior written notice to Lessor. Lessee
shall, at least thirty (30) days prior to the expiration of
such policies, furnish Lessor with renewals or "binders"
thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable by
Lessee upon demand. Lessee shall not do or permit to be
done anything which shall invalidate the insurance policies
referred to in Paragraph 8.3.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall herein mean
damage or destruction to the Premises to the extent that the
cost of repair is less than 50% of the fair market value of
the Premises immediately prior to such damage or
destruction. "Premises Building Partial Damage" shall
herein mean damage or destruction to the building of which
the Premises are a part to the extent that the cost of
repair, is less than 50% of the fair market value of such
building as a whole immediately prior to such damage or
destruction.
(b) "Premises Total Destruction" shall herein mean
damage or destruction to the Premises to the extent that the
cost of repair is 50% or more of the fair market value of
the Premises immediately prior to such damage or
destruction. "Premises Building Total Destruction" shall
herein mean damage or destruction to the building of which
the Premises are a part to the extent that the cost of
repair is 50% or more of the fair market value of such
building as a whole immediately prior to such damage or
destruction.
(c) "Insured Loss" shall herein mean damage or
destruction which was caused by an event required to be
covered by the insurance described in paragraph 8.
9.2 Partial Damage - Insured Loss. Subject to the
provisions of paragraph 9.4, 9.5 and 9.6, if at any time
during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of
Premises Partial Damage or Premises Building Partial Damage,
then Lessor shall, at Lessor's sole cost, repair such
damage, but not Lessee's fixtures, equipment or tenant
improvements, as soon as reasonably possible and this Lease
shall continue in full force and effect.
9.3 (#3) Partial Damage - Uninsured Loss. Subject
to the provisions of Paragraphs 9.4, 9.5 and 9.6, if at any
time during the term of this Lease there is damage which is
not an Insured Loss and which falls within the
classification of Premises Partial Damage or Premises
Building Partial Damage, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense), Lessor may at Lessor's option
either (i) repair such damage as soon as reasonably possible
at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) give written
notice to Lessee within thirty (30) days after the date of
the occurrence of such damage of Lessor's intention to
cancel and terminate this Lease, as of the date of the
occurrence of such damage. In the event Lessor elects to
give such notice of Lessor's intention to cancel and
terminate this Lease, Lessee shall have the right within ten
(10) days after the receipt of such notice to give written
notice to Lessor of Lessee's intention to repair such damage
at Lessee's expense, without reimbursement from Lessor, in
which event this Lease shall continue in full force and
effect, and Lessee shall proceed to make such repairs as
soon as reasonably possible. If Lessee does not give such
notice within such 10-day period this Lease shall be
cancelled and terminated as of the date of the occurrence of
such damage.
9.4 Total Destruction. If at any time during the
term of this Lease there is damage, whether or not an
Insured Loss, (including destruction required by any
authorized public authority), which falls into the
classification of Premises Total Destruction or Premises
Building Total Destruction, this Lease shall automatically
terminate as of the date of such total destruction.
9.5 Damage Near End of Term.
(a) If at any time during the last six months of
the term of this Lease there is damage, whether or not an
Insured Loss, which falls within the classification of
Premises Partial Damage, Lessor may at Lessor's option
cancel and terminate this Lease as of the date of occurrence
of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of
occurrence of such damage.
(b) Notwithstanding paragraph 9.59(a), in the event
that Lessee has an option to extend or renew this Lease, and
the time within which said option may be exercised has not
yet expired, Lessee shall exercise such option, if it is to
be exercised at all, no later than 20 days after the
occurrence of an Insured Loss falling within the
classification of Premises Partial Damage during the last
six months of the term of this Lease. If Lessee duly
exercises such option during said 20 day period, Lessor
shall, at Lessor's expense, repair such damage as soon as
reasonably possible and this Lease shall continue in full
force and effect. If Lessee fails to exercise such option
during said 20 day period, then Lessor may at Lessor's
option terminate and cancel this Lease as of the expiration
of said 20 day period by giving written notice to Lessee of
Lessor's election to do so within 10 days after the
expiration of said 20 day period, notwithstanding any term
or provision in the grant of option to the contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in paragraphs
9.2 or 9.3, and Lessor or Lessee repairs or restores the
Premises pursuant to the provisions of this Paragraph 9, the
rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in
proportion to the degree to which Lessee's use of the
Premises is impaired. Except for abatement of rent, if any,
Lessee shall have no claim against Lessor for any damage
suffered by reason of any such damage, destruction, repair
or restoration.
(b) (#4) If Lessor shall be obligated to repair or
restore the Premises under the provisions of this Paragraph
9 and shall not commence such repair or restoration within
90 days after such obligations shall accrue, Lessee may at
Lessee's option cancel and terminate this Lease by giving
Lessor written notice of Lessee's election to do so at any
time prior to the commencement of such repair or
restoration. In such event this Lease shall terminate as of
the date of such notice.
9.7 Termination - Advance Payments. Upon
termination of this Lease pursuant to this Paragraph 9, an
equitable adjustment shall be made concerning advance rent
and any advance payments made by Lessee to Lessor. Lessor
shall, in addition, return to Lessee so much of Lessee's
security deposit as has not theretofore been applied by
Lessor.
9.8 Waiver. Lessor and Lessee waive the provisions
of any statutes which relate to termination of leases when
leased property is destroyed and agree that such event shall
be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Tax Increase. Lessor shall pay the
real property tax, as defined in paragraph 10.3, applicable
to the Premises; provided, however, that Lessee shall pay,
in addition to rent, the amount, if any, by which real
property taxes applicable to the Premises increase over the
fiscal real estate tax year 1990-1991. Such payment shall
be made by Lessee within thirty (30) days after receipt of
Lessor's written statement setting forth the amount of such
increase and the computation thereof. If the term of this
Lease shall not expire concurrently with the expiration of
the tax fiscal year, Lessee's liability for increased taxes
for the last partial lease year shall be prorated on an
annual basis.
10.2 Additional Improvements. Notwithstanding
paragraph 10.1 hereof, Lessee shall pay to Lessor upon
demand therefor the entirety of any increase in real
property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at
Lessee's request.
10.3 Definition of "Real Property Tax". As used
herein, the term "real property tax" shall include any form
of real estate tax or assessment, general, special, ordinary
or extraordinary, and any license fee, commercial rental
tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed on the
Premises by any authority having the direct or indirect
power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire,
street, drainage or other improvement district thereof, as
against any legal or equitable interest of Lessor in the
Premises or in the real property of which the Premises are a
part, as against Lessor's right to rent or other income
therefrom, and as against Lessor's business of leasing the
Premises. The term "real property tax" shall also include
any tax, fee levy, assessment or charge (i) in substitution
of, partially or totally, any tax, fee levy, assessment or
charge hereinabove included within the definition of "real
property tax," or (ii) the nature of which was hereinbefore
included within the definition of "real property tax", or
(iii) which is imposed for a service or right not charged
prior to June 1, 1978, or, if previously charged, has been
increased since June 1, 1978, or (iv) which is imposed as a
result of a transfer, either partial or total, of Lessor's
interest in the Premises or which is added to a tax or
charge hereinbefore included within the definition of real
property tax by reason of such transfer, or (v) which is
imposed by reason of this transaction, any modifications or
changes hereto, or any transfers hereof.
10.4 Joint Assessment. If the Premises are not
separately assessed, Lessee's liability shall be an
equitable proportion of the real property taxes for all of
the land and improvements included within the tax parcel
assessed, such proportion to be determined by Lessor from
the respective valuations assigned in the assessor's work
sheets or such other information as may be reasonably
available. Lessor's reasonable determination thereof, in
good faith, shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes
assessed against and levied upon trade fixtures,
furnishings, equipment and all other personal property of
Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause said trade fixtures,
furnishings, equipment and all other personal property to be
assessed and billed separately from the real property of
Lessor.
(b) If any of Lessee's said personal property shall
be assessed with Lessor's real property, Lessee shall pay
Lessor the taxes attributable to Lessee within 10 days after
receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessee shall pay for all water, gas, heat,
light, power, telephone and other utilities and services
supplied to the Premises, together with any taxes thereon.
If any such services are not separately metered to Lessee,
lessee shall pay a reasonable proportion to be determined by
Lessor or all charges jointed metered with other premises.
12. Assignment and Subletting.
12.1 Lessors's Consent Required. Lessee shall not
voluntarily or by operation of law assign, transfer,
mortgage, sublet, or otherwise transfer or encumber all or
any part of Lessee's interest in this Lease or in the
Premises, without Lessor's prior written consent, which
Lessor shall not unreasonably withhold. Lessor shall
respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer,
mortgage, encumbrance or subletting without such consent
shall be void, and shall constitute a breach of this Lease.
12.2 Lessee Affiliate. Notwithstanding the provisions
of paragraph 12.1 hereof, Lessee may assign or sublet the
Premises, or any portion thereof, without Lessor's consent,
to any corporation which controls, is controlled by or is
under common control with Lessee, or to any corporation
resulting from the merger or consolidation with Lessee, or
to any person or entity which acquires all the assets of
Lessee as a going concern of the business that is being
conducted on the Premises, provided that said assignee
assumes, in full, the obligations of Lessee under this
Lease. Any such assignment shall not, in any way, affect or
limit the liability of Lessee under the terms of this Lease
even if after such assignment or subletting the terms of
this Lease are materially changed or altered without the
consent of Lessee, the consent of whom shall not be
necessary.
12.3 No Release of Lessee. Regardless of Lessor's
consent, no subletting or assignment shall release Lessee of
Lessee's obligation or alter the primary liability of Lessee
to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a
waiver by Lessor of any provision hereof. Consent to one
assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of
default by any assignee of Lessee or any successor of
Lessee, in the performance of any of the terms hereof,
Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said assignee.
Lessor may consent to subsequent assignments or subletting
of this Lease or amendments or modifications to this Lease
with assignees of Lessee, without notifying Lessee, or any
successor of Lessee, and without obtaining its or their
consent thereto and such action shall not relieve Lessee of
liability under this Lease.
12.4 Attorney's Fees. In the event Lessee shall
assign or sublet the Premises or request the consent of
Lessor to any assignment or subletting or if Lessee shall
request the consent of Lessor for any act Lessee proposes to
do then Lessee shall pay Lessor's reasonable attorneys fees
incurred in connection therewith, such attorneys fees not to
exceed $350.00 for each such request.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of
the following events shall constitute a material default and
breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by
Lessee.
(b) (#5) The failure by Lessee to make any payment
of rent or any other payment required to be made by Lessee
hereunder, as and when due, where such failure shall
continue for a period of three days after written notice
thereof from Lessor to Lessee. In the event that Lessor
serves Lessee with a Notice to Pay Rent or Quit pursuant to
applicable Unlawful Detainer statues such Notice to Pay Rent
or Quit shall also constitute the notice required by this
subparagraph.
(c) The failure by Lessee to observe or perform any
of the covenants, conditions or provisions of this Lease to
be observed or performed by Lessee, other than described in
paragraph (b) above, where such failure shall continue for a
period of 30 days after written notice thereof from Lessor
to Lessee; provided, however, that if the nature of Lessee's
default is such that more than 30 days are reasonably
required for its cure, then Lessee shall not be deemed to be
in default if Lessee commenced such cure within said 30-day
period and thereafter diligently prosecutes such cure to
completion.
(d) (i) The making by Lessee of any general
arrangement or assignment for the benefit of creditors; (ii)
Lessee becomes a "debtor" as defined in 11 U.S.C. 101 or any
successor statue thereto (unless, in the case of a petition
filed against Lessee, the same is dismissed within 60 days);
(iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located
at the Premises or of Lessee's interest in this Lease, where
possession is not restored to Lessee within 30 days; or (iv)
the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises
or of Lessee's interest in this Lease, where such seizure is
not discharged within 30 days. Provided, however, in the
event that any provision of this paragraph 13.1(d) is
contrary to any applicable law, such provision shall be of
no force or effect.
(e) The discovery by Lessor that any financial
statement given to Lessor by Lessee, any assignee of Lessee,
any subtenant of Lessee, any successor in interest of Lessee
or any guarantor of Lessee's obligation hereunder, and any
of them, was materially false.
13.2 Remedies. In the event of any such material
default or breach by Lessee, Lessor may at any time
thereafter, with or without notice or demand and without
limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default or breach:
(a) Terminate Lessee's right to possession of the
Premises by any lawful means, in which case this Lease shall
terminate and Lessee shall immediately surrender possession
of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default including, but not
limited to, the cost of recovering possession of the
Premises; expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable
attorney's fees, and any real estate commission actually
paid; the worth at the time of award by the court having
jurisdiction thereof of the amount by which the unpaid rent
for the balance of the term after the time of such award
exceeds the amount of such rental loss for the same period
that Lessee proves could be reasonably avoided; that portion
of the leasing commission paid by Lessor pursuant to
Paragraph 15 applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which
case this Lease shall continue in effect whether or not
Lessee shall have abandoned the Premises. In such event
Lessor shall be entitled to enforce all of Lessor's rights
and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter
available to Lessor under the laws or judicial decisions of
the state wherein the Premises are located. Unpaid
installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest
from the date due at the maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in
default unless Lessor fails to perform obligations required
of Lessor within a reasonable time, but in no event later
than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of
trust covering the Premises whose name and address shall
have theretofore been furnished to Lessee in writing,
specifying wherein Lessor has failed to perform such
obligation; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days
are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day
period and thereafter diligently prosecutes the same to
completion.
13.4 Late Charges. (#6) Lessee hereby acknowledges
that late payment by Lessee to Lessor of rent and other sums
due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will
be extremely difficult to ascertain. Such costs include,
but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms
of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due
from Lessee shall not be received by Lessor or Lessor's
designee within ten (10) days after such amount shall be
due, then, without any requirement for notice to Lessee,
Lessee shall pay to Lessor a late charge equal to 6% of such
overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee.
Acceptance or such late charge by Lessor shall in no event
constitute a waiver of Lessee's default with respect to such
overdue amount, nor prevent Lessor from exercising any of
the other rights and remedies granted hereunder. In the
event that a late charge is payable hereunder, whether or
not collected, for three (3) consecutive installments of
rent, then rent shall automatically become due and payable
quarterly in advance, rather than monthly, notwithstanding
paragraph 4 or any other provision of this Lease to the
contrary.
13.5 Impounds. In the event that a late charge is
payable hereunder, whether or not collected, for three (3)
installments of rent or any other monetary obligation of
Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other
payments required under this Lease, a monthly advance
installment, payable at the same time as the monthly rent,
as estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under
the terms of this Lease. Such fund shall be established to
insure payment when due before delinquency of any or all
such real property taxes and insurance premiums. If the
amounts paid to Lessor by Lessee under the provisions of
this paragraph are insufficient to discharge the obligations
of Lessee to pay such real property taxes and insurance
premiums as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums necessary to pay
such obligations. All moneys paid to Lessor under this
paragraph may be intermingled with other moneys of Lessor
and shall not bear interest. In the event of a default in
the obligations of Lessee to perform under this Lease, then
any balance remaining from funds paid to Lessor under the
provisions of this paragraph may, at the option of Lessor,
be applied to the payment of any monetary default of Lessee
in lieu of being applied to the payment of real property tax
and insurance premiums.
14. Condemnation. (#7) If the Premises or any portion
thereof are taken under the power of eminent domain, or
sold under the threat of the exercise of said power (all of
which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the
condemning authority takes title or possession, whichever
first occurs. If more than 10% of the floor area of the
building on the Premises, or more than 25% of the land area
of the Premises which is not occupied by any building, is
taken by condemnation, Lessee may, at Lessee's option, to be
exercised in writing only within ten 910) days after Lessor
shall have given Lessee written notice of such taking (or in
the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession) terminate
this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in
full force and effect as to the portion of the Premises
remaining, except that the rent shall be reduced in the
proportion that the floor area of the building taken bears
to the total floor area of the building situation on the
Premises. (#8) Any award for the taking of all or any part
of the Premises under the power of eminent domain or any
payment made under the threat of the exercise of such power
shall be the property of Lessor, whether such award shall be
made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance
damages; provided, however, that Lessee shall be entitled to
any award for loss of or damage to Lessee's trade fixtures
and removable personal property. In the event that this
Lease is not terminated by reason of such condemnation,
Lessor shall to the extent of severance damages received by
Lessor in connection with such condemnation, repair any
damage to the Premises caused by such condemnation except to
the extent that Lessee has been reimbursed therefor by the
condemning authority. Lessee shall pay any amount in excess
of such severance damages required to complete such repair.
15. Broker's Fee.
(a) Upon execution of this Lease by both parties,
Lessor shall pay to N/A Licensed real estate broker(s), a
fee as set forth in a separate agreement between lessor and
said broker(s), or in the event there is no separate
agreement between Lessor and said broker(s), the sum of
$____, for brokerage services rendered by said broker(s) to
Lessor in this transaction.
(b) Lessor further agrees that if Lessee exercises
any Option as defined in paragraph 39.1 of this Lease, which
is granted to Lessee under this Lease, or any subsequently
granted option which is substantially similar to an Option
granted to Lessee under this Lease, or if Lessee acquires
any rights to the Premises or other premises described in
this Lease which are substantially similar to what Lessee
would have acquired had an Option herein granted to Lessee
been exercised, or if Lessee remains in possession of the
Premises after the expiration of the term of this Lease
after having failed to exercise an Option, or if said
broker(s) are the procuring cause of any other lease or safe
entered into between the parties pertaining to the Premises
and/or any adjacent property in which Lessor has an
interest, then as to any of said transactions, Lessor shall
pay said broker(s) a fee in accordance with the schedule of
said broker(s) in effect at the time of execution of this
Lease.
(c) Lessor agrees to pay said fee not only on
behalf of Lessor but also on behalf of any person,
corporation, association, or other entity having an
ownership interest in said real property or any part
thereof, when such fee is due hereunder. Any transferee of
Lessor's interest in this Lease, whether such transfer is by
agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Said
broker shall be a third party beneficiary of the provisions
of this Paragraph 15.
16. Estoppel Certificate.
(a) Lessee shall at any time upon not less than ten
(10) days' prior written notice from Lessor execute,
acknowledge and deliver to Lessor a statement in writing (i)
certifying that this Lease is unmodified and in full force
and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified,
is in full force and effect) and the date to which the rent
and other charges are paid in advance if any, and (ii)
acknowledging that there are not, to Lessee's knowledge, any
uncured defaults on the part of Lessor hereunder, or
specifying such defaults if any are claimed. Any such
statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver
such statement within such time shall be a material breach
of this Lease or shall be conclusive upon Lessee (i) that
this Lease is in full force and effect, without
modification, except as may be presented by Lessor, (ii)
that there are no uncured defaults in Lessor's performance,
and (iii) that not more than one month's rent has been paid
in advance or such failure may be considered by Lessor as a
default by Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or
sell the Premises, or any part thereof, Lessee hereby agrees
to deliver to any lender or purchaser designated by Lessor
such financial statements of lessee as may be reasonably
required by such lender or purchaser. Such statements shall
include the past three years' financial statements of
Lessee. All such financial statements shall be received by
Lessor and such lender or purchaser in confidence and shall
be used only for the purposes herein set forth.
17. Lessor's Liability. (#9) The term "Lessor" as used
herein shall mean only the owner or owners at the time in
question of the fee title or a lessee's interest in a ground
lease of the Premises, and except as expressly provided in
Paragraph 15, in the event of any transfer of such title or
interest. Lessor herein named (and in cases of any
subsequent transfers then the grantor) shall be relieved
from and after the date of such transfer of all liability as
respects Lessor's obligations thereafter to be performed,
provided that any funds in the hands of Lessor or the then
grantor at the time of such transfer, in which Lessee has an
interest, shall be delivered to the grantee. The
obligations contained in this Lease to be performed by
Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods
of ownership.
18. Severability. The invalidity of any provision of this
Lease as determined by a court of competent jurisdiction,
shall in no way affect the validity of any other provision
hereof.
19. Interest on Past-due Obligations. Except as expressly
herein provided, any amount due to Lessor not paid when due
shall bear interest at the maximum rate then allowable by
law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease,
provided, however, that interest shall not be payable on
late charges incurred by Lessee nor on any amounts upon
which late charges are paid by Lessee.
20. Time of Essence. Time is of the essence.
21. Additional Rent. Any monetary obligations of Lessee to
Lessor under the terms of this Lease shall be deemed to be
rent.
22. Incorporation of Prior Agreements; Amendments. This
Lease contains all agreements of the parties with respect to
any matter mentioned herein. No prior agreement or
understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only,
signed by the parties in interest at the time of the
modification. Except as otherwise stated in this Lease,
Lessee hereby acknowledges that neither the real estate
broker listed in Paragraph 15 hereof nor any cooperating
broker on this transaction nor the Lessor or any employees
or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to
the condition or use by Lessee of said Premises and Lessee
acknowledges that Lessee assumes all responsibility
regarding the Occupational Safety Health Act, the legal use
and adaptability of the Premises and the compliance thereof
with all applicable laws and regulations in effect during
the term of this Lease except as otherwise specifically
stated in this Lease.
23. Notices. Any notice required or permitted to be given
hereunder shall be in writing and may be given by personal
delivery or by certified mail, and if given personally or by
mail, shall be deemed sufficiently given if addressed to
Lessee or to Lessor at the address noted below the signature
of the respective parties, as the case may be. Either party
may by notice to the other specify a different address for
notice purposes except that upon Lessee's taking possession
of the Premises, the Premises shall constitute Lessee's
address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter
designate by notice to Lessee.
24. Waivers. No waiver by Lessor or any provision hereof
shall be deemed a waiver of any other provision hereof or of
any subsequent breach by Lessee of the same or any other
provision. Lessor's consent to, or approval of any act,
shall not be deemed to render unnecessary the obtaining of
Lessor's consent to or approval of any subsequent act by
Lessee. The acceptance of rent hereunder by Lessor shall
not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay
the particular rent so accepted, regardless of Lessor's
knowledge of such preceding breach at the time of acceptance
of such rent.
25. Holding Over. If Lessee, with Lessor's consent,
remains in possession of the Premises or any part thereof
after the expiration of the term hereof, such occupancy
shall be a tenancy from month to month upon all the
provisions of this Lease pertaining to the obligations of
Lessee, but all options and rights of first refusal, if any
granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to
month tenancy.
27. Cumulative Remedies. No remedy or election hereunder
shall be deemed exclusive but shall, wherever possible, be
cumulative with all other remedies at law or in equity.
28. Covenants and Conditions. Each provision of this Lease
performable by Lessee shall be deemed both a covenant and a
condition.
29. Binding Effect; Choice of Law. Subject to any
provisions hereof restricting assignment or subletting by
Lessee and subject to the provisions of Paragraph 17, this
Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall
be governed by the laws of the State wherein the Premises
are located.
30. Subordination. (#10)
(a) This Lease, at Lessor's option, shall be
subordinate to any ground lease, mortgage, deed of trust, or
any other hypothecation or security now or hereafter placed
upon the real property of which the Premises are a part and
to any and all advances made on the security thereof and to
all renewals, modifications, consolidations, replacements
and extensions thereof. Notwithstanding such subordination,
Lessee's right to quiet possession of the Premises shall not
be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgages, trustee
or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and
shall given written notice thereof to Lessee, this Lease
shall be deemed prior to such mortgage, deed of trust, or
ground lease, whether this Lease is dated prior or
subsequent to the date of said mortgage, deed of trust or
ground lease or the date of recording thereof.
(b) Lessee agrees to execute any documents required
to effectuate an attornment, a subordination or to make this
Lease prior to the lien or any mortgage, deed of trust or
ground lease, as the case may be. Lessee's failure to
execute such documents within 10 days after written demand
shall constitute a material default by Lessee hereunder, or,
at Lessor's option, Lessor shall execute such documents on
behalf of Lessee as Lessee's attorney-in-fact. Lessee does
hereby make, constitute and irrevocably appoint Lessor as
Lessee's attorney-in-fact and in Lessee's name, place and
stead, to execute such documents in accordance with this
paragraph 30(b).
31. Attorney's Fees. If either party or the broker named
herein brings an action to enforce the terms hereof or
declare rights hereunder, the prevailing party in any such
action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as
fixed by the court. The provisions of this paragraph shall
inure to the benefit of the broker named herein who seeks to
enforce a right hereunder.
32. Lessor's Access. (#11) Lessor and Lessor's agents
shall have the right to enter the Premises at reasonable
times for the purpose of inspecting the same, showing the
same to prospective purchasers, lenders, or lessees, and
making such alterations, repairs, improvements or additions
to the Premises or to the building of which they are a part
as Lessor may deem necessary or desirable. Lessor may at
any time place on or about the Premises and ordinary "For
Sale" signs and Lessor may at any time during the last 120
days of the term hereof place on or about the Premises any
ordinary "For Lease" signs, all without rebate of rent or
liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be
conducted, either voluntarily or involuntarily, any auction
upon the Premises without first having obtained Lessor's
prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining
whether to grant such consent.
34. Signs. (#12) Lessee shall not pace any sign upon the
Premises without Lessor's prior written consent except that
Lessee shall have the right, without the prior permission of
Lessor to place ordinary and usual for rent or sublet signs
thereon.
35. Merger. The voluntary or other surrender of this Lease
by Lessee, or a mutual cancellation thereof, or a
termination by Lessor, shall not work a merger, and shall,
at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an
assignment to Lessor of any or all of such subtenancies.
36. Consents. Except for paragraph 33 hereof, wherever in
this Lease the consent of one party is required to an act of
the other party, such consent shall not be unreasonably
withheld.
37. Guarantor. In the event that there is a guarantor of
this Lease, said guarantor shall have the same obligations
as Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the
Premises and observing and performing all of the covenants
and provisions on Lessee's part to be observed and performed
hereunder, Lessee shall have quiet possession of the
Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this
Lease on behalf of Lessor represent and warrant to Lessee
that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership
interest in the Premises.
39. Options.
39.1 Definition. As used in this paragraph the word
"Options" has the following meaning: (1) the right or option
to extend the term of this Lease or to renew this Lease or
to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option or right of first refusal
to lease the Premises or the right of first offer to lease
the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease
other property of Lessor; (3) the right or option to
purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to
purchase the Premises or the right or option to purchase
other property of Lessor, or the right of first refusal to
purchase other property of Lessor or the right of first
offer to purchase other property of Lessor.
39.2 Options Personal. Options granted to Lessee in
this Lease are personal to Lessee and may not be exercised
or be assigned, voluntarily or involuntarily, by or to any
person or entity other than Lessee, provided, however, the
Option may be exercised by or assigned to any Lessee
Affiliate as defined in paragraph 12.2 of this Lease. The
options herein granted to Lessee are not assignable separate
and apart from this Lease.
39.3 Multiple Options. In the event that Lessee has
any multiple options to extend or renew this Lease a later
option cannot be exercised unless the prior option to extend
or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an
Option, notwithstanding any provision in the grant of Option
to the contrary, (i) during the time commencing from the
date Lessor gives to Lessee a notice of default pursuant to
paragraph 13.1(b) or 13.1(c) and continuing until the
default alleged in said notice of default is cured, or (ii)
during the period of time commencing on the day after a
monetary obligation to Lessor is due from Lessee and unpaid
(without any necessity for notice thereof to Lessee)
continuing until the obligation is paid, or (iii) at any
time after an event of default described in paragraphs
13.1(a), 13.1(d), or 13.1(e) (without any necessity of
Lessor to give notice of such default to Lessee), or (iv) in
the event that Lessor has given to Lessee three or more
notices of default under paragraph 13.1(b), where a late
charge becomes payable under paragraph 13.4 for each of such
defaults, or paragraph 13.1(c), whether or not the defaults
are cured, during the 12 month period prior to the time that
Lessee intends to exercise the subject option.
(b) The period of time within which an Option may
be exercised shall not be extended or enlarged by reason of
Lessee's inability to exercise an Option because of the
provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an
Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the
Option, if after such exercise and during the term of this
Lease, (i) Lessee fails to pay to Lessor a monetary
obligation of Lessee for a period of 30 days after such
obligation becomes due (without any necessity of Lessor to
give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13.1(c)
within 30 days after the date that Lessor gives notice to
Lessee of such default and/or Lessee fails thereafter to
diligently prosecute said cure to completion, or (iii)
Lessee commits a default described in paragraph 13.1(a),
13.1(d) or 13.1(e) (without any necessity of Lessor to give
notice of such default to Lessee), or (iv) Lessor gives to
Lessee three or more notices of default under paragraph
13.1(b), where a late charge becomes payable under paragraph
13.4 for each such default, or paragraph 13.1(c), whether or
not the defaults are cured.
40. Multiple Tenant Building. In the event that the
Premises are part of a larger building or group of buildings
ten Lessee agrees that it will abide by, keep and observe
all reasonable rules and regulations which Lessor may make
from time to time for the management, safety, care and
cleanliness of the building and grounds, the parking of
vehicles and the preservation of good order therein as well
as for the convenience of other occupants and tenants of the
building. The violations of any such rules and regulations
shall be deemed a material breach of this Lease by Lessee.
41. Security Measures. Lessee hereby acknowledges that the
rental payable to Lessor hereunder does not include the cost
of guard service or other security measures, and that Lessor
shall have no obligation whatsoever to provide same. Lessee
assumes all responsibility for the protection of Lessee, its
agents and invitees from acts of third parties.
42. Easements. Lessor reserves to itself the right, from
time to time, to grant such easements, rights and
dedications that Lessor deems necessary or desirable, and to
cause the recordation of Parcel Maps and restrictions, so
long as such easements, rights, dedications, Maps and
restrictions do not unreasonably interfere with the Use of
the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure
to do so shall constitute a material breach of this Lease.
43. Performance Under Protest. If at any time a dispute
shall arise as to any amount or sum of money to be paid by
one party to the other under the provisions hereof, the
Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under
protect" and such payment shall not be regarded as a
voluntary payment, and there shall survive the right on the
part of said party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal
obligation on the part of said party to pay such sum or any
part thereof, said party shall be entitled to recover such
sum or so much thereof as it was not legally required to pay
under the provisions of this Lease.
44. Authority. If Lessee is a corporation, trust, or
general or limited partnership, each individual executing
this Lease on behalf of such entity represents and warrants
that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If Lessee is a
corporation, trust or partnership, Lessee shall, within
thirty (30) days after execution of this Lease, deliver to
Lessor evidence of such authority satisfactory to Lessor.
45. Conflict. Any conflict between the printed provisions
of this Lease and the typewritten or handwritten provisions
shall be controlled by the typewritten or handwritten
provisions.
46. Addendum. Attached hereto is an addendum or addenda
containing paragraphs A-1 through A-3 which constitutes a
part of this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS
LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY
EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY
CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME
THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND
PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN
PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR HIS
APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION RELATING THERETO; THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN
LEGAL COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE.
The parties hereto have executed this Lease on the dates
specified immediately adjacent to their respective
signatures.
Executed at 1411 E. Orangethorpe Ave., Fullerton, CA 92631,
by Ron Hart - President, Nelco Products, Inc.
Address 1009 Dolphin Terrace, Corona del Mar, CA 92625, by
James Emmi - Owner
Modification To Lease
Building Lease between James Emmi, Lessor and
Nelco, Lessee Dated December 12, 1989
1100 E. Kimberly Avenue, Anaheim, CA
#1 - 7.3 (c) Last sentence to read:
In addition, Lessor may require Lessee to pay Lessor's
reasonable attorneys fees and costs in participating
in such action if Lessor shall decide it is to Its
best interest to do so.
#2 - 7.3 (d) Last sentence to read:
Notwithstanding the provisions of this Paragraph
7.3(d), Lessee's machinery and equipment, including
that which is affixed to the Premises shall remain the
property of Lessee and may be removed by Lessee
subject to the provisions of Paragraph 7.2(c).
#3 - 9.3 First sentence to read:
Subject to the provisions of Paragraphs 9.4. 9.5, and
9.6, if at any time during the term of this Lease
there is damage which is not an Insured Loss and which
falls within the classification of Premises Partial
Damage or Premises Building Partial Damage, unless
caused by negligent or willful act of Lessee (in which
event Lessee shall make the repair at Lessee's expense
to the extent caused by the negligence or willful act
of Lessee......
#4 - 9.6 M First sentence to read:
If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and
shall not complete such repairs within 90 days of
written notice of such occurrence of damage, then
Lessee may terminate or cancel this lease by written
notice to Lessor.
#5 - 13.1 (b) First sentence to read:
The failure by Lessee to make any payment of rent or
any other payment required to be made by Lessee
hereunder, as and when due, where such failure shall
continue for a period of three business days after
written notice thereof from Lessor to Lessee.
#6 - 13.4 Add to end of paragraph:
To the extent Lesser is entitled to any other recovery
for damages, and late coverage payment which has
already been made shall be
credited against the amount of such damages.
#7 - 14 Second sentence to read:
Any of the floor area of the building on the
Premises.....
#8 - 14 Delete the sentence:
Delete: No reduction of rent shall occur if the only
area taken is that which does not have a building
located thereon.
#9 - 17 Add to end of first sentence:
shall be delivered to grantee conditioned upon the
acceptance of the new owners of the terms and
provisions of this lease.
#10 - 30 Change second sentence to read:
Notwithstanding such subordination, Lessee's right to
quiet possession of the Premises shall not be
disturbed if Lessee is not in material default so long
as Lessee shall pay the rent and be in substantial
compliance with all provisions of this Lease.......
#11 - 32 Add to first sentence:
Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times after providing
Lessee with 24 hour prior notice for the purpose of
inspecting the same, showing .....
#12 - 34 Add the sentence:
All signs currently in place are deemed to have
Lessor's prior consent.
Ron Hart - Nelco Products, Inc.
James Emmi - Owner
ADDENDUM TO
BUILDING LEASE BETWEEN JAMES EMMI, LESSOR
AND NELCO LESSEE DATED DECEMBER 12, 1989
1100 E. KIMBERLY AVENUE, ANAHEIM, CA
A1. CONSUMER PRICE INDEX ADJUSTMENT:
The monthly rental will be increased in the same
proportion as the percentage of increase of the Los
Angeles/Long Beach/Anaheim area C.P.I. as determined
by the U.S. Department of Labor Statistics. The
starting base for the C.P.I. index will be the index
for the month of April 1990 which will be stipulated
at 133.25. The C.P.I. adjustment will be made
effective on each of the 2nd, 4th, 6th, 8th and 10th
anniversary of the effective starting date of the
lease (June 21, 1990). The bi-annual adjustment will
be made every two years thereafter through the lease
option periods if exercised. The C.P.I. index used
for each period will be the published index for the
month of April preceding the effective adjustment
date. In no case will the rate increase be more than
10% per annum.
A2. ALTERATIONS
As provided for in Item 7.3, the building's original
configuration and improvements shall be deemed to be
the condition of the building when first occupied by
the Lessee under previous leases. Any changes or
modifications having been done subsequent to the
original occupancy shall be subject to change back to
original condition before any termination of lease at
the option of Lessor. Normal wear and tear is
excepted.
This building is presently occupied by Lessee and is
acceptable as is.
A3. OPTIONS TO EXTEND LEASE PERIOD.
The Lessee is hereby granted the option to extend this
lease for an additional 5 years, June 21, 1995 to June
20, 2000 under the same terms and conditions as the
first 5 years, providing that the Lessee has
substantially complied with all the obligations of
said lease for the first 5 years. Rental rate will
continue to be adjusted as stipulated by C.P.I.
adjustment, and tax and insurance adjustments as
provided for in lease.
The Lessee is hereby granted the option to renew this
lease for an additional 5 year period, June 21, 2000
to June 20, 2005. The rental rate for this period
will be determined by agreement between the Lessor and
Lessee and shall be equal to 90% of the average rental
rates in effect at the time of Lessee's notice of
intention to renew. Average rental rates will be
determined by prevailing and available rental rates in
the Fullerton/Anaheim area for a minimum of 6 or more
buildings of comparable size and location.
In order to exercise the option to extend or renew
this lease, the Lessee must notify Lessor of his
intention to exercise his option before January 1, of
the year of the start of option period.
Ron Hart - Nelco Products, Inc.
James Emmi - Owner
December 29, 1994
Mr. James Emmi
1009 Dolphin Terrace
Corona del Mar, CA 92625
VIA CERTIFIED MAIL
Dear Mr. Emmi,
Writing to you in my dual capacity as Vice President of
Nelco Products, Inc., this letter serves as formal notice on
behalf of Nelco Products, Inc., of their intention to
exercise the June 12, 1995, options to extend the leases of
both 1100 and 1107 E. Kimberly Avenue, Anaheim, CA, in
accord with paragraphs A3 in the Addendums dated December 12
1989, to the Leases also dated December 12, 1989. The
options thus exercised will run until June 20, 2000.
We extend our best wishes for the New Year.
Sincerely,
NELCO, INTERNATIONAL CORPORATION
Lee H. Newton
Vice President Finance
copy: Ron Hart, Nelco Products Inc.
Phil Smoot, Nelco International Corporation
Allen Levine, Park Electrochemical Corp.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<FILENAME>ex1003.txt
<DESCRIPTION>EXHIBIT
<TEXT>
Exhibit 10.03
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and
between TCLW/Fullerton, a general partnership, hereinafter
referred to as "Landlord," and Nelco Products, Inc., a
Delaware Corporation, hereinafter referred to as "Tenant":
WITNESSETH:
1. Premises and Term. In consideration of the
obligation of Tenant to pay rent as herein provided, and in
consideration of the other terms, provisions and covenants
hereof, Landlord hereby demises and leases to Tenant, and
Tenant hereby takes from Landlord, certain premises
consisting of space within a building described as follows:
Approximately 36,462 square feet at 1411 Orangethorpe,
Fullerton, California within the County of Orange, State of
California, and more particularly described on Exhibit "A"
attached hereto and incorporated herein by this reference
(hereinafter referred to as the "premises").
TO HAVE AND TO HOLD the same for a term commencing on
the "commencement date" (as hereinafter defined) and ending
59 months thereafter (provided, however, that in the event
the commencement date other than the first day of a calendar
month, said term shall extend for said number of months in
addition to the remainder of the calendar month following
the commencement date), unless earlier terminated in
accordance with the provisions of this lease.
A. The "commencement date" shall be November 1,
1993. Tenant acknowledges that it has inspected and accepts
the premises, and specifically the buildings and
improvements comprising the same, in their present condition
as suitable for the purpose for which the premises are
leased. Taking of possession by Tenant shall be deemed
conclusively to establish that said buildings and other
improvements are in good and satisfactory condition as of
when possession was taken. Tenant hereby waives the benefit
of California Civil Code 1941. Tenant further acknowledges
that no representations as to the repair of the premises,
nor premises to alter, remodel or improve the premises have
been made by Landlord, unless such are expressly set forth
in this lease.
2. Base Rent and Security Deposit.
A. Tenant agrees to pay as rental for the premises
to Landlord or order, without deduction or set off, for the
entire term hereof, Twelve Thousand Three Hundred Ninety
Seven and 00/100 dollars ($12,397.00) per month. One such
monthly installment shall be due and payable on the date
hereof and a like monthly installment shall be due and
payable without demand on or before the first day of each
calendar month succeeding the commencement date recited
above during the hereby demised term, except that the rental
payment for any fractional calendar month at the
commencement or end of the lease term shall be prorated.
All costs and expenses which are the responsibility of
Tenant also constitute "rent." In the event Tenant fails to
pay any installment of rent hereunder (1), to help defray
the additional cost to Landlord for processing such late
payments. Tenant shall pay to Landlord on demand a late
charge in an amount equal to (2) of such installment. The
provision for such late charge shall be in addition to all
of Landlord's other rights and remedies hereunder or at law
and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner.
B. In addition, Tenant agrees to deposit with
Landlord on the date hereof the sum of Twenty Four Thousand
Seven Hundred Ninety Four and 00/100 dollars ($24,794.00),
which sum shall be held by Landlord, (3) for interest, as
security for the performance of Tenant's covenants and
obligations under this lease, it being expressly understood
and agreed that such deposit is not an advance rental
deposit or a measure of Landlord's damages in case of
Tenant's default. Upon the occurrence of any event of
default by Tenant, Landlord may, from time to time, without
prejudice to any other remedy provided herein or provided by
law, use such funds to the extent necessary to make good any
arrears of rent or other payments due Landlord hereunder,
and any other damage, injury, expense or liability caused by
such event of default; and Tenant shall pay to Landlord on
demand the amount so applied in order to restore the
security deposit to its original amount. Although the
security deposit shall be deemed the property of Landlord,
any remaining balance of such deposit shall be returned by
Landlord to Tenant at such time after termination or
expiration of this lease that all of Tenant's obligations
under this lease have been fulfilled (4).
3. Use. The demised premises shall be used only for
the purpose of (5) receiving, storing, shipping and selling
(other than retail) for interest, materials and merchandise
made and/or distributed by Tenant and for such other lawful
purposes as may be incidental thereto. Under no
circumstances shall the premises be used for gambling or the
retail sale of alcoholic beverages, whether or not those
uses may be lawful. Outside storage is prohibited without
Landlord's prior written consent. Tenant shall at its own
cost and expense obtain any and all licenses and permits
necessary for any such use. Tenant shall comply with all
governmental laws, ordinances and regulations applicable to
the premises or use thereof, and shall promptly comply with
all governmental orders and directives for the correction,
prevention and abatement of nuisances in or upon, or
connected with, the premises, all at (6). Without limiting
the generality of the foregoing, and subject to paragraph 6,
Tenant shall at its own cost and expense install and
construct all physical improvements to the premises,
interior and exterior, required by any Federal, State or
local building code or other law or regulation enacted after
the date on which this lease is executed by Tenant, or after
said date determined retroactively to apply to the premises,
(7) made necessary by the nature of Tenant's use of the
premises. Tenant shall not permit any objectionable or
unpleasant odors, smoke, dust, gas, noise or vibrations to
emanate from the premises, nor take any other action which
would constitute a nuisance or would disturb or endanger any
other tenants of the building in which the premises are
situated or unreasonably interfere with their use of their
respective premises. Tenant shall not place a load upon the
floor of the premises which exceeds the load per square foot
which such floor was designed to carry and which is allowed
by law. Without Landlord's prior written consent, Tenant
shall not receive, store or otherwise handle any product,
material or merchandise which is explosive or highly
inflammable. Tenant will not permit the premises to be used
for any purpose which would render the insurance thereon
void or the insurance risk more hazardous. If at any time
during the term of this lease the State Board of Insurance
or other insurance authority disallows any of Landlord's
sprinkler credits or imposes an additional penalty or
surcharge in Landlord's insurance premiums because of
Tenant's original or subsequent placement or use of storage
racks or binds, Tenant's method of storage, the nature of
Tenant's inventory or any other act of Tenant, Tenant agrees
to pay, as additional rental, the increase (between fire
walls) in Landlords insurance premiums, and, upon demand by
Landlord, to correct at Tenant's expense the cause of such
disallowance, penalty or surcharge to the satisfaction of
the particular insurance authority. Additionally, Tenant
shall pay to any other tenants in the building in which the
premises are situated, upon demand, any increases in such
other tenant's insurance premiums or charges caused by the
acts of Tenant.
4. Taxes.
A. Tenant agrees to pay before they become
delinquent all general and special, ad valorem and specific
taxes, excises, assessments, and governmental charges of any
kind and nature whatsoever (hereinafter collectively
referred to as the "taxes") lawfully levied or assessed
against the land, building, grounds, parking areas,
driveways, sidewalks and/or alleys on or around the
premises. Tenant shall furnish to Landlord, not later than
twenty (20) days before the date any such taxes becoming
delinquent, official receipts of the appropriate taxing
authority or other evidence satisfactory to Landlord
evidencing payment thereof. If Tenant should fail to pay
any taxes, assessments, or governmental charges required to
be paid by Tenant hereunder, in addition to any other
remedies provided herein, Landlord may, if it so elects, pay
such taxes, assessments, and governmental charges. Any sums
so paid by Landlord shall be deemed to be additional rent
due and payable on demand by Landlord.
B. In the event the premises constitute a portion
of a multiple occupancy building, Tenant agrees to pay to
Landlord, as additional rent, (8), the amount of Tenant's
"proportionate share" of the "taxes" referred to in
subparagraph A, above. Tenant's "proportionate share," as
used in this lease, shall mean a fraction, the numerator of
which is the square footage of the premises and the
denominator or which is the square footage of the building
containing the premises.
C. If at any time during the term of this lease
there shall be levied, assessed or imposed on Landlord, by
any governmental entity, any general or special, ad valorem
or specific, capital levy, excise or other tax, assessment,
levy or charge directly on the rental received under this
lease, and/or any license fee, excise or franchise tax,
assessment, levy or charge measured by or based, in whole or
in part, upon such rentals, and/or any transfer,
transaction, or similar tax, assessment, levy or charge
based directly or indirectly upon the transaction
represented by this lease, and/or any occupancy, use, per
capita or other tax, assessment, levy or charge based
directly or indirectly upon the use or occupancy of the
premises, then all such taxes, assessments, levies and
charges shall be deemed to be included within the term
"taxes" for the purposes of this paragraph 4 (9).
D. Tenant may, alone or along with any other
tenants of said building, at its or their sole cost and
expense, in its or their own name(s) and/or in the name of
Landlord, dispute and contest and "taxes" by appropriate
proceedings diligently conducted in good faith, but only
after Tenant and all other tenants, if any, joining with
Tenant in such contest, have deposited with Landlord the
amount so contested and unpaid, or their proportionate
shares thereof, as the case may be, which shall be held by
Landlord without obligation for interest until the
termination of the proceedings, at which time the amount(s)
deposited shall be applied by Landlord toward the payment of
the items held valid (plus any court costs, interest,
penalties and other liabilities associated with the
proceedings), and Tenant's share of any excess shall be
returned to Tenant. Tenant further agrees to pay to
Landlord, upon demand, Tenant's share (as among all tenants
who participated in the contest) of all court costs,
interest, penalties, and other liabilities relating to such
proceedings. Tenant hereby indemnifies and agrees to hold
Landlord harmless from and against any cost, damage or
expense (including attorneys' fees) in connection with any
such proceedings.
E. Any payment to be made pursuant to this
paragraph 4 with respect to the tax year in which this lease
commences or terminates shall bear the same ratio to the
payment which would be required to be made for the full tax
year as that part of such tax year covered by the term of
this lease bears to a full tax year. (10)
5. Repairs and Maintenance.
A. Tenant shall, at its own cost and expense keep
and maintain the premises in good condition, promptly making
all necessary repairs and replacements, interior and
exterior, non-structural, ordinary and extraordinary,
including but not limited to, windows, glass and plate
glass, doors, any special office entry, walls and finish
work, floors and floor covering, roof, foundation,
downspouts, gutters heating and air conditioning systems,
dock boards, truck doors, dock bumpers, ramps, paving,
plumbing work and fixtures, termite and pst extermination,
regular removal of trash and debris, regular mowing of any
grass, caring for shrubs, trimming, weed removal and general
landscape maintenance, including rail spur areas,
maintaining the parking areas, driveways, alleys, sidewalks,
and the whole of the premises in a clean and sanitary
condition, maintaining any spur track serving the premises
(Tenant agrees to sign a joint maintenance agreement with
the railroad company servicing the premises, if requested by
the railroad company), and providing guard and alarm
service. Tenant shall, at its own cost and expense, repaint
the exterior walls, overhead doors, canopies, entries,
headrails, gutters and other exposed parts of the building
which reasonably require periodic repainting to prevent
deterioration or to maintain aesthetic standards. Tenant
shall maintain trash receptacles within the building on the
premises.
B. The cost of maintenance and repair or any common
party wall (any wall, divider, partition or any other
structure separating the premises from any adjacent premises
occupied by other tenants) shall be shared equally by Tenant
and the tenant occupying adjacent premises. Tenant shall
not damage any party wall or disturb the integrity and
support provided by any party wall and shall, at its sole
cost and expense, promptly repair any damage or injury to
any party wall caused by Tenant or its employees, agents or
invitees.
C. In the event the premises constitute a portion
of a multiple occupancy building, Tenant and its employees,
customers and invitees shall have the nonexclusive right to
use, in common with the other parties occupying said
building, the parking areas, driveways and alleys adjacent
to said building, subject to such reasonable rules and
regulations as Landlord may from time to time prescribe.
Further, in such event, Landlord (11) to perform the paving
and landscape maintenance, exterior painting and common
sewage line plumbing and any other responsibilities which
are otherwise Tenant's obligations under subparagraph A
above, and Tenant shall, in lieu of the obligations set
forth under subparagraph A above with respect to such items,
be liable for its proportionate share (as defined in
subparagraph 4B, above) of the cost and expense of the care
for the grounds around the building, including but not
limited to, exterior repainting and common sewage line
plumbing; provided, however, that Landlord shall have the
right to require Tenant to pay such other reasonable
proportion of said costs as may be determined by Landlord in
its sole discretion; and further provided that if Tenant or
any other particular tenant of the building can be clearly
identified as being responsible for obstruction or stoppage
of the common sanitary sewage line, then Tenant, if Tenant
is responsible, or such other responsible tenant, shall pay
the entire cost thereof, upon demand, as additional rent.
Tenant shall at Landlord's option either (i) pay when due
(but not more frequently than monthly) its share, determined
as aforesaid, of such costs and expenses along with the
other tenants of the building directly to the persons
performing such work, or (ii) reimburse Landlord upon demand
(but not more frequently than monthly), as additional rent,
for the amounts of its share as aforesaid of such costs and
expenses in the event Landlord elects to perform or cause to
be performed such work.
D. N/A.
E. Tenant shall, at its own cost and expense, enter
into a regularly scheduled preventive maintenance/service
contract with a maintenance contractor for servicing all
heating and air conditioning systems and equipment within
the premises. The maintenance contractor must be approved
by Landlord. The service contract must include all services
suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective
within thirty (30) days of the date Tenant takes possessio
of the premises. All guarantees/warranties provided with
the heating and air conditioning systems will be recognized
within this program.
(12)
6. Alterations.
A. Tenant shall not make any alterations, additions
or improvements to the premises including but not limited to
roof and wall penetrations without the prior written consent
of Landlord (13). Tenant may, without the consent of
Landlord, but at its own cost and expense and in a good
workmanlike manner make such minor alterations, additions or
improvements or erect, remove or alter such partitions, or
erect such shelves, bins, machinery and trade fixtures as it
may deem advisable, without altering the basic character of
the building or improvements and without overloading or
damaging such building or improvements, and in each case
complying with all applicable governmental laws, ordinances,
regulations and other requirements. All alterations,
additions, improvements and partitions erected by Tenant
shall be and remain the property of Tenant during the term
of this lease and Tenant shall, unless Landlord otherwise
elects as hereinafter provided, remove all alterations,
additions, improvements and partitions erected by Tenant and
restore the premises to their original condition by the date
of termination or expiration of this lease; provided,
however, that if Landlord so elects prior to termination or
expiration of this lease, such alterations, additions,
improvements and partitions shall become the property of
Landlord as of the date of termination or expiration of this
lease and shall be delivered up to the Landlord with the
premises. All shelves bins, machinery and trade fixtures
installed by Tenant may be removed by Tenant prior to the
termination or expiration of this lease if Tenant so elects,
and shall be removed if required by Landlord; upon any such
removal Tenant shall restore the premises to their original
condition. All such removals and restoration shall be
accomplished in a good and workmanlike manner so as not to
damage the primary structure or structural qualities of the
buildings and other improvements situated on the premises.
(14)
B. Before commencing any work relating to
alterations, additions and improvements affecting the
premises, Tenant shall notify Landlord in writing of the
expected date of commencement thereof. Landlord shall then
have the right at any time and rom time to time to post and
maintain on the premises such notices as Landlord deems
necessary to protect the premises and Landlord from
mechanics' liens, materialmen's liens or any other liens.
At any time Tenant either desires or is required to make any
repairs, alterations, additions, improvements or utility
installations pertaining to the premises, Landlord may
require Tenant, at Tenant's sole cost and expense, to obtain
and provide to Landlord a lien and completion bond in a form
and by a surety acceptable to Landlord in an amount equal to
the estimate cost of (15) such improvements, to insure
Landlord against liability for mechanics' and materialmen's
liens and to insure completion of the work.
7. Signs. (16) Tenant shall have the right to install
signs upon the exterior of said buildings (17) and subject
to any applicable governmental laws, ordinances, regulations
and other requirements. Tenant shall remove all such signs
by the termination or expiration of this lease. Such
installations and removals shall be made in such manner as
to avoid injury or defacement of the building and other
improvements, and Tenant shall repair any injury or
defacement, including without limitation discoloration,
caused by such installation and/or removal.
8. Inspection. Landlord and Landlord's agents and
representatives shall have the right to enter and inspect
the premises at any reasonably time during business hours,
for the purpose of ascertaining the condition of the
premises or in order to make such repairs as may be required
or permitted to be made by Landlord under the terms of this
lease. During the period that is six (6) months prior to
the end of the term hereof, Landlord and Landlord's agents
and representatives shall have the right to enter the
premises at any reasonable time during business hours for
the purpose of showing the premises and shall have the right
to erect on the premises a suitable sign indicating the
premises are available. (18) shall arrange to meet with
(19) for a joint inspection of the premises at the time of
vacating.
9. Utilities. Tenant shall pay for all water, gas,
heat, light, telephone, sewer, sprinkler charges and other
utilities and services used on or from the premises,
together with any taxes, penalties, surcharges or the like
pertaining thereto and any maintenance charges for utilities
and shall furnish all electric light bulbs and tubes. If
any such services are not separately metered to Tenant,
Tenant shall pay a reasonable proportion as determined by
Landlord of all charges jointly metered with other premises.
Landlord shall in no event be liable for any interruption or
failure of utility services on the premises.
10. Assignment and Subletting.
A. Tenant shall not have the right to assign this
lease or to sublet the whole or any part of the premises, or
allow, for valuable consideration, the occupancy of all or
any part of the premises by another, without the prior
written consent of Landlord (20). Notwithstanding any
permitted assignment or subletting, Tenant shall at all
times remain directly, primarily and fully responsible and
liable for the payment of the rent herein specified and for
compliance with all of its other obligations under the
terms, provisions and covenants of this lease. Upon the
occurrence of an "event of default" as hereinafter defined,
if the premises or any part thereof are then assigned or
sublet, Landlord, in addition to any other remedies herein
provided, or provided by law, may at its option collect
directly from such assignee or subtenant all rents becoming
due to Tenant under such assignment or sublease and apply
such rent against any sums due to Landlord from Tenant
hereunder, and no such collection shall be construed to
constitute a novation or release of Tenant from the further
performance of Tenant's obligations hereunder.
B. In the event Tenant desires to sublet the
premises, or any portion thereof, or assign this lease,
Tenant shall give written notice thereof to Landlord setting
forth the name of the proposed subtenant or assignee, the
term, use, rental rate and other particulars of the proposed
subletting or assignment, including without limitation (21)
satisfactory to Landlord that the proposed subtenant or
assignee will immediately occupy and thereafter use the
entire premises (or any sublet portion thereof) for the
remaining term of this lease (or for the entire term of the
sublease, if shorter). In addition to Landlord's approval
right pursuant to subparagraph 10A above, Landlord shall
have the option, i the event of any proposed assignment or
subletting (22) to cancel this lease as of the date the
subletting or assignment described in Tenant's notice is to
be effective. The option shall be exercised, if at all, by
Landlord giving Tenant written notice thereof within sixty
(60) days following Landlord's receipt of Tenant's written
request. Upon any such cancellation Tenant shall pay to
Landlord all amounts, as estimated by Landlord, payable by
Tenant to such termination date, with respect to taxes,
insurance, repairs, maintenance, restoration and other
obligations, costs or charges which are the responsibility
of Tenant hereunder. Further, upon any such cancellation
Landlord and Tenant shall have no further obligations or
liabilities to each other under this lease, except with
respect to obligations or liabilities which accrue hereunder
as of such cancellation date (in the same manner as if such
cancellation date were the date originally fixed for the
expiration of the term hereof). Without limitation,
Landlord may lease the premises to the prospective subtenant
or assignee, without liability to the Tenant. Landlord's
failure to exercise said cancellation right as herein
provided shall not be construed as Landlord's consent to the
proposed subletting or assignment.
C. Landlord shall have the right to assign any of
its rights and obligations under this lease. (23)
11. Fire and Casualty Damage.
A. Landlord agrees to maintain standard fire and
extended coverage insurance covering the building of which
the premises are a part in an amount not less than 80% (or
such greater percentage as may be necessary to comply with
the provisions of any co-insurance clauses of the policy) of
the "replacement cost" thereof as such term is defined in
the Replacement Cost Endorsement to be attached thereto,
insuring against the perils of Fire, (24), Lightning,
Extended Coverage, Vandalism and Malicious Mischief,
extended by Special Extended Coverage Endorsements to insure
against all other Risks of Direct Physical Loss, and
Earthquake and Flood, such coverages and endorsements to be
as defined, provided and limited in the standard bureau
forms prescribed by the insurance regulatory authority for
the state in which the premises are situated for use by
insurance companies admitted in such state for the writing
of such insurance on risks located within such state.
Subject to the provisions of subparagraphs 11B and 11E,
below, such insurance shall be for the sole benefit of
Landlord and under its sole control. Tenant agrees to pay
to Landlord, as additional rent, Landlord's cost of
maintaining such insurance on said building (or in the event
the premises constitute a portion of a multiple occupancy
building, Tenant's full proportionate share [as defined in
subparagraph 4B above] of such cost). Said payments shall
be made to Landlord within ten (10) days after presentation
to Tenant of Landlord's statement setting forth the amount
due. Any payment to be made pursuant to this subparagraph A
with respect to the year in which this lease commences or
terminates shall bear the same ratio to the payment which
would be required to be made for the full year as the part
of such year covered by the term of this lease bears to a
full year. (25)
B. If the buildings situated upon the premises
should be damaged or destroyed by any peril covered by the
insurance to be provided by Landlord under subparagraph 11A
above, Tenant shall give immediate notice thereof to
Landlord and Landlord shall at its sole cost and expense
thereupon proceed with reasonable diligence to rebuild and
repair such buildings to substantially the condition in
which they existed prior to such damage or destruction,
except that Landlord shall not be required to rebuild,
repair or replace any part of the partitions, fixtures,
additional and other improvements which may have been placed
in, on or about the premises by Tenant and except that
Tenant shall pay to Landlord, upon demand, any applicable
deductible amount specified under Landlord's insurance. The
rent payable hereunder shall in no event abate by reason of
any damage or destruction. (26)
C. (27)
D. Tenant covenants and agrees to maintain
insurance on all alterations, additions, partitions and
improvements erected by or on behalf of Tenant in, on or
about the premises in an amount not less than 80% (or such
greater percentage as may be necessary to comply with the
provisions of any co-insurance clause of the policy) of the
"replacement cost" thereof, as such term is defined in the
Replacement cost Endorsement to be attached thereto. Such
insurance shall insure against the perils and be in form,
including stipulated endorsements, as provided in
subparagraph 11A hereof. Such insurance shall be for the
sole benefit of Tenant and under its sole control. All such
policies shall b procured by Tenant from responsible
insurance companies satisfactory to Landlord. Certified
copies of policies of such insurance, together with receipt
evidencing payment of the premiums therefor, shall be
delivered to Landlord prior to the commencement date of this
lease. Not less than fifteen (15) days prior to the
expiration date of any such policies, certified copies of
renewals thereof (bearing notations evidencing the payment
of renewal premiums) shall be delivered to Landlord. Such
policies shall further provide that no less than thirty (30)
days written notice shall be given to Landlord before such
policy may be cancelled or changed to reduce insurance
provided thereby.
E. Notwithstanding anything herein to the contrary,
in the event the holder of any indebtedness secured by a
mortgage or deed of trust covering the Landlord's interest
in the premises requires that the insurance proceeds be
applied to such indebtedness, then Landlord shall have the
right to terminate this lease by delivering written notice
of termination to Tenant within fifteen (15) days after such
requirement is made by any such holder, whereupon all rights
and obligations hereunder shall cease and terminate. (28)
F. Landlord and Tenant hereby each release the
other from any and all liability or responsibility to the
other or anyone claiming through or under them by way of
subrogation or otherwise for any loss or damage to property
caused by fire or any other perils insured in policies of
insurance covering such property, even if such loss or
damage shall have been caused by the fault or negligence of
the other party, or anyone for whom such party may be
responsible; provided, however, that this release shall be
applicable and in force and effect only with respect to loss
or damage occurring during such times as the releasor's
policies shall contain a clause or endorsement to the effect
that any such release shall not adversely affect or impair
said policies or prejudice the right of the releasor to
recover thereunder and then only to the extent of the
insurance proceeds payable under such policies. Each of
Landlord and Tenant agrees that it will request its
insurance carriers to include in its policies such a clause
or endorsement. If extra cost shall be charged therefor,
each party shall advise the other thereof and of the amount
of the extra cost, and the other party, at its election, may
pay the same, but shall not be obligated to do so.
12. Liability. Tenant does hereby indemnify and
agree to forever save and hold harmless Landlord from and
against any and all damages, claims, losses, demands, costs,
expenses (including reasonable attorneys' fees and costs),
obligations, liens, liabilities, actions and causes of
action, threatened or actual, which Landlord may suffer or
incur arising out of or in connection with Tenant's
obligations under this lease, including without limitation,
Tenant's use of the premises, the conduct of Tenant's
business, any activity, work or things done, permitted or
suffered by Tenant in or about the premises. Tenant's
nonobservance or nonperformance of any law, ordinance or
regulations, or any negligence of the Tenant or any of
Tenant's agents, contractors employees, guests licensees and
invitees. Tenant further agrees that in case of any claim,
demand, action or proceeding against Landlord, Tenant, upon
notice from Landlord shall defend Landlord at Tenant's
expense. In the event Tenant does not provide a defense
against any and all such claims, demands, liens,
liabilities, actions or causes of action, threatened or
actual, then Tenant will, in addition to the above, pay
Landlord the attorneys' fees, legal expenses and costs
incurred by Landlord in providing or preparing such defense
and Tenant agrees to cooperate with Landlord in such
defense, including, but not limited to, the providing of
affidavits and testimony upon request of Landlord.
Tenant shall obtain at its cost and keep in full force
during the term of the lease a policy of Combined Single
Limit Bodily Injury and Property Damage Insurance insuring
Landlord and Tenant against any liability arising out of the
use, occupancy or maintenance of the premises and all areas
appurtenant thereto by Tenant. Such insurance shall be in
an amount not less than (29). The policy shall contain
cross liability endorsements and shall insure performance by
Tenant of the foregoing indemnity provisions of this lease.
The limits of said insurance shall not, however, limit the
liability of Tenant hereunder.
13. Condemnation.
A. If the whole or any substantial part of the
premises should be taken for any public or quasi-public use
under governmental law, ordinance or regulation, or by right
of eminent domain, or by private purchase in lieu thereof,
and the taking would prevent or materially interfere with
the use of the premises for the purpose for which they are
then being used, this lease shall terminate (30) and the
rent shall be abated during the unexpired portion of this
lease, effective when the physical taking of such premises
shall occur (31).
B. If part of the premises shall be taken for any
public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain, or
by private purchase in lieu thereof, and this lease is not
terminated as provided in subparagraph A, above, this lease
shall not terminate but the rent payable hereunder during
the unexpired portion of this lease shall be reduced in the
same ratio as the square footage of the premises taken bears
to the total square footage of the premises.
C. This paragraph 13 shall be Tenant's sole and
exclusive remedy in the event of any such taking or purchase
in lieu thereof. Landlord shall be entitled to any and all
compensation, damages, income, rents, awards (except for an
award specified by the condemning authority for Tenant's
unamortized portion of its improvements (32) if any) or any
interest therein whatsoever which may be paid or made in
connection therewith, and Tenant shall have no claim against
Landlord for the value of any unexpired term of this lease.
Tenant hereby waives the benefits of California Code of
Civil Procedure 1265.130.
14. Holding Over. Tenant will, at the termination
or expiration of this lease by lapse of time or otherwise,
yield up immediate possession to Landlord. In the event of
any holding over by Tenant after the expiration or
termination of this lease, unless the parties hereto
otherwise agree in writing, the hold over tenancy shall be
subject to termination by Landlord at any time upon not less
than seven (7) days advance written notice, and all of the
other terms and provisions of this lease shall be applicable
during that period, except that Tenant shall pay Landlord
from time to time upon demand, as rental for the period of
any hold over, an amount equal to one and one-half (1 1/2)
the rental which would have been payable by Tenant had the
hold over period been a part of the original term of this
lease, computed on a daily basis for each day during which
such possession is withheld. In the event of any such hold
over, Tenant agrees to vacate and deliver the premises to
Landlord within seven (7) days after Tenant's receipt of
notice from Landlord to vacate. No holder over by Tenant
whether with or without consent of Landlord, shall operate
to extend this lease except as otherwise expressly provided.
15. Quiet Enjoyment. Landlord covenants that it
now has, or will acquire before Tenant takes possession of
the premises, good title to the premises, excepting the lien
for current taxes not yet due, such mortgages or deeds of
trust as are permitted by the terms of this lease, zoning
ordinances and other building and fire ordinances and
governmental regulations relating to the use of such
property, and easements, restrictions and other matters of
record. Landlord represents and warrants that it has full
right and authority to enter into this lease and that
Tenant, upon paying the rental herein set forth and
performing its other covenants and agreements herein set
forth, shall peaceable and quietly have, hold and enjoy the
premises for the term hereof without hindrance or
molestation from Landlord, subject to the terms and
provisions of this lease. Landlord agrees to make
reasonable efforts to protect Tenant from interference or
disturbance by other tenants or third persons, however,
Landlord shall not be liable for any such interference or
disturbance, nor shall Tenant be released from any of the
obligations of this lease because of such interference or
disturbance.
16. Events of Default. The following events shall
be deemed to be "events of default" by Tenant under this
lease:
(a) Tenant shall fail to pay any installment of the
rent herein reserved when due, or any payment with respect
to taxes hereunder when due, or any other payment or
reimbursement to Landlord required herein when due, and such
failure shall continue for a period of (33) from the date
such payment was due.
(b) Tenant shall become insolvent, or shall make a
transfer in fraud of creditors, or shall make an assignment
for the benefit of creditors.
(c) Tenant shall file a petition under any section
or chapter of the National Bankruptcy Act, as amended or
under any similar law or statute of the United State or any
state thereof; or Tenant shall be adjudged bankrupt or
insolvent in proceedings filed against Tenant thereunder.
(d) A receiver or trustee shall be appointed for
all or substantially all of the assets of Tenant.
(e) Tenant shall desert any substantial portion of
the premises.
(f) Tenant shall fail to comply with any term,
provision or covenant of this lease (other than the
foregoing in this paragraph 16), and shall not cure such
failure within (34).
17. Remedies. If any event of default occurs,
Landlord may at any time thereafter, with or without notice
or demand, except as stated hereafter, and without limiting
Landlord in the exercise of any right or remedy which
Landlord may have by reason of such event of default;
(a) Enter upon and take possession of the premises.
IN such event, Landlord shall have the right to remove all
persons and property from the premises and store such
property in a public warehouse or elsewhere at the cost and
risk of and for the account of Tenant, and all such persons
shall quit and surrender possession of the premises to
Landlord, Tenant hereby waives all claims for damages which
may be caused by the entry of Landlord and taking possession
of the premises or removing and storing the furniture and
property and hereby agrees to indemnify and save Landlord
harmless from any loss, costs, damages or liability
occasioned thereby, and no such entry shall be considered or
construed to be a forcible entry. Should Landlord elect to
enter, as herein provided, or should Landlord take
possession pursuant to legal proceedings or pursuant to any
notice provided by law, Landlord may terminate this lease
pursuant to paragraph (b) hereof.
(b) Terminate Tenant's right to possession of the
premises at any time. Acts of maintenance, efforts to relet
the premises, or the appointment of a receiver on Landlord's
initiative to protect Landlord's interest under this lease
shall not constitute a termination of Tenant's right to
possession. On termination, Landlord may recover from
Tenant (i) the worth at the time of the award of the unpaid
rent that had been earned at the time of termination of
Tenant's right to possession of the premises; (ii) the worth
at the time of the award of the amount by which the unpaid
rent that would have been earned after the date of
termination of Tenant's right to possession until the time
of award exceeds the amount of the loss of rent for the same
period that Tenant proves could have been reasonably
avoided; (iii) the worth at the time of the award of the
amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of the loss of
rent for the same period that Tenant proves could have been
reasonably avoided; and (iv) any other amount, and court
costs, necessary to compensate Landlord for all detriment
proximately caused by Tenant's default. "The worth at the
time of the award," as used in (i) and (ii) of this
paragraph, is to be computed by allowing interest at the
rate of ten percent (10%) per annum. "The worth at the time
of the award" as referred to in (iii) of this paragraph is
to be computed by discounting the amount at the discount
rate of the Federal Reserve Bank of San Francisco at the
time of the award, plus 1%.
(c) Continue this lease in full force and effect,
and this lease will continue in effect as long as Landlord
does not terminate Tenant's right to possession, and
Landlord shall have the right to collect rent when due.
(d) Cure the default at Tenant's cost. If Landlord
at any time, by any reason of Tenant's default, pays any sum
or does any act that requires the payment of any sum, the
sum paid by Landlord shall be due immediately from Tenant to
Landlord upon demand by Landlord. The sum, together with
late charges, as provided in paragraph 2, above, of this
lease, shall be additional rent.
(e) Pursue any other remedy now or hereafter
available to Landlord under the laws or judicial decisions
of the State of California.
19. Mortgages. (35)
20. Landlord's Default.
A. In the event Landlord should become in default
in any payments due and payable on any such mortgage
described in paragraph 19 hereof, Tenant is authorized and
empowered after giving Landlord five (5) days prior written
notice of such default and Landlord's failure to cure such
default, to pay any such delinquent items for and on behalf
of Landlord, and the amount of any item so paid by Tenant
for or on behalf of Landlord, together with any interest or
penalty required to be paid in connection therewith, shall
be payable on demand by Landlord to Tenant; provided,
however, that Tenant shall not be authorized and empowered
to make any payment under the terms of this paragraph 20
unless the item paid shall be superior to Tenant's interest
hereunder, in the event Tenant pays any mortgage debt in
full, in accordance with this paragraph, it shall, at its
election, be entitled to the mortgage security by assignment
or subrogation.
21. Tenant's Remedies. Except as otherwise
specifically provided in this lease, Tenant hereby waives
and relinquishes any right which Tenant may have to
terminate this lease or withhold rent on account of any
damage, condemnation, destruction or state of disrepair of
the premises (including, without limiting the generality of
the foregoing, those rights under California Civil Code
1932(2), 1933(4), 1941 and 1942).
22. Mechanic's Liens. Tenant shall have no
authority, express or implied, to create or place any lien
or encumbrance of any kind or nature whatsoever upon, or in
any manner to bind, the interest of Landlord in the
premises, or to charge the rentals payable hereunder for any
claim in favor of any person dealing with Tenant, including
those who may furnish materials or perform labor for any
construction or repairs, and each such claim shall affect
and each such lien shall attach to, if at all, only the
leasehold interest granted to Tenant by this instrument.
Tenant covenants and agrees that it will pay or cause to be
paid all sums legally due and payable by it on account of
any labor performed or materials furnished in connection
with any work performed on the premises on which any lien is
or can be validly and legally asserted against its leasehold
interest in the premises or the improvements thereon and
that it will save and hold Landlord harmless from any and
all loss, cost or expense based on or arising out of
asserted claims or liens against the leasehold estate or
against the right, title and interest of the Landlord in the
premises or under the terms of this lease. Tenant will not
permit any mechanics' lien or liens to be placed upon the
premises or any building or improvement thereon during the
term hereof, and in case of the filing of any such lien
Tenant will promptly pay same. If any such lien shall
remain in force and effect for twenty (20) days after
written notice thereof from Landlord to Tenant, Landlord
shall have the right and privilege at Landlord's option of
paying and discharging the same or any portion thereof
without inquiry as to the validity thereof, and any amounts
so paid, including expenses and applicable late charge,
shall be so additional rent hereunder due from Tenant to
Landlord and shall be repaid to Landlord immediately on
rendition of bill therefor. Notwithstanding the foregoing,
Tenant shall have the right to contest any such lien in good
faith and with all due diligence so long as any such
contest, or action taken in connection therewith, protects
the interest of Landlord and Landlord's mortgagee in the
premises and Landlord and any such mortgagee are, by the
expiration of said twenty (20) days period, furnished proof
of such protection, and indemnification by Tenant against
any loss, cost or expense related to any such lien and the
contest thereof, satisfactory to Landlord and any such
mortgagee.
23. Sale by Landlord. In the event the original
Landlord hereunder, or any successor owner of the premises,
shall sell or convey the premises, Tenant agrees to attorn
to such new owner. In the event of such sale, Landlord
shall transfer to the new owner the balance of any security
deposit remaining after lawful deductions and, after notice
to Tenant (36) shall be relieved of all future liability
with respect to such security deposit.
24. Attorneys' Fees. If either Landlord or Tenant
commences or engages in, or threatens to commence or engage
in, an action by or against the other party arising out of
or in connection with this lease or the premises, including
but not limited to any action for recovered of rental due
and unpaid (37) to recover possession or for damages for
breach of this lease, the prevailing party shall be entitled
to have and recover from the losing party reasonable
attorneys' fees and other costs incurred in connection with
the action and in preparation for said action. (38)
25. Further Documents. Upon Landlord's request,
Tenant agrees to modify this lease to meet the requirements
of a lender selected by Landlord who demands such
modification as a condition precedent to granting a loan and
placing a deed of trust upon the building or land of which
the premises is a part, provided such modification does not
(1) increase the minimum rent or percentage rent; (2) alter
the term of lease or any extended term; or (3) materially
adversely affect Tenant's estate or right under this lease.
26. Waiver. The waiver by (39) of any term,
covenant, agreement or condition herein contained shall not
be deemed to be a waiver of any subsequent breach of the
same or any other term, covenant, agreement or condition
herein contained, nor shall any custom or practice which may
grow up between the parties in the administration of this
lease be construed to waive or to lessen the right of (40)
to insist upon the performance by (41) in strict accordance
with all of the provisions of this lease. The subsequent
acceptance of rent hereunder by Landlord shall not be deemed
to be a waiver or any preceding breach by Tenant of any
provisions, covenant, agreement or condition of this lease,
other than the failure of Tenant to pay the particular rent
so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such rent.
27. Notices. Each provision of this instrument or
of any applicable governmental laws, ordinances, regulations
and other requirements with reference to the sending,
mailing or delivery of any notice or the making of any
payment by Landlord to Tenant or with reference to the
sending, mailing or delivery of any notice or the making of
any payment by Tenant to Landlord shall be deemed to be
complied with when and if the following steps are taken:
(a) All payments required to be made by Landlord to
Tenant hereunder shall be payable to Tenant at the address
hereinbelow set forth or at such other address as Landlord
may specify from time to time by written notice delivered in
accordance herewith.
(b) All payments required to be made by Landlord to
Tenant hereunder shall be payable to Tenant at the address
hereinbelow set forth, or at such other address within the
continental United States as Tenant may specify from time to
time by written notice delivered in accordance herewith.
(c) Any notice or document required or permitted to
be delivered hereunder shall be deemed to be delivered
whether actually received or not (42) deposited in the
United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective
addresses set out below, or at such other address as they
have theretofore specified by written notice delivered in
accordance herewith:
LANDLORD: TENANT:
TCLW/Fullerton Nelco Products, Inc.
a general partnership a Delaware Corporation
17941 Fitch 1411 Orangethorpe
Irvine, California Fullerton, California
(43)
If and when included within the term "Landlord," as used in
this instrument, there are more than one person, firm or
corporation, all shall jointly arrange among themselves for
their joint execution of such a notice specifying some
individual at some specific address (44) for the receipt of
notices and payments to Landlord; if and when included
within the term "Tenant," as used in this instrument, there
are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution
of such a notice specifying some individual at some specific
address within the continental United States for the receipt
of notices and payments to Tenant. All parties included
within the terms "Landlord" and "Tenant," respectively,
shall be bound by notices given in accordance with the
provisions of this paragraph to the same effect as if each
had received such notice.
28. Entire Agreement. This lease contains the
entire agreement between the parties respecting the lease of
the premises to Tenant.
29. Time of the Essence. Time is of the essence of
this lease.
30. Miscellaneous.
A. Words of any gender used in this lease shall be
held and construed to include any other gender, and words in
the singular number shall be held to include the plural,
unless the context otherwise requires.
B. The terms, provisions and covenants and
conditions contained in this lease shall apply to, inure to
the benefit of, and be binding upon, the parties hereto and
upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein
expressly provided. Each party agrees to furnish to the
other, promptly upon demand, a corporate resolution, proof
of due authorization by partners, or other appropriate
documentation evidencing the due amortization of such party
to enter into this lease.
C. The captions inserted in this lease are for
convenience only and in no way define, limit or otherwise
describe the scope or intent of this lease, or any provision
hereof, or in any way affect the interpretation of this
lease.
D. (45)
E. This lease may not be altered, changed or
amended except by an instrument in writing signed by both
parties hereto.
F. All obligations of Tenant (46) hereunder not
fully performed as of the expiration or earlier termination
of the term of this lease shall survive the expiration or
earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and
insurance and all obligations concerning the condition of
the premises. Upon the expiration or earlier termination of
the term hereof, and prior to Tenant vacating the premises.
Landlord and Tenant shall jointly inspect the premises and
Tenant shall pay to Landlord any amount estimated by
Landlord as necessary to put the premises, including without
limitation all heating and air conditioning systems and
equipment therein, in good (47). Tenant shall also, prior
to vacating the premises, pay to Landlord the amount, as
estimated by Landlord, of Tenant's obligation hereunder for
real estate taxes and insurance premiums for the year in
which the lease expires or terminates. All such amounts
shall be used and held by Landlord for payment of such
obligations of Tenant hereunder, with Tenant being liable
for any additional costs therefor upon demand by Landlord,
or with any excess to be returned to Tenant after all such
obligations have been determined and satisfied, as the case
may be (48). Any security deposit held by Landlord shall be
credited against the amount payable by Tenant under this
paragraph 30F.
G. If any clause or provision of this lease is
illegal, invalid or unenforceable under present or future
laws effective during the term of this lease, then and in
that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby,
and it is also the intention of the parties to this lease
that in lieu of each clause of provision of this lease that
is illegal, invalid or unenforceable, there be added as a
part of this lease contract a clause or provision as similar
in terms to such illegal, invalid or unenforceable clause or
provisions as may be possible and be legal, valid and
enforceable.
H. Because the premises are on the open market and
are presently being shown, this lease shall be treated as an
offer with the premises being subject to prior lease and
such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the premises without notice, and
this lease shall not be valid or binding unless and until
the lease is accepted by Landlord in writing and a fully
executed copy is delivered to both parties hereto.
I. Paragraph I and Exhibit "A" of this lease
notwithstanding, the "premises," and Tenant's estate under
this lease, do not include any right, title or interest in
water, oil, gas or other hydrocarbons, or other mineral
rights, all of which are excepted and reserved to Landlord
with the sole and exclusive right in Landlord to sell,
lease, assign or otherwise transfer the same, but without
any right of Landlord or any such transferee to enter upon
the surface of the property described in said Exhibit "A"
during the term of this lease except as otherwise expressly
provided elsewhere in this lease.
J. All references in this lease to "the date
hereof" or similar references shall be deemed to refer to
the last date, i point of time, on which all parties hereto
have executed this lease.
31. Additional Provisions.
Those additional provisions set forth in Exhibit "C"
attached hereto are hereby incorporated by this reference as
if fully set forth herein. (49-54)
IN WITNESS WHEREOF, this lease is, EXECUTED BY
LANDLORD, this 16th day of August, 1983.
TCLW/Fullerton
Crow Fullerton
By: Clifton K. Chang
General Partner
Executed by Tenant, this 22nd day of August, 1983.
NELCO PRODUCTS, INC.
By: E.P. Smoot
President
EXHIBIT "C" TO LEASE-DATED AUGUST 16, 1983 BETWEEN NELCO
PRODUCTS, INC., AS
("TENANT") AND TCLW/FULLERTON, AS("LANDLORD"):
1.before the end of the ten (10) day grace period in
paragraph 16 (a) of the Lease.
2.five percent (5%)
3.in an interest bearing account
4.Provided Tenant is not in default of the Lease,
$12,397.00 of the security deposit plus interest
thereon shall be released to Tenant on September,30,
1984
5.manufacturing,
6.Provided that such required improvements are not
necessary by nature of Tenant's use of the premises,
then:
1) If the costs are less than $10,000.00,
Landlord and Tenant shall each bear one-half the
cost of such improvements.
2) If the costs exceed $10,000.00, then
Landlord shall have the option of paying the cost
or terminating the Lease.
3) If the Landlord elects to terminate the
Lease, Tenant shall have the choice of paying the
cost of improvements or terminating the Lease.
4) In the event neither Landlord or Tenant
elects to pay the cost, then Lease shall
terminate when the appropriate government
authority forces Tenant to move out of the
facility.
5) In the event Tenant and Landlord mutually
agree to contest the installation of such
improvements, then the cost of contesting the
governmental regulation shall be split up to
$10,000.00.
7. provided such improvements are
8. not earlier than fifteen (15) nor later than five (5)
days before each semi-annual delinquency date.
9. Notwithstanding the foregoing, Tenant shall not be
liable for the payment of any federal, state, county or
municipal income or franchise taxes or an taxes or
license fees imposed on the collection of rent or
measured by the amount of rent, unless such taxes or
fees are a substitution in whole or in part for real
estate taxes.
10.Tenant shall bear the cost of tax increases due to
improvements within its space, and Tenant shall not bear
the cost of tax increases from improvements for other
tenants in the building. To the extent taxes increase
due to ownership changes, then Landlord shall bear the
cost of such tax increases to the end of the current
least term or option period, after which the increases
shall be Tenant's responsibility in the next lease
option period.
11.assumes the duty
12.Notwithstanding anything to the contrary contained in
subparagraph 1A and this paragraph 5, Landlord shall
repair or cause to be repaired all structural portions
of the building during the lease term, and during the
first two years of the lease term (a) the common sewage
line and the common water line and, (b) the roof of the
building, unless the need for any of the foregoing
repairs is caused by Tenant, in which event Tenant shall
be solely responsible for such repairs.
13., Landlord's consent not to be unreasonably withheld,
and such consent or dissent to be provided within five
(5) working days of delivery of plans and