<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended December 31, 1996 [Fee Required]
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
Commission File Number: 33-96808
CRAIN INDUSTRIES, INC.
________________________________________
(Exact name of registrant as specified in its charter)
Delaware 43-1714086
__________________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 South Hanley Road, St. Louis, Missouri 63105
___________________________________________ _____________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 719-0100
Securities registered pursuant to Section 12(b) of the Act: None
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 the
filing requirements for at least the past 90 days.
Yes __X___ No _____
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 stock held by nonaffiliates of
the registrant. (The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of
filing.)
No market exists for the Common Stock of Crain Industries, Inc. All of the
outstanding shares of Common Stock are held by Crain Holdings Corp.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date (applicable only to
corporate registrants.)
Outstanding at
Class February 28, 1997
______________________ _________________
Crain Industries, Inc.
Common Stock 1,000 shares
Documents incorporated by reference: None
Page Cover
PART I
ITEM 1. BUSINESS
General
Crain Holdings Corp. ("Holdings") is a holding company which owns all of the
outstanding common stock of Crain Industries, Inc. (the "Company"). Holdings
and the Company were incorporated in Delaware in May 1995 by an investor group
led by Hicks, Muse, Tate & Furst Incorporated ("Hicks, Muse") and Mills &
Partners, Inc. ("Mills & Partners") to facilitate the August 1995 acquisition
(the "Acquisition") of substantially all of the assets and the assumption of
certain liabilities of the Company's predecessor, Crain Industries, Inc. (an
Arkansas corporation) (the "Predecessor"). The Company is a fully integrated
manufacturer, fabricator and distributor of a broad range of flexible
polyurethane foam and foam products which are sold to a diverse customer base
principally in the furniture, bedding and carpeting markets. The Company is
currently the third largest domestic producer of flexible polyurethane foam
and foam products, operating 30 facilities throughout the United States.
On February 9, 1996, the Board of Directors of the Company approved a change
in the Company's fiscal year end to December 31, effective as of December 31,
1995. The Company's fiscal year end used previously was the last Friday in
the month of August. The Board of Directors of the Company concluded that
better information could be provided to investors, management and other
interested parties by changing the Company's fiscal year to a calendar year.
Recent Events
In October 1996, the Company acquired substantially all of the assets of the
Comfort Clinic division ("Comfort Clinic") of Bio Clinic Corporation (the
"Comfort Acquisition"). The consideration paid in connection with the Comfort
Acquisition consisted of cash in the amount of $14.5 million, subject to final
adjustments, and was funded with borrowings of $9.5 million of senior debt
under a bank credit agreement among the Company, the several lenders party
thereto and Texas Commerce Bank National Association, as agent (the "Credit
Agreement") and $5.0 million of capital contributions from Holdings. Comfort
Clinic is engaged in the design, manufacturing and marketing of therapeutic
comfort products, which include foam mattress pads and pillows.
Products
The Company is a manufacturer, fabricator and distributor of flexible
polyurethane foam and foam products. The Company also manufactures polyester
fiber and cotton batting. The Company sells its flexible polyurethane foam
and fiber products primarily to the furniture, bedding and carpet markets.
Furniture.
The Company manufactures and sells flexible polyurethane foam and a broad
range of cushioning foam products to furniture manufacturers both directly and
indirectly through independent fabrication operations located throughout the
United States. The Company also manufactures and markets a broad line of home
furnishing products to retailers throughout the United States. The Company's
home furnishing products include a broad range of products such as leisure
furniture, futon sofas, bean bag chairs, floor pillows and pet beds.
Bedding.
The Company manufactures and sells flexible polyurethane foam and polyester
fiber to bedding manufacturers both directly and indirectly through
independent fabrication operations located throughout the United States.
Bedding manufacturers purchase flexible polyurethane foam and polyester fiber
for mattress slabs and toppers, along with quilting and border applications.
The Company also sells flexible polyurethane foam and polyester fiber for use
in therapeutic sleep products such as mattress pads and bed pillows, which are
manufactured for the health care and consumer markets.
Carpet Cushion.
The Company manufactures and sells carpet cushion (or carpet underlay) to
carpet retailers both directly and indirectly through independent carpet
underlay distributors throughout the United States. The Company's carpet
cushion products include both prime carpet cushion and bonded carpet cushion.
Prime carpet cushion is made from polyurethane foam buns, whereas bonded
carpet cushion, which comprises the majority of carpet cushion produced in the
United States, is made from various types of scrap foam which are shredded
into small pieces, processed and then bonded using a chemical adhesive. The
use of various types of foam (usually of different colors) gives bonded carpet
cushion its unique "marbled" look.
Other Products.
In addition to manufacturing and fabricating cushioning foam for use in the
furniture, bedding and carpet industries, the Company also sells cushioning
foam for use in a number of other markets. The uses of cushioning foam
include packaging materials for such things as computer and electronic
components and cushioning applications in certain sporting good products and
in recreational vehicles.
Marketing and Customers
The Company sells its products through a combination of direct (company-
employed) sales people, manufacturers' representatives and distributors. The
Company's sales organization is supported by an internal marketing group and a
customer service group. Essentially all of the Company's revenues come from
customers located in North America. The Company's strategy is to sell
flexible polyurethane foam and related foam products to customers that demand
high quality products and superior service.
Raw Materials
Supplies on critical materials are currently adequate to meet market needs.
The two principal raw materials used by the Company are chemicals - toluene
diisocyanate ("TDI") and polyether polyol. The prices of these chemicals are
tied to worldwide supplier capacity as well as the prices of oil and natural
gas. These chemical prices have historically been subject to fluctuations,
however, such price changes have not had a material effect on the Company's
earnings because the Company generally passes the chemical costs through to
its customers.
Manufacturing
The Company is committed to the highest quality standards for its products, a
standard maintained in part by continuous improvements to its production
processes and upgrades and investments to its manufacturing equipment. The
Company maintains quality assurance and testing equipment to ensure the
manufactured products will consistently meet customer quality requirements.
The Company manufactures and/or fabricates foam products at 30 locations
throughout the United States. Management believes that these facilities are
well suited for their intended purposes and are in good condition. The
following is a description of the Company's major manufacturing processes:
MaxFoam(R) Process.
The Max Foam("(R)") process, which is the most widely used manufacturing
process in the flexible polyurethane foam industry, produces a foam "bun" by
moving a chemical mixture through a horizontal production process.
Vertifoam(R) Process.
The Vertifoam(R) process produces a foam "bun" by moving a chemical mixture
through a vertical production process.
Enviro-Cure(R) Process.
The Enviro-Cure(R) process is a Company developed and patented foam cooling
process which reduces the use of ozone depleting chemicals and complies with
applicable state and federal environmental laws. The Enviro-Cure(R) process,
which can be used with both the MaxFoam(R) and Vertifoam(R) manufacturing
processes, cools the foam in significantly less time than the traditional
methods, significantly reducing the need for ozone depleting chemicals and
hazardous air pollutants. The Company has successfully implemented this
process at six of its locations.
CARDIO(R) Process. The CARDIO(R) process is a chemical mixing process
developed in Europe which reduces the use of ozone depleting chemicals and
complies with state and federal environmental laws. The CARDIO(R) process,
which can be used with both the MaxFoam(R) and Vertifoam(R) manufacturing
processes, utilizes high pressure liquid carbon dioxide as a blowing agent,
substantially eliminating the need for ozone depleting chemicals and hazardous
air pollutants. The Company has implemented this process at four of its
locations.
The Company fabricates foam products at 24 locations throughout the United
States. The fabrication process involves cutting foam buns into various
shapes and sizes to meet customer specifications. Fabricated foam is sold to
customers and is utilized by the Company to produce its home furnishing
products. Scrap foam, generated in connection with the fabrication of foam
products, is used by the Company to produce bonded carpet cushion.
Competition
The flexible polyurethane foam industry is highly competitive and tends to be
regionalized due to the high costs of transporting foam. Competition is based
primarily on the basis of quality, price, reputation and customer service.
The Company's facilities are strategically located near its customers to
minimize transportation costs and to provide responsive customer service and
delivery.
Backlog
Due to the manner in which it processes orders, the Company has no significant
order backlog. The Company follows the industry practice of producing its
products on an ongoing basis to meet customer demand without significant
delay. The Company believes the ability to supply orders in a timely fashion
is a competitive factor in its market, and therefore, attempts to minimize
order backlog to the extent practicable.
Patents and Trademarks
The Company owns various patents and trademarks registered domestically and in
numerous foreign countries. The registered processes and products were
developed through ongoing research and development activities to improve
quality, reduce costs and expand markets through the development of new
applications for flexible polyurethane foam products. The Company uses
several trademarks and trade names for product identification including
Vertifoam(R), Enviro-Cure(R) and Egg Crate(R). While the Company considers
its patents and trademarks to be a valuable asset, it does not believe that
its competitive position is dependent on patent protection or that its
operations are dependent upon any individual patent, trademark or trade name.
Research and Development
The Company's research and development facilities are located in Fort Smith,
Arkansas, and employ ten full-time employees.
Environmental Matters
The Company is subject to a variety of federal, state and local environmental
laws and regulations relating to the storage, handling, use, emission,
discharge, release or disposal of hazardous materials and solid wastes into
the environment and the investigation and remediation of contamination
associated with such materials. These laws include, but are not limited to,
the Comprehensive Environmental Response, Compensation and Liability Act, the
Water Pollution Control Act, the Clean Air Act, and the Resource Conservation
and Recovery Act, as those laws have been amended and supplemented, the
regulations promulgated thereunder, and any applicable state regulations. The
Company's operations also are governed by laws and regulations relating to
employee health and safety, including those relating to occupational exposure
to hazardous materials and chemicals. The Company believes that it is in
material compliance with such applicable laws and regulations and that its
environmental controls are adequate to address existing regulatory
requirements.
The Company's operations, as well as those of other companies engaged in
similar operations, involve the use of a number of materials that are
considered hazardous under one or more environmental laws. In 1990, Congress
enacted the Clean Air Act Amendments ("CAAA"), which, among other things,
require States, pursuant to Title V of the CAAA, to institute a new permitting
process for facilities that emit or have the potential to emit any hazardous
air pollutants ("HAPs") in quantities in excess of 10 tons per year.
Chemicals used by the Company that are HAPs include methylene chloride,
Toluene-2,4-Diisocyanate and propylene oxide. The Title V permitting may
apply to both the foam manufacturing plants as well as many of the fabrication
plants. The CAAA also may result in the imposition of more stringent
standards regulating air emissions for the use of these chemicals by
polyurethane foam manufacturers, but those standards have not yet been
promulgated. The Company is aware of these potential requirements and, while
the ultimate effect of the CAAA on the Company's operations will depend on the
promulgation of final regulations and the interpretation thereof, the Company
does not believe that achieving compliance will materially and adversely
affect the Company.
In addition to general regulatory requirements, the CAAA as well as state laws
have resulted or will result in more stringent regulations regarding the use
and emission of methylene chloride. In fact, many states already are
requiring the Company to meet greater restrictions regarding emission limits
and/or quantities used of this chemical. For example, in California,
methylene chloride usage was phased out at the end of 1995, while in Kent,
Washington, and Easton, Pennsylvania, the Company, pursuant to consent decrees
as well as applicable laws, must over a period of time phase out methylene
chloride usage. The Company believes that it is in a position to meet these
more stringent restrictions. Specifically, through the development of the
Enviro-Cure(R) process, which uses ambient or refrigerated air to remove the
heat of reaction during the foam curing process, the Company can reduce
methylene chloride usage by up to 90 percent and, when used in conjunction
with the Vertifoam(R) process, completely. The Company has installed the
Enviro-Cure(R) process at its manufacturing facilities in Ft. Smith, Arkansas;
Compton, California; San Leandro, California; Elkhart, Indiana; Tupelo,
Mississippi; and Conover, North Carolina. Where regulations require the
elimination of methyl-chloroform and methylene chloride, for example, in
Compton, California, the Company has installed a CARDIO(R) system, which
eliminates the use of methyl-chloroform. During 1996 the Company installed
the CARDIO(R) system at its Compton, California; Easton, Pennsylvania; and
Kent, Washington plants.
The CAAA also require the elimination of certain ozone depleting chemicals,
including chlorofluorocarbons ("CFCs") and methylene chloride by the year 2002
or earlier. As the CARDIO(R) system is installed, the use of methylene
chloride will be discontinued. In addition, methylene chloride based glues
are used at numerous fabrication plants of the Company. Pursuant to a consent
decree the Company is substituting water-based adhesives for the adhesives
currently being used by November 1997.
In connection with the Acquisition, the Predecessor agreed to retain liability
for and, subject to a $1.0 million indemnity "basket", to indemnify the
Company for a period of two years following the closing of the Acquisition
with respect to any loss, damage, claim, injury, cost or expense suffered or
paid by the Company arising out of the failure of the Predecessor to have
complied with any environmental laws and regulations.
While the Company believes it is in material compliance with applicable
environmental laws, it cannot accurately predict future developments, such as
increasingly stricter requirements, which might affect the handling,
manufacture, use, emission or disposal of hazardous materials and hazardous
and solid wastes as well as establish lower occupational exposure limits. In
particular, the ultimate effect of the CAAA on the Company's operations will
depend on how the law is interpreted and implemented pursuant to regulations
that are currently being developed and on additional factors such as the
evaluation of environmental emission standards for a number of materials
including TDI, methylene chloride and propylene oxide. Some risk of
environmental costs and liabilities, including those related to remediation,
is inherent in the operations of the Company, as it is with other companies
engaged in similar businesses, and there is no assurance that material costs
and liabilities will not be incurred. In general, however, with respect to
the capital expenditures and risks described above, the Company does not
expect that it will be affected differently from the rest of the foam
manufacturing industry.
Employees
As of December 31, 1996, the Company employed approximately 1,770 full time
employees, of which 18 (all located at the Company's plant in West Memphis,
Arkansas) were represented by a labor union. The contract covering the
Company's unionized work force expires in December, 1998. The Company believes
that it has a good relationship with its employees.
ITEM 2. PROPERTIES
The Company leases substantially all of its properties. These leases are for
varying durations and the Company has a renewal option on substantially all of
such leases. The Company considers its plants to be well-maintained and
providing adequate production capacity to meet the expected demand for its
products.
Listed below are the principal manufacturing, fabrication and distribution
facilities operated by the Company as of December 31, 1996:
Approximate Owned/
Location Square Feet Leased Principal Use
____________________ ___________ ______ ___________________________________
Compton, California 150,000 Leased Foam manufacturing
Compton, California 116,000 Leased Foam fabrication, bonded fiber
manufacturing and rebond carpet
pad manufacturing
Compton, California 66,000 Leased Foam fabrication and distribution
Conover, North Carolina 169,000 Leased Foam manufacturing and fabrication
Coralville, Iowa 32,000 Leased Foam fabrication
Derry, Pennsylvania 60,000 Leased Foam fabrication and distribution
Easton, Pennsylvania 128,000 Leased Foam manufacturing and fabrication
Elkhart, Indiana 185,000 Leased Foam manufacturing
Elkhart, Indiana 41,000 Leased Bonded fiber manufacturing
Elkhart, Indiana 40,000 Leased Foam fabrication
Elkhart, Indiana 140,000 Owned Foam fabrication
Fort Smith, Arkansas 600,000 Leased Foam manufacturing and fabrication
Fort Smith, Arkansas 68,000 Leased Rebond carpet pad manufacturing
Houston, Texas 57,000 Leased Foam fabrication
Kent, Washington 105,000 Leased Foam manufacturing and fabrication
Kent, Washington 78,000 Leased Foam fabrication
Lithia Springs, Georgia 196,000 Leased Foam fabrication
Morristown, Tennessee 57,000 Leased Foam fabrication
New Albany, Indiana 46,000 Leased Foam fabrication
Newnan, Georgia 86,000 Leased Foam manufacturing and fabrication
Newnan, Georgia 61,000 Leased Foam fabrication
Ontario, California 74,000 Leased Foam fabrication
Phoenix, Arizona 63,000 Leased Foam fabrication
Portland, Oregon 50,000 Leased Foam fabrication
San Leandro, California 200,000 Leased Foam manufacturing, fabrication and
rebond carpet pad manufacturing
San Leandro, California 100,000 Leased Foam fabrication
Sparks, Nevada 28,000 Leased Furniture manufacturing and
distribution
Stockertown, Pennsylvania 100,000 Leased Foam fabrication
Verona, Mississippi 304,000 Leased Foam manufacturing, fabrication,
and bonded fiber manufacturing
West Memphis, Arkansas 81,000 Leased Cotton batting manufacturing
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings and administrative
actions, all of which are of an ordinary or routine nature incidental to the
operations of the Company. In the opinion of the Company's management, such
proceedings and actions should not, individually or in the aggregate, have a
material adverse effect on the Company's financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth quarter
of 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
All of the Company's outstanding common stock is held by Holdings and,
accordingly, there is no established public trading market for the Company's
common stock. The Company has paid no dividends since inception and its
ability to pay dividends is limited by the terms of certain agreements related
to its indebtedness.
ITEM 6. SELECTED FINANCIAL DATA
The Company
The selected historical financial information presented below for the year
ended December 31, 1996 and the four months ended December 31, 1995, has been
derived from the audited consolidated financial statements of the Company.
The Predecessor's unaudited financial data presented below for the four months
ended December 31, 1994 is provided for comparison purposes. The company
believes that the financial information of the Predecessor is generally not
comparable to that of the Company. Subsequent to the Acquisition, the Company
changed its fiscal year end from the last Friday in the month of August to
December 31. The selected financial data should be read in conjunction with
the consolidated financial statements of the Company and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
The Company The Predecessor
________________________ ______________
Four Four
Year Ended Months Ended Months Ended
December 31, December 31, December 31,
1996 1995 1994
___________ ____________ ____________
(Unaudited)
Results of Operations:
(In thousands)
Net sales $ 306,093 $ 96,463 $ 86,371
Cost of goods sold 243,745 77,885 69,032
Selling, general and
administrative expenses 35,299 10,438 10,792
Depreciation and amortization 9,295 2,439 1,740
__________ _________ _________
Operating income 17,754 5,701 4,807
Interest expense 14,618 5,156 1,076
Amortization of deferred
financing costs 1,841 597 16
Other expense 304 103 439
__________ _________ _________
Net income (loss)
before income taxes 991 (155) 3,276
Provision for income taxes (1) 395 91 --
__________ __________ _________
Net income (loss) $ 596 $ (246) $ 3,276
__________ __________ _________
__________ __________ _________
Other Data:
Total assets $ 198,876 $ 183,858 $ 113,858
Long-term obligations
(including current portion) 118,318 116,337 43,843
________
(1) The Predecessor elected to be taxed under the provisions of Subchapter S
of the Internal Revenue Code. Accordingly, taxable income of the Predecessor
was allocated to the sole shareholder of the Predecessor who was responsible
for the payment of taxes thereon.
The Predecessor
The selected historical financial information presented below for the years
ended August 25, 1995, August 26, 1994, August 27, 1993 and August 28, 1992,
has been derived from the audited financial statements of the Predecessor.
The selected financial data should be read in conjunction with the financial
statements of the Predecessor and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere herein. The Company believes that the financial information of the
Predecessor is generally not comparable to that of the Company.
Fiscal Years Ended
_________________________________________________
August 25, August 26, August 27, August 28,
1995 1994 1993 1992
__________ __________ __________ __________
Results of Operations:
(In thousands)
Net sales $ 258,895 $ 232,826 $ 180,769 $ 166,163
Cost of goods sold 210,459 180,575 142,104 124,221
Selling, general and
administrative expenses 32,673 28,404 27,007 25,893
Depreciation and
amortization 5,286 4,962 4,290 4,060
__________ __________ __________ __________
Operating income 10,477 18,885 7,368 11,989
Interest expense 3,431 2,564 2,016 1,939
Other (income) expense (1) (2,510) (223) 332 (13)
__________ __________ __________ __________
Net income (2) $ 9,556 $ 16,544 $ 5,020 $ 10,063
__________ __________ __________ __________
__________ __________ __________ __________
Other Data:
Total assets $ 121,835 $ 105,985 $ 86,470 $ 68,107
Long-term obligations
(including current portion) 42,263 35,908 28,634 18,008
_______________________
(1) During 1995 a gain of $2,434 was recognized on an insurance settlement
related to a fire at one of its facilities.
(2) The Predecessor elected to be taxed under the provisions of Subchapter S
of the Internal Revenue Code. Accordingly, taxable income of the Predecessor
was allocated to the sole shareholder of the Predecessor who was responsible
for the payment of taxes thereon.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis is based on the historical results of
operations of (i) the Company for the year ended December 31, 1996 and the
combined results of the Company and the Predecessor for the twelve months
ended December 31, 1995, (ii) the Company for the four months ended December
31, 1995 and the Predecessor for the four months ended December 31, 1994 and
(iii) the Predecessor for the years ended August 25, 1995 and August 26, 1994.
The following table sets forth the major components of the results of
operations and should be used in reviewing the discussion and analysis of
results of operations and liquidity and capital resources. The combined
twelve months ended December 31, 1995, consists of the Predecessor's eight
months ended August 25, 1995 and the Company's four months ended December 31,
1995.
Results of Operations
The Company Combined The Company The Predecessor
___________ ________ ___________ _______________
Fiscal Years Ended Four Months Ended
December 31, December 31,
__________________________ ____________________________
1996 1995 1995 1994
___________ _____________ ___________ _______________
(Unaudited) (Unaudited)
(In thousands)
Net sales $ 306,093 $ 268,987 $ 96,463 $ 86,371
Cost of goods sold 243,745 218,838 77,885 69,032
Selling, general
and administrative
expenses 35,299 32,810 10,438 10,792
Depreciation and
amortization 9,295 5,968 2,439 1,740
_________ _________ ________ ________
Operating income $ 17,754 $ 11,371 $ 5,701 $ 4,807
_________ _________ ________ ________
_________ _________ ________ ________
The Predecessor
__________________
Fiscal Years Ended
_____________________
August 25, August 26,
1995 1994
__________ __________
(In thousands)
Net sales $ 258,895 $ 232,826
Cost of goods sold 210,459 180,575
Selling, general
and administrative
expenses 32,673 28,404
Depreciation and
amortization 5,286 4,962
_________ _________
Operating income $ 10,477 $ 18,885
_________ _________
_________ _________
Year Ended December 31, 1996 Compared To Twelve Months Ended December 31, 1995
Net sales for the year ended December 31, 1996 were $306.1 million,
representing a $37.1 million or 13.8% increase over the twelve months ended
December 31, 1995. This increase in net sales was primarily attributable to
growth in the Company's carpet cushion and consumer products accounts. The
increase in carpet cushion sales was primarily due to market share gains and
the pass-through of rising scrap material prices to its customers. The
increase in consumer product sales was bolstered by new product
introductions, a strong back-to-school season and the fourth quarter
acquisition of Comfort Clinic.
Cost of goods sold as a percentage of sales improved from 81.3% for the twelve
months ended December 31, 1995 to 79.6% for the year ended December 31, 1996.
This change was primarily due to cost reduction activities put in place during
the year, including the consolidation of five facilities. The decrease in
cost of goods sold as a percentage of sales was also attributable to the
benefits received from the utilization of internally produced scrap foam
during the period of increasing scrap prices.
Selling, general and administrative expenses were $35.3 million for the year
ended December 31, 1996, as compared to $32.8 million for the twelve months
ended December 31, 1995, representing an increase of $2.5 million or 7.6%.
Expressed as a percentage of sales, selling, general and administrative
expenses decreased to 11.5% for the year ended December 31, 1996 from 12.2%
for the twelve months ended December 31, 1995. The decrease as a percentage
of sales was primarily due to plant consolidation activities which included
the elimination of certain administrative costs.
Four Months Ended December 31, 1995 Compared To Four Months Ended December 31,
1994
Net sales for the four months ended December 31, 1995, were $96.5 million or
an increase of $10.1 million or 11.7% over the four months ended December 31,
1994. This sales growth was experienced across most product lines, but was
primarily due to strong market penetration of the Company's carpet pad
products. In addition, selling prices of many of the Company's products
increased compared to the same prior year period, primarily reflecting the
effects of higher raw material prices.
Cost of goods sold for the four months ended December 31, 1995 increased $8.9
million or 12.8% to $77.9 million over the four months ended December 31,
1994. Expressed as a percentage of sales, cost of goods sold increased from
79.9% for the four months ended December 31, 1994 to 80.7% for the four months
ended December 31, 1995. This increase was due primarily to increased raw
material prices and a product mix shift.
Selling, general and administrative expenses for the four months ended
December 31, 1995 were $10.4 million, a decrease of $0.4 million from the four
months ended December 31, 1994. Expressed as a percentage of sales, selling,
general and administrative expenses decreased to 10.8% for the four months
ended December 31, 1995, from 12.5% for the four months ended December 31,
1994, due primarily to the absorption of fixed costs and various cost
reductions implemented by new management.
Year Ended August 25, 1995 Compared To Year Ended August 26, 1994
The Predecessor's net sales for the year ended August 25, 1995, were $258.9
million or an increase of $26.1 million or 11.2% over the year ended August
26, 1994. This sales growth was experienced across all product lines with
home furnishings and bedding products producing the largest increases. Gross
sales increased by $30.7 million in 1995 over 1994, offset by a $4.6 million
increase in sales deductions to a total of $9.3 million, of which $4.3 million
was provided in the fourth quarter of 1995. In addition, during the fourth
quarter of 1995, the Predecessor granted $0.5 million of special price
concessions on selected home furnishings products. The net sales increase of
$26.1 million resulted from increased demand due to strong market penetration
of the Predecessor's foam, carpet pad products and home furnishings products.
In addition, selling prices of many of the Predecessor's products increased
throughout the year, primarily reflecting the effects of higher raw material
prices.
The Predecessor's cost of goods sold increased $29.9 million or 16.6% to
$210.5 million in 1995 from $180.6 million in 1994. Expressed as a percentage
of sales, cost of goods sold increased from 77.6% in 1994 to 81.3% in 1995.
This increase was due to increased raw material prices, a product mix shift
and the substantial increase in sales deductions. The Predecessor recorded an
unfavorable $1.8 million book-to-physical inventory adjustment in the fourth
quarter of 1995, which significantly increased cost of goods sold for the
Predecessor's home furnishings products.
The Predecessor's selling, general and administrative expenses increased $4.3
million or 15.0% to $32.7 million in 1995 from $28.4 million in 1994. This
increase was due in part to an increase in expenses that vary directly with
sales such as shipping and selling expenses. In addition, the Predecessor
incurred approximately $0.9 million relative to the installation of new
information systems as well as certain legal and professional fees, associated
with the sale of the Company. Expressed as a percentage of sales, selling,
general and administrative expenses increased from 12.2% in 1994 to 12.6% in
1995. This increase was due largely to increased information systems costs
and legal and professional expenses.
Liquidity and Capital Resources
Working Capital and Cash Flows
For the year ended December 31, 1996, the Company generated $15.2 million in
cash from operations and had $120.3 million of net proceeds from a combination
of capital contributions and borrowings on the Credit Facility associated with
the Comfort Acquisition and capital projects. During 1996, the Company made
net repayments of $103.3 million under debt obligations, spent $11.0 million
on capital projects and used $2.4 million to pay financing fees.
For the four months ended December 31, 1995, the Company generated $3.1
million in cash from operations and $170.4 million of net proceeds from
contributed capital and long-term obligations related to acquisitions. During
the four months ended December 31, 1995, the Company made net repayments of
$29.0 million under debt obligations, spent $2.1 million on capital projects
and used $10.5 million to pay financing fees.
The Predecessor's cash provided by operating activities for the year ended
August 25, 1995 was $10.4 million, an increase of $1.5 million from the year
ended August 26, 1994. Cash used in investing activities increased to $9.0
million for the year ended August 25, 1995 from $5.8 million for the year
ended August 26, 1994. This increase in cash used in investing activities
was attributable to increased capital expenditures as a result of the
rebuilding of the facility which was involved in a fire. Cash used in
financing activities for the year ended August 25, 1995 was $0.2 million while
cash used in financing activities for the year ended August 26, 1994 was $2.5
million. The primary reason for this fluctuation was a reduction in dividends
paid by the Predecessor.
Liquidity
The Company's primary sources of liquidity are cash flows from operations and
borrowings under the Credit Agreement, which are subject to borrowing base
limitations. As of February 28, 1997, approximately $21.2 million was
available to the Company for borrowing under the Credit Agreement.
The major uses of cash in 1997 are expected to be for debt service
requirements and capital expenditures. In 1997, debt service requirements are
estimated at $15.4 million while capital expenditures are estimated at $8.0
million. Management believes that cash from operating activities, together
with available borrowings under the Credit Agreement, if necessary, should be
sufficient to permit the Company to meet these financial obligations.
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Crain Industries, Inc. (a Delaware corporation) Page
Report of Independent Public Accountants 11
Consolidated Balance Sheets as of December 31, 1996
and December 31, 1995 12
Consolidated Statements of Operations for the year ended
December 31, 1996 and the four months ended December 31, 1995 13
Consolidated Statements of Stockholder's Equity for the year
ended December 31, 1996 and the four months ended December 31, 1995 14
Consolidated Statements of Cash Flows for the year ended
December 31, 1996 and the four months ended December 31, 1995 15
Notes to Consolidated Financial Statements 16
Schedule II - Valuation and Qualifying Accounts 23
Crain Industries, Inc. (an Arkansas corporation) (Predecessor)
Report of Independent Public Accountants 24
Balance Sheet as of August 25, 1995 25
Statements of Income for the years ended August 25, 1995 and
August 26, 1994 26
Statement of Stockholder's Equity for the year ended August 25, 1995 27
Statements of Cash Flows for the years ended August 25, 1995
and August 26, 1994 28
Notes to Financial Statements 29
Schedule II - Valuation and Qualifying Accounts 34
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Crain Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Crain
Industries, Inc. (a Delaware corporation and a wholly owned subsidiary of
Crain Holdings Corp.) and subsidiaries as of December 31, 1996 and 1995 and
the related consolidated statements of operations, stockholder's equity, and
cash flows for the year ended December 31, 1996 and the four months ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Crain Industries, Inc. and subsidiaries as of December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for the
year ended December 31, 1996 and the four months ended December 31, 1995, in
conformity with generally accepted accounting principles.
s\Arthur Andersen
St. Louis, Missouri
January 31, 1997
Page
CRAIN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 1996 and 1995
(In thousands, except share data)
ASSETS
1996 1995
_________ _________
Current assets:
Cash and cash equivalents $ 6,102 $ 1,983
Accounts receivable, less allowance of $7,554 and $4,093,
respectively 40,921 35,987
Inventories 30,025 33,128
Prepaid expenses and other 3,014 1,313
_________ _________
Total current assets 80,062 72,411
Property, plant and equipment, net 49,873 41,975
Intangible assets, net 56,297 56,341
Deferred financing costs, net 11,334 12,046
Other assets 1,310 1,085
_________ _________
Total assets $ 198,876 $ 183,858
_________ _________
_________ _________
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term obligations $ 136 $ 122
Accounts payable 23,320 19,919
Accrued and other liabilities 9,790 11,918
Accrued interest 5,176 5,030
Accrued payroll and personnel 6,986 3,739
_________ _________
Total current liabilities 45,408 40,728
Long-term obligations, less current maturities 118,182 116,215
Other long-term liabilities 5,444 2,633
_________ _________
Total liabilities 169,034 159,576
Stockholder's equity:
Common stock, $.01 par value, 1,000 shares authorized,
issued and outstanding 0 0
Contributed capital 29,492 24,528
Retained earnings (deficit) 350 (246)
_________ _________
Total stockholder's equity 29,842 24,282
_________ _________
Total liabilities and stockholder's equity $ 198,876 $ 183,858
_________ _________
_________ _________
See accompanying notes to the consolidated financial statements.
Page
CRAIN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
Four Months
Year Ended Ended
December 31, December 31,
1996 1995
____________ ____________
Net sales $ 306,093 $ 96,463
Operating expenses:
Cost of goods sold 243,745 77,885
Selling, general and administrative 35,299 10,438
Depreciation and amortization 9,295 2,439
__________ _________
Operating income 17,754 5,701
Other expenses:
Interest expense 14,618 5,156
Amortization of deferred financing costs 1,841 597
Other expense 304 103
__________ _________
Income (loss) before provision for income taxes 991 (155)
Provision for income taxes 395 91
__________ _________
Net income (loss) $ 596 $ (246)
__________ _________
__________ _________
See accompanying notes to the consolidated financial statements.
Page
CRAIN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
For The Year Ended December 31, 1996
and The Four Months Ended
December 31, 1995
(In thousands)
Retained Total
Common Contributed Earnings Stockholders's
Stock Capital (Deficit) Equity
______ ___________ _________ ______________
Contributed capital $ 0 $ 25,028 $ -- $ 25,028
Issuance costs -- (500) -- (500)
Net loss -- -- (246) (246)
______ __________ _________ __________
December 31, 1995 0 24,528 (246) 24,282
Contributed capital -- 4,964 -- 4,964
Net income -- -- 596 596
______ __________ _________ __________
December 31, 1996 $ 0 $ 29,492 $ 350 $ 29,842
______ __________ _________ __________
______ __________ _________ __________
See accompanying notes to the consolidated financial statements.
CRAIN INDUSTRIES,INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Four Months
Year Ended Ended
December 31, December 31,
1996 1995
_____________ ______________
Cash flows from operating activities:
Net income (loss) $ 596 $ (246)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 9,295 2,439
Amortization of deferred financing costs 1,841 597
Change in assets and liabilities,
net of acquisitions:
Accounts receivable 1,515 (892)
Inventories (492) 2,369
Prepaid expenses and other 115 379
Accounts payable 1,273 (4,340)
Accrued and other liabilities 705 (2,325)
Accrued interest 156 5,030
Income taxes payable 216 91
__________ ___________
Net cash from operating activities 15,220 3,102
Cash flows from investing activities:
Acquisitions, net of cash acquired (14,568) (129,842)
Capital expenditures (11,030) (2,141)
__________ ___________
Net cash used in investing activities (25,598) (131,983)
Cash flows from financing activities:
Proceeds from issuance of long-term obligations -- 115,000
Borrowings on long-term obligations 115,270 30,405
Payments on long-term obligations (103,290) (29,068)
Equity proceeds 4,964 25,028
Financing fees and other (2,447) (10,502)
__________ ___________
Net cash from financing activities 14,497 130,863
__________ ___________
Net change in cash and cash equivalents 4,119 1,982
Cash and cash equivalents at beginning of period 1,983 1
__________ ___________
Cash and cash equivalents at end of period $ 6,102 $ 1,983
__________ ___________
__________ ___________
See accompanying notes to the consolidated financial statements.
CRAIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
1. The Company
Crain Industries, Inc., a Delaware corporation ("Crain" or the "Company"), was
formed on May 25, 1995 to participate in the Acquisition (as described below)
and the transactions related thereto. Crain is a wholly owned subsidiary of
Crain Holdings Corp. ("Holdings"). Prior to the Acquisition, Crain conducted
no operations other than those incident to the Acquisition. The Company is
engaged in the design, manufacturing and marketing of flexible polyurethane
foam and foam products. The Company's products are sold to a wide variety of
customers primarily in the furniture, bedding and carpet markets.
On August 29, 1995, Crain consummated an agreement pursuant to which the
Company acquired certain assets for an aggregate cash consideration of
$130,027 and assumed certain liabilities of Crain Industries, Inc., an
Arkansas corporation (the "Predecessor") (the "Acquisition"). The initial
cash consideration for the Acquisition was reduced by $10,000 during 1996 as
the result of a favorable settlement of a lawsuit with the Predecessor,
discussed in Note 11. The Company has designated August 26, 1995 as the
effective date of the Acquisition for financial reporting purposes. Subsequent
to the Acquisition, the Company changed its fiscal year end to December 31.
Previously, the Predecessor's fiscal year end was the last Friday in August.
The Acquisition was accounted for using the purchase method of accounting
whereby the total acquisition cost was allocated to the acquired net assets
based on their respective fair values.
The total acquisition cost was allocated to the acquired net assets as
follows:
Current assets $ 70,710
Property, plant and equipment 40,434
Goodwill 50,188
Fees and costs 12,500
Other assets 1,914
Current liabilities (43,469)
Non-current liabilities (2,250)
_________
$130,027
_________
_________
2. Comfort Clinic Acquisition
On October 18, 1996, the Company acquired substantially all of the assets of
the Comfort Clinic division of Bio Clinic Corporation (the "Comfort
Acquisition"). The consideration paid in connection with the Comfort
Acquisition consisted of cash in the amount of $14,568, subject to final
adjustments. The Comfort Acquisition was funded with borrowings of
approximately $9,500 of senior debt under the Revolver (hereinafter defined)
and approximately $5,000 of capital contributions from Holdings. The Comfort
Acquisition was accounted for using the purchase method of accounting whereby
the total acquisition cost has been preliminarily allocated to the acquired
net assets based on their estimated respective fair values. The purchase
price allocations are still in process. It is not expected that the final
allocation of the acquisition cost will result in a materially different
allocation than is presented herein.
The total acquisition cost has been preliminarily allocated to the acquired
net assets as follows:
Current assets $ 9,824
Property, plant and equipment 4,644
Goodwill and intangibles 6,654
Other 48
Fees and costs 1,000
Current liabilities (6,722)
Non-current liabilities (880)
_________
$ 14,568
_________
_________
Page
Unaudited pro forma data, which shows condensed results of operations for the
year ended December 31, 1996 and the four months ended December 31, 1995, as
though the Comfort Acquisition and related financing had occurred at the
beginning of each period is as follows:
Year Ended Four Months Ended
December 31, 1996 December 31, 1995
_________________ _________________
Net sales $ 328,158 $ 104,728
Net loss (595) (2,477)
3. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Crain and its
wholly-owned subsidiaries. All material intercompany balances and transactions
have been eliminated in consolidation.
Revenue Recognition
Sales and related costs of goods sold are included in income when goods are
shipped to the customers.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out ("FIFO") method.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation is calculated
using the straight-line method. The average estimated lives utilized in
calculating depreciation are as follows: machinery and equipment - 3-8 years;
and transportation equipment - 3-5 years. Leasehold improvements are
depreciated over the shorter of the term of the respective lease or the life
of the respective improvement. Interest costs applicable to equipment
constructed for use by the Company are capitalized as a part of the assets.
Intangible Assets
Intangible assets consist principally of goodwill arising from the excess of
cost over the value of net assets acquired, which is amortized using the
straight-line method over forty years. Accumulated amortization aggregated
$2,118 and $339 at December 31, 1996 and 1995, respectively. The Company
generally assesses the recoverability of its intangible assets primarily based
on its current and anticipated future undiscounted cash flows. At December
31, 1996 and 1995 the Company does not believe there have been any impairment
of its intangible assets.
Deferred Financing Costs
Deferred financing costs, consisting of fees and other expenses associated
with the debt financing, are amortized over the term of the related debt using
the straight-line method which approximates the effective interest method.
Fair Value of Financial Instruments
The Company's financial instruments, excluding the Senior Notes (as
hereinafter defined) are carried at fair value or amounts that approximate
fair value. The Company has estimated the fair value of the Senior Notes
using current market data. At December 31, 1996, the estimated fair market
value of the Senior Notes was $112,750. At December 31, 1995, the Senior
Notes approximated fair value.
Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with maturities of three
months or less to be cash equivalents. Interest paid for the year ended
December 31, 1996 and the four month period ended December 31, 1995, was
approximately $14,630 and $220, respectively. Taxes paid for the year ended
December 31, 1996 and the four month period ended December 31, 1995 was
approximately $106 and $0, respectively.
4. Inventories
The composition of inventories at December 31, 1996 and 1995 is as follows:
1996 1995
_________ _________
Raw materials $ 21,194 $ 25,738
Finished goods 8,831 7,390
_________ _________
$ 30,025 $ 33,128
_________ _________
_________ _________
5. Property, Plant and Equipment
The composition of property, plant and equipment at December 31, 1996 and
1995 is as follows:
1996 1995
_________ _________
Machinery and equipment $ 43,181 $ 36,096
Transportation equipment 5,534 4,263
Construction in progress 4,965 1,775
Leasehold improvements 3,871 1,941
Land and buildings 2,000 --
Less: accumulated depreciation (9,678) (2,100)
_________ _________
$ 49,873 $ 41,975
_________ _________
_________ _________
6. Financing Costs and Related Party Transactions
In connection with the Acquisition, the Company incurred aggregate fees and
costs of $13,000. Costs of $10,000 related to the Senior Notes and Revolver
(see Note 7) are included in deferred financing costs and amortized over the
terms of the related borrowings. Costs of $500 related to the issuance of
Holdings' common stock have been deducted from the proceeds to reduce the
carrying value of the common stock.
In connection with the Acquisition and obtaining the related financing, the
Company entered into a Monitoring and Oversight Agreement ("Agreement") with
Hicks, Muse & Co. Partners L.P. ("Hicks, Muse") (an affiliate of the Company)
pursuant to which the Company paid Hicks, Muse a cash fee of $2,500 as
compensation for financial advisory services. The fees have been allocated to
the debt and equity securities issued in connection with the Acquisition as
deferred financing costs or as a deduction from the cash proceeds received
from the sale of the common stock of Holdings. In connection with the Comfort
Acquisition and obtaining the related financing, the Company paid a fee of
$210 to Hicks, Muse. The Agreement further provides that the Company shall
pay Hicks, Muse an annual fee of $250 for ten years for monitoring and
oversight services adjusted annually at the end of each fiscal year to an
amount equal to .1% of the consolidated net sales of the Company, but in no
event less than $250 annually. The obligation under the Agreement and the
related deferred financing costs have been recorded in the consolidated
balance sheets.
Page
7. Long-Term Obligations
The composition of long-term obligations at December 31, 1996 and 1995 is as
follows:
1996 1995
_________ _________
Revolving credit facility $ 17,700 $ 5,600
Senior subordinated notes 100,000 100,000
Notes payable 618 10,737
Total 118,318 116,337
Less current maturities 136 122
_________ _________
$ 118,182 $ 116,215
_________ _________
_________ _________
The schedule of principal payments for long-term obligations at December 31,
1996 is as follows:
1997 $ 136
1998 149
1999 164
2000 17,869
2001 --
Thereafter 100,000
_________
$ 118,318
_________
_________
Credit Agreement
In connection with the Acquisition, Crain and Holdings entered into a credit
agreement (the "Credit Agreement") dated as of August 29, 1995 with certain
financial institutions. Borrowings under the Credit Agreement are
collateralized by first priority mortgages and liens on all of the assets of
the Company. In addition, borrowings under the Credit Agreement are
guaranteed by Holdings. The Credit Agreement terminates on August 29, 2000,
at which time all outstanding borrowings are due.
The Credit Agreement consists of a $50,000 revolving credit facility (the
"Revolver"). The Revolver provides that up to $7,500 of such facilities may
be used for the issuance of letters of credit. At December 31, 1996 and 1995,
Crain had $6,032 and $893 in outstanding letters of credit, respectively. At
December 31, 1996 and 1995 there was $26,268 and $43,507, respectively, of
unused borrowing capacity under the Credit Agreement. The Credit Agreement
contains several financial covenants which, among other things, require Crain
to maintain certain financial ratios and restrict Crain's ability to incur
indebtedness, make capital expenditures and pay dividends. A commitment fee on
the unused portion of the Revolver of .5% is payable on each quarterly payment
date.
Borrowings under the Revolver bear interest, at the option of Crain, at a rate
per annum equal to (a) the Alternative Base Rate (as defined in the Credit
Agreement) plus 1.5% or (b) the Eurodollar Rate (as defined in the Credit
Agreement) plus 2.5%. The Alternative Base Rate and Eurodollar Rate margins
are established quarterly based on a formula as defined in the Credit
Agreement. Interest payment dates vary depending on the interest rate option
to which the Revolver is tied, but generally interest is payable quarterly.
Senior Subordinated Notes
The senior subordinated notes due 2005 (the "Senior Notes") were issued under
an indenture, dated August 29, 1995 (the "Indenture") in connection with the
Acquisition. The Senior Notes represent unsecured general obligations of
Crain and are subordinated to all Senior Debt (as defined in the Indenture) of
Crain. The Senior Notes, which were originally sold pursuant to an exemption
from the registration requirements of the Securities Act of 1933, as amended,
were exchanged for identical notes registered under such Act in February,
1996.
Page
The Senior Notes mature on August 15, 2005. Interest on the Senior Notes is
payable semiannually on each February 15 and August 15. The Senior Notes bear
interest at the rate of 13.5% per annum. The Senior Notes may not be redeemed
prior to August 15, 2000, except in the event of a Change of Control (as
defined) or Crain may, subject to certain requirements (as defined), on or
prior to August 15, 1998 redeem up to 33 1/3% of the aggregate original
principal amount with proceeds from an Equity Offering (as defined).
The Senior Notes are fully and unconditionally (as well as jointly and
severally) guaranteed on an unsecured, senior subordinated basis by Crain
Aero, Inc. ("Crain Aero"). The Company's only other subsidiary, Sleep
Solutions, Industries, Inc., ("Sleep Solutions"), does not guarantee the
Senior Notes as it is not required under the terms of the Indenture. Each of
Crain Aero and Sleep Solutions is a wholly-owned subsidiary of the Company.
8. Stock Option Plans
In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation",
the Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for Holdings' stock
option plans. Accordingly, no compensation cost has been recognized for the
plans. Had compensation cost for the plans been determined based upon the
fair value at the grant date for awards under those plans, consistent with the
methodology prescribed under SFAS No. 123, the effect on the Company's net
income would be immaterial.
Changes in the status of the stock option plans are summarized below:
Weighted
Average Exercise Options Options
Price Per Share Granted Vested
________________ _________ _______
August 25, 1995 $ -- -- --
Granted 1.00 2,032,323 --
______ _________ _______
December 31, 1995 1.00 2,032,323 --
Granted 1.26 175,000 --
Vested -- -- 235,600
Forfeited 1.00 (100,000) --
______ _________ _______
December 31, 1996 $ 1.06 2,107,323 235,600
______ _________ _______
______ _________ _______
The weighted average grant-date fair value of options granted during 1996 and
1995 was $1.26 and $1.00 per share, respectively. Of the options outstanding
at December 31, 1996, 1,113,000 options, 904,323 options and 90,000 options
have exercise prices of $1.00, $1.09 and $1.50, respectively, and have
weighted average remaining contractual lives of 8.9 years, 8.7 years and 10
years, respectively. The weighted average exercise price of options vested at
December 31, 1996 is, $1.00 per share.
9. Income Taxes
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109. The provision for income taxes for the fiscal year ended
December 31, 1996 and for the four months ended December 31, 1995 is as
follows:
1996 1995
__________ ________
Current:
Federal $ (2,224) $ --
State (327) 10
Deferred:
Federal 2,568 71
State 378 10
__________ ________
Total $ 395 $ 91
__________ ________
__________ ________
Page
Reconciliation between the statutory income tax rate and effective tax rate is
summarized below:
1996 1995
______ _______
U.S. Federal statutory rate $ 337 $ (53)
State taxes 50 (8)
Other 8 152
______ _______
$ 395 $ 91
______ _______
______ _______
The tax effects of significant temporary differences representing deferred tax
assets and liabilities are as follows:
1996 1995
________ ________
Deferred tax assets:
Accrued liabilities not yet deductible $ 2,625 $ 2,641
Net operating loss carry forward 3,437 --
Other 228 157
________ ________
6,290 2,798
________ ________
Deferred tax liabilities:
Depreciation and amortization 6,601 2,710
Other 165 169
________ ________
6,766 2,879
________ ________
Net deferred tax liability $ (476) $ (81)
________ ________
________ ________
10. Commitments
The Company leases certain buildings, transportation vehicles and other
equipment. Total rental expense under operating leases for the year ended
December 31, 1996 and for the four months ended December 31, 1995 was $9,286
and $3,001, respectively. Future minimum lease payments under operating leases
that have initial or remaining noncancelable lease terms in excess of one
year, for years ending December 31 are:
1997 $ 4,594
1998 4,405
1999 3,790
2000 2,849
2001 2,309
Thereafter 7,059
___________
$ 25,006
___________
___________
The Company does not have any capital leases and does not hold any derivative
financial instruments with off-balance sheet risk.
11. Contingencies
The Company is subject to legal proceedings and claims which arise in the
normal course of business. In the opinion of the Company's management, the
ultimate liabilities with respect to these actions should not, individually or
in the aggregate, have a material adverse effect on the Company's financial
condition or results of operations. The Company believes it is in material
compliance with applicable environmental laws and regulations and that its
environmental controls are adequate to address existing regulatory
requirements.
On December 13, 1995, the Company initiated a lawsuit in the District Court
of Dallas County, Texas styled Crain Industries, Inc., f/k/a/ Crain
Acquisition Corp. v. Dude, Inc., f/k/a Crain Industries, Inc., H.C. "Dude"
Crain, Jr., et al., Cause No. 95-12997, seeking money damages based on certain
allegations of misrepresentation, fraud, and breach of contract in connection
with the acquisition. In August, 1996, the Company settled all litigation
with the sole shareholder of the Predecessor. The settlement amounted to a
$10,000 reduction in the purchase price through the cancellation of a $10,000
note payable owed to the sole shareholder of the Predecessor.
Page
12. Retirement Plan
The Company has a defined contribution retirement savings plan (the "Plan")
covering substantially all employees who meet certain eligibility requirements
as to age and length of service. The Plan incorporates the salary deferral
provision of Section 401 (k) of the Internal Revenue Code and employees may
defer up to 15% of compensation or the annual maximum limit prescribed by the
Internal Revenue Code. The Company may elect to match a percentage of the
employees' deferrals. Company contribution expense related to the Plan for
the year ended December 31, 1996 and the four months ended December 31, 1995
were approximately $555 and $163, respectively.
13. Supplemental Transition Period Disclosure
The following unaudited supplemental data, provided for comparison purposes
only, is for the four months ended December 31, 1994. The Company believes
that the financial information of the Predecessor is generally not comparable
to that of the Company.
Unaudited
_________
Net sales $ 86,371
Cost of goods sold 69,032
Selling, general and administrative expenses 10,792
Depreciation and amortization 1,740
_________
Operating income 4,807
Interest expense 1,076
Amortization of deferred financing costs 16
Other expense 439
_________
Net income $ 3,276
_________
_________
The Predecessor elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Accordingly, taxable income of the Predecessor was
allocated to the sole shareholder of the Predecessor who was responsible for
the payment of taxes thereon.
Page
CRAIN INDUSTRIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For The Year Ended December 31, 1996
and The Four Months Ended December 31, 1995
(In thousands)
Balance at Balance at
Beginning End of
of Period Acquisition Provision Write-offs Period
_________ ___________ _________ __________ __________
Allowance for
doubtful accounts
Four months ended
December 31, 1995 $ 4,514 $ -- $ 196 $ (617) $ 4,093
Year ended
December 31, 1996 4,093 3,202 789 (540) 7,544
Page
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Crain Industries, Inc.:
We have audited the accompanying balance sheet of Crain Industries, Inc.
(an Arkansas corporation) as of August 25, 1995, and the statements of
income, stockholder's equity, and cash flows for the years ended August 25,
1995 and August 26, 1994. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Crain Industries, Inc. as
of August 25, 1995, and the results of its operations and its cash flows for
years ended August 25, 1995 and August 26, 1994, in conformity with generally
accepted accounting principles.
s\Arthur Andersen
Dallas, Texas,
November 28, 1995
Page
CRAIN INDUSTRIES, INC.
BALANCE SHEET
As of August 25, 1995
(In thousands, except share data)
ASSETS
Current assets:
Cash $ 4,057
Trade receivables, less allowance for doubtful accounts of $4,514 34,650
Inventories 38,068
Prepaid expenses and other assets 1,038
Due from stockholder 4,604
_________
Total current assets 82,417
Property, plant and equipment, net 35,498
Intangibles and other assets 3,920
_________
Total assets $ 121,835
_________
_________
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable, including bank overdrafts of $4,394 $ 23,673
Accrued compensation 4,359
Accrued expenses and other liabilities 3,225
Due to related parties 1,000
Current portion of long-term obligations 1,995
_________
Total current liabilities 34,252
Long term obligations 40,268
Due to related parties 1,050
Stockholder's equity:
Common stock, stated value $10 a share, authorized 10,000 shares;
issued and outstanding, 5,945 shares 59
Additional paid-in capital 4,013
Retained earnings 44,363
_________
48,435
Less-treasury stock, 1,320 shares at cost (2,170)
Total stockholder's equity 46,265
_________
Total liabilities and stockholder's equity $ 121,835
_________
_________
The accompanying notes are an integral part of these financial statements.
Page
CRAIN INDUSTRIES, INC.
STATEMENTS OF INCOME
(In thousands)
For The Years Ended
___________________________
August 25, August 26,
1995 1994
__________ __________
Net sales $258,895 $232,826
Cost of sales 214,633 183,556
________ ________
Gross profit 44,262 49,270
Operating expenses:
Shipping 9,875 9,397
Selling 4,329 4,020
General and administrative 19,020 16,647
Product and equipment development 561 321
________ ________
Total operating expenses 33,785 30,385
________ ________
Operating profit 10,477 18,885
Other income (expense):
Interest income 206 352
Interest expense (3,431) (2,564)
Gain on insurance settlement 2,434 --
Other, net (130) (129)
________ ________
Total other expenses (921) (2,341)
________ ________
Net income $ 9,556 $ 16,544
________ ________
________ ________
The accompanying notes are an integral part of these financial statements.
Page
CRAIN INDUSTRIES, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
(In thousands)
Additional Total
Common Paid-In Retained Treasury Stockholder's
Stock Capital Earnings Stock Equity
______ _________ ________ _________ _____________
August 26, 1994 $ 59 $ 4,013 $ 40,469 $ (2,170) $ 42,371
Net income -- -- 9,556 -- 9,556
Dividends -- -- (5,662) -- (5,662)
____ _______ ________ _________ _________
August 25, 1995 $ 59 $ 4,013 $ 44,363 $ (2,170) $ 46,265
____ _______ ________ _________ _________
____ _______ ________ _________ _________
The accompanying notes are an integral part of these financial statements.
Page
CRAIN INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
For The Years Ended
_______________________
August 25, August 26,
1995 1994
____________ __________
Cash flows from operating activities:
Net income $ 9,556 $ 16,544
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 5,286 4,962
Provision for losses on receivables 980 1,729
(Gain) loss on disposal of equipment
and other (720) 375
Changes in operating assets and liabilities:
Trade receivables (2,912) (6,350)
Inventories (7,353) (10,449)
Prepaid expenses, and other assets 797 (1,084)
Other assets (802) (344)
Accounts payable 4,809 2,331
Accrued compensation, accrued expenses
and other liabilities 792 1,224
________ _________
Net cash provided by operating activities 10,433 8,938
________ _________
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment 2,711 750
Purchases of property, plant and equipment (11,754) (6,505)
________ _________
Net cash used in investing activities (9,043) (5,755)
________ _________
Cash flows from financing activities:
Proceeds under credit agreement 69,403 97,021
Principal payments of credit agreement (62,428) (92,521)
Principal payments of other long-term
obligations (4,871) (1,846)
Dividends (5,662) (8,858)
Changes in due from stockholder and
related parties (885) (910)
Proceeds from other long-term obligations 4,251 4,620
________ _________
Net cash used in financing activities (192) (2,494)
Net increase in cash 1,198 689
Cash, beginning of year 2,859 2,170
________ _________
Cash, end of year $ 4,057 $ 2,859
________ _________
________ _________
Supplemental disclosures of cash flow
information:
Cash paid during the year
Interest $ 3,530 $ 2,564
________ _________
________ _________
Income taxes $ 423 $ 247
________ _________
________ _________
The accompanying notes are an integral part of these financial statements.
Page
CRAIN INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(In thousands, except per share data)
1. Summary of Significant Accounting Policies
Nature of Business
Crain Industries, Inc. (the "Company") is primarily involved in manufacturing,
fabricating, and distributing polyurethane foam, polyester fiber, and related
products. The Company's customers are in the furniture, bedding, packaging,
automotive, retail, and construction industries throughout the United States.
Sales are generally made on account to customers based on preapproved credit
terms.
Inventories
Inventories are stated at the lower of cost or market. Cost includes raw
materials, labor and manufacturing overhead. Inventory has been valued using
the last-in, first-out (LIFO) method.
Property, Plant, and Equipment
Property, plant, and equipment are recorded at cost. Depreciation and
amortization are computed primarily by the straight-line method over the
estimated useful lives of the related assets.
Interest costs applicable to buildings and equipment constructed for use by
the Company are capitalized as a part of the assets. The Company capitalized
interest of $271,000 and $114,000 in 1995 and 1994, respectively.
Other Assets
Other assets include deferred loan costs and goodwill. Deferred loan costs
are amortized over the term of the loan. Goodwill is amortized on a straight-
line basis over the periods benefited, generally from 5 to 25 years. The
Company periodically reviews the carrying value and amortization period for
goodwill to determine whether events and circumstances warrant a reduction in
the carrying value or amortization period.
Product and Equipment Development
Expenditures for product development activities relating to new products are
generally charged to expense as incurred.
Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Accordingly, taxable income of the Company is
allocated to the stockholder who is responsible for the payment of taxes
thereon. The Company may be subject to future taxes associated with the
disposition of assets which had unrealized gains at the effective date of the
Subchapter S election.
Revenue Recognition
Sales and related cost of goods sold are included in income when goods are
shipped to the customer.
2. Stockholder's Equity
During 1995 and 1994, dividends of $5,662 and $8,858 were declared and paid to
the stockholder, resulting in dividends per share of common stock of $1,224
and $1,915, respectively.
Page
3. Inventories
Inventories are as follows:
August 25,
1995
___________
Raw Material $ 31,086
Finished goods 6,982
________
$ 38,068
________
________
The LIFO inventory method results in a better matching of costs and revenues.
Information related to the first-in, first-out (FIFO) method may be useful in
comparing operating results to those of companies not on LIFO. On a
supplemental basis, if inventories were valued at the lower of FIFO cost or
market, inventories would have increased by approximately $4,286 at August 25,
1995. FIFO approximates current cost.
4. Property, Plant, and Equipment
Property, plant, and equipment consists of the following:
August 25,
1995
_________
Machinery, equipment, and furniture $ 40,664
Land, plant, and office buildings 17,965
Transportation equipment 8,713
Leasehold improvements 3,763
Construction in progress 4,651
_________
75,756
Less - accumulated depreciation and amortization (40,258)
_________
$ 35,498
_________
_________
5. Other Assets
Other assets are recorded at cost and consist of the following:
August 25,
1995
_________
Deferred loan costs and goodwill, net of accumulated
amortization of $891 $ 370
Long-term portion of notes receivable which bear interest from
6% to 10% and are due at various dates through May 1998 650
Cash surrender value, utility deposits, long-term receivables,
and other 2,900
_________
$ 3,920
_________
_________
6. Long-Term Obligations
Long-term obligations consist of the following:
August 25,
1995
_________
Senior secured notes $ 10,500
Credit agreement 24,975
Mortgage notes payable 6,788
_________
42,263
Less - current maturities (1,995)
_________
$ 40,268
_________
_________
Page
The Senior Secured Notes are payable in annual installments of $1,500 through
January 31, 2002, with interest at 9.01% payable semiannually. The Company
also has a Credit Agreement with a bank which provides for borrowings up to
the lesser of $30,000 or the borrowing base, as defined. At August 25, 1995,
the Company has $5,025 available to borrow under the terms of the Credit
Agreement. The Credit Agreement extends through February 25, 1997, and
provides for several borrowing options with different interest rates and
maturities. The Company's interest is payable monthly or quarterly at the
Eurodollar rate, or at alternative market rates, as defined (7.2% to 8.75% at
August 25, 1995). In addition, the Company is required to pay a quarterly
commitment fee in the amount of 3/8% per annum on the unused portion of the
Credit Agreement.
The Company is in compliance with the restrictive financial covenants of the
Senior Secured Notes and Credit Agreement which include, among others, certain
minimum requirements as to working capital, net worth, debt to equity,
restrictions on the amount of indebtedness the Company can incur, payments of
dividends, and certain changes in capital stock. Borrowings under the Senior
Secured Notes and Credit Agreement are collateralized by substantially all
assets of the Company.
In conjunction with the asset purchase agreement discussed in Note 13, the
amounts outstanding under the Senior Secured Notes and the Credit Agreement
were paid in full.
One mortgage note is payable in monthly installments of approximately $9,375,
plus interest at the greater of 7% or the prime rate (8.75% at August 25,
1995), through March 2008. The mortgage note is collateralized by land and a
building with a net book value of approximately $1,671 at August 25, 1995.
During 1994, the Company converted $4,600 of revolving debt from the Credit
Agreement to a mortgage note payable. This mortgage note is payable in
quarterly payments of $77 plus interest at the Eurodollar rate (7.5% at August
25, 1995), or at alternative market rates, as defined, with the remaining
principal due October 30, 1998. The mortgage note is collateralized by land
and a building with a net book value of approximately $5,417 at August 25,
1995.
Annual maturities of long-term obligations at August 25, 1995, are payable as
follows:
1997 $ 1,995
1998 26,970
1999 1,995
2000 4,843
2001 1,687
Thereafter 4,773
__________
$ 42,263
__________
__________
Interest paid by the Company during 1995 and 1994 totaled approximately $3,530
and $2,564, respectively. Carrying amounts for the Company's debt agreements
approximate fair value.
7. Related-Party Transactions
The Company leases certain plant facilities, buildings, and aircraft from its
stockholder and former stockholders under operating leases which expire at
various dates through 2001. Certain leases provide for an option for up to an
additional 15-year renewal period at the expiration of the initial term.
Rental payments to related parties amounted to $1,321 and $771 in 1995 and
1994, respectively.
Amounts receivable from related parties are as follows:
August 25,
1995
___________
Receivable from stockholder, due on demand with interest
compounded monthly at the applicable federal interest
rate (interest income of $214 and $186 was recognized
in 1995 and 1994, respectively) $ 4,604
Receivables from insurance trust and other 963
________
$ 5,567
________
________
Page
Amounts due to related parties are as follows:
August 25,
1995
________
Unsecured notes payable to former stockholders due in
October 1995 with interest at 10%, payable quarterly $ 1,000
Other related party obligations 1,050
________
$ 2,050
________
________
Other related party obligations consist of notes to two related-party trusts.
One note provides for monthly interest payments of 8% with principal amount of
$1,000 due October 21, 1998. The other note provides for monthly interest
payments of 12% with principal amount of $50 due December 1, 1997. The
Company has recorded $186 for interest expense in both 1995 and 1994 under the
terms of these notes.
8. Retirement Plan
The Company has a defined contribution retirement savings plan (the "Plan")
covering substantially all employees who meet certain eligibility requirements
as to age and length of service. The Plan incorporates the salary deferral
provision of Section 401 (k) of the Internal Revenue Code and employees may
defer up to 15% of compensation or the annual maximum limit prescribed by the
Internal Revenue Code. The Company may elect to match a percentage of the
employees' deferrals. The Company's contributions to the Plan were
approximately $436 and $395 in 1995 and 1994, respectively.
9. Postemployment and Postretirement Benefits
The Company does not offer any postemployment or postretirement benefits.
10. Significant Customers
The Company had one customer that accounted for $30,552 or 12% and $25,405 or
11% of total sales in fiscal years 1995 and 1994, respectively.
11. Lease Commitments
The Company leases plant facilities and transportation equipment under
operating leases including several leases with escalation clauses. The
Company expects that in the normal course of business operating leases that
expire will be renewed or replaced by other leases.
Future minimum lease commitments under noncancelable operating leases with
terms of one year or longer as of August 25, 1995, are payable as follows (in
thousands):
Related
Parties Other Total
________ ________ ________
1996 $ 1,068 $ 3,361 $ 4,429
1997 888 2,498 3,386
1998 548 2,134 2,682
1999 440 1,594 2,034
2000 --- 1,130 1,130
Thereafter --- 3,505 3,505
________ ________ ________
$ 2,944 $ 14,222 $ 17,166
________ ________ ________
________ ________ ________
Total rent expense for all operating leases was $5,880 and $7,025 for 1995
and 1994, respectively.
Page
12. Contingencies
The Company is involved in various legal matters incidental to its business.
Management believes these matters can be successfully defended or resolved
without material adverse effects on the financial position or operations of
the Company. In addition, certain operations of the Company are subject to
various environmental laws and regulations. Management believes the Company
has substantially complied with these laws and regulations in all material
respects.
On August 8, 1994, the Company sustained significant fire damage to its plant
located in Fort Smith, Arkansas. The Company filed both property loss and
business interruption claims, however, no settlement has been reached as of
December 8, 1994. As of August 26, 1994, the Company incurred expenses
related to the demolition and cleanup of the facility as well as expenses
related to computer disaster recovery services. As of August 26, 1994, the
Company recorded these expenses and the value of the inventory stock, totaling
$594, lost as current receivables. Additionally, the Company transferred the
net book value of the property destroyed of $303 to other long-term assets.
For the year ended August 25, 1995, the Company recorded, as other income, a
gain of $2,434 from insurance proceeds.
On November 30, 1994, the U.S. Consumer Product Safety Commission issued a
recall on bean bags which were produced by Base Line Design, a division of
Crain Industries, Inc., before October 12, 1994. The Company cooperated with
the Commission and recalled the bags. The effect of this recall has not been
material to the financial statements taken as a whole.
13. Asset Purchase Agreement
On August 29, 1995, the Company consummated an asset purchase agreement
pursuant to which Crain Industries, Inc. ("Newco") acquired substantially all
of the assets of the Company for an aggregate cash consideration of $130
million, assumed certain liabilities, and entered into certain leases. The
Company has designated August 26, 1995, as the effective date of the
Acquisition for financial reporting purposes.
Page
CRAIN INDUSTRIES, INC. (PREDECESSOR)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For The Year Ended August 25, 1995
(In thousands)
Collection
Balance At Of Previously Balance
Beginning Written Off At End Of
Of Period Provision Write-offs Accounts Period
_________ _________ __________ _____________ _________
Allowance for
doubtful accounts
August 25, 1995 $ 3,534 $ 2,920 $ (2,113) $ 173 $ 4,514
Page
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names and positions of the directors and executive
officers of the Company. All directors hold office until the next annual
meeting of stockholders of Holdings and the Company, and until their
successors are duly elected and qualified. All officers serve at the pleasure
of the Board of Directors.
James N. Mills 59 Chairman of the Board and Chief Executive Officer
of Holdings and Chairman of the Board of the
Company
Jack D. Furst 39 Director *
John R. Muse 45 Director *
David M. Sindelar 39 Senior Vice President and Chief Financial Officer of
Holdings and Senior Vice President of the Company
Larry S. Bacon 50 Senior Vice President - Human Resources *
Thomas McGhee 61 Secretary and General Counsel *
RV Linn 59 President of Holdings and President and Chief
Executive Officer of the Company
Donald D. Wood, Jr. 56 Vice President - General Manager of Southwest Region
Michael A. Ricciardi 63 Senior Vice President and Technical Director of the
Company
Wesley D. DeHaven 32 Vice President and Chief Financial Officer of the
Company
John R. McAlister 43 Vice President - Sales and Marketing of the Company
___________
* Position with each of Holdings and the Company
James N. Mills is Chairman of the Board and Chief Executive Officer of
Holdings and the Chairman of the Board of the Company and has held such
positions since May 1995. Mr. Mills serves as the Chairman, President and
Chief Executive Officer of Mills & Partners, Inc., a St. Louis-based
investment and management services firm. Mr. Mills is also Chairman of the
Board, and Chief Executive Officer of Berg Electronics Corp., Chairman of the
Board and Chief Executive Officer of International Wire Holding Company and
Chairman of the Board and Chief Executive Officer of Viasystems Group, Inc.
and Copy USA Holdings Corp. Mr. Mills was Chairman of the Board and Chief
Executive Officer of Jackson Holding Company and Jackson Products, Inc. from
February 1993 through August 1995. Mr. Mills was Chairman of the Board and
Chief Executive Officer of Thermadyne Holdings Corporation from February 1989
through February 1995 and Chairman of the Board and Chief Executive Officer of
Thermadyne Industries, Inc. from 1987 to 1995. Mr. Mills was Executive Vice
President of McGraw-Edison Company, a company engaged in the electronic,
industrial, commercial and automotive industries, from 1978 to 1985, and
served as Industrial Group President and President of the Bussmann Division of
the McGraw-Edison Company from 1980 to 1984. Mr. Mills also serves as a
director of Hat Brands Holding Corporation.
Jack D. Furst was elected a director of Holdings and the Company in May 1995.
Mr. Furst is a Managing Director and Principal of Hicks, Muse and has held
such position since 1989. Mr. Furst has approximately 15 years of experience
in merchant and investment banking. Mr. Furst is involved in all aspects of
Hicks, Muse's business and has been actively involved in originating,
structuring and monitoring its investments. Mr. Furst is primarily
responsible for managing the relationship with Mills & Partners, Inc., a St.
Louis-based management alliance of Hicks, Muse. Prior to joining Hicks, Muse,
Mr. Furst was a vice president and subsequently a partner of Hicks & Haas
Incorporated from 1987 to May 1989. From 1984 to 1986, Mr. Furst was a merger
and acquisition/corporate finance specialist for The First Boston Corporation
in New York. Before joining First Boston, Mr. Furst was a financial
consultant at Price Waterhouse. Mr. Furst serves on the board of directors of
Neodata Corporation, Desa Holdings Corporations, International Wire Holding
Company and Cooperative Computing, Inc.
John R. Muse was elected a director of Holdings and the Company in May 1995.
Mr. Muse is an Executive Vise President, Managing Director and Principal of
Hicks, Muse having served since its inception in May 1989. From 1984 to 1989
Mr. Muse was Managing Directory of Prudential Securities Incorporated
("Prudential Securities") in Dallas, Texas, where he served as the head of
investment/merchant banking activities for the southwestern region of the
United States. Prior to joining Prudential Securities, Mr. Muse served as
senior vice president and a director of Schneider, Bernet & Hickman, Inc.
("Schneider, Bernet") in Dallas from 1979 to 1983 and was responsible for the
company's investment banking activities. Prior to his employment with
Schneider, Bernet, Mr. Muse was employed by Bateman, Eichler, Hill Richards in
Los Angeles. Mr. Muse is the Chairman of the Board of Hedstrom Corporation
and Hat Brands, Inc., and serves as a director of The Morningstar Group, Inc.
and Olympus Real Estate Corporation.
David M. Sindelar is Senior Vice President and Chief Financial Officer of
Holdings and Senior Vice President of the Company and has held such positions
since May 1995. Mr. Sindelar is also Senior Vice President and Chief
Financial Officer of Mills & Partners, Inc., Berg Electronics Corp.,
International Wire Holding Company, Copy USA Holdings Corp. and Viasystems
Group, Inc. Mr. Sindelar was Senior Vice President and Chief Financial
Officer of Jackson Holding Company from February 1993 through August 1995.
From 1987 to February 1995, Mr. Sindelar held various other positions at
Thermadyne Holdings Corporation including Senior Vice President and Chief
Financial Officer, Vice President - Corporate Controller and Controller. Mr.
Sindelar was employed by Arthur Andersen & Co. from 1979 to 1987.
Larry S. Bacon is Senior Vice President - Human Resources of Holdings and the
Company and has held such positions since April 1995. Mr. Bacon is also
Senior Vice President - Human Resources of Mills & Partners, Inc., Berg
Electronics Corp., International Wire Holding Company, Copy USA Holdings Corp.
and Viasystems Group, Inc. Mr. Bacon was Senior Vice President - Human
Resources of Jackson Holding Company from February 1993 through August 1995.
Previously, Mr. Bacon was Senior Vice President - Human Resources of
Thermadyne Holdings Corporation from September 1987 until February 1995.
Prior to that, he held a variety of senior human resources management
positions with Cooper Industries, McGraw-Edison Company and Hoechst Celanese.
W. Thomas McGhee is Secretary and General Counsel of Holdings and the Company
and has held such positions since May 1995. Mr. McGhee is also a partner in
the law firm of Herzog, Crebs and McGhee and has held that position since
1987. In addition, Mr. McGhee serves as Secretary and General Counsel of
Mills & Partners, Inc., International Wire Holding Company, Berg Electronics
Corp., Viasystems Group, Inc. and Copy USA Holdings Corp. Mr. McGhee was
Secretary and General Counsel of Jackson Holding Company from March 1993
through August 1995. Mr. McGhee was Secretary and General Counsel of
Thermadyne Holdings Corp. from March 1993 through February 1995.
RV Linn was appointed President of Holdings and President and Chief Executive
Officer of the Company in August 1995. From 1993 to 1995 Mr. Linn served as
President and Chief Operating Officer of Stoody Deloro Stellite Inc., a
division of Thermadyne Holdings Corporation. In that capacity, Mr. Linn was
responsible for the manufacturing, distribution, engineering, product
development, sales and marketing activities, short and long-term planning, and
division level financial reporting for each of Stoody Delero's six business
units. Prior to becoming President, Mr. Linn served for five years as the
Executive Vice President of Operations for Thermadyne Industries, Inc. where
he was responsible for all domestic manufacturing operations. Mr. Linn was
employed by Tweco Company, a subsidiary of Thermadyne, for 31 years.
Donald D. Wood, Jr. serves as Vice President - General Manager of the
Southwest Region. Mr. Wood has also served as Vice President, Secretary and
Treasurer of the Predecessor and held such position since 1981. During his
employment with the Predecessor, he was in charge of finance and accounting,
risk management and safety, data processing and human resources. Prior to
1981, Mr. Wood was employed by Peat, Marwick, Mitchell & Co.
Michael R. Ricciardi was elected as Senior Vice President - Technical Director
of the Company on August 29, 1995. Prior thereto Mr. Ricciardi served as Vice
President and Technical Director of the Predecessor and held such position
since 1988. During his employment with the Predecessor he was responsible for
new process development, raw material purchasing and manufacturing
engineering. Mr. Ricciardi has 36 years experience in the foam industry,
holds several patents and has authored several articles for national
polyurethane industry publications. He has been an active member of the
Polyurethane Foam Association for 18 years.
Wesley D. DeHaven is Vice President and Chief Financial Officer for the
Company and has held such position since January 1997. From 1995 through 1996
Mr. DeHaven was Corporate Controller for International Wire Group, Inc. Prior
to his position with International Wire Group, Inc., he was Manager of
Acquisitions and Operations for Mills & Partners, Inc. and held various
accounting positions, including Divisional Controller for Thermadyne Holdings
Corporation. Mr. DeHaven was employed by Arthur Andersen & Co. from 1989 to
1993.
John R. McAlister is Vice President of Sales and Marketing for the Company and
has held such position since December 1995. Prior thereto, Mr. McAlister was
employed by Huber Corporation from 1988 to 1995 during which he held a variety
of sales and marketing positions including Vice President of Business
Development. Previous to Huber Corporation, Mr. McAlister held a variety of
marketing, sales and management positions with Petro Life Corporation and
Nalco Chemical Company.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash and non cash compensation earned
during the fiscal year ended December 31, 1996 and the four month period ended
December 31, 1995 by the Chief Executive Officer of the Company and the four
other most highly compensated executive officers of the Company and one former
executive officer of the Company.
Summary Compensation Table
Long-Term
Compensation
Awards
_____________
Annual Compensation(1) Securities
______________________ Underlying All Other
Year Salary($) Bonus($)(2) Options (#)(3) Comp.($)
______ _________ ___________ ______________ ________
James N. Mills 1996 316,000 525,000 -- --
Chairman of the Board 1995(4) 65,000 43,000 301,441(5) --
of the Company
RV Linn 1996 298,000 250,000 -- 165,000(6)
President and Chief 1995(4) 114,000 185,000 300,000 --
Executive Officer of
the Company
Donald D. Wood 1996 191,000 116,000 -- --
Vice President-General 1995(4) 59,000 28,000 75,000 --
Manager of the
Southwest Region
James G. Powers(7) 1996 156,000 103,000 15,000 --
Former Vice President 1995(4) 47,000 25,000 75,000 --
and Chief Financial
Officer of the Company
Michael A. Ricciardi 1996 156,000 103,000 -- --
Senior Vice President 1995(4) 54,000 25,000 75,000 --
and Technical Director
of The Company
John R. McAlister 1996 159,000 103,000 90,000 --
Vice President of 1995(4) 12,000 25,000 -- --
Sales and Marketing
of the Company
(1) Holdings and the Company provide to certain executive officers a car
allowance, reimbursement for club memberships, insurance policies and certain
other benefits. The aggregate incremental costs of these benefits to Holdings
and the Company for each officer do not exceed the lesser of either $50,000 or
10% of the total of annual salary and bonus reported for each officer.
(2) Bonuses were paid in 1997 for 1996.
(3) Options were granted under the Crain Holdings Corp.
1995 Stock Option Plan (the "Stock Option Plan") pursuant to which incentive
and non-qualified stock options may be issued to certain of its Holdings or
the Company's officers, key employees and directors.
(4) Represents compensation for four month period ended December 31, 1995.
Page
(5) Reflects Performance Options (as hereinafter defined) granted by
Holdings. For a description of the material terms of such options, see
"Benefit Plans - Performance Options." The Performance Options are
exercisable only in the event that Hicks, Muse Equity Fund II, an affiliate of
Hicks, Muse realizes a 35% overall rate of return, compounded annually on its
equity funds invested in Holdings.
(5) Represents compensation for fair value of options held with a previous
employer in compliance with Mr. Linn's employment agreement.
(6) Mr. Powers resigned from his position as Vice President and Chief
Financial Officer of the Company effective December 31, 1996 to take a
position with Viasystems Group, Inc.
The following table summarizes option grants made with respect to the common
stock, par value $.01 per share of Holdings ("Holdings Common Stock") during
fiscal year 1996 to the executive officers named above:
Option Grants in Last Fiscal Year
Number of
Securities % of Total
Underlying Options Granted Exercise
Options to Employees Price Expiration
Name (#) In Fiscal Year ($/share) Date
__________ ______________ _________ __________
James G. Powers 15,000(2) 8.6 1.50 9/7/06
John R. McAlister 75,000(2) 42.9 1.00 2/8/06
15,000(2) 8.6 1.50 8/5/06
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
For Option Term (1)
____________________________
Name 5%($) 10%($)
_______ _______
James G. Powers 23,000 43,000
John R. McAlister 117,000 217,000
23,000 43,000
(1) The potential realizable value portion of the foregoing table illustrates
the value that might be realized upon exercise of the option immediately prior
to the expiration of its term, assuming the specified compound rates of
appreciation of Holdings Common Stock over the term of the options. These
amounts represent certain assumed rates of appreciation only. Actual gains on
the exercise of options are dependent on the future performance of Holdings
Common Stock. There can be no assurance that the potential values reflected
in this table will be achieved. All amounts have be rounded to the nearest
whole dollar.
(2) Reflects options to purchase Holdings Common Stock granted under the
Stock Option Plan. The options vest in five equal annual installments
commencing on the first anniversary date of the grant, subject to acceleration
under certain circumstances, including a Change of Control (as defined in the
Stock Option Plan).
The following table summarizes the number of options exercised during the
fiscal year ended December 31, 1996 for the above named executive officers and
the value of unexercised options as of December 31, 1996:
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
Number of Securities
Underlying
Unexercised Options at
Fiscal Year End
Acquired On Value Realized _______________________________
Exercise (#) ($) Exercisable(#) Unexercisable(#)
Name ____________ ______________ ______________ ________________
James N. Mills -- -- -- 301,441
RV Linn -- -- 90,000 210,000
James G. Powers -- -- 15,000 75,000
John R. McAlister -- -- -- 90,000
Donald D. Wood -- -- 15,000 60,000
Michael R. Ricciardi -- -- 15,000 60,000
Value of
Unexercised In-the-money
Options at
Fiscal Year End (1)
_______________________________
Exercisable($) Unexercisable($)
Name ______________ ________________
James N. Mills -- --
RV Linn 45,000 105,000
James G. Powers 7,500 30,000
John R. McAlister -- 37,500
Donald D. Wood 7,500 30,000
Michael R. Ricciardi 7,500 30,000
(1) Represents the difference between the value at December 31, 1996 of the
Holdings Common Stock underlying the options and the exercise price of such
options.
Compensation Committee Interlocks and Insider Participation
Compensation decisions are made by the Board of Directors. James N. Mills
served as both an Executive Officer and Director during 1996 and is expected
to serve in such capacity in 1997.
Page
Compensation of Directors
The directors of Holdings and the Company did not receive compensation from
either Holdings or the Company for services rendered in that capacity during
the year ended December 31, 1996. Directors of Holdings and the Company are
entitled to reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to and attendance at meetings of the board of
directors or committees thereof.
Employment Contracts and Termination of Employment and Change in Control
James N. Mills Employment Agreement. Mr. Mills entered into an employment
agreement with the Company and Holdings on August 29, 1995. Pursuant to such
employment agreement, Mr. Mills will serve as the Chairman of the Board and
Chief Executive Officer of Holdings and Chairman of the Board of the Company
through August 31, 2000. Mr. Mills is required to devote such business time
and attention to the transaction of Holdings' and the Company's business as is
reasonably necessary to discharge his duties under the employment agreement.
Subject to the foregoing limitation on his activities, Mr. Mills is free to
participate in other business endeavors.
The compensation provided to Mr. Mills under his employment agreement includes
annual base salary of not less than $200,000 subject to adjustment at the sole
discretion of the Board of Directors of Holdings and such benefits as are
customarily accorded the executives of Holdings and the Company for as long as
the employment agreements are in force. In addition, Mr. Mills is entitled to
an annual bonus in an amount to be determined at the sole discretion of the
Board of Directors of Holdings.
Mr. Mills' employment agreement also provides that if Mr. Mill's employment is
terminated without cause, Mr. Mills will continue to receive his then current
salary for the longer of 18 months following such termination or the remaining
term of his employment agreement. In the event that Mr. Mills' employment is
terminated due to death or disability, Mr. Mills, or his estate, heirs or
beneficiaries, as applicable, will continue to receive his then current salary
for 18 months from such termination.
RV Linn Employment Agreement. Mr. RV Linn entered into an employment
agreement with the Company and Holdings on September 1, 1995. Pursuant to
such employment agreement, Mr. Linn will serve as the President of Holdings
and the President and Chief Executive Officer of the Company through September
1, 2000. Mr. Linn is required to devote all of his business time and
attention to the transaction of the Company's business as is reasonably
necessary to discharge his duties under the employment agreement.
The compensation provided to Mr. Linn under his employment agreement includes
an initial annual base salary of $285,000 and shall be increased to $310,000
in the event net sales of the Company exceed $300 million annually, subject to
upward adjustments in the Chief Executive Officer of Holdings' sole
discretion, and shall include such benefits as are customarily accorded to the
executives of the Company so long as the employment agreement is in effect.
In addition, Mr. Linn is entitled to an annual bonus in an amount to be
determined in the sole discretion of the Chief Executive Officer of Holdings
of up to 97% percent of his annual base salary.
Mr. Linn's employment agreement also provides that in the event Mr. Linn's
employment is terminated due to death or disability, Mr. Linn or his estate,
heirs or beneficiaries, as applicable, will receive, in addition to any other
benefits provided him or them under any benefit plan, Mr. Linn's then current
salary for a period of 18 months from such termination. In the event Mr.
Linn's employment is terminated without cause, Mr. Linn will continue to
receive his then current salary for the longer of 12 months following such
termination or the remaining term of his employment agreement.
Benefit Plans
Stock Option Plan
Holdings has adopted the Crain Holdings Corp. 1995 Stock Option Plan (the
"Stock Option Plan") pursuant to which incentive and non-qualified stock
options may be issued to certain of its or the Company's officers, key
employees and directors. A total of 1,461,988 shares of Holdings Common Stock
was reserved for issuance under the Stock Option Plan. As of the date of this
filing, options to purchase an aggregate of 1,203,000 shares of Holdings
Common Stock subject to the terms and conditions of the Stock Option Plan are
outstanding. The Stock Option Plan is administered by the Board of Directors
of Holdings, although the plan provides that the Board of Directors of
Holdings may designate an option or other committee (the "Committee") to
administer the Plan. Under the Stock Option Plan, certain executive officers,
key employees and directors are eligible to receive incentive and non-
qualified options to purchase shares of Holdings Common Stock. Subject to
restrictions contained in the Stock Option Plan, stock options are exercisable
at such time and on such terms as the Board of Directors of Holdings or the
Committee determines. The exercise price of any option granted pursuant to
the Stock Option Plan is not permitted to be less than the fair market value
per share on the date of grant, as determined by the Board of Directors of
Holdings. Subject to certain additional limitations, no option by its terms
is permitted to be exercisable after the expiration of ten years from the date
of grant, or such other periods (in the case of non-qualified options) or such
shorter period (in the case of incentive options) as the Board of Directors of
Holdings or Committee in its sole discretion may determine. Stock options are
not transferable, except by will or by laws of descent and distribution.
An optionee under the Stock Option Plan must pay the full option price upon
exercise of an option (i) in cash or by an equivalent means acceptable to the
Committee or Board of Directors of Holdings, (ii) with the consent of the
Committee or Board of Directors of Holdings, by delivering shares already
owned by such optionee (including shares to be received upon exercise of the
option) and having a fair market value at least equal to the exercise price or
(iii) in any combination of the foregoing. Holdings may require optionee to
satisfy federal tax withholding obligations with respect to the exercise of
options by (i) additional withholding from the employee's salary, (ii)
requiring the optionee to pay in cash or (iii) retaining the number of shares
issuable upon exercise of the option having a fair market value on the date of
exercise which is equal to the amount to be withheld.
Performance Options
On August 29, 1995, Holdings adopted a stock option plan for certain managers
of the Company's management (including Mr. Mills and certain other managers)
(the "Performance Options") to purchase 904,323 shares of Holdings Common
Stock.
The Performance Options are exercisable only in the event that Hicks, Muse,
Tate & Furst Equity Fund II, L.P. ("HM Fund II") has realized an overall rate
of return of at least 35% per annum, compounded annually, on all equity funds
invested by it in Holdings. Subject to the foregoing, the Performance Options
are exercisable (i) immediately prior to a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined), or (iii) on December 31, 2004. A "Liquidity Event"
generally means (i) one or more sales or other dispositions of Holdings Common
Stock if, thereafter, the amount of Holdings Common Stock owned by HM Fund II
is reduced by 50%, (ii) any merger, consolidation or other business
combination of Holdings pursuant to which any person or group acquires a
majority of the common stock of the resulting entity, or (iii) any sale of all
or substantially all of the assets of Holdings. A "Qualified IPO" means a
firm commitment underwitten public offering of Holdings Common Stock for gross
proceeds of at least $25 million.
The exercise price for the Performance Options is initially equal to $1.00 per
share and, effective each anniversary of the grant date, the per share
exercise price for the Performance Options is equal to the per share exercise
price for the prior year multiplied by 1.09. The exercise price of the
Performance Options and the number of shares of Holdings Common Stock for
which the Performance Options are exercisable is subject to adjustment in the
event of certain fundamental changes in the capital structure of Holdings.
All Performance Options terminate on August 30, 2005.
ITEM 12. SECURITIES OWNERSHIP
Security Ownership of Certain Beneficial Owners
All the issued and outstanding shares of common stock of the Company are held
by Holdings. The following table sets forth certain information regarding the
beneficial ownership of the voting securities of Holdings, by each person who
is known by the Company to beneficially own more than 5% of any class of
Holdings voting securities and by the directors and certain executive officers
of Holdings, individually, and by the directors and executive officers of
Holdings as a group. The Holdings Class A Common Stock (as herein after
defined), votes together with the Holdings Common Stock as a single class and
is entitled to one vote for each share. The following table sets forth the
shares beneficially owned as of February 28, 1997.
Shares Beneficially Owned
________________________________________________________
Holdings Common Stock Holdings Class A Common Stock (1)
_____________________ _________________________________
Number of Percent of Number of Percent Percent of
Shares Class Shares of Class Total
__________ _______ __________ ________ _________
5% Stockholders:
HM Parties (2) 28,139,535 98.8% -- -- 89.5%
c/o Hicks, Muse, Tate
& Furst Incorporated
200 Crescent Court,
Suite 1600
Dallas, Texas 75201
Officers and Directors:
James N. Mills (3) 347,500 1.2% 2,953,524 100.0% 10.5%
Jack D. Furst (2) 28,139,535 98.8% -- -- 89.5%
John R. Muse (2) 28,139,535 98.8% -- -- 89.5%
David M. Sindelar 75,000 * 887,889 30.0% 3.1%
Larry S. Bacon 25,000 * 207,863 7.0% *
W. Thomas McGhee -- -- 207,863 7.0% *
RV Linn (5) 140,000 * 124,695 4.2% *
Donald D. Wood, Jr.(6) 365,000 1.3% -- -- 1.1%
James G. Powers(7) 25,000 * -- -- *
Michael A. Ricciardi (8) 90,000 * -- -- *
All executive officers
and directors as a
group (9 persons) (4) 28,487,035 100% 2,953,524 100.0% 100.00%
* Represents less than 1%.
(1) The Class A Common Stock, par value $.01 per share, of Holdings
("Holdings Class A Common Stock") is convertible into Holdings Common Stock
(i) at the option of any holder thereof at any time, (ii) at the option of
Holdings upon the occurrence of a Triggering Event (as defined below), and
(iii) mandatorily at August 30, 2005. A "Triggering Event" means any sale of
substantially all of the assets of Holdings or any merger, consolidation or
other business combination of Holdings in which Hicks, Muse and its affiliates
cease to own at least 50% of the resulting entity. Each share of Holdings
Class A Common stock is convertible into a fraction of a share of Holdings
Common Stock at the time of conversion less the sum of $.99 plus imputed
interest thereon at a rate of 9% per annum, compounded annually, at the time
of conversion, divided by (ii) the fair market value of a share of Holdings
Common Stock at the time of conversion. Because the fraction of a share of
Holdings Common Stock into which Holdings Class A Common Stock is convertible
is determinable only at the time of a conversion, shares of Holdings Common
Stock that may be issuable upon conversion of Holdings Class A Common Stock
are not included in the shares of Holdings Common Stock beneficially owned in
the foregoing table.
(2) Includes (i) shares owned of record by Hicks, Muse, Tate & Furst Equity
Fund II L.P. ("HM Fund II"), a limited partnership of which the sole general
partner is HM2/GP Partners, L.P., a limited partnership of which the sole
general partner is Hicks, Muse GP Partners, L.P., a limited partnership of
which the sole general partner is Hicks, Muse, Tate & Furst Fund II
Incorporated, a corporation affiliated with Hicks, Muse; (ii) shares owned of
record by certain individuals subject to an irrevocable proxy in favor of
Hicks, Muse. Thomas O. Hicks is a controlling stockholder of Hicks, Muse and
serves as Chairman of the Board, President, Chief Executive Officer, Chief
Operating Officer and Secretary of Hicks, Muse. Accordingly, Mr. Hicks may be
deemed to be the beneficial owner of Holdings Common Stock held by HM Fund II.
John R. Muse, Charles W. Tate, Jack D. Furst, Lawrence D. Stuart, Jr., Alan
B. Menkes, and Michael J. Levitt are officers, directors and minority
stockholders of Hicks, Muse and as such may be deemed to share with Mr. Hicks
the power to vote or dispose of Holdings Common Stock held by HM Fund II. Each
of Messrs. Hicks, Muse, Tate, Furst and Stuart disclaims the existence of a
group and disclaims beneficial ownership of Holdings Common Stock not
respectively owned of record by him; and (iii) includes 145,600 shares of
common stock subject to options that are exercisable within 60 days.
(3) Includes shares of Holdings Common Stock and Holdings Class A Common
Stock held by James N. Mills and shares of Holdings Common Stock and Holdings
Class A Common Stock owned of record by certain individuals. Includes 90,000
shares of common stock subject to options that are exercisable within 60 days
subject to an irrevocable proxy in favor of Mr. Mills. Does not include
301,441 shares of Holdings Common Stock issuable to Mr. Mills upon the
exercise of Performance Options that are not currently exercisable. See
"Management_Benefit Plans_Performance Options.
(4) Does not include 904,323 shares of Holdings Common Stock issuable to
executive officers of Holdings upon the exercise of Performance Options that
are not currently exercisable.
(5) Includes 50,000 shares owned and 90,000 vested unexercised options.
(6) Includes 350,000 shares owned and 15,000 vested unexercised options.
(7) Includes 10,000 shares owned and 15,000 vested unexercised options.
(8) Includes 75,000 shares owned and 15,000 vested unexercised options.
Page
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Monitoring and Oversight Agreement
On August 29, 1995, Holdings and the Company entered into a ten-year agreement
(the "Monitoring and Oversight Agreement") with Hicks, Muse & Co. Partners,
L.P. ("Hicks, Muse Partners"), pursuant to which they pay Hicks, Muse Partners
an annual fee of $250,000 for oversight and monitoring services to Holdings
and the Company. The annual fee is adjustable at the end of each fiscal year
to an amount equal to 0.1% of the consolidated net sales of the Company during
such fiscal year, but in no event less than $250,000. Messrs. Muse and Furst,
directors of Holdings and the Company, are each principals of Hicks, Muse
Partners. In addition, Holdings and the Company have agreed to indemnify
Hicks Muse Partners, its affiliates and shareholders, and their respective
directors, officers, agents, employees and affiliates from and against all
claims, actions, proceedings, demands, liabilities, damages, judgments,
assessments, losses and costs, including fees and expenses, arising out of or
in connection with the services rendered by Hicks, Muse Partners in connection
with the Monitoring and Oversight Agreement.
The Monitoring and Oversight Agreement makes available the resources of Hicks,
Muse Partners concerning a variety of financial and operational matters. The
services that have been and will continue to be provided by Hicks, Muse
Partners could not otherwise be obtained by Holdings and the Company without
the addition of personnel or the engagement of outside professional advisors.
In management's opinion, the fees provided for under this agreement reasonably
reflect the benefits received and to be received by Holdings and the Company.
Financial Advisory Agreement
On August 29, 1995, Holdings and the Company entered into a ten-year agreement
(the "Financial Advisory Agreement") with HM2/Management Partners, L.P.
("HM2"), pursuant to which they paid HM2 a cash financial advisory fee of
approximately $2.25 million as compensation for its services as financial
advisor for the Acquisition. HM2 also will be entitled to receive a fee equal
to 1.5% of the transaction value (as defined) for each add-on transaction (as
defined) in which the Company is involved. The term "transaction value" means
the total value of any add-on transaction (excluding any fees payable pursuant
to the Financial Advisory Agreement and any fees, if any, paid to any other
person or entity for financial advisory, investment banking, brokerage, or any
other similar services rendered in connection with such add-on transaction)
including the amount of any indebtedness, preferred stock or similar items
assumed (or remaining outstanding). The term "add-on transaction" means any
future proposal for a tender offer, acquisition, sale, merger, exchange offer,
recapitalization, restructuring, or other similar transaction directly or
indirectly involving Holdings, the Company, or any of their respective
subsidiaries and any other person or entity. On October 18, 1996, pursuant to
the Comfort Acquisition, Holdings and the Company paid HM2 a cash financial
advisory fee of approximately $0.2 million as compensation for its services as
financial advisor.
Messrs. Muse and Furst, directors of Holdings and the Company, are each
principals of HM2. In addition, Holdings and the Company have agreed to
indemnify HM2, its affiliates and shareholders, and their respective
directors, officers, agents, employees and affiliates from and against all
claims, actions, proceedings, demands, liabilities, damages, judgements,
assessments losses and costs, including fees and expenses, arising out of or
in connection with the services rendered by HM2 in connection with the
Financial Advisory Agreement. The Financial Advisory Agreement makes
available the resources of HM2 concerning a variety of financial matters. The
services that have been and will continue to be provided by HM2 could not
otherwise be obtained by Holdings and the Company without the addition of
personnel or the engagement of outside professional advisors. In management's
opinion, the fees provided for under this agreement reasonably reflect the
benefits received and to be received by Holdings and the Company.
Page
Stockholders Agreement
The investors who received any class of common stock of Holdings as part of
the Financing, and all transferees of such investors, have entered into a
stockholders agreement (the "Stockholders Agreement"). The Stockholders
Agreement grants preemptive rights and certain piggy-back registration rights
to the parties thereto and contains provisions requiring the parties thereto
to sell their shares of common stock in connection with certain sales of
Holdings' common stock by Hicks, Muse ("drag-along rights") and grants the
parties thereto the right to include a portion of their shares of common stock
in certain sales in which Hicks, Muse does not exercise its drag-along rights
("tag-along rights"). In addition, the Stockholders Agreement contains an
irrevocable proxy pursuant to which certain parties to the Stockholders
Agreement holding shares of Holdings Common Stock grant to Hicks, Muse the
power to vote all shares of Holdings Common Stock held by such parties, and
certain other parties holding shares of Holdings Common Stock and Holdings
Class A Common Stock grant to James N. Mills the power to vote all shares of
Holdings Common Stock and Holdings Class A Common Stock held by such parties.
The Stockholders Agreement terminates on its tenth anniversary date, although
the preemptive rights, drag-along rights and tag-along rights contained
therein will terminate earlier upon the consummation of a firm commitment
underwritten public offering of Common Stock.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of this Report
(1) and (2) Financial Statement and Financial Statement Schedules
See Index to Financial Statements and Financial Schedules on page 10 of
this report.
(3) Exhibits
Exhibit
Number Description
2.1 Asset Purchase Agreement dated as of August 3, 1995, between Crain
Acquisition Corporation (now known as Crain Industries, Inc.) and Crain
Industries, Inc. (now known as Dude, Inc.) (1)
2.2 First Amendment to Asset Purchase Agreement, dated as of August 29,
1995, between Crain Industries, Inc. and Crain Industries, Inc. (now known as
Dude, Inc.) (1)
2.3 Asset Purchase Agreement, dated as of August 29, 1996, by and among
Bio Clinic Corporation, Sunrise Medical Inc. and Crain Industries, Inc. (2)
3.1 Certificate of Incorporation of Crain Industries, Inc., as amended
(1)
3.2 Bylaws of Crain Industries, Inc. (1)
4.1 Indenture, dated as of August 29, 1995, between Crain Industries,
Inc., as Issuer, and IBJ Schroder Bank & Trust Company, as Trustee (1)
4.2 First Supplemental Indenture, dated as of September, 1995, among
Crain Industries, Inc., Crain Aero, Inc., and IBJ Schroder Bank & Trust
Company, as Trustee (1)
4.4 Form of 13 1/2% Senior Subordinated Note Due 2005 (included in
Exhibit 4.1, Exhibit B) (1)
4.5 Exchange and Registration Rights Agreement, dated as of August 29,
1995, between Crain Industries, Inc. and Chemical Securities, Inc. (1)
4.6 Purchase Agreement, dated as of August 22, 1995, between Crain
Industries, Inc. and Chemical Securities, Inc. (1)
10.1 Credit Agreement, dated as of August 29, 1995, among Crain
Industries, Inc., Texas Commerce National Bank, as Agent and other lenders
parties thereto (1)
10.2 Form of Revolving Credit Note, issuable under the Credit Agreement
(1)
10.3 Borrower Security Agreement, dated as of August 29, 1995, between
Crain Industries, Inc. and Texas Commerce Bank National Association, as agent,
for itself and other lenders parties to the Credit agreement (1)
10.4 Holding Pledge Agreement, dated as of August 29, 1995, between Crain
Holdings Corp. and Texas Commerce Bank National Association, as agent, for
itself and the other lenders parties to the Credit Agreement (1)
10.5 Promissory Note, dated August 29, 1995, of Crain Industries, Inc., as
Maker, payable to the order of Crain Industries, Inc. (now known as Dude,
Inc.) (1)
10.6 Employment Agreement, dated as of August 29, 1995 between Crain
Industries, Inc. and H.R. Crain (1)
10.7 Employment Agreement, dated as of September 1, 1995 among Crain
Holdings Corp., Crain Industries, Inc. and RV Linn (1)
10.8 Option Agreement, dated as of August 29, 1995, between Crain Holdings
Corp. and James N. Mills (1)
10.9 Option Agreement, dated as of August 29, 1995, between Crain Holdings
Corp. and David M. Sindelar (1)
10.10 Stockholders Agreement dated as of August 29, 1995, among Crain
Holdings Corp. and the stockholders signatories thereto (1)
10.11 Monitoring and Oversight Agreement dated as of August 29, 1995, among
Crain Holdings Corp., Crain Industries, Inc. and Hicks, Muse & Co. Partners,
L.P. (1)
10.12 Financial Advisory Agreement dated August 29, 1995, among Crain
Holdings Corp., Crain Industries, Inc. and HM2/Management partners, L.P. (1)
10.13 Commercial Lease, dated as of August 29, 1995, by and between Donald
D. Wood Jr. and H.C. Crain, Jr., Co-Trustees of Cathee Crain First Amended
Trust, Lisa D. Crain First Amended Trust, Marilyn C. Crain First Amended
Trust, Kristan D. Crain First Amended Trust, as Landlord, and Crain
Industries, Inc., as Tenant, pertaining to property at 4300 South Phoenix,
Fort Smith, Arkansas (1)
10.14 Commercial Lease dated as of August 29, 1995, by an between Donald D.
Wood Jr. and H.C. Crain, Jr., Co-Trustees of Cathee Crain First Amended Trust,
Lisa D. Crain First Amended Trust, Marilyn C. Crain First Amended Trust,
Kristan D. Crain First Amended Trust, as Landlord, and Crain Industries, Inc.,
as Tenant, pertaining to property at 2920 South Zero Street, Fort Smith,
Arkansas (1)
10.15 Commercial Lease, dated as of August 29, 1995, by and between H.C.
Crain, Jr., as Landlord, and Crain Industries, Inc., as Tenant, pertaining to
property at 6201 State Line Road, Fort Smith, Arkansas (1)
10.16 Commercial Lease, dated as of August 29, 1995, by and between H.C.
Crain, Jr. and Shirley Crain, as Landlord, and Crain Industries, Inc., as
Tenant, pertaining to property at 5401 South Zero Street, Fort Smith, Arkansas
(1)
10.17 Commercial Lease, dated as of August 29, 1995, by and between Donald
D. Wood Jr. and H.C. Crain, Jr., Co-Trustees of Cathee Crain First Amended
Trust, Lisa D. Crain First Amended Trust, Marilyn C. Crain First Amended
Trust, Kristan D. Crain First Amended Trust, as Landlord, and Crain
Industries, Inc., as Tenant, pertaining to property at 4401 South Savannah,
Fort Smith, Arkansas (1)
10.18 Commercial Lease, dated as of August 29, 1995, by and between H.C.
Crain, Jr. and Shirley Crain, as Landlord, and Crain Industries, Inc., as
Tenant, pertaining to property at 600 and 604 South Zero, Fort Smith, Arkansas
(1)
10.19 Commercial Lease, dated as of August 29, 1995, by and between Crain
Industries, Inc. (now known as Dude, Inc.), as Landlord, and Crain Industries,
Inc., as Tenant, pertaining to property at 19201 South Reyes Avenues, Compton,
California (1)
10.20 Commercial Lease, dated as of August 29, 1995, by and between H.C.
Crain, Jr. and Shirley Crain, as Landlord, and Crain Industries, Inc., as
Tenant, pertaining to property at 2345 Polvorosa, San Leandro, California (1)
10.21 Commercial Lease, dated as of August 29, 1995, by and between H.C.
Crain, Jr. and Shirley Crain, as Landlord, and Crain Industries, Inc., as
Tenant, pertaining to property at 2451, 2461, 2465, 2475, 2481, 2487 and 2495
Polvorosa, San Leandro, California (1)
10.22 Commercial Lease, dated as of August 29, 1995, by and between H.C.
Crain, Jr., as Landlord, and Crain Industries, Inc., as Tenant, pertaining to
property at 374 Old Corinth Road, Newnan, Georgia (1)
10.23 Commercial Lease, dated as of August 29, 1995, by and between Crain
Industries, Inc. (now known as Dude, Inc.), as Landlord, and Crain Industries,
Inc., as Tenant, pertaining to property at 536 Old Corinth Road, Newnan,
Georgia (1)
10.24 Commercial Lease, dated as of August 29, 1995, by and between Donald
D. Wood Jr. and H.C. Crain, Jr., Co-Trustees of Cathee Crain First Amended
Trust, Lisa D. Crain First Amended Trust, Marilyn C. Crain First Amended
Trust, Kristan D. Crain First Amended Trust, Cathee Crain, Lisa Crain, Marilyn
Brody (f/k/a Marilyn Crain) and Kristan Tadlock (f/k/a Kristan Crain), as
Landlord, and Crain Industries, Inc., as Tenant, pertaining to property at
1806 Conant, Elkhart, Indiana (1)
10.25 Commercial Lease, dated as of August 29, 1995, by and between Crain
Industries, Inc. (now known as Dude, Inc.), as Landlord and Crain Industries,
Inc., as Tenant, pertaining to property at 55650 County Road #15, Elkhart,
Indiana (1)
10.26 Commercial Lease, dated as of August 29, 1995, by and between Crain
Industries, Inc. (now known as Dude, Inc.), as Landlord, and Crain Industries,
Inc., as Tenant, pertaining to property at 1018 Clarinet, Elkhart, Indiana (1)
10.27 Commercial Lease, dated as of August 29, 1995, by and between Crain
Industries, Inc. (now known as Dude, Inc.), as Landlord, and Crain Industries,
Inc., as Tenant, pertaining to property at Tupelo Lee Industrial Park South,
East Extension 725, Verona, Mississippi (1)
10.28 Commercial Lease, dated as of August 29, 1995, by and between Crain
Industries, Inc. (now known as Dude, Inc.), as Landlord, and Crain Industries,
Inc., as Tenant, pertaining to property at 117 McLin Creek Road and 1819
Pineview Street, Conover, North Carolina (1)
10.29 Commercial Lease, dated as of August 29, 1995, by and between Crain
Industries, Inc. (now known as Dude, Inc.), as Landlord, and Crain Industries,
Inc., as Tenant, pertaining to property at 4715 South Cheryl Drive, Easton,
Pennsylvania (1)
10.30 Commercial Lease, dated as of August 29, 1995, by and between Crain
Industries, Inc. (now known as Dude, Inc.), as Landlord, and Crain Industries,
Inc., as Tenant, pertaining to property at 5330 Manchester Avenue, Morristown,
Tennessee (1)
10.31 Crain Holdings Corp., 1995 Stock Option Plan (1)
10.32 First Amendment to Credit Agreement, dated as of March 22, 1996, by
and among Crain Industries, Inc., Texas Commerce Bank N.A., as agent and the
other lenders party hereto. (3)
10.33 First Amendment to Stockholder's Agreement, dated September 23, 1996,
among Crain Holdings Corp. and the stockholders party hereto. (3)
10.34 Assignment of Lease by Bio Clinic Corporation and Crain Industries,
Inc. and Consent to Assignment by General American Life Insurance Company,
dated as of October 15, 1996. (3)
10.35 Assignment of Lease by Sunrise Medical, Inc. and Crain Industries,
Inc. and Consent to Assignment by Sun Life Assurance Company of Canada, dated
as of October 15, 1996. (3)
12.1 Computation of Ratio of Earnings to Fixed Charges of Crain
Industries, Inc. and Pro Forma Computation of Deficiency of Earnings to Cover
Fixed Charges of Crain Industries, Inc. (1)
21.1 Subsidiaries of Crain Industries, Inc. (1)
27.1 Financial Data Schedule. (3)
(1) Previously filed as an Exhibit to the Registration Statement of Crain
Industries, Inc. on Form S-1, Registration No. 33-96808 and incorporated by
reference herein.
(2) Previously filed as an Exhibit to the Form 8-K of Crain Industries Inc.,
dated November 1, 1996 and incorporated by reference herein.
(3) Filed herewith.
(B) Reports on Form 8-K.
A Form 8-K was filed with the SEC on February 23, 1996 for notification of a
change in fiscal year end to December 31 from the last Friday in the month of
August.
A Form 8-K was filed with the SEC on November 1, 1996 including Comfort
Clinic's Statement of Assets to be Acquired and Liabilities to be Assumed as
of June 28, 1996, Statement of Revenues and Expenses for the fiscal year ended
June 28, 1996 and Notes to Consolidated Financial Statements for the fiscal
year ended June 28, 1996 and a form 8-K/A amended was filed on December 31,
1996 including the Comfort Clinic division of Sunrise Medical Inc.'s
Statements of Assets to be Acquired and Liabilities to be Assumed as of June
28, 1995, and the Statements of Operating Revenues and Expenses for the years
ended June 28, 1996, June 30, 1995 and July 1, 1994 and the accompanying Notes
to the Financial Statements; the Comfort Clinic division of Sunrise Medical
Inc.'s Unaudited Statements of Assets to be Acquired and Liabilities to be
Assumed as of October 18, 1996 and the accompanying Notes to the Statements of
Assets to be Acquired and Liabilities to be Assumed; Crain Industries, Inc.
Pro Forma Combined Statements of Operations for the year ended December 31,
1995; Crain Industries, Inc. Pro Forma Combined Statements of Operations for
the nine months ended September 30, 1996; and Crain Industries, Inc. Pro forma
Combined Balance Sheet as of September 30, 1996 for notification of the
acquisition of Comfort Clinic.
Page
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 1997 CRAIN INDUSTRIES, INC.
By s/David M. Sindelar
David M. Sindelar
Senior Vice President
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
s/James N. Mills Chairman of the Board of March 31, 1997
James N. Mills Directors
s/RV Linn President and Chief Executive March 31, 1997
RV Linn Officer
s/David M. Sindelar Senior Vice President - Principal March 31, 1997
David M. Sindelar Financial & Accounting Officer
of Crain Industries, Inc.
s/Jack D. Furst Director March 31, 1997
Jack D. Furst
s/John R. Muse Director March 31, 1997
John R. Muse
<PAGE> 1
EXHIBIT 10.32
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment") dated as of March
22, 1996, is among CRAIN INDUSTRIES, INC., a Delaware corporation
("Borrower"), each of the banks or other lending institutions which is or may
from time to time become a signatory thereto or any successor or assign
thereof (individually, a "Bank" and, collectively, the "Banks"), TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, as an
issuing bank (in such capacity, together with its successors, any other Banks
or any of their respective Affiliates acting in such capacity, an "Issuing
Bank") and as administrative agent for itself, the Issuing Banks and the other
Banks (in such capacity, together with its successors in such capacity, the
"Agent").
RECITALS:
A. Borrower, the Agent, the Issuing Banks and the Banks have entered into
that certain Credit Agreement dated as of August 29, 1995 (such Credit
Agreement as the same may be amended or otherwise modified is hereinafter
referred to as the "Agreement").
B. Borrower has advised the Agent that it desires to acquire pursuant to
that certain Stock Purchase Agreement among Capital Foam Products, Inc., a New
Jersey corporation ("Capital Foam"), Bart Krupp and the Borrower (the "Stock
Purchase Agreement") all of the issued and outstanding stock of Capital Foam
for an aggregate purchase price not to exceed $7,800l,000.00 (the
"Acquisition"), and has requested that the Required Banks consent to such
Acquisition.
C. Pursuant to Section 10.13 of the Agreement, the Borrower has also given
the Agent prior written notice that it has elected to change its fiscal year
to a calendar year.
D. Borrower, the Agent, the Issuing Banks and the Banks now desire to
enter into this amendment to evidence the Required Banks' consent to the
Acquisition and to amend the Agreement to reflect the change in the Borrower's
fiscal year and as otherwise herein set forth.
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1. Definitions. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meanings as set forth
in the Agreement, as amended hereby.
ARTICLE II
Amendments
Section 2.1. Amendment to Sections 11.1, 11.2, 11.3 and 11.4. Effective as
of the date hereof, Sections 11.1, 11.2, 11.3 and 11.4 of the Agreement are
hereby amended in their entirety to read as follows:
Section 11.1 Interest Coverage Ratio. The Borrower will not permit its
Interest Coverage Ratio, calculated quarterly (beginning December 21, 1995)
for the four fiscal quarters of Borrower ending as of the last day of each of
the fiscal quarters of each fiscal year set forth below, to be less than the
ratio set forth opposite each such fiscal year below. For the purposes of
determining the Interest Coverage Ratio for the first two fiscal quarters of
Borrower following the Closing Date, Consolidated EBITDA for the fiscal
quarters ending in June 1995 and September 1995 shall be deemed to be
$6,300,000 for each such quarter. The Interest Coverage Ratio for the four
quarters ending in December 1995 shall be calculated using (i) the deemed
amounts of Consolidated EBITDA for the quarters ending in June 1995 and
September 1995 and the actual amount of Consolidated EBITDA for the fiscal
quarter ending in December 1995 multiplied by two, and (ii) the actual
annualized amount of Interest Expense for the quarter or quarters then ended.
Quarters Ending During Fiscal Year Interest Coverage Ratio
1996 1.40 to 1.0
1997 1.60 to 1.0
1998 and thereafter 1.75 to 1.0
Section 11.2 Consolidated Net Worth. The Borrower will maintain
Consolidated Net Worth in an amount not less than the sum of (i) $20,000,000,
plus (ii) 50% of the Consolidated Net Income (to the extent positive) of
Borrower for each fiscal year ending after December 31, 1995 to the extent
that such fiscal year has been completed (which shall include for the current
fiscal year, the year-to-date Consolidated Net Income for such fiscal year),
plus (iii) 75% of the net proceeds of any Permitted Issuance, calculated
quarterly (beginning December 31, 1995) as of the last day of each March,
June, September and December.
Section 11.3 Maintenance of Consolidated EBITDA. The Borrower will not
permit Consolidated EBITDA for the Borrower and its Subsidiaries calculated as
of the last day of each fiscal quarter of Borrower set forth below for the
four fiscal quarters then ended to be less than the amount set forth opposite
each such fiscal quarter. Consolidated EBITDA of the Borrower and its
Subsidiaries for the fiscal quarters ending in June 1995 and September 1995
shall be deemed to be $6,300,000 for each such quarter. Consolidated EBITDA
for the four fiscal quarters ending in December 1995 shall be calculated using
the deemed amounts of Consolidated EBITDA for the quarters ending in June 1995
and September 1995 and the actual amount of Consolidated EBITDA for the fiscal
quarter ending in December 1995 multiplied by two.
Quarter Ending Amount
1995 December 20,000,000
1996 March 20,800,000
June 21,800,000
September 22,300,000
December 22,850,000
1997 March 23,400,000
June 23,950,000
September 24,500,000
December 25,000,000
1998 March 25,500,000
June 26,000,000
September 26,500,000
December 27,125,000
1999 March 27,750,000
June 28,375,000
September 29,000,000
December 29,625,000
2000 March 30,250,000
June 30,875,000
September 31,500,000
Section 11.4 Capital Expenditures. The Borrower will not make or commit
to make any Capital Expenditures, except for expenditures in the ordinary
course of business not exceeding, in the aggregate for the Borrower and its
Subsidiaries during any fiscal year of the Borrower set forth below, the
amount set forth opposite such fiscal year, provided that 100% of any amount
not used in any fiscal year may be carried forward only into the next
succeeding fiscal year:
Fiscal Year Amount
1996 $12,400,000
1997 $8,000,000
1998 $7,000,000
1999 and thereafter $6,500,000
ARTICLE III
Conditions Precedent
Section 3.1. Conditions. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent:
(a) The Agent shall have received all of the following, each dated
(unless otherwise indicated) the date of this Amendment, in form and
substance satisfactory to the Agent:
(1) Resolutions. Resolutions of the Board of Directors of Borrower
certified by its Secretary or an Assistant Secretary which authorize the
execution, delivery, and performance by Borrower of this Amendment and the
other Loan Documents to which Borrower is or is to be a party hereunder;
(2) Incumbency Certificate. A certificate of incumbency certified by
the Secretary of an Assistant Secretary of Borrower certifying the names of
the officers of Borrower authorized to sign this Amendment and each of the
other Loan Documents to which Borrower is or is to be a party hereunder
(including the certificates contemplated herein) together with specimen
signatures of such officer;
(3) Additional Information. The Agent shall have received such
additional documents, instruments and information as the Agent or its legal
counsel, Winstead Sechrest & Minick P.C., may reasonably request; and
(b) The representations and warranties contained herein and in all other
Loan Documents, as amended hereby, shall be true and correct as of the date
hereof as if made on the date hereof, except for those representations and
warranties that are expressly made as of a specific date.
(c) No Default shall have occurred and be continuing.
(d) All corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments, and other legal
matters incident thereto shall be reasonably satisfactory to the Agent and its
legal counsel, Winstead Sechrest & Minick P.C.
ARTICLE IV
Consents, Ratifications, Representations and Warranties
Section 4.1. Consents. Sections 10.3 and 10.5 of the Credit Agreement
prohibit the Borrower from consummating the Acquisition without the consent of
the Required Banks. The Required Banks hereby consent to the Acquisition by
the Borrower upon the terms set forth in the Recitals hereto and agree that
the consummation of the Acquisition upon such terms shall not constitute an
Event of Default under Section 10.3 or 10.5 of the Agreement. The Required
Banks hereby further acknowledge and agree that in connections with the change
of the Borrower's fiscal year to the calendar year as described in the
Recitals hereto, the Borrower shall not be required to deliver quarterly
financial statements or a Certificate of No Default as required by subsections
9.1(b) and (c) of the Agreement for the quarter ending February 29, 1996, but
instead shall be required to deliver quarterly financial statements and
Certificates of No Default for each of the quarters ending December 31, 1995,
march 341, 1996 and each fiscal quarter of Borrower thereafter.
Section 4.2. Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement and the other Loan
Documents are ratified and confirmed and shall continue in full force and
effect. Borrower, the Agent, the Banks and the Issuing Banks agree that the
Agreement as amended hereby and the other Loan Documents shall continue to be
legal, valid, binding and enforceable in accordance with their respective
terms.
Section 4.3. Representations and Warranties. Borrower hereby represents
and warrants to the Agent, the Banks and the Issuing Banks that (i) the
execution, delivery and performance of this Amendment and any and all other
Loan Documents executed and/or delivered in connection herewith have been
authorized by all requisite corporate action on the part of the Borrower and
will not violate the articles of incorporation or bylaws of Borrower, (ii) the
representations and warranties contained in the Agreement, as amended hereby,
and in each other Loan Document are true and correct on and as of the date
hereof as though made on and as of the date hereof, (iii) no Default has
occurred and is continuing, and (iv) Borrower is in full compliance with all
covenants and agreements contained in the Agreement as amended hereby and the
other Loan Documents to which it is a party.
ARTICLE V
Miscellaneous
Section 5.1. Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any other Loan
Document including any Loan document furnished in connection with this
Amendment shall survive the execution and delivery of this Amendment and the
other Loan Documents, and no investigation by the Agent, any Bank, any Issuing
Bank or any closing shall affect the representations and warranties or the
right of the Agent, the Banks and the Issuing Banks to rely upon them.
Section 5.2. Reference to Agreement. Each of the Loan Documents, including
the Agreement and any and all other agreements, documents, or instruments now
or hereafter executed and delivered pursuant to the terms hereof or pursuant
to the terms of the Agreement as amended hereby, are hereby amended so that
any reference in such Loan Documents to the Agreement shall mean a reference
to the Agreement as amended hereby.
Section 5.3. Expenses of the Agent. As provided in the Agreement, Borrower
agrees to pay on demand all reasonable costs and expenses incurred by the
Agent in connection with the preparation, negotiation, and execution of this
Amendment and the other Loan Documents executed pursuant hereto and any and
all amendments, modifications, and supplements thereto, including without
limitation the costs and reasonable fees of the Agent's legal counsel, and all
costs and expenses incurred by the Agent, the Banks and the Issuing Banks in
connection with the enforcement or preservation of any rights under the
Agreement, as amended hereby, or any other Loan Document, including without
limitation the costs and reasonable fees of legal counsel for the Agent and
the Issuing Banks and at any time following and during the continuance of the
Event of Default, of one legal counsel to each Bank.
Section 5.4. Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.5. Applicable Law. This Amendment and all other Loan Documents
executed pursuant hereto shall be deemed to have been made and to be
performable in Dallas, Dallas County, Texas and shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 5.6. Successor and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Agent, the Banks, the Issuing Banks and
Borrower and their respective successors and assigns, except Borrower may not
assign or transfer any of its rights or obligations hereunder without the
prior written consent of the Agent and all of the Banks.
Section 5.7. Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the
same instrument.
Section 5.8. Effect of Waiver. No consent or waiver, express or implied,
by the Agent and/or any of the Banks to or for any breach of or deviation from
any covenant, condition or duty by Borrower or any obligated party shall be
deemed a consent or waiver to or of any other breach of the same or any other
covenant, condition or duty.
Section 5.9. Headings. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
Section 5.10. ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY
NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Executed as of the date first written above.
BORROWER:
CRAIN INDUSTRIES, INC.
By: s/James G. Powers
Name: James G. Powers
Title: Vice President/Chief Financial Officer
AGENT:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Agent
By: s/Michael J. Lister
Name: Michael J. Lister
Title: Vice President
ISSUING BANK:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: s/Michael J. Lister
Name: Michael J. Lister
Title: Vice President
BANKS:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: s/Michael J. Lister
Name: Michael J. Lister
Title: Vice President
FIRST INTERSTATE BANK OF CALIFORNIA
By: s/Charles C. Warner
Name: Charles C. Warner
Title: Vice President
NBD BANK
By: s/Larry E. Schuster
Name: Larry E. Schuster
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: s/Bianca Hemmen
Name: Bianca Hemmen
Title: Senior Vice President
HELLER FINANCIAL, INC.
By: s/Kelli J. O'Connel
Name: Kelli J. O'Connel
Title: Assistant Vice President
THE BANK OF NEW YORK
By: s/John C. Lambert
Name: John C. Lambert
Title: Vice President
SOCIETE GENERALE, SOUTHWEST AGENCY
By: s/Christopher J. Speltz
Name: Christopher J. Speltz
Title: Vice President
The undersigned Guarantor hereby consents and agrees to this Amendment
and agrees that the Subsidiary Guaranty shall remain in full force and effect
and shall continue to be the legal, valid and binding obligation of such
Guarantor enforceable against such Guarantor in accordance with its terms.
GUARANTOR:
CRAIN AERO, INC.
By: s/James G. Powers
Name: James G. Powers
Title: Vice President/Chief Financial Officer
<PAGE> 1
Exhibit 10.33.
FIRST AMENDMENT TO STOCKHOLDERS AGREEMENT
THIS FIRST AMENDMENT TO STOCKHOLDERS AGREEMENT (this "Amendment"), dated as
of September 23, 1996, is entered into by and among Crain Holdings Corp., a
Delaware corporation (the "Company") and the security holders listed on the
signature pages hereof (the "Holders").
WITNESSETH
WHEREAS, the Company and the security holders of the Company have executed
and delivered that certain Stockholders Agreement, dated as of August 29, 1995
(the "Stockholders Agreement");
WHEREAS, as of the date hereof the Holders own more than 66 2/3% of the
aggregate number of outstanding shares of Common Stock and Class A Common
Stock (taken together as a class) subject to the Stockholders Agreement; and
WHEREAS, clause (iv) of Section 4.1.2 of the Stockholders Agreement contains
a typographical error and the Company and the Holders desire to correct such
error pursuant to the provisions of Section 8.7.2 of the Stockholders
Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1. Certain Definitions. Unless otherwise defined herein, terms used herein
with their initial letter capitalized shall have the meanings given such terms
in the Stockholders Agreement.
2. Amendment to Section 4.1.2. Clause (iv) of Section 4.1.2 of the
Stockholders Agreement is hereby amended in its entirety as follows (amended
terms are underlined for identification):
"(iv) issuances or sales of Common Stock or Common Stock Equivalents
pursuant to a registered underwritten public offering, a merger of the Company
or a subsidiary of the Company into or with another entity or an acquisition
by the Company or subsidiary of the Company of another business or
corporation or".
3. Counterparts. This amendment may be executed in counterparts, each of
which, when executed and delivered shall be an original, but all of which
shall be together one and the same instrument.
4. Governing Law. THIS PURCHASE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed, all as of the date first above written.
CRAIN HOLDING CORP.
By: s/Ellen Lipsitz
Name: Ellen Lipsitz
Title: Vice President
HICKS, MUSE, TATE & FURST EQUITY
FUND II, L.P.
By: HM2/GP Partners, L.P.,
as General Partner
By: Hicks, Muse GP Partners, L.P.,
its General Partner
By: Hicks, Muse Fund II
Incorporated,
its General Partner
By: s/J.D. Furst
Name: J.D. Furst
Title: Managing Director, Principal
<PAGE> 1
Exhibit 10.34
ASSIGNMENT OF LEASE
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Bio Clinic corporation, a Delaware corporation
("Seller"), does hereby assign, grant, bargain, sell, convey and transfer to
Crain Industries, Inc., a Delaware corporation ("Buyer"), its successors and
assigns forever all of Seller's right, title and interest as lessee in and to
that certain lease dated June 24, 1993 between General American Life Insurance
Company, a Missouri corporation, as lessor, and Seller, as lessee, together
with all amendments and clarifications attached thereto (the "Lease")
respecting those certain premises commonly known as 727 Wanamaker Avenue,
Ontario, California including any lease security, deposit or prepayment.
This Assignment shall not take effect until the closing of the transaction
(the "Closing") under that certain Asset Purchase Agreement between Seller,
buyer and Sunrise Medical, Inc., a Delaware corporation.
ASSUMPTION OF LEASE
For good and valuable consideration the receipt and adequacy of which are
hereby acknowledged and further in consideration of the foregoing Assignment
of Lease (the "Assignment") executed with Bio Clinic Corporation, a Delaware
corporation ("Seller") and the Consent to Assignment executed by General
American Life Insurance Company, a Missouri corporation, attached hereto,
Crain Industries, Inc., a Delaware corporation, does hereby agree to assume
and make all payments relating to obligations arising from and after the date
hereof under the Lease (as defined in the Assignment), and to perform all
covenants and conditions which are to be performed by Seller pursuant to the
Lease from and after the date thereof.
CONSENT TO ASSIGNMENT
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and further in consideration of the foregoing Assumption
of Lease executed by Crain Industries, Inc., a Delaware corporation
("Assignee"), the undersigned as lessor under the Lease (as defined in the
foregoing Assignment of Lease executed by Bio Clinic Corporation, a Delaware
corporation ("Assignor") does hereby consent to the foregoing Assignment of
Lease whereby the rights and obligations of Assignor under the Lease arising
from and after the date of the Assumption of Lease are assigned to Assignee.
NOTWITHSTANDING ANYTHING HEREIN CONTAINED, SUCH CONSENT WILL NOT RELEASE BIO
CLINIC CORPORATION, A DELAWARE CORPORATION, A WHOLLY OWNED SUBSIDIARY OF
SUNRISE MEDICAL, INC. ("TENANT") OF ITS OBLIGATIONS OR ALTER THE PRIMARY
LIABILITY OF TENANT TO PAY THE RENT AND PERFORM AND COMPLY WITH ALL OF THE
OBLIGATIONS OF TENANT TO BE PERFORMED UNDER THE LEASE.
Page
Executed this 15 day of October, 1996.
BIO CLINIC CORPORATION
By: s \ Steven A. Jaye
Its Secretary
CRAIN INDUSTRIES, INC.
By: s \ James G. Powers
Its VP-CFO
GENERAL AMERICAN LIFE INSURANCE
COMPANY
By: s \ William R. Bennet
Its Second VP-Real Estate
Page
STANDARD FORM OF INDUSTRIAL LEASE
(SEMI-GROSS)
THIS LEASE, made this 24th day of June, 1993, by and between GENERAL AMERICAN
LIFE INSURANCE COMPANY, a Missouri corporation (hereinafter "Landlord"), and
BIO CLINIC CORPORATION, A DELAWARE CORP. A WHOLLY OWNED SUBSIDIARY OF SUNRISE
MEDICAL, INC. (hereinafter "Tenant").
ARTICLE I. DEFINITIONS.
1.1 Address of Landlord: 1100 E Orangethorpe Avenue, Suite 130
Anaheim, CA 92801
1.2 Address of Tenant: 4083 E. Airport Drive
Ontario, CA 91761
1.3 Base Rent: $17,091.00 per month.
January 1, 1994 through December 31, 1994 $ 17,091.00
January 1, 1995 through December 31, 1995 $ 17,834.00
January 1, 1996 through December 31, 1996 $ 18,577.00
January 1, 1997 through December 31, 1997 $ 19,320.00
January 1, 1998 through December 31, 1998 $ 20,063.00
January 1, 1999 through December 31, 1999 $ 20,806.00
January 1, 2000 through December 31, 2000 $ 21,549.00
1.4 Base Year: The calendar year in which this Lease commences.
1.5 Building/s: The Building/s in which the Premises is located. The
specific Building in which the Premises is located contains 74,307 square
feet. The total square footage of all the Buildings in the Center is 343,813
square feet.
1.6 Center: The land, improvements and appurtenances depicted on Exhibit B
attached hereto and commonly referred to as General American Pacific Gate and
located at Airport Drive and Wanamaker Avenue, Ontario, California.
1.7 Common Area: The term "common Area" means all the area of the Center
designed for the common use and benefit of the Landlord and all of the
tenants, their employees, agents, customers and invitees. The Common Area
includes, but not by way of limitation, parking lots, truck courts, landscaped
and vacant area, driveways, rail spurs, walks and curbs with facilities
appurtenant to each as such areas may exist from time to time.
1.8 Lease Term: The lease term shall commence on January 1, 1994 and run for
6 years, and 2 months, expiring on February 29, 2000.
1.9 Permitted Use of the Premises: Manufacture and distribution of
therapeutic cushions and other consumer products and other legally permitted
uses.
1.10 Premises: 74,307 square feet of space together with 116 parking spaces
situated upon 3.71 acres of land in the Center located as outlined on Exhibit
B attached hereto, and addressed as: 727 Wanamaker Avenue, Ontario, CA 91761
(See Rider, Par. 1.2).
1.11 Rent: All sums, moneys or payments required to be paid by Tenant to
Landlord pursuant to this Lease, including Base Rent and Additional Rent.
1.12 Additional Rent: All sums, moneys or payments required to be paid by
Tenant to Landlord pursuant to this Lease other than Base Rent.
1.13 Security Deposit: $21,549.00
1.14 Tenant's Allocated Share: The percentage figure determined by dividing
the number of square feet in the Premises by the number of square feet in the
Building that is then leased to Tenant and to other tenants.
1.15 Tenant's Proportionate Share: The percentage figure determined by
dividing the number of square feet in the Premises by the total number of
square feet in all the Buildings (this paragraph is applicable when the Center
contains more than one Building), which percentage figure is 21.61%.
Page
1.16 Tenant's Prorata Share: The percentage figure determined by dividing
the number of square feet in the Premises by the number of square feet in the
specific Building in which the Premises is located, which percentage figure is
100%.
ARTICLE II. THE DEMISED PREMISES.
2.1 Lease of the Premises: In consideration of the Rents, covenants,
agreements and conditions hereinafter provided to be paid, kept, performed and
observed, the Landlord leases to the Tenant and the Tenant hereby hires from
the Landlord the Premises, upon all the terms and conditions set forth in this
Lease.
2.2 Use of Common Area: Landlord grants the Tenant the nonexclusive
revocable use of the Common Area by Tenant, Tenant's employees, agents,
customers and invitees, under all the terms and conditions hereof, which use
shall be subject at all times to such reasonable, uniform and non-
discriminatory rules and regulations as may from time to time be established
by Landlord.
2.3 Quiet Enjoyment: Landlord covenants that the Tenant, on paying the Rent
herein provided and keeping, performing and observing the covenants,
agreements and conditions herein required of the Tenant, shall peaceably and
quietly hold and enjoy the Premises for the Lease Term, subject, however, to
the terms and conditions of this Lease.
2.4 Reservations by Landlord: Landlord excepts and reserves from the
Premises the roof and exterior walls of the Building/s, and further reserves
the right to place, install, maintain, carry through, repair and replace such
utility lines, air ducts, pipes, wires, appliances, tunneling and the like in,
over, through and upon the Premises as may be reasonably necessary or
advisable for the servicing of the Premises or any other portions of the
Center. Landlord further reserves the right, at any time, and from time to
time to:
(i) make alterations, changes and additions to the Building/s and other
improvements in the Center;
(ii) add additional areas to the Center and/or to exclude areas therefrom;
(iii) construct additional buildings and other improvements to the Center;
(iv) remove or relocate the whole or any part of any building or other
improvement in the Center; and
(v) relocate any other tenant in the Center. It is further understood that
the existing layout of the buildings, walks, roadways, parking areas,
entrances, exits, and other improvements shall not be deemed to be a warranty,
representation or agreement on the part of the Landlord that the Center will
remain exactly as presently built, it being understood and agreed that
Landlord may change the number, dimensions and locations of the walks,
buildings and parking spaces as Landlord shall deem proper. Notwithstanding
anything herein to the contrary, Landlord shall have no right to make
alterations, changes or additions to the Building or Premises that adversely
affects Tenant's quiet enjoyment of the Building and Premises.
ARTICLE III. TERM OF THE LEASE.
3.1 Term: Tenant shall have and hold the Premises for and during the Lease
Term subject to the payment of the Rent and the full and timely performance by
Tenant of all the covenants and conditions set forth in this Lease.
3.2 Tender of Possession. Landlord shall tender possession of the Premises
to Tenant at the commencement of the Lease Term. Landlord shall not be
subject to any liability for any failure to render possession of the Premises
to Tenant, provided that such failure occurred as a consequence of any
circumstance or cause beyond Landlord's reasonable control, including but not
limited to any Act of God or the failure of a prior tenant to vacate all or
any portion of the Premises.
3.3 Holding Over. In the event of a holding over by Tenant or any of its
successors in interest after expiration or termination of this Lease without
the consent in writing of the Landlord, Tenant shall be deemed a Tenant at
sufferance and shall pay as liquidated damages, double Rent for the entire
holdover period and all attorney's fees and expenses incurred by Landlord in
enforcing its rights hereunder. Any holding over with the consent of Landlord
shall constitute Tenant a month-to-month tenant upon and subject to all the
terms, covenants and conditions of this Lease.
ARTICLE IV. RENT.
4.1 Base Rent. Tenant covenants to pay without notice, deduction, set-off
or abatement to Landlord the Base Rent in lawful money of the United States in
equal consecutive monthly installments in advance on the first day of each
month during the Lease Term. Base Rent for any partial month shall be
prorated on a per diem basis. Base Rent shall be payable to Landlord at
Landlord's Address or such other place as Landlord may designate from time to
time in writing. Tenant shall pay the first full month's rent upon execution
of this Lease.
4.2 Additional Rent: For the calendar year 1994, Tenant shall pay $716
per month to Landlord as Additional Rent. Tenant covenants to pay without
notice, deduction, set-off or abatement to Landlord the Additional Rent in
lawful money of the United States in equal consecutive monthly installments in
advance on the first day of each month during the Lease Term. Additional Rent
for any partial month shall be prorated on a per diem basis. Additional Rent
shall be payable to Landlord at Landlord's address or such other place as
Landlord may designate in writing. In order to provide for current payments
of Additional Rent. Tenant agrees to pay an amount of Additional Rent
reasonably estimated by Landlord from time to time commencing on the first day
of the month following the month in which Landlord notifies Tenant of the
amount of such Additional Rent. If, as finally determined, the amount of
Additional Rent installments so paid to Landlord for each calendar year, the
Tenant shall pay to Landlord the amount of such underpayment, or Landlord
shall credit Tenant for the amount of such overpayment, as the case may be.
It is the intention hereunder to estimate the amount of Additional Rent for
each calendar year and then to adjust such estimate in the following year
based on the actual amount of Additional Rent owing. The obligation of Tenant
with respect to the payment of Additional Rent shall survive the termination
of this Lease. Any payment, refund or credit made pursuant to this paragraph
shall be made without prejudice to any right of Tenant to dispute the amount
of Additional Rent owing, or the right of Landlord to correct any items as
billed pursuant to the provisions hereof. Within 30 days of the date Landlord
notifies Tenant of the amount of Additional Rent owing, Tenant or its
authorized agent shall have the right to inspect the books of Landlord during
the business hours of Landlord at such location that Landlord may specify, for
the purpose of verifying such amount. Unless Tenant asserts specific errors
within such 30 days, such notification by Landlord shall be deemed to be
correct. No decrease in Additional Rent shall reduce Tenant's liability
hereunder below the amount of Base Rent payable hereunder.
4.2(a) Utilities and Services. Landlord shall not be liable for any
interruption or failure whatsoever in utility services. Tenant shall contract
in its own name and pay for all charges for electricity, gas, fuel, telephone,
and any other services or utilities used in, servicing or assessed against the
Premises, unless otherwise herein expressly provided. Additionally, and if
the Building is master metered for water, sewer and exterior lighting, Tenant
agrees to pay to Landlord as Additional Rent Tenant's Prorata Share of the
cost of such utilities for the Building. Additionally, and as containerized
rubbish collection bins will be provided to the Building, Tenant agrees to pay
to Landlord as Additional Rent, Tenant's Allocated Share of the service cost
of such bins (unless Landlord, exercising reasonable discretion, should
determine that Tenant's actual use thereof is greater than such Tenant's
Allocated Share therefore, in which case an equitable adjustment shall be
made). Landlord may, however, require Tenant to contract for his own rubbish
collection. In the event Tenant's needs for such containers constitute
excessive demand on common containers. In such event, Tenant shall contract
with the same provider as the Center'' common bins.
4.2(b) Insurance. Tenant shall pay to Landlord as Additional Rent Tenant's
Prorata Share (or, Tenant's Proportionate Share in the event there is more
than one Building in the Center) of any increase in the cost of the premium
for the fire and extended coverage insurance that Landlord maintains hereunder
over the premium paid by Landlord for the 1994 calendar year. Tenant shall
pay any increase in the cost of fire and extended coverage insurance caused by
Tenant's use or activities on or about the Premises.
4.2(c) Real Estate Taxes. Tenant shall pay to Landlord as Additional Rent
Tenant's Prorata Share (or, Tenant's Proportionate Share in the event there is
more than one Building in the Center) of any increases in Landlord's Real
Estate taxes for the 1993/1994 property tax bill levied against the Center.
However, during the initial Lease term only, Tenant shall not be responsible
for the payment of any increase in Real Estate Taxes resulting from a sale of
the Premises to a third party. "Real Estate" taxes shall mean:
(a) all ad valorem Real Estate Taxes on the Center (adjusted after protest
or litigation, if any) for any part of the term of this Lease, exclusive of
penalties;
(b) any taxes which shall be levied in lieu of any such ad valorem Real
Estate Taxes;
(c) any special assessments for benefits on or to the Center paid in annual
installments by the Landlord;
(d) occupational taxes or excise taxes levied on rentals derived from the
operation of the property of the privilege of leasing property
(e) any provide subdivision assessment made against the Center; and
(f) the expense of protesting, negotiating or contesting the amount of
validity of any such taxes, charges or assessments, such expense to be
applicable to the period of the item contest, protested or negotiated. The
amount of such expense that Tenant is obligated to pay shall not exceed the
realized savings resulting from the protest, negotiation or contest.
If the Lease Term shall end during a tax year ("tax year" shall mean the
annual period for which Real Estate Taxes are assessed and levied) of which
only part is included in the Lease Term, the amount of such Additional Rent
shall be prorated on a per diem basis and shall be paid on or before the last
day of the Lease Term. If the Lease Term ends in any tax year before the
amount to be payable by Tenant has been determined under the provisions of
this Section, an amount payable for the portion of the Lease Term during the
tax year shall be reasonably estimated by Landlord and the estimated amount
shall be promptly paid by Tenant. As soon as the amount properly payable by
Tenant for the partial period has finally been determined, the amount shall be
adjusted between Landlord and Tenant. Tenant shall be liable for all taxes
levied against personal property and trade fixtures placed by Tenant in the
Premises.
4.2(d) HVAC Maintenance. Tenant shall pay for all expenses incurred to
repair the heating ventilating and air conditioning equipment servicing the
Premises Within thirty (30) days from the Commencement Date of the Lease,
Tenant shall provide Landlord with evidence of an executed and valid HVAC
maintenance contract. The HVAC maintenance shall be performed by a mechanical
contractor, licensed in the state of California, and shall provide for no less
than quarterly (4 x year) preventative maintenance services.
4.2(e) Common Area Expenses. Tenant will pay to Landlord as Additional Rent
Tenant's Prorata Share (or, Tenant's Proportionate Share in the event there is
more than one Building in the Center of Landlord's cost and expense in
maintaining the landscaped areas of the Premises and Common Areas. However,
in no event will Tenant be responsible for the payment of Landlord's expense
for maintaining the landscaped areas at other premises or buildings within the
Center.
4.2(f) Rent on Sales Taxes. Tenant shall pay to Landlord as Additional
Rent any Sales or Rent Taxes, however named or designated, levied on any form
of Rent or Additional Rent. 4.3 Late Payment. Tenant's failure to make any
rental payment or other Rider payment required of Tenant hereunder within ten
(10) days of the due date therefor shall automatically result in the
imposition of a service charge for such late payment in the amount of ten
percent (10%) of such payment, without notice. 4.4 Security Deposit. Tenant
herewith deposits with Landlord the Security Deposit as security for the
performance by Tenant of every covenant and condition of this Lease. Said
Security Deposit may be mingled with other funds of Landlord and shall bear no
interest. If Tenant shall default with respect to any convent or condition
of this Lease, Landlord may apply the whole or any part of such Security
Deposit to the payment of any sum in default, including Rent and Additional
Rent, or any sum which Landlord may be required to spend by reason of Tenant's
default. This includes, but is not limited to, applying the Security Deposit
first to any restoration, revamping, repairs and/or cleanup costs necessary
over and above normal wear and tear of the vacated space. Should Landlord so
apply the Security Deposit or any portion thereof during the Lease Term,
Tenant shall promptly reimburse Landlord for same. It is understood that the
Security Deposit is not to be considered as the last month's rent. Should
Tenant comply with all of the covenants and conditions of this Lease, the
Security Deposit or any balance thereof shall be returned to Tenant within 30
days of the expiration of the Lease Term.
ARTICLE V. LANDLORD'S RIGHTS AND OBLIGATIONS.
5.1 Maintenance by Landlord. During the Lease Term, Landlord shall operate
and maintain the Common Area and shall keep and maintain the roof, exterior
walls (excluding doors, glass, or plate glass, foundation, gutters and
downspouts of the Building's in good condition and repair. Landlord shall be
under no obligation and shall not be liable for any failure to make repairs
that are Landlord's responsibility herein until and unless Tenant notifies
Landlord in writing of the necessity therefor, in which event Landlord shall
have a reasonable time thereafter to make such repairs. Landlord reserves the
right to the exclusive use of the roof and exterior walls of the Building/s
which Landlord is so obligated to maintain and repair. Landlord shall enter
into a service contract on the Building for the heating, ventilation and air
conditioning equipment for periodic inspection and service of such equipment,
and Tenant shall reimburse Landlord pursuant to the provisions hereof. If any
portion of the Center which Landlord is obligated to maintain or repair is
damaged by the negligence of Tenant, its agents, employees or invitees, ten
repairs necessitated by such damage shall be paid for by Tenant.
5.2 Mortgage and Transfer: Estoppel Certificates. Landlord shall have
the right to transfer, mortgage, pledge or otherwise encumber, assign and
convey, in whole or in part, the Center, the Building/s, this Lease, and all
or any part of the rights now or thereafter existing therein and all Rents and
amounts payable to Landlord under the provisions hereof. In the event of any
such transfer or transfers, Landlord herein named (and in case of any
subsequent transfer, then the transferor) shall be automatically freed and
relieved from and after the date of such transfer of all personal liability as
respects the performance of any covenants or agreements on the part of
Landlord contained in this Lease thereafter to be performed. Nothing herein
contained shall limit or restrict any such rights, and the rights of the
Tenant under this Lease shall be subject and subordinate to all instruments
executed and to be executed in connection with the exercise of any such
rights, including, but not limited to, the lien of any mortgage, deed or
trust, or security agreement now or hereafter placed upon Landlord's interest
in the Premises. This paragraph shall be self-operative. However, Tenant
covenants and agrees to execute and deliver upon demand such further
instruments subordinating this Lease to the lien, of any such mortgage, deed
of trust or security agreement as shall be requested by Landlord and/or
mortgagee or proposed mortgagee or holder of any security agreement. In the
event of any such transfer, mortgage or pledge, Tenant's obligations to
subordinate this Lease to the lien of any proposed Mortgage, Deed of Trust or
Security Agreement is conditioned upon the delivery to Tenant and mutual
execution by such proposed mortgagee or holder of such security agreement,
within a reasonable time thereafter, or an agreement not to disturb Tenant's
possession ("Non-Disturbance Agreement") so long as Tenant complies with all
of the obligations contained in this Lease. Tenant shall, within ten (10)
days after written request of Landlord, execute, acknowledge, and deliver to
landlord or to Landlord's mortgagee, proposed mortgagee, Land Lessor of
proposed purchaser of the Center or any part thereof, any estoppel
certificates requested by Landlord from time to time, which estoppel
certificates shall show whether the lease is in full force and effect and
whether any changes may have been made to the original lease; whether the term
of the lease has commenced and full rental is accruing; whether there are any
defaults by Landlord and, if so, the nature of such defaults; whether
possession has been assumed and all improvements to be provided by Landlord
have been completed; and whether rent has been paid more than thirty (30) days
in advance and that there are no liens, charges, or offsets against rental due
or to become due and that the address shown on such estoppel is accurate.
5.3 Landlord's Inability to Perform. If, by reason of: inability to obtain
and utilize labor, materials or supplies; circumstances directly or indirectly
the result of a state of war or national or local emergency; any laws, rules
orders, regulations or requirements of any governmental authority now or
hereafter in force; strikes or riots; accident in, damage to or the making of
repairs, replacements, or improvements to, the Premises or any of the
equipment thereof; or by reason of any other cause beyond the reasonable
control of the Landlord including "Acts of God," Landlord shall be unable to
perform or shall be delayed in the performance of any covenant to supply any
service, such nonperformance or delay in performance shall not render Landlord
liable in any respect for damages to either person or property, constitute a
total or partial eviction, constructive or otherwise, work an abatement of
rent or relieve Tenant from the fulfillment of any covenant or agreement
contained in this Lease. This paragraph shall provide reciprocal protections
to the Tenant. Should the circumstances described herein prevent or delay
Tenant's ability to supply any service, except the payment of Base Rent or
Additional Rent, such non-performance or delay in performance shall not render
Tenant liable for damages to the Landlord.
5.4 Rights of Landlord. Landlord may enter upon the Premises with forty-
eight hours notice for the purpose of exercising any or all of the rights
hereby reserved without being deemed guilty of an eviction of disturbance of
Tenant's use or possession and without being liable in any manner to Tenant.
The reservation of these rights by Landlord shall not render Landlord liable
for not performing any of the matters specified herein.
5.4(a) Name of Center. To change the name of the Building/s or the Center
without notice or liability of the Landlord to Tenant.
5.4(b) During the last ninety (90) days of the Lease Term or any renewal or
extension thereof, if during or prior to that time the Tenant has vacated the
Premises, to decorate, remodel, repair, alter or otherwise prepare the Prepare
the Premises for reoccupancy;
5.4(c) Re-Lease. To exhibit the Premises to others and to display "For
Lease" signs on the Premises during the last one hundred eighty (180) days of
the Lease Term or any renewal or extension thereof;
5.4(d) Vehicles. To remove abandoned or unlicensed vehicles and vehicles
that are unreasonably interfering with the use of the parking lot by others,
and to charge the responsible tenant for the expense of removing said
vehicles;
5.4(e) Preservation of the Center. To take any and al measures, including
making inspection, repairs, alternations, additions and improvements to the
Premises or to the Center as may be necessary or desirable for the safety,
protection or preservation of the Premises or the Center or the Landlord's
interests, or as may be necessary or desirable in the operation of the
Premises or the Center.
ARTICLE V. TENANT'S RIGHTS AND OBLIGATIONS.
6.1 Acceptance of Premises. Landlord will complete the Premises in
accordance with Exhibit C, if attached hereto. Tenant acknowledges that it
will examine the Premises before taking possession hereunder. Unless Tenant
furnishes Landlord with a notice in writing specifying any defect in the
construction or condition of the Premises within ten (10) days after taking
possession, such taking of possession , such taking of possession shall be
conclusive evidence as against Tenant that at the time thereof the Premises
were in good order and satisfactory condition. However, Tenant's notice to
landlord of latent defects in materials, workmanship and other hidden problems
existing as of the date that Tenant takes possession of the Premises shall not
be limited to the ten (10) day notice period contained herein.
6.2 Alternations and Additions. Tenant shall not make any structural
alterations, improvements, or additions exceeding $5,000.00 to the Premises
without the prior written consent and approval of plans therefor by Landlord.
Alternations, improvements or additions made by either of the parties upon the
Premises, except moveable furniture and equipment placed in the Premises at
the expense of Tenant, shall be the property of Landlord and shall remain upon
and be surrendered with the Premises as a part thereof at the termination of
this Lease, without disturbance, molestation, injury of damage unless Landlord
elects to require Tenant to remove such alterations or improvements from the
Premises at the expiration of this lease. Landlord must notify Tenant within
five (5) days of Landlord's receipt of Tenant's construction plans of
Tenant's obligation to remove said alteration, improvement or addition. In
the event damage shall be caused by moving said furniture and equipment in or
out of the Premises, said damage shall be repaired at the cost of Tenant.
6.3 Assignment and Subletting. Tenant shall not assign or hypothecate this
Lease or sublet all or any part of the Premises without the prior written
consent of Landlord. If Tenant wishes to assign or sublet the Premises, to a
non-related entity, it shall give notice in writing (by certified mail or by
personal delivery) of such intention to Landlord and, thereupon, Landlord
shall, within thirty (30) days of receipt of such notice, have the right to
unilaterally terminate this Lease or to approve said subletting by written
notice to Tenant. If no notice is given by landlord, landlord will be deemed
to have elected to approve the assignment or subletting. If the assignment or
subletting is approved and rents under the sublease are greater than the
resents provided for herein, then Landlord shall have the further option
either
(a) to convert the sublease into a prime Lease and receive all of the rents,
in which case Tenant will be relieved of further liability hereunder and under
the proposed sublease, or
(b) to require Tenant to remain liable under this Lease, in which event
Tenant shall be entitled to retain such excess rents. If the assignment or
subletting is approved and rents under the sublease are less than the rents
provided for herein, Tenant shall remain liable under all the covenants and
conditions of this Lease. Landlord may withhold its consent to any proposed
assignee or subtenant which in Landlord's judgment
(a) would conflict with the tenancy, use or business of any other tenant or
the tenant mix of the Center,
(b) has a net worth and/or credit history inferior to that of Tenant, or
(c) is currently a tenant or negotiating for space in the Center. Tenant
may assign or sublet the Premises, or any portion thereof, without Landlord's
consent, to any related entity which controls, is controlled by or is under
common control with Tenant, provided that said assignee or subtenant assumes,
in full, the obligations of tenant under this Lease. However, it is
understood and agreed that any such assignment or sublease shall not, in any
way, affect, limit or relieve Tenant's obligation under the terms of this
Lease.
6.4 Maintenance by Tenant. Tenant shall be responsible for all maintenance
and repair to the Premises of whatsoever kind or nature that it not herein set
forth specifically as the obligations of Landlord. Tenant shall take good
care of the Premises and fixtures, and keep them in good repair free from
filth, overloading , danger or fire or any pest or nuisance, repair any damage
or breakage done by Tenant or Tenant's agents, employees or invitees,
including damage done to the Building's by Tenant's equipment or
installations. Tenant shall be responsible for the repair and replacement of
all glass and plate glass on the Premises. In the event Tenant fails to
maintain the Premises or make required repairs as provided for herein within
thirty (30) days after receipt of notice from Landlord, Landlord shall have
the right, but not the obligation, to perform such maintenance as is required
of Tenant in which event Tenant shall reimburse Landlord for its costs in
providing such maintenance or repairs together with a ten (10%) percent charge
for landlord's overhead and Tenant shall promptly reimburse Landlord for the
amount so billed to Tenant by Landlord.
6.5 Mechanic's Liens. Tenant will not permit any mechanic's liens, or
other liens, to be place upon the Premises, the Building/s or the Center
during the Lease Term or any extension or renewal thereof, and in case of the
filling of any such lien, Tenant will promptly pay same. Tenant agrees to pay
or bond all legal fees that might be incurred by Landlord because of any
mechanic's liens being placed upon the Premises, as a result of Tenant's
actions.
6.6 Redelivery of Premises. No later than the last day of the Lease
Term, Tenant will remove all Tenant's personal property and repair all injury
done by or in connection with installation or removal of such property and
surrender the Premises broom clean (together with al keys to the premises) in
as good a condition as they were in at the beginning of the Lease Term,
reasonable wear and tear excepted.
6.7 Signs and Advertisements. Tenant shall not put upon nor permit to be
put upon any part of the Premises, the Building's or the Center, any signs,
billboards, or advertisements whatever in any location or any form without the
prior written consent or Landlord whose consent shall not be unreasonably
withheld. Wherever the consent or approval of Landlord and Tenant is called
for anywhere in this Lease, such consent or approval shall not be unreasonably
withheld, delayed or conditioned. A charge of $50.00 per day per sign,
billboard or advertisement will be assessed against Tenant if Tenant fails to
obtain the written consent of Landlord prior to placing any such signs.
6.8 Use of Common Areas. Tenant shall not use any pat of the Center
exterior to the Premises for outside storage. No trash, creates, pallets, or
refuse shall be permitted anywhere on the Center outside of the Building/s by
Tenant except in enclosed metal containers to be located as directed by
Landlord. Tenant shall not park any trucks or trailers, loaded or empty,
except in front of the loading areas.
6.9 Use of Premises. The Premises hereby leased shall be used by the
Tenant only for the Permitted Use of the Premises and for no other purposes.
Tenant shall, at Tenant's expense, comply promptly with all applicable
statutes, ordinances, rules, regulations, orders and requirements in effect
during the term or any part of the term hereof regulating the use by Tenant
of the Premises. Tenant shall not use or permit the use of the Premises in
any manner that will tend to create waste or a nuisance, or will tend to
unreasonably disturb such other tenants in the Center. Tenant, its employees
and all persons visiting or doing business with the Tenant in the Premises
shall be bound by and shall observe the Rules and Regulations attached to this
Lease as Exhibit A. No rule or regulation contained herein or specified in
Exhibit A shall unreasonably restrict or adversely affect the Tenant's use of
the Premises.
6.10 Hazardous Substances. Tenant shall not cause or permit to be released
(whether by way of uncapping, pouring, spilling, spraying, spreading,
attaching, or otherwise) into or onto the Premises, or the Building/s, or the
Center, or the Common Areas (including the ground and ground water thereunder
and the sewer and drainage systems therein) any hazardous substances (as
defined or established from time to time by applicable local, state or federal
law that is in violation of any applicable law, code or ordinance. Tenant
shall immediately notify Landlord if any such release occurs, and, as to any
such release that has been caused or permitted by Tenant:
(i) Tenant shall immediately and entirely remove such released hazardous
substance, and in a manner fully in compliance with all laws pertaining to the
removal and storage or deposit thereof; and
(ii) Tenant hereby agrees to hold Landlord harmless of and from any
liability, public or private, resulting to Landlord as a result of such
release. Further, upon reasonable evidence that a release of a hazardous
substances has occurred, Tenant shall, upon landlord's demand and at Tenant's
sole expense, demonstrate to Landlord (through such tests, professional
inspections, sampling or otherwise as is, in Landlord's sole judgment
sufficient for the purpose) that Tenant has not caused or permitted any such
release of hazardous substances. Landlord warrants that as of the date of
execution hereof and to the best of its knowledge, there are no hazardous
substances stored on or within the Premises, utilized in the construction of
the Premises or existing in the Premises that would constitute a violation of
any applicable law, code or ordinance.
ARTICLE VII. INSURANCE.
7.1 Liability Insurance. Tenant covenants and agrees to maintain on the
Premises at all times during the Lease Term, or any extension or renewal
thereof, a policy or policies of comprehensive public liability and property
damage insurance with not less than $1,000,000 combined single limit for both
bodily injury and property damage.
7.2 Fire and Extended Coverage Insurance. Landlord shall, throughout the
Lease Term, or any extension or renewal thereof, maintain fire and extended
coverage (FEC) insurance on the property owned by Landlord located on the
Center in such amounts and with such deductibles as Landlord shall determine.
Landlord shall not in any way or manner insure any property of Tenant or any
property that may be in the Premises not owned by the Landlord. Tenant shall
comply with all reasonable insurance regulations so that the lowest fire,
lightning, explosion, extended coverage and liability insurance rates may be
obtained; and nothing shall be done or kept in or on the Premises by Tenant
except as reasonably necessary for the operation of Tenant's business which
will cause an increase in the premium for any such insurance on the Premises
or on any Building/s of which the Premises are a part or on any contents
located therein, over the rate usually obtained for the proper use of the
Premises permitted by this Lease or which will cause cancellation of such
insurance.
7.3 Indemnification of Landlord. Other than for the loss or injury
resulting from the negligent actions, willful misconduct or failure to
reasonably perform on the part of Landlord, its agents, employees or
contractors, Tenant shall indemnify Landlord and save Landlord harmless from
and against any and all loss (including loss of rentals payable by Tenant or
other tenants) and against all claims, actions, damages, liability and
expenses in connection with loss of life, bodily and personal injury or
damages to property arising from any occurrence in, upon or at the Premises or
any part thereof, or occasioned wholly or in part by any act or omission of
Tenant, or by anyone permitted to be on the Premises by Tenant. Tenant
assumes all risk of and Landlord shall not be liable for injury to person or
damage to property resulting from the conditions of the Premises or from the
bursting or leaking of any and all pipes, utility lines, connections, or air
conditioning or heating equipment in, on or about the Premises, or from water,
rain or snow which may leak into, issue or flow from any part of the Building.
Other than for the loss or injury resulting from the negligent actions,
willful misconduct or failure to reasonably perform on the part of the
Landlord, its agents, employees or contractors, Tenant agrees, at all times,
to indemnify and hold Landlord harmless against all actions, claims, demands,
costs damages or expenses of any kind which may be brought or made against
Landlord or which landlord may pay or incur by reason of Tenant's occupancy
of the Premises or its negligent performance of or failure to perform any of
its obligations under this Lease. In case Landlord shall, without fault on
its part, be made a party to any litigation commenced by or against Tenant,
then Tenant shall protect and hold Landlord harmless and shall pay all costs,
expenses and reasonable attorney's fees incurred or paid by Landlord in
connection with such litigation. Tenant's obligations under this paragraph
shall be limited to loss or injury occurring in, on or about the Premises
only.
ARTICLE VIII. EMINENT DOMAIN AND DAMAGE OR DESTRUCTION.
8.1 Eminent Domain. In the event that title to the whole or a substantial
part of the Premises shall be lawfully condemned or taken in any manner for
any public or quasi-public use, this lease and the term and estate hereby
granted shall forthwith crease and terminate as of the date of vesting title
and Landlord shall be entitled to receive the entire award. Tenant hereby
assigning to landlord the Tenant's interest therein, if any. However, nothing
herein shall be deemed to give Landlord any interest in or to require Tenant
to assign to Landlord any award made to Tenant for the taking of personal or
property or fixtures belonging to Tenant or for the interruption of our damage
to Tenant's business or for Tenant's moving expenses. A sale to a public or
quasi-public authority under threat of condemnation shall constitute a taking
by eminent domain.
In the event that title to a part of the Premises shall be so condemned or
taken where such condemnation or taking adversely affects, limits or restricts
the use of the Premises by Tenant, Landlord may terminate this lease and the
term and estate hereby granted by notifying the other party of such
termination within sixty (60) days following the date of vesting of title, and
this lease and the term and estate hereby granted shall expire on the date
specified in the notice of termination, not less than (60) days after the
giving of such notice, as fully and completely as if such date were the date
herein set for the expiration of the leas Term and the Rent hereunder shall be
apportioned as of such date. In the event that a part of the Premises is
taken and neither Landlord or Tenant elect to terminate the Lease, the Base
Rent and Additional Rent Payable by Tenant shall be reasonably adjusted by
Landlord and Tenant to reflect the partial taking of the Premises. In the
event of any condemnation or taking of any portion of the parking area of the
Center, which does not result in a reduction of the parking area by more than
twenty percent (20%), the terms of this lease shall continue in full force and
effect. If more than twenty percent (20%) of the parking area is taken,
either party shall have the right to terminate this lease upon giving written
notice to the other party within thirty (30) days of such taking.
8.2 Damage or Destruction. If the Premises, the Building or any part
thereof is damaged by fire or other casualty, cause of condition whatsoever
and Landlord shall determine not to restore said Premises or Building,
Landlord may, by written notice to Tenant given within sixty (60) days after
such damage, terminate this Lease. Such termination shall become effective as
of the date of the damage. If this Lease is not terminated as above provided
and if the Premises are made partially or wholly untenantable, Landlord, at
its expense, shall restore the same with reasonable promptness to the
condition in which Landlord furnished the Premises to Tenant at the
commencement of the Lease Term as to those items that were provided to the
Premises at Landlord's expense without any reimbursement by Tenant. Landlord
shall be under no obligation to restore any alternation, improvements or
additions to the Premises made by Tenant or paid for by Tenant, including, but
not limited to, any of the initial tenant finish done or paid for by Tenant or
any subsequent changes, alternations or additions made by Tenant or
reimbursement by Tenant.
If, as a result of fire or other casualty, cause of condition whatsoever
the Premises are made partially or wholly untenantable and, if landlord has
not given the sixty (60) day notice above provided for and fails within one
hundred twenty (120) days, effective as of the date such damage occurs to
eliminate substantial interference with Tenant's use of said Premises or
substantially to restore said Premises. Tenant may terminate this Lease after
the end of said one hundred twenty (120) days, effective as of the date such
damage occurs, by notice to Landlord given at any time prior to the
commencement of restoration of the Premises. If the Premises are rendered
totally untenantable but this Lease is not terminated, all rent shall abate
from the date of the fire or other relevant cause or condition until the
Premises are ready for occupancy and reasonably accessible to Tenant. If a
portion of the Premises is untenantable, rent shall be prorated on a per diem
basis and apportioned in accordance with the portion of the Premises which is
usable by the Tenant until the damaged part is ready for the Tenant's
occupancy. If a substantial portion of the Premises is made untenantable
during the last two (2) years of the initial Lease Term, or during the last
two (2) years of any previously exercised Option Period, and the time required
to restore the Premises will exceed one hundred one hundred eighty (180) days,
Tenant may terminate the Lease. In all cases, due allowance shall be made for
reasonable delay caused by adjustment of insurance loss, strikes, labor
difficulties or any cause beyond Landlord's reasonable control. For the
purposes of this Lease, said Premises shall be considered tenantable so long
as and to the extent that the Premises are substantially utilized by Tenant in
the operation of its business. In any event, Tent shall be responsible for
the removal, or restoration, when applicable, of all its damaged property and
debris from the Premises, upon request by Landlord or else Tenant must
reimbursement Landlord for the cost of removal.
ARTICLE IX. DEFAULT AND REMEDIES.
9.1 Events of Default. The occurrence of any one or more of the
following events shall constitute a Default and a material breach of this
Lease by Tenant:
9.1(a) Nonpayment. Failure of Tenant to pay any installment of Rent or other
sum payable to Landlord hereunder on the date that same is due and such
failure shall continue for a period of five (5) days; or
9.1(b) Noncompliance. Failure of Tenant to comply with any term, condition
or covenant of this Lease, other than the payment of Rent or other sum of
money; or
9.1(c) Insolvency or Transfer. Insolvency, the making of a transfer in fraud
of creditors or the making of an of an assignment for the benefit of creditors
by Tenant or any guarantor of Tenant's obligation; or
9.1(d) Bankruptcy. The filing by or against Tenant or any guarantor of
Tenant's obligations hereunder of a petition in bankruptcy or for liquidation,
or adjudication as a bankrupt or insolvent in proceedings filed by or against
Tenant or such guarantor; or
9.1(e) Receiver. Appointment of receiver or trustee for all or substantially
all of the assets of Tenant or any guarantor of Tenant's obligations
hereunder; or
9.1(f) Abandonment. Abandonment by Tenant of any substantial portion of the
Premises.
9.2 Remedies. In the event of the occurrence of any Default, Landlord shall
have the right, without further notice to or demand upon Tenant and without
being liable to Tenant for any damages or to any prosecution therefor, to do
any and all of the following to the extent permitted by law:
9.2(a) Repossession and Sale. Re-enter and take exclusive possession of the
Premises with or without force or legal process, refuse to allow Tenant to
enter the same or have possession thereof, change the locks on the doors to
the Premises, take possession of any furniture or fixtures or other property
in or upon the Premises (Tenant hereby waiving the benefit of all exemptions
by law), sell the same at public or private sale without notice and apply the
proceeds thereof to the costs of sale, payment of damages and payment of all
sums owing under this Lease; and/or
9.2(b) Releasing. Relet the Premises as agent of Tenant for the balance of
the term f this lease or for a shorter or longer term and receive the rents
therefor, applying them first to the payment of the expense of such reletting
and, second, to the payment of damages suffered to the Premises, and third to
all sums due and to become due under this Lease, Tenant remaining liable for
and hereby agreeing to pay Landlord any deficiency; and/or
9.2(c) Cancellation. Cancel and terminate the remaining term of this Lease,
and re-enter and take possession of the Premises free of this Lease.
Thereafter this Lease shall be null and void and the Rent in such case shall
be apportioned and paid on and up to the date of such entry. Thereafter both
parties shall be released and relieved from and of any and all obligations
thereafter to accrue hereunder. Tenant shall be liable for all loss and
damage resulting from such breach or default; and/or
9.2(d) Anticipatory Breach. Treat such default as an anticipatory breach of
this Lease and, as liquidated damages for such default, be entitled to the
difference, if any, between the sum which, at the time of such termination for
anticipatory breach represents the then present worth (computed at ten percent
(10% per year) of the excess aggregate rents and additional rents payable
hereunder that would have accrued over the balance of the Lease Term
(including renewals) had such term not been prematurely terminated, over the
aggregate market rental value of the Premises over the term (including
renewals) that the Lease would have run had it not been prematurely
terminated; and/or
9.2(e) Attorney's Fees. Recover from Tenant, landlord's attorney fees
incurred in enforcing its rights hereunder.
9.3 Remedies Cumulative. All rights and remedies expressly provided in this
Lease for Landlord's protection shall be cumulative as to each other and of
any other rights and remedies provided hereunder or by law.
9.4 No Waiver. A waiver by Landlord of a breach or default by Tenant under
the terms and conditions of this Lease shall not be construed to be a waiver
of any subsequent breach or default or of any other or the same term or
condition of this Lease, and the failure of Landlord to assert any breach or
to declare a default by Tenant shall not be construed to constitute a waiver
thereof so long as such breach or default continues unremedied.
ARTICLE X. MISCELLANEOUS
10.1 Bankruptcy of Assignment to Trustee. Neither this Lease nor any interest
therein nor any estate hereby created shall pass to any trustee or receiver in
bankruptcy or to any other receiver or assignee for the benefit of creditors
or otherwise by operation of law during the term of this Lease or any renewal
thereof.
10.2 Brokers. Except as may be expressly set forth to the contrary in the
Rider, each party represents to the other that no person, firm, corporation or
other entity is entitled to any brokerage commission or finder's fee on
account of the execution, delivery, and consummation of this Lease. Tenant
hereby agrees to indemnify Landlord and to hold Landlord free and harmless of
and from any and all claims, losses, damages, costs and expenses of whatsoever
nature, including attorneys' fees and costs of litigation arising from or
relating to any brokerage commissions or finder's fees incurred by Tenant in
connection with this Lease. Said indemnity is deemed to be reciprocal and
protects the Tenant to the same degree as landlord. Landlord recognizes Grubb
& Ellis, city of Ontario for the Tenant and CB Commercial city of Industry for
the landlord as the brokers in this transaction. Said brokers shall be
compensated per separate agreement.
10.3 Captions The captions used throughout this Lease for the convenience
and reference only and shall in no way be held to explain, modify, amplify, or
aid in the interpretation , construction or meaning of any provisions in this
Lease.
10.4 Certificates of Occupancy. Tenant may, prior to the commencement of the
Lease Term, apply for a certificate of occupancy to be issued by the
municipality in which the Premises are located, but this Lease shall not be
contingent on issuance thereof.
10.5 Entire Agreement. This Lease including its Exhibits and Rider, if any,
contains the entire agreement between the parties and no modification of this
Lease shall be binding upon the parties unless evidenced by an agreement in
writing signed by Landlord and Tenant after the date hereof.
10.6 Joint and Several Liability of Multiple Tenants. If there be more than
one Tenant named herein, the provisions of this Lease shall be applicable to
and binding upon such Tenants jointly and severally.
10.7 Notices. Except as otherwise herein provided, whenever by the terms of
this Lease notice shall or may be given either to landlord or to Tenant, such
notice shall be in writing and shall be deemed to have been properly delivered
if sent by certified mail, return receipt requested, postage prepaid, to
Landlord at Landlord's Address and to Tenant at the Premises, or to such other
place as Landlord or Tenant may designate in writing. The date of mailing
shall be deemed the date of delivery.
10.8 Partial Invalidity. If any term, covenant, condition or provision of
this Lease or the application thereof to any person or circumstances shall, to
any extent be invalid, unenforceable or violate a party's legal rights, then
such term, covenant, condition or provision shall be deemed to be null and
void an unenforceable, however, all other provisions of this Lease, or the
application of such term or provision to persons or circumstances other than
those which are held invalid, unenforceable or violative of legal rights,
shall not be affected thereby, shall not be affected thereby and each and
every other term, condition, covenant and provision of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
10.9 Recording. This lease shall not be recorded by either party without the
written consent of the other.
10.10 Successors. The agreements, covenants and conditions of this Lease
shall be binding upon and inure to the benefit of the heirs, legal
representatives, successors and assigns of each of the parties hereto, except
that no assignment, encumbrance, or subletting by Tenant, unless permitted by
the provisions of this Lease, without the written consent of Landlord shall
vest any right in the assignee, encumbrancee or sublessee of Tenant.
10.11 Use of the Singular: Gender. The terms "Landlord" and "Tenant," and
pronouns representing the same, wherever used herein shall include the plural
as well as the singular, the feminine as well as the masculine.
10.12 Rider. A Rider consisting of 4 pages, with paragraphs numbered 1
through 47 consecutively, is attached hereto and made a part hereof.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
hereinabove stated.
LANDLORD:
GENERAL AMERICAN LIFE INSURANCE COMPANY,
a Missouri Corporation
BY: s \ Mary Lou Lemley
Director of Real Estate
TENANT:
BIO-CLINIC CORPORATION, A DELAWARE
CORP., A WHOLLY OWNED SUBSIDIARY
OF SUNRISE MEDICAL, INC.
BY: s \ Gary Limon, VP / Gen. Mgr.
BY: s \ Bob Barton, VP / Finance
BY:
<PAGE> 1
Exhibit 10.35.
CONSENT AND AGREEMENT
WHEREAS, Sun Life Assurance Company of Canada, successor in interest to
Industrial Developments International, Inc., (the "Landlord") has entered into
that certain Industrial Lease Agreement ("Lease") dated August 24, 1995, with
BIO CLINIC CORPORATION, a Delaware Corporation ("Tenant"), which provides for
the leasing by Tenant of approximately 196,333 square feet of space in a
building owned by Landlord and located in Westfork Business Park in Douglas
County, Georgia (the "Premises");
WHEREAS SUNRISE MEDICAL, INC., A Delaware Corporation ("Guarantor") made and
entered into that certain Guaranty dated as of the 24th day of August, 1995
("Guaranty") in favor of Landlord, pursuant to which the Guarantor agreed and
undertook to guaranty the performance of Tenant's obligations under the Lease;
WHEREAS, the Tenant has requested that Landlord consent to the assignment (the
"Assignment") of Tenant's interest in the Lease to Crain Industries, Inc., a
Delaware Corporation ("Assignee");
WHEREAS, Landlord has agreed to consent to the Assignment subject to the terms
and conditions set forth herein;
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
Subject to the terms and conditions set forth below, Landlord hereby consents
to the Assignment:
1. Assignee does hereby agree to assume and make all payments relating to
obligations arising from and after the Closing Date (as defined below) under
the Lease and to perform all covenants and conditions which are to be
performed by Tenant after the Closing Date under the Lease;
2. Tenant does hereby assign to Assignee, as of the closing Date, all of
Tenant's rights, title and interests under the Lease;
3. Guarantor does hereby consent to the Assignment of the Lease and ratifies
and reaffirms its obligations under the Guaranty to the same extent and as if
the Assignee were the original Tenant under the Lease;
4. Tenant does hereby acknowledge and certify that Landlord has performed all
of its obligations under the Lease as of the date hereof, and that Tenant has
no charge, lien, or claim of offset under the lease or otherwise against rents
or other charges due or to become due under the lease.
5. The parties hereto agree and acknowledge that any use of the Premises shall
be restricted as set forth in, and shall in all respects comply with, the
Lease.
6. The parties hereto agree and acknowledge that the manufacture of Flexible
Polyurethane Foam is prohibited under the Lease.
7. For Purposes hereof, the term "Closing Date" shall mean the date of closing
under that Certain Asset Purchase Agreement dated August 29, 1996 between
Tenant, Assignee and Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Consent and Agreement
to be duly executed as of this ____ day of October, 1996.
TENANT:
BIO CLINIC CORPORATION
By: s / Steven A. Jaye
Its: Secretary
ASSIGNEE:
CRAIN INDUSTRIES, INC.
By: s / James G. Powers
Its: Vice President
Chief Financial Officer
GUARANTOR:
SUNRISE MEDICAL, INC.
By: s / Steven A. Jaye
Its: Vice President
General Counsel and Secretary
LANDLORD
SUN LIFE ASSURANCE COMPANY OF CANADA
By: s / George M. Collins
Its: President
Page
BUILD TO SUIT
INDUSTRIAL LEASE AGREEMENT
BETWEEN
INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC.
AS LANDLORD
AND
BIO CLINIC CORPORATION
AS TENANT
DATED August 24, 1995
Page
LEASE INDEX
Section Subject
1 Basic Lease Provisions
2 Demised Premises
3 Term
4 Base Rent
5 Security Deposit
6 Additional Rent
7 Use of Demised Premises
8 Insurance
9 Utilities
10 Taxes and Other Impositions
11 Maintenance and Repairs
12 Tenants' Personal Property; Indemnity
13 Tenant's Fixtures
14 Signs
15 Landlord's Lien Waiver
16 Governmental Regulations
17 Environmental Matters
18 Plans and Specifications for Construction of Demised Premises
19 Tenant Alterations and Additions
20 Services by Landlord
21 Fire and Other Casualty
22 Condemnation
23 Tenant's Default
24 Landlord's Right of Entry
25 Mortgagee's Rights
26 Estoppel Certificate
27 Landlord Liability
28 Notices and Payments
29 Brokers
30 Assignment and Subleasing
31 Termination of Expiration
32 Late Payments
33 Rules and Regulations
34 Dispute Resolution Procedure
35 Option to Extend Term
36 Early Cancellation and Cancellation Payment
37 Miscellaneous
Exhibit "A" Legal Description
Exhibit "A-1" Site Plan
Exhibit "A-2" Floor Plan
Exhibit "A-3" Elevation Plan
Exhibit "A-4" Preliminary Construction Specifications
Exhibit "B" Permitted Encumbrances
Exhibit "C" Rules and Regulations
Exhibit "D" Protective Covenants
Exhibit "E" Form of SNDA
Page
BUILD TO SUIT
INDUSTRIAL LEASE AGREEMENT
THIS FIRST AMENDMENT AGREEMENT (this "Lease") is made this _____ day of
August, 1995, by and between INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC., A
Delaware corporation ("Landlord"), and BIO CLINIC CORPORATION, a Delaware
corporation ("Tenant") (the words "Landlord" and "Tenant" to include their
respective legal representatives successors and permitted assigns where the
context requires or permits)
WITNESSETH
1. Basic Lease Provisions. The following constitute the "Basic Lease
Provisions" of this Lease.
(a) Demised Premises: Exhibit "A" attached hereto
(b) Building Square Footage: 196,333
(c) Annual Base Rent
Lease Year 1 $ 502,365.99
Lease Years 2-5 $ 549,732.00
Lease Years 6-10 $ 632,192.00
Months 121-126 $ 316,096.00
(d) Monthly Base Rent Installments:
Months 1-3 $ 35,000.00
Months 4-6 $ 40,833.33
Months 7-12 $ 45,811.00
Lease Years 2-5 $ 45,811.00
Lease Years 6-10 $ 52,682.66
Months 121-126 $ 52,682.66
(e) Lease Commencement Date: February 1, 1996
(f) Base Rent Commencement Date: February 1, 1996
(g) Primary Term: 126 months
(h) Security Deposit: $10,000.00
(i) Date Tenant Must Approve Plans and Specifications For Improvements:
October 15, 1995
(j) Permitted Use: office fabrication light manufacturing and distribution
of therapeutic consumer products
(k) Addresses for notice:
Landlord Industrial Developments International, Inc.
Atlanta Financial Center
3343 Peachtree Road, Suite 1050
Atlanta, Georgia 30326
Attn: Chief Operating Officer
Page
Tenants: Bio Clinic Corporation
1550 Distribution Court
Lithia Springs, Georgia 30057
Attn: Vice President - Operations
(l) Address for rental payments:
Industrial Developments International, Inc.
P.O. Box 930199
Atlanta, Georgia 30318
Attn: Rusty Epperson
2. Demised Premises. For and in consideration of the rent hereinafter
reserved and the mutual covenants hereinafter contained, Landlord does hereby
lease and demise unto Tenants, and Tenant does hereby hire, lease and accept
from Landlord, that certain parcel of real property (the "Land") containing
approximately 11 acres which Land is situated in Douglas County, Georgia,
within Wertfork Distribution Center (the "Project") and is more particularly
described in Exhibit "A" attached hereto and by this reference made a part
hereof, together with and including all buildings, structures, driveways,
parking lots, walkways, landscaping and other appurtenances thereto and all
other improvements with the consent of Tenant, at any time during the term of
this Lease erected or situated thereon including specifically, but without
limitation, a building (the "Building") to be constructed containing
approximately 196,333 square feet of office and warehouse space of which
approximately 12,000 square feet shall be office space and to be located on
the Land as shown on Exhibit "A-1" attached hereto, and all other improvements
including all driveways, parking lots, walkways, landscaping and other
appurtenances thereto (collectively, the "Demised Premises") subject only to
the matters on Exhibit "B" attached hereto (herein referred to as "Permitted
Encumbrances"), all upon the terms and conditions hereinafter set forth. The
Demised Premises including the Building shall be developed and constructed by
Landlord substantially in accordance with the Preliminary Drawings prepared by
Smallwood, Reynolds, Stewart & Stewart, attached hereto as Exhibit "A-1)
(herein, the "Site Plan"): Exhibit "A-2" (herein, the "Floor Plan") and
Exhibit "A-3" (herein, the "Elevation Plan"), and the construction
specifications attached hereto as Exhibit "A-4") (herein "Preliminary
Construction Specifications"), (the plans and specifications as shown on
Exhibit "A-1" through "A-4" are herein, collectively the "Preliminary Plans")
and in accordance with the terms of Section 18 hereof. Exhibit to the extent
required to cause compliance with the provisions of applicable law, the
Building and improvements comprising the Demised Premises shall be located
substantially as shown on the Site Plan.
3. Term
(a) To have and to hold the Demised Premises for
(i) a preliminary term (the "Preliminary Term") which shall commence on the
date of execution of this Lease by Landlord and Tenant and shall expire on the
Lease Commencement Date, as defined herein, and
(ii) a primary term (the "Primary Term") which shall commence on the Lease
Commencement Date and shall expire one hundred twenty-six (126) calendar
months thereafter (the Preliminary Term, the Primary Term, and any and all
extensions thereof, herein referred to as the "Term". The Term of this Lease
shall end on the final day thereof without the requirement of notice from
either party to the other.
(b) For purposes of this Lease, the term "Lease Commencement Date" shall
mean the later to occur of Substantial Completion as defined herein and
January 1, 1996.
(c) For purposes of this Lease, the term "Substantial Completion" or any
grammatical variation thereof shall mean sufficient completion of construction
of the Demised Premises in accordance with the Plans (as defined in Section
18), so that Tenants can lawfully occupy the Demised Premises for the
Permitted Use, as evidenced by the delivery by Landlord to Tenant of
(i) a Certificate of Occupancy or its equivalent (or Temporary Certificate
of Occupancy or its equivalent ) for the Building issued by the appropriate
governmental authority if so required by applicable law, and
(ii) a Certificate of Substantial Completion on standard AJA Form G-704
certified by the project architect, Smallwood, Reynolds, Stewart & Stewart
(the "Architect"). In the event completion to such extent is delayed because
of Tenant Delay, as defined herein, then Substantial Completion, shall be
deemed to mean the date when the Demised Premises would have been completed to
such extent but for such Tenant Delay as determined by the Architect in the
event Tenant shall dispute the determination of such date by the Architect,
the parties shall utilize the Dispute Resolution Procedure as defined in
Section 34, with Qualified Architects serving as Officials. For purposes of
this Lease, the Architect shall be deemed a "Qualified Architect" for Landlord
and ________________________ shall be deemed a "Qualified Architect" for
Tenant.
(d) The Lease Commencement Date and the expiration date of the Term, when
determined as herein provided, shall be evidenced by a supplemental agreement
to be executed upon the request of either party to the other party hereto.
(e) For purposes of this Lease, the term "Lease Year" shall mean each one
(1) year period beginning on the Lease Commencement Date, and each anniversary
thereof, and ending on the day immediately prior to the next succeeding
anniversary of the Lease Commencement Date.
(f) Tenant's Early Occupancy. Tenant shall have the right to enter the
Demised Premises for thirty (30) days prior to the Lease Commencement Date in
order to make tenant improvements and otherwise prepare the Demised Premises
for occupancy provided that during said period:
(i) Tenant shall comply with all terms and conditions of this Lease
another than the obligation to pay rent,
(ii) Tenant shall not interfere with Landlord's completion of the Demised
Premises, and
(iii) Tenant shall not begin operation of its business.
4. Base Rent. Tenant shall pay to Landlord at the address set forth in
Section 1(i) as base rent for the Demised Premises, commencing on the Lease
Commencement Date (herein, the "Base Rent Commencement Date") and continuing
throughout the Term in lawful money of the United States the annual amount set
forth in Section 1(c) payable in equal monthly installments as set forth in
Section 1(d) (the "Base Rent"), payable in advance, without demand and without
abatement, reduction, set-off, or deduction on the first day of each calendar
month during the Term. If the Base Rent Commencement Date shall fall on a day
other than the first day of a calendar month, the Base Rent shall be
apportioned pro rata on a per diem basis for the period between such Base Rent
Commencement Date and the first day of the following calendar month and such
apportioned sum shall be paid on the Base Rent commencement Date. If the last
day of the Term shall fall on a day other than the last day of a calendar
month, the Base Rent shall be apportioned pro rata on a per diem basis for the
period between the first day of the last calendar month of the Term and the
last day of the Term.
5. Security Deposit. Upon execution of this Lease by both parties, Tenant
will pay to the Landlord the sum set forth in Section 1(h) (the "Security
Deposit") as security for the full and faithful performance by Tenant of each
and every term, covenant and condition of this Lease. In the event that
Tenant is in default under this Lease, or fails to perform any of the terms,
provisions and conditions of this Lease, Landlord may use, apply, or retain
the whole or any part of the Security Deposit for the payment of any sum due
Landlord of which Landlord may expend or be required to expend by reason of
Tenant's default or failure to perform, including, but not limited to, any
damage or deficiency in the reletting of the Demised Premises; provided,
however, that any such use application or retention by Landlord of the whole
or any part of the Security Deposit shall not be or be deemed to be an
election of remedies by Landlord or viewed as liquidated damages, it being
expressly understood and agreed that, notwithstanding such use, application or
retention. Landlord shall have the right to pursue any and all other remedies
available to it under the terms of this Lease or otherwise. In the event that
Tenant shall comply with all of the terms, covenants and conditions of this
Lease, the Security Deposit shall be returned to Tenant within thirty (30)
days after compliance has been ascertained by Landlord and after delivery of
possession of the Demised Premises to Landlord in the event of a sale of the
Building. Landlord shall have the right to transfer the Security Deposit to
the purchaser and Landlord shall thereupon be released from all liability for
the return of the Security Deposit. Tenant shall look solely to the new
landlord for the return of such Security Deposit. Tenant shall not assign or
encumber the money deposited as security, and neither Landlord not its
successors or assigns shall be bound by any such assignment or encumbrance.
6. Additional Rent. Any amounts required to be paid by Tenant under this
Lease (in addition to Base Rent) hereunder and any charges or expenses
incurred by Landlord on behalf of Tenant under the terms of this Lease,
including, without limitation, any expenses incurred for taxes, insurance,
maintenance, repairs, replacements and utilities which are the obligation of
Tenant hereunder, shall be considered additional rent (herein "Additional
Rent") payable in the same manner and upon the same terms and conditions as
Base Rent reserved hereunder except as expressly set forth herein to the
contrary. Any failure on the part of Tenant to pay such Additional Rent when
due shall entitle Landlord to the remedies available to it for non-payment of
Base Rent, including without limitation, late charges and interest thereon at
the Interest Rate (as herein defined) pursuant to Section 32 hereof. Tenant's
obligations for payment of Additional Rent shall begin to accrue on the Lease
Commencement Date regardless of the Base Rent Commencement Date.
7. Use of Demised Premises
(a) The Demised Premises shall be used for the Permitted Use set forth in
Section 1(j) and for no other purpose, without prior written consent of
Landlord.
(b) Tenant will permit no liens to attach or exist against the Demised
Premises and shall not commit any waste.
(c) The Demised Premises shall not be used for any illegal purposes and
Tenant shall not allow, suffer, or permit any vibration, noise, odor, light or
other effect to occur within or around the Demised Premises that could
constitute a nuisance or trespass for any tenant of Landlord occupying an
adjoining building, its customers, agents, licensees or invitees. Upon notice
by Landlord to Tenant that any of the aforesaid prohibited uses are occurring,
Tenant agrees to promptly remove or control the same.
(d) Tenant shall not in any way violate any law, ordinance or any
restrictive covenant affecting the Demised Premises as shown by and included
in the Permitted Encumbrances, including specifically, but without limitation,
the Protective Covenants (as defined in Section 33), and shall not in any
manner use the Demised Premises so as to cause cancellation of, or prevent the
use of the fire and extended coverage insurance policy required hereunder.
8. Insurance
(a) Tenant covenants and agrees that from and after the date of deliver of
the Demised Premises from Landlord to Tenant, Tenant will carry and maintain
at its sole cost and expense, the following types of insurance in the amounts
specified and in the form hereinafter provided for:
(i) Liability insurance in the Commercial General Liability form (or
reasonable equivalent thereto) covering the Demised Premises and Tenant's use
thereof against claims for personal injury or death and property damage
occurring upon, in or about the Demised Premises, such insurance to be written
on an occurrence basis (not a claims made basis), to be in combined single
limits amounts not less than Three Million Dollars ($3,000,000.00) and to have
general aggregate limits of not less than Ten Million Dollars ($10,000,000.00)
for each policy year. The insurance coverage required under this Section
8(a)(i) shall, in addition, extend to any liability of Tenant arising out of
the indemnities provided for in Section 11 and, if necessary, the policy shall
contain a contractual endorsement to that effect.
(ii) (A) insurance on the "All-Risk" or equivalent form on a Replacement
Cost Basis against loss or damage to the Building and all other improvements
now or hereafter located on the Land and leased to Tenant hereunder
(including, without limiting the generality of the foregoing, flood insurance
if the Demised Premises are located in a flood hazard area), having a
deductible not greater than Fifty Thousand Dollars ($50,000.00); and in an
amount sufficient to prevent Landlord or Tenant from becoming a co-insurer of
any loss, but in any event in amounts not less than 100% of the actual
replacement value of such Building and improvements Landlord shall have the
right to require from Tenant, not more often than once every twelve (12)
months, reasonable evidence of the value of the Building.
(B) insurance on the "All-Risk" or equivalent form against abatement
or loss of rental by reason of the occurrences covered by the insurance
described in clause (A) above and by reason of any insurable service
interruptions in an amount equal to Base Rent and all Additional Rent for at
least twelve 12) months following the occurrence of such casualty.
(C) boiler and machinery insurance covering losses to or from any
steam boilers, pressure vessels or similar apparatus requiring inspection
under applicable state or municipal laws or regulations which are located at
the Demised Premises or on any other building systems for which such coverage
is available in amounts determined by Tenant to be appropriate or for such
higher amounts as may at any time be reasonably required by Landlord and
having a deductible of not more than Fifty Thousand Dollars ($50,000.00);
coverage shall be on a broad form comprehensive basis including loss of income
with a limit of at least an amount which is reasonably acceptable to Landlord,
and
(D) workmen's compensation insurance to the extent required by the
laws of the state in which the Demised Premises are located to the extent
necessary to protect Landlord, Mortgagee and the Demised Premises against
workmen's compensation claims.
(b) All policies of the insurance provided for in Section 8(a) shall be
issued in form acceptable to Landlord by insurance companies with a rating of
not less than "B-" and financial size of not less than Class XII, in the most
current available 'Best's Insurance Reports' and licensed to do business in
the state in which the Building is located. Tenant shall have the right to
increase the deductible amounts under the policies of insurance required by
Sections 8(a)(ii)(A) and (C) above, subject to the approval of Landlord, such
approval not to be unreasonably withheld; provided, however, that Landlord
shall be entitled to withhold such approval unless Tenant is able to
demonstrate that the requested increase in any such deductible is commercially
reasonable for improvements comparable to the Building. Each and every such
policy:
(i) shall name Landlord as well as Landlord's Mortgagee, as defined in
Section 24 and any other party reasonably designated by Landlord, as an
additional insured. In addition, the coverage described in Section 8(a)(ii)
shall also name Landlord as "loss payee" as its interest may appear.
(ii) shall endeavor to deliver to Landlord prior to (but in no event later
than thirty (30) days after) delivery of possession of the Demised Premises to
Tenant and thereafter within thirty (30) days prior to the expiration of each
such policy, and, as often as any such policy shall expire or terminate.
Renewal or additional policies shall be procured and maintained by Tenant in
like manner and to like extent;
(iii) shall contain a provision that the insurer waives any right of
subrogation against Landlord on account of any loss or damage occasioned to
Landlord, its property, the Demised Premises or its contents arising from any
risk covered by all risks fire and extended coverage insurance of the type and
amount required to be carried hereunder, provided that such waiver does not
invalidate such policies or prohibit recovery thereunder.
(iv) shall contain a provision that the insurer will endeavor to give to
Landlord and such other parties in interest at least thirty (30) days notice
in writing in advance of (but in no event later than thirty (30) days after)
any material change, cancellation, termination or lapse, or the effective date
of any reduction in the amounts of insurance; and
(v) shall be written as a primary policy which does not contribute to and
is n to in excess of coverage which Landlord may carry.
(c) Any insurance provided for in Section 8(a) may be maintained by means of
a policy or policies of blanket insurance, covering additional items or
locations or insureds; provided, however, that:
(i) Landlord and any other parties in interest from time to time
designated by Landlord to Tenant shall be named as an additional insured
thereunder as its interest may appear;
(ii) the coverage afforded Landlord and any such other parties in interest
will not be reduced or diminished by reason of the use of such blanket policy
of insurance;
(iii) any such policy or policies shall specify therein the amount of the
total insurance allocated to the Tenant's improvements an property, and;
(iv) the requirements set forth in this Section 8 are otherwise satisfied.
(d) In the event that Tenant shall fail to carry and maintain the insurance
coverages set forth in this Section 8, Landlord may upon thirty (30) days
notice to Tenant (unless such coverages will lapse in which event no such
notice shall be necessary) procure such policies of insurance and Tenant shall
promptly reimburse Landlord therefor.
(e) Each party may, at any time, but not more than one (1) time in any
twelve (12) month period, require a review of the insurance coverage and
limits of liability set forth in Section 8 to determine whether the coverage
and the limits are reasonable and adequate in the then existing circumstances.
The review shall be undertaken on a date and at a time set forth in a party's
notice requesting review and shall be conducted at the Demised Premises. If
the parties are, after a review, unable to agree on either the coverage or the
limits, then the parties shall employ the Dispute Resolution Procedure (as
defined in Section 34) with insurance advisors having at least ten (10) years
experience in insurance for commercial and industrial properties serving as
Officials. In rendering the decision the Officials shall consider the
requirements of Section 8, the cost of the insurance to be obtained,
inflation, changes in condition, and the insurance then being carried by
similar industrial use developments in the area of the Project.
9. Utilities. Commencing on the Lease Commencement Date and continuing
through the remainder of the Term, Tenant shall be responsible for maintaining
the portion of the utility lines located between the Land boundary line and
the Building and shall promptly pay as billed to Tenant all rents and charges
for water and sewer services and all costs and charges for gas, steam,
electricity, fuel, light, power, telephone, heat and any other utility or
service used or consumed in or servicing the Demised Premises and all other
costs and expenses involved in the care, management and use thereof to the
extent charged by the applicable utility companies. If Tenant fails to pay
any utility bills or charges, Landlord may, at its option and upon reasonable
notice to Tenant, pay the same and in such event, the amount of such payment,
together with interest thereon at the Interest Rate as defined in Section 32
from the date of such payment by Landlord, will be added to Tenant's next due
payment, as Additional Rent.
10. Taxes and Other Impositions.
(a) Commencing on the Lease Commencement Date and continuing through the
remainder of the Term, Tenant shall be solely obligated for the costs of all
real estate taxes and other impositions for the Demised Premises, including
the Building and the Land, and Tenant agrees to pay all installments of such
imposition which accrue during the Term. This provision shall expressly
survive the expiration or termination of this Lease in order to settle up
Tenant's pro rata share of such taxes for the final Lease Year of the Term.
(b) Real estate taxes and other impositions shall mean all ad valorem taxes,
water and sanitary taxes, assessments, liens, licenses and permit fees (except
for any permit fees associated with the initial construction to be performed
by Landlord pursuant to Section 8 hereof) or any other taxes imposed, assessed
or levied against the Land and the Demised Premises, and all other charges,
impositions or burdens of whatever kind and nature, whether or not
particularized by name, and whether general or special, ordinary or
extraordinary, foreseen or unforeseen, which at any time during the Term may
be created, assessed, confirmed, adjudged, imposed or charged upon or with
respect to the Demised Premises, the Land, or any improvements made thereto,
or on any part of the foregoing or any appurtenances thereto, or directly upon
this Lease or the rent payable hereunder of amount payable by any subtenants
or other occupants of the Demised Premises, or upon this transaction or any
documents to which Tenant is a party or successor-in-interest, or against
Landlord because of Landlord's estate or interest herein, by any governmental
authority, or under any law, including, among others, all rental, sales, use,
inventory or other similar taxes and any special tax bills and general,
special, or other assessments and liens or charges made on local or general
improvements or any governmental or public power or authority whatsoever.
(c) Notwithstanding the foregoing, if any imposition shall be created,
levied, assessed, adjudged, imposed, charged or become a lien with respect to
a period of time which commences before the Lease Commencement Date or ends
after the expiration date of the Term (other than an expiration date of the
Term by reason of breach of any of the terms hereof by Tenant), then Tenant
shall only be required to pay that portion of such imposition which is equal
to the proportion of said period which falls within the Term if Tenant is
permitted to pay (by the assessing and collecting authorities) and elects to
pay any imposition in installments. Tenant shall nevertheless pay any and all
installments thereof which would otherwise become delinquent prior to the
expiration of the Term or sooner termination of the Term. Nothing contained
in this Lease shall require Tenant to pay any income or excess profits or
taxes assessed against Landlord, or any corporation, capital stock and
franchise taxes imposed upon Landlord. Landlord agrees to deliver to Tenant,
copies of all such notices of real estate taxes and impositions which Landlord
receives.
(d) Tenant agrees to pay such real estate taxes and impositions prior to
delinquency.
(e) Tenant shall furnish Landlord, not later than thirty (30) days after the
last day upon which they may be paid without any fine, penalty, interest or
additional cost, but in any event, by the due date thereof, evidence of the
payment of all real estate taxes and impositions.
(f) Landlord agrees that Tenant's financial obligations for the assessments
due under the Protective Covenants (as hereinafter defined) shall be capped at
$9.817 per year during the initial Term of this Lease.
11. Maintenance and Repairs.
(a) From and after the Lease Commencement Date and throughout the Term,
Tenant shall, at its own cost and expense, except as provided in Section 11(b)
below, maintain the Demised Premises in good condition and repair, including
but not limited to the electrical systems, heating air conditioning and
ventilation systems, plate glass windows and doors, sprinkler and plumbing
systems. Tenant shall maintain in full force and effect a service contract
for the heating, ventilation and air conditioning systems with an entry
reasonably acceptable to Landlord. Tenant's obligations to repair and
maintain the Demised Premises shall also include, without limitation, repair,
maintenance and replacement of all plumbing and sewage facilities within and
about the Demised Premises (including, specifically, but without limitation,
the portion of water and sewer lines between the boundary of the Land and
Building), fixtures, interior walls, floors, ceilings, windows, doors,
storefronts, plate glass, skylights, all electrical facilities and equipment
including, without limitation, lighting fixtures, lamps, fans and any exhaust
equipment and systems, electrical motors, and all other appliances and
equipment of every kind and nature located in, upon or about the Demised
Premises including, without limitation, exterior lighting and fencing, and any
sidewalks, parking areas and access ways (including, without limitation, curbs
and striping) upon the Demised Premises and the landscaping and grounds
surrounding the Building. All glass, both interior and exterior, is at the
sole risk of Tenant; and any broken glass shall be promptly replaced at
Tenant's expense by glass of like kind, size and quality. Unless the same is
caused solely by the negligent action r inaction of Landlord, Landlord shall
not be liable to Tenant or to any other person for any damage occasioned by
failure in any utility system or by the bursting or leaking of any vessel or
pipe in or about the Demised Premises, or for any damage occasioned by water
coming into the Demised Premises or arising from the acts or neglects of
occupants of adjacent property or the public.
(b) Landlord shall, at its own cost and expense, maintain in good condition
and repair the exterior walls, roof, foundation and structural frame of the
Building. Landlord's obligation shall exclude the cost of any maintenance or
repair required because of the negligence of Tenant, Tenant's employees, agents
or any other party acting on behalf of Tenant, the cost of which shall be the
responsibility of Tenant.
12. Tenant's Personal Property Indemnity. All of Tenant's personal property
in the Demised Premises shall be and remain at Tenant's sole risk, and
Landlord shall not be liable for and Tenant hereby releases Landlord from any
and all liability for theft thereof or any damage thereto occasioned by any
acts or negligence of any third persons, or any act of God, except to the
extent caused by the acts or negligence of Landlord, its agents, employees and
contractors. As to personal injury or property damage (including personal
property of Tenant), Landlord shall not be liable for any injury to the person
or property of Tenant or other persons in or about the Demised Premises,
Tenant expressly agreeing to indemnify and save Landlord harmless in all such
cases, except to the extent occasioned by any acts of negligence of Landlord,
its agents, employees or contractors. Tenant further agrees to reimburse
Landlord for any reasonable costs or expenses, including without limitation
attorneys' fees, which Landlord may actually and reasonably incur in
investigation, handling or litigating any such claim against Landlord by a
third person. Tenant shall have the option to defend Landlord with counsel
selected by Tenant and reasonably acceptable to Landlord. The provisions of
this Section 12 shall survive the expiration or termination of this Lease with
respect to any damage, injury or death occurring before such expiration or
termination.
13. Tenant's Fixtures. Tenant shall have the right to install in the Demised
Premises trade fixtures required by Tenant or used by it in its business and
if installed by Tenant, to remove any or all such trade fixtures from time to
time during and upon termination of this Lease, provided, however, that Tenant
shall repair and restore any damage or injury to the Demised Premises (to the
condition in which the Demised Premises existed prior to such installation)
caused by the installation and/or removal of any such trade fixtures.
14. Signs. No sign, advertisement or notice shall be inscribed, painted,
affixed, or displayed on the windows or exterior walls of the Demised Premises
or on any public area of the Building, except in such places, numbers, sizes,
colors and styles as are approved in advance in writing by Landlord, which
approval shall not be unreasonably withheld or delayed and which conform to
all applicable laws and/or ordinances and the Protective Covenants. Any and
all permitted signs shall be installed, maintained and removed by Tenant, at
Tenant's sole expense.
15. Waiver of Landlord's Lien. Landlord hereby waives its right to lien
Tenant's personal property and trade fixtures.
16. Governmental Regulations. Tenant shall promptly comply throughout the
Term of this Lease, at Tenant's sole cost and expense, with all present and
future laws, ordinances and regulations of all applicable governing
authorities relating to all or any part of the Demised Premises, foreseen or
unforeseen, ordinary as well as extraordinary, or to the use or manner of use
of the Demised Premises or to the sidewalks, parking areas, curbs and access
ways adjoining the Demised Premises. In the event that such law, ordinance or
regulation promulgated or effective after the Lease Commencement Date requires
a renovation, improvement or replacement to the Demised Premises, then Tenant
shall be required to make such renovation, improvement or replacement at
Tenant's sole cost and expense. Tenant shall also observe and comply with the
requirements of all policies of public liability, fire and other policies of
insurance at any time in force with respect to the Demised Premises. Landlord
represents and warrants that as of the Lease Commencement Date and to
Landlord's actual knowledge the design and construction of the improvements on
the land materially complies with all applicable federal, state, courts and
municipal laws, ordinances and codes.
17. Environmental Matters.
(a) For purposes of this Lease:
(i) "Contamination" as used herein means the uncontained or uncontrolled
presence of or release of Hazardous Substances (as hereinafter defined) into
any environmental media from, upon, within, below, into or on any portion of
the Demised Premises, the Building, or the Project so as to require
remediation, cleanup or investigation under any applicable Environmental Law
(as hereinafter defined).
(ii) "Environmental Laws" as used herein means all federal, state, and
local laws, regulations, orders, permits, ordinances or other requirements,
concerning protection of human health, safety and the environment, all as may
be amended from time to time.
(iii) "Hazardous Substances" as used herein means any hazardous or toxic
substance, material, chemical, pollutant, contaminant or waste as those terms
are defined by any applicable Environmental Laws (including, without
limitation, the Comprehensive Environmental Response Compensation and
Liability Act 42 USC 9601 et seq ("CERCLA") and the Resource Conservation and
Recovery Act, 42 USC 6901 et seq ["RCRA"]) and any solid wastes,
polychlorinated biphenyl, urea formaldehyde, asbestos, radioactive materials,
radon, explosives, petroleum products and oil.
(b) Landlord represents that except as set forth in environmental reports
delivered by Landlord to Tenant
(i) Landlord has not treated, stored or disposed of any Hazardous
Substances upon or within the Demised Premises and
(ii) to Landlord's actual knowledge, no Hazardous Substances are present on
or under the Land as of the date of this Lease.
(c) Tenant represents that all its activities on the Demised Premises or
the Project during the course of this Lease will be conducted in compliance
with Environmental Laws. Tenant warrants that it is currently in compliance
with all applicable Environmental Laws and that there are no pending or
threatened notices of deficiency, notices of violation, orders, or judicial or
administrative actions involving alleged violations by Tenant of any
Environmental Laws. Tenant, at Tenant's sole cost and expense, shall be
responsible for obtaining all permits or licenses or approvals under
Environmental Laws necessary for Tenant's operation of its business on the
Demised Premises and shall make all notifications and registrations required
by any applicable Environmental Laws. Tenant, at Tenant's sole cost and
expense, shall at all times comply with the terms and conditions of all such
permits, licenses, approvals, notifications and registrations and with any
other applicable Environmental Laws affecting in any way the Demised Premises.
Tenant warrants that it will obtain all such permits, licenses or approvals
and make all such notifications and registrations required by any applicable
Environmental Laws necessary for Tenant's operation of its business on the
Demised Premises.
(d) Tenant shall not cause or permit any Hazardous Substances to be brought
upon, kept, stored or used in or about the Demised Premises, the Building, or
the Project without the prior written consent of Landlord, which consent may
be granted or withheld in the absolute discretion of Landlord; provided,
however, that the consent of Landlord shall not be required for the use at the
Demised Premises of cleaning supplies, toner for photocopying machines and
other similar materials, in containers and quantities reasonably necessary for
and consistent with normal and ordinary use by Tenant, at the Demised
Premises, in the routine operation or maintenance of Tenant's office equipment
or in the routine janitorial service, cleaning and maintenance for the Demised
Premises.
(e) Tenant shall not cause or permit the release of any Hazardous Substances
by Tenant or its agents, contractors, employees or invitee into any
environmental media such as air, water or land, or into or on the Demised
Premises, the Building or the Project in any manner that violates any
Environmental Laws. If such release shall occur, Tenant shall
(i) make all steps reasonably necessary to contain and control such release
and any associated Contamination,
(ii) clean up or otherwise remedy such release and any associated
Contamination to the extent required by, and take any and all other actions
required under, applicable Environmental Laws and
(iii) notify and keep Landlord reasonably informed of such release and
response.
(f) Regardless of any consent granted by Landlord pursuant to Section 17(d)
allowing Hazardous Substances upon the Demised Premises, Tenant shall under no
circumstances whatsoever
(i) cause or permit any activity on the Demised Premises which would cause
the Demised Premises to become subject to regulation as a hazardous waste
treatment, storage or disposal facility under RCRA or the regulations
promulgated thereunder,
(ii) discharge Hazardous Substances into the storm sewer system serving the
Project, or
(iii) install any underground storage tank or underground piping on or
under the Demised Premises.
(g) Tenant shall and hereby does indemnify Landlord and hold and defend
Landlord harmless from and against any and all reasonable and actual expense
loss, and liability suffered by Landlord (with the exception of those
expenses, losses, and liabilities arising from Landlord's own negligence or
willful act) by reason of Tenant's storage, generation, handling, treatment,
transportation, disposal, or arrangements for transportation or disposal of
any Hazardous Substances (whether accidental, intentional, or negligent) or by
reason of Tenant's breach of any of the provisions of this Section 17. Such
expenses, losses and liabilities shall include, without limitation
(i) any and all expenses that Landlord may incur to comply with any
Environmental Laws as a result of Tenant's failure to comply therewith,
(ii) any and all costs that Landlord may incur in studying or remedying any
Contamination at or arising from the Demised Premises as a result of a failure
by Tenant to comply with this Section 17 or Environmental Laws,
(iii) any and all costs that Landlord may incur in studying, removing,
disposing or otherwise addressing any Hazardous Substances which are present
at the Demised Premises as a result of a failure by Tenant to comply with this
Section 17 or Environmental Laws,
(iv) any and all fines, penalties or other sanctions assessed upon and
Landlord by reason of Tenant's failure to comply with Environmental Laws, and
(v) any and all reasonable legal and professional fees and costs incurred by
Landlord in connection with the foregoing. The indemnity contained herein
shall survive the termination or expiration of this Lease.
(h) Landlord shall have the right, but not the obligation, to enter the
Demised Premises at reasonable times throughout the Term, after prior written
notice to Tenant, to audit and inspect the Demised Premises for Tenant's
compliance with this Section 17.
18. Plans and Specifications for Construction of Demised Premises.
(a) Within sixty (60) days after the date hereof, Landlord shall prepare at
Landlord's sole cost and expense, and submit to Tenant a set of plans and
specifications (collectively, the "Plans and Specifications") based upon the
Preliminary Plans, covering all work to be performed by Landlord in
constructing the Building and other improvements which shall be a part of the
Demised Premises. Tenant shall have ten (10) business days after receipt of
the Plans and Specifications in which to review and approve the Plans and
Specifications. Tenant shall have the right to object to the Plans and
Specifications if they are not a logical evaluation from the Preliminary
Plans. In the event Tenant shall fail to review the Plans and Specifications
within such time period, Tenant shall be deemed to have approved such Plans
and Specifications. Any subsequent changes to the Plans and Specifications
requested by Tenant shall be at Tenant's sole cost and expense and subject to
Landlord's written approval (herein referred to as a "Change Order"), which
approval shall not be unreasonably withheld or delayed. Tenant may by
comparable materials, or with materials of a higher grade, but Tenant shall
have no right to change the materials to materials which, in Landlord's
reasonable opinion, are of an inferior grade or quality to those called for in
the Plans and Specifications. The aggregate cost of all such Change Orders in
excess of the costs reflected in the Plans and Specifications shall be paid in
cash by Tenant to Landlord upon Landlord's submission to Tenant of written
request for payment of such additional cost and not later than the Lease
Commencement Date. The cost to Tenant for Change Orders shall be Landlord's
cost plus fifteen percent (15%) of such amounts as Landlord's overhead.
(b) Landlord shall, at its sole cost and expense construct the Building and
other improvements pursuant to the Plans and Specifications, and in accordance
with the terms and conditions of this Lease ("Landlords Work"). Landlord
shall make no changes to the Plans and Specifications without Tenant's written
consent, with the exception of immaterial details, which will not affect
Tenant's use or occupancy of the Building or other improvements. Landlord
shall have the final Plans and Specifications sealed by the Architect,
obtained all required building permits, certificates and licenses and
thereafter, in accordance with all applicable law and insurance requirements,
perform Landlord's Work in a diligent and good workmanlike manner, subject to
Ordinary Delay and Tenant Delay (as those terms are defined below).
(c) Landlord shall use reasonable speed and diligence to achieve Substantial
Completion, at Landlord's sole cost and expense, on or before February 1,
1996. In the event that Landlord is unable to achieve Substantial Completion
on or before March 1, 1996 (as may be extended for delay as set forth in
Section 18(e) below), the first months' Base Rent shall abate. In the event
that Landlord is unable to achieve Substantial Completion on or before April
1, 1996 (as may be extended for delay as set forth in Section 18(c) below),
Tenant shall receive two (2) days additional free rent for each day of delay
thereafter, up to a maximum of thirty (30) days additional free rent. In the
event that Landlord is unable to achieve Substantial Completion on or before
May 1, 1996 (as may be extended for delay as set forth in Section 18(e)
below), Tenant may, at its option and sole remedy, terminate this Lease by
written notice to Landlord given on or before June 1, 1996 (provided that
Substantial Completion has not occurred prior to Landlord's receipt of said
termination notice), and thereafter neither Landlord nor Tenant shall have any
further obligation hereunder.
(d) No later than the date which is seven (7) days prior to the estimated
date of Substantial Completion, Landlord shall give Tenant written notice that
Landlord estimates Substantial Completion will occur seven (7) days
thereafter. Immediately after receipt of such notice, Tenant may commence
construction and installation of Tenant's improvements and fixtures within the
Demised Premises (herein referred to as "Tenant's Work"), Landlord and Tenant
shall cause their respective workmen to work in cooperation with each other.
(e) The Substantial Completion target date of February 1, 1996 shall be
extended for one(1) day for each day that Substantial Completion is delayed;
(i) as a result of the failure by Tenant to timely approve or disapprove
the Plans and Specifications, or as a result of Change Orders or other changes
requested by Tenant in the Plans and Specifications after the Tenant's
approval thereof (collectively referred to herein as "Tenant Delay"); or
(ii) due to strikes or other labor troubles not specific to the Demised
Premises, governmental restrictions and limitations, war or other national
emergency, noon-availability of materials or supplies, delay in
transportation, accidents, floods, fire, damage or other casualties, weather
or acts or omissions of Tenant, or delays by utility companies in bringing
utility lines to the Demised Premises all beyond the reasonable control of
Landlord (collectively referred to herein as "Ordinary Delay"). The inability
or refusal of Landlord to make any monetary payment shall not constitute or
result in an Ordinary Delay.
(f) On or prior to the date of Substantial Completion of the Demised
Premises, a representative of Landlord and a representative of Tenant
together shall inspect the Demised Premises and, within fifteen (15) days
thereafter, generate a punch list of defective or uncompleted items relating
to the completion of construction of the improvements within the Demised
Premises, which punch list shall indicate the estimation by the parties of the
cost of each item. Landlord shall, within a reasonable time after such punch
list is prepared and agreed upon by Landlord and Tenant, complete such
incomplete work and remedy such defective work as are set forth on the punch
list.
(g) Upon the Lease Commencement Date, Tenant shall execute and deliver to
Landlord a letter confirming the Lease Commencement Date and expiration date of
this Lease.
(h) Landlord hereby warrants to Tenant that the materials and equipment
furnished by Landlord's contractors in the completion of Landlord's Work will
be of good quality and new, that during the one (1) year period following the
date of Substantial Completion of Landlord's Work, such materials and
equipment and the work of such contractors shall be free from defects not
inherent in the quality required or permitted hereunder, and that such work
will conform to the Plans and Specifications (the foregoing referred to herein
as "Landlord's Warranty"). This warranty shall exclude damages or defects
caused by abuse by Tenant, its employees, invitee, licensees, contractors and
agents, improper or insufficient maintenance, improper operation or normal
wear and tear under normal usage.
19. Tenant Alterations and Additions
(a) Except as to any nonstructural alterations, improvements or additions to
the Demised Premises (collectively a "Tenant Change"), which Tenant changes
individually cost less than $20,000.00 and in the aggregate over the Term
total less than $200,000.00, Tenant shall not make or permit to be made any
other Tenant Change without first obtaining on each occasion Landlord's prior
written consent (which consent Landlord agrees not unreasonably to withhold)
and Mortgagee's prior written consent (if such consent is required). With
respect to any such Tenant Change requiring Landlord's prior written consent,
Tenant shall furnish Landlord with a full set of plans and specifications for
any such Tenant Change prior to the commencement thereof together with an
original builder's risk policy of insurance in form and amount of coverage
reasonably acceptable to Landlord, showing Tenant as named insured, and
Landlord and Mortgagee (if applicable) as loss payees. If Landlord, a the
time of giving his approval to any Tenant Change, notifies Tenant that
approval is conditioned upon restoration, then upon written request of
Landlord, Tenant shall, at its sole cost and expense and upon the termination
of this Lease, remove the same and restore the Demised Premises to its
condition prior to such Tenant Change.
(b) All Tenant Changes shall be performed in accordance with all legal
requirements applicable thereto and in a good and workmanlike manner with
first-class materials and, upon completion of any Tenant Change, Tenant shall
furnish to Landlord "as-built" drawings showing the location and type thereof.
No Tenant Change shall impair the structural strength of the Building or
reduce its value. Tenant shall take or cause to be taken all steps that are
required or permitted by law in order to avoid the imposition of any
materialmen's or mechanics' liens upon the Building or the Demised Premises,
and Tenant shall pay the full cost of any Tenant Change. Except as otherwise
provided herein and in Section 12 hereof, all Tenant Changes and all repairs
and all other property attached to or installed on the Demised Premises by or
on behalf of Tenant shall immediately upon the expiration or earlier
termination of the Term be and become part of the Demised Premises surrendered
to Landlord upon the expiration or earlier termination of the Term. With
respect to any Tenant Change, whether or not requiring Landlord's prior
consent, Landlord shall have no duty or obligation to make any replacement or
repair thereto, whether interior or exterior, structural or non-structural,
ordinary or extraordinary or as required to comply with any law.
20. Services by Landlord. From and after the Lease Commencement Date,
Landlord shall be responsible for providing no services to the Demised
Premises whatsoever, except for the services for which Landlord is
specifically obligated pursuant to Section 18(f) and (h).
21. Fire and Other Casualty.
(a) If the Building or other improvements on the Land shall be damaged or
destroyed by fire or other casualty, Tenant at Tenant's sole cost and expense,
shall promptly and diligently proceed to adjust the loss with the insurance
companies (subject to the approval of the Mortgagee (if applicable) and of
Landlord) and arrange for the disbursement of insurance proceeds, and repair,
rebuild or replace such Building and other improvements, so as to restore the
Demised Premises to the condition in which they were immediately prior to such
damage or destruction. The net proceeds of any insurance recovered by reason
of such damage or destruction in excess of the cost of adjusting the insurance
claim and collecting the insurance proceeds (such excess being referred to
herein as the "Net Insurance Proceeds") shall be held by the Mortgagee
(provided that such Mortgagee is a bank savings association, insurance company
or other similar institutional lender, herein called "Institutional Lender"),
or, if no Institutional Lender then holds a mortgage lien, or deed of trust on
the Demised Premises, by any national or state chartered bank which is
reasonably acceptable to Landlord and Tenant, and the Net Insurance Proceeds
shall be released for the purpose of paying the fair and reasonable cost of
restoring such Building and other improvements. Such Net Insurance Proceeds
shall be released to Tenant, or to Tenant's contractors from time to time as
the work progresses, pursuant to such requirements and limitations as may be
reasonably acceptable to Landlord and Mortgagee (if the Mortgagee so requires)
including without limitation, lien waivers from each of the contractors,
subcontractors, materialmen and suppliers performing the work. If the Net
Insurance Proceeds (less any applicable deductible) are insufficient to
restore the Demised Premises, Tenant shall be obligated to pay such deficiency
and the amount of any such deductible. Notwithstanding the foregoing if the
Net Insurance Proceeds are less than Twenty-Five Thousand Dollars
($25,000.00), and if the Mortgagee agrees in writing such Net Insurance
Proceeds may be held by Tenant and used by Tenant to pay the fair and
reasonable cost of restoring such Demised Premises and other improvements. If
the Net Insurance Proceeds exceed the full cost of the repair, rebuilding or
replacement of the damaged Building or other Improvements, if the Mortgagee
does not retain such excess proceeds and supply the same on account of the
debt owed to it, then the amount of such excess Net Insurance Proceeds shall
be paid to Tenant upon the completion of such repair, rebuilding or
replacement. Landlord agrees not unreasonably to withhold or delay any
approvals required to be obtained by Tenant from Landlord pursuant to the
provisions of this Section 21(a). Landlord agrees to cooperate with Tenant,
at no cost to Landlord, in connection with Tenant's request to Mortgagee to
release the Net Insurance Proceeds to Tenant.
(c) Notwithstanding the foregoing, in the event that the Demised Premises
are so destroyed in the last thirty (30) months of the then Term so as to
prevent Tenant from operating a substantial portion of its business within the
Demised Premises and which cannot be repaired by a date which is ninety (90)
days prior to the expiration of the then Term, then Tenant may terminate and
cancel this Lease effective as of the date of such casualty by giving written
notice to Landlord within thirty (30) days of the date of such casualty. Upon
the giving of such notice, all obligations hereunder with respect to periods
from and after the effective date of termination shall thereupon cease and
terminate, provided, however, that a condition of said termination is that
Tenant pay to Landlord an amount equal to the deductible under Tenant's
insurance policy covering said casualty and that Tenant assign to Landlord all
insurance proceeds relating to said casualty.
22. Condemnation.
(a) If all of the Demised Premises is taken or condemned for a public or
quasi-public use, this Lease shall terminate as of the earlier of the date
title to the condemned real estate vests in the condemnor and the date on
which Tenant is deprived of possession of all of the Demised Premises. In
such event, the Base Rent herein reserved and all Additional Rent and other
sums payable hereunder shall be apportioned and paid in full by Tenant to
Landlord to that date, all Base Rent, Additional Rent and other sums payable
hereunder prepaid for periods beyond that date shall forthwith be repaid by
Landlord to Tenant, and neither party shall thereafter have any liability
hereunder, except that any obligation or liability of either party, actual or
contingent, under this Lease which has accrued on or prior to such termination
date shall survive.
(b) In the event of a taking of "Substantially All of the Demised Premises"
(as herein defined), Tenant may, at its option, upon thirty (30) days' written
notice to Landlord, which shall be given no later than sixty (60) days
following the taking, have the right to terminate this Lease. All Base Rent
and other sums payable by Tenant hereunder shall be apportioned and paid
through and including the date of taking and neither Landlord nor Tenant shall
have any rights in any compensation or damages payable to the other in
connection with such condemnation. For purposes of this provision,
"Substantially All of the Demised Premises" shall mean
(i) so much of the Demised Premises as when taken, leaves the untaken
portion unavailable, in the reasonable opinion of Tenant and Landlord, for the
continued feasible and economic operation of the Demised Premises by Tenant
for the same purposes as immediately prior to such taking or as contemplated
herein;
(ii) so many of the parking spaces on the Land as reduces the parking ratio
below that which is required by the zoning ordinance applicable to the Project
and Landlord's failure to provide substantially similar alternative parking
reasonably acceptable to Tenant within sixty (60) days after such taking, or
(iii) so much of the Demised Premises that access to the Demised Premises
is materially impeded as reasonably determined by Landlord and Tenant.
(c) If only part of the Demised Premises is taken or condemned for a public
or quasi-public use and this Lease does not terminate pursuant to Section
23(b) above, Tenant shall restore, using all reasonable speed and diligence,
the Demised Premises to a condition and to a size as nearly comparable as
reasonably possible to the condition and size thereof immediately prior to the
taking and Landlord to the extent of the award it receives in excess of the
costs of collecting the award and value of the land taken (herein, the "Net
Condemnation Proceeds), shall release the Net Condemnation Proceeds to Tenant
for that purpose and Tenant shall have the right to participate in any
proceeding relating to the awarding of restoration damages. There shall be an
equitable abatement of the Base Rent and Additional Rent according to the
value of the Demised Premises before and after the taking. Determination of
such value of the Demised Premises after a partial taking shall be mutually
agreed to by the parties within sixty (60) days from the date of the taking
and if the parties cannot so agree, then such value shall be determined in
accordance with the Dispute Resolution Procedure (as defined in Section 34),
with real estate appraisers having at least ten (10) years experience
appraising commercial real estate, including build-to-suit leases, serving as
Officials. Pending such determination, Tenant shall continue to pay the Base
Rent and Additional Rent as herein originally specified, and upon such
determination, if Tenant is entitled to a refund because of an overpayment of
Base Rent or Additional Rent, Landlord shall make the same promptly, or in
lieu thereof credit the amount thereof to future installments of Base Rent or
Additional Rent as they become due.
(d) Landlord shall be entitled to receive the entire award is any proceeding
with respect to any taking provided for in that Section 22, without deduction
therefrom for any estate vested in Tenant by this Lease, and Tenant shall
receive no part of such award. Nothing herein contained shall be deemed to
prohibit Tenant from making a separate claim, against he condemnor, to the
extent permitted by law, for the value of the unamortized tenant improvements
(installed in accordance with Section 19 at Tenant's expense). Tenant's
movable trade fixtures, machinery and moving expenses, provided that, in any
case, the making of such claim shall not and does not adversely affect or
diminish Landlord's award.
23. Tenant's Default.
(a) The occurrence of any one or more of the following events shall
constitute an event of default (herein referred to as an "Event of Default")
of Tenant under this Lease;
(i) if Tenant fails to pay Base Rent or any Additional Rent hereunder as
and when such rent becomes due and such failure shall continue for more than
ten (10) days after receipt of written notice from Landlord of such failure;
(ii) if Tenant fails to pay Base Rent or any Additional Rent on time more
than three (3) times in any period of twelve (12) months, notwithstanding that
such payments have been made within the applicable cure period;
(iii) [intentionally deleted]
(iv) if Tenant permits to be done anything which creates a lien upon the
Demised Premises and fails either (A) to discharge, (B) bond such lien, or (C)
________ security with Landlord acceptable to Landlord, within thirty (30)
days after receipt by Tenant of written notice thereof;
(v) if Tenant violates the provisions of Section 30 of this Lease by
attempting to make an unpermitted assignment or sublease;
(vi) if Tenant fails to maintain in force all policies of insurance
required by this Lease and such failure shall continue for more than thirty
(30) days after Landlord gives Tenant notice of such failure;
(vii) if any petition is filed by or against Tenant or any guarantor of
this Lease under any present or future section or chapter of the Bankruptcy
Code, or under any similar law or statute of the United States or any state
thereof (which, the case of an involuntary proceeding, is not permanently
discharged, dismissed, stayed, or vacated, as the case may be, within sixty
(60) days of commencement), or if any order for relief shall be entered
against Tenant or any guarantor of this Lease in any such proceedings;
(viii) if Tenant or any guarantor of this Lease becomes insolvent or makes
a transfer in fraud of creditors or makes an assignment for the benefit of
creditors;
(ix) if a receiver custodian or trustee is appointed for the Demised
Premises or for all or substantially all of the assets of Tenant or of any
guarantor of the Lease, which appointments is not vacated within sixty (60)
days following the date of such appointment; or
(x) if Tenant fails to perform or observe any other term of this Lease
and such failure shall continue for more than thirty (30) days after Landlord
gives Tenant notice of such failure, or if such failure cannot be corrected
within such thirty (30) day period, if Tenant does not commence to correct
such default within said thirty (30) day period and thereafter diligently
prosecute the correction of same to completion within a reasonable time and in
any event prior to the time a failure to complete such correction could cause
Landlord to be subject to t a prosecution for violation of any law, rule,
ordinance or regulation or causes, or could cause a default under any mortgage
or other Permitted Encumbrance.
(b) Upon the occurrence of any one or more of the aforesaid Events of
Default, or upon the occurrence of any other default or defaults by Tenant
under this Lease, Landlord may, at Landlord's option, without any demand or
notice whatsoever (except as expressly required in this Section 23);
(i) Terminate this Lease by giving Tenant notice of termination in which
event this Lease shall expire and terminate on the date specified in such
notice of termination with the same force and effect as though the date so
specified were the date herein originally fixed as the termination date of the
Term, and all rights of Tenant under this Lease and in and to the Demised
Premises shall expire and terminate and Tenant shall remain liable for all
obligations under this Lease arising up to the date of such termination, and
Tenant shall surrender the Demised Premises to Landlord on the date specified
in such notice, and if Tenant fails to so surrender, Landlord shall have the
right without notice to enter upon and take possession of the Demised Premises
and to expel or remove Tenant and its effects without being liable for
prosecution or any claim for damages therefore; or
(ii) Terminate this Lease as provided in Section 23(b)(i) hereof and
recover from Tenant all damages Landlord may incur by reason of Tenant's
default, including, without limitation, a sum which, as the date of such
termination, represents the value of the excess, if any, of (1) the Base Rent,
Additional Rent and all other sums which would have been payable hereunder by
Tenant for the period commencing with the day following the date of such
termination and ending with the expiration date had this Lease not been
terminated over (2) the aggregate reasonable rental value of the Demised
Premises for the period commencing with the day following the date of such
termination and ending with the expiration date had this Lease not been
terminated, plus (3) the costs of recovering possession of the Demised
Premises and all other expenses incurred by Landlord due to Tenant's default,
including, without limitation, reasonable attorney's fees, plus (4) the unpaid
Base Rent and Additional Rent earned as of the date of termination plus any
interest and late fees due hereunder, plus other sums of money and damages
owing on the date of termination by Tenant to Landlord under this Lease or in
connection with the Demised Premises, all of which excess sum shall be deemed
immediately due and payable; provided, however, that such payments shall not
be deemed a penalty but shall merely constitute payment of liquidated damages,
it being understood and acknowledged by Landlord and Tenant that actual
damages to Landlord are extremely difficult, if not impossible, to ascertain.
The excess, if any, of subparagraph (ii)(1) over subparagraph (ii)(2) herein
shall be discounted to present value at the "Treasury Yield" rate. "Treasury
Yield" shall mean the rate of return in percent per annum of Treasury Constant
Maturities for the length of time specified as published in document
H.15(paragraph 19) (presently published by the Board of Governors of the U.S.
Federal Reserve System titled "Federal Reserve Statistical Release") for the
calendar week immediately preceding the calendar week in which the termination
occurs. If the rate of return of Treasury Constant Maturities of the calendar
week in question is not published on or before the business day preceding the
date of the Treasury Yield in question is to become effective, then the
Treasury Yield shall be based upon the rate of return of Treasury Constant
Maturities of the length of time specified for the most recent calendar week
for which such publication has occurred. If no rate of return for Treasury
Constant Maturities most nearly corresponding to the length of the applicable
period specified. If the publishing of the rate of return of Treasury
Constant Maturities is ever discontinued, then the Treasury Yield shall be
based upon the Index which is published by the Board of Governors of the U.S.
Federal Reserve System in replacement thereof or, if no such replacement Index
is published, the index which, in Landlord's reasonable determination, most
nearly corresponds to the rate of return of Treasury Constant Maturities. In
determining the aggregate reasonable rental value pursuant to subparagraph
(ii)(2) above, the parties hereby agree that, at the time Landlord seeks to
enforce this remedy, all relevant factors should be considered, including, but
not limited to,
(a) the length of time remaining in the Term,
(b) the then current market conditions in the general area in which the
Building is located,
(c) the likelihood of reletting the Demised Premises for a period of time
equal to the remainder of the Term,
(d) the net effective rental rates then being obtained by landlords for
similar type space of similar size in similar type buildings in the general
area in which the Building is located,
(e) the vacancy levels in the general area in which the Building is located,
(f) current levels of new construction that will be completed during the
remainder of the Term and how this construction will likely affect vacancy
rates and rental rates an d
(g) inflation, or
(iii) Without terminating this Lease, and with or without notice to
Tenant, Landlord may in its own name but as agent for Tenant enter into and
upon and take possession of the Demised Premises or any part thereof, and, at
Landlord's option remove persons and property therefrom, and such property, if
any, may be removed and stored in a warehouse or elsewhere at the cost of and
for the account of Tenant, all without being deemed guilty of trespass or
becoming liable for any loss or damage which may be occasioned thereby, and
Landlord may rent the Demised Premises or any portion thereof as the agent of
Tenant with or without advertisement, and by private negotiations and for any
term upon such terms and conditions as Landlord may deem necessary or
desirable in order to relet the Demised Premises. Landlord shall in no way be
responsible or liable for any failure to rent the Demised Premises or any part
thereof, or for any failure to collect any rent due upon such reletting. Upon
each such reletting, all rentals received by Landlord from such reletting
shall be applied, first to the payment of any indebtedness (other than any
rent due hereunder) from Tenant to Landlord; second, to the payment of any
costs and expenses of such reletting, including, without limitation, brokerage
fees and attorney's fees and costs of alterations and repairs; third, to the
payment of rent and other charges then due and unpaid hereunder, and the
residue, if any, shall be held by Landlord to the extent of and for
application in payments of future rent, if any becomes owing, as the same may
become due and payable hereunder. In reletting the Demised Premises, as
aforesaid, Landlord may rant rent concessions and Tenant shall not be credited
therefore. If such rentals received from such reletting shall at any time or
from time to time be less than sufficient to pay to Landlord the entire sum is
then due from the Tenant hereunder. Tenant shall pay any such deficiency to
Landlord. Such deficiency shall, at Landlord's option, be calculated and paid
monthly. Notwithstanding any such reletting without termination, Landlord may
at any time thereafter elect to terminate this Lease for any such previous
default provided same has not been cured; or
(iv) Without terminating this Lease and with or without notice to Tenant,
Landlord may enter into and upon the Demised Premises and without being liable
for prosecution or any claims for damages therefor, maintain the Demised
Premises and repair or replace any damage thereto or do anything or make any
payment for which Tenant is responsible hereunder. Tenant shall reimburse
Landlord immediately upon demand for any expenses which Landlord incurs in
thus effecting Tenant's compliance under this Lease, and Landlord shall not be
liable to Tenant for any damages with respect thereto; or
(v) Without liability to Tenant or any other party and without
constituting a constructive or actual eviction, suspend or discontinue
furnishing or rendering to Tenant any property, material, labor, utilities or
other service, whatever Landlord is obligated to furnish or render the same so
long as Tenant is in default under this Lease; or
(vi) Allow the Demised Premises to remain unoccupied and collect rent from
Tenant as it comes due, or
(vii) [intentionally deleted]
(viii) Pursue such other remedies as are available as law or in equity.
(c) If this Lease shall terminate as a result of or while there exists a
default hereunder, any funds of Tenant held by Landlord may be applied by
Landlord to any damages payable by Tenant (whether provided for herein or by
law) as a result of such termination or default.
(d) Neither the commencement of any action or proceeding, nor the settlement
thereof, nor entry of judgment thereon shall bar Landlord from bringing
subsequent actions or proceedings from time to time, nor shall the failure to
include in any action or proceeding any sum or sums then due by a bar to the
maintenance of any subsequent actions or proceedings for the recovery of such
sum or sums to omitted.
(e) If any statute or rule of law shall limit any of Landlord's remedies as
hereinabove set forth, Landlord shall nonetheless be entitled to any and all
other remedies hereinabove set forth.
(f) No agreement to accept a surrender of the Demised Premises and no act or
omission by Landlord or Landlord's agents during the Term shall constitute an
acceptance or surrender of the Demised Premises unless made in writing and
signed by Landlord. No re-entry or taking possession of the Demised Premises
by Landlord shall constitute an election by Landlord to terminate this Lease
unless a written notice of such intention is given to Tenant.
(g) No provision of this Lease shall be deemed to have been waived by either
party unless such waiver is in writing and signed by the party making such
waiver. Landlord's acceptance of Base Rent or Additional Rent following an
Event of Default hereunder shall not constitute as a waiver of such Event of
Default. No custom or premise which may grow up between the parties in
connection with the terms of this Lease shall be construed to waive or lessen
either party's right to insist upon strict performance of the terms of this
Lease, without a written notice thereof the other party.
(h) The rights granted to Landlord in this Section 23 shall be cumulative of
every other right or remedy provided in this Lease or which Landlord may
otherwise have as law or in equity or by statute, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies or constitute a forfeiture or
waiver of Base Rent. Additional Rent or damages accruing to Landlord by
reason of any Event of Default. If an Event of Default shall occur, Tenant
shall pay to Landlord, on demand, all expenses incurred by Landlord as a
result thereof, including reasonable attorneys' fees, court costs and
expenses. Other than in connection with a claim arising from the negligence
or intentional misconduct of Landlord, its employees, agents or
representatives, if Landlord shall be made a party to any litigation commenced
against Tenant as a result of this Lease, Landlord's ownership of the Demised
Premises or the relationship of Landlord and Tenant arising by virtue of this
Lease. Tenant shall pay all costs and reasonable attorneys' fees incurred by
Landlord in connection with such litigation. Notwithstanding anything to the
contrary contained herein, the event any third party prevails in any action to
which Landlord is made a party and it is ultimately determined that there was
no negligence or intentional misconduct on the part of Landlord, Tenant shall
pay all costs and reasonable attorneys' fees incurred by Landlord in
connection with such litigation.
24. Landlord's Right of Entry. Tenant agrees to permit Landlord and the
authorized representatives of Landlord and of the Mortgagee to enter upon the
Demised Premises at all reasonable times for the purposes of inspecting them
and making any necessary repairs thereto and performing any work therein that
may be necessary by reason of Tenant's failure to make such repairs or perform
any such work required of Tenant under this Lease; provided that, except in
the case of an emergency. Landlord shall give the Tenant reasonable prior
written notice not less than two (2) days in advance of Landlord's intended
entry upon the Demised Premises. Nothing herein shall imply any duty upon the
part of Landlord to do any such work, and the performance thereof by Landlord
shall not constitute a waiver of Tenant's default in failing to perform it.
Landlord shall not be liable for inconvenience, annoyance, disturbance or
other damage to Tenant by reason of making such repairs or the performance of
such work in the Demised Premises or on account of bringing materials,
supplies and equipment into or through the Demised Premises during the course
thereof, and the obligations of Tenant under this Lease shall not thereby be
affected, provided, however, that Landlord shall use reasonable efforts not
to annoy, disturb or otherwise interfere with Tenant's operations in the
Demised Premises in making such repairs or performing such work. Landlord
also shall have the right to enter the Demised Premises at all reasonable
times to exhibit the Demised premises to any prospective purchaser, mortgagee
or tenant.
25. Mortgagee's Rights
(a) For purposes of this Lease:
(i) "Mortgagee" as used herein means the current holder of a Mortgage.
(ii) "Mortgage" as used herein means any or all mortgages, deeds to secure
debt, deeds of trust or other instruments in the nature thereof which ma now
or hereafter affect or encumber Landlord's title to the Demised Premises and
any amendments, modifications, extensions or renewals thereof.
(b) This Lease and all rights of Tenant hereunder are and shall be subject
and subordinate to the lien and security title of any Mortgage created after
the Lease Date provided that the holder of said Mortgage created after the
Lease Date provided that the holder of said Mortgage agrees not to disturb
Tenant's possession of the Leased Premises so long as Tenant is not in default
hereunder, as evidenced by a non-disturbance agreement, signed by said holder
which agreement may include (a) the conditions contained in Section 24(a)
below, (b) a requirement that said holder be given notice and opportunity to
cure a landlord default and (c) other provisions customarily required by
lenders and reasonably acceptable to Tenant. Tenant recognizes and
acknowledges the right of Mortgagee to foreclose or exercise the power of sale
against the Demised Premises under any Mortgage.
(c) [Intentionally deleted}
(d) If requested by Mortgagee, Tenant shall, upon demand, at any time or
times, execute, acknowledge, and deliver to Mortgagee any and all instruments
that may be necessary to make this Lease superior to the lien of any Mortgage.
(e) If Mortgagee (or Mortgagee's nominee, or other purchaser at foreclosure)
shall hereafter succeed to the rights of Landlord under this Lease, whether
through possession or foreclosure action or delivery of a new lease, Tenant
shall, if requested by such successor, attorn to and recognize such successor
as Tenant's landlord under this Lease without change in the terms and
provisions of this Lease, provided that such successor shall not be bound by
(i) any payment of Base Rent or Additional Rent for more than one month in
advance, except prepayments in the nature of security for the performance by
Tenant of its obligations under this Lease, or
(ii) any provision of any amendments to the Lease to which Mortgagee has
not consented (provided that Landlord or such Mortgagee has given Tenant
written notice of such consent requirement), and shall promptly execute and
deliver any instrument that may be necessary to evidence such attornment,
(iii) the defaults of any prior landlord under this Lease, or
(iv) any other rights arising out of the defaults of any prior landlord
under this Lease. Such successor landlord shall, if requested by Tenant,
deliver an estoppel certificate stating that this Lease is unmodified and in
full force and effect (or if there have been modifications, that the same is
in full force and effect, as modified) Upon such attornment, this Lease shall
continue in full force and effect as a direct lease between such successor
landlord and Tenant, subject to all of the terms, covenants and conditions of
this Lease.
(f) In the event there is a Mortgage at any time during the Term, Landlord
shall use reasonable efforts to cause the Mortgagee to enter into a
subordination, nondisturbance and attornment agreement with Tenant reasonably
satisfactory to Tenant and consistent with this Section 25.
(g) Landlord represents that First Union National Bank of Georgia ("First
Union") currently holds a Mortgage encumbering the Demised Premises. Landlord
shall use reasonable efforts to cause First Union to enter into a
subordination nondisturbance and attornment agreement in the form attached
hereto as Exhibit "E" within thirty days after the Lease Date.
26. Estoppel Certificate. Tenant agrees at any time, and from time to time
within fifteen (15) days after Landlord's written request, to execute,
acknowledge and deliver to Landlord, a statement in writing in recordable form
to Landlord and/or its designee certifying that;
(i) this Lease is unmodified and in full force and effect (or, if there
have been modifications, that the same is in full force and effect, as
modified) and
(ii) the dates to which Base Rent, Additional Rent and other charges have
been paid,
(iii) whether or not, to the best knowledge of the signer of such
certificates, there exists any failure by Landlord to perform any term,
covenant or condition contained in this Lease, and if so, specifying each such
failure of which the signer may have knowledge,
(iv) (if such be the case) the Tenant has unconditionally accepted the
Demise Premises and is conducting its business therein;
(v) and as to such additional matters as may be reasonably requested by
Landlord, it being intended that any such statement delivered pursuant hereto
may be relied upon by Landlord and by any purchaser of title to the Demised
Premises or by any Mortgagee or any assignee thereof or any party to any sale-
leaseback of the Demised Premises, or the landlord under a ground lease
effecting the Demised Premises.
27. Landlord Liability. No owner of the Demised Premises, whether or not
named herein, shall have liability hereunder after it ceases to hold title to
the Demised Premises, except for obligations which may have theretofore
accrued. Neither Landlord nor any officer, director, shareholder, partner or
principal of Landlord, whether disclosed or undisclosed, shall be under any
personal liability with respect to any of the provisions of this Lease, and if
Landlord is in breach or default with respect to Landlord's obligations or
otherwise under this Lease, Tenant shall look solely to the equity of Landlord
in the Demised Premises for the satisfaction of Tenant's remedies. It is
expressly understood and agreed that Landlord's liability under the terms,
covenants, conditions, warranties and obligations of this Lease shall in no
event exceed the loss of Landlord's equity interest in the Demised Premises.
28. Notices and Payments. Any notice or payment required or permitted to be
given or served by either party to this Lease shall be deemed given when made
in writing and either
(i) personally delivered,
(ii) deposited with the United States Postal Service, postage prepaid, to
be mailed by registered mail, return receipt requested, or
(iii) delivered by overnight delivery service providing proof of delivery,
properly addressed to the address set forth in Section 1(k) (as the same may
be changed by giving written notice of the aforesaid in accordance with this
Section 28). If any notice mailed is properly addressed with appropriate
postage but returned for any reason, such notice shall be deemed to be
effective notice and to be given on the date of mailing.
29. Brokers. Neither Landlord nor Tenant has engaged any brokers who would
be entitled to any commission or fee based on the execution of this Lease,
other than as set forth in Section 1(m) (the "Broker") who shall be paid by
Landlord pursuant to separate agreement. Further, neither Landlord nor Tenant
have had any conversations or negotiations with any broker except the Broker
concerning the leasing of the Demised Premises to Tenant. Landlord and Tenant
hereby indemnify each other against and from any claims for any brokerage
commissions (except those payable to the Broker, all of which are payable
pursuant to a separate agreement) and all costs, expenses and liabilities in
connection therewith, including, without limitation, reasonable attorneys'
fees and expenses, for any breach of the foregoing. The foregoing
indemnification shall survive the expiration or termination of the Lease for
any reason.
30. Assignment and Subleasing.
(a) Tenant may not assign, mortgage, pledge, encumber or otherwise transfer
this Lease, or any interest hereunder, or sublet the Demised Premises in whole
or in part, without on each occasion first obtaining the prior express written
consent of Landlord, which consent may be withheld in Landlord's reasonable
discretion. for purposes of this Section 30, Landlord shall be deemed to have
reasonably withheld consent if Landlord determines
(i) that the prospective assignee or subtenant is not of a financial
strength similar to Tenant as of the Lease Date,
(ii) that the prospective assignee or subtenant has a poor business
reputation
(iii) that the proposed use of the Demised Premises by such prospective
assignee or subtenant (including without limitation, a use involving the use
or handling of Hazardous Substances) will negatively affect the value or
marketability of the Building or the Project or
(iv) that the prospective assignee or subtenant is a current tenant in the
Project or is a bona-fide third-party prospective tenant Permitted subtenants
or assignees shall become liable directly to Landlord for all obligations of
Tenant hereunder, without, however, relieving Tenant of any of its liability
hereunder. No assignment, mortgaging, subletting or use or occupancy by
others shall in any way be construed to relieve Tenant from any of its
liability hereunder to pay Base Rent, Additional Rent and all other sums
payable by Tenant hereunder or to perform its obligations hereunder (which
shall in every instance continue as the liability and obligation of a
principal and not a surety) or from thereafter obtaining the express consent
of Landlord to any other or further assignment, mortgaging or subletting of
this Lease.
(b) Notwithstanding Section 30(a), provided that there is not an Event of
Default under this Lease which remains uncured, Tenant shall have the right,
upon ten (10) days' prior written notice to Landlord,
(i) to sublet all or part of the Demised Premises to any related
corporation or entity which controls Tenant, is controlled by Tenant or is
under common control with Tenant; or
(ii) to assign this Lease to a successor corporation into which or with
which Tenant is merged or consolidated or which acquired substantially all of
Tenant's assets and property, provided that (x) such successor corporation
assumes substantially all of the obligations and liabilities of Tenant and
shall have assets, capitalization, net worth and credit worthiness at least
equal to the assets, capitalization, net worth and credit worthiness of Tenant
as of the date of this Lease as determined by generally accepted accounting
principles and (y) Tenant shall provide in its notice to Landlord the
information required in Section 30(c) below. For the purpose hereof "control"
shall mean ownership of not less than fifty percent (50%) of all the voting
stock or legal and equitable interest in such corporation or entity.
(c) If Tenant should desire to assign this Lease or sublet the Demised
Premises (or any part thereof), Tenant shall give Landlord written notice no
later than forty-five (45) days in advance of the proposed effective date of
any proposed assignment or sublease specifying
(i) the name and business of the proposed assignee or sublessee;
(ii) the amount and location of the space within the Demised Premises
proposed to be so subleased;
(iii) the proposed effective date and duration of the assignment or
subletting; and
(iv) the proposed rent or consideration to be paid to Tenant by such
assignee or sublessee. Tenant shall promptly supply Landlord with financial
statements and other information as Landlord may reasonably request to
evaluate the proposed assignment or sublease.
(d) Landlord shall have a period of thirty (30) days following receipt of
such notice and other information requested by Landlord within which to notify
Tenant in writing that Landlord elects,
(i) to terminate this Lease as to the space so affected as of the proposed
effective date set forth in Tenant's notice, in which event Tenant shall be
relieved of all further obligation hereunder as to such space, except for
obligations under Section 12 and 29 and all other provisions of this Lease
which expressly survive the termination hereof; or
(ii) to permit Tenant to assign or sublet such space, provided, however,
that, if the rent rate agreed upon between Tenant and its proposed subtenants
is greater than the rent rate that Tenant must pay Landlord hereunder for
that portion of the Demised Premises, or if any consideration shall be
promised to or received by Tenant in connection with such proposed assignment
or sublease (in addition to rent), then one half (1/2) of such excess rent and
other consideration shall be considered Additional Rent owed by Tenant to
Landlord (less brokerage commissions, attorneys' fees and other disbursements
reasonably incurred by Tenant for such assignment and subletting if acceptable
evidence of such disbursements is delivered to Landlord), and shall be paid by
Tenant to Landlord, in the case of excess rent, in the same manner that Tenant
pays Base Rent and, in the case of any other consideration, within ten (10)
business days after receipt thereof by Tenant; or
(iii) to refuse, in Landlord's reasonable discretion, taking into
consideration the factors set forth in paragraph (a) above, to consent to
Tenant's assignment or subleasing of such space and to continue this Lease in
full force and effect as to the entire Demised Premises. If Landlord should
fail to notify Tenant in writing of such election within the aforesaid thirty
(30) day period. Landlord shall be deemed to have elected option
(iii) above. Tenant agrees to reimburse Landlord for reasonable legal fees
(not to exceed $5,000.00) and any other reasonable costs incurred by Landlord
in connection with any requested assignment or subletting and such payments
shall not be deducted from the Additional Rent owed to Landlord pursuant to
subsection (ii) above. Tenant shall deliver to Landlord copies of all
documents executed in connection with any permitted assignment or subletting
which documents shall be in form and substance reasonably satisfactory to
Landlord and which shall require such assignee to assume performance of all
terms of this Lease on Tenant's part to be performed. No acceptance by
Landlord of any rent or any other sum of money from any assignee, sublessee or
other category of transferee shall be deemed to constitute Landlord's consent
to any assignment sublease, or transfer.
(e) Any attempted assignment or sublease by Tenant in violation of the terms
and provisions of this Section 30 shall be void and such act shall constitute
a material breach of this Lease. In no event shall any assignment, subletting
or transfer, whether or not with Landlord's consent, relieve Tenant of its
primary liability under this Lease for the entire Term, and Tenant shall in no
way be released from the full and complete performance of all the terms
hereof. Any assignment or sublease allowed hereunder or consented to by
Landlord shall not relieve Tenant (or its assignee) from obtaining Landlord's
consent to any subsequent assignment or sublease if required by this Section
30. If Landlord takes possession of the Demised Premises before the
expiration of the Term, Landlord shall have the right at its option to take
over any sublease of the Demised Premises or any portion thereof and such
subtenant shall attorn to Landlord, as its landlord, under all the terms and
obligations of such sublease occurring from and after such date, but excluding
previous acts, omissions, negligence or defaults of Tenant and any repair or
obligation in excess of available net insurance proceeds or condemnation
award.
(f) Landlord shall have the right to sell, transfer, assign, pledge, and
convey all or any part of the Demised Premises and any and all of Landlord's
right under this Lease. In the event Landlord assigns or otherwise conveys
its rights under this Lease, Landlord shall be entirely freed and released
from any obligations accruing thereafter under this Lease, and Tenant agrees
to look solely to Landlord's successor in interest for performance of such
obligations.
31. Termination or Expiration.
(a) No termination of this Lease prior to the normal ending thereof by lapse
of time or otherwise, shall affect Landlord's right to collect rent for the
period prior to termination thereof.
(b) At the expiration or earlier termination of the Term, Tenant shall
surrender the Demised Premises and all improvements, alterations and additions
thereto and keys therefor to Landlord, clean and neat and in the same
condition as at the commencement of the Term, ordinary wear and tear and
permitted alterations and additions only excepted.
(c) If Tenant remains in possession of the Demised Premises after expiration
of the Term, with or without Landlord's acquiescence and without any express
agreement of the parties. Tenant shall be a tenant-at-sufferance at one
hundred fifty percent (150%) of the Base Rent in effect at the end of the
Term. Tenant shall also continue to pay all other Additional Rent due
hereunder, and there shall be no renewal of this Lease by operation of law.
32. Late Payments. In the event any installment of rent, inclusive of Base
Rent, or Additional Rent or other sums due hereunder, if any, is not paid
(i) within five (5) days after Tenant's receipt of written notice of such
failure to pay on the first occasion during any twelve (12) month period, or
(ii) as and when due with respect to any subsequent late payments in any
twelve (12) month period. Tenant shall pay an administrative fee equal to
five percent (5%) of such past due amount, plus interests on the amount past
due at a rate equal to the lesser of (X) twelve percent (12%) per annum or (Y)
the maximum interest rate allowed under the applicable law (the "Interest
Rate") to defray the additional expenses incurred by Landlord in processing
such payment.
33. Rules and Regulations. Tenant agrees to abide by the Rules and
Regulations set forth on Exhibit "C" attached hereto, as well as other rules
and regulations reasonably promulgated by the Landlord from time to time and
the declaration of protective covenants for the Project, attached hereto as
Exhibit "D" as it may be amended from to time (herein, the "Protective
Covenants"), which Protective Covenants shall run with the Land and be binding
on Tenant, its successors and assigns. As to Tenant, the Rules and
Regulations shall be revised as follows:
(a) Landlord hereby consents to Tenant's contractor under the service
contract required in Section 11(a) of this Lease going on the roof of the
Building; provided, however, that Tenant shall give Landlord reasonable prior
notice thereof.
(b) In the event that Tenant desires to install any awning or other
projection on the outside wall of the Building, Landlord agrees that it shall
not unreasonably withhold its consent to such installation.
34. Dispute Resolution Procedure.
(a) In the event that a dispute arises between Landlord and Tenant under the
Lease, and the Lease specifically provides that the dispute resolution
procedure outlined in this Section 34 (herein referred to as the "Dispute
Resolution Procedure") shall be utilized, the parties shall proceed as
follows:
(i) The party electing to proceed under the procedures outlined herein
(the "Electing Party") shall give written notice of such election to the other
party (the "Other Party") and shall designate in writing the Electing Party's
selection of an individual with the qualifications outlined in the section of
the Lease giving rise to this remedy (the "Official") who shall act on the
Electing Party's behalf in determining the disputed fact.
(ii) Within twenty (20) days after the Other Party's receipt of the
Electing Party's selection of an Official, the Other party, by written notice
to the Electing Party, shall designate an Official who shall act on the Other
Party's behalf in determining the disputed fact.
(iii) Within twenty (20) days of the selection of the Other Party's
Official, the two (2) Officials shall render a joint written determination of
the disputed fact. If the two (2) Officials are unable to agree upon a joint
written determination within such twenty (20) day period, each Official shall
render his or her own written determination and the two Officials shall select
a third Official within such twenty (20) day period. In the event the two
Officials are unable to select a third Official within such twenty (20) day
period, then either party may apply to a court of original jurisdiction in
Douglas County, Georgia for appointment by such court of such third Official.
(iv) Within twenty (20) days after the appointment of the third Official,
the third Official shall select one of the determinations of the two (2)
Officials originally selected, without modification or qualification.
(v) If either Landlord or Tenant fails or refuses to select an Official,
the Official selected shall alone determine the disputed fact. Landlord and
Tenant agree that they shall be bound by the determination of disputed fact
pursuant to this subsection. Landlord shall bear the fee and expense of its
Official, Tenant shall bear the fee and expenses of its Official, and Landlord
and Tenant shall share equally the fee and expense of the third Official, if
any.
35. Option to Extend Term
(a) Landlord hereby grants to Tenant two (2) consecutive options to extend
the Term for a period of five (5) years each time, each option to be exercised
by Tenant giving written notice of its exercise to Landlord in the manner
provided in this Lease at least one hundred eighty (180) days prior to (but
not more than two hundred ten (210) days prior to) the expiration of the Term,
as it may have been previously extended. No extension option may be exercised
by Tenant if an Event of Default has occurred and is then continuing or any
facts or circumstances then exist which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default either at the
time of exercise of the option or at the time the applicable Term would
otherwise have expired if the applicable option had not been exercised.
(b) If Tenant exercises its options to extend the Term, Landlord shall,
within thirty (30) days after the receipt of Tenant's notice of exercise,
notify Tenant in writing of Landlord's reasonable determination of the Base
Rent for the Demised Premises, which amount shall not be less than Base Rent
for the prior Term for the applicable five (5) year option period, taking into
account all relevant factors for space of this type in the Lithia Springs,
Georgia area. Tenants shall have thirty (30) days from its receipt of
Landlord's notice to notify Landlord in writing that Tenant does not agree
with Landlord's determination of the Base Rent and therefore that Tenant
elects to retract is option to extend the Term, in which case the Term, as it
may have been previously extended, shall expire on its scheduled expiration
date and Tenant's option to extend the Term shall be void and of no further
force and effect. If Tenant does not notify Landlord of such retraction
within thirty (30) days of its receipt of Landlord's notice, Base Rent for the
Demised Premises for the applicable extended term shall be the Base Rent set
forth in Landlord's notice to Tenant.
(c) Except for the Base Rent, which shall be determined as set forth on
subparagraph (b) above, leasing of the Demised Premises by Tenant for the
applicable extended term shall be subject to all of the same terms and
conditions set forth in this Lease, including Tenant's obligation to pay
Tenant's share of Operating Expenses as provided in this Lease; provided,
however, that any improvement allowances, rent abatements, or other
concessions applicable to the Demised Premises during the initial Term shall
not be applicable during any such extended term.
36. Early Cancellation and Cancellation Payment. Provided that no Event of
Default has occurred and is then continuing and no facts or circumstances then
exist which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default, Tenant shall have the right to cancel this
Lease effective on the date which is the last day of the ninety-sixth (96th)
month of the Term. Tenant shall notify Landlord in writing at least one
hundred eight (180) days prior to the effective date of such termination, and
together with such notice Tenant shall deliver to Landlord an amount equal to
six months of the then current Base Rent as an agreed-upon cancellation
payment in the event Tenant fails to notify Landlord within such period,
Tenant shall be deemed to have waived Tenant's cancellation right for the
remainder of the Term and any extensions thereof.
37. Miscellaneous.
(a) The parties hereto hereby covenant and agree that any present or fixture
law to the contrary notwithstanding this Lease shall not terminate, except as
herein specifically provided, and Landlord shall receive the Base Rent and
Additional Rent and all other sums payable by Tenant hereinabove provided as
net income from the Demised Premises, without any abatement, reduction, set-
off, counterclaim, defense or deduction, except as expressly provided in this
Lease, and not diminished by
(i) any imposition of any public authority of any nature whatsoever during
the Term, notwithstanding any changes in the method of taxation or raising,
levying or assessing any imposition, or any changes in the name of any
imposition, or
(ii) any expenses or charges required to be paid by Tenant to maintain,
restore or replace the Demised Premises or to protect Landlord's ownership of
the Demised Premises, other than payments under any Mortgage now existing or
hereafter created by Landlord. The obligations of Tenant hereunder shall not
be affected by reason of any damage to or destruction of the Demised Premises
except as expressly otherwise provided to the contrary in this Lease. Tenant
shall remain obligated under this Lease in accordance with its terms and shall
not take any action to terminate, rescind or void this Lease, solely as a
result of any bankruptcy, insolvency, reorganization, liquidation, dissolution
or other proceeding affecting Landlord or any assignee of Landlord.
(b) If any clause or provision of this Lease is determined to be illegal,
invalid or unenforceable under present or future laws effective during the
Term, 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 that in lieu of
such illegal, invalid or unenforceable clause or provision there shall be
substituted a clause or provision as similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be legal, valid
and enforceable. If such invalidity is essential to the rights of either or
both parties, then the affected party shall have the right to reinstate this
Lease on written notice to the other.
(c) All rights, powers, and privileges conferred hereunder upon the parties
hereto shall be cumulative, but not restrictive to those given by law.
(d) Time is of the essence of this agreement.
(e) No failure of Landlord or Tenant to exercise any power given Landlord or
Tenant hereunder or to insist upon strict compliance by Landlord or Tenant
with hits obligations hereunder, and no custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of Landlord's or
Tenant's rights to demand exact compliance with the terms hereof.
(f) This Lease contains the entire agreement of the parties hereto and no
representations, inducements, promises or agreements, oral or otherwise,
between the parties not embodied herein shall be of any force and effect. The
masculine (or neuter) pronoun, singular number shall include the masculine,
feminine and neuter gender and the singular and plural number.
(g) This contract shall create the relationship of Landlord and Tenant
between Landlord and Tenant no estate shall pass out of Landlord; Tenant has a
usufruct not subject to levy and sale and not assignable by Tenant except as
expressly set forth herein.
(h) Landlord and Tenant agree to execute, upon request of the other, a short
form memorandum of this Lease in recordable form and the requesting party
shall pay the costs and charges for the recording of such short form
memorandum of lease. Under no circumstances shall Tenant have the right to
record this Lease (other than a short form memorandum of Lease, as approved by
Landlord), and should Tenant do so, Tenant shall be in default hereunder.
(i) The captions of this Lease are for convenience only and are not a part
of this Lease, and do not in any way define, limit, describe or amplify the
terms or provisions of this Lease or the scope or intent thereof.
(j) This lease may be executed in multiple counterparts, each of which shall
constitute an original, but all of which taken together shall constitute one
and the same agreement.
(k) This Lease shall be interpreted under the laws of the State in which the
Demised Premises is located.
(l) The parties acknowledge that this Lease is the result of the
negotiations between the parties, and in construing any ambiguity hereunder no
presumption shall be made in favor of either party. No interference shall be
made from any item which has been stricken from this Lease other than the
deletion of such item.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands under
seals, the day and year first above written.
Signed, sealed and delivered in the presence of:
Unofficial Witness
Notary Public
(NOTARY SEAL)
My Commission Expires:
Signed and sealed and delivered in presence of:
Unofficial Witness
Notary Public
(NOTARY SEAL)
My Commission Expires:
LANDLORD
INDUSTRIAL DEVELOPMENTS
INTERNATIONAL, INC.
By:
Name:
Title:
Attest:
Name:
Title:
(CORPORATE SEAL)
TENANT
BIO CLINIC CORPORATION
By:
Name:
Title:
Attest:
Name:
Title:
(CORPORATE SEAL)
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