<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM 10
GENERAL FORM FOR
REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
ENTEX INFORMATION SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 93-133715291
<S> <C>
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
6 INTERNATIONAL DRIVE, RYE BROOK, NEW YORK 10573-1058
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
COMPANY'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(914) 935-3600
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE.
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.0001 PAR VALUE
(TITLE OF CLASS)
================================================================================
<PAGE> 2
INFORMATION REQUIRED IN REGISTRATION STATEMENT
CERTAIN FORWARD-LOOKING INFORMATION
The information contained in this Registration Statement includes
forward-looking statements, including without limitation statements set forth in
the sections entitled "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in Item 2 of this
Registration Statement. Since this information is based on current expectations
which involve risks and uncertainties, actual results could differ materially
from those expressed in the forward-looking statements. Various important
factors known to ENTEX Information Services, Inc. that could cause such material
differences are identified in the section entitled "Business Factors" contained
in Item 1 of this Registration Statement. Certain sentences in this Registration
Statement have been identified as forward-looking statements. The reader is
cautioned that other sections and sentences not so identified may also contain
forward-looking statements.(1)
ITEM 1. BUSINESS
OVERVIEW
ENTEX Information Services, Inc. ("ENTEX" or the "Company") was formed in
August 1993 in a management-led buyout of the domestic information systems
business of JWP Inc. ("JWPIS"). ENTEX is a leading provider of personal computer
("PC") solutions to meet the distributed information technology systems and
end-user support requirements of Fortune 1000 companies and other large
enterprises. The Company's total PC management capabilities include acquisition
and procurement services and network, professional and other outsourcing service
support for the PC-based network environment. The proliferation of complex
client/server networks and the deployment of mission critical applications and
databases on these networks has made the effective management of distributed
information technology resources a top priority for many large enterprises.
Currently, client/server networks may consist of thousands of PCs connected to
hundreds of servers, linked to dozens of midrange or mainframe hosts, and
internetnetworked over multiple sites. Large enterprises are finding it
challenging and costly to support and manage these extensive distributed
environments.
PRODUCTS AND SERVICES
ENTEX's integrated array of acquisition and procurement services and
network and professional services and other outsourcing services address
customers' needs throughout the life cycle of their PC-based systems, beginning
with the design, specification and acquisition of hardware, software and network
products and extending through the support and eventual replacement of the
system (or elements of the system) with a new technology solution.
ACQUISITION AND PROCUREMENT SERVICES
The Company sells and distributes a wide variety of personal computer and
network products and peripherals, providing its customers with a single source
for all their PC product needs. Customers use the Company for product
procurement because ENTEX provides product availability, rapid system
configuration customized for individual users, and accurate and reliable product
shipment. The Company believes its customers improve their purchasing decisions
by leveraging the Company's extensive experience in evaluating products for
performance, reliability, ease of use and compatibility with other hardware and
software products. The Company also provides logistics management services,
which involve the coordination of product delivery, receipt and installation.
- ---------------
(1)ENTEX and Solution Line are registered trademarks of the Company, and ENTEX
Information Services, Random Access and System Builder are trademarks of the
Company. This Registration Statement also includes trademarks of other companies
which are the property of their respective owners.
2
<PAGE> 3
To ensure product availability, the Company maintains a finished goods
inventory and build-to-order components at its Integration Center in Erlanger,
Kentucky, utilizes second source suppliers and participates with certain vendors
in their build-to-order programs. Using the Company's real-time inventory
management systems, ENTEX employees across the country can check on product
availability.
A majority of the PC systems shipped by ENTEX are customized to meet
customer specifications. The Company's configuration processes load and
configure operating systems, applications and proprietary software to customer
specifications. Through vendor build-to-order programs, ENTEX receives system
components from original equipment manufacturers and completes the manufacturing
process to a customer's specific requirements. ENTEX's configuration operations
have been ISO 9002 certified since August 1994.
Through ENTEX, customers may purchase application software either in
separate "shrink-wrapped" units or on a volume-licensed basis.
NETWORK, PROFESSIONAL AND OUTSOURCING SERVICES
ENTEX provides its customers with a broad array of services to enable them
to more effectively manage their distributed information technology systems.
These services include:
Network and Professional Services. The Company provides customers with
network design, implementation and integration services on a project basis. The
consulting services which the Company provides include design, installation and
upgrade of local-area, wide-area, and enterprise networks. The Company also
assists customers in the implementation of messaging and Internet/Intranet
technologies, provides comprehensive support to network managers and
administrators and assists customers with their network operating systems,
network-based applications and connectivity.
Migration Services. The Company provides a wide range of migration services
to assist customers in transitioning from one computing environment to another.
These migration services include Microsoft NT and BackOffice upgrades and
migrations; local area network migrations; desktop operating system migrations;
and messaging migrations.
Outsourcing Services. The Company provides customers with outsourcing
services under long and short term contracts. These services include many of the
network and professional services as well as the Company's core support
services, including network implementation, operation and support; warranty
services; help desk services; deskside support; and asset management services.
Outsourcing services are typically provided through a mixture of on-site and
centrally managed resources.
Core Support Services. The Company offers a variety of PC and network
operation and support services, including system installation, integration, and
relocation; maintenance and repair; warranty services; and system management
upgrades. Deskside support services include installation, moves, adds, and
changes to desktop computing devices. In addition, deskside services include
on-going support of PCs from an end-user perspective, including application
enablement, optimization and connectivity. The Company provides a range of
warranty programs, passing existing manufacturer warranties to clients.
Customers benefit by receiving a single point of contact for warranty services
on a wide range of products.
Help Desk Services. Help desk services for end-user hardware and software
support are provided on-site at customer locations as well as through the
Company's centralized Solution Line service. The Company also provides network
help desk services through its centralized Enterprise Support Line.
Asset Management Services. The Company's asset management services assist
customers in formulating policies and procedures and implementing automated
processes to manage more effectively PC assets deployed throughout their
organizations.
OPERATIONS
The Company's National Service Center ("NSC") supports the Company's field
personnel with product acquisition specialists, order entry, order management,
product management, help desk services, remote network management and national
dispatch services. The NSC is located in a facility in Mason, Ohio which
3
<PAGE> 4
houses the Company's centralized back office functions and personnel, including
its Corporate Account Center ("CAC"), Solution Line, dispatch services and
training centers. The Company has 48 branch offices located in 30 states and
five regional offices to support the Company's five operating regions (East,
Midwest, South, Central and West).
All of the Company's product configuration, build-to-order and distribution
activities are conducted at the Company's Integration Center located in
Erlanger, Kentucky, less than five miles from the Cincinnati/Northern Kentucky
International Airport. The facility is 255,000 square feet and is ISO 9002
certified.
SALES AND MARKETING
The Company targets its marketing efforts primarily at senior level
executive, financial, purchasing and information management personnel at Fortune
1000 companies and other large enterprises. ENTEX markets its products and
services through its direct sales force operating from 48 branch offices. Sales
personnel nationwide are also supported by the Company's CAC. In addition, the
Company participates in industry trade shows and conferences and distributes
sales and product literature.
In fiscal 1997, none of the Company's customers accounted for more than 5%
of the Company's total revenues.
COMPETITION
The computer products and services industry is intensely competitive. The
Company expects competition to intensify in the future. As an integrated product
and service provider, ENTEX competes with PC system integrators, high-end system
integrators, PC resellers and distributors, service providers and direct
marketers. In addition, there is increased competition from manufacturers such
as Hewlett Packard Company ("HP"), Compaq Computer Corporation ("Compaq"),
Digital Equipment Corporation ("DEC") and Unisys Corporation ("Unisys"), who
sell direct to the Company's customer base. PC system integrators include GE
Capital Information Technology Solutions, Inc., CompuCom Systems, Inc. and
Vanstar Corp. High-end system integrators have traditionally been
mainframe-oriented service providers and include Andersen Consulting, Computer
Sciences Corporation, IBM Global Services and SHL SystemHouse Inc., a division
of MCI Communications Corp. PC resellers and distributors include InaCom Corp.
and MicroAge Inc. Service providers are firms which have focused their business
exclusively on providing PC and network related services and include Decision
One Corp. and Technology Service Solutions. Direct marketers include Dell
Computer Corp. ("Dell"). In addition to these large national companies, ENTEX
also competes against numerous regional and local companies, many of which have
long-standing customer relationships.
Some of the Company's competitors have greater financial, technical and
marketing resources at a lower cost structure than the Company. As a result,
such companies may be able to respond more quickly to new or emerging
technologies and changes in customer needs, devote more resources to the
development, promotion and sales of their services or deliver products at a
lower price than the Company. In addition, competition could result in price
decreases and depress gross margins in the industry. Further declines in the
Company's gross margins may exacerbate the impact of fluctuating net revenues on
the Company's operating results and have a material adverse effect on the
Company's business, operating results and financial condition.
The principal competitive factors in the Company's industry include the
breadth and quality of product and service offerings, product availability,
cost, pricing, sales and distribution strategies, and expertise and size of the
technical workforce. The Company believes that it competes favorably with
respect to each of these factors. However, there can be no assurance that the
Company will, in the future, be able to compete successfully against existing or
future competitors or that such competition will not adversely affect the
Company's business, operating results and financial condition. See "-- Business
Factors -- Intense Competition" and "-- Increased Competition from Direct
Marketers."
4
<PAGE> 5
EMPLOYEES
As of September 28, 1997, the Company had over 8,000 employees. None of the
Company's employees is subject to a collective bargaining agreement. The Company
has never experienced a work stoppage and considers its employee relations to be
good.
BUSINESS FACTORS
In evaluating the Company's business, the following business factors should
be carefully considered. In addition, this document contains certain
forward-looking statements and trend analysis based on current expectations.
Actual results may differ materially due to a number of factors, including those
set forth below.
Fluctuations in Quarterly Results. The Company's quarterly results have
varied in the past and the Company expects its quarterly operating results to
continue to fluctuate. The Company's net revenues may fluctuate due to a variety
of factors, including the level of expenditures by large enterprises for PC
hardware, software and related products and services in general, demand for the
Company's products and services in particular, the timing of orders for the
Company's products and services, product supply constraints, the Company's
build-to-order programs and customer demand driven by the introduction and
adoption of new products. Due to its narrow product gross margins, the Company's
operating results may be especially sensitive to changes in the mix of product
and service revenues, the margin mix of products sold, the margin mix of
services sold and the level of its operating expenses. The Company's expenses
may fluctuate as a result of numerous factors, including interest rates, the
timing and rate of new employee hiring, the amount and timing of vendor-provided
allowances, the utilization rate of service personnel, competitive conditions
and the impact of acquisitions. The Company's costs are largely fixed in the
near term and the Company may be unable to adjust spending in a timely manner to
compensate for an unexpected revenue shortfall. As a result, revenue shortfalls
may have an immediate and disproportionate adverse effect on operating results.
In addition, if the Company spends to build its capabilities to support higher
revenue levels, the Company's near term operating results will suffer until it
achieves its revenue goals. Due to the Company's recent growth, it is difficult
to discern seasonal trends. However, the Company believes that first and third
quarter revenues may be negatively affected due to generally lower computing
equipment purchases during the summer months which coincide with the first
quarter; and in January which falls within the third quarter. Due to all of
these factors, the Company believes that its operating results are likely to
vary on a quarterly basis. As a result, period-to-period comparisons of its
operating results are not necessarily meaningful, and quarterly results may not
be indicative of results to be expected for a full year. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Gross Margins for Product Sales. Approximately 86% of the Company's net
revenues in fiscal 1997 were generated through sales of PC hardware, software
and related products. The Company believes that competitive conditions will
continue to place pressures on its product gross margins. Furthermore, the
original purchase price of products is often offset by favorable vendor
allowances and negotiated price protection agreements against price decreases on
inventory carried by the Company. There can be no assurance that vendors will
continue to offer such vendor allowances or price protection at the current
levels. A reduction or elimination of such vendor programs could significantly
decrease the Company's product gross margins. In addition, such vendor
allowances and refunds for price decreases are not automatic and must be tracked
and collected by the Company. The Company's failure to effectively manage such
vendor receivables may further decrease product gross margins. Narrow product
gross margins result in fluctuations in net revenues and operating costs which
may have a disproportionate impact on the Company's operating results. Further
declines in the Company's product gross margins may have a material adverse
effect on the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Dependence on Integration Center. All of the Company's product
configuration, build-to-order and distribution activities are conducted at the
Company's Integration Center in Erlanger, Kentucky. Disruption of operations at
its Integration Center for any reason, including power or telecommunications
failures, natural disasters such as fires, tornados or floods, or work
stoppages, would have a material adverse effect on the
5
<PAGE> 6
Company's business, operating results and financial condition. In addition, the
Company relies almost entirely on Skyway Freight Systems, Inc. ("Skyway"), an
independent shipping company, for the delivery of its products. The failure or
inability of Skyway to deliver products to the Company's customers on a timely
basis, whether as a result of a work stoppage or slow-down, or the unanticipated
termination of the Company's arrangement with Skyway, could have a material
adverse effect on the Company's business, operating results and financial
condition.
Increased Emphasis on Service Offerings. The Company's service operations
are characterized by higher gross margins than those attainable in product
sales. During fiscal 1997, service revenues grew 70% to $353.6 million while
product revenues grew 9.6% to $2.1 billion. The Company's success in increasing
its service revenues will depend primarily on the continued need for the
Company's services and the continued acceptance by large companies of
outsourcing as a solution to their PC management needs. In addition, the Company
must have the ability to identify opportunities where its service solutions are
appropriate, sell such service solutions at attractive margins, successfully
implement such solutions and maintain the quality of its service offerings. To
the extent that the Company does not successfully increase the proportion of
revenues attributable to its service business, the Company's operating margins
may be adversely affected. In order to expand its service operations, the
Company will need to recruit, train and retain a significant number of qualified
technical personnel, and integrate them into the Company. There can be no
assurance that the Company will do so successfully. The expense of these efforts
and the costs associated with the hiring of additional service personnel and
expansion of the Company's service infrastructure will be incurred prior to
increases in service revenues. If service revenues do not increase sufficiently
or the Company fails to accurately price its services, the Company's business,
operating results and financial condition would be materially and adversely
affected.
A number of the Company's service offerings depend on central service and
sales support or dispatch coordination from its NSC in Mason, Ohio. Disruption
of operations at the Mason facility, including power or telecommunications
failures, natural disasters such as fires, tornados or floods, or work
stoppages, would have a material adverse effect on the Company's service
operations and could affect customer relationships. See "-- Need to Recruit and
Retain Management, Technical and Sales Personnel," "Business -- Products and
Services" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Need to Recruit and Retain Management, Technical and Sales Personnel. The
Company believes that its future success depends, to a large extent, upon the
efforts and abilities of its executive officers, managers, technical and sales
personnel. The Company's expansion of its service operations requires the
recruiting and training of a significant number of additional qualified
technical personnel, including project managers and network integration
specialists. Frequently, the Company must rapidly hire a significant number of
technical personnel to staff projects at customer sites. The Company's inability
to hire such personnel within the time schedule agreed to with the customer
could damage customer relationships and result in lost revenues. Competition for
qualified technical and sales personnel is intense. The Company competes with
other service providers as well as with its own customers, including those at
whose locations ENTEX employees work. Failure by the Company to attract and
train skilled managers, technical and sales personnel on a timely basis, or the
inability of the Company to retain such personnel, could materially and
adversely affect the Company's business, operating results and financial
condition. In 1987, Dort A. Cameron III, the Chairman of the Board of Directors
and a co-founder of the Company, was diagnosed with multiple sclerosis. See
"Directors and Executive Officers."
Management of Growth. The Company has experienced significant growth since
its inception. This rapid growth has placed, and is expected to continue to
place, a significant strain on the Company's management, financial, sales,
technical and support systems and personnel. The Company's ability to manage its
growth effectively will require it to continue to develop and improve its
operational, financial and other internal systems and train, manage and motivate
its employees. The Company has in the past and will continue in the future to
evaluate the acquisition of businesses that complement or expand the Company's
technical skills, service offerings or geographical presence. Integrating newly
acquired companies could be costly and may result in the loss of customers and
key personnel and may disrupt operations. Additionally, integrating newly
acquired businesses may divert significant management resources and attention
from day to day operations.
6
<PAGE> 7
Intense Competition. The computer products and services industry is
intensely competitive. The Company expects competition to intensify in the
future. As an integrated product and service provider, ENTEX competes with PC
system integrators, high-end systems integrators, PC resellers and distributors,
service providers and direct marketers. In addition, there is increased
competition from manufacturers such as HP, Compaq, DEC and Unisys, who sell
direct to the Company's customer base. PC system integrators include GE Capital
Information Technology Solutions, Inc., CompuCom Systems, Inc. and Vanstar Corp.
High-end system integrators have traditionally been mainframe-oriented service
providers and include Andersen Consulting, Computer Sciences Corporation, IBM
Global Services and SHL SystemHouse Inc., a division of MCI Communications Corp.
PC resellers and distributors include InaCom Corp. and MicroAge Inc. Service
providers are firms which have focused their business exclusively on providing
PC and network related services and include Decision One Corp. and Technology
Service Solutions. Direct Marketers include Dell. In addition to these large
national companies, ENTEX also competes against numerous regional and local
companies, many of which have long-standing customer relationships. Some of the
Company's competitors have greater financial, technical and marketing resources
at a lower cost structure than the Company. As a result, such companies may be
able to respond more quickly to new or emerging technologies and changes in
customer needs, devote more resources to the development, promotion and sales of
their services or deliver products at a lower price than the Company. In
addition, competition could result in price decreases and depress gross margins
in the industry. Further declines in the Company's gross margins may exacerbate
the impact of fluctuating net revenues on the Company's operating results and
have a material adverse effect on the Company's business, operating results and
financial condition. See "-- Increased Competition from Direct Marketers" and
"Business -- Competition."
Increased Competition from Direct Marketers. The Company competes with
several manufacturers in meeting the distributed information needs of large
enterprises. Notably, direct marketers such as Dell compete with the Company by
selling directly to Fortune 1000 clients. The expansion of the direct selling
model has increased the competitive risks in an already highly competitive
market. To combat the additional competition, the Company has enhanced its
System Builder program to provide for final assembly services and has joined
with certain vendors to provide products to customers on a build-to-order basis.
However, there can be no assurance that ENTEX will be able to successfully
transition from its current systems which utilize high levels of inventory to
managing a more streamlined product fulfillment process. In addition, there can
be no assurance that the vendors can supply components on a "just-in-time" basis
to allow successful management of a build-to-order program. The Company's
failure to successfully transition to the build-to-order process could have a
material adverse effect on the Company's business, operating results and
financial condition. See "-- Intense Competition."
Fixed Fee Service Contract and Service Level Agreement Risks. The Company
has begun implementing and intends to expand the use of new pricing policies for
its service offerings. Such new pricing policies include pricing on a fixed fee
or per end-user basis and on a service and support performance metrics basis
rather than on a time and materials basis. As a result, the Company must
accurately assess the scope of work of each project and estimate the resources
required to complete the project and to meet any service and support performance
metrics. Failure by the Company to accurately estimate the scope of a project or
support expenses or to meet service and support performance metrics could have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, the Company has certain warranty service
commitments for which the Company seeks reimbursement from manufacturers. A
reduction by manufacturers in the scope or duration of their reimbursements for
warranties which the Company cannot contractually pass on to its customers or
the failure of the Company to properly track and collect such reimbursements
could have a material adverse effect on the Company's business, operating
results and financial condition.
Dependence on Vendors. A significant portion of the Company's revenues are
derived from sales of PC hardware, software and related products. Approximately
62.2% of such product revenues in fiscal 1997 were attributable to sales of
products manufactured by Compaq, HP and IBM. The Company's agreements with these
manufacturers do not provide for long-term supply commitments and can be
terminated with 15 to 90 days' notice. From time to time, the PC industry has
experienced product constraints, with vendors
7
<PAGE> 8
allocating product based on criteria beyond the buyer's control. In the event
the Company is not able to obtain sufficient quantities of products from its
vendors or sufficient component parts for use in its build-to-order programs,
the Company's business, operating results and financial condition could be
materially and adversely affected. The Company works closely with its key
manufacturers. Many manufacturers provide vendor allowances which the Company
uses to reduce cost of goods sold and to subsidize a variety of activities
including many of its employee and customer training programs. In addition, many
manufacturers provide ENTEX with early previews of new products and technology
and instruction and training for ENTEX technical and support personnel on the
use of these new products. There can be no assurance that these arrangements
will continue in the future. In the event that these arrangements were
discontinued or industry practices were to change, commercial terms with vendors
were to change generally, or the Company were to otherwise lose vendor support,
the Company's business, operating results and financial condition could be
materially and adversely affected. See "--Gross Margins for Product Sales."
Risks of Inventory Obsolescence; Inventory Management. In order to offer
rapid delivery and efficient support and service to its customers, the Company
maintains relatively high levels of products and parts inventory. The Company
attempts to protect itself from inventory obsolescence and inventory price
reductions by negotiating price protection and stock balancing arrangements with
its vendors and enforcing a limited return policy with its customers. These
arrangements entitle the Company to receive refunds from manufacturers equal to
price decreases on inventory carried by ENTEX and provide ENTEX the ability to
return, subject to certain conditions including restocking fees, slow moving
products. Such price protection and stock balancing provisions provided through
the Company's supply agreements or particular manufacturers' sales policies may
provide only limited protection against inventory risks. The Company's suppliers
have been decreasing the level of price protection and return privileges offered
and there can be no assurance that such suppliers will not continue to further
decrease or eliminate such protection in the future. Manufacturers experiencing
financial difficulties may also be unable or unwilling to honor their price
protection and stock balancing commitments. Further, the Company regularly
disposes of excess and obsolete inventory at discounts to the Company's original
purchase price. Although the Company sets up reserves for losses associated with
the disposal of excess and obsolete items and records inventories net of these
reserves, there can be no assurance that such reserves will be adequate. Changes
in industry practices which increase the risks associated with maintaining high
levels of inventory, the Company's inability to effectively manage its current
and future inventory, or significant adjustments to the value of its inventory
could materially and adversely affect the Company's business, operating results
and financial condition. See "--Increased Competition from Direct Marketers,"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Year 2000 Compliance. The Company uses a significant number of computer
software programs and operating systems in its internal operations, including
applications used in financial business systems and various administration
functions. As the year 2000 approaches, each of these computer systems will be
affected in some way by the rollover of the two digit year value to 00. If these
systems are unable to properly recognize date sensitive information when the
year changes to 2000, they could generate erroneous data or cause a system to
fail. The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for year 2000 compliance. Given the
information known at this time about the Company's systems, coupled with the
Company's ongoing efforts to upgrade or replace business critical systems as
necessary, it is currently not anticipated that these year 2000 costs will have
a material adverse effect on the Company's business, operating results and
financial condition. However, the Company is still analyzing its computer
systems and, to the extent they are not fully year 2000 compliant, there can be
no assurance that the costs necessary to update software or potential systems
interruptions would not have a material adverse effect on the Company's
business, operating results and financial condition.
Rapid Technological Change. The personal computer products and services
industry is subject to rapid technological change, evolving industry standards
and frequent new product and service introductions. The Company must, on a
timely and cost-effective basis, continuously respond to new product
introductions. It must source such new products, develop and introduce new
services which keep pace with technological developments and increasingly
sophisticated network systems, and train its employees to provide the necessary
services to support new products and systems. There can be no assurance that the
Company will be able to source new products to meet customer demand, respond to
technological developments in a timely manner, if at all, or that its service
offerings will adequately meet the changing requirements of its customers and
achieve market acceptance. Further, suppliers may restrict the Company's access
to new products. The Company's failure to successfully source new products or
develop and introduce new services which meet evolving customer needs could have
a material adverse effect on the Company's business, operating results and
financial condition.
Control by Principal Stockholders. The directors and executive officers of
the Company beneficially own approximately 82% of the outstanding shares of
Common Stock. As a result, the directors and executive officers of the Company
are able to control the election of members of the Company's Board of Directors
and generally exercise control over the Company's corporate actions. In
particular, Dort A. Cameron III, the Company's Chairman, and entities controlled
by Mr. Cameron (the "Cameron Affiliates") exercise a high degree of control over
the Company's actions. The Cameron Affiliates together beneficially own
approximately
8
<PAGE> 9
77% of the outstanding shares of Common Stock. In addition, pursuant to certain
provisions of a Stockholders' Agreement dated as of December 10, 1993 (as
amended, the "Stockholders' Agreement"), the Cameron Affiliates have a right to
purchase additional shares of Common Stock from certain employees of the Company
(the "Participants") under certain circumstances. The Participants own
approximately 18% of the outstanding shares of Common Stock and include John A.
McKenna, Jr., Dale H. Allardyce and David J. Csira. Pursuant to the
Stockholders' Agreement, in the event that a Participant's employment is
terminated under certain circumstances, the Company will have an option to
purchase such Participant's shares of Common Stock. However, if the Company is
not able to pay the full amount of the total purchase price in cash in
connection with its repurchase rights, the Company must assign its rights to the
Cameron Affiliates. Further, pursuant to the Stockholders' Agreement, the
Participants have agreed to vote in the same manner as the Cameron Affiliates in
connection with certain transactions which are outside of the ordinary course of
business and the Cameron Affiliates have agreed to vote their shares of Common
Stock to elect a nominee of the Participants to the Board of Directors of the
Company. Such concentration of ownership as well as the voting provisions of the
Stockholders' Agreement may have the effect of delaying or preventing a change
in control of the Company. See "Security Ownership of Certain Beneficial Owners
and Management" and "Certain Transactions and Related Transactions."
Anti-Takeover Effects. Certain provisions of the Company's Certificate of
Incorporation, as amended, Bylaws and Delaware law may be deemed to have an
anti-takeover effect. The Company's Certificate of Incorporation provides that
the Board of Directors may issue additional shares of Common Stock without
stockholder approval. The Company's Bylaws do not permit anyone other than the
Board of Directors, the Chairman of the Board or the President to call special
meetings of the stockholders. In addition, the Company is subject to the
antitakeover provisions of Section 203 of the Delaware General Corporation Law
(the "DGCL"). In general, the statute prohibits a publicly-held Delaware
corporation or a privately-held Delaware corporation with more than 2,000
stockholders from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. Each of the foregoing provisions
gives the Board of Directors, acting without stockholder approval, the ability
to prevent, or render more difficult or costly, the completion of a takeover
transaction that stockholders might view as being in their best interests,
including a takeover transaction that might result in a premium over the market
price for the shares of Common Stock. See "Description of Company's Securities
to be Registered."
Absence of Dividends. The Company has never declared or paid any cash
dividends on its Common Stock and does not presently intend to pay cash
dividends on the Common Stock in the foreseeable future. The Company currently
anticipates that it will retain future earnings for reinvestment in its
business. Furthermore, the Company's Fourth Amended and Restated Agreement for
Wholesale Financing, as amended from time to time (the "IBMCC Financing
Agreement") with IBM Credit Corporation ("IBMCC") prohibits the Company from
paying cash dividends on the Common Stock. See "-- High Degree of Leverage;
Dependence on IBM Credit Corporation; Future Capital Needs."
High Degree of Leverage; Dependence on IBM Credit Corporation; Future
Capital Needs. The Company requires substantial working capital to fund its
business and, in particular, to finance product inventory, accounts receivable
and capital expenditures. To date, the Company has relied on several credit
facilities to finance its business and its expansion. As a result, the Company
is highly leveraged and at September 28, 1997 and June 29, 1997, the Company's
total interest bearing outstanding debt was $374.7 million and $396.5 million,
respectively. The Company has financed a significant portion of its working
capital needs under the IBMCC Financing Agreement, a working capital line of
credit of up to $525 million (the "IBMCC Working Capital Line of Credit"), the
interest bearing portion of which was $333.3 million as of September 28, 1997.
Borrowings under the IBMCC Working Capital Line of Credit are secured by the
Company's assets, including certain accounts receivable, certain inventory and
other assets. The amount of available borrowings under the IBMCC Working Capital
Line of Credit may be increased for higher seasonal purchasing requirements and
may be reduced or terminated by IBMCC upon 60 days prior notice. The IBMCC
Financing Agreement is subject to annual renewal and expires September 15, 1998.
There can be no assurance that IBMCC will not reduce amounts available under or
terminate the IBMCC Working Capital Line of Credit or that IBMCC will
9
<PAGE> 10
renew the IBMCC Financing Agreement in any year. The IBMCC Financing Agreement
provides for a term loan in the original principal amount of $20 million (the
"IBMCC Long-Term Loan"), a short term loan in the original principal amount of
$55 million (the "Short-Term Loan") and a special working capital advance in the
original principal amount of $20 million (the "Special Working Capital
Advance"). The IBMCC Long-Term Loan is required to remain outstanding unless
there are no outstanding interest bearing advances under the IBMCC Financing
Agreement. The Short-Term Loan has been repaid in full. The Company also
maintains a vendor relationship with International Business Machines Corporation
("IBM"), of which IBMCC is an affiliate. There can be no assurance that any
deterioration in the vendor-customer relationship between the Company and IBM
will not adversely affect the Company's relationship with IBMCC or its ability
to secure adequate working capital through IBMCC. In addition, from time to
time, the Company has failed to comply with certain financial covenants of the
IBMCC Financing Agreement. In the past, IBMCC has promptly waived such defaults.
However, there can be no assurance that IBMCC will waive future breaches of such
covenants. If IBMCC substantially reduces the amounts available under the IBMCC
Working Capital Line of Credit or fails to renew or otherwise terminates the
IBMCC Financing Agreement, the Company would be required to seek alternative
sources of financing. No assurance can be given that such alternative financing
will be available or if available, will be available on terms that are favorable
to the Company. The Company's inability to procure such financing would have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, if Dort A. Cameron III ceases to own and/or
control at least 35% of the issued and outstanding capital stock of the Company,
the Company will be deemed to be in default under the IBMCC Financing Agreement.
At present, the Cameron Affiliates beneficially own approximately 77% of the
outstanding shares of the capital stock of the Company. However, there can be no
assurance that they will continue to do so.
Substantially all of the Company's outstanding indebtedness is tied to the
prime rate, including the IBMCC Working Capital Line of Credit which bears
interest at the prime rate plus .50% and the other loans under the IBMCC
Financing Agreement which bear interest at the prime rate plus 2.50%. The
Company is not currently a party to any financial instruments which would
mitigate the Company's exposure to increases in the prime interest rate.
Accordingly, increases in the prime rate could adversely impact the Company's
pretax income or otherwise materially and adversely affect the Company's
business, operating results and financial condition. Also, there can be no
assurance that the Company will be able to generate sufficient cash from
operations to satisfy future interest and principal payments under its credit
facilities. In the event that the Company is unable to meet its payment
obligations or needs additional capital to fund its business, the Company would
be required to seek alternative sources of financing or attempt to refinance its
existing credit facilities. There can be no assurance that such alternative
equity or debt funding would be available on terms acceptable to the Company, if
at all. Under such circumstances, the Company's inability to procure additional
funding or refinance existing indebtedness would have a material adverse effect
on the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
10
<PAGE> 11
ITEM 2. FINANCIAL INFORMATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements of the Company and the
related notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere herein. The consolidated
statements of operations data set forth below with respect to the years ended
July 2, 1995, June 30, 1996 and June 29, 1997 and the consolidated balance sheet
data as of June 30, 1996 and June 29, 1997 are derived from the audited
consolidated financial statements included elsewhere in this Registration
Statement, which have been audited by KPMG Peat Marwick LLP. The consolidated
statements of operations data as set forth below with respect to the year ended
July 3, 1994 and the consolidated balance sheet data for the years ended July 3,
1994 and July 2, 1995 are derived from audited financial statements not included
herein. The consolidated statements of operations data for the three months
ended September 28, 1997 and September 29, 1996 and the consolidated balance
sheet data as of September 28, 1997 are derived from unaudited financial
statements included elsewhere in the Registration Statement. The balance sheet
data as of September 29, 1996 is derived from unaudited financial statements
which are not included elsewhere herein. The unaudited data has been prepared on
the same basis as the audited financial statements appearing elsewhere herein,
and include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such information for the periods presented.
The information set forth in this Registration Statement reflects a four-for-one
stock dividend to holders of shares of the Company's Common Stock which occurred
in November 1997. See Note 10 of Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
----------------------------- -----------------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, JUNE 29, JUNE 30, JULY 2, JULY 3,
1997 1996 1997 1996 1995 1994(1)
------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Product revenues.................... $ 500,938 $ 525,962 $ 2,126,973 $ 1,940,796 $ 1,342,323 $ 1,019,010
Service revenues.................... 105,901 71,674 353,624 207,511 130,940 75,917
----------- ----------- ----------- ----------- ----------- -----------
Total net revenues............ 606,839 597,636 2,480,597 2,148,307 1,473,263 1,094,927
----------- ----------- ----------- ----------- ----------- -----------
Cost of revenues:
Cost of products sold............... 450,781 482,716 1,922,826 1,764,775 1,236,940 917,939
Cost of services provided........... 79,872 54,039 267,554 168,957 110,349 64,300
----------- ----------- ----------- ----------- ----------- -----------
Cost of revenues.............. 530,653 536,755 2,190,380 1,933,732 1,347,289 982,239
----------- ----------- ----------- ----------- ----------- -----------
Product gross margin.................. 50,157 43,246 204,147 176,021 105,383 101,071
Services gross margin................. 26,029 17,635 86,070 38,554 20,591 11,617
----------- ----------- ----------- ----------- ----------- -----------
Total gross margin............ 76,186 60,881 290,217 214,575 125,974 112,688
Selling, general and administrative
expenses............................ 61,815 58,547 251,963 192,312 132,586 100,790
Nonrecurring stock compensation
costs............................... -- -- -- 18,185 -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
operations.................. 14,371 2,334 38,254 4,078 (6,612) 11,898
Interest expense, net............... 9,669 8,132 37,147 29,726 23,151 17,444
Other income........................ -- -- 462 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes....................... 4,702 (5,798) 1,569 (25,648) (29,763) (5,546)
Provision (benefit) for income
taxes............................... 2 10 25 28 (509) (2,225)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)............. $ 4,700 $ (5,808) $ 1,544 $ (25,676) $ (29,254) $ (3,321)
=========== =========== =========== =========== =========== ===========
Net income (loss) per share........... $ .14 $ (.18) $ .04 $ (.82) $ (.93) $ (.12)
=========== =========== =========== =========== =========== ===========
Weighted average number of shares and
dilutive common stock equivalents
outstanding(2)...................... 33,736,205 32,357,840 35,296,435 31,348,340 31,333,300 28,053,165
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------
SEPTEMBER 28, JUNE 29, JUNE 30, JULY 2, JULY 3, AUGUST 6,
1997 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................ 665,644 683,590 590,588 415,170 351,777 329,701
Total long-term liabilities................. 49,477 49,486 52,509 37,224 38,425 37,382
Stockholders' equity (deficit).............. (32,929) (37,732) (39,515) (31,305) (2,623) (11,767)
</TABLE>
- ---------------
(1) The statements of operations data for the Company's 1994 fiscal year
presents the results of operations from August 6, 1993, the date the Company
acquired the net assets of the domestic information systems business of JWP
Inc.
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the calculation of weighted average number of shares outstanding.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This section contains trend analysis and other forward-looking statements
based on current expectations. Actual results may differ materially, due to a
number of factors including those set forth in the section entitled "Business
Factors" contained in Item 1 of this Registration Statement.
OVERVIEW
ENTEX is a leading provider of PC solutions to meet the distributed
information technology systems and end-user support requirements of Fortune 1000
companies and other large enterprises. The Company's total PC management
capabilities include acquisition and procurement services and network,
professional and other outsourcing service support for the PC-based network
environment.
During fiscal 1996 and 1997, the Company completed several acquisitions to
improve its ability to meet customer demands for expanded service offerings,
including (i) Random Access, Inc. ("Random Access"), a provider of information
technology solutions through the sale of microcomputers and technical services
to corporate and institutional clients in the western United States, and (ii)
FCP Technologies, Inc. ("FCP"), a systems integrator specializing in network
integration, migration and consulting services. Each acquisition was accounted
for as a purchase and the results of each have been included in the consolidated
financial statements since the date of the each acquisition. See Note 2 of Notes
to Consolidated Financial Statements.
The Company has two principal sources of revenues: product revenues and
service revenues. Product revenues include acquisition and procurement of
personal computer and network products, software and peripherals. Service
revenues include configuration services, network and professional services,
migration services, outsourcing services, PC and network operation support
services, on-site and centrally located help desk services, as well as asset
management services. ENTEX has expanded rapidly, growing from $1.1 billion in
total net revenues for the eleven months in fiscal 1994 to $2.5 billion in total
net revenues in fiscal 1997. While product revenues have historically accounted
for more than 80% of total net revenues, service revenues have grown in absolute
dollar terms and as a percentage of total net revenues in each fiscal year since
the Company's inception.
12
<PAGE> 13
RESULTS OF OPERATIONS
The following table sets forth the percentage of total net revenues
represented by the items in the Company's statements of operations for the
period indicated:
<TABLE>
<CAPTION>
THEE MONTHS ENDED FISCAL YEAR ENDED
----------------------- ---------------------------------
SEPT. 28, SEPT. 29, JUNE 29, JUNE 30, JULY 2,
1997 1996 1997 1996 1995
--------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues............................ 82.5% 88.0% 85.7% 90.3% 91.1%
Service revenues............................ 17.5 12.0 14.3 9.7 8.9
--- --- --- --- ---
Total net revenues.................. 100.0 100.0 100.0 100.0 100.0
Cost of revenues.............................. 87.4 89.8 88.3 90.0 91.4
--- --- --- --- ---
Gross margin(1)............................... 12.6 10.2 11.7 10.0 8.6
Selling, general and administrative
expenses.................................... 10.2 9.8 10.2 9.0 9.0
Nonrecurring stock compensation costs......... -- -- -- 0.8 --
--- --- --- --- ---
Income (loss) from operations................. 2.4 0.4 1.5 0.2 (0.4)
Interest expense, net......................... 1.6 1.4 1.4 1.4 1.6
Income (loss) before income taxes............. 0.8 (1.0) 0.1 (1.2) (2.0)
Provision (benefit) for income taxes.......... -- -- -- -- --
--- --- --- --- ---
Net income (loss)............................. 0.8% (1.0)% 0.1% (1.2)% (2.0)%
=== === === === ===
</TABLE>
- ---------------
(1) Product gross margin as a percentage of product revenues and service gross
margin as a percentage of service revenue for each period was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
----------------------- ---------------------------------
SEPT. 28, SEPT. 29, JUNE 29, JUNE 30, JULY 2,
1997 1996 1997 1996 1995
--------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Product gross margin.......................... 10.0% 8.2% 9.6% 9.1% 7.9%
Services gross margin......................... 24.6 24.6 24.3 18.6 15.7
</TABLE>
Three Months Ended September 28, 1997 Compared to Three Months Ended September
29, 1996
The Company's net income improved in the three months ended September 28,
1997 to $4.7 million compared to a net loss of $5.8 million in the three months
ended September 29, 1996. The improvement was a result of an increase in product
gross margins attributable to improved controls over vendor programs and a
higher percentage of services in the revenue base.
Product revenues. Product revenues were $500.9 million for the three months
ended September 28, 1997 as compared to $526.0 million for the three months
ended September 29, 1996, a decrease of $25.1 million or 4.8%. While the Company
experienced overall unit growth in sales of desktops, laptops and server units
during the three months ended September 28, 1997, the revenue decline reflects
price reductions in average sales price driven by lower manufacturer prices and
intense competition.
Service revenues. Service revenues were $105.9 for the three months ended
September 28, 1997 as compared to $71.7 million for the three months ended
September 29, 1996, an increase of $34.2 million or 47.8%. Service revenues as a
percentage of total net revenues increased to 17.5% for the three months ended
September 28, 1997 as compared to 12.0% in the three months ended September 29,
1996. These increases
13
<PAGE> 14
reflect increase in demand from existing customers and the addition of new large
accounts. The Company is focused on continuing to increase service revenue as a
percentage of total net revenues.*
Gross margins. Total gross margins increased to 12.6% for the three months
ended September 28, 1997 as compared to 10.2% for the three months ended
September 29, 1996. This increase was due primarily to the revenue growth in the
higher margin service business. Product gross margin increased to 10.0% or $50.2
million for the three months ended September 28, 1997 as compared to 8.2% or
$43.2 million for the three months ended September 29, 1996. These increases
reflect the Company's efforts to improve product margins through improved
controls over price protection arrangements and vendor allowances and to a
lesser extent, the Company's involvement in certain manufacturers' programs
designed to increase sales of specific products. Future product margins may be
adversely influenced by manufacturers' pricing strategies and increased
competition.* Service margins remained constant over the periods at 24.6%,
reflecting an improved mix of services, partially offset by pricing pressures.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $61.8 million for the three months ended September
28, 1997 as compared to $58.5 million for the three months ended September 29,
1996, an increase of $3.3 million or 5.6%. The increase resulted from
expenditures in support of the Company's growth in services including
investments in the enterprise-wide technology infrastructure to support
operations.
Income from Operations. Income from operations was $14.4 million for the
three months ended September 28, 1997 as compared to $2.3 million in the three
months ended September 29, 1996, an increase of $12.1 million. The increase
reflects significant improvements in gross margins partially offset by increases
in selling, general and administrative expenses to support business expansion.
Interest expense, net. Net interest expense increased to $9.6 million for
the three months ended September 28, 1997 as compared to $8.1 million for the
three months ended September 29, 1996, an increase of $1.5 million or 18.9%. The
increase was driven by an increase in borrowing rates under the Company's credit
agreements and the prime rate in addition to increased working capital needs.
Provisions for income taxes. The Company utilized net operating loss
carryforwards to offset federal income tax requirements for the three months
ended September 28, 1997 and September 29, 1996. Although the Company recognized
net income for the three months ended September 28, 1997, based on the history
of negative pretax earnings, the Company has determined that it would be prudent
to maintain the valuation reserve against the deferred tax asset until it can
sustain several quarters of profitable operations. While the Company considered
the improved operations over the course of fiscal year 1997, the Company did not
believe that two quarters of profitable operations following two years of fairly
unprofitable operations was sufficient to conclude that it was more likely than
not that the deferred tax asset would be realized. The Company will reevaluate
the foregoing premise in connection with future periods.
Net income. As a result of the factors mentioned above, net income for the
three months ended September 28, 1997 was $4.7 million as compared to a net loss
of $5.8 million for the three months ended September 29, 1996.
Fiscal 1997 Compared to Fiscal 1996
The Company's net income improved in fiscal 1997 to $1.5 million compared
to a net loss of $25.7 million in fiscal 1996. The improvement resulted from an
increase in product gross margins attributable to improved controls over vendor
programs, an increased percentage of higher margin services in the revenue base
and the effect of a non-recurring stock compensation charge in 1996.
Product revenues. Product revenues were $2.1 billion in fiscal 1997 as
compared to $1.9 billion in fiscal 1996, an increase of $186.2 million or 9.6%.
The increase was primarily due to an increase of $159 million in equipment sales
and a $27 million increase in software sales. The increase in equipment sales
reflected the sale of more desktops, laptops and server units to existing
customers as well as new customers, although at a lower average sales price due
to manufacturers' price reductions.
- ---------------
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. Investors are strongly
encouraged to review the section entitled "Business Factors" contained in Item 1
of this Registration Statement, for a discussion of factors that could affect
future performance. The reader is cautioned that other sentences and sections
not so identified may also contain forward-looking information.
14
<PAGE> 15
Service revenues. Service revenues were $353.6 million in fiscal 1997 as
compared to $207.5 million in fiscal 1996, an increase of $146.1 million or
70.4%. The increase was due to higher professional service and outsourcing
revenues which were favorably affected by the acquisition of FCP, increased
sales to existing customers and the addition of new customers. An increase in
unit volume of products sold, such as desktops and laptops, also contributed to
the growth in service revenues which the Company believes will continue to
create demand for services such as configuration and installation.* The
Company's emphasis on growing service revenues was reflected in the growth of
service revenues as a percentage of total net revenues from 9.7% in fiscal 1996
to 14.3% in fiscal 1997.*
Gross margins. Total gross margins increased to 11.7% in fiscal 1997 from
10.0% in fiscal 1996, primarily due to the increased product and service
revenues, improved cost controls and increased service revenues in the mix of
products sold. Product gross margins were 9.6% in fiscal 1997 as compared to
9.1% in fiscal 1996. The increase in product gross margins was primarily due to
the Company's efforts to improve controls over price protection arrangements and
vendor allowances and to a lesser extent the Company's involvement in certain
manufacturers' programs designed to increase sales of specific products. The
increase was partially offset by competitive pricing strategies. Service gross
margins increased to 24.3% in fiscal 1997 from 18.6% in fiscal 1996 as a result
of pricing changes, a greater mix of higher margin professional services and the
Company's ability to further utilize its service personnel.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $252.0 million in fiscal 1997 as compared to $192.3
million in fiscal 1996, an increase of $59.7 million or 31.1%. The increase was
in support of the Company's growth in services including investments in
enterprise-wide technology infrastructure to support operations.
Income from Operations. Income from operations was $38.3 million in fiscal
1997 as compared to $4.1 million in fiscal 1996, an increase of $34.2 million.
This increase was due to overall improved profit margins and the effect of
nonrecurring stock compensation costs of $18.2 million which were recorded in
fiscal 1996.
Interest expense, net. Net interest expense was $37.1 million in fiscal
1997 as compared to $29.7 million in fiscal 1996, an increase of $7.4 million or
25.0%. The increase was due to increased interest rates charged to the Company
by lenders and increased financing to support revenue growth.
Provisions for income taxes. The Company utilized net operating loss
carryforwards to offset federal income tax requirements for the fiscal years
1997 and 1996. Although the Company recognized net income for fiscal 1997, based
on the history of negative pretax earnings, the Company has determined that it
would be prudent to maintain the valuation reserve against the deferred tax
asset until it can sustain several quarters of profitable operations. While the
Company considered the improved operations over the course of fiscal year 1997,
the Company did not believe that two quarters of profitable operations following
two years of fairly unprofitable operations was sufficient to conclude that it
was more likely than not that the deferred tax asset would be realized. The
Company will reevaluate the foregoing premise in connection with future periods.
Net income. As a result of the factors mentioned above, net income was $1.5
million in fiscal 1997 as compared to a loss of $25.7 million in fiscal 1996.
Fiscal 1996 Compared to Fiscal 1995
Product revenues. Product revenues were $1.9 billion in fiscal 1996 as
compared to $1.3 billion in fiscal 1995, an increase of $598.5 million or 44.6%.
This increase was primarily due to successful sales and marketing efforts and
increased product sales to existing customers as well as sales to new customers
and the acquisition of Random Access.
Service revenues. Service revenues were $207.5 million in fiscal 1996 as
compared to $130.9 million in fiscal 1995, an increase of $76.6 million or
58.5%. The increase was primarily due to successful sales and marketing efforts
and increased sales to existing customers and new customers.
- ---------------
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. Investors are strongly
encouraged to review the section entitled "Business Factors" contained in Item 1
of this Registration Statement, for a discussion of factors that could affect
future performance. The reader is cautioned that other sentences and sections
not so identified may also contain forward-looking information.
15
<PAGE> 16
Gross margins. Total gross margins increased to 10.0% in fiscal 1996 from
8.6% in fiscal 1995, primarily due to the increase in both product and service
gross margins. Product gross margins were 9.1% in fiscal 1996 as compared to
7.9% in fiscal 1995. Product gross margins were favorably impacted by increased
sales of higher margin network products. Service gross margins were 18.6% in
fiscal 1996 as compared to 15.7% in fiscal 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $192.3 million in fiscal 1996 as compared to $132.6
million in fiscal 1995, an increase of $59.7 million or 45%. The increase
reflected the integration of Random Access into the Company's operations and
investment in the Company's configuration capabilities, order processing
enhancements and enterprise-wide technology infrastructure upgrades.
Non-recurring stock compensation costs. Stock compensation costs in fiscal
1996 were $18.2 million, consisting of $16.2 million related to remeasurement of
compensation expense to fair market value and the assumption of $2.0 million in
estimated tax withholding.
Income from Operations. Income from operations, exclusive of nonrecurring
stock compensation costs, was $22.3 million in fiscal 1996, as compared to a
loss of $6.6 million in fiscal 1995.
Interest expense, net. Net interest expense was $29.7 million in 1996 as
compared to $23.1 million in 1995, an increase of $6.6 million or 28.4%. The
increase was primarily due to higher borrowings to finance increased working
capital requirements, partially offset by lower effective interest rates.
Net loss. As a result of the factors mentioned above, the Company
experienced a net loss of $25.7 million in 1996 as compared to a net loss of
$29.3 million in 1995. Exclusive of stock compensation costs, the Company's net
loss in fiscal 1996 was $7.5 million.
16
<PAGE> 17
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly statements of
operations data for the five quarters ended September 28, 1997, as well as such
data expressed as a percentage of total net revenues. The unaudited data has
been prepared on the same basis as the audited financial statements appearing
elsewhere herein, and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such information for
the periods presented. Such statement of operations data should be read in
conjunction with the consolidated financial statements of the Company and the
related notes thereto appearing elsewhere herein. The operating results for any
quarter are not indicative of the operating results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
SEPTEMBER 28, JUNE 29, MARCH 31, DECEMBER 31, SEPTEMBER 29,
1997 1997 1997 1996 1996
------------- -------- --------- ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues....................... $ 500,938 $542,032 $ 506,370 $552,609 $ 525,962
Service revenues....................... 105,901 104,356 92,824 84,770 71,674
-------- -------- -------- -------- --------
Total net revenues.............. 606,839 646,388 599,194 637,379 597,636
-------- -------- -------- -------- --------
Cost of revenues:
Cost of products sold.................. 450,781 482,841 456,088 501,181 482,716
Cost of services provided.............. 79,872 78,844 71,161 63,510 54,039
-------- -------- -------- -------- --------
Cost of revenues................ 530,653 561,685 527,249 564,691 536,755
-------- -------- -------- -------- --------
Product gross margin..................... 50,157 59,191 50,282 51,428 43,246
Services gross margin.................... 26,029 25,512 21,663 21,260 17,635
-------- -------- -------- -------- --------
Total gross margin.............. 76,186 84,703 71,945 72,688 60,881
Selling, general and administrative
expenses............................... 61,815 64,698 61,811 66,907 58,547
-------- -------- -------- -------- --------
Income from operations................... 14,371 20,005 10,134 5,781 2,334
Interest expense, net.................... 9,669 9,839 9,418 9,758 8,132
Other income............................. -- 462 -- -- --
-------- -------- -------- -------- --------
Income (loss) before income
taxes......................... 4,702 10,628 716 (3,977) (5,798)
Provision (benefit) for income taxes..... 2 1 9 5 10
-------- -------- -------- -------- --------
Net income (loss)............... $ 4,700 $ 10,627 $ 707 $ (3,982) $ (5,808)
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
SEPTEMBER 28, JUNE 29, MARCH 31, DECEMBER 31, SEPTEMBER 29,
1997 1997 1997 1996 1996
------------- -------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues......................... 82.5% 83.9% 84.5% 86.7% 88.0%
Service revenues......................... 17.5 16.1 15.5 13.3 12.0
---- ---- ---- ---- ----
Total net revenues................ 100.0 100.0 100.0 100.0 100.0
Cost of revenue............................ 87.4 86.9 88.0 88.6 89.8
---- ---- ---- ---- ----
Gross margin(1)............................ 12.6 13.1 12.0 11.4 10.2
Selling, general and administrative
expenses................................. 10.2 10.0 10.3 10.5 9.8
---- ---- ---- ---- ----
Income from operations..................... 2.4 3.1 1.7 0.9 0.4
Interest expense, net...................... 1.6 1.5 1.6 1.5 1.4
Other income............................... -- -- -- -- --
---- ---- ---- ---- ----
Income (loss) before income taxes........ 0.8 1.6 0.1 (0.6) (1.0)
Provision (benefit) for income taxes....... 0.0 -- -- -- --
---- ---- ---- ---- ----
Net income (loss)........................ 0.8% 1.6% 0.1% (0.6)% (1.0)%
==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) Product gross margin as a percentage of product revenues and services gross
margin as a percentage of service revenue for each period were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
SEPTEMBER 28, JUNE 29, MARCH 31, DECEMBER 31, SEPTEMBER 29,
1997 1997 1997 1996 1996
------------- -------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Product gross margin....................... 10.0% 10.9% 9.9% 9.3% 8.2%
Services gross margin...................... 24.6 24.4 23.3 25.1 24.6
</TABLE>
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations with borrowings under
various credit lines. Cash provided by (used in) operating activities was $21.1
million, $(26.1) million, $(74.7) million and $(10.1) million during the three
months ended September 28, 1997 and in fiscal years 1997, 1996 and 1995,
respectively. Cash provided by operations during the three months ended
September 28, 1997 resulted primarily from net income of $4.7 million,
depreciation and other non-cash charges to income, and from changes in operating
assets and liabilities. Cash used in operations in fiscal years ended June 29,
1997 and June 30, 1996, respectively, increased due to greater working capital
requirements resulting from higher revenues. For fiscal year ended 1995, cash
used in operations increased primarily due to a net loss of $29.3 million which
was partially offset by a decrease in net working capital requirements.
Cash (used in) investing activities was $(4.2) million, $(27.8) million,
$(33.1) million and $(9.0) million during the three months ended September 28,
1997 and in fiscal years 1997, 1996 and 1995, respectively. Cash was used during
these periods for capital expenditures and for acquisitions.
Cash provided from (used in) financing activities was $(22.4) million,
$57.2 million, $108.3 million and $19.9 million during the three months ended
September 28, 1997 and in fiscal years 1997, 1996 and 1995, respectively. The
fluctuations in cash from financing activities during these periods resulted
primarily from changes in the Company's borrowings to support the business
growth.
As of September 28, 1997, the Company's primary source of liquidity
consisted of various financing provided by IBMCC and an inventory financing
facility with FINOVA Capital Corporation ("FINOVA"). The IBMCC Financing
Agreement provides for borrowings under the IBMCC Working Capital Line of
Credit, the interest bearing portion of which was $333.3 million as of September
28, 1997. The amount of available borrowings under the IBMCC Financing Agreement
may be increased for higher seasonal purchasing requirements, and may be reduced
or terminated by IBMCC upon 60 days prior written notice. Amounts outstanding
under the IBMCC Working Capital Line of Credit bear interest at the prime rate
plus .50% (9.0% at September 28, 1997). Borrowings under the IBMCC Financing
Agreement are secured by the Company's assets, including certain accounts
receivable, certain inventories and other assets. The agreement is subject to
annual renewal and expires September 15, 1998.
In connection with the Company's acquisition of Random Access in September
1995, the IBMCC Financing Agreement was amended to provide for the IBMCC
Long-Term Loan in the original principal amount of $20 million. The IBMCC
Long-Term Loan is required to remain outstanding unless there are no outstanding
interest bearing advances under the IBMCC Financing Agreement. The IBMCC
Financing Agreement was further amended in December 1996 and July 1997 to
provide for the Short-Term Loan in the original principal amount of $55 million
and the Special Working Capital Advance in the original principal amount of $20
million. The Short-Term Loan was repaid in full subsequent to September 28,
1997. Amounts outstanding under the IBMCC Long-Term Loan and Special Working
Capital Advance bear interest at the prime rate plus 2.50% (11.0% at September
28, 1997). At September 28, 1997, $17.3 million of principal was outstanding
under the IBMCC Long-Term Loan, $27.5 million of principal was outstanding under
the Short-Term Loan and $20.0 million of principal was outstanding under the
Special Working Capital Advance.
As of September 28, 1997, the Company had $110 million available for
borrowing under its inventory line of credit with FINOVA. The line of credit is
secured by the Company's inventory financed by FINOVA. At September 28, 1997,
the principal amount outstanding under this line of credit was $70 million.
Under the terms of the agreement with FINOVA, the Company pays no interest on
this borrowing.
The IBMCC Financing Agreement provides that if Dort A. Cameron III ceases
to own and/or control at least 35% of the issued and outstanding capital stock
of the Company, the Company will be deemed to be in default under the IBMCC
Financing Agreement. In addition, the IBMCC Financing Agreement contains
restrictive covenants which require the Company to, among other things,
(i) maintain a ratio of current assets to current liabilities of at least 0.83
to 1.00; (ii) maintain the total liabilities minus the aggregate outstanding
principal amount of certain indebtedness during each fiscal year at an amount no
greater than $800 million; (iii) not permit the sum of tangible net worth plus
the aggregate outstanding principal amount of certain indebtedness to be less
than $60 million for the fiscal quarter ended December 1997, $48.2 million for
the fiscal quarter ended March 1998 and $38.7 million for all periods
thereafter; (iv) not permit the ratio of EBIT for interest expense for the
period of two consecutive fiscal quarters then ended to be less than 1.40 to
1.00 for the fiscal quarter ended December 1997, 1.60 to 1.00 for the fiscal
quarter ended March 1998 and 1.70 to 1.00 for each fiscal quarter thereafter;
(v) not permit the consolidated net income for the fiscal quarter ended
December 1997 to be less than .70% of sales for such fiscal quarter and for any
fiscal quarter thereafter to be less than 1.00% of sales for such fiscal
quarter; (iv) not permit the aggregate amount of capital expenditures made in
any fiscal year to exceed $30 million net of dispositions related to such
capital expenditures; and (vii) maintain working capital of at least $100.5
million for the fiscal quarter ended December 1997, $92.3 million for the
fiscal quarter ended March 1998 and at least $83.8 million for periods
thereafter. The Company is currently in compliance with all of these
restrictive covenants.
18
<PAGE> 19
In addition, the IBMCC Financing Agreement prohibits the Company from
paying cash dividends on Common Stock.
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is complex since virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for the year 2000 compliance. It is
anticipated that all reprogramming efforts will be complete by December 31,
1999, allowing adequate time for testing.* Given the information known at this
time about the Company's systems, coupled with the Company's ongoing efforts to
upgrade or replace business critical systems as necessary, it is currently not
anticipated that these year 2000 costs will have a material adverse effect on
the Company's business, operating results and financial condition. However, the
Company is still analyzing its computer systems and, to the extent they are not
fully year 2000 compliant, there can be no assurance that the costs necessary
to update software or potential systems interruptions would not have a material
adverse effect on the Company's business, operating results and financial
condition.
The Company has committed approximately $1.0 million toward capital
expenditures for the fiscal year ended June 28, 1998. The Company believes its
current cash balances and its available credit facilities will be sufficient to
meet its anticipated cash needs for capital expenditures for the next 12
months.* The Company intends to continue to finance a significant portion of its
working capital needs through credit facilities. The Company believes that it
may seek to raise additional funds through public or private equity or debt
financing or from other sources to support the future growth of the business.
However, there can be no assurance that the Company will be able to raise such
additional funding.
ITEM 3. PROPERTIES
The Company's headquarters are located in Rye Brook, New York, where the
Company leases approximately 31,200 square feet of office space under a lease
which expires on May 30, 2002 and approximately 12,100 square feet under a lease
which expires December 31, 1998. In addition, the Company owns a 255,000 square
foot facility in Erlanger, Kentucky which serves as the Company's integration
center. The Company also leases approximately 151,949 square feet of office
space in Mason, Ohio, which houses the Company's NSC, including its CAC,
Solution Line, dispatch services and training centers. The lease for such
property expires on July 17, 2005. The Company leases approximately 19,200
square feet of office space in Canton, Massachusetts to accommodate the
Company's data processing and credit and collections departments under a lease
which expires June 30, 1998.
The Company leases additional office space for sales, services and support
staff in various states. The Company believes that alternate office space is
available on comparable terms in each location.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of November 30, 1997 for
(i) each person or entity who is known by the Company to beneficially own five
percent or more of the outstanding Common Stock of the Company, (ii) each of the
Company's directors, (iii) each of the Named Officers (as defined below), and
(iv) all
- ---------------
*This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. Investors are strongly
encouraged to review the section entitled "Business Factors" contained in Item 1
of this Registration Statement, for a discussion of factors that could affect
future performance. The reader is cautioned that other sentences sections not so
identified may also contain forward-looking information.
19
<PAGE> 20
directors and executive officers of the Company as a group and reflects the
nine-for-one stock dividend of Common Stock effected by the Company on August
15, 1995 and the four-for-one stock dividend of Common Stock effected by the
Company on November 25, 1997:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
----------------------
NAME OF GROUP OR BENEFICIAL OWNERS NUMBER PERCENT
- ------------------------------------------------------------------------ ---------- -------
<S> <C> <C>
Dort A. Cameron III(2)
c/o Entex Information Services, Inc.
Six International Drive
Rye Brook, NY 10573.............................................. 25,000,000 77.2%
IBM Credit Corporation(3)
1133 Westchester Avenue
White Plains, NY 10604................................................ 2,436,055 7.4%
John A. McKenna, Jr.(4)(5).............................................. 666,650 2.1%
Kenneth Ghazey(6)....................................................... 333,333 1.0%
Dale H. Allardyce(7).................................................... 300,000 *%
David J. Csira(5)(8).................................................... 233,333 *%
Richard Nathanson....................................................... -- --
R. Randolph Devening(9)................................................. 26,239 *%
Linwood A. (Chip) Lacy, Jr.(10)......................................... 26,239 *%
Frank W. Miller......................................................... 13,740 *%
All directors and executive officers as a group (11 persons)(11)........ 26,924,534 82.1%
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of November 30, 1997
are deemed outstanding. Such shares, however, are not deemed outstanding
for the purposes of computing the percentage ownership of each other
person. Except as indicated in the footnotes to this table, pursuant to the
Stockholders' Agreement and pursuant to applicable community property laws,
each stockholder named in the table has sole voting and investment power
with respect to the shares set forth opposite such stockholder's name. See
"Business -- Business Factors -- Control by Principal Stockholders" and
"Description of Company's Securities to be Registered."
(2) Includes 21,500,000 shares registered in the name of ENTEX Associates L.P.
Dort A. Cameron III is the sole stockholder of the Putnam Group, Inc., the
general partner of ENTEX Associates L.P. Includes 1,851,850 shares
currently owned by Mr. Cameron which are subject to an immediately
exercisable option to purchase such shares which Mr. Cameron granted to
IBMCC. See "Certain Relationships and Related Transactions."
(3) Includes 1,851,850 shares of Common Stock currently owned by Mr. Cameron
which are subject to an option immediately exercisable by IBMCC to purchase
such shares and 584,205 shares of the Company's Common Stock subject to an
immediately exercisable warrant. See "Certain Relationships and Related
Transactions."
(4) Excludes 1,695,120 shares of the Company's Common Stock which are subject
to unvested options.
(5) Pursuant to the Stockholders' Agreement, in the event that Mr. McKenna's or
Mr. Csira's employment is terminated for any reason, the Company shall have
a right to purchase all shares of Common Stock owned by him. If the Company
is unable to purchase such shares in cash, the Cameron Affiliates will have
a right to purchase such shares. See "Business -- Business
Factors -- Control by Principal Stockholders" and "Certain Relationships
and Related Transactions."
(6) Includes 333,333 shares of the Company's Common Stock currently owned by
Mr. Ghazey which are subject to an option exercisable within 60 days of
November 30, 1997.
20
<PAGE> 21
(7) Pursuant to the Stockholders' Agreement, in the event Mr. Allardyce's
employment is terminated as a result of death or disability, the Company
shall have the right to purchase and Mr. Allardyce or his legal
representative shall have the right to require the Company to purchase all
of his shares of Common Stock. In the event Mr. Allardyce's employment is
terminated for cause, the Company shall have a right to purchase all of his
shares of Common Stock. See "Business -- Business Factors -- Control by
Principal Stockholder" and "Certain Relationships and Related
Transactions."
(8) Includes 33,333 shares of the Company's Common Stock currently owned by Mr.
Csira which are subject to an option exercisable within 60 days of November
30, 1997.
(9) Includes 12,499 shares of the Company's Common Stock currently owned by Mr.
Devening which are subject to an option exercisable within 60 days of
November 30, 1997.
(10) Includes 12,499 shares of the Company's Common Stock currently owned by Mr.
Lacy which are subject to an option exercisable within 60 days of November
30, 1997.
(11) Includes 391,664 shares of the Company's Common Stock which are subject to
options exercisable within 60 days of November 30, 1997.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
MANAGEMENT -- EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEE
The executive officers, directors and other key employees of the Company,
and their ages and positions as of November 30, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Dort A. Cameron III.................. 52 Chairman of the Board of Directors
John A. McKenna, Jr.................. 42 President, Chief Executive Officer and Director
Kenneth Ghazey....................... 41 Executive Vice President, Finance and Administration,
Chief Financial Officer and Director
Dale H. Allardyce.................... 48 Executive Vice President, Operations
David J. Csira....................... 40 Executive Vice President, Field Operations
Philip R. Johnson.................... 49 Senior Vice President, Human Resources
John Lyons........................... 44 Senior Vice President, Sales and Marketing
Richard Nathanson.................... 40 Senior Vice President, Services
R. Randolph Devening(1).............. 55 Director
Linwood A. (Chip) Lacy, Jr.(1)....... 52 Director
Frank W. Miller(1)................... 52 Director
</TABLE>
- ---------------
(1) Member of the Audit and Compensation Committees.
Mr. Cameron co-founded the Company in August 1993, and has served as a
director and Chairman of the Board of the Company since its formation. From
October 1988 to the present, Mr. Cameron has served as the managing general
partner of EBD, L.P., the general partner of The Airlie Group, L.P., a private
investment limited partnership; from June 1984 to the present, as the general
partner of BMA, the general partner of Investment Limited Partnership, a private
investment limited partnership; and from December 1995 to the present, as
managing member of Airlie Enterprises LLC, a private consulting company ("Airlie
Enterprises"). Mr. Cameron holds a B.A. from Middlebury College and an M.B.A.
from Boston University. In 1983, Mr. Cameron was diagnosed with multiple
sclerosis. See "Business -- Business Factors -- Need to Recruit and Retain
Management, Technical and Sales Personnel" and "-- Control by Principal
Stockholders."
Mr. McKenna co-founded the Company in August 1993, and has served as a
Director and as President of the Company since its inception and as Chief
Executive Officer since April 1996. From March 1989 to March 1993, Mr. McKenna
held various positions with JWPIS, including Executive Vice President of Sales
21
<PAGE> 22
and Marketing, President of the Integration Services Division, and most recently
as Senior Executive Vice President. Mr. McKenna holds a B.A. from Trinity
College.
Mr. Ghazey joined the Company as Executive Vice President, Finance and
Administration, Chief Financial Officer and Director in January 1997. Mr. Ghazey
served as President, Chief Operating Officer and a Director for Darling
International, a publicly-owned food waste recycler, from 1993 to December 1996,
and as Executive Vice President, Chief Financial Officer and Treasurer of
Darling International from 1990 to 1992. Mr. Ghazey is a Certified Public
Accountant and holds a B.S. in accounting from the University of Vermont.
Mr. Allardyce joined the Company in February 1995 as Executive Vice
President, Operations. From January 1993 to February 1995, Mr. Allardyce served
as Senior Vice President of the TSI Business Unit at THORN Americas, Inc., a
consumer rental company. From March 1982 to December 1992, Mr. Allardyce was
employed by The Southland Corporation, an operator of convenience stores, most
recently as Vice President of Distribution, Manufacturing and Procurement. Mr.
Allardyce holds a B.B.A. in Industrial Management from the University of Texas.
Mr. Csira joined the Company as Vice President, West Operations in August
1993 in connection with the acquisition of JWPIS and served as Senior Vice
President, West Operations from October 1995 to November 1996 and has served as
Executive Vice President, Operations since November 1996. From July 1989 to
August 1993, Mr. Csira served in various sales and management positions with
JWPIS, most recently as Vice President, West Operations. Prior to joining JWPIS,
Mr. Csira served as Vice President of sales for Clancy-Paul, a New Jersey-based
computer reseller. Mr. Csira holds a B.S. in Business Administration from the
University of Southern California.
Mr. Johnson joined the Company in November 1994 as Senior Vice President,
Human Resources. From May 1993 to May 1994, Mr. Johnson served as Senior Vice
President, Human Resources, Corporate for R.H. Macy, Inc., a department store
operator. From April 1991 to May 1993, Mr. Johnson served as Senior Vice
President, Human Resources for Saks Fifth Avenue, a specialty store operator.
Mr. Johnson holds a B.S. in Industrial Engineering and an M.B.A. from the
University of Florida.
Mr. Lyons joined the Company in April 1994 as Vice President, Marketing and
has served as Senior Vice President, Sales and Marketing since October 1996.
From August 1993 until March 1994, Mr. Lyons was Vice President, Sales and
Marketing for Carrabassett Spring Water. From July 1976 to July 1993, Mr. Lyons
held various sales and marketing management positions at IBM. Mr. Lyons holds a
B.S. in marketing from Syracuse University.
Mr. Nathanson joined the Company in July 1996 as Senior Vice President,
Network and Professional Services in connection with the Company's acquisition
of FCP, a network integration and professional services consulting firm and has
served as Senior Vice President, Services since April 1997. From February 1984
to July 1996, Mr. Nathanson served as President and Chief Executive Officer of
FCP.
Mr. Devening has served as a Director of the Company since June 1996. Since
August 1994, Mr. Devening has served as Chairman, President and Chief Executive
Officer of Foodbrands America, Inc., a diversified food manufacturing company.
From April 1993 to July 1994, Mr. Devening served as Vice Chairman and Chief
Financial Officer of Fleming Companies, Inc., a food distribution and marketing
company. From July 1989 to March 1993, Mr. Devening served as Executive Vice
President and Chief Financial Officer at Fleming Companies, Inc. Mr. Devening
holds a B.A. from Stanford University and an M.B.A. from the Harvard Graduate
School of Business. Mr. Devening serves as a director of Hancock Fabrics Inc.,
as well as numerous private companies.
Mr. Lacy has served as a Director of the Company since June 1996. From July
1985 until May 1996, Mr. Lacy served as the Chief Executive Officer and Chairman
of Ingram Micro Inc. and its predecessor company Micro D Inc., a distributor of
microcomputer products. From December 1993 to January 1996, Mr. Lacy served as
President of Ingram Industries, the holding company of Ingram Micro Inc., and
continues to serve as a director of Ingram Industries. From June 1995 to April
1996, he served as the Chief Executive Officer of Ingram Industries. From
October 1996 to October 1997, Mr. Lacy served as President and Chief
22
<PAGE> 23
Executive Officer of MicroWarehouse, a direct marketer of computer products. Mr.
Lacy holds a B.S. in Chemical Engineering and an M.B.A. from the University of
Virginia. Mr. Lacy serves as a director of Earthlink and Micro Warehouse.
Mr. Miller has served as a Director of the Company since September 1994.
Since January 1995, Mr. Miller has served as President of Miller Associates,
Inc., a management consulting firm. From February 1990 to December 1994, Mr.
Miller served as the Vice Chairman and Chief Executive Officer of Darling
International, a publicly owned food waste recycling company. Mr. Miller holds a
B.S. in Industrial Management from the Lowell Technological Institute. Mr.
Miller serves on the boards of directors of several private companies.
The Company currently has six directors. All directors serve on the Board
of Directors of the Company until the next annual meeting of the stockholders of
the Company, and until their successors are elected and qualified. There are no
family relationships among any of the directors or executive officers of the
Company. The Company's executive officers serve at the discretion of the Board
of Directors.
In June 1996, the Board of Directors established an Audit Committee and a
Compensation Committee. The Audit Committee is currently comprised of Messrs.
Devening, Lacy and Miller and is chaired by Mr. Miller. The Audit Committee
oversees the activities of the Company's independent auditors and reviews the
Company's internal accounting procedures and controls. The Compensation
Committee is currently comprised of Messrs. Devening, Lacy and Miller and is
chaired by Mr. Devening. The Compensation Committee makes recommendations to the
Board of Directors with respect to general compensation and benefit levels and
other related matters, reviews and approves the compensation and benefits for
the Company's executive officers, administers the Company's stock purchase and
stock option plans and makes recommendations to the Board of Directors regarding
such matters.
23
<PAGE> 24
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
by the Company during the Company's fiscal year ending June 29, 1997 to the
Company's Chief Executive Officer, and each of the Company's four other most
highly compensated executive officers (collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARD
------------
ANNUAL COMPENSATION SECURITIES
FISCAL --------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(1)
- --------------------------------------------------- ------ --------- ------- ------------
<S> <C> <C> <C> <C>
John A. McKenna, Jr. .............................. 1997 357,199 150,171 --
President and Chief Executive Officer
Kenneth Ghazey(2).................................. 1997 130,246 -- 880,000
Executive Vice President, Finance and
Administration, and Chief Financial Officer
Dale H. Allardyce.................................. 1997 239,623 135,371 --
Executive Vice President, Operations
David J. Csira..................................... 1997 226,999 116,877 100,000
Executive Vice President, Field Operations
Richard Nathanson.................................. 1997 258,048 193,787(3) 187,395
Senior Vice President, Services
</TABLE>
- ---------------
(1) The stock options listed in the table represent options to purchase Common
Stock of the Company under the Company's 1996 Performance Incentive Plan
("PIP") or the Company's 1996 Stock Option Plan (the "EIS Plan") and reflect
the nine-for-one stock dividend of Common Stock effected by the Company on
August 15, 1995 and the four-for-one stock dividend of Common Stock effected
by the Company on November 25, 1997.
(2) Mr. Ghazey was appointed Executive Vice President, Finance and
Administration and Chief Financial Officer in January 1997.
(3) Includes $120,787 bonus payable by FCP at the time of the acquisition and
paid by the Company after the closing.
24
<PAGE> 25
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth for each of the Named Officers who received
options granted during the fiscal year ended June 29, 1997 certain information
concerning such grants and reflects the nine-for-one stock dividend of Common
Stock effected by the Company on August 15, 1995 and the four-for-one stock
dividend of Common Stock effected by the Company on November 25, 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE OF ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO PRICE TERM(3)
OPTIONS EMPLOYEES PER EXPIRATION -----------------------
NAME GRANTED IN 1997 SHARE(1) DATE(2) 5%($) 10%($)
- ------------------------- --------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kenneth A. Ghazey(4)..... 880,000 43.21% $ 2.04 5/27/07 1,127,885 2,858,281
David J. Csira(5)........ 100,000 4.91 2.04 6/26/07 128,169 324,805
Richard Nathanson........ 154,885(6) 7.61 2.04 7/10/01 87,209 192,712
32,510(7) 1.60 2.04 8/01/01 18,305 40,450
</TABLE>
- ---------------
(1) In determining the fair market value of the Company's Common Stock, the
Board of Directors considered various factors, including the Company's
financial condition and business prospects, its operating results, the
absence of a market for its Common Stock, the risks normally associated with
investments in companies engaged in similar businesses and the market prices
of securities of certain competitors. The exercise price for options granted
under the PIP may be paid in any form as shall be permitted by the Company's
Compensation Committee of the Board of Directors, including without
limitation cash, shares of the Company's Common Stock, other awards granted
or other property, including promissory notes. The exercise price for
options granted under the EIS Plan may be paid in cash or other property
including promissory notes, shares of the Company's Common Stock, or any
form of "cashless" exercise, including by net exercise, as shall be
permitted by the Company's Compensation Committee of the Board of Directors.
(2) Options may terminate before their expiration dates if the optionee's status
as an employee or consultant is terminated or upon the optionee's death or
disability. Options must generally be exercised within 30 days of the
termination of the optionee's status as an employee or consultant of the
Company, or within 12 months after such optionee's death or disability. If,
however, an optionee is terminated for cause, all vested options shall be
canceled on the date of grant.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the Company's future
Common Stock prices.
(4) Represents (i) 147,200 shares of the Company's Common Stock subject to an
incentive stock option, (ii) 352,800 shares of the Company's Common Stock
subject to a non-qualified stock option and (iii) 380,000 shares of the
Company's Common Stock subject to a performance stock option. All options
were granted pursuant to the Company's PIP. One-third of each of the
incentive stock option and the non-qualified stock option vested immediately
upon grant and additional one-third of such options shall vest after each
anniversary of January 6, 1997. The performance stock option shall vest 100%
on May 27, 2004, provided, however, that vesting may be accelerated based on
the value of the Company's Common Stock.
(5) Represents incentive stock option granted pursuant to the Company's PIP.
One-third of such option vested immediately upon grant and additional
one-third of such option shall vest after each anniversary of June 26, 1997.
(6) Represents a non-qualified stock option granted pursuant to the Company's
EIS Plan. One-half of such option shall vest on July 10, 1998 and the
remaining portion shall vest on July 10, 1999.
(7) Represents a non-qualified stock option granted pursuant to the Company's
EIS Plan. One-half of such option shall vest on August 1, 1998 and the
remaining portion shall vest on August 1, 1999.
25
<PAGE> 26
DIRECTOR COMPENSATION
The Company does not pay cash compensation to its directors. However, under
the Company's 1996 Non-Employee Director Stock Plan, each non-employee director
receives an annual retainer and fees for each Board or committee meeting in the
form of shares of the Company's Common Stock. In addition, the Company
reimburses directors for expenses incurred in attending board and committee
meetings.
Since inception, the Company has paid Mr. Cameron a salary for services
rendered in his capacity as Chairman of the Board. During fiscal 1997, his
annual salary was $400,000.
EMPLOYMENT AGREEMENTS
The Company has entered into agreements with certain of the Company's
executive officers, including John A. McKenna, Jr., the Company's President and
Chief Executive Officer, Kenneth A. Ghazey, the Company's Executive Vice
President, Finance and Administration and Chief Financial Officer, Dale H.
Allardyce, the Company's Executive Vice President, Operations, David J. Csira,
the Company's Executive Vice President, Field Operations and Richard Nathanson,
the Company's Senior Vice President, Services.
Mr. McKenna's severance agreement provides that upon a Severance Event (as
defined below), he will be entitled to a payment equal to 12 times his monthly
compensation as of the date of termination (including his bonus or any variable
compensation at 100% of target). In addition, if a Severance Event occurs or Mr.
McKenna's employment is terminated prior to a public offering or change of
control (as defined below) and the Company elects to repurchase his shares of
Common Stock pursuant to the Stockholders' Agreement, Mr. McKenna shall be
entitled to receive (i) the difference between the book value as of the end of
the most recent fiscal year and the Share Value (as defined below) and (ii) a
tax gross-up for the difference between ordinary income tax treatment and
capital gains tax treatment resulting from such repurchase, computed to put Mr.
McKenna in the same position he would have been in if he had timely made an IRC
Section 83(b) election. A "Severance Event" is defined as (i) a termination for
any reason other than cause or as a result of his death, disability or voluntary
resignation or (ii) a change of control which results in a reduction of his base
compensation, a reduction in the level of authority or scope of responsibilities
or relocation. The agreement provides for the acceleration of the vesting period
pertaining to stock options granted to him in addition to extending his exercise
period to two years after termination in the event of a Severance Event. Mr.
McKenna's severance agreement terminates on August 6, 2000.
Mr. Ghazey's at-will employment agreement provides for an annual base
salary of $275,000 and participation in the ENTEX Management Incentive Plan at a
target bonus of 50% of his base salary for 100% achievement of established
goals. In addition, Mr. Ghazey's employment agreement provides that upon (i) the
termination of his employment by the Company for other than cause or as a result
of death, disability or voluntary resignation, (ii) a change of control (as
defined below) or (iii) a unilateral decrease in his aggregate compensation,
benefits and incentive package which is not uniformly applied to all other
senior executive officers, he will be entitled to one year's base salary at the
then current rate and all incentive compensation earned but not paid and under
the Management Incentive Plan then in effect.
Mr. Allardyce's agreement is effective until 24 months following a change
of control (as defined below) or until November 30, 1998 if no change of control
has occurred by such date. Mr. Allardyce's retention agreement provides that
upon a change of control followed by (i) a termination for other than cause or
as a result of his death, disability or voluntary resignation, (ii) a reduction
in his compensation, (iii) a reduction in the level of authority or scope of
responsibilities or (iv) a relocation, he will be entitled to 12 times his
monthly compensation as of the date of termination (including his bonus at 100%
of target).
Mr. Csira's at-will employment agreement provides for an annual base salary
of $250,000 and participation in the ENTEX Management Incentive Plan at a target
bonus of 50% of his base salary for 100% achievement of established goals. In
addition, Mr. Csira's employment agreement provides that if he is terminated
following a change in control (as defined below), other than for cause, he is
entitled to one year base salary then in effect plus bonus at 100% of target.
Mr. Nathanson's employment agreement provides for a monthly base salary of
$18,333, participation in
26
<PAGE> 27
the ENTEX Management Incentive Plan at a target bonus of not less than 50% of
his base salary and $1,000 per month for mortgage expenses. In addition, Mr.
Nathanson's employment agreement provides that upon termination without cause,
he will be entitled to severance payments equal to 12 times his monthly
compensation as of the date of termination plus bonus at 100% of target. Mr.
Nathanson is subject to a covenant not to compete until the later of July 1999
or one year after his employment with the Company is terminated.
A "change of control" for purposes of Mr. McKenna's and Mr. Csira's
agreements is defined as an event in which the Cameron Affiliates no longer own
voting securities of the Company entitled to cast a majority of votes for
election of the Board of Directors of the Company. A "change of control" for
purposes of Mr. Allardyce's and Mr. Ghazey's agreements is defined as a transfer
of ownership or control of more than 50% of all of the assets or shares of the
Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Share Ownership.
Dort A. Cameron III, the Company's Chairman, owns of record 3,500,000
shares of the Company's Common Stock. In addition, ENTEX Associates, L.P., a
Delaware limited partnership, owns 21,500,000 shares of the Company's Common
Stock. Mr. Cameron is the sole stockholder of The Putnam Group, Inc., the
general partner of ENTEX Associates, L.P. (the "Putnam Group"). Two of the
limited partners of ENTEX Associates, L.P., Airlie Associates and Airlie
Associates II, are general partnerships consisting of Mr. Cameron's relatives.
The other limited partners of ENTEX Associates, L.P. are business associates of
Mr. Cameron. Mr. Cameron has voting and dispositive power over the shares of the
Company's Common Stock held by ENTEX Associates, L.P. and, accordingly, may be
deemed to have beneficial ownership with respect to these shares. In connection
with the restructuring of indebtedness under the IBMCC Financing Agreement in
December 1996, Mr. Cameron and ENTEX Associates, L.P., along with Mr. McKenna,
have pledged the Common Stock held by each to IBMCC as additional collateral.
See "-- IBMCC Financing."
Indebtedness Between the Company and Certain Affiliates
In July 1993, Mr. Cameron, Airlie Associates and Airlie Associates II
loaned $3.13 million, $340,000 and $780,000, respectively, to ENTEX Holdings. In
addition, Mr. Cameron, in December 1993, loaned ENTEX Holdings $312,500. These
loans are evidenced by promissory notes (the "1993 Notes"). The 1993 Notes
issued in July 1993 are due on July 29, 2000 and the 1993 Note issued in
December 1993 is due on August 6, 2000. The 1993 Notes have been assumed by the
Company and $415,925 principal amount repaid in connection with the merger of
ENTEX Holdings with and into the Company on June 28, 1996 (the "Holdings
Merger"). Interest on the 1993 Notes is payable quarterly at a rate equal to the
prime rate plus 2.50%. On August 6, 1993, the Company borrowed $5.3 million from
Citibank N.A. to partially finance the acquisition of JWPIS. Mr. Cameron
personally guaranteed the repayment of this loan. In connection with the
Holdings Merger, the outstanding balance of this loan, approximately $4.1
million, was repaid.
Payments to Affiliates
From December 1993 to December 1995, ENTEX Holdings paid to the Putnam
Group a monthly overhead allocation fee of $15,000 for a total of $360,000. Such
monthly fee was paid by ENTEX Holdings to Airlie Enterprises from January 1996
to June 1996, and by the Company to Airlie Enterprises from July 1996 to the
present. In addition, in October 1995, ENTEX Holdings paid a consulting fee to
Airlie Enterprises the amount of $500,000.
Transfer of Entex Holdings Investments; Assets
During fiscal years 1994, 1995 and 1996, ENTEX Holdings invested $335,000
in National Teacher Academy, Inc. in exchange for promissory notes and shares
representing 51% of the outstanding capital stock of National Teacher Academy,
Inc. In connection with the Holdings Merger, ENTEX Holdings transferred to Mr.
Cameron the promissory notes and stock of National Teacher Academy, Inc. in
exchange for a $335,000
27
<PAGE> 28
reduction in the amounts outstanding under the 1993 Notes. In July 1994, ENTEX
Holdings invested $50,000 in Russian Investors, L.P. in exchange for shares
representing approximately 10% of the profit of Russian Investors, L.P. In
connection with the Holdings Merger, ENTEX Holdings transferred to Mr. Cameron
the partnership interest of Russian Investors, L.P. in exchange for a $50,000
reduction in the amounts outstanding under the 1993 Notes. In June 1995, ENTEX
Holdings loaned a consultant to the Company $30,925. In connection with the
Holdings Merger, Mr. Cameron acquired the loan in exchange for a $30,925
reduction in Mr. Cameron's 1993 Note. In April 1996, the Company sold to
Knowledge Alliance Holdings, Inc. ("KAH"), a corporation controlled by the
Cameron Affiliates, the PC training business which the Company had previously
acquired in connection with the merger of Random Access. The book value of such
business was $1.1 million at the time of the transfer to KAH. In consideration
for this transfer, the Company received shares of KAH representing 25% of its
then outstanding capital stock. The Company also entered into an agreement with
KAH to market these training services. The agreement granted the Company an
option to purchase up to an additional 2,500 shares of common stock of KAH
depending on the level of sales of such training services by the Company. KAH
was granted the option to purchase the assets of the training business conducted
by the Company in Minneapolis, Minnesota for book value of such assets on the
date of acquisition. This option was exercised on August 1, 1996.
Stockholders' Agreement.
On December 10, 1993, ENTEX Holdings, Dort A. Cameron III, ENTEX
Associates, L.P. and the Participants entered into the Stockholders' Agreement
in connection with the sale and purchase of a total of 5,930,690 shares, net of
repurchases, of the Common Stock (the "Original Shares") of ENTEX Holdings by
the Participants. The Stockholders' Agreement is binding on the Company as the
successor corporation of ENTEX Holdings and all obligations of the Participants
and the Cameron Affiliates relating to the shares of Common Stock of ENTEX
Holdings relate to the shares of Common Stock of the Company. Pursuant to the
Stockholders' Agreement, each of the Cameron Affiliates and each of the
Participants agreed to vote their shares of Common Stock to elect one
Participant nominated by the Participants and acceptable to the Cameron
Affiliates to the Board of Directors of the Company. In addition, in the event
of (i) any proposed capital reorganization of the Company, (ii) any
reclassification or recapitalization of the Company, (iii) any transfer of all
or substantially all of the assets of the Company, (iv) any consolidation or
merger involving the Company and any other person, (v) any dissolution,
liquidation or winding-up of the Company, or (vi) any material transaction
affecting the capital stock of the Company which is not in the ordinary course
of business and which is required by the laws of Delaware to be submitted to a
vote of the stockholders of the Company, the Participants agreed to vote their
shares of Common Stock in the same manner as the Cameron Affiliates.
In addition, pursuant to the Stockholders' Agreement, in the event that the
employment of certain Participants including Dale Allardyce (the "Plan 1
Participants") is terminated for death, disability or cause, the Company will
have the right to purchase all of the shares of Common Stock of such
Participants. Upon termination as a result of death or disability the Plan 1
Participants and their legal representatives will have the right to require the
Company to purchase all of their shares of Common Stock. The per share price to
be paid by the Company shall equal the greater of the Original Purchase Price
(as defined below) or the Share Value (as defined below). The Company will have
the right to purchase shares of Common Stock if a Participant who is not a Plan
1 Participant, including John McKenna and David Csira (a "Plan 2 Participant")
is terminated for any reason. If a Plan 2 Participant's employment is terminated
for cause, the per share value shall equal the lesser of Original Purchase Price
and the Book Value (as defined below) and if for any other reason, shall equal
the Book Value. If the Company is not able to pay for a Participant's shares of
Common Stock in cash, the Company must assign its rights to the Cameron
Affiliates.
"Share Value" shall mean the amount determined by multiplying (a) the net
income of the Company on a consolidated basis for the four most recent fiscal
quarters of the Company immediately preceding the date of the termination of the
Plan 1 Participant's employment, as shown on the financial statements of the
Company, determined in accordance with GAAP, by (b) the Earnings Multiple, and
dividing the product so obtained by the number of shares of Common Stock issued
and outstanding on a fully diluted basis. "Earnings Multiple" shall mean the
arithmetic average of the "price to earnings ratio" of each of certain publicly
traded companies
28
<PAGE> 29
as reported in composite transactions in the Wall Street Journal on the last
day of each of the six calendar months immediately preceding the date of
repurchase of such Common Stock. "Original Purchase Price" shall mean the
original purchase price paid for the Original Shares, as adjusted to reflect the
nine-for-one stock dividend of Common Stock effected by ENTEX Holdings on August
15, 1995 and the four-for-one stock dividend of Common Stock effected by the
Company on November 25, 1997. "Book Value" shall mean the book value of a share
of Common Stock as of the end of the most recent fiscal year.
The Stockholders' Agreement will terminate upon the consummation of a
public offering; provided, that the voting provisions shall terminate upon the
earlier of (a) the consummation of a public offering or (b) December 10, 2000,
and provided, further that certain provisions relating to the Company's right to
repurchase a Participant's shares of Common Stock shall terminate upon the
earlier of (x) the consummation of a public offering or (y) a change of control.
A "change of control" is defined as an event in which the Cameron Affiliates no
longer own voting securities of the Company entitled to cast a majority of votes
for election of the Board of Directors of the Company.
IBMCC Financing.
The Company has financed a significant portion of its working capital needs
under the IBMCC Financing Agreement. IBMCC is the beneficial owner of more than
5% of the outstanding capital stock of the Company. The IBMCC Financing
Agreement provides for borrowings under the IBMCC Working Capital Line of Credit
of up to $525.0 million, the interest bearing portion of which was $333.3
million as of September 28, 1997. The amount of available borrowings under the
IBMCC Financing Agreement may be adjusted upwards for higher seasonal purchasing
requirements, and may be reduced or terminated by IBMCC upon 60 days prior
written notice. Amounts outstanding under the IBMCC Working Capital Line of
Credit bear interest at the prime rate plus .50% (9.0% at September 28, 1997).
In connection with the Company's acquisition of Random Access in September 1995,
the IBMCC Financing Agreement was amended to provide for the IBMCC Long-Term
Loan in the original principal amount of $20 million. The IBMCC Long-Term Loan
is required to remain outstanding unless there are no outstanding interest
bearing advances under the IBMCC Financing Agreement. The IBMCC Financing
Agreement was further amended in December 1996 and July 1997 to provide for the
Short-Term Loan in the original principal amount of $55 million and the Special
Working Capital Advance in the original principal amount of $20 million. The
December 1996 and 1997 amendments also included favorable revisions to the
financial covenant requirements and the payment schedule for the Company,
including agreements to waive all financial covenant defaults pertaining to
fiscal 1997. The Short-Term Loan was repaid in full subsequent to September 28,
1997. Amounts outstanding under the IBMCC Long-Term Loan and Special Working
Capital Advance bear interest at the prime rate plus 2.50% (11.0% at September
28, 1997). At September 28, 1997, $17.3 million of principal was outstanding
under the IBMCC Long-Term Loan, $27.5 million of principal was outstanding under
the Short-Term Loan and $20.0 million of principal was outstanding under the
Special Working Capital Advance. The IBMCC Financing Agreement provides that if
Dort A. Cameron III ceases to own and/or control at least 35% of the issued and
outstanding capital stock of the Company, the Company will be deemed to be in
default. In connection with the financing arrangement, Mr. Cameron has granted
to IBMCC an option to acquire 1,851,850 shares of Common Stock held by him. The
option is immediately exercisable at a price of $.02 per share and expires July
15, 2001. IBMCC holds a warrant to purchase up to 333,350 shares of the
Company's Common Stock which was committed to by Entex Holdings in August 1993
and issued in November 1994 in connection with a settlement of a dispute
between International Business Machines Corporation, JWPIS and ENTEX Holdings.
In connection with the restructuring of indebtedness under the IBMCC Financing
Agreement in December 1996, Mr. Cameron, Mr. McKenna and ENTEX Associates, L.P.
have pledged the Common Stock held by each to IBMCC as additional collateral. In
connection with an amendment to the IBMCC Financing Agreement on July 15, 1997
the Company entered into a warrant agreement pursuant to which IBMCC was issued
warrants to acquire up to 250,855 shares of Common Stock. All warrants issued
to IBMCC under the warrant agreement may be exercised at any time prior to
July 31, 2004 at an exercise price of $7.55. In addition, under the warrant
agreement, IBMCC was granted the right to sell the Common Stock issuable upon
exercise of the warrants (the "Warrant Shares") along with any sale of Common
Stock representing more than 20% of the capital stock of the Company held by
the Cameron Affiliates. Mr. Cameron has a right to require IBMCC to sell the
Warrant Shares along with any sale of Common Stock representing 50% or more of
the capital stock of the Company by the Cameron Affiliates. IBMCC was also
granted certain demand and piggyback registration rights for the Warrant
Shares. See "Business -- Business Factors", "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and Note 7 of the Notes to Consolidated Financial Statements.
29
<PAGE> 30
ITEM 8. LEGAL PROCEEDINGS
The Company is engaged in legal actions arising in the ordinary course of
business but is not currently a party to any legal actions which could have a
material adverse effect on its business, financial condition or results of
operations.
ITEM 9.MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
As of November 30, 1997, the Company had outstanding 32,399,060 shares of
Common Stock held by 2,177 stockholders and no shares of Preferred Stock. There
is no established public trading market for any class of the Company's equity
securities.
The Company has not paid any dividends on any of its capital stock and does
not anticipate that any cash dividends will be declared in the foreseeable
future. The IBMCC Financing Agreement prohibits the payment of dividends.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
From June 30, 1993 through November 30, 1997, ENTEX Holdings and the
Company issued and sold the following securities (as adjusted, in the case of
equity securities, to reflect the nine-for-one stock dividend of Common Stock
effected by ENTEX Holdings on August 15, 1995 and the four-for-one stock
dividend of Common Stock effected by the Company on November 25, 1997):
(a) In August 1993, ENTEX Holdings issued 3,500,000 shares of Common
Stock to Dort A. Cameron III in exchange for 3,500 shares of Common Stock
of the Company.
(b) In August 1993, ENTEX Holdings issued 750,000 shares of Common
Stock to ENTEX Associates, L.P. in exchange for 750 shares of Common Stock
of the Company.
(c) In August 1993, ENTEX Holdings issued and sold 20,750,000 shares
of Common Stock to ENTEX Associates, L.P. for an aggregate purchase price
of $415,000.
(d) From December 1993 through June 1997, ENTEX Holdings and the
Company issued to approximately 76 key employees an aggregate of 5,930,690
shares of Common Stock, net of repurchases, for an aggregate purchase price
of $118,614. At the same time, Entex Holdings issued promissory notes in
the aggregate principal amount of $770,991 for cash and notes of such
employee purchasers.
(e) From December 1993 to June 1996, ENTEX Holdings issued to
approximately 2,100 employees of the Company, 1,260,500 Share Units, net of
repurchases, with each Share Unit representing a right to receive one share
of Common Stock of ENTEX Holdings or an equivalent amount of cash, at the
election of ENTEX Holdings pursuant to the ENTEX Share Plan.
(f) In July 1994, ENTEX Holdings issued warrants for purchase of
333,350 shares of Common Stock to IBMCC which are currently exercisable at
$.20.
(g) In January 1995, the Company issued options to purchase up to
166,650 shares of Common Stock to an employee and from April 1996 to May
1997, the Company issued 166,650 shares of Common Stock to such employee
pursuant to the exercise of such options.
(h) From February 1996 to June 1996, the Company issued an aggregate
of 2,846,260 options with exercise prices ranging from $4.63 to $9.02, net
of forfeitures, to purchase shares of Common Stock to officers, employees,
consultants and directors pursuant to the ENTEX Holdings, Inc. 1996 Stock
Option Plan, as amended.
(i) In June 1996, ENTEX Holdings issued warrants for the purchase of
375,000 shares of Common Stock to Microsoft Corporation which were
exercisable at $14.40 per share. In November 1997, these warrants were
canceled and new warrants were issued. See 10(p) below.
(j) In connection with the Holdings Merger, the Company exchanged all
outstanding shares of Common Stock of ENTEX Holdings for shares of Common
Stock of the Company on a one-for-one
30
<PAGE> 31
basis. In addition, the Company exchanged all outstanding Share Units of
ENTEX Holdings for an equivalent number of shares of the Company's Common
Stock.
(k) From July 1996 to August 1996, the Company issued an aggregate of
812,795 options wtih exercise prices ranging from $2.04 to $9.38, net of
forfeitures, to purchase shares of Common Stock to officers, employees,
consultants and former employees of FCP pursuant to the EIS Plan.
(l) From May 1997 to November 1997, the Company issued an aggregate of
2,362,000 options with exercise prices ranging from $2.04 to $4.63, net of
forfeitures, to purchase shares of Common Stock to officers, employees and
consultants pursuant to the PIP.
(m) In June 1997, the Company issued 41,220 shares to Non-employee
Directors pursuant to the Non-employee Director Share Plan.
(n) In July 1997, the Company issued warrants for purchase of 167,235
shares of Common Stock to IBMCC which are currently exercisable at $7.55
per share.
(o) In October 1997, the Company issued warrants for purchase of
83,620 shares of Common Stock to IBMCC which are currently exercisable at
$7.55 per share.
(p) In November 1997, the Company issued warrants for purchase of
715,230 shares of Common Stock to Microsoft Corporation which are currently
exercisable at $7.55 per share. See note 10(i) above.
The issuances of the securities described in Items 15(a), (b), (c), (d),
(f), (g), (i), (n), (o) and (p) were deemed to be exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act") in reliance on
Section 4(2). The issuance of the securities described in Items 15(e), (h), (k),
(l) and (m) were deemed to be exempt from registration under the Securities Act
in reliance on Rule 701 promulgated thereunder. The issuance of the securities
described in Item 15(j) were deemed to be exempt from registration under the
Securities Act in reliance on Section 3(a)(9). The recipients of securities in
each such transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions. All recipients had access, through
their relationships with the Company, to information about the Company.
ITEM 11. DESCRIPTION OF COMPANY'S SECURITIES TO BE REGISTERED
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, $0.0001 per share par value, and 2,000,000 shares of
undesignated Preferred Stock, $0.0001 per share par value.
The following summary of certain provisions of the Common Stock does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Company's Certificate of Incorporation, as amended, which is
included as an exhibit to this Registration Statement, and by the provisions of
applicable law.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. The holders of Common
Stock shall receive dividends as and when declared by the Board of Directors out
of funds legally available for the payment of dividends. See "Market Price of
and Dividends on the Company's Common Equity and Related Stockholder Matters."
In the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets. Holders of
Common Stock have no preemptive rights or rights to convert their Common Stock
into any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and non-assessable.
Pursuant to the Stockholders' Agreement, each of the Cameron Affiliates and
each of the Participants agreed to vote their shares of Common Stock to elect
one Participant nominated by the Participants and acceptable to the Cameron
Affiliates to the Board of Directors of the Company. In addition, in the event
of (i) any proposed capital reorganization of the Company, (ii) any
reclassification or recapitalization of the Company, (iii) any transfer of all
or substantially all of the assets of the Company, (iv) any consolidation or
31
<PAGE> 32
merger involving the Company and any other person, (v) any dissolution,
liquidation or winding-up of the Company, or (vi) any material transaction
affecting the capital stock of the Company which is not in the ordinary course
of business and which is required by the laws of Delaware to be submitted to a
vote of the stockholders of the Company, the Participants agreed to vote their
shares of Common Stock in the same manner as the Cameron Affiliates. See
"Certain Relationships and Related Transactions."
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Certificate of Incorporation authorizes the issuance of
additional shares of Common Stock, without stockholder approval. The Company's
Bylaws do not permit anyone other than the Board of Directors, the Chairman of
the Board or the President to call special meetings of the stockholders. These
provisions could discourage potential acquisition proposals and could delay or
prevent a change in control of the Company. Such provisions also may have the
effect of preventing changes in the management of the Company.
DELAWARE TAKEOVER STATUTE
The Company is subject to Section 203 of the DGCL ("Section 203") which,
subject to certain exceptions, prohibits a Delaware corporation from engaging in
any business combination with any interested stockholder for a period of three
years following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder; (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
(x) by persons who are directors and also officers and (y) by employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition involving the interested stockholder
of 10% or more of the assets of the corporation; (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the DGCL, the Company's Certificate of
Incorporation, as amended, includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of their duty of
care. In addition, as permitted by Section 145 of the DGCL, the Bylaws of the
Company provide that: (i) the Company is required to indemnify its directors and
officers and persons serving in such capacities in other business enterprises
(including, for example, subsidiaries of the Company) at the Company's request,
to the fullest extent permitted by Delaware law; (ii) the Company is required to
indemnify its directors and officers and persons serving in such capacities in
other business enterprises at the Company's request in connection with any
action, suit, or proceeding initiated by such person only if such initiation was
authorized
32
<PAGE> 33
by the Board of Directors; (iii) the Company may, in its discretion, indemnify
employees and agents in those circumstances where indemnification is not
required by law; (iv) the Company is required to advance expenses, as incurred,
to its directors and officers in connection with defending a proceeding; (v) the
rights conferred in the Bylaws are not exclusive; and (vi) the Company may not
retroactively amend the Bylaw provisions in a way that is adverse to such
directors, officers and employees.
The Company's policy is to enter into indemnification agreements with each
of its directors and officers that provide the maximum indemnity allowed to
directors and officers by Section 145 of the DGCL and the Bylaws, as well as
certain additional procedural protections. In addition, the indemnification
agreements provide that directors and officers will be indemnified to the
fullest possible extent not prohibited by law against all expenses (including
attorney's fees) and settlement amounts paid or incurred by them in any action
or proceeding, including any action by or in the right of the Company, arising
out of such person's services as a director, officer, employee, agent or
fiduciary of the Company, any subsidiary of the Company or any other company or
enterprise to which such person provides services at the request of the Company
unless a reviewing party as appointed by the Board of Directors determines that
the Company is not obligated to indemnify under applicable law. The Company will
not be obligated pursuant to the indemnification agreements to indemnify or
advance expenses to an indemnified party with respect to proceedings or claims
initiated by the indemnified party and not by way of defense, except with
respect to proceedings specifically authorized by the Board of Directors or
brought to enforce a right to indemnification under the indemnification
agreement, the Company's Bylaws or any statute or law or as otherwise required
under Section 145 of the DGCL. Under the agreements, the Company is not
obligated to indemnify the indemnified party (i) for any expenses incurred by
the indemnified party with respect to any proceeding instituted by the
indemnified party to enforce or interpret the agreement, if a court having
jurisdiction determines that each of the material assertions made by the
indemnified party in such proceeding was not made in good faith or was
frivolous; (ii) for any expenses incurred by the indemnified party with respect
to any proceeding instituted by or in the name of the Company to enforce or
interpret the agreement, if a court of competent jurisdiction determines that
each of the material defenses made by the indemnified party in such proceeding
was made in bad faith or was frivolous; (iii) for any amounts paid in settlement
of a proceeding unless the Company consents to such settlement; (iv) for any
expenses resulting from acts, omissions or transactions for which a court having
jurisdiction makes a final judicial determination that the indemnified party is
prohibited from receiving indemnification under the agreement or applicable law;
or (v) on account of any suit in which judgment is rendered against the
indemnified party for an accounting of profits made from the purchase or sale by
the indemnified party of securities of the Company pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended, and related
laws.
The indemnification provisions in the Bylaws and the indemnification
agreements entered into between the Company and its directors and officers may
be sufficiently broad to permit indemnification of the Company's directors and
officers for liabilities arising under the Securities Act.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 15.
ITEM 14.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
33
<PAGE> 34
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS AND SCHEDULES
1. Financial Statements. The following Consolidated Financial
Statements of ENTEX Information Services, Inc. and the Report of
Independent Auditors are included at pages F-1 through F-18 of this
Registration Statement.
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
- ----------------------------------------------------------------------------------- --------
<S> <C>
Independent Auditors Report........................................................ F-1
Consolidated Balance Sheets as of September 28, 1997 (unaudited) and as of June 29,
1997 and June 30, 1996........................................................... F-2
Consolidated Statements of Operations for the Three Months ended September 28, 1997
and September 29, 1996 (unaudited) and for the Years Ended June 29, 1997, June
30, 1996 and July 2, 1995........................................................ F-3
Consolidated Statements of Cash Flows for the Three Months ended September 28, 1997
and September 29, 1996 (unaudited) and for the Years Ended June 29, 1997, June
30, 1996 and July 2, 1995........................................................ F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended June
29, 1997, June 30, 1996 and July 2, 1995......................................... F-5
Notes to Consolidated Financial Statements......................................... F-6
</TABLE>
2. Financial Statement Schedules. The following Consolidated Financial
Statement Schedules of ENTEX Information Services, Inc. are filed as part
of this Registration Statement and should be read in conjunction with the
Consolidated Financial Statements of ENTEX Information Services, Inc.
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
- ----------------------------------------------------------------------------------- --------
<S> <C>
Schedule II -- Valuation and Qualifying Accounts and Reserves...................... II-1
</TABLE>
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or notes thereto.
(b) EXHIBITS
<TABLE>
<S> <C>
2.1(a) Agreement and Plan of Reorganization by and between ENTEX Holdings, Inc. and
the Company dated as of June 28, 1996.
2.2 Agreement and Plan of Merger by and among the Company, ENTEX Acquisition
Corp. and Random Access, Inc. and related amendment.
2.3 Agreement and Plan of Reorganization among the Company, EIS Acquisition
Corporation and FCP Technologies, Inc.
3.1(a) Certificate of Incorporation of the Company, as amended.
3.2(a) Bylaws of the Company.
4.1(a) Form of the Company's Common Stock Certificate.
10.1(a) Form of Indemnification Agreement entered into by the Company with each of
its directors and executive officers.
10.2(a) Agreement between John A. McKenna, Jr. and the Company dated August 7, 1994
and related amendment.
10.3(a) Letter Agreement between Kenneth A. Ghazey and the Company dated January 6,
1997.
</TABLE>
34
<PAGE> 35
<TABLE>
<S> <C>
10.4(a) Retention Agreement between Dale H. Allardyce and the Company dated November
17, 1997.
10.5(a) Letter Agreement between David J. Csira and the Company dated November 15,
1996.
10.6(a) Employment Agreement between Richard Nathanson and the Company dated July
10, 1996.
10.7(a) Stockholders' Agreement among Entex Holdings, Inc., Dort A. Cameron III and
Entex Associates, L.P. dated December 10, 1993 and related amendment.
10.8(b) ENTEX Holdings, Inc. 1996 Stock Option Plan and related agreements.
10.9(b) ENTEX Information Services, Inc. 1996 Stock Option Plan and related
agreements.
10.10(b) 1996 Performance Incentive Plan and related agreements.
10.11(a) 1996 Non-Employee Director Stock Plan.
10.12(a) ENTEX Management Incentive Plan.
10.13 Sublease Agreement dated June 6, 1997 between General Electric Company and
the Company and related consent.
10.14 Lease Agreement dated January 20, 1995 between Royal Executive Park II and
the Company and related amendment.
10.15 Sublease Agreement dated August 6, 1993 between JWP Inc. and the Company and
related amendments, consents and lease agreements.
10.16 Lease Agreement dated December 31, 1996 between the Company and Duke Realty
Limited Partnership and related amendments.
10.17 Lease Agreement dated May 15, 1995 between the Company and Duke Realty
Limited Partnership and related amendments.
10.18 Lease Agreement dated February 29, 1992 between the Company and 725 C.W.
Associates Limited Partnership and related amendments.
10.19 Dealer Loan and Security Agreement between FINOVA Capital Corporation and
the Company dated April 21, 1995 and Letter Agreements dated April 17, 1995
and May 17, 1996.
10.20 Fourth Amended and Restated Agreement for Wholesale Financing by and between
IBM Credit Corporation and the Company and related amendments.
10.21(a) Warrant Agreement between IBM Credit Corporation, Entex Holdings, Inc. and
the Company dated November 15, 1994.
10.22(a) Warrant Agreement between IBM Credit Corporation and the Company dated July
15, 1997.
11.1(a) Statement of computation of earnings per share.
21.1(a) Subsidiaries of the Company.
27.1(a) Financial Data Schedule.
</TABLE>
- ---------------
(a) Previously filed.
(b) Portion filed herewith and portion previously filed.
35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
ENTEX INFORMATION SERVICES, INC.
By: /s/ JOHN A. MCKENNA, JR.
------------------------------------
John A. McKenna, Jr., President
and Chief Executive Officer
Dated: January 27, 1998
36
<PAGE> 37
INDEPENDENT AUDITORS REPORT
The Board of Directors and Stockholders
ENTEX Information Services, Inc.
We have audited the consolidated balance sheets of ENTEX Information
Services, Inc. and subsidiaries as of June 29, 1997 and June 30, 1996 and the
related consolidated statements of operations, cash flows and stockholders'
equity for each of the years in the three-year period ended June 29, 1997. In
connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedule listed in Item 15(a)2. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express our
opinion on these consolidated financial statements and schedule based on our
audit.
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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ENTEX
Information Services, Inc. and subsidiaries as of June 29, 1997 and June 30,
1996, and the results of their operations and their cash flows for each of the
years in the three-year period ended June 29, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
Stamford, Connecticut
September 17, 1997, except as to note 13
which is as of November 28, 1997
F-1
<PAGE> 38
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 28, JUNE 29, JUNE 30,
1997 1997 1996
------------- -------- --------
<S> <C> <C> <C>
Current assets:
Cash................................................... $ 10,330 $ 15,838 $ 12,603
Trade receivables, net of allowance for doubtful
accounts of $4,526, $4,746 and $4,101,
respectively........................................ 327,723 334,196 295,011
Vendor receivables, net of allowance of $2,000, $2,000
and $0 respectively................................. 33,481 37,789 21,340
Inventories............................................ 184,408 183,957 171,453
Other current assets................................... 8,302 9,228 8,334
-------- -------- --------
Total current assets........................... 564,244 581,008 508,741
Property, plant and equipment, net....................... 54,894 55,049 44,812
Goodwill, net of accumulated amortization of $9,743,
$8,903 and $4,664, respectively........................ 45,047 45,887 35,319
Other assets, net........................................ 1,459 1,646 1,716
-------- -------- --------
Total assets........................................ $ 665,644 $683,590 $590,588
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 262,157 $269,962 $277,864
Accrued liabilities.................................... 60,660 53,598 29,952
Notes payable and current installments of long-term
debt................................................ 326,012 348,276 269,778
-------- -------- --------
Total current liabilities...................... 648,829 671,836 577,594
-------- -------- --------
Long-term debt........................................... 48,653 48,215 52,158
Other long-term liabilities.............................. 1,091 1,271 351
-------- -------- --------
Total long-term liabilities....................... 49,744 49,486 52,509
-------- -------- --------
Total liabilities................................... 698,573 721,322 630,103
-------- -------- --------
Stockholders' equity (deficit):
Preferred stock, 2,000,000 shares authorized; no shares
issued or outstanding.................................. -- --
Common stock, $.0001 par value; 100,000,000 shares
authorized, 32,399,060, 32,357,840 and 32,677,155
shares issued respectively............................. 3 3 3
Additional paid-in capital............................... 19,114 19,003 18,735
Retained earnings (deficit).............................. (52,007) (56,707) (58,251)
Treasury stock, shares at cost........................... (2) (2) (2)
Cumulative translation adjustments....................... (37) (29) --
-------- -------- --------
Total stockholders' equity (deficit)................ (32,929) (37,732) (39,515)
-------- -------- --------
$ 665,644 $683,590 $590,588
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 39
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED YEARS ENDED
----------------------- ------------------------------------
SEPT. 28, SEPT. 29, JUNE 29, JUNE 30, JULY 2,
1997 1996 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues................... $ 500,938 $ 525,962 $2,126,973 $1,940,796 $1,342,323
Service revenues................... 105,901 71,674 353,624 207,511 130,940
---------- ---------- ---------- ---------- ----------
Total net revenues......... 606,839 597,636 2,480,597 2,148,307 1,473,263
---------- ---------- ---------- ---------- ----------
Cost of revenues:
Cost of products sold.............. 450,781 482,716 1,922,826 1,764,775 1,236,940
Cost of services provided.......... 79,872 54,039 267,554 168,957 110,349
---------- ---------- ---------- ---------- ----------
Cost of revenues........... 530,653 536,755 2,190,380 1,933,732 1,347,289
---------- ---------- ---------- ---------- ----------
Product gross margin................. 50,157 43,246 204,147 176,021 105,383
Services gross margin................ 26,029 17,635 86,070 38,554 20,591
---------- ---------- ---------- ---------- ----------
Total gross margin......... 76,186 60,881 290,217 214,575 125,974
Selling, general and administrative
expenses........................... 61,815 58,547 251,963 192,312 132,586
Nonrecurring stock compensation
costs.............................. -- -- -- 18,185 --
---------- ---------- ---------- ---------- ----------
Income (loss) from
operations............... 14,371 2,334 38,254 4,078 (6,612)
Interest expense, net................ 9,669 8,132 37,147 29,726 23,151
Other income......................... -- -- 462 -- --
Income (loss) before income
taxes.................... 4,702 (5,798) 1,569 (25,648) (29,763)
Provision (benefit) for income
taxes.............................. 2 10 25 28 (509)
---------- ---------- ---------- ---------- ----------
Net income (loss).......... $ 4,700 $ (5,808) $ 1,544 $ (25,676) $ (29,254)
========== ========== ========== ========== ==========
Net income (loss) per share.......... $ .14 $ (.18) $ .04 $ (.82) $ (.93)
========== ========== ========== ========== ==========
Weighted average number of shares
outstanding and dilutive common
stock equivalents.................. 33,736,205 32,357,840 35,296,435 31,438,340 31,333,300
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 40
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNAUDITED THREE
MONTHS ENDED
------------------- YEARS ENDED
SEPT. SEPT. ------------------------------
28, 29, JUNE 29, JUNE 30, JULY 2,
1997 1996 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................... $ 4,700 $ (5,808) $ 1,544 $(25,676) $(29,254)
Adjustments to reconcile net income (loss)
to net cash used in operating
activities:
Stock compensation costs............... 111 -- -- 16,185 --
Depreciation and amortization.......... 4,487 2,869 14,146 10,628 5,911
Amortization of goodwill............... 840 1,311 4,239 3,012 847
Provision for doubtful trade and vendor
receivables.......................... -- 496 2,393 2,245 233
Accretion on long-term debentures and
notes................................ 561 516 2,032 1,996 1,609
Gain on sale of assets................. -- -- (504) -- --
Other.................................. 72 (1,213) 20 404 (508)
Changes in working capital, net of effects
of acquisitions:
Trade receivables...................... 6,473 (11,834) (31,168) (66,645) (41,026)
Inventories............................ (451) (34,469) (8,161) (24,141) (11,437)
Vendor receivables..................... 4,308 5,206 (18,219) (11,463) (931)
Other current assets................... 926 1,596 (396) 1,710 (2,636)
Accounts payable and accrued
liabilities.......................... (743) 26,255 8,635 17,371 67,696
Other long-term liabilities............ (186) (46) (661) (296) (565)
-------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities................. 21,098 (15,121) (26,100) (74,670) (10,061)
-------- -------- -------- -------- --------
Cash flows from investing activities:
Sale of assets, net of expenses........... -- -- 2,285 8,483 --
Capital expenditures...................... (4,219) (6,644) (21,737) (19,205) (7,178)
Cash paid for acquisitions................ -- (5,546) (7,216) (21,970) (1,615)
Other..................................... -- (1,179) (1,181) (395) (161)
-------- -------- -------- -------- --------
Net cash provided by (used in)
investing activities................. (4,219) (13,369) (27,849) (33,087) (8,954)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of notes payable... 30,185 36,087 87,090 112,050 16,784
Change in cash overdraft.................. 6,107 (3,636) (13,687) 11,176 5,347
Proceeds from long-term debt.............. -- -- -- 28,103 --
Issue of common stock warrants............ -- -- -- 897 571
Proceeds from sale of common stock, net... -- 121 268 385 --
Payments on debt.......................... (58,679) (451) (16,487) (44,332) (2,798)
-------- -------- -------- -------- --------
Net cash provided from (used in)
financing activities................. (22,387) 32,121 57,184 108,279 19,904
-------- -------- -------- -------- --------
Increase (decrease) in cash................. (5,508) 3,631 3,235 522 889
Cash at beginning of period................. 15,838 12,603 12,603 12,081 11,192
-------- -------- -------- -------- --------
Cash at end of period....................... $ 10,330 $ 16,234 $ 15,838 $ 12,603 $ 12,081
======== ======== ======== ======== ========
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest paid............................. $ 10,383 $ 8,427 $ 36,458 $ 28,081 $ 22,085
======== ======== ======== ======== ========
Taxes paid/(refund)....................... $ (657) $ (1,276) $(12,087) $ 11,701 $ 4,446
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 41
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED CUMULATIVE
--------------- PAID IN DEFERRED EARNINGS TREASURY TRANSLATION
SHARES AMOUNT CAPITAL COMPENSATION (DEFICIT) STOCK ADJUSTMENTS TOTAL
------ ------ ---------- ------------ --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 3, 1994............... 31,335 $ 3 $ 695 $ -- $ (3,321) $ (1) $ -- $ (2,624)
Purchase of treasury stock.......... -- -- -- -- -- (28) -- (28)
Issuance of treasury stock.......... -- -- -- -- -- 24 -- 24
Repurchase of common stock
warrants.......................... -- -- (44) -- -- -- -- (44)
Issuance of common stock warrants... -- -- 621 -- -- -- -- 621
Net (loss).......................... -- -- -- -- (29,254) -- -- (29,254)
------ --- ------- ------- ------- ---- ---- -------
Balance, July 2, 1995............... 31,335 3 1,272 -- (32,575) (5) -- (31,305)
Purchase of treasury stock.......... -- -- -- -- -- (7) -- (7)
Issuance of common stock under stock
purchase arrangements............. 80 -- 381 -- -- 10 -- 391
Issuance of common stock warrants... -- -- 897 -- -- -- -- 897
Issuance of common stock............ 1,262 -- 4,484 -- -- -- -- 4,484
Deferred compensation............... -- -- 11,701 (11,701) -- -- -- --
Amortization of deferred
compensation...................... -- -- -- 11,701 -- -- -- 11,701
Net (loss).......................... -- -- -- -- (25,676) -- -- (25,676)
------ --- ------- ------- ------- ---- ---- -------
Balance, June 30, 1996.............. 32,677 3 18,735 -- (58,251) (2) -- (39,515)
Return of treasury stock............ (429) -- -- -- -- -- -- --
Issuance of common stock............ 110 -- 268 -- -- -- -- 268
Foreign currency change............. -- -- -- -- -- -- (29) (29)
Net income.......................... -- -- -- -- 1,544 1,544
------ --- ------- ------- ------- ---- ---- -------
Balance, June 29, 1997.............. 32,358 $ 3 $ 19,003 $ -- $ (56,707) $ (2) $ (29) $(37,732)
====== === ======= ======= ======= ==== ==== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 42
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Description of the Business
ENTEX Information Services, Inc. ("ENTEX" or the "Company") was formed for
the purpose of acquiring, on August 6, 1993, the net assets of the personal
computer and systems integration business of JWP Information Services, Inc. On
June 28, 1996, the Company's former parent, ENTEX Holdings, Inc., ("Holdings")
was merged with and into the Company. Holdings' investment in the Company
represented its only substantive assets and operations, and accordingly, was
accounted for like a pooling-of-interests transaction.
ENTEX is a leading provider of personal computer ("PC") solutions to meet
the distributed information technology systems and end user support requirements
of Fortune 1000 companies and other large enterprises. The Company's total PC
management capabilities include acquisition services, network integration, and
advanced support for the PC-based networked environment. Typical services
provided include: hardware and software acquisition and integration; network
design, integration and migration; selective outsourcing; end user support and a
variety of other professional services.
(B) Fiscal Year
The Company maintains its accounting records on a fifty-two week basis
ending on the Sunday closest to June 30. The accompanying financial statements
present the results of operations for the fiscal years July 1, 1996 to June 29,
1997, July 3, 1995 to June 30,1996 and July 3, 1994 to July 2, 1995.
(C) Consolidation
The consolidated financial statements include the financial statements of
the Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
(D) Inventories
Inventory for resale is stated at the lower of cost or market value. Cost
for finished goods is lowered when vendors announce price reductions. Spare
parts inventory is valued using a moving weighted average market value method
which approximates lower of cost or market. The Company assesses the
appropriateness of the inventory valuations giving consideration to obsolete,
slow moving or non-saleable inventory.
(E) Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation expense is calculated on the straight-line method
over the estimated useful lives of the assets. Such useful lives range from 25
years for buildings and three to seven Leasehold and capital improvements are
amortized straight-line over the estimated useful life of the property or over
the term of the lease, whichever is shorter. Capitalized software is amortized
using a straight-line basis over a period of five years.
The Company systematically reviews the recoverability of its long-lived
assets by comparing their unamortized carrying value to their related
undiscounted future cash flows. Any impairment is charged to expense when such
determination is made.
F-6
<PAGE> 43
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(F) Goodwill
Goodwill relates to the excess of cost over the net assets of acquired
businesses and is being amortized on a straight-line basis from ten to 20 years.
The Company reviews the recoverability of goodwill by comparing the
unamortized balance to the related anticipated undiscounted future cash flows
and measures any impairment based on the excess of the unamortized balance over
the present value of future cash flows, discounted using the Company's average
cost of funds.
(G) Revenue Recognition
Product revenue is recognized at the time of shipment to the customer.
Service revenue is recognized at the time the service is rendered or ratably
based on time elapsed or hours incurred if performed over a service contract
period. Unrecognized service revenue is deferred and included with accrued
liabilities.
(H) Vendor Programs
The Company receives volume incentives and rebates from certain
manufacturers related to sales of certain products which are recorded as a
reduction of cost of sales when related products are sold. Other incentives may
require specific incremental action on the part of the Company such as training,
advertising or other pre-approved market development activities and are
recognized as an offset to the related costs when the required action is
performed.
(I) Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method of SFAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in the tax rates is recognized
in income in the period that includes the enactment date.
(J) Financial Instruments
The Company's financial instruments, principally cash, accounts receivable
and accounts payable are carried at cost, which approximates fair value due to
the short-term maturity of these instruments. As amounts outstanding under the
Company's credit agreements bear interest approximating current market rates,
their carrying amounts approximate fair value.
(K) Stock-Based Compensation
The Company accounts for its stock option plans in accordance with
Accounting Principles Board Opinion No. 25, "Accounting For Stock Issued To
Employees". Accordingly, no compensation expense has been recognized in 1997
because the options had an exercise price equal to or greater than the market
value of the Common Stock on the date of the grant.
(L) New Accounting Pronouncements
The Financial Accounting Standards Board recently issued standards which
will be applicable to the Company but which the Company has not yet adopted:
FASB Statement No. 130, Reporting Comprehensive
F-7
<PAGE> 44
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Income and FASB Statement No. 131, Disclosures About Segments of an Enterprise
and Related Information. These statements are not expected to have a significant
impact on the financial statements.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted for both interim
and annual financial statements for periods ending after December 15, 1997. At
that time, the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods. Under the new
requirements for calculating earnings per share, the common stock equivalents
are not considered in the calculation of basic earnings per share. Basic
earnings per share under FAS No. 128 will not be significantly different from
amounts presented herein.
(M) Earnings Per Share
Primary and fully diluted earnings per share are computed using the
weighted average number of shares of Common Stock and dilutive common stock
equivalents outstanding during the period. Common stock equivalents are computed
using the treasury stock method. Common stock equivalents include amounts
computed on options and warrants issued during the periods presented.
(N) Interim Financial Statements
In the opinion of management, the information furnished in the unaudited
interim consolidated financial statements reflects all adjustments necessary for
a fair statement of the results of operations as of and for the three months
ended September 28, 1997 and September 29, 1996. The unaudited interim
consolidated financial statements have been prepared in accordance with the
instructions to Form 10-Q and therefore do not include some information and
notes necessary to conform with the annual reporting requirements.
(2) ACQUISITIONS AND DIVESTITURES
On January 12, 1995, the Company acquired all the issued and outstanding
stock of CompuEase, Inc., d/b/a The L.E.A.D. Group for $2,400. The L.E.A.D.
Group was a private, value-added computer reseller and provider of network
services in Bloomfield, Michigan. The purchase price was comprised of $1,400 in
cash and non-interest bearing promissory notes totaling $1,000. The acquisition
has been accounted for as a purchase, and the results of The L.E.A.D. Group have
been included in the accompanying consolidated financial statements since the
date of acquisition. The excess of the aggregate purchase price over the fair
value of net assets acquired was $1,595.
On September 19, 1995 the Company purchased all of the outstanding shares
of Random Access, Inc. ("Random Access") for $21,970. Random Access was a
provider of information technology solutions through the sale of microcomputers
and technical services to corporate and institutional clients in the western
United States. The Company issued a $20,000 four year interest-bearing note
payable to IBM Credit Corporation to fund this purchase. The acquisition has
been accounted for as a purchase, and the results of operations of Random Access
have been included in the accompanying financial statements since the date of
acquisition. The excess of the aggregate purchase price over the fair value of
the net assets acquired was $28,317.
On April 2, 1996, the Company sold the training business that was acquired
as part of the Random Access acquisition to Knowledge Alliance Holdings, Inc.
("KAH"), a wholly owned subsidiary of Training Holdings LLC. Training Holdings
LLC is a corporation controlled by Dort A. Cameron III, the Company's chairman
and majority stockholder, and his affiliates. The training business assets had a
net book value of approximately $1,100 and were exchanged for 2,500 shares of
KAH common stock, which represented 25% of its outstanding shares. There was no
gain or loss recognized on the sale and the Company's $1,100 investment in KAH
is included in other assets. In connection with this sale, KAH was granted the
option to purchase the assets of the training business conducted by ENTEX in
Minneapolis, MN for the book value of the assets on
F-8
<PAGE> 45
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
the date of acquisition. The option was exercised on August 1, 1996 and the
purchase price was $235. The Company's share of earnings (loss) in KAH since
April 2, 1996 is insignificant.
On July 12, 1996, the Company acquired all the issued and outstanding stock
of FCP Technologies Inc. ("FCP") for $7,216, including direct acquisition costs.
FCP was a systems integrator based in Frederick, Maryland specializing in
network integration, migration and consulting services. The acquisition has been
accounted for as a purchase, and the results of operations of FCP have been
included in the accompanying financial statements since the date of acquisition.
The excess of the aggregate purchase price over the fair market value of the net
assets acquired was $14,077. The difference between the pro forma results of
operations under the assumption that the FCP acquisition occurred as of July 1,
1996 and actual reported results is immaterial. Pro forma consolidated revenue,
net (loss) and net loss per share for the year ended June 30, 1996 under the
assumption that the FCP acquisition occurred as of July 3, 1995 are $2,218,307,
($26,276) and $(.84), respectively.
On April 18, 1997, the Company sold Education Access, acquired as part of
the acquisition of Random Access, for $2,285. The net gain on the sale was $504.
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 28, JUNE 29, JUNE 30,
1997 1997 1996
------------- -------- --------
<S> <C> <C> <C>
Finished goods held for resale... $ 175,428 $175,300 $164,805
Spare parts...................... 8,980 8,657 6,648
-------- -------- --------
$ 184,408 $183,957 $171,453
======== ======== ========
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 29, JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
Land................................................... $ 1,305 $ 1,155
Building and building improvements..................... 8,437 5,963
Office and computer equipment.......................... 47,061 29,227
Furniture and fixtures................................. 11,471 9,547
Leasehold improvements................................. 7,083 6,293
Capitalized software................................... 7,590 5,773
Other equipment........................................ 6,363 7,048
-------- --------
89,310 65,006
-------- --------
Accumulated depreciation and amortization.............. (34,261) (20,194)
-------- --------
$ 55,049 $ 44,812
======== ========
</TABLE>
F-9
<PAGE> 46
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(5) DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
JUNE 29, JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
Floor Plan Financing........................... $338,005 $263,025
Short-Term Debt................................ 10,271 6,753
-------- --------
348,276 269,778
Long-Term Debt................................. 48,215 52,158
-------- --------
Total................................ $396,491 $321,936
======== ========
</TABLE>
(A) FLOOR PLAN FINANCING
The Company has floor plan financing agreements with IBM Credit Corporation
and Finova Capital Corporation which made credit available of up to
$635,000 at June 29, 1997 and $645,000 at June 30, 1996. These agreements
provide that a portion of the balance outstanding be non-interest bearing
for a specific period of time ranging from 30 to 60 days. Interest rates
under the agreements are prime plus 1/2% (base rate) and prime plus 1/4%
(base rate) at June 29, 1997 and June 30, 1996, respectively, except for
$62,500 which bears interest at prime plus 2%. The agreements are generally
secured by inventories, equipment, and in certain instances, accounts
receivable. The aggregate amounts outstanding under these agreements as of
June 29, 1997 and June 30, 1996 were $421,075 and $454,564, respectively.
Of these amounts, $338,005 and $263,025, respectively, represent interest
bearing liabilities and $83,070 and $191,539, respectively, are
non-interest bearing and are included within accounts payable. Under the
financing agreement with IBM Credit Corporation, a term loan in the
original principal amount of $20 million is required to be outstanding
unless there are no outstanding interest bearing advances under such
financing agreement. The agreements may be terminated by the financiers
immediately; upon certain events of default; or otherwise within sixty
days by either party with notice. Under these agreements the Company had
available an additional $213,925 and $190,436, at June 29,1997 and
June 30, 1996, respectively.
The above floor plan agreements contain restrictive covenants with respect
to maintenance of minimum tangible net worth, current ratio, fixed asset
additions, fixed charges, and certain additional indebtedness. In addition,
the IBM Credit Corporation agreement prohibits the Company from paying cash
dividends on common stock. As of June 30, 1996, the Company was not in
compliance with all such covenants and, as a result of certain excess
borrowings, was in a collateral shortfall position with respect to the
contractual levels of collateral. Under the IBM Credit Agreement at June
29, 1997, the Company was not in compliance with all such covenants but
continued to maintain an excess collateral position. As of July 15, 1997,
the Company amended its financing agreement with IBM Credit Corporation.
IBM Credit Corporation has waived all defaults arising from such
non-compliance with covenants.
(B) SHORT-TERM DEBT
Short-term debt includes current installments of long-term debt totaling
$984 at June 29, 1997 and $6,753 at June 30, 1996. Remaining amounts at
June 30, 1997 are notes payable carrying an effective interest rate of 4%
to 7%.
F-10
<PAGE> 47
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(C) LONG-TERM DEBT
Long-term debt consists primarily of (a) subordinated debentures discounted
to yield 20% that will accrete to their face value of $43,128 by their due
date of March 1, 2007 ($22,654 and $23,081 outstanding at June 29, 1997 and
June 30, 1996, respectively), (b) $17,250 note (outstanding at June 29,
1997 and June 30, 1996, respectively) issued in connection with the
purchase of Random Access which bears interest at prime plus 2.5% and is
due on September 19, 1999, (c) a mortgage loan of $5,149 relating to the
integration center in Erlanger, Kentucky which bears interest at 8.75% and
is due February 2007, of which $5,149 and $5,475 was outstanding at June
29, 1997 and June 30, 1996, respectively, (d) $4,146 (outstanding at June
29, 1997 and June 30, 1996, respectively) in notes held by entities owned
or controlled by the Company's Chairman that bear interest at prime plus
2.5% and are due on July 29, 2000, (e) $9,000 face amount six year interest
bearing note ($0 and $8,103 outstanding at June 29, 1997 and June 30, 1996,
respectively), due June 2002 bearing interest at 4.0% for the first two
years, and at 6.0% for the final four years, (f) $372 note related to the
management buyout ($0 and $372 outstanding at June 29, 1997 and June 30,
1996, respectively) and (g) $484 note related to an acquisition ($0 and
$484 outstanding at June 29, 1997 and June 30, 1996, respectively).
Aggregate annual principal payments of long-term debt subsequent to June
29, 1997 (including the subordinated debentures at face value) are as follows:
<TABLE>
<S> <C>
1998.............................................. $ 984
1999.............................................. 4,138
2000.............................................. 4,173
2001.............................................. 8,358
2002.............................................. 4,254
Thereafter........................................ 47,766
--------
69,673
Less unaccreted interest.......................... (20,474)
--------
$ 49,199
========
</TABLE>
(6) INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
---------------------------------
JUNE 29, JUNE 30, JULY 2,
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Current:
Federal........................................ $ $ $ (449)
State.......................................... -- -- (68)
Foreign........................................ 25 28 8
Deferred:
Federal........................................ -- -- --
State............................................ -- -- --
--- --- -----
Total.................................. $ 25 $ 28 $ 509
=== === =====
</TABLE>
Through June 30, 1996, the Company had generated net operating losses for
both book and tax purposes. For the current year the provision for income taxes
was offset by the utilization of a net operating loss carryforward. Realization
of the remaining deferred tax asset associated with the net operating loss
carryforward is dependent on the likelihood of generating sufficient taxable
income prior to its expiration. Accordingly, the amount of the valuation
allowance equals the excess of the deferred tax assets over deferred tax
liabilities.
F-11
<PAGE> 48
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
A reconciliation of the differences between income taxes computed at
Federal statutory rates (34%) and the provision for income taxes is as follows:
<TABLE>
<CAPTION>
JUNE JUNE
29, 30, JULY 2,
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Tax at statutory rate........................ $ 533 $(8,720) $(10,119)
Non-deductible goodwill...................... 1,051 782 27
Non-deductible meals and entertainment
expenses................................... 437 263 79
State and local income carryback............. -- (589) (1,552)
Provision/(benefit) for valuation
allowances................................. (1,982) 4,335 11,161
Nondeductible stock compensation expense..... -- 3,978 --
Other........................................ (14) (21) (105)
------- ------- --------
Provision for income taxes................... $ 25 $ 28 $ (509)
======= ======= ========
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for tax and financial
reporting purposes. Significant components of the Company's deferred tax assets
and deferred tax liabilities at June 29, 1997 and June 30, 1996 are as follows:
<TABLE>
<CAPTION>
JUNE 29, JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward.............. $ 19,425 $ 21,629
Accruals and reserves not currently
deductible................................ 3,768 4,888
Allowance for bad debts...................... 1,576 1,303
Inventory valuation reserves................. 2,157 1,227
Other........................................ 1,873 1,824
Valuation allowance.......................... (17,015) (18,463)
-------- --------
Total................................ $ 11,784 $ 12,408
======== ========
Deferred tax liabilities:
Discount in subordinated debentures.......... $ 7,106 $ 7,859
Other........................................ 4,678 4,549
-------- --------
Total................................ $ 11,784 $ 12,408
======== ========
</TABLE>
Net current and non-current assets/liabilities are insignificant.
At June 29, 1997, the Company had a net operating loss carryforward of
approximately $50,000, which will expire in 2009 through 2011. Of such amounts,
approximately $11,500 relates to purchased net tax benefits which when realized
will decrease goodwill by approximately $4,500.
(7) STOCK OPTIONS, STOCK BENEFIT PLANS AND WARRANTS
The Company has three stock options plans: the ENTEX Holdings 1996 Stock
Option Plan (the "Holdings Plan") adopted February 1996, EIS Stock Option Plan
(the "EIS Plan") adopted July 1996, and the Performance Incentive Plan (the
"PIP") adopted August 1996 (collectively, the "Plans"). The Holdings Plan and
the EIS Plan provide for the issuance of incentive stock options ("ISOs") and
stock options that are non-qualified for Federal income tax purposes ("NQSOs").
The PIP provides for the issuance of ISOs, NQSOs, stock appreciation rights,
restricted stock, deferred stock, dividend equivalents and other stock-related
awards. The exercise price of the ISOs under all Plans may not be less than 100%
of fair market value
F-12
<PAGE> 49
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
at the time of grant. Options granted under the Holdings Plan and the EIS Plan
have an expiration of five years and generally vest over three years. Options
granted under the PIP have an expiration of ten years and generally vest over
five years. The Holdings Plan and EIS Plan were terminated in June 1996 and
August 1996, respectively, and therefore no further grants can be awarded from
such plans. At June 29, 1997 there were 9,045,000 shares reserved for issuance
under the PIP, and 5,120,805 options outstanding under all Plans.
The Company has a Non-Employee Director Stock Plan, adopted August 1996,
which provides for the crediting of stock units representing the right to
receive common stock at not less than 100% of the fair market value at the time
of the credit. At June 29, 1997, 100,000 shares have been reserved for issuance,
of which no shares have been issued.
In fiscal year 1996, certain managers and employees owned common stock of
the Company pursuant to Securities Purchase and Stockholders' Agreements
("Management Shares"), and share units pursuant to the 1993 Employee Share Unit
Plan ("SharePlan Shares"). Effective June 28, 1996, as a result of an amendment
to such plans ownership was vested in the management shares, common stock was
issued for shares units, and the Company recorded compensation expense of
$11,701 relating to the Management Shares and $4,484 relating to the SharePlan
Shares. In addition, the Company assumed the obligation for the tax withholding
requirement for the SharePlan Shares of $2,000, which was recorded as
compensation expense. No compensation expense was recognized in connection with
the Management Shares or SharePlan Shares for the year ended June 29, 1997.
At June 30, 1996 and June 29, 1997 there were 708,350 shares of common
stock reserved for outstanding warrants held by lenders. Warrants to purchase
333,350 shares of common stock were granted on November 15, 1994, are
exercisable for $.20 in total and expire on July 15, 2001. These warrants were
issued in connection with a settlement of a dispute between the Company and the
vendor. Warrants to purchase 375,000 shares of common stock were granted on June
21, 1996, are exercisable for $14.40 per share and expire on June 21, 2003.
These warrants were issued as consideration for less than market rate debt.
A summary of the Company's stock option activity, and related information
for the fiscal years ended June 29, 1997 and June 30, 1996 is as follows (in
thousands, except for the weighted average exercise prices):
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
----- -------------- ----- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year........................ 3,260 $ 5.03 -- --
Granted............................................... 2,325 $ 5.34 3,565 $ 5.03
Exercised............................................. -- -- -- --
Canceled.............................................. (465) $ 4.46 (305) $ 4.63
Outstanding -- end of year.............................. 5,120 $ 5.19 3,260 $ 5.03
Exercisable -- end of year.............................. 365 $ 2.38 10 $ 9.02
</TABLE>
The following summarizes information about the Company's stock options
outstanding and exercisable by price range at June 29, 1997 (options in
thousands):
<TABLE>
<CAPTION>
WT. AVERAGE
REMAINING
RANGE OF NUMBER CONTRACTUAL WEIGHTED-AVERAGE NUMBER
EXERCISE PRICES OUTSTANDING LIFE YEARS EXERCISE PRICE EXERCISABLE
- ------------------ ----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
$.01-$4.00........ 1,285 9.9 $ 2.04 295
$4.00-$8.00....... 2,690 4.8 $ 4.63 60
$8.00-$12.00...... 1,145 3.7 $ 9.53 10
</TABLE>
F-13
<PAGE> 50
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Pro forma information regarding net income is required by SFAS No. 123
"Accounting for Stock Based Compensation", and has been determined as if the
Company had accounted for its stock option plan under the fair value method of
that statement. Pro forma net income (loss) and compensation expense are as
follows:
<TABLE>
<CAPTION>
JUNE 29, JUNE 30,
1997 1996
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss)...................................... As reported $1,544 $(25,676)
Pro forma $ 721 $(26,373)
Compensation Expense................................... Pro forma $ 823 $ 697
Primary Earnings Per Share............................. As reported $ .04 $ (.82)
Pro forma $ .02 $ (.84)
</TABLE>
For purposes of pro forma disclosures only, the estimated fair value of the
options is amortized to expense over the options' vesting period. The fair value
for all options was estimated at the date of grant using the Black-Scholes
multiple option model with the following assumptions: Risk-free interest rates
of 6.22% to 6.39%, for fiscal year 1997 and 6.39% to 6.69% for fiscal year 1996;
expected dividend yield of 0.0%; and expected life of 3.7 to 9.9 years. The per
share weighted-average fair value of options granted was $1.40 during fiscal
year 1997 and $1.06 during fiscal 1996. Volatility was not a factor in
calculating the fairness of options since the Company is not a public company as
defined in SFAS, No. 123.
(8) 401(K) PLAN
The Company has a 401(k) Plan that covers all employees effective the first
day of the month following 30 days of employment and who are at least 21 years
of age. Employees may contribute between 1% and 15% of compensation subject to
the limitations imposed by law. The Company will match up to 3% of the
employee's eligible contribution. The amount charged to expense for the matching
contribution was $1,655 for the year ended June 29, 1997. There was no matching
contribution for the years ended June 30, 1996 and July 2, 1995.
(9) LEASES
The Company routinely leases office buildings, equipment and automobiles.
These leases expire at various dates through July 2005. Certain leases contain
renewal provisions and generally require the Company to pay utilities,
insurance, taxes, and other operating expenses. Future minimum rental payments
under operating leases that have initial or remaining non-cancelable lease terms
in excess of one year as of July 29, 1997 as are follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE:
<S> <C>
1998............................................ $ 8,456
1999............................................ 7,762
2000............................................ 6,361
2001............................................ 4,973
2002............................................ 3,269
Thereafter...................................... 6,368
-------
Total minimum lease payments....................... $37,189
=======
</TABLE>
Rent expense for all operating leases totaled $11,908, $9,412 and $5,060
for the years ended June 29, 1997, June 30, 1996, and July 2, 1995,
respectively.
F-14
<PAGE> 51
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
The cost of assets recorded under capital leases was $1,870 at June 29,
1997 and $1,502 at June 30, 1996 and July 2, 1995. Accumulated amortization on
such assets was $638, $343, and $109 at June 29, 1997, June 30, 1996, and July
2, 1995, respectively. The present value of capital leases as of June 29, 1997,
June 30, 1996 and July 2, 1995 was $579, $767, and $1,199, respectively.
(10) COMMON STOCK SPLIT
On November 25, 1997 the Board of Directors approved an increase in the
number of authorized common stock shares from 10,000,000 to 100,000,000. In
addition, the Board of Directors authorized a stock split in the form of a
four-for-one stock dividend to holders of record as of November 25, 1997,
whereby each such share will be equal to five shares of Common Stock. All
references in the consolidated financial statements referring to shares, share
prices, per share amounts and stock plans have been adjusted retroactively for
the four-for-one stock dividend.
F-15
<PAGE> 52
ENTEX INFORMATION SERVICES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE
AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
--------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Description
Allowance for doubtful accounts
1997......................... $ 4,101 $ 474 $ -- $ 171(1) $ 4,746
1996......................... 2,455 2,101 -- (455)(1) 4,101
1995......................... 2,849 232 -- (626)(1) 2,455
Vendor receivable reserve
1997......................... -- 2,000 -- -- 2,000
1996......................... -- -- -- -- --
1995......................... -- -- -- -- --
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries
II-1
<PAGE> 53
ENTEX INFORMATION SERVICES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER PAGE NUMBER
--------- -----------
<S> <C> <C>
2.1(a) Agreement and Plan of Reorganization by and between ENTEX
Holdings, Inc. and the Company dated as of June 28, 1996.........
2.2 Agreement and Plan of Merger by and among the Company, ENTEX
Acquisition Corp. and Random Access, Inc. and related
amendment........................................................
2.3 Agreement and Plan of Reorganization among the Company, EIS
Acquisition Corporation and FCP Technologies, Inc................
3.1(a) Certificate of Incorporation of the Company, as amended..........
3.2(a) Bylaws of the Company............................................
4.1(a) Form of the Company's Common Stock Certificate...................
10.1(a) Form of Indemnification Agreement entered into by the Company
with each of its directors and executive officers................
10.2(a) Agreement between John A. McKenna, Jr. and the Company dated
August 7, 1994 and related amendment.............................
10.3(a) Letter Agreement between Kenneth A. Ghazey and the Company dated
January 6, 1997..................................................
10.4(a) Retention Agreement between Dale H. Allardyce and the Company
dated November 17, 1997..........................................
10.5(a) Letter Agreement between David J. Csira and the Company dated
November 15, 1996................................................
10.6(a) Employment Agreement between Richard Nathanson and the Company
dated July 10, 1996..............................................
10.7(a) Stockholders' Agreement among Entex Holdings, Inc., Dort A. Cam-
eron III and Entex Associates, L.P. dated December 10, 1993 and
related amendment................................................
10.8(b) ENTEX Holdings, Inc. 1996 Stock Option Plan and related
agreements.......................................................
10.9(b) ENTEX Information Services, Inc. 1996 Stock Option Plan and
related agreements...............................................
10.10(b) 1996 Performance Incentive Plan and related agreements...........
10.11(a) 1996 Non-Employee Director Stock Plan............................
10.12(a) ENTEX Management Incentive Plan..................................
10.13 Sublease Agreement dated June 6, 1997 between General Electric
Company and the Company and related consent......................
10.14 Lease Agreement dated January 20, 1995 between Royal Executive
Park II and the Company and related amendment....................
10.15 Sublease Agreement dated August 6, 1993 between JWP Inc., and the
Company and related amendments consents and lease agreements.....
10.16 Lease Agreement dated December 31, 1996 between the Company and
Duke Realty Limited Partnership and related amendments...........
10.17 Lease Agreement dated May 15, 1995 between the Company and Duke
Realty Limited Partnership and related amendments................
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER PAGE NUMBER
--------- -----------
<S> <C> <C>
10.18 Lease Agreement dated February 29, 1992 between the Company and
725 C.W. Associates Limited Partnership and related
amendments.......................................................
10.19 Dealer Loan and Security Agreement between FINOVA Capital
Corporation and the Company dated April 21, 1995 and Letter
Agreements dated April 17, 1995 and May 17, 1996.................
10.20 Fourth Amended and Restated Agreement for Wholesale Financing by
and between IBM Credit Corporation and the Company and related
amendments.......................................................
10.21(a) Warrant Agreement between IBM Credit Corporation, Entex Holdings,
Inc. and the Company dated November 15, 1994.....................
10.22(a) Warrant Agreement between IBM Credit Corporation and the Company
dated July 15, 1997..............................................
11.1(a) Statement of computation of earnings per share...................
21.1(a) Subsidiaries of the Company......................................
27.1(a) Financial Data Schedule..........................................
</TABLE>
- ---------------
(a) Previously filed.
(b) Portion filed herewith and portion previously filed.
<PAGE> 1
Exhibit 2.2
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ENTEX INFORMATION SERVICES, INC.
ENTEX ACQUISITION CORP.
AND
RANDOM ACCESS, INC.
Dated as of May 15, 1995
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
<S> <C> <C>
ARTICLE I
THE MERGER
Section 1.01. The Merger................................................... 1
Section 1.02. Effective Time............................................... 1
Section 1.03. Effect of the Merger......................................... 2
Section 1.04. Articles of Incorporation; By-Laws........................... 2
Section 1.05. Directors and Officers....................................... 2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01. Conversion of Securities..................................... 2
Section 2.02. Conversion of Sub Common Stock............................... 2
Section 2.03. Exchange of Company Certificates and Cash.................... 3
Section 2.04. Stock Transfer Books......................................... 4
Section 2.05. Company Options.............................................. 4
Section 2.06. Dissenting Shares............................................ 4
Section 2.07. Closing...................................................... 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Organization and Qualification............................... 5
Section 3.02. Capitalization............................................... 5
Section 3.03. Subsidiaries................................................. 6
Section 3.04. Authorization................................................ 6
Section 3.05. SEC Filings.................................................. 6
Section 3.06. No Conflicts................................................. 7
Section 3.07. Consents and Approvals....................................... 7
Section 3.08. Financial Statements......................................... 8
Section 3.09. Absence of Certain Changes or Events......................... 8
Section 3.10. No Undisclosed Material Liabilities.......................... 9
Section 3.11. Proxy Statement.............................................. 9
Section 3.12. Fairness Opinion............................................. 10
Section 3.13. Brokers and Finders.......................................... 10
Section 3.14. Environmental Matters........................................ 10
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 3.15. Litigation................................................... 11
Section 3.16. ERISA Compliance............................................. 11
Section 3.17. Tax Matters.................................................. 12
Section 3.18. Change in Control Payments................................... 13
Section 3.19. Other Information............................................ 13
Section 3.20. Intellectual Property........................................ 13
Section 3.21. Insurance Coverage........................................... 14
Section 3.22. Inventory.................................................... 14
Section 3.23. Certain Transactions......................................... 14
Section 3.24. Contracts.................................................... 15
Section 3.25. Personnel.................................................... 15
Section 3.26. Compliance with Laws......................................... 16
Section 3.27. Expenses..................................................... 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 4.01. Organization and Power....................................... 16
Section 4.02. Authorization................................................ 16
Section 4.03. No Conflicts................................................. 17
Section 4.04. Consents and Approvals....................................... 17
Section 4.05. Proxy Statement.............................................. 17
Section 4.06. Financing of the Merger...................................... 17
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.01. Conduct of Business Between Execution of this Agreement and the
Effective Time........................................................... 18
Section 5.02. Consolidated Net Worth....................................... 20
Section 5.03. Mutual Covenants............................................. 21
Section 5.04. Access to Information; Confidentiality....................... 22
Section 5.05. Meeting of Shareholders...................................... 22
Section 5.06. Proxy Statement.............................................. 22
Section 5.07. Hart-Scott-Rodino Filing..................................... 22
Section 5.08. Public or Shareholder Communications......................... 23
Section 5.09. Additional Agreements........................................ 23
Section 5.10. Closing Conditions........................................... 23
Section 5.11. Parent Shareholder Approval.................................. 23
Section 5.12. No Solicitation.............................................. 23
Section 5.13. Distribution Agreement....................................... 24
Section 5.14. Indemnification.............................................. 24
Section 5.15. Directors' and Officers' Insurance........................... 24
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.01. Conditions to Each Party's Obligation to Effect the Merger... 25
Section 6.02. Additional Conditions to the Obligations of the Company...... 25
Section 6.03. Additional Conditions to the Obligations of Parent and Sub... 26
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.01. Termination.................................................. 28
Section 7.02. Effect of Termination........................................ 28
Section 7.03. Amendment.................................................... 28
Section 7.04. Waiver....................................................... 29
ARTICLE VIII
FEES AND EXPENSES/GENERAL PROVISIONS
Section 8.01. Fees and Expenses............................................ 29
Section 8.02. Survival of Representations and Warranties................... 30
Section 8.03. Notices...................................................... 31
Section 8.04. Headings..................................................... 32
Section 8.05. Exhibits, Schedules and Annexes.............................. 32
Section 8.06. Counterparts................................................. 32
Section 8.07. Governing Law................................................ 32
Section 8.08. Pronouns..................................................... 32
Section 8.09. Time Periods................................................. 32
Section 8.10. No Strict Construction....................................... 32
Section 8.11. Entire Agreement............................................. 32
Section 8.12. Severability................................................. 32
Section 8.13. Successors and Assigns....................................... 33
LIST OF SCHEDULES AND ANNEXES
SCHEDULES
3.02 Capitalization
3.03 Matters Concerning Subsidiaries
3.05 Matters Concerning SEC Filings
3.06 No Conflicts
3.07 Consents and Approvals
3.09 Certain Changes or Events
3.14 Environmental Matters
3.15 Company Litigation
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C>
3.16 ERISA Compliance
3.17 Tax Matters
3.18 Change in Control Payments
3.20 Intellectual Property Matters
3.21(a) Insurance Policies
3.21(b) Insurance Claims
3.23 Certain Transactions
3.24(a) Contracts
3.24(b) Defaults Under Contracts
3.25 Personnel
3.27 Expenses
5.01 Conduct of Business between Execution of Agreement and Effective Time
5.02(e) Calculation of Tangible Net Worth
</TABLE>
<TABLE>
<CAPTION>
ANNEXES
<S> <C>
Annex A Shareholder Agreement
Annex B Form of Opinion of Reid & Priest LLP
Annex C Consulting Agreement with Bruce A. Milliken
Annex D Employment Agreement with Richard A. Crawford, Jr.
Annex E Purchase Agreement among the Company, Total Access LLC and Bruce A.
Milliken
Annex F Form of Opinion of Stroock & Stroock & Lavan
</TABLE>
(iv)
<PAGE> 6
AGREEMENT AND PLAN OF MERGER, dated as of May 15, 1995 (this "Agreement"), by
and among ENTEX INFORMATION SERVICES, INC., a Delaware corporation ("Parent"),
ENTEX Acquisition Corp., a Colorado corporation and a wholly owned subsidiary of
Parent ("Sub"), and RANDOM ACCESS, INC., a Colorado corporation (the "Company").
WHEREAS, the parties desire that Sub be merged (the "Merger") with and into
the Company, pursuant to which the Company will become a wholly owned subsidiary
of Parent, all upon the terms and conditions contained herein and in accordance
with the Colorado Business Corporation Act (the "Colorado Act");
WHEREAS, the Board of Directors of each of Parent, Sub and the Company deems
the Merger to be in the best interests of each of Parent, Sub, the Company and
their respective shareholders;
WHEREAS, in order to induce Parent and Sub to enter into this Agreement,
simultaneously with the execution hereof, Bruce A. Milliken ("Milliken"), the
Chairman of the Board and a principal shareholder of the Company, and Parent
have executed a Shareholder Agreement, substantially in the form of Annex A
hereto, pursuant to which, among other things, Milliken has agreed not to
transfer the Shares (as hereinafter defined) beneficially owned by him except as
permitted by the terms of such Shareholder Agreement, and to vote the Shares
beneficially owned by him in favor of the approval of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Colorado Act, at the
Effective Time (as defined in Section 1.02), Sub shall be merged with and into
the Company, whereupon the Company will become a wholly owned subsidiary of
Parent. As a result of the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation in the Merger
(the "Surviving Corporation"). The name of the Surviving Corporation shall, by
virtue of the Merger, remain "Random Access, Inc."
Section 1.02. Effective Time. As promptly as reasonably practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VI, the parties hereto shall cause the Merger to be consummated by filing
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of Colorado, in such form as required by, and executed in
1
<PAGE> 7
accordance with the relevant provisions of the Colorado Act (the date and time
of such filing being the "Effective Time").
Section 1.03. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the Colorado Act.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of Sub and the Company shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Sub and the
Company shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 1.04. Articles of Incorporation; By-Laws. The Articles of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation, unless
and until duly amended, altered or repealed. The By-Laws of the Company as in
effect immediately prior to the Effective Time shall be the By-Laws of the
Surviving Corporation, unless and until duly amended, altered or repealed.
Section 1.05. Directors and Officers. The directors of Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of Sub
shall be the initial officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01. Conversion of Securities. (a) Each share of common stock,
$0.0001 par value, of the Company (the "Shares") issued and outstanding
immediately prior to the Effective Time, other than Shares owned by Parent, Sub
or any other wholly owned subsidiary of Parent or held in the treasury of the
Company, all of which shall be cancelled (collectively, the "Cancelled Shares"),
and Shares held by Dissenting Shareholders (as defined in Section 2.06 hereof)
(collectively, the "Dissenting Shares"), shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive $3.50 net to the holder in cash (the "Merger Consideration"),
payable to the holder thereof, without interest thereon, upon the surrender of
the certificate representing such Share.
Section 2.02. Conversion of Sub Common Stock. Each share of common stock, par
value $0.0001 per share, of Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and exchangeable into one (1) share of
common stock of the Surviving Corporation and each certificate evidencing
ownership of any shares of capital stock of Sub shall evidence ownership of the
same number of shares of common stock of the Surviving Corporation.
2
<PAGE> 8
Section 2.03. Exchange of Company Certificates and Cash.
(a) Deposit of Merger Consideration. As of the Effective Time, Parent or
Sub shall deposit, or cause to be deposited, with or for the account of a bank
or trust company (the "Exchange Agent") selected by Parent prior to the
Effective Time, for the benefit of the holders of the Shares (other than
Canceled Shares and Dissenting Shares), for exchange in accordance with this
Article II, through the Exchange Agent, cash in the aggregate amount required to
be exchanged for the Shares (other than Canceled Shares and Dissenting Shares)
pursuant to Section 2.01 (the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Exchange Fund to holders of
the Shares (other than Canceled Shares and Dissenting Shares). The Exchange Fund
shall not be used for any other purpose. Any interest, dividends or other income
earned on the investment of the Exchange Fund while held by the Exchange Agent
shall be for the account of Parent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding Shares (other than Dissenting Shares) (the
"Certificates"), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for payment in cash therefor. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor cash in an amount equal to the product of the number of
Shares represented by such Certificate multiplied by the Merger Consideration,
and the Certificate so surrendered shall forthwith be cancelled. In the event of
a transfer of ownership of Shares which is not registered in the transfer
records of the Company, cash may be paid in accordance with this Article II to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.03, each Certificate
shall represent for all purposes after the Effective Time only the right to
receive upon such surrender the Merger Consideration in cash multiplied by the
number of Shares evidenced by such Certificate, without any interest thereon;
and all other rights of such holder as a shareholder of the Company shall cease
at the Effective Time, except as otherwise required by the Colorado Act.
(c) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Shares for 180 days after the Effective
Time shall be delivered to Parent, upon demand, and any holders of Shares who
have not theretofore complied with this Article II shall thereafter look only to
Parent for payment of their claim for the Merger Consideration to which they are
entitled pursuant to this Agreement. Neither Parent nor the Company shall be
liable to any holder of the Shares for any cash from the Exchange Fund
3
<PAGE> 9
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(d) Withholding Rights. Parent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Shares such amounts as Parent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Parent, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the Shares in respect of which such deduction and withholding was made by
Parent.
Section 2.04. Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of Shares thereafter on the records of the Company. On or after the
Effective Time, any Certificates presented to the Exchange Agent or Parent for
any reason shall be cancelled and converted into the right to receive the Merger
Consideration in cash multiplied by the number of Shares evidenced by such
Certificate.
Section 2.05. Company Options. At the Effective Time (and subject to the
effectiveness of the Merger), each option to purchase Shares shall be canceled
in consideration of the payment by the Company to each holder thereof of an
amount in cash equal to the extent (if any) by which the Merger Consideration
exceeds the exercise price per share payable under such option, multiplied by
the number of Shares subject to such option. All incentive stock option plans
and non-qualified stock option plans maintained by the Company, and each option
issued under any of such plans, shall be amended, to the extent necessary, to
incorporate the terms of the preceding sentence and to delete any inconsistent
provisions thereof regarding the treatment of such options as a consequence of
the Merger. Parent shall be entitled to cause the Company to withhold for
amounts otherwise payable pursuant to this Section 2.05 any amount required to
be withheld under applicable tax laws.
Section 2.06. Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, any issued and outstanding Shares held by a person (a
"Dissenting Shareholder") who objects to the Merger and complies with all the
provisions of the Colorado Act concerning the right of shareholders of the
Company to dissent from the Merger and require appraisal of their Shares shall
not be converted as described in Section 2.01 but shall become the right to
receive such consideration as may be determined to be due to such Dissenting
Shareholder pursuant to the Colorado Act. If after the Effective Time, such
Dissenting Shareholder withdraws his demand for appraisal or fails to perfect or
otherwise loses his right of appraisal, in any case pursuant to the Colorado
Act, his Shares shall be deemed to be converted as of the Effective Time into
the right to receive the Merger Consideration, without interest. The Company
shall give Parent (i) prompt notice of any demands for appraisal of Shares
received by the Company and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Parent, make any payment with
respect to, or settle, offer to settle or otherwise negotiate any such demands.
4
<PAGE> 10
Section 2.07. Closing. The closing of the Merger will take place at 10:00
a.m. not later than the third business day after the day on which there shall
have been satisfaction or waiver of the conditions set forth in Article VI, at
the offices of Reid & Priest LLP, 40 West 57th Street, New York, New York 10019,
unless another date or place is agreed to in writing by the parties hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.01. Organization and Qualification.
(a) Organization and Power. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
The Company has all requisite power and authority, corporate and otherwise, to
carry on its business as it is now being conducted and to own, lease and operate
its assets.
(b) Qualification. The Company is duly qualified or licensed to do
business as a foreign corporation in good standing in every jurisdiction where
the character of its properties, owned or leased, or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified will not be reasonably likely to have an effect which is material and
adverse to the business, financial condition or results of operations of the
Company and its Subsidiaries (as hereinafter defined) taken as a whole (a
"Company Material Adverse Effect").
(c) Articles of Incorporation and By-Laws. The Company has heretofore
delivered to Parent complete and correct copies of the Company's Articles of
Incorporation, as amended, and By-Laws, as amended, each as currently in effect.
Section 3.02. Capitalization. The authorized capital stock of the Company,
together with a description of treasury securities and a description of all
securities issued and outstanding as of May 9, 1995 is as set forth on Schedule
3.02 attached hereto. All securities identified on Schedule 3.02 as being issued
and outstanding securities are validly issued, fully paid and nonassessable.
Except as set forth on Schedule 3.02, there is no outstanding option, warrant,
right, call, subscription or other agreement or commitment which (a) calls for
the issuance, sale, pledge or other disposition of any shares of capital stock
of the Company or any securities convertible or exchangeable into, or other
rights to acquire, any shares of capital stock of the Company, (b) obligates the
Company to make any payments with respect to appreciation in shares of its
capital stock, (c) obligates the Company to grant, offer or enter into any of
the foregoing, or (d) relates to the voting, transfer or control of such capital
stock, securities or rights. Schedule 3.02 sets forth the exercise price of each
stock option currently outstanding.
5
<PAGE> 11
Section 3.03. Subsidiaries. Except as set forth in Schedule 3.03 attached
hereto, each Subsidiary of the Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power to carry on its business as it is now
being conducted. Each Subsidiary is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified will not
have a Company Material Adverse Effect. Other than Total Access Limited
Liability Company, a Colorado Limited Liability Company ("Total Access"), which
is 88%-owned by the Company, all of the outstanding shares of capital stock of
each are validly issued, fully paid and nonassessable and owned directly or
indirectly by the Company free and clear of all liens, claims or encumbrances
and were not issued in violation of any preemptive right. There are no existing
options, calls or commitments of any character relating to the issued or
unissued capital stock of any Subsidiary, or any securities convertible into, or
exchangeable or exercisable for, or otherwise evidencing the right to acquire,
any shares of capital stock of any Subsidiary. For purposes of this Agreement,
the term "Subsidiary" of the Company shall mean any corporation or other entity
a majority of whose outstanding voting stock or ownership interests entitled to
vote for the election of directors or other governing body is at the time owned
by the Company and/or one or more other Subsidiaries. The Subsidiaries listed on
Schedule 3.03 are inactive, and do not have liabilities of any kind whatsoever
(absolute, accrued, or contingent), other than liabilities of the Company
guaranteed by them, in excess of $10,000 in the aggregate.
Section 3.04. Authorization. The Company has all requisite corporate power to
enter into this Agreement, and all other documents and instruments to be
executed and delivered by it in connection herewith, and to carry out its
obligations hereunder and thereunder. Except with respect to the approval by the
shareholders of the Company of this Agreement and the Merger (a) the execution
and delivery of this Agreement and the due consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company, and (b) this Agreement
constitutes (and each document and instrument contemplated by this Agreement,
when executed and delivered in accordance with the provisions hereof, will
constitute) a valid and legally binding agreement of the Company enforceable in
accordance with its terms. The affirmative vote of the holders of two-thirds of
the Shares is the only vote of any class or series of capital stock of the
Company necessary to approve the Merger.
Section 3.05. SEC Filings.
(a) Except as set forth on Schedule 3.05 attached hereto, the Company has
filed with the Securities and Exchange Commission (the "SEC") all required
reports, schedules, forms, statements and other documents from February 28, 1992
through the date hereof, including (i) the annual reports on Form 10-K for all
fiscal years ended during such period, (ii) the quarterly reports on Form 10-Q
required for all fiscal quarters during such period, (iii) its proxy or
information statements relating to meetings of, or actions taken without a
meeting by, the shareholders of the Company held during such period and (iv) all
of its other reports, statements,
6
<PAGE> 12
schedules and registration statements filed with the SEC during such period (the
"SEC Documents").
(b) As of its filing date or, if amended, as of the date of its amendment,
as the case may be, each such report, proxy or information statement (as amended
or supplemented, if applicable), filed pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(c) Each such registration statement (as amended or supplemented, if
applicable) filed pursuant to the Securities Act of 1933, as amended (the
"Securities Act") on the date such statement, amendment or supplement became
effective did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
Section 3.06. No Conflicts. Except as set forth on Schedule 3.06 attached
hereto, the execution, delivery and performance of this Agreement by the Company
and the consummation of the transactions contemplated hereby:
(a) will not constitute a conflict with, breach or violation of or default
(or an event which with notice or lapse of time or both would become a default)
under: (i) the Company's Articles of Incorporation or By-Laws, as amended to
date, (ii) any material agreement, instrument, license, franchise or permit to
which the Company or any of its Subsidiaries is subject or by which any of them
is bound, (iii) any order, writ, injunction or decree to which the Company or
any of its Subsidiaries are subject or by which any of them is bound, or (iv)
any law, rule or regulation to which the Company or any of its Subsidiaries is
subject or by which any of them is bound, the violation of which would have a
Company Material Adverse Effect; and
(b) will not result in the creation of any lien, charge or encumbrance on
the properties or assets of the Company, except those created or imposed by or
through Parent or Sub.
Section 3.07. Consents and Approvals. Except: (i) for filings and approvals
required by: (a) the Secretary of State of the State of Colorado, (b) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations promulgated thereunder (the "Hart- Scott-Rodino Act"); (c) the
Exchange Act; and (d) such other statutes, rules or regulations which may
require registrations, authorizations, consents or approvals relating to matters
that, in the aggregate, are not material to the Company and its Subsidiaries
taken as a whole; (ii) for the approval by the shareholders of the Company of
this Agreement and the transactions contemplated hereby, and except as set forth
on Schedule 3.07 attached hereto, neither the Company nor any of its
Subsidiaries is required to submit any notice, report or other filing with or
obtain any consent or approval from any governmental authority or third party in
connection with the execution and delivery by the Company of this Agreement or
the consummation of the transactions contemplated hereby.
7
<PAGE> 13
Section 3.08. Financial Statements.
The financial statements of the Company included in the annual reports
on Form 10-K filed by the Company with respect to the three most recently
completed fiscal years of the Company and the quarterly report on Form 10-Q
filed by the Company with the SEC with respect to the two quarters ended
February 28, 1995, as amended by Amendment No. 1 thereto dated April 25, 1995
(the "Amended February 28 Form 10-Q"), comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles, consistently applied (except as may be indicated
in the notes thereto or, in the case of the unaudited statements, as permitted
by Form 10-Q of the SEC), and fairly present (subject, in the case of the
unaudited statements, to normal, recurring adjustments, none of which are
anticipated to be material) the financial position, results of operations,
shareholders' equity and changes in financial position of the Company and its
Subsidiaries as at the dates and for the periods indicated.
Section 3.09. Absence of Certain Changes or Events. Except as set forth on
Schedule 3.09 attached hereto, since February 28, 1995, there has been no
Company Material Adverse Effect (whether or not covered by insurance), and there
has not been:
(a) any event, occurrence or development of a state of circumstances or
facts which has had or reasonably could be expected to have a Company Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or any
Subsidiary or any repurchase, redemption or other acquisition by the Company or
any Subsidiary of any outstanding shares of capital stock or other securities
of, or other ownership interests in, the Company or any Subsidiary;
(c) any amendment of any material term of any outstanding security of the
Company or any Subsidiary;
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent with past practices,
but in no event in the amount of more than $100,000 in the aggregate;
(e) any creation or assumption by the Company or any Subsidiary of any
lien on any material asset other than in the ordinary course of business
consistent with past practices, but in no event in respect of any obligation of
more than $100,000 in the aggregate;
(f) any making of any loan, advance or capital contributions to, or
investment in any person other than investments in cash equivalents made by, the
Company or any Subsidiary except those made in the ordinary course of business
consistent with past practices;
8
<PAGE> 14
(g) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any Subsidiary of any contract or other right,
in either case, material to the Company and its Subsidiaries taken as a whole
other than transactions and commitments in the ordinary course of business
consistent with past practice and those contemplated by this Agreement, but in
no event representing commitments on behalf of the Company and its Subsidiaries
taken as a whole of more than $100,000 for any transaction or series of
transactions;
(h) any change in any method of accounting or accounting practice by the
Company or any Subsidiary, except for any such change required by reason of a
concurrent change in generally accepted accounting principles;
(i) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or employee of the
Company or any Subsidiary, (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements of the Company or
any Subsidiary or (iv) increase in compensation, bonus or other benefits payable
to directors, officers or employees of the Company or any Subsidiary, other than
in the ordinary course of business consistent with past practice; or
(j) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any Subsidiary, which employees were not subject
to a collective bargaining agreement at February 28, 1995, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to such
employees.
Section 3.10. No Undisclosed Material Liabilities. There are no liabilities
of the Company or its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a) liabilities disclosed in the Company's filings with the SEC or
otherwise reflected or reserved against in the Company's financial statements;
(b) liabilities incurred in the ordinary course of business consistent
with past practice, which individually or in the aggregate, would not have a
Company Material Adverse Effect; and
(c) liabilities under this Agreement or disclosed pursuant to this
Agreement.
Section 3.11. Proxy Statement. None of the information to be supplied by the
Company or any of its accountants, counsel or other authorized representatives
for inclusion in the Proxy Statement (as defined in Section 5.06) to be
distributed in connection with the Shareholders'
9
<PAGE> 15
Meeting (as defined in Section 5.05) will, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the time of
the Shareholders' Meeting contain any untrue statement of a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, it being understood and agreed that no representation or warranty is
made by the Company with respect to any information supplied by Parent or Sub or
their accountants, counsel or other authorized representatives. If at any time
prior to the Effective Time any event with respect to the Company, its officers
and directors or any of its subsidiaries shall occur which is or should be
described in an amendment of, or a supplement to, the Proxy Statement, such
event shall be so described and the presentation in such amendment or supplement
of such information will not contain any statement which, at the time and in
light of the circumstances under which it is made, is false or misleading in any
material respect or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not false or misleading. The Proxy
Statement will comply as to form in all material respects with all applicable
laws, including the provisions of the Exchange Act and the rules and regulations
promulgated thereunder.
Section 3.12. Fairness Opinion. The Company has received the written opinion
of Chatfield Dean & Co., Inc. ("Chatfield Dean"), financial advisor to the
Company, that, as of the date of the opinion, the Merger Consideration to be
received by the holders of Shares is fair, from a financial point of view, to
such holders, and such opinion has not been withdrawn as of the date hereof. The
Company has delivered a copy of such opinion to Parent.
Section 3.13. Brokers and Finders. Except for fees and expenses payable to
Chatfield Dean, no broker, finder or investment banker is entitled to any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the Company.
The fees (excluding out-of-pocket expenses that are payable in addition to such
fees) payable to Chatfield Dean shall not exceed $100,000 for services in
rendering the opinion referred to in Section 3.12, and an additional $400,000
payable at the Effective Time.
Section 3.14. Environmental Matters. The Company and its Subsidiaries are,
and at all times in the past have been, in compliance with all applicable legal
requirements, laws, rules, orders and regulations related to environmental,
natural resource, health or safety matters, except where such non-compliance has
not had a Company Material Adverse Effect, including but not limited to those
promulgated, adopted or enforced by the United States Environmental Protection
Agency and by similar agencies in states in which the Company or its
Subsidiaries conduct their business. Except as set forth on Schedule 3.14
attached hereto, neither the Company nor any of its Subsidiaries is a party to
any suit, action, claim or proceeding now pending before any court, governmental
agency or board or other forum or, to the knowledge of the Company, threatened
by any person which if adversely determined, would have a Company Material
Adverse Effect (i) for alleged noncompliance with any environmental law, rule or
regulation or (ii) relating to the discharge or release into the environment of
any hazardous material, pollutant, or waste at or on a site presently or
formerly owned, leased or operated by the Company or any
10
<PAGE> 16
Subsidiary. There are no facts or circumstances known to the Company upon which
such a suit, action, claim or proceeding reasonably could be based.
Section 3.15. Litigation. Except as set forth in the SEC Documents or as set
forth on Schedule 3.15 attached hereto, there is no suit, action, claim or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, which, if adversely determined, individually
or in the aggregate with other such suits, actions, claims or proceedings, would
(i) have a Company Material Adverse Effect, (ii) materially and adversely affect
the Company's ability to perform its obligations under this Agreement or (iii)
prevent the consummation of any of the transactions contemplated by this
Agreement. The Company has provided to Parent all material information possessed
by the Company or its counsel regarding the facts and circumstances that are the
subject of the litigation and claims listed on Schedule 3.15 (the "Company
Litigation"), including, but not limited to, the investigation of the Company by
the SEC (the "SEC Investigation"). The litigation entitled Lane v. Intelligent
Electronics, Inc. (Civil Action No. 94-5-2071, D. Colorado) (the "Lane
Litigation") has been settled, and the Company has provided to Parent a written
statement of the material terms of such settlement.
Section 3.16. ERISA Compliance.
(a) The Company has delivered to Parent correct and complete copies of all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all other bonus,
deferred compensation, pension, profit-sharing, retirement, medical, group life,
disability income, stock purchase, stock option, incentive or other
employee-related plans, programs, contracts, agreements and arrangements
(sometimes referred to herein collectively as "Benefit Plans") currently
maintained, or contributed to, or required to be maintained or contributed to,
by the Company or any other person or entity that, together with the Company, is
treated as a single employer under Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code") (each a "Commonly
Controlled Entity") for the benefit of any current or former employees, officers
or directors of the Company or any Subsidiary. Except as disclosed on Schedule
3.16 attached hereto, the Company also has delivered to Parent complete and
correct copies of (x) the most recent annual report on Form 5500 filed with the
Internal Revenue Service with respect to each Benefit Plan (if any such report
was required) including all schedules thereto, (y) the most recent summary plan
description for each Benefit Plan for which such summary plan description is
required and (z) each currently effective trust agreement and group annuity
contract relating to any Benefit Plan. Except as disclosed on Schedule 3.16
attached hereto, the Company has no obligation or liability with respect to any
employee benefit plan (as defined under Section 3(3) of ERISA) or any other
bonus, deferred compensation, pension, profit sharing, retirement, medical,
group life, disability income, stock purchase, stock option, incentive or other
employee related plans, programs, contracts, agreements or arrangements, other
than such Benefit Plans currently maintained, contributed to or required to be
maintained or contributed to by the Company or any Company Controlled Entity.
11
<PAGE> 17
(b) Each Benefit Plan has been administered in accordance with its terms
in all material respects except where the failure to do so either singly or in
the aggregate would not have a Company Material Adverse Effect. Except as
disclosed on Schedule 3.16 attached hereto, the Company and each Benefit Plan
are in compliance with applicable provisions of ERISA and the Code, except for
any noncompliance that singly or in the aggregate would not have a Company
Material Adverse Effect. Except as provided in Section 2.05 or pursuant to the
plans or agreements disclosed on Schedule 3.18 attached hereto, the consummation
of the transactions contemplated herein will not directly or indirectly cause
the payment, or the acceleration of any payment, under any Benefit Plan of any
amount to any person.
(c) All Benefit Plans intended to be qualified under Section 401(a) of the
Code have been the subjects of determination letters from the Internal Revenue
Service to the effect that such Benefit Plans are qualified and exempt from
Federal income taxes under Section 401(a) and 501(a), respectively, of the Code
and no such determination letter has been revoked nor, to the knowledge of the
Company, has revocation been threatened. Except as set forth on Schedule 3.16
attached hereto, no such Benefit Plan has been amended since the date of its
most recent determination letter or application therefor in any respect that, to
the knowledge of the Company, would have a Company Material Adverse Effect.
(d) Neither the Company nor any Commonly Controlled Entity maintains,
contributes to, or at any time maintained, contributed to or was obligated to
contribute to, any Benefit Plan which is subject to Title IV of ERISA or Section
412 of the Code.
(e) None of the Company, any Subsidiary, any officer of the Company, or
any Subsidiary or any other person or persons, has engaged in a non-exempt
"prohibited transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) or any other breach of fiduciary responsibility that
could subject the Company or any officer of the Company to direct or indirect
tax, penalty or liability under ERISA, the Code or other applicable law which
would have a Company Material Adverse Effect.
(f) With respect to any Benefit Plan that is an employee welfare benefit
plan, (x) no such Benefit Plan is funded through a "welfare benefit fund", as
such term is defined in Section 419(a) of the Code, and (y) each such Benefit
Plan that is a "group health plan", as such term is defined in Section
5000(b)(1) of the Code, complies in all material respects with the applicable
requirements of Section 4980B(f) of the Code and Part 6 of Title I of ERISA
except where the failure to do so would not individually or in the aggregate
have a Company Material Adverse Effect.
Section 3.17. Tax Matters.
(a) The Company, and if applicable each Subsidiary, has filed all Federal
income tax returns and all other tax returns and reports required to be filed by
them, the failure to file which would have a Company Material Adverse Effect.
All such returns are complete and correct in all material respects. The Company,
and if applicable each Subsidiary, has paid or
12
<PAGE> 18
has made provisions for payment for all taxes and all material taxes for which
no return was required to be filed, the nonpayment of which would have a Company
Material Adverse Effect, and the most recent consolidated financial statements
of the Company contained in the SEC Reports reflect an adequate reserve for all
taxes payable for all taxable periods and portions thereof through the date of
such financial statements, except where the failure to maintain such reserve
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
(b) Except as set forth on Schedule 3.17 attached hereto, no audits
concerning taxes of the Company and, if applicable, any Subsidiary are currently
being conducted and no notice regarding commencement of such an audit has been
received.
(c) Except as set forth on Schedule 3.17 attached hereto, no proposed or
assessed deficiencies for any taxes are currently pending against the Company,
or if applicable any Subsidiary, and no requests for waivers of the time to
assess any such taxes are pending, in either case which, individually or in the
aggregate, would have a Company Material Adverse Effect.
(d) Except as set forth in Schedule 3.17, the Company is not aware of any
basis for the assertion of any deficiency against the Company or, if applicable,
any Subsidiaries for taxes which, if adversely determined, either individually
or in the aggregate, would have a Company Material Adverse Effect with respect
to the tax return of the Company and its Subsidiaries for the taxable years as
to which the statute of limitations has not expired.
(e) As used in this Agreement, "taxes" shall include all Federal, state,
local and foreign income, property, sales, excise, employment, payroll, custom
duty and any other governmental fee or assessment, and penalties, in addition to
any liability to a third party for such amounts, of any nature whatsoever.
Section 3.18. Change in Control Payments. Except as set forth on Schedule
3.18 attached hereto, neither the Company nor its Subsidiaries have any plans or
agreements to which they are parties, or to which they are bound, pursuant to
which payments or acceleration of benefits may be required upon a "change of
control" of the Company.
Section 3.19. Other Information. None of the documents or written information
delivered to Parent in connection with the transactions contemplated by this
Agreement (unless amended or corrected in writing prior to the date hereof)
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
Section 3.20. Intellectual Property. The Company and each Subsidiary has
exclusive ownership of or rights to use each registered patent, registered
trademark, registered tradename, registered service mark and registered
copyright (collectively, the "Registered Intellectual Property"), and to the
knowledge of the Company, the Company and each Subsidiary has exclusive
ownership of or rights to use each material patent application, unregistered
trademark,
13
<PAGE> 19
trademark application, unregistered trade name, unregistered service mark,
unregistered copyright and other trade secret or proprietary intellectual
property (the "Other Intellectual Property" and collectively with the Registered
Intellectual Property, the "Intellectual Property") owned by or used in and
material to its business and the current use by the Company and each Subsidiary
of such Intellectual Property does not infringe the rights of any other person,
except for any such infringements that do not, individually or in the aggregate,
have a Company Material Adverse Effect. Except set forth on Schedule 3.20
attached hereto, to the knowledge of the Company, no other person is infringing
the rights of the Company or any Subsidiary in any such Intellectual Property,
except for any such infringements, that do not, individually or in the
aggregate, have a Company Material Adverse Effect.
Section 3.21. Insurance Coverage.
(a) Set forth on Schedule 3.21(a) attached hereto is a true and complete
list of all insurance policies currently owned by the Company (the "Company
Insurance Policies"), setting forth, for each such policy, the policy number,
the date of inception of the policy and the period of coverage, the insurer, and
a general description of the risks insured against under such policy. The
Company has heretofore delivered to Parent a true and complete copy of each of
the Company Insurance Policies, including all endorsements, amendments or
supplements thereto. Each of the Company Insurance Policies has been validly
obtained, all premiums required to be paid with respect thereto have been paid
in full, and each of the Company Insurance Policies is in full force and effect.
(b) Set forth on Schedule 3.21(b) attached hereto is a true and complete
list of each and every pending claim made with respect to the Company Insurance
Policies where the amount of damage or potential liability exceeds $10,000.
Section 3.22. Inventory.
(a) The values at which all inventories are carried on the books of the
Company and its Subsidiaries (copies of which books previously have been
provided by the Company to Parent), including without limitation the reserves
with respect thereto, have been calculated in accordance with generally accepted
accounting principles consistent with past practices.
(b) Consistent with past practices, taking into account the reserves for
inventory, the inventories reflected on the books of the Company and its
Subsidiaries are: (i) in all material respects in good and merchantable
condition; (ii) generally usable for the purposes for which they are intended,
or salable in the ordinary course of business; and (iii) not excessive in
material respects in kind or amount in the context of the Company's business
taken as a whole. The inventories reflected on the books of the Company and its
Subsidiaries include any and all inventory held on consignment by third parties.
Section 3.23. Certain Transactions. Except as set forth in the SEC Documents
or as set forth on Schedule 3.23 attached hereto, none of the officers or
directors of the Company or any
14
<PAGE> 20
of its Subsidiaries is presently a party to any transaction with the Company or
any of its Subsidiaries (other than for services as employees, officers and
directors), including without limitation any contract, agreement or other
arrangement (i) providing for the furnishing of services to or by, (ii)
providing for rental of real or personal property to or from, or (iii) otherwise
requiring payments to or from, any officer or director, any member of the family
of any officer or director or any corporation, partnership, trust or other
entity in which any officer or director has a substantial interest or is an
officer, director, trustee or partner.
Section 3.24. Contracts. Except as set forth on the Exhibit Index to the
Company's annual report on form 10-K for the fiscal year ended August 31, 1994,
or as set forth on Schedule 3.24(a) attached hereto, there are no outstanding
agreements, commitments, purchase orders, or contracts, written or oral, express
or implied, to which the Company or any of its Subsidiaries is a party or to
which they are bound which (i) involve the payment or receipt by the Company or
any of its Subsidiaries of more than $1,000,000 under any one of such contracts,
or (ii) have an initial term of more than 150 days and are not cancelable
without significant penalties by the Company or such Subsidiary on 60 days' or
less notice or (iii) otherwise would be required to be included as an exhibit to
an annual report of the Company on Form 10-K under the regulations promulgated
by the SEC under the Exchange Act. Except as set forth on Schedule 3.24(b)
attached hereto, the Company and its Subsidiaries are not in default in respect
of any such agreement, commitment, purchase order or contract, or any other
material agreement, commitment, purchase order, or contract, and, except as so
disclosed, the Company has no knowledge of any facts or circumstances existing
as of the date hereof which would reasonably indicate that the Company or any of
its Subsidiaries will be or may be in default in respect of any such agreement,
commitment, purchase order or contract subsequent to the date hereof.
Section 3.25. Personnel.
(a) Schedule 3.25 contains a correct and complete list of:
(i) all employment, severance, bonus, profit sharing,
percentage compensation and pension or retirement plans; stock purchase and
stock option plans; contracts or agreements with present or former directors,
officers or employees that are not terminable on 60 days' or less notice without
penalty to the Company; and all consulting agreements, to which the Company or
any of its Subsidiaries is a party or to which they are bound as of the date of
this Agreement;
(ii) all group insurance programs in effect for employees
of the Company and its Subsidiaries; and
(iii) all accrued but unused vacation, holiday and
sick-time on the account of each employee of the Company and its Subsidiaries.
15
<PAGE> 21
Neither the Company nor any of its Subsidiaries is in default
with respect to any of its obligations listed above.
Section 3.26. Compliance with Laws. Except as disclosed in this
Agreement or in the Schedules hereto, the operations of the business of the
Company and its Subsidiaries as heretofore or currently conducted were not and
are not in violation of, nor is the Company or any of its Subsidiaries in
default under, or violation of, any federal, state, local or foreign law,
statute or regulation or any order, judgment or decree of any federal, state,
local or foreign governmental authority, regulatory or administrative agency,
commission, court or tribunal to which the Company or any of its Subsidiaries
are bound, except for such violations or defaults as have not had a Company
Material Adverse Effect. The Company and its Subsidiaries have been duly granted
all authorizations necessary for the conduct of its business as currently
conducted, except those, the failure of which to obtain, has not had a Company
Material Adverse Effect.
Section 3.27. Expenses. Schedule 3.27 attached hereto sets forth a
description of the expenses of the Company and its Subsidiaries which the
Company estimates that it will incur, or has already incurred, in connection
with the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub, jointly and severally, hereby represent and warrant to
the Company as follows:
Section 4.01. Organization and Power.
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Parent has all requisite
corporate power to enter into this Agreement, and all other documents and
instruments to be executed and delivered by it in connection herewith, and to
carry out its obligations hereunder and thereunder.
(b) Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado. Sub has all requisite
corporate power to enter into this Agreement, and all other documents and
instruments to be executed and delivered by it in connection herewith, and to
carry out its obligations hereunder and thereunder. Sub is a wholly-owned
subsidiary of Parent, has been organized solely for the purpose of consummating
the Merger and has conducted no business or operations of any nature.
Section 4.02. Authorization. The execution and delivery of this Agreement
and the due consummation by Parent and Sub of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of Parent and Sub. This Agreement constitutes (and each document and
instrument contemplated by this Agreement,
16
<PAGE> 22
when executed and delivered in accordance with the provisions hereof, will
constitute) a valid and legally binding agreement of each of Parent and Sub and
enforceable against them in accordance with its terms.
Section 4.03. No Conflicts. The execution, delivery and performance of this
Agreement by Parent and Sub and the consummation of the transactions
contemplated hereby will not constitute a conflict with, breach or violation of
or default (or an event which with notice or lapse of time or both would become
a default) under (a) Parent's Certificate of Incorporation or By-Laws, as
amended to date; (b) Sub's Articles of Incorporation or By-laws, as amended to
date; (c) any material agreement, instrument, license, franchise or permit to
which Parent or Sub is subject or by which Parent or Sub is bound; (e) any
order, writ, injunction or decree to which Parent or Sub is subject or by which
Parent or Sub is bound; or (f) to the best of Parent's or Sub's respective
knowledge, any law, rule or regulation to which Parent or Sub is subject or to
which it is bound.
Section 4.04. Consents and Approvals. Except for filings, approvals or
consents required by (a) the Secretary of State of the State of Colorado; (b)
the Hart-Scott-Rodino Act; (c) the Exchange Act; (d) Parent's lenders pursuant
to certain credit agreements with such lenders, which consents have been
obtained; and (e) such other statutes, rules or regulations which may require
registrations, authorizations, consents or approvals relating to matters that,
in the aggregate, are not material to Parent, neither Parent nor Sub is required
to submit any notice, report or other filing with or obtain any consent or
approval from any governmental authority or third party in connection with the
execution and delivery by Parent or Sub of this Agreement or the consummation of
the transactions contemplated hereby.
Section 4.05. Proxy Statement. None of the information to be supplied by
Parent or Sub or any of their accountants, counsel or other authorized
representatives for inclusion in the Proxy Statement will, at the time of the
mailing of the Proxy Statement and any amendments or supplements thereto, and at
the time of the Shareholders' Meeting contain any untrue statement of a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect to
Parent or Sub, or their officers and directors or any of the subsidiaries of
Parent shall occur which is or should be described in an amendment of, or a
supplement to, the Proxy Statement, Parent will notify the Company in writing of
such event.
Section 4.06. Financing of the Merger. Parent has all funds, or appropriate
commitments for funds (complete copies of which have been provided to the
Company), necessary for the exchange of the Shares pursuant to the Merger.
17
<PAGE> 23
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.01. Conduct of Business Between Execution of this Agreement and
the Effective Time. During the period commencing on the date of this Agreement
and continuing until the Effective Time, the Company covenants and agrees that
the business of the Company and the Company's Subsidiaries shall be conducted
only in the regular and ordinary course of business, consistent with past
practice; and that it shall use all reasonable efforts to preserve intact its
business, keep available the services of its current officers and employees and
preserve its relationships with desirable customers, suppliers, licensors,
licensees, distributors and others having business dealings with it. Without
limiting the generality of the foregoing, except as set forth on Schedule 5.01
attached hereto, neither the Company nor any of its Subsidiaries shall, without
the prior written consent of Parent:
(a) adjust, split, combine or reclassify any shares of capital stock;
(b) make, declare, set aside or pay any dividend or make any other
distribution on, or directly or indirectly issue, sell, pledge, grant, redeem,
repurchase or otherwise acquire, any shares of its or any Subsidiary's capital
stock, any securities or obligations convertible into or exchangeable for any
shares of its capital stock, or any options, warrants or other rights to acquire
any shares of its capital stock except the issuance of stock pursuant to the
exercise of employee stock options outstanding on the date hereof;
(c) grant any stock option or appreciation rights or other rights to
share in the equity value of the Company or any Subsidiary;
(d) make any changes in the Articles of Incorporation or By-laws, as
amended to date, of the Company or any Subsidiary;
(e) acquire, sell, lease, encumber, transfer or dispose of any assets
outside the ordinary course of business, except pursuant to obligations in
effect on the date hereof;
(f) incur any indebtedness for borrowed money or guarantee any
indebtedness or issue or sell securities or warrants or rights to acquire any
debt securities or guarantee (or become liable for) any debt of others or make
any loans, advances or capital contributions or mortgage, pledge or otherwise
encumber any assets or create or suffer any material lien thereupon, except
pursuant to obligations or any guarantees thereof which in the aggregate do not
exceed $100,000;
(g) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
any payment, discharge or satisfaction (i) in the ordinary course of business
consistent with past practice; (ii) in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the financial
18
<PAGE> 24
statements (or the notes thereto) of the Company and (iii) of amounts described
on Schedule 3.25;
(h) notwithstanding any provision of clause (g) of this Section 5.01,
pay, discharge or satisfy any claims, liabilities or obligations in connection
with the Company Litigation, including, but not limited to, the SEC
Investigation, it being understood and agreed that the Company shall keep Parent
fully informed of all material developments in connection with the Company
Litigation, including, but not limited to, the SEC Investigation, and that
Parent shall have the right to participate in all decisions with respect to the
management, defense and settlement of the Company Litigation, including, but not
limited to, the SEC Investigation;
(i) change any of the accounting principles or practices used by it
(except as required by generally accepted accounting principles);
(j) except as required by law or contemplated by this Agreement (i)
enter into, adopt, amend or terminate any employee benefit plan or any
agreement, arrangement, plan or policy between the Company and one or more of
its directors or executive officers, (ii) increase in any manner the
compensation or fringe benefits of any director, officer or employee or (iii)
grant any bonus to any of its executive officers or pay any termination,
severance or other benefit not required by any plan and arrangement as in effect
on the date hereof;
(k) make or enter into any agreement, commitment or contract, except
those in the ordinary course of business for the purchase or sale of products in
amounts not exceeding $100,000 in any instance and not giving rise to
obligations extending beyond 90 days from the date hereof;
(l) make or enter into any lease of real property or extend or amend
any existing lease of real property;
(m) intentionally take, or enter into an agreement to take, any action
that would result in any of the conditions to the Merger set forth in Article VI
not being satisfied; or
(n) agree to, or make any commitment to take any of the actions
prohibited by this Section 5.01; or take any action, or agree or commit to take
any action that would make any representation or warranty of the Company
hereunder inaccurate in any respect at, or as of any time prior to the Effective
Time, or omit or agree or commit to omit to take any action necessary to prevent
any such representation or warranty from being inaccurate in any respect at any
such time.
(o) terminate the employment of any employee whose annual compensation
exceeds $40,000.
19
<PAGE> 25
Section 5.02. Consolidated Net Worth.
(a) As promptly as practicable after May 31, 1995, the Company will
prepare and deliver to Parent unaudited financial statements for the Company and
its consolidated subsidiaries as of May 31, 1995 (the "May 31 Financial
Statements"). The May 31 Financial Statements shall include line items
consistent with the financial statements of the Company included in the Amended
February 28 Form 10-Q and shall be prepared in accordance with generally
accepted accounting principles applied on a consistent basis with those used in
preparing the financial statements included in the Amended February 28 Form
10-Q.
(b) The May 31 Financial Statements shall be audited by the Company's
independent accountants, Deloitte & Touche LLP ("Deloitte & Touche"), and the
Company will use its best efforts to cooperate with Deloitte & Touche to enable
such firm to complete its audit as promptly as practicable and to express its
opinion as to the fairness of the presentation of the May 31 Financial
Statements. The Company will conduct a physical count of all the inventory of
the Company and its consolidated subsidiaries as of May 31, 1995. This physical
count will be observed by Deloitte & Touche as part of such firm's examination
of the May 31 Financial Statements in accordance with generally accepted
auditing standards. Representatives of Parent, Parent's lenders, and KPMG Peat
Marwick LLP ("KPMG Peat Marwick"), Parent's independent accountants, shall have
the right to observe such count and to review the Company's compilation of such
physical inventory and the workpapers of Deloitte & Touche relating to its
observations of the physical inventory conducted by the Company.
(c) As promptly as practicable after the delivery by the Company of the
May 31 Financial Statements, Deloitte & Touche shall use its best efforts to
complete its audit of the May 31 Financial Statements and to express its opinion
thereon. Prior to expressing its opinion, Deloitte & Touche shall deliver to
Parent and Sub a draft of the May 31 Financial Statements and its draft opinion
thereon (the "Audited Financial Statements"). Deloitte & Touche shall also
deliver to Parent and the Company a draft report (the "Tangible Net Worth
Report") setting forth the amount of the Tangible Net Worth of the Company as of
May 31, 1995, together with a statement by Deloitte & Touche to the effect that
such report has been prepared in accordance with generally accepted accounting
principles applied on a consistent basis with those used in preparing the
financial statements included in the Amended February 28 Form 10-Q and the terms
of this Agreement. Representatives of the Company and its independent
accountants, KPMG Peat Marwick, shall have the opportunity to examine the
workpapers, schedules and other documents prepared or used by Deloitte & Touche
in connection with the draft report on the audit of the May 31 Financial
Statements and the preparation of the draft Tangible Net Worth Report.
(d) Parent shall have a period of twenty (20) days after delivery of
the draft Audited Financial Statements and the draft Tangible Net Worth Report
to present in writing to the Company objections Parent may have to the matters
set forth therein, which objections shall be set forth in reasonable detail. If
no objections are raised within such twenty (20) day period, the draft Audited
Financial Statements and draft Tangible Net Worth Report shall be deemed
20
<PAGE> 26
accepted and approved by Parent. If Parent shall raise any objections within
such twenty (20) day period, and, Parent and the Company are unable to resolve
such dispute within ten (10) days after such objections are raised, then the
specific matters in dispute shall be submitted to a nationally recognized firm
of independent accountants agreed upon by Parent and the Company (the
"Arbitrating Accountants"), which firm shall make a final and binding
determination as to such matter or matters within ten (10) days after the
submission of such matters to such Arbitrating Accountants. The fees and
expenses of the Arbitrating Accountants shall be borne equally by Parent and the
Company. The parties shall use their best efforts to resolve all disputes with
respect to the Audited Financial Statements and the Tangible Net Worth Report by
July 31, 1995.
(e) For purposes of this Agreement, the "Tangible Net Worth" of the
Company shall mean the stockholders' equity of the Company, reduced by amounts
reflected on the Company's balance sheet as "Other Assets", including, but not
limited to, franchise rights and vendor authorizations, goodwill and other
intangible assets, and deposits, and giving effect to (i) the acquisition by the
Company of all of the outstanding common stock of Advanced Systems and
Peripherals, Inc. ("ASAP"), and (ii) the payment of accrued costs and settlement
costs and legal fees and expenses of approximately $175,000 (taking into account
applicable tax benefits) in connection with the settlement of the Lane
Litigation. By way of example, Schedule 5.02(e) attached hereto sets forth a
calculation of the Tangible Net Worth of the Company as of February 28, 1995,
based upon the pro forma balance sheet of the Company as of such date set forth
in Note 5 to the financial statements included in the Amended February 28 Form
10-Q, and giving effect to the ASAP acquisition and the settlement of the Lane
Litigation as of such date.
Section 5.03. Mutual Covenants.
(a) Compliance with Laws. Each party covenants and agrees to use its
best efforts to comply promptly with (and furnish information to the other
parties in connection with) any and all requirements that federal or state law
may impose on it or them, as the case may be, with respect to the Merger.
(b) Cooperation in Connection with Proceedings. Each party covenants
and agrees that if any action, suit, proceeding or investigation of the nature
specified in Section 6.01(c) hereof is commenced, it shall cooperate with the
others and shall use its best efforts to defend against the same and respond
thereto.
(c) Notification of Certain Events. Each party covenants and agrees to
give prompt written notice to the others of (i) the occurrence (or
non-occurrence) of any event the occurrence (or non-occurrence) of which would
be likely to cause (A) any representation or warranty contained in this
Agreement to be untrue or inaccurate or (B) any covenant, agreement or condition
in this Agreement not to be complied with or satisfied; and (ii) any failure by
such first party to comply with or satisfy any covenant, agreement or condition
contained in this Agreement.
21
<PAGE> 27
Section 5.04. Access to Information; Confidentiality.
(a) Information of the Company. The Company covenants and agrees to
afford Parent and Parent's accountants, counsel and other representatives, full
access, during normal business hours during the period prior to the Effective
Time or the earlier termination of this Agreement, to all of the properties,
books, contracts, commitments and records of the Company and its Subsidiaries,
and, during such period, shall furnish promptly to Parent a copy of each report,
schedule and other document filed or received thereby during such period
pursuant to the requirements of federal and state securities laws.
(b) Confidentiality Covenants of Parent. Parent covenants and agrees
that until the Effective Time, it shall continue to be bound by the terms of the
Confidentiality Agreement, dated November 21, 1994, as amended by the supplement
thereto dated February 3, 1995, between the Company and Parent.
Section 5.05. Meeting of Shareholders. The Company shall, promptly after
the date of this Agreement, take all action necessary in accordance with the
Colorado Act and its Articles of Incorporation and By-Laws to convene a meeting
of the Company's shareholders to act on the Merger Agreement (the "Shareholders'
Meeting"), and the Company shall consult with Parent in connection therewith.
The Company shall use its reasonable best efforts to solicit from shareholders
of the Company proxies in favor of the approval and adoption of the Merger
Agreement and to secure the vote or consent of shareholders required by the
Colorado Act to approve and adopt the Merger Agreement, unless otherwise
required by the applicable fiduciary duties of the directors of Company, as
determined by such directors in good faith after consultation with independent
legal counsel (which may include the Company's regularly engaged legal counsel).
Section 5.06. Proxy Statement. As promptly as practicable after the
execution of this Agreement, the Company shall prepare and file with the SEC a
proxy statement and a form of proxy, in connection with the vote of the
Company's shareholders with respect to the Merger (such proxy statement,
together with any amendments thereof or supplements thereto, in each case in the
form or forms mailed to the Company's shareholders, being the "Proxy
Statement"). Each of Parent and the Company shall furnish all information
concerning it and the holders of its capital stock as the other may reasonably
request in connection with such actions. As promptly as practicable the Company
shall mail the Proxy Statement to its shareholders. The Proxy Statement shall
include the recommendation of the Company's Board of Directors in favor of the
Merger unless otherwise required by the applicable fiduciary duties of the Board
of Directors of the Company, as determined by such directors in good faith after
consultation with legal counsel.
Section 5.07. Hart-Scott-Rodino Filing. To the extent required by law, the
respective ultimate parent entities of the Company and Parent shall file
Notification and Report Forms under the Hart-Scott-Rodino Act with the Federal
Trade Commission and the Antitrust Division
22
<PAGE> 28
of the Department of Justice. The parties shall cooperate and consult with each
other with respect to the preparation of the Notification and Report Forms and
any other submissions, including, but not limited to, responses to written or
oral comments or requests for additional information or documenting material by
the Federal Trade Commission or the Antitrust Division of the Department of
Justice, required to be made pursuant to the Hart-Scott-Rodino Act in connection
with the transactions contemplated hereby. The filing fee associated with such
filings shall be borne equally by Parent and the Company.
Section 5.08. Public or Shareholder Communications. From and after the date
of this Agreement, except as required by law, the Company, Parent and Sub will
not, with respect to the transactions contemplated hereby, issue any press
release or make any public statements or, in the case of the Company, mail any
communications or letters to its shareholders generally, except with the prior
approval of the other party or as required by law. With respect to any
communication required by law, the party making such communication agrees to use
its best efforts to provide a copy of the text of such communication to the
other party prior to its release.
Section 5.09. Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by the Merger and this Agreement, including, but not
limited to, using its best efforts to obtain all necessary waivers, consents,
authorizations and approvals of or exemptions by any governmental authority or
third party, and effecting all necessary registrations and filings. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each party shall take all such necessary action.
Section 5.10. Closing Conditions. Each of the Company and Parent will use
its best efforts to cause the conditions set forth in Article VI to be
satisfied; provided, however, this provision shall not require any party to
waive any condition.
Section 5.11. Parent Shareholder Approval. Parent covenants and agrees to
(a) vote the shares of capital stock of Sub held by Parent to approve and adopt
this Agreement and the transactions contemplated hereby, and (b) cause Parent to
take any and all actions as may be necessary or appropriate to consummate the
Merger in accordance with the terms of this Agreement.
Section 5.12. No Solicitation.
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, representative or agent of the Company or any of
its subsidiaries, solicit or encourage the initiation of any inquiries or
proposals regarding any merger, sale of substantial assets, sale of shares of
capital stock (including, without limitation, by way of a tender offer) or
similar transactions involving the Company or any subsidiaries of the Company
(any of the foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal"). The Company
23
<PAGE> 29
shall immediately cease and cause to be terminated all existing discussions and
negotiations, if any, with any parties conducted heretofore with respect to any
Acquisition Proposal. Nothing contained in this Section 5.12 shall prevent the
Board of Directors of the Company from considering, negotiating, approving and
recommending to the shareholders of the Company, a bona fide Acquisition
Proposal not solicited in violation of this Agreement, provided the Board of
Directors of the Company determines in good faith (upon advice of counsel) that
it is required to do so in order to discharge properly its fiduciary duties.
(b) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any Subsidiary in connection with an Acquisition Proposal or for access to the
properties, books or records of the Company or any Subsidiary by any person or
entity that informs the Board of Directors of the Company or such Subsidiary
that it is considering making, or has made, an Acquisition Proposal. Such notice
to Parent shall be made orally and in writing, and shall indicate whether the
Company is providing or intends to provide the person making the Acquisition
Proposal with access to information concerning the Company as provided in
Section 5.12(c).
(c) If the Board of the Company receives a request for commercial
nonpublic information by a person who makes a bona fide Acquisition Proposal,
and the Board of Directors determines in good faith and upon the advice of
counsel that it is required to cause the Company to act as provided in this
Section 5.12(c) in order to discharge properly its fiduciary duties, then,
provided the person making the Acquisition Proposal has executed a
confidentiality agreement substantially similar to the one then in effect
between the Company and Parent, the Company may provide such person with access
to information regarding the Company.
Section 5.13. Distribution Agreement. The Company, if requested by Parent,
will promptly exercise its right to terminate the Reseller Agreement between the
Company and Intelligent Electronics, Inc., and will enter into a mutually
acceptable Distribution Agreement with Parent.
Section 5.14. Indemnification. From and after the Effective Time, Parent
and the Surviving Corporation shall maintain in effect the rights to
indemnification of the Company's officers and directors provided for in the
Company's Articles of Incorporation and By-laws as in effect on the date hereof,
and provided in the resolution adopted by the Board of Directors of the Company
on the date hereof regarding the indemnification by the Company of its officers
and directors, a true and complete copy of which has heretofore been delivered
to Parent, regarding indemnification for acts and omissions occurring prior to
the Effective Time, including, but not limited to, this Agreement and the
transactions contemplated by this Agreement.
Section 5.15. Directors' and Officers' Insurance. The Company shall deliver
to Parent a binder (the "D&O Insurance Binder") validly obtained from an insurer
approved by Parent, evidencing such insurer's irrevocable commitment to provide
directors' and officers' insurance covering the directors and officers of the
Company for the period beginning on June 3, 1995 and
24
<PAGE> 30
ending not earlier than three years after the Effective Time, on terms and
conditions (including, but not limited to, scope and limits of coverage) at
least as favorable as the directors' and officers' insurance policies covering
the Company's directors and officers in effect on the date hereof.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.01. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the shareholders of the
Company required by applicable law or by the Company's Articles of Incorporation
or By-Laws;
(b) The waiting period applicable to the consummation of the Merger
under the Hart-Scott-Rodino Act shall have expired;
(c) No preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority shall be in effect, which would prevent the consummation of the
Merger; and
(d) All actions by or in respect of or filing with any governmental
regulatory or administrative agency or commission required to consummate the
Merger shall have been obtained or made.
Section 6.02. Additional Conditions to the Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to each of the
following conditions:
(a) Each of Parent and Sub shall have performed in all material
respects each obligation to be performed by it hereunder at or prior to the
Effective Time; and
(b) The representations and warranties of Parent and Sub set forth in
this Agreement shall be true and correct in all material respects at and as of
the Effective Time as if made at and as of such time, except as affected by
transactions contemplated or permitted by this Agreement and except to the
extent that any such representation or warranty is made as of a specified date,
in which case such representation or warranty shall have been true and correct
as of such date.
25
<PAGE> 31
(c) Parent shall have delivered to the Company certificates issued by
appropriate governmental authorities evidencing the good standing of Parent in
the State of Delaware and of Sub in the State of Colorado.
(d) Parent and Sub shall have delivered to the Company copies,
certified by the Secretary of an Assistant Secretary, of the resolutions adopted
by the Boards of Directors of Parent and Sub, authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, and by Parent as the sole shareholder of Sub, approving this Agreement
and the Merger.
(e) Parent shall have delivered to the Company a certificate of its
Chief Executive and Chief Financial Officers, certifying as to the fulfillment
of the conditions to the obligations of the Company set forth in this Article
VI; and
(f) The Company shall have received the opinion of Reid & Priest LLP,
counsel to Parent and Sub, substantially in the form of Annex B hereto.
Section 6.03. Additional Conditions to the Obligations of Parent and Sub.
The obligations of Parent and Sub to effect the Merger are also subject to each
of the following conditions:
(a) The Company shall have performed in all material respects each
obligation to be performed by it hereunder at or prior to the Effective Time;
(b) The representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects at and as of the
Effective Time as if made at and as of such time, except as affected by
transactions contemplated or permitted by this Agreement and except to the
extent that any of such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true and
correct as of such date;
(c) The consents of third parties set forth on Schedule 3.07 attached
hereto, required to consummate the transactions contemplated hereby, shall have
been obtained;
(d) The Company shall have delivered to Parent certificates issued by
appropriate governmental authorities (i) evidencing the good standing of the
Company in the State of Colorado and as a foreign corporation in each
jurisdiction in which it has qualified to do business as a foreign corporation,
and (ii) evidencing the good standing of each Subsidiary of the Company (other
than the Subsidiaries listed on Schedule 3.03 attached hereto) in its
jurisdiction of organization or incorporation and as a foreign corporation in
which it has qualified to do business as a foreign corporation;
(e) The Company shall have delivered to Parent copies, certified by the
Secretary or Assistant Secretary, of the resolutions adopted by the Board of
Directors of the Company
26
<PAGE> 32
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, and by the shareholders of the Company
approving this Agreement and the Merger;
(f) The Tangible Net Worth of the Company as reflected on the
consolidated balance sheet of the Company as of May 31, 1995, determined in
accordance with Section 5.02, shall be not less than $14,650,000;
(g) Parent shall have received funding under its existing financing
commitments sufficient to enable Sub to consummate the Merger and pay related
fees and expenses;
(h) No Company Material Adverse Effect shall have occurred, it being
understood that the failure by US West to reaffirm its intention to continue in
effect its existing agreement with the Company after the Effective Time shall
constitute a Company Material Adverse Effect;
(i) No event which is reasonably likely to be material and adverse to
the business, financial condition or results of operations of Parent and its
subsidiaries taken as a whole (a "Parent Material Adverse Effect") shall have
occurred;
(j) By not later than immediately prior to the Effective Time, Parent,
Milliken and the Company shall have entered into a Consulting Agreement
substantially in the form of Annex C hereto;
(k) By not later than immediately prior to the Effective Time, the
employment agreement of Richard A. Crawford, Jr. shall have been amended and
restated as set forth in Annex D hereto;
(l) By not later than immediately prior to the Effective Time, the
Company, Total Access and Milliken shall have entered into a Purchase Agreement
substantially in the form of Annex E hereto pursuant to which (i) the Company
shall acquire from Milliken all of his right, title and interest in Total
Access, and (ii) Milliken shall acquire from Total Access all of the right,
title and interest of Total Access in and to certain real property more
particularly described in such Purchase Agreement and the transactions
contemplated by such Purchase Agreement shall have been consummated, it being
understood that, with the approval of Parent (which shall not be unreasonably
withheld), the parties to the Purchase Agreement may amend such Purchase
Agreement such that no party thereto will incur a disproportionate disadvantage
with respect to the federal income tax treatment of the transactions
contemplated by such Purchase Agreement;
(m) the D&O Insurance Binder shall have been obtained and shall be in
full force and effect;
27
<PAGE> 33
(n) All incentive stock option and non-qualified stock option plans of
the Company, and each option issued under any of such plans, shall have been
amended, to the extent necessary in accordance with Section 2.05 hereof;
(o) Appraisal rights under the Colorado Act shall have been perfected
by the holders of not more than 10 per cent (10%) of the outstanding shares;
(p) The Company shall have delivered to Parent and Sub the certificate
of its Chief Executive and Chief Financial Officers, certifying as to the
fulfillment of the conditions to the obligations of Parent and Sub set forth in
this Article VI; and
(q) Parent and Sub shall have received the opinion of Stroock & Stroock
& Lavan, substantially in the form of Annex F hereto.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of the Company, (a) by the mutual written consent of the Board of
Directors of Parent, Sub and the Company or (b) by either Parent or the Company
if (i) any court of competent jurisdiction in the United States or other United
States governmental body shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the Merger
(which the party seeking to terminate this Agreement has used its best efforts
to have reversed or lifted without paying any material amounts not reasonably
expected for the transactions contemplated hereby) and such order, decree,
ruling or other action shall have become final and nonappealable, (ii) the
Effective Time shall not have occurred by September 30, 1995, but, the right to
terminate in such event shall not be available to any party whose failure to
fulfill any obligations hereunder has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date, (c) by Parent
upon the occurrence of any Trigger Event described in clauses (i) through (iv)
of Section 8.01(b) or (d) by the Company upon the occurrence of either of the
events described in Section 8.01(c).
Section 7.02. Effect of Termination. Except as set forth in Section 5.02 or
Section 8.01 hereof, in the event of termination of this Agreement as provided
above, this Agreement shall forthwith become void and there shall be no
liability on the part of Parent, Sub or the Company.
Section 7.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time before or after approval hereof by the shareholders of the Company,
but, after such approval, no amendment shall be made which reduces the amount or
changes the form of consideration to be paid in the Merger or in any way
adversely affects the rights of holders of the Shares without the further
28
<PAGE> 34
approval of such holders. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of each of the parties hereto.
Section 7.04. Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken by their respective Boards of Directors, may (a) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the representations and
warranties of the other parties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
satisfaction of any of the conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
Notwithstanding anything to the contrary set forth herein, the following
conditions precedent to the consummation of the Merger may not be waived by
either party hereto: (i) the approval of the Merger and this Agreement by the
shareholders of the Company pursuant to the Colorado Act; (ii) the expiration or
earlier termination of all applicable waiting periods under the Hart-Scott
Rodino Act, with no outstanding requests for additional information or
clarification or notices indicating that further action will be taken by the
Federal Trade Commission or the Antitrust Division of the Department of Justice
with respect to the Merger; and (iii) the execution by all necessary parties of
the Articles of Merger to be filed with the Colorado Secretary of State.
ARTICLE VIII
FEES AND EXPENSES/GENERAL PROVISIONS
Section 8.01. Fees and Expenses.
(a) Except as otherwise expressly provided in this Agreement, all costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense.
(b) If this Agreement is terminated as a result of the occurrence of
any of the events set forth below (a "Trigger Event"):
(i) the Company shall have entered into, or shall have
publicly announced its intention to enter into, an agreement or an agreement in
principle with respect to any Acquisition Proposal;
(ii) any representations or warranty made by the Company in,
or pursuant to, this Agreement shall not have been true and correct in all
material respects when made and any such failures to be true and correct could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect or the Company shall have failed to observe or perform
in any material respect any of its obligations under this Agreement;
29
<PAGE> 35
(iii) the Board of Directors of the Company shall have
withdrawn or materially modified in a manner adverse to Parent or Sub its
approval or recommendation of the Merger or this Agreement, in any such case
whether or not such withdrawal or modification is required by the fiduciary
duties of the Board of Directors; or
(iv) the Company's shareholders shall have failed to approve
the Merger at the Shareholders' Meeting;
and, at the time of such termination, Parent is not in breach of any material
provision of this Agreement, then the Company shall pay Parent promptly, but in
no event later than two business days after the termination of the Agreement, a
cash termination fee of $1,250,000, on account of fees, costs and out-of-pocket
expenses incurred by Parent or Sub (including, without limitation, fees and
expenses payable to all legal, accounting, financial, public relations and other
professional advisors) arising out of, in connection with or related to the
Merger or the transactions contemplated by this Agreement.
(c) If this Agreement is terminated by reason of (i) the failure by
Parent to satisfy the condition contained in Section 6.03(g) for any reason
other than as a consequence of a Company Material Adverse Effect, or (ii) the
failure by Parent to satisfy the condition contained in Section 6.03(i) and, at
the time of such termination, the Company is not in breach of any material
provision of this Agreement, then Parent shall pay to the Company promptly, but
in no event later than two business days after the termination of this Agreement
by reason of the failure by Parent to satisfy either of such conditions, a cash
termination fee of $1,250,000 on account of fees, costs and out-of-pocket
expenses incurred by the Company (including, without limitation, fees and
expenses payable to all legal, accounting, financial, public relations and other
professional advisors) arising out of, in connection with or related to the
Merger or the transactions contemplated by this Agreement.
Section 8.02. Survival of Representations and Warranties. Except as set
forth in the last sentence of this Section 8.02, the representations and
warranties made by each party contained in this Agreement or in any exhibit,
disclosure schedule, certificate or other instrument delivered pursuant to this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the other party, whether prior to or after
the execution of this Agreement. No representations and warranties contained in
this Agreement or in any exhibit, disclosure schedule, certificate or other
instrument delivered pursuant to this Agreement shall survive the consummation
of the Merger at the Effective Time.
30
<PAGE> 36
Section 8.03. Notices. All notices and other communications required or
permitted hereunder shall be in writing and delivered as follows:
if to Parent or Sub:
ENTEX Information Services, Inc.
Six International Drive
Rye Brook, New York 10573
Attention: Lynne A. Burgess
Vice President and
General Counsel
Telephone: (914) 935-3879
Facsimile: (914) 935-3880
with a copy to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Richard S. Green, Esq.
Telephone: (212) 603-2000
Facsimile: (212) 603-2298
if to the Company:
Random Access, Inc.
8000 East Iliff Avenue
Denver, Colorado 80231
Attention: Bradley A. Cromer
Vice President and General Counsel
Telephone: (303) 745-9600
Facsimile: (303) 745-0242
with a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004-2696
Attention: James R. Tanenbaum, Esq.
Telephone: (212) 806-5400
Facsimile: (212) 806-6006
or to such other address as may have been designated in a prior notice. Notices
sent by registered or certified mail, postage prepaid and with return receipt
requested, shall be deemed
31
<PAGE> 37
to have been given two (2) business days after being mailed, and otherwise
notices shall be deemed to have been given when received.
Section 8.04. Headings. The headings in this Agreement are intended solely
for convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
Section 8.05. Exhibits, Schedules and Annexes. The Exhibits, Schedules and
Annexes referred to in this Agreement shall be deemed to be an integral part of
this Agreement as if fully rewritten herein. To the extent applicable, a
disclosure set forth on any one such document will serve as a disclosure for
purposes of all other such documents.
Section 8.06. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same document.
Section 8.07. Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be governed by and construed and
enforced in accordance with the laws of the State of New York, as applied to
contracts made, executed and to be fully performed in such state by citizens of
such state, without regard to conflict of laws principles.
Section 8.08. Pronouns. The use of a particular pronoun herein shall not be
restrictive as to gender or number but shall be interpreted in all cases as the
context may require.
Section 8.09. Time Periods. Unless otherwise provided herein, any action
required hereunder to be taken within a certain number of days shall be taken
within that number of calendar days; provided, however, that if the last day for
taking such action falls on a weekend or a holiday, the period during which such
action may be taken shall be automatically extended to the next business day.
Section 8.10. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against either
party.
Section 8.11. Entire Agreement. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations and prior agreements between the parties are merged
into this Agreement, and there are no representations, warranties, covenants,
understandings, or agreements, oral or otherwise, in relation thereto among the
parties other than those incorporated herein and to be delivered hereunder.
Section 8.12. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision
32
<PAGE> 38
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
Section 8.13. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto. Except as otherwise provided in
this Agreement, nothing in this Agreement is intended or shall be construed to
confer on any person other than the parties hereto any rights or benefits
hereunder.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
ENTEX INFORMATION SERVICES, INC.
By: /s/ Robert Auray, Jr.
----------------------------------------
Robert R. Auray, Jr.
Executive Vice President and
Chief Financial Officer
ENTEX ACQUISITION CORP.
By: /s/ Robert Auray, Jr.
----------------------------------------
Robert R. Auray, Jr.
Vice President
RANDOM ACCESS, INC.
By: /s/ Richard A. Crawford, Jr.
----------------------------------------
Richard A. Crawford, Jr.
President and
Chief Executive Officer
33
<PAGE> 39
AMENDMENT NO.1 TO AGREEMENT AND PLAN OF MERGER
AMENDATORY AGREEMENT, dated as of June 27, 1995, by and among
ENTEX Information Services, Inc., a Delaware corporation ("Parent"), ENTEX
Acquisition Corp., a Colorado corporation and wholly owned subsidiary of Parent
("Sub"), and Random Access, Inc., a Colorado corporation (the "Company").
WHEREAS, Parent, Sub and the Company are parties to an Agreement
and Plan of Merger, dated as of May 15, 1995 (the "Agreement"); and
WHEREAS, the parties have mutually agreed that it is in their
respective best interests that the Agreement be amended as provided herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment of Section 2.01 of the Agreement. Section 2.01 of
the Agreement is hereby amended by deleting such Section as it currently exists
in its entirety and inserting in lieu thereof the following:
Section 2.01. Conversion of Securities. Each share of common
stock, $0.0001 par value, of the Company (the "Shares") issued and
outstanding immediately prior to the Effective Time, other than Shares
owned by Parent, Sub or any other wholly owned subsidiary of Parent or
held in the treasury of the Company, all of which shall be canceled
(collectively, the "Canceled Shares"), and Shares held by Dissenting
Shareholders (as defined in Section 2.06 hereof) (collectively, the
"Dissenting Shares"), shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive $3.25 net to the holder in cash (the "Merger Consideration"),
payable to the holder thereof, without interest thereon, upon the
surrender of the certificate representing such Share.
2. Amendment of Section 3.03 of the Agreement. Section 3.03 of
the Agreement is hereby amended by deleting the third sentence of such Section
as it currently exists in its entirety and inserting in lieu thereof the
following:
Other than Total Access Limited Liability Company, a Wyoming limited
liability company ("Total Access"), which is 88%-owned by the Company,
all of the outstanding shares of capital stock of each Subsidiary are
validly issued, fully paid and nonassessable and owned directly or
indirectly by the Company free and clear of all liens, claims or
encumbrances and were not issued in violation of any preemptive right.
-1-
<PAGE> 40
3. Amendment of Section 5.02 of the Agreement. Section 5.02 of
the Agreement is hereby amended by deleting such Section as it currently exists
in its entirety and inserting in lieu thereof the following:
Section 5.02. Consolidated Net Worth.
(a) As promptly as practicable after the date hereof, the
Company will prepare and deliver to Parent unaudited financial
statements for the Company and its consolidated subsidiaries as
of May 31, 1995 (the "May 31 Financial Statements") and a report
(the "Tangible Net Worth Report") setting forth the amount of the
Tangible Net Worth of the Company as of May 31, 1995. The May 31
Financial Statements shall include line items consistent with the
financial statements of the Company included in the Amended
February 28 Form 10-Q and shall be prepared in accordance with
generally accepted accounting principles applied on a consistent
basis with those used in preparing the financial statements
included in the Amended February 28 Form 10-Q.
(b) The May 31 Financial Statements shall be audited by
Parent's independent accountants, KPMG Peat Marwick LLP ("KPMG
Peat Marwick"), and the Company will use its best efforts to
cooperate with KPMG Peat Marwick to enable such firm to complete
its audit as promptly as practicable and to express its opinion
as to the fairness of the presentation of the May 31 Financial
Statements. The Company shall use its best efforts to cause its
independent accountants, Deloitte & Touche LLP ("Deloitte &
Touche"), to cooperate with KPMG Peat Marwick in making available
to KPMG Peat Marwick all workpapers of Deloitte & Touche that
KPMG Peat Marwick may reasonably request in connection with such
audit. The Company will conduct a physical count of all the
inventory of the Company and its consolidated subsidiaries as of
May 31, 1995. This physical count will be observed by KPMG Peat
Marwick as part of such firm's examination of the May 31
Financial Statements in accordance with generally accepted
auditing standards. Representatives of Parent and Parent's
lenders shall have the right to observe such count and to review
the Company's compilation of such physical inventory and the
workpapers of KPMG Peat Marwick relating to its observations of
the physical inventory conducted by the Company. The fees and
expenses of KPMG Peat Marwick in conducting such audit shall be
paid by the Company.
(c) As promptly as practicable after the delivery by the
Company of the May 31 Financial Statements, KPMG Peat Marwick
shall use its best efforts to complete its audit of the May 31
Financial Statements and to express its opinion thereon. Prior to
expressing its opinion, KPMG Peat Marwick shall deliver to Parent
and the Company a draft of the May 31 Financial Statements and
its draft opinion thereon (the "Audited Financial Statements").
-2-
<PAGE> 41
KPMG Peat Marwick shall also deliver to Parent the Tangible Net
Worth Report, together with a statement by KPMG Peat Marwick to
the effect that such report has been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis with those used in preparing the financial statements
included in the Amended February 28 Form 10-Q and the terms of
this Agreement. Representatives of the Company shall have the
opportunity to examine the workpapers, schedules and other
documents prepared or used by KPMG Peat Marwick in connection
with the draft report on the audit of the May 31 Financial
Statements and the Tangible Net Worth Report.
(d) The Company shall have a period of twenty (20) days
after delivery of the draft Audited Financial Statements and the
draft Tangible Net Worth Report to present in writing to Parent
objections the Company may have to the matters set forth therein,
which objections shall be set forth in reasonable detail. If no
objections are raised within such twenty (20) day period, the
draft Audited Financial Statements and draft Tangible Net Worth
Report shall be deemed accepted and approved by the Company. If
the Company shall raise any objections within such twenty (20)
day period, and, Parent and the Company are unable to resolve
such dispute within ten (10) days after such objections are
raised, then the specific matters in dispute shall be submitted
to a nationally recognized firm of independent accountants agreed
upon by Parent and the Company (the "Arbitrating Accountants"),
which firm shall make a final and binding determination as to
such matter or matters within ten (10) days after the submission
of such matters to such Arbitrating Accountants. The fees and
expenses of the Arbitrating Accountants shall be borne equally by
Parent and the Company. The parties shall use their best efforts
to resolve all disputes with respect to the Audited Financial
Statements and the Tangible Net Worth Report by August 15, 1995.
(e) For purposes of this Agreement, the "Tangible Net
Worth" of the Company shall mean the stockholders' equity of the
Company, reduced by amounts reflected on the Company's balance
sheet as "Other Assets", including, but not limited to, franchise
rights and vendor authorizations, goodwill and other intangible
assets, and deposits, and giving effect to (i) the acquisition by
the Company of all of the outstanding common stock of Advanced
Systems and Peripherals, Inc. ("ASAP"), and (ii) the payment of
accrued costs and settlement costs and legal fees and expenses of
approximately $175,000 (taking into account applicable tax
benefits) in connection with the settlement of the Lane
Litigation; provided, however, that for purposes of determining
such Tangible Net Worth, the Company shall not be required to
include as additional goodwill as of May 31, 1995, any accrued
"earn-out" or additional purchase price consideration payable by
the Company in connection with the acquisition of ASAP or the
acquisition by the Company
-3-
<PAGE> 42
on February 15, 1995 from Documatrix Corporation ("Documatrix")
of certain assets (the "Documatrix Assets"), and the assumption
by the Company of certain liabilities of Documatrix (the
"Documatrix Liabilities") in conjunction with the acquisition of
the Documatrix Assets. By way of example, Schedule 5.02(e)
attached hereto sets forth a calculation of the Tangible Net
Worth of the Company as of February 28, 1995, based upon the pro
forma balance sheet of the Company as of such date set forth in
Note 5 to the financial statements included in the Amended
February 28 Form 10-Q, and giving effect to the ASAP acquisition
and the settlement of the Lane Litigation as of such date.
4. Amendment of Section 5.15 of the Agreement. Section 5.15 of
the Agreement is hereby amended by deleting such Section as it currently exists
in its entirety and inserting in lieu thereof the following:
Section 5.15. Directors' and Officers' Insurance. The Company
shall deliver to Parent a binder (the "D&O Insurance Binder") validly
obtained from an insurer approved by Parent, evidencing such insurer's
irrevocable commitment to provide not less than $2.5 million of
directors' and officers' insurance covering the directors and officers
of the Company for the period beginning on June 8, 1995 and ending not
earlier the Effective Time and for non-cancellable "tail" coverage for
the period beginning at Effective Time and ending not earlier than one
year after the Effective Time, and otherwise containing terms and
conditions (including, but not limited to, scope of coverage) at least
as favorable as the directors' and officers' insurance policies covering
the Company's directors and officers in effect on May 15, 1995.
5. Addition of New Section 5.16 to the Agreement. The Agreement
is hereby amended by adding thereto a new Section 5.16, reading as follows:
Section 5.16. Documatrix Divestiture. The Company will use its
best efforts to negotiate, execute and deliver as promptly as
practicable one or more agreements or other documents satisfactory in
form and substance to Parent in its sole discretion (the "Documatrix
Divestiture Documents"), pursuant to which the Company will divest its
entire right, title and interest in and to the Documatrix Assets and
will be relieved of substantially all the Documatrix Liabilities, and to
consummate the transactions contemplated by the Documatrix Divestiture
Documents on or before August 11, 1995.
6. Amendment of Section 6.03(f) of the Agreement. Subparagraph
(f) of Section 6.03 of the Agreement is hereby amended by deleting such
Subsection as it currently exists in its entirety and inserting in lieu thereof
the following:
(f) The Tangible Net Worth of the Company as reflected on the
consolidated balance sheet of the Company as of May 31, 1995, determined
in accordance with Section 5.02, shall be not less than $13,500,000;
-4-
<PAGE> 43
7. Amendment of Section 6.03(l) of the Agreement. Subsection (l) of
Section 6.03 of the Agreement is hereby amended by deleting such Subsection as
it currently exists in its entirety and inserting in lieu thereof the following:
(l) By not later than immediately prior to the Effective Time,
the Company and Milliken shall have entered into a Purchase Agreement,
and Total Access and Milliken shall have entered into a Second Amendment
to the Operating Agreement of Total Access, each substantially in the
form of Annexes E-1 and E-2 hereto, pursuant to which the Company shall
acquire from Milliken all of his right, title and interest in Total
Access and the transactions contemplated by such Purchase Agreement
shall have been consummated;
8. Addition of new Section 6.03(n) to the Agreement. The
Agreement is hereby amended by adding thereto after Subsection (m) of Section
6.03 thereof a new Subsection (n) of Section 6.03 thereof, reading as follows:
(n) The Documatrix Divestiture Documents shall have been executed
and delivered and the transactions contemplated thereby shall have been
consummated;
The Agreement is further amended by renumbering Subsections (n)
through (q) of Section 6.03 of the Agreement as they currently exist (prior to
giving effect to addition of the new Subsection (n) of Section 6.03 of the
Agreement as described in this Section 7, as Subsections (o) through (r) of
Section 6.03, respectively.
9. Amendment of Annex C to the Agreement. Annex C to the
Agreement, the form of the Consulting Agreement to be entered into by Parent,
the Company and Bruce A. Milliken, is hereby amended by deleting the whole
thereof as it currently exists, and substituting therefor the revised Annex C in
the form attached hereto.
10. Amendment of Annex E to the Agreement. Annex E to the
Agreement, the form of the Purchase Agreement to be entered into by the Company
and Bruce A. Milliken, is hereby amended by deleting the whole thereof as it
currently exists, and substituting therefor revised Annexes E-1 and E-2 in the
form attached hereto.
11. Amendment of Section 8.01 of the Agreement. (a) Subsection
(b) of Section 8.01 of the Agreement is hereby amended by deleting such
Subsection as it currently exists in its entirety and inserting in lieu thereof
the following:
(b) If this Agreement is terminated as a result of the occurrence
of any of the events set forth below (a "Trigger Event"):
-5-
<PAGE> 44
(i) the Company shall have entered into, or shall have publicly
announced its intention to enter into, an agreement or an
agreement in principle with respect to any Acquisition Proposal;
(ii) any representations or warranty made by the Company in, or
pursuant to, this Agreement shall not have been true and correct
in all material respects when made and any such failures to be
true and correct could reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect or the Company shall have failed to observe or perform in
any material respect any of its obligations under this Agreement;
(iii) the Board of Directors of the Company shall have withdrawn
or materially modified in a manner adverse to Parent or Sub its
approval or recommendation of the Merger or this Agreement, in
any such case whether or not such withdrawal or modification is
required by the fiduciary duties of the Board of Directors; or
(iv) the Company's shareholders shall have failed to approve the
Merger at the Shareholders' Meeting;
and, at the time of such termination, Parent is not in breach of any
material provision of this Agreement, then (A) if such termination is
due to a Trigger Event other than the event described in subclause (ii)
above, the Company shall pay Parent promptly, but in no event later than
two business days after the termination of the Agreement, a cash
termination fee of $1,050,000, on account of fees, costs and
out-of-pocket expenses incurred by Parent or Sub (including, without
limitation, fees and expenses payable to all legal, accounting,
financial, public relations and other professional advisors) arising out
of, in connection with or related to the Merger or the transactions
contemplated by this Agreement and (B) if such termination is due to a
Trigger Event described in subclause (ii) above the Company shall pay to
Parent a cash termination fee of $750,000, on account of such fees,
costs and out-of pocket expenses, of which $500,000 shall be paid
promptly, but in no event later than two business days after the
termination of the Agreement, and the remainder shall be paid, without
interest thereon, fourteen months after the termination of the
Agreement.
(b) Subsection (c) of Section 8.01 of the Agreement is hereby
amended by deleting such Subsection as it currently exists in its
entirety and inserting in lieu thereof the following:
(c) If this Agreement is terminated by reason of (i) the failure
by Parent to satisfy the condition contained in Section 6.03(g) for any
reason other than as a consequence of a Company Material Adverse Effect,
or (ii) the failure by Parent to satisfy the condition contained in
Section 6.03(i) and, at the time of such termination, the Company is not
in breach of any material provision of this Agreement, then
-6-
<PAGE> 45
Parent shall pay to the Company promptly, but in no event later than two
business days after the termination of this Agreement by reason of the
failure by Parent to satisfy either of such conditions, a cash
termination fee of $750,000 on account of fees, costs and out-of-pocket
expenses incurred by the Company (including, without limitation, fees
and expenses payable to all legal, accounting, financial, public
relations and other professional advisors) arising out of, in connection
with or related to the Merger or the transactions contemplated by this
Agreement, of which $500,000 shall be paid promptly, but in no event
later than two business days after such termination, and the remainder
shall be paid, without interest thereon, fourteen months after such
termination.
12. Defined Terms. Capitalized terms that are defined in the
Agreement and not otherwise defined in this Amendatory Agreement shall have the
meanings ascribed to them in the Agreement.
13. Representations and Warranties Restated. Except as set forth
on Schedule A hereto, each and every representation and warranty made by the
parties to the Agreement is hereby restated as of, and as if originally made on,
the date hereof.
14. Agreement Remains in Force. Except as expressly set forth in
this Amendatory Agreement, the Agreement remains unmodified and in full force
and effect.
15. Counterparts; Effect. This Amendatory Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same agreement.
-7-
<PAGE> 46
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Amendatory Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
ENTEX INFORMATION SERVICES, INC.
By: /s/ Robert R. Auray, Jr.
----------------------------------------
Name:
Title: Executive Vice President and
Chief Financial Officer
ENTEX ACQUISITION CORP.
By: /s/ Robert R. Auray, Jr.
----------------------------------------
Name:
Title: Vice President
RANDOM ACCESS, INC.
By: /s/ Bruce A. Milliken
----------------------------------------
Name:
Title: Chairman
-8-
<PAGE> 47
Schedule A
Add to Schedule 3.09:
15. Losses from operations for the fiscal quarter ended May 31, 1995,
previously identified and disclosed to Parent, currently
estimated to be approximately $950,000 after taxes.
-1-
<PAGE> 48
ANNEX C
CONSULTING AGREEMENT
This Consulting Agreement, dated __________, 1995, is by and among
ENTEX INFORMATION SERVICES, INC., a Delaware corporation ("ENTEX"), RANDOM
ACCESS, INC., a Colorado corporation (the "Company") and BRUCE A. MILLIKEN
(the "Consultant").
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the
"Merger Agreement"), dated as of May 15, 1995, as amended, among ENTEX, ENTEX
Acquisition Corp., a Colorado corporation and a wholly owned subsidiary of
ENTEX ("Sub"), and the Company, ENTEX has agreed to acquire all of the issued
and outstanding Common Stock of the Company, through the merger of Sub with and
into the Company, on the terms and subject to the conditions set forth in the
Merger Agreement; and
WHEREAS, prior to the date hereof, Consultant has been employed by the
Company and possesses expertise regarding the Company's business and affairs
which ENTEX and the Company desire to retain and to use after the Effective
Time (as defined in the Merger Agreement); and
WHEREAS, ENTEX and the Company desire to engage the Consultant to
provide consulting services to the Company, and, if requested, to ENTEX, from
and after the Effective Time, on the terms and conditions set forth herein,
and the Consultant has agreed to accept such engagement and to provide such
consulting services.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
ARTICLE I
ENGAGEMENT AS CONSULTANT
Section 1.1 Engagement as Consultant. Effective as of the
Effective Time, ENTEX and the Company hereby engage the Consultant to provide
consulting services to the Company, and, if requested, to ENTEX and the
Consultant hereby accepts such engagement and agrees to provide consulting
services as provided herein.
Section 1.2 Consulting Services to be Provided. Subject to the
terms of this Agreement, the Consultant shall provide consulting services and
advice to ENTEX, the Company or both, with
<PAGE> 49
respect to (i) the realization by ENTEX and the Company of maximum value from
the sale or other disposition of the real property, building and improvements
comprising the premises at 8000 East Iliff Avenue, Denver Colorado (the
"Headquarters Building") at which the Company's principal executive offices are
currently located, (ii) the Company's defense of litigation currently pending
against the Company and the Company's response to the currently pending
investigation of the Company by the Securities and Exchange Commission, (iii)
the development and implementation of cost savings and other operational
improvement programs for the Company at both the corporate and branch levels,
and (iv) such additional consulting services as ENTEX and the Company may
determine. During his engagement under this Agreement, Consultant shall devote
such time to the subject of his engagement hereunder during normal working hours
as will result in his performing his engagement in a diligent and professional
manner. The specific consulting services to be provided by the Consultant shall
be determined by any one of the Chief Executive Offices of the Company, the
President of ENTEX, or the Executive Vice President and Chief Financial Officer
of ENTEX.
Section 1.3 Expenses. The Consultant shall be permitted to incur reasonable
expenses incurred in connection with his engagement, including expenses for
travel and similar items consistent with ENTEX's expense reimbursement policy.
The Company or ENTEX, as the case may be, will reimburse the Consultant for all
such expenses upon the presentation by the Consultant, from time to time, of an
itemized account of such expenditures.
ARTICLE II
CONSULTING FEES
Section 2.1 Base Fees. As payment for services performed pursuant to his
engagement hereunder, ENTEX and/or the Company shall pay to the Consultant a
consulting fee at the rate of $225,000 per year, in equal monthly installments.
Section 2.2 Transaction Bonus. ENTEX and/or the Company will decide not
later than one year after the Effective Time regarding the sale or other
disposition of the Headquarters Building, and will advise the Consultant of
their decision. If the disposition of the Headquarters Building is consummated
within one year after the date on which such decision is made and the purchase
price obtained by the Company in such disposition (the "Purchase Price") is
equal to or exceeds $3,000,000, then the Consultant shall be entitled to receive
additional compensation, payable not later than 45 days after the consummation
of such disposition, of an amount in cash equal to the sum of (i) $25,000, plus
(ii) (A) 2.0% of the amount by which the Purchase Price exceeds $3,000,000 but
does not exceed $4,000,000; (B) 3.5% of the amount by which the Purchase
<PAGE> 50
Price exceeds $4,000,000 but does not exceed $5,000,000; and (C) 5.0% of the
amount by which the Purchase Price exceeds $5,000,000. The Consultant
acknowledges and agrees that the terms, conditions and timing of any sale or
other disposition of the Headquarters Building remain subject to the sole
discretion and control of ENTEX, the Company or both ENTEX and the Company.
Section 2.3 Supplementary Payment. Not later than five business days after
the earlier to occur of (i) the consummation of any disposition of the
Headquarters Building pursuant to Section 2.3 or (ii) the end of the
contemplated term of the engagement as set forth in Section 3.1, ENTEX and/or
the Company will pay to the Consultant the sum of $100,000 in cash, together
with interest, if any, thereon at a rate per annum equal to the Prime Rate (as
hereinafter defined) plus 2.00%, for the period beginning six months after the
Effective Time and ending on the date of such payment. The payment described in
this Section 3.1 is hereinafter referred to as the "Supplementary Payment."
Section 2.4 Insurance. The Consultant shall be entitled to receive (on the
same terms and costs made available to senior employees of the Company) such
medical insurance coverage as is now offered by the Company to the senior
employees of the Company. The Consultant shall also be entitled to receive life
insurance coverage under the policies listed on Exhibit A attached hereto. The
Consultant shall be required to make such contributions to the cost of such
insurance coverages as may be required by the policies of the Company in effect
from time to time. If the insurance plan of the Company does not permit
consultants to be covered thereunder, then ENTEX or the Company shall pay to
the Consultant an amount in cash sufficient to permit the Consultant to
purchase insurance coverage comparable to the medical and life insurance
coverage offered by pursuant to this Section 2.03. The Consultant shall not be
eligible to participate in any 401(k) plan, pension plan, stock option, stock
purchase or similar plan of ENTEX or the Company.
Section 2.5 Automobile Allowance. The Consultant shall be entitled to
receive an automobile allowance of $700 per month on the same terms as are now
offered by the Company to the Consultant.
ARTICLE III
TERM OF ENGAGEMENT AS CONSULTANT AND TERMINATION
Section 3.1 Term. The Consultant's engagement hereunder shall commence at
the Effective Time and end on August 31, 1997, subject, however, to termination
during such period as provided herein.
<PAGE> 51
Section 3.2 Termination by ENTEX or the Company. Notwithstanding any
provision of this Agreement to the contrary, the Consultant's engagement will
terminate upon his death or permanent disability, and ENTEX or the Company at
any time may terminate the Consultant's engagement at any time, with or without
cause, by giving Consultant written notice of such termination for cause, as
hereinafter defined. For the purpose of this Section 3.2, "for cause" shall
mean: (a) fraud, misappropriation or intentional material damage to the property
or business of ENTEX or the Company; (b) the Consultant being charged with a
felony; (c) conduct in an unprofessional, unethical, immoral or fraudulent
manner if such conduct continues or is uncorrected for 10 days following written
notice thereof to the Consultant; or (d) determination by ENTEX in good faith
that Consultant has wilfully neglected to perform the duties incident to his
engagement hereunder or committed gross negligence in the performance of the
duties incident to his engagement hereunder, following Consultant's failure to
cure any such failure of performance within 14 days after the delivery by ENTEX
or the Company of written notice to Consultant of such failure of performance.
Section 3.3 Termination by Consultant. The Consultant shall have the right
to terminate this Agreement and his engagement hereunder at any time by giving
ENTEX and the Company written notice of such termination.
Section 3.4 Effect of Termination. The rights and remedies of the
Consultant under this Section 3.4 of this Agreement shall survive termination
of his engagement under this Agreement.
In the event of termination of the Consultant's engagement by ENTEX or the
Company for any reason other than "for cause" as set forth in Section 3.2, the
Consultant shall receive at the option of ENTEX or the Company (i) either (A)
the base consulting fees provided for in Section 2.1 for the remainder of the
contemplated term of the engagement set forth in Section 3.1 or (B) a lump sum
payment paid within forty-five (45) days after the termination of his
engagement, equal to the base consulting fees provided for in Section 2.1 for
the remainder of the contemplated term of the engagement as set forth in Section
3.1, subject to the application of a present value discount based upon the
announced prime rate of interest of the lender which has made the largest loan
to ENTEX then outstanding (the "Prime Rate"), as in effect on the date of
termination, and (ii) the Supplementary Payment, if not previously paid.
If the Consultant's engagement is terminated "for cause" pursuant to
Section 3.2, if the Consultant dies, becomes permanently disabled, or the
Consultant voluntarily terminates his engagement, then neither ENTEX nor the
Company will be liable to Consultant for (1) any further consulting fees
pursuant to Section
--4-
<PAGE> 52
2.1, (ii) transaction bonus pursuant to Section 2.2, or (iii) Supplementary
Payment, after the date of the termination of the Consultant's engagement.
ARTICLE IV
DISCLOSURE OF INFORMATION
Section 4.1 Consultant Shall Not Disclose Information. The Consultant
recognizes and acknowledges that the list of the customers, any trade secrets
and/or any other proprietary information of ENTEX or the Company, as it may
exist from time to time, is a valuable, special, and unique asset of ENTEX and
the Company. The Consultant will not disclose the list of the customers, any
trade secrets and/or any other proprietary information of ENTEX or the Company,
or any part thereof to any person, firm, corporation, association, or other
entity for any reason or purpose whatsoever, except as may be required by law
and except for information that is publicly available through other sources.
Section 4.2 Breach of This Article IV. In the event of a breach or
threatened breach by the Consultant of the provisions of this Article IV, ENTEX,
the Company or both shall be entitled to an injunction restraining the
Consultant from breaching this Article IV in any manner, including without
limitation, restraining the Consultant from disclosing, in whole or in part, the
list of the customers of the Company, ENTEX or both, any trade secrets and/or
any other proprietary information of ENTEX, the Company or both, or from
rendering any services to any person, firm, corporation, association, or other
entity to whom such list, in whole or in part, has been disclosed or is
threatened to be disclosed. Nothing herein shall be construed as prohibiting
ENTEX, the Company or both from pursuing any other remedies available to the
Company for such breach or threatened breach, including the recovery of damages
from the Consultant. Should a court of law conclude that the provisions of this
Article IV are too broad to be enforceable, the parties hereto authorize such
court to narrow the scope of this Article IV are too broad to be enforceable,
the parties hereto authorize such court to narrow the scope of this Article IV
to the extent necessary to enable enforcement thereof.
ARTICLE V
COVENANT NOT TO COMPETE
Section 5.1 Covenant Not to Compete. In consideration of the mutual
covenants contained in this Agreement, the Consultant further covenants that
for a period of three years after the termination of his engagement hereunder,
the Consultant will not, within the State of Colorado and within 30 miles of
any existing business locations of ENTEX or the Company, directly or
indirectly,
<PAGE> 53
own, manage, operate, control, act as a consultant to, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation or control of any businesses similar to the type of business
conducted by ENTEX or the Company at the time of the termination of the
Consultant's engagement hereunder.
Section 5.2 Breach of This Article V. In the event of a breach or
threatened breach by the Consultant of the provisions of this Article V,
ENTEX, the Company or both shall be entitled to an injunction restraining the
Consultant from breaching this Article in any manner, including without
limitation, restraining the Consultant from rendering any services to any
person, firm, corporation, association or other entity which services are
prohibited by this restrictive covenant. Nothing herein shall be construed as
prohibiting ENTEX, the Company or both from pursuing any other remedies
available to ENTEX, the Company or both for such breach or threatened breach,
including the recovery of damages from the Consultant. Should a court conclude
that the provisions of this Article V are too broad to be enforceable, the
parties hereto authorize such court to narrow the scope of this Article V to
the extent necessary to enable enforcement thereof.
ARTICLE VI
GENERAL MATTERS
Section 6.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to the conflict of laws principles thereof.
Section 6.2 No Waiver and Notification. No provision of this Agreement
may be modified, waived or discharged except by an agreement in writing signed
by the affected party. A modification, waiver or discharge of any term or
provision shall not be construed as a modification, waiver or discharge of any
other term or provision.
Section 6.3 Amendment. This Agreement may be amended, altered or revoked
at any time, in whole or in part, by filing with this Agreement a written
instrument setting forth such changes, signed by all of the parties.
Section 6.4 Assignment, Inurement. This Agreement and the rights
hereunder may not be assigned in whole or in part. Subject to this Section,
this Agreement shall be binding upon and shall inure to the benefit of any
successor or successors (including any successor by merger) of ENTEX and the
Company.
Section 6.5 Notice. For the purpose of this Agreement, notices and
demands shall be deemed given when mailed by United
-6-
<PAGE> 54
States certified or registered mail, return receipt requested, postage prepaid,
addressed (i) in the case of ENTEX, to Six International Drive, Rye Brook, New
York 10573, Attention: Lynne A. Burgess, Vice President and General Counsel;
(ii) in the case of the Company to 8000 East Iliff Avenue, Denver, Colorado
80231, Attention: Chief Executive Officer; and (iii) in the case of the
Consultant to 5780 Honey Locust Circle, Greenwood Village, Colorado 80111. The
parties may change such address by giving the other party notice of such change
in the aforesaid manner, except that notices of change of address shall only be
effective upon receipt.
Section 6.6 Construction. Throughout this Agreement the singular shall
include the plural, and the plural shall include the singular, and the masculine
and neuter shall include the feminine, wherever the context so requires.
Section 6.7 Text to Control. The headings of articles and sections are
included solely for the convenience of reference. If any conflict between any
heading and the text of this Agreement exists, the text shall control.
Section 6.8 Severability. If any provision of this Agreement is declared by
any court of competent jurisdiction to be invalid for any reason, such
invalidity shall not affect the remaining provisions. On the contrary, such
remaining provisions shall be fully severable, and this Agreement shall be
construed and enforced as if such invalid provisions never had been inserted in
the Agreement.
Section 6.9 Entire Agreement; Supersedes All Prior Agreements. This
Consulting Agreement represents the entire agreement of the parties with
respect to the subject matter hereof, and supersedes all agreements, written or
oral, of the parties hereto, including, but not limited to, the Amended
Employment Agreement dated August 11, 1993 between the Company and Bruce A.
Milliken, which shall be deemed to be terminated immediately prior to the
Effective Time.
-7-
<PAGE> 55
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
ENTEX INFORMATION SERVICES, INC.
By:_____________________________
Name:
Title:
RANDOM ACCESS, INC.
By:_____________________________
Name:
Title:
________________________________
Bruce A. Milliken
<PAGE> 56
Annex E-1
PURCHASE AGREEMENT
FOR
TOTAL ACCESS LIMITED LIABILITY COMPANY INTEREST
This Purchase Agreement for an interest in Total Access Limited Liability
Company is entered into by and between Random Access, Inc., a Colorado
corporation (sometimes referred to herein as "Purchaser") and Bruce A. Milliken
(sometimes referred to herein as "Seller"), executed effective as of June ____,
1995.
A. Total Access Limited Liability Company ("LLC") was formed on May 31,
1991, and its Operating Agreement executed effective as of September 24, 1991,
by and between Bruce A. Milliken (sometimes referred to herein as "Milliken")
and Building Access, a Colorado general partnership, each of whom owned a fifty
percent (50%) interest in the LLC.
B. A First Amendment to Operating Agreement of total Access Limited
Liability Company was executed effective as of May 20, 1994, by and between
Milliken and Random Access, Inc. ("Random") whereby Random purchased Building
Access' fifty percent (50%) interest in the LLC, and invested a significant
amount of additional capital in the LLC resulting in a dilution in Milliken's
percentage interest in the LLC to twelve percent (12%) and an increase in
Random's percentage interest in the LLC to eighty-eight percent (88%).
C. Purchaser desires to purchase and Seller desires to sell Seller's
twelve percent (12%) interest ("Interest") in the LLC pursuant to the following
terms and conditions:
AGREEMENT
1. Sale of Interest. Seller hereby sells and Purchaser hereby purchases
Seller's twelve percent (12%) interest in the LLC. Simultaneous with the
execution of this Agreement, in consideration for the purchase by the Purchaser
of Seller's twelve percent (12%) interest in the LLC, Purchaser shall deliver
to the Seller its check for Ten Dollars ($10.00). Both Purchaser and Seller
acknowledge the sufficiency and adequacy of both the consideration transferred
and the consideration received in this transaction.
2. Representations and Warranties. Seller represents and warrants to
Purchaser as follows:
2.1 Ownership of Interest. Seller is the lawful owner of a twelve percent
(12%) interest in Total Access, free and clear of all liens, encumbrances,
restrictions and claims of
<PAGE> 57
-2-
every kind; Seller has full legal right, power and authority to enter into this
Agreement and to sell, assign, transfer and convey the interest so owned by him
pursuant to this Agreement; the delivery to Seller of the interest pursuant to
the provisions of this Agreement will transfer to the Company valid title
thereto, free and clear of all liens, encumbrances, restrictions and claims of
every kind. Seller makes no representations and warranties whatsoever as to the
condition or nature of the LLC's assets and Purchaser specifically acknowledges
that it has relied on its own inspection of the nature and quality of the assets
of the LLC.
2.2 Due Execution and Enforceability. This Agreement is a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application referring to or affecting
enforcement of creditors' rights and general principles of equity.
2.3 No Conflict. The execution, delivery and performance of this
Agreement will not result in any violation of, be in conflict with, or
constitute a default under: (i) any provision of any judgment, decree or order
to which Seller is a party or by which he is bound; (ii) any debt, mortgage,
indenture or any material contract obligation or commitment to which Seller is
a party or by he is bound; or (iii) any statute, rule or governmental
regulation applicable to Seller.
2.4 Brokers and Finders. Seller has not retained any investment
banker, broker or finder, nor is Seller liable nor will the Company be liable
for any broker's or finder's fee or any similar fee or charge, however
designated, in connection with the transactions contemplated by this Agreement.
3. Indemnification. Purchaser hereby agrees to indemnify and hold harmless
Seller from any and all claims or liabilities relating to the LLC, its
properties and its business operations. Specifically, Purchaser agrees to
assume all responsibility of Seller on that certain promissory note in the
approximate amount of $1,800,000 made payable to Bank One, N.A. which was
originally incurred by the LLC and its members in order to finance construction
of the LLC's property.
4. Attorneys' Fees. If any dispute arises between the parties to this
Agreement, then either party may submit the dispute to binding arbitration if
the other party so consents. In the event of any litigation or arbitration
between Purchaser and Seller to enforce any provision of this Agreement or any
right of either party, the unsuccessful party to such litigation
<PAGE> 58
-3-
or arbitration shall pay the successful party all costs and expenses, including
reasonable attorneys' fees, incurred.
5. COUNTERPART. This Agreement may be executed in several counterparts,
and as so executed shall constitute one Agreement, binding on all of the
parties hereto, notwithstanding that all of the parties are not signatory to
the original or to the same counterpart.
6. GOVERNING LAW. The terms and provisions of this Agreement shall be
governed by the laws of the State of Colorado.
IN WITNESS WHEREOF, this Agreement is executed effective as of the date
set forth above.
RANDOM ACCESS, INC.,
a Colorado corporation
By:
-----------------------------------
Richard A. Crawford, Jr., President
- ---------------------------------------
Bruce A. Milliken
<PAGE> 59
Annex E-2
SECOND AMENDMENT
TO
OPERATING AGREEMENT
OF
TOTAL ACCESS LIMITED LIABILITY COMPANY
This Second amendment to the Operating Agreement of Total Access Limited
Liability Company, a Wyoming limited liability company ("LLC"), is hereby
executed by Bruce A. Milliken ("Milliken") and Random Access, Inc., a Colorado
corporation ("Random") effective as of June __, 1995.
BACKGROUND
A. The Operating Agreement of the LLC was executed effective as of
September 24, 1991, by and between Milliken and Building Access, a Colorado
general partnership.
B. A First Amendment to the Operating Agreement of the LLC was executed
effective as of May 20, 1994, by and between Milliken and Random.
C. Simultaneous with execution of this Amendment, Random has acquired
Milliken's twelve percent (12%) interest in the LLC pursuant to a Purchase
Agreement dated the date hereof.
AGREEMENT
1. CONSENT TO PURCHASE A COMPANY INTEREST. Milliken hereby acknowledges
and consents to Random's purchase of his twelve percent (12%) interest in the
LLC.
2. ELECTION OF MANAGER. Random, the sole member, hereby agrees to elect
Richard A. Crawford as the sole Manager of the LLC.
3. FINAL COMPANY INTERESTS. As the result of the transaction referred to
above, Random shall own one hundred percent (100%) of the membership interest
in the LLC.
4. ADOPTION AND REAFFIRMATION OF OPERATING AGREEMENT. By executing this
Amendment, Random hereby accepts all terms and conditions of the LLC's
Operating Agreement and Random hereby affirms that, except as set forth in this
Amendment, all other provisions of the Operating Agreement shall remain in full
force and effect.
<PAGE> 60
-2-
IN WITNESS WHEREOF, this Second Amendment is executed effective as of the
date set forth above.
RANDOM ACCESS, INC.,
a Colorado corporation
By:
-----------------------------------
Richard A. Crawford, Jr., President
- --------------------------------------
Bruce A. Milliken
<PAGE> 61
Schedule 5.02(e)
Calculation of Tangible Net Worth
as of February 28, 1996 (Pro Forma)
Stockholders' Equity $18,909,000
-----------
Franchise rights and vendor
authorizations, net of accumulated
amortization $ 174,000
Goodwill and other intangible assets,
net of accumulated amortization -- Random
Access 1,936,000
Goodwill and other intangible assets -- ASAP 1,550,000
Deposits and other 109,000
Deposits -- ASAP 13,000
Lane Litigation settlement costs, net of
tax benefit of $70,000 105,000
-----------
3,887,000
Tangible Net Worth $15,022,000
===========
<PAGE> 1
EXHIBIT 2.3
AGREEMENT AND PLAN OF REORGANIZATION
Among
ENTEX INFORMATION SERVICES, INC.
EIS ACQUISITION CORPORATION
And
FCP TECHNOLOGIES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS 1
1.1 Certain Definitions 1
1.2 Other Definitions 2
ARTICLE II
THE MERGER 2
2.1 Merger; Effective Time of the Merger 2
2.2 Closing 2
2.3 Effects of the Merger 3
2.4 Taxable Transaction, Not Pooling of Interests 3
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES 3
3.1 Effect on Capital Stock 3
3.2 Exchange of Certificates 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES 6
4.1 Representations and Warranties of FCP 6
4.2 Representations and Warranties of Entex and Sub 18
ARTICLE V
EMPLOYMENT AGREEMENTS; STOCK OPTIONS; RETENTION PROGRAM 21
5.1 Employment 21
5.2 FCP Retention Bonus Program 21
5.3 Grant of Stock Options to Richard and Kim Nathanson 21
5.4 Grant of Stock Options to FCP Key Employees 21
ARTICLE VI
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE
TIME; ADDITIONAL AGREEMENTS 22
6.1 Conduct of Business of FCP 22
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.2 Access to Information 24
6.3 Exclusivity; Acquisition Proposals 24
6.4 Breach of Representations and Warranties 24
6.5 Consents 24
6.6 Best Efforts 25
6.7 FIRPTA 25
6.8 FCP Shareholders' Approval 25
6.9 Conversion of FCP Preferred 25
6.10 FCP Dissenting Shares 25
6.11 Communications 25
6.12 Legal Conditions to the Merger 25
6.13 Employee Benefits 26
6.14 Expenses 26
6.15 Brokers or Finders 26
6.16 Confidentiality 27
6.17 Officers and Directors 27
ARTICLE VII
CONDITIONS PRECEDENT 27
7.1 Conditions to Each Party's Obligation to Effect the Merger 27
7.2 Conditions of Obligations of Entex and Sub 28
7.3 Conditions of Obligation of FCP 29
ARTICLE VIII
INDEMNIFICATION 30
8.1 FCP Indemnity 30
8.2 Entex's and Sub's Indemnity 30
8.3 Conditions of Indemnification for Third Party Claims 30
8.4 Offsets 31
8.5 Arbitration 31
ARTICLE IX
TERMINATION 32
9.1 Termination 32
9.2 Effect of Termination 33
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE X
GENERAL PROVISIONS 33
10.1 Nonsurvival of Representations, Warranties and Agreements 33
10.2 Amendment 33
10.3 Extension; Waiver 34
10.4 Notices 34
10.5 Interpretation 35
10.6 Counterparts 35
10.7 Entire Agreement 35
10.8 No Transfer 35
10.9 Severability 35
10.10 Other Remedies 36
10.11 Further Assurances 36
10.12 Absence of Third Party Beneficiary Rights 36
10.13 Mutual Drafting 36
10.14 Governing Law 36
</TABLE>
EXHIBITS
Exhibit 2.1 Merger Agreement
Exhibit 5.2 FCP Retention Bonus Program
Exhibit 4.1(x) FCP Customers Aggregating 80% of Revenue for the 12 Months
Ended June 30, 1996
Exhibit 5.4 Lit of FCP Key Employees to Receive Options
Exhibit 7.2(d) Form of Legal Opinion of O'Connor and Hannan
Exhibit 7.3(c) Form of Legal Opinion of Wilson, Sonsini, Goodrich &
Rosati
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is entered into effective as
of July__, 1996, by and among ENTEX INFORMATION SERVICES, INC., a Delaware
corporation ("Entex"), EIS ACQUISITION CORPORATION, a Delaware corporation and a
wholly owned subsidiary of Entex ("Sub"), and FCP TECHNOLOGIES, INC., a Delaware
corporation ("FCP")
RECITALS
A. In connection with the transactions contemplated by this Agreement,
Sub and FCP will execute an Agreement and Plan of Merger in substantially the
form attached hereto as Exhibit 2.1 (the "Merger Agreement"), which provides for
the merger of Sub into FCP (the "Merger") Under the Merger Agreement, the shares
of Common Stock, $.001 par value, of FCP ("FCP Common") issued and outstanding
immediately prior to the Effective Time of the Merger (as such term is
hereinafter defined), other than FCP Dissenting Shares, will be converted into
cash in accordance with Section 3.1(c)(i) of this Agreement.
B. The parties hereto desire to enter into this Agreement for the
purpose of setting forth certain representations, warranties and covenants made
by each to the other as an inducement to the execution and delivery of the
Merger Agreement and the conditions precedent to the consummation of the Merger.
C. The Boards of Directors of Entex, Sub and FCP, respectively, have
approved and adopted this Agreement and the Merger Agreement.
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and mutual
covenants and agreements contained herein, Entex, Sub, FCP, and Computers Plus,
L.P. hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Definitions. The terms defined in this Section 11 shall, for
all purposes of this Agreement, have the meanings herein specified, unless the
context expressly or by necessary implication otherwise requires:
(a) "Delaware General Corporation Law" means the General Corporation
Law of Delaware, as amended.
(b) "FCP Common" means the shares of Class A Common Stock and Class
B Common Stock of FCP issued and outstanding immediately prior to the Effective
Time of the Merger.
<PAGE> 6
(c) "FCP Dissenting Shares" means shares of FCP Common which shall
be owned by FCP Shareholders who are entitled to appraisal rights with respect
to such shares in accordance with Section 262 et seq. of the Delaware General
Corporation Law.
(d) "FCP Dissenting Shareholders" means those FCP Shareholders who
are holders of and are entitled to FCP Dissenting Shares.
(e) "FCP Preferred" means the shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock of FCP issued and outstanding immediately prior to the
Effective Time of the Merger.
(f) "FCP Shareholders" shall mean holders of FCP Common and FCP
Preferred
1.2 Other Definitions. In addition to the terms defined in Section 1.1,
certain other terms are defined elsewhere in this Agreement, and, whenever such
terms are used in this Agreement, they shall have their respective defined
meanings, unless the context expressly or by necessary implication otherwise
requires.
ARTICLE II
THE MERGER
2.1 Merger: Effective Time of the Merger. Subject to the terms and
conditions of this Agreement and of the Agreement and Plan of Merger in
substantially the form attached hereto as Exhibit 2.1 (the "Merger Agreement"),
Sub will be merged with and into FCP (the "Merger") in accordance with Section
251 of the Delaware General Corporation Law. The Merger Agreement provides,
among other things, the mode of effecting the Merger and the manner and basis of
converting each issued and outstanding share of FCP Common into the right to
receive one or more cash payments. Unless the parties agree otherwise, the
Merger Agreement shall be executed by FCP and Sub as soon as practicable
following the approval of the Merger by the FCP Shareholders at the FCP
Shareholders' Meeting.
Subject to the provisions of this Agreement and the Merger Agreement,
the Merger Agreement shall be filed in accordance with the Delaware General
Corporation Law on the Closing Date (as defined in Section 2.2). Except as
otherwise agreed by the parties, the Merger shall become effective upon
confirmation of such filing of the Merger Agreement (the date of confirmation of
such filing being hereinafter referred to as the "Effective Date of the Merger"
and the time of confirmation of such filing being hereinafter referred to as the
"Effective Time of the Merger").
2.2 Closing. The Closing under this Agreement (the "Closing") shall be
held as soon as practicable following the later to occur of (a) the approval of
the Merger by the FCP Shareholders, and (b) satisfaction of all other conditions
precedent to the Merger specified in this Agreement; unless duly waived by the
party entitled to satisfaction thereof. In any event, if the Closing has not
occurred
-2-
<PAGE> 7
on or before July 30, 1996, this Agreement may be terminated as provided in
Article VIII. Such date on which the Closing is to be held is herein referred to
as the "Closing Date". The Closing shall be held at the offices of Entex, 6
International Drive, Rye Brook, New York at 10:00 a.m. on such date, or at such
other time and place as the parties may agree upon in writing.
2.3 Effects of the Merger. At the Effective Time of the Merger, (i) the
separate existence of Sub shall cease and Sub shall be merged with and into FCP
(Sub and FCP are sometimes referred to herein as the "Constituent Corporations"
and FCP after the Merger is sometimes referred to herein as the "Surviving
Corporation"), (ii) the Certificate of Incorporation of FCP shall be the
Certificate of Incorporation of the Surviving Corporation, except that such
Certificate of Incorporation shall be amended to provide that the authorized
capital stock of the Surviving Corporation shall be 1,000 shares of Common
Stock, (iii) the Bylaws of Sub shall be the Bylaws of the Surviving Corporation,
(iv) the directors of Sub shall be the directors of the Surviving Corporation,
(v) the officers of Sub shall be the officers of the Surviving Corporation, and
(vi) the Merger shall, from and after the Effective Time of the Merger, have all
the effects provided by applicable law.
2.4 Taxable Transaction; Not Pooling of Interests. The Merger is not
intended to be a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and is not to be
accounted for as a pooling of interests pursuant to Opinion No. 16 of the
Accounting Principles Board.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. As of the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holder of any
shares of FCP Common:
(a) Capital Stock of Sub. All issued and outstanding shares of
capital stock of Sub shall continue to be issued and shall be converted into
1,000 shares of common stock of the Surviving Corporation. Each stock
certificate of Sub evidencing ownership of any such shares shall continue to
evidence ownership of such shares of capital stock of the Surviving Corporation.
(b) Cancellation of Certain Capital Stock of FCP. All shares of FCP
Common that are owned directly or indirectly by FCP or any Subsidiary of FCP and
any shares of FCP Common owned by Entex, Sub or any other Subsidiary of Entex
shall be canceled and no consideration shall be delivered in exchange therefor.
In this Agreement, a "Subsidiary" means a corporation or other entity whose
voting securities are owned or are otherwise controlled directly or indirectly
by a parent corporation or other intermediary entity in an amount sufficient to
elect at least a majority of the Board of Directors or other managers of such
corporation or other entity
-3-
<PAGE> 8
(c) Conversion of FCP Preferred. Immediately prior to the Effective
Time, all issued and outstanding shares of FCP Preferred shall be converted into
shares of issued and outstanding FCP Common.
(d) Conversion of FCP Common. Subject to adjustment for FCP
Dissenting Shares, if any, as provided in Sections 3.1(f), each share of FCP
Common issued and or issuable immediately prior to the Effective Time of the
Merger shall be converted into the right to receive the following amounts:
(i) $1,000,000 payable in accordance with Section 3.2(c) below
to the holder of all of the outstanding Series E Preferred and Series F
Preferred (the "Preferred Payment") in consideration for the sale by such holder
of all such shares or shares of Class A Common issuable upon conversion thereof
(the "Preferred Payment Shares")
(ii) $3,000,000 payable upon the Closing divided by the total
number of shares of FCP Common (other than the Preferred Payment Shares) issued
or issuable at the Closing Date (the "Closing Payment"), and
(iii) $1,000,000 less the KPMG Sales Tax Estimated Amount
(determined in accordance with Section 4.1(o) hereof), and subject to the offset
provisions of Article VIII hereof, such sum payable six (6) months after the
Closing, divided by the total number of shares of FCP Common issued or issuable
at the Closing Date; provided, however that the Preferred Payment Shares shall
not be included in such calculation nor shall the holders of the Preferred
Payment Shares be entitled to receive any part of the Closing Payment or the
Deferred Payments as hereinafter defined (the "Deferred Payment, and together
with the Preferred Payment and the Closing Payments, the "Merger Payments").
At the option of Richard Nathanson, exercised once during
the six (6) month period following the Closing, acting on behalf of the former
shareholders of FCP, payment of the Deferred Payment may be further delayed for
the portion of the KPMG Sales Tax Estimated Amount which relates to specific
states in order to determine the actual sales tax liability of FCP in such
states. In such case, the portion of the Deferred Payment that is delayed (the
"Sales Tax Deferral") shall not be due until the amount of actual sales tax
liability, interest and penalties represented by the Sales Tax Deferral is
finally determined by the appropriate state taxing authorities and paid by
Entex.
Following payment of the Deferred Payment, FCP shall have
no further liability for sales taxes and Entex shall be solely responsible for
FCP sales tax liability in excess of the KPMG Sales Tax Estimated Amount.
If the Sales Tax Deferral is greater than the actual sales
tax liability, interest and penalties required to be paid by Entex, Entex will
promptly pay to Richard Nathanson as the designated fiduciary of the former
shareholders of FCP the excess of the Sales Tax Deferral over the actual amount
paid.
-4-
<PAGE> 9
The amount of Sales Tax Deferral shall be 200% of the KPMG
Sales Tax Estimated Amount for each state selected by Nathanson.
(e) Adjustment of Exchange Ratio. If, between the date of this
Agreement and the Effective Time of the Merger, the outstanding shares of FCP
Common or FCP Preferred shall have been changed into a different number of
shares or a different class, or the rate at which FCP Preferred converts into
FCP Common shall be adjusted, by reason of any reclassication, recapitalization,
split-up, stock dividend, stock combination, exchange of shares or readjustment,
the Closing Payment and Deferred Payment shall be correspondingly adjusted.
(f) Dissenters' Rights of FCP Shareholders. If holders of FCP Common
or FCP Preferred are entitled to appraisal rights in connection with the Merger
under Section 262 of the Delaware General Corporation Law, any FCP Dissenting
Shares shall not be converted into the Merger Payments in accordance with
Section 3.2 hereof but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such FCP Dissenting
Shares pursuant to the Delaware General Corporation Law. FCP shall give Entex
prompt notice of any demand received by FCP to require FCP to purchase shares of
FCP Common, and Entex shall have the right to participate in all negotiations
and proceedings with respect to such demand. FCP agrees that, except with the
prior written consent of Entex, or as required under the provisions of the
Delaware General Corporation Law, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any such purchase demand. Each FCP
Dissenting Shareholder who, pursuant to the provisions of the Delaware General
Corporation Law, becomes entitled to payment of the value of shares of FCP
Common or FCP Preferred shall receive payment therefor pursuant to such
provisions. In the event of any legal obligation, after the Effective Time of
the Merger, to deliver the Merger Payments to any FCP Dissenting Shareholder who
shall have failed to make an effective demand for appraisal or shall have lost
his status as a FCP Dissenting Shareholder, Entex shall issue and deliver, upon
surrender by such FCP Dissenting Shareholder of his certificate or certificates
representing shares of FCP Common, the Closing Payments to which such FCP
Dissenting Shareholder is then entitled under this Section 3.1, the Merger
Agreement and the Delaware General Corporation Law.
3.2 Exchange of Certificates
(a) Exchange Agent. Entex shall act as exchange agent (the "Exchange
Agent") in the Merger.
(b) Entex to Provide Closing Payment. As promptly as practicable
after the Effective Time of the Merger, Entex shall make available for exchange
in accordance with this Article III and the Merger Agreement, through such
reasonable procedures as Entex may adopt, the Closing Payment payable pursuant
to Section 3.1 and the Merger Agreement in exchange for shares of FCP Common.
(c) Exchange Procedures. As promptly as practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of a certificate or certificates
-5-
<PAGE> 10
which immediately prior to the Effective Time of the Merger represented
outstanding shares of FCP Common or FCP Preferred (the "Certificates") whose
shares are being converted into Merger Payments pursuant to Section 3.1 hereof
and the Merger Agreement, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Entex may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Payments. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Entex, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Payments to which the holder of FCP Common and FCP Preferred is entitled
pursuant to Section 3.1 hereof and the Merger Agreement. The Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of FCP Common or FCP Preferred which is not registered on the transfer records
of FCP, the appropriate Merger Payments may be delivered to a transferee if the
Certificate representing such FCP Common or FCP Preferred is presented to the
Exchange Agent and accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 3.2, each Certificate
shall be deemed at any time after the Effective Time of the Merger to represent
the right to receive upon such surrender the Merger Payments as provided by this
Article III and the provisions of the Delaware General Corporation Law.
(d) No Further Ownership Rights in FCP Common or FCP Preferred. The
Merger Payments delivered in exchange for shares of FCP Common and FCP Preferred
in accordance with the terms hereof shall be deemed to have been delivered in
full satisfaction of all rights pertaining to such shares of FCP Common and FCP
Preferred, as the case may be. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of FCP Common or FCP Preferred which were outstanding immediately prior to the
Effective Time of the Merger. If, after the Effective Time of the Merger,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of FCP. Except as disclosed in a
document referring specifically to the representations and warranties in this
Agreement which is delivered by FCP to Entex prior to the execution of this
Agreement (as may be supplemented in a nonmaterial manner prior to the Closing)
(the "FCP Disclosure Schedule"), FCP represents and warrant to Entex and Sub as
set forth below, which representations and warranties are true and correct as of
the date of this Agreement and will be true and correct as of the Closing Date.
As used in this Agreement, "Business Condition" with respect to any corporate
entity or group of corporate entities shall mean the business,
-6-
<PAGE> 11
Financial condition, results of operations and assets of such corporate entity
or group of corporate entities.
(a) Organization, Standing and Power. FCP is a corporation which is
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to own, operate and
lease its properties (subject to the ownership of FCP's principal executive
offices as described in Section 4.1(s)(ii) hereof) and to carry on its business
as now being conducted. FCP is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which the failure to so qualify would have
a material adverse effect on the corporation's Business Condition. FCP has no
Subsidiaries nor any direct or indirect equity interest in or loans to any
partnership, corporation, joint venture, business association or other entity.
FCP has delivered to Entex complete and correct copies of the Certificate of
Incorporation and Bylaws of FCP as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of FCP consists
of 20,000,000 shares of common stock, $.001 par value, and 5,000,000 shares of
preferred stock, $.001 par value. At the close of business on May 31, 1996,
there were 2,831,143.40 shares of FCP Class A Common and 3,729,570 shares of FCP
Class B Common outstanding. As of May 31, 1996, there were outstanding
1,445,689.4 shares of Series A Preferred Stock, 385,453 shares of Series B
Preferred Stock, 372,957 shares of Series C Preferred Stock, 1,000,000 shares of
Series D Preferred Stock, 87,299 shares of Series E Preferred Stock and 292,700
shares of Series F Preferred Stock. The outstanding shares of FCP Preferred are
convertible into an aggregate of 700,399 shares of FCP Common. All outstanding
shares of FCP Common and FCP Preferred are validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, FCP's
Certificate of Incorporation or Bylaws or any agreement to which FCP is a party
or may be bound. Except for the FCP Preferred which is convertible into an
aggregate of 700,399 shares of FCP Common, there are no options, warrants,
calls, conversion rights, commitments or agreements of any character to which
FCP is a party or by which it is bound that do or may obligate FCP to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
FCP Common or FCP Preferred or that do or may obligate FCP to grant, extend or
enter into any such option, warrant, call, conversion right, commitment or
agreement.
(c) Authority. FCP has all requisite corporate power and authority
to enter into this Agreement and the Merger Agreement and, subject to approval
of this Agreement and the Merger Agreement by the shareholders of FCP, to
perform its obligations hereunder, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the Merger
Agreement, the performance by FCP of its obligations hereunder and thereunder
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on the part
of FCP, and have been unanimously approved by the Board of Directors of FCP. No
other corporate proceeding on the part of FCP is necessary to authorize this
Agreement or the Merger Agreement or the performance of FCP's obligations
hereunder or thereunder or the consummation of the transactions contemplated
hereby or thereby, other than the approval of the Merger by FCP's shareholders.
This Agreement and the Merger Agreement have been duly executed and delivered by
FCP and constitute legal, valid and binding
-7-
<PAGE> 12
obligations of FCP enforceable against FCP in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency, or other
similar laws affecting the enforcement of creditors' rights generally and except
that the availability of equitable remedies is subject to the discretion of the
court before which any proceeding therefor may be brought. Subject to
satisfaction of the conditions set forth in Article VII, the execution and
delivery of this Agreement and the Merger Agreement do not, and the consummation
of the transactions contemplated hereby and thereby will not conflict with or
result in any violation of any material statute, law, rule, regulation,
judgment, order, decree, or ordinance applicable to FCP or its properties or
assets, or conflict with or result in any breach or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of a material lien or encumbrance on any of the
properties or assets of FCP pursuant to (i) any provision of the Certificate of
Incorporation or Bylaws of FCP or (ii) any material agreement, contract, note,
mortgage, indenture, lease, instrument, permit, concession, franchise or license
to which FCP is a party or by which FCP or any of its properties or assets may
be bound or affected. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency,
commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to FCP in connection with the execution and delivery of this
Agreement or the Merger Agreement by FCP or the consummation by FCP of the
transactions contemplated hereby or thereby, except for (i) the obtaining of the
approval of the Merger by the FCP Shareholders, and (ii) the filing of the
Merger Agreement and officers' certificates with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities of
other states in which FCP is qualified to do business.
(d) Financial Statements
(i) FCP has furnished Entex with (a) its audited financial
statements for each of the fiscal years ended January 28, 1995 and February 3,
1996, including a balance sheet of FCP as at January 28, 1995 and February 3,
1996 and the related statements of income and cash flow, (b) unaudited financial
statements as of May 4, 1996, including a balance sheet as of May 4, 1996 (the
"FCP Fiscal April Balance Sheet) and the related statement of income and cash
flow for the quarter then ended (the foregoing financial statements are referred
to collectively as the "FCP Financial Statements").
(ii) The FCP Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be indicated in the notes thereto, and except that the FCP Fiscal
April Balance Sheet and the financial statements do not contain notes) and
fairly present the financial position of FCP as at the dates thereof and the
results of its operations and changes in financial position for the periods then
ended. There are no capitalized software development costs recorded in the FCP
Financial Statements. There has been no change in FCP's accounting policies,
except as described in the notes to the FCP Financial Statements.
-8-
<PAGE> 13
(iii) As reflected on the FCP Fiscal April Balance Sheet, as
adjusted by Entex which adjustments have been agreed to by FCP, FCP had a
negative net worth of not greater than $3,956,000.
(iv) As reflected on the FCP Financial Statements, FCP realized
(a) net income before interest and provision for taxes of not less than negative
$10,000 (-$10,000) for the three (3) month period ended May 4, 1996 and (b) net
income before interest and provision for taxes of not less than $1,397,000 for
the nine (9) month period ended May 4, 1996.
(e) Inventory. The inventories (the "FCP Inventories") of FCP shown
on the FCP Fiscal April Balance Sheet, as adjusted by Entex which adjustments
have been agreed to by FCP, including finished goods (including in-transit goods
and office supplies) of at least $5,859,199 and parts of at least $1,162,669,
are in each case valued at cost (determined on a first-in first-out basis or
market, whichever is lower), with proper allowance for obsolescence, in
accordance with generally accepted accounting principles (the "Inventory
Reserve"). The FCP Inventories consist of items which FCP in good faith believes
are of quality and quantity readily usable or saleable in the normal course of
business of FCP, except the Inventory Reserve.
(f) Receivables. The receivables shown on the FCP May Balance Sheet
arose in the ordinary course of business and have been collected or are
collectible in the book amounts thereof, less an amount not in excess of the
allowance for doubtful accounts provided for in such balance sheet. The
receivables of FCP acquired after the date of the FCP May Balance Sheet and
prior to the Effective Time of the Merger arose or will arise in the ordinary
course of business and have been collected or are or will be collectible in the
book amounts thereof, consistent with the past practice of FCP, less an
allowance for doubtful accounts which shall not be lower as a proportion of such
receivables than the aggregate amount of the allowance for doubtful accounts
provided for in the FCP Fiscal April Balance Sheet is to the aggregate amount of
receivables provided for therein.
(g) Compliance with Law. FCP is in compliance and has conducted its
business so as to comply with all laws, rules and regulations, judgments,
decrees or orders of any Governmental Entity applicable to its operations or
with respect to which compliance is a condition of engaging in the business
thereof, except to the extent that failure to comply would, individually or in
the aggregate, not have had and is expected not to have a material adverse
effect on the Business Condition of FCP. There are no material judgments or
orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration) against FCP or against any of
its respective properties or businesses.
(h) No Defaults. FCP is not, nor has received notice that it would
be with the passage of time, (i) in violation of any provision of the
Certificate of Incorporation or Bylaws of FCP or (ii) in default or violation of
any material term, condition or provision of (A) any material judgment, decree,
order, injunction or stipulation applicable to FCP or (B) any material
agreement, note, mortgage, indenture, contract, lease or instrument, permit,
concession, franchise or license to which FCP is a party or by which FCP or its
properties or assets may be bound.
-9-
<PAGE> 14
(i) Litigation. There are no actions, suits, proceedings, claims or
investigations pending or, to the best knowledge of FCP, threatened, against FCP
which could, individually or in the aggregate, have a material adverse effect on
the Business Condition of FCP or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
hereby. The FCP Disclosure Schedule sets forth with respect to each pending
action, suit, proceeding, claim or investigation to which FCP is a party, the
forum, the parties thereto, a brief description of the subject matter thereof
and the amount of damages claimed. FCP has delivered to Entex correct and
complete copies of all correspondence prepared by its counsel for FCP's
independent public accountants in connection with the last two completed audits
of FCP's financial statements and any such correspondence since the date of the
last such audit.
(j) No Material Adverse Change. Since May 4, 1996, FCP has conducted
its business in the ordinary course and there has not occurred:
(i) Any material adverse change in the Business Condition of
FCP;
(ii) Any amendments or changes in the Certificate of
Incorporation or Bylaws of FCP;
(iii) Any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting any of the properties or
businesses of FCP;
(iv) Any redemption, repurchase or other acquisition of shares
of FCP Common or FCP Preferred by FCP (other than pursuant to arrangements with
terminated employees or consultants), or any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to FCP Common or FCP Preferred;
(v) Any increase in or modification of the compensation or
benefits payable or to become payable by FCP to any of its directors or
employees, except in the ordinary course of business consistent with past
practice;
(vi) Any increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement (including, but
not limited to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of its employees, except in the
ordinary course of business consistent with FCP's past practice;
(vii) Any acquisition or sale of a material amount of property
or assets of FCP;
(viii) Any alteration in any term of any outstanding security of
FCP, other than the conversion of the FCP Preferred into FCP Common, which will
occur prior to the Effective time of the Merger;
-10-
<PAGE> 15
(ix) Any (A) incurrence, assumption or guarantee by FCP of any
debt for borrowed money; (B) issuance or sale of any securities convertible into
or exchangeable for debt, securities of FCP, or (C) issuance or sale of options
or other rights to acquire from FCP, directly or indirectly, debt securities of
FCP or any securities convertible into or exchangeable for any such debt
securities;
(x) Any creation or assumption by FCP of any mortgage, pledge,
security interest or lien or other encumbrance on any asset;
(xi) Any making of any loan, advance or capital contribution to
or investment in any person other than (A) travel loans or advances made in the
ordinary course of business of FCP and (B) other loans and advances in an
aggregate amount which does not exceed $25,000 outstanding at any time;
(xii) Any entry into, amendment of, relinquishment, termination
or nonrenewal by FCP of any contract, lease transaction, commitment or other
right or obligation other than in the ordinary course of business;
(xiii) Any transfer or grant of a right under the FCP
Intellectual Property Rights (as defined in Section 4.1(r) hereof), other than
those transferred or granted in the ordinary course of business consistent with
past practice;
(xiv) Any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of FCP; or
(xv) Any termination of any key FCP employee; or
(xvi) Any agreement or arrangement made by FCP to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Agreement untrue or incorrect as of
the date when made.
(k) Absence of Undisclosed Liabilities. FCP has no liabilities or
obligations (whether absolute, accrued or contingent, and whether or not
determined or determinable) of a character which, under generally accepted
accounting principles, should be accrued, shown, disclosed or indicated in a
balance sheet and are not reflected on the FCP May Balance Sheet.
(l) Certain Agreements. Except for the representations and covenants
made by Entex management in joint presentations with FCP management to FCP
employees regarding (i) severance, (ii) sales commissions, or (iii)
participation in Entex stock benefit plans, neither the execution and delivery
of this Agreement or the Merger Agreement nor the consummation of the
transactions contemplated hereby or thereby will (i) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director or employee of FCP
from FCP, under any Plan (as defined in Section 41(m)
-11-
<PAGE> 16
hereof) or otherwise, (ii) materially increase any benefits otherwise payable
under any Plan, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
(m) ERISA. All material employee benefit plans, programs, policies
or arrangements covering any active, former or retired employee of FCP are
listed in the FCP Disclosure Schedule (the "Plans") To the extent applicable,
the Plans comply with the requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Code, and any Plan intended
to be qualified under Section 401(a) of the Code has either obtained a
favorable determination letter as to its qualified status from the Internal
Revenue Service or still has a remaining period of time under applicable
Treasury Regulations or Internal Revenue Service pronouncements in which to
apply for such determination letter and to make any amendments necessary to
obtain a favorable determination. To the extent any Plan with an existing
determination letter from the Internal Revenue Service must be amended to comply
with the applicable requirements of the Tax Reform Act of 1986 and subsequent
legislation, the time period for effecting such amendments will not expire prior
to the Merger. FCP has furnished Entex with copies of the most recent Internal
Revenue Service letters and Forms 5500 with respect to any such Plan. No Plan is
covered by Title IV of ERISA or Section 412 of the Code. Neither FCP nor any
officer or director of FCP has incurred any liability or penalty under Sections
4975 through 4980 of the Code or Title I of ERISA. Each Plan has been maintained
and administered in all material respects in compliance with its terms and with
the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such Plans. No suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of Plan activities) has been
brought, or to the best knowledge of FCP is threatened, against or with respect
to any such Plan. All material contributions, reserves or premium payments
required to be made or accrued as of the date hereof to the Plans have been made
or accrued.
(n) Major Contracts. FCP is not a party to or subject to:
(i) Any union contract or any employment contract or arrangement
providing for future compensation, written or oral, with any officer,
consultant, director or employee which is not terminable by it on 30 day's
notice or less without penalty or obligation to make payments related to such
termination, other than (A) (in the case of employees other than executive
officers) such agreements as are not materially different from standard
arrangements offered to employees generally in the ordinary course of business
consistent with FCP's past practices and (B) such agreements as may be imposed
or implied by law;
(ii) Any plan, contract or arrangement exceeding $25,000,
written or oral, providing for bonuses, pensions, deferred compensation,
severance pay or benefits, retirement payments, profit-sharing, or the like;
(iii) Any joint venture contract or arrangement or any other
agreement which has involved or is expected to involve a sharing of profits with
other persons;
-12-
<PAGE> 17
(iv) Any existing OEM agreement, distribution agreement, volume
purchase agreement or other similar agreement which (i) is not in the ordinary
course of business or (ii) in which the annual amount involved in 1995 exceeded
or is expected to exceed in 1996 $200,000 in aggregate amount or (iii) pursuant
to which FCP has granted or received most favored nation pricing provisions or
exclusive marketing rights related to any service, group of services or
territory;
(v) Any lease for real or personal property in which the amount
of payments which FCP is required to make on an annual basis exceeds $200,000;
(vi) Any material agreement, contract, mortgage, indenture,
lease, instrument, license, franchise, permit, concession, arrangement,
commitment or authorization which may be, by its terms, terminated or breached
by reason of the execution of this Agreement, the Merger Agreement, the closing
of the Merger, or the transactions contemplated hereby or thereby;
(vii) Except for trade indebtedness incurred in the ordinary
course of business, any instrument evidencing or related in any way to
indebtedness incurred in the acquisition of companies or other entities or
indebtedness for borrowed money by way of direct loan, sale of debt securities,
purchase money obligation, conditional sale, guarantee, or otherwise;
(viii) Any material license agreement, either as licensor or
licensee (excluding nonexclusive software licenses granted to customers or
end-users in the ordinary course of business);
(ix) Any contract containing covenants purporting to limit FCP's
freedom to compete in any line of business in any geographic area; or
(x) Any other agreement, contract or commitment which is
material to FCP.
Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license and commitment listed in the
FCP Disclosure Schedule pursuant to this Section 4.1(o) is valid and binding on
FCP, and is in full force and effect, and neither FCP nor to the knowledge of
FCP any other party thereto, has breached any provision of, or is in default
under the terms of, any such agreement, contract, mortgage, indenture, plan,
lease, instrument, permit, concession, franchise, arrangement, license or
commitment.
(o) Taxes
(i) Except for state sales taxes incurred during any Taxable
period prior to the Effective Time of the Merger, which amounts have been
properly accrued, all Tax returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports) required
to be filed with any Taxing Authority with respect to any Taxable period ending
on or before the Effective Time of the Merger, by or on behalf of FCP
(collectively, the "FCP Returns"), have been or will be filed when due
(including any extensions of such due date), and all amounts shown due thereon
on or before the Effective Time of the Merger have been or will be paid
-13-
<PAGE> 18
on or before such date. Except as provided on or before subparagraph (v) below,
the FCP Fiscal April Balance sheet fully accrues all actual and contingent
liabilties for Taxes with respect to all periods through May 4, 1996 and FCP has
not and will not incur any Tax liability with respect to all periods through May
4, 1996 in excess of the amount reflected on the FCP Fiscal April Balance Sheet.
(ii) No material Tax liability since May 4, 1996 has been
incurred other than in the ordinary course of business. Except for those certain
state sales taxes which amounts have been properly accrued, FCP has withheld and
paid to the applicable financial institution or Taxing Authority all amounts
required to be withheld, All FCP Returns filed with respect to U.S. Federal
income taxes for which FCP has received notice of audit from any Taxing
Authority, have been examined and closed or are with respect to a taxable year
for which the period for assessment, after giving effect to extensions or
waivers, has expired. FCP (or any member of any affiliated or combined group of
which FCP has been a member) has not granted any extension or waiver of the
limitation period applicable to any FCP Returns.
(A) Except as provided in subparagraph (v) below, there is no
material claim, audit, action, suit, proceeding, or investigation now pending or
(to the best knowledge of FCP) threatened against or with respect to FCP in
respect of any Tax or assessment. No notice of deficiency or similar document of
any Tax Authority has been received by FCP. Except as may be required as a
result of the Merger, FCP has not been or will not be required to include any
material adjustment in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code as a result of transactions, events
or accounting methods employed prior to the Closing.
(B) Other than pursuant to this Agreement, FCP is not a party to
or bound by (or will prior to the Effective Time of the Merger become a party to
or bound by) any tax indemnity, tax sharing or tax allocation agreement (whether
written, unwritten or arising under operation of federal law as a result of
being a member of a group filing consolidated tax returns, under operation of
certain state laws as a result of being a member of a unitary group, or under
comparable laws of other states or foreign jurisdictions) which includes a party
other than FCP. FCP has not participated in (or will not prior to the Effective
Date participate in) an international boycott within the meaning of Section 999
of the Code.
(iii) FCP has heretofore provided or made available to Entex true
and correct copies of all material Tax Returns, and, as reasonably requested by
Entex prior to or following the date hereof, information statements, reports,
work papers, Tax opinions and memoranda and other Tax data and documents
(iv) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means (i) any and all federal, state, local and foreign taxes and similar
governmental obligations, charges, imposts and assessments, including without
limitation any income (gross or net), alternative or add-on minimum tax, gross
income, gross receipts, sales, use, environmental, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property,
-14-
<PAGE> 19
net worth, environmental or windfall profit tax, custom, duty or other tax,
assessment or similar governmental charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount imposed by any
governmental entity (a "Taxing Authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period and
(iii) any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of any express or implied obligation to indemnify or
reimburse any other person.
(v) FCP is currently contesting sales taxes and franchise taxes
for the period January 1, 1989 to date allegedly owed to the State of New York.
FCP has not reserved for such sales taxes and believes that none are due. To the
extent that it is subsequently determined that such sales taxes are due, any
amounts paid (including all interest and penalties thereon) shall be deemed to
be "Damages" for such purposes.
(vi) Following the (closing Date, KPMG Peat Marwick will prepare
an analysis of sales taxes owed by FCP through the Closing. Within six(6) months
of the Closing Date, KPMG Peat Marwick will issue a written report of such
analysis, including an amount which KPMG determines to be the amount which
should be reserved for such FCP sales taxes (the "KPMG Sales Tax Estimated
Amount"). Such KPMG Sales Tax Estimated Amount shall reduce the Deferred Payment
in accordance with Section 3.1(d) hereof.
(p) Interests of Officers. None of FCP's officers or directors has
any material interest in any property, real or personal, tangible or intangible,
used in or pertaining to its business, including any interest in the FCP
Intellectual Property Rights, except for rights as a shareholder.
(q) Technology.
(i) FCP owns, or is licensed or otherwise entitled to use rights
to all patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, mask-works, net lists, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that in any material respect are used or
currently proposed to be used in the business of FCP (the "FCP Intellectual
Property Rights"). The FCP Disclosure Schedule lists all trademarks, registered
and material unregistered copyrights, trade names and service marks, and any
applications therefor, included in the FCP Intellectual Property Rights, and
specifies the jurisdictions in which each such FCP Intellectual Property Right
has been issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers, together with a list of all of FCP's currently marketed
software products and an indication as to which, if any, of such software
products have been registered for copyright protection with the United States
Copyright Office and any foreign offices.
(ii) The FCP Disclosure Schedule also lists all material
licenses, sublicenses and other agreements as to which FCP is a party and
pursuant to which FCP, or any other
-15-
<PAGE> 20
person is authorized to use any FCP Intellectual Property Right or other trade
secret material to FCP, and includes the identity of all parties thereto. FCP is
not, or as a result of the execution and delivery of this Agreement or the
performance of FCP`s obligations hereunder will not be, in violation of any
material license, sublicense or agreement described in the FCP Disclosure
Schedule.
(iii) FCP is the sole and exclusive owner or licensee of, with
all right, title and interest in and to (free and clear of any liens or
encumbrances), the FCP Intellectual Property Rights, and has sole and exclusive
rights (and except as set forth in the FCP Disclosure Schedule is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the FCP Intellectual Property
Rights are being used. Except as set forth in the FCP Disclosure Schedule, no
claims with respect to the FCP Intellectual Property Rights have been asserted
or, to the knowledge of FCP after reasonable investigation, are threatened by
any person, nor does FCP know of any valid grounds for any bona fide claims (i)
to the effect that the manufacture, sale or use of any product or the sale of
any service as now offered or proposed for use or sale by FCP infringes on any
copyright, patent or trade secret, (ii) against the use by FCP of any
trademarks, trade names, trade secrets, copyrights, technology, know-how or
computer software programs and applications used in the business of FCP as
currently conducted or as proposed to be conducted, or (iii) challenging the
ownership, validity or effectiveness of any of the FCP Intellectual Property
Rights.
(iv) To FCP's knowledge, after reasonable investigation, all
registered trademarks and copyrights held by FCP are valid and subsisting. To
FCP's knowledge, after reasonable investigation, there is no material
unauthorized use, infringement or misappropriation of any of the FCP
Intellectual Property Rights by any third party, including any employee or
former employee of FCP. FCP (i) has not been sued or charged in writing as a
defendant in any claim, suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks or copyrights and which
has not been finally terminated prior to the date hereof, (ii) has no knowledge
of any such charge or claim or (iii) has no knowledge of any infringement
liability with respect to, or infringement by, FCP of any patent, trademark,
service mark or copyright of another. No FCP Intellectual Property Right is
subject to any outstanding order, judgment, decree, stipulation or agreement
restricting in any manner the licensing thereof by FCP. FCP has not entered into
any agreement to indemnify any other person against any charge of infringement
of any FCP Intellectual Property Right.
(r) Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon FCP which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of FCP, any acquisition of property by FCP or
the conduct of business by FCP as currently conducted or as currently proposed
to be conducted.
(s) Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment.
-16-
<PAGE> 21
(i) The FCP Disclosure Schedule sets forth a true and complete
list of all real property owned or leased by FCP and the aggregate annual rental
or other fee payable under any such Lease.
(ii) FCP owns a 99.9% interest in the limited partnership and
Richard Nathanson owns a 0.1% interest in the limited partnership which owns
FCP's principal executive offices (such limited partnership hereinafter referred
to as the "FCP Property Partnership"). FCP, as general partner of the FCP
Property Partnership, hereby agrees to amend the lease with FCP to provide for a
month to month lease following the Closing Date; provided that FCP shall not
terminate such lease before December 31, 1996.
(iii) FCP has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens, charges, pledges, security interests or other encumbrances,
except as reflected in the FCP Financial Statements and except for such
imperfections of title and encumbrances, if any, which are not substantial in
character, amount or extent, and which do not materially detract from the value,
or interfere with the present use, of the property subject thereto or affected
thereby.
(iv) The equipment (the "FCP Equipment") owned or leased by FCP
is, taken as a whole, (A) adequate for the conduct of the business of FCP
consistent with its past practice, (B) suitable for the uses to which it is
currently employed, (C) in good operating condition, (D) regularly and properly
maintained, (E) not obsolete, dangerous or in need of renewal or replacement,
except for renewal or replacement in the ordinary course of business, and (F)
free from any defects.
(t) Governmental Authorizations and Licenses. FCP is the holder of
all licenses, authorizations, permits, concessions, certificates and other
franchises of any Governmental Entity required to operate its business
(collectively, the "FCP Licenses"). The FCP Licenses are in full force and
effect. There is not now pending, or to the best knowledge of FCP is there
threatened, any action, suit, investigation or proceeding against FCP before any
Governmental Entity with respect to the FCP Licenses, nor is there any issued or
outstanding notice, order or complaint with respect to the violation by FCP of
the terms of any FCP License or any rule or regulation applicable thereto.
(u) Environmental Matters.
(i) No substance that is regulated by any Governmental Entity or
that has been designated by any Governmental Entity to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment (a "Hazardous
Material") is present in, on or under any property that FCP has at any time
owned, operated, occupied or leased.
(ii) FCP has not transported, stored, used, manufactured,
released or exposed its employees or any other person in any material way to any
Hazardous Material in violation of any applicable statute, rule, regulation,
order or law.
-17-
<PAGE> 22
(iii) FCP has obtained all permits, licenses and other
authorizations ("Environmental Permits") required to be obtained by any of them
under the Laws of any Governmental Entity relating to pollution or protection of
the environment (collectively, "Environmental Laws"). The FCP Disclosure
Schedule sets forth a true and complete list of all Environmental Permits, each
of which is in full force and effect. FCP (A) is in compliance with all terms
and conditions of the Environmental Permits and (B) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. FCP has not received any notice and is not aware of any
past or present condition or practice of the business conducted by FCP which
forms or could form the basis of any claim, action, suit, proceeding, hearing or
investigation against FCP arising out of the manufacture, processing,
distribution, use, treatment, storage, spill, disposal, transport, or handling,
or the emission, discharge, release or threatened release into the environment,
of any Hazardous Material.
(v) Insurance. The FCP Disclosure Schedule lists all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of FCP. There is no
claim by FCP pending under any of such policies or bonds as to which coverage
has been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums payable under all such policies and bonds have been paid and
FCP is otherwise in full compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). Such policies of insurance and bonds are of the type and in amounts
customarily carried by persons conducting business similar to that of FCP. FCP
does not know of any threatened termination of or material premium increase with
respect to, any of such policies.
(w) Labor Matters. FCP is in compliance in all material respects
with all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment and wages and
hours and occupational safety and health and employment practices, and is not
engaged in any unfair labor practice. FCP has not received any notice from any
Governmental Entity, and there has not been asserted before any Governmental
Entity, any claim, action or proceeding to which FCP is a party or involving
FCP, and there is neither pending nor, to FCP's best knowledge, threatened any
investigation or hearing concerning FCP arising out of or based upon any such
laws, regulations or practices.
(x) Customers. Attached as Exhibit 4.1(x) hereto is a schedule of
FCP customers which in the aggregate accounted for not less than 80% of FCP net
revenue for the 12 months ended June 30, 1996. Except for project oriented
contracts and bids, FCP has no reason to believe that any of such customers
listed on Exhibit 4.1(x) intends to terminate its business relationship with FCP
or to materially reduce the dollar amount of its business with FCP.
(y) Disclosure. No representation or warranty made by FCP in this
Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished or to be
prepared and furnished by FCP or its representatives pursuant hereto
-18-
<PAGE> 23
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. To the knowledge of FCP after reasonable inquiry, there is no event,
fact or condition that materially and adversely affects the Business Condition
of FCP that has not been set forth in this Agreement or in the FCP Disclosure
Schedule. The financial projections relating to FCP delivered to Entex prior to
the date hereof were prepared in good faith based upon reasonable assumptions.
(z) Intelligent Electronics. FCP is a party to that certain reseller
agreement dated December 1, 1994 between FCP and Intelligent Electronics ("IE")
(the "Reseller Agreement"). FCP agrees to terminate this Reseller Agreement as
soon as practicable, and as of the May 4 Balance Sheet represents that the net
asset and liability position relating to all open account transactions specific
to IE, as reflected on the May 4 Balance Sheet, will not exceed the lesser of
$270,000 or the net asset and liability position relating to open account
transactions specific to IE, as reflected on the May 4 Balance Sheet determined
in accordance with GAAP ("the IE Setoff"). In the event that the parties are in
dispute with regard to the IE Setoff, KPMG Peat Marwick shall determine the IE
Setoff, and such determination shall be binding upon the parties. FCP represents
and warrants that the amounts represented by such net balance sheet position
will satisfy all obligations of FCP to IE arising out of or related to any past,
current, or future defaults or obligations agreed to between the parties, or the
termination of the Reseller Agreement.
4.2 Representations and Warranties of Entex and Sub. Except as disclosed
in a document referring specifically to the representations and warranties in
this Agreement which is delivered by Entex to FCP prior to the execution of this
Agreement (as may be supplemented in a nonmaterial manner prior to Closing) (the
"Entex Disclosure Schedule"), Entex and Sub represent and warrant to, and agree
with, FCP as follows, which representations and warranties will be true and
correct as of the date of this Agreement and will be true and correct as of the
Closing Date:
(a) Organization, Standing and Power. Entex is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and each of Entex and Sub has
all requisite power and authority to own, operate and lease its properties and
to carry on its business as now being conducted. Each of Entex and Sub is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on the
corporation's Business Condition. Entex has delivered to FCP complete and
correct copies of the Certificate of Incorporation and Bylaws of each of Entex
and Sub as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of Entex
consists of to 10,000,000 shares of common stock, $.0001 par value, and
2,000,000 shares of preferred stock, $.0001 par value. At the close of business
on June 30, 1996, there were 7,706,000 shares of Entex Common issued and
outstanding or reserved for issuance upon the exercise of outstanding stock
-19-
<PAGE> 24
options issued under Entex stock benefit plans or other outstanding options and
warrants. As of June 30, 1996, there were no shares of Preferred Stock
outstanding.
The authorized Common Stock of Sub consists of 1,000 shares of
common stock, $.001 par value. At the date hereof there were 1,000 shares of Sub
Common Stock outstanding. All outstanding shares of Entex Common and Sub Common
Stock are, and any shares of Entex Common issued upon exercise of any Entex
Option, will be, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, Entex's or Sub's Certificate of
Incorporation or Bylaws or any agreement to which Entex or Sub is a party or may
be bound. Except for the shares listed above issuable pursuant to Entex Options,
there are no options, warrants, calls, conversion rights, commitments or
agreements of any character to which Entex or Sub is a party or by which either
is bound that do or may obligate Entex or Sub to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of Entex Common or that
do or may obligate Entex or Sub to grant, extend or enter into any such option,
warrant, call, conversion right, commitment or agreement.
(e) Authority. Each of Entex and Sub has all requisite corporate
power and authority to enter into this Agreement (and, in the case of Sub, the
Merger Agreement) and, subject to approval of Entex as the sole shareholder of
Sub, to perform its obligations hereunder, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement (and, in the
case of Sub, the Merger Agreement), the performance by each of Entex and Sub of
its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of each of Entex and
Sub, and have been unanimously approved by the Board of Directors of each of
Entex and Sub. No other corporate proceeding on the part of Entex or Sub is
necessary to authorize this Agreement or the Merger Agreement or the performance
of Entex's or Sub's obligations hereunder or thereunder or the consummation of
the transactions contemplated hereby or thereby, other than the approval of the
Merger by the Entex Shareholders and Entex as the sole shareholder of Sub. This
Agreement (and, in the case of Sub, the Merger Agreement) have been duly
executed and delivered by Entex and Sub and constitute legal, valid and binding
obligations of Entex and Sub enforceable against each of Entex and Sub in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought. Subject to satisfaction of the conditions set forth in
Article VII, the execution and delivery of this Agreement (and, in the case of
Sub, the Merger Agreement) do not, and the consummation of the transactions
contemplated hereby and thereby will not conflict with or result in any
violation of any material statute, law, rule, regulation, judgment, order,
decree, or ordinance applicable to Entex or Sub or their properties or assets,
or conflict with or result in any breach or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of a material lien or encumbrance on any of the
properties or assets of Entex or Sub pursuant to (i) any provision of the
Certificate of Incorporation or Bylaws of Entex or Sub or (ii) any material
agreement, contract, note, mortgage, indenture, lease, instrument, permit,
concession, franchise or license to which Entex or Sub
-20-
<PAGE> 25
is a party or by which Entex or Sub or any of its properties or assets may be
bound or affected. No consent, approval, order or authorization of, or
registration, declaration or filling with, any court, administrative agency,
commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to Entex or Sub in connection with the execution and delivery of
this Agreement or the Merger Agreement by Entex and Sub or the consummation by
Entex or Sub of the transactions contemplated hereby or thereby, except for (i)
the obtaining of the approval of the Merger by Entex as the sole shareholder of
Sub, (ii) the filing of the Merger Agreement and officers' certificates with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which Entex and Sub are qualified to do
business, (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any foreign
country, which if not obtained or made would not have a material adverse effect
on the Business Condition of Entex and (iv) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would not
have a material adverse effect on the Business Condition of Entex.
(d) Financial Statements. Entex has furnished FCP with (a) its
audited financial statements for each of the fiscal years ended December 31,
1993, December 31, 1994 and December 31, 1995, including a balance sheet of
Entex as at December 31, 1994 and December 31, 1995 and the related statements
of income and cash flow, (b) unaudited financial statements as of March 31,
1996, including a balance sheet as at March 31, 1996 and the related statement
of income and cash flow for the quarter then ended (the foregoing financial
statements are referred to collectively as the "Entex Financial Statements").
The Entex Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto) and fairly present the financial position of Entex as at
the dates thereof and the results of its operations and changes in financial
position for the periods then ended.
(e) Compliance with Law. Entex is in compliance and has conducted
its business so as to comply with all laws, rules and regulations, judgments,
decrees or orders of any Governmental Entity applicable to is operations or with
respect to which compliance is a condition of engaging in the business thereof,
except to the extent that failure to comply would, individually or in the
aggregate, not have had and is expected not to have a material adverse effect on
the Business Condition of Entex. There are no material judgments or orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration) against Entex or against any of its
respective properties or businesses.
(f) No Defaults. Entex is not, nor has received notice that it would
be with the passage of time, (i) in violation of any provision of the
Certificate of Incorporation or Bylaws of Entex or (ii) in default or violation
of any material term, condition or provision of (A) any material judgment,
decree, order, injunction or stipulation applicable to Entex or (B) any material
agreement, note, mortgage, indenture, contract, lease or instrument, permit,
concession, franchise or license to which Entex is a party or by which Entex or
its properties or assets may be bound.
(g) Litigation. There is no action, suit, proceeding, claim or
investigation pending or, to the best knowledge of Entex, threatened, against
Entex which could, individually or in the
-21-
<PAGE> 26
aggregate, have a material adverse effect on the Business Condition of Entex or
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay any of the transactions contemplated hereby.
(h) Disclosure. No representation or warranty made by Entex or Sub
in this Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished or to be
prepared and furnished by Entex or Sub or their representatives pursuant hereto
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
(i) Assets and Liabilities of Sub. As of the date hereof and at the
Effective Time of the Merger, the assets of Sub are and will consist of cash and
Sub does not and will not have conducted any material operations or have any
liabilities, except possible liabilities for organizational expenses and
expenses in connection with the Merger.
ARTICLE V
EMPLOYMENT AGREEMENTS; STOCK OPTIONS; RETENTION PROGRAM
5.1 Employment Agreements with Richard and Kim Nathanson. At the
Closing, Entex shall enter into Employment Agreements with Richard Nathanson and
Kim Nathanson.
5.2 FCP Retention Bonus Program. Entex shall reserve $1,000,000 in cash,
subject to any reduction pursuant to Section 8.4(b), for payment under the FCP
Retention Bonus Program attached as Exhibit 5.2 hereto.
5.3 Grant of Stock Options to Richard and Kim Nathanson. At the Closing,
Entex shall grant the following stock options to Richard and Kim Nathanson:
(a) 30,977 Share Option to Richard Nathanson. Entex shall grant to
Richard Nathanson, within ten (10) days from the Closing Date, a nonqualified
stock option to purchase 30,977 shares of Entex Common Stock at an exercise
price of $50.00 (the "Option"). The Option shall be issued pursuant to, and
governed by, the terms of Entex's 1996 Stock Option Plan and a Stock Option
Agreement dated as of even date herewith by and between Entex and Employee (the
"Option Agreement"). The Option Agreement shall provide, among other things,
that the Option shall vest with respect to 50% of the shares upon the second
anniversary of the date of grant and 50% of the shares upon the third
anniversary of the date of grant; provided, however, that the Option will vest
in full in the event Employee's employment is Involuntarily Terminated without
Cause (including a Constructive Termination) (as such capitalized terms are
defined in the Option Agreement).
-22-
<PAGE> 27
(b) 30,978 Share Option to Kim Nathanson. Entex shall grant to Kim
Nathanson, within ten (10) days from the Closing Date, a nonqualified stock
option to purchase 30,978 shares of Entex Common Stock at an exercise price of
$50.00 (the "Option"). The Option shall be issued pursuant to, and governed by,
the terms of Entex's 1996 Stock Option Plan and a Stock Option Agreement dated
as of even date herewith by and between Entex and Employee (the "Option
Agreement"). The Option Agreement shall provide, among other things, that the
Option shall vest with respect to 50% of the shares upon the second anniversary
of the date of grant and 50% of the shares upon the third anniversary of the
date of grant; provided, however, that the Option will vest in full in the event
Employee's employment is Involuntarily Terminated without Cause (including a
Constructive Termination) (as such capitalized terms are defined in the Option
Agreement).
5.4 Grant of Stock Options to FCP Key Employees. Entex shall grant
to those FCP employees listed in Exhibit 5.4(a) options to purchase an aggregate
of 26,103 shares of Entex Common at an exercise price of $50.00 per share under
its 1996 Stock Option Plan, pursuant to an option agreement in substantially the
form attached hereto as Exhibit 5.4(b); provided, however that certain changes
to the form of option agreement may be made to reflect certain requirements
under Rule 16(b)(3) of the Securities Exchange Act of 1934 and to reflect the
merger of Entex Holdings Inc., with and into Entex. Subject to continued
employment with Entex, the option shall be exercisable with respect to 50% of
the shares subject thereto on the second anniversary of the Closing and the
other 50% on the third anniversary of the Closing.
ARTICLE VI
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE
TIME, ADDITIONAL AGREEMENTS
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time of the
Merger, the parties hereto agree (except to the extent that the other parties
hereto shall otherwise consent in writing) that:
6.1 Conduct of Business of FCP. Except as disclosed in item 4.1(j) on
the FCP Disclosure Schedule or as otherwise disclosed on the FCP Disclosure
Schedule with a reference to this Section 6.1 (a), FCP shall carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent with such business,
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organizations, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it (except as may be otherwise requested by Entex in
writing), to the end that its goodwill and ongoing business shall be unimpaired
at the Effective Time of the Merger. FCP shall promptly notify Entex of any
event or occurrence or emergency not in the ordinary course of business of FCP,
and any event which could have a material and adverse effect on the Business
Condition of
-23-
<PAGE> 28
FCP. Except as expressly contemplated by this Agreement or the FCP Disclosure
Schedule, FCP shall not, without the prior written consent of Entex:
(a) Enter into any commitment or transaction not in the ordinary
course of business consistent with past practices;
(b) Grant any severance or termination pay (A) to any director or
(B) to any employee except (x) payments made pursuant to standard written
agreements outstanding on the date hereof or (y) in the case of employees who
are not officers, grants which are made in the ordinary course of business in
accordance with FCP's standard past practices;
(c) Except in the ordinary course of business consistent with past
practices, transfer to any person or entity any rights to the FCP Intellectual
Property Rights;
(d) Enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or other rights of any type or scope with
respect to any products or services of FCP;
(e) Except in the ordinary course of business with prior notice to
Entex, violate, amend or otherwise modify the terms of any of the contracts set
forth on the FCP Disclosure Schedule;
(f) Commence a lawsuit other than (A) for the routine collection of
bills, (B) for software piracy, (C) in such cases where FCP in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of FCP's business, provided that FCP consults with Entex
prior to filing such suit, or (D) following a breach of this Agreement;
(g) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of the FCP Common or FCP
Preferred, or split, combine or reclassify any of the FCP Common or FCP
Preferred or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of FCP Common or FCP Preferred, or
repurchase or otherwise acquire, directly or indirectly, any shares of FCP
Common or FCP Preferred except from former employees, directors and consultants
in accordance with agreements providing for the repurchase of shares in
connection with any termination of service to FCP;
(h) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of FCP
Common or FCP Preferred or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities, other than the conversion into FCP Common of outstanding shares of
FCP Preferred,
(i) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws,
-24-
<PAGE> 29
(j) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Business
Condition of FCP;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets which are material, individually or in the aggregate, to
the Business Condition of FCP except in the ordinary course of business
consistent with past practices;
(l) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of FCP or guarantee any debt
securities of others, except as disclosed under the FCP Disclosure Schedule;
(m) Adopt or amend any Plan, or enter into any employment contract,
pay any special bonus or special remuneration to any director or employee, or
increase the salaries or wage rates of its employees other than pursuant to
scheduled employee reviews under FCP's normal employee review cycle, as the case
may be, or in connection with the hiring of employees other than officers in the
ordinary course of business, in all cases consistent with FCP's past practices;
(n) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(o) Pay, discharge or satisfy in an amount in excess of $50,000 in
any one case any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected or
reserved against in the financial statements (or the notes thereto) of FCP;
(p) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 6.l(a)(i) through (xvi) above, or any action which
would make any of the representations or warranties or covenants of FCP
contained in this Agreement materially untrue or incorrect.
6.2 Access to Information. FCP shall afford Entex and its respective
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time of the Merger to
(a) all of FCP' properties, books, contracts, commitments and records, and (b)
all other information concerning the business, properties and personnel of FCP
as Entex may reasonably request. FCP agrees to provide to Entex and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request. No information or knowledge obtained in any
investigation pursuant to this Section 6.2 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
-25-
<PAGE> 30
6.3 Exclusivity; Acquisition Proposals. Unless and until this Agreement
shall have been terminated by either party pursuant to Section 9.1 hereof, FCP
shall not, directly or indirectly, through any of its officers or directors, or
agents, representatives or affiliates, solicit, encourage, initiate or entertain
any proposals or offers from any party other than Entex: and Sub relating to the
acquisition of FCP by merger, consolidation, purchase of all or substantially
all of FCP's assets, tender or exchange offer, stock purchase or other business
combination (each of the foregoing, an "Acquisition"), nor will FCP directly or
indirectly, through any of its officers, directors, agents, representatives or
affiliates, participate in any negotiations regarding, or furnish to any person
any information with respect to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any person (other than Entex or Sub) to do or
seek any Acquisition.
6.4 Breach of Representations and Warranties. Except as permitted under
Section 6.1, each of Entex and FCP shall not take any action which would cause
or constitute a breach of any of their respective representations and warranties
set forth in this Agreement or which would cause any of such representations and
Warranties to be inaccurate as of the Effective Time of the Merger. In the event
of, and promptly after becoming aware of, the occurrence of or the pending or
threatened occurrence of any event which would cause or constitute such a breach
or inaccuracy, each party shall give detailed notice thereof to the other and
shall use its best efforts to prevent or promptly remedy such breach or
inaccuracy.
6.5 Consents. Each of Entex and FCP shall promptly apply for or
otherwise seek, and use its best efforts to obtain, all consents and approvals
required to be obtained by it for the consummation of the Merger, and FCP shall
use its best efforts to obtain all necessary consents, waivers and approvals
under any of FCP's material agreements, contracts or licenses in connection with
the Merger, except consents under FCP real property leases and such other
consents and approvals as Entex and FCP agree FCP shall not seek to obtain, as
contemplated by the FCP Disclosure Schedule.
6.6 Best Efforts. Entex and FCP shall each use its best efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement.
6.7 FIRPTA. FCP shall deliver to the Internal Revenue Service a notice
regarding the statement described in Section 7.2(h) hereof, in accordance with
the requirements of Treasury Regulation Section 1.897-2(h)(2).
6.8 FCP Shareholders' Approval. FCP agrees to submit this Agreement and
the Merger Agreement to its shareholders for approval and adoption, all as
provided by law and its Certificate of Incorporation and Bylaws, at a meeting
which will be held on the earliest practicable date following the execution of
this Agreement. The Board of Directors of FCP will unanimously recommend to the
FCP Shareholders that such shareholders approve the transactions contemplated by
this Agreement and the Merger Agreement.
-26-
<PAGE> 31
6.9 Conversion of FCP Preferred. FCP agrees to solicit from the holders
of FCP Preferred consent to convert all of the shares of FCP Preferred into
shares of FCP Common immediately prior to the Effective Time of the Merger.
6.10 FCP Dissenting Shares. As promptly as practicable after the date of
the FCP Shareholders' Meeting and prior to the Closing Date, FCP shall furnish
Entex with the name and address of each FCP Dissenting Shareholder and the
number of FCP Dissenting Shares owned by such FCP Dissenting Shareholder.
6.11 Communications. Between the date hereof and the Effective Time of
the Merger, neither Entex nor FCP will furnish any communication to its
shareholders (other than the Proxy Statement) or to the public generally if the
subject matter thereof relates to the other party or to the transactions
contemplated by this Agreement or the Merger Agreement without the prior
approval of the other party as to the content thereof, which approval shall not
be unreasonably withheld. Nothing contained herein shall prevent either party at
any time from furnishing any information to any governmental agency or from
issuing any release where it reasonably believes it is legally required to do
so.
6.12 Legal Conditions to the Merger.
(a) FCP shall take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on FCP with respect to
the Merger and will promptly cooperate with and furnish information to Entex in
connection with any such requirements imposed upon Entex or Sub in connection
with the Merger. FCP shall take all reasonable actions to obtain (and to
cooperate with Entex and Sub in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity, required to be
obtained or made by FCP (or by Entex or Sub) in connection with the Merger or
the taking of any action contemplated thereby, by this Agreement or by the
Merger Agreement, and to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby, to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby, and to effect all necessary registrations and filings and
submissions of information requested by any Governmental Entity, and to fulfill
all conditions to this Agreement.
(b) Each of Entex and Sub shall take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the Merger and will promptly cooperate with and furnish
information to FCP in connection with any such requirements imposed upon FCP in
connection with the Merger. Entex and Sub shall take all reasonable actions to
obtain (and to cooperate with FCP in obtaining) any consent, authorization,
order or approval of, or exemption by, any Governmental Entity required to be
obtained or made by Entex or Sub (or by FCP) in connection with the Merger or
the taking of any action contemplated thereby, by this Agreement or by the
Merger Agreement, and to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby, to lift or rescind any injunction or restraining order or other order
adversely affecting the
-27-
<PAGE> 32
ability of the parties to consummate the transactions contemplated hereby, and
to effect all necessary registrations and filings and submissions of information
requested by any Governmental Entity, and to fulfill all conditions to this
Agreement.
6.13 Employee Benefits. Entex and FCP agree to appoint personnel from
their respective human relations departments who will meet and coordinate the
manner of transition of the insurance and other benefit plans of FCP after the
Merger. It is intended that the benefits provided by Entex taken as a whole will
be substantially consistent with those provided by Entex to its employees and
that such benefits taken as a whole will not be materially less favorable than
those currently provided by FCP.
6.14 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement, the Merger Agreement and
the transactions contemplated hereby and thereby shall be paid by the party
incurring such expense; provided, however, that in the event the Merger is
consummated, Entex shall pay the fees and expenses of O'Connor and Hannan in
connection with the transactions contemplated under this Agreement and the
Merger Agreement (which payment shall be made no later nor earlier than the time
Entex pays the fees and expenses of its corresponding advisors relating to their
services to Entex in connection with the services contemplated under this
Agreement and the Merger Agreement).
6.15 Brokers or Finders. Each of Entex, Sub and FCP represents that no
agent, broker, investment banker or other firm or person is or will be entitled
to any broker's or finder's fee or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement, other
than a payment of up to $95,000 owed to MCK Associates which amount shall be
paid by Entex and which amount, if paid by Entex or by FCP, shall reduce the
Merger Payments by an equal amount.
6.16 Confidentiality. The parties agree and acknowledge that the
agreements regarding confidentiality executed prior to the execution of this
Agreement are still in full force and effect and nothing in this Agreement is
intended to or shall be construed to limit the obligations of the parties under
such confidentiality agreements.
6.17 Officers and Directors. Entex shall extend indemnification to all
current officers and directors of FCP to the maximum extent permitted by law. To
the extent permitted by law, Entex shall extend the indemnification provisions
of Entex's Certificate of Incorporation and Bylaws to the officers and directors
of FCP who shall become officers or directors of Entex.
-28-
<PAGE> 33
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Shareholder Approval.
(i) This Agreement and the Merger Agreement shall have been
approved and adopted by the affirmative vote of the holders of (A) at least a
majority of the outstanding shares of FCP Common, voting as a single class, and
(B) at least a majority of the outstanding shares of FCP Preferred, voting
together as a single class.
(ii) FCP shall have obtained from the holders of FCP Preferred
consent to convert all of the shares of FCP Preferred into shares of FCP Common
immediately prior to the Effective Time of the Merger.
(b) Approvals. All authorizations, consents, orders or approvals of,
or declarations or filings with any Governmental Entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, occurred or been obtained, other than filings and approvals relating to
the Merger or affecting Entex's ownership of FCP or any of its Subsidiaries or
any of their properties if failure to make such filing or obtain such approval
would not be materially adverse to Entex or FCP and their respective
Subsidiaries taken as a whole.
(c) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any Governmental Entity and remain in
effect, and no litigation seeking the issuance of such an order or injunction,
or seeking the imposition against FCP, the Surviving Corporation or Entex of
substantial damages if the Merger is consummated, shall be pending which, in the
good faith judgment of FCP's or Entex's Board of Directors (acting upon the
written opinion of their respective outside counsel) has a reasonable
probability of resulting in such order, injunction or damages. In the event any
such order or injunction shall have been issued, each party agrees to use its
reasonable efforts to have any such injunction lifted.
(d) Statutes. No action shall have been taken, and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity which would (i) make the
consummation of the Merger illegal, (ii) prohibit Entex's or FCP's ownership or
operation of all or a material portion of the business or assets of FCP or Entex
or compel Entex or FCP to dispose of or hold separate all or a material portion
of the business or assets of FCP or Entex as a result of be Merger or (iii)
render Entex, Sub or FCP unable to consummate the Merger.
-29-
<PAGE> 34
7.2 Conditions of Obligations of Entex and Sub. The obligations of Entex
and Sub to effect the Merger are subject to the satisfaction of the following
conditions, unless waived by Entex and Sub:
(a) Representations and Warranties. The representations and
warranties of FCP set forth in this Agreement shall be true and correct in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all respects) (i) as of the date
of this Agreement, (ii) as of the FCP Shareholders' Meeting Date and (iii) as of
the Closing Date, as though made on and as of each such date, except as
otherwise contemplated by this Agreement, and Entex shall have received a
certificate signed by the chief executive officer and the chief financial
officer of FCP to such effect on the Closing Date.
(b) No Material Adverse Change. Except as described in 4.1 (j) of
the FCP Disclosure Schedule, there shall have been no material adverse change in
the Business Condition of FCP on or before the Closing Date.
(c) Performance of Obligations of FCP. FCP shall have performed in
all material respects all obligations and covenants required to be performed by
it under this Agreement and the Merger Agreement prior to the Closing Date, and
Entex shall have received a certificate signed by the chief executive officer
and the chief financial officer of FCP to such effect.
(d) Opinion of FCP Counsel. Entex shall have received an opinion
dated the Closing Date of O'Connor & Hannan, counsel to FCP, substantially in
the form set forth on Exhibit 7.2(d) hereto.
(e) FIRPTA. Entex, as agent for the shareholders of FCP, shall have
received a properly executed Foreign Investment and Real Property Tax Act of
1980 ("FIRPTA") Notification Letter, in form and substance satisfactory to
Entex, which states that shares of FCP Common and FCP Preferred do not
constitute "United States real property interests" under Section 897(c) of the
Code, for purposes of satisfying Entex's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
(f) Consents. Entex shall have received duly executed copies of all
material third-party consents and approvals contemplated by this Agreement or
the Entex Disclosure Schedule in form and substance reasonably satisfactory to
Entex, except for such consents and approvals as Entex and FCP shall have agreed
shall not be obtained, as contemplated by the Entex Disclosure Schedule.
(g) Resignation of Directors. The directors of FCP in office
immediately prior to the Effective Time of the Merger shall have reigned as
directors of the Surviving Corporation effective as of the Effective Time of the
Merger.
-30-
<PAGE> 35
(h) Resignation of Officers. The officers of FCP in office
immediately prior to the Effective Time of the Merger shall have reigned as
officers of the Surviving Corporation effective as of the Effective Time of the
Merger.
(i) Satisfactory Form of Legal and Accounting Matters. The form,
scope and substance of all legal and accounting matters contemplated hereby and
all closing documents and other papers delivered hereunder shall be acceptable
to Entex's counsel.
7.3 Conditions of Obligation of FCP. The obligation of FCP to effect the
Merger is subject to the satisfaction of the following conditions unless waived
by FCP:
(a) Representations and Warranties. The representations and
warranties of Entex and Sub set forth in this Agreement shall be true and
correct in all material respects (except for such representations and warranties
which are qualified by their terms by a reference to materiality, which
representations and warranties as so qualified shall be true in all respects)
(i) as of the date of this Agreement, and (ii) as of the Closing Date, as though
made on and as of each such date, except as otherwise contemplated by this
Agreement, and FCP shall have received a certificate signed by the chief
executive officer and the chief financial officer of Entex to such effect.
(b) Performance of Obligations of Entex and Sub. Entex and Sub shall
have performed in all material respects all obligations and covenants required
to be performed by them under this Agreement and the Merger Agreement prior to
the Closing Date, and FCP shall have received a certificate signed by the chief
executive officer and the chief financial officer of Entex to such effect.
(c) Opinion of Entex's Counsel. FCP shall have received an opinion
dated the Closing Date of Wilson Sonsini Goodrich & Rosati, counsel to Entex, in
substantially the form set forth on Exhibit 7.3(c) hereto.
(d) Satisfactory Form of Legal Matters. The form, scope and
substance of all legal matters contemplated hereby and all closing documents and
other papers delivered hereunder shall be reasonably acceptable to counsel to
FCP.
ARTICLE VIII
INDEMNIFICATION
8.1 FCP Indemnify. Subject to the terms and conditions of this Article
VIII, FCP hereby agrees to indemnify, defend and hold Entex, Sub and their
respective officers, directors, agents, employees, affiliates, successors and
assigns, harmless from and against all damages, including, without limitation,
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees and expenses, but excluding damages
resulting from business interruption and lost business opportunities
(collectively, "Damages"), asserted against, resulting to, imposed upon, or
-31-
<PAGE> 36
incurred by Entex or Sub by reason of or resulting from a breach of any
representation, warranty or covenant of FCP contained in Section 4.1 and Article
VI of this Agreement.
8.2 Entex's and Sub's Indemnity. Subject to the terms and conditions of
this Article VIII, Entex, Sub and their respective successors and assigns hereby
agree to indemnify, defend and hold FCP and its successors or assigns harmless
from and against all Damages asserted against, resulting to, imposed upon or
incurred by FCP by reason of or resulting from:
(a) a breach of any representation, warranty or covenant of Entex or
Sub contained in Section 4.2 and Article VI of this Agreement; or
(b) the failure of Entex or Sub to pay, perform and discharge when
due any of their respective other obligations under this Agreement.
8.3 Conditions of Indemnification for Third Party Claims. The respective
obligations and liabilities of FCP, Entex and Sub, as the case may be, (herein
sometimes referred to as the "indemnifying party"), to each other (herein
sometimes referred to as the "party to be indemnified") under Section 8.1 or 8.2
hereof with respect to claims resulting from the assertion of liability by third
parties shall be subject to the following terms and conditions:
(a) Within 20 days after receipt of notice of commencement of any
action evidenced by service of process or other legal pleading, or with
reasonable promptness after the assertion in writing of any claim by a third
party, the party to be indemnified shall give the indemnifying party written
notice thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing.
(b) In connection with any such indemnification, the party to be
indemnified will cooperate in all reasonable requests of the indemnifying party.
(c) With respect to any claim covered by Sections 8.1 or 8.2 hereof,
in the event that the indemnifying party by the thirtieth (30th) day after
receipt of notice of any such claim (or, if earlier, by the tenth (10th) day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim)
notifies the party to be indemnified that it will not defend against such claim,
the party to be indemnified shall (upon further notice to the indemnifying
party) have the right, but not the obligation, to undertake the defense,
compromise or settlement of such claim on behalf of and for the account of and
at the sole expense of the indemnifying party, including all attorneys' fees
incurred, subject to the right of the indemnifying party to assume the defense
of such claims at any time prior to settlement, compromise or final
determination thereof on payment to the party to be indemnified of all expenses
incurred, including but not limited to attorneys' fees, to date.
-32-
<PAGE> 37
8.4 Offsets
(a) If Entex or Sub suffers any Damages as defined in Section 8.1
hereof as a result of a breach of any representation contained in Sections
4.1(d) Financial Statements, (e) Inventory, (f) Receivables, (j) No Material
Adverse Change, (k) Absence of Undisclosed Liabilities and (o) Taxes hereof,
then Entex may in its sole discretion offset the amount of such Damages against
the Deferred Payment.
(b) Following the offset of such Damages under 8.4(a) hereof, if
Entex suffers any Damages as defined in Section 8.1 hereof as a result of a
breach of any representation contained in Section 4.l(z) Intelligent Electronics
("IE Damages"), then Entex may in its sole discretion offset the amount of the
IE Damages against the Deferred Payment. To the extent that the Damages exceed,
in the aggregate (inclusive of IE Damages), one million dollars ($1,000,000),
then Entex may in its sole discretion reduce amounts otherwise payable under the
FCP Retention Bonus Program by the lesser of (x) the amount of IE Damages, or
(y) the amount in which Damages exceed, in the aggregate (inclusive of IE
Damages), one million dollars ($1,000,000).
(c) Prior to offsetting any amount as described in subsection (a) or
(b) hereof, Entex shall notify Richard Nathanson ("Nathanson") (as the
designated fiduciary of the shareholders of FCP) in writing of the Damages
incurred, the amount to be offset and shall provide details as to how Entex
computed such Damages and the amount to be offset (the "Offset Notice"). Entex
may then offset the amount set forth in the Offset Notice, unless Nathanson
disputes the computation of the amount to be offset by serving written notice
(the "Reply to Offset Notice") on Entex within 15 days after Nathanson receives
the Offset Notice.
(d) If a Reply to Offset Notice is sent, Entex and Nathanson shall
attempt to resolve the dispute within 30 days after Entex receives the Reply to
Offset Notice. If no resolution can be reached within such 30 day period, then
Nathanson shall have the right to commence arbitration proceedings in accordance
with the provisions of Section 87 hereof within 15 days after the expiration of
such 30 day period.
(e) If arbitration proceedings are not commenced within such 15 day
period, then Entex may offset the amount described in the Offset Notice. If,
however, arbitration proceedings are commenced, Entex, may not offset any amount
until such arbitration proceedings are concluded, either by settlement or by an
award, and in such event may only offset either the amount agreed to by the
parties prior to the completion of the arbitration proceedings, or the amount
awarded to Entex by such arbitration proceedings.
8.5 Arbitration.
(a) At the option of either Entex or FCP, any and all disputes or
controversies whether of law or fact and of any nature whatsoever arising from
or respecting this Agreement shall
-33-
<PAGE> 38
be decided by arbitration under the rules and regulations of the American
Arbitration Association by one (l) arbitrator selected in accordance with such
rules
(b) Such arbitration shall take place in New York County, New York.
(c) At the request of either Entex or FCP, arbitration proceedings
will be conducted in the utmost secrecy; in such case all documents, testimony
and records shall be received, heard and maintained by the arbitrator in secrecy
under seal, available for the inspection only of Entex and FCP and their
respective attorneys and their respective experts who shall agree in advance and
in writing to receive all such information confidentially and to maintain such
information in secrecy until such information shall become generally known. The
arbitrator shall be able to decree any and all relief of an equitable nature,
including but not limited to such relief as a temporary restraining order, a
temporary and/or a permanent injunction, and shall also be able to award
damages, with or without an accounting and costs. The decree or judgment of an
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
(d) The arbitrator may award to a prevailing party the recovery of
costs and expenses, including legal fees and expenses.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of the Merger
by the shareholders of FCP:
(a) by mutual agreement of Entex, Sub and FCP;
(b) by Entex, if there has been a breach by FCP of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of FCP which FCP fails to cure within seven days after notice thereof
is given by Entex (except that no cure period shall be provided for a breach by
FCP which by its nature cannot be cured);
(c) by FCP, if there has been a breach by Entex or Sub of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of Entex or Sub which Entex or Sub, as the case may be, fails to cure
within seven days after notice thereof is given by FCP (except that no cure
period shall be provided for a breach by Entex or Sub which by its nature cannot
be cured);
(d) by Entex or FCP, if the Merger shall not have been consummated
on or before July 31, 1996;
-34-
<PAGE> 39
(e) by Entex or FCP if the required approval of the shareholders of
FCP contemplated by this Agreement shall not have been obtained by reason of the
failure to obtain the required vote upon a vote taken at the FCP Shareholders'
Meeting or at any adjournment thereof or by written consent of the FCP
Shareholders in accordance with applicable law;
(f) by either Entex or FCP if (i) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger or (ii) there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity which would make
consummation of the Merger illegal;
(g) by either Entex or FCP if there shall be any action taken, or
any statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would (A) prohibit
Entex's or FCP's ownership or operation of all or a material portion of the
business or assets of FCP or Entex and Sub taken as a whole, or compel Entex or
FCP to dispose of or hold separate all or a material portion of the business or
assets of FCP or Entex and Sub taken as a whole, as a result of the Merger or
(B) render Entex or FCP unable to consummate the, Merger, except for any waiting
period provisions; or
(h) by Entex, if there shall have been a material adverse change in
the Business Condition of FCP on or before the Closing Date.
Where action is taken to terminate this Agreement pursuant to this Section 8.1,
it shall be sufficient for such action to be authorized by the Board of
Directors of the party taking such action
9.2 Effect of Termination. In the event of termination of this Agreement
by either Entex or FCP as provided in Section 8.1, this Agreement and the Merger
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Entex or FCP or their respective officers or directors
except as set forth in Sections 7.25 (Expenses) and 7.27 (Confidentiality) and
except to the extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to be conditions
to the Merger and shall not survive the consummation of the Merger, except that
the agreements contained in Articles IV, VIII, IX and X herein shall survive the
consummation of the Merger.
10.2 Amendment. This Agreement may be amended by the parties hereto, at
any time before or after approval of the Merger by the FCP Shareholders;
provided that following approval of
-35-
<PAGE> 40
the Merger by the FCP Shareholders, no amendment shall be made which by law
requires the further approval of such shareholders without obtaining such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
10.3 Extension; Waiver. At any time prior to the Effective Time of the
Merger, each of FCP and Entex, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other, (ii) waive any inaccuracies in the representations and warranties made to
it contained herein or in any document delivered pursuant hereto, (iii) waive
compliance with any of the agreements or conditions for the benefit of it
contained herein and (iv) waive or modify performance of any of the obligations
of the other. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. No action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representation, warranty, condition or agreement contained herein. Waiver of
the breach of any one or more provisions of this Agreement shall not be deemed
or construed to be a waiver of other breaches or subsequent breaches of the same
provisions.
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or sent by telecopy,
confirmation received, to the parties at the following addresses and telecopy
numbers (or at such other address or number for a party as shall be specified by
like notice):
(a) if to Entex or Sub, to:
Entex Information Systems, Inc.
6 International Drive
Rye Brook, New York 10573-1058
Attn: Vice President and General Counsel
Telephone No.: (914) 935-3600
Telecopy No.: (914) 935-3880
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Richard J. Char, Esq.
Telephone No.: (415) 493-9300
Telecopy No.: (415) 493-6811
-36-
<PAGE> 41
(b) if to FCP, to:
FCP Technologies, Inc.
5726 Industry Lane PO Box 3818
Frederick, Maryland 21701-0906
Attn: Richard Nathanson, Chief Executive Officer
Telecopy No.: (301) 815-8857
Telephone No.: (301) 815-8759
with a copy to:
O'Connor & Hannan
1919 Pennsylvania Avenue, NW, Suite 800
Washington, DC 20006
Attn: Charles McCarthy
Telecopy No.: (202) 466-2198
Telephone No.: (202) 887-1466
10.5 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.6 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
10.7 Entire Agreement. This Agreement and the schedules, exhibits,
documents and instruments and other agreements among the parties delivered
pursuant hereto constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and are not intended to confer upon any other person any
rights or remedies hereunder except as otherwise expressly provided herein.
10.8 No Transfer. This Agreement and the rights and obligations set
forth herein may not be transferred or assigned by operation of law or otherwise
without the consent of each party hereto. This Agreement is binding upon and
will inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
10.9 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable
-37-
<PAGE> 42
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision.
10.10 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law or equity on
such party, and the exercise of any one remedy will not preclude the exercise of
any other.
10.11 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
10.12 Absence of Third Party Beneficial Rights. No provision of this
Agreement is intended, nor will be interpreted, to provide to create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee, partner or any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
10.13 Mutual Drafting. This Agreement is the joint product of Entex and
FCP, and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of Entex and FCP, and shall not be construed for or
against any party hereto.
10.14 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to its choice of law principles).
IN WITNESS WHEREOF, Entex, Sub and FCP have caused this Agreement to be
signed by their respective officers thereunto duty authorized, all as of the
date first written above.
EIS ACQUISITION CORPORATION FCP TECHNOLOGIES, INC.
By: /s/ John A. McKenna By: /s/ Richard Nathanson
John A McKenna, Jr., President Richard Nathanson
President
ENTEX INFORMATION SERVICES, INC.
By: /s/ John A. McKenna
John A McKenna, Jr., President
-38-
<PAGE> 43
EXHIBIT 5.4
[SHEET ONE OMITTED]
<PAGE> 44
FCP Disclosure Schedule Under Section IV
----------------------------------------
The following represents those variant matters which are now known to exist and
which previously have been disclosed to ENTEX by documents provided by FCP
Technology, Inc. (hereafter FCP) and Computers Plus L.P. as part of the FCP
response to various due diligence requests, and which are also specifically
referenced by category in the Representations and Warranties section of the
Agreement and Plan of Reorganization of July 9, 1996, as follows:
(a) Organization, Standing and Power
FCP holds a 99.9% interest in Computers Plus L.P. as sole general
partner.
(c) Authority
Requisite shareholder approval, referenced in Article VII, is required
before this transaction can be completed.
(h) No Defaults
FCP received a notice on June 24, 1996, indicating that, pursuant to
Section 3.3 of the Reseller Agreement, IE exercised its right to terminate the
Reseller Agreement effective as of June 20, 1996.
(i) Litigation
A claim has been made by one Jennifer Walsh for an alleged employment
discrimination, which has been set for hearing in the District Court of
Frederick County for September 9, 1996. Damages are estimated to be $50,000.
(k) Absence of Undisclosed Liabilities
Under the terms of a purchase agreement with Intelligent Electronics
("I.E.") there is a dispute regarding FCP's refusal to meet certain minimal
purchase requirements. They have alleged that this failure gives rise to a
significant liability exposure to which the company objects and views as highly
inflated.
(n) Major Contracts
<PAGE> 45
There is $120,780.74 owed to Mr. Nathanson as deferred compensation due him; and
deferred interest of $85,21245 owed the Sandhurst Group, et. al. Additionally,
there are a number of normal incentive compensation plans which are attached
which have been instituted by the Company in the normal course of its business
to provide additional incentives to individuals and groups.
Leases in current force and effect include the following:
1. New Jersey: Lincoln National
2. King of Prussia: lease with Trilem Inc.
(AE Triad Inc. General Partner)
3. Boston: Reservoir Place Realty Trust
Also: Intelligent Electronics (previously referenced herein).
<PAGE> 46
Exhibit 5.2 to Agreement and Plan of Reorganization
--------------------------------------------------
FCP RETENTION BONUS PROGRAM
On or before February 15, 1997 and subject in each case to the
attainment of the Individual Hurdle described in paragraph d. below, Entex shall
pay to the persons named on Attachment A hereto (which Attachment A shall be
prepared by Richard and Kim Nathanson within 30 days of the Closing Date and
attached hereto) a payment (the "Retention Bonus") equal to the percentage set
forth opposite their respective names, multiplied by the Aggregate Retention
Bonus (as hereinafter defined). The term "Aggregate Retention Bonus" shall mean
the sum of the Employee Retention Amount, the Customer Retention Amount and the
Support Amount (each as hereinafter defined); provided, however, that if the sum
of the Employee Retention Amount, the Customer Retention Amount and the Support
Amount exceeds $1,000,000 the Aggregate Retention Amount shall be equal to
$1,000,000.
a The Employee Retention Amount shall be determined by
calculating the number of Key FCP Employees (defined below) which remain
full-time employees of Entex or its subsidiaries at December 31, 1996 in
accordance with the following schedule:
<TABLE>
<CAPTION>
Retained Employee Retention Retained Employee Retention Retained Employee Retention
Employeees Amount Employees Amount Employees Amount
<S> <C> <C> <C> <C> <C>
77 $871,696 60 $679,245 43 $486,792
76 $860,377 59 $667,925 42 $427,925
75 $849,057 58 $656,604 41 $417,736
74 $837,736 57 $645,283 40 $407,547
73 $826,415 56 $633,962 39 $397,358
72 $815,094 55 $622,642 38 $387,170
71 $803,774 54 $611,321 37 $314,151
70 $792,453 53 $600,000 36 $305,660
69 $781,132 52 $588,679 35 $297,170
68 $769,811 51 $577,358 34 $288,679
67 $758,491 50 $566,038 33 $280,189
66 $747,170 49 $554,717 32 $181,132
65 $735,849 48 $543,396 31 $175,472
64 $724,528 47 $532,075 30 $169,811
63 $713,208 46 $520,755 29 $164,151
62 $701,887 45 $509,434 28 $158,491
61 $690,566 44 $498,113 27 $ 0
</TABLE>
<PAGE> 47
For purposes of this subparagraph, "Key FCP Employees" shall mean those
individuals named in Attachment B hereof.
b. The "Customer Retention Amount" shall be defined to mean an amount
based on the net revenues (revenues less warranty expenses, allowances and
returns; as derived from financial statements prepared in accordance with
generally accepted accounting principles applied on a consistent basis with
FCP's past practices) attributable to the FCP Customers (as hereinafter
defined), generated by the historic business of FCP from July 1, 1996 to
December 31, 1996 and determined in accordance with the following schedule:
<TABLE>
<CAPTION>
Net Revenues Customer Retention Amount
------------ -------------------------
<S> <C>
Greater than $18,000,000 $ 400,000
Greater than $15,000,000 but less than or equal to $18,000,000 $ 300,000
Greater than $12,000,000 but less than or equal to $15,000,000 $ 240,000
Greater than $10,000,000 but less than or equal to $12,000,000 $ 200,000
Greater than $ 8,000,000 but less than or equal to $10,000,000 $ 100,000
Less than or equal to $ 8,000,000 $ 0
</TABLE>
For purposes of this subparagraph, "FCP Clients" shall mean the
companies and entities named in Attachment C hereto.
c. The term Support Amount shall be defined to mean an amount based on
FCP's Nation Support Center ("NSC") service gross margins from the July 1, 1996
to December 31, 1996 (which service gross margins shall be equal to Net Revenues
attributable to FCP's service and support activities less the cost of software
subscriptions and parts used (as derived from financial statements prepared on a
consistent basis with FCP's past practices) and determined in accordance with
the following schedule:
<TABLE>
<CAPTION>
Service Gross Margins Support Amount
--------------------- --------------
<S> <C>
Greater than $2,700,000 $ 400,000
Greater than $2,400,000 but less than or equal to $2,700,000 $ 300,000
Greater than $2,100,000 but less than or equal to $2,400,000 $ 280,000
Greater than $1,800,000 but less than or equal to $2, 1 00,000 $ 240,000
Greater than $1,500,000 but less than or equal to $1,800,000 $ 200,000
Greater than $1,200,000 but less than or equal to $1,500,000 $ 170,000
Greater than $1,000,000 but less than or equal to $1,200,000 $ 135,000
Greater than $ 800,000 but less than or equal to $1,000,000 $ 100,000
Less than or equal to $ 800,000 $ 0
</TABLE>
d. With respect to each former FCP employee participating in this FCP
Retention Bonus Program, the payment of such former FCP employee's Retention
Bonus shall be further conditioned on the attainment or satisfaction of the
condition (the "Individual Hurdle") described opposite such former FCP
employee's name on Attachment A.
<PAGE> 48
Attachment A
(to be completed by Rick and Kim Nathanson and attached within
30 days following the Closing Date)
<TABLE>
<CAPTION>
Name Percentage Individual Hurdle
- ---- ---------- -----------------
<S> <C> <C>
Richard Nathanson none
Kim Nathanson none
</TABLE>
[add other names]
<PAGE> 49
Attachment B
KEY EMPLOYEES OF FCP TECHNOLOGIES, INC.
1. A. Catlett
2. A. Reed
3. A. Boehman
4. A. Dobelbower
5. B. Harris
6. B. Leibowitz
7. B. Moorer
8. B. Ohlson
9. B. Remmert
10. C. Anastos
11. C. Borucke
12. D. Barfield
13. D. Fullmer
14. D. Hickel
15. D. Jansen
16. D. Lipetz
17. D. Murray
18. D. Pritchard
19. D. Saylor
20. D. Sheiber
21. D. Weary
22. E. Choinski
23. F. Schimpf
24. G. Miller
25. G. Nelson
26. G. Quinn
27. H. Yeager
28. J. Albright
29. J. Biggs
30. J. Bruce
31. J. D'Antonio
32. J. Foltz
33. J. Gomez
34. J. Higgins
35. J. Hoffman
36. J. Jageman
37. J. McGarry
38. J. McNulty
39. J. Peeples
40. J. Philbrick
<PAGE> 50
41. J. Shi
42. J. Wilmer
43. K. Gnacek
44. K. Nathanson
45. L. Turkaly
46. L. Palm
47. M. Crow
48. M. Deffenbaugh
49. M. Hrynio
50. M. Melanson
51. M. Simmons
52. N. Spungen
53. P. Heery
54. P. Hetteshelmer
55. P. Panzerrela
56. P. Souders
57. R. Collins
58. R. Harris
59. R. Hawley
60. R. Miller
61. R. Nathanson
62. R. Shaffer
63. R. Snowden
64. R. Sparre
65. R. Vazzana
66. R. Waltz
67. R. Wood
68. S. Boughner
69. S. Burdette
70. S. Maxwell
71. S. Rabinowitz
72. S. Scott
73. S. Sharon
74. S. Sheehan
75. T. Baldwin
76. T. Giffillan
77. V. Marino
<PAGE> 51
Attachment C
CUSTOMER LIST (LESS ADVANTA AND ARMY)
27 Total Customers
1. BANM/BELL
2. Elf Technologies (related)
3. Elf Atochem
4. SEI Corp/Capital Resources
5. Rite Aid
6. State of Delaware
7 State of New Jersey
8. Mobil
9. Commonwealth of Mass
10. Stone and Webster
11. Dana Farber
12. National Medical Care
13. Robbins
14. Groundwater Tech
15. Foxboro
16. Kaiser Permanente
17. IMF
18. SCM Chemicals
19. Winchest Med. Center
20. Waverly Press
21. Barents
22. Lewin VHI
23. The Equitable
24. MCI
25. CommVault
26. BOC
27. ViaCom.
<PAGE> 1
EXHIBIT 10.13
[Company Logo]
Global Services Operation
General Electric Company
Property & Logistics Services
6161 Oak Tree Blvd.
Independence, OH 44131
July 15, 1997
Mr. Robert Weber
Entex Information Services, Inc.
6 International Drive
Rye Brook, New York 10573
Re: Sublease dated June 6, 1997 between General
Electric Company and Entex Information Services,
Inc.
Dear Mr. Weber
In light of the delays that have occurred in obtaining the landlord's
consent to the above-referenced Sublease, this letter confirms the following
agreement between General Electric Company and Entex Information Services, Inc.:
1. The term of the Sublease, and Sublessee's obligation to pay rent, shall
commence on the later of (a) August 1, 1997 and (b) the date on which
the landlord delivers to General Electric Company a signed copy of the
Consent to Sublease and General Electric Company, in turn, delivers such
signed copy to Entex.
2. The provisions of Paragraph 15 of the Sublease are deleted and General
Electric Company and Entex Information Services, Inc. each waive any
claim that the Sublease is ineffective based upon the provisions of said
Paragraph 15.
3. Except as set forth in items 1 and 2 above, all terms and conditions of
the Sublease are reaffirmed.
Please confirm your agreement to the foregoing provisions by
countersigning this letter in the appropriate place below.
Very truly yours,
General Electric Company
By: /s/ R. PALAME
------------------------------------
Title: Region Mgr
<PAGE> 2
Entex Information Services, Inc.
By:/s/ Dale Allardyce
Title: EVP, Operations
Re: Sublease dated June 6, 1997 between General Electric Company and Entex
Information Services, Inc.
Attachment to letter dated July 15, 1997 addressed to Mr. Robert Weber
<PAGE> 3
SUBLEASE
--------
THIS SUBLEASE, made and entered into as of the 6th day of June, 1997, by
and between GENERAL ELECTRIC COMPANY, a New York corporation having an office
and place of business at Two Corporate Drive, 6th Floor - CS&DO, P.0. Box 861,
Shelton, Connecticut 06484, hereinafter called "GE", and ENTEX INFORMATION
SERVICES, INC., a Delaware corporation, having an office and principal place of
business at 6 International Drive, Rye Brook, New York 10573, hereinafter called
"Sublessee".
W I T N E S S E T H :
WHEREAS, by a certain written lease agreement dated February 15, 1995
("Master Lease"), Royal Executive Park II (hereinafter called "Owner") leased to
GE those certain premises ("Premises") consisting of 3,808 square feet of net
rentable space on the first floor of the building ("Building") located at and
commonly known as 6 International Drive, Rye Brook, Westchester County, New York
which, together with such other improvements and appurtenances therein
mentioned, are more particularly described in said Master Lease; and
WHEREAS, Sublessee desires to sublease and hire from GE, and GE is
willing to sublet to Sublessee, the entire Premises as described in said Master
Lease ("Sublease Premises"), on the terms and conditions more particularly
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
agreements herein contained, GE and Sublessee agree as follows:
1. GE, for and in consideration of the rents and covenants specified to
be paid, performed and observed by Sublessee, does hereby sublease to Sublessee
the
<PAGE> 4
aforementioned Sublease Premises for the term and according to the covenants and
conditions contained herein.
2. This Sublease shall be for a term commencing on the 16th day of June,
1997 and terminating on the 29th day of April, 2000.
3. Sublessee shall pay to GE as rent for said Sublease Premises the sum
of Sixty-Six Thousand Six Hundred Forty and 00/100 Dollars ($66,640.00) per
annum, payable in equal monthly installments of Five Thousand Five Hundred
Fifty-Three and 33/100 Dollars ($5,553.33) in advance on the first day of each
and every month during the term hereof. In addition, Sublessee shall promptly
pay to GE: (a) four and 32/100ths per cent (4.32%) of Landlord's Expenses (as
defined in Section 4.2 of the Master Lease); (b) the cost of electric power for
Sublessee's use as provided in Section 5 (c) of the Master Lease, which cost is
presently $714.00 per month, but is subject to adjustment in accordance with the
terms of the Master Lease; and (c) any payments which may be required to be made
by GE to Owner pursuant to the Master Lease, and which are solely for the
benefit of Sublessee, except those payments set forth in Section 10 (b) of the
Master Lease and any other payments specifically excluded by the terms of this
Sublease or which cover a period prior to the commencement date of this
Sublease. For purposes of determining Sublessee's additional rent obligation
under clause (a) of the preceding sentence, the term "Base Year" set forth in
Section 4.2 (a)(ii) of the Master Lease shall mean calendar year 1997 for
Operating Expenses and July 1, 1997 through June 30, 1998 for Real Estate Taxes
which are based on a fiscal, and not a calendar, year. Any such payments which
Sublessee is herein required to make which cover a period of time both before
and after the commencement date of this Sublease shall be prorated between the
parties hereto as of the commencement date of this Sublease. Payment of said
rent and additional rent shall be made to GE at its address first above written
or at such other place or to such other party as GE may designate in writing,
without any offset or deduction whatsoever. In addition, if the Master Lease
requires the tenant to make payments of
Page 2
<PAGE> 5
real estate taxes and/or utilities which are applicable to the Sublease Premises
directly to the taxing authorities and/or utility companies, as the case may be,
Sublessee shall make such payments in a timely manner and promptly supply GE
with evidence thereof, and such shall be deemed to be additional rent hereunder.
4. The provisions of the Master Lease are, except as otherwise herein
specifically provided, hereby incorporated in this Sublease with the same effect
as if entirely rewritten herein, and shall fix the rights and obligations of the
parties hereto with respect to the Sublease Premises with the same effect as if
GE and Sublessee were, respectively, the landlord and tenant named in the Master
Lease. Sublessee hereby covenants to perform the covenants and undertakings of
GE as tenant under the Master Lease to the extent the same are applicable to the
Sublease Premises during the term of this Sublease, and agrees not to do or
permit to be done any act which shall result in a violation of any of the terms
and conditions of said Master Lease. Sublessee agrees to indemnify and save GE
harmless against and from any and all loss, cost, expense and liability arising
out of or relating to any violation or breach of, or default under, any
provision of the Master Lease caused by any act or omission of Sublessee. Except
as otherwise specifically provided herein, Sublessee is to have the benefit of
the covenants and undertakings of Owner as landlord in the Master Lease to the
extent the same are applicable to the Sublease Premises during the term of this
Sublease. It is expressly understood and agreed, however, that GE is not in the
position to render any of the services or to perform any of the obligations
required of GE by the terms of this Sublease, and that performance by GE of its
obligations hereunder are conditioned upon due performance by Owner of its
corresponding obligations under the Master Lease. It is further understood and
agreed, therefore, that notwithstanding anything to the contrary contained in
this Sublease, GE shall not be in default under this Sublease for failure to
render such services or perform such obligations required of GE by the terms of
this Sublease which are the responsibility of the Owner as landlord under the
Master Lease, but GE
Page 3
<PAGE> 6
agrees to take all reasonable measures to insure that Owner performs said
obligations. The term "reasonable measures" shall not include legal action
against Owner for its failure to so perform unless Sublessee agrees to pay all
costs and expenses in connection therewith.
5. The parties agree that the following provisions of the Master Lease
are, for the purposes of this Sublease, hereby deleted: Section 4.1 (Base Rent);
Section 22 (Right to Extend); and Section 23 (Tenant Improvements). The
remaining provisions of said Master Lease shall, for the purposes of this
Sublease and to the extent that same are applicable, remain in full force and
effect as between GE and Sublessee as provided in Paragraph 4 of this Sublease,
except as said provisions have been otherwise amended or modified by this
Sublease. Should there be any conflict between the terms of this Sublease as
specifically set out herein and the terms of the Master Lease which are
incorporated herein by reference, the terms specifically set out herein shall
control.
6. Any holding over by Sublessee beyond April 29, 2000, the expiration
date of this Sublease, shall be deemed unlawful unless expressly consented to by
GE in writing, and GE shall be entitled to any and all remedies in law or in
equity by reason of such unlawful holding over by Sublessee. Sublessee agrees to
indemnify and save GE harmless against and from any and all loss, cost, expense
and liability incurred by GE under the Master Lease by reason of any such
holding over.
7. All notices, requests, demands and other communications with respect
to this Sublease, whether or not herein expressly provided for, shall be in
writing and shall be deemed to have been duly given either (a) forty-eight (48)
hours after being mailed by United States First-Class Certified or Registered
Mail, postage prepaid, return receipt requested or (b) the next business day
after being deposited (in time for delivery by such service on such business
day) with Federal Express or another national courier service, for delivery to
the parties at their respective addresses first
Page 4
<PAGE> 7
above written, or to such other address or addresses as may hereafter be
designated by either party in writing for such purpose.
8. This Sublease is subject and subordinate in all respects to said
Master Lease. Sublessee acknowledges that it has received a copy of said Master
Lease.
9. Sublessee shall not, without the prior written consent of GE, assign
the term hereby demised, nor suffer or permit it to be assigned by operation of
law or otherwise, nor shall the Sublessee, without the prior written consent of
GE, let or underlet or permit the said sublease Premises or any part thereof to
be used by others for hire. Notwithstanding the foregoing, but subject to the
terms of the Master Lease, Sublessee shall be entitled to assign this Sublease
or further sublet the Sublease Premises to an Affiliate of Sublessee, provided
Sublessee gives GE at least fifteen (15) days prior written notice of such
assignment or subletting. For purposes of the preceding sentence, "Affiliate"
shall mean a corporation or other business entity which controls Sublessee,
which is controlled by Sublessee or which is, together with Sublessee, under the
control of a common parent corporation. No assignment or sublease shall operate
to release Sublessee from any of its obligations hereunder.
10. Sublessee acknowledges that it has inspected the Sublease Premises
demised hereunder, and is fully satisfied with their condition and accepts the
same, "as is". GE has made no representation or warranties of any nature
whatsoever with regard to the Sublease Premises, other than those set forth
herein, and GE shall have no obligation or duty with regard to preparation of
the Sublease Premises for occupancy by Sublessee.
11. Sublessee shall indemnify and save harmless GE against and from any
and all liability, damage, expense, cause of action, suits, claims or judgments
for injury or death to persons or damage to property sustained by anyone in and
about said Sublease Premises or any part thereof, caused by Sublessee's
negligent acts or omissions.
Page 5
<PAGE> 8
12. Sublessee shall not cause or permit any "Hazardous Substances" (as
hereinafter defined) to be used, stored, generated or disposed of in, on or
about the Sublease Premises by Sublessee, its agents, employees, contractors or
invitees, except for such Hazardous Substances as are normally utilized in the
activities which are permitted on the Sublease Premises pursuant to the Master
Lease and this Sublease and which are necessary to Sublesse's business. Any such
Hazardous Substances permitted on the Sublease Premises as hereinabove provided,
and all containers therefor, shall be used, kept, stored and disposed of in a
manner that complies with all federal, state and local laws or regulations
applicable to any such Hazardous Substances. Sublessee shall indemnify and hold
harmless GE from any and all claims, damages, fines, judgments, penalties,
costs, expenses or liabilities (including, without limitation, any and all sums
paid for settlement of claims, attorneys' fees, consultant and expert fees)
arising during or after the Sublease term from or in connection with the use,
storage, generation or disposal of Hazardous Substances in, on or about the
Sublease Premises by Sublessee, Sublessee's agents, employees, contractors or
invitees. As used herein, "Hazardous Substances" means any substance with, is
toxic, ignitable, reactive, or corrosive and which is regulated by any state or
local government or by the United States government. "Hazardous Substances"
includes any and all material or substances which are defined as "hazardous
waste", "extremely hazardous waste" or a "hazardous substance" pursuant to
state, federal or local governmental law. "Hazardous Substances" includes but is
not restricted to asbestos, polychlorinated biphenyls ("PCBs") and petroleum
products.
13. Neither GE nor Sublessee have had any relationship or dealings with
any real estate broker in connection with this Sublease except McCarthy
O'Callaghan. GE shall pay any commission due McCarthy O'Callaghan in connection
with this Sublease. GE and Sublessee each shall indemnify, defend and hold the
other
Page 6
<PAGE> 9
harmless from claims by any other broker who has or alleges that it has
represented GE or Sublessee and is entitled to a commission in connection with
this Sublease.
14. This Agreement and any Exhibits attached hereto:
(a) Contain the entire agreement among the parties hereto with respect
to the subject matter covered hereby;
(b) May not be amended or rescinded except by an instrument in
writing executed by each of the parties hereto;
(c) Shall inure to the benefit of and be binding upon the successors
and permitted assigns of the parties hereto.
15. This Sublease is subject to and conditioned upon the written consent
of Owner to this subletting, such consent to be given by Owner executing the
consent to this Sublease set forth below no later than June 16, 1997.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the day and year first about written.
Signed, sealed and delivered
in the presence of: GENERAL ELECTRIC COMPANY
/s/ MARGE GOSS By: /s/ R. PALAME
- ---------------------------------- -----------------------------
Witness Title: Region Manager
/s/ [SIGNATURE ILLEGIBLE]
- ----------------------------------
Witness
Signed, sealed and delivered
in the presence of: ENTEX INFORMATION SERVICES, INC.
/s/ JILL FRIEDLANDER By: /s/ KENNETH A. GHAZEY
- ----------------------------------- ----------------------------
Witness Title: Executive Vice
President, CFO
/s/ ROBERT A. WEBER
- -----------------------------------
Witness
Page 7
<PAGE> 10
CONSENT TO SUBLEASE
-------------------
Royal Executive Park II, a New York limited partnership ("Landlord")
under that certain lease ("Original Lease") dated February 15, 1985, made by and
between the Landlord and General Electric Company, a New York corporation
("Original Tenant"), hereby grants its consent to that certain Sublease
("Sublease") dated June 6, 1997, made by and between the Original Tenant, as
Sublandlord, and Entex Information Services, Inc. ("Subtenant"), as Subtenant,
covering certain premises ("Premises") described with particularity in the
Sublease located on the first floor of Building No. 6 in Royal Executive Park,
Rye Brook, New York. A true and correct copy of the Sublease is attached hereto
as Exhibit "A."
It is understood and agreed as follows:
1. This Consent to Sublease shall in no way release the Original Tenant
from any of its covenants, agreements, liabilities and duties under the Original
Lease. It is further agreed that the Original Tenant shall be responsible for
the collection of all rent due it from the Subtenant, and that the Landlord
shall look only to the Original Tenant as its tenant. Nothing herein contained
shall:
a. operate as a representation or warranty by Landlord;
b. be deemed or construed to modify, waive, impair or affect any of
the provisions, covenants, agreements, terms or conditions
contained in the Original Lease, or to waive any present or
future breach thereof, or any of Original Tenant's obligations
under the Original Lease, or any right or remedy of Landlord
against Original Tenant or otherwise, or to enlarge or increase
Landlord's obligations or Original Tenant's rights under the
Original Lease or otherwise; or
c. create any privity of contract or estate between Subtenant and
Landlord.
2. The Sublease is and shall remain subject and subordinate at all times
to all of the provisions, covenants, agreements, terms and conditions contained
in the Original Lease, and to all renewals, modifications, replacements and
extensions thereof.
3. In the event of any inconsistency between the terms and conditions of
this Consent and the terms and conditions of the Sublease, the terms and
conditions of this Consent shall govern.
4. Subject to the terms of paragraph 5 hereof, upon the expiration or
any earlier termination of the term of the Original Lease, or in case of the
surrender of the Original Lease by Original Tenant to Landlord, the Sublease and
its term shall expire and come to an end as of the effective date of such
expiration, termination, or surrender and Subtenant shall vacate the Premises on
or before such date. In the event that Subtenant fails to vacate the Premises on
or before the expiration of the Sublease, Original Landlord shall be entitled to
all of the rights and remedies
<PAGE> 11
available to Landlord against a tenant holding over after the expiration of the
lease term as set forth in the Original Lease.
5. If, at any time prior to the expiration of the term of the Sublease,
the Original Lease shall terminate or be terminated for any reason, Subtenant
agrees, at the election and upon written demand of Landlord, to attorn to
Landlord upon the then executory terms and conditions set forth in the Sublease
for the remainder of the term of the Sublease. The foregoing provisions of this
paragraph shall apply notwithstanding that as a matter of law, the Sublease
may otherwise terminate upon the termination of the Original Lease, and shall be
self-operative upon such written demand of the Landlord and no further
instrument shall be required to give effect to said provisions. Upon demand of
the Landlord, Subtenant agrees, however, to execute, from time to time,
document(s) in confirmation of the foregoing provisions of this paragraph
satisfactory to the Landlord, in which Subtenant shall acknowledge such
attornment and shall set forth the terms and conditions of its tenancy. Nothing
contained in this paragraph shall be construed to impair or modify any right
otherwise exercisable by the Landlord, whether under the Original Lease or any
other agreement.
6. Notwithstanding anything to the contrary set forth in the Sublease,
this Consent shall not be deemed or construed as a consent by Landlord to, or as
permitting, any other or further leasing by Original Tenant or anyone claiming
under or through Original Tenant (including, without limitation, Subtenant), and
no other or further lease of the Premises or any part thereof or any assignment
of the Sublease or modification thereof shall be made by Original Tenant or
anyone claiming under or through Original Tenant (including, without limitation,
Subtenant) without Landlord's prior written consent in each instance as set
forth in the Lease.
7. No amendment, modification or revision of the Sublease shall hereafter
be made without the prior written consent of Landlord. Landlord shall not be
responsible for any required compliance with the Americans with Disabilities Act
arising or resulting from alterations to the space demised under the Sublease
which are made by Original Tenant or Subtenant.
8. Original Tenant and Subtenant hereby represent to Landlord that the
Sublease attached hereto as Exhibit "A" (a) is a correct and complete copy of
the document it purports to be, and (b) contains the entire agreement and
understanding between Original Tenants and Subtenant with regard to the subject
matter contained thereof, specifically including without limitation, all
agreements concerning rent and other considerations payable by Subtenant to
Original Tenant for Premises and the Sublease will not generate any "sublease
profit" to which Landlord is entitled under the terms of the Original Lease.
9. Original Tenant hereby agrees to indemnify, defend (if requested by
Landlord) and hold harmless Landlord, the managing agent of the building and
their respective officers, directors, employees, agents, and beneficiaries from
and against any and all liabilities and claims for brokerage commissions and
fees arising out of or in connection with the Sublease of the Premises.
2
<PAGE> 12
10. This Agreement shall be binding upon and inure to the benefit of
Landlord, Original Tenant, Subtenant and their respective successors and
permitted assigns.
11. Simultaneously with the execution of this Consent, Original Tenant
shall pay to Landlord's counsel, Handsman & Kaminsky LLP, an amount equal to
$1,00.00 covering attorneys' fees incurred by Landlord in connection with its
review of the Sublease and the giving of this Consent.
Dated as of this 15th day of July, 1997.
LANDLORD
ROYAL EXECUTIVE PARK II,
a New York limited partnership
By: JMB Income Properties, Ltd-XI,
a limited partnership, general partner
By: JMB Realty Corporation, a Delaware
Corporation, managing general partner
By: /s/ [SIGNATURE ILLEGIBLE]
--------------------------------
Name:
Title: V.P.
ORIGINAL TENANT
GENERAL ELECTRIC COMPANY ATTEST:
By: /s/ ROBERT PALAME By: /s/ MARGE GOSS
-------------------------------- -------------------------
Name: Robert Palame
Title: Region MGR
SUBTENANT
ENTEX INFORATION SERVICES, INC. ATTEST:
By: /s/ KENNETH A. GHAZEY By: /s/ ROBERT A. WEBER
-------------------------------- --------------------------
Name:
Title:
3
<PAGE> 1
EXHIBIT 10.14
LEASE
-----
ROYAL EXECUTIVE PARK II,
Lessor
and
ENTEX INFORMATION SERVICES, INC.,
Lessee
Premises in the Royal Executive Park,
King Street, Rye Brook, New York
January 20, 1995
<PAGE> 2
LEASE
-----
LEASE, dated as of January 20, 1995 between ROYAL EXECUTIVE PARK II, a
New York limited partnership, with an office c/o Heitman Properties Ltd., 1211
Avenue of the Americas, New York, New York 10036 ("Landlord"), and ENTEX
INFORMATION SERVICES, INC., a Delaware corporation, with an office at 6
International Drive, Rye Brook, New York 10573 ("Tenant").
ARTICLE ONE
-----------
LEASE OF PREMISES
-----------------
Section 1.01. Lease of Premises. (a) Landlord hereby leases to Tenant,
and Tenant hereby leases from Landlord, upon and subject to the covenants,
agreements, terms, provisions and conditions of this Lease, for the term and at
the rent hereinafter stated, the premises referred to in subsection (b) below,
situated on a plot of land (the "Land") designated as Phase II in the Royal
Executive Park, King Street, Rye Brook, New York (such Phase being herein
referred to as the "Executive Park").
(b) The Leased Premises shall be that portion of the ground floor
indicated by crosshatching on the floor plan annexed hereto as Exhibit A and
made a part hereof (the "Leased Premises"), in the building known as 6
International Drive, Rye Brook, New York (a/k/a Building 6) in the Executive
Park (the "Building"), and all fixtures, equipment, improvements, installations
and appurtenances which at the commencement of or during the term of this Lease
are attached to or used in connection with such space leased by Tenant, but
excluding (i) any personal property or trade fixtures of Tenant and (ii) such
space as may be excluded from the Leased Premises pursuant to any provision of
this Lease.
(c) This Lease includes the right of Tenant to use the Common
Building Facilities (as defined in subsection 1.01(d) below) in common with
other tenants in the Building and/or in the buildings designated on said Site
Plan as Buildings 4 and 5.
(d) The term "Common Building Facilities" shall mean all of the
common facilities in the Building designed and intended for use by all tenants
in the Building or in the portion of the Executive Park (excluding parking
spaces in Phase II designated for single tenant use which do not exceed 329
spaces) designed and intended for use by tenants in the buildings designated as
4,5 , and 6 in the Executive Park, in common with Landlord and each other,
including, but not limited to hallways, lobbies, receiving areas, loading docks,
elevators, stairways, telephone and
<PAGE> 3
electrical closets, walkways, plazas, courts, service areas, landscaped areas
and all other common and service areas of the Building or the Executive Park
intended for such use.
Section 1.02. Access Drive. The Executive Park shall include rights in
the existing paved access drive running to and from King Street as shown on the
Site Plan, provided, however, that the owner of the Adjoining Premises
(designated as Phase I on the Site Plan) and its successors and assigns, shall
have the right to use that portion of said access drive which runs from east to
west and forms the northerly boundary of Phase I (the "Access Drive") in common
with Tenant and other occupants of Phase I and Phase 11 for ingress and egress
of motor vehicles and pedestrians to and from King Street to the Adjoining
Premises and for the installation of underground utilities. Landlord and/or the
owner of the Adjoining Premises shall also have the right to use the Access
Drive in connection with the extension or widening thereof over and upon the
Adjoining Premises, provided that same shall not materially adversely affect
Tenant's access to the Building. Landlord and/or the owner of the Adjoining
Premises shall have the right to relocate the Access Drive or to substitute
therefor another access drive.
Section 1.03. Cancellation Option. Both Landlord and Tenant shall have
the right to cancel this Lease effective at any time following July 31, 1995 by
delivering not less than sixty (60) days' prior written notice thereof to the
other party. As a condition to the effectiveness of any cancellation notice
delivered by Tenant, Tenant shall not be in monetary default hereunder as of the
date fixed for cancellation and Tenant shall pay to Landlord, simultaneously
with delivery of its cancellation notice (time being of the essence), a
cancellation fee (by good certified or official bank check) equal to Thirty-Five
Thousand Three Hundred Fifty-Six ($356.00) Dollars plus the unamortized amount
of any brokerage commission payable by Landlord in connection with this Lease.
In no event shall Landlord be obligated to pay any cancellation fee to Tenant if
Landlord shall exercise its right to cancel this Lease pursuant to this Section
1.03. If either Landlord or Tenant shall deliver any such cancellation notice,
then this Lease shall be deemed terminated as of the date fixed for lease
termination in such party's cancellation notice (which shall be the last day of
the month) and Tenant shall vacate the Premises on such cancellation date in the
condition required at the Expiration Date hereof, time being of the essence. If
Tenant shall fail to timely vacate the Premises, then the holdover provisions
set forth in this Lease shall apply. If Landlord or Tenant shall cancel this
Lease as aforesaid, then following the date of cancellation neither Landlord nor
Tenant shall have any further rights or obligations hereunder except as to any
obligations relating to the period prior to the dated fixed for cancellation and
except as otherwise provided in this Lease.
2
<PAGE> 4
ARTICLE TWO
-----------
TERM
----
Section 2.01. Term. The term of this Lease (the "Term") shall commence
on February 1, 1995 (the "Term Commencement Date") and shall terminate on
January 31, 1996 (the "Expiration Date") or on such earlier date on which the
term may expire or be terminated pursuant to the provisions of this Lease or
pursuant to law.
ARTICLE THREE
-------------
CONDITION OF PREMISES
---------------------
Section 3.01 Condition of Premises. Tenant has examined the Building
(including the Leased Premises), is familiar with the physical condition thereof
and is leasing the Leased Premises in its "as is" condition. Except as otherwise
provided herein, Landlord has not made and does not make any representations or
warranties as to the physical condition, expenses, operation and maintenance, or
any other matter or thing affecting or related to the Building or the Leased
Premises therein located. Landlord shall have no obligation to perform any work
in the Leased Premises in order to prepare same for Tenant's occupancy, all of
which work shall be installed by Tenant or its contractors, at Tenant's sole
cost and expense, in accordance with the provisions hereof.
ARTICLE FOUR
---------
RENTAL
------
Section 4.01. Annual Rent.
(a) Tenant shall pay to Landlord as rent, at the office of Landlord
at c/o Heitman Properties Ltd., 1211 Avenue of the Americas, New York, New York
10036 or elsewhere as directed from time to time by Landlord's written notice to
Tenant, base rental per annum (the "Annual Rental") in an amount equal to Two
Hundred Twelve Thousand One Hundred ThirtyFive ($212,135.00) Dollars per annum,
payable in equal monthly installments of Seventeen Thousand Six Hundred
Seventy-Seven and 92/100 ($17,677.92) Dollars, for the period commencing on the
Term Commencement Date to and including the Expiration Date hereof.
3
<PAGE> 5
(b) The Annual Rental shall be Payable in equal monthly installments, in
advance, on the first day of each and every month. Simultaneously with the
execution hereof, Tenant has delivered to Landlord a check in the amount of
$17,677.92, which payment (subject to collection) represents the monthly Annual
Rental for February, 1995.
ARTICLE FIVE
------------
SERVICES
--------
Section 5.01. Standard of Operations; Cafeteria Landlord shall at all
times operate and maintain the Building in accordance with a standard at least
as high as that customarily followed in the operation and maintenance of
comparable office buildings in Westchester County and, without limiting the
foregoing, shall provide the specific facilities, utilities and services set
forth in this Article.
Section 5.02. Heating, Ventilating and Air Conditioning.
(a) Landlord shall provide heating, ventilating and air conditioning
("HVAC") and snow removal consistent with that offered by first class office
buildings in the vicinity, Landlord shall furnish HVAC services in season as
required for Tenant's comfortable use and normal occupancy of the Leased
Premises from 8:00 a.m. to 6:00 p.m., Mondays through Fridays, except holidays
and from 9:00 a.m. to 1:00 p.m. on Saturdays. Holidays shall be New Year's Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day,
President's Day and such other days as are locally observed by Tenant. Tenant
shall advise Landlord of its local holiday schedule and any changes thereto.
(b) Landlord shall, upon reasonable advance notice from Tenant (by
4:00 p.m. for evening service and 4:00 p.m. Friday for weekend service), furnish
to Tenant HVAC services at any time or times other than the regular hours
specified above, with any such overtime service furnished to Tenant at an
initial charge of $25.00 per hour, subject to reasonable increases based on
prevailing market charges for overtime HVAC services.
(c) For HVAC and humidity requiring special operating hours or other
conditions which necessitate the use of self-contained units not served by the
Building's chilled water system (the "Special Systems"), Landlord shall furnish
electrical power to Tenant for Tenant's use in installing and operating, at
Tenant's expense, one or more Special Systems. Tenant shall bear any extra
expense incurred by Landlord in furnishing such power from the Building's
systems or in expanding the Building's systems, if necessary, to provide such
electrical power. Each Special System shall require the prior written consent of
Landlord which shall not be unreasonably withheld or delayed.
Section 5.03. Electrical Service. Landlord shall provide an electrical
distribution system and electrical service for the Building at the level of not
less than four watts per square foot.
4
<PAGE> 6
Landlord shall cause to be furnished and shall pay for electricity used in
connection with HVAC and the Common Building Facilities as an item included in
Operating Expenses; provided, however, that Tenant shall bear the expense of
electric power used in the Leased Premises, exclusive of electric power used in
connection with HVAC and the Common Building Facilities. The cost of electric
power for Tenant's use shall be $2,272.88 per month, subject to increases (but
not decreases) based upon surveys prepared by Landlord's contractor at Tenant's
expense, which surveys may be updated from time to time, and Tenant shall pay to
Landlord as additional rent together with monthly installments of the Annual
Rental the cost of the electric service so determined.
Section 5.04. Elevators. Landlord shall provide passenger elevators
serving the Building. The passenger elevators shall be available during all
working hours of all working days, and, at all other times, there shall be at
least one passenger elevator available to serve the Building.
Section 5.05. Light Bulbs and Water. Landlord shall furnish and/or
install at its expense
(a) all initial and replacement light bulbs, fluorescent tubes and
ballasts in the Common Building Facilities; and (b) water, including heated
water, to serve the Leased Premises as required for lavatory and drinking
purposes. Landlord shall furnish and/or install all initial light bulbs,
fluorescent tubes and ballasts for the Leased Premises. Landlord shall provide,
at Tenant's expense, replacement light bulbs, fluorescent Tubes and ballasts for
the Leased Premises. Water for special purposes shall be separately metered to
Tenant through meters installed by Landlord at Tenant's expense.
Section 5.06. Building Security. (a) Landlord does not contemplate
retaining security guards to be stationed in the Building. If Tenant requests
Landlord to supply special security services. These services will be billed to
Tenant directly and will not be included in Operating Expenses.
(b) Tenant, at its expense and with the prior written approval of
Landlord, may design and install such safety and security systems or devices,
including without limitation, electronic security devices and auxiliary
emergency electric power supplies, as Tenant may deem appropriate.
Section 5.07. Janitorial Services. (a) Landlord shall provide, at its
expense, the cleaning and janitorial services (the "Janitorial Services") and
window cleaning services set forth in Exhibit B hereto.
ARTICLE SIX
-----------
TENANT PARKING
--------------
Section 6.01. Tenant Parking. (a) Subject to the provisions of Section
6.01(c) Landlord shall provide Tenant with access to not less than 40 parking
spaces to be used in common with other
5
<PAGE> 7
tenants at no additional cost to Tenant. The parking spaces shall be available
for use twenty-four (24) hours a day, every day of the year, and shall be
illuminated after dark. Landlord shall monitor and enforce Tenant's parking
rights granted hereby.
(b) If Tenant, its permitted assignees or subtenants and/or their
respective employees, licensees and guests at any time during the Term are not
able to use the parking spaces because of unauthorized use thereof, Landlord
shall take reasonable steps including, if appropriate, the posting of signs, the
distribution of parking stickers and the towing away of unauthorized vehicles,
to end further unauthorized use.
(c) Tenant understands and agrees that the parking spaces provided by
Landlord shall be utilized solely for the parking of passenger vehicles,
exclusive of trucks, vans and service vehicles (except for normal deliveries of
supplies and equipment to Tenant in the regular course of its business), and
that no maintenance or service of vehicles shall be permitted.
(d) No fence or other barrier shall be erected at the parking spaces
designated for Tenant.
(e) Tenant agrees to minimize the traffic impact of the occupancy of
Building by utilizing its best efforts to encourage car pooling, use of public
transportation, and staggered working hours for its employees.
ARTICLE SEVEN
-------------
USE AND ACCESS
--------------
Section 7.01. Use. (a) Tenant, its Affiliates (as defined in Section
16.01) and permitted assignees and subtenants shall have the right to use the
Leased Premises (excluding Tenant's Parking Spaces) for general and executive
office purposes and for all activities normally incidental thereto and for no
other purpose. In no event shall the Leased Premises be used by a tenant or
occupant which is of the following character: telecommunications common carrier,
banks, automated tellers and banking services, newsstands, tobacconists,
markets, grocery stores, bars, saloons, cocktail lounges, pawn shops, employment
agencies, union hiring halls or uses of like character of the foregoing.
(b) Tenant shall not use the Leased Premises for purposes prohibited
or not provided for under this Lease except upon Landlord's prior written
consent. Tenant shall not use the Leased Premises in any manner which would be
incompatible with a first class office park and/or which would have the effect
of materially lowering the rental and/or capital value of the Leased Premises
and/or the Executive Park.
6
<PAGE> 8
Section 7.02. Access. Tenant, its Affiliates and permitted subtenants
and their respective employees, licensees and guests, shall have access to the
Leased Premises at all times, twenty-four (24) hours per day, every day of the
year.
ARTICLE EIGHT
-------------
REPAIRS AND MAINTENANCE
-----------------------
Section 8.01. Landlord's Obligation to Repair and Maintain. Landlord
shall (except as otherwise provided in Section 8.02 herein) keep and maintain in
good repair and working order and perform necessary maintenance upon the
Building and the Common Building Facilities and all parts thereof (exclusive of
the Leased Premises), including, but not limited to, the roof, parking areas,
elevators, lighting, HVAC (other than supplemental HVAC units which hereafter
may be installed by Tenant), plumbing, floors, corridors, windows, window
frames, common area lobbies and equipment within and serving the Building
(exclusive of the Leased Premises). Landlord shall keep and maintain in good
repair and working order the HVAC system currently serving the Leased Premises
(other than supplemental units, as aforesaid) and existing plumbing therein
unless damaged by reason of Tenant's negligence or wilful misconduct.
Notwithstanding the foregoing, Landlord shall not be obligated to make and
repair or perform any maintenance which Tenant is obligated to make or perform
pursuant to Section 8.02 of this Lease.
Section 8.02. Tenant's Obligations. Tenant shall maintain all of
Tenant's property within the Leased Premises and shall repair any and all damage
to the Building and/or the Leased Premises caused by it, its agents or
employees, except damage by fire or other insured casualty or which may be due
to the negligence of Landlord, its agents or employees. Except as otherwise
provided in Article Eleven or in any other provision of this Lease, upon
termination of this Lease, Tenant shall surrender and deliver up the Leased
Premises in the same condition in which they existed on the Term Commencement
Date, except for ordinary wear and tear, repairs and maintenance assumed by
Landlord, Permitted Alterations (as hereinafter defined), damage arising from
fire or other insured casualty and damage caused by others for whom Tenant is
not responsible.
ARTICLE NINE
------------
FIRE AND OTHER CASUALTY
-----------------------
Section 9.01. Damage or Destruction. (a) If the Leased Premises or any
part thereof should be destroyed or damaged by fire or other insured casualty
("insured casualty" meaning fire or other casualty Landlord is required to
insure against pursuant to Article Twenty-Six of this Lease) during the term of
this Lease and such damage or destruction was not caused by the
7
<PAGE> 9
negligence or willful misconduct of Tenant, its agents or employees, then
(unless the Lease is terminated by Landlord or Tenant as hereinafter provided)
Landlord shall promptly proceed to reconstruct, restore and repair the Leased
Premises, as the case may be, to a condition substantially equivalent to their
former construction.
Commencing with the date of such damage, provided such damage was not
caused by the negligence or willful misconduct of Tenant, its agents or
employees, the rent provided for herein shall abate pro rata to the extent that,
and for so long as, any portion of the Leased Premises is not reasonably usable
with reasonable ingress and egress and its proportionate number of required
parking spaces, and is not actually used, by Tenant in the ordinary conduct of
its business.
(b) It is agreed that if the Building is totally destroyed by any
cause or is so substantially destroyed that reconstruction would require more
than three (3) months, either Landlord or Tenant may elect to terminate this
Lease by giving the other party written notice of such election within thirty
(30) days after the giving of notice from Landlord hereinafter provided for.
Such termination shall be effective as of the date of such election.
(c) In the event of any casualty, Landlord shall, within twenty (20)
days thereafter, give Tenant written notice of to estimated time required to
repair the same. If Landlord and Tenant shall disagree as to the probable
reconstruction period, the matter shall be determined by an independent
architect reasonably acceptable to both parties, and the thirty (30) day period
for giving of a notice of termination shall commence upon the determination of
such architect that more than three (3) months is required to reconstruct the
Building.
(d) In the event of a casualty, if the reconstruction of the Building
can be completed within three (3) months, Landlord shall commence to restore the
Building within thirty (30) days after the date of the destruction, and complete
the reconstruction within three (3) months, as extended by Excusable Delays, but
in no event later than four (4) months after the date of commencement of the
work. If Landlord fails to commence the reconstruction work within said thirty
(30) day period or complete the reconstruction work within said three (3) month
period, as the case may be, Tenant shall have the option to terminate this Lease
on written notice to Landlord. Nothing contained in this Section 9.01 shall be
deemed to extend the term of this Lease.
Section 9.02. Waiver of Subrogation Rights. The parties hereto hereby
waive any and all rights of recovery, claim, action or cause of action, against
each other, their respective agents, officers and employees, for any loss or
damage in connection with a loss covered by any insurance policies which the
releasor carries with respect to the Leased Premises, the Building, or any
interest or property therein or thereon, whether real, personal or mixed
(whether or not such insurance is required to be carried under this Lease), but
only to the extent that such loss is collectible under such insurance policies,
regardless of the cause or origin of the loss or damage, including negligence of
the parties hereto, their respective agents and employees. Each party agrees to
provide the other with reasonable evidence of its insurance carrier's consent to
8
<PAGE> 10
such waiver of subrogation. If at any time in the future the waiver of
subrogation results in increased insurance premiums for either party, the other
party shall reimburse the party incurring the higher premium for the amount of
the increased cost attributable to the waiver of subrogation.
ARTICLE TEN
-----------
LIABILITY
---------
Section 10.01. Indemnification of the Parties. Subject to the provisions
of section 9.02, Landlord and Tenant each agree to indemnify and save the other
harmless from any and all claims with respect to bodily injury or property
damage, arising from any breach or default on the part of the indemnifying party
in the performance of any covenant or agreement on its part to be performed
pursuant to the terms of this Lease or arising from its negligence or the
negligence of any of its agents or employees, including all costs, counsel fees,
expenses and liabilities incurred in or about any such claim; and if any action
or proceeding is brought against either Landlord or Tenant by reason of any such
claim, the indemnifying party upon notice from the party to be indemnified
covenants to resist or defend such action on proceeding at its expense and the
indemnified party shall cooperate in such defense.
ARTICLE ELEVEN
--------------
ALTERATIONS AND FIXTURES
------------------------
Section 11.01. Alterations by Tenant. (a) Tenant may make such Permitted
Alterations (as hereinafter defined) to the Leased Premises as it shall from
time to time elect to make. Tenant shall notify Landlord in writing prior to
making any Permitted Alterations but Landlord's approval thereof shall not be
required if such Permitted Alterations are non-structural in nature, have an
aggregate cost that is less than $10000 and am not visible from the Common
Building Facilities or exterior of the Leased Premises.
The following shall be deemed to be Permitted Alterations:
(i) Erection, demolition or alteration of non-load bearing partitions
and hung ceiling, including lighting fixtures.
(ii) Painting, decorating and installation of wall and floor
coverings.
Except for Permitted Alterations, Tenant shall make no alterations,
installations, additions or improvements in or to the Leased Premises or any
alteration to the mechanical
9
<PAGE> 11
systems of the Building or Leased Premises, including, but not limited to the
plumbing and air-conditioning systems of the Building or any part thereof or to
other Building apparatus of other or like nature without Landlords prior written
consent (any such alteration, installation, addition or improvement as to which
Landlord's approval is required being hereinafter referred to as a "Tenant's
Change"). Tenant's relocation of movable modular office partitions shall not be
considered an alteration. Landlord agrees that Landlord will not unreasonably
withhold or delay Landlord's consent to Tenant's Changes provided that such
Tenant's Changes:
(i) do not materially adversely affect the structural elements of the
Building;
(ii) do not materially adversely affect the plumbing, electrical and
HVAC systems of the Building; and
(iii) do not materially adversely affect the outside appearance of the
Building.
(iv) do not materially adversely affect the rental or capital value of
the Building and/or Executive Park.
Landlord may condition Landlord's approval with respect to any Tenant's
Changes on Tenant's agreement to remove such Tenant's Change and restore the
portion of the Leased Premises affected thereby to the condition existing as of
the Term Commencement Date.
(b) Insurance requirements relating to Tenant alterations and
installations are as set forth in Article Twenty-Seven.
(c) All alterations or additions made by Tenant in the Leased
Premises shall be constructed and completed in a good and workmanlike manner at
Tenant's expense by contractors approved by Landlord, such approval not to be
unreasonably withheld or delayed. Tenant shall obtain all necessary governmental
permits, licenses and approvals and shall comply with all Applicable Laws.
Landlord shall. at Tenant cost and expense cooperate with Tenant in connection
with Tenant's procurement of such permits, licenses and approvals and, to the
extent legally required, promptly execute (in Landlord's name) any and all
governmental applications in connection with Tenant's work, provided that in no
event shall Landlord be obligated to make any expenditures by reason of the
foregoing. Tenant shall pay to Landlord, as additional rent for services to be
performed by Landlord in connection with Permitted Alterations and Tenant's
Changes (other than Tenant's initial build-out), Landlord's reasonable charges
therefor not to exceed ten (10%) percent of the total cost of Tenant's Changes.
(d) The quality of any Permitted Alterations or Tenant's Changes
shall be consistent with tenant installations typically found in first class
office parks. Landlord shall have the right to conduct reasonable inspections
(during Building Hours) of any construction undertaken by or on behalf of Tenant
to ensure reasonably satisfactory quality. Tenant shall deliver to Landlord a
complete set of "as-built" plans and specifications promptly following
completion of any Permitted Alterations or Tenant's Changes.
10
<PAGE> 12
Section 11.02. Tenant's Property. (a) Tenant, at its expense, may, at
any time and from time to time, install in and remove from the Leased Premises
its trade fixtures, equipment, partitions, walls and wall systems, furniture and
Furnishings, provided such installation or removal is accomplished without
material damage to the Leased Premises or the Building and Tenant promptly
repairs any such damage.
(b) Subject to the provisions of Section 11.01(a) hereof, upon the
expiration of this Lease, Tenant shall remove all of Tenant's property not
permanently affixed to the Building. If Tenant fails to remove any personal
property of Tenant that Tenant may remove upon the termination of this Lease,
any such property not so removed shall, at Landlord's election, become the
property of Landlord or be removed by Landlord at Tenant's expense.
ARTICLE TWELVE
--------------
CONDEMNATION
------------
Section 12.01. Total Taking. If all or substantially all of the Leased
Premises shall be taken by condemnation or in any other manner for any public or
quasi-public use or purpose (other than for temporary use or occupancy), the
term of this Lease shall terminate as of the date of vesting of title (the "Date
of the Taking"), and, subject to a pro-ration and apportionment of Annual
Rental, additional rental and other sums due hereunder as of the Date of the
Taking, no further rent shall be due hereunder.
Section 12.02. Partial Taking. If a part of the Leased Premises shall be
so taken, then Landlord shall give Tenant prompt written notice thereof and the
part so taken shall no longer constitute part of the Leased Premises, but this
Lease shall continue in force and effect as to the part not so taken; provided,
however, that Tenant may elect to terminate this Lease (a) if a partial taking
is more than ten percent (10%) of the Leased Premises, and if, in the good faith
judgment of Tenant, the remaining portion of the Leased Premises cannot be
economically and practicably used by Tenant for the conduct of its business as
conducted immediately prior to the taking, or (b) if a partial taking has a
material adverse effect upon the means of access to the Leased Premises, the
entrances or lobbies of the Buildings or the number of parking spaces reasonably
available to Tenant, unless Landlord shall have provided reasonable substitutes
therefor. Tenant shall give notice of any election to terminate to Landlord not
later than sixty (60) days after notice of such taking is given by Landlord to
Tenant, which notice shall describe in reasonable detail the premises subject to
said condemnation. Upon the date specified in Tenant's notice (which shall not
be more than one hundred eighty (180) days after that notice), the term of this
Lease shall terminate and, subject to a proration and apportionment of Annual
Rental, additional rental and other sums due hereunder as of the Date of Taking
and such termination date, as applicable, no further rent shall be due
hereunder. Upon a partial taking and the term of this Lease continuing in force
as to any part of the Leased Premises, the Annual
11
<PAGE> 13
Rental or any additional rental shall be reduced proportionately based upon the
part or parts of the Leased Premises so taken and not replaced.
Section 12.03. Claims of Landlord and Tenant. Landlord shall be entitled
to receive the entire award in any proceeding with respect to any taking (other
than for temporary use and occupancy) provided for in this Article without
deduction therefrom for any estate vested in Tenant by this Lease and Tenant
shall receive no part of such award, except as hereinafter expressly provided.
Tenant shall have the right to make a separate claim with the condemning
authority for (a) any moving expenses incurred by Tenant as a result of such
condemnation; (b) the value of any of Tenant's property taken (including any
leasehold improvements made by Tenant); and (c) any other separate claim which
Tenant may hereafter be permitted to make, provided, however, that such separate
claim shall not reduce or adversely affect the amount of Landlord's award. If
Tenant shall not be permitted to make a separate claim in such proceeding,
Landlord shall prosecute all claims in such proceeding on behalf of both
Landlord and Tenant in which event Tenant may, if it so elects and at its
expense, join with Landlord in such proceeding, retain co-counsel, attend
hearings, present arguments and generally participate in the conduct of the
proceeding; provided, however, that if Landlord incurs and additional expense
because of Tenant's exercising its rights under this sentence, Tenant will bear
such additional expense.
Section 12.04. Distribution of the Award. The aggregate amount of all
awards received in any proceeding relating to any taking (other than awards to
Tenant pursuant to Section 12.03 or for temporary use or occupancy) is
hereinafter called the "Award". Regardless of the apportionment of the Award in
such proceeding, and regardless of any termination of this Lease, the Award
shall be held in trust by Landlord or any mortgagee, as their interests may
appear, and distributed in the following order of priority:
(a) If Landlord shall be obligated to repair, alter and restore the
remaining part of the Building or Leased Premises pursuant to Section 12.06, the
amount actually expended by Landlord for such repair, alteration and restoration
shall be paid to Landlord out of the Award.
(b) The balance of the Award shall then be paid to Landlord.
Section 12.05. Temporary Taking of Premises. If all or any part of the
Leased Premises shall be temporarily taken by condemnation or otherwise for any
public or quasi-public use or purpose (unless Tenant shall have elected to
terminate the term of this Lease in accordance with the option provided in the
last sentence of this Section), this Lease shall nevertheless remain in full
force and effect. Tenant shall continue to be responsible for all of its
obligations hereunder insofar as such obligations are not affected by such
taking; provided, however, that Tenant shall not be liable to the payment of
Annual Rental, additional rental or other sums for the part of the Leased
Premises so temporarily taken. The award for the temporary taking shall be
payable to Landlord, except to the extent such award is intended to cover the
value of Tenant's property taken or the moving costs incurred by Tenant as a
result of such condemnation. In the event of a temporary taking which meets the
requirements of Section 12.02 for a period in excess of
12
<PAGE> 14
three months and involves a taking of more than twenty-five percent (25%) of the
Leased Premises, Tenant may terminate the term of this Lease upon notice to
Landlord given within thirty (30) days after written notice to Tenant of such
temporary taking, and this Lease shall terminate as of the date of such taking.
Section 12.06. Landlord's Obligation to Restore.
(a) In the event of a taking which taking does not result in the
termination of the Lease, Landlord shall, at its expense and regardless of
whether any Award or Awards shall be sufficient for the purpose, proceed with
due diligence to repair, alter and restore the remaining part of the Leased
Premises substantially to its former condition to the extent feasible. Upon the
expiration of any temporary taking which did not result in a termination of this
Lease, Landlord shall restore the Leased Premises to their former condition as
aforesaid and any Award relating to the cost of such restoration shall be paid
over to Landlord and used for such purpose.
(b) During any period of restoration of the Leased Premises pursuant
to subsection (a) above, the rent provided for herein shall abate pro rata to
the extent that, and for so long as, any portion of the Lease Premises is not
reasonably usable, and is not actually used, by Tenant in the ordinary conduct
of its business.
ARTICLE THIRTEEN
----------------
REMEDIES AND DEFAULTS
---------------------
Section 13.01. Default by Tenant. (a) The term of this Lease is subject
to the limitation that (i) whenever Tenant fails to pay any monthly installment
of the Annual Rental or any additional rental or other sum due Landlord from
Tenant hereunder and such default continues for a period of ten (10) days after
written notice by Landlord, or (ii) whenever Tenant fails to perform or observe
any other covenant, term, provision or condition of this Lease and such default
continues for a period of thirty (30) days after written notice by Landlord
(plus such additional time as may be reasonably required to cure a default
which, despite diligent and continuous effort, cannot by its very nature be
cured within said thirty (30) days) then, in any of such cases Landlord may give
Tenant a notice of intention to terminate this Lease five (5) days after such
notice and the term and estate hereby granted, whether or not the term shall
theretofore have commenced, shall expire and terminate on that fifth day with
the same effect as if the date of termination were the Expiration Date, but
Tenant shall remain liable for damages as provided herein.
(b) If the notice provided in subparagraph (a) above shall have been
given and the term shall expire as aforesaid, then Landlord or Landlord's agents
and employees may immediately or at any time thereafter re-enter the leased
Premises, or any part thereof, either by summary dispossess proceedings or by
any suitable action or proceeding at law, or otherwise (other than by force),
without being liable to indictment, prosecution or damages therefor, and may
repossess
13
<PAGE> 15
the same, and may remove any persons therefrom, to the end that Landlord may
have, hold and enjoy the Leased Premises again as and of its first estate and
interest therein. In the event of any termination of the term of this Lease
under the provisions of Article Thirteen or in the event of the termination of
the term of this Lease, or of re-entry, by or under any summary dispossess or
other proceeding or action or any provision of law by reason of default
hereunder on the part of Tenant, Tenant shall thereupon pay to Landlord the rent
and any other charge payable by Tenant to Landlord up to the time of such
termination or re-entry, as the case may be, and shall also pay to Landlord
damages as provided in subparagraph (c) below.
(c) Despite any termination of Tenant's rights of possession, Tenant
shall remain liable for the Annual Rental and any additional rental due and to
become due hereunder, and the same shall be paid by Tenant to Landlord on the
regular days stipulated herein for payment of rent; provided that Landlord shall
have the right to alter, change or remodel the improvements within the Building
and to lease or let the Leased Premises, or portions thereof, for such periods
of time and at such rent and for such use and upon such covenants and conditions
as Landlord may elect, applying the net rent or avails of such letting first to
the payment of Landlord's reasonable expenses in dispossessing Tenant and such
costs or expenses as may be necessary in order to enable Landlord to relet the
same; provided further, however, that Tenant shall be entitled to a credit in
the net amount of the rental or additional rental received by Landlord as a
result of reletting (after deducting all reasonable costs incurred by Landlord
in finding a new tenant, Including brokerage fees, agent's commissions,
redecorating costs, attorneys' fees and party other reasonable costs and
expenses incident thereto). Tenant shall remain obligated to pay the amount of
any deficiency in the annual Rental and additional rental obtained on such
reletting, but if the annual rental or any additional rental obtained upon such
reletting is greater than that provided for herein plus Landlord's costs,
Landlord shall be entitled to receive such excess. Landlord shall have the right
to collect from Tenant amounts equal to said deficiencies provided for above by
suits or proceedings brought from time to time on one or more occasions without
Landlord being obligated to wait until the expiration of the term of this Lease.
(d) Whether or not Landlord shall have collected any amounts pursuant
to (c) above, Landlord shall be entitled to recover from Tenant, and Tenant
shall pay to Landlord, on demand, in lieu of any further monthly payments as and
for liquidated and agreed final damages, a sum equal to the amount by which the
rental for the period which otherwise would have constituted the unexpired
portion of the Term exceeds the then fair and reasonable rental value of the
Leased Premises for the same period, both discounted to present worth at an
interest rate per annum equal to the Treasury Bill Rate (hereinafter defined)
less the aggregate amount theretofore collected by Landlord pursuant to the
provisions of (c) above for the same period; if, before presentation of proof of
such liquidated damages to any court, commission or tribunal, the Leased
Premises, or any part thereof, shall have been relet by Landlord for the period
which otherwise would have constituted the unexpired portion of the Term, or any
part thereof, the amount of rent reserved upon such reletting shall be deemed,
prima facie, to be the fair and reasonable rental value for the part or the
whole of the Leased Premises so relet during the term of the reletting. For
purposes of the foregoing, the "Treasury Bill Rate" shall mean the annual
14
<PAGE> 16
rate of interest then payable on U.S. Treasury Bills having a maturity date
corresponding as closely as practicable to the Expiration Date.
(e) If Tenant shall default in the performance of any of Tenant's
obligations hereunder, then Landlord (in addition to the other remethes provided
herein or at law or in equity), without being obligated to and without thereby
waiving such default, shall have the following remethes:
Thirty (30) days after notice to Tenant and Tenant's subsequent failure
to perform or, in the case of any obligation which cannot be performed in thirty
(30) days, to commence to perform within said thirty (30) day period and to
continue thereafter, with due diligence, to complete such performance, Landlord
may perform such obligation, or, in the case of payment due others, make such
payment, as Tenant's agent. The full amount of the cost and expense so incurred
by Landlord or the payment so made, together with the amount of attorneys' fees
in instituting, prosecuting or defending any action or proceeding by reason of
any default of Tenant hereunder shall be paid by Tenant to Landlord with
interest as provided in Section 13.01(e) of this Lease within ten (10) days
after written demand therefor.
(f) The special remedies to which Landlord may resort under this
Section 13.01 are cumulative and are not intended to be inclusive of any other
remethes or means of redress to which Landlord may lawfully be entitled at any
time, and Landlord may invoke any remedy allowed at law or in equity as if
specific remedies were not provided for herein.
ARTICLE FOURTEEN
----------------
BANKRUPTCY
----------
Section 14.01. Bankruptcy by Tenant. If at any time during the term of
this Lease a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or substantially all of Tenant's
assets is filed against Tenant in any court pursuant to any statute either of
the United States or of any state and Tenant fails to secure a discharge thereof
within one hundred twenty (120) days, or if Tenant voluntarily files a petition
in bankruptcy or makes an assignment for the benefit of creditors or petitions
for or enters into an arrangement with creditors, the term of this Lease, at the
option of Landlord, exercised within thirty (30) days after notice of the
happening of any one or more of such events, shall terminate on such a date as
Landlord shall specify by notice to Tenant, with the same effect as if the date
of termination were the Expiration Date of this Lease, but Tenant shall remain
liable for rent and/or damages and attorneys' fees as provided in Article
Thirteen. However, if a petition for reorganization or for an arrangement is
filed by or against Tenant, Landlord may not terminate the term of this Lease so
long as Tenant is not in default hereunder and, provided this Lease is assumed
or affirmed in such reorganization or arrangement proceeding and all defaults
cured within the time periods provided by law.
15
<PAGE> 17
ARTICLE FIFTEEN
---------------
COMPLIANCE WITH LAWS
--------------------
Section 15.01. Tenant's Compliance with Laws. Tenant, at its expense,
shall comply with any valid and applicable laws, rules, orders, ordinances,
regulations and other requirements, present or future (collectively, "Applicable
Laws"), affecting its occupancy of the Leased Premises and/or the Building that
are promulgated by any governmental authority or agency having jurisdiction over
the Leased Premises and/or the Building and with any reasonable requirements of
the insurance companies insuring Landlord against damage, loss or liability for
accidents in or connected with the Building to the extent that the same shall
affect or be applicable to: (i) Tenant's manner of use of the Leased Premises
(as opposed to its mere use thereof as general and executive offices), (ii)
alterations or improvements made by Tenant, or (iii) a breach by Tenant of its
obligations under this Lease. Tenant shall not at any time use or occupy the
Leased Premises so as to violate the certificate of occupancy for the Building.
Nothing herein contained, however, shall be deemed to impose any obligation upon
Tenant to make any structural alterations, installations or repairs unless
necessitated by reason of (A) a particular manner of use by Tenant of the Leased
Premises, (B) alterations or improvements made by Tenant, or (C) a breach by
Tenant of its obligations under this Lease. If by reason of a future change in
Applicable Laws, structural alterations or installations are required with
respect to buildings or premises used for the same or similar purposes and/or in
the same or similar manner as the Building or Leased Premises, as contrasted
with structural alterations or installations required as a result of a change in
use or manner of use of the Building or Leased Premises by Tenant, then, if the
cost of such structural alterations or installations exceeds $500,000.00
Landlord may terminate this Lease upon thirty (30) days prior written notice to
Tenant. If the cost of such structural alterations or installations is
$500,000.00 or less, Landlord shall make such alterations or installations at
its expense, within the time period allowed by Applicable Laws for compliance.
If Landlord elects to terminate this Lease as aforesaid, Tenant shall have do
right to cancel Landlord's election to terminate by notifying Landlord within
sixty (60) days after receipt of landlord's notice that Tenant agrees to pay on
a monthly basis a pro rata share of the amortized value of such structural
alterations or installations over the remaining life of the alterations or
installations, plus interest, per annum, from the date Landlord paid for such
alterations or installations at the Chase Prime as of Landlord's payment date
(the "Applicable Chase Prime"), calculated as follows: divide me cost of do
alterations or installations by useful life and multiply the quotient (the
"Quotient") by the lesser of (x) the number of years remaining in the original
term of the Lease (the "Remaining Original Term") or (y) the number of years of
the useful life (the "Useful Life") of such alterations or installations (such
product is hereinafter referred to as the "Adjusted Cost"). Thereafter,
ascertain the amount necessary to amortize the Adjusted Cost at the Applicable
Chase Prime, per annum, in equal monthly installments (each a "Monthly Payment")
over the Remaining Original Term. Tenant shall pay as additional rent its pro
rata share of the Monthly Payment on the same day of the month the fixed rental
payment is due under this Lease until the Adjusted Cost is paid in full.
16
<PAGE> 18
The estimated life (in years) of the alterations or installations shall
be determined in accordance with Internal Revenue Code guidelines or generally
accepted accounting principles, whichever results in the longer estimated life.
If Tenant elects to cancel the termination of the Lease as aforesaid,
Landlord shall make such alterations or installations within the time period
allowed by the Applicable Laws for compliance.
Section 15.02. Landlord's Compliance with Laws. Landlord shall be
responsible for complying with all Applicable Laws affecting the design,
construction and operation of the Building (excluding the Leased Premises) or
relating to the performance by Landlord of any duties or obligations to be
performed by it hereunder. Landlord may, at its expense (and, if necessary, in
the name of but without expense to, Tenant) contest, by appropriate proceedings
diligently prosecuted, the validity, or applicability to the Leased Premises,
any matter it may be required to comply with provided the deferral of compliance
does not subject Tenant to criminal prosecution or deprive Tenant of the
possession, use or the then current manner of use of the Leased Premises and
Landlord agrees to indemnify Tenant against any, loss or expense Tenant may
incur as a result of such deferral of compliance.
ARTICLE XVI
-----------
ASSIGNMENT AND SUBLETTING
-------------------------
Section 16.01. Assignment and Subletting by Tenant.
(a) Except as expressly permitted herein, Tenant, without the prior
written consent of Landlord in each instance, shall not (a) assign its rights or
delegate its duties under this Lease (whether by operation of law, transfers of
interests in Tenant or otherwise), or mortgage or encumber its interest in this
Lease, in whole or in part, (b) sublet, or permit the subletting of, the Leased
Premises or any part thereof, or (c) permit the Leased Premises or any part
thereof to be occupied, or used for desk space, mailing privileges or otherwise,
by any person other than Tenant. Notwithstanding the foregoing, Tenant's
subsidiaries, vendor representatives, auditors, and consultants shall have the
right to use portions of the premises as desk space, not exceeding 3000 square
feet.
(b) The consent by Landlord to any assignment, subletting, occupancy
or use shall not relieve Tenant from its obligation to obtain the express prior
written consent of Landlord to any further assignment, subletting, occupancy or
use. Tenant shall pay to Landlord all reasonable costs, including reasonable
attorneys' fees and disbursements, incurred by Landlord in connection with any
proposed assignment of Tenant's interest in this Lease or any proposed
subletting of the Leased Premises or any part thereof. Neither any assignment of
Tenant's interest in this Lease nor any subletting, occupancy or use of the
Leased Premises or any part thereof by any person other than Tenant or its
Affiliates, nor any collection of rental by Landlord from any person other than
Tenant as provided in this Section, nor any application of any such rental by
Landlord, shall relieve or release Tenant of its obligations under this Lease on
Tenant's part to
17
<PAGE> 19
be observed and performed, and, subsequent to any assignment, Tenant's liability
hereunder shall continue notwithstanding any subsequent modification or
amendment hereof or the release of any subsequent tenant hereunder from any
liability, to all of which Tenant hereby consents in advance. Tenant shall
strictly enforce the terms and conditions of any assignment or sublease to which
Landlord shall have consented, and shall assign to Landlord any and all rights
it may have against such subtenant or assignee, as the case may be, should
Landlord so request, including the right to commence legal proceedings in
Tenant's name.
(c) If Landlord shall recover or come into possession of the Leased
Premises before the Expiration Date, Landlord shall have the right, at its
option, to take over any and all subleases or sublettings of the Leased Premises
or any part thereof made by Tenant and to succeed to all the rights of said
subleases and sublettings or such of them as it may elect to take over. Tenant
hereby expressly assigns and transfers to Landlord such of the subleases and
sublettings as Landlord may elect to take over at the time of such recovery of
possession, such assignment and transfer not to be effective until the
termination of this Lease or re-entry by Landlord hereunder (or if Landlord
shall, otherwise succeed to Tenant's estate in the Leased Premises), at which
time Tenant shall upon request of Landlord, execute, acknowledge and deliver to
Landlord such further assignments and transfers as may be necessary to vest in
Landlord the then existing subleases and sublettings. Every subletting hereunder
is subject to the condition and by its acceptance of and entry into a sublease,
each subtenant thereunder shall be deemed conclusively to have thereby agreed
from and after the termination of this Lease or re-entry by Landlord hereunder
(or if Landlord shall otherwise succeed to Tenant's estate in the Leased
Premises), that such subtenant shall waive any right to surrender possession or
to terminate the sublease and, at Landlord's election, such subtenant shall be
bound to Landlord for the balance of the term of such sublease and shall attorn
to and recognize Landlord, as its landlord, under all of the then executory
terms of such sublease. Each subtenant or licensee of Tenant shall be deemed
automatically upon and as a condition of occupying or using the Leased Premises
or any part thereof, to have given a waiver of subrogation of the type described
in and to the extent and upon the conditions set forth in Article XXVI hereof.
(d) If Tenant is a corporation, Tenant may, without Landlord's
consent, assign its interest in this Lease (i) to any corporation which is a
successor to Tenant either by merger or consolidation, (ii) to a purchaser of
all or substantially all of Tenant's assets (provided such purchaser shall have
also assumed substantially all of Tenant's liabilities), or (iii) to a
corporation or other entity which shall (1) control, (2) be under the control
of, or (3) be under common control with, Tenant the term "control" as used
herein stall be deemed to mean ownership of more than fifty (50%) percent of the
outstanding voting stock of a corporation, or other majority equity and control
interest, if not a corporation). Tenant may also sublease to, or permit the use
of all or any portion of the Leased Premises by, an entity described in clause
(iii) (any such entity is referred to herein as an "Affiliate") without
Landlord's consent. As conditions to any such assignment or subletting, (a)
Tenant shall not be in default in the performance of any of its obligations
under this Lease, (b) prior to such subletting Tenant shall furnish Landlord
with the name of any such related corporation, together with a certification of
Tenant and such other proof as Landlord may reasonably request that such
assignee or sublessee is a related corporation
18
<PAGE> 20
of Tenant, (c) in the reasonable judgment of Landlord the proposed subtenant
shall be of a character in keeping with the standards of Landlord for the
Building (d) such subtenant or assignee shall not be a "telecommunications
common carrier". In the event of any assignment or subletting described above,
(a) any such assignee, subtenant or occupant shall continue to use the Leased
Premises for the conduct of the purposes permitted hereby, (b) the principal
purpose of such assignment or sublease shall not be the acquisition of Tenant's
interest in this Lease (except if such assignment or sublease is made pursuant
to clause (iii) and is made for a valid intracorporate business purpose and is
not made to circumvent the provisions of this Article), and (c) any such
assignee shall have a net worth and annual income and cash flow, determined in
accordance with generally accepted accounting principles, consistently applied,
after giving effect to such assignment, equal to or greater than Tenant's net
worth and annual income and cash flow, as so determined, on the date of such
assignment. Tenant shall, within ten (10) business days after execution thereof,
deliver to Landlord (a) duplicate original instrument of assignment (or
sublease) in form and substance reasonably satisfactory to Landlord, duly
executed by Tenant (and the subtenant), and (b) an instrument in form and
substance reasonably satisfactory to Landlord, duly executed by the assignee, in
which such assignee shall assume observance and performance of, and agree to be
personally bound by, all of the terms, covenants and conditions of this Lease on
Tenant's part to be observed and performed; provided, however, that in no event
shall such assignment relieve or release Tenant from any of its obligations
hereunder. Except as set forth above, either a transfer of a controlling
interest in the shares of Tenant (if Tenant is a corporation or trust) or a
transfer of a majority of the total interest in Tenant if Tenant is a
partnership) at any one time or over a period of time through a series of
transfers, shall be deemed an assignment of this Lease and shall be subject to
all of the provisions of this Article, including, without limitation, the
requirement that Tenant obtain Landlord's prior consent thereto. The transfer of
shares of Tenant (if Tenant is a corporation or trust), for purposes of this
Article, shall not include any sale of shares effected through the
"over-the-counter market" or through any recognized stock exchange.
(e) Except as to sublettings or assignments made pursuant to Section
(d) above, prior to any proposed subletting or assignment, Tenant shall submit a
statement to Landlord (an "Assignment/Sublease Statement") containing the
following information: (a) the name and address of the proposed subtenant or
assignee, (b) a description of the portion of the Leased Premises to be sublet,
(c) the terms and conditions of the proposed subletting including the rent
payable or the proposed assignment, including the consideration payable
therefor, (d) the nature and character of the business of the proposed subtenant
or assignee including financial statements supporting the creditworthiness of
the proposed subtenant or assignee, and (e) any other information that Landlord
may reasonably request. A complete copy of the proposed assignment or sublease
to be executed by Tenant and the assignee or subtenant shall accompany Tenant's
Assignment/Sublease Statement.
(f) Landlord may, by notice to Tenant ("Landlord's Notice"), given
within fifteen (15) days after its receipt of an Assignment/Sublease Statement
wherein Tenant shall propose to sublet all or any portion of the Leased
Premises, require Tenant to sublease the proposed sublease space to Landlord or
its nominee on the terms set forth in Section (g) below. If Tenant shall propose
19
<PAGE> 21
to assign this Lease or sublease substantially all of the Leased Premises for
substantially the then balance of the term of this Lease, Landlord also may, by
Landlord's Notice, terminate this Lease as of the date which is two (2) months
following Landlord's receipt of the Assignment/Sublease Statement as though such
date was the Expiration Date set forth in this Lease. If Landlord fails to so
exercise either of such options, it shall not unreasonably withhold or delay its
consent to the proposed assignment or sublease by Tenant, as provided below, but
such consent shall be deemed of no effect if such assignment or sublease is not
consummated by Tenant and the assignee or subtenant, as the case may be,
executing and delivering the assignment or sublease which accompanied Tenant's
Assignment/Sublease Statement within one hundred twenty (120) days after such
consent is given. The portion of the Leased Premises to which any proposed
subletting is to be applicable is hereinafter referred to as the "Space".
(g) If Landlord requires Tenant to execute a sublease ("Sublease")
pursuant to Section (f), then the Sublease shall be upon the same terms as this
Lease, except for such terms thereof as are inapplicable and except that: (1)
the term of the Sublease shall be the term specified in Tenant's
Assignment/Sublease Statement; (2) the fixed annual rent for the Sublease shall
be the lesser of (a) the product of the rate per RSF (net of any credits Tenant
may be receiving in respect thereof pursuant to this Lease or otherwise) Tenant
is then paying Landlord hereunder and the RSF contained in the Space and (b) the
fixed annual rent set forth in Tenant's Assignment/Sublease Statement; (3)
"Tenant's Share" shall be determined by multiplying Tenant's Stare under this
Lease by a fraction, the numerator of which is the RSF contained in the Space
(including any common corridor allowances attributable to the Space), and the
denominator of which is 94,016; (4) for purposes of determining additional rent
under the Sublease, the "Base Year" shall be the later of (i) the Base Year
under this Lease, or (ii) the Base Year as set forth in the assignment or
sublease which accompanies the Tenant's Assignment/Sublease Statement; (5) the
subtenant under the Sublease shall have the unrestricted right to assign the
Sublease or any interest therein, to further sublet all or any part of the Space
and/or to make any alterations, decorations, additions or improvements in and to
the Space (all or any part of which may be removed, at Landlord's option, at any
time, provided Landlord repairs all damage caused by such removal); (6) Tenant,
as sublandlord under the Sublease, shall, at its expense (if and only if,
Tenant, as sublandlord under its proposed Sublease, was required to perform the
following work): (a) erect all partitions required to separate the Space from
the remainder of the Leased Premises and (b) to the extent necessitated by the
Sublease, install all doors required for independent access from the Space to
the elevators, lavatories and staircases on the applicable floor and install all
equipment and facilities required to comply with all Applicable Laws and to
enable Landlord to maintain and service the Space and permit the Space to be
used as an independent unit; (7) the Sublease shall provide that the termination
of all or any portion of this Lease by merger is not thereby intended, and (8)
at the expiration of the Sublease, the Space shall, subject to subdivision (5).
be returned to Tenant as then existing.
(h) If Landlord fails to execute its options set forth in Section (f)
above, then, within such fifteen (15) day period, Landlord shall not
unreasonably withhold its consent to an assignment of this Lease in its entirety
or to any subletting of the Leased Premises, provided that:
20
<PAGE> 22
(i) the Leased Premises and this Lease shall not, without Landlord's
prior consent, have been published or otherwise publicly advertised for
subletting at a rental rate less than the prevailing rental rate at which
Landlord is then offering to lease space in the Building;
(ii) no Event of Default shall have occurred and be continuing;
(iii) the proposed subtenant or assignee shall have a financial
standing, be of a character, be engaged in a business, and propose to use the
Leased Premises in a manner in keeping with Landlord's then current standards in
such respects of tenancies in the Building;
(iv) the proposed subtenant or assignee shall not be an occupant of
the Executive Park, if Landlord has or within nine (9) months thereafter expects
to have suitable space available in the executive Park and the proposed
subtenant or assignee shall not be a person or entity with whom Landlord is then
negotiating or discussing to lease space in the Building;
(v) the character of the business to be conducted or the proposed use
of the Leased Premises by the proposed subtenant or assignee shall not (a) be
likely to increase substantially Landlord's operating expenses beyond those
which would be incurred for use by Tenant or for use in accordance with the
standards of use of other tenancies in the Building; (b) substantially increase
the burden on existing cleaning services over the burden prior to such proposed
subletting or assignment; (c) violate any provision or restrictions herein
relating to the use or occupancy of the Leased Premises or (d) involve the
presence in the Leased Premises, as occupant or user, of a governmental agency;
(vi) the sublease shall be expressly subject to all of the terms,
covenants, conditions and obligations on Tenant's part to be observed and
performed under this Lease and the further condition and restriction that this
Lease shall not be assigned, encumbered or otherwise transferred in whole or in
part, or any part thereof suffered or permitted to be used or occupied by
others, without the prior written consent of Landlord in each instance;
(vii) the subtenant or assignee, as the case may be, shall agree to
assume all of the obligations of Tenant under this Lease for the balance of the
term, with regard to an assignment, or for the term of the subletting, with
regard to a sublease;
(viii) Tenant shall reimburse Landlord on demand for all reasonable out
of pocket cons that may be incurred by Landlord in connection with said
sublease, including, without limitation, reasonable attorneys' fees and
disbursements;
(ix) the proposed subtenant or assignee shall not be entitled,
directly or indirectly, to diplomatic or sovereign immunity and shall be subject
to the service of process in, and the jurisdiction of the courts of, the State
of New York;
(x) the proposed subtenant or assignee shall not be a
"telecommunications common carrier", and
21
<PAGE> 23
(xi) the proposed subtenant or assignee shall not contemplate using
the Leased Premises in any manner which would be incompatible with a first class
office park and/or which would have the effect of materially lowering the rental
and/or capital value of the Leased Premises and/or the Executive Park.
(i) If Landlord shall fail to exercise its options set forth in
Section (f) above and shall object to any proposed assignment or subletting,
then Landlord shall provide Tenant with its reason(s) for so objecting within
such fifteen (15) day period following Landlord's receipt of Tenant's
Assignment/Sublease Statement.
(j) Tenant shall pay to Landlord, as additional rent, as and when
payable to Tenant one hundred (100%) percent of the following: (i) with respect
to any sublease, all of any rent or other consideration paid to Tenant by any
subtenant in excess of the pro rata portion of the then Annual Rent and
additional rent payable for such space, and, (ii) with respect to an assignment,
all consideration payable to Tenant, directly or indirectly, by any assignee,
plus any other amount received by Tenant from or in connection with such
subletting or assignment of this Lease, including, in either case, but not
limited to, sums paid for the sale, rental or contribution of Tenant's fixtures,
leasehold improvements, equipment, furniture or other personal property
("Tenant's Property") less, in the event of a sale (or contribution) of Tenant's
Property, the then unamortized or undepreciated cost thereof determined on the
basis of a ten (10) year useful life (as certified to Landlord by Tenant's
independent certified accountants) ("Sublease Profit" or "Assignment Proceeds,"
as the case may be). Tenant shall be entitled to deduct from the total amount of
Sublease Profit or Assignment Proceeds, as the case may be, payable to it, the
reasonable out-of-pocket expenses incurred by Tenant in making such sublease or
assignment, such as reasonable brokers' fees, reasonable attorneys' fees, and
advertising fees paid to unrelated third parties, non-decorative improvement or
alteration costs to prepare the space for such sublease or assignment and, in
connection with any assignment, payments required to be made by Tenant in
connection with the assignment of this Lease pursuant to Article 31-B of the Tax
Law of the State of New York or any real property transfer tax of the United
States or The State of New York (other than any income tax) and the costs of
obtaining any accountant's certification, as required above. If the
consideration payable to Tenant for any assignment shall be payable in
installments, then the expenses specified herein shall be amortized over the
period during which such installments shall be payable.
ARTICLE SEVENTEEN
-----------------
LANDLORD'S ACCESS
-----------------
Section 17.01. Landlord's Right to Use Certain Facilities. Tenant shall
permit Landlord to install, use and maintain additional utility and other pipes,
ducts, lines, flues and conduits in and through the Leased Premises and serving
other portions of the Building and/or the Leased Premises, provided that such
installations are concealed within the permanent walls, floors,
22
<PAGE> 24
columns and ceilings of the Leased Premises and in the shafts provided in the
Leased Premises for such installations, do not damage the appearance, reduce the
floor area of the Leased Premises or affect Tenant's layout, and provided
further, that the installation work is performed without substantial
interference with Tenant's use of the Leased Premises. Any damage to the Leased
Premises resulting from Landlord's exercise of the foregoing rights shall be
repaired by Landlord, at Landlord's expense.
Section 17.02. Landlord's Access to Premises. Landlord, and Landlord's
employees, agents and contractors, shall have the right to enter and pass
through the Leased Premises or any part or parts thereof (a) during non-business
hours and during business hours upon reasonable prior notice to Tenant: (i) to
examine the Leased Premises and to show them to underlying or ground lessees or
mortgagees and to prospective purchasers, mortgagees, or insurers, and (ii) for
cleaning and maintenance and making such repairs or changes in or to the Leased
Premises or in or to the Building or the Common Building Facilities as may be
provided for or permitted by this Lease or as may be mutually agreed upon by the
parties or as Landlord may be required to make by laws and requirements of
public authorities; provided, however, that the foregoing shall be done upon
prior notice to Tenant, in a manner so as to reduce interference with Tenant's
business operations and, if requested by Tenant, accompanied by a designated
representative of Tenant; (b) after business hours to perform janitorial
services; and (c) in emergencies. Tenant may designate one or more areas in the
Leased Premises as secure areas, and Landlord shall have no access thereto
without being accompanied by a designated representative of Tenant or, in the
case of emergencies, by members of the Fire or Police Department.
Notwithstanding anything to the contrary contained herein, Landlord and its
agents shall have the right to show the Leased Premises to prospective tenants
throughout the term hereof at any time without notice to Tenant. Additionally,
Landlord shall have the right to construct a demising wall separating the Leased
Premises from adjacent space, during normal business hours.
ARTICLE EIGHTEEN
----------------
NAME OF BUILDING; SIGNS
-----------------------
Section 18.01. Landlord's Right to Designate Building Name. Landlord
shall have the right to designate, and thereafter change, the name of Building 6
to any name it so desires.
Section 18.02. Signs Identifying the Building. Landlord shall provide
and maintain a directory at the entrance of the Executive Park and allow Tenant,
at no charge, to list the name of Tenant or Affiliate and any subtenant or
assignee of Tenant on such directory. The size and prominence of the aforesaid
listings of Tenant or Affiliate on said directory shall be commensurate with the
amount of space occupied by Tenant in the Executive Park in relation to other
tenants listed.
Section 18.03. Limitations on Other Signs. Tenant shall neither install
any signs and/or graphics and shall not permit the Building to be identified by
the name of another company, or permit any other company to erect any signs
and/or graphic outside or in the Common Building
23
<PAGE> 25
Facilities of the Building, without first obtaining Landlord's written consent,
which consent shall not be unreasonably withheld or delayed provided such signs
and/or graphics (i) shall not adversely affect on the character or dignity of
the Building, and (ii) conform with the design, style, colors and materials
which are utilized by Landlord throughout the Executive Park.
ARTICLE NINETEEN
----------------
QUIET ENJOYMENT
---------------
Section 19.01. Landlord's Covenant of Quiet Enjoyment. Landlord
covenants and agrees, provided Tenant performs the terms, conditions and
covenants of this Lease, to take all necessary steps to secure and to maintain
for the benefit of Tenant the quiet and peaceful possession of the Leased
Premises and the Common Building Facilities, for the term of this Lease, without
hindrance, claim or molestation by Landlord or any other person.
ARTICLE TWENTY
--------------
NON-WAIVER
----------
Section 20.01. No Waiver Implied. Failure by either party to complain of
any action, nonaction or default of the other party shall not constitute a
waiver of any aggrieved party's rights hereunder. Waiver by either party of any
right for any default of the other party shall not constitute a waiver of any
right for either a subsequent default of the same obligation or for any other
default, past, present or future.
ARTICLE TWENTY-ONE
------------------
NOTICES
-------
Section 21.01. Notices to Landlord or Tenant. Any notice or
communication to Landlord or Tenant which is required or permitted to be given
under this Lease shall be effectively given only if in writing and mailed by
United States Certified Mail, postage prepaid, return receipt requested,
addressed as follows:
If to Tenant, as follows:
Entex Information Services, Inc.
24
<PAGE> 26
6 International Drive
Rye Brook, New York 10573
Attn: Mr. Robert Weber
If to Landlord, addressed as follows:
Royal Executive Park
c/o Heitman Properties Ltd.
1211 Avenue of the Americas
New York, New York 10036
Attn: Property Management
With a copy to:
Edward A. Kaminsky, Esq.
Handsman & Kaminsky
609 Fifth Avenue, Sixth Floor
New York, New York 10017
Either party shall have the right to change the address to which notices shall
thereafter be sent by giving notice to the other parry as aforesaid.
ARTICLE TWENTY-TWO
------------------
PARTIAL INVALIDITY
------------------
Section 22.01. Severability Clause. If any term, covenant, condition or
provision of this Lease, or the application thereof to any person or
circumstance, shall ever be held to be invalid or unenforceable, then in each
such event the remainder of this Lease or the application of such term,
covenant, condition or provision to any other person of any other circumstance
(other than those as to which it shall be invalid or unenforceable) shall not be
thereby affected, and each term, covenant, condition and provision hereof shall
remain valid and enforceable to the fullest extent permitted by law.
ARTICLE TWENTY-THREE
--------------------
BROKERAGE
---------
Section 23.01. Brokerage. Landlord and Tenant mutually represent to each
other that the only broker with whom they have dealt with respect to this Lease
is The Galbreath Company and
25
<PAGE> 27
Landlord agrees to pay all commissions that may be owing to such broker.
Landlord agrees to indemnify Tenant and hold it harmless against any claims for
commissions that may be asserted in connection with this Lease based upon acts
of Landlord, and Tenant agrees to indemnify Landlord and hold it harmless
against any claims for commissions that may be asserted in connection with this
Lease based upon acts of Tenant, provided, however, in no event shall Tenant be
liable to Landlord or otherwise for payment of commissions that may be owing to
the broker named above.
ARTICLE TWENTY-FOUR
LANDLORD'S REPRESENTATIONS AND
WAIVERS AND TENANT'S REPRESENTATIONS
Section 24.01. Landlord's Representations. Landlord represents and
warrants to Tenant that (i) Landlord has the right and lawful authority to enter
into this Lease for the term hereof, (ii) the execution, delivery and
performance of this Lease by Landlord do not and will not contravene the
provisions of Landlord's partnership agreement or any law, governmental rule,
regulation or order as in effect on the date hereof and applicable to Landlord,
or result in a violation of, or constitute a default under, any indenture,
contract, agreement, or other instrument to which it is a party, (iii) Landlord
is the owner of the Leased Premises in fee simple, (iv) the Land is presently
zoned to permit use of the Leased Premises as "offices", and (v) the elevators,
HVAC, electrical, plumbing and mechanical systems in the Building are in good
working order and the roof is free from leaks.
Section 24.02. Waivers. Notwithstanding any provision contained in this
Lease to the contrary, Landlord hereby expressly waives any Landlord's lien it
now has or may hereafter obtain and any and all rights granted by or under any
present or future laws to levy or distrain for rent, in arrears, in advance, or
both, upon any or all towers, antennas, machinery, equipment, fixtures,
furniture and other personal property or fixtures of Tenant or any assignee or
subtenant of Tenant in the Leased Premises.
Tenant, for Tenant, and on behalf of any and all persons claiming
through or under Tenant, including creditors of all kinds, does hereby waive and
surrender all right and privilege which they or any of them might have under or
by reason of any present or future law, to redeem the Leased Premises or to have
a continuance of this Lease for the term hereby demised after being dispossessed
or ejected therefrom by process of law or under the terms of this Lease or after
the termination of this Lease as herein provided.
Section 24.03. Tenant's Representations. Tenant represents and warrants
to Landlord that (i) Tenant has the right and lawful authority to enter into
this Lease for the term hereof, (ii) the execution, delivery and performance of
this Lease by Tenant do not and will not contravene the provisions of Tenant's
articles of incorporation or any law, governmental rule, regulation or
26
<PAGE> 28
order as in effect on the date hereof and applicable to Tenant, or result in a
violation of, or constitute a default under any indenture, contract, agreement,
or other instrument to which it is a party.
ARTICLE TWENTY-FIVE
-------------------
SUBORDINATION; NON-DISTURBANCE
------------------------------
Section 25.01. Subordination. Landlord may, from time to time, grant
mortgages or security interests or enter into ground leases covering its estate
in the Land and the Building to a lender or lenders (herein, collectively
referred to as a "Mortgage"). Tenant agrees that this Lease shall be subject and
subordinate to any Mortgage now or hereafter encumbering the Land and/or
Building, including any modifications, extensions or renewals thereof and
advances thereunder from time to time in effect. Upon the request of Landlord
and at no expense to Tenant, Tenant agrees to execute a subordination agreement
comprehending the provisions of this Article and otherwise in form reasonably
acceptable to Landlord.
Section 25.02. Investor's Approval. This Lease shall not become
effective unless JMB Realty Corp. shall approve the execution and delivery of
this Lease by Landlord. This Lease shall be null and void if such approval shall
not have been obtained within fifteen (15) business days after the date of
execution of the Lease.
ARTICLE TWENTY-SIX
------------------
INSURANCE
---------
Section 26.01. Landlord's Insurance. (a) Landlord shall maintain at all
times during the term of this Lease:
(i) standard all-risk fire and casualty insurance, covering the
Building in amounts at least equal to eighty percent (80%) of the replacement
cost of the Building at the time in question, but in no event less than such
coverage as is required to avoid co-insurance provisions;
(ii) comprehensive public liability insurance against all claims of
personal injury, death and property damage occurring in the Common Building
Facilities in the Executive Park, with minimum limits of $5,000,000 for injury
to or death of one or more persons in any one occurrence and $1,000,000 for
damage to or destruction of property in any one occurrence; and
(iii) workers compensation insurance in statutory limits and employer's
liability insurance with a limit of $100,000 per employee.
27
<PAGE> 29
Section 26.02. Tenant's Insurance. Tenant covenants and agrees to
provide at its expense on or before the Commencement Date and to keep in force,
during the: Term naming Landlord and Tenant as insured parties:
(i) comprehensive general liability insurance including, but not
limited to, premises operations, blanket contractual insurance, broad form
property damage, independent contractor's coverage and personal injury coverage,
protecting Landlord and Tenant against any liability whatsoever, occasioned by
any occurrence on or about the Leased Premises or any appurtenances thereto.
Such policy is to be written by insurance companies licensed to do business in
the State of New York and satisfactory to Landlord, and shall be in a form and
in such limits as Landlord may reasonably require with minimum limits of
liability thereunder of not less than $5,000,000 per occurrence for bodily or
personal injury (including death) and in the amount of $1,000,000 per occurrence
in respect of property damage.
(ii) standard all-risk fire and casualty insurance covering Tenant's
contents in the Building.
Such insurance may be carried under blanket policies covering the Leased
Premises and other locations of Tenant, if any, provided that each such policy
shall in all respects comply with this Article and shall specify that the
portion of the total coverage of such policy that is allocated to the Leased
Premises is in the amounts required to be carried by Tenant and thereafter, at
least 15 days prior to the effective date of any such policy, Tenant agrees to
deliver to Landlord either a duplicate original of the aforesaid policies or a
certificate evidencing such insurance. Said certificates shall contain an
endorsement that such insurance may not be canceled except upon 30 days' prior
notice to Landlord. Such certificates shall also have the indemnity clause set
forth herein typed on the certificates evidencing that the "hold harmless"
clause has been insured. Tenant's failure to provide and keep in force the
aforementioned insurance shall be regarded as a material default hereunder
entitling Landlord to exercise any or all of the remethes provided in this Lease
in the event of Tenant's default.
"Tenant shall pay on behalf of and indemnify, defend and save
Landlord harmless from and against any loss, liability, cost and
expense, including reasonable attorneys' fees, (except for those
expenses arising out of Landlord's provision of the services
which Landlord is obligated to provide pursuant to Article Five
of the Agreement of Lease between (Landlord] and [Tenant] dated
_________, 1992 (the "Lease") arising from the use or occupation
of the Leased Premises by Tenant or anyone in the Leased Premises
with Tenant's permission and or from any breach of the Lease by
Tenant"
Section 26.03. Waiver of Subrogation. (a) Tenant agrees that it will, at
its sole cost and expense, include in its fire insurance Policies appropriate
clauses pursuant to which the insurance companies (i) waive all right of
subrogation against Landlord regarding any tenant space in the Building with
respect to losses payable under such policies and (ii) agree that such policies
shall not be invalidated should the insured waive in writing prior to a loss any
or all right of recovery against any party for losses covered by such policies.
28
<PAGE> 30
(b) Landlord hereby waives any and all rights of recovery which it
might otherwise have against Tenant, its servants, agents and employees, for
loss or damage occurring to the Building and the fixtures, appurtenances and
equipment therein, to the extent the same is covered by Landlord's insurance
(which, for purposes of this Section (b), shall be deemed to be the coverages
which Landlord is required to carry hereunder), notwithstanding that such loss
or damage may result from the negligence or fault of Tenant, its servants,
agents or employees. Tenant hereby waives any and all right of recovery which it
might otherwise have against Landlord, its servants, and employees, and against
any such tenant in the Building who shall have executed a similar waiver as set
forth herein for the loss or damage to, Tenant's furniture, furnishings,
fixtures and other property removable by Tenant under the provisions hereof
notwithstanding that such loss or damage may result from the negligence or fault
of Landlord, its servants, agents or employees, or such other tenant and the
servants, agents or employees thereof.
Section 26.04. Compliance with Terms. Tenant shall not do or permit to
be done any act or thing upon the Leased Premises which will invalidate or be in
conflict with the policies covering the Building, and fixtures and property
therein, or which would increase the rate of fire insurance applicable to the
Building to an amount higher than it otherwise would be (but the foregoing shall
not prevent Tenant from utilizing the Leased Premises as general and executive
offices); and Tenant shall neither do nor permit to be done any act or thing
upon the Leased Premises which shall or might subject Landlord to any liability
or responsibility for injury to any person or persons or to property by reason
of any business or operation being carried on within the Leased Premises; but
nothing in this Section shall prevent Tenant's use of the Leased Premises for
the purposes stated in Article Seven hereof.
Section 26.05. Excess Rates. If, as a result of any act or omission by
Tenant or violation of this Lease, the rate of fire insurance applicable to the
Building shall be increased to an amount higher than it otherwise would be,
Tenant shall reimburse Landlord for all increases of Landlord's fire insurance
premiums so caused; such reimbursement to be additional rent payable within 5
days of demand therefor by Landlord. In any action or proceeding wherein
Landlord and Tenant are parties, a schedule or "make-up" of rates for the
Building or the Leased Premises issued by the body making fire insurance rates
for the Leased Premises, shall be presumptive evidence of the facts stated
therein including the items and charges taken into consideration in fixing the
fire insurance rate then applicable to the Leased Premises.
Section 26.06. Windows. Notwithstanding any other clause of this lease,
Landlord or its agents shall not be liable for any damage which Tenant may
sustain, if at any time any window of the Leased Premises is broken, or
temporarily or permanently closed, darkened or bricked upon for any reason
whatsoever, except only Landlord's arbitrary acts if the result is permanent,
and Tenant shall not be entitled to any compensation therefor or abatement of
rent or to any release from any of Tenant's obligations under this Lease, nor
shall the same constitute an eviction or constructive eviction.
Section 26.07. Fines and Penalties. Notwithstanding any other clause of
this Lease, Tenant shall reimburse Landlord for all expenses, damages or fines
incurred or suffered by Landlord,
29
<PAGE> 31
by reason of any breach, violation or nonperformance by Tenant, or its agents,
servants or employees, of any covenant or provision of this Lease, or by reason
of damage to persons or property caused by moving property or or for Tenant in
or out of the Building, or by the installation or removal of furniture or other
property of or for Tenant, or by reason of or arising out of carelessness,
negligence or improper conduct of Tenant, or its agents, servants or employees,
in the use or occupancy of the Leased Premises. Tenant shall have the right, at
Tenant's own cost and expense, to participate in the defense of any action or
proceeding brought against Landlord for expenses, damages or fines incurred or
suffered by Landlord for which Tenant is liable.
Section 26.08. Notice of Casualty. Tenant shall give Landlord notice in
case of fire or accidents in the Leased Premises promptly after Tenant is aware
of such event.
Section 26.09. Landlord's Liability. Landlord or its agents shall not be
liable for any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, rain or snow or
leaks from any part of the Building, or from the pipes, appliances or plumbing
works or from the roof, street or subsurface or from any other place or by
dampness or by any other of whatsoever nature, unless any of the foregoing shall
be caused by or due to the negligence of Landlord, its agents, servants or
employees.
Section 26.10. Construction Insurance. Prior to commencement of any
installations or alterations by Tenant, Tenant shall furnish to Landlord
certificates of insurance evidencing the existence of:
(a) Workers compensation covering all persons employed for such work.
(b) Employer's liability including bodily injury caused by disease
with a limit of $100,000 per employee.
(c) Comprehensive general liability insurance including but not
limited to completed operations coverage, products liability, contractual
coverage, broad from property damage, independent contractor's coverage and
personal injury coverage naming Landlord, its officers, agents, directors,
employees, representatives, consultants, and/or partners and owners, including
but not limited to any managing agent, and Tenant as insured, with coverage of
at least $5,000,000 combined single limit.
Such insurance shall be placed with solvent and responsible companies
satisfactory to Landlord and licensed to do business in the State of New York,
and the policies shall provide that they may not be canceled without 30 days
prior notice in writing to Landlord.
(d) Tenant shall require all contractors engaged or employed by
Tenant to indemnify and hold Tenant, Landlord, Landlord's consultants, including
but not limited to any managing agent, harmless in accordance with the following
clause:
30
<PAGE> 32
"The contractor hereby agrees to the fullest extent permitted by
law to assume the entire responsibility and liability for and
defense of and to pay and indemnify Landlord, Tenant and managing
agent against any loss, cost, expense, liability or damage and
will hold each of them harmless from and pay any loss, cost,
expense, liability or damage (including, without limitation,
judgments, attorney's fees, court costs, and the cost of
appellate proceedings), which Landlord and/or Tenant and/or
managing agent incurs because of injury to or death of any person
on account of damage to property, including loss of use thereof,
or any other claim arising out of, in connection with, or as a
consequence of the performance of the work by the contractor
and/or any acts or omissions of the contractor any of its
officers, directors, employees, agents, sub-contractors or anyone
directly or indirectly employed by the contractor or anyone for
whose acts the contractor may be liable as it relates to the
scope of this Contract, whether such injuries to person or damage
to property are due or claimed to be due to any negligence of
Landlord and/or Tenant and/or managing agent its or their
employees or agents or any other person."
ARTICLE TWENTY-SEVEN
--------------------
RULES AND REGULATIONS
---------------------
Section 27.01. General: This Lease Controls in Event of Conflict. Tenant
shall comply with Landlord's Rules and Regulations which are annexed hereto as
Exhibit C, and such reasonable changes therein (whether by modification,
elimination, addition or waiver) as Landlord at any time or times hereafter may
make, which (i) shall be necessary or desirable for the reputation, safety, care
or appearance of the Building or the preservation of good order therein or the
operation or maintenance of the Building or the equipment thereof or the comfort
of tenants or others in the Building and (ii) do not reasonably interfere with
or materially adversely affect the conduct of Tenant's business in the Leased
Premises; provided, however, that in the case of any conflict or inconsistency
between the provision of this Lease and any of such Rules or Regulations, as
changed, the provisions of this Lease shall control. Landlord shall give
reasonable notice to Tenant, communicated in writing, of any changes in the
Rules and Regulations made in accordance with this Section and Tenant shall be
entitled to a reasonable opportunity to respond thereto. The Rules and
Regulations, as changed in accordance with this Section from time to time, are
hereinafter called the "Rules and Regulations."
Section 27.02. Standards Applicable to Landlord. Landlord shall (a) not
discriminate against Tenant in enforcing the Rules and Regulations; (b) not
unreasonably withhold or delay its consent from Tenant for any approval required
under the Rules and Regulations; and (c) exercise its judgment in good faith in
any instance providing for the exercise of its judgment in the Rules and
Regulations.
Section 27.03. Landlord's Enforcement. Landlord shall use its best
efforts to secure compliance by all tenants and other occupants with the Rules
and Regulations, but Landlord may permit
31
<PAGE> 33
reasonable waivers with respect to other parties so long as such waivers do not
materially adversely affect Tenant and provided further that Landlord grants
Tenant similar waivers.
ARTICLE TWENTY-EIGHT
--------------------
MISCELLANEOUS
-------------
Section 28.01. Certain Miscellaneous Provisions. This Lease (including
the Exhibits referred to herein and all supplementary agreements provided for
herein) contains the entire agreement between the parties and all prior
negotiations and agreements are merged into this Lease. This Lease may not be
changed, modified, terminated or discharged, in whole or in part, except by a
writing, executed by the party against whom enforcement of the change,
modification, termination or discharge is to be sought. The Article and Section
headings or titles in this Lease are inserted for convenience only and are not
to be given any effect in its construction. Wherever appropriate in this Lease,
personal pronouns shall be deemed to include the other genders and the singular
to include the plural. The covenants and agreements contained herein shall inure
to and be binding upon Landlord, its successors and assigns, and, Tenant, its
successors and assigns. The term "Landlord" means only the owner for the time
being of the Building, so that in the event of any sale or other transfer of the
Executive Park or any part thereof including the Building, Landlord shall be
released of all covenants and obligations of Landlord hereunder with respect to
the Executive Park or portion thereof sold or transferred accruing after such
sale or transfer. Neither the submission of this Lease form to Tenant nor the
execution of this Lease by Tenant shall constitute an offer by Landlord to
Tenant to lease the space herein described as the Leased Premises or otherwise.
This Lease shall not be or become binding upon Landlord to any extent or for any
purpose unless and until it is executed by Landlord and a fully executed
duplicate original thereof is delivered to Tenant or Tenant's counsel.
Section 28.02. Estoppel Certificate. At any time and from time to time
within five (5) days after written demand therefor, Tenant shall execute,
acknowledge and deliver to Landlord, without charge, a statement addressed to
Landlord (and/or such other persons or pants as Landlord shall require),
certifying that to the best knowledge of Tenant, this Lease is in full force and
effect and is unmodified (or, if there have been modifications, specifying same)
and setting forth the dates to which the rentals and other charges payable
hereunder have been paid and stating that Landlord is not in default in the
performance of any of the covenants or agreements on its part to be performed
hereunder (or, if that is not the case, specifying each particular in which
Tenant alleges that Landlord is in default) and certifying as to such other
items in respect of this Lease as Landlord may reasonably require.
Section 28.03. Governing Law. This Lease shall be governed in all
aspects by the laws of the State of New York.
32
<PAGE> 34
Section 28.04. Holdover. In the event Tenant shall hold over after
termination of the Lease by lapse of time or otherwise, Tenant shall pay as rent
for the holdover period an amount equal to one and one-half times the monthly
Annual Rental set forth in Section 4.01 of this Lease, pro rated on a daily
basis. If Landlord gives notice to Tenant of Landlord's election thereof, such
holding over shall constitute renewal of this Lease for a period from month to
month at a rent equal to one and one-half times the Annual Rental set forth in
Section 4.01 of this Lease, but if Landlord does not so elect, acceptance by
Landlord of all rent after such termination shall not constitute a renewal of
the Lease. This provision shall not be deemed to waive Landlord's right of
re-entry or any other right hereunder or at law. This Section shall survive the
termination or any cancellation of the Lease or the Term thereof.
Section 28.05. Late Fee. If Tenant shall fail to pay any installment of
Annual Rental when first due hereunder (irrespective of any grace period as may
be applicable thereto) and (i) if such failure to pay shall continue for more
than ten (10) days after such payment was first due, then Tenant shall be
required to pay Landlord, upon demand, a late charge of $.05 for each 51.00
which remains so unpaid and (ii) if such failure to pay shall continue for more
than twenty (20) days after such payment was first due, then, in addition to
Landlord's right to collect the late charge described in clause (i) above,
interest at a rate per annum equal to the lesser of (a) three (3%) percent over
the Chase Manhattan Bank prime rate, or (b) the maximum rate of interest that
then may be charged to parties of the same legal capacity as Tenant, shall
accrue from and after the date on which any such sum was first due and payable
hereunder, and such late charge and accrued interest shall be deemed additional
rent hereunder and shall be paid to Landlord upon demand. Nothing in this
Section shall be intended to violate any applicable law, code or regulation and
in all instances all such charges shall be automatically reduced to any maximum
applicable legal rate or charge. The provisions of this Section are in addition
to all other
33
<PAGE> 35
remethes available to Landlord for nonpayment of Annual Rental.
THIS LEASE is hereby executed and delivered effective as of the date and
year first above written.
LANDLORD:
ROYAL EXECUTIVE PARK II, a New York
limited partnership
By: JMB Income Properties, LTD.-XI,
a limited partnership, general partner
By: JMB Realty Corporation, a Delaware
Corporation, general partner
By: /s/ signature illegible
Name: illegible
Title: SVP
TENANT:
ENTEX INFORMATION SERVICES, INC.
By: /s/ Robert A. Weber
Name: Robert A. Weber
Title: Manager, Enterprise Facilities
34
<PAGE> 36
EXHIBIT A
[IMAGE NOT SHOWN]
<PAGE> 37
EXHIBIT "B"
CLEANING SPECIFICATIONS
-----------------------
TENANT SPECIFICATIONS
A. NIGHTLY SERVICES: FIVE (5) PER WEEK, MONDAY THROUGH FRIDAY, EXCLUDING
ALL LEGAL HOLIDAYS.
1. Empty and clean all wastebaskets and remove trash to pre-designated area
on premises, This includes trash relocation to compactors behind
Buildings #3 & 5. Small plastic trash liners not included.
2. Empty and wipe clean all ashtrays.
3. Dust furniture, files, fixtures, telephones, window sills and other
surfaces up to 60" high.
4. Spot clean all interior partition glass doors, remove fingerprints and
smudges.
5. Remove fingermarks and smudges from all doors, door frames and light
switch areas.
6. Secure all windows and doors upon completion of cleaning.
7. Extinguish all but the designated night lights to remain on in the
building.
8. Report any faulty equipment to supervisors, who will in turn, report
such items to tenants representative.
FLOOR CARE
----------
1. Sweep and/or dust mop non-carpeted areas five (5) times per week.
2. Damp mop non-carpeted areas five (5) times per week.
3. Vacuum all carpeting five (5) times per week. Spot-clean as necessary.
B. PERIODIC SERVICES
1. Office areas-high dusting every four (4) months.
2. Dust and wipe clean all closet shelving when empty quarterly.
3. Dust all picture frames, charts, graphs, etc., monthly.
4. Dust and damp wipe as necessary ventilating, air conditioning outlets
and return air grills.
5. Dust venetian blinds quarterly.
F-1
<PAGE> 38
EXHIBIT "C"
RULES AND REGULATIONS
---------------------
1. The sidewalks, driveways entrances passages, courts, esplanade
areas and plazas, shall not be obstructed of encumbered by Tenant or used for
any purpose other than ingress and egress to and from the Leased premises and
Tenant shall not permit any of its employees, agents or invitees to park
automotive or other vehicles in any areas other than the designated parking
spaces leased to the Tenant and referred to in this Lease as Tenant's Parking
Spaces.
2. All deliveries to and pick-ups from the Buildings shall be made
at the entrances designated by the Landlord therefor.
3. All sweepings, rubbish and other refuse shall be deposited by
Tenant in the appropriate receptacles provided by Landlord in the locations
designated for the storage of such refuse on the Leased Premises.
4. Tenant shall use its best efforts to assist the Landlord in
keeping the Common Building Facilities in a clean and orderly condition so as to
maintain a proper appearance to the Buildings and the surrounding areas. (This
shall not be deemed to impose on Tenant the obligation to clean or maintain the
Common Building Facilities.)
5. In case of any renewal under this Lease by Tenant of part but not
all of one or both of the Buildings, Tenant shall comply with such additional
rules and regulations as Landlord may impose for the orderly administration of
such Buildings.
<PAGE> 39
FIRST AMENDMENT OF LEASE
THIS AGREEMENT (the "Amendment") made as of the 18th day of October,
1995, between ROYAL EXECUTIVE PARK II, a New York limited partnership, having an
office c/o Heitman Properties Ltd., 1211 Avenue of the Americas, New York, New
York 10036 ("Landlord") and ENTEX INFORMATION SERVICES, INC., a Delaware
corporation, having an office at 6 International Drive, Rye Brook, New York
10573 ("Tenant").
WITNESSETH:
WHEREAS, by Agreement of Lease, dated as of January 20, 1995 (the
"Lease"), Landlord did demise and let to Tenant, and Tenant did hire and take
from Landlord, certain premises consisting of a portion of the ground floor
located in Building 6 of Phase II in Royal Executive Park, Rye Brook, New York
(the "Building");
WHEREAS, Landlord and Tenant desire to modify, amend and supplement the
Lease on the terms, covenants and conditions more particularly set forth herein.
NOW, THEREFORE, in consideration of the sum of TEN DOLLARS ($10.00) paid
by Tenant to Landlord and for other good and valuable consideration, the mutual
receipt and legal sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Unless otherwise provided to the contrary, capitalized terms used
herein shall have the meanings ascribed to such terms in the Lease.
2. The Term of the Lease is hereby extended from January 31, 1996 until
December 31, 1998. Accordingly, the Expiration Date of the Lease shall be
December 31, 1998.
<PAGE> 40
3. Tenant shall continue to pay Annual Rental at the rate specified in
Section 4.01 of the Lease through December 31, 1995. Tenant shall pay Annual
Rental in an amount equal to Two Hundred Six Thousand Seventy-Four ($206,074.00)
Dollars per annum, payable in equal monthly installments of Seventeen Thousand
One Hundred Seventy-Two and 83/100 ($17,172.83) Dollars, for the period
commencing January 1, 1996 through and including the Expiration Date.
4. The following shall be added as Section 4.02 of the Lease:
"Section 4.02. Rent Escalation.
(a) For purposes of this Section, the following definitions shall apply:
(i) The term "Operating Year" shall mean: (1) the period
commencing on January 1, 1996 and ending on December 31, 1996, and (2) each
successive period of twelve (12) months, and (3) the period of twelve (12)
months or less commencing with January 1st immediately preceding the Expiration
Date and ending on the Expiration Date. Escalation additional rent payable
pursuant to this Section 4.02 shall be appropriately apportioned for any partial
Operating Years comprising less than one (1) full year.
(ii) The term "Base Year" shall mean, with regard to Operating
Expenses and Taxes, the calendar year 1995.
(iii) The term "Landlord's Expenses" shall mean the sum of (A)
"Operating Expenses" as defined in Exhibit "A" annexed hereto plus (B) "Taxes"
as hereinafter defined.
(iv) Landlord's "Expense Statement" shall mean a reasonably
detailed statement of Landlord's Expenses certified by Landlord in sufficient
detail to enable Tenant's accountants to compute additional rent payable
hereunder.
-2-
<PAGE> 41
(v) The term "Tax Premises" shall mean Phase II of Royal
Executive Park excluding the Access Drive, together with the improvements
thereon, including without limitation Buildings 4, 5 and 6.
(vi) The term "Taxes" shall mean one-third of all real estate
taxes and assessments (but not interest and/or penalties for late payment)
levied and assessed against the Tax Premises and to the extent allocable to
Phase II, the Access Drive and the Drainage Basin, as shown on Landlord's tax
bills for the respective period, but such term shall not include any income,
franchise, transfer, inheritance, capital stock or any other tax unless a tax
upon rent or some other tax shall be substituted in whole or in part for the
present general real estate taxes, in which event such tax shall constitute a
Tax but only to the extent to which such tax shall be substituted for said real
estate taxes.
(vii) The term "Drainage Basin" shall mean the drainage retention
basin servicing Royal Executive Park.
(viii) Any assessments imposed by public authorities for
improvements included in Taxes which may be paid in installments shall be deemed
payable in the maximum number of installments permitted by law and only such
installment(s) as are payable within any real estate fiscal tax year shall be
included in Taxes for such tax year for the purposes of this Lease.
If any assessment for improvements includable in Taxes is not payable in
installments, the estimated useful life (in years) of the improvement for which
the assessment is levied shall be determined in accordance with (i) Internal
Revenue Code guidelines or (ii) generally accepted accounting principles
whichever results in the longer useful life, and Tenant shall pay as its share
of that portion of the assessment allocable to the Leased Premises (in
accordance with generally
-3-
<PAGE> 42
accepted accounting principles) a pro-rata amount determined by (a) dividing (1)
the amount of the assessment by (2) the number of years of such useful life: and
(b) multiplying the quotient by the lesser of (1) the number of years remaining
in the term of the Lease (including the number of years of any renewal option
exercised by Tenant) or (2) the number of years of such useful life.
(ix) The term "Tenant's Share" shall mean 13.47%.
(b) Tenant shall pay as additional rent for each Operating Year,
Tenant's Share of the excess, if any, in the Landlord's Expenses for said
Operating Year over Landlord's Expenses for the Base Year. In the event that the
Executive Park is 95% or more fully occupied, Landlord's Expenses shall be
actual costs of operation. In the event of lower occupancy, Operating Expenses
shall be determined by adjustment to the level that they would have been at 95%
occupancy. Such additional rental shall be payable by Tenant to Landlord as
follows:
(i) The additional rent for Operating Expenses for the first
Operating Year shall be payable on the first day of each month commencing on
January 1, 1996 and ending December 31, 1996 in a monthly installment equal to
1/12th of the additional rent hereunder for Landlord's Expenses reasonably
estimated by Landlord to be payable by Tenant to Landlord for the first
Operating Year. If the actual amount of additional rent paid by Tenant for the
first Operating Year is ultimately determined to be less than or in excess of
the actual amount therefor due from Tenant hereunder, then within thirty (30)
days after the date on which Landlord delivers its Expense Statement for the
respective Operating Year Tenant shall pay to Landlord the amount of such
shortfall, if any, or Landlord shall credit such excess, if any, to future
payments of Annual Rental and/or additional rent required to be paid by Tenant
under this Lease.
-4-
<PAGE> 43
(ii) Commencing with the second Operating Year, the additional
rent for Landlord's Expenses shall be payable on the first day of each month
during each Operating Year in an amount equal to 1/12th of the additional rent
hereunder for Landlord's Expenses estimated by Landlord to be payable by Tenant
to Landlord for the current Operating Year. Such estimated payments shall be
reconciled to actual payments in the same manner as set forth in Section
4.02(b)(i).
(iii) Landlord shall deliver its Expense Statement to Tenant
within ninety (90) days after the end of each Operating Year, provided, however,
Landlord shall not lose its right to collect the additional rent for Landlord's
Expenses for the respective Operating Year if Landlord fails to submit an
Expense Statement within the time specified herein. The payment of any
additional rental by Tenant shall not preclude it from questioning the
correctness of any Expense Statement. In the event Tenant objects to the Expense
Statement, Tenant shall give Landlord a specific statement of its objections
within one hundred twenty (120) days from the date Landlord delivers the Expense
Statement to Tenant. If Tenant does not object to an Expense Statement within
said one hundred twenty (120) day period, Tenant may not thereafter object to
said Expense Statement.
Landlord will make available to Tenant and its advisors (upon
reasonable notice during normal business hours) all relevant books and records
pertaining to Landlord's Expenses, provided, however, that if Tenant shall audit
Landlord's books and records utilizing a third-party auditor, then such auditor
shall not be compensated by Tenant on a contingency fee basis. In the event
Tenant objects to the Expense Statement, Tenant shall give Landlord a specific
statement of its objections within ninety (90) days from the date Landlord makes
such books and
-5-
<PAGE> 44
records available to Tenant. If Tenant does not provide such statement to
Landlord within said ninety (90) day period (provided Landlord shall have timely
made its books and records available to Tenant as aforesaid), Tenant may not
thereafter object to said Expense Statement. In the event Tenant shall dispute
Landlord's Expense Statement and the parties cannot resolve their differences
within thirty (30) days thereafter, Tenant may request a certification of the
Expense Statement by Landlord's certified public accountant. Such certification
by an accountant shall be binding upon Landlord and Tenant unless Tenant
demonstrates same to be in error. Pending delivery of such certified statement
by Landlord's accountant, Tenant may not withhold payment of the amount in
dispute.
(c) Notwithstanding anything in this Section 4.02 to the contrary, it is
understood and agreed that if Landlord shall receive a refund of any portion of
Taxes in respect of which Tenant shall have paid additional rental under this
Section, then and under such circumstances Tenant shall be entitled to a credit
against future payments of additional rental under this Section in an amount
equal to a pro rata share of such refund, after first deducting from such total
refund all reasonable fees, costs and expenses incurred by Landlord in
collecting same.
(d) If, upon the expiration of the term of the Lease, any credit to
which Tenant might be entitled pursuant to this Section shall not then have been
used as a credit, then, subsequent to Tenant properly vacating the Leased
Premises and provided that Tenant is not in default hereunder, Tenant shall be
entitled to a payment equal to the amount of any such remaining credit within
thirty (30) days of said lease expiration. Tenant's obligation hereunder to pay
additional rent for any Operating Year shall survive the expiration or
termination of the term of this Lease. In the event that the additional rent to
be paid by Tenant under this Section for the final
-6-
<PAGE> 45
Operating Year has not been determined upon the last day of the Lease term,
Tenant covenants to pay to Landlord the additional rent required to be paid
pursuant to this Section for the final Operating Year upon a determination being
made by Landlord of the actual amount of additional rent required to be paid by
Tenant pursuant to this Section. Notwithstanding the foregoing, Tenant's
obligation to pay additional rent shall not extend to that period of the
Operating Year after termination of this Lease."
5. Section 1.03 of the Lease is hereby deleted in its entirety.
6. The last sentence of Section 5.03 of the Lease is hereby deleted and
the following shall be substituted in its place and stead:
"The cost of electric power for Tenant's use shall be $2,272.88 per
month subject to increases or decreases based upon surveys as provided below.
Such amount shall be paid by Tenant as additional rent hereunder together with
monthly installments of Annual Rent. If either party shall request a survey of
Tenant's electrical consumption, then Landlord and Tenant jointly shall select
an independent third party whose fees shall be paid by Tenant for purposes of
conducting such survey, and the monthly electrical charge shall be prospectively
adjusted if indicated by such survey. Tenant's electricity cost shall be based
upon the Landlord's then current average cost per kilowatt hour charged by the
local utility company, without any administrative charge to Tenant."
7. Supplementing Section 5.07 of the Lease, Landlord, as part of its
Janitorial Services, will (i) supply the restrooms servicing the Leased Premises
with toilet tissue and soap, and (ii) remove ice, snow and litter from the
walks, driveways and parking areas of the Executive Park. Additionally, Landlord
will maintain the Building's access security system,
-7-
<PAGE> 46
provided, however, that Tenant, at its cost and expense, will maintain the
security system servicing the Leased Premises.
8. In supplementing Section 7.01 of the Lease, Tenant may occupy the
Leased Premises for offices, sales, display, storage, service, repair and use of
Tenant's products and equipment, engineering, training of Tenant's customers and
employees, and all other uses incidental and related thereto.
9. Notwithstanding anything to the contrary contained in Section 11.01
of the Lease, Landlord's approval shall not be required for Permitted
Alterations that are non-structural in nature and do not affect Building systems
if the aggregate cost thereof does not exceed $25,000. Additionally, the
percentage specified in Section 1 1.01 (c) of the Lease is hereby reduced from
ten (10%) percent to five (5%) percent.
10. Notwithstanding anything to the contrary contained in Section
11.02(b) of the Lease, Tenant will not be required to repaint any portion of the
Leased Premises upon the expiration of the Lease unless repainting is
necessitated by Tenant's abnormal wear and tear.
11. Section 13.01(a) of the Lease is hereby amended to add the words
"receipt of" after the words "ten (10) days after" in line four thereof and
"thirty (30) days after" in line six thereof. Notices delivered pursuant to
Article 21 of the Lease shall be deemed to have been received by a party three
(3) business days following the date such notice shall have been mailed by the
sending party.
12. The third sentence of Section 15.01 of the Lease beginning with the
words "If by reason of a future change in Applicable Laws" and all succeeding
sentences of such Section are hereby deleted in their entirety.
-8-
<PAGE> 47
13. In addition to the forty (40) nonexclusive parking spaces provided
to Tenant pursuant to Section 6.01(a) of the Lease, Landlord shall provide
Tenant with eight (8) reserved spaces which will be designated "Entex"
throughout the Lease Term.
14. The phrase "on the date of such assignment" set forth at the end of
the first full sentence on page 19 of the Lease shall be deleted and "on the
date hereof" shall be substituted in its place and stead.
15. The reference to one hundred (100%) percent set forth in Section
16.01(j) of the Lease shall be deleted and "fifty (50%) percent" shall be
substituted in its place and stead.
16. Supplementing Section 17.02 of the Lease, if Landlord shall require
access to the Leased Premises for repairs, construction or otherwise, then
Landlord shall use reasonable efforts to minimize interference with Tenant's use
of the Leased Premises and its ability to conduct business therein.
17. Supplementing Article 25 of the Lease, Landlord shall use reasonable
efforts to secure customary non-disturbance protection in favor of Tenant in
connection with any refinancing of the Building.
18. Landlord shall keep in full force and effect throughout the Lease
Term a policy of insurance against loss or damage by fire and such other risks
and hazards (including burglary and theft) as are insurable under standard forms
of "all risk" insurance policies, with extended coverage, covering the Building
for at least ninety (90%) percent of the replacement value thereof, exclusive of
foundations and any tenant alterations. Effective as of the date hereof and
thereafter throughout the Lease Term, the liability and property damage
insurance policy which Tenant is required to obtain pursuant to Section 26.02 of
the Lease shall cover (in addition to
-9-
<PAGE> 48
the risks described therein) all risk of direct physical loss or damage,
including but not limited to, water leakage, overflow and sewer and drain
build-up. Simultaneously with the execution and delivery of this Amendment,
Tenant shall deliver a certificate of insurance to Landlord evidencing such
additional coverage.
19. Landlord and Tenant hereby covenant that they will not release or
discharge any hazardous or toxic materials in or around the Building, provided,
however, that the foregoing shall not restrict either party from using and
storing normal office building cleaning materials or hiring licensed
exterminators for the purpose of rodent or pest control. Additionally, Landlord
may store hydrocarbons at the Building such as gasoline, oil and diesel fuel so
long as the storage thereof complies with applicable law.
20. Provided Tenant shall not be in monetary default under the Sublease
or Non-Disturbance Agreement (as such terms are hereinafter defined) at the time
Tenant delivers its Exercise Notice or on the Renewal Commencement Date (as such
terms are hereinafter defined), Tenant shall have the option (the "Option") to
extend the term of the Lease for the period commencing on the first day next
succeeding the Expiration Date (the "Renewal Commencement Date") through and
including May 30, 2002 (the "Renewal Term") upon the same terms, conditions and
provisions as are provided for in the Lease (including without limitation
payment of Rent Escalations pursuant to Section 4.02) except that:
(x) the Annual Rental during the Renewal Term shall equal the sum
of (A) the Annual Rental payable during the last twelve (12) months of the
original Term plus (B) ninety-five (95%) percent of the amount by which (x) the
then-current market rental rate for five-year leases of space comparable to the
Leased Premises (less the amount payable per rentable square
-10-
<PAGE> 49
foot under Section 4.02 for the last twelve (12) months of the original Term)
multiplied by the rentable area then included in the Leased Premises exceeds (y)
the amount payable under (A) of this paragraph. The fair market rental rate for
a five (5) year lease shall be utilized for purposes of determining the Annual
Rental during the Renewal Term notwithstanding the fact that the Renewal Term
shall comprise fewer than five (5) years. In the event that Landlord and Tenant
cannot agree upon the market rental rate to determined the Annual Rental for the
Renewal Term on or before the ninetieth (90th) day prior to the commencement of
the Renewal Term, such market rental rate shall be determined by a real estate
appraiser with not less than ten (10) years' experience in the Westchester
leasing market and mutually acceptable to Landlord and Tenant, provided, that if
a mutually acceptable appraiser cannot be selected by the parties, then the
selection of a real estate appraiser (complying with the experiential
requirements above) shall be made by the American Arbitration Association. The
cost of such appraiser's services and any arbitration fees shall be shared
equally by Landlord and Tenant. The real estate appraiser shall be directed to
not consider in determining the "then-current market rental rate" any rent
concessions, build-out allowances, work letter expenses and any other expenses
Landlord would have to make by reason of market conditions if a new tenant were
to lease the Leased Premises instead of Tenant For example, if the "then-current
market rental rate" were $35.00 per rentable square foot, such $35.00 per
rentable square foot figure would be utilized for purposes of determining the
Annual Rental during the Renewal Term notwithstanding that then prevailing
market conditions would require Landlord to provide a new tenant of the Leased
Premises with a six month rent concession, $30.00 per rentable square foot work
letter or other
-11-
<PAGE> 50
such incentives. For the purposes of this paragraph only, the area of the Leased
Premises is 12,122 rentable square feet.
(y) the Expiration Date shall mean May 30, 2002; and
(z) Tenant shall have no further options under this
paragraph.
The Option may be exercised only by Tenant giving notice (the "Exercise
Notice") to Landlord of Tenant's exercise of said Option, not later than one (1)
year prior to the Expiration Date. Upon Tenant's giving of the Exercise Notice,
the term of this Lease shall be extended automatically upon the terms and
conditions herein specified without the execution of an extension agreement or
other instrument. If this Lease case shall be terminated before the commencement
of the Renewal Term, Tenant's option to extend the term of this Lease, or its
exercise thereof, or the Renewal Term or lease created by any such exercise,
shall be rendered null and void. If Tenant shall not give Landlord the Exercise
Notice at the time set forth above and in the manner prescribed by Article XXI
of the Lease, then the Option shall terminate and be deemed waived by Tenant.
Time is of the essence as to the date for the giving of the Exercise Notice.
21. Tenant acknowledges that it currently occupies the Leased Premises
pursuant to the Lease and represents to Landlord that it has thoroughly
inspected and examined the Leased Premises and is fully familiar with the
physical condition and state of repair thereof. Tenant does hereby agree to
accept the Leased Premises in its existing condition and state of repair,
subject to any and all defects therein, latent or otherwise, "AS IS", and
Landlord shall have no obligation of any kind to or in respect thereof, except
as elsewhere in the Lease otherwise expressly provided.
-12-
<PAGE> 51
22. Notwithstanding anything to the contrary contained in the Lease,
Tenant shall be obligated to comply with the requirements of any handicapped
laws and regulations applicable to the Leased Premises, including without
limitation, the so-called Americans with Disabilities Act and the regulations
promulgated thereunder.
23. Tenant represents and warrants that it has not dealt with any broker
in connection with this Amendment other than The Galbreath Company (the
"Broker") and Tenant does hereby indemnify and agree to hold Landlord harmless
from and against any and all liability, loss, claim, damage, cost or expense
(including, without limitation, reasonable attorneys' fees and disbursements)
arising out of or in connection with claims for commission made against Landlord
by any broker, finder or like agent who claims to have dealt with Tenant in
connection with the execution and delivery of this Amendment (other than
Broker). Landlord represents and warrants to Tenant that Landlord has not dealt
with any broker in connection with this Amendment (other than Broker). Landlord
shall indemnify and hold Tenant harmless from and against any and all liability,
loss, damage, cost or expense (including, without limitation, reasonable
attorneys' fees and disbursements) incurred by Tenant resulting from a
misrepresentation contained in the preceding sentence. Landlord shall pay Broker
any commission payable in connection with this Amendment pursuant to separate
agreement. This provision shall survive the cancellation or expiration of the
Lease.
24. Reference is hereby made to that certain Amended Sublease, dated
December 31, 1993 between JWP, Inc. and Tenant covering the entire second (2nd)
floor of the Building (the "Sublease") and that certain Landlord's Consent and
Non-Disturbance and Attornment Agreement, dated December 31, 1993, among JWP,
Inc., Landlord and Tenant (the "Non-
-13-
<PAGE> 52
Disturbance Agreement"). Any monetary default by Tenant under the Sublease
and/or Non-Disturbance Agreement shall constitute a material default under the
Lease and any monetary default by Tenant under the Lease shall constitute a
material default under the Sublease and Non-Disturbance Agreement.
25. Except as expressly modified, amended and supplemented by this
Amendment, all of the terms, covenants and conditions of the Lease shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
Landlord:
ROYAL EXECUTIVE PARK II,
a New York limited partnership
By: JMB Income Properties, LTD.-XI,
a limited partnership, general partner
By: JMB Realty Corporation, a Delaware
Corporation, general partner
/s/ By: signature illegible
Name: name illegible
Title: Vice President
TENANT:
ENTEX INFORMATION SERVICES, INC.
/s/ By: Robert R. Auray, Jr.
Name: Robert R. Auray, Jr.
Title: Executive Vice President, Finance
Chief Financial Officer
-14-
<PAGE> 53
EXHIBIT "A"
-----------
OPERATING EXPENSES
------------------
"Operating Expenses" as used in Section 4.02 shall mean the direct
operating costs specified below in Category A actually incurred by Landlord for
a given Operating Year, (a) to the extent properly allocable (in accordance with
generally accepted accounting principles consistently applied) to the operation,
repair and maintenance of the Building and (b) to the direct operating costs
specified below in Category A actually incurred by Landlord for a given Base or
Operating Year that are properly allocable (in accordance with generally
accepted accounting principles consistently applied) to the operation, repair
and maintenance of the Common Building Facilities, the drainage retention basin
servicing Royal Executive Park (the "Drainage Basin") and the Access Drive. It
is agreed that any cost allocable to the items specified below in Category B
shall be excluded from Operating Expenses.
The Building's pro-rata share of the aforesaid direct operating costs
allocable to the operation, repair and maintenance of (x) the Common Building
Facilities shall be determined by multiplying said allocable costs by a
fraction, the numerator of which shall be the aggregate gross rentable area of
the Building and the denominator of which shall be the aggregate gross rentable
area of all buildings now or hereafter erected on the Land, and (y) the Drainage
Basin and the Access Drive shall be determined by multiplying said allocable
costs by (i) a fraction, the numerator of which shall be the number of acres of
land within Phase II and the denominator of which shall be the number of acres
of land within the entire Royal Executive Park, excluding the Drainage Basin or
the Access Drive as the case may be, and by multiplying the product thereof by
(ii) a further fraction, the numerator of which shall be the aggregate gross
rentable area of the Buildings and the denominator of which shall be the
aggregate gross rentable area of all buildings now or hereafter erected within
Phase II.
A. Items Included in Operating Expenses:
(1) salaries, wages and all other expenses incurred for the employment
of Building staff excluding those staff members above the grade of Building
Manager and/or equally held positions;
(2) the cost of materials and supplies used in the operation, repair and
maintenance of the Building, the Common Building Facilities, the Drainage Basin
and the Access Drive;
(3) the cost of replacements for tools and equipment used in the
operation, repair and maintenance of the Building, the Common Building
Facilities, the Drainage Basin and the Access Drive, it being agreed that such
equipment shall not include elevators or any items of a capital nature, except
as provided in subparagraph A(15);
<PAGE> 54
(4) amounts charged to Landlord by independent contractors for services
(including full or part-time labor), materials and supplies furnished in
connection with the operation, repair and maintenance of any part of the
Building, the Common Building Facilities, the Drainage Basin and the Access
Drive, and the heating, air conditioning, ventilating, plumbing, electrical and
elevator systems of the Building;
(5) amounts paid by Landlord, or charged to Landlord by independent
contractors, for window cleaning and janitorial, rubbish removal and porter
services;
(6) water charges and sewer rents;
(7) the cost of repainting or otherwise redecorating any part of Common
Building Facilities;
(8) seasonal decorations for the lobby and other public portions of the
Common Building Facilities;
(9) the cost of telephone service, postage, office supplies, maintenance
and repair of office equipment and similar charges related to operation of the
building manager's office;
(10) the cost of licenses, permits and similar fees and charges related
to the operation, repair and maintenance of the Building, Common Building
Facilities and the Drainage Basin;
(11) premiums for insurance obtained by Landlord covering the Building,
Drainage Basin, Common Building Facilities and Access Drive;
(12) fees for the management of the Building, not exceeding those fees
customarily charged for comparable buildings and excluding any leasing
commissions or compensations;
(13) charges (including applicable taxes) for electricity, steam and
other utilities required in the operation of the Building and other Common
Building Facilities.
(14) lease payments for rented equipment used by Landlord to provide
services which would otherwise be provided by an independent contractor and the
cost of which services would be an item included as an Operating Expense;
provided that in no event shall the annual cost of such lease payments and
direct services included in Operating Expenses exceed, in the aggregate, the
cost that would have been charged by an independent contractor for such
services;
(15) the amount of annual amortization taken by Landlord (calculated by
the straight-line method and based on the estimated number of years of the
actual useful life of the equipment or of the useful life thereof established in
accordance with Internal Revenue Code guidelines) for any replacement equipment
purchased by Landlord to provide services and the cost of which services would
be an item included as an Operating Expense; and
<PAGE> 55
(16) If any capital improvement is made or any item of capital equipment
is leased during any Operating Year either (i) in compliance with a legal
requirement, whether or not such requirement is valid or mandatory, or a
requirement of any applicable insurance policies, or (ii) for the purpose of
reducing Operating Expenses (as, for example, a labor-saving improvement), then
the cost of such improvement (or rental thereof) shall be included in Operating
Expenses for the Operating Year in which such improvement was made (or such
rental payment obligation incurred); provided however, to the extent the cost of
such improvement is required to be capitalized for federal income tax purposes,
such cost shall be amortized over the shortest useful life of such improvement
permitted pursuant to the Internal Revenue Code of 1986, as amended, and the
annual amortization thereof, together with interest thereon at a rate equal to
two (2%) percent over the then prime rate being charged by Chemical Bank, N.A.,
shall be deemed an Operating Expense in each of the Operating Years during which
such cost of the improvement is amortized.
B. Items Excluded from Operating Expenses:
(1) the cost of any work or service performed for any tenant (including
Tenant) at such tenant's cost;
(2) the cost of installing, operating and maintaining any specialty
service, such as an observatory, broadcasting facilities, athletic or
recreational club, unless such facility is an amenity for Tenant;
(3) salaries of officers and executives of Landlord above the grade of
building manager;
(4) the cost of any items for which Landlord is reimbursed by any tenant
or by insurance of otherwise;
(5) the cost of any repairs, alterations, additions, changes,
replacements and other items which are made in order to prepare for a new
tenant's occupancy (and the cost of correcting defects in any such work) or
which under generally accepted accounting principles are properly classified as
capital expenditures (except costs referred to in subparagraphs A(15) and A(16)
(which shall be deemed to include a) any costs of correcting defects in the:
Building equipment if such defects are noted within one (1) year after the Term
Commencement Date, (b) the costs of correcting any deficiencies in Landlord's
Work within six (6) months after the Term Commencement Date or (c) the cost of
correcting structural defects in the construction of the Building, Common
Building Facilities and Drainage Basin);
(6) the cost of any, work or service performed for any tenant of the
Buildings (other than Tenant) to a materially greater extent or in a materially
more favorable manner than that furnished generally to the tenants and other
occupants (including Tenant);
<PAGE> 56
(7) the cost of any work or service performed for any facility other
than the Leased Premises, Common Building Facilities, and Drainage Basin;
(8) the cost any additions to the Buildings;
(9) the cost of any repair in accordance with Articles Nine and Twelve
of the Lease;
(10) interest on debt or amortization payments on any mortgage and
rental under any ground lease or other underlying lease and legal expenses
incurred in connection with such mortgages or ground or underlying lease;
(11) any real estate brokerage commissions or other cost incurred in
procuring tenants or in Landlord disposing of its interest in Royal Executive
Park;
(12) any advertising expenses;
(13) charges (including applicable taxes) for electricity, steam and
other utilities for which Landlord receives reimbursement from any tenant; and
(14) franchise, transfer, inheritance, capital stock or income taxes of
Landlord;
<PAGE> 1
EXHIBIT 10.15
LEASE
-----
ROYAL EXECUTIVE PARK II,
Lessor
and
JWP INC.,
Lessee
Premises in the Royal Executive Park,
King Street, Rye Brook, New York
May 21, 1992
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE
LEASE OF PREMISES
Section 1.01. Lease of Premises..................................................... 1
Section 1.02. Access Drive ....................................................... 2
Section 1.03. Right of First offer.................................................. 2
Section 1.04. Initial Space Option.................................................. 3
Section 1.05. Surrender Option...................................................... 6
Section 1.06. Building Roof Rights.................................................. 7
ARTICLE TWO
TERM
Section 2.01. Term ....................................................... 8
Section 2.02. Extension of Term..................................................... 8
ARTICLE THREE
CONDITION OF PREMISES
Section 3.01 Condition of Premises................................................. 11
ARTICLE FOUR
RENTAL
Section 4.01. Annual Rent ........................................................ 11
Section 4.02. Rent Escalation....................................................... 12
Section 4.03. Real Estate Taxes; Assessed Valuation................................. 16
ARTICLE FIVE
SERVICES
Section 5.01. Standard of Operations................................................ 16
Section 5.02. Electrical Service.................................................... 16
Section 5.03. Elevators .......................................................... 17
Section 5.04. Light Bulbs and Water................................................. 18
Section 5.05. Building Security..................................................... 18
Section 5.06. Janitorial Services................................................... 18
ARTICLE SIX
TENANT PARKING
Section 6.01. Tenant Parking...................................................... 18
ARTICLE SEVEN
USE AND ACCESS
Section 7.02. Use ................................................................ 19
Section 7.01. Access ............................................................. 20
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE EIGHT
REPAIRS AND MAINTENANCE
Section 8.01. Landlord's Obligation to Repair and Maintain.......................... 20
Section 8.02. Tenant's Obligations.................................................. 20
ARTICLE NINE
FIRE AND OTHER CASUALTY
Section 9.01. Damage or Destruction................................................. 21
Section 9.02. Waiver of Subrogation Rights.......................................... 22
ARTICLE TEN
LIABILITY
Section 10.01. Indemnification of the Parties........................................ 22
ARTICLE ELEVEN
ALTERATIONS AND FIXTURES
Section 11.01. Alterations by Tenant................................................. 23
Section 11.02. Tenant's Property..................................................... 25
ARTICLE TWELVE
CONDEMNATION
Section 12.01. Total Taking ........................................................ 25
Section 12.02. Partial Taking........................................................ 25
Section 12.03. Claims of Landlord and Tenant......................................... 26
Section 12.04. Distribution of the Award............................................. 26
Section 12.05. Temporary Taking of Premises.......................................... 26
Section 12.06. Landlord's Obligation to Restore...................................... 27
ARTICLE THIRTEEN
HANDLES AND DEFAULTS
Section 13.01. Default by Tenant..................................................... 27
ARTICLE FOURTEEN
BANKRUPTCY
Section 14.01. Bankruptcy by Tenant.................................................. 30
ARTICLE FIFTEEN
COMPLIANCE WITH LAWS
Section 15.01. Tenant's Compliance with Laws......................................... 30
Section 15.02. Landlord's Compliance with Laws....................................... 32
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE SIXTEEN
ASSIGNMENT AND SUBLETTING
Section 16.01. Assignment and Subletting by Tenant................................... 32
ARTICLE SEVENTEEN
LANDLORD'S ACCESS
Section 17.01. Landlord's Right to Use Certain Facilities............................ 38
Section 17.02. Landlord's Access to Premises......................................... 39
ARTICLE EIGHTEEN
NAME OF BUILDING; SIGNS
Section 18.01. Landlord's Right to Designate Building Name........................... 39
Section 18.02. Signs Identifying the Building........................................ 39
Section 18.03. Limitations on Other Signs............................................ 39
ARTICLE NINETEEN
QUIET ENJOYMENT
Section 19.01. Landlord's Covenant of Quiet Enjoyment................................ 40
ARTICLE TWENTY
NON-WAIVER
Section 20.0l. No Waiver Implied..................................................... 40
ARTICLE TWENTY-ONE
NOTICES
Section 21.01. Notices to Landlord or Tenant......................................... 40
ARTICLE TWENTY-TWO
PARTIAL INVALIDITY
Section 22.01. Severability Clause................................................... 41
ARTICLE TWENTY-THREE
BROKERAGE
Section 23.01. Brokerage ............................................................ 42
ARTICLE TWENTY-FOUR
LANDLORD'S REPRESENTATIONS AND
WAIVERS AND TENANT'S REPRESENTATIONS
Section 24.01. Landlord's Representations............................................ 42
Section 24.02. Waivers............................................................... 42
Section 24.03. Tenant's Representation............................................... 43
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE TWENTY-FIVE
SUBORDINATION; NON-DISTURBANCE
Section 25.01. Landlord's Right to Mortgage; Priority................................ 43
ARTICLE TWENTY-SIX
INSURANCE
Section 26.01. Landlord's Insurance.................................................. 45
Section 26.02. Tenant's Insurance.................................................... 45
Section 26.03. Waiver of Subrogation................................................. 46
Section 26.04. Compliance with Terms................................................. 47
Section 26.05. Excess Rates ...................................................... 47
Section 26.06. Windows ............................................................ 47
Section 20.07. Fines and Penalties................................................... 47
Section 26.08. Notice of Casualty.................................................... 48
Section 26.09. Landlord's Liability.................................................. 48
Section 26.10. Construction Insurance................................................ 48
ARTICLE TWENTY-SEVEN
RULES AND REGULATIONS
Section 27.01. General; This Lease Controls in Event of Conflict..................... 49
Section 27.02. Standards Applicable to Landlord...................................... 49
Section 27.O3. Landlord's Enforcement................................................ 50
ARTICLE TWENTY-EIGHT
MISCELLANEOUS
Section 28.01. Certain Miscellaneous Provisions...................................... 50
Section 28.02. Estoppel Certificate.................................................. 50
Section 28.03. Governing Law ...................................................... 51
Section 28.04. Building Four Cafeteria............................................... 51
</TABLE>
iv
<PAGE> 6
LIST OF EXHIBITS
----------------
Exhibit A. Site Plan
Exhibit B. Description of Land Comprising Executive Park
Exhibit C. Floor Plans
Exhibit D. Operating Expenses
Exhibit E. Janitorial Services
Exhibit F. Permitted Encumbrances
Exhibit G. Rules and Regulations
Exhibit H. Available Space
Exhibit I. Building Electrical System
<PAGE> 7
LEASE
-----
LEASE, dated as of May 21, 1992 between ROYAL EXECUTIVE PARK II, a New
York limited partnership with an office at 101 East 52nd Street, New York, New
York 10022 ("Landlord"), and JWP INC., a Delaware corporation, with an office at
2975 Westchester Avenue, Purchase, New York, 10577 ("Tenant").
ARTICLE ONE
-----------
LEASE OF PREMISES
-----------------
Section 1.01. Lease of Premises. (a) Landlord hereby leases to Tenant,
and Tenant hereby leases from Landlord, upon and subject to the covenants,
agreements, terms, provisions and conditions of this Lease, for the term and at
the rent hereinafter stated, the premises referred to in subsection (b) below
(subject to the expansion and surrender rights of Tenant, as hereinafter
provided) (the "Leased Premises"), situated on a plot of land (the "Land")
designated as Phase II on the Site Plan annexed hereto as Exhibit A and made a
part hereof, in the Royal Executive Park, King Street, Rye Brook, New York (such
Phase being herein referred to as the "Executive Park"). The land comprising the
Executive Park is described in Exhibit B annexed hereto and made a part hereof.
(b) The Leased Premises shall be that portion of the ground floor and
the entire second (2nd) and third (3rd) floors, comprising 72,156 rentable
square feet in the aggregate, as indicated on the floor plans annexed hereto as
Exhibit C and made a part hereof (the "Leased Premises"), in the building
designated as B-l (the "Building") on the Site Plan, and all fixtures,
equipment, improvements, installations and appurtenances which at the
commencement of or during the term of this Lease are attached to or used in
connection with such space leased by Tenant, but excluding (i) any personal
property or trade fixtures of Tenant and (ii) such space as may be excluded from
the Leased Premises pursuant to any provision of this Lease.
(c) This Lease includes the right of Tenant to use the Common Building
Facilities (as defined in subsection 1.01(d) below) in common with other tenants
in the Building and/or in the buildings designated on said Site Plan as
Buildings B-2 and B-3.
(d) The term "Common Building Facilities" shall mean all of the common
facilities in the Building designed and intended for use by all tenants in the
Building or in the portion of the Executive Park (excluding parking spaces in
Phase II designated for single tenant use which do not exceed 329 spaces)
designed and intended for use by tenants in the buildings designated as B-1, B-2
and B-3 on the aforesaid Site Plan, in common with Landlord and each other,
<PAGE> 8
including, but not limited to hallways, lobbies, receiving areas, loading docks,
elevators, stairways, telephone and electrical closets, walkways, plazas,
courts, service areas, landscaped areas and all other common and service areas
of the Building or the Executive Park intended for such use.
Section 1.02. Access Drive. The Executive Park shall include rights in
the existing paved access drive running to and from King Street as shown on the
Site Plan, provided, however, that the owner of the Adjoining Premises
(designated as Phase I on the Site Plan) and its successors and assigns, shall
have the right to use that portion of said access drive which runs from east to
west and forms the northerly boundary of Phase I (the "Access Drive") in common
with Tenant and other occupants of Phase I and Phase II for ingress and egress
of motor vehicles and pedestrians to and from King Street to the Adjoining
Premises and for the installation of underground utilities. Landlord and/or the
owner of the Adjoining Premises shall also have the right to use the Access
Drive in connection with the extension or widening thereof over and upon the
Adjoining Premises, provided that same shall not materially adversely affect
Tenant's access to the Buildings. Landlord and/or the owner of the Adjoining
Premises shall have the right to relocate the Access Drive or to substitute
therefor another access drive.
Section 1.03. Right of First Offer. (a) If at any time during the Term
or any Renewal Term (as such terms are hereinafter defined) the Landlord shall
determine in its sole and absolute discretion to offer the Building for sale
individually (as opposed to a sale of the Building together with one or more
other properties) then, provided that JWP INC. is the Tenant hereunder and
Tenant is not then in monetary default hereunder beyond any applicable grace,
notice and cure period, Landlord shall notify Tenant in writing that the
Building will be available for purchase on the terms and conditions set forth by
Landlord, prior to entering into an agreement to sell the Building with any
other individual or entity ("Landlord's Notice"). If Tenant desires to purchase
the Building from Landlord, then Tenant shall notify Landlord thereof in writing
within fifteen (15) days of receipt of Landlord's Notice, time being of the
essence. If Tenant shall timely deliver the aforesaid notice, then Landlord and
Tenant shall enter into a commercially reasonable purchase agreement (the
"Purchase Agreement") for the Building on the terms so offered within thirty
(30) days of Landlord's Notice, time being of the essence. If Tenant does not
enter into such Purchase Agreement within said thirty (30) day period, or if
Tenant shall fail to timely respond to Landlord's Notice as aforesaid, then
Tenant shall be deemed to have rejected the offer and such Building shall be
released from the restrictions contained in this Section 1.03. If Tenant rejects
the offer as described above, Landlord shall have the right to sell the Building
to any other party provided that such sale is consummated within six (6) months
after the last day for Tenant's acceptance of the offer and provided further
that the economic terms to the purchaser are not
2
<PAGE> 9
substantially more favorable than those offered to Tenant. For the purposes of
the preceding sentence, economic terms that are in aggregate equal to 90% or
more of the terms net forth in the offer shall be deemed not substantially more
favorable to the purchaser. If Landlord shall sell the Building to such
purchaser, then Tenant shall have no further rights under this Section 1.03.
(b) Anything in this Section to the contrary notwithstanding, Landlord
shall have the absolute right to sell the Building which is the subject of this
Section, without first being required to offer such Building to Tenant, to MCI
Telecommunications Corporation which has a right of first offer or right of
first refusal with respect to, or has an option to purchase the Building as of
the date hereof.
Section 1.04. Initial Space Option. (a) Provided that this Lease shall
be in full force and effect on the date that Landlord shall receive the Option
Notice (hereinafter defined), Tenant shall have the exclusive option,
exercisable in the manner hereinafter provided, to lease the Option Space
(hereinafter defined) on the following terms and conditions.
(b) Not later than thirty (30) days following the Term Commencement Date
(time being of the essence) , Tenant shall give Landlord written notice (the
"Option Notice") of whether it exercises its option to lease the Option Space.
If Tenant shall fail to deliver the Option Notice within such thirty (30) day
period, then Tenant shall be deemed to have waived all rights with respect to
such space (except as otherwise provided herein) and Landlord shall be free to
offer same to, and enter into a lease (a "Third Party Lease") for such space
with, any other prospective tenant upon such terms and conditions as Landlord,
in its sole and absolute discretion, deems appropriate, provided however that
the term of any such lease shall expire not later than the sixth (6th)
anniversary of the Rent Commencement Date (hereinafter defined). Promptly
following the execution of any Third Party Lease, Landlord shall notify Tenant
in writing of the expiration date thereof.
(c) If Tenant delivers the Option Notice within the aforesaid thirty
(30) day period: (i) the Option Space shall be added to and deemed a part of the
Leased Premises for all purposes as of the date of delivery of the Option Notice
to Landlord, (ii) the Annual Rentals specified in (X) Section 4.01(b)(i) hereof
shall be increased by an amount equal to $22.50 multiplied by the Option Space's
rentable square footage ("RSF"), and (y) Section 4.01(b) (ii) hereof shall be
increased by an amount equal to $24.50 multiplied by the Option Space's RSF,
(iii) "Tenant's Share shall be increased by the percentage of rentable space in
the Building constituting the Option Space, and (iv) the Option Space shall be
delivered to and accepted by Tenant in its "as is" condition (subject,
nevertheless, to Landlord's representations set forth in Section 3.01 hereof)
and, except as otherwise provided herein,
3
<PAGE> 10
Landlord shall not be obligated to perform any work with respect thereto.
(d) For purposes hereof, the term "Option Space" shall mean all or any
portion of the Available Space (hereinafter defined), as specified by Tenant in
its Option Notice; provided, however, that the balance of any Available Space
not designated by Tenant as option Space must be in reasonably leasable
configuration. The term "Available Space" shall mean that portion of the ground
floor of the Building comprising approximately 13,585 RSF which is crosshatched
on Exhibit H annexed hereto.
(e) Tenant shall have the further exclusive Option (the "Additional
Space Option") to lease the space demised under any Third Party Lease on the
terms and conditions hereinafter provided, by delivering written notice (an
"Additional Space Notice") to Landlord of Tenant's election to lease such space
not later than twelve (12) months prior to the expiration date of the applicable
Third Party Lease, time being of the essence. As provided above, Landlord shall
notify Tenant in writing of the expiration date of all Third Party Leases
promptly following the execution thereof and again not earlier than twenty-two
(22) months nor later than eighteen (18) months prior to such expiration date.
If Tenant shall timely deliver an Additional Space Notice, (i) the space demised
under the applicable Third Party Lease (the "Additional Space"), shall be added
to and deemed a part of the Leased Premises as of the day immediately succeeding
the expiration date of such Third Party Lease (the "Additional Space
Commencement Date"), (ii) effective as of the Additional Space Commencement
Date, the Annual Rentals shall be increased in accordance with the formulae
specified in Section 1.04(c)(ii) above (provided, however, that the rentals
therein stated shall be multiplied by the RSF of the Additional Space), (iii)
"Tenant's Share" shall be increased by the percentage of rentable space in the
Building constituting the Additional Space, (iv) the Additional Space shall be
delivered to and accepted by Tenant in its then "as is" condition, and Landlord
shall not be Obligated to perform any work with respect thereto, and (v) Tenant
shall pay to Landlord, on the Additional Space Commencement Date, an amount
equal to the aggregate savings realized by Tenant by utilizing all or any
portion of the leasehold improvements (the "Improvements") which were installed
in the Additional Space by Landlord (or by the Tenant thereof) in connection
with any Third Party Lease (the "Construction Savings"); provided, however, that
Tenant shall not be obligated to utilize any such Improvements. The Construction
Savings shall be jointly determined by Landlord and Tenant and shall be equal to
the difference between (x) the amount Tenant's build-out of the Additional Space
would reasonably cost if the Improvements were not previously installed, and (y)
the actual cost of Tenant's build-out of the Additional Space, as certified to
Landlord by Tenant's architect and general contractor. If Landlord and Tenant
shall be unable to mutually agree upon the Construction Savings within thirty
(30) days following Tenant's
4
<PAGE> 11
taking occupancy of the Additional Space, then such matter shall be determined
by the American Arbitration Association in accordance with the prevailing rules
and procedures of such organization. If Tenant fails to timely deliver an
Additional Space Notice to Landlord, Tenant shall be deemed to have waived all
rights with respect to such space and Landlord shall be free to offer the same
to, and enter into a lease for such space with any other prospective tenant upon
such terms and conditions as Landlord, in its sole and absolute discretion,
deems appropriate, without being required to again offer such Additional Space
to Tenant. If Landlord is unable to deliver possession of any Additional Space
on a given Additional Space Commencement Date because of the holding over or
retention of possession of any tenant, under tenant or occupants, (aa) Landlord
shall not be subject to any liability for failure to give possession on said
date, (bb) Tenant waives the right to recover any damages which may result from
the failure of Landlord to deliver possession of the Additional Space and agrees
that the provisions of this Section shall constitute an "express provision to
the contrary" within the meaning of Section 223-a of the New York Real Property
Law, (cc) all items of rental payable for the Additional Space shall be abated
and the Additional Space Commencement Date shall be postponed until five (5)
days after Landlord shall give Tenant notice that the Additional Space is vacant
and available for Tenant's occupancy, and (dd) Landlord at Landlord's expense
shall use its reasonable efforts to deliver possession of the Additional Space
to Tenant and in connection therewith, if necessary, shall institute and
diligently and in good faith prosecute holdover and any other appropriate
proceedings against the occupant of such Additional Space. Notwithstanding the
foregoing, Tenant shall have the right to withdraw its Additional Space Notice
if Landlord is unable to deliver possession of the Additional Space to Tenant
within six (6) months following the Additional Space Commencement Date by
delivering written notice to Landlord within seven (7) days following the
expiration of such six (6) month period.
(f) Promptly following Landlord's receipt of an Option Notice or
Additional Space Notice, Landlord shall notify Tenant of the RSF of the Option
Space selected by Tenant or the Additional Space, as the case may be. Such RSF
shall be reasonably determined by Landlord utilizing the standards and practices
that the Landlord currently employs at Executive Park to determine RSF. For
purposes of this Section 1.04, Landlord and Tenant hereby agree that the entire
ground floor of the Building comprises 31,860 RSF. The RSF of the Option Space
or Additional Space shall be reasonably increased in the event common corridors
shall be required for such space (based upon the relative square footage
occupied by all of the ground floor tenants utilizing such common corridors).
Within seven (7) days following landlord's notification of Tenant of the Option
Space's or Additional Space's RSF, Landlord and Tenant shall execute and deliver
to each other an agreement supplementary hereto setting forth the Option Space's
or Additional Space's RSF and the
5
<PAGE> 12
appropriate modifications to Sections 4.01 and 4.02 described in Sections (c)
and (e) above.
(g) If common corridors shall be required in connection with any Option
Space or Additional Space hereafter leased by Tenant (or any space surrendered
by Tenant pursuant to Section 1.05 below), then Landlord shall pay fifty (50%)
percent of the reasonable costs of (i) creating demising walls for such common
corridors, and (ii) relocating any Building systems within such demising walls,
to the extent reasonably required.
Section 1.05. Surrender Option. (a) Tenant shall have the right to
surrender all or any portion of the Leased Premises (in units of not less than
15,000 RSF of contiguous space, provided however, that Tenant shall have the
right to surrender that portion of the ground floor of the Building that is
occupied by Tenant, in accordance with the terms and conditions of this Section
1.05, notwithstanding that Tenant's ground floor premises may comprise less than
15,000 RSF), in reasonably leasable configuration and good condition, on either
the sixth (6th) anniversary (the "First Surrender Date") or eighth (8th)
anniversary (the "Second Surrender Date"), of the Rent Commencement Date
(hereinafter defined) (each, a "Surrender Date"), by delivering written notice
to Landlord (specifying the space to be surrendered and whether such space shall
be surrendered on the First or Second Surrender Date) not later then nine (9)
months preceding the applicable Surrender Date (time being of the essence). In
the event of a surrender of all of the Leased Premises, then this Lease shall
terminate as of the applicable Surrender Date as if such date were the
Expiration Date hereof. Time shall be of the essence as to Tenant's obligation
to deliver any space surrendered pursuant to this Section 1.05 by the applicable
Surrender Date in vacant, broom-clean condition (provided, however, that the
foregoing shall not require Tenant to remove any permanent leasehold
improvements that it may have installed in the surrendered space in compliance
with the terms hereof).
(b) If Tenant shall surrender less than the entire Leased Premises
pursuant to this Section 1.05, then provided that Tenant shall have timely
vacated the surrendered space in the condition required hereby and is not
otherwise in monetary default hereunder beyond any applicable grace, notice and
cure period, effective as of the applicable Surrender Date: (i) the surrendered
space shall be deemed deleted from the Leased Promises for all purposes, and
(ii) "Tenant's Share" shall be decreased the percentage of rentable space in the
Building constituting the surrendered space. Additionally, if Tenant shall
surrender a portion of the Leased Premises on the First Surrender Date, then
effective. as of such First Surrender Date, the Annual Rentals specified in
Section 4.01 (b) (ii) hereof shall be decreased by an amount equal to $24.50
multiplied by the RSF of the surrendered space. If Tenant shall surrender a
portion of the Leased Premises on the Second Surrender Date, then effective as
of such Second Surrender Date the Annual
6
<PAGE> 13
Rental specified in Section 4.01 (b) (ii) hereof shall be further reduced by
an amount equal to $24.50 multiplied by the RSF of the space surrendered on the
Second Surrender Date.
(c) The RSF of any space surrendered by Tenant in accordance with this
Section 1.05 shall be reasonably determined by Landlord utilizing the standards
and practices that Landlord currently employs at Executive Park to determine RSF
and shall be deemed to include any additional square footage which was allocated
to the surrendered space by reason of common corridors. For purposes of this
Section 1.05 only, the entire Building shall be deemed to comprise 94,016 RSF.
Within seven (7) days following Landlord's notification of Tenant of any
surrendered space's RSF, Landlord and Tenant shall execute and deliver to each
other an agreement supplementary hereto setting forth the surrendered space's
RSF and the appropriate modifications to Sections 4.01 and 4.02 described in
Section (b) above. Except as expressly provided in this section 1.05, Tenant
shall have no other right to surrender any portion of the Leased Premises to
Landlord.
Section 1.06. Building Roof Rights. Throughout the Term and any Renewal
Terms, Tenant shall have the right to install and maintain on the Building's
roof supplemental HVAC equipment (not to exceed the Building's electrical
capacity which is described on Exhibit "I" annexed hereto) and, subject to the
prior rights of MCI Telecommunications Corporation and New York Telephone
Company (details of which rights Tenant acknowledges having received),
telecommunications equipment. The installations shall not materially adversely
affect the appearance of the Building, nor shall they interfere in any way with
other tenants of Executive Park or their telecommunications installations.
Tenant shall install a catwalk to access any roof installations made by Tenant
pursuant hereto at its sole cost and expense. All roof installations shall be
subject to Landlord's prior approval, which shall not be unreasonably withheld
or delayed. All taxes (if any) and reasonable costs, including without
limitation, engineering, roof reinforcement (if required) and Landlord's review
of plans, specifications and construction, shall be at Tenant's sole cost and
expense. Tenant shall indemnify and hold Landlord harmless from and against any
and all loss, cost, liability and expense( including without limitation,
reasonable attorneys' fees and disbursements) arising from or relating to
Tenant's use of the Building's roof and/or its installations located thereon.
Additionally, Tenant shall pay any costs which are incurred by Landlord to
repair any damage to the roof that is caused by Tenant or its contractors,
employees, agents, licensees or invitees within fifteen (15) days of Tenant
receipt of an invoice therefore.
7
<PAGE> 14
ARTICLE TWO
-----------
TERM
----
Section 2.01. Term. The term of this Lease (the "Term") shall commence
on the date hereof (the "Term Commencement Date") and shall terminate, subject
to Section 2.02, on the last day of the calendar month in which the day
immediately preceding the tenth (10th) anniversary of the Term Commencement Date
occurs (the "Expiration Date") or on such earlier date on which the term may
expire or be terminated pursuant to the provisions of this Lease or pursuant to
law.
Section 2.02. Extension of Term.
(a) Tenant shall have the option (the "Renewal Option") to extend the
Term for three (3) successive periods of five (5) years each (individually, a
"Renewal Term" and collectively, the "Renewal Terms"), the first of which shall
commence on the date immediately succeeding the Expiration Date and on the fifth
(5th) anniversary of the Expiration Date; provided, however, Tenant shall not
have the right to exercise a Renewal option (at Landlord's sole option) if this
Lease shall have been previously terminated or if Tenant shall be in default
beyond any applicable grace, notice and cure period in its monetary obligations
hereunder on the Exercise Date (hereinafter defined) or on the Expiration Date
or the last day of the existing Renewal Term, as the case may be. Each such
Renewal Option may be exercised with respect to the entire Leased Premises only,
and shall be exercisable by Tenant delivering written notice (the "Renewal
Notice") to Landlord of Tenant's election to exercise each Renewal Option at
least twelve (12) months prior to the Expiration Date and thereafter, for each
successive Renewal Term at least twelve (12) months prior to the expiration of
the existing Renewal Term (each such date being referred to herein as the
"Exercise Date"). Time shall be of the essence as to Tenant's obligation to
deliver a Renewal Notice by the applicable Exercise Date.
(b) If Tenant exercises a Renewal Option, each Renewal Term shall be
upon the same terms, covenants and conditions as those contained in this Lease,
except that (i) there shall be one (1) less Renewal option remaining to be
exercised, (ii) the Annual Rental (to be payable pursuant to Section 4.01
hereof) for each Renewal Term shall be deemed to mean the Annual Rental
determined pursuant to Section 2.02 (c) below, and (iii) the term "Base Year"
(as such term is utilized in Section 4.02 hereof) shall mean, in respect of a
given Renewal Term, the twelve (12) month period immediately following the
commencement date of such Renewal Term.
8
<PAGE> 15
(c) The Annual Rental for each Renewal Term shall be as follows:
(i) The Annual Rental for the Leased Premises, for each year of such
Renewal Term, shall be equal to the annual fair market rental value of the
Leased Premises for a term equal to the applicable Renewal Term (the "Fair
Market Rent") as of the commencement date of such Renewal Term. The Fair Market
Rent shall equal the rental value determined as if the Leased Premises were
available in the then current rental market for comparable, proximately located
buildings in Westchester County and assuming that Landlord has had a reasonable
time to locate a tenant who rents with the knowledge of the uses to which the
Leased Premises can be adapted, and that neither Landlord nor the prospective
tenant is under any compulsion to rent. In determining the Fair Market Rent,
tenant rent abatements and fifty (50%) percent of the cost of any additional
workletter expenditures Landlord would be required to make to prepare the Leased
Premises for a new tenant (taking into account any reductions in such
expenditures which would reasonably accrue to Landlord's benefit by reason of
being able to utilize the leasehold improvements installed in the Leased
Premises at such time) shall be taken into consideration if prevailing market
conditions would require the Landlord to grant such a rent abatement and/or
workletter to a new tenant. The fact that Landlord would be required to pay a
brokerage commission in connection with a new lease shall not be taken into
consideration to reduce the Fair Market Rent. Additionally, the fact that Tenant
shall receive a now "Base Year" for purposes of determining escalations pursuant
to Section 4.02 hereof (viz., the twelve (12) month period immediately
following the commencement date of the applicable Renewal Term) shall be taken
into consideration.
(ii) For purposes of determining the Fair Market Rent, the following
procedures shall apply:
(aa) Landlord shall give Tenant written notice (the "Rent
Notice"), within six (6) months after the Exercise Date, which Rent Notice shall
set forth Landlord's determination of the Fair Market Rent ("Landlord's
Determination").
(bb) Tenant shall give Landlord written notice ("Tenant's
Notice" within thirty (30) days after Tenant's receipt of the Rent Notice, of
whether Tenant accepts or disputes Landlord's Determination. If Tenant in
Tenant's Notice accepts Landlord's Determination, or if Tenant fails or refuses
to give Tenant's Notice as aforesaid, then the Fair Market Rent for the
applicable Renewal Term shall be Landlord's Determination. If Tenant in Tenant's
Notice disputes Landlord's Determination, then Tenant shall deliver to Landlord,
within said thirty (30) days, Tenant's determination of the Fair Market Rent
("Tenant's Determination"), as determined by an independent real estate
appraiser ("Tenant's Appraiser"), together with a copy of the appraisal prepared
by Tenant's Appraiser.
9
<PAGE> 16
(cc) Landlord shall give Tenant written notice ("Landlord's
Notice"), within thirty (30) days after Landlord's receipt of Tenant's
Determination, of whether Landlord accepts or disputes Tenant's Determination.
If Landlord in Landlord's Notice accepts Tenant's Determination, then the Fair
Market Rent shall be deemed to be equal to Tenant's determination. If Landlord
in Landlord's Notice disputes Tenant's Determination, Landlord, within such
thirty (30) days, shall appoint an independent real estate appraiser
("Landlord's Appraiser") and so notify Tenant. Landlord's Appraiser and Tenant's
Appraiser shall then have twenty (20) days after such notice is received by
Tenant, to agree upon the Fair Market Rent. If, within said twenty (20) days
Landlord's Appraiser and Tenant's Appraiser shall mutually agree upon the
determination (the "Mutual Determination") of the Fair Market Rent, their
determination shall be final and binding upon the parties. If Landlord's
Appraiser and Tenant's Appraiser shall be unable to reach a Mutual Determination
within said twenty (20) days, at the request of Landlord or Tenant, both of the
Appraisers shall jointly select a third independent real estate appraiser (the
"Third Appraiser") whose fee shall be borne equally by Landlord and Tenant. In
the event that Landlord's Appraiser and Tenant's Appraiser shall be unable to
agree jointly on the designation of the Third Appraiser within five (5) business
days after they are requested to do so by either party, then the parties agree
to allow the American Arbitration Association to make such designation.
(dd) The Third Appraiser shall conduct such meetings and
investigations as he may deem appropriate and shall, within fifteen (15) days
after the data of designation of the Third Appraiser, determine the Fair Market
Rent. Additionally, Landlord and Tenant shall have the right to present written
evidence to the Third Appraiser in support of their respective determinations of
the Fair Market Rent. The Third Appraiser's determination of Fair Market Rent
shall be conclusive and binding upon Landlord and Tenant, Each party shall pay
its own counsel fees and expenses, if any in connection with any appraisal under
this section including the expenses and fees of any Appraiser selected by it in
accordance with the provisions of this Section. Any appraiser appointed pursuant
to this Section 2.02 shall by an independent real estate broker or appraiser
with at least ten (10) years' experience in the leasing and valuation of
Westchester County properties which are similar in character to the Building.
The Appraisers shall not have the power to add to, modify or change any of the
provisions of this Lease.
(ee) It is expressly understood that any determination of Fair
Market Rent pursuant to this Section shall. be based on the criteria stated in
Section 2.02(c) hereof.
(d) If the final determination of the Fair Market Rent shall not be made
on or before the first day of the Renewal Term in accordance with the provisions
of this Section 2.02, pending such
10
<PAGE> 17
final determination Tenant shall continue to pay, as the Annual Rental for such
Renewal Term, an amount equal to Landlord's Determination, and shall continue to
pay rent escalations as provided in Section 4.02 hereof. If based upon the final
determination hereunder of the Fair Market Rent, the payments made by Tenant on
account of the Annual Rental for such portion of the Renewal Term were (i) less
than the Annual Rental payable for the Renewal Term, Tenant shall pay to
Landlord the amount of such deficiency within fifteen (15) days after demand
therefor, or (ii) greater than the Annual Rental payable for the Renewal Term,
Landlord, at its option, shall either refund to Tenant or credit towards the
next monthly payment of Annual Rental, the amount of such excess, provided,
however, that if such credit shall exceed the next monthly payment of Annual
Rental, then Landlord shall pay to Tenant an amount equal to any remaining
credit not later than the first day of the next succeeding month.
(e) Within seven (7) days after it determination has been made of the
Annual Rental for a given Renewal Term, the parties shall execute and deliver to
each other an instrument supplementary hereto setting forth such Annual Rental.
ARTICLE THREE
-------------
CONDITION OF PREMISES
---------------------
Section 3.01 Condition of Premises. Tenant has examined the Building
(including the Leased Premises), is familiar with the physical condition thereof
and is leasing the Leased Premises in its "as is" condition. Except as otherwise
provided herein, Landlord has not made and does not make any representations or
warranties as to the physical condition, expenses, operation and maintenance, or
any other Latter or thing affecting or related to the Building or the Leased
Premises therein located. Notwithstanding the foregoing, Landlord represents and
warrants that the Leased Premises are for from structural defects and that the
Building complies with all current laws, regulations and building codes
applicable thereto prior to the making of tenant installations therein. Landlord
shall have no obligation to perform any work in the Leased Premises in order to
prepare same for Tenant's occupancy, all of which work shall be installed by
Tenant or its contractors, at Tenant's sole cost and expense, in accordance with
the provisions hereof.
ARTICLE FOUR
------------
RENTAL
------
Section 4.01. Annual Rent. (a) For purposes of this Section, the term
"Rent Commencement Date" shall mean the day occurring ninety (90) days after the
Term Commencement Date.
11
<PAGE> 18
(b) Tenant shall pay to Landlord as rent, at the office of Landlord at
101 East 52nd Street, New York, New York 10022 or elsewhere as directed from
time to time by Landlord's written notice to Tenant, a base rental per annum
(the "Annual Rental") as follows:
(i) an amount of One Million Six Hundred Twenty-Three Thousand Five
Hundred Ten dollars ($1,623,510.00) per annum, payable in equal monthly
installments of one Hundred Thirty-Five Thousand Two Hundred Ninety-Two and
50/100 dollars ($135,292.50), for the period commencing on the Rent Commencement
Date to and including the day preceding the fifth (5th) anniversary of the Term
Commencement Date;
(ii) an amount of One Million Seven Hundred Sixty-Seven Thousand
Eight Hundred Twenty-Two dollars ($1,767,822.00) per annum, payable in equal
monthly installments of One Hundred Forty Seven Thousand Three Hundred Eighteen
and 50/100 dollars ($147,318.50) for the period commencing on the fifth (5th)
anniversary of the Term Commencement Date to and including the Expiration Date;
and
(iii) an amount determined in accordance with Section 2.02 for the
Renewal Terms, if any.
(c) The Annual Rental shall be payable in equal monthly installments, in
advance, on the first day of each and every month (unless otherwise provided in
this Section 4.01(c)) of the Term of this Lease. A prorated monthly installment
shall be paid if the Rent Commencement Date is other than the first day of a
month or if the term of this Lease, terminates on a day other than the last day
of a month. Simultaneously with the execution hereof, Tenant has delivered to
Landlord a check in the amount of $135,292.50, which payment (subject to
collection) represents the monthly Annual Rental for the first full month
following Rent Commencement Date. If the Annual Rental is payable for a period
of less than a year, the Annual Rental shall be prorated to cover the shorter
period.
Section 4.02. Rent Escalation. (a) For purposes of this Section, the
following definitions shall apply:
(i) The term "Operating Year" shall mean: (1) the period of twelve
(12) months commencing January 1, 1993 and (2) each successive period of twelve
(12) months, and (3) the period of twelve (12) months or less commencing with
January 1st immediately preceding the Expiration Date and ending on the
Expiration Date. If the term of this Lease terminates or expires on a date other
than December 31st, the additional rent, including the base for computing such
rent, for the pertinent escalation year shall be prorated based upon the number
of days in such Operating Year occurring before the termination or expiration of
the term of this Lease, as applicable.
12
<PAGE> 19
(ii) The term "Base Year" shall mean, with regard to operating
Expenses and Taxes, the twelve (12) month period commencing on May 1, 1992.
(iii) The term "Landlord's Expenses" shall mean the sum of (A)
"Operating Expenses" as defined in Exhibit D annexed hereto plus (B) "Taxes" as
hereinafter defined.
(iv) Landlord's "Expense Statement" shall mean a reasonably detailed
statement of Landlord's Expenses certified as true and correct by Landlord.
(v) The term "Tax Premises" shall mean the Land designated as Phase
II on the Site Plan, excluding the Access Drive, together with the improvements
thereon, including without limitation Buildings B-1, B-2 and B-3.
(vi) The term "Taxes" shall mean 34.82% of all real estate taxes and
assessments (but not interest and/or penalties for late payment) levied and
assessed against the Tax Premises and to the extent allocated to the Executive
Park, the Access Drive and the Drainage Basin, but such term shall not include
any income, franchise, transfer, inheritance, capital stock or any other tax
unless a tax upon rent or some other tax shall be substituted in whole or in
part for the present general real estate taxes, in which event such tax shall
constitute a Tax but only to the extent to which such tax shall be substituted
for said real estate taxes.
(vii) The term "Drainage Basin" shall mean the drainage retention
basin indicated by hatching on the Site Plan.
(viii) Any assessments imposed by public authorities for
improvements included in Taxes which may be paid in installments shall be deemed
payable in the maximum number of installments permitted by law and only such
installment(s) as are payable within any real estate fiscal tax year shall be
included in Taxes for such tax year for the purposes of this Lease.
If any assessment for improvements includable in Taxes is not
payable in installments, the estimated useful life (in years) of the improvement
for which the assessment is levied shall be determined in accordance with
(i) Internal Revenue Code guidelines or (ii) generally accepted accounting
principles whichever results in the longer useful life, and Tenant shall pay as
its share of that portion of the assessment reasonably allocable to the Leased
Premises at pro-rata amount determined by (a) dividing (1) the amount of such
assessment by (2) the number of years of such useful life and (b) multiplying
the quotient by the lesser of (1) the number of years remaining in the term of
the Lease (including the number of years of any renewal option exercised by
Tenant) or (2) the number of years of such useful life.
13
<PAGE> 20
(ix) The "Term Tenant's Share" shall mean 76.749% with regard to the
Building, which percentage shall be increased or decreased proportionately, as
the case may be, if Tenant shall exercise any of the expansion options contained
herein or surrender a portion of the Leased Premises pursuant to Section 1.05
hereof.
(x) The term "Fiscal Period" shall mean May 1, 1993 through April
30, 1994 and each successive twelve (12) month period thereafter, any portion of
which shall fall within an Operating Year.
(b) Tenant shall pay as additional rent far each Operating Year,
Tenant's Share of the excess, if any, of the Landlord's Expense for said
Operating Year over Landlord's Expenses for the Base Year. In the event that the
Executive Park is 90% or more fully occupied, Landlord's Expenses shall be
actual costs of operation. In the event of lower occupancy, Operating Expenses
shall be determined by adjustment to the level that they would have been at 90%
occupancy, provided that only those components of Operating Expenses that are
affected by variations in the Building's occupancy shall be so adjusted. In the
event of any such adjustment, Landlord's Expense Statement shall set forth in
reasonable detail how such Operating Expenses were so adjusted. Such additional
rental shall be payable by Tenant to Landlord as follows:
(i) The additional rent in respect of Landlord's Expenses for the
first Operating Year shall be payable on the first day of each month commencing
May 1, 1993 and ending April 30, 1994 in a monthly installment equal to 1/12th
of the additional rent hereunder for Landlord's Expenses reasonably estimated by
Landlord to be payable by Tenant to Landlord for the first Operating Year. If
the actual amount of additional rent paid by Tenant for the first Operating Year
is ultimately determined to be less than or in excess of the actual amount
therefor due from Tenant hereunder, then within thirty (30) days after the date
on which Landlord delivers its Expense Statement for the respective Operating
Year Tenant shall pay to Landlord the amount of such shortfall, if any, or
Landlord shall credit such excess, if any, to the next monthly payment of Annual
Rental and/or additional rent required to be paid by Tenant under this Lease,
provided, however, that if such credit shall exceed the next monthly installment
of rentals due hereunder, then Landlord shall pay to Tenant any remaining credit
not later than the first day of the next succeeding month.
(ii) Commencing with the second Operating Year, the additional rent
for Landlord's Expenses shall be payable on the first day of each month during
each Fiscal Period in an amount equal to 1/12th of the additional rent hereunder
for Landlord's Expenses estimated by Landlord to be payable by Tenant to
Landlord for the current Operating Year. Such estimated payments shall be
reconciled to actual payments in the same manner as set forth in Section
4.02(b)(i).
14
<PAGE> 21
(iii) Landlord shall deliver its Expense Statement to Tenant within
ninety (90) days after the end of each Operating Year provided, however,
Landlord shall not lose its right to collect the additional rent for Landlord's
Expenses for the respective Operating Year if Landlord fails to submit an
Expense Statement within the time specified herein. The payment of any
additional rental by Tenant shall not preclude it from questioning the
correctness of any Expense Statement. If Tenant shall question the correctness
of any Expense Statement, then, if Landlord shall be unable to satisfy Tenant of
the correctness of such Expense Statement within a reasonable period thereafter,
Landlord will make available to Tenant and its advisors (upon reasonable notice
during normal business hours) all relevant books and records pertaining to
Landlord's Expenses. In the event Tenant objects to the Expense Statement,
Tenant shall give Landlord a specific statement of its objections within ninety
(90) days from the date Landlord makes such books and records available to
Tenant. If Tenant does not object to an Expense Statement within said ninety
(90) day period (provided Landlord shall have timely made its books and records
available to Tenant as aforesaid), Tenant may not thereafter object to said
Expense Statement.
In the event Tenant shall dispute Landlord's Expense Statement and the
parties cannot resolve their differences through negotiations within thirty (30)
days thereafter, Tenant shall have the right to audit, at its sole cost and
expense, all relevant books and records pertaining to Landlord's Expenses. If
such audit accurately discloses that Landlord's Expenses in the aggregate, as
set forth in the disputed Expense Statement, are 12.5 percent or more greater
than Landlord's Expenses in the aggregate, as set forth in the audit, then
Landlord (in addition to crediting and/or refunding such excess amount to
Tenant, as aforesaid) shall pay Tenant interest on the excess amount which
theretofore has been paid by Tenant in an amount equal to one (1%) percent per
annum over the Chase Prime.
(c) Notwithstanding anything in this Section 4.02 to the contrary, it is
understood and agreed that if Landlord shall receive a refund of any portion of
Taxes in respect of which Tenant shall have paid additional rental under this
Section, then and under such circumstances Tenant shall be entitled to it credit
against future payments of additional rental under this Section in an amount
equal to a pro rate share of such refund, after first deducting from such total
refund all fees, costs and expenses incurred by Landlord in collecting same.
(d) If, upon the expiration of the term of the Lease, any credit to
which Tenant might be entitled pursuant to this Section shall not then have been
used as a credit, then, subsequent to Tenant properly vacating the Leased
Premises and provided that Tenant is not in default hereunder, Tenant shall be
entitled to a payment equal to the amount of any such remaining credit, Tenant's
15
<PAGE> 22
obligation hereunder to pay additional rent for any Operating Year shall survive
the expiration or termination of the term of this Lease. In the event that the
additional rent to be paid by Tenant under this Section for the final Operating
Year has not been determined upon the last day of the Lease term, Tenant
covenants to pay to Landlord the additional rent required to be paid pursuant to
this Section for the final Operating Year upon a determination being made by
Landlord of the actual amount of additional rent required to be paid by Tenant
pursuant to this Section, subject to the dispute resolution procedure set forth
in Section 4.02(b) above. Notwithstanding the foregoing, Tenant's obligation to
pay additional rent shall not extend to that period of the operating Year after
termination of this Lease.
Section 4.03. Real Estate Taxes; Assessed Valuation.
(a) Landlord shall pay real estate taxes when due and payable and prior
to the time that any penalty or interest may be charged in respect of the
nonpayment thereof and shall obtain a receipted tax bill therefor.
(b) Landlord may, within the respective times and in the manner
prescribed by law for such purposes, petition for reduction of the assessed
valuation of the Building and the Land, claim a refund of real estate taxes or
otherwise challenge the validity or applicability of any real estate tax,
assessment or similar or related laws (a "Tax Protest"), provided that all
costs and expenses of such tax protests, including legal and appraisal fees,
shall be chargeable to Tenant as Landlord's Expenses on the basis of its
Tenant's Share.
ARTICLE FIVE
------------
SERVICES
--------
Section 5.01. Standard of Operations. (a) Landlord shall at all times
operate and maintain the Building in accordance with a standard at least as high
as that customarily followed in the operation and maintenance of first class
office buildings in Westchester County and, without limiting the foregoing,
shall provide the specific facilities, utilities and services set forth in this
Article.
Section 5.02. Electrical Service. Landlord shall provide an electrical
distribution system and electrical service for the Building at the level of five
(5) watts per square foot demand, provided, however, that Tenant shall be
responsible for distributing electrical service within the Leased Premises at
its sole cost and expense. Landlord shall cause to be furnished and shall pay
for electricity used in connection with the Common Building Facilities
16
<PAGE> 23
(including the Building's cooling tower (during Building Hours (hereinafter
defined)), but excluding electricity used in connection with the hallways and
lobby areas located an the second (2nd) and third (3rd) floors of the Building)
as an item included in Operating Expenses; provided, however, that Tenant shall
bear the expense of all other electric power used in the Leased Promises (other
than the Building's cooling tower during Building Hours), inclusive of electric
power used in connection with all heating, ventilating and air conditioning
("HVAC") equipment servicing the Leased Premises. In furtherance thereof, Tenant
shall pay its proportionate share of Landlord's actual cost of providing
electricity for the 40 ton "core" HVAC unit servicing the ground floor of the
Building, based upon the RSF occupied by Tenant on such ground floor (as such
RSF may be increased or decreased from time to time in accordance with the terms
hereof). If Landlord shall furnish cooling tower services at the request of
Tenant during periods other than Building Hours, Tenant shall pay Landlord, as
additional tent, an amount equal to $25.00 per hour, as the same may be
reasonably increased from time to time by a percentage which shall not exceed
the percentage increase in Operating Expenses for a given Operating Year over
Operating Expenses for the Base Year (or as of the most recent increase in
overtime cooling tower charges, as the case may be). Landlord shall not be
required to furnish overtime cooling tower services unless Landlord has received
advance notice from Tenant requesting same prior to 11:00 a.m. of the day upon
which such service is requested or by 11:00 a.m. of the last preceding business
day if such overtime use is to occur on a day other than a business day. The
electric power for Tenant's use and Landlord's use shall be supplied and
measured by the electric company via one or more meters for the Landlord's
account. The portion of such power for which Tenant is required to pay pursuant
hereto shall be measured by one or more submeters and billed by Landlord to
Tenant, provided, however, Tenant shall not be required to pay Landlord more per
unit electricity supplied than Landlord is actually required to pay the electric
company per unit (net of any rebates received by Landlord from the electric
company in respect thereof) for the supply of said electricity to Tenant. The
actual cost of administration of such billing system shall be an Operating
Expenses, and the cost of electric Power for Tenant's use shall be at Tenant's
expense and shall be separately indicated an the bill to be delivered by
Landlord pursuant to the preceding sentence, which Tenant shall pay as
additional rent hereunder with seven (7) days after receipt of such bill. The
main meters and all necessary submeters for the Leased Promises shall be
installed by Landlord, at Tenant's cost and expense.
Section 5.03. Elevators. Landlord shall provide passenger elevators
serving the Building. The passenger elevators shall be available during all
working hours (8:00 a.m. to 6:00 p.m.) of all working days (excluding national
holidays) ("Building Hours") and, at all other times, there shall be at least
one passenger elevator available to serve the Building.
17
<PAGE> 24
Section 5.04. Light Bulbs and Water. Landlord shall furnish and/or
install at its expense (a) all initial and replacement light bulbs, fluorescent
tubes and ballasts in the Common Building Facilities; and (b) water, including
heated water, to serve the Leased Premises as required for lavatory and drinking
purposes. Tenant shall provide, at its expense, all initial and replacement
light bulbs, fluorescent tubes and ballasts for the Leased Premises. Water for
special purposes such as cafeterias within the Leased Premises shall be
separately metered to Tenant through meters installed by Landlord at Tenant's
expense.
Section 5.05. Building Security. (a) Landlord does not contemplate
retaining security guards to be stationed in the Building. If Tenant requests
Landlord to supply special security services, these services will be billed to
Tenant directly and will not be included in operating Expenses.
(b) Tenant, at its expense and with the prior written approval of
Landlord (not to be unreasonably withheld or delayed), may design and install
such safety and security systems or devices, including without limitation, smoke
detectors, electronic security devices and auxiliary emergency electric power
supplies, as Tenant may deem appropriate. Landlord shall provide the plumbing
infrastructure for a standard wet pipe sprinkler system at its sole cost and
expense. Tenant shall be responsible for required branch piping and placement
of sprinkler heads in accordance with Applicable Laws (hereinafter defined).
Section 5.06. Janitorial Services. (a) Landlord shall keep the Common
Building Facilities cleaned and maintained in a first-class manner. Landlord
shall provide, at its expense, the cleaning and janitorial services (the
"Janitorial Services") and window cleaning services set forth in Exhibit E
hereto.
ARTICLE SIX
-----------
TENANT PARKING
--------------
Section 6.01. Tenant Parking. (a) Subject to the provisions of Section
6,01(c) Landlord shall provide Tenant with access to not less than 3.3
non-designated parking spaces for each one thousand (1,000) RSF of Leased
Premises to be used in common with other tenants of Executive Park on a first
come, first served basis (except for 329 designated spaces at Executive Park
which may be utilized solely by MCI Telecommunications Corporation).
Notwithstanding the foregoing, Landlord shall provide Tenant with forty-five
(45) designated parking spaces (two (2) of which shall be handicapped passenger
vehicle spaces and one (1) of which a handicapped van space) for Tenant's
exclusive use, which spaces shall be considered a portion of the 3.3 spaces per
1,000 RSF provided to Tenant hereun-
18
<PAGE> 25
der. The parking spaces shall be available for use twenty-four (24) hours a day,
every day of the year, and shall be illuminated after dark. Landlord shall keep
and maintain the parking spaces in a clean, safe and first-class condition.
(b) If Tenant, its permitted assignees or subtenants and/or their
respective employees, licensees and guests at any time during the Term are not
able to use the parking spaces because of unauthorized use thereof, Landlord
shall take reasonable steps including, if appropriate, the posting of signs, the
distribution of parking stickers and the towing away of unauthorized vehicles,
to end further unauthorized use.
(c) Tenant understands and agrees that the parking spaces provided by
Landlord shall be utilized solely for the parking of passenger vehicles,
exclusive of trucks, vans and service vehicles and that no maintenance or
service of vehicles shall be permitted.
(d) No fence or other barrier shall be erected at the parking spaces
designated for Tenant.
(e) Tenant agrees to minimize the traffic impact of the occupancy of
Building by utilizing its reasonable efforts to encourage car pooling, use of
public transportation, and staggered working hours for its employees.
ARTICLE SEVEN
-------------
USE AND ACCESS
--------------
Section 7.01. Use. (a) Tenant, its Affiliates (as defined in Section
16.01) and permitted assignees and subtenants shall have the right to use the
Leased Premises (excluding Tenant's Parking Spaces) for general and executive
office purposes are for all activities normally incidental thereto and for no
other purpose. In no event shall the Leased Promises be used by a tenant or
occupant which is of the following character telecommunications common carrier
(provided, however, that Tenant may engage a telecommunications common carrier
to provide services to Tenant), banks, automated tellers and banking services,
newsstands, tobacconists, markets, grocery stores, bars, saloons, cocktail
lounges, pawn shops, employment agencies, union hiring halls or uses of like
character of the foregoing.
(b) Tenant shall not use the Leased Premises for purposes prohibited or
not provided for under this Lease except upon Landlord's prior written consent.
Tenant shall not use the Leased Premises in any manner which would be
incompatible with a first class office park and/or which would have the effect
of materially
19
<PAGE> 26
lowering the rental and/or capital value of the Leased Promises and/or the
Executive Park.
Section 7.02. Access. Tenant, its Affiliates and permitted subtenants
and their respective employees, licensees and guests, shall have access to the
Leased Premises at all times, twenty-four (24) hours per days every day of the
year.
ARTICLE EIGHT
-------------
REPAIRS AND MAINTENANCE
-----------------------
Section 8.01. Landlord's Obligation to Repair and Maintain. Landlord
shall (except as otherwise provided in Section 8.02 herein) keep and maintain in
good repair and working order and perform necessary maintenance upon the
Building and the Common Building Facilities and all parts thereof (exclusive of
the Leased Premises), including, but not limited to, the roof, parking areas,
elevators, lighting, HVAC (other than supplemental HVAC units which hereafter
may be installed by Tenant), plumbing, floors, corridors, windows, window
frames, common area lobbies and equipment within and serving the Building
(exclusive of the Leased Premises). Landlord shall keep and maintain in good
repair and working order the HVAC system currently serving the Leased Premises
(other than supplemental units, as aforesaid) and existing plumbing therein
unless damaged by reason of Tenant's negligence or willful misconduct.
Notwithstanding the foregoing, Landlord shall not be obligated to make and
repair or perform any maintenance which Tenant is obligated to make or perform
pursuant to Section 8.02 of this Lease. If Landlord shall default in its
obligations under this Section 8.01 for a period of thirty (30) days after it
shall have received written notice from Tenant specifying the nature of such
default (plus such additional time as may be reasonably required to cure a
default which despite diligent and continuous effort, cannot by its very nature
be cared within such thirty (30) day period), then Tenant upon giving a second
three (3) day written notice to Landlord stating that such default remains
uncured, may make reasonable and necessary repairs to the building in order to
remedy such default at Landlord's cost and expense,
Section 8.02. Tenant's Obligations. Tenant shall maintain all of
Tenant's property within the Leased Premises and shall repair any and all
damage to the Building and/or the Leased Premises caused by it, its agents or
employees, except damage by fire or other insured casualty or which may be due
to the negligence of Landlord, its agents or employees. Except as otherwise
provided in Article Eleven or in any other provision of this Lease, upon
termination of this Lease, Tenant shall surrender and deliver up the Leased
Premises in the same condition in which they existed on the Term Commencement
Date, except for ordinary wear and tear, repairs
20
<PAGE> 27
and maintenance assumed by Landlord, Permitted Alterations (as hereinafter
defined), damage arising from fire or other insured casualty and damage caused
by others for whom Tenant is not responsible.
ARTICLE NINE
------------
FIRE AND OTHER CAUSALITY
------------------------
Section 9.01. Damage or Destruction. (a) If the Leased Premises or any
part thereof should be destroyed or damaged by fire or other insured casualty
("insured casualty" meaning fire or other casualty Landlord is required to
insure against pursuant to Article Twenty-Six of this Lease) during the term of
this Lease and such damage or destruction was not caused by the negligence or
willful misconduct of Tenant, its agents or employees, then (unless the Lease is
terminated by Landlord or Tenant as hereinafter provided) Landlord shall
promptly proceed to reconstruct, restore and repair the Leased Premises, as the
case may be, to a condition substantially equivalent to their former
construction.
Commencing with the date of such damage, provided such damage was not
caused by the negligence or willful misconduct of Tenant, its agents or
employees, the rent provided for herein shall abate pro rata to the extent that,
and for so long as, any portion of the Leased Premises is not reasonably usable
with reasonable ingress and egress and its proportionate number of required
parking spaces, and is not actually used, by Tenant in the ordinary conduct of
its business.
(b) It is agreed that if the Building is totally destroyed by any cause
or is so substantially destroyed that reconstruction would require more than
nine (9) months (or six (6) months if the casualty shall occur during the last
year of the Term), either Landlord or Tenant may elect to terminate this Lease
by giving the other party written notice of such election within thirty (30)
days after the giving of notice from Landlord hereinafter provided for. Such
termination shall be effective as of the date of such election.
(c) In the event of any casualty, Landlord shall, within twenty (20)
days thereafter, give Tenant written notice of the estimated time required to
repair the same. If Landlord and Tenant shall disagree as to the probable
reconstruction period, the matter shall be determined by an independent
architect reasonably acceptable to both parties, and the thirty (30) day period
for giving of a notice of termination shall commence upon the determination of
such architect that more than nine (9) months (or six (6) months, as the case
may be) is required to reconstruct the Building.
21
<PAGE> 28
(d) In the event of a casualty, if the reconstruction of the Building
can be completed within nine (9) months (or six (6) months, as the case may be),
Landlord shall commence to restore the Building within ninety (90) days after
the date of the destruction, and complete the reconstruction within nine (9)
months, as extended by Excusable Delays, but in no event later than fifteen (15)
months after the date of commencement of the work. If Landlord fails to commence
the reconstruction work within said ninety (90) day period or complete the
reconstruction work within said nine (9) month or six (6) month period, as the
case may be, as extended as aforesaid, Tenant shall have the option to terminate
this Lease an written notice to Landlord. Nothing contained in this Section 9.01
shall be deemed to extend the term of this Lease.
Section 9.02. Waiver of Subrogation Rights. The parties hereto hereby
waive any and all rights of recovery, claim, action or cause of action, against
each other, their respective agents, officers and employees, for any loss or
damage in connection with a loss covered by any insurance policies which the
releasor carries with respect to the Leased Premises, the Building, or any
interest or property therein or thereon, whether real, personal or mixed
(whether or not such insurance is required to be carried under this Lease), but
only to the extent that such loss is collectible under such insurance policies,
regardless of the cause or origin of the loss or damage, including negligence of
the parties hereto, their respective agents and employees. Each party agrees to
provide the other with reasonable evidence of its insurance carriers consent to
such waiver of subrogation. If at any time in the future the waiver of
subrogation results in increased insurance premiums for either party, the other
party shall reimburse the party incurring the higher premium for the amount of
the increased cost attributable to the waiver of subrogation.
ARTICLE TEN
-----------
LIABILITY
---------
Section 10.01. Indemnification of the Parties. Subject to the provisions
of section 9.02, Landlord and Tenant each agree to indemnify and save the other
harmless from any and all claims with respect to bodily injury or property
damage, arising from any breach or default on the part of the indemnifying party
in the performance of any covenant or agreement on its part to be performed
pursuant to the terms of this Lease or arising from its negligence or the
negligence at any of its agents or employees, including all costs, counsel fees,
expenses and liabilities incurred in or about any such claim; and if any action
or proceeding is brought against either Landlord or Tenant by reason of any such
claim, the indemnifying party upon notice from the party to be indemnified
covenants to resist or defend such action on proceeding
22
<PAGE> 29
at its expense and the indemnified party shall cooperate in such defense.
ARTICLE ELEVEN
--------------
ALTERATIONS AND FIXTURES
------------------------
Section 11.01. Alterations by Tenant. (a) Tenant may make such Permitted
Alterations (as hereinafter defined) to the Leased Premises as it shall from
time to time elect to make. Tenant shall notify Landlord in writing prior to
making any Permitted Alterations but Landlord's approval thereof shall not be
required if such Permitted Alterations are non-structural in nature, have an
aggregate cost that is less than $33,000 and are not visible from the Common
Building Facilities or exterior of the Leased Premises.
The following shall be deemed to be Permitted Alterations:
(i) Erection, demolition or alteration of non-load bearing
partitions and hung ceilings, including lighting fixtures.
(ii) Painting, decorating and installation of wall and floor
coverings.
Except for Permitted Alterations, Tenant shall make no
alterations, installations, additions or improvements in or to the Leased
Premises or any alteration to the mechanical systems of the Building or Leased
Premises, including, but not limited to the plumbing and air-conditioning
systems of the Building or any part thereof or to other Building apparatus of
other or like nature without Landlords prior written consent (any such
alteration, installation, addition or improvement as to which Landlord's
approval is required being hereinafter referred to as a "Tenant's Change").
Tenant's relocation of movable modular office partitions shall not be considered
an alteration. Landlord agrees that Landlord will not unreasonably withhold or
delay Landlord's consent to Tenant's Changes (including Tenant's initial
build-out) provided that such Tenant's Changes:
(i) do not materially adversely affect the structural elements of
the Building;
(ii) do not materially adversely affect the plumbing, electrical and
HVAC systems of the Building; and
(iii) do not materially adversely affect the outside appearance of
the Building.
(iv) do not materially adversely affect the rental or capital value
of the Building and/or Executive Park.
23
<PAGE> 30
Landlord may condition Landlord's approval with respect to any Tenant's
Changes on Tenant's agreement to remove such Tenant's change and restore the
portion of the Leased Premises affected thereby to the condition existing as of
the Term Commencement Date. Nothing contained herein shall require Tenant to
remove any alteration, installation, addition or improvement to the Leased
Premises made in connection with finishing the space for Tenant's initial
occupancy (including HVAC installations).
(b) Insurance requirements relating to Tenant alterations and
installations are as set forth in Article Twenty-Seven.
(c) All alterations or additions made by Tenant in the Leased Premises
shall be constructed and completed in a good and workman-like manner at Tenant's
expense by contractors approved by Landlord, such approval not to be
unreasonably withheld or delayed. Landlord hereby approves JWP Affiliates
(hereinafter defined) to perform any Permitted Alterations and Tenant Changes.
Tenant shall obtain all accessory governmental permits licenses and approvals
and shall comply with all Applicable Laws. Landlord shall, at Tenant's cost and
expense, cooperate with Tenant in connection with Tenant's procurement of such
permits, licenses and approvals and, to the extent legally required, promptly
execute (in Landlord's name) any and all governmental applications in connection
with Tenant's work, provided that in no event shall Landlord be obligated to
make any expenditures by reason of the foregoing. Tenant shall pay to Landlord,
as additional rent for services to be performed by Landlord in connection with
Permitted Alterations and Tenant's Changes (other than Tenant's initial
build-out), Landlord's reasonable charges therefor not to exceed ton (10%)
percent of the total cost of Tenant's Changes.
(d) As soon as practicable following the date hereof, Tenant shall
deliver the complete set of architectural and engineering plans and
specifications covering its initial build-out for Landlord's approval, which
shall not be unreasonably withheld or delayed, Landlord, within five (5)
business days after receipt of such plans and specifications (or reasonable
portions thereof), either shall approve the same or notify Tenant of Landlord's
specific objections thereto, in writing. If Landlord shall fail to respond to
the submission of Tenant's plans and specifications within such five (5)
business day period, then Landlord shall be deemed to have consented thereto.
The quality of Tenant's initial build-out and any further Permitted Alterations
or Tenant's Changes shall be consistent with tenant installations typically
found in first class office parks. Landlord shall have the right to conduct
reasonable inspections (during Building Hours) of any construction undertaken by
or on behalf of Tenant to ensure reasonably satisfactory quality. Tenant shall
deliver to Landlord a complete set of "as-built" plans and specifications
promptly following completion of Tenant's initial build-out and any further
Tenant's Changes.
24
<PAGE> 31
Section 11.O2. Tenant's Property. (a) Tenant, at its expense, may, at
any time and from time to time, install in and remove from the Leased Premises
its trade fixtures, equipment, partitions, walls and wall systems, furniture and
furnishings, provided such installation or removal is accomplished without
material damage to the Leased Premises or the Building and Tenant promptly
repairs any such damage.
(b) Subject to the provisions of Section 11.01(a) hereof, upon the
expiration of this Lease, Tenant shall remove all of Tenant's property not
permanently affixed to the Building. If Tenant fails to remove any personal
property of Tenant that Tenant may remove upon the termination of this Lease,
any such property not so removed shall, at Landlord's election, become the
property of Landlord or be removed by Landlord at Tenant's expenses.
ARTICLE TWELVE
--------------
CONDEMNATION
------------
Section 12.01. Total Taking. If all or substantially all of the Leased
Premises shall be taken by condemnation or in any other manner for any public or
quasi-public use or purpose (other than for temporary use or occupancy), the
term of this Lease shall terminate as of the date of vesting of title (the "Date
of the Taking"), and, subject to a pro-ration and apportionment of Annual
Rental, additional rental and other sums due hereunder as of the Date of the
Taking, no further rent shall be due hereunder.
Section 12.02. Partial Taking. If a part of the Leased Premises, shall
be so taken, then Landlord shall give Tenant prompt written notice thereof and
the part so taken shall no longer constitute part of the Leased Premises, but
this Lease shall continue in force and effect as to the part not so taken;
provided, however, that Tenant may elect to terminate this Lease (a) if a
partial taking is more than ten percent (10%) of the Leased Premises, and if, in
the good faith judgment of Tenant, the remaining portion of the Leased Premises
cannot be economically and practicably used by Tenant for the conduct of its
business as conducted immediately prior to the taking, or (b) if a partial
taking has a material adverse effect upon the means of access to the Leased
Premises, the entrances or lobbies of the Buildings or the number of parking
spaces reasonably available to Tenant, unless Landlord shall have provided
reasonable substitutes therefore. Tenant shall give notice of any election to
terminate to Landlord not later than sixty (60) days after notice of such taking
is given by Landlord to Tenant, which notice shall describe in reasonable detail
the premises subject to said condemnation. Upon the date specified in Tenant's
notice (which shall not be more than one hundred eighty (180) days after that
notice), the term of this Lease shall terminate and, subject to a proration
25
<PAGE> 32
and apportionment of Annual Rental, additional rental and other sums due
hereunder as of the Date of Taking and such termination date, as applicable no
further rent shall be due hereunder. Upon a partial taking and the term of this
Lease continuing in force as to any part of the Leased Premises, the Annual
Rental or any additional rental shall be reduced proportionately based upon the
part or parts of the Leased Premises so taken and not replaced.
Section 12.03. Claims of Landlord and Tenant. Landlord shall be entitled
to receive the entire award in any proceeding with respect to any taking (other
than for temporary use and occupancy) provided for in this Article without
deduction therefrom for any estate vested in Tenant by this Lease and Tenant
shall receive no part of such award, except as hereinafter expressly provided.
Tenant shall have the right to make a separate claim with the condemning
authority for (a) any moving expenses incurred by Tenant as a result of such
condemnation; (b) the value of any of Tenant's property taken (including any
leasehold improvements made by Tenant); and (c) any other separate claims which
Tenant may hereafter be permitted to make, provided, however, that such separate
claim shall not reduce or adversely affect the amount of Landlord's award. If
Tenant shall not be permitted to make a separate claim in such proceeding,
Landlord shall prosecute all claims in such proceeding on behalf of both
Landlord and Tenant in which event Tenant may, if it so elects and at its
expense, join with Landlord in such proceeding, retain co-counsel, attend
hearings, present arguments and generally participate in the conduct of the
proceeding; provided, however, that if Landlord incurs an additional expense
because of Tenant's exercising its rights under this sentence, Tenant will bear
such additional expense.
Section 12.04. Distribution of the Award. The aggregate amount of all
awards received in any proceeding relating to any taking (other than awards to
Tenant pursuant to Section 12.03 or for temporary use or occupancy) is
hereinafter called the "Award". Regardless of the apportionment of the Award in
such proceeding, and regardless of any termination of this Lease, the Award
shall be held in trust by Landlord or any mortgagee, as their interests may
appear, and distributed in the following order of priority:
(a) If Landlord shall be obligated to repair, alter and restore the
remaining part of the Building or Leased Premises pursuant to Section 12.06, the
amount actually expended by Landlord for such repair, alteration and restoration
shall be paid to Landlord out of the Award.
(b) The balance of the Award shall then be paid to Landlord.
Section 12.05. Temporary Taking of Premises. If all or any part of the
Leased Premises shall be temporarily taken by condemnation or otherwise for any
public or quasi-public use or purpose (unless Tenant shall have elected to
terminate the term of this Lease in
26
<PAGE> 33
accordance with the option provided in the last sentence of this Section), this
Lease shall nevertheless remain in full force and effect. Tenant shall continue
to be responsible for all of its obligations hereunder insofar as such
obligations are not affected by such taking; provided, however, that Tenant
shall not be liable for the payment of Annual Rental, additional rental or other
sums for the part of the Leased Promises so temporarily taken. The award for the
temporary taking shall be payable to Landlord, except to the extent such award
is intended to cover the value of Tenant's property taken or the moving costs
incurred by Tenant as a result of such condemnation. In the event of a temporary
taking which meets the requirements of Section 12.02 for a period in excess of
six months and involves a taking of more than twenty-five percent (25%) of the
Leased Promises, Tenant may terminate the term of this Lease upon notice to
Landlord given within thirty (30) days after written notice to Tenant of such
temporary taking, and this Lease shall terminate as of the date of such taking.
Section 12.06. Landlord's Obligation to Restore.
(a) In the event of a taking which taking does not result in the
termination of the Lease, Landlord shall, at its expense and regardless of
whether any Award or Awards shall be sufficient for the purpose, proceed with
due diligence to repair, after and restore the remaining part of the Leased
Premises substantially to its former condition to the extent feasible. Upon the
expiration of any temporary taking which did not result in a termination of this
Lease, Landlord shall restore the Leased Premises to their former condition as
aforesaid and any Award relating to the cost of such restoration shall be paid
over to Landlord and used for such purpose.
(b) During any period of restoration of the Leased Premises pursuant to
subsection (a) above, the rent provided for herein shall abate pro rata to the
extent that, and for so long as, any portion of the Lease Premises is not
reasonably usable, and is not actually, used by Tenant in the ordinary conduct
of its business.
ARTICLE THIRTEEN
----------------
REMEDIES AND DEFAULTS
---------------------
Section 13.02. Default by Tenant. (a) The term of this Lease in subject
to the limitation that (i) whenever Tenant fails to pay any monthly installment
of the Annual Rental or any additional rental or other sum due Landlord from
Tenant hereunder and such default continues for a period of ton (10) days after
written notice by Landlord, or (ii) whenever Tenant fails to perform or observe
any other covenant, term, provision or condition of this Lease and such default
continues for a period of thirty (30) days after written notice by Landlord
(plus such additional time as may be reasonably
27
<PAGE> 34
required to cure a default which, despite diligent and continuous effort, cannot
by its very nature be cured within said thirty (30) days) then, in any of such
cases Landlord may give Tenant a notice of intention to terminate this Lease
fifteen (15) days after such notice and the term and estate hereby granted,
whether or not the term shall theretofore have commenced, shall expire and
terminate on that fifteenth day with the same effect as if the date of
termination were the Expiration Date, but Tenant shall remain liable for damages
as provided herein.
(b) If the notice provided in subparagraph (a) above shall have been
given and the term shall expire as aforesaid, then Landlord or Landlord's agents
and employees may immediately or at any time thereafter re-enter the Leased
Premises, or any part thereof, either by summary dispossess proceedings or by
any suitable action or proceeding at law, or otherwise (other than by force),
without being liable to indictment, prosecution or damages therefor, and may
repossess the same, and may remove any persons therefrom, to the end that
Landlord may have, hold and enjoy the Leased Premises again as and of its first
estate and interest therein. In the event of any termination of the term of this
Lease under the provisions of Article Thirteen or in the event of the
termination of the term of this Lease, or of re-entry, by or under any summary
dispossess or other proceeding or action or any provision of law by reason of
default hereunder on the part of Tenant, Tenant shall thereupon pay to Landlord
the rent and any other charge payable by Tenant to Landlord up to the time of
such termination or re-entry, as the case may be, and shall also pay to Landlord
damages as provided in subparagraph (c) below.
(c) Despite any termination of Tenant's rights of possession, Tenant
shall remain liable for the Annual Rental and any additional rental due and to
become due hereunder, and the same shall be paid by Tenant to Landlord on the
regular days stipulated herein for payment of rent; provided that Landlord shall
have the right to alter, change or remodel the improvements within the Building
and to lease or let the Leased Premises, or portions thereof, for such periods
of time and at such rent and for such use and upon such covenants and conditions
as Landlord may elect, applying the net rent or avails of such letting first to
the payment of Landlord's reasonable expenses in dispossessing Tenant and such
costs or expenses as may be necessary in order to enable Landlord to relet the
same; provided further, however, that Tenant shall be entitled to a credit in
the net amount of the rental or additional rental or additional rental by
Landlord as a result of reletting (after deducting all reasonable costs incurred
by Landlord in finding a new tenant, including brokerage fees, agent's
commissions, redecorating costs, attorneys' fees and any other reasonable costs
and expenses incident thereto). Tenant shall remain obligated to pay the amount
of any deficiency in the Annual Rental and additional rental obtained on such
reletting, but if the annual rental or any additional rental obtained upon such
reletting is greater than that provided for
28
<PAGE> 35
herein plus Landlord's costs, Landlord shall be entitled to receive such excess.
Landlord shall have the right to collect from Tenant amounts equal to said
deficiencies provided for above by suits or proceedings brought from time to
time an one or more occasions without Landlord being obligated to wait until the
expiration of the term of this Lease.
(d) Whether or not Landlord shall have collected any amounts pursuant to
(c) above, Landlord shall be entitled to recover from Tenant, and Tenant shall
pay to Landlord, on demand, in lieu of any further monthly payments as and for
liquidated and agreed final damages, a sum equal to the amount by which the
rental for the period which otherwise would have constituted the unexpired
portion of the Term exceeds the then fair and reasonable rental value of the
Leased Premises for the same period, both discounted to present worth at an
interest rate per annum equal to the Treasury Bill Rate (hereinafter defined)
less the aggregate amount theretofore collected by Landlord pursuant to the
provisions of (c) above for the same period; if, before presentation of proof of
such liquidated damages to any court, commission or tribunal, the Leased
Premises, or any part thereof, shall have been relet by Landlord for the period
which otherwise would have constituted the unexpired portion of the Term, or any
part thereof, the amount of rent reserved upon such reletting shall be deemed,
prima facie, to be the fair and reasonable rental value for the part or the
whole of the Leased Premises so relet during the term of the reletting. For
purposes of the foregoing, the "Treasury Bill Rate" shall mean the annual rate
of interest then payable on U.S. Treasury Bills having a maturity date
corresponding as closely as practicable to the Expiration Date.
(e) If Tenant shall default in the performance of any of Tenant's
obligations hereunder, then Landlord, without being obligated to and without
thereby waiving such default, shall have the following remedies:
Thirty (30) days after notice to Tenant and Tenant's subsequent failure
to perform or, in the case of any obligation which cannot be performed in thirty
(30) days, to commence to perform within said thirty (30) day period and to
continue thereafter, with due diligence, to complete such performance, Landlord
may perform such obligation, or, in the case of payment due others, make such
payment, as Tenant's agent. The full amount of the cost and expense so incurred
by Landlord or the payment so made, together with the amount of attorneys' fees
in instituting, prosecuting or defending any action or proceeding by reason of
any default of Tenant hereunder shall be paid by Tenant to Landlord with
interest as provided in Section 13.01(a) of this Lease within ten (10) days
after written demand therefor.
(f) If any amount due under this Lease is not paid by Tenant to Landlord
when due to Landlord pursuant to the terms of this Lease,
29
<PAGE> 36
Tenant shall pay Landlord interest upon such amount at the rate of three percent
(3%) per annum over the prime rate of interest from time to time announced by
the Chase Manhattan Bank, N.A. at its principal office in New York City (the
"Chase Prime"), or the highest rate of interest permitted by law, whichever is
less, for the period from the due date of such payment to the date of payment in
full.
(g) The special remedies to which Landlord may resort under this Section
13.01 are cumulative and are not intended to be inclusive of any other remedies
or means of redress to which Landlord may lawfully be entitled at any time, and
Landlord may invoke any remedy allowed at law or in equity as if specified
remedies were not provided for herein.
ARTICLE FOURTEEN
----------------
BANKRUPTCY
----------
Section 14.01. Bankruptcy by Tenant. If at any time during the term of
this Lease a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or substantially all of Tenant's
assets is filed against Tenant in any court pursuant to any statute either of
the United states or of any state and Tenant fails to secure a discharge thereof
within one hundred twenty (120) days, or if Tenant voluntarily files a petition
in bankruptcy or makes an assignment for the benefit of creditors or petitions
for or enters into an arrangement with creditors, the term of this Lease, at the
option of Landlord, exercised within thirty (30) days after notice of the
happening of any one or more of such events, shall terminate on such a date as
Landlord shall specify by notice to Tenant, with the same effect as if the date
of termination were the Expiration Date of this Lease, but Tenant shall remain
liable for rent and/or damages and attorneys' fees as provided in Article
Thirteen. However, if a petition for reorganization or for an arrangement is
filed by or against Tenant, Landlord may not terminate the term of this Lease so
long as Tenant is not in default hereunder and, provided this Lease is assumed
or affirmed in such reorganization or arrangement proceeding and all defaults
cured within the time periods provided by law.
ARTICLE FIFTEEN
---------------
COMPLIANCE WITH LAWS
--------------------
Section 15.01. Tenant's Compliance with Laws. Tenant, at its expense,
shall comply with any valid and applicable laws, rules, orders, ordinances,
regulations and other requirements, present or
30
<PAGE> 37
future (collectively, "Applicable Laws"), affecting its occupancy of the Leased
Premises and/or the Building that are promulgated by any governmental authority
or agency having jurisdiction over the Leased Premises and/or the Building and
with any reasonable requirements of the insurance companies insuring Landlord
against damage, loss or liability for accidents in or connected with the
Building to the extent that the same shall affect or be applicable to: (i)
Tenant's manner of use of the Leased Premises (as opposed to its mere use
thereof as general and executive offices), (ii) alterations or improvements made
by Tenant, or (iii) a breach by Tenant of its obligations under this Lease
Tenant shall not at any time use or occupy the Leased Premises so as to violate
the certificate of occupancy for the Building. Nothing herein contained,
however, shall be deemed to impose any obligation upon Tenant to make any
structural alterations, installations or repairs unless necessitated by reason
of (A) a particular manner of use by Tenant of - the Leased Premises, (B)
alterations or improvements made by Tenant, or (C) a breach by Tenant of its
obligations under this Lease. If by reason of a future change in Applicable
Laws, structural alterations or installations are required with respect to
buildings or premises used for the same or similar purposes and/or in the same
or similar manner as the Building or Leased Premises, as contrasted with
structural alterations or installations required as a result of a change in use
or manner of use of the Building or Leased Premises by Tenant, then, if the cost
of such structural alterations or installations exceeds $500,000.00 Landlord may
terminate this Lease upon thirty (30) days prior written notice to Tenant. If
the cost of such structural alterations or installations is $500,000.00 or less,
Landlord shall make such alterations or installations at its expense, within the
time period allowed by Applicable Laws for compliance If Landlord elects to
terminate this Lease as aforesaid, Tenant shall have the right to cancel
Landlord's election to terminate by notifying Landlord within sixty (60) days
after receipt of Landlord's notice that Tenant agrees to pay on a monthly basis
a pro rata share of the amortized value of such structural alterations or
installations ever the remaining life of the alterations or installations, plus
interest, per annum, from the date Landlord paid for such alterations or
installations at the Chase Prime as of Landlord's payment date (the "Applicable
Chase Prime"), calculated as follows: divide the cost of the alterations or
installations by useful life and multiply the quotient (the "Quotient") by the
lesser of (x) the number of years remaining in the original term of the Lease
(the "Remaining Original Term") or (y) the number of years of the useful life
(the "Useful Life") of such alterations or installations (such product is
hereinafter referred to as the "Adjusted Cost"). Thereafter, ascertain the
amount necessary to amortize the Adjusted Cost at the Applicable Chase Prime,
per annum, in equal monthly installments (each a "Monthly Payment") over the
Remaining Original Term. Tenant shall pay as additional rent its pro rata share
of the Monthly Payment on the same day of the month the fixed rental payment is
due under this Lease until the Adjusted Cost is paid in full.
31
<PAGE> 38
The estimated life (in years) of the alterations or installations shall
be determined in accordance with Internal Revenue Code guide lines or generally
accepted accounting principles, whichever results in the longer estimated life.
If Tenant elects to cancel the termination of the Lease as aforesaid,
Landlord shall make such alterations or installations within the time period
allowed by the Applicable Laws for compliance.
Section 15.02. Landlord's Compliance with Laws. Landlord shall be
responsible for complying with all Applicable Laws affecting the design,
construction and operation of the Building (excluding the Leased Premises) or
relating to the performance by Landlord of any duties or obligations to be
performed by it hereunder. Landlord may, at its expense (and, if necessary, in
the name of but without expense to, Tenant) contest, by appropriate proceedings
diligently prosecuted, the validity, or applicability to the Leased Promises,
any matter it may be required to comply with provided the deferral of compliance
dose not subject Tenant to criminal prosecution or deprive Tenant of the
possession, use or the then current manner of use of the Leased Promises and
Landlord agrees to indemnify Tenant against any loss or expense Tenant may incur
as a result of such deferral of compliance.
ARTICLE XVI
-----------
ASSIGNMENT AND SUBLETTING
-------------------------
Section 16.01. Assignment and Subletting by Tenant.
(a) Except as expressly permitted herein, Tenant, without the prior
written consent of Landlord in each instance, shall not (a) assign its rights or
delegate its duties under this Lease (whether by operation of law, transfers of
interests in Tenant or otherwise), or mortgage or encumber its interest in this
Lease, in whole or in part, (b) sublet, or permit the subletting of, the Leased
Premises or any part thereof, or (c) permit the Leased Premises or any part
thereof to be occupied, or used for desk space, mailing privileges or otherwise,
by any person other than Tenant.
(b) The consent by Landlord to any assignment, subletting, occupancy or
use shall not relieve Tenant from its obligation to obtain the express prior
written consent of Landlord to any further assignment, subletting, occupancy or
use. Tenant shall pay to Landlord all reasonable costs, including reasonable
attorneys' fees and disbursements, incurred by Landlord in connection with any
proposed assignment of Tenant's interest in this Lease or any proposed
subletting of the Leased Premises or any part thereof. Neither any assignment of
Tenant's interest in this Lease nor any subletting, occupancy or use of the
Leased Premises or any part thereof by any person other than Tenant or its
Affiliates, nor any collection of
32
<PAGE> 39
rental by Landlord from any person other than Tenant as provided in this
Section, nor any application of any such rental by Landlord, shall relieve or
release Tenant of its obligations under this Lease on Tenant's part to be
observed and performed, and, subsequent to any assignment, Tenant's liability
hereunder shall continue notwithstanding any subsequent modification or
amendment hereof or the release of any subsequent tenant hereunder from any
liability, to all of which Tenant hereby consents in advances. Tenant shall
strictly enforce the terms and conditions of any assignment or sublease to which
Landlord shall have consented, and shall assign to Landlord any and all rights
it may have against such subtenant or assignee, as the case may be, should
Landlord so request, including the right to commence legal proceedings in
Tenant's name.
(c) If Landlord shall recover or come into possession of the Leased
Premises before the Expiration Date, Landlord shall have the right, at its
option, to take over any and all subleases or sublettings of the Leased Premises
or any part thereof made by Tenant and to succeed to all the rights of paid
subleases subletting or such of them as it may elect to take over. Tenant hereby
expressly assigns and transfers to Landlord such of the subleases and
sublettings as Landlord may elect to take over at the time of such recovery of
possession, such assignment and transfer not to be effective until the
termination of this Lease or re-entry by Landlord hereunder (or if Landlord
shall otherwise succeed to Tenant's estate in the Leased Premises), at which
time Tenant shall, upon request of Landlord, execute, acknowledge and deliver to
Landlord such further assignments and transfers as may be necessary to vest in
Landlord the then existing subleases and sublettings. Every subletting hereunder
is subject to the condition and by its acceptance of and entry into a sublease,
each subtenant thereunder shall be deemed conclusively to have thereby agreed
from and after the termination of this Lease or re-entry by Landlord hereunder
(or if Landlord shall otherwise succeed to Tenant's estate in the Leased
Premises), that such subtenant shall waive any right to surrender possession or
to terminate the sublease and, at Landlord's election, such subtenant shall be
bound to Landlord for the balance of the term of such sublease and shall attorn
to and recognize Landlord, as its landlord, under all of the then executory
terms of such subleases Each subtenant or licensee of Tenant shall be deemed
automatically upon and as a condition of occupying or using the Leased Premises
or any part thereof, to have given a waiver of subrogation of the type described
in and to the extent and upon the conditions set forth in Article XXVI hereof.
(d) If Tenant is a corporation, Tenant may, without Landlord's consent,
assign its interest in this Lease (i) to any corporation which is a successor to
Tenant either by merger or consolidation, (ii) to a purchaser of all or
substantially all of Tenant's assets (provided such purchaser shall have also
assumed substantially all of Tenant's liabilities). or (iii) to a corporation or
other entity which shall (1) control, (2) be under the control of or (3) be
33
<PAGE> 40
under common control with, Tenant (the term "control" as used herein shall be
deemed to mean ownership of more than fifty (50%) percent of the outstanding
voting stock of a corporation, or other majority equity and control interest, if
not a corporation). Tenant may also sublease to, or permit the use of all or any
portion of the Leased Premises by an entity described in clause (iii) (any such
entity is referred to herein as an "Affiliate") without Landlord's consent. As
conditions to any such assignment or subletting, (a) Tenant shall not be in
default in the performance of any of its obligations under this Lease, (b) prior
to such subletting Tenant shall furnish Landlord with the name of any such
related corporation, together with a certification of Tenant and such other
proof as Landlord may reasonably request that such assignee or sublessee is a
related corporation of Tenant, (c) in the reasonable judgment of Landlord the
proposed subtenant shall be of at character in keeping with the standards of
Landlord for the Building (d) such subtenant or assignee shall not be a
"telecommunications common carrier". In the event of any assignment or
subletting described above, (a) any such assignee, subtenant or occupant shall
continue to use the Leased Premises for the conduct of the purposes permitted
hereby, (b) the principal purpose of such assignment or sublease shall not be
the acquisition of Tenant's interest in this Lease (except if such assignment or
sublease is made pursuant to clause (iii) and is made for a valid intracorporate
business purpose and is not made to circumvent the provisions of this Article),
and (c) any such assignee shall have a net worth and annual income and cash
flow, determined in accordance with generally accepted accounting principles,
consistently applied, after giving effect to such assignment, equal to or
greater than Tenant's net worth and annual income and cash flow, as so
determined, on the date of such assignments. Tenant shall, within ton (10)
business days after execution thereof, deliver to Landlord a duplicate original
instrument of assignment (or sublease) in form and substance reasonably
satisfactory to Landlord, duly executed by Tenant (and the subtenant), and (b)
an instrument in form and substance reasonably satisfactory to Landlord, duly
executed by the assignee, in which such assignee shall assume observance and
performance of, and agree to be personally bound by, all of the terms, covenants
and conditions of this Lease on Tenant's part to be observed and performed;
provided, however, that in no event shall such assignment relieve or release
Tenant from any of its obligations hereunder. Except as set forth above, either
a transfer of a controlling interest in the shares of Tenant (if Tenant is a
corporation or trust) or a transfer of a majority of the total interest in
Tenant (if Tenant is a partnership) at any one time or over a period of time
through a series of transfers, shall be deemed an assignment of this Lease and
shall be subject to all of the provisions of this Article, including, without
limitation, the requirement that Tenant obtain Landlord's prior consent thereto.
The transfer of shares of Tenant (if Tenant is a corporation or trust) , for
purposes of this Article, shall not include any sale of shares effected through
the "over-the-counter market" or through any recognized stock exchange.
34
<PAGE> 41
(e) Except as to sublettings or assignments made pursuant to Section (d)
above, prior to any proposed subletting or assignment, Tenant shall submit a
statement to Landlord (an "Assignment/Sublease Statement") containing the
following information: (a) the name and address of the proposed subtenant or
assignee, (b) a description of the portion of the Leased Premises to be sublet,
(c) the terms and conditions of the proposed subletting including the rent
payable or the proposed assignment, including the consideration payable
therefor, (d) the nature and character of the business of the proposed subtenant
or assignee including financial statements supporting the creditworthiness of
the proposed subtenant or assignee, and (A) any other information that Landlord
may reasonably request. A complete copy of the proposed assignment or sublease
to be executed by Tenant and the assignee or subtenant shall accompany Tenant's
Assignment/Sublease Statement.
(f) Landlord may, by notice to Tenant ("Landlord's Notice"), given
within fifteen (15) days after its receipt of an Assignment/Sublease Statement
wherein Tenant shall propose to sublet all or any portion of the Leased
Premises, require Tenant to sublease the proposed sublease space to Landlord or
its nominee on the terms set forth in Section (g) below. If Tenant shall propose
to assign this Lease or sublease substantially all of the Leased Premises for
substantially the then balance of the term of this Lease, Landlord also may, by
Landlord's Notice, terminate this Lease as of the date which is two (2) months
following Landlord's receipt of the Assignment/Sublease Statement as though such
date was the Expiration Date set forth in this Lease. If Landlord falls to so
exercise either of such options, it shall not unreasonably withhold or delay its
consent to the proposed assignment or sublease by Tenant, as provided below, but
such consent shall be deemed of no effect if such assignment or sublease is not
consummated by Tenant and the assignee or subtenant, as the case may be,
executing and delivering the assignment or sublease which accompanied Tenant's
Assignment/Sublease Statement within one hundred twenty (120) days after such
consent is given. The portion of the Leased Premises to which any proposed
subletting is to be applicable is hereinafter referred to as the "Space".
(g) If Landlord requires Tenant to execute it sublease ("Sublease")
pursuant to Section (f), then the Sublease shall be upon the same terms as this
Lease, except for such terms thereof as are inapplicable and except that: (1)
the term of the Sublease shall be the term specified in Tenant's
Assignment/Sublease Statement; (2) the fixed annual rent for the Sublease shall
be the lesser of (a) the product of the rate per RSF (net of any credits Tenant
may be receiving In respect thereof pursuant to this Lease or otherwise) Tenant
in then paying Landlord hereunder and the RSF contained in the Space and (b) the
fixed annual rent set forth in Tenant's Assignment/ Sublease Statement; (3)
"Tenant's Share" shall be determined by multiplying Tenant's Share under this
Lease by is fraction, the numerator of which is the RSF contained in the Space
(including
35
<PAGE> 42
any common corridor allowances attributable to the Space), and the denominator
of which is 94,016; (4) for purposes of determining additional rent under the
Sublease, the "Base Year" shall be the later of (i) the Base Year under this
Lease, or (ii) the Base Year as set forth in the assignment or sublease which
accompanies the Tenant's Assignment/Sublease Statement; (5) the subtenant under
the Sublease shall have the unrestricted right to assign the Sublease or any
interest therein, to further sublet all or any part of the Space and/or to make
any alterations, decorations, additions or improvements in and to the Space (all
or any part of which may be removed, at Landlord's option, at any time, provided
Landlord repairs all damage caused by such removal); (6) Tenant, as sublandlord
under the Sublease, shall, at its expense (if and only if, Tenant, as
sublandlord under its proposed Sublease, was required to perform the following
work): (a) erect all partitions required to separate the Space from the
remainder of the Leased Premises and (b) to the extent necessitated by the
Sublease, install all doors required for independent access from the Space to
the elevators, lavatories and staircases on the applicable floor and install all
equipment and facilities required to comply with all Applicable Laws and to
enable Landlord to maintain and service the Space and permit the Space to be
used as an independent unit; (7) the Sublease shall provide that the termination
of all or any portion of this Lease by merger is not thereby intended, and (8)
at the expiration of the Sublease, the Space shall, subject to subdivision (5),
be returned to Tenant as then existing.
(h) If Landlord fails to execute its options set forth in Section (f)
above, then, within such fifteen (15) day period, Landlord shall not
unreasonably withhold its consent to an assignment of this Lease in its entirety
or to any subletting of the Leased Premises, provided that:
(i) the Leased Promises and this Lease shall not, without Landlord's
prior consent, have been published or otherwise publicly advertised for
subletting at a rental rate less than the prevailing rental rate at which
Landlord is then offering to lease space in the Building;
(ii) no Event of Default shall have occurred and be continuing;
(iii) the proposed subtenant or assignee shall have a financial
standing, be of a character, be engaged in a business, and propose to use the
Leased Premises in a manner in keeping with Landlord's then current standards in
such respects of tenancies in the Building;
(iv) the proposed subtenant or assignee shall not be an occupant of
the Executive Park, if Landlord fiats or within nine (9) months thereafter
expects to have suitable space available in the executive Park and the proposed
subtenant or assignee shall not be
36
<PAGE> 43
a person or entity with whom Landlord in then negotiating or discussing to lease
space in the Building;
(v) the character of the business to be conducted or the proposed
use of the Leased Premises by the proposed subtenant or assignee shall not (a)
be likely to Lease substantially Landlord's operating expenses beyond those
which would be incurred for use by Tenant or for use in accordance with the
standards of use of other tenancies in the Building; (b) substantially increase
the burden on existing cleaning services over the burden prior to such proposed
subletting or assignment; (c) violate any provision or restrictions herein
relating to the use or occupancy of the Leased Premises or (d) involve the
presence in the Leased Premises, as occupant or user, of a governmental agency;
(vi) the sublease shall be expressly subject to all of the terms,
covenants, conditions and obligations on Tenant's part to be observed and
performed under this Lease and the further condition and restriction that this
Lease shall not be assigned, encumbered or otherwise transferred in whole or in
part, or any part thereof suffered or permitted to be used or occupied by
others, without the prior written consent of Landlord in each instance;
(vii) the subtenant or assignee, as the case may be, shall agree to
assume all of the obligations of Tenant under this Lease for the balance of the
term, with regard to an assignment, or for the term of the subletting, with
regard to a sublease;
(viii) Tenant shall reimburse Landlord on demand for all reasonable
out of pocket costs that may be incurred by Landlord in connection with said
sublease, including, without limitation, reasonable attorneys' fees and
disbursements;
(ix) the proposed subtenant or assigns shall not be entitled,
directly or indirectly, to diplomatic or sovereign immunity and shall be subject
to the service of process in, and the jurisdiction of the courts of, the State
of New York;
(x) the proposed subtenant or assignee shall not be a
"telecommunications common carrier"; and
(xi) the proposed subtenant or assignee shall not contemplate using
the Leased Promises in any manner which would be incompatible with a first class
office park and/or which would have the effect of materially lowering the rental
and/or capital value of the Leased Premises and/or the Executive Park.
(i) If Landlord shall fail to exercise its options set forth in Section
(f) above and shall object to any proposed assignment or subletting, then
Landlord shall provide Tenant with its reason(s) for so objecting within such
fifteen (15) day period following Landlord's receipt of Tenant's
Assignment/Sublease Statement.
37
<PAGE> 44
(j) Tenant shall pay to Landlord, as additional rent, as and when
payable to Tenant one hundred (100%) percent of the following: (i) with respect
to any sublease, all of any rent or other consideration paid to Tenant by any
subtenant in excess of the pro rata portion of the then Annual Rent and
additional rent payable for such space, and, (ii) with respect to an
assignment, all consideration payable to Tenant, directly or indirectly, by any
assignee, plus any other amount received IV Tenant from or in connection with
such-subletting or assignment of this Lease, including, in either case, but not
limited to, sums paid for the sale, rental or contribution of Tenant's fixtures,
leasehold improvements, equipment, furniture or other personal property
("Tenant's Property") less, in the event of a sale (or contribution) of Tenant's
Property, the then unamortized or undepreciated cost thereof determined on the
basis of a ten (10) year useful life (as certified to Landlord by Tenant's
independent certified accountants) ("Sublease Profit" or "Assignment Proceeds",
as the case may be). Tenant shall be entitled to deduct from the total amount of
Sublease Profit or Assignment Proceeds, as the case may be, payable
to it, the reasonable out-of-pocket expenses incurred by Tenant in making such
sublease or assignment such as reasonable brokers' fees, reasonable attorneys'
fees, and advertising fees paid to unrelated third parties, non-decorative
improvement or alteration costs to prepare the space for such sublease or
assignment and, in connection with any assignment, payments required to be made
by Tenant in connection with the assignment of this Lease pursuant to Article
31-B of the Tax Law of the State of New York or any real property transfer tax
of the United States or The State of New York (other than any income tax) and
the costs of obtaining any accountant's certification, as required above. If the
consideration payable to Tenant for any assignment shall be payable in
installments, then the expenses specified herein shall be amortized over the
period during which such installments shall be payable.
ARTICLE SEVENTEEN
-----------------
LANDLORD'S ACCESS
-----------------
Section 17.01. Landlord's Right to Use Certain Facilities. Tenant shall
permit Landlord to install, use and maintain additional utility and other pipes,
ducts, lines, flues and conduits in and through the Leased Premises and serving
other portions of the Building and/or the Leased Premises, provided that such
installations are concealed within the permanent walls, floors, columns and
ceilings of the Leased Premises and in the shafts provided in the Leased
Premises for such installations, do not damage the appearance, reduce the floor
area of the Leased Premises or affect Tenant's layout, and provided further,
that the installation work is performed without substantial interference with
Tenant's use of the Leased Premises. Any damage to the Leased Premises resulting
from
38
<PAGE> 45
Landlord's exercise of the foregoing rights shall be repaired by Landlord at
Landlord's expense.
Section 17.02. Landlord's Access to premises. Landlord, and Landlord's
employees, agents and contractors, shall have the right to enter and pass
through the Leased Premises or any part or parts thereof (a) during non-business
hours and during business hours upon reasonable prior notice to Tenant: (i) to
examine the Leased Premises and to show them to underlying or ground lessees or
mortgagees and to prospective purchasers, mortgagees, lessees (during the last
year of the term of this Lease) or insurers, and (ii) for cleaning and
maintenance and making such repairs or changes in or to the Leased Premises or
in or to the Building or the Common Building Facilities as may be provided for
or permitted by this Lease or as may be mutually agreed upon by the parties or
as Landlord may be required to make by laws and requirements of public
authorities; provided, however, that the foregoing shall be done upon prior
notice to Tenant, in a manner so as to reduce interference with Tenant's
business operations and, if requested by Tenant, accompanied by a designated
representative of Tenant; (b) after business hours to perform janitorial
services; and (c) in emergencies. Tenant may designate one or more areas in the
Masai Premises as secure areas, and Landlord shall have no access thereto
without being accompanied by a designated representative of Tenant or, in the
case of emergencies, by members of the Fire or Police Department.
ARTICLE EIGHTEEN
----------------
NAME OF BUILDING; SIGNS
-----------------------
Section 18.01. Landlord's Right to Designate Building Name. Landlord
shall have the right to designate, and thereafter change, the name of Building
B-1 (a/k/a Building # 6, provided, however, that for so long as JWP Inc. is the
Tenant hereunder, Landlord shall not name the Building for any other company or
entity (other than Landlord, provided all buildings at Executive Park also shall
be named for Landlord).
Section 18.02. Signs Identifying the Building. Landlord shall provide
and maintain a directory at the entrance of the Executive Park and allow Tenant,
at no charge, to list the name of Tenant or Affiliate and any subtenant or
assignee of Tenant on such directory. The size and prominence of the aforesaid
listings of Tenant or Affiliate on said directory shall be commensurate with the
amount of space occupied by Tenant in the Executive Park in relation to other
tenants listed.
Section 18.03. Limitations on Other Signs. Tenant shall neither install
any signs and/or graphics and shall not permit the Building to be identified by
the name of another company, or permit any
39
<PAGE> 46
other company to erect any signs and/or graphic outside or in the Common
Building Facilities of the Building, without first obtaining Landlord's written
consent, which consent shall not be unreasonably withheld or delayed provided
such signs and/or graphics (i) shall not adversely affect on the character or
dignity of the Building, and (ii) conform with the design, style, colors and
materials which are utilized by Landlord throughout the Executive Park.
ARTICLE NINETEEN
----------------
QUIET ENJOYMENT
---------------
Section 19.01. Landlord's Covenant of Quiet Enjoyment. Landlord
covenants and agrees, provided Tenant performs the terms, conditions and
covenants of this Lease, to take all necessary steps to secure and to maintain
for the benefit of Tenant this quiet and peaceful possession of the Leased
Premises and the Common Building Facilities, for the term of this Lease, without
hindrance, claim or molestation by Landlord or any other person.
ARTICLE TWENTY
--------------
NON-WAIVER
----------
Section 20.01. No Waiver Implied. Failure by either party to complain of
any action, nonaction or default of the other party shall not constitute a
waiver of any aggrieved party's rights hereunder. Waiver by either party of any
right for any default of the other party shall not constitute a waiver of any
right for either a subsequent default of the same obligation or for any other
default, past, present or future.
ARTICLE TWENTY-ONE
------------------
NOTICES
-------
Section 21.01. Notices to Landlord or Tenant. Any notice or
communication to Landlord or Tenant which is required or permitted to be given
under this Lease shall be effectively given only if in writing and mailed by
United States Certified Mail, postage prepaid, return receipt requested,
addressed as follows:
If to Tenant, as follows:
Prior to the Term Commencement Date:
40
<PAGE> 47
JWP INC
2975 Westchester Avenue
Purchase, Now York 10577
Attn: Mr. Andrew T. Dwyer
After the Rent Commencement Date:
JWP INC.
Royal Executive Park
King Street
Rye Brook, Now York 10573
Attn: Mr. Andrew T. Dwyer
If to Landlord, addressed as follows:
Prior to and after the Term Commencement Date:
Royal Executive Park
C/o D&D. Management Corporation
101 E. 52nd Street
New York, New York 10022
Attn: Anthony P. Grant, President
With a copy to:
London & Leeds Development Corporation
101 East 52nd Street
New York, New York 10022
Attn: General Counsel
- and -
Edward A. Kaminsky, Esq.
757 Third Avenue, Sixth Floor
New York, New York 10017
Either party shall have the right to change the address to which notices shall
thereafter be sent by giving notice to the other party as aforesaid.
ARTICLE TWENTY-TWO
------------------
PARTIAL INVALIDITY
------------------
Section 22.01. Severability Clause. If any term, covenant, condition or
provision of this Lease, or the application thereof to any person or
circumstance, shall ever be hold to be invalid or unenforceable, then in each
such event the remainder of this Lease or the application of such term,
covenant, condition or provision to any other person of any other circumstance
(other than those as to which it shall be invalid or unenforceable) shall not be
thereby
41
<PAGE> 48
affected, and each term, covenant condition, and provision hereof shall remain
valid and enforceable to the fullest extent permitted by law.
ARTICLE TWENTY-THREE
--------------------
BROKERAGE
---------
Section 23.01. Brokerage. Landlord and Tenant mutually represent to each
other that the only brokers with whom they have dealt with respect to this Lease
are The Pyne Companies, Ltd. and Austin Corporate Properties, and Landlord
agrees to pay all commissions that may be owing to such brokers. Landlord agrees
to indemnify Tenant and hold it harmless against any claims for commissions that
may be asserted in connection with this Lease based upon acts of Landlord, and
Tenant agrees to indemnify Landlord and hold it harmless against any claims for
commissions that way be asserted in connection with this Lease based upon acts
of Tenant, provided, however, in no event shall Tenant be liable to Landlord or
otherwise for payment of commissions that may be owing to the brokers named
above.
ARTICLE TWENTY-FOUR
-------------------
LANDLORD'S REPRESENTATIONS AND
------------------------------
WAIVERS AMP TENANT'S REPRESENTATIONS
------------------------------------
Section 24.01. Landlord's Representations. Landlord represents and
warrants to Tenant that (i) Landlord has the-right and lawful authority to enter
into this Lease for the term hereof, (ii) the execution, delivery and
performance of this Lease by Landlord do not and will not contravene the
provisions of Landlord's partnership agreement or any law, governmental rule,
regulation or order as in effect on the date hereof and applicable to Landlord,
or result in a violation of or constitute a default under, any indenture,
contract, agreement, or other instrument to which it is a party, (iii) Landlord
is the owner of the Leased Premises in fee simple, (iv) the Land is presently
zoned to permit use of the Leased Premises as "offices" (v) title to the Leased
Premises is free and clear of any liens and encumbrances except those (the
"Permitted Encumbrances") described in Exhibit F annexed hereto and made a part
hereof, and (vi) the elevators, HVAC, electrical, plumbing and mechanical
systems in the Building are in good working order and the roof is free from
leaks.
Section 24.02. Waivers. Notwithstanding any provision contained in this
Lease to the contrary, Landlord hereby expressly waives any
42
<PAGE> 49
Landlord's lien it now has or may hereafter obtain and any and all rights
granted by or under any present or future laws to levy or distrain for rent, in
arrears, in advance, or both, upon any or all towers, antennas, machinery,
equipment, fixtures, furniture and other personal property or fixtures of Tenant
or any assignee or subtenant of Tenant in the Leased Premises.
Tenant, for Tenant, and on behalf of any and all persons claiming
through or under Tenant, including creditors of all kinds, does hereby waive and
surrender all right and privilege which they or any of them might have under or
by reason of any present or future law, to redeem the Leased Premises or to have
a continuance of this Lease for the term hereby demised after being dispossessed
or ejected therefrom by process of law or under the terms of this Lease or after
the termination of this Lease as herein provided.
Section 24.03. Tenant's Representations. Tenant represents and warrants
to Landlord that (i) Tenant has the right and lawful authority to enter into
this Lease for the term, hereof, (ii) the execution, delivery and performance of
this Lease by Tenant do not and will not contravene the provisions of Tenant's
articles of incorporation or any law, governmental rule, regulation or order as
in effect on the date hereof and applicable to Tenant or result in a violation
of, or constitute a default under any indenture, contract, agreement, or other
instrument to which it is a party.
ARTICLE TWENTY-FIVE
-------------------
SUBORDINATION; NON-DISTURBANCE
------------------------------
Section 25.01. Landlord's Right to Mortgage; Priority. Landlord shall
have the right at any time or from time to time to place one or more mortgages
on all or any part of the Land or Building (all such mortgages and any
increases, renewals, modifications, consolidations, replacements and extensions
thereof being collectively called "Mortgages") or to enter into a ground lease
affecting the Land or Building, provided that any such Mortgages or ground
leases shall be subject and subordinate to this Lease and the rights of Tenant
hereunder. Notwithstanding the foregoing, it a mortgagee or ground lessor shall
execute and deliver to Tenant an agreement to the effect that, if there shall be
a foreclosure of its Mortgage or termination of a ground lease affecting the
Land or Building, such mortgagee or lessor will not make Tenant a party
defendant to such foreclosure, evict Tenant, disturb Tenant's leasehold estate
or rights hereunder provided no default has occurred hereunder beyond any
applicable grace, notice and cure period (any such agreement, or any agreement
of similar import, from a mortgagee or ground lessor being hereinafter called a
"Non-Disturbance Agreement"), then this Lease shall be subject and subordinate
to such mortgage or ground lease. This clause shall be self-operative and no
fur-
43
<PAGE> 50
the instrument of subordination shall be required to make the interest of any
mortgagee or ground lessor superior to the interest of Tenant hereunder;
however, Tenant shall execute and deliver promptly any certificate or agreement
that Landlord may reasonably request in confirmation of such subordination. If,
in connection with the financing of the Land or Building, any lending
institution or Landlord shall request reasonable modifications of the Lease that
do not increase the monetary obligations of Tenant under this Lease or
materially and adversely affect the rights of Tenant or its non-monetary
obligations under this Lease, Tenant shall make such modifications. Any
Non-Disturbance Agreement may be made on the condition that neither the
mortgagee or ground lessor, nor anyone claiming by, through or under such
mortgagee or ground lessor, including a purchaser at a foreclosure sale, shall
be:
(a) liable for any act or omission of any prior Landlord (including,
without limitation, the then defaulting Landlord), or
(b) subject to any defense or offsets (except as expressly set forth
in this Lease) which Tenant may have against any prior Landlord (including,
without limitation, the then defaulting Landlord), or
(c) bound by any payment of Annual Rental or additional rent which
Tenant might have paid for more than the current month to any prior Landlord
(including, without limitation, the then defaulting Landlord), or
(d) bound by any obligation to make any payment to Tenant which was
required to be made prior to the time such mortgagee succeeded to any prior
Landlord's interest, or
(e) bound by any obligation to perform any work or to make
improvements to the Leased Premises.
If required by the mortgagee or ground lessor, Tenant promptly shall
join in any Non-Disturbance Agreement to indicate its concurrence with the
provisions thereof and its agreement, in the event of a foreclosure of such
Mortgage or termination of such ground lease to attorn to such mortgagee, ground
lessor or any purchaser at a foreclosure sale, as Tenant's Landlord hereunder.
Tenant shall promptly accept, execute and deliver any Non-Disturbance Agreement
proposed by any such mortgagee or ground lessor which conforms with the
provisions of this Section. Any such Non-Disturbance Agreement may also contain
other terms and conditions as may otherwise be reasonably required by such
mortgagee or ground lessor which do not materially increase Tenant's monetary
obligations or materially and adversely affect the rights or obligations of
Tenant under this Lease.
44
<PAGE> 51
ARTICLE TWENTY-SIX
------------------
INSURANCE
---------
Section 26.01. Landlord's Insurance. (a) Landlord shall maintain at all
times during the term of this Lease:
(i) standard all-risk fire and casualty insurance, covering the
Building in amounts at least equal to eighty percent (80%) of the replacement
cost of the Building at the time in question, but in no event less than such
coverage as is required to avoid co-insurance provisions;
(ii) comprehensive public liability insurance against all claims
of personal injury, death and property damage occurring in the Common Building
Facilities in the Executive Park, with minimum limits of $5,000,000 for injury
to or death of one or more persons in any one occurrence and $1,000,000 for
damage to or destruction of property in any one occurrence; and
(iii) workers compensation insurance in statutory limits and
employer's liability insurance with a limit of $100,000 per employee.
Section 26.02. Tenant's Insurance. Tenant covenants and agrees to
provide at its expense on or before the Commencement Date and to keep in force,
during the Term naming Landlord and Tenant as insured parties:
(i) comprehensive general liability insurance including, but not
limited to, premises operations, blanket contractual insurance, broad form
property damage, independent contractor's coverage and personal injury coverage,
protecting Landlord and Tenant against any liability whatsoever, occasioned by
any occurrence on or about the Leased Premises or any appurtenances thereto.
Such policy is to be written by insurance companies licensed to do business in
the State of New York and satisfactory to Landlord, and shall be in a form and
in such limits as Landlord may reasonably require with minimum limits of
liability thereunder of not less than $5,000,000 per occurrence for bodily or
personal injury (including death) and in the amount of $1,000,000 per occurrence
in respect of property damage.
(ii) standard all-risk fire and casualty insurance covering
Tenant's contents in the Building.
Such insurance may be carried under blanket policies covering the Leased
Premises and other locations of Tenant, if any, provided that each such policy
shall in all respects comply with this Article and shall specify that the
portion of the total coverage of such policy that is allocated to the Leased
Premises is in the
45
<PAGE> 52
amounts required to be carried by Tenant and thereafter, at least is days prior
to the effective date of any such policy, Tenant agrees to deliver to Landlord
either a duplicate original of the aforesaid policies or a certificate
evidencing such insurances. Said certificates shall contain an endorsement that
such insurance may not be canceled except upon 30 days' prior notice to
Landlord. Such certificates shall also have the indemnity clause set forth
herein typed on the certificates evidencing that the "hold harmless" clause has
been insured. Tenant's failure to provide and keep in force the aforementioned
insurances shall be regarded as a material default hereunder entitling Landlord
to exercise any or all of the remedies provided in this Lease in the event of
Tenant's default,
"Tenant shall pay on behalf of and indemnify, defend and save
Landlord harmless from and against any loss, liability, cost and
expense, including reasonable attorneys' fees (except for those
expenses arising out of Landlord's provision of the services
which Landlord is obligated to provide pursuant to Article Five
of the Agreement of Lease between (Landlord] and [Tenant] dated
_____, 1992 (the "Lease") arising from the use or occupation of
the Leased Premises by Tenant or anyone in the Leased Premises
with Tenant's permission and or from any breach of the Lease by
Tenant."
Section 26.03. Waiver of Subrogation. (a) Tenant agrees that it will, at
its sole cost and expense; include in its fire insurance policies appropriate
clauses pursuant to which the insurance companies (i) waive all right of
subrogation against Landlord regarding any tenant space in the Building with
respect to losses payable under such-policies and (ii) agree that such policies
shall not be invalidated should the insured waive in writing prior to a loss any
or all right of recovery against any party for losses covered by such policies.
(b) Landlord hereby waives any and all rights of recovery which it might
otherwise have against Tenant, its servants, agents and employees, for loss or
damage occurring to the Building and the fixtures, appurtenances and equipment
therein, to the extent the same is covered by Landlord's insurance (which, for
purposes of this Section (b), shall be deemed to be the coverages which Landlord
is required to carry hereunder) , notwithstanding that such loss or damage may
result from the negligence or fault of Tenant, its servants, agents or
employees. Tenant hereby waives any and all right of recovery which it might
otherwise have against Landlord, its servants, and employees, and against any
such tenant in the Building who shall have executed a similar waiver as set
forth herein for the loss or damage to, Tenant's furniture, furnishings,
fixtures and other property removable by Tenant under the provisions hereof
notwithstanding that such loss or damage may result from the negligence or fault
of Landlord, its servants, agents or
46
<PAGE> 53
employees, or such other tenant and the servants, agents or employees thereof.
Section 26.04. Comp1iance with Terms. Tenant shall not do or permit to
be done any act or thing upon the Leased Premises which will invalidate or be in
conflict with the policies covering the Building, and fixtures and property
therein, or which would increase the rate of fire insurance applicable to the
Building to an amount higher than it otherwise would be (but the foregoing shall
not prevent Tenant from utilizing the Leased Premises as general and executive
offices); and Tenant shall neither do nor permit to be done any act or thing
upon the Leased Premises which shall or might subject Landlord to any liability
or responsibility for injury to any person or persons or to property by reason
of any business or operation being carried on within the Leased Promises; but
nothing in this Section shall prevent Tenant's use of the Leased Premises for
the purposes stated in Article Seven hereof.
Section 26.05. Excess Rates. If, as a result of any act or omission by
Tenant or violation of this Lease, the rate of fire insurance applicable to the
Building shall be increased to an amount higher than it otherwise would be,
Tenant shall reimburse Landlord for all increases of Landlord's fire insurance
premiums so caused; such reimbursement to be additional rent payable within 5
days of demand therefor by Landlord. In any action or proceeding wherein
Landlord and Tenant are parties, a schedule or "make-up" of rates for the
Building or the Leased Premises issued by the body making fire insurance rates
for the Leased Premises, shall be presumptive evidence of the facts stated
therein including the items and charges taken into consideration in fixing the
fire insurance rate then applicable to the Leased Premises.
Section 26.06. Windows. Notwithstanding any other clause of this lease,
Landlord or its agents shall not be liable for any damage which Tenant may
sustain, if at any time any window of the Leased Premises is broken, or
temporarily or permanently closed, darkened or bricked upon for any reason
whatsoever, except only Landlord's arbitrary acts if the result is permanent,
and Tenant shall not be entitled to any compensation therefor or abatement of
rent or to any release from any of Tenant's obligations under this Lease, nor
shall the same constitute an eviction or constructive eviction.
Section 26.07. Fines and Penalties. Notwithstanding any other clause of
this Lease, Tenant shall reimburse Landlord for all expenses, damages or fines
incurred or suffered by Landlord, by ream son of any breach, violation or
nonperformance by Tenant, or its agents, servants or employees, of any covenant
or provision of this Lease, or by reason of damage to persons or property caused
by moving property of or for Tenant in or out of the Building, or by the
installation or removal of furniture or other property of or for Tenant, or by
reason of or arising out of carelessness, negligence or improper conduct of
Tenant, or its agents, servants or
47
<PAGE> 54
employees, in the use or occupancy of the Leased Premises. Tenant shall have the
right, at Tenant's own cost and expense, to participate in the defense of any
action or proceeding brought against Landlord for expenses, damages or fines
incurred or suffered by Landlord for which Tenant is liable.
Section 26.08. Notice of Casualty. Tenant shall give Landlord notice in
case of fire or accidents in the Leased Premises promptly after Tenant is aware
of such event.
Section 26.09. Landlord's Liability. Landlord or its agents shall not be
liable for any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, rain or snow or
leaks from any part of the Building, or from the pipes, appliances or plumbing
works or from the roof, street or subsurface or from any other place or by
dampness or by any other cause of whatsoever nature, unless any of the foregoing
shall be caused by or due to the negligence of Landlord, its agents, servants or
employees.
Section 26.l0. Construction Insurance. Prior to commencement of any
installations or alterations by Tenant, Tenant shall furnish to Landlord
certificates of insurance evidencing the existence of:
(a) Workers compensation covering all persons employed for such
work.
(b) Employer's liability including bodily injury caused by disease
with a limit of $100,000 per employee.
(c) Comprehensive general liability insurance including but not
limited to completed operations, coverage, products liability, contractual
coverage, broad from property damage, independent contractor's coverage and
personal injury coverage naming Landlord its officers, agents, directors,
employees, representatives, consultants, and/or partners and owners, including
but not limited to any managing agent, and Tenant as insured, with coverage of
at least $5,000,000 combined single limit.
Such insurance shall be placed with solvent and responsible
companies satisfactory to Landlord and licensed to do business in the State of
New York, and the policies shall provide that they may not be canceled without
30 days prior notice in writing to Landlord.
(d) Tenant shall require all contractors engaged or employed by
Tenant to indemnify and hold Tenant, Landlord, Landlord's consultants, including
but not limited to any managing agent, harmless in accordance with the following
clause:
"The contractor hereby agrees to the fullest extent
permitted by law to assume the entire responsibility and
liability for
48
<PAGE> 55
and defense of and to pay and indemnify Landlord, Tenant and
managing agent against any loss, cost, expense, liability or
damage and will hold each of them harmless from and pay any
loss, cost, expense, liability or damage (including, without
limitation, judgments, attorney's fees, court costs, and the
cost of appellate proceedings), which Landlord and/or Tenant
and/or managing agent incurs because of injury to or death
of any person on account of damage to property, including
loss of use thereof, or any other claim arising out of, in
connection with, or as a consequence of the performance of
the work by the contractor and/or any acts or omissions of
the contractor any of its officers, directors, employees,
agents, sub-contractors or anyone directly or indirectly
employed by the contractor or anyone for whose acts the
contractor may be liable as it relates to the scope of this
Contract, whether such injuries to person or damage to
property are due or claimed to be due to any negligence of
Landlord and/or Tenant and/or managing agent its or their
employees or agents or any other person."
ARTICLE TWENTY-SEVEN
--------------------
RULES END REGULATIONS
---------------------
Section 27.01. General; This Lease Controls in Event of Conflict. Tenant
shall comply with Landlord's Rules and Regulations which are annexed hereto as
Exhibit G, and such reasonable changes therein (whether by modification,
elimination, addition or waiver) as Landlord at any time or times hereafter may
make, which (i) shall be necessary or desirable for the reputation, safety, care
or appearance of the Building or the preservation of good order therein or the
operation or maintenance of the Building or the equipment thereof or the comfort
of tenants or others in the Building and (ii) do not reasonably interfere with
or materially adversely affect the conduct of Tenant's business in the Leased
Premises; provided, however, that in the case of any conflict or inconsistency
between the provisions of this Lease and any of such Rules or Regulations, as
changed, the provisions of this Lease shall control. Landlord shall give
reasonable notice to Tenant, communicated in writing, of any changes in the
Rules and Regulations made in accordance with this Section and Tenant shall be
entitled to a reasonable opportunity to respond thereto. The Rules and
Regulations, as changed in accordance with this Section from time to time, are
hereinafter called the "Rules and Regulations".
Section 27.02. Standards Applicable to Landlord. Landlord shall (a) not
discriminate against Tenant in enforcing the Rules and Regulations; (b) not
unreasonably withhold or delay its consent from Tenant for any approval required
under the Rules and Regulations; and (c) exercise its judgment in good faith in
any instance
49
<PAGE> 56
providing for the exercise of its judgment in the Rules and Regulations.
Section 27.03. Landlord's Enforcement. Landlord shall use its best
efforts to secure compliance by all tenants and other occupants with the Rules
and Regulations, but Landlord may permit reasonable waivers with respect to
other parties so long as such waivers do not materially adversely affect Tenant
and provided further that Landlord grants Tenant similar waivers.
ARTICLE TWENTY-EIGHT
--------------------
MISCELLANEOUS
-------------
Section 28.01. Certain Miscellaneous Provisions. This Lease (including
the Exhibits referred to herein and all supplementary agreement provided for
herein) contains the entire agreement between the parties and all prior
negotiations and agreements are merged into this Lease. This Lease may not be
changed, modified, terminated or discharged, in whole or in part, except by a
writing, executed by the party against whom enforcement of the change,
modification, termination or discharge is to be sought. The Article and Section
headings or titles in this Lease are inserted for convenience only and are not
to be given any effect in its construction. Wherever appropriate in this Lease,
personal pronouns shall be deemed to include the other genders and the singular
to include the plural. The covenants and agreements contained herein shall inure
to and be binding upon Landlord, its successors and assigns, and Tenant, its
successors and assigns. The term "Landlord" means only the owner for the time
being of the Building, so that in the event of any sale or other transfer of the
Executive Park or any part thereof including the Building, Landlord shall be
released of all covenants and obligations of Landlord hereunder with respect to
the Executive Park or portion thereof sold or transferred accruing after such
sale or transfer. Neither the submission of this Lease form to Tenant nor the
execution of this Lease by Tenant shall constitute an offer by Landlord to
Tenant to lease the space herein described as the Leased Premises or otherwise.
This Lease shall not be or become binding upon Landlord to any extent or for any
purpose unless and until it is executed by Landlord and a fully executed
duplicate original thereof is delivered to Tenant or Tenant's counsel.
Section 28.02. Estoppel Certificate. At any time and from time to time
within five (5) days after written demand therefor, Tenant shall execute,
acknowledge and deliver to Landlord without charge, a statement addressed to
Landlord (and/or such other persons or parties as Landlord shall require),
certifying that to the best knowledge of Tenant, this Lease is in full force and
effect and is unmodified (or, if there have been modifications, specifying same)
50
<PAGE> 57
and setting forth the dates to which the rentals and other charges payable
hereunder have been paid and stating that Landlord is not in default in the
performance of any of the covenants or agreements on its part to be performed
hereunder (or, if that is not the case, specifying each particular in which
Tenant alleges that Landlord is in default) and certifying as to such other
items in respect of this Lease as Landlord may reasonably require.
Section 28.03. Governing Law. This Lease shall be governed in all
respects by the laws of the State of New York.
Section 28.04. Building Four Cafeteria. Not later than three (3) months
following the Term Commencement Date, Landlord at its sole cost and expense
shall increase the seating capacity in the cafeteria located in Building Four to
the maximum seating capacity permissible under Applicable Laws.
THIS LEASE is hereby executed and delivered effective as of the date and
year first above written.
LANDLORD:
ROYAL EXECUTIVE PARK II,
a New York limited partnership
By: London & Leeds -
Rye Corporation, General Partner
By: /s/ Anthony P. Grant
Anthony P. Grant,
President
TENANT:
JWP INC.
By:/s/ Ernest Grendi
Name: Ernest Grendi
Title: Executive VP & CFO
51
<PAGE> 58
Addendum No. 1 to Lease, dated
as of May 21, 1992, between
Royal Executive Park II, as
Landlord, and JWP INC.,
as Tenant
The following clause is hereby incorporated in the foregoing Lease, executed
contemporaneously herewith, between Royal Executive Park II. as landlord, and
JWP INC, as tenant covering a portion of Building #6 at Royal Executive Park Rye
Brook, New York. For purposes hereof, initially capitalized terms used herein
shall have the meanings ascribed to such terms in the Lease.
The liability of Landlord to Tenant for any default by Landlord under this Lease
or arising in connection herewith or with Landlords operation, management,
leasing, repair, renovation, alteration, or any other matter relating to the
Building or the Executive Park, shall be limited to the interest of Landlord In
the Executive Park (and the rental proceeds thereof). Tenant agrees to look
solely to Landlord's interest in the Executive Park (and the rental proceeds
thereof) for the recovery of any judgment against Landlord, and Landlord shall
not be personally liable for any such judgment or deficiency after execution
thereon. The limitations of liability contained in this provision shall apply
equally and inure to the benefit of Landlord's present and future partners,
beneficiaries, officers, directors, trustees, shareholders, agents and
employees, and their respective heirs, successors and assigns. Under no
circumstances shall any present or future general or limited partner of Landlord
(if Landlord is a partnership), or trustee or beneficiary (if Landlord or any
partner of Landlord is a trust) have any liability for the performance of
Landlord's obligations under the Lease. Notwithstanding the foregoing to the
contrary, Landlord shall have personal liability for insured claims, beyond
Landlord's interest in the Executive Park (and rental proceeds thereof), to the
extent of Landlord's liability insurance coverage available for such claims.
ROYAL EXECUTIVE PARK II, as Landlord
By: London & Leeds - Rye Corporation,
general partner
/s/ Anthony P. Grant
Anthony P. Grant
President
JWP INC.
By: /s/ Ernest W. Grendi
Name: Ernest W. Grendi
Title: Executive Vice President
and Chief Financial Officer
<PAGE> 59
Exhibit B
---------
Description of the Land Comprising the Executive Park
-----------------------------------------------------
ALL that certain plot, piece or parcel of land, situate, lying and being
in the Tovs of Rye and Harrison County of Westchester and State of New York and
partly in the Town of Greenwich, County of Fairfield, State of Connecticut,
bounded and described as follows:
BEGINNING at a point an the westerly site of King Street ad-joining the
southeast corner of land formerly of Chisholm and now or formely belonging to
Straus:
thence running along said westerly side of King Street and the following
courses and distances:
South 19deg 22' East 173.57 feet;
South 22deg 38' East 114.4 feet;
South 26deg 23' East 70 feet;
South 27deg 29' East 60 feet;
South 28deg 31' East 126 feet;
South 30deg 56' East 100.1 feet;
South 33deg 52' Mast 29.1 feet;
South 39deg 49' East 29.2 fact;
South 25deg 29' East 6 feet;
South 31deg 6' East 29.4 feet;
South 35deg 37' East 16.1 feet;
South 41deg 31' East 267 fact;
South 43deg 30' East 320.07 feet;
South 44deg 44' East 287.5 feet; and
South 46deg 14' East 178.6 feet to the northeast corner of land formerly
of McClenahan, now or formerly belonging to Kings Ridge Golf Club;
thence running along the northerly line of said last mentioned line the
following courses and distances:
South 68deg 50' West 931.1 feet;
South 78deg 40' West 435.2 feet;
South 78deg 15' West 98 feet;
South 82deg 07' West 515.3 feet;
South 75deg 13; West 335.1 feet;
South 77deg 03' West 29.1 feet and
South 12deg 20' West 147.1 feet to the easterly line of land now or
formerly belonging to Hugh J. Chisholm, Jr.;
<PAGE> 60
EXHIBIT B
Page 2
thence running along said easterly line of said last mentioned land the
following courses and distances:
North 45deg 52' West 22.1 feet;
North 62deg 25' West 236.7 feet;
South 34deg 25; 40deg West crossing Blind Brook 40.46 feet;
North 52deg 24; West 35.44 feet;
North 43deg 38' West 66.7 feet;
North 21deg 08' 30deg West 79.16 feet;
North 15deg 05' 30deg West 373.31 feet; and
North 10deg 45' 30deg West 481.15 feet to the southerly line of said
land formerly of Chisholm, now or formerly of Strauss;
thence running along the southerly line of said last mentioned land the
following courses and distances:
North 53deg 01' East 595.5 feet;
North 52deg 20' East 50 feet;
North 53deg 24' East 501.8 feet;
North 62deg 28' East ? feet;
North 62deg 20' East 26 feet; and
North 67deg 34' East 801.6 feet to the westerly side of King Street at
the point of beginning.
EXHIBIT B
---------
<PAGE> 61
EXHIBIT NOT SHOWN
EXHIBIT 'C
THIRD FLOOR
<PAGE> 62
EXHIBIT D
---------
OPERATING EXPENSES
------------------
"Operating Expenses" as used in Section 4.02 shall mean the direct
operating costs specified below in Category A actually incurred by Landlord for
a given Operating Year, (a) to the extent properly allocable (in accordance with
generally accepted accounting principles consistently applied) to the operation,
repair and maintenance of the Building and (b) properly allocable (in accordance
with generally accepted accounting principles consistently applied) to the
operation, repair and maintenance of the Common Building Facilities, the
drainage retention basin (the "Drainage Basin") hatched in the green on the Site
Plan and the Access Drive. It is agreed that any cost allocable to the items
specified below in Category B shall be excluded from Operating Expenses.
Tenant's pro-rata share of the aforesaid direct operating costs
allocable to the operation, repair and maintenance of (x) the Common Building
Facilities shall be determined by multiplying said allocable costs by a
fraction, the numerator of which shall be the aggregate gross rentable area of
the Buildings and the denominator of which shall be the aggregate gross rentable
area of all buildings now on hereafter erected on the Land, and (y) the Drainage
Basin and the Access Drive shall be determined by multiplying said allocable
costs by (i) a fraction, the numerator of which shall be the number of acres of
land within Phase II and the denominator of which shall be the number of acres
of land within the Executive Park, excluding the Drainage Basin or the Access
Drive as the case may be, and by multiplying the product thereof by (ii) a
further fraction, the numerator of which shall be the aggregate gross rentable
area of the Buildings and the denominator of which shall be the aggregate gross
rentable area of all buildings now or hereafter erected within Phase II.
A. Items Included in Operating Expenses:
(1) salaries, wages and all other expenses incurred for the employment
of a building staff, excluding those staff members above the grade of office
park manager and/or equally held positions;
(2) the cost of materials and supplies used in the operation, repair and
maintenance of the Building, the Common Building Facilities, the Drainage Basin
and the Access Drive;
(3) the cost of replacements for tools and equipment used in the
operation, repair and maintenance of the Building, the Common Building
Facilities, the Drainage Basin and the Access Drive, it being agreed that such
equipment shall not include eleva.
D-1
<PAGE> 63
tors or any items of a capital nature, except as provided in subparagraph A(15);
(4) amounts charged to Landlord by independent contractors for services
(including full or part-time labor), materials and supplies furnished in
connection with the operation, repair and maintenance of any part of the
Building, the Common Building Facilities, the Drainage Basin and the Access
Drive and the heating, air conditioning, ventilating, plumbing, electrical and
elevator systems of the Building;
(5) amounts paid by Landlord, or charged to Landlord by independent
contractors, for window cleaning and janitorial rubbish removal and porter
services;
(6) water charges and sewer rents;
(7) the cost of repainting or otherwise redecorating any part of Common
Building Facilities;
(8) seasonal decorations for the lobby and other public portions of the
Common Building Facilities;
(9) the cost of telephone service, postage, office supplies, maintenance
and repair of office equipment and similar charges related to operation of the
building manager's office;
(10) the cost of licenses, permits and similar fees and charges related
to the operation, repair and maintenance of the Building, Common Building
Facilities and the Drainage Basin;
(11) premiums for insurance obtained by Landlord;
(12) fees for the management of the Building, not exceeding 4% of the
total rental income of the Building (net of any rent credits or similar
concessions provided to the tenants of the Building) assuming 90% occupancy
thereof and excluding any leasing commissions or compensations;
(13) charges (including applicable taxes) for electricity steam and
other utilities required in the operation of the Building and other Common
Building Facilities.
(14) lease payments for rented equipment used by Landlord to provide
services which would otherwise be provided by an independent contractor and the
cost of which services would be an item included as an Operating Expense;
provided that in no event shall the annual cost of such lease payments and
direct services included in Operating Expenses exceed, in the aggregate, the
cost that would have been charged by an independent contractor for such
services; and
D-2
<PAGE> 64
(15) the amount of annual depreciation taken by Landlord (calculated by
the straight-line method and based on the estimated number of years of the
actual useful life of the equipment or of the useful life thereof established in
accordance with Internal Revenue Code guidelines) for any replacement or energy
or labor saving equipment purchased by Landlord to provide services and the cost
of which services would be an item included as an Operating Expense.
If, in the event of Landlord's default in performing any of the services
required hereunder, a tenant performs on Landlord's behalf and is reimbursed for
the cost of such performance by Landlord, Landlord may include as an operating
Expense (i) amount of such reimbursement less (A) that interest and attorneys
fees, if any, paid to that tenant, and (B) that portion, if any, of such cost
which would not have been incurred had Landlord performed the service, without
default, in the first place, (ii) plus the amount of offset from rent, if any,
for such service.
B. Items Excluded from Operating Expenses:
(1) the cost of any work or service performed for any tenant (including
Tenant) at such tenant's cost;
(2) the cost of installing, operating and maintaining any specialty
service, such as an observatory, broadcasting facilities, athletic or
recreational club, unless such facility is an amenity for Tenant;
(3) salaries of officers and executives of Landlord;
(4) the cost of any items for which Landlord is reimbursed by insurance
of otherwise;
(5) the cost of any repairs, alterations, additions, changes,
replacements (except costs referred to in subparagraph A(15)) and other items
which are made in order to prepare for a new tenant's occupancy or which under
generally accepted accounting principles are properly classified as capital
expenditures (which shall be deemed to include (a) any costs of correcting
defects in the Building equipment if such defects are noted within one (1) year
after the Term Commencement Date, (b) the costs of correcting any deficiencies
in Landlord's Work within six (6) months after the Term Commencement Date or (c)
the cost of correcting structural defects in the construction of the Building,
Common Building Facilities and Drainage Basin);
(6) the cost of any work or service performed for any tenant of the
Buildings (other than Tenant) to a materially greater extent or in a materially
more favorable manner than that furnished generally to the tenants and other
occupants (including Tenant);
D-3
<PAGE> 65
(7) the cost of any work or service performed for any facility other
than the Leased Premises, Common Building Facilities, and Drainage Basin;
(8) the cost of (including increased expenses) related to any additions
to the Buildings;
(9) the cost of any repair in accordance with Articles Nine and Twelve
of the Lease;
(10) interest on debt or amortization payments on any mortgage and
rental under any ground lease or other underlying lease;
(11) any real estate brokerage commissions or other cost incurred in
procuring tenants;
(12) any advertising expenses;
(13) any cost included in Operating Expenses representing an amount paid
to a corporation related to Landlord which is in excess of the amount which
would have been paid in the absence of such relationship;
(14) charges (including applicable taxes) for electricity, steam and
other utilities for which Landlord receives reimbursement from any tenant; and
(15) any costs of painting or decorating of any demised part of the
Building.
D-4
<PAGE> 66
EXHIBIT E
----------
CLEANING SPECIFICATIONS
------------------------
TENANT SPECIFICATIONS
- ---------------------
A. NIGHTLY SERVICES: FIVE (5) PER WEEK, MONDAY THROUGH FRIDAY EXCLUDING ALL
LEGAL HOLIDAYS.
1. Empty and clean all wastebaskets and remove to pre-designated area on
premises. This includes trash relocation to (NOT LEGIBLE)
2. Empty and wipe clean all ashtrays.
3. Dust furniture, pictures, telephones, window sills and other surfaces
(NOT LEGIBLE)
4. (NOT LEGIBLE)
5. Remove fingerprints and smudges from all doors. Clean frames and light
switch areas.
6. Secure all windows and doors upon completion of (NOT LEGIBLE)
7. Extinguish all but the designated night lights to remain on in the
building.
8. Report any faulty equipment to supervisors, who will in turn report such
items to tenant's representative.
FLOOR CARE
-----------
1. Sweep and/or dust mop non-carpeted areas five (5) times per week.
2. (ILLEGIBLE) mop non-carpeted areas five (5) times per week.
3. Vacuum all carpeting five (5) times per week. Spot clean as necessary.
B. PERIODIC SERVICES
1. Offices areas- high dusting every four (4) months.
2. Dust and wipe clean all closet shelving when empty ( NOT LEGIBLE)
3. Dust at picture frames, charts, graphs, etc. monthly.
4. Dust and damp wipe as necessary ventilating, air conditioning outlets
and return air (NOT LEGIBLE)
5. Dust venetian blinds (NOT LEGIBLE)
1
<PAGE> 67
PUBLIC AREAS
C. ENTRANCE LOBBY AND PUBLIC FLOOR AREAS
1. Sweep and wash lobby and entrance vestibule floors nightly. Wax. Buff
and apply (NOT LEGIBLE)
2. Strip and machine scrub lobby and entrance vestibule floors two (2)
times per year. Then wax and buff.
3. Vacuum carpets floors nightly, spot clean as necessary.
4. Shampoo carpeted floors two (2) times per year.
5. Wipe down all metal surfaces in the lobby up to 50" high.
6. (NOT LEGIBLE)
7. (NOT LEGIBLE)
8. High dust all air conditioning diffusers, vents, exterior surfaces of
lighting fixtures every four (4) months in lobby and corners.
9. Clean lobby stainless steel ceiling once per year.
C. (NOT LEGIBLE)
1. Sweep and wash tile floors. Apply finish as necessary.
2. (NOT LEGIBLE)
3. (NOT LEGIBLE)
4. Fill all toilet tissues, soap and towel dispensers furnished by
contractor.
5. Empty and wash sanitary disposal (NOT LEGIBLE).
6. Fill vending machines in ladies room. All supplies furnished by
contractor. Contractor will maintain vending machines in working order
and collect the proceeds cash.
7. Furnish, install and supply refills for toilet seat dispensers. All
supplies furnished by contractor.
8. (NOT LEGIBLE)
9. Machine scrub floors as necessary.
10. (NOT LEGIBLE)
2
<PAGE> 68
D ELEVATORS
1. Clean (NOT LEGIBLE), doors and frames as needed.
2. Vacuum dirt from door tracks.
3. Clean inside surfaces of elevator case nightly.
4. Clean elevator (NOT LEGIBLE) ceiling two (2) times per year or as
necessary.
5. Vacuum floor, spot clan nightly. Shampoo elevator carpets as necessary.
E. STAIRWELLS
1. Check all public stairwells throughout the buildings and keep in clean
condition, sweep (NOT LEGIBLE)
2. (NOT LEGIBLE)
3. (NOT LEGIBLE)
F. WINDOW CLEANING
1. Clean all windows on the outside and inside form the main floor to the
roof at least four times a year as directed by building Manager. Wipe
clean window frames and (NOT LEGIBLE)
2. Clean entrance doors as necessary or at least dusty.
3. Clean directory glass (NOT LEGIBLE)
G. PEST CONTROL - PUBLIC AREAS ONLY
1. The public spaces throughout the buildings shall be kept under pest
control treatment (NOT LEGIBLE) one (1) time per month unless additional
treatment required.
2. All service shall be rendered by a licensed Board of Health operator,
with special emergency call on request at no extra charge.
3
<PAGE> 69
EXHIBIT F
PERMITTED ENCUMBRANCES
Agreement recorded Liber 7739 Page 388 (sanitary sewer).
Taxes currently a lien but not due.
Exceptions which would appear by current survey, including but not limited to,
conduits, utility poles and lines, drainage flow, stream beds, access drivers
and other improvements.
Easements for the benefits of Phase IA as set forth in the (NOT LEGIBLE)
Easements to be granted to New York Telephone for approximately 300 along the
edge of King Street, for the maintenance and installation of (NOT LEGIBLE).
<PAGE> 70
EXHIBIT G
---------
RULES AND REGULATIONS
---------------------
1. The sidewalks, driveways entrances, passages, courts, esplanade areas
and plazas, shall not be obstructed or encumbered by Tenant or used for any
purpose other than ingress and egress to and from the Leased premises and Tenant
shall not permit any of its employees, agents or invitees to park automotive or
other vehicles in any areas other than the designated parking spaces leased to
the Tenant and referred to in this Lease as Tenant's Parking Spaces.
2. All deliveries to and pick-ups from the Buildings shall be made at
the entrances designated by the Landlord therefor.
3. All sweepings, rubbish and other refuse shall be deposited by Tenant
in the appropriate (NOT LEGIBLE)
4. Tenant shall use its best efforts to assist the Landlord in keeping
the Common Building Facilities in a clean and orderly condition so as to
maintain a proper appearance to the Buildings and the surroundings areas. (This
shall not be deemed to impose on Tenant the obligation to clean or maintain the
Common Building Facilities.)
5. In case of any renewal under this Lease by Tenant of part but not all
of one or both of the Buildings, Tenant shall comply with such additional rules
and regulations as Landlord may* impose for the orderly administration of such
Buildings.
*reasonably
<PAGE> 71
[EXHIBIT "H" OMITTED]
<PAGE> 72
EXHIBIT I
Based on review by the engineers of record, EE Linden Associates of Darien,
Connecticut, be aware of the following electrical design new in place at the
building new known as Building VI, located in Phase B of the office complex
known as Royal Executive Park, Rye Brook, New York 10573 and within the
boundaries of the county of Wastchester.
And, to the effects that within the confines of said building, there are a total
of three electrical closets. Each closet contains for the tenant a 225 ampere
450/277 volt lighting panel, a 45 KVA transformer and 225 amperes (NOT LEGIBLE)
volt power panel. The engineers further state that the total capacity of these
panels and transformers is 5 watts per square feet.
However, the main switch boards distribution to each of the three electrical
closets can provide for (NOT LEGIBLE) a square feet for a total of 7.5 watts per
square foot available to the tenant. It should now be further known that the
above referenced building is capable of delivering 5 watts per square feet on
demand.
/s/ Michael Fabrish (ILLEGIBLE) /s/ Robert D. Huffer
EE Linden Associates, Inc. Director
Property Operations
London & Leeds
Development Corporation
Date: May 12, 1992 Date: May 12,1992.
/s/ David Osborne
David Osborne
Vice President
EE Linden Associates, Inc.
Date: May 12, 1992
<PAGE> 73
ROYAL EXECUTIVE PARK II
101 East 52nd Street
New York, New York 10022
May 21, 1992
JWP INC.
2975 Westchester Avenue
Purchase, New York 10577
Re: Agreement to Permit Rent Offsets
or to Make Monthly Payments
--------------------------------
Gentlemen:
In consideration of your execution of a Lease (the "Lease") dated of
even date herewith, covering certain premises in Building B-1 at Royal Executive
Park Phase II, Royal Executive Park II (For purposes hereof, "Landlord" shall
mean only Royal Executive Park II.) agrees with you as follows. For purposes
hereof, capitalized terms used herein shall have the meanings ascribed to such
terms in the Lease.
1. With respect to the payment of your first installment of Annual
Rental under the Lease, you shall deduct therefrom the amount of $54,660.20,
prorated for the actual number of days remaining in the month and remit the
prorated balance of the first installment, as provided in the Lease, to the
Landlord.
2. Thereafter with regard to each subsequent monthly installment of
Annual Rental under the Lease, you shall deduct an amount equal to the RSF of
the Leased Premises (as such RSF may be increased or decreased pursuant to the
terms of the Lease) multiplied by (a) $.70 for the period commencing on the
first day of the month following the month in which the Rent Commencement Date
shall occur through and including the month immediately preceding the month in
which the fifth (5th) anniversary of the Term Commencement Date shall occur and,
(b) $.866667 for the period commencing on the first day of the month in which
the fifth (5th) anniversary of the Term Commencement Date shall occur through
and including the first day of the month in which the Expiration Date of the
original Term shall occur, provided that the last month's payment shall be
appropriately prorated.
3. Notwithstanding the provisions of paragraph 2 of this agreement, if
at any time Landlord intends to refinance or to convey the Executive Park to new
owners, Landlord may elect to give you written notice of its intention to do so
and referring to the provisions of this letter. When you receive such a
<PAGE> 74
notice, you shall begin to pay each month the full monthly installments of
Annual Rental as provided in the Lease without the deduction described in
paragraph 2. At the same time, Landlord shall commence to pay you on or before
the fourteenth day of the month preceding each month of your own rental
liability under the Lease the amounts set forth in paragraph 2 of this agreement
in lieu of such rental credit or if Annual Rental is payable for a part of a
month only, a prorated portion of the applicable amount.
In the event Landlord elects to give you notice as described in the
preceding paragraph, Landlord shall, simultaneously therewith, either (i)
deliver to you an irrevocable declining letter of credit in substantially the
form attached to this agreement, drawn on a bank reasonably acceptable to you
and otherwise in form reasonably satisfactory to your counsel and in an amount
sufficient to defray Landlord's outstanding obligations hereunder at all times,
or (ii) deposit funds in escrow in such amount with a law firm or trust or
escrow company reasonably acceptable to you (paying all administrative costs
arising), which escrow deposit shall be established and fully funded before the
date of the first monthly payment referred to in paragraph 3 above, upon terms
which shall entitle you to draw for the remaining monthly installments due to
you on materially the same terms as specified in the letter of credit and
otherwise upon terms reasonably satisfactory to your counsel. This will be done
to protect your right to receive the payments from Landlord. The terms on which
you may draw shall be spelled out in the letter of credit or terms of the
escrow. If Landlord fails to pay a monthly installment when due and after the
specified grace period, you may draw upon the letter of credit or escrowed funds
for the amount of that missed installment.
If (i) Landlord shall fail to timely deliver the aforesaid letter of
credit or escrowed funds prior to conveying or refinancing the Executive Park,
or (ii) any payment to you hereunder or thereunder, or any part thereof, is not
made when due or is rescinded or must otherwise be restored or returned by you
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
Landlord or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for Landlord or any substantial
part of any of its property or otherwise, then same shall constitute a default
by Landlord under the Lease entitling you to continue to offset the amounts
specified in paragraph 2 above notwithstanding such conveyance or refinancing,
provided that if Landlord shall cure such default, then such right to offset
shall thereafter cease. Landlord agrees that any new owner or financing source
shall acknowledge your right pursuant to this paragraph 3 to offset the amounts
set forth in paragraph 2 from the monthly installments of Annual Rental under
the Lease in the event of a Landlord default hereunder.
-2-
<PAGE> 75
4. Landlord will cease to make payments to you under paragraph 3 only in
the event and for only so long as you cease to be obligated to pay the Annual
Rental, subject to paragraph 7 hereof In the event of a casualty or condemnation
loss or other cause which results in an abatement or reduction of Annual Rental
under the Lease, Landlord's payments to you would be suspended or would be
reduced, pro rata, for a corresponding period so that you would receive a net
benefit equal to that contemplated by this agreement.
5. Notwithstanding anything to the contrary in this agreement, your
right to offset the amount specified in paragraph 2 will be suspended or
Landlord's obligation to make payment to you under paragraph 3 will be
suspended, as the case may be, in the event that the then-current successor of
Landlord under the Lease advises Landlord that a monthly installment of Annual
Rental has not been paid when due. If you decide to withhold all or part of a
monthly installment, you must tell Landlord promptly that you will not pay that
full or partial installment, and your right to offset the amount specified in
paragraph 2 will be suspended or Landlord's obligation to make corresponding
payments under paragraph 3 will be suspended, as the case may be, until you
resume making all monthly payments. If you decide to and do withhold any part of
a monthly installment without advising Landlord in advance, your right to offset
the amount specified in paragraph 2 and Landlord's obligation to make payments
under paragraph 3 of this agreement, as the case may be, will be suspended until
you resume payment of monthly rent, and you will promptly return to Landlord any
amounts paid to you under paragraph 3 that apply to monthly installments
withheld by you.
6. Notwithstanding anything to the contrary contained herein, if you
shall be liable for monetary damages to the Landlord by reason a default by you
under the Lease for any reason, then if Landlord has not theretofore refinanced
or conveyed the Executive Park, you shall be entitled to a credit against such
damages in an amount sufficient to reduce the damages that are payable by you to
the damages which would be payable by you had the Annual rental payable under
the Lease during the original Term been $14.10 per RSF. If the Executive Park
shall have been conveyed or refinanced, then we shall pay to you (or you shall
be entitled to drawn upon the letter of credit or escrowed sums, as the case
may be) a like amount.
7. This agreement is for your benefit. If you assign or sublet the space
you occupy under the Lease, you may choose to transfer your rights hereunder
including the right to offsets or payments under this agreement or you may
retain them, as you and your successor in the space agree. You will be entitled
to transfer your rights under this agreement, provided Landlord or the
then-current successor of Landlord approves in writing the sublet or assignment
(a copy of which must be supplied to us) in
-3-
<PAGE> 76
accordance with the terms of the Lease, if Landlord approval is required and you
give Landlord notice that you have done so and allow Landlord to, and Landlord
agrees promptly after receiving such notice to, replace your name with your
transferee's name on the letter of credit or the escrow agreement described
herein. Offsets or payments under this agreement will be subject to suspension
and cessation as set out in this agreement, regardless of who is the beneficiary
of the letter of credit or receives the payments or is entitled to the offsets.
8. Not less than thirty (30) days prior to the expiration date stated in
a letter of credit. Landlord will deliver to you a replacement or renewal of the
letter of credit. Landlord will continue to renew it on the same basis for each
subsequent expiration date so that you will have a current letter of credit in
the full amount of Landlord's remaining obligations to you hereunder for so long
as we are obligated to make payments. If Landlord fails to provide any renewal
of the Letter of Credit by the date which is thirty (30) days prior to the
expiration stated in the then-current Letter of Credit and after the specified
grace period, you will be entitled to draw upon the letter of credit for the
purpose of establishing an escrow for the remaining payments due to you.
Please countersign this letter below to indicate that you agree to the
terms of this letter.
Very truly yours,
ROYAL EXECUTIVE PARR II
By: London & Leeds - Rye
Corporation, General Partner
By: /s/ Anthony P. Grant
Anthony P. Grant, President
Accepted and agreed:
JWP INC.
By: /s/ Ernest W. Grendi
Name: Ernest W. Grendi
Title: Executive vice President
-4-
<PAGE> 77
ROYAL EXECUTIVE PARK II
101 East 52nd Street
New York, New York 10022
June 22, 1992
JWP INC.
2975 Westchester Avenue
Purchase, New York 10577
Re: Agreement to Permit Rent Offsets or to make Monthly Payments,
dated May 21, 1992, between Royal Executive Park II and
JWP INC. (the "Agreement")
Gentlemen:
Reference is made to that certain First Amendment of Lease, of even date
herewith, between Royal Executive Park II and JWP INC. regarding premises in
Building B-1 of Phase II In the Royal Executive Park, Rye Brook, New York. In
consideration of our entering into the aforesaid amendment of lease, and for
other good and valuable consideration the mutual receipt and legal sufficiency
of which is hereby acknowledged, we hereby agree that (i) the amount specified
in paragraph 1 of the Agreement shall be increased from $50,509.20 to
$54,660.20, and (ii) the percentage specified in section (b) of paragraph 2 of
the Agreement shall be .866667 Instead of .8667.
Please countersign below to signify your agreement with the foregoing.
Very truly yours,
Royal Executive PARK II
a New York limited,
partnership
AGREED TO AND By: London & Leeds
ACCEPTED: Rye Corporation,
general partner
JWP INC.
By: /s/ David L. Sokol By: /s/ Thomas J. Collins
Name: David L. Sokol Thomas J. Collins
Title: President and Chief Operating Vice President & General Counsel
Officer
<PAGE> 78
FIRST AMENDMENT OF LEASE
THIS AGREEMENT (the "Amendment" ) made as of the 22nd day of June, 1992,
between ROYAL EXECUTIVE PARK II a New York limited partnership, having an office
at 101 East 52nd Street, Now York, New York 10022 ("Landlord") and JWP INC., a
Delaware corporation, having an office at 2975 Westchester Avenue, Purchase, New
York 10577 ("Tenant").
WITNESSETH:
-----------
WHEREAS, by Agreement of Lease, dated as of May 21, 1992 (the "Lease"),
landlord did demise and let to Tenant, and Tenant did hire and take from
Landlord, certain premises consisting of a portion of the ground floor and the
entire second (2nd) and third (3rd) floors located in Building B-1 of Phase II
in the Royal Executive Park, Rye Brock, New York (the "Building");
WHEREAS, Section 1.04 of the Lease grants to Tenant the exclusive option
to lease the Option Space (as such term is defined in the Lease) on the terms
and conditions therein provided;
WHEREAS, on June 8, 1992, Tenant duly delivered the Option Notice (as
such term is defined in the Lease) to Landlord, wherein Tenant designated the
Option Space to be added to the Leased Premises; and
WHEREAS, Landlord and Tenant desire to modify, amend and supplement the
Lease to provide for the incorporation of the Option
<PAGE> 79
space in accordance with section 1.04 of the Lease and as hereinafter provided.
NOW THEREFORE, in consideration of the sum of Ten Dollars ($10.00) paid
by Tenant to Landlord and for other good and valuable consideration, the mutual
receipt and legal sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
l. Unless otherwise provided to the contrary, capitalized terms used
herein shall have the meanings ascribed to such terms in the Lease. For purposes
hereof, the "Option Space" shall mean that portion of the ground floor of the
Building which is designated as "Option Space" on Exhibit "A" annexed hereto and
made a part hereof. Landlord and Tenant hereby agree that the Option Space
comprises 5,930 RSF and that the Leased Premises, inclusive of the Option Space,
comprises 78,086 RSF.
2. Effective as of June 8,1992 (the "Effective Date"), the Option Space
shall be added to and deemed a part of the Leased Premises.
3. Effective as of the Effective Date, (i) the Annual Rental specified
in Section 4.01 (b) (i) of the Lease shall be increased to One Million Seven
Hundred Fifty-Six Thousand Nine Hundred Thirty Five dollars ($1,756,935.00) and
the monthly payment therein specified shall be increased to One Hundred
Forty-Six Thousand Four Hundred Eleven and 25/100 dollars ($146,411.25) and (ii)
the Annual Rental specified in Section 4.01(b)(ii) of the Lease shall be
increased to One Million Nine Hundred Thirteen Thousand One Hundred Seven
dollars ($1,913,107.00) and the monthly rental therein speci-
-2-
<PAGE> 80
fied shall be increased to One Hundred Fifty-Nine Thousand Four Hundred
Twenty-Five and 83/100 dollars ($159,425.58)
4. Effective as of the Effective Date, the term "Tenant's Share", as
defined in Section 4.02 (a) (ix) of the Lease, shall mean 83.056% instead of
76.749%.
5. Except as expressly modified, amended and supplemented by this
Amendment, all of the terms, covenants and conditions of the Lease shall remain
in full force and effect
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
Landlord:
ROYAL EXECUTIVE PARK II
a New York limited partnership
By: London & Leeds -
Rye Corporation, General Partner
By: /s/ Thomas J. Collins
Thomas J. Collins
Vice President & General Counsel
TENANT:
JWP INC.
By: /s/ David L. Sokol
Name: David L. Sokol
Title: President and Chief Operating
Officer
-3-
<PAGE> 81
SECOND AMENDMENT OF LEASE
THIS AGREEMENT (the "Amendment") made as of the 28th day of May, 1993,
between ROYAL EXECUTIVE PARK II, a New York limited partnership, having an
office c/o London & Leeds Development Corporaiton, One Wall Street Court, New
York, New York 10005 ("Landlord") and JWP Inc., a Delaware corporation, having
an office at 6 International Drive, Rye Brook, New York 10573 ("Tenant")
W I T N E S E T H
-----------------
WHEREAS, by Agreement of Lease, dated as of May 21, 1992 as amended by
First Amendment of Lease, dated June 22, 1992 (the lease, as so amended, is
hereinafter referred to as the "Lease"), Landlord did demise and let to Tenant,
and Tenant did hire and take from Landlord, certain premises consisting of a
portion of the ground floor comprised of 21,860 RSF which includes the Option
Space exercised in the First Amendment to Lease and the entire second (2nd) and
third (3rd) floors located in Building B-1 of Phase II in the Royal Executive
Park, Rye Brook, New York (the "Building");
WHEREAS, Tenant has agreed to sublease the entire third (3rd) floor of
the Premises to Market Data Corporation; and,
WHEREAS, Landlord agrees to consent to said subleasing by Consent; and
Non-disturbance and Attornment Agreement; and,
WHEREAS, Landlord and Tenant desire to modify, amend and supplement the
Lease as hereinafter provided.
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) paid
by Tenant to Landlord and for other good and valuable consideration, the mutual
receipt and legal sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
<PAGE> 82
1. Unless otherwise provided to the contrary, capitalized terms used
herein shall have the meanings ascribed to such terms in the Lease.
2. Effective as of the Term Commencement Date, the last four (4)
sentences of Section 5.02 of the Lease, commencing with the words "The electric
power for Tenant's use", shall be deleted in their entirety and the following
shall be added in substitution therefor:
The parties acknowledge that the Annual Rent reserved hereunder does not
include any charge for Tenant's electrical consumption. The cost of
providing electric power for Tenant's use, for which Tenant is
responsible hereunder, shall be determined by survey in the manner
hereinafter provided. Tenant may, at any time or from time to time,
retain, or Landlord may request Tenant to retain, a reputable
independent electrical engineer or consultant, selected by Tenant, to
make a survey (a "Survey") of the electrical equipment, usage and power
load to ascertain the actual cost to Landlord of current electrical
consumption and demand in the Leased Premises. The findings of
consultant or engineer in all such instances shall, subject to the
provision of Section 5.02(c) below, be conclusive and binding upon the
parties. When the cost of electric power is so determined, the parties
shall execute and exchange an agreement supplementary hereto to reflect
any appropriate increase or decrease in the amount of Electricity
Additional Rent (hereinafter defined) payable hereunder, effective from
the date of such Survey, but such increase or decrease shall be
effective from such date even if such supplementary agreement is not
executed. The parties agree that a Survey shall be undertaken in
accordance herewith not less than once per annum throughout the Term
hereof. The cost of each annual Survey shall be paid for by Tenant,
provided, however, that the cost of the second annual Survey shall be
2
<PAGE> 83
paid for by Landlord and the cost of the third annual Survey shall be
shared equally by Landlord and Tenant. Thereafter the cost of each
Annual Survey shall be paid by Tenant.
(a) Tenant shall pay to Landlord, as additional rent hereunder on
the first day of each month during the Term, a monthly electrical charge
("Electricity Additional Rent"), which monthly charge shall be reasonably
determined by Tenant's consultant or engineer (subject, however, to the
provisions of Section 5.02(c) below) based upon the most recent Survey. The
current determination as of the date hereof agreed upon by Landlord and Tenant
is that Tenant's monthly charge shall be $22,571.16.
(b) If any tax is imposed upon Landlord in connection with the
furnishing of electric power to Tenant by any federal, state or local
governmental subdivision or authority, then Tenant shall pay to Landlord an
amount equal to such tax.
(c) Anything in this Section 5.02 to the contrary
notwithstanding, the findings of the consultant or engineer retained by Tenant
shall be conclusive unless within thirty (30) days after delivery of such
engineer's or consultant's determination to Landlord, Landlord disputes such
determination. If Landlord so disputes the determination, it shall obtain from a
reputable independent electrical engineer or consultant its own determination in
accordance with the provisions of this Section 5.02 ("Landlord's
Determination"). The cost of obtaining Landlord's Determination shall be
paid for by Landlord, provided, however, that if the second annual Survey shall
be disputed by Landlord, then Tenant shall pay the cost of obtaining Landlord's
Determination thereof, and provided further, that if the Third Annual Survey
shall be disputed by Landlord, then the cost of offering Landlord's
determination thereof shall be shared equally by Landlord and Tenant. If
Landlord's Determination differs from the determination of Tenant's engineer or
consultant, then the two
3
<PAGE> 84
engineers or consultants shall choose a third reputable electrical engineer of
consultant (whose cost shall be borne equally by Landlord and Tenant) to make a
similar determination, which determination shall be controlling. If they are
unable to agree upon the identity of the third engineer or consultant, then such
appointment shall be made by the American Arbitration Association. However,
pending such controlling determination, Tenant shall pay to Landlord the amount
in accordance with the determination of Tenant's engineer or consultant. If the
final determination differs from that of Tenant's engineer or consultant, then
the parties shall promptly make adjustment for any deficiency owed by Tenant or
overage paid by Tenant.
4. Tenant hereby waives any and all rights including the exclusive
option to lease the balance of space available under the Additional Space Option
pursuant to Section 1.04 of the Lease.
5. Tenant hereby waives its right of First Offer under Section 1.03 of
the Lease.
6. Tenant agrees not to exercise its surrender Option under Section 1.05
of the Lease solely with respect to the entire third (3rd) floor of the
Premises.
7. Except as expressly modified, amended and supplemented by this
Amendment, all of the terms, covenants and conditions of the Lease shall remain
in full force and effect.
4
<PAGE> 85
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
Landlord:
ROYAL EXECUTIVE PARK II
By: London & Leeds Rye Corporation
A GENERAL PARTNER
By: /s/ DESMOND TALGAARD
--------------------------------------
Desmond Talgaard
Its: President
Tenant:
JWP INC.
By: /s/ JOSEPH W. BARNETT
--------------------------------------
Joseph W. Barnett
Corporate Secretary and
Vice President Real Estate
5
<PAGE> 86
SUBLEASE
--------
This Sublease Agreement ("Sublease"), made as of this 6th day of
August,, 1993, between JWP, INC., a Delaware corporation with offices at 6
International Drive, Rye Brook, New York 10573 ("Sublessor"), and ENTEX
INFORMATION SERVICES, INC. a Delaware corporation with offices at 6
International Drive, Rye Brook, New York 10573 ("Sublessee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Sublessor is the tenant under a Lease dated as of May 21, 1992
between Royal Executive Park II, a New York limited partnership, as landlord
(the "Prime Landlord"), and Sublessor, as tenant, as amended by an Addendum No.
1 to Lease dated of even date therewith between Prime Landlord and Sublessor,
letter of Sublessor dated June 8, 1992 (exercising option to take additional
space), First Amendment of Lease dated as of June 22, 1992 ("First Amendment"),
a letter agreement between Prime Landlord and Sublessor dated June 22, 1992 and
Second Amendment of Lease dated as of May 28, 1993 ("Second Amendment")
(collectively, the "Prime Lease");
WHEREAS, Sublessor and Sublessee desire to enter into a sublease for a
portion of the premises demised under the Prime Lease.
NOW, THEREFORE, in consideration of the covenants and conditions set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by both parties, it is hereby agreed
as follows:
1. Premises: (a) Sublessor hereby leases to Sublessee and Sublessee
hereby leases from Sublessor, upon and subject to the terms and conditions of
this Sublease, a portion of the premises demised under the Prime Lease, such
portion consisting of the entire second floor of the building having an address
at 6 International Drive, Rye Brook, New York (the "Building"), as such premises
are shown on Exhibit A attached hereto and made a part hereof ("Demised
Premises").
This Sublease is subject and subordinate to all of the terms, covenants
and conditions of the Prime Lease and to all matters to which the Prime Lease is
subject and subordinate. Sublessee, acknowledges having received and reviewed a
copy of the Prime Lease. To the extent not otherwise provided in Article 24
hereof or elsewhere in this. Sublease, nor otherwise inconsistent with the
provisions of this Sublease, all of the terms, covenants and conditions of the
Prime Lease shall be deemed incorporated herein by reference as if set forth
herein at length. For purposes of such incorporation, the term "Landlord" as
used in the Prime Lease shall refer to Sublessor (and its successors and
assigns), the term "Tenant" as used in the Prime Lease shall refer to Sublessee
(and its successors and assigns) and the term "Leased Premises" as used in the
Prime Lease shall
<PAGE> 87
-2-
refer to the Demised Premises. Nothing in this Sublease shall be construed or
deemed to grant any right to Sublessee in excess of Sublessor's rights under the
Prime Lease or to it a violation of the Prime Lease pursuant to the provisions
of this Sublease.
(b) The Demised Premises have been inspected by Sublessee who
accepts the same in an "as is" condition, without reliance on any
representations or accept warranties of Sublessor concerning the Demised
Premises. Sublessor shall have no obligation whatsoever to Sublessee to alter,
improve, decorate, paint or otherwise prepare the Demised Premises or any
portion thereof for Sublessee's occupancy, nor shall Sublessor have any
obligation to fund any of the foregoing.
(c) Whenever in the Prime Lease a time is specified within which
the Tenant thereunder (i.e., the Sublessor) must give notice or make a demand
following an event, or within which the Tenant must respond to any notice,
request or demand previously given or made by the Landlord thereunder (i.e., the
Prime Landlord), or to comply with any obligation on the Tenant's part
thereunder, such time is hereby changed (but only for purposes of the
incorporation of the Prime Lease in this Sublease pursuant to Section l(a) of
this Sublease) by subtracting four (4) days therefrom. Whenever in the Prime
Lease a time is specified within which the Landlord thereunder must give notice
or make a demand following an event, or within which the Landlord must respond
to any notice, request or demand previously given or made by the Tenant
thereunder, or to comply with any obligation on the Landlord's part thereunder,
such time is hereby changed (but only for purposes of the incorporation of the
Prime Lease in this Sublease pursuant to Section 1(a) of this Sublease) by
adding four (4) days thereto. It is the purpose and intent of the foregoing
provisions of this Section 1(c) to provide the Sublessor with time within which
to transmit to the Prime Landlord any notices or demands received from the
Sublessee and to transmit to the Sublessee any notices or demands received from
the Prime Landlord.
2. Term: (a) Except as otherwise provided in this Sublease, the initial
term ("Initial Term") of this Sublease shall commence on the date that the
Consent (as defined in Section 18 hereof) is obtained ("Commencement Date") and
expire at midnight on December 31, 1993 or on such earlier date upon which the
term of this Sublease shall expire or be canceled or terminated pursuant to the
terms of this Sublease or the Prime Lease or pursuant to law ("Expiration
Date").
(b) Sublessee shall have the option ("Extension Option") to
extend the Initial Term for an additional period of eight (8) years, four (4)
months and thirty (30) days, commencing on January 1, 1994 and terminating on
May 30, 2002 or on such earlier date upon which the term of this Sublease shall
expire or be canceled or terminated pursuant to the terms of this Sublease or
the Prime Lease or pursuant to law ("Option Term"). If Sublessee shall elect to
exercise the Extension Option, it shall do so by giving notice thereof to
Sublessor on or before September 30, 1993, with time being of the essence.
During the Option Term all of the terms and conditions of this Sublease shall
remain in full force and
<PAGE> 88
-3-
effect. except that the fixed annual rent for the Demised Premises shall be the
Fair Market effect in Section 3(b) hereof), Sublessee shall pay additional rent
as described in Section 3(c) and 3(d) hereof and be responsible for the other
charges, costs, expenses, fees of additional rent imposed under the Prime Lease
with respect to the Demised premises or arising out of the use or occupancy
thereof, as incorporated into this Sublease and Sublessee shall have no further
option to extend the term of this Sublease. Sublessee may not exercise the
Extension Option if Sublessee is in default hereunder after the Sublessor and
the expiration of the applicable grace or cure period at the time of Sublessee's
exercise of the Extension Option or of the Option Term.
3. Rent: (a) During the Initial Term (i) the fixed annual rent due under
this Sublease shall equal zero ($0) dollars, (ii) the amount payable by
Sublessee on account of the Electricity Additional Rent shall equal zero ($0)
dollars, and (iii) Sublessee shall have no obligation to make any payment of the
escalations required to be paid by Sublessor as Tenant under the Prime Lease,
provided that Sublessee shall nevertheless be required to pay its Proportionate
Share (as hereinafter defined) of any charges imposed under this Sublease, or
the Prime Lease for the furnishing of utilities during periods other than
Business Hours (as defined in the Prime Lease), if utilities for such periods
are requested by Sublessee.
(b) (i) If Sublessee shall duly exercise the Extension Option,
during the Option Term Sublessee shall pay to Sublessor a fixed annual rent
("Annual Rent") equal to the annual fair market rental value of the Demised
Premises as of the commencement date of the Option Term for a term equal to the
Option Term ("Fair Market Rent"). The Fair Market Rent shall equal the rental
value determined as if the Demised Premises were available in the then current
rental market for comparable first-class, proximately located buildings in
Westchester County and assuming that Sublessor has had a reasonable time to
locate a subtenant who rents with the knowledge of the uses to which the Demised
Premises can be adapted, and that neither Sublessor nor the prospective
subtenant is under any compulsion to rent. Nothing set forth herein shall
require that the Fair Market Rent be constant throughout the Option Term, the
parties hereby acknowledging that the Prime Lease provides for an increase in
annual rental following the fifth anniversary of the Rental Commencement Date
(as defined in the Prime Lease). In determining the Fair Market Rent, tenant
rent abatements, concessions, work letters and work allowances shall be taken
into consideration if merited by prevailing market conditions, as well as
whether and how much work is required to be performed in the Demised Premises in
order to prepare the same for the use permitted under this Sublease.
Additionally, the fact that Tenant shall receive a "Base Year" for purposes of
determining escalations pursuant to Section 3(c) hereof equal to calendar year
1994 shall be taken into consideration. Sublessee shall pay Annual Rent to
Sublessor in equal monthly installments, in advance, one (1) business day prior
to the first (1st) day of each month during the Option Term, without any offset,
setoff or deduction of any kind whatsoever.
<PAGE> 89
-4-
(ii) For purposes of determining the Fair Market Rent for the
Option the following procedures shall apply:
(A) Within fifteen (15) days after the giving by Sublessee
of Sublessee's notice of exercise of option, Sublessor shall give notice to
Sublease in writing ("Sublessor's Notice") of the amount Sublessor believes
should be the Fair Market Rent.
(B) Sublessee shall give notice to Sublessor in writing
("Sublessee's Notice") within fifteen (15) days after the giving by Sublessor of
Sublessor's Notice whether Sublessee agrees or disagrees with Sublessor's
calculation of the Fair Market Rent. If Sublessee agrees with Sublessor's
calculation, then the Fair Market Rent shall be the amount calculated by
Sublessor.
(C) If in Sublessee's Notice Sublessee advises Sublessor
that it disagrees with Sublessor's calculation of the Fair Market Rent, then
Sublessor and Sublessee shall promptly attempt to agree on the Fair Market Rent.
If Sublessor and Sublessee cannot so agree within fifteen (15) days of the
giving of Sublessee's Notice, then Sublessor and Sublessee shall attempt to
mutually select a licensed real estate broker then currently doing business in
Westchester County who is knowledgeable in rental rates for comparable office
premises in Westchester County, to determine the Fair Market Rent
("Arbitrator"). If the parties cannot agree on one Arbitrator within fifteen
(15) days of the giving of Sublessee's Notice, then they shall each, within
thirty (30) days after the giving of Sublessee's Notice, select a licensed real
estate broker currently (i) doing business in Westchester County, (ii) familiar
with rental rates for comparable office premises in the Westchester County area
and (iii) engaged in and having at least five (5) years experience in the
leasing of office premises in Westchester County. Each Arbitrator shall have no
direct or indirect financial or other business interest in Sublessor or
Sublessee and shall not be affiliated with either Sublessor or Sublessee. If
either Sublessor or Sublessee fails to timely appoint an Arbitrator, the
Arbitrator selected by the other party shall act as the sole Arbitrator, The two
(2) Arbitrators shall promptly attempt to reach agreement on the Fair Market
Rent. If they cannot agree on a Fair Market Rent within ten (10) days of their
appointment, they shall together select a third Arbitrator meeting the
requirements set forth hereinabove. If the two Arbitrators fail to so timely
select a third Arbitrator within twenty (20) days of the appointment of the
second Arbitrator, then the third Arbitrator shall be selected by the President
of the Society of Arbitrators of Westchester County, or if there be no such
Society at such time, by the administrative Judge of the Supreme Court of the
State of New York in Westchester County.
(D) The Arbitrators shall render their decision upon the
concurrence of at least two (2) of the Arbitrators within ten (10) days of the
selection or appointment of the third Arbitrator. If there shall be no
concurrence of two
<PAGE> 90
-5-
Arbitrators, the decision of the third Arbitrator selected or appointed shall
prevail. The fixed annual rent for the Option Term shall be equal to the Fair
Market Rent as so determined and Sublessor and Sublessee shall be conclusively
bound thereby.
(E) Each party shall bear the cost of the Arbitrator
selected by such party and the cost of the third Arbitrator shall be shared
equally by Sublessor and Sublessee.
(F) Within seven (7) days after the Fair Market Rent has
been determined, Sublessor and Sublessee shall execute an amendment to this
sublease confirming same.
(c) In addition to the Fair Market Rent, Sublessee shall pay to
Sublessor additional rent during the Option Term in an amount equal to Fifty
(50%) Percent (the "proportionate Share") of the escalations payable by
Sublessor to the Prime Landlord under the Prime Lease for Landlord's Expenses
(as defined in the Prime Lease) on the terms and conditions set forth in Section
4.02 of the Prime Lease, provided, however, that for such purposes the "Base
Year" as defined in Section 4.02(a)(ii) of the Prime Lease shall mean the,
calendar year 1994. Sublessee shall pay 1/12th of the Proportionate Share of the
increase in Landlord's Expenses, in advance, one (1) business day prior to the
first (1st) day of each month during the Option Term, based upon the Prime
Landlord's estimate of Landlord's Expenses pursuant to Section 4.02(b) of the
Prime Lease. Sublessor shall deliver to sublessee a copy of Landlord's Expense
Statement (as defined in the Prime Lease) for the period in question promptly
upon receipt thereof from the Prime Landlord. If Sublessee should question or
contest the validity of Landlord's Expense Statement, Sublessor shall at its
option, either (i) exercise its rights under Section 4.02(b)(iii) of the Prime
Lease with respect to such Expense Statement (and in such event Sublessee shall
be required to pay the Proportionate Share of the reasonable cost of such
exercise if such exercise is successful and which cost shall be borne solely by
Sublessee if such exercise is unsuccessful) or (ii) permit Sublessee to exercise
directly the rights of Sublessor set forth in Section 4.02(b)(iii) of the Prime
Lease, provided, however, that Sublessee shall have the foregoing contest rights
only if Sublessee first pays the disputed amount, and further provided that the
following conditions are met with respect to any such contest (or litigation, as
the case may be): (w) such contest or ligation is prosecuted and maintained by
attorneys reasonably approved by Sublessor; (x) Sublessee shall not be in
default under this Sublease after notice thereof from Sublessor and beyond the
expiration of any applicable notice or cure period; (y) Sublessee shall
indemnify and hold Sublessor harmless from and against any loss, cost,
liability, damage, expense (including, without limitation, reasonable attorneys'
fees and disbursements), penalties and fines incurred by Sublessor arising from
or in connection with such contest or litigation; and (z) Sublessee shall not
institute any such contest or litigation (or if such contest or litigation shall
have been instituted, the same shall be discontinued) if, in the good faith
judgment of Sublessor, reasonably exercised, the institution (or prosecution) of
such action may result in
<PAGE> 91
-6-
a cancellation or termination of the Prime Lease (the conditions described in
clause (w) through (z) being referred to herein as the "Litigation Conditions").
(d) Sublessee shall also pay to Sublessor during the Option Term
the Proportionate Share of the Electricity Additional Rent (as defined in the
Second Amendment). Such amount shall be payable by Sublessee to Sublessor at
least five (5) days before the respective payment of Electricity Additional Rent
is payable by Sublessor to the prime Landlord. If at any time during the Option
Term either Sublessor or Sublessee believes that the cost of Sublessee's usage
of electricity in the Demised Premises is not accurately reflected by the
Proportionate Share of the Electricity Additional Rent payable by Sublessor to
the Prime Landlord, it may retain a reputable independent electrical engineer or
consultant to perform a survey of Sublessee's usage of electricity and
Sublessee's payments under this Subsection 3(d) shall thereafter be adjusted in
accordance with the results of such survey, unless the other party shall dispute
such determination, in which event the issue shall be resolved in substantially
the same manner as a dispute between Sublessor and the Prime Landlord as
described in Section 2(c) of the Second Amendment.
(e) In addition to the foregoing amounts specified in this
Section 3, Sublessee shall pay any other sums, charges, fees, expenses and other
items of additional rent payable under the Prime Lease with respect to the
Demised Premises or arising out of the use or occupancy thereof, as incorporated
herein pursuant to the provisions of Section 1(a) hereof.
4. Use. Sublessee shall use the Demised Premises for general and
executive office purposes and for all activities normally incidental thereto
(but under no circumstances in violation of the provisions of the Prime Lease)
and for no other purpose.
5. Sublessee's Defaults: In the event Sublessee shall default in the
full performance of any of the terms, covenants and conditions on its part, to
be performed under this Sublease, then Sublessor shall have, in addition to any
other rights or remedies specified in this Sublease, the same rights and
remedies with respect to such default as are given to the Prime Landlord under
the Prime Lease, all with the same force and effect as though the provisions of
the Prime Lease with respect to defaults and the rights and remedies of the
Prime Landlord thereunder were set forth at length herein as the rights and
remedies of the Sublessor, as modified pursuant to the provisions of Section
l(c) hereof.
6. Services: (a) Sublessee shall have and enjoy the same rights to have
facilities and services furnished by the Prime Landlord as Sublessor possesses
under the Prime Lease. Sublessee acknowledges and agrees that Sublessor is not
in a position, nor shall Sublessor be required, to furnish to Sublessee any
water, sewer; gas, heat, electricity, air conditioning, light, power, parking or
any other facilities, materials or services of any kind whatsoever, whether or
not specified in the Lease or required by law, including, without limitation,
making any repairs or restorations arising from or in connection with a
<PAGE> 92
-7-
casualty or condemnation, or complying with any laws or requirements of any
governmental authorities, with respect to the Demised Premises. The performance
by the Prime Landlord of its obligations under the Prime Lease shall, for all
purposes of this Sublease, be deemed to be the performance of such obligations
by Sublessor, and Sublessor's obligations under the Prime Lease, as incorporated
in this Sublease pursuant to Section l(a), shall be fully discharged to the
extent to which such obligations are performed by the Prime Landlord under the
Prime Lease. Notwithstanding the foregoing, Sublessor shall use all reasonable
efforts to obtain performance by the Prime Landlord of its obligations under the
Prime Lease, with the reasonable cost of such efforts to be borne solely by
Sublessee to the extent such performance relates solely to the Demised Premises
and to be shared on a Proportionate Share basis by Sublessee and Sublessor if
such performance also relates to portions of the premises demised under the
Prime Lease other than the Demised Premises. If the Prime Landlord shall default
in the performance of any of its obligations with respect to the Demised
Premises, Sublessee may participate with Sublessor in the enforcement of
sublessor's rights in respect thereof (and in any recovery or relief obtained,
to the extent relating to the Demised Premises), it being agreed that Sublessor
shall make all decisions regarding such enforcement, unless such enforcement
relates solely to the Demised Premises (in which event decisions shall be made
jointly by Sublessor and Sublessee). Sublessor will promptly give to Prime
Landlord each and every notice which Sublessee delivers to Sublessor advising of
any default by the Prime Landlord in any of its obligations with respect to the
Demised Premises. Furthermore, if Prime Landlord shall default in the
performance of any of its obligations with respect to the Demised Premises and
Sublessee shall request that Sublessor compel the cure of such default by
commencing a litigation against the Prime Landlord, Sublessor shall, either (i)
institute and prosecute such litigation itself or (ii) permit Sublessee to
institute and prosecute such litigation, provided that in each case the
Litigation Conditions are satisfied; in either of such events the reasonable
expense of such litigation shall be borne solely by Sublessee (if Prime
Landlord's default relates solely to the Demised Premises) or shared on a
Proportionate Share basis (if such default also relates to portions of the
premises demised under the Prime Lease other than the Demised Premises).
Sublessee shall be entitled to the benefit of any recovery or relief obtained
pursuant to such proceeding to the extent that the same shall apply to the
Demised Premises and Sublessor shall be entitled to the benefit of any recovery
or relief to the extent the same does not apply to the Demised Premises.
(b) If Sublessee shall duly exercise the Extension Option,
Sublessee shall not be entitled to any abatement of rent for the failure of the
Prime Landlord to supply the above services or perform such obligations, unless
Sublessor is entitled to receive an abatement of rent under the Prime Lease, in
which case Sublessee shall be entitled to the Proportionate Share of such
abatement of the rent and additional rent payments due hereunder, unless such
failure of the Prime Landlord results from Sublessor's willful misconduct or
Sublessor's being in default under the Sublease or the Prime Lease and
Sublessor's default thereunder is not due to a default of Sublessee hereunder,
in either of
<PAGE> 93
-8-
which latter events Sublessee shall be entitled to such abatement of rent and
additional rent as may be equitable under the circumstances.
7. Direct Dealing with the Prime Landlord: If Sublessee procures any
additional services (such as alternations, cleaning services, overtime air
conditioning, etc.) with respect to the Demised Premises, Sublessee shall pay
all charges for such services, as and when due, directly to the party rendering
such services (or as otherwise directed by the prime Landlord.)
8. Sublessor's Defaults: (a) Sublessor shall not do anything or fail to
take any action which may cause or result in an Event of Default (as defined in
the Prime Lease) under the Prime Lease, or in a situation which, with the
passage of time or the giving of notice, or both, may result in an Event of
Default.
(b) If Sublessor shall default in the observance or performance
of any term or covenant on its part to be observed or performed by it as Tenant
under the Prime Lease, Sublessee, without being under any obligation to do so,
shall have the right to remedy such default for the account and at the expense
of Sublessor following the expiration of five (5) business days after delivery
to Sublessor of a notice with specificity as to Sublessee's intention to
exercise such remedy, but only where Sublessor shall not have effected or
commenced to effect the cure of such default by the expiration of such period,
or, if having so timely commenced cure, shall thereafter fail to diligently
prosecute such cure to completion. Any sums reasonably expended by Sublessee in
so remedying any such default of Sublessor shall be paid to Sublessee by
Sublessor on demand and if not so paid, may be set off by Sublessee against any
rent or additional rent thereafter becoming payable under this Sublease.
9. Prime Lease: Sublessor represents and warrant accepts that the Prime
Lease is in full force and effect, that fixed annual rent due thereunder which
has been billed through June 30, 1993 has been paid, that the Prime Lease has
not been modified or amended in any way other than as set forth in the Prime
Lease, that to the best of Sublessor's knowledge, there are no existing defaults
thereunder on the part of Sublessor as tenant thereunder, nor has any event
occurred which, with the giving of notice or the passage of time, or both, would
constitute a default thereunder.
10. Indemnification: (a) Sublessee, shall not do or permit to be done
any act or thing which will constitute a breach or violation of any of the
terms, covenants, conditions or provisions of this Sublease or an Event of
Default under the Prime Lease (except to the extent caused by an act or omission
of Sublessor or any of its agents, employees, invitees or contractors) and shall
hold harmless, indemnify and defend Sublessor from and against any and all
claims, demands, actions, causes of action, suits, judgments, damages, losses,
liabilities, fines, penalties, costs and expenses (including, without
limitation,
<PAGE> 94
-9-
reasonable attorneys' fees and disbursements) (collectively, "Liabilities")
incurred by Sublessor by reason of any breach by Sublessee of the foregoing
covenant.
(b) Sublessor shall timely perform all of its obligations under
the Prime Lease and shall not do or permit to be done any act or thing which
will constitute a breach or violation of any of the terms, covenants, conditions
or provisions of this Sublease or an Event of Default under the Prime Lease
(except to the extent caused by any act or omission of Subleases or any of its
agents, employees, invitees, or contractors), Sublessor shall hold harmless,
indemnify and defend Sublessee from and against any and all Liabilities incurred
by Sublessee by reason of any breach by Sublessor of the foregoing covenant
including, without limitation, any Liabilities incurred by Sublessee as a result
of a termination of the Prime Lease as a result thereof.
11. Sublessor's Consent: Whenever Sublessor's consent or approval is
required under the provisions of this Sublease, Sublessor's refusal to consent
or approve any matter or thing shall be deemed reasonable if, inter alia, the
Prime Landlord or the mortgagee of the Building has refused to give such consent
or approval if required under the Prime Lease. Whenever the consent of the Prime
Landlord is required, Sublessor shall promptly transmit Sublessee's request for
consent to the Prime Landlord. Further, provided Sublessee is not in default
hereunder after notice from Sublessor and beyond any applicable grace period,
the consent or approval of Sublessor shall not be required with respect to any
matter to which the Prime Landlord shall have consented unless the action for
which such consent is sought may reasonably be expected to increase Sublessor's
obligations or liabilities under the Prime Lease or this Sublease, and in such
latter event, Sublessor's consent will not be withheld if Sublessee delivers to
Sublessor its agreement in form and substance reasonably satisfactory to
Sublessor whereby Sublessee indemnities Sublessor against the consequences of
such increase in Sublessor's obligations or liabilities, including, without
limitation, the reimbursement of any expense incurred by Sublessor by reason of
its performance of such increased obligations or any loss suffered by reason of
such increased liabilities, it being agreed that Sublessor shall have the right
to condition any such consent upon the provision of security reasonably
satisfactory to Sublessor.
12. Amendment of Prime Lease: Sublessor shall neither amend the Prime
Lease nor consent to the amendment thereof if the effect thereof would be an
increase in Sublessee's obligations or liabilities or a decrease in Sublessee's
rights under this Sublease.
13. Covenant of Quite Enjoyment: Upon observing and performing all the
terms, covenants and conditions hereof on Sublessee's part to be observed and
performed, Sublessee may peaceably and quietly enjoy the Demised Premises
without disturbance by Sublessor or anyone claiming by, through or under
Sublessor, upon and subject to the terms and conditions of this Sublease.
<PAGE> 95
-10-
14. Entire Agreement: This Sublease contains the entire agreement the
between parties hereto with respect to the Demised Premises. No agreement
hereafter made between Sublessor and Sublessee shall be effective to change,
modify, waive, release, discharge or terminate this Sublease or any term
thereof, in whole or in part, unless such agreement is in writing and signed by
the party against whom enforcement of the change, modification, waiver, release,
discharge or termination is sought.
15. Notices: Any notice, consent, approval, request, communication,
bill, demand or statement provided under this Sublease to be sent or delivered
by either party to the other party shall be in writing and shall be given by
personal delivery (including, without limitation, recognized overnight delivery
service) with signed receipt therefor, or mailed in a postage envelope,
registered or certified, with return receipt, addressed to such other party, at
the address for such party as set forth on the first page of this Sublease and,
with respect to Sublessor, to the attention of "President." Either party,
however, may designate such new or other address to which such notice shall
thereafter be given, by notice given in accordance with this Article 15. Any
notice to be given under this Sublease shall be deemed given upon receipt, or,
if delivery is refused, on the date delivery is first attempted. Each party
shall promptly deliver to the other party a copy of all notices given by the
Prime Landlord to such party relating to or affecting this Sublease or the
Demised Premises.
16. Liability Insurance: (a) Each party shall maintain with responsible
companies commercial general liability insurance with contractual liability
endorsement against all claims, demands or actions for injury to or death of any
one or more persons, or damage to property, in an amount of not less than
$1,000,000 combined single limit, arising from, related to or connected with the
conduct and operation of such party's business in the respective portion of the
premises demised under the Prime Lease occupied by such party, or caused by the
actions or omissions of such party, its agents and employees.
(b) A copy of or certificates evidencing each such policy or
policies of insurance shall be delivered to the other party on request. On
Sublessee's default in obtaining or delivering any such policy or policies or
failure to pay the charges therefor, Sublessor may secure or pay the charges for
any such policy or policies and charge the Sublessee as additional rent
therefor.
17. Fire and Extended Coverage Insurance. (a) Each party shall carry
separate fire and extended coverage insurance policies on the respective
portions of the premises demised under the Prime Lease occupied by such party.
However, provided such separate policies are unavailable (or if Sublessor shall
have been required, pursuant to the Prime Lease, to carry a fire and extended
coverage insurance policy on its entire demised premises), and a single policy
shall cover Sublessor's entire premises, including the Demised Premises,
Sublessee shall pay the Proportionate Share of Sublessor's premium. Bills for
such share of the premium shall be rendered by Sublessor to Sublessee at such
times as Sublessor may elect together with a copy of the bill from Sublessor's
insurance carrier and
<PAGE> 96
-11-
shall be due from, and payable by, Sublessee when rendered, and the amount
additional rent under this Sublease.
(b) Sublessee shall obtain such other insurance, and in such
amounts, as may from time to time be reasonably required by the Prime Landlord,
Sublessor, or any fee mortgagee, against other insurable hazards which at the
time are commonly insured against in the case of premises similarly situated,
due regard being or to be given to the height and type of building, its
construction, use and occupancy.
(c) Each fire and extended coverage insurance policy shall, if
obtainable from the insurer without expense, either contain a provision waiving
subrogation against the other party hereto or include the name of such other
party as an additional Insured.
(d) Notwithstanding any provision in this Sublease to the
contrary, neither party shall be liable for damage to the other party's property
in or constituting a part if the premises demised under the Prime Lease,
regardless of whether or not such damage is due to such party's negligence, to
the extent that such damage is covered by collectible insurance carried by the
other party.
18. Prime Landlord's Consent: The validity of this Sublease is
conditioned upon Sublessor obtaining the written consent of the Prime Landlord
to the terms and conditions hereof (the "Consent"). If such Consent is not
obtained on or before December 31, 1993, this Sublease shall be null and void
and of no further force and effect. Sublessee agrees to cooperate in good faith
and comply with reasonable requests of Sublessor and Prime Landlord in obtaining
the consent. Each party shall pay one half of all reasonable out-of-pocket costs
that may be incurred by Prime Landlord in connection with the granting of the
Consent, including, without limitation, reasonable attorneys' fees and
disbursements.
19. Non-Disturbance Agreement: If Sublessee shall duly exercise the
Extension Option, Sublessor shall request of Prime Landlord that Prime Landlord
execute and deliver to Sublessee an agreement on or before the commencement of
the Option Term providing that so long as Sublessee is not in default under this
Sublease after the giving of notice thereof and the expiration of the applicable
grace or cure period provided hereunder, Sublessee shall be permitted to remain
in undisturbed possession, use and enjoyment of the Demised Premises,
notwithstanding any default by Sublessor under the Prime Lease or any
termination of the Prime Lease on account thereof by Prime Landlord, it being
agreed that Sublessor shall have no obligation to expend any monies in order to
obtain any such agreement and that failure to obtain such agreement despite
Sublessor's request therefor shall not diminish any of Sublessee's obligations
under this Agreement.
20. Unavoidable Delays: If either party hereto shall be delayed or
hindered in or prevented from the performance of any act required under this
Sublease by reason of
<PAGE> 97
-12-
strikes, lockouts labor troubles, inability to procure materials, failure of
power, governmental laws or regulations, riots, insurrection, war or other
reason of a like nature not the fault of the party delayed, then performance of
such act shall be excused for the period of the delay and the period for the
performance of any such act shall be extended for a period equivalent to the
period of such delay. The provisions of this Article 20 shall not operate to
excuse Sublessee from prompt payment of fixed annual rent (if any) or any other
payments (if any) required under the terms of this Sublease.
21. Captions: The captions and article and section numbers appearing in
this Sublease are inserted only as a matter of convenience and in no way define,
limit, construe, or describe the scope or intent of such sections or articles or
this Sublease nor in any way affect this Sublease.
22. Brokers: Each party represents to the other that it has dealt with
no broker or finder in connection with this Sublease and shall hold harmless,
indemnify and defend the other party from and against any and all Liabilities
incurred by such party as a result of a breach of the foregoing representation.
23. Surrender Option: Sublessee shall have the same right to surrender
all or any portion of the Demised Premises (and be released from all further
liability in connection therewith) as Sublessor does to surrender all or any
portion of the premises ]eased under the Prime Lease pursuant to Section 1.05 of
the Prime Lease, effective as of the respective Surrender Dates (as defined in
the Prime Lease) as set forth in the Prime Lease and otherwise on the terms and
conditions as set forth in Section 1.05 of the Prime Lease. If either Sublessor
or Sublessee shall exercise its rights of surrender with respect to the Demised
Premises in accordance with Section 1.05 of the Prime Lease, this Sublease shall
terminate on and as of the effective date of such surrender, provided, however,
that only Sublessee, and not Sublessor, may elect (subject to the provisions of
Paragraph 1.05 of the Prime Lease) to surrender a portion of the Demised
Premises. Notwithstanding anything to the contrary set forth in this Sublease,
Sublessor shall incur no liability to Sublessee arising from or in connection
with the exercise by Sublessor of its right under the Prime Lease to surrender
the Demised Premises to the Prime Landlord, provided Sublessor shall have
exercised such right in accordance with the provisions of the preceding
sentence.
24. Prime Lease Modifications: The following provisions of the Prime
Lease shall be deemed deleted and shall not apply to this Sublease: Sections
1.01(a), 1.01(b), 1.03, 1.04, 2.01, 2.02, 3.01, 4.01 4.03(a), the first three
sentences of 11.01(d), the fifth sentence of 15.01, 15.02, 21.01, 23.01, clauses
(iii)-(vi), inclusive, of 24.01, 26.01, 27.02 and 27.03. The last sentence of
the last paragraph of Section 4.02(b) shall be modified for purposes of
incorporation into this Sublease such that Sublessee shall be entitled to
receive interest on any excess payment of its Proportionate Share of any
increase in Expenses only if Sublessor receives such interest from the Prime
Landlord. In addition, that certain letter from Prime Landlord to Sublessor,
dated May 21, 1992, referring to
<PAGE> 98
-13-
"Agreement to Permit Rent Offsets or to make Monthly Payment" shall not be
deemed to have been incorporated into, and shall not apply to, this Sublease and
Sublessee shall not be entitled to any of the benefits accruing under such
letter.
25. Parking. Sublessee shall be entitled to use of the Proportionate
Share of the non-designated and designated parking spaces to which Sublessee is
entitled pursuant to the provisions of Section 6.01 of the Prime Lease.
Sublessee may (subject to the provisions of Section 6.01 of the Prime Lease)
continue to use the specific designated spaces used by employees of JWP
Information Services, Inc. on the date hereof.
26. Assignment and Subletting. Sublessee shall not be permitted to
assign its interests in this Lease or sublet all or any portion of the Demised
Premises except in strict accordance with the terms and conditions of Article
XVI of the Prime Lease (as incorporated in the Sublease pursuant to Section l(a)
hereof). All assignments and sublettings shall require the written consent of
both Sublessor and the Prime Landlord, except that those referred to in Section
16.01(d) of the Prime Lease shall require the consent of Prime Landlord but not
of Sublessor. All assignments and sublettings (including, without limitation,
those referred to in Section 16.01(d) of the Prime Lease) shall be effected in
strict accordance with the terms and conditions of Article XVI of the Prime
Lease.
27. Severability: If any term, covenant or condition of this Sublease or
the application thereof to any person or circurnstance shall, to any extent, be
invalid or unenforceable, the remainder of this Sublease or the application of
such term, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable shall not be affected thereby and
each term, covenant or condition of this Sublease shall be valid and be enforced
to the fullest extent permitted by law.
28. No Recording: Sublessee shall not record this Sublease without the
written consent of Sublessor.
29. Successors and Assigns. This Sublease shall bind and accrue to the
benefit of Sublessor and Sublessee and their respective successors and permitted
assigns.
30. Computer and Switching Rooms: During the term of this Sublease,
Sublessee shall be permitted non-exclusive access to the computer and switching
rooms presently located on the first floor of the Building for the purpose of
using the equipment therein with respect to Sublessee's operations. Sublessor
shall properly insure, maintain, repair and replace all equipment (other than
equipment which is "dedicated" to a particular entity in the Building other than
Sublessor, with respect to which equipment Sublessor shall have no
responsibility whatsoever) in such rooms and Sublessee shall pay its
Proportionate Share of the reasonable cost thereof promptly upon receipt of
statements thereof from Sublessor, together with substantiating invoices or
receipts.
<PAGE> 99
-14-
31. Removal of Fixtures: At the expiration or earlier termination of the
term of this Sublease, provided Sublessee shall not then be in default under
this Sublease after notice thereof from Sublessor and the expiration of the
applicable grace or cure period provided under this Sublease, subject to the
provisions of the Prime Lease, Sublessee shall be terminated to remove its
fixtures and equipment which may be removed without causing significant damage
to the Demised Premises (and Sublessee shall repair any damage caused thereby).
IN WITNESS WHEREOF, the parties hereto have executed this Sublease as of
the day and year first above written.
Sublessor:
JWP, INC.
By:/s/ Stephen H. Meyers
Name: Stephen H. Meyers
Title: Sr. VP
Sublessee:
ENTEX INFORMATION SERVICES, INC.
By: /s/ Tom Taylor
Name: Tom Taylor
Title: EVP
<PAGE> 100
EXHIBIT A
[SECOND FLOOR NOT SHOWN]
<PAGE> 101
AMENDED SUBLEASE
----------------
This Amended Sublease Agreement ("Sublease"), made as of the 31st day of
December, 1993, between JWP, INC., a Delaware corporation with offices at 6
International Drive, Rye Brook, New York 10573 ("Sublessor"), and ENTEX
INFORMATION SERVICES, INC., a Delaware corporation with offices at 6
International Drive, Rye Brook, New York 10573 ("Sublessee").
W I T N E S S E T H:
--------------------
WHEREAS, Sublessor is the tenant under a Lease dated as of May 21, 1992
between Royal Executive Park II, a New York limited partnership, as landlord
(the "Prime Landlord"), and Sublessor, as tenant, as amended by an Addendum No,
1 to Lease dated of even date therewith between Prime Landlord and Sublessor,
letter of Sublessor dated June 8. 1992 (exercising option to take additional
space), First Amendment of Lease dated as of June 22, 1992 ("First Amendment")
and Second Amendment of Lease dated as of May 28, 1993 ("Second Amendment")
(collectively, the "Prime Lease");
WHEREAS, Sublessor and Sublessee desire to enter into a sublease for a
portion of the premises demised under the Prime Lease.
NOW, THEREFORE, in consideration of the covenants and conditions set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by both parties, it is hereby agreed
as follows:
1. Premises: (a) Sublessor hereby leases to Sublessee and Sublessee
hereby leases from Sublessor, upon and subject to the terms and conditions of
this Sublease, a portion of the premises demised under the Prime Lease, such
portion consisting of the entire second floor of the building having an address
at 6 International Drive, Rye Brook, New York (the "Building"), as such premises
are shown on Exhibit A attached hereto and made a part hereof ("Demised
Premises").
This Sublease is subject and subordinate to all of the terms, covenants
and conditions of the Prime Lease and to all matters to which the Prime Lease is
subject and subordinate. Sublessee acknowledges having received and reviewed a
copy of the Prime Lease. To the extent not otherwise provided in Article 24
hereof or elsewhere in this Sublease, nor otherwise inconsistent with the
provisions of this Sublease, all of the terms, covenants and conditions of the
Prime Lease shall be deemed incorporated herein by reference as if set forth
herein at length. For purposes of such incorporation, the term "Landlord" as
used in the Prime Lease shall refer to Sublessor (and its successors and
<PAGE> 102
assigns), the term "Tenant" as used in the Prime Lease shall refer to Sublessee
(and its successors and assigns) and the term "Leased Premises" as used in the
Prime Lease shall refer to the Demised Premises. Nothing in this Sublease shall
be construed or deemed to grant any right to Sublessee in excess of Sublessor's
rights under the Prime Lease or to permit a violation of the Prime Lease
pursuant to the provisions of this Sublease.
(b) The Demised Premises have been inspected by Sublessee who
accepts the same in an "as is" condition, without reliance on any
representations or warranties of Sublessor concerning the Demised Premises.
Sublessor shall have no obligation whatsoever to Sublessee to alter, improve,
decorate, paint or otherwise prepare the Demised Premises or any portion thereof
for Sublessee's occupancy, nor shall Sublessor have any obligation to fund any
of the foregoing.
(c) Whenever in the Prime Lease a time is specified within which
the Tenant thereunder (i.e., the Sublessor) must give notice or make a demand
following an event, or within which the Tenant must respond to any notice,
request or demand previously given or made by the Landlord thereunder (i.e., the
Prime Landlord), or to comply with any obligation on the Tenant's part
thereunder, such time is hereby changed (but only for purposes of the
incorporation of the Prime Lease in this Sublease pursuant to Section 1 (a) of
this Sublease) by subtracting four (4) days therefrom. Whenever in the Prime
Lease a time is specified within which the Landlord thereunder must give notice
or make a demand following an event, or within which the Landlord must respond
to any notice, request or demand previously given or made by the Tenant
thereunder, or to comply with any obligation on the Landlord's part thereunder,
such time is hereby changed (but only for purposes of the incorporation of the
Prime Lease in this Sublease pursuant to Section 1(a) of this Sublease) by
adding four (4) days thereto. It is the purpose and intent of the foregoing
provisions of this Section 1(c) to provide the Sublessor with time within which
to transmit to the Prime Landlord any notices or demand received form the
Sublessee and to transmit to the Sublessee any notices or demands received from
the Prime Landlord.
2. Term: Except as otherwise provided in this Sublease, the term
("Term") of this Sublease shall commence on January 1, 1994 and expire at 11:59
p.m. on May 30, 2002 or on such earlier date upon which the term of this
Sublease shall expire or be canceled or terminated pursuant to the terms of this
Sublease or the Prime Lease or pursuant to law ("Expiration Date").
3. Rent: (a) During the Term (i) the fixed annual rent due under this
Sublease shall be Four Hundred Forty Four Thousand Four Hundred Thirty Two
Dollars ($444,432), payable in equal monthly installments of Thirty Seven
Thousand and Thirty Six
-2-
<PAGE> 103
Dollars ($37,036), (ii) the amount payable by Sublessee on account of the
Electricity Additional Rent shall equal Ninety Thousand One Hundred Forty Seven
and 20/100 Dollars ($90,147.20) per annum, subject to adjustment in accordance
with Section 3(d) below, and (iii) Sublessee shall make payment of the
escalations required to be paid by Sublessor as Tenant under the Prime Lease.
B. "Base Year" for purposes of determining escalations pursuant
to Section 3(c) shall be the twelve (12) month period commencing on May l, 1992.
Sublessee shall pay fixed annual rent to Sublessor in equal monthly
installments, in advance, one (1) business day prior to the first (1st) day of
each month during the Term, without any offset or deduction of any kind
whatsoever.
C. In addition to the fixed annual rent, Sublessee shall pay to
Sublessor additional rent during the Term in an amount equal to Forty and Four
Tenths (40.4%) Percent (the "Proportionate Share") of the escalations payable by
Sublessor to the Prime Landlord under the Prime Lease for Landlord's Expenses
(as defined in the Prime Lease) on the terms and conditions set forth in Section
4.02 of the Prime Lease, provided, however, that for such purposes the "Base
Year" as defined in Section 4.02(a)(ii) of the Prime Lease shall mean the twelve
(12) month period commencing on May 1, 1992. Sublessee shall pay 1/12th of the
Proportionate Share of the increase in Landlord's Expenses, in advance, one (1)
business day prior to the first (1st) day of each month during the Option, based
upon the Prime Landlord's estimate of Landlord's Expenses pursuant to Section
4,02(b) of the Prime Lease. Sublessor shall deliver to Sublessee a copy of
Landlord's Expense Statement (as defined in the Prime Lease) for the period in
question promptly upon receipt thereof from the Prime Landlord. Upon receipt of
notice from Sublessee questioning the accuracy of a particular Landlord's
Expense Statement, Sublessor agrees to review such statement and shall
thereafter contest such statement with the Landlord if such action is determined
to be appropriate by Sublessor in the exercise of its good faith business
judgment,
D. As heretofore provided in Section 3(a) above, Sublessee
shall also pay to Sublessor during the Term, the Proportionate Share of the
"Electricity Additional Rent" (as such term is defined in the Second Amendment).
Such amount shall be payable by Sublessee to Sublessor at least five (5) days
before the respective payment of Electricity Additional Rent is payable by
Sublessor to the Prime Landlord, If at any time during the Term either Sublessor
or Sublessee believes that the cost of Sublessee's usage of electricity in the
Demised Premises is not accurately reflected by the Proportionate Share of the
Electricity Additional Rent payable by Sublessor to the Prime Landlord, such
party may retain a reputable independent electrical engineer or consultant to
perform a survey of Sublessee's usage of electricity and Sublessee's payments
under this Subsection 3(d) shall
-3-
<PAGE> 104
thereafter be adjusted in accordance with the results of such survey, unless the
other party shall dispute such determination, in which event the issue shall be
resolved in substantially the same manner as a dispute between Sublessor and the
Prime Landlord as described in Section 2(c) of the Second Amendment. Sublessee
acknowledges and agrees that in the event Sublessee shall attorn to Prime
Landlord pursuant to that certain agreement contemplated to be executed by
Sublessee, Sublessor and Prime Landlord contemporaneously herewith entitled
"Landlord's Consent; and Non-Disturbance and Attornment Agreement", Sublessee
shall be bound by the Second Amendment, without limiting any of Sublessee's
other obligations thereunder.
(e) In addition to the foregoing amounts specified in this
Section 3, Sublessee shall pay any other sums, charges, fees, expenses and other
items of additional rent payable under the Prime Lease with respect to the
Demised Premises or arising out of the use or occupancy thereof, as incorporated
herein pursuant to the provisions of Section 1(a) hereof.
4. Use: Sublessee shall use the Demised Premises for general and
executive office purposes and for all activities normally incidental thereto
(but under no circumstances in violation of the provisions of the Prime Lease)
and for no other purpose.
5. Sublessee's Defaults: In the event Sublessee shall default in the
full performance of any of the terms, covenants and conditions on its part to be
performed under this Sublease, then Sublessor shall have, in addition to any
other rights or remedies specified in this Sublease, the same rights and
remedies with respect to such default as are given to the Prime Landlord under
the Prime Lease, all with the same force and effect as though the provisions of
the Prime Lease with respect to defaults and the rights and remedies of the
Prime Landlord thereunder were set forth at length herein as the rights and
remedies of the Sublessor, as modified pursuant to the provisions of Section
l(c) hereof.
6. Services: (a) Sublessee shall have facilities and services furnished
by the Prime Landlord as Sublessor possesses under the Prime Lease. Sublessee
acknowledges and agrees that, Sublessor is not in a position, nor shall
Sublessor be required, to furnish to Sublessee, any water, sewer, gas, heat,
electricity, air conditioning, light, power, parking or any other facilities,
materials or services of any kind whatsoever, whether or not specified in the
Lease or required by law including without limitation, making any repairs or
restorations arising from or in connection with a casualty or condemnation, or
complying with any laws or requirements of any governmental authorities, with
respect to the Demised Premises. The performance by the Prime Landlord of its
obligations by Sublessor, and Sublessor's obligations under
-4-
<PAGE> 105
the Prime Lease, as incorporated in this Sublease pursuant to Section l(a),
shall be fully discharged to the extent to which such obligations are performed
by the Prime Landlord under the Prime Lease. Notwithstanding the forgoing,
Sublessor shall use all reasonable efforts to obtain performance by the Prime
Landlord of its obligations under the Prime Lease, with the reasonable cost of
such efforts to be borne solely by Sublessee to the extent such performance
relates solely to the Demised Premises and to be shared on a Proportionate Share
basis by Sublessee and Sublessor if such performance also relates to portions of
the premises demised under the Prime Lease other than the Demised Premises. If
the Prime Landlord shall default in the performance of any of its obligations
with respect to the Demised Premises. Sublessee may participate with Sublessor
in the enforcement of Sublessor's rights in respect thereof (and in any recovery
or relief obtained, to the extent relating to the Demised Premises), it being
agreed that Sublessor shall make all decisions regarding such enforcement,
unless such enforcement relates solely to the Demised Premises (in which event
decisions shall be made jointly by Sublessor and Sublessee). Sublessor will
promptly give to Prime Landlord each and every notice which Sublessee delivers
to Sublessor advising of any default by the Prime Landlord in any of its
obligations with respect to the Demised Premises, Furthermore, if Prime Landlord
shall default in the performance of any of its obligations with respect to the
Demised Premises and Sublessee shall request that Sublessor compel the cure of
such default by commencing a litigation against the Prime Landlord, Sublessor
shall, either (i) institute and prosecute such litigation itself or (ii) permit
Sublessee to institute and prosecute such litigation, provided that in each case
the Litigation Conditions (as hereinafter defined) are satisfied; in either of
such events the reasonable expense of such litigation shall be borne solely by
Sublessee (if Prime Landlord's default relates solely to the Demised Premises)
or shared on a Proportionate Share basis (if such default also relates to
portion of the premises demised under the Prime Lease other than the Demised
Premises). Sublessee shall be entitled to the benefit of any recovery or relief
obtained pursuant to such proceeding to the extent that the same shall apply to
the Demised Premises and Sublessor shall be entitled to the benefit of any
recovery or relief to the extent the same does not apply to the Demised
Premises. "Litigation Conditions" shall mean the following conditions with
respect to any litigation: (w) such litigation is prosecuted and maintained by
attorneys reasonably approved by Sublessor; (x) Sublessee shall not be in
default under this Sublease after notice thereof from Sublessor and beyond the
expiration of any applicable notice or cure period; (y) Sublessee shall
indemnify and hold Sublessor harmless from and against any loss, cost,
liability, damage, expense (including, without limitation, reasonable attorneys'
fees and disbursements), penalties and fines incurred by Sublessor arising from
or in connection with such litigation; and (z) Sublessee shall not
-5-
<PAGE> 106
institute any such litigation (or if such litigation shall have been instituted,
the same shall be discontinued) if, in the good faith judgment of Sublessor,
reasonably exercised, the institution (or prosecution) of such litigation may
result in a cancellation or termination of the Prime Lease.
(b) Sublessee shall not be entitled to any abatement of rent for
the failure of the Prime Landlord to supply the above services or perform such
obligations, unless Sublessor is entitled to receive an abatement of rent under
the Prime Lease, in which case Sublessee shall be entitled to the Proportionate
Share of such abatement of the rent and additional rent payments due hereunder,
unless such failure of the Prime Landlord results from sublessor's willful
misconduct or Sublessor's being in default under the Sublease or the Prime Lease
and Sublessor's default thereunder is not due to a default of Sublessee
hereunder, in either of which latter events Sublessee shall be entitled to such
abatement of rent and additional rent as may be equitable under the
circumstances. It is further agreed that, in the event Sublessee shall attorn to
the Prime Landlord, the Prime Landlord shall not be subject to any offsets,
credits or defenses which the Sublessee may have against Sublessor.
7. Direct Dealing with the Prime Landlord: If Sublessee procures any
additional services (such as alterations, cleaning services, overtime air
conditioning, etc.) with respect to the Demised Premises, Sublessee shall pay
all charges for such services, as and when due, directly to the party rendering
such services (or as otherwise directed by the Prime Landlord.)
8. Sublessor's Defaults: (a) Sublessor shall not do anything or fail to
take any action which may cause or result in an Event of Default (as defined in
the Prime Lease) under the Prime Lease, or in a situation which, with the
passage of time or the giving of notice, or both, may result in an Event of
Default.
(b) If Sublessor shall default in the observance or performance of
any term or covenant on its part to be observed or performed by it as Tenant
under the Prime Lease, Sublessee, without being under any obligation to do so,
shall have the right to remedy such default for the account and at the expense
of Sublessor following the expiration of five (5) business days after delivery
to Sublessor of a notice with specificity as to Sublessee's intention to
exercise such remedy, but only where Sublessor shall not have effected or
commenced to effect the cure of such default by the expiration of such period,
or, if having so timely commenced cure, shall thereafter fail to diligently
prosecute such cure to completion. Any sums reasonably expended by Sublessee in
so remedying any such default of Sublessor shall be paid to Sublessee by
Sublessor on demand and if not so paid, may be set off by Sublessee against any
rent or additional rent thereafter becoming payable under this Sublease.
-6-
<PAGE> 107
9. Prime Lease: Sublessor represents and warrants that the Prime Lease
is in full force and effect, that fixed annual rent due thereunder which has
been billed through December 31, 1993 has been paid, that the Prime Lease has
not been modified or amended in any way other than as set forth in the Prime
Lease, that to the best of Sublessor's knowledge, there are no existing defaults
thereunder on the part of Sublessor as tenant thereunder, nor has any event
occurred which, with the giving of notice or the passage of time, or both, would
constitute a default thereunder.
10. Indemnification: (a) Sublessee shall not do or permit to be done any
act or thing which will constitute a breach or violation of any of the terms,
covenants, conditions or provisions of this Sublease or an Event of Default
under the Prime Lease (except to the extent caused by an act or omission of
Sublessor or any of its agents, employees, invitees or contractors) and shall
hold harmless, indemnify and defend Sublessor from and against any and all
claims, demands, actions, causes of action, suits, judgments, damages, losses,
liabilities, fines, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) (collectively,
"Liabilities") incurred by Sublessor by reason of any breach by Sublessee of the
foregoing covenant.
(b) Sublessor shall timely perform all of its obligations under the
Prime Lease and shall not do or permit to be done any act or thing which will
constitute a breach or violation of any of the terms, covenants, conditions or
provisions of this Sublease or an Event of Default under the Prime Lease (except
to the extent caused by any act or omission of Sublessee or any of its agents,
employees, invitees or contractors). Sublessor shall hold harmless, indemnify
and defend Sublessee from and against any and all Liabilities incurred by
Sublessee by reason of any breach by Sublessor of the foregoing covenant
including, without limitation, any Liabilities incurred by Sublessee as a result
of a termination of the Prime Lease as a result thereof.
11. Sublessor's Consent: Whenever Sublessor's consent or approval is
required under the provisions of this Sublease, Sublessor's refusal to consent
or approve any matter or thing shall be deemed reasonable if, inter alia, the
Prime Landlord has refused to give such consent or approval if required under
the Prime Lease, Whenever the consent of the Prime Landlord is required,
Sublessor shall promptly transmit Sublessee's request for consent to the Prime
Landlord, Further, provided Sublessee is not in default hereunder after notice
from Sublessor and beyond any applicable grace period, the consent or approval
of Sublessor shall not be required with respect to any matter to which the Prime
Landlord shall have consented unless the action for which such consent is sought
may reasonably be expected to increase Sublessor's obligations or liabilities
under the Prime Lease or this Sublease, and in such latter event, Sublessor's
consent will
-7-
<PAGE> 108
not be withheld if Sublessee delivers to Sublessor its agreement in form and
substance reasonably satisfactory to Sublessor whereby Sublessee indemnifies
Sublessor against the consequences of such increase in Sublessor's obligations
or liabilities, including, without limitation, the reimbursement of any expense
incurred by Sublessor by reason of its performance of such increased obligations
or any loss suffered by reason of such increased liabilities, it being agreed
that Sublessor shall have the right to condition any such consent upon the
provision of security reasonably satisfactory to Sublessor.
12. Amendment of Prime Lease: Sublessor shall neither amend the Prime
Lease nor consent to the amendment thereof if the effect thereof would be an
increase in Sublessee's obligations or liabilities or a decrease in Sublessee's
rights under this Sublease.
13. Covenant of Quiet Enjoyment: Upon observing and performing all the
terms, covenants and conditions hereof on Sublessee's part to be observed and
performed, Sublessee may peaceably and quietly enjoy the Demised Premises
without disturbance by Sublessor or anyone claiming by, through or under
Sublessor, upon and subject to the terms and conditions of this Sublease.
14. Entire Agreement: This Sublease contains the entire agreement
between the parties hereto with respect to the Demised Premises. No agreement
hereafter made between Sublessor and Sublessee shall be effective to change,
modify, waive, release, discharge or terminate this Sublease or any term
thereof, in whole or in part, unless such agreement is in writing and signed by
the party against whom enforcement of the change, modification, waiver, release,
discharge or termination is sought.
15. Notices: Any notice, consent, approval, request, communication,
bill, demand or statement provided under this Sublease to be sent or delivered
by either party to the other party shall be in writing and shall be given by
personal delivery (including, without limitation, recognized overnight delivery
service) with signed receipt therefor, or mailed in a postage envelope,
registered or certified, with return receipt, addressed to such other party, at
the address for such party as set forth on the first page of this Sublease and,
with respect to Sublessor, to the attention of "President." Either party,
however, may designate such new or other address to which such notice shall
thereafter be given, by notice given in accordance with this Article 15. Any
notice to be given under this Sublease shall be deemed given upon receipt, or,
if delivery is refused, on the date deliver is first attempted. Each party shall
promptly deliver to the other party a copy of all notices given by the Prime
Landlord to such party relating to or affecting this Sublease or the Demised
Premises.
-8-
<PAGE> 109
16. Liability Insurance: (a) Each party shall maintain with responsible
companies commercial general liability insurance, naming Prime Landlord as an
additional insured, with contractual liability endorsement against all claims,
demands or actions for injury to or death of any one or more persons, or damage
to property, in an amount of not less than $5,000,000 combined single limit,
arising from, related to or connected with the conduct and operation of such
party's business in the respective portion of the premises demised under the
Prime Lease occupied by such party, or caused by the actions or omissions of
such party, its agents and employees.
(b) A copy of or certificates evidencing each such policy or
policies of insurance shall be delivered to the other party on request. On
Sublessee's default in obtaining or delivering any such policy or policies or
failure to pay the charges therefor, Sublessor may secure or pay the charges for
any such policy or policies and charge the Sublessee as additional rent
therefor.
17. Fire and Extended Coverage Insurance: (a) Each party shall carry
separate fire and extended coverage insurance policies on the respective
portions of the premises demised under the Prime Lease occupied by such party.
However, provided such separate policies are unavailable (or if sublessor shall
have been required, pursuant to the Prime Lease, to carry a fire and extended
coverage insurance policy on its entire demised premises), and a single policy
shall cover Sublessor's entire premises, including the Demised Premises,
Sublessee shall pay the Proportionate Share of Sublessor's premium. Bills for
such share or the premium shall be rendered by Sublessor to Sublessee at such
times as Sublessor may elect together with a copy of the bill from Sublessor's
insurance carrier and shall be due from, and payable by, Sublessee when
rendered, and the amount thereof shall be deemed additional rent under this
Sublease.
(b) Sublessee shall obtain such other insurance, and in such
amounts, as may from time to time be reasonably required by the Prime Landlord,
Sublessor, or any fee mortgagee, against other insurable hazards which at the
time are commonly insured against in the case of premises similarly situated,
due regard being or to be given to the height and type of building, its
construction, use and occupancy.
(C) Each fire and extended coverage insurance policy shall, if
obtainable from the insurer without expense, either contain a provision waiving
subrogation against the other party hereto or include the name of such other
party as an additional insured.
(d) Notwithstanding any provision in this Sublease to the
contrary, neither party shall be liable for damage to the
-9-
<PAGE> 110
other party's property in or constituting a party of the premises demised under
the Prime Lease, regardless of whether or not such damage is due to such party's
negligence, to the extent that such damage is covered by collectible insurance
carried by the other party.
18. Prime Landlord's Consent: The validity of this Sublease is
conditioned upon Sublessor obtaining the written consent of the Prime Landlord
to the terms and conditions hereof (the "Consent"). If such Consent is not
obtained on or before January 31, 1994, this Sublease shall be null and void and
of no further force and effect. Sublessee agrees to cooperate in good faith and
comply with reasonable requests of Sublessor and Prime Landlord in obtaining the
consent. Each party shall pay one-half of all reasonable out-of-pocket costs
that may be incurred by Prime Landlord in connection with the granting of the
Consent, including, without limitation, reasonable attorneys' fees and
disbursements.
19. Non-Disturbance Agreement: Sublessor has requested Prime Landlord to
execute and deliver to Sublessee an agreement on or before the commencement of
the Term providing that so long as Sublessee is not in default under this
Sublease after the giving of notice thereof and the expiration of the applicable
grace or cure period provided hereunder, Sublessee shall be permitted to remain
in undisturbed possession, use and enjoyment of the Demised Premises,
notwithstanding any default by Sublessor under the Prime Lease or any
termination of the Prime Lease on account thereof by Prime Landlord or for any
other reason specified in such agreement, it being agreed that Sublessor shall
have no obligation to expend any monies in order to obtain any such agreement
and that failure to obtain such agreement despite Sublessor's request therefor
shall not diminish any of Sublessee's obligations under this Agreement.
20. Unavoidable Delays: If either party hereto shall be delayed or
hindered in or prevented from the performance of any act required under this
Sublease by reason of strikes, lockouts, labor troubles, inability to procure
materials, failure of power, governmental laws or regulations, riots,
insurrection, war or other reason of a like nature not the fault of the party
delayed, then performance of such act shall be excused for the period of the
delay and the period for the performance of any such act shall be extended for a
period equivalent to the period of such delay. The provisions of this Article 20
shall not operate to excuse Sublessee from prompt payment of fixed annual rent
(if any) or any other payments (if any) required under the terms of this
Sublease.
21. Captions: The captions and article and section numbers appearing in
this Sublease are inserted only as a matter of convenience and in no way define,
limit, construe, or describe
-10-
<PAGE> 111
the scope or intent of such sections or articles or this Sublease nor in any way
affect this Sublease.
22. Brokers: Each party represents to the other that it has dealt with
no broker or finder in connection with this Sublease and shall hold harmless,
indemnify and defend the other party from and against any and all Liabilities
incurred by such party as a breach of the foregoing representation.
23. Surrender Option: The parties acknowledge that, pursuant to Section
1.05 of the Prime Lease, Sublessor has the right to surrender all or a portion
of the Demised Premises on either (i) the sixth anniversary of the Rent
Commencement Date of the Prime Lease (for purposes hereof the "First Surrender
Option") or (ii) the eighth anniversary of the Rent Commencement Date of the
Prime Lease (for purposes hereof the "Second Surrender Option"). Sublessor and
Sublessee hereby covenant and agree that neither shall exercise the First
Surrender Option in any respect at Any time during the term of this Sublease,
and each hereby waives such right. Except as hereafter provided, Sublessee shall
have the same right to exercise the Second Surrender Option and thereby
surrender all or any portion of the Demised Premises (and be released from all
further liability in connection therewith) as Sublessor does to surrender all or
any portion of the premises leased under the Prime Lease pursuant to Section
1.05 of the Prime Lease, effective as of the Second Surrender Date (as defined
in the Prime Lease) as set forth in the Prime Lease and otherwise on the terms
and conditions as set forth in Section 1.05 of the Prime Lease. If either
Sublessor or Sublessee shall exercise its rights of surrender with respect to
the Second Surrender Option accordance with Section 1.05 of the Prime Lease (in
the case of sublessee as such Section is modified hereby), this Sublease shall
terminate on and as of the effective date of such surrender, provided, however,
that only Sublessee, and not Sublessor, may elect (subject to the provisions of
Paragraph 1.05 of the Prime Lease) to surrender a portion of the Demised
Premises. Notwithstanding anything to the contrary set forth in this Sublease,
Sublessor shall incur no liability to Sublessee arising from or in connection
with the exercise by Sublessor of its right under the Prime Lease to surrender
the Demised Premises to the Prime Landlord, provided Sublessor shall have
exercised such right in accordance with the applicable provisions of the
preceding sentence. In addition, and notwithstanding anything to the contrary
contained in Section l(c) of this Sublease, Sublessee must deliver notice of its
election to exercise the Second Surrender Option, no less than sixty (60) days
before the date by which Sublessor is required to deliver the corresponding
notice to Sublessor; it being agreed that, time shall be of the essence with
respect to the delivery by Sublessee of such notice, and Sublessee's failure to
deliver such notice in a timely manner shall vitiate Sublessee's right to
exercise such surrender option.
-11-
<PAGE> 112
24. Prime Lease Modifications: The following provisions of the Prime
Lease (having no relationship to the terms and conditions of this Sublease, or
inconsistent with the agreements and understandings expressed in this Sublease
or applicable only to the original parties to the Prime Lease) shall be deemed
deleted and shall not apply to this Sublease: Sections 1.01(a), 1.01(b), 1.03,
1.04, 2.01, 2.02, 3.01, 4.01, 4.03(a), the first three sentences of 11.01(d),
the fifth sentence of 15.01, 15.O2, 2l.0l, 23.01, clauses (iii)-(vi), inclusive,
of 24.01, 26.01, 27.02 and 27.03. In addition, Sublessee hereby acknowledges and
agrees that (i) those certain letters from Prime Landlord to Sublessor, dated
May 21, 1992 and June 22, 1992, referring to "Agreement to Permit Rent Offsets
or to Make Monthly Payments" (collectively, the "Offset Letters") shall not be
deemed to have been incorporated into this Sublease; (ii) Sublessee shall have
no right to receive any of the offsets or other benefits accruing under the
Offset Letters and (iii) Sublessor shall be solely entitled to all offsets and
other benefits accruing under the Offset Letters. The last sentence of the last
paragraph of Section 4.02(b) shall be modified for purposes of incorporation
into this Sublease such that Sublessee shall be entitled to receive interest on
any excess payment of its Proportionate Share of any increase in Expenses only
if Sublessor receives such interest from the Prime Landlord.
25. Parking. Sublessee shall be entitled to use of the Proportionate
Share of the non-designated and designated parking spaces to which sublessee is
entitled pursuant to the provisions of Section 6.01 of the Prime Lease.
Sublessee may (subject to the provisions of Section 6.01 of the Prime Lease)
continue to use the specific designated spaces uses by employees of JWP
Information Services, Inc. on the date hereof.
26. Assignment or Subletting. Sublessee shall not be permitted to assign
its interests in this Lease or sublet all or any portion of the Demised Premises
except in strict accordance with the terms and conditions of Article XVI of the
Prime Lease(as incorporated in the Sublease pursuant to Section 1 (a) hereof).
All assignments and subletting shall require the written consent of both
Sublessor and the Prime Landlord, except that those referred to in Section
16.01(d) of the Prime Lease shall require the consent of Prime Landlord but not
of Sublessor. Assignments and subletting (including, without limitation, those
referred to in Section 16.01(d) of the Prime Lease) shall be effected in strict
accordance with the terms and conditions of Article XVI of the Prime Lease.
27. Severability: If any term, covenant or condition of this Sublease or
the application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Sublease or the application of
such term, covenant or condition to persons or circumstances other than those
-12-
<PAGE> 113
as to which it is held invalid or unenforceable shall not be affected thereby
and each term, covenant or condition of this Sublease shall be valid and be
enforced to the fullest extent permitted by law.
28. No Recording: Sublessee shall not record this Sublease without the
written consent of Sublessor.
29. Successors and Assigns: This Sublease shall bind and accrue to the
benefit of Sublessor and Sublessee and their respective successors and permitted
assigns.
30. Computer and Switching Rooms: During the term of this Sublease,
Sublessee shall be permitted non-exclusive access to the computer and switching
rooms presently located on the first floor of the Building for the purpose of
using the equipment therein with respect to Sublessee's operations. Sublessor
shall properly insure, maintain, repair and replace all equipment (other than
equipment which is "dedicated" to a particular entity in the Building other than
Sublessor, with respect to which equipment Sublessor shall have no
responsibility whatsoever) in such rooms and Sublessee shall pay its
Proportionate Share of the reasonable cost thereof promptly upon receipt of
statements thereof from Sublessor, together with substantiating invoices or
receipts.
31. Removal of Fixtures: At the expiration or earlier termination of the
term of this Sublease, provided Sublessee shall not then be in default under
this Sublease after notice thereof from Sublessor and the expiration of the
applicable grace or cure period provided under this Sublease, subject to the
provisions of the Prime Lease, Sublessee shall be permitted to remove its
fixtures and equipment which may be removed without causing significant damage
to the Demised Premises (and Sublessee shall repair any damage caused thereby).
32. Security Deposit: (a) Sublessee has deposited with Sublessor the sum
of $37,036 as security for the faithful performance and observance by Sublessee
of the terms, covenants and conditions of the Sublease. It is agreed that in the
event Sublessee defaults in respect of any of the terms, covenants and
conditions of this Sublease after the expiration of any applicable notice, grace
or cure period, including, but not limited to, the payment of rent and
additional rent, Sublessor may, but shall not be obligated to, use, apply, or
retain the whole or any part of the security so deposited to the extent required
for payment of any rent and additional rent or any other sum as to which
Sublessee is in default or for any sum which Sublessor may expend or may be
required to expend by reason of Sublessee's default, including but not limited
to, any damages or deficiency in reletting of the Demised Premises, whether such
damages or deficiency accrued before or after summary proceedings or other
reentry by Sublessor. Sublessee shall, upon demand, deposit with
-13-
<PAGE> 114
Sublessor the full amount so used, in order that Sublessor shall have the full
security deposit on hand at all times during the term of this Sublease.
Sublessor may permit Prime Landlord to hold said security as
custodian and provide for a contingent assignment of same in the event of
Sublessor's default under the Prime Lease and an attornment by Prime Landlord to
Sublessor, or of Sublessor's rights to the security in the event of default by
Sublessee under the Sublease.
In the event that Sublessee shall fully and faithfully comply
with all of the terms, covenants and conditions of this Sublease, the security
shall be returned to Sublessee after the date fixed as the end of the Sublease
and after delivery of entire possession of the Demised Premises to Sublessor.
In the event of a transfer or assignment of this Sublease,
Sublessor shall have the right to transfer the security to the transferee or
assignee and Sublessor shall thereupon be released by Sublessee from all
liability for the return of such security; and Sublessee agrees to look to the
new Sublessor for the return of said security; and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Sublessor.
Sublessee further covenants that it will not assign or encumber,
or attempt to assign or encumber, moneys deposited herein as security, and that
neither Sublessor nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.
(b) Anything hereinabove to the contrary notwithstanding, and
supplementing Subparagraph (a) hereof, Sublessee, instead of depositing cash
with Sublessor as security deposit hereunder, may elect to substitute therefor
and deliver to Sublessor, as and for a security deposit, an unconditional,
irrevocable commercial Letter of Credit, negotiable, (hereinafter called "the
Credit"), to be held and used under the security deposit provisions of this
Sublease, which Credit shall be issued by a bank which is a member of the New
York Clearing House Association, in the amount of $37,036, naming Sublessor (or
its successor as Sublessor) as beneficiary and authorizing the beneficiary to
draw on the bank in said amount or any portion thereof, available by the
beneficiary's sight draft, without presentation of any other documents,
statements or authorizations. The Credit shall have a term of at least twelve
(12) months, and it shall by its terms be renewed, automatically, each year, by
the bank, unless the bank gives written notice to the beneficiary, at least
forty-five (45) days prior to the expiration date of the then existing Credit
that the bank elects that it not be renewed. The Credit shall be transferable
and Sublessee agrees that it
-14-
<PAGE> 115
shall pay to Sublessor any transfer fees imposed by the bank. The bank shall
further agree with drawers, endorsers, and all bona fide holders that drafts
drawn under and in compliance with the terms of the Credit will be duly honored
upon presentation to the bank at its main office located in New York, New York.
The Credit shall be subject to the Uniform Customs and Practice for Documentary
Credits (1983 Revision) International Chamber of Commerce Publication No. 400.
If during the term of this Sublease the Credit and/or the
proceeds of all or part of said Credit become less than the full amount of the
security deposit hereinabove required, then and in such event Sublessee shall,
upon demand, deposit with Sublessee the amount of any security deposit/Credit
theretofore used or applied by Sublessor pursuant to the terms hereof in order
that Sublessor shall have the full security deposit on hand at all times during
the term of this Sublease. If at the expiration of the term of this Sublease,
Sublessor holds all or part of said Credit, and Sublessee is not in default
under any of the terms, covenants and conditions of this Sublease, then
Sublessor will promptly turn over said Credit to Sublessee or assign it to the
designee of Sublessee.
It shall be the obligation of Sublessee during the term of this
Sublease to deliver to Sublessor at least forty (40) days prior to the
expiration date of the then existing Credit, a renewal or extension of said
Credit or a substitute Credit (each fully complying with the foregoing). If for
any reason Sublessor has not received such renewal or extension or substitute
Credit within thirty (30) days prior to the expiration date of the then existing
Credit, then and in such event Sublessor shall be free to draw on the Credit and
hold and use and apply the proceeds thereof in accordance with the security
deposit provisions of this Lease. In the event Sublessor so draws upon the
Credit it shall be entitled to reimbursement for any attorneys' fees incurred in
connection therewith.
33. Telephone, Security, Etc. Sublessor and Sublessee agree that
telephone, security, voice mail and TABS System services shall be provided, paid
and otherwise treated in accordance with the terms described on Exhibit B
hereto.
34. Old Sublease. Sublessor and Sublessee have heretofore entered into
a Sublease, dated as of August 6. 1993, with respect to the Demised Premises
(the "Old Sublease"). Sublessor and Sublessee hereby agree that the old Sublease
shall govern the relationship of the Sublessor and Sublessee to the Demised
Premises only with respect to the period commencing on August 6. 1993 and
expiring on December 31, 1993, and shall not apply to any period occurring
subsequent to December 31, 1993. This Sublease shall govern the relationship of
the Sublessor and Sublessee to
-15-
<PAGE> 116
the Demised Premises with respect to all periods occurring subsequent to
December 31, 1993.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease as of
the day and year first above written.
Sublessor:
JWP, INC.
By: /s/ [SIGNATURE ILLEGIBLE]
------------------------------
Name:
Title: SR VP
Sublessee:
ENTEX INFORMATION SERVICES, INC.
By: /s/ SIGNATURE ILLEGIBLE
------------------------------
Name:
Title: EVP
-16-
<PAGE> 117
Exhibit A
Demised Premises
----------------
(NOT SHOWN)
-17-
<PAGE> 118
Exhibit B
---------
1. Telephone
---------
Sublessee understands that it is sharing the resources of the existing Lexar PBX
as a "tenant" on that system. Sublessor has allocated a separate partition for
lease by Sublessee. The costs of any additions, moves, or changes by PBX Vendor
requested by Sublessee to be performed by Sublessor's administrator shall be
paid by Sublessee in accordance with Section 5 hereof. Sublessor will use
reasonable commercial efforts to maintain the PBX in good working condition and
agrees to have a maintenance contract in effect with the PBX vendor or other
qualified source during the Term of this Sublease and Sublessee will pay its
Proportionate Share (as defined in the Sublease to which this Schedule is
attached) of said maintenance agreement. Sublessee agrees to use the services of
Sublessor's maintenance vendor and will not otherwise modify or access equipment
under said maintenance agreement.
2. Security
--------
Sublessee understands that it is sharing the resources of the existing Access
Security system. Sublessor will furnish initial and/or replacement access
security cards at cost. In the event of a breach of security, Sublessor will
provide reasonable access to video tapes and audit logs. Sublessor will use
reasonable commercial efforts to maintain the access security system in good
working condition and agrees to have a maintenance contract in effect with the
security system vendor or other qualified source during the term of this
Sublease and Sublessee will pay its Proportionate Share of said maintenance
agreement. Sublessee agrees to use the services of Sublessor's maintenance
vendor and will not otherwise modify or access equipment under said maintenance
agreement. The costs of any additions, moves or changes requested by Sublessee
are to be performed by Sublessor's Administrator and shall be paid by Sublessee
in accordance with Section 5 hereof.
3. Voice Mail
----------
Sublessee understands that it is sharing the resources of the existing VMX Voice
Mail System ("VMX"). Sublessor will use reasonable commercial efforts to
maintain the VMX in good working condition and agrees to have a maintenance
contract in effect with VMX or other qualified source during the Term of this
Sublease and Sublessee will pay its Proportionate Share of said maintenance
agreement. Sublessee agrees to use the services of Sublessor's maintenance
vendor and will not otherwise modify or access equipment under said maintenance
agreement. The costs of any additions, moves or changes requested by Sublessee
are to be performed by Sublessor's Administrator and shall be paid by Sublessee
in accordance with Section 5 hereof.
<PAGE> 119
4. TABS System (Telephone, Accounting & Billing System)
----------------------------------------------------
Sublessee understands that it is sharing the resources of the existing TABS
Systems. Sublessor will use reasonable commercial efforts to maintain the TABS
System in good working condition and agrees to have a maintenance contract in
effect with New Castle Communications or other qualified source during the Term
of this Sublease and Sublessee will pay its Proportionate Share of said
maintenance agreement. Sublessee agrees to use the services of Sublessor's
maintenance vendor and will not otherwise modify or access equipment under said
maintenance agreement. The costs of any additions, moves or changes requested by
Sublessee are to be performed by Sublessor's Administrator and shall be paid by
Sublessee in accordance with Section 5 hereof.
5. Price Schedule
--------------
a. Telephone
---------
Lexar 21 Button Phone $ 203.63 *
Lexar 37 Button Phone $ 229.45 *
Speaker Module $ 57.93 *
Current Vendor Hourly Rate $ 68.50
OT Rate $ 102.75
Sublessor Administrator $ 40.00/hour
(or any portion thereof)
b. Access Security System
----------------------
Access Cards $ 15.00/each
Sublessor Administrator $ 40.00/hour
(or any portion thereof)
c. VMX
---
Sublessor Administrator $ 40.00/hour
(or any portion thereof)
* Sublessor's discounted prices from third parties, which are subject
to change from time to time. Sublessee to be billed therefor by
Sublessor at Sublessor's cost.
Sublessor shall provide Sublessee with a copy of all existing maintenance
contracts.
-19-
<PAGE> 1
Exhibit 10.16
OFFICE LEASE
THIS LEASE, made this 31st day of December, 1996, by and between DUKE
REALTY LIMITED PARTNERSHIP, an Indiana limited partnership ("Landlord"), and
ENTEX INFORMATION SERVICES, INC., a Delaware corporation ("Tenant").
W I T N E S S E T H:
--------------------
ARTICLE 1 - LEASE OF PREMISES
Section 1.01. Lease of Premises. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord, subject to all of the terms and conditions
hereinafter set forth, office space in the office building described below which
is commonly known as 4605 Duke Drive in Warren County, Ohio (the Building") for
the term hereinafter specified. The space in the Building hereby leased to
Tenant is set forth in Item A of the Basic Lease Provisions and is outlined in
red on Exhibit A attached hereto (the "Leased Premises"). Elevators, if any,
shall not be leased to Tenant and shall remain under Landlord's control.
Landlord reserves the right to alter any portion of the Building not included
within the Leased Premises; provided, however, Tenant's access to the Leased
Premises shall not be materially impaired.
Section 1.02. Basic Lease Provisions. The following constitute the "Basic Lease
Provisions" of this Lease:
A. Building Name: 4605 Duke Drive, Suite: 300
Address: 4605 Duke Drive, Mason, Ohio 45040;
B. Rentable Area: approximately 20,036 rentable square feet;
Landlord shall use BOMA usable standards plus sixteen percent (16%) loss
factor, consistently applied, in determining the Rentable Area and the
rentable area of the Building. The Rentable Area shall include the area
within the Leased Premises plus a pro rata portion of the area covered
by the common areas within the Building, as reasonably determined by
Landlord (applying BOMA usable standards plus sixteen percent (16%) loss
factor). Landlord's determination of Rentable Area made in good faith
shall conclusively be deemed correct for all purposes hereunder,
including without limitation the calculation of Tenant's Building
Expense Percentage and Tenant's Minimum Annual Rent. Landlord's
measurement of the Rentable Area of Tenant shall be subject to field
verification by Tenant or its designated representative.
C. Building Expense Percentage: 11.42% (Rentable Area of Tenant/20,036
rentable square feet divided by Rentable Area of Building/175,485
rentable square feet);
<PAGE> 2
D. Minimum Annual Rent:
<TABLE>
<S> <C>
January 1, 1997 - February 28, 1997 (months 1-2) $ 0.00
March 1, 1997 - December 31, 1997 (months 3-12) $205,369.00
January 1, 1998 - December 31, 1998 $246,442.80
January 1, 1999 - December 31, 1999 $246,442.80
January l, 2000 - December 31, 2000 $246,442.80
January 1, 2001 - December 31, 2001 $246,442.80
January 1, 2002 - December 31, 2002 $266,478.84
January l, 2003 - December 31, 2003 $266,478.84
January 1, 2004 - December 31, 2004 $266,478.84
January 1, 2005 - June 30, 2005 (months 1-6) $133,239.42
July 1, 2005 - July 17, 2005 (17 days) $ 12,177.78;
</TABLE>
E. Monthly Rental Installments:
<TABLE>
<S> <C>
January 1, 1997 - February 28, 1997 $ 0.00
March 1, 1997 - December 31, 2000 $ 20,536.90
January 1, 2001 - June 30, 2005 $ 22,206.57
July 1, 2005 - July 17, 2005 $ 12,177.78;
</TABLE>
F. Lease Term: Eight (8) years, six (6) months and seventeen (17) days;
G. Commencement Date: January 1, 1997;
H. Security Deposit: None;
I. Broker(s): Duke Realty Limited Partnership, representing Landlord and
Cincinnati Commercial Realtors representing Tenant;
J. Permitted Use: General office purposes including by way of illustration
but not for limitation, computer service and repair, parts storage,
training, telemarketing, computer operations and related activities;
K. Address for payments and notices as follows:
Landlord: Duke Realty Limited Partnership
4555 Lake Forest Drive, Suite 400
Cincinnati, OH 45242
with Rental
Payments to: Duke Realty Limited Partnership
P.O. Box 960664
Cincinnati, OH 45296-0664
Tenant: Entex Information Services, Inc.
4605 Duke Drive, Suite 300
Mason, OH 45040
With a Copy to: ENTEX
6 International Drive
Rye Brook, NY 10573
Attn: General Counsel
ARTICLE 2 - TERM AND POSSESSION
Section 2.01. Lease Term. The term of this Lease shall be the period of time
specified in Item F of the Basic Lease Provisions ("Lease Term") and shall
commence on the Commencement Date as provided in Item G of the Basic Lease
Provisions. The date of commencement as defined above, hereinafter called the
"Commencement Date," and the "Expiration Date" shall be confirmed by Tenant as
provided in Section 2.03.
<PAGE> 3
Section 2.02. Construction of Tenant Finish Improvements and Possession.
Landlord shall provide an allowance for the direct costs of tenant finish
improvements to the Leased Premises in the amount of Sixty Thousand Dollars
($60,000.00) (the "Allowance"). The Allowance shall be used exclusively to
construct and pay for the tenant finish improvements that are directly related
to the construction of the Leased Premises, excluding the cost of running
conduit between the Building and 4705 Duke Drive, Mason, Ohio in order to
connect Tenant's data rooms which will be paid by the Landlord and completed by
January 1, 1997. Any unused portion of the Allowance shall be used to reimburse
Tenant's actual moving costs incurred in moving to the Leased Premises or upon
Tenant's option to apply to Tenant's rental obligations under this Lease. Tenant
shall provide Landlord with invoices and evidence of payment for any moving
costs Tenant requests reimbursement. Landlord shall reimburse Tenant based upon
such invoices to the extent of the Allowance. Tenant shall reimburse Landlord
for any cost or expense attributable to the tenant finish improvements which
exceed the Allowance no later than thirty (30) days after receipt of an invoice
from Landlord for such costs or expenses. Landlord shall provide space planning
services and engineering and permit drawings at no cost to Tenant nor as a
deduction of the Allowance. Landlord agrees to perform and complete the work on
the tenant finish improvements in the Leased Premises in a good and workmanlike
manner in accordance with all applicable building codes and regulations.
Landlord shall give advance written notice of the day on which the tenant finish
improvements shall be substantially completed and in a condition generally to
allow for the intended use of the Leased Premises by Tenant. From and after
receipt of said notice or earlier with the consent of Landlord, Tenant shall
have the right and privilege of going onto the Leased Premises in compliance
with the terms of Section 7.03 to complete interior decoration work and to
prepare the Leased Premises for its occupancy, provided, however, that its
schedule in so doing shall be communicated to Landlord and the approval of
Landlord secured so as not to interfere with other work of Landlord being
carried on at the time; and provided further that Landlord shall have no
responsibility or liability whatsoever for any loss or damage to any of Tenant's
leasehold improvements, fixtures, equipment or any other materials installed or
left in the Leased Premises prior to the Commencement Date.
Landlord hereby warrants the Leased Premises against defects in materials and
workmanship for a period of one (1) year from the Commencement Date, routine
maintenance (except as to Landlord's obligations under Article 7 herein) and
ordinary wear and tear excepted. Upon final completion of the Leased Premises,
Landlord shall deliver to Tenant copies of all warranties and guarantees
relating to the Leased Premises and any and all systems contained therein. To
the extent not so permitted, Landlord shall afford to Tenant the benefit of a
right to enforce the same in Landlord's name. Tenant shall not take any action
which shall invalidate any of the foregoing warranties or guarantees.
Section 2.03. Tenant's Acceptance of the Leased Premises. Upon delivery of
possession of the Leased Premises to Tenant as hereinbefore provided, Tenant
shall execute a letter of understanding acknowledging (i) the Commencement Date
and Expiration Date of this Lease, and (ii) that Tenant has accepted the Leased
Premises for occupancy and that the condition of the Leased Premises, including
the tenant finish improvements constructed thereon and the Building was at the
time satisfactory and in conformity with the provisions of this Lease in all
respects, except for any punchlist items to which
<PAGE> 4
Tenant shall give written notice to Landlord within thirty (30) days after such
delivery. Landlord shall promptly thereafter correct all such punchlist items.
Such letter of understanding shall become a part of this Lease. If Tenant takes
possession of and occupies the Leased Premises, Tenant shall be deemed to have
accepted the Leased Premises in the manner described in this Section 2.03, even
though the letter of understanding provided for herein may not have been
executed by Tenant.
Section 2.04. Surrender of the Premises. Upon the expiration or earlier
termination of this Lease, or upon the exercise by Landlord of its right to
re-enter the Leased Premises without terminating this Lease, Tenant shall
immediately surrender the Leased Premises to Landlord, together with all
alterations, improvements and other property as provided elsewhere herein, in
broom-clean condition and in good order, condition and repair, except for
ordinary wear and tear and damage which Tenant is not obligated under the terms
of this Lease to repair, failing which Landlord may restore the Leased Premises
to such condition at Tenant's expense. Tenant shall remove any installations
made by Tenant and repair any damage caused by such removal.
Section 2.05. Holding Over. If Tenant holds over after the expiration or earlier
termination of this Lease with the consent of Landlord, Tenant shall become a
tenant from month-to-month at rental equal to one hundred twenty-five percent
(125)% of the Minimum Rent and Annual Rental Adjustment described in Article 3
hereof, and otherwise upon the terms, covenants and conditions herein specified,
so far as applicable and upon such other and different terms and conditions as
Landlord may from time to time so notify Tenant. Acceptance by Landlord of rent
after such expiration or earlier termination shall not result in a renewal of
this Lease. Notwithstanding the foregoing provision, no holding over by Tenant
shall operate to extend this Lease, and Tenant shall vacate and surrender the
Leased Premises to Landlord upon Tenant's being given thirty (30) days prior
written notice from Landlord to vacate. The foregoing provisions of this Section
2.05 are in addition to and do not affect Landlord's right of re-entry or any
other rights of Landlord hereunder or as otherwise provided by law.
ARTICLE 3 - RENT
Section 3.01. Minimum Rent. Tenant shall pay to Landlord as Minimum Annual Rent
for the Leased Premises the sum specified in Item D of the Basic Lease
Provisions, payable in equal consecutive Monthly Rental Installments as
specified in Item E of the Basic Lease Provisions, in advance, without demand,
deduction, counterclaim or offset, and without relief from valuation and
appraisement laws, on or before the first day of each and every calendar month
during the term of this Lease; provided, however, that if the Commencement Date
shall be a day other than the first day of a calendar month or the Expiration
Date shall be a day other than the last day of a calendar month, the Monthly
Rental Installment for such first or last fractional month shall be prorated on
the basis of the number of days during the month this Lease was in effect in
relation to the total number of days in such month.
Section 3.02. Annual Rental Adjustment.
A. Definitions. For purposes of this Section 3.02, the following
definitions shall apply:
1. "Annual Rental Adjustment" - shall mean the amount of Tenant's
Proportionate Share of Operating Expenses for a particular calendar year.
<PAGE> 5
2. "Operating Expenses" - shall mean the amount of all of Landlord's direct
costs and expenses paid or incurred in operating, maintaining and
managing the Building and Common Areas (as defined in Section 18.03) for
a particular calendar year as determined by Landlord in accordance with
generally accepted accounting principles, consistently applied,
including all additional direct costs and expenses of operation and
maintenance of the Building which Landlord reasonably determines that it
would have paid or incurred during such year if the Building had been
fully occupied, including by way of illustration and not limitation: all
general real estate taxes and all special assessments levied against the
Building and the land associated therewith (hereinafter called "real
estate taxes"), other than penalties for late payment; costs and
expenses of contesting the validity or amount of real estate taxes;
insurance premiums; water, sewer, electrical and other utility charges
other than the separately billed electrical and other charges paid by
Tenant as provided in this Lease; service and other charges incurred in
the operation and maintenance of the elevators and the heating,
ventilation and air-conditioning system; cleaning and other janitorial
services; tools and supplies; repair costs; landscape maintenance costs
and security services; license, permit and inspection fees; management
fees; wages and related employee benefits payable for the maintenance
and operation of the Building; amortization of the costs, including
interest at the rate per annum quoted and announced from time to time by
Bank One, Cincinnati, N.A., Ohio as its "prime" rate (the "Prime Rate"),
of capital improvements that produce a reduction in operating costs (but
only to the extent of the actual savings realized) or are required to be
made under any governmental law or regulation which was not applicable
to the Building upon the execution date of this Lease; and in general
all other costs and expenses which would, under generally accepted
accounting principles, be regarded as operating and maintenance costs
and expenses. All capital improvements or replacements allowed herein
shall be amortized using the longest life permitted under the Internal
Revenue Code. For purposes herein, operating Expenses charged to Tenant
for the calendar year 1997 will not exceed $6.00 per rentable square
foot.
For subsequent years, or partial years, Controllable Operating Expenses
(defined as all Operating Expenses other than real estate taxes,
insurance, utility charges and snow and ice removal charges) shall not
exceed the amount which would have been charged for Controllable
Operating Expenses in calendar year 1997 had the Building been 100%
occupied for the entire year plus an escalation figure to reflect actual
increases in such Controllable Operating Expenses, which escalation
figure shall not exceed 5% per year compounded annually. For example, if
actual Controllable Operating Expenses increase only 3% in the first
year of the term, the Landlord's Estimate of Operating Expenses would
increase from $6.00 per square foot to $6.18 per square foot in year
two. If actual Controllable Operating Expenses then increased by 10% in
the second year of the term, the Landlord's Estimate of Operating
Expenses would increase from $6.00 per square foot to $6.615 per square
foot ($6.00 per sq.
<PAGE> 6
ft. 1st yr. times a cumulative, compounded 10.25% = $6.615). Landlord's
estimate of Operating Expenses for calendar year 1997 of $6.00 per
square foot is based upon an assumed full occupancy of the Building for
an entire calendar year.
For purposes herein, Operating Expenses shall not include the following
fees, costs and expenses:
a. Capital expenditures or replacements, except as expressly allowed
herein;
b. Management Fees exceeding 15% of the grossed-up Operating Expenses
for the Building;
c. Wages and benefits for employees of Landlord or an affiliate of
Landlord except to the extent an employees' services are performed with
respect to the Building;
d. Environmental remediation; and
e. Wages or benefits of the Building's property management personnel or
Landlord's principal office overhead.
For purposes herein, Landlord agrees to pay real estate taxes and any
special assessments over the longest period permitted by the applicable
taxing authority.
3. "Building Expense Percentage" - shall mean the percentage specified
in Item C of the Basic Lease Provisions. This percentage was determined
by dividing the Rentable Area in the Leased Premises as specified in
Item B of the Basic Lease Provisions by the total rentable area in the
Building.
4. "Tenant's Proportionate Share of Operating Expenses" - shall be an
amount equal to the product of Tenant's Building Expense Percentage as
provided in Item C of the Basic Lease Provisions times the Operating
Expenses.
B. Payment Obligation. In addition to the Minimum Annual Rent specified in
this Lease, Tenant shall pay to Landlord as additional rent for the
Leased Premises in each calendar year or partial calendar year during
the term of this Lease, an amount equal to Tenant's Proportionate Share
of Operating Expenses for such calendar year.
1. Payment of Tenant's Proportionate Share of Operating Expenses -
The Annual Rental Adjustment shall be estimated annually by
Landlord, and written notice thereof shall be given to Tenant at
least thirty (30) days prior to the beginning of each calendar
year. In the case of the calendar year in which the Lease Term
commences, written notice of the estimated Operating Expenses
shall be given Tenant prior to the Commencement Date. Tenant
shall pay to Landlord each month, at the same time the Monthly
Rental Installment is due, an amount equal to one-twelfth (1/12)
of the estimated Annual Rental Adjustment.
2. Adjustment to Actual Annual Rental Adjustment - Within ninety
(90) days after the end of each calendar year, Landlord shall
prepare and deliver to Tenant a statement showing Tenant's
actual Annual Rental Adjustment.
<PAGE> 7
Within thirty (30) days after receipt of the aforementioned
statement, Tenant shall pay to Landlord, or Landlord shall
credit against the next rent payment or payments due from
Tenant, as the case may be, the difference between Tenant's
actual Annual Rental Adjustment for the preceding calendar year
and the estimated amount paid by Tenant during such year. If
this Lease shall commence, expire or be terminated on any date
other than the last day of a calendar year, then Tenant's
Proportionate Share of Operating Expenses for such partial
calendar year shall be prorated on the basis of the number of
days during the year this Lease was in effect in relation to the
total number of days in such year.
3. Tenant Verification - Tenant or its accountants shall have the
right to inspect, at reasonable times and in a reasonable
manner, during the ninety (90) day period following the delivery
of Landlord's statement of the actual amount of Tenant's Annual
Rental Adjustment, such of Landlord's books of account and
records as pertain to and contain information concerning the
Operating Expenses in order to verify the amounts thereof. In
the event that an audit by Tenant reveals an error by Landlord
of more than five percent (5%) in the aggregate, Landlord shall
reimburse Tenant the reasonable cost of the audit, not to exceed
Two Thousand Five Hundred Dollars and 00/100 ($2,500.00).
Section 3.03. INTENTIONALLY OMITTED.
Section 3.04. Late Charges. Tenant acknowledges that late payments by Tenant to
Landlord of Minimum Rent and all other amounts provided to be paid hereunder
shall cause Landlord to incur costs not contemplated by this Lease, the exact
amount of which are extremely difficult and impractical to determine. Such costs
include, without limitation, processing and accounting charges and late charges
that may be imposed on Landlord by the terms of any encumbrances and notes
secured by any encumbrances covering the Leased Premises, or late charges and
penalties by virtue of late payments of taxes due on the Leased Premises.
Therefore, if any installment of Minimum Rent or any other amount due from
Tenant is not received by Landlord within ten (10) days of the date due, Tenant
shall pay to Landlord an additional sum of ten percent (10%) of the amount due
as a late charge. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of the late
payment by Tenant. Acceptance of any late charge shall not constitute a waiver
of Tenant's default with respect to the overdue amount, nor prevent Landlord
from exercising any of the other rights and remedies available to Landlord. In
addition, in the event Tenant fails to pay within thirty (30) days after the
same is due and payable any installment of Minimum Annual Rent or any other sum
or charge required to be paid by Tenant to Landlord under this Lease, such
unpaid amount shall bear interest from the due date thereof to the date of
payment at the rate of fourteen percent (14%) per annum until paid.
ARTICLE 4 - SECURITY DEPOSIT - INTENTIONALLY OMITTED.
ARTICLE 5 - OCCUPANCY AND USE
Section 5.01. Occupancy. Tenant shall use and occupy the Leased Premises for the
purposes set forth in Item J of the Basic Lease Provisions and shall not use the
Leased Premises for
<PAGE> 8
any other purpose except with the prior written consent of Landlord.
Section 5.02. Covenants of Tenant Regarding Use. In connection with its use of
the Leased Premises, Tenant agrees to do the following:
A. Tenant shall (i) use and maintain the Leased Premises and conduct its
business thereon in a safe, careful, reputable and lawful manner, (ii)
comply with all laws, rules, regulations, orders, ordinances, directions
and requirements of any governmental authority or agency, now in force
or which may hereafter be in force, including without limitation those
which shall impose upon Landlord or Tenant any duty with respect to or
triggered by a change in the use or occupation of, or any improvement or
alteration to, the Leased Premises, (iii) comply with and obey all
reasonable directions of the Landlord, including the Building Rules and
Regulations attached hereto as Exhibit C and as may be modified from
time to time by Landlord on reasonable notice to Tenant.
B. Tenant shall not (i) use the Leased Premises for any unlawful purpose or
act, (ii) commit or permit any waste or damage to the Leased Premises,
or (iii) do or permit anything to be done in or about the Leased
Premises which constitutes a nuisance or which will in any way obstruct
or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them. Landlord shall not be responsible to
Tenant for the nonperformance by any other tenant or occupant of the
Building of any of the Building Rules and Regulations, but agrees to
take reasonable measures to assure such other Tenant's compliance.
C. Tenant shall not overload the floors of the Leased Premises beyond their
designed weight-bearing capacity which Landlord has determined to be
eighty (80) pounds per square foot live load, including an allowance for
partition loading. Landlord reserves the right to direct the positioning
of all heavy equipment, furniture and fixtures which Tenant desires to
place in the Leased Premises so as to distribute properly the weight
thereof, and to require the removal of any equipment or furniture which
exceeds the weight limit specified herein.
D. Tenant shall not use the Leased Premises, or allow the Leased Premises
to be used, for any purpose or in any manner which would, in Landlord's
opinion, invalidate any policy of insurance now or hereafter carried on
the Building or increase the rate of premiums payable on any such
insurance policy. Should Tenant fail to comply with this covenant,
Landlord may, at its option, require Tenant to stop engaging in such
activity or to reimburse Landlord as additional rent for any increase in
premiums charged during the term of this Lease on the insurance carried
by Landlord on the Building and attributable to the use being made of
the Leased Premises by Tenant.
E. Tenant shall not inscribe, paint, affix or display any signs,
advertisements or notices on the Building, except for such tenant
identification information as Landlord permits to be included or shown
on the directory board in the main lobby and on or adjacent to the
access door or doors to the Leased Premises.
Section 5.03. Landlord's Rights Regarding Use. In addition to the rights
specified elsewhere in this Lease, Landlord shall
<PAGE> 9
have the following rights regarding the use of the Leased Premises or the Common
Areas by Tenant, its employees, agents, customers and invitees, each of which
may be exercised without notice or liability to Tenant:
A. Landlord may install such signs, advertisements or notices or tenant
identification information on the directory board or tenant access doors
as it shall deem necessary or proper.
B. Landlord shall approve or disapprove, prior to installation, all types
of drapes, shades and other window coverings used in the Leased
Premises, and may control all internal lighting that may be visible from
outside the Leased Premises.
C. Landlord shall approve or disapprove all sign painting and lettering.
D. Landlord may grant to any person the exclusive right to conduct any
business or render any service in the Building, provided that such
exclusive right shall not operate to limit Tenant from using the Leased
Premises for the use permitted in Item J of the Basic Lease Provisions.
Notwithstanding the foregoing, Tenant shall be allowed to contract for
and use within the Leased Premises, vending and catering services
exclusively for Tenant's use with vendors and caterers of Tenant's
selection.
E. Landlord may control the Common Areas in such manner as it deems
necessary or proper, including by way of illustration and not
limitation: requiring all persons entering or leaving the Building to
identify themselves and their business in the Building to a security
guard; excluding or expelling any peddler, solicitor or loud or unruly
person from the Building or any part thereof, including entrances,
corridors, doors, and elevators, during times of emergency, repairs or
after regular business hours.
Section 5.04. Access to and Inspection of the Leased Premises. Landlord, its
employees and agents and any mortgagee of the Building shall have the right to
enter any part of the Leased Premises at reasonable times for the purposes of
examining or inspecting the same, showing the same to prospective purchasers,
mortgagees or tenants and making such repairs, alterations or improvements to
the Leased Premises or the Building as Landlord may deem necessary or desirable.
If representatives of Tenant shall not be present to open and permit such entry
into the Leased Premises at any time when such entry is necessary by reason of
emergency, Landlord and its employees and agents may enter the Leased Premises
by means of a master or pass key or otherwise. Landlord shall incur no liability
to Tenant for such entry, nor shall such entry constitute an eviction of Tenant
or a termination of this Lease, or entitle Tenant to any abatement of rent
therefor. Notwithstanding the foregoing, Landlord shall have the right to show
the Leased Premises to prospective tenants only after Tenant shall exercise its
right to terminate this Lease under Sections 18.21, 18.23 and 18.24 hereunder or
if Tenant shall fail to exercise its option to renew this Lease under Section
18.23 hereunder.
ARTICLE 6 - UTILITIES AND OTHER BUILDING SERVICES
Section 6.01. Services to be Provided. Provided Tenant is not in material
default beyond a reasonable period of time after notice, Landlord shall subject
to interruptions beyond Landlord's control furnish to Tenant, except as noted
below, the following utilities and other building services to the
<PAGE> 10
extent reasonably necessary for Tenant's comfortable use and occupancy of the
Leased Premises for general office use or as may be required by law or directed
by governmental authority:
A. Heating, ventilation and air-conditioning service seven (7) days a week,
24 hours a day, except for interruptions caused by unanticipated power
outages or scheduled repairs of which repairs Tenant shall receive
advanced written notice;
B. Water in the Common Areas for lavatory and drinking purposes;
C. Automatic elevator service;
D. Cleaning and janitorial service, in the Leased Premises and the Common
Areas consistent with the level of service generally provided in Class A
Suburban Office Buildings in the greater Cincinnati area and in
accordance with the Landlord's current janitorial specifications set
forth in Exhibit D attached hereto;
E. Interior and exterior washing of windows at intervals reasonably
established by Landlord but not less than twice annually;
F. Replacement of all lamps, bulbs, starters and ballasts in Building
standard lighting as required from time to time as a result of normal
usage;
G. Cleaning and maintenance of the Common Areas, including the removal of
rubbish and snow; and
H. Repair and maintenance to the extent specified elsewhere in this Lease.
Landlord reserves the right to separately meter any utility directly to the
Tenant and Tenant shall thereafter pay such utility charges as billed. Any cost
and expense associated with installing a separate meter shall be paid for by
Landlord and shall not be included in Operating Expenses.
Section 6.02. Additional Services. If Tenant requests any other utilities or
building services in addition to those identified above or any of the above
utilities or building services in frequency, scope, quality or quantity
substantially greater than those which Landlord determines are normally required
by other tenants in the Building for general office use, then Landlord shall use
reasonable efforts to attempt to furnish Tenant with such additional utilities
or building services. In the event Landlord is able to and does furnish such
additional utilities or building services, the costs thereof shall be borne by
Tenant, who shall reimburse Landlord monthly for the same as additional rent at
the same time Monthly Rental Installments and other additional rent is due. If
any lights, machines or equipment (including but not limited to computers) used
by Tenant in the Leased Premises materially affect the temperature otherwise
maintained by the Building's air-conditioning system or generate substantially
more heat in the Leased Premises than that which would normally be generated by
the lights and business machines typically used by other tenants in the Building
or by tenants in comparable office buildings, then Landlord shall have the right
to install any machinery or equipment which Landlord considers reasonably
necessary in order to restore the temperature balance between the Leased
Premises and the rest of the Building, including equipment which modifies the
Building's air-conditioning system. All costs expended by Landlord to install
any such machinery and
<PAGE> 11
equipment and any additional costs of operation and maintenance occasioned
thereby shall be borne by Tenant, who shall reimburse Landlord in full for such
costs upon thirty (30) days written demand, and any additional costs of
operation and maintenance occasioned by such installation shall also be borne by
Tenant who shall reimburse Landlord for the same as provided in the first
paragraph of this Section 6.02.
Tenant shall not install or connect any electrical equipment other than the
business machines and equipment typically used for general office purposes by
tenants in office buildings comparable to the Building without Landlord's prior
written consent. At all times Tenant's use of electrical current shall never
exceed the capacity of the feeders to the Building or the risers or wiring
installation. If Landlord determines that the electricity used by the equipment
to be so installed or connected exceeds the designed load capacity of the
Building's electrical system or is in any way incompatible therewith, then
Landlord shall have the right, as a condition to granting its consent, to make
such modifications to the electrical system or other parts of the Building or
Leased Premises, or to require Tenant to make such modifications to the
equipment to be installed or connected. All costs expanded by Landlord to make
any such modifications shall be borne by Tenant, who shall reimburse Landlord in
full for such costs upon thirty (30) days written demand, and Tenant shall
reimburse Landlord for the additional electricity supplied to the Leased
Premises as provided in this Section 6.02. Landlord represents that the Building
electrical equipment and heating, ventilating and air-conditioning systems shall
be adequate for Tenant's initial use within the Leased Premises as descried in
writing to Landlord by Tenant.
Section 6.03. Interruption of Services. Tenant understands, acknowledges and
agrees that any one or more of the utilities or other building services
identified in Section 6.01 may be interrupted by reason of accident, emergency
or other causes beyond Landlord's control, or the quality or character of
electric service may be changed or such service may no longer be suitable for
Tenant's requirements or such services may be discontinued or diminished
temporarily by Landlord or other persons until certain repairs, replacements,
alterations, improvements or cleaning can be made; that Landlord does not
represent or warrant the uninterrupted availability of such utilities or
building services, and that any such interruption shall not be deemed an
eviction or disturbance of Tenant's right to possession, occupancy and use of
the Leased Premises or any part thereof, or render Landlord liable to Tenant for
damages by abatement of rent or otherwise, or relieve Tenant from the obligation
to perform its covenants under this Lease.
Landlord shall have no liability to Tenant, including, without limitation,
liability for consequential damage arising out of, resulting from, or related to
any such interruption of utility services. The above provision notwithstanding,
if the utility services, which substantially impair the Tenant's ability to
conduct its business operations, are discontinued for more than two (2)
consecutive business days due to causes within Landlord's control, then the
Minimum Annual Rent due hereunder shall be equitably abated in proportion to the
impairment of Tenant's business operations, as determined by Landlord within its
reasonable discretion, until such services are fully restored.
ARTICLE 7 - REPAIRS, MAINTENANCE, ALTERATIONS, IMPROVEMENTS AND FIXTURES
<PAGE> 12
Section 7.01. Repair and Maintenance of Building. Subject to Section 7.02 and
except for any repairs made necessary by the negligence, misuse, or default of
Tenant, its employees, agents, customers and invitees, Landlord shall make all
necessary repairs to the exterior walls, exterior doors, windows, corridors and
other common areas of the Building, and Landlord shall keep the Building in a
safe, clean and neat condition and use reasonable efforts to keep all equipment
used in common with other tenants, such as elevators, plumbing, pipes, ducts,
heating, air conditioning and similar equipment, in good condition and repair.
Payment for such repairs and maintenance shall be included in Operating
Expenses. Except as provided in Article 8 and Article 10 hereof, there shall be
no abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Leased
Premises or in or to any fixtures, appurtenances and equipment therein or
thereon. In the event Landlord's failure to remedy needed repairs or maintenance
results in the liability of Tenant to conduct its normal business operations for
two (2) consecutive business days, then the minimum Annual Rent due hereunder
shall be equitably abated in proportion to the impairment of Tenant's business
operations, as determined by Landlord within its reasonable discretion, until
such repairs or maintenance shall be completed.
Section 7.02. Repair and Maintenance of Leased Premises. Landlord shall keep and
maintain the Leased Premises in good order, condition and repair. Tenant shall
notify Landlord of any items that Tenant believes needs repair. Except for the
services specified in Section 6.01(D), (E) and (F), and except for ordinary wear
and tear and damage which Tenant is not obligated to repair as provided
elsewhere in this Lease, the cost of all repairs and maintenance to the Leased
Premises shall be borne by Tenant, who shall be separately billed and shall
reimburse Landlord for the same as additional rent.
Section 7.03. Alterations or Improvements. Tenant may make, or may permit to be
made, alterations or improvements to the Leased Premises but only if Tenant
obtains the prior written consent of Landlord which shall not be unreasonably
withheld. Notwithstanding the foregoing, Tenant may make or permit to be made
alterations or improvements of a non-structural nature to the Leased Premises
without the prior written consent of Landlord to the extent that the cumulative
cost of such alterations or improvements does not exceed Twenty-five Thousand
Dollars ($25,000.00) in any Lease Year. If Landlord allows Tenant to make any
such alterations or improvements, Tenant shall secure all necessary permits and
shall make the alterations and improvements in accordance with all applicable
laws, regulations and building codes, in a good and workmanlike manner and
quality equal to or better than the original construction of the Building and
shall comply with such requirements as Landlord considers necessary or
desirable, including without limitation, requirements as to the manner in which
and the times at which such work shall be done and the contractor or
subcontractors to be selected to perform such work. Landlord's approval of the
plans, specifications and working drawings for Tenant's alterations shall create
no responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with all laws, rules and regulations of
governmental agencies or authorities. All alterations, additions or improvements
shall be installed at Tenant's sole expense in compliance with all applicable
laws and by a licensed contractor approved in writing by Landlord. Landlord may
require tenant to provide Landlord, at Tenant's
<PAGE> 13
sole cost and expense, a lien and completion bond in an amount equal to one and
one-half (1 1/2) times the estimated cost of such improvements, alterations or
additions to insure against any liability for mechanic's and/or materialmen's
liens and to insure completion of the work. Any alterations, improvements or
utility installations in, on or about the Leased Premises that Tenant shall
desire to make shall be presented to Landlord in written form with proposed
detailed plans. If Landlord shall give its consent, such consent shall be
conditioned upon (i) Tenant's acquiring a permit to do so from appropriate
governmental agencies, (ii) the furnishing of a copy thereof to Landlord prior
to the commencement of the work, and (iii) the compliance by Tenant of all
conditions of said permit in a prompt and expeditious manner.
Tenant shall promptly pay all costs attributable to such alterations and
improvements. Tenant shall promptly repair any damage to the Leased Premises or
the Building caused by any such alterations or improvements. Any alterations or
improvements to the Leased Premises paid for by Landlord, except movable office
furniture and equipment and trade fixtures, shall become a part to the realty
and the property of Landlord, and shall not be removed by Tenant. Tenant has the
option to remove alterations or improvements to the Leased Premises paid for by
Tenant.
Section 7.04. Trade Fixtures. Any trade fixtures installed on the Leased
Premises by Tenant at its own expense, such as movable partitions, counters,
shelving, showcases, mirrors and the like, may be removed on the expiration or
earlier termination of this Lease, provided that Tenant is not then in default,
bears the cost of such removal, and repairs at its own expense any and all
damage to the Leased Premises resulting from such removal. If Tenant fails to
remove any and all fixtures from the Leased Premises on the expiration or
earlier termination of this Lease, all such trade fixtures shall become the
property of Landlord, provided however, that Landlord may elect by written
notice to Tenant to require that Tenant remove all or any portion of such trade
fixtures. Promptly after receiving such notice, Tenant shall, at its expense
promptly remove the same and restore the Leased Premises to their prior
condition.
ARTICLE 8 - FIRE OR OTHER CASUALTY; CASUALTY INSURANCE
Section 8.01. Substantial Destruction of the Building or the Leased Premises. If
either the Building or the Leased Premises are substantially destroyed or
damaged (which as used herein, means destruction or material damage to at least
fifty percent (50%] of the Building or the Leased Premises) by fire or other
casualty, then either Tenant or Landlord may, at its option, terminate this
Lease by giving written notice of such termination to the other party within
sixty (60) days after the date of such casualty. In such event, rent shall be
apportioned to and shall cease as of the date of such casualty. If neither party
exercises its option, then the Leased Premises shall be reconstructed and
restored, at Landlord's expense, to substantially the same condition as they
were prior to the casualty; provided however, that Landlord's obligation
hereunder shall be limited to the reconstruction of such of the tenant finish
improvements as were originally required to be made by Landlord and further
provided that if Tenant has made any additional improvements pursuant to Section
7.03, Tenant shall reimburse Landlord for the cost of reconstructing the same.
In the event of such reconstruction, rent shall be abated from the date of the
casualty until substantial completion of the reconstruction repairs, and this
Lease shall continue in full force and effect for the balance of the term.
<PAGE> 14
Section 8.02. Partial Destruction of the Leased Premises. If the Leased Premises
should be damaged by fire or other casualty, but not substantially destroyed or
damaged to the extent provided in Section 8.01, then so long as sufficient
insurance proceeds are available for restoration, such damaged part of the
Leased Premises shall be reconstructed and restored, at Landlord's expense, to
substantially the same condition as it was prior to the casualty; provided
however, that Landlord's obligation hereunder shall be limited to the
reconstruction of such of the tenant finish improvements as were originally
required to be made by Landlord and further provided that if Tenant has made any
additional improvements pursuant to Section 7.03, Tenant shall reimburse
Landlord for the cost of reconstructing the same. In such event, if within the
reasonable business judgment of Tenant using quantifiable or verifiable proof
the damage is expected to prevent Tenant from carrying on its business in the
Leased Premises to an extent exceeding five percent (5%) of its normal business
activity, rent shall be abated in the proportion which the approximate area of
the damaged part bears to the total area in the Leased Premises from the date of
the casualty until substantial completion of the reconstruction repairs; and
this Lease shall continue in full force and effect for the balance of the Lease
Term. Landlord shall use reasonable diligence in completing such reconstruction
repairs, but in the event Landlord fails to complete the same within one hundred
eighty (180) days from the date of the casualty and Landlord shall not have
diligently commenced construction, Tenant may, at its option, terminate this
Lease by giving Landlord written notice of such termination, whereupon both
parties shall be released from all further obligations and liability hereunder.
Section 8.03. Landlord's Insurance. Landlord shall at all times during the Lease
Term carry a policy of insurance which insures the Building, including the
Leased Premises, against loss or damage by fire or other casualty (namely, the
perils against which insurance is afforded by a standard fire insurance policy
and extended coverage endorsement); provided, however, that Landlord shall not
be responsible for, and shall not be obligated to insure against, any loss of or
damage to any personal property of Tenant or which Tenant may have in the
Building or the Leased Premises or any trade fixtures installed by or paid for
by Tenant on the Leased Premises or any additional improvements which Tenant may
construct on the Leased Premises; and notwithstanding anything contained herein
to the contrary, Landlord shall not be liable and Tenant releases Landlord from
liability for any loss or damage to such property, regardless of cause,
including the negligence of Landlord or its employees, agents, customers and
invitees. If the tenant finish improvements or any alterations made by Tenant
pursuant to Section 7.03 result in an increase in the premiums charged during
the term of this Lease on the casualty insurance carried by Landlord on the
Building, then the cost of such increase in insurance premiums shall be borne by
Tenant, who shall reimburse Landlord for the same as additional rent after being
separately billed therefor, and such improvements shall be covered and available
for replacement in the event of a fire or casualty.
Section 8.04. Waiver of Subrogation. Landlord and Tenant hereby release each
other and each other's employees, agents, customers and invitees from any and
all liability for any loss, damage or injury to person or property occurring in,
on or about or to the Leased Premises, or the Building the Common Areas or
personal property within the Building by reason of fire or other casualty or any
other risk which could be insured against under a standard fire and extended
coverage insurance policy,
<PAGE> 15
regardless of cause, including the negligence of Landlord or Tenant and their
respective employees, agents, customers and invitees, and agree that all
insurance carried by either of them shall contain a clause whereby the insurer
waives its right of subrogation against the other party provided such insurance
is available. Because the provisions of this Section 8.04 are intended to
preclude the assignment of any claim mentioned herein by way of subrogation or
otherwise to an insurer or any other person, each party to this Lease shall give
to each insurance company which has issued to it one or more policies of fire
and extended coverage insurance notice of the provisions of this Section 8.04
and have such insurance policies properly endorsed, if necessary, to prevent the
invalidation of such insurance by reason of the provisions of this Section 8.04.
In the event that such endorsement is not reasonably available from Landlord and
Tenant's respective insurance carriers or the foregoing waiver would impair
Landlord and Tenant's ability to collect any insurance proceed, then such waiver
shall be ineffective.
ARTICLE 9 - GENERAL PUBLIC LIABILITY, INDEMNIFICATION AND INSURANCE
Section 9.01. Tenant's Responsibility. Tenant does hereby indemnify, forever
save and hold Landlord and Landlord's agents, contractors, licensees, employees,
directors, officers, partners, trustees and invitees (collectively, 'Landlord's
Employees") harmless from and against any and all damages, claims, losses,
demands, costs, expenses (including reasonable attorneys' fees and costs),
obligations, liens, liabilities, actions and causes of action, threatened or
actual, which Landlord may suffer or incur arising out of or in connection with
this Lease, including without limitations, Tenant's or Tenant's employees use of
the Leased Premises, the conduct of Tenant's business, any activity, work or
things done, permitted or suffered by Tenant in or about the Leased Premises,
the Building or Common Area, or Tenant's employees' nonobservance or
nonperformance of any statute, law, ordinance, rule or regulation, or any
negligence of the Tenant's employees; provided, however, Tenant shall not be
obligated to indemnify Landlord and hold it harmless from liability from which
Landlord has released Tenant as provided in Section 8.04. Tenant further agrees
that in case of any claim, demand, action or cause of action, threatened or
actual, against Landlord, Tenant, upon notice from Landlord, shall defend
Landlord at Tenant's expense by counsel reasonably satisfactory to Landlord. In
the event Tenant does not provide such a defense against any and all claims,
demand, actions or causes of action, threatened or actual, then Tenant will, in
addition to the above, pay Landlord the attorneys' fees, legal expenses and
costs incurred by Landlord in providing or preparing such defense, and Tenant
agrees to cooperate with Landlord in such defense, including but not limited to,
the providing of affidavits and testimony upon request of Landlord.
Section 9.02. Tenant's Insurance. Tenant shall at all times during the term of
this Lease carry, at its own expense, one or more policies of general public
liability and property damage insurance, issued by one or more insurance
companies acceptable to Landlord, with the following minimum coverages against
loss of or damage or injury to any person (including death resulting therefrom)
or property occurring in, on or about the Leased Premises:
A. Worker's Compensation - - minimum statutory amount.
<PAGE> 16
B. Comprehensive General - Not less than $1,000,000
Liability Insurance, Combined Single Limit
including Blanket, Con- for both bodily injury
tractual Liability, and property damage.
Broad Form Property
Damage, Personal Injury,
Completed Operations,
Products Liability,
Fire Damage.
C. Fire and Extended Coverage, Vandalism and Malicious Mischief, and
Sprinkler Leakage insurance, for the full cost of replacement of
Tenant's property.
Such insurance policy or policies shall protect Tenant and Landlord as their
interests may appear, naming Landlord and Landlord's managing agent and
mortgagee as additional insureds and shall provide that they may not be
cancelled on less than thirty (30) days prior written notice to Landlord. Tenant
shall furnish Landlord with Certificates of Insurance evidencing such coverage.
Should Tenant fail to carry such insurance and furnish Landlord with such
Certificates of Insurance after a request to do so, Landlord shall have the
right to obtain such insurance and collect the cost thereof from Tenant as
additional rent.
ARTICLE 10 - EMINENT DOMAIN
If the whole or any part of the Leased Premises shall be taken for public or
quasi-public use by a governmental or other authority having the power of
eminent domain or shall be conveyed to such authority in lieu of such taking,
Landlord shall have the option to terminate this Lease upon thirty (30) days
written notice from Landlord to Tenant provided such taking materially and
substantially impairs Tenant's ability to conduct its normal operations to the
extent that the Tenant shall abandon the Leased Premises. In the event Landlord
does not exercise such option, and if such taking or conveyance would cause the
remaining part of the Leased Premises to be untenantable and inadequate for use
by Tenant for the purpose for which they were leased, then Tenant may, at its
option, terminate this Lease as of the date Tenant is required to surrender
possession of the Leased Premises by giving Landlord written notice of such
termination. If a part of the Leased Premises shall be taken or conveyed but the
remaining part is tenantable and adequate for Tenant's use, and Landlord does
not exercise its option to terminate this Lease, then this Lease shall be
terminated as to the part taken or conveyed as of the date Tenant surrenders
possession; Landlord shall make such repairs, alterations and improvements as
may be necessary to render the part not taken or conveyed tenantable; and the
rent shall be reduced in proportion to the part of the Leased Premises so taken
or conveyed. All compensation awarded for such taking or conveyance shall be the
property of Landlord without any deduction therefrom for any present or future
estate of Tenant, and Tenant hereby assigns to Landlord all its rights, title
and interest in and to any such award. However, Tenant shall have the right to
assert a claim against such authority, but not from Landlord, provided such
compensation as may be awarded to Tenant shall not diminish Landlord's award.
ARTICLE 11 - LIENS
If, because of any act or omission of Tenant or any person claiming by, through,
or under Tenant, any mechanic's lien or other lien shall be filed against the
Leased Premises or the
<PAGE> 17
Building or against other property of Landlord (whether or not such lien is
valid or enforceable as such), Tenant shall, at its own expense, cause the same
to be discharged of record within thirty-five (35) days after the date of filing
thereof, and shall also indemnify Landlord and hold it harmless from any and all
claims, losses, damages, judgments, settlements, costs and expenses, including
attorneys' fees, resulting therefrom or by reason thereof. Landlord may, but
shall not be obligated to, pay the claim upon which such lien is based so as to
have such lien released of record; and, if Landlord does so, then Tenant shall
pay to Landlord, upon demand, the amount of such claim, plus all other costs and
expenses incurred in connection therewith, plus interest thereon at the rate of
eighteen percent (18%) per annum or at the Prime Rate (as defined in Section
3.02(A)(2) hereof) plus four percent (4%) per annum, whichever is higher.
ARTICLE 12 - RENTAL, PERSONAL PROPERTY AND OTHER TAXES
Tenant shall pay before delinquency any and all taxes, assessments, fees or
charges, including any sales, gross income, rental, business occupation or other
taxes, levied or imposed upon Tenant's business operations in the Leased
Premises and any personal property or similar taxes levied or imposed upon
Tenant's trade fixtures, leasehold improvements or personal property located
within the Leased Premises. In the event any such taxes, assessments, fees or
charges are charged to the account of, or are levied or imposed upon the
property of Landlord, Tenant shall reimburse Landlord for the same as additional
rent. Notwithstanding the foregoing, Tenant shall have the right to contest in
good faith any such item and to defer payment until after Tenant's liability
therefor is finally determined.
If any tenant finish improvements, trade fixtures, alterations or improvements
or business machines and equipment located in, on or about the Leased Premises,
regardless of whether they are installed or paid for by Landlord or Tenant and
whether or not they are affixed to and become a part of the realty and the
property of Landlord, are assessed for real property tax purposes at a valuation
higher than that at which other such property in other leased space in the
Building is assessed, then Tenant shall reimburse Landlord as additional rent
for the amount of real property taxes shown on the appropriate county official's
records as having been levied upon the Building or other property of Landlord by
reason of such excess assessed valuation.
ARTICLE 13 - ASSIGNMENT AND SUBLETTING
Tenant may assign or transfer this Lease or sublease all or any part of the
Leased Premises without Landlord's approval provided that: (i) the new entity
shall use the Leased Premises for any or all of the uses permitted to Tenant in
the Basic Lease Provisions, (ii) Tenant gives prior written notice to Landlord,
and (iii) the assignment or subletting shall be otherwise subject to all of the
terms, covenants and conditions of the Lease; provided, however, that a sublease
need not include similar terms, covenants and conditions as to lease term,
rights to renew, rights to expand and other matters not essential to occupancy
of the subleased premises. In the event of any assignment or subletting, Tenant
shall, nevertheless, remain primarily liable to perform the obligations imposed
on Tenant hereunder. In addition, any assignment or sublease profits (i.e.,
gross rent proceeds received by Tenant after deduction of all expenses incurred
by Tenant in connection with such
<PAGE> 18
subleasing or assignment) shall be divided equally between Landlord and Tenant
as the same are received. Landlord shall not have the right or option to
recapture any space which Tenant assigns or subleases in accordance with the
terms hereunder.
ARTICLE 14 - TRANSFERS BY LANDLORD
Section 14.01. Sale and Conveyance of the Building. Landlord shall have the
right to sell, convey or transfer its interest in the Building or the control
thereof at any time during the term of this Lease subject only to the rights of
Tenant hereunder; and such sale and conveyance or other transfer of Landlord's
interest or control of the Building shall operate to release Landlord's interest
from liability hereunder after the date of such conveyance as provided in
Section 15.04.
Landlord hereby represents that (i) it is the fee simple title holder of the
Building, (ii) the person executing this Lease on behalf of Landlord has full
authority to do so and such signature shall bind the Landlord and (iii) upon the
execution date of this Lease there is no mortgage existing on the Building.
Landlord hereby consents to the recording of, and agrees to execute if requested
by Tenant, a memorandum of lease provided said memorandum does not disclose any
significant economic terms of this Lease.
Section 14.02. Subordination. Landlord shall have the right to subordinate this
Lease to any mortgage presently existing or hereafter placed upon the Building
by so declaring in such mortgage; and the recording of any such mortgage shall
make it prior and superior to this Lease regardless of the date of execution or
recording of either document. Notwithstanding the foregoing, no default by
Landlord under any such mortgage, shall affect Tenant's rights hereunder so long
as Tenant is not in default under this Lease. Tenant shall, in the event any
proceedings are brought for foreclosure of any such mortgage, attorn to the
purchaser upon any such foreclosure and recognize such purchaser as the landlord
under this Lease.
ARTICLE 15 - DEFAULTS AND REMEDIES
Section 15.01. Defaults by Tenant. The occurrence of any one or more of the
following events shall be a default under and breach of this Lease by Tenant:
A. Tenant shall fail to pay any monthly Rental Installment of Minimum
Annual Rent or the Annual Rental Adjustment within ten (10) days after
written notice that such payments are due and payable, or any other
amounts due Landlord from Tenant as additional rent or otherwise
including any amounts owed by Tenant for Building Non-Standard Work
within thirty (30) days after written notice the same shall be due and
payable.
B. Tenant shall fail to perform or observe any term, condition, covenant or
obligation required to be performed or observed by it under this Lease
for a period of ten (10) days after notice thereof from Landlord;
provided, however, that if the term, condition, covenant or obligation
to be performed by Tenant is of such nature that the same cannot
reasonably be performed within such ten-day period, such default shall
be deemed to have been cured if Tenant commences such performance within
said ten-day period and thereafter
<PAGE> 19
diligently undertakes to complete the same and does so complete the
required action within a reasonable time.
C. A trustee or receiver shall be appointed to take possession of
substantially all of Tenant's assets in, on or about the Leased Premises
or of Tenant's interest in this Lease (and Tenant does not regain
possession within sixty (60) days after such appointment); Tenant makes
an assignment for the benefit of creditors; or substantially all of
Tenant's assets in, on or about the Leased Premises or Tenant's interest
in this Lease are attached or levied under execution (and Tenant does
not discharge the same within sixty (60) days thereafter).
D. A petition in bankruptcy, insolvency, or for reorganization or
arrangement is filed by or against Tenant pursuant to any federal or
state statute (and, with respect to any such petition filed against it,
Tenant fails to secure a stay or discharge thereof within sixty (60)
days after the filing of the same).
Section 15.02. Remedies of Landlord. Upon the occurrence of any event of default
set forth in Section 15.01, Landlord shall have the following rights and
remedies in addition to those allowed by law, any one or more of which may be
exercised without further notice to or demand upon Tenant:
A. Landlord may re-enter the Leased Premises and cure any default of
Tenant, in which event Tenant shall reimburse Landlord as additional
rent for any costs and expenses which Landlord may incur to cure such
default; and Landlord shall not be liable to Tenant for any loss or
damage which Tenant may sustain by reason of Landlord's action,
regardless of whether caused by Landlord's negligence or otherwise.
B. 1. Landlord may terminate this Lease as of the date of such default, in
which event: (i) neither Tenant nor any person claiming under or through
Tenant shall thereafter be entitled to possession of the Leased
Premises, and Tenant shall immediately thereafter surrender the Leased
Premises to Landlord; (ii) Landlord may re-enter the Leased Premises and
dispossess Tenant or any other occupants of the Leased Premises by any
means permitted by law, and may remove their effects, without permitted
by law, and may remove their effects, without prejudice to any other
remedy which Landlord may have for possession or arrearages in rent; and
(iii) notwithstanding the termination of this Lease, Landlord may
declare all rent which would have been due under this Lease for the
balance of the term to be obligated to pay the same to Landlord,
together with all loss or damage which Landlord may sustain by reason of
such termination, it being expressly understood and agreed that the
liabilities and remedies specified in this subsection (B) (1) of Section
15.02 shall survive the termination of this Lease; or
2. Landlord may, without terminating this Lease, re-enter the Leased
Premises and re-let all or any part of the Leased Premises for a term
different from that which would otherwise have constituted the balance
of the term of this Lease and for rent and on terms and conditions
different from those contained herein, whereupon Tenant shall
immediately be obligated to pay to Landlord as liquidated damages the
difference between the rent provided for herein and that provided for in
any lease covering a subsequent re-letting of the Leased Premises, for
the period which would otherwise have constituted the balance of the
term of this
<PAGE> 20
Lease, together with all of Landlord's reasonable costs and expenses for
preparing the Leased Premises for re-letting, including all repairs,
tenant finish improvements, brokers' and attorneys' fees, and all loss
or damage which Landlord may sustain by reason of such re-entry and
re-letting.
C. Landlord may sue for injunctive relief or to recover damages for any
loss resulting from the breach.
Section 15.03. Default by Landlord and Remedies of Tenant. It shall be a default
under and breach of this Lease by Landlord if it shall fail to perform or
observe any term, condition, covenant or obligation required to be performed or
observed by it under this Lease for a period of thirty (30) days after notice
thereof from Tenant; provided, however, that if the term, condition, covenant or
obligation to be performed by Landlord is of such nature that the same cannot
reasonably be performed within such thirty-day period, such default shall be
deemed to have been cured if Landlord commences such performance within said
thirty-day period and thereafter diligently undertakes to complete the same, and
further provided that Landlord shall not be in default if Landlord's failure to
perform or observe some term, condition, covenant, or obligation under this
Lease is due to causes beyond the reasonable control of Landlord. Upon the
occurrence of any such default, Tenant may sue for injunctive relief or to
recover damages for any loss resulting from the breach, but Tenant shall not be
entitled to terminate this Lease or withhold or abate any rent due hereunder.
Section 15.04. Limitation of Landlord's Liability. If Landlord shall fail to
perform or observe any term, condition, covenant or obligation required to be
performed or observed by it under this Lease as provided in Section 15.03 and if
Tenant shall, as a consequence thereof, recover a money judgment against
Landlord, Tenant agrees that Landlord shall have no personal liability and
Tenant shall look solely to Landlord's right, title and leasehold interest in
and to the Building for the collection of such judgment; and Tenant further
agrees that no other assets of Landlord shall be subject to levy, execution or
other process for the satisfaction of Tenant's judgment and that Landlord shall
not be liable for any deficiency.
The references to "Landlord" in this Lease shall be limited to mean and include
only the owner or owners of the leasehold interest in the Building. In the event
of a sale or transfer of such interest (except a mortgage or other transfer as
security for a debt), the "Landlord" initially named herein, or, in the case of
a subsequent transfer, the transferor, shall, after the date of such transfer,
be automatically released from all personal liability for the performance or
observance of any term, condition, covenant or obligation required to be
performed or observed by Landlord hereunder; and the transferee shall be deemed
to have assumed all of such terms, conditions, covenants and obligations except
as to pre-existing defaults or events of default. The covenants and obligations
contained in this Lease on the part of "Landlord" shall be binding on the
Landlord or any transferor only during the periods it is a landlord hereunder.
Section 15.05. Non-Waiver of Defaults. The failure or delay by either party
hereto to exercise or enforce at any time any of the rights or remedies or other
provisions of this Lease shall not be construed to be a waiver thereof, nor
affect the validity of any part of this Lease or the right of either party
thereafter to exercise or enforce each and every such right or remedy or other
provision. No waiver of any default and breach of the Lease shall be deemed to
be a waiver of any other or
<PAGE> 21
further default and breach. The receipt by Landlord of less than the full rent
due shall not be construed to be other than a payment on account of rent then
due, nor shall any statement on Tenant's check or any letter accompanying
Tenant's check be deemed an accord and satisfaction, and Landlord may accept
such payment without prejudice to Landlord's right to recover the balance of the
rent due or to pursue any other remedies provided in this Lease. No act or
omission by Landlord or its employees or agents during the Lease Term shall be
deemed an acceptance of a surrender of the Leased Premises, and no agreement to
accept such a surrender shall be valid unless in writing and signed by Landlord.
Section 15.06. Attorneys' Fees. In the event either party defaults in the
performance or observance of any of the terms, conditions, covenants or
obligations contained in this Lease and the non-defaulting party employs
attorneys to enforce all or any part of this Lease, collect any rent due or to
become due or recover possession of the Leased Premises, the defaulting party
agrees to reimburse the non-defaulting party for the attorneys' fees incurred
thereby.
Section 15.07. Force Majeure. Notwithstanding any other provision contained in
this Lease or elsewhere, Landlord shall not be chargeable with, liable for, or
responsible to Tenant for anything or in any amount for any failure to perform
or delay caused by fire, earthquake, explosion, flood, hurricane, the elements,
acts of God or the public enemy, action, restrictions, limitations, or
interference of governmental authorities or agents, war, invasion, insurrection,
rebellion, riots, strikes or lockouts or any other cause whether similar or
dissimilar to the foregoing which is beyond the reasonable control of Landlord
and any such failure or delay due to said causes or any of them shall not be
deemed a breach of or default in the performance of this Lease.
ARTICLE 16 - LANDLORD'S RIGHT TO RELOCATE TENANT - INTENTIONALLY OMITTED.
ARTICLE 17 - NOTICE AND PLACE OF PAYMENT
Section 17.01. Notices. Any notice required or permitted to be given under this
Lease or by law shall be deemed to have been given if it is written and
delivered in person or mailed by Registered or Certified mail, postage prepaid,
to the party who is to receive such notice at the addresses specified in item K
of the Basic Lease Provisions. When so mailed, the notice shall be deemed to
have been given as of the date it was mailed. The address specified in Item K of
the Basic Lease Provisions may be changed by giving written notice thereof to
the other party.
Section 17.02. Place of Payment. All rent and other payments required to be made
by Tenant to Landlord shall be delivered or mailed to Landlord's management
agent at the address specified in Item K of the Basic Lease Provisions or to
Landlord's management agent at any other address Landlord may specify from time
to time by written notice given to Tenant.
ARTICLE 18 - MISCELLANEOUS GENERAL PROVISIONS
Section 18.01. Condition of Premises. Tenant acknowledges that neither Landlord
nor any agent of Landlord has made any representation or warranty with respect
to the Leased Premises or the Building or with respect to the suitability or
condition of any part of the Building for the conduct of Tenant's business
<PAGE> 22
except as provided in this Lease; and any exhibits or attachments hereto.
Section 18.02. Insolvency or Bankruptcy. In no event shall this Lease be
assigned or assignable by operation of law, and in no event shall this Lease be
an asset of Tenant in any receivership, bankruptcy, insolvency, or
reorganization proceeding.
Section 18.03. Common Areas. The term "Common Areas," as used in this Lease,
refers to the areas of the Building which are designed for use in common by all
tenants of the Building and their respective employees, agents, customers,
invitees and others, and includes, by way of illustration and not limitation,
entrances and exits, hallways and stairwells, elevators, restrooms, sidewalks,
driveways, parking areas, landscaped areas and other areas as may be designated
by Landlord as part of the Common Areas of the Building. Tenant shall have the
nonexclusive right, in common with others, to use the Common Areas, subject to
such nondiscriminatory rules and regulations as may be adopted by Landlord
including those set forth in Section 5.02 and Exhibit C of this Lease.
Section 18.04. Choice of Law. This Lease shall be governed by and construed
pursuant to the laws of the State of Ohio.
Section 18.05. Successors and Assigns. Except as otherwise provided in this
Lease, all of the covenants, conditions and provisions of this Lease shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
Section 18.06. Name. Tenant shall not, without the written consent of Landlord,
use the name of the Building for any purpose other than as the address of the
business to be conducted by Tenant in the Leased Premises, and in no event shall
Tenant acquire any rights in or to such names.
Section 18.07. Examination of Lease. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation of or
option for Lease, and it is not effective as a Lease or otherwise until
execution by and delivery to both Landlord and Tenant.
Section 18.08. Defined Terms and Marginal Headings. The words "Landlord" and
"Tenant" as used herein shall include the plural as well as the singular. If
more than one person is named as Tenant, the obligations of such persons are
joint and several. The marginal headings and titles to the articles of this
Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.
Section 18.09. Prior Agreements and Amendments to this Lease. This Lease and the
letter of understanding executed pursuant to Section 2.03 hereof contain all of
the agreements of the parties hereto with respect to any matter covered or
mentioned in this Lease, and no prior agreement, understanding or representation
pertaining to any such matter shall be effective for any purpose. No provision
of this Lease may be amended or added to except by an agreement in writing
signed by the parties hereto or their respective successors in interest.
Section 18.10. Payment of and Indemnification for Leasing Commissions. The
parties hereby acknowledge, represent and warrant that the only real estate
broker or brokers involved in the negotiation and execution of this Lease is the
broker or brokers named in Item I of the Basic Lease Provisions; that
-22-
<PAGE> 23
Landlord is obligated to pay to it or them or for their benefit a leasing
commission; and that no other broker or person is entitled to any leasing
commission or compensation as a result of the negotiation or execution of this
Lease. Each party shall indemnify the other party and hold it harmless from any
and all liability for the breach of any such representation and warranty on its
part and shall pay any compensation to any other broker or person who may be
deemed or held to be entitled thereto.
Section 18.11. Severability of Invalid Provisions. If any provision of this
Lease shall be held to be invalid, void or unenforceable, the remaining
provisions hereof shall not be affected or impaired, and such remaining
provisions shall remain in full force and effect.
Section 18.12. Definition of the Relationship between the Parties. Landlord
shall not, by virtue of the execution of this Lease or the leasing of the Leased
Premises to Tenant, become or be deemed a partner of or joint venturer with
Tenant in the conduct of Tenant's business on the Premises or otherwise.
Section 18.13. Estoppel Certificate. Tenant shall, within ten (10) days
following receipt of a written request from Landlord, execute, acknowledge and
deliver to Landlord or to any lender, purchaser or prospective lender or
purchaser designated by Landlord a written statement, in the form as Landlord
may reasonably request, certifying (i) that this Lease is in full force and
effect and unmodified (or, if modified, stating the nature of such
modification), (ii) the date to which rent has been paid, (iii) that there are
not, to Tenant's knowledge, any uncured defaults (or specifying such defaults if
any are claimed), and (iv) any other matters or state of facts reasonably
required respecting the Lease or Tenant's occupancy of the Leased Premises. Any
such statement may be relied upon by any prospective purchaser or mortgagee of
all or any part of the Building. Tenant's failure to deliver such statement
within such period shall be conclusive upon Tenant that this Lease is in full
force and effect and unmodified, and that there are no uncured defaults in
Landlord's performance hereunder.
Section 18.14. Hazardous Waste. Tenant shall not in any manner use, maintain or
allow the use or maintenance of the Leased Premises in violation of any law,
ordinance, statute, regulation, rule or order (collectively "Laws") of any
governmental authority, including but not limited to Laws governing zoning,
health, safety (including fire safety), occupational hazards, and pollution and
environmental control. Tenant shall not use, maintain or allow the use or
maintenance of the Leased Premises or any part thereof to treat, store, dispose
of, transfer, release, convey or recover hazardous, toxic or infectious waste
nor shall Tenant otherwise, in any manner, possess or allow the possession of
any hazardous, toxic or infectious waste on or about the Leased Premises;
provided, however, any toxic material lawfully permitted and generally
recognized as necessary and appropriate for general office use may be stored and
used on the Leased Premises so long as (i) such storage and use is in the
ordinary course of Tenant's business permitted under this Lease; (ii) such
storage and use is performed in compliance with all applicable Laws and in
compliance with the highest standards prevailing in the industry for the storage
and use of such materials; (iii) Tenant delivers prior written notice to
Landlord of the identity of and information regarding such materials as Landlord
may require; and (iv) Landlord consents thereto. Hazardous, toxic or infectious
waste shall mean any solid, liquid or gaseous waste, substance or emission or
any combination thereof which may (i) cause or significantly contribute to an
increase in mortality or
-23-
<PAGE> 24
in serious illness, or (ii) pose the risk of a substantial present or potential
hazard to human health, to the environment or otherwise to animal or plant life,
and shall include without limitation hazardous substances and materials
described in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; the Resource Conservation and Recovery Act,
as amended; and any other applicable federal, state or local Laws. Tenant shall
immediately notify Landlord of the presence or suspected presence of any
hazardous, toxic or infectious waste on or about the Leased Premises and shall
deliver to Landlord any notice received by Tenant relating thereto.
Landlord and its agents shall have the right, but not the duty, to inspect the
Leased Premises and conduct tests thereon at any time to determine whether or
the extent to which there is hazardous, toxic or infectious waste on the Leased
Premises. Landlord shall have the right to immediately enter upon the Leased
Premises to remedy any contamination found thereon. In exercising its rights
herein, Landlord shall use reasonable efforts to minimize interference with
Tenant's business but such entry shall not constitute an eviction of Tenant, in
whole or in part, and Landlord shall not be liable for any interference, loss,
or damage to Tenant's property or business caused thereby. If any lender or
governmental agency shall ever require testing to ascertain whether there has
been a release of hazardous materials, then the reasonable costs thereof shall
be reimbursed by Tenant to Landlord upon demand as Additional Rent if such
requirement arose in whole or in part because of Tenant's use of the Leased
Premises. Tenant shall execute affidavits, representations and the like from
time to time, at Landlord's request, concerning Tenant's best knowledge and
belief regarding the presence of any hazardous, toxic or infectious waste on the
Leased Premises or Tenant's intent to store or use toxic materials on the Leased
Premises. Tenant shall indemnify and hold harmless Landlord from any and all
claims, loss, liability, costs, expenses or damage, including attorneys' fees
and costs of remediation, incurred by Landlord in connection with any breach by
Tenant of its obligations under this section. The covenants and obligations of
Tenant under this Section 18.14 shall survive the expiration or earlier
termination of this Lease for a period of five (5) years.
Landlord represents to Tenant that Landlord has not received any written notice
of any release, leak, discharge, spill, disposal or emission of hazardous, toxic
or infectious waste on the Leased Premises.
Section 18.15. Agency Disclosure. Tenant acknowledges having reviewed the Agency
Disclosure Statement and Tenant acknowledges that said Statement is signed and
attached hereto and made a part hereof as Exhibit F. The broker as provided in
Item I of the Basic Lease Provisions, its agent and employees, have represented
only the Landlord, and have not in any way represented the Tenant, in the
marketing, negotiation, and completion of this lease transaction.
Section 18.16. Financial Statements. During the Lease Term and any extensions
thereof, Tenant shall provide to Landlord on an annual basis, within ninety (90)
days following the end of Tenant's fiscal year, and upon Landlord's written
request therefor not more than one (1) time per Lease year, a copy of Tenant's
most recent certified and audited financial statements prepared as of the end of
Tenant's fiscal year. Such financial statements shall be prepared in conformity
with generally accepted accounting principles consistently applied.
-24-
<PAGE> 25
Section 18.17. Representations and Indemnifications. Any representations and
indemnifications of Landlord contained in the Lease shall not be binding upon
(i) any mortgagee having a mortgage presently existing or hereafter placed on
the Building, or (ii) a successor to Landlord which has obtained or is in the
process of obtaining fee title interest to the Building as a result of a
foreclosure of any mortgage or a deed in lieu thereof.
Section 18.18. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is a corporation that is
duly organized, validly existing and in good standing in accordance with the
laws of the state under which it was organized; (ii) all action necessary to
authorize the execution of this Lease has been taken by Tenant; and (iii) the
individual executing and delivering this Lease on behalf of Tenant has been
authorized to do so, and such execution and delivery shall bind Tenant. Tenant,
at Landlord's request, shall provide Landlord with evidence of such authority.
Section 18.19. Right of First Refusal. If Tenant is not in default hereunder,
and subject to any rights of GE Capital Consumer Card Co. to the Refusal Space,
Tenant shall have the right of first refusal ("Refusal Option") to lease any
additional space in the Building ("Refusal Space") as such space becomes
available for leasing during the Lease Term which shall include any portion of
the space currently leased to Cincom which Landlord proposes to recapture and
lease to a third party. The term for the Refusal Space shall be coterminous with
the Lease Term, provided, however, that the minimum term for the Refusal Space
shall be three (3) years and the Lease Term shall be extended, if necessary, to
be coterminous with the term for the Refusal Space. The Refusal Space shall be
offered to Tenant at the rental rate and upon such other terms and conditions,
excluding rental abatement and other concessions, as contained under this Lease.
Landlord shall provide Tenant an allowance for tenant finish improvements for
the Refusal Space in the amount of Three Dollars ($3.00) per rentable square
foot of the Refusal Space leased ("Refusal Space Allowance"). In the event that
the Refusal Space is not leased to the initial third party prospective tenant,
then this Refusal Option shall remain in effect in the event of an offer to any
other specific third party prospective tenant and the Refusal Space shall again
be offered to Tenant in accordance herewith.
Upon notification in writing by Landlord that the Refusal Space is available,
Tenant shall have five (5) business days in which to notify Landlord in writing
of its election to lease the Refusal Space at such rental rates described above,
in which event this Lease shall be amended to incorporate such Refusal Space.
It is understood and agreed that this Refusal Option shall not be construed to
prevent any tenant in the Building from extending or renewing its lease for the
same or lessor square feet.
In the event Tenant exercises its option for the Refusal Space, Tenant shall
waive its First Termination Option in Section 18.21 of this Lease and
acknowledges and agrees that the square footage and buy out amount in Tenant's
Second Termination Option in Section 18.23 of this Lease shall be adjusted
proportionately for any Refusal Space taken.
Section 18.20. Option to Renew. If Tenant is not in default hereunder, Tenant
shall have one (1) option to renew the Lease Term for one (1) additional period
of five (5) years (the "Option Period"). Such renewal shall be upon the same
terms and
-25-
<PAGE> 26
conditions contained in the Lease for the original Lease Term except for this
provision giving the renewal option and subject to an adjustment of the Minimum
Annual Rent. Such option shall be exercised by the occurrence of the following
events: (i) Tenant's giving written notice to Landlord of its intention to renew
the Lease Term no later than nine (9) months prior to the expiration of the
original Lease Term; and (ii) Tenant's giving written notice to Landlord of its
acceptance of the Minimum Annual Rent as adjusted herein within ten (10) days
following receipt of the Landlord's written notification of the Minimum Annual
Rent for the Option Period.
The Minimum Annual Rent for the Option Period shall be an amount equal
to the Minimum Annual Rent then being quoted by Landlord to prospective tenants
for space of comparable size and quality and with similar or equivalent
improvements in comparable buildings in a comparable location; provided,
however, that in no event shall the Minimum Annual Rent payable during such
Option Period be less than the Minimum Annual Rent payable during the last year
of the original Lease Term. Landlord shall notify Tenant of the amount of any
rent change no later than thirty (30) days after receiving notice of Tenant's
intent to exercise such option to renew. The Minimum Monthly Rent shall be an
amount equal to one-twelfth (1/12) of the Minimum Annual Rent for the Option
Period and shall be paid at the same time and in the same manner as provided in
the Lease. In the event that the parties cannot agree to the Minimum Annual Rent
for the Option Period, the parties agree to submit such rent determination to
arbitration in accordance with the rules and procedures of the American
Arbitration Association using the method commonly known as "Baseball Style
Arbitration."
Section 18.21. First Option to Terminate. Provided Tenant is not in default
hereunder, Tenant shall have the option to terminate this Lease on July 17, 1999
("First Termination Option"). Such option shall be exercised by (i) Tenant's
giving written notice to Landlord of its intention to terminate at least nine
(9) months prior to the effective date of such termination, and (ii) Tenant's
payment to Landlord of an amount equal to Landlord's unamortized costs for
leasing commissions, tenant finish improvement allowance and conduit costs and
the first two (2) months of net rent abatement at an interest rate of ten
percent (10%) per annum through the expiration date of this Lease plus three (3)
months of the then current gross rent, which payment shall accompany the notice
provided in (i) above. Such payment is made in consideration for Landlord's
grant of this option to terminate, to compensate Landlord for rental and other
concessions given to Tenant, and for other good and valuable consideration. Such
payment shall not in any manner affect Tenant's obligations to pay Minimum
Annual Rent and additional rent or to perform its obligations under the Lease up
to and including the date of termination. Failure to timely and properly
exercise this option shall forever waive and extinguish it. If such option is
validly exercised, then upon such termination, Tenant shall surrender the Leased
Premises to Landlord in accordance with the terms of this Lease and each party
shall be released from further liability hereunder; provided, however, that such
termination shall not affect any right or obligation arising prior to
termination.
Section 18.22. Parking. Tenant will be allowed the use of five (5) unreserved
parking spaces in the parking lot, per one thousand (1,000) rentable square feet
of Leased Premises leased by Tenant from Landlord.
Section 18.23. Second Option to Terminate. Provided Tenant is not in default
hereunder, Tenant shall have the option to terminate this Lease on July 17, 2002
("Second Termination
-26-
<PAGE> 27
Option"). Such option shall be exercised by (i) Tenant's giving written notice
to Landlord of its intention to terminate at least nine (9) months prior to the
effective date of such termination, and (ii) Tenant's payment to Landlord of an
amount equal to Landlord's unamortized costs for leasing commissions, tenant
finish improvement allowance and conduit costs and the first two (2) months of
net rent abatement at interest rate of ten percent (10%) per annum through the
expiration date of this Lease, which payment shall accompany the notice provided
in (i) above. Such payment is made in consideration for Landlord's grant of this
option to terminate, to compensate Landlord for rental and other concessions
given to Tenant, and for other good and valuable consideration. Such payment
shall not in any manner affect Tenant's obligations to pay Minimum Annual Rent
and Annual Rental Adjustment or to perform its obligations under the Lease up to
and including the date of termination. Failure to timely and properly exercise
this option shall forever waive and extinguish it. If such option is validly
exercised, then upon such termination, Tenant shall surrender the Leased
Premises to Landlord in accordance with the terms of this Lease and each party
shall be released from further liability hereunder; provided, however, that such
termination shall not affect any right or obligation arising prior to
termination.
Section 18.24. Third Option to Terminate. Provided Tenant is not in default
hereunder, Tenant shall have the option to terminate this Lease at any time
during the Lease Term without penalty, provided Tenant leases a total of 29,000
rentable square feet of office space in a building owned by Landlord in the
Cincinnati Area for a term equal to the remaining term of this Lease, but not
less than five (5) years. If such option is validly exercised and a new lease is
entered into between Landlord and Tenant, this Lease will terminate upon
occupancy by Tenant of the new space. If such option is validly exercised, then
upon such termination and commencement of the new lease, Tenant shall surrender
the Leased Premises to Landlord in accordance with the terms of this Lease and
each party shall be released from further liability hereunder; provided,
however, that such termination shall not affect any right or obligation arising
prior to termination.
Section 18.25. Consent to be Reasonable. Wherever in the Lease it is required
that consent or approval of the other party shall be required, such consent or
approval which is required shall not be unreasonably withheld, delayed or
denied.
Section 18.26. Early Occupancy. Landlord will allow Tenant to take possession of
the Leased Premises no later than November 15, 1996 to allow Tenant to prepare
the Leased Premises for retrofit work and furniture placement. All terms and
conditions of this Lease will become effective upon Tenant taking possession of
the Leased Premises, except for the payment of Minimum Rent which will commence
on March 1, 1997 and Annual Rental Adjustment which will commence on January 1,
1997. Notwithstanding this paragraph, Tenant's early occupancy of the Leased
Premises shall not be deemed an acceptance of Landlord's work on the tenant
finish improvements.
IN WITNESS WHEREOF, the parties hereto have fully executed this Lease as of the
day and year first above written.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
WITNESSES: an Indiana limited partnership
- ---------------------
-27-
<PAGE> 28
/s/ Alice Battaglia By: Duke Realty Investments, Inc.,
ALICE BATTAGLIA its general partner
(Printed)
By: /s/ Jeffrey G. Tulloch
/s/ Nicole C. Stevens Jeffrey G. Tulloch
Nicole C. Stevens Vice President,
(Printed) Cincinnati Group
-28-
<PAGE> 29
TENANT:
WITNESSES: ENTEX INFORMATION SERVICES,
- ------------------ INC., a Delaware corporation
- ------------------
(printed) By: /s/ D. H. Allardyce
/s/ Robert A. Weber Printed: D. H. Allardyce
Robert A. Weber
(printed) Title: EV.P., Operations
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State, personally
appeared Jeffrey G. Tulloch, by me known and by me known to be the Vice
President, Cincinnati Group of Duke Realty Investments, Inc., an Indiana
corporation, the general partner of Duke Realty Limited Partnership, an Indiana
limited partnership, who acknowledged the execution of the foregoing "Lease" on
behalf of said partnership.
WITNESS my hand and Notarial Seal this 31 day of Dec, 1996.
/s/ Nicole C. Stevens
Notary Public
[NICOLE C. STEVENS NOTARIAL SEAL NOT SHOWN]
(Printed Signature)
My Commission Expires:
My County of Residence:
STATE OF New York )
) SS:
COUNTY OF Westchester )
Before me, a Notary Public in and for said County and State, personally appeared
Dale Allardyce, by me known and by me known to be the EVP - Operations of Entex
Information Services, Inc., a Delaware corporation, who acknowledged the
execution of the foregoing "Lease" on behalf of said corporation.
WITNESS my hand and Notarial Seal this 26th day of November, 1996.
[B. MAXINE BAKER NOTARIAL SEAL NOT SHOWN] /s/ B. Maxine Baker
Notary Public
B. MAXINE BAKER
(Printed Signature)
My Commission Expires: April 1, 1998
My County of Residence: Putnam
-29-
<PAGE> 30
EXHIBIT A
[FLOOR PLAN]
<PAGE> 31
EXHIBIT B
To be attached once plans are finalized by Tenant. Payment for improvements to
be made in accordance with the body of the lease.
<PAGE> 32
EXHIBIT C
RULES AND REGULATIONS
OFFICE LEASE
------------
These rules and regulations have been adopted for the purpose of insuring order
and safety in the Building and of maintaining the rights of tenants and of the
owner.
1. The sidewalks, entrances, vestibules, halls, passages, lavatories, and
stairways are the property of the Lessor and shall not be obstructed or
used for any purpose other than ingress and egress. The Lessor shall in
all cases retain the right to control and prevent access to the
building, or in any part thereof, of all persons whose presence, in the
judgment of the Lessor or its employees, shall be prejudicial to the
safety, character, reputation or interests of the Building or its
occupants.
2. No awnings or other projections shall be attached to the outside walls
of the Building. No curtains, blinds, shades or screens shall be
attached to or hung in or used in connection with any window or door of
the Leased Premises other than Landlord standard drapes without
Landlord's prior written approval. All electrical ceiling fixtures hung
in offices or spaces along the perimeter of be building must be
fluorescent, of a quality, type, design and bulb color approved by
Landlord. Neither the interior nor the exterior of any windows shall be
coated or otherwise sunscreened without written consent of Landlord.
3. No sign, advertisement, notices or handbill shall be exhibited,
distributed, painted or affixed by any Tenant on, about or from any part
of the Leased Premises or the Building without prior written consent of
Landlord. In the event of the violation of the foregoing by any Tenant,
Landlord may remove or stop same without any liability and may charge
the expense incurred in such removal or stopping to Tenant. Standard
interior signs on doors, and directory tablet shall be inscribed,
painted or affixed for each Tenant by the Landlord and shall be of a
size, color and style acceptable to Landlord. The directory tablet will
be provided exclusively for the display of the name and location of
Tenants only, and Landlord reserves the right to exclude any other names
therefrom. Nothing may be placed on the exterior corridor walls or
corridor doors other than Landlord's standard lettering.
4. The sashes, sash doors, windows and doors that reflect or admit light
and air into halls, passageways or other public places in the Building
shall not be covered or obstructed by any Tenant.
5. The water and wash closets and other plumbing fixtures shall not be used
for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown herein. All
damages resulting from any misuse of the fixtures shall be borne by
Tenant who, or whose subtenants, assignees or any of their servants,
employees, agents, visitors or licensees shall have caused the same.
6. No Tenant shall mark, paint, drill into or in any way deface any part of
the Leased Premises or the Building. No boring, cutting or stringing of
wires or laying of linoleum or other similar floor coverings shall be
permitted, except with the prior written consent of the Landlord and as
the Landlord may direct.
7. No bicycles, vehicles, birds or animals of any kind shall be brought
into or kept in or about the Leased Premises, and no cooking shall be
done or permitted by any Tenant on the Leased Premises, except that the
preparation of coffee, tea, hot chocolate and similar items for Tenants
and their employees shall be permitted provided power shall not exceed
the amount which can be provided by a 30-amp circuit. No Tenant shall
have cause or permit any unusual or objectionable odors to be produced
or permeate the Leased Premises.
Page 1 of 3
<PAGE> 33
EXHIBIT C
RULES AND REGULATIONS
8. The Leased Premises shall not be used for manufacturing or for the
storage of merchandise except as such storage may be incidental to the
permitted use of the Leased Premises. No tenant shall occupy or permit
any portion of the Leased Premises to be occupied as an office for the
manufacture or sale of liquor, narcotics, or tobacco in any form, or as
a medical office, or as a barber, or manicure shop, or as an employment
bureau without the express written consent of Landlord. The Leased
Premises shall not be used for lodging or sleeping or for any immoral or
illegal purposes.
9. No Tenant shall make, or permit to be made, any unseemly noise or
disturb or interfere with occupants of this or neighboring buildings
whether by the use of any musical instrument radio, phonograph, unusual
noise or in any other way. No Tenant shall throw anything out of doors,
windows or down the passageways.
10. No tenant, subtenant or assignee, nor any of its servants, employees,
agents, visitors or Licensees shall at any time bring or keep upon the
Leased Premises any flammable, combustible or explosive fluid, chemical
or substance.
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in
existing locks or the mechanism thereof. Each tenant must, upon the
termination of his tenancy, restore to the Landlord all keys of storage
offices and toilet rooms, either furnished to, or otherwise procured by,
such Tenant, and in the event of the loss of keys so furnished, such
Tenant shall pay to the Landlord the cost of replacing the same or of
changing the lock or locks opened by such lost key if Landlord shall
deem it necessary to make such changes.
12. All removals or the carrying in or out of any safes, freight, furniture
or bulky matter of any description must take place during the hours
which Landlord shall reasonably determine from time to time. The moving
of safes or other fixtures or bulky matter of any kind must be done upon
previous notice to the superintendent of the Building and under his
supervision, and the persons employed by any Tenant for such work must
be acceptable to Landlord. Landlord reserves the right to inspect all
safes, freights or other bulky articles which violate any of these Rules
and Regulations or the Lease of which these Rules and Regulations are a
part. The Landlord reserves the right to prescribe the weight and
position of all safes, which must be placed upon supports approved by
Landlord to distribute the weight.
13. No Tenant shall purchase water, ice, towel, janitorial or maintenance or
other like services from any person or persons not approved by Landlord.
14. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as an office location, and upon written
notice from Landlord any Tenant shall refrain from or discontinue such
advertising.
15. In case of an invasion, mob riot, public excitement or other
circumstances rendering such action advisable in Landlord's opinion,
Landlord reserves the right without any abatement or rent to require all
persons to vacate the Building and to prevent access to the Building
during the continuance of the same for the safety of the Tenants and the
protection of the Building and the property in the Building.
16. Any persons employed by any Tenant to do work upon the Premises shall,
while in the Building and outside of the Leased Premises, be subject to
and under the control and direction of the superintendent of the
Building (but not as an agent or servant of said superintendent or of
the Landlord), and Tenant shall not be responsible for all acts of such
persons.
Page 2 of 3
<PAGE> 34
EXHIBIT C
RULES AND REGULATIONS
17. All doors opening into public corridors shall be kept closed, except
when in use for ingress and egress.
18. Canvassing, soliciting and peddling in the Building are prohibited, and
each Tenant shall report and otherwise cooperate to prevent the same.
19. All office equipment of any electrical or mechanical nature shall be
placed by Tenant in the Leased Premises in settings which will, to the
maximum extent possible, absorb or prevent any vibration, noise and
annoyance.
20. No air conditioning unit or other similar apparatus shall be installed
or used by a Tenant without the written consent of Landlord.
21. There shall not be used in any space, or in public halls of the
Building, either by Tenant or others, any hand trucks except those
equipped with rubber tires and rubber side guards.
22. No vending machine or machines of any description shall be installed,
maintained or operated upon the Leased Premises without written consent
of Landlord.
23. The scheduling of Tenant move-ins shall be subject to the reasonable
direction of Landlord.
24. Tenant agrees that it shall not discriminate upon the basis of race,
color, religion, sex or national origin in the use and occupancy or in
any sublease or subletting of the demises premises.
25. Landlord may refuse admission to the Building outside of ordinary
business hours to any person not known to watchman in charge, or not
having a pass issued by Tenant or not properly identified, and may
require all persons admitted to or leaving the Building outside of
ordinary business hours to register.
26. All entrance doors in the Premises shall be left locked when the
Premises are not in use.
27. The Landlord reserves the right to rescind, modify or supplement any of
these rules and to make such other and further reasonable rules and
regulations which, in the Landlord's judgment may from time to time be
needful for the safety, care and cleanliness of the Premises, and for
the preservation of good order therein.
Anything contained in these Rules and Regulations which is contrary to or
inconsistent with any express provision of the Lease shall be void and of no
force and effect.
Page 3 of 3
<PAGE> 35
CLEANING SCHEDULE
5 DAYS
Vinyl Floors
Daily: Dust mop and remove spillage.
Weekly: Damp mop.
Monthly: Damp mop and spray clean complete. Refinish if required.
Carpet Floors
Daily: Vacuum traffic lanes.
Spot vacuum other areas.
Weekly: Complete vacuum.
Baseboards
Monthly: Dust
Kick plates
Monthly: Polish
Desks
Daily: Dust open tops, spot clean.
Weekly: Dust vertical.
Ash Trays and Urns
Daily: Empty and wipe.
Weekly: Wet wipe and remove stains.
File Cabinets
Daily: Dust horizontal.
Monthly: Dust complete.
Pictures and Frames
Weekly: Dust.
Tables and Stands
Daily: Dust horizontal and remove spots.
Weekly: Dust complete.
Ledges and Window Sills
Weekly: Dust.
Monthly: Wet wipe.
Page 1 of 3
EXHIBIT D
<PAGE> 36
Cleaning Specifications
Page 2 of 3
Telephones
Monthly: Clean.
Drinking Fountains
Daily: Clean, polish and disinfect.
Waste Receptacles
Daily: Empty.
Weekly: Wet wipe if required.
Replace liners as required.
Glass Partitions
Daily: Spot clean.
Monthly: Wash complete.
Chairs
Weekly: Dust bottoms.
Monthly: Vacuum.
Entrance Doors
Daily: Spot clean.
Weekly: Wash complete.
Lights, Switches, Doors and Frames
Weekly: Complete cleaning not included, but marks will be removed if it does not
spoil general appearance.
Elevators
Daily: Clean, Polish, vacuum or damp mop.
Rest Rooms and Lounges
Daily: Empty and disinfect all waste receptacles.
Clean and polish all mirrors.
Empty sanitary napkin containers.
Clean and disinfect all wash basins, toilet bowls and urinals.
Disinfect underside and tops of toilet seats.
Spot clean walls around wash basins and partitions.
Wet mop floors with germicidal solution.
Fill out dispensers from customers stock.
Weekly: Wash all partitions, horizontal and vertical surfaces.
Vents and Louvers
Monthly: Dust.
EXHIBIT D
<PAGE> 37
Cleaning Specifications
Page 3 of 3
Lunch Room
Daily: Clean table tops.
Mop floors with germicidal solution.
Wipe chairs.
EXHIBIT D
<PAGE> 38
EXHIBIT F
NOTICE TO PROSPECTIVE REAL ESTATE PURCHASERS/TENANTS
In Ohio, real estate licensees are required to disclose which party the
represent in a real estate transaction. Under Ohio law, a real estate licensee
is considered to be an agent of the owner of real estate unless there is an
agreement to the contrary and that agreement is disclosed to all parties.
Some of be duties of the licensee, as the agent of the owner, are to:
* Treat all parties to a transaction honestly
* Offer the property without regard to race, color, religion, sex,
ancestry, national origin or handicap
* Promote the best interest of the owner
* Obtain the best price for the owner
* Fully disclose to the owner all facts which might affect or influence
a decision
* Present all offers to the owner
As a buyer, if you choose to have a real estate broker represent you as your
agent, you should enter into a written contract that clearly establishes the
obligations of both you and your agent and specifies how your agent will be
compensated.
Under Ohio law, the disclosure statement below must be submitted to the
prospective purchaser/tenant in each transaction. This form has been approved by
the Ohio Real Estate Commission for use by Ohio real estate licensees. Please
sign below.
AGENCY DISCLOSURE STATEMENT
The listing broker and all agents associated with the listing broker represent
the owner.
The___________________________________
(Selling Broker)
and___________________________________represent (please check one):
(Selling Agent)
the purchaser/tenant_____the owner_____
If a broker/agent is representing both the purchaser/tenant and the owner as a
dual agent, he/she must attach a copy of the agreement signed by the
purchaser/tenant and owner acknowledging their agreement to this arrangement.
By signing below, the parties confirm that they have received, read and
understood the information in this Agency Disclosure Form and that this form was
provided to them before signing a contract to purchase/lease real estate.
/s/ signature illegible
Purchaser/Tenant Date Owner Date
- -------------------------------------------------
Purchaser/Tenant Date Owner Date
Any questions regarding the role or responsibility of real estate brokers or
agents in Ohio can be directed to an attorney or to:
State of Ohio
Department of Commerce
Division of Real Estate
Telephone in Ohio 1-800-344-4100 or in Columbus 614/466-4100
<PAGE> 39
[FLOOR PLANS]
<PAGE> 40
FIRST LEASE AMENDMENT
---------------------
THIS FIRST LEASE AMENDMENT (the "Amendment") is executed this 14th
day of May, 1997, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
limited partnership ("Landlord"), and ENTEX INFORMATION SERVICES, INC., a
Delaware corporation ("Tenant").
W I T N E S S E T H
-------------------
WHEREAS, Landlord and Tenant entered into a certain Lease dated
December 31, 1996, (the "Lease"), whereby Tenant leased from Landlord certain
premises consisting of approximately 20,036 rentable square feet of space (the
"Original Premises") located at Suite 300, 4605 Duke Drive, Mason, Ohio 45040;
and
WHEREAS, Landlord and Tenant desire to expand the Original Premises
by approximately 2,750 rentable square feet (the "Additional Space").
Collectively, the Original Premises and the Additional Space shall hereinafter
be referred to as the "Leased Premises"; and
WHEREAS, Landlord and Tenant desire to amend certain other
provisions of the Lease to reflect such expansion, changes and additions to the
Lease;
NOW, THEREFORE, in consideration of the-foregoing premises, the
mutual covenants herein contained and each act performed hereunder by the
parties, Landlord and Tenant hereby agree that the Lease is amended as follows:
1. Amendment of Article 1. Basic Lease Provisions.
(a) Commencing November 1, 1997, Section 1.01 of Article 1
of the Lease is hereby amended by adding Exhibit A-1, attached hereto and
incorporated herein by reference, on which the Additional Space is shown.
(b) Commencing November 1, 1997, Subsections B, C, D and E
of Section 1.02 of Article 1 of the Lease are hereby deleted and the following
subsections are substituted in lieu thereof:
B. Rentable Area: approximately 22,786 rentable square feet;
Landlord shall use BOMA usable standards plus sixteen percent (16%)
loss factor, consistently applied, in determining the Rentable Area
and the rentable area of the Building. The Rentable Area shall
include the area within the Leased Premises plus a pro rata portion
of the area covered by the common areas within the Building, as
reasonably determined by Landlord (applying BOMA usable standards
plus sixteen percent (16%) loss factor). Landlord's determination of
Rentable Area made in good faith shall conclusively be deemed
correct for all purposes hereunder, including without limitation the
calculation of Tenant's Building Expense Percentage and Tenant's
Minimum Annual Rent. Landlord's measurement of the Rentable Area of
Tenant shall be subject to field verification by Tenant or its
designated representative.
-1-
<PAGE> 41
C. Building Expense Percentage: 13.0% (Rentable Area of Tenant/22,786
rentable square feet divided by Rentable Area of Building/175,485
rentable square feet);
D. Minimum Annual Rent:
Original Premises
-----------------
<TABLE>
<S> <C>
November 1, 1997 - December 31, 1997 $ 41,073,80 (2 months)
January 1, 1998 - December 31, 1998 $246,442,80 per year
January 1, 1999 - December 31, 1999 $246,442.80 per year
January 1, 2000 - December 31, 2000 $246,442.80 per year
January l, 2001 - December 31, 2001 $246,442.80 per year
January l, 2002 - December 31, 2002 $266,478.84 per year
January 1, 2003 - December 31, 2003 $266,478.84 per year
January 1, 2004 - December 31, 2004 $266,478.84 per year
January 1, 2005 - June 30, 2005 $133,239.42 (6 months)
July 1, 2005 - July 17, 2005 $ 12,177.78 (17 days);
Additional Space:
November 1, 1997 - October 31, 1998 $33,825.00 per year
November 1, 1998 - October 31, 1999 $33,825.00 per year
November 1, 1999 - October 31, 2000 $33,825.00 per year
November 1, 2000 - December 31, 2000 $ 5,637.50 (2 months)
January 1, 2001 - December 31, 2001 $36,575.04 per year
January 1, 2002 - December 31, 2002 $36,575.04 per year
January 1, 2003 - December 31, 2003 $36,575.04 per year
January 1, 2004 - December 31, 2004 $36,574.04 per year
January 1, 2005 - June 30, 2005 $18,287.52 (6 months)
July 1, 2005 - July 17, 2005 $ 1,671.44 (17 days);
E. Monthly Rental Installments:
Original Premises
-----------------
November 1, 1997 - December 31, 2001 $20,536.90 per month
January 1, 2002 - June 30, 2005 $22,206.57 per month
July 1, 2005 - July 17, 2005 $12,177.78 (17 days);
Additional Space:
----------------
November 1, 1997 - December 31, 2000 $ 2,818.75 per month
January 1, 2001 - June 30, 2005 $ 3,047.92 per month
July 1, 2005 - July 17, 2005 $ 1,671.44 (17 days);
</TABLE>
F. Lease Term: Through July 17, 2005 for the Original Premises and
Additional Space;
2. Amendment of Section 2.02. Construction of Tenant Finish
Improvements and Possession. The following shall be added to the end of Article
2 of the Lease:
"Tenant has personally inspected the Additional Space
and accepts the same "as is" without representation or warranty by
Landlord of any kind and with the understanding that Landlord shall
have no responsibility with respect thereto except as specifically
provided herein. Landlord shall provide an allowance for the direct
costs of tenant finish improvements for the Additional Space up to
the amount of
<PAGE> 42
Eight Thousand Two Hundred Fifty Dollars ($8,250.00) (the
"Allowance"). All tenant finish improvements in the Additional Space
shall be performed by Landlord and shall be completed in a good and
workmanlike manner in accordance with applicable building codes and
regulations and in accordance with plans and specifications approved
by Landlord and Tenant. The Allowance shall be
-2-
<PAGE> 43
used exclusively to construct and pay for the tenant finish
improvements for the Additional Space. The Allowance shall be paid
to Tenant in accordance with this Section 2.02 of the Lease and
after Tenant occupies the Additional Space.
Upon commencement of the Lease as to the Additional Space, Tenant
shall execute a letter of understanding as referred to in Section 2.03 of the
Lease."
3. Amendment of Section 18.21. First Option to Terminate.
Section 18.21 of the Lease is hereby amended to provide that the payment from
Tenant to Landlord shall include the unamortized leasing commissions and
Allowance paid by Landlord for the Additional Space.
4. Amendment of Section 18.23. Second Option to Terminate.
Section 18.23 of the Lease is hereby amended to provide that the payment from
Tenant to Landlord shall include the unamortized leasing commissions and
Allowance paid by Landlord for the Additional Space.
5. Amendment of Article 18. Article 18 of the Lease is
hereby amended by adding the following additional sections:
Section 18.27. Shuttle Van. Landlord's obligation to provide
reimbursement for a shuttle van as set forth in Section 18.23 of
that certain Lease dated May 15, 1995, by and between Landlord and
Tenant for leased premises at 4705 Duke Drive is hereby terminated
and of no further force or effect.
6. Application of Additional Space to Previous Agreement.
Landlord and Tenant acknowledge that the rentable square feet of the Additional
Space shall be added to any future rentable square feet leased by Landlord to
Tenant in accordance with that certain Agreement dated March 20, 1997 by and
between Landlord and Tenant.
7. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution of
this Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
8. Examination of Amendment. Submission of this instrument
for examination or signature to Tenant does not constitute a reservation or
option, and it is not effective until execution by and delivery to both Landlord
and Tenant.
9. Definitions. Except as otherwise provided herein, the
capitalized terms used in this Amendment shall have the definitions set forth in
the Lease.
10. Incorporation. This Amendment shall be incorporated into
and made a part of the Lease, and all provisions of the Lease not expressly
modified or amended hereby shall remain in full force and effect.
-3-
<PAGE> 44
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
WITNESSES
/s/ Bill Poffenberger By: Duke Realty Investments, Inc.,
Bill Poffenberger its general partner
(Printed)
/s/ Kathleen A. Jones
Kathleen A. Jones By: /s/ James W. Gray
(Printed)
Printed: James W. Gray
Title: VP & General Manager
TENANT:
WITNESSES: ENTEX INFORMATION SERVICES, INC.,
/s/ Robert A. Weber a Delaware corporation
Robert A. Weber
(Printed)
By: /s/ D.H. Allardyce
/s/ Dayatra D. Jones
Dayatra D. Jones Printed: D.H. Allardyce
(Printed)
Title: EVP Operations
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
Before me a Notary Public in and for said County and State
personally appeared James W. Gray, by me known and by me known to be the Vice
President of Realty Investments, Inc., an Indiana corporation, the general
partner of Duke Realty Limited Partnership, an Indiana limited partnership, who
acknowledged the execution of the foregoing "First Lease Amendment" on behalf of
said partnership.
WITNESS my hand and Notarial Seal this 14th day of May, 1997.
KATHLEEN A. JONES
-----------------
Notary Public
Kathleen A. Jones
-------------------
(Printed Signature)
My Commission Expires: 2/15/99
[Kathleen A. Jones Seal not shown]
My County of Residence: Hamilton
-4-
<PAGE> 45
STATE OF NEW YORK )
) SS:
COUNTY OF WESTCHESTER )
Before me, a Notary Public in and for said County and State,
personally appeared Dale Allardyce, by me known and by me known to be the EVP-
Operations of Entex Information Services, Inc., a Delaware corporation who
acknowledged the execution of the foregoing "First Lease Amendment" on behalf of
said corporation.
WITNESS my hand and Notarial Seal this 12th day of May, 1997.
/s/ B. Maxine Baker
Notary Public
B. Maxine Baker
(Printed Signature)
My Commission Expires: 4-1-98
[B. Maxine Baker Seal not shown]
My County of Residence: Putnam
-5-
<PAGE> 46
EXHIBIT A-1
[FLOOR PLAN]
<PAGE> 47
SECOND LEASE AMENDMENT
----------------------
THIS SECOND LEASE AMENDMENT (the "Amendment") is executed this 25th
day of August, 1997, by and between DUKE REALTY LIMITED PARTNERSHIP , an Indiana
limited partnership ("Landlord"), and ENTEX INFORMATION SERVICES, INC., a
Delaware corporation ("Tenant").
W I T N E S S E T H:
--------------------
WHEREAS, Landlord and Tenant entered into a certain Lease dated
December 31, 1996, (the "Lease"), whereby Tenant leased from Landlord certain
premises consisting of approximately 20,036 rentable square feet of space (the
"Original Premises") located at Suite 300, 4605 Duke Drive, Mason, Ohio 45040;
and
WHEREAS, Landlord and Tenant entered into a First Lease Amendment
dated May 14, 1997 ("First Amendment") whereby Tenant leased from Landlord an
additional 2,750 rentable square feet (the "First Additional Space").
WHEREAS, Landlord and Tenant desire to expand the original Premises
and the First Additional Space by approximately 9,362 rentable square feet (the
"Second Additional Space"). The Lease, First Amendment and this Amendment are
hereinafter referred to as the "Lease"; and
WHEREAS, Landlord and Tenant desire to amend certain other
provisions of the Lease to reflect such expansion, changes and additions to the
Lease;
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants herein contained and each act performed hereunder by the
parties, Landlord and Tenant hereby agree that the Lease is amended as follows:
1. Amendment of Article 1. Section 1.01.
Commencing September 1, 1997, Section 1.01 of Article 1 of the
Lease is hereby amended by adding Exhibit A-1, attached hereto and incorporated
herein by reference, on which the Second Additional Space is shown.
The Original Premises and the Second Additional Space shall hereinafter be
referred to as the "Leased Premises." After November 1, 1997, the First
Additional Space shall be included in the definition of Leased Premises.
2. Amendment of Basic Lease Provisions
(a) Commencing September 1, 1997 through October 31, 1997,
Subsections B, C D and E of Section 1.02 of Article 1 of the Lease are hereby
amended as follows:
B. Rentable Area: approximately 29,398 rentable square feet;
Landlord shall use BOMA usable standards plus sixteen percent (16%)
loss factor, consistently applied, in determining the Rentable Area
and the rentable area of the Building. The Rentable Area shall
include the area within the Leased Premises plus a pro rata portion
of the area covered by the common areas within the Building, as
reasonably determined by Landlord (applying BOMA usable standards
plus sixteen percent (16%) loss factor). Landlord's measurement of
the Rentable Area of Tenant shall be subject to field verification
by Tenant or its designated representative.
<PAGE> 48
C. Building Expense Percentage: 16.8% (Rentable Area of Tenant/29,398
rentable square feet divided by Rentable Area of Building/175,485
rentable square feet);
D. Minimum Annual Rent:
Original Premises
September 1, 1997 - October 31, 1997 $41,073.80 (2 months);
Second Additional Space:
September 1, 1997 - October 31, 1997 $19,192.10 (2 months);
E. Monthly Rental Installments:
Original Premises
September 1, 1997 - October 31, 1997 $20,536.90 per month;
Second Additional Space:
September 1, 1997 - October 31, 1997 $ 9,596.05 per month;
F. Lease Term: Through July 17, 2005 for the original Premises, First
Additional Space and Second Additional Space.
(b) Commencing November 1, 1997, Subsections B, C, D, E and F of
Section 1.02 of Article 1 of the Lease are hereby amended as follows:
B. Rentable Area: approximately 32,148 rentable square feet;
Landlord shall use BOMA usable standards plus sixteen percent (16%) loss
factor, consistently applied, in determining the Rentable Area and the
rentable area of the Building. The Rentable Area shall include the area
within the Leased Premises plus a pro rata portion of the area covered
by the common areas within the Building, as reasonably determined by
Landlord (applying BOMA usable standards plus sixteen percent (16%) loss
factor). Landlord's measurement of the Rentable Area of Tenant shall be
subject to field verification by Tenant or its designated
representative.
C. Building Expense Percentage: 18.30% (Rentable Area of Tenant/32,148
rentable square feet divided by Rentable Area of Building/175,485
rentable square feet);
D. Minimum Annual Rent:
Original Premises
November 1, 1997 - December 31, 1997 $ 41,073.80 (2 months)
January 1, 1998 - December 31, 1998 $246,442.80 per year
January 1, 1999 - December 31, 1999 $246,442.80 per year
January 1, 2000 - December 31, 2000 $246,442.80 per year
January 1, 2001 - December 31, 2001 $246,442.80 per year
January 1, 2002 - December 31, 2002 $266,478.84 per year
January 1, 2003 - December 31, 2003 $266,478.84 per year
January 1, 2004 - December 31, 2004 $266,478.84 per year
January 1, 2005 - June 30, 2005 $133,239.42 (6 months)
July 1, 2005 - July 17, 2005 $ 12,177.78 (17 days);
-2-
<PAGE> 49
First Additional Space:
November 1, 1997 - December 31, 1997 $ 5,637.50 (2 months)
January 1, 1998 - December 31, 1998 $33,825.00 per year
January 1, 1999 - December 31, 1999 $33,825.00 per year
January 1, 2000 - December 31, 2000 $33,825.00 per year
January 1, 2001 - December 31, 2001 $36,575.04 per year
January 1, 2002 - December 31, 2002 $36,575.04 per year
January 1, 2003 - December 31, 2003 $36,575.04 per year
January 1, 2004 - December 31, 2004 $36,574.04 per year
January 1, 2005 - June 30, 2005 $18,287.52 (6 months)
July 1, 2005 - July 17, 2005 $ 1,671,44 (17 days);
Second Additional Space
November 1, 1997 - December 31, 1997 $ 19,192.10 (2 months)
January 1, 1998 - December 31, 1998 $115,152.60 per year
January 1, 1999 - December 31, 1999 $115,152.60 per year
January 1, 2000 - December 31, 2000 $115,152.60 per year
January 1, 2001 - December 31, 2001 $115,152.60 per year
January 1, 2002 - December 31, 2002 $124,514.64 per year
January 1, 2003 - December 31, 2003 $124,514.64 per year
January 1, 2004 - December 31, 2004 $124,514.64 per year
January 1, 2005 - June 30, 2005 $ 62,257.32 (6 months)
July 1, 2005 - July 17, 2005 $ 5,690.18 (17 days);
E. Monthly Rental Installments:
Original Premises
November 1, 1997 - December 31, 2001 $20,536.90 per month
January 1, 2002 - June 30, 2005 $22,206.57 per month
July 1, 2005 - July 17, 2005 $12,177.78 (17 days);
First Additional Space
November 1, 1997 - December 31, 2000 $ 2,818.75 per month
January 1, 2001 - June 30, 2005 $ 3,047.92 per month
July 1, 2005 - July 17, 2005 $ 1,671.44 (17 days);
Second Additional Space
November 1, 1997 - December 31, 2001 $ 9,596.05 per month
January 1, 2002 - June 30, 2005 $10,376.22 per month
July 1, 2005 - July 17, 2005 $ 5,690.18 (17 days);
F. Lease Term: Through July 17, 2005 for the Original Premises, First
Additional Space and Second Additional Space;
3. Amendment of Section 2.02. Construction of Tenant Finish
Improvements and Possession.
Commencing August 1, 1997, the following shall be added to the
end of Article 2 of the Lease:
"Tenant has personally inspected the Second Additional
Space and accepts the same "as is" without representation or
warranty by Landlord of any kind and with the understanding
that Landlord shall have no responsibility with respect thereto
except as specifically provided herein. Landlord shall provide
an allowance for the direct costs of tenant finish improvements
for the Second Additional Space up to the amount of
Twenty-eight Thousand Eighty-six Dollars ($28,086.00) (the
"Second Additional Space Allowance"). All tenant finish
improvements in the Second Additional Space shall be performed
by Landlord and shall be completed in a good and workmanlike
manner in
-3-
<PAGE> 50
accordance with applicable building codes and regulations and
in accordance with plans and specifications approved by
Landlord and Tenant. The Second Additional Space Allowance
shall be used exclusively to construct and pay for the tenant
finish improvements for the Second Additional Space. The Second
Additional Space Allowance shall be paid to Tenant in
accordance with this Section 2.02 of the Lease and after Tenant
occupies the Second Additional Space.
Upon commencement of the Lease as to the Second Additional
Space, Tenant shall execute a letter of understanding as referred to in Section
2.03 of the Lease."
4. Amendment of Section 18.21. First Option to Terminate. Section
18.21 of the Lease is hereby deleted.
5. Amendment of Section 18.23. Second Option to Terminate. Section
18.23 of the Lease is hereby amended to provide that the payment from Tenant to
Landlord shall include the unamortized leasing commissions and Allowance paid by
Landlord for the Second Additional Space.
6. Application of the Second Additional Space to Previous
Agreement. Landlord and Tenant acknowledge that the rentable square feet of the
Second Additional Space plus the First Additional Space is sufficient additional
rentable square feet leased by Landlord to Tenant to allow Tenant a credit
against minimum annual rent and other amounts due Landlord in accordance with
that certain Agreement dated March 20, 1997 by and between Landlord and Tenant
("Agreement"). Landlord shall credit Tenant the sum of Sixty Thousand Dollars
($60,000.00) against the first payments of Minimum Annual Rent and Additional
Rent due for the First Additional Space and Second Additional Space.
7. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution of
this Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
8. Examination of Amendment. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
9. Definitions. Except as otherwise provided herein, the
capitalized terms used in this Amendment shall have the definitions set forth in
the Lease.
10. Incorporation. This Amendment shall be incorporated into and
made a part of the Lease, and all provisions of the Lease and First Amendment
not expressly modified or amended hereby shall remain in full force and effect.
<PAGE> 51
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
WITNESSES:
/s/ Naomi Gump By: Duke Realty Investments, Inc.,
Naomi Gump its general partner
(Printed)
/s/ Ricena A. McKee
Ricena A. McKee By: /s/ James W. Gray
(Printed) James W. Gray
Vice President and
General Manager
TENANT:
WITNESSES: ENTEX INFORMATION SERVICES, INC.,
/s/ Elizabeth Manocchi a Delaware corporation
Elizabeth Manocchi
(Printed)
By: /s/ Dale Allardyce
"SEE NOTARY"
Printed: Dale Allardyce
(Printed)
Title: EVP, OPERATIONS
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State,
personally appeared James W. Gray, by me known and by me known to be the Vice
President and General Manager of Duke Realty Investments, Inc., an Indiana
corporation, the general partner of Duke Realty Limited Partnership, an Indiana
limited partnership, who acknowledged the execution of the foregoing "First
Lease Amendment" on behalf of said partnership.
WITNESS my hand and Notarial Seal this 25 day of August, 1997.
/s/ Ricena A. McKee
Notary Public
Ricena A. McKee
(Printed Signature)
My Commission Expires: July 29, 2001
[NOTARIAL SEAL NOT SHOWN]
My County of Residence: Clermont
-5-
<PAGE> 52
STATE OF NEW YORK )
) SS:
COUNTY OF WESTCHESTER )
Before me, a Notary Public in and for said County and State,
personally appeared Dale Allardyce, and by me known and by me known to be the
EVP- Operations, of Entex Information Services, Inc., a Delaware corporation who
acknowledged the execution of the foregoing "First Lease Amendment" on behalf of
said corporation.
WITNESS my hand and Notarial Seal this 11th day of August 1997.
/s/ B. Maxine Baker
Notary Public
B. Maxine Baker
(Printed Signature)
My Commission Expires:4/1/98
[Maxine Baker Seal not shown]
My County of Residence: Putnam
-6-
<PAGE> 53
THIRD LEASE AMENDMENT
---------------------
THIS THIRD LEASE AMENDMENT (the "Amendment") is executed this 13th day
of November, 1997, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
limited partnership ("Landlord"), and ENTEX INFORMATION SERVICES, INC., a
Delaware corporation ("Tenant").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Landlord and Tenant entered into a certain Lease dated December
31, 1996, (the "Lease"), whereby Tenant leased from Landlord certain premises
consisting of approximately 20,036 rentable square feet of space (the "Original
Premises") located at Suite 300, 4605 Duke Drive, Mason, Ohio 45040; and
WHEREAS, Landlord and Tenant entered into a First Lease Amendment dated
May 14, 1997 ("First Amendment") whereby Tenant leased from Landlord an
additional 2,750 rentable square feet (the "First Additional Space").
WHEREAS, Landlord and Tenant entered into a Second Lease Amendment dated
August 25, 1997 ("Second Amendment") whereby Tenant leased from Landlord an
additional 9,362 rentable square feet (the "Second Additional Space").
WHEREAS, Landlord and Tenant desire to expand the Original Premises by
approximately 10,438 rentable square feet on the eighth floor of the Building
(the "Third Additional Space"). The Lease, the First Amendment, the Second
Amendment and this Amendment are hereinafter referred to as the "Lease"; and
WHEREAS, Landlord and Tenant desire to amend certain other provisions of
the Lease to reflect such expansion, changes and additions to the Lease;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants herein contained and each act performed hereunder by the parties,
Landlord and Tenant hereby agree that the Lease is amended as follows:
1. Amendment of Article 1. Section 1.01.
Commencing sixty (60) days after the current tenant in the Third
Additional Space vacates the Third Additional Space ("Third Additional Space
Commencement Date") which for purposes of this Third Lease Amendment is
estimated to be March 1, 1998, Section 1.01 of Article 1 of the Lease is hereby
amended by adding Exhibit A-2, attached hereto and incorporated herein by
reference, on which the Third Additional Space is shown. The Original Premises,
the First Additional Space, the Second Additional Space and the Third Additional
Space shall hereinafter be referred to as the "Leased Premises." Notwithstanding
anything contained in this Amendment to the contrary, the rent and all other
obligations of Tenant contained herein shall not commence until after the actual
Third Additional Space Commencement Date, which may or may not be March 1, 1998.
2. Amendment of Basic Lease Provisions
(a) Commencing on the Third Additional Space Commencement Date,
Subsections B, C, D and E of Section 1.02 of Article 1 of the Lease are hereby
deleted and the following subsections are substituted in lieu thereof:
<PAGE> 54
B. Rentable Area: approximately 42,586 rentable square feet;
Landlord shall use BOMA usable standards plus sixteen percent
(16%) loss factor, consistently applied, in determining the
Rentable Area and the rentable area of the Building. The Rentable
Area shall include the area within the Leased Premises plus a pro
rata portion of the area covered by the common areas within the
Building, as reasonably determined by Landlord (applying BOMA
usable standards plus sixteen percent (16%) loss factor).
Landlord's measurement of the Rentable Area of Tenant shall be
subject to field verification by Tenant or its designated
representative.
C. Building Expense Percentage: 24.3% (Rentable Area of Tenant/42,586
rentable square feet divided by Rentable Area of Building/175,485
rentable square feet);
D. Minimum Annual Rent:
Original Premises
March 1, 1998 - December 31, 1998 $205,369.00 (10 months)
January 1, 1999 - December 31, 1999 $246,442.80 per year
January 1, 2000 - December 31, 2000 $246,442.80 per year
January 1, 2001 - December 31, 2001 $246,442.80 per year
January 1, 2002 - December 31, 2002 $266,478.84 per year
January 1, 2003 - December 31, 2003 $266,478.84 per year
January 1, 2004 - December 31, 2004 $266,478.84 per year
January 1, 2005 - June 30, 2005 $133,239.42 (6 months)
July 1, 2005 - July 17, 2005 $ 12,177.78 (17 days);
First Additional Space
March 1, 1998 - December 31, 1998 $28,187.50 (10 months)
January 1, 1999 - December 31, 1999 $33,825.00 per year
January 1, 2000 - December 31, 2000 $33,825.00 per year
January 1, 2001 - December 31, 2001 $36,575.04 per year
January 1, 2002 - December 31, 2002 $36,575.04 per year
January 1, 2003 - December 31, 2003 $36,575.04 per year
January 1, 2004 - December 31, 2004 $36,574.04 per year
January 1, 2005 - June 30, 2005 $18,287.52 (6 months)
July 1, 2005 - July 17, 2005 $ 1,671.44 (17 days);
Second Additional Space
March 1, 1998 - December 31, 1998 $ 95,960.50 (10 months)
January 1, 1999 - December 31, 1999 $115,152.60 per year
January 1, 2000 - December 31, 2000 $115,152.60 per year
January 1, 2001 - December 31, 2001 $115,152.60 per year
January 1, 2002 - December 31, 2002 $124,514.64 per year
January 1, 2003 - December 31, 2003 $124,514.64 per year
January 1, 2004 - December 31, 2004 $124,514.64 per year
January 1, 2005 - June 30, 2005 $ 62,257.32 (6 months)
July 1, 2005 - July 17, 2005 $ 5,690.18 (17 days);
Third Additional Space
March 1, 1998 - December 31, 1998 $106,989.60 (10 months)
January 1, 1999 - December 31, 1999 $128,387.40 per year
January 1, 2000 - December 31, 2000 $128,387.40 per year
January 1, 2001 - December 31, 2001 $128,387.40 per year
January 1, 2002 - December 31, 2002 $138,825.40 per year
January 1, 2003 - December 31, 2003 $138,825.40 per year
January 1, 2004 - December 31, 2004 $138,825.40 per year
January 1, 2005 - June 30, 2005 $ 69,412.70 (6 months)
July 1, 2005 - July 17, 2005 $ 6,555.64 (17 days);
-2-
<PAGE> 55
E. Monthly Rental Installments:
Original Premises
March 1, 1998 - December 31, 2001 $20,536.90 per month
January 1, 2002 - June 30, 2005 $22,206.57 per month
July 1, 2005 - July 17, 2005 $12,177.78 (17 days);
First Additional Space
March 1, 1998 - December 31, 2000 $2,818.75 per month
January 1, 2001 - June 30, 2005 $3,047.92 per month
July 1, 2005 - July 17, 2005 $1,671.44 (17 days);
Second Additional Space
March 1, 1998 - December 31, 2001 $ 9,596.05 per month
January 1, 2002 - June 30, 2005 $10,376.22 per month
July 1, 2005 - July 17, 2005 $ 5,690.18 (17 days);
Third Additional Space
March 1, 1998 - December 31, 2001 $10,698.95 per month
January 1, 2002 - June 30, 2005 $11,568.78 per month
July 1, 2005 - July 17, 2005 $ 6,555.64 per month;
4. Amendment of Section 2.02. Construction of Tenant Finish
Improvements and Possession.
Commencing on the Third Additional Space Commencement Date, the
following shall be added to the end of Article 2 of the Lease:
"Tenant has personally inspected the Third Additional Space and
accepts the same "as is" subject to normal wear and tear by the current
tenant in the space. Landlord shall provide an allowance for the direct
costs of tenant finish improvements for the Third Additional Space up to
the amount of Fifty-two Thousand One Hundred Ninety Dollars ($52,190.00)
(the "Third Additional Space Allowance"). All tenant finish improvements
in the Third Additional Space shall be performed by Landlord and shall
be completed in a good and workmanlike manner in accordance with
applicable building codes and regulations and in accordance with plans
and specifications approved by Landlord and Tenant, prior to the Third
Additional Space Commencement Date. The Third Additional Space Allowance
shall be used exclusively to construct and pay for the tenant finish
improvements for the Third Additional Space. The Third Additional Space
Allowance shall be paid to Tenant in accordance with this Section 2.02
of the Lease and after Tenant occupies the Third Additional Space.
Upon commencement of the Lease as to the Third Additional Space,
Tenant shall execute a letter of understanding as referred to in Section
2.03 of the Lease."
5. Amendment of Section 18.19. Right of First Refusal. Section
18.19 of the Lease is hereby amended by adding the following:
"Tenant acknowledges that the Building is fully occupied and that
this Refusal Option shall apply to space as it becomes available in the
future during the term of this Lease."
-3-
<PAGE> 56
6. Amendment of Section 18.23. Second Option to Terminate.
Section 18.23 of the Lease is hereby amended to provide that the payment from
Tenant to Landlord shall include the unamortized leasing commissions and
Allowance paid by Landlord for the Third Additional Space.
7. Amendment of Section 18.24. Third Option to Terminate. Section
18.24 of the Lease is hereby amended by changing the total rentable square feet
to be leased by Tenant from "29,000 rentable square feet" to "60,000 rentable
square feet."
8. Termination of Third Additional Space. Landlord and Tenant
agrees that if the Third Additional Space Commencement Date has not occurred on
or before April 30, 1998 unless such delay is due to the acts or omissions of
Tenant, Tenant shall have the right to terminate the Lease as to the Third
Additional Space only upon written notice of its right to terminate from Tenant
to Landlord received by Landlord on or before May 10, 1998. If Tenant decides
not to terminate this Lease as provided above, then Tenant shall have the right
to receive one (1) free day of rent, for each day beyond April 30, 1998 that the
Third Additional Space Commencement Date has not occurred.
9. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution of
this Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
10. Examination of Amendment. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
11. Definitions. Except as otherwise provided herein, the
capitalized terms used in this Amendment shall have the definitions set forth in
the Lease.
12. Incorporation. This Amendment shall be incorporated into and
made a part of the Lease, and all provisions of the Lease not expressly modified
or amended hereby shall remain in full force and effect.
-4-
<PAGE> 57
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
WITNESSES:
/s/ Naomi Gump By: Duke Realty Investments, Inc.,
NAOMI GUMP its general partner
(Printed)
/s/ Ricena A Watson By: /s/ James W. Gray
Ricena A Watson James W. Gray
(Printed) Vice President and
General Manager
TENANT:
WITNESSES: ENTEX INFORMATION SERVICES, INC.,
/s/ George E. Perez a Delaware corporation
George E. Perez
(Printed)
By: /s/ Dale Allardyce
/s/ Betty Jean Reed
Betty Jean Reed Printed: DALE ALLARDYCE
(Printed)
Title: Executive Vice President,
Operations
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State, personally
appeared James W. Gray, by me known and by me known to be the Vice President and
General Manager of Duke Realty Investments, Inc., an Indiana corporation, the
general partner of Duke Realty Limited Partnership, an Indiana limited
partnership, who acknowledged the execution of the foregoing "First Lease
Amendment" on behalf of said partnership.
Witness my hand and Notarial Seal this 13 day of November, 1997.
/s/ Ricena A Watson (McKee)
Notary Public
Ricena A. Watson (McKee)
(Printed Signature)
My Commission Expires: June 29, 2001
My County of Residence: Clermont
[SEAL OMITTED]
5
<PAGE> 58
STATE OF NEW YORK )
) SS:
COUNTY OF WESTCHESTER )
Before me, a Notary Public in and for said County and State, personally
appeared Dale Allardyce, by me known and by me known to be the EVP-Operations of
Entex Information Services, Inc., a Delaware corporation who acknowledged the
execution of the foregoing "First Lease Amendment" on behalf of said
corporation.
WITNESS my hand and Notarial Seal this 12th day of November, 1997.
/S/ B. Maxine Baker
Notary Public
[stamp omitted]
(Printed Signature)
My Commission Expires: _______________________
My County of Residence: _______________________
-6-
<PAGE> 59
EXHIBIT A-2
[FLOOR PLAN]
<PAGE> 1
EXHIBIT 10.17
OFFICE LEASE
------------
THIS OFFICE LEASE, made this 15th day of May, 1995, by and between DUKE REALTY
LIMITED PARTNERSHIP, an Indiana limited partnership ("Landlord"), and ENTEX
INFORMATION SERVICES, INC., a Delaware corporation ("Tenant").
W I T N E S S E T H:
-------------------
ARTICLE 1 - LEASE OF PREMISES
Section 1.01. Lease of Premises. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord, subject to all of the terms and conditions
hereinafter set forth, office space in the building commonly known as 4705 Duke
Drive located in Warren County, Ohio (the "Building") for the term hereinafter
specified. The space in the Building hereby leased to Tenant is set forth in
item A of the Basic Lease Provisions and is outlined in red on Exhibit "A"
attached hereto (the "Leased Premises"). Elevators, if any, shall not be leased
to Tenant and shall remain under Landlord's control. Landlord reserves the right
to alter any portions of the Building not included within the Leased Premises;
provided, however, that Tenant's access to the Leased Premises may not be
materially impaired.
Section 1.02. Basic Lease Provisions. The following constitute the "Basic Lease
Provisions" of this Lease:
A. Building Name: 4705 Duke Drive; Suite: 100;
Address: 4705 Duke Drive, Mason, Ohio 45040;
B. Rentable Area of Tenant: 81,972 square feet consisting of:
Floor 1 20,943 rentable square feet
Floor 2 14,014 rentable square feet
Floor 5 23,983 rentable square feet
Floor 6 23,032 rentable square feet
Landlord shall use BOMA standards, consistently applied, in determining
the Rentable Area and the rentable area of the Building. The Rentable
Area shall include the area within the Leased Premises plus a pro rata
portion of the area covered by the common areas within the Building, as
reasonably determined by Landlord (applying BOMA standards) from time to
time. Landlord's determination of Rentable Area made in good faith shall
conclusively be deemed correct for all Purposes hereunder, including
without limitation the calculation of Tenant's Building Expense
Percentage and Tenant's Minimum Annual Rent. Landlord's Measurement of
the Rentable Area of Tenant shall be subject to field verification by
Tenant or its designated representative.
C. Building Expense Percentage: 58.2% (Rentable Area of Tenant/81,972
square feet divided by Rentable Area of building/140,984 square feet);
<PAGE> 2
D. Minimum Annual Rent:
Lease Year
----------
Year 1 $409,860.00 per year
Years 2 - 5 $815,621.40 per year
Years 6 - 10 $897,593.40 per year
E. Monthly Rental Installments:
Lease Year
----------
Year 1 $34,155.00 per month
Years 2 - 5 $67,968.45 per month
Years 6 - 10 $74,799.45 per month
*For any month or partial month that only the Floor 2 space shall be
occupied by Tenant, the schedule set forth in this Section 1.02 (E)
shall not commence. Tenant shall however be charged a rental rate of
$375.00 per day for occupancy of such space prior to the Commencement
Date,F. Lease Term: Ten (10) years and zero (0) months;
G. Target Commencement Date of ten (10) year period: July 18, 1995;
H. Security Deposit: None
I. Broker(s): Duke Realty Services Limited Partnership, representing
Landlord, and Cincinnati Commercial, representing Tenant;
J. Permitted Use: General office purposes including by way of illustration
but not for limitation computer service and repair, parts storage,
training, telemarketing, computer operations and related activities;
K. Address for payments and notices as follows:
Landlord Duke Realty Limited Partnership
8044 Montgomery Road, Suite 600
Cincinnati, Ohio 45236
With Rental
Payments to: Duke Realty Limited Partnership
Dept. 00432
Cincinnati, Ohio 45263
Tenant ENTEX Information Services, Inc.
4705 Duke Drive
Mason, Ohio 45040
With a
copy to: ENTEX
6 International Drive
Rye Brook, New York 10573
Attn.: General Counsel
<PAGE> 3
ARTICLE 2 - TERM AND POSSESSION
Section 2.01. Term. The term of this Lease shall be the period of time specified
in Item F of the Basic Lease Provisions and shall commence on the Target
Commencement Date as provided in Item G of the Basic Lease Provisions (and as
further described in Exhibit "B") or such date as the tenant finish improvements
shall be substantially complete in accordance with Section 2.02 herein. The date
of commencement as defined above, hereinafter called the "Commencement Date,"
and the "Expiration Date" shall be confirmed by Tenant as provided in Section
2.03.
Section 2.02. Construction of Tenant Finish Improvements and Possession.
Landlord agrees to perform and complete the work on the tenant finish
improvements in the Leased Premises as set out on Exhibit "B" in a good and
workmanlike manner in accordance with all applicable building codes and
regulations. Landlord shall give advance written notice of the day on which its
work to be performed in accordance with the terms of Exhibit "B" shall be
substantially completed and in a condition generally to allow for the intended
use of the Leased Premises by Tenant. From and after receipt of said notice or
earlier with the consent of Landlord, Tenant shall have the right and privilege
of going onto the Leased Premises in compliance with the terms of Section 7.03
to complete interior decoration work and to prepare the Leased Premises for its
occupancy, provided, however, that its schedule in so doing shall be
communicated to Landlord and the approval of Landlord secured so as not to
interfere with other work of Landlord being carried on at the same time; and
provided further that Landlord shall have no responsibility or liability
whatsoever for any loss or damage to any of Tenant's leasehold improvements,
fixtures, equipment or any other materials installed or left in the Leased
Premises prior to the Commencement Date.
Provided that this Lease is executed by Tenant and Landlord on or before May 15,
1995, Landlord shall substantially complete the tenant finish improvements in
the Leased Premises on or before July 18, 1995, subject to force majeure events
as defined in Section 15.07, Tenant directed change orders or Tenant delays
(together "Excusable Delays"). In the event said tenant finish improvements
shall not be substantially complete by September 18, 1995, subject to Excusable
Delays, Tenant shall, commencing upon the Commencement Date, receive an
abatement of rent equal to one (1) day of rent for each day the tenant finish
improvements shall not be substantially complete beyond September 18, 1995. In
the event that Landlord shall not substantially complete the tenant finish
improvements by October 18, 1995, subject to Excusable Delays, Tenant shall have
the right to terminate this Lease by providing written notice to Landlord,
whereupon this Lease shall be null and void and neither party shall have any
liability to the other hereunder.
Landlord hereby warrants the Leased Premises against defects in materials and
workmanship for a period of one (1) year from the Commencement Date, routine
maintenance (except as to Landlord's obligations under Article 7 herein) and
ordinary wear and tear excepted. Upon final completion of the Leased Premises,
Landlord shall deliver to Teneant copies of all warranties and
<PAGE> 4
guarantees relating to the Leased Premises and any and all systems contained
therein. To the extent permitted by such warranties and guarantees, Landlord
shall assign the same to Tenant. To the extent not so permitted, Landlord shall
afford to Tenant the benefit of a right to enforce the same in Landlord's name.
Tenant shall not take any action which shall invalidate any of the foregoing
warranties or guarantees.
Section 2.03. Tenant's Acceptance of the Leased Premises. Upon delivery of
possession of the Leased Premises to Tenant as hereinbefore provided, Tenant
shall execute a letter of understanding acknowledging (i) the Commencement Date
and Expiration Date of this Lease, and (ii) that Tenant has accepted the Leased
Premises for occupancy and that the condition of the Leased Premises, including
the tenant finish improvements constructed thereon, and the Building was at the
time satisfactory and in conformity with the provisions of this Lease in all
respects, except for any punchlist items as to which Tenant shall give written
notice to Landlord within thirty (30) days after such delivery. Landlord shall
promptly thereafter correct all such punchlist items. such letter of
understanding shall become a part of this Lease. If Tenant takes possession of
and occupies the Leased Premises, Tenant shall be deemed to have accepted the
Leased Premises in the manner described in this Section 2.03, even though the
letter of understanding provided for herein may not have beet executed by
Tenant.
Section 2.04. Surrender of the Premises. Upon the expiration or earlier
termination of this Lease, or upon the exercise by Landlord of its right to
re-enter the Leased Premises without terminating this Lease, Tenant shall
immediately surrender the Leased Premises to Landlord, together with all
alterations, improvements and other property as provided elsewhere herein, in
broom-clean condition and in good order, condition and repair, except for
ordinary wear and tear and damage which Tenant is not obligated under the terms
of this Lease to repair, failing which Landlord may restore the Leased Premises
to such condition at Tenant's expense. Tenant shall remove any installations
made by Tenant and repair any damage caused by such removal.
Section 2.05. Holding Over. If Tenant holds over after the expiration or earlier
termination of this Lease with the consent of Landlord, Tenant shall become a
tenant from month to month at rent equal to one hundred twenty-five percent
(125%) of the Minimum Rent and Annual Rental Adjustment described in Article 3
hereof, and otherwise upon the terms, covenants and conditions herein specified,
so far as applicable and upon such other and different terms and conditions as
Landlord may from time to time so notify Tenant. Acceptance by Landlord of rent
after such expiration or earlier termination shall not result in a renewal of
this Lease. Notwithstanding the foregoing provision no holding over by Tenant
shall operate to extend this Lease, and Tenant shall vacate and surrender the
Leased Premises to Landlord upon Tenant's being given thirty (30) days prior
written notice from Landlord to vacate. The foregoing provisions of this Section
2.05 are in addition to and do not affect Landlord's right of re-entry or any
other rights of Landlord hereunder or as otherwise provided by law.
<PAGE> 5
ARTICLE 3 - RENT
Section 3.01. Minimum Rent. Tenant shall pay to Landlord as Minimum Annual Rent
for the Leased Premises the sum specified in Item D of the Basic Lease
Provisions, payable in equal consecutive Monthly Rental Installments as
specified in Item E of the Basic Lease Provisions, in advance, without demand,
deduction, counterclaim or offset and without relief from valuation and
appraisement laws, on or before the first day of each and every calendar month
during the term of this Lease; provided, however, that if the Commencement Date
shall be a day other than the first day of a calendar month or the Expiration
Date shall be a day other than the last day of a calendar month, the Monthly
Rental Installment for such first or last fractional month shall be prorated on
the basis of the number of days during the month this Lease was in effect in
relation to the total number of days in such Month.
Section 3.02. Annual Rental Adjustment.
A. Definitions. For purposes of this Section 3.02, the following
definitions shall apply;
1. "Annual Rental Adjustment" - shall mean the amount of Tenant's
Proportionate Share of Operating Expenses for a particular
calendar year.
2. "Operating Expenses" - shall mean the amount of all of Landlord's
direct costs and expenses paid or incurred in operating,
maintaining and managing the Building and Common Areas (as
defined in Section 18.03) for a particular calendar year as
determined by Landlord in accordance with generally accepted
accounting principles, consistently applied, including all
additional direct costs and expenses of operation and maintenance
of the Building which Landlord reasonably determines that it
would have paid or incurred during such year if the Building had
been fully occupied, including by way of illustration and not
limitation: all general real estate taxes and all special
assessments levied against the Building and the land associated
therewith (hereinafter called "real estate taxes"), other than
penalties for late payment; costs and expenses of contesting the
validity or amount of real estate taxes; insurance premiums;
water, sewer, electrical and other utility charges other than the
separately billed electrical and other charges paid by Tenant as
provided in this Lease; service and other charges incurred in the
operation and maintenance of the elevators and the heating,
ventilation and air-conditioning system; cleaning and other
janitorial services; tools and supplies; repair costs; landscape
maintenance costs and security services; license, permit and
inspection fees; management fees; wages and related employee
benefits payable for the maintenance and operation of the
Building; amortization of the costs, including interest at the
rate per annum quoted and announced from time to time
<PAGE> 6
by Bank One, Cincinnati, N.A., Ohio as its "prime" rate (the
"Prime Rate"), of capital improvements that produce a reduction
in operating costs (but only to the extent of the actual savings
realized) or are required to be made under any governmental law
or regulation which was not applicable to the Building upon the
execution date of this Lease; and in general all other costs and
expenses which would, under generally accepted accounting
principles, be regarded as operating and maintenance costs and
expenses. All capital improvements or replacements allowed herein
shall be amortized using the longest life permitted under the
Internal Revenue Code.
For purposes herein, operating Expenses charged to Tenant for the balance of
calendar year 1995 will not exceed $5.25 per rentable square foot. For
subsequent years, or partial years, Controllable operating Expenses (defined as
all operating Expenses other than real estate taxes, insurance, utility charges
and snow and ice removal charges) shall not exceed the amount which would have
been charged for Controllable Operating Expenses in calendar year 1995 had the
Building been 100% occupied for the entire year plus an escalation figure to
reflect actual increases in such Controllable operating Expenses, which
escalation figure shall not exceed 5% per year compounded annually. For example,
if actual Controllable Operating Expenses increase only 3% in the first year of
the term, the Landlord's Estimate of Operating Expenses would increase from
$5.25 per square foot to $5.4075 per square foot in year two. If actual
Controllable Operating Expenses then increased by 10% in the second year of the
term, the Landlord's Estimate of Operating Expenses would increase from $5.4075
per square foot to $5.788 per square foot ($5.25 per sq. ft. 1st yr. times a
cumulative, compounded 10.25% = $5.788). Landlord's estimate of Operating
Expenses for calendar year 1995 of $5.25 per square foot is based upon an
assumed full occupancy of the Building for an entire calendar year.
For purposes herein, Operating Expenses shall not include the following fees,
costs and expenses:
a. Capital expenditures or replacements, except as expressly allowed
herein;
b. Management Fees exceeding 15% of the grossed-up Operating
Expenses for the Building;
c. Wages and benefits for employees of Landlord or an affiliate of
Landlord except to the extent an employees' services are
performed with respect to the Building;
d. Environmental remediation; and
e. Wages or benefits of the Building's property management personnel
or Landlords principal office overhead.
<PAGE> 7
For purposes herein, Landlord agrees to pay real estate taxes and any
special assessments over the longest period permitted by the applicable
taxing authority.
3. "Building Expense Percentage" - shall mean the percentage
specified in Item C of the Basic Lease Provisions. This
percentage was determined by dividing the Rentable Area in the
Leased Premises as specified in Item B of the Basic Lease
Provisions by the total rentable area in the Building.
4. "Tenant's Proportionate Share of Operating Expenses" - shall be
an amount equal to the product of Tenant's Building Expense
Percentage as provided in Item C of the Basic Lease Provisions
times the Operating Expenses.
B. Payment Obligation. In addition to the Minimum Annual Rent specified in
this Lease, Tenant shall pay to Landlord as additional rent for the
Leased Premises, in each calendar year or partial calendar year during
the term of this Lease, an amount equal to Tenant's Proportionate Share
of Operating Expenses for such calendar year.
1. Payment of Tenant's Proportionate Share of Operating Expenses -
The Annual Rental Adjustment shall be estimated annually by
Landlord, and written notice thereof shall be given to Tenant at
least thirty (30) days prior to the beginning of each calendar
year. In the case of the calendar year in which the Lease Term
commences, written notice of the estimated Operating Expenses
shall be given Tenant prior to the Commencement Date. Tenant
shall pay to Landlord each month, at the same time the Monthly
Rental Installment is due, an amount equal to one-twelfth (1/12)
of the estimated Annual Rental Adjustment.
2. Adjustment to Actual Annual Rental Adjustment - Within ninety
(90) days after the end of each calendar year, Landlord shall
prepare and deliver to Tenant a statement showing Tenant's actual
Annual Rental Adjustment. Within thirty (30) days after receipt
of the aforementioned statement, Tenant shall pay to Landlord, or
Landlord shall credit against the next rent payment or payments
due from Tenant, as the case may be, the difference between
Tenant's actual Annual Rental Adjustment for the preceding
calendar year and the estimated amount paid by Tenant during such
year. If this Lease shall commence, expire or be terminated on
any date other than the last day of a calendar year, then
Tenant's Proportionate Share of Operating Expenses for such
partial calendar year shall be prorated on the basis of the
number of days during the year this Lease was in effect in
relation to the total number of days in such year.
3. Tenant Verification - Tenant or its accountants shall have the
right to inspect, at reasonable times and in a reasonable
manner, during the ninety (90) day
<PAGE> 8
period following the delivery of Landlord's statement of the
actual amount of Tenant's Annual Rental Adjustment, such of
Landlord's books of account and records as pertain to and contain
information concerning the Operating Expenses in order to verify
the amounts thereof. In the event that an audit by Tenant reveals
an error by Landlord of more than five percent (5%) in the
aggregate, Landlord shall reimburse Tenant the reasonable cost of
the audit, not to exceed Two Thousand Five Hundred Dollars and
00/100 ($2,500.00).
Section 3.03. Contribution for Certain Tenant Finish Improvements. Tenant shall
pay to Landlord the cost of Tenant directed change orders in excess of
Landlord's Work delineated on Exhihit "B". Tenant shall have the option of
paying for up to One Hundred Sixty Four Thousand Dollars and 00/100
($164,000.00) in Tenant directed change orders by amortizing the amount expended
by Tenant over ten (10) years at the interest rate of eleven percent (11%) which
amortized amount shall be included in minimum Annual Rent. In such event, the
termination payments referred to in Section 18.22 shall be revised to reflect
the unamortized and unpaid portion of the cost of Tenant directed change order.
Section 3.04. Late Charges. Tenant acknowledges that late payments by Tenant to
Landlord of Minimum Rent and all other amounts provided to be paid hereunder
shall cause Landlord to incur costs not contemplated by this Lease, the exact
amount of which are extremely difficult and impractical to determine. Such costs
include, without limitation, processing and accounting charges and late charges
that may be imposed on Landlord by the terms of any encumbrances and notes
secured by any encumbrances covering the Leased Premises, or late charges and
penalties by virtue of late payments of taxes due on the Leased Premises.
Therefore, if any installment of Minimum Rent or any other amount due from
Tenant is not received by Landlord within ten (10) days of the date due, Tenant
shall pay to Landlord an additional sum of ten percent (10%) of the amount due
as a late charge. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of the late
payment by Tenant. Acceptance of any late charge shall not constitute a waiver
of Tenant's default with respect to the overdue amount, nor prevent Landlord
from exercising any of the other rights and remedies available to Landlord. In
addition, in the event Tenant fails to pay within thirty (30) days after the
same is due and payable any installment of Minimum Annual Rent or any other sum
or charge required to be paid by Tenant to Landlord under this Lease, such
unpaid amount shall bear interest from the due date thereof to the date of
payment at the rate of fourteen percent (14%) per annum until paid.
ARTICLE 4 - SECURITY DEPOSIT - INTENTIONALLY OMITTED
ARTICLE 5 - OCCUPANCY AND USE
Section 5.01. Occupancy. Tenant shall use and occupy the Leased Premises for
the purposes set forth in Item J of the
<PAGE> 9
Basic Lease Provisions and shall not use the Leased Premises for any other
purpose except with the prior written consent of Landlord.
Section 5.02. Covenants of Tenant Regarding Use. In connection with its use of
the Leased Premises, Tenant agrees to do the following:
A. Tenant shall (i) use and maintain the Leased Premises and conduct its
business thereon in a safe, careful, reputable and lawful manner, (ii)
comply with all laws, rules, regulations, orders, ordinances, directions
and requirements of any governmental authority or agency, now in force
or which may hereafter be in force, including without limitation those
which shall impose upon Landlord or Tenant any duty with respect to or
triggered by a change in the use or occupation of, or any improvement or
alteration to, the Leased Premises, and (iii) comply with and obey all
reasonable directions of the Landlord, including the Building Rules and
Regulations attached hereto as Exhibit "C" and as may be modified from
time to time by Landlord on reasonable notice to Tenant.
B. Tenant shall not (i) use the Leased Premises for any unlawful purpose or
act, (ii) commit or permit any waste or damage to the Leased Premises,
or (iii) do or permit anything to be done in or about the Leased
Premises which constitutes a nuisance or which will in any way obstruct
or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them. Landlord shall not be responsible to
Tenant for the nonperformance by any other tenant or occupant of the
Building of any of the Building Rules and Regulations, but agrees to
take reasonable measures to assure such other Tenant's compliance.
C. Tenant shall not overload the floors of the Leased Premises beyond their
designed weight-bearing capacity, which Landlord has determined to be
eighty (80) pounds per square foot live load, including an allowance for
partition load. Landlord reserves the right to direct the positioning of
all heavy equipment, furniture and fixtures which Tenant desires to
place in the Leased Premises so as to distribute properly the weight
thereof, and require the removal of any equipment or furniture which
exceeds the weight limit specified herein.
D. Tenant shall not use the Leased Premises, or allow the Leased Premises
to be used, for any purpose or in any manner which would, in Landlord's
opinion, invalidate any policy of insurance now or hereafter carried on
the Building or increase the rate of premiums payable on any such
insurance policy. Should Tenant fail to comply with this covenant,
Landlord may, at its option, require Tenant to stop engaging in such
activity or to reimburse Landlord as additional rent for any increase in
premiums charged during the term of this Lease on the insurance carried
by Landlord on the Building and attributable to the use being
made of the Leased Premises by Tenant.
<PAGE> 10
E. Tenant shall not inscribe, paint, affix or display any signs,
advertisements or notices on the Building, except such tenant
identification information as Landlord permits to be included or shown
on the directory board in the main lobby and on or adjacent to the
access door or doors to the Leased Premises.
Section 5.03. Landlord's Rights Regarding Use. In addition to the rights
specified elsewhere in this Lease, Landlord shall have the following rights
regarding the use of the Leased Premises or the Common Areas by Tenant, its
employees, agents, customers and invitees, each of which may be exercised
without notice or liability to Tenant:
A. Landlord may install such signs, advertisements or notices or tenant
identification information on the directory board or tenant access doors
as it shall deem necessary or proper.
B. Landlord shall reasonably approve or disapprove, prior to installation,
all types of drapes, shades and other window coverings used in the
Leased Premises, and may control all internal lighting that may be
visible from outside the Leased Premises.
C. Landlord shall reasonably approve or disapprove all sign painting and
lettering.
D. Landlord may grant to any person the exclusive right to conduct any
business or render any service in the Building, provided that such
exclusive right shall not operate to limit Tenant from using the Leased
Premises for the use permitted in Item J of the Basic Lease Provisions.
Notwithstanding the foregoing, Tenant shall be allowed to contract for
and use within the Leased Premises, vending and catering services
exclusively for Tenant's use with vendors and caterers of Tenant's
selection.
E. Landlord may control the Common Areas in such manner as it deems
necessary or proper, including by way of illustration and not
limitation: requiring all persons entering or leaving the Building to
identify themselves and their business in the Building to a security
guard; excluding or expelling any peddler, solicitor or loud or unruly
person from the Building or any part thereof, including entrances,
corridors, doors, and elevators, during times of emergency, repairs or
after regular business hours.
Section 5.04. Access to and Inspection of the Leased Premises. Landlord, its
employees and agents and any mortgagee of the Building shall have the right to
enter any part of the Leased Premises at reasonable times and with reasonable
advance written notice for the purposes of examining.or inspecting the same,
showing the same to prospective purchasers, mortgagees or tenants and making
such repairs, alterations or improvements to the Leased Premises or the Building
as Landlord may deem necessary or desirable. If representatives of Tenant
shall not
<PAGE> 11
be present to open and permit such entry into the Leased Premises at any time
when such entry is necessary by reason of emergency, Landlord and its employees
and agents may enter the Leased Premises by means of a master or pass key or
otherwise. Landlord shall incur no liability to Tenant for such entry, nor shall
such entry constitute an eviction of Tenant or a termination of this Lease, or
entitle Tenant to any abatement of rent therefor. Notwithstanding the foregoing,
Landlord shall have the right to show the Leased Premises to prospective tenants
only after Tenant shall exercise its right to terminate this Lease under Section
18.22 hereunder or if Tenant shall fail to exercise its option to renew this
Lease under Section 18.21 hereunder.
ARTICLE 6 - UTILITIES AND OTHER BUILDING SERVICES
Section 6.01. Services to be Provided. Provided Tenant is not in default,
Landlord shall, subject to interruptions beyond Landlord's control, furnish to
Tenant, except as noted below, the following utilities and other building
services to the extent reasonably necessary for Tenant's comfortable use and
occupancy of the Leased Premises for general office use or as may be required by
law or directed by governmental authority:
A. Heating, ventilation and air-conditioning service seven(7) days a week,
24 hours a day, except for interruptions caused by unanticipated power
outages or scheduled repairs of which repairs Tenant shall receive
advanced written notice;
B. Water in the Common Areas for lavatory and drinking purposes;
C. Automatic elevator service and a dumbwaiter servicing Floor 2 from the
loading area of the Building;
D. Cleaning and janitorial service in the Leased Premises and the Common
Areas consistent with the level of service generally provided in Class A
Suburban Office Buildings in the greater Cincinnati area, and in
accordance with the Landlord's current janitorial specifications set
forth in Exhibit "D" attached hereto;
E. Interior and exterior washing of windows at intervals reasonably
established by Landlord but not less than twice annually;
F. Replacement of all lamps, bulbs, starters and ballasts in Building
standard lighting (as set forth in Landlord's standard tenant finish
improvements being described in Exhibit-"B") as required from time to
time as a result of normal usage;
G. Cleaning and maintenance of the Common Areas, including the removal of
rubbish and snow; and
H. Repair and maintenance to the extent specified elsewhere in this Lease.
<PAGE> 12
Landlord reserves the right to separately meter any utility directly to the
Tenant and Tenant shall thereafter pay such utility charges as billed. Any cost
and expense associated with installing a separate meter shall be paid for by
Landlord and shall not be included in Operating Expenses.
Section 6.02. Additional Services. If Tenant requests any other utilities
or building services in addition to those identified above or any of the above
utilities or building services in frequency, scope, quality or quantity
substantially greater than those which Landlord determines are normally
required by other tenants in the Building for general office use, then Landlord
shall use reasonable efforts to attempt to furnish Tenant with such additional
utilities or building services. In the event Landlord is able to and does
furnish such additional utilities or building services, the costs thereof shall
be borne by Tenant, who shall reimburse Landlord monthly for the same as
additional rent at the same time Monthly Rental Installments and other
additional rent is due. If any lights, machines or equipment (including but not
limited to computers) used by Tenant in the Leased Premises materially affect
the temperature otherwise maintained by the Building's air-conditioning system
or generate substantially more heat in the Leased Premises than that which
would normally be generated by the lights and business machines typically used
by other tenants in the Building or by tenants in comparable office buildings,
then Landlord shall have the right to install any machinery or equipment which
Landlord considers reasonably necessary in order to restore the temperature
balance between the Leased Premises and the rest of the Building, including
equipment which modifies the Building's air-conditioning system. All costs
expensed by Landlord to install any such machinery and equipment shall be borne
by Tenant who shall reimburse Landlord in full for such costs upon thirty (30)
days written demand, and any additional costs of operation and maintenance
occasioned by such installation shall also be borne by Tenant who shall
reimburse Landlord for the same as provided in the first paragraph of this
Section 6.02.
Tenant shall not install or connect any electrical equipment other than the
business machines and equipment typically used for general office purposes by
tenants in office buildings comparable to the Building without Landlord's prior
written consent. At all times Tenant's use of electric current shall never
exceed the capacity of the feeders to the Building or the risers or wiring
installation. If Landlord determines that the electricity used by the equipment
to be so installed or connected exceeds the designed load capacity of the
Building's electrical system or is in any way incompatible therewith, then
landlord shall have the right, as a condition to granting its consent, to make
such modifications to the electrical system or other parts of the Building or
Leased Premises, or to require Tenant to make such modifications to the
equipment to be installed or connected, as Landlord considers to be reasonably
necessary before such equipment may be so installed or connected. All costs
expended by Landlord to make any such modifications shall be borne by Tenant
who shall reimburse Landlord in full for such costs upon thirty (30) days
written demand, and Tenant shall reimburse Landlord for the additional
<PAGE> 13
electricity supplied to the Leased Premises as provided in the first paragraph
of this Section 6.02. Landlord represents that the Building electrical equipment
and heating, ventilating and air conditioning systems shall be adequate for
Tenant's initial use within the Leased Premises as described in writing to
Landlord by Tenant and delineated on Exhibit "B".
Section 6.03. Interruption of Services. Tenant understands, acknowledges and
agrees that any one or more of the utilities or other building services
identified in Section 6.01 may be interrupted by reason of accident, emergency
or other causes beyond Landlord's control, or the quality or character of
electric service may be changed or such service may no longer be suitable for
Tenant's requirements, or such services may be discontinued or diminished
temporarily by Landlord or other persons until certain repairs, replacements,
alterations, improvements or cleaning can be made; that Landlord does not
represent or warrant the uninterrupted availability of such utilities or
building services, and that any such interruption shall not be deemed an
eviction or disturbance of Tenant's right to possession, occupancy and use of
the Leased Premises or any part thereof, or render Landlord liable to Tenant for
damages by abatement of rent or otherwise, or relieve Tenant from the obligation
to perform its covenants under this Lease.
Landlord shall have no liability to Tenant, including, without limitation,
liability for consequential damage arising out of, resulting from, or related to
any such interruption of utility services. The above provision notwithstanding,
if the utility services, which substantially impair the Tenant's ability to
conduct its business operations, are discontinued for more than two (2)
consecutive business days due to causes within Landlord's control, then the
Minimum Annual Rent due hereunder shall be equitably abated in proportion to the
impairment of Tenant's business operations, as determined by Landlord within its
reasonable discretion, until such services are fully restored.
ARTICLE 7 - REPAIRS, MAINTENANCE, ALTERATIONS, IMPROVEMENTS AND FIXTURES
Section 7.01. Repair and Maintenance of Building. Subject to Section 7.02 and
except for any repairs made necessary by the negligence, misuse, or default of
Tenant, its employees, agents customers and invitees, Landlord shall make all
necessary repairs to the exterior walls, exterior doors, windows, corridors and
other common areas of the Building, and Landlord shall keep the Building in a
safe, clean and neat condition and use reasonable efforts to keep all equipment
used in common with other tenants, such as elevators, plumbing, pipes, ducts,
heating, air conditioning and similar equipment, in good condition and repair.
Payment for such repairs and maintenance shall be included in Operating
Expenses. Except as provided in Article 8 and Article 10 hereof, there shall be
no abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Leased
Premises or in or to any fixtures, appurtenances and equipment therein or
thereon. In the event
<PAGE> 14
Landlord's failure to remedy needed repairs or maintenance results in the
inability of Tenant to conduct its normal business operations for two (2)
consecutive business days, then the Minimum Annual Rent due hereunder shall be
equitably abated in proportion to the impairment of Tenant's business
operations, as determined by Landlord within its reasonable discretion, until
such repairs or maintenance shall be completed.
In the event that Landlord shall fail to conduct the necessary repairs and
maintenance of the Building under this Section 7.01 or the Leased Premises under
Section 7.02 within a commercially reasonable period of time, but no longer than
ten (10) business days after receipt from Tenant of written notice specifying
the extent of the necessary repairs and maintenance, Tenant may give further
notice to Landlord that if such repairs are not made within the time provided in
this Section, Tenant may make such repairs on Landlord's behalf (provided all
work performed complies with all relevant laws and Tenant uses a contractor
reasonably acceptable to Landlord). Tenant agrees that it shall endeavor to
minimize disruption to the business of any tenant in the Building at such time
as Tenant shall make such repairs on Landlord's behalf. Landlord agrees that it
shall reimburse Tenant for the reasonable and actual cost of such repairs upon
receipt of original invoices from Tenant documenting its costs and marked "paid
in full". This provision shall not be interpreted to allow Tenant to offset
Tenant's expenses against future payments of rent.
Section 7.02. Repair and Maintenance of Leased Premises. Landlord shall keep and
maintain the Leased Premises in good order, condition and repair. Tenant shall
notify Landlord of any items that Tenant believes need repair. Except for the
services specified in Section 6.01 (D), (E) and (F), and except for ordinary
wear and tear and damage which Tenant is not obligated to repair as provided
elsewhere in this Lease but which are a part of Operating Expenses, the cost of
all repairs and maintenance to the Leased Premises shall be borne by Tenant, who
shall be separately billed and shall reimburse Landlord for the same as
additional rent.
Section 7.03. Alterations or Improvements. Tenant may make, or may permit to be
made, alterations or improvements to the Leased Premises, but only if Tenant
obtains the prior written consent of Landlord thereto which shall not be
unreasonably withheld. Notwithstanding the foregoing, Tenant may make or permit
to be made alterations or improvements of a non-structural nature to the Leased
Premises without the prior written consent of Landlord to the extent that the
cumulative cost of such alterations or improvements does not exceed Twenty-Five
Thousand Dollars ($25,000.00) in any Lease Year. If Landlord allows Tenant to
make any such alterations or improvements, Tenant shall secure all necessary
permits and shall make the alterations and improvements in accordance with all
applicable laws, regulations and building codes, in a good and workmanlike
manner and quality equal to or better than the original construction of the
building and shall comply with such requirements as Landlord considers necessary
or desirable, including without limitation, requirements as to the manner in
which and the times at which such work shall be done and the
<PAGE> 15
contractor or subcontractors to be selected to perform such work. Landlord's
approval of the plans, specifications and working drawings for Tenant's
alterations shall create no responsibility or liability on the part of Landlord
for their completeness, design sufficiency, or compliance with all laws, rules
and regulations of governmental agencies or authorities. All alterations,
additions or improvements shall be installed at Tenant's sole expense in
compliance with all applicable laws and by a licensed contractor approved in
writing by Landlord. Landlord may require Tenant to provide Landlord, at
Tenant's sole cost and expense, a lien and completion bond in an amount equal to
one and one-half (1 1/2) times the estimated cost of such improvements,
alterations or additions to insure against any liability for mechanic's and/or
materialmen's liens and to insure completion of the work. Any alterations,
improvements or utility installations in, on or about the Leased Premises that
Tenant shall desire to make shall be presented to Landlord in written form with
proposed detailed plans. If Landlord shall give its consent, such consent shall
be conditioned upon (i) Tenant's acquiring a permit to do so from appropriate
governmental agencies, (ii) the furnishing of a copy thereof to Landlord prior
to the commencement of the work, and (iii) the compliance by Tenant of all
conditions of said permit in a prompt and expeditious manner.
Tenant shall promptly pay all costs attributable to such alterations and
improvements. Tenant shall promptly repair any damage to the Leased Premises or
the Building caused by any such alterations or improvements. Any alterations or
improvements to the Leased Premises paid for by Landlord, except movable office
furniture and equipment and trade fixtures, shall become a part of the realty
and the property of Landlord, and shall not be removed by Tenant. Tenant has the
option to remove alterations or improvements to the Leased Premises paid for by
Tenant.
Section 7.04. Trade Fixtures. Any trade fixtures installed on the Leased
Premises by Tenant at its own expense, such as movable partitions, counters,
shelving, showcases, mirrors and the like, may be removed on the expiration or
earlier termination of this Lease, provided that Tenant is not then in default,
bears the cost of such removal, and repairs at its own expense any and all
damage to the Leased Premises resulting from such removal. If Tenant fails to
remove any and all fixtures from the Leased Premises on the expiration or
earlier termination of this Lease, all such trade fixtures shall become the
property of Landlord, provided, however, that Landlord may elect, by written
notice to Tenant, to require that Tenant remove all or any portion of such trade
fixtures. Promptly after receiving such notice, Tenant shall, at its expense,
promptly remove the same and restore the Leased Premises to their prior
condition.
<PAGE> 16
ARTICLE 8 - FIRE OR OTHER CASUALTY: CASUALTY INSURANCE
Section 8.01. Substantial Destruction of the Building or the Leased Premises. If
either the Building or the Leased Premises are substantially destroyed or
damaged (which as used herein, means destruction or material damage to at least
fifty percent (50%) of the Building or the Leased Premises) by Fire or other
casualty, then either Tenant or Landlord may, at its option, terminate this
Lease by giving written notice of such termination to the other party within
sixty (60) days after the date of such casualty. In such event, rent shall be
apportioned to and shall cease as of the date of such casualty. If neither party
exercises its option, then the Leased Premises shall be reconstructed and
restored, at Landlord's expense, to substantially the same condition as they
were prior to the casualty; provided however, that Landlord's obligation
hereunder shall be limited to the reconstruction of such of the tenant finish
improvements as were originally required to be made by Landlord in accordance
with Exhibit "B", and further provided that, if Tenant has made any additional
improvements pursuant to Section 7.03, Tenant shall reimburse Landlord for the
cost for reconstructing the same. In the event of such reconstruction, rent
shall be abated from the date of the casualty until substantial completion of
the reconstruction repairs; and this Lease shall continue in full force and
effect for the balance of the term.
Section 8.02. Partial Destruction of the Leased Premises. If the Leased Premises
are damaged by fire or other casualty, but not substantially destroyed or
damaged to the extent provided in Section 8.01, then, so long as sufficient
insurance proceeds are available for restoration, such damaged part of the
Leased Premises shall be reconstructed and restored, at Landlord's expense, to
substantially the same condition as it was prior to the casualty; provided
however, that Landlord's obligation hereunder shall be limited to the
reconstruction of such of the tenant finish improvements as were originally
required to be made by Landlord in accordance with Exhibit "B", and further
provided that, if Tenant has made any additional improvements pursuant to
Section 7.03, Tenant shall reimburse Landlord for the cost of reconstructing the
same. In such event, if within the reasonable business judgment of Tenant using
quantifiable or verifiable proof the damage is expected to prevent Tenant from
carrying on its business in the Leased Premises to an extent exceeding five
percent (5%) of its normal business activity, rent shall be abated in the
proportion which the approximate area of the damaged part bears to the total
area in the Leased Premises from the date of the casualty until substantial
completion of the reconstruction repairs; and this Lease shall continue in full
force and effect for the balance of the Lease Term. Landlord shall use
reasonable diligence in completing such reconstruction repairs, but in the event
Landlord fails to complete the same within one hundred eighty (180) days from
the date of the casualty and Landlord shall not have diligently commenced
construction, Tenant may, at its option, terminate this Lease by giving Landlord
written notice of such termination, whereupon both parties shall be released
from all further obligations and liability hereunder.
<PAGE> 17
Section 8.03. Landlord's Insurance. Landlord shall at all times during the term
of this Lease carry a policy of insurance which insures the Building, including
the Leased Premises, against loss or damage by fire or other casualty (namely,
the perils against which insurance is afforded by a standard fire insurance
policy and extended coverage endorsement); provided, however, that Landlord
shall not be responsible for, and shall not be obligated to insure against, any
loss of or damage to any personal property of Tenant or which Tenant may have in
the Building or the Leased Premises or any trade fixtures installed by or paid
for by Tenant on the Leased Premises or any additional improvements which Tenant
may construct on the Leased Premises; and, notwithstanding anything contained
herein to the contrary, Landlord shall not be liable, and Tenant releases
Landlord from liability, for any loss or damage to such property, regardless of
cause, including the negligence of Landlord and its employees, agents, customers
and invitees. If the tenant finish improvements or any alterations or
improvements made by Tenant pursuant to Section 7.03 result in an increase in
the premiums charged during the term of this Lease on the casualty insurance
carried by Landlord on the Building, then the cost of such increase in insurance
premiums shall be borne by Tenant, who shall reimburse Landlord for the same as
additional rent after being separately billed therefor, and such improvements
shall be covered and available for replacement in the event of a fire or
casualty.
Section 8.04. Waiver of Subrogation. Landlord and Tenant hereby release each
other and each other's employees, agents, customers and invitees from any and
all liability for any loss, damage, or injury to person or property occurring
in, on, about, or to the Leased Premises, or the Building, the Common Areas or
personal property within the Building by reason of fire or other casualty which
could be insured against under a standard fire and extended coverage insurance
policy, regardless of cause, including the negligence of Landlord or Tenant and
their respective employees, agents, customers and invitees, and agree that such
insurance carried by either of them shall contain a clause whereby the insurer
waives its right of subrogation against the other party, provided such insurance
is available. Because the provisions of this Section 8.04 are intended to
preclude the assignment of any claim mentioned herein by way of subrogation or
otherwise to an insurer or any other person, each party to this Lease shall give
to each insurance company which has issued to it one or more policies of fire
and extended coverage insurance notice of the provisions of this Section 8.04
and have such insurance policies properly endorsed, if necessary, to prevent the
invalidation of such insurance by reason of the provisions of this Section 8.04.
In the event that such endorsement is not reasonably available from Landlord and
Tenant's respective insurance carriers or the foregoing waiver would impair
Landlord and Tenant's ability to collect any insurance proceed, then such waiver
shall be ineffective.
ARTICLE 9 - INDEMNIFICATION AND PUBLIC LIABILITY INSURANCE
Section 9.01. Tenant's Responsibility. Tenant does hereby indemnify, forever
save and hold Landlord and Landlord's agents, contractors, licensees,
employees, directors, officers,
<PAGE> 18
partners, trustees and invitees (collectively, "Landlord's Employees") harmless
from and against any and all damages, claims, losses, demands, costs, expenses
(including reasonable attorneys' fees and costs), obligations, liens,
liabilities, actions and causes of action, threatened or actual, which Landlord
may suffer or incur arising out of or in connection with this Lease, including
without limitations, Tenant's or Tenant's employees' use of the Leased Premises,
the conduct of Tenant's business, any activity, work or things done, permitted
or suffered by Tenant in or about the Leased Premises, the Building or Common
Area, or Tenant's employees' nonobservance or nonperformance of any statute,
law, ordinance, rule or regulation, or any negligence of the Tenant's employees;
provided, however, Tenant shall not be obligated to indemnify Landlord and hold
it harmless from liability from which Landlord has released Tenant as provided
in Section 8.04. Tenant further agrees that in case of any claim, demand, action
or cause of action, threatened or actual, against Landlord, Tenant, upon notice
from Landlord, shall defend Landlord at Tenant's expense by counsel reasonably
satisfactory to Landlord. In the event Tenant does not provide such a defense
against any and all claims, demand, actions or causes of action, threatened or
actual, then Tenant will, in addition to the above, pay Landlord the attorneys'
fees, legal expenses and costs incurred by Landlord in providing or preparing
such defense, and Tenant agrees to cooperate with Landlord in such defense,
including, but not limited to, the providing of affidavits and testimony upon
request of Landlord.
Section 9.02. Tenant's Insurance. Tenant shall at all times during the term of
this Lease carry, at its own expense, one or more policies of general public
liability and property damage insurance, issued by one or more insurance
companies acceptable to Landlord, with the following minimum coverages against
loss of or damage or injury to any person (including death resulting therefrom)
or property occurring in, on or about the Leased Premises:
A. Worker's Compensation - minimum statutory amount.
B. Comprehensive General - not less than $1,000,000
Liability Insurance, Combined Single Limit
including Blanket, for both bodily injury
Contractual Liability and property damage.
Broad Form Property
Damage, Personal Injury,
Completed Operations,
Products Liability,
Fire Damage.
C. Fire and Extended Coverage, Vandalism and Malicious Mischief, and
Sprinkler Leakage insurance, for the full cost of replacement of
Tenant's Property.
Such insurance policy or policies shall protect Tenant and Landlord as their
interests may appear, naming Landlord and Landlord's managing agent and
mortgagee as additional insureds and shall provide that they may not be canceled
on less than thirty (30) days prior written notice to Landlord. Tenant shall
<PAGE> 19
furnish Landlord with Certificates of Insurance evidencing such coverage. Should
Tenant fail to carry such insurance and furnish Landlord with Certificates of
Insurance after a written request to do so, Landlord shall have the right to
obtain such insurance and collect the cost thereof from Tenant as additional
rent.
ARTICLE 10 - EMINENT DOMAIN
If the whole or any part of the Leased Premises shall be taken for public or
quasi-public use by a governmental or other authority having the power of
eminent domain or shall be conveyed to such authority in lieu of such taking,
then Landlord shall have the option to terminate this Lease upon thirty (30)
days written notice from Landlord to Tenant provided such taking materially and
substantially impairs the Tenant's ability to conduct its normal operations to
the extent that the Tenant shall abandon the Leased Premises. In the event
Landlord does not exercise such option, and if such taking or conveyance would
cause the remaining part of the Leased Premises to be untenantable and
inadequate for use by Tenant for the purpose for which they were leased, then
Tenant may, at its option, terminate this Lease as of the date Tenant is
required to surrender possession of the Leased Premises by giving Landlord
written notice of such termination. If a part of the Leased Premises shall be
taken or conveyed but the remaining part is tenantable and adequate for Tenant's
use, and Landlord does not exercise its option to terminate this Lease, then
this Lease shall be terminated as to the part taken or conveyed as of the date
Tenant surrenders possession; Landlord shall make such repairs, alterations and
improvements as may be necessary to render the part not taken or conveyed
tenantable; and the rent shall be reduced in proportion to the part of the
Leased Premises so taken or conveyed. All compensation awarded for such taking
or conveyance shall be the property of Landlord without any deduction therefrom
for any present or future estate of Tenant, and Tenant hereby assigns to
Landlord all its rights, title and interest in an to any such award. However,
Tenant shall have the right to assert a claim against such authority, but not
from Landlord, provided such compensation as may be awarded to Tenant shall not
diminish Landlord's award.
<PAGE> 20
ARTICLE 11 - LIENS
If, because of any act or omission of Tenant or any person claiming by, through,
or under Tenant, any mechanic's lien or other lien shall be filed against the
Leased Premises or the Building or against other property of Landlord (whether
or not such lien is valid or enforceable as such), Tenant shall, at its own
expense, cause the same to be discharged of record within thirty-five (35) days
after the date of filing thereof, and shall also indemnify Landlord and hold it
harmless from any and all claims, losses, damages, judgments, settlements, costs
and expenses, including attorneys' fees, resulting therefrom or by reason
thereof. Landlord may, but shall not be obligated to, pay the claim upon which
such lien is based so as to have such lien released of record; and, if Landlord
does so, then Tenant shall pay to Landlord, upon demand, the amount of such
claim, plus all other costs and expenses incurred in connection therewith, plus
interest thereon at the rate of eighteen percent (18%) per annum or at the Prime
Rate [as defined in Section 3.02 (A) (2) hereof] plus four percent (4%) per
annum, whichever is higher.
ARTICLE 12 - RENTAL, PERSONAL PROPERTY AND OTHER TAXES
Tenant shall pay before delinquency any and all taxes, assessments, fees or
charges, including any sales, gross income, rental, business occupation or other
taxes, levied or imposed upon Tenant's business operations in the Leased
Premises and any personal property or similar taxes levied or imposed upon
Tenant's trade fixtures, leasehold improvements or personal property located
within the Leased Premises. In the event any such taxes, assessments, fees or
charges are charged to the account of, or are levied or imposed upon the
property of Landlord, Tenant shall reimburse Landlord for the same as additional
rent. Notwithstanding the foregoing, Tenant shall have the right to contest in
good faith any such item and to defer payment until after Tenant's liability
therefor is finally determined.
If any tenant finish improvements, trade fixtures, alterations or improvements
or business machines and equipment located in, on or about the Leased Premises,
regardless of whether they are installed or paid for by Landlord or Tenant and
whether or not they are affixed to and become a part of the realty and the
property of Landlord, are assessed for real property tax purposes at a valuation
higher than that at which other such property in other leased space in the
Building is assessed, then Tenant shall reimburse Landlord as additional rent
for the amount of real property taxes shown on the appropriate county official's
records as having been levied upon the Building or other property of Landlord by
reason of such excess assessed valuation.
ARTICLE 13 - ASSIGNMENT AND SUBLETTING
Tenant may assign or transfer this Lease or sublease all or any part of the
Leased Premises without Landlord's approval provided that:(i) the new entity
shall use the Leased Premises for any or all of the uses permitted to Tenant in
the Basic Lease
<PAGE> 21
Provisions, (ii) Tenant gives prior written notice to Landlord, and (iii) the
assignment or subletting shall be otherwise subject to all of the terms,
covenants and conditions of the Lease; provided, however, that a sublease need
not include similar terms, covenants and conditions as to lease term, rights to
renew, rights to expand, rights to purchase and other matters not essential to
occupancy of the subleased premises. In the event of any assignment or
subletting, Tenant shall, nevertheless, remain primarily liable to perform the
obligations imposed on Tenant hereunder. In addition, any assignment or sublease
profits (i.e., gross rent proceeds received by Tenant after deduction of all
expenses incurred by Tenant in connection with such subleasing or assignment)
shall be divided equally between Landlord and Tenant as the same are received.
Landlord shall not have the right or option to recapture any space which Tenant
assigns or subleases in accordance with the terms hereunder.
ARTICLE 14 - TRANSFERS BY LANDLORD
Section 14.01. Sale and Conveyance of the Building. Landlord shall have the
right to sell, convey or transfer its Interest in the Building or the control
thereof at any time during the term of this Lease, subject only to the rights of
Tenant hereunder; and such sale and conveyance or other transfer of Landlord's
interest or control of the Building shall operate to release Landlord's interest
from liability hereunder after the date of such conveyance as provided in
Section 15.04.
Landlord hereby represents that (i) it is the fee simple title holder of the
Building, (ii) the person executing this Lease on behalf of Landlord has full
authority to do so and such signature shall bind the Landlord and (iii) upon the
execution date of this Lease there is no mortgage existing on the Building.
Landlord hereby consents to the recording of, and agrees to execute if requested
by Tenant, a memorandum of lease provided said memorandum does not disclose any
significant economic terms of this Lease.
Section 14.02. Subordination. Landlord shall have the right to subordinate this
Lease to any mortgage presently existing or hereafter placed upon the Building
by so declaring in such mortgage; and the recording of any such mortgage shall
make it prior and superior to this Lease regardless of the date of execution or
recording of either document. Notwithstanding the foregoing, no default by
Landlord under any such mortgage shall affect Tenant's rights hereunder so long
as Tenant is not in default under this Lease. Tenant shall, in the event any
proceedings are brought for the foreclosure of any such mortgage, attorn to the
purchaser upon any such foreclosure and recognize such purchaser as the landlord
under this Lease.
<PAGE> 22
ARTICLE 15 - DEFAULTS AND REMEDIES
Section 15.01. Defaults by Tenant. The occurrence of any one or more of the
following events shall be a default under and breach of this Lease by Tenant:
A. Tenant shall fail to pay any Monthly Rental Installment of Minimum
Annual Rent or the Annual Rental Adjustment within ten (10) days after
written notice that such payments are due and payable, or any other
amounts due Landlord from Tenant as additional rent or otherwise,
including any amounts owed by Tenant for Building Non-Standard Work,
within thirty (30) days after written notice the same shall be due and
payable.
B. Tenant shall fail to perform or observe any term, condition, covenant or
obligation required to be performed or observed by it under this Lease
for a period of ten(10)days after notice thereof from Landlord;
provided, however, that if the term, condition, covenant or obligation
to be performed by Tenant is of such nature that the same cannot
reasonably be performed within such ten-day period, such default shall
be deemed to have been cured if Tenant commences such performance within
said ten-day period and thereafter diligently undertakes to complete the
same and does so complete the required action within a reasonable time.
C. A trustee or receiver shall be appointed to take possession of
substantially all of Tenant's assets in, on or about the Leased Premises
or of Tenant's interest in this Lease (and Tenant does not regain
possession within sixty (60) days after such appointment); Tenant makes
an assignment for the benefit of creditors; or substantially all of
Tenant's assets in, on or about the Leased Premises or Tenant's interest
in this Lease are attached or levied under execution (and Tenant does
not discharge the same within sixty (60) days thereafter).
D. A petition in bankruptcy, insolvency, or for reorganization or
arrangement is filed by or against Tenant pursuant to any federal or
state statute (and, with respect to any such petition filed against it,
Tenant fails to secure a stay or discharge thereof within sixty (60)
days after the filing of the same).
Section 15.02. Remedies of Landlord. Upon the occurrence of any event of default
set forth in Section 15.01, Landlord shall have the following rights and
remedies, in addition to those allowed by law, any one or more of which may be
exercised without further notice to or demand upon Tenant;
A. Landlord may re-enter the Leased Premises and cure any default of
Tenant, in which event Tenant shall reimburse Landlord as additional
rent for any costs and expenses which Landlord may incur to cure such
default; and Landlord shall not be liable to Tenant for any loss or
damage which Tenant may sustain by reason of Landlord's
<PAGE> 23
action, regardless of whether caused by Landlord's negligence or
otherwise.
B 1. Landlord may terminate this Lease as of the date of such default, in
which event: (i) neither Tenant nor any person claiming under or
through Tenant shall thereafter be entitled to possession of the
Leased Premises, and Tenant shall immediately thereafter surrender
the Leased Premises to Landlord; (ii) Landlord may re-enter the
Leased premises and dispossess Tenant or any other occupants of the
Leased Premises by any means permitted by law, and may remove their
effects, without prejudice to any other remedy which Landlord may
have for possession or arrearages in rent; and (iii) notwithstanding
the termination of this Lease, Landlord may declare all rent which
would have been due under this Lease for the balance of the term to
be immediately due and payable, whereupon Tenant shall be obligated
to pay the same to Landlord, together with all loss or damage which
Landlord may sustain by reason of such termination, it being
expressly understood and agreed that the liabilities and remedies
specified in this subsection (B) (1) of Section 15.02 shall survive
the termination of this Lease; or
2. Landlord may, without terminating this Lease, reenter the Leased
Premises and re-let all or any part of the Leased Premises for a term
different from that which would otherwise have constituted the
balance of the term of this Lease and for rent and on terms and
conditions different from those contained herein, whereupon Tenant
shall immediately be obligated to pay to Landlord as liquidated
damages the difference between the rent provided for herein and that
provided for in any lease covering a subsequent reletting of the
Leased Premises, for the period which would otherwise have
constituted the balance of the term of this Lease, together with all
of Landlord's reasonable costs and expenses for preparing the Leased
Premises for re-letting, including all repairs, tenant finish
improvements, brokers, and attorneys' fees, and all loss or damage
which Landlord may sustain by reason of such re-entry and re-letting.
C. Landlord may sue for injunctive relief or to recover damages for any
loss resulting from the breach.
Section 15.03. Default by Landlord and Remedies of Tenant. It shall be a default
under and breach of this Lease by Landlord if it shall fail to perform or
observe any term, condition, covenant or obligation required to be performed or
observed by it under this Lease for a period of thirty (30) days after notice
thereof from Tenant; provided, however, that if the term, condition covenant or
obligation to be performed by Landlord is of such nature that the same cannot
reasonably be performed within such thirty-day period, such default shall be
deemed to have been cured if Landlord commences such performance within
<PAGE> 24
said thirty-day period and thereafter diligently undertakes to complete the
same, and further provided that Landlord shall not be in default if Landlord's
failure to perform or observe some term, condition, covenant, or obligation
under this Lease is due to causes beyond the reasonable control of Landlord.
Upon the occurrence of any such default, Tenant may sue for injunctive relief or
to recover damages for any loss resulting from the breach, but Tenant shall not
be entitled to terminate this Lease or withhold, setoff or abate any rent due
hereunder.
Section 15.04. Limitation of Landlord's Liability. If Landlord shall fail to
perform or observe any term, condition, covenant or obligation required to be
performed or observed by it under this Lease and does not cure such failure as
provided in Section 15.03, and if Tenant shall, as a consequence thereof,
recover a money judgment against Landlord, Tenant agrees that Landlord shall
have no personal liability, and Tenant shall look solely to Landlord's right and
leasehold interest in and to the Building for the collection of such judgment;
and Tenant further agrees that no other assets of Landlord shall be subject to
levy, execution or other process for the satisfaction of Tenant's judgment and
that Landlord shall not be liable for any deficiency.
The references to "Landlord" in this Lease shall be limited to mean and include
only the owner of the Building or the owners of the leasehold interest in the
Building. In the event of a sale or transfer of such interest (except a mortgage
or other transfer as security for a debt), the "Landlord" initially named
herein, or in the case of a subsequent transfer, the transferor, shall, after
the date of such transfer, be automatically released from all personal liability
for the performance or observance of any term, condition, covenant or obligation
required to be performed or observed by Landlord hereunder; and the transferee
shall be deemed to have assumed all of such terms, conditions, covenants and
obligations except as to preexisting defaults or events of default. The
covenants and obligations contained in this Lease on the part of "Landlord"
shall be binding on the Landlord or any transferor only during the periods it is
a landlord hereunder.
Section 15.05. Non-Waiver of Defaults. The failure or delay by either party
hereto to exercise or enforce at any time any of the rights or remedies or other
provisions of this Lease shall not be construed to be a waiver thereof, nor
affect the validity of any part of this Lease or the right of either party
thereafter to exercise or enforce each and every such right or remedy or other
provision. No waiver of any default and breach of the Lease shall be deemed to
be a waiver of any other or further default and breach. The receipt by Landlord
of less than the full rent due shall not be construed to be other than a payment
on account of rent then due, nor shall any statement on Tenant's check or any
letter accompanying Tenant's check be deemed an accord and satisfaction, and
Landlord may accept such payment without prejudice to Landlord's right to
recover the balance of the rent due or to pursue any other remedies provided in
this Lease. No act or omission by Landlord or its employees or agents during the
term of this Lease shall be deemed an acceptance of a surrender of the Leased
Premises, and no
<PAGE> 25
agreement to accept such a surrender shall be valid unless in writing and signed
by Landlord.
Section 15.06. Attorney's Fees. In the event either party defaults in the
performance or observance of any of the terms, conditions, covenants or
obligations contained in this Lease and the non-defaulting party employs
attorneys to enforce all or any part of this Lease, collect any rent due or to
become due or recover possession of the Leased Premises, the defaulting party
agrees to reimburse the non-defaulting party for the attorney's fees incurred
thereby.
Section 15.07. Force Majeure. Notwithstanding any other provision contained in
this Lease or elsewhere, Landlord shall not be chargeable with, liable for, or
responsible to Tenant for anything or in any amount for any failure to perform
or delay caused by fire, earthquake, explosion, flood, hurricane, the elements,
acts of God or the public enemy, action, restrictions, limitations, or
interference of governmental authorities or agents, war, invasion, insurrection,
rebellion, riots, strikes or lockouts or any other cause whether similar or
dissimilar to the foregoing which is beyond the reasonable control of Landlord
and any such failure or delay due to said causes or any of them shall not be
deemed a breach of or default in the performance of this Lease.
ARTICLE 16 - LANDLORD'S RIGHT TO RELOCATE TENANT - INTENTIONALLY OMITTED
ARTICLE 17 - NOTICE AND PLACE OF PAYMENT
Section 17.01. Notices. Any notice required or permitted to be given under this
Lease or by law shall be deemed to have been given if it is written and
delivered in person or mailed by Registered or Certified mail, postage prepaid,
to the party who is to receive such notice at the address specified in Item K of
the Basic Lease Provisions. When so mailed, the notice shall be deemed to have
been given as of the date it was mailed. The address specified in Item K of the
Basic Lease Provisions may be changed by giving written notice thereof to the
other party.
Section 17.02. Place of Payment. All rent and other payments required to be made
by Tenant to Landlord shall be delivered or mailed to Landlord at the address
specified in Item K of the Basic Lease Provisions or to Landlord's management
agent at any other address Landlord may specify from time to time by written
notice given to Tenant.
ARTICLE 18 - MISCELLANEOUS GENERAL PROVISIONS
Section 18.01. Condition of Premises. Tenant acknowledges that neither Landlord
nor any agent of Landlord has made any representation or warranty with respect
to the Leased Premises or the Building or with respect to the suitability or
condition of any part of the Building for the conduct of Tenant's business
except as provided in this Lease; and any exhibits or attachments hereto.
<PAGE> 26
Section 18.02. Insolvency or Bankruptcy. In no event shall this Lease be
assigned or assignable by operation of law, and in no event shall this Lease be
an asset of Tenant in any receivership, bankruptcy, insolvency, or
reorganization proceeding.
Section 18.03. Common Areas. The term "Common Areas" as used in this Lease,
refers to the areas of the Building which are designed for use in common by all
tenants of the Building and their respective employees, agents, customers,
invitees and others, and includes, by way of illustration and not limitation,
entrances and exits, hallways and stairwells, elevators, restrooms, sidewalks,
landscaped areas and other areas as may be designated by Landlord as part of the
Common Areas of the Building. Tenant shall have the nonexclusive right, in
common with others, to use the Common Areas, subject to such nondiscriminatory
rules and regulations as may be adopted by Landlord including those set forth in
Section 5.02 and Exhibit "C" of this Lease.
Section 18.04. Choice of Law. This Lease shall be governed by and construed
pursuant to the laws of the State of Ohio.
Section 18.05. Successors and Assigns. Except as otherwise provided in this
Lease, all of the covenants, conditions and provisions of this Lease shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
Section 18.06. Name. Tenant shall not, without the written consent of Landlord,
use the name of the Building for any purpose other than as the address of the
business to be conducted by Tenant in the Leased Premises, and in no event shall
Tenant acquire any rights in or to such names.
Section 18.07. Examination of Lease. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation of or
option for Lease, and it is not effective as a Lease or otherwise until
execution by and delivery to both Landlord and Tenant.
Section 18.08. Defined Terms and Marginal Headings. The words "Landlord" and
"Tenant" as used herein shall include the plural as well as the singular. If
more than one person is named as Tenant, the obligations of such persons are
joint and several. The marginal headings and titles to the articles of this
Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.
Section 18.09. Prior Agreements and Amendments to this Lease. This Lease and the
letter of understanding executed pursuant to Section 2.03 hereof contain all of
the agreements of the parties hereto with respect to any matter covered or
mentioned in this Lease, and no prior agreement, understanding or representation
pertaining to any such matter shall be effective for any purpose. No provision
of this Lease may be amended or added to except by an agreement in writing
signed by the parties hereto or their respective successors in interest.
<PAGE> 27
Section 18.10. Payment of and Indemnification for Leasing Commissions. The
parties hereby acknowledge, represent and warrant that the only real estate
broker or brokers involved in the negotiation and execution of this Lease is the
broker or brokers named in Item I of the Basic Lease Provisions; that Landlord
is obligated to pay to it or them or for their benefit a leasing commission; and
that no other broker or person is entitled to any leasing commission or
compensation as a result of the negotiation or execution of this Lease. Each
party shall indemnify the other party and hold it harmless from any and all
liability for the breach of any such representation and warranty on its part and
shall pay any compensation to any other broker or person who may be deemed or
held to be entitled thereto.
Section 18.11. Severability of Invalid Provisions. If any provision of this
Lease shall be held to be invalid, void or unenforceable, the remaining
provisions hereof shall not be affected or impaired, and such remaining
provisions shall remain in full force and effect.
Section 18.12. Definition of the Relationship between the Parties. Landlord
shall not, by virtue of the execution of this Lease or the leasing of the Leased
Premises to Tenant, become or be deemed a partner of or joint venturer with
Tenant in the conduct of Tenant's business on the Premises or otherwise.
Section 18.13. Estoppel Certificate. Tenant shall, within ten (10) days
following receipt of a written request from Landlord, execute, acknowledge and
deliver to Landlord or to any lender, purchaser or prospective lender or
purchaser designated by Landlord a written statement, in such form as Landlord
may reasonably request, certifying (i) that this Lease is in full force and
effect and unmodified (or, if modified, stating the nature of such
modification), (ii) the date to which rent has been paid, (iii) that there are
not, to Tenant's knowledge, any uncured defaults (or specifying such defaults if
any are claimed), and (iv) any other matters or state of facts reasonably
required respecting the Lease or Tenant's occupancy of the Leased Premises. Any
such statement may be relied upon by any prospective purchaser or mortgagee of
all or any part of the Building. Tenant's failure to deliver such statement
within such period shall be conclusive upon Tenant that this Lease is in full
force and effect and unmodified, and that there are no uncured defaults in
Landlord's performance hereunder.
Section 18.14. Hazardous Waste. Tenant shall not in any manner use, maintain or
allow the use or maintenance of the Leased Premises in violation of any law,
ordinance, statute, regulation, rule or order (collectively "Laws") of any
governmental authority, including but not limited to Laws governing zoning,
health, safety (including fire safety), occupational hazards; and pollution and
environmental control. Tenant shall not use, maintain or allow the use or
maintenance of the Leased Premises or any part thereof to treat, store, dispose
of, transfer, release, convey or recover hazardous, toxic or infectious waste
nor shall Tenant otherwise, in any manner, possess or allow the possession of
any hazardous, toxic or infectious waste on or about the Leased Premises;
provided, however, any toxic material lawfully permitted and generally
<PAGE> 28
recognized as necessary and appropriate for general office use may be stored and
used on the Leased Premises so long as (i) such storage and use is in the
ordinary course of Tenant's business permitted under this Lease; (ii) such
storage and use is performed in compliance with all applicable Laws and in
compliance with the highest standards prevailing in the industry for the storage
and use of such materials; (iii) Tenant delivers prior written notice to
Landlord of the identity of and information regarding such materials as Landlord
may require; and (iv) Landlord consents thereto. Hazardous, toxic or infectious
waste shall mean any solid, liquid or gaseous waste, substance or emission or
any combination thereof which may (i) cause or significantly contribute to an
increase in mortality or in serious illness, or (ii) pose the risk of a
substantial present or potential hazard to human health, to the environment or
otherwise to animal or plant life, and shall include without limitation
hazardous substances and materials described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; the Resource
Conservation and Recovery Act, as amended; and any other applicable federal,
state or local Laws. Tenant shall immediately notify Landlord of the presence or
suspected presence of any hazardous, toxic or infectious waste on or about the
Leased Premises and shall deliver to Landlord any notice received by Tenant
relating thereto.
Landlord and its agents shall have the right, but not the duty, to inspect the
Leased Premises and conduct tests thereon at any time to determine whether or
the extent to which there is hazardous, toxic or infectious waste on the Leased
Premises. Landlord shall have the right to immediately enter upon the Leased
Premises to remedy any contamination found thereon. In exercising its rights
herein, Landlord shall use reasonable efforts to minimize interference with
Tenant's business but such entry shall not constitute an eviction of Tenant, in
whole or in part, and Landlord shall not be liable for any interference, loss,
or damage to Tenant's property or business caused thereby. If any lender or
governmental agency shall ever require testing to ascertain whether there has
been a release of hazardous materials, then the reasonable costs thereof shall
be reimbursed by Tenant to Landlord upon demand as Additional Rent if such
requirement arose in whole or in part because of Tenant's use of the Leased
Premises. Tenant shall execute affidavits, representations and the like from
time to time, at Landlord's request, concerning Tenant's best knowledge and
belief regarding the presence of any hazardous, toxic or infectious waste on the
Leased Premises or Tenant's intent to store or use toxic materials on the Leased
Premises. Tenant shall indemnify and hold harmless Landlord from any and all
claims, loss, liability, costs, expenses or damage, including attorneys' fees
and costs of remediation, incurred by Landlord in connection with any breach by
Tenant of its obligations under this section. The covenants and obligations of
Tenant under this Section 18.14 shall survive the expiration or earlier
termination of this Lease for a period of five (5) years.
Landlord represents to Tenant that (i) Landlord has not received any written
notice of any release, leak, discharge, spill, disposal or emission of
hazardous, toxic or infectious waste on
<PAGE> 29
the Leased Premises and (ii) Landlord has been provided with that certain
environmental assessment report of the Building dated September 30, 1993 and
prepared by Rust Environment and Infrastructure, Incorporated, a copy of which
is attached and made a part of this Lease on Exhibit "E".
Section 18.15. Agency Disclosure. Tenant acknowledges having reviewed the Agency
Disclosure Statement and Tenant acknowledges that said Statement is signed and
attached hereto and made a part hereof as Exhibit "F". The broker as provided in
Item I of the Basic Lease Provisions, its agent and employees, have represented
only the Landlord, and have not in any way represented the Tenant, in the
marketing, negotiation, and completion of this lease transaction.
Section 18.16. Financial Statements. During the Lease Term and any extensions
thereof, Tenant shall provide to Landlord on an annual basis, within ninety (90)
days following the end of Tenant's fiscal year and upon Landlord's written
request therefor not more than one (1) time per Lease Year, a copy of Tenant's
most recent certified and audited financial statements prepared as of the end of
Tenant's fiscal year. Such financial statements shall be prepared in conformity
with generally accepted accounting principles consistently applied.
Section 18.17. Representations and Indemnifications. Any representations and
indemnifications of Landlord contained in the Lease shall not be binding upon
(i) any mortgagee having a mortgage presently existing or hereafter placed on
the Building, or (ii) a successor to Landlord which has obtained or is in the
process of obtaining fee title interest to the Building as a result of a
foreclosure of any mortgage or a deed in lieu thereof.
Section 18.18. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is a corporation that is
duly organized, validly existing and in good standing in accordance with the
laws of the state under which it was organized; (ii) all action necessary to
authorize the execution of this Amendment has been taken by Tenant; and (iii)
the individual executing and delivering this Amendment on behalf of Tenant has
been authorized to do so, and such execution and delivery shall bind Tenant.
Tenant, at Landlord's request, shall provide Landlord with evidence of such
authority.
Section. 18.19. Right of First Refusal. If Tenant is not in default hereunder
and provided that at least thirty-six (36) months remain in the Lease Term,
Landlord agrees that prior to leasing to new tenants, the balance of the vacant
space in the Building or space which becomes vacant in the Building (the
"Refusal Space"), it will first offer to lease all of the Refusal Space to
Tenant for the balance of the Lease Term. In the event Landlord intends to lease
the Refusal Space to a bona fide third party, Landlord will give Tenant written
notice of such intent; and Tenant shall have five (5) business days after
receipt of such notice to notify Landlord in writing of its agreement to lease
the Refusal Space. Such leasing shall be on the same terms and conditions as in
the Lease for the Leased Premises and shall include a tenant finish allowance
or $1.25 per full year of Lease
<PAGE> 30
Term remaining. In the event that Landlord's proposed transaction with the
prospective tenant which triggered the right hereunder is not closed within six
(6) months of the date Tenant shall decline the Refusal Space, then Tenant's
right with respect to such Refusal Space shall be deemed to be reinstated and
available for exercise pursuant to the terms herein.
Section 18.20. Option to Renew. If Tenant is not in default hereunder, Tenant
shall have the option to renew the Lease Term for one (1) additional period of
five (5) years ("Option Period"). Such renewal shall be upon the same terms and
conditions contained in the Lease for the original Lease Term except for this
provision giving the renewal option and subject to an adjustment of the Minimum
Annual Rent. Such option shall be exercised by the occurrence of the following
events: (i) Tenant's giving written notice to Landlord of its intention to renew
the Lease Term no later than nine (9) months prior to the expiration of the
original Lease Term; and (ii) Tenant's giving written notice to Landlord of its
acceptance of the Minimum Annual Rent as adjusted herein within ten (10) days
following receipt of the Landlord's written notification of the Minimum Annual
Rent for the option Period.
The Minimum Annual Rent for the Option Period shall be an amount equal to the
Minimum Annual Rent then being quoted by landlord's to prospective tenants for
space of comparable size and quality and with similar or equivalent improvements
in the comparable buildings in a comparable location; provided, however, that in
no event shall the Minimum Annual Rent payable during such Option Period be less
than the Minimum Annual Rent payable during the last year of the original Lease
Term. Landlord shall notify Tenant of the amount of any rent change no later
than thirty (30) days after receiving notice of Tenant's intent to exercise such
option to renew. The Minimum Monthly Rent shall be an amount equal to
one-twelfth (1/12) of the Minimum Annual Rent for the Option Period and shall be
paid at the same time and in the same manner as provided in the lease. In the
event that the parties cannot agree to the Minimum Annual Rent for the Option
Period, the parties agree to submit such rent determination to arbitration in
accordance with the rules and procedures of the American Arbitration Association
using the method commonly known as "Baseball Style Arbitration."
Section 18.21. Option to Terminate. Provided Tenant is not in default hereunder,
Tenant shall have the option to terminate this Lease at the end of the forty
eighth (48th) and eighty-fourth (84th) months of the Lease Term. Such options
shall be exercised by (i) Tenant's giving written notice to Landlord of its
intention to terminate at least nine (9) months prior to the effective date of
such termination (i.e., nine (9) months prior to the expiration of the
forty-eighth (48th) or eighty-fourth (84th) months of the Lease Term), and (ii)
Tenant's payment to Landlord of an amount equal to One Million Three Hundred
Sixty Two Thousand Two Hundred Forty Eight Dollars ($1,362,248.00) for
termination in the forty-eighth (48th) month and Seven Hundred Ninety Two
thousand and Two Dollars ($792,002.00) if terminated at the eighty-fourth (84th)
month, which shall accompany the notice provided in (i) above. Such payment is
made in consideration for Landlord's grant of this option to terminate,
<PAGE> 31
to compensated Landlord for rental and other concessions given to Tenant, and
for other good and valuable consideration. Such payment shall not in any manner
affect Tenant's obligations to pay Minimum Annual Rent and additional rent or to
perform its obligations under the Lease up to and including the date of
termination. Failure to timely and properly exercise either option shall forever
waive and extinguish it. If any such option is validly exercised, then upon such
termination, each party shall be released from further liability hereunder and
this Lease shall be null and void; provided, however, that such termination
shall not affect any right or obligation arising prior to such termination.
Section 18.22. Parking. Tenant will be allowed the use of five (5) parking
spaces per 1,000 rentable square feet of leased space on an unreserved basis.
Five (5) of these spaces will be identified as customer parking spaces for
Tenant's clients and located in reasonable proximity to the Building's main
entrance.
Section 18.23. Shuttle Van. The Landlord will provide Three Hundred Sixty
Dollars ($360.00) per month to lease a vehicle of Tenant's choice for a period
of three (3) years. Tenant will be responsible for operation, maintenance,
insurance and any other costs and all liability associated with the vehicle,
which at Tenant's option may be applied on a credit against Minimum Annual Rent.
Section 18.24. Signage. Tenant shall have the right, at its sole cost and
expense, to erect a sign on the face of the Building and a sign at the entrance
of the Building parking lot (together the "Signs") identifying the Tenants'
business name. The location, style and size of the Signs shall be subject to
Landlord's prior written approval. Tenant agrees to maintain such Signs in a
first class condition and in compliance with all zoning and building codes
throughout the Lease Term. Landlord does not warrant the approval of such signs
by the municipality having jurisdiction thereof, but Landlord shall cooperate
with Tenant in seeking such necessary approvals. Upon expiration or early
termination of the Lease Term, Tenant shall remove the Signs and repair all
damage to the Building caused thereby. Any language in the Lease
notwithstanding, Tenant shall indemnify and hold harmless Landlord from any and
all liability for any lose of or damage or injury to any person (including death
resulting therefrom) or property connected with or arising from the Signs or the
rights granted Tenant herein. So long as Tenant shall lease not less than
fifty-eight percent (58%) of the rentable area of the Building, (i) Tenant's
right herein to signage on the exterior face of the Building shall be exclusive
to all other tenant's in the Building and (ii) Landlord shall permit only one
(1) other sign at the entrance of the Building which shall not be larger than
the sign permitted Tenant herein.
Section 18.25 Contingency.. Notwithstanding anything contained in this Lease to
the contrary, in the event that Tenant is not able to obtain the approval of the
Job Tax Credit Commission to substantially all of the tax relief described on
the letter attached hereto as Exhibit "G" on or before June 10, 1995, Tenant
shall have the right to terminate this Lease by written notice to
Landlord, which notice must be sent to Landlord on or before
<PAGE> 32
June 12, 1995 (the "Notice Period"). In the event that Tenant properly exercises
such right of termination, this Lease shall terminate and be of no further force
or effect except that Tenant shall promptly reimburse Landlord for all
verifiable obligations, costs, expenses and liabilities incurred by Landlord in
connection with constructing the tenant improvements for the Leased Premises,
including but not limited to, demolition costs, permitting fees, costs
associated with the preparation of drawings and plans for the Leased Premises
and any other construction costs. In the event that Tenant shall fail to
properly exercise Tenant's termination option described in this paragraph before
the expiration of the Notice Period, such termination right shall be deemed to
be waived and of no further force or effect.
Section 18.26. Consent to be Reasonable. Wherever in the Lease it is required
that consent or approval of the other party shall be required, such consent or
approval which is required shall not be unreasonably withheld, delayed or
denied.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and year first above written.
LANDLORD:
DUKE REALTY LIMITED
PARTNERSHIP
WITNESSES:
/s/ James W. Gray By: Duke Realty Investments,
James W. Gray Inc., as general partner
(Printed)
/s/ By: Daniel C. Staton
/s/ Kimberly Bush Daniel C. Staton
Kimberly Bush Executive Vice
(Printed) President
TENANT:
ENTEX INFORMATION SERVICES,
INC., a Delaware corporation
WITNESSES:
/s/ Robert A. Weber
Robert A. Weber /s/ By: Robert R. Auray, Jr.
(Printed)
/s/ Kathleen M. Felker Printed: Robert R. Auray, Jr
Kathleen M. Felker Title: Executive Vice President, CFO
(Printed)
<PAGE> 33
STATE OF OHIO )
)SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State, personally
appeared Daniel C. Staton, by me known and by me known to be the Executive Vice
President of Duke Realty Investments, Inc., an Indiana limited partnership, who
acknowledged the execution of the foregoing "Lease" on behalf of said
partnership.
Witness my hand and Notarial Seal this 16th day of May, 1995.
/s/ Kimberly Bush
Notary Pubic
Kimberly Bush
(Printed Signature)
My Commission Expires: 8-17-99
(Stamp Omitted)
My County of Residence: Butler
STATE OF New York )
)SS:
COUNTY OF WESTCHESTER )
Before me, a Notary Public in and for said County and State, personally
appeared ROBERT AURAY, by me known and by me known to be the EVP/CFO, of ENTEX
Information Services, Inc., a(n) DELAWARE corporation, who acknowledged the
execution of the foregoing "Lease" on behalf of said corporation.
WITNESS my hand and Notarial Seal this 15th day of May, 1995.
/s/ Margaret J. O'Hare
Notary Public
(Stamp Omitted)
My Commission Expires: 11-19-96
My County of Residence: Westchester
<PAGE> 34
Exhibit A
[FLOOR PLANS]
(NOT SHOWN)
<PAGE> 35
FIRST LEASE AMENDMENT
---------------------
THIS FIRST LEASE AMENDMENT (the "Amendment") is executed this 27 day
of October, 1995 by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
limited partnership ("Landlord"), and ENTEX INFORMATION SERVICES, INC., a
Delaware corporation ("Tenant").
W I T N E S S E T H:
--------------------
WHEREAS, Landlord and Tenant entered into a certain Lease dated May
15, 1995 (the "Lease"), whereby Tenant leased from Landlord certain premises
consisting of approximately 81,972 square feet of space (the "Leased Premises")
located in a building commonly known as 4705 Duke Drive, Suite 100, Mason, Ohio
45040; and
WHEREAS, Landlord and Tenant desire to include costs of tenant
finish improvements as part of the Minimum Rent; and
WHEREAS, Landlord and Tenant desire to amend certain provisions of
the Lease to reflect such inclusion;
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants herein contained and each act performed hereunder by the
parties, Landlord and Tenant hereby enter into this Amendment.
1. Amendment of Section 1.02. Basic Lease Provisions. Commencing
September 1, 1995, Section 1.02.D. and E. are hereby deleted in their entirety
and are replaced by the following:
D. Minimum Annual Rent:
Year 1 $437,321.40
Years 2 - 5 $843,082.80
Years 6 - 10 $925,054.80
E. Minimum Monthly Rent:
Months 1 - 12 $36,443.45
Months 13 - 60 $70,256.90
Months 61 - 120 $77,087.90
2. Amendment of Section 3.03. Contribution for Certain Tenant Finish
Improvements. Commencing September 1, 1995, Section 3.03 of the Lease is hereby
amended to change the amount of One Hundred Sixty-Four Thousand Dollars
($164,000.00) to One Hundred Sixty-Six Thousand One Hundred Thirty-One Dollars
($166,13l.00).
3. Amendment of Section 18.21. Section 18.21 of the Lease is hereby
amended to allow Landlord to increase the stated termination fee by the amount
of any unpaid unamortized costs of tenant finish improvements, should Tenant
exercise its right to terminate the Lease in the forty-eighth (48th) month or
the eighty-fourth (84th) month of the Lease Term.
4. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution
of this Amendment has been taken by Tenant; and (iii) the
<PAGE> 36
individual executing and delivering this Amendment on behalf of Tenant has been
authorized to do so, and such execution and delivery shall bind Tenant. Tenant,
at Landlord's request, shall provide Landlord with evidence of such authority.
5. Examination of Amendment. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
6. Definitions. Except as otherwise provided herein, the capitalized
terms used in this Amendment shall have the definitions set forth in the Lease.
7. Incorporation. This Amendment shall be incorporated into and made
a part of the Lease, and all provisions of the Lease not expressly modified or
amended hereby shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
WITNESSES:
/s/ signature not legible By: Duke Realty Investments, Inc.
its General Partner
/s/ Nicole C. Stevens
Nicole C. Stevens By: /s/ Jeffrey G. Tulloch
(Printed) Jeffrey G. Tulloch
Vice President - General Manager
TENANT:
WITNESSES: ENTEX INFORMATION SERVICES, INC.,
/s/ Thomas D.Neilly a Delaware corporation
Thomas D. Neilly
(Printed) By: /s/ Robert Auray, Jr.
/s/ Rosemarie Burguiere Printed: Robert Auray, Jr.
Rosemarie Burguiere
(Printed) Title: EVP/CFO
<PAGE> 37
STATE OF OHIO )
) SS: Jeffrey G. Tulloch
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State,
personally appeared Jeffrey G. Tulloch, by me known and by me known to be the
Vice President - General Manager of Duke Realty Investments, Inc., an Indiana
corporation, the general partner of Duke Realty Limited Partnership, an Indiana
limited partnership, who acknowledged the execution of the foregoing "First
Lease Amendment" on behalf of said partnership.
WITNESS my hand and Notarial Seal this 27 day of October, 1995.
/s/ JOAN WOLPIN
Notary Public
(Printed Signature)
My Commission Expires:_______________
My County of Residence:______________[Notary Seal not shown]
STATE OF New York )
) SS:
COUNTY OF Westchester )
Before me, a Notary Public in and for said County and State,
personally appeared Robert R. Auray, Jr., by me known and by me known to be the
EVP & CFO of Entex Information Services, Inc., who acknowledged the execution of
the foregoing "First Lease Amendment" on behalf of said corporation.
WITNESS my hand and Notarial Seal this 16th day of October, 1995.
/s/ MARGARET J. O'HARE
Notary Public
(Printed Signature)
My Commission Expires: Notary seal not shown
My County of Residence: Westchester
<PAGE> 38
SECOND LEASE AMENDMENT
----------------------
THIS SECOND LEASE AMENDMENT (the "Amendment") is executed this 6 day of
November, 1995 by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
limited partnership ("Landlord"), and ENTEX INFORMATION SERVICES, INC., a
Delaware corporation ("Tenant").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, Landlord and Tenant entered into a certain Lease dated May 15,
1995, as amended on October 17, 1995 (collectively the "Lease"), whereby Tenant
leased from Landlord certain premises consisting of approximately 81,972 square
feet of space (the "Leased Premises") located in a building commonly known as
4705 Duke Drive, Suite 100, Mason, Ohio 45040; and
WHEREAS, Landlord and Tenant desire to expand the Original Premises by
25,012 square feet (the "Additional Space"). Collectively, the Original Premises
and Additional Space shall hereinafter be referred to as the "Leased Premises";
and
WHEREAS, Landlord and Tenant desire to amend certain provisions of the
Lease to reflect such expansion;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants herein contained and each act performed hereunder by the parties,
Landlord and Tenant hereby enter into this Amendment.
1. Amendment of Article 1.
(a) Commencing July 18, 1996, Section 1.01 of Article 1 of the Lease is
hereby amended by substituting Exhibit A-1, attached hereto and incorporated
herein by reference, on which the Original Premises are striped, the Additional
Space is cross-hatched, in lieu of Exhibit A attached to the Lease.
(b) Commencing July 18, 1996, Article 1, Section 1.02 (B,C,D and E) are
hereby amended as follows:
B. Rentable Area: 106,984 rentable square feet, consisting of the
following spaces;
Floor 1 20,943 rentable square feet
Floor 2 14,014 rentable square feet
Floor 4 25,012 rentable square feet
Floor 5 23,983 rentable square feet
Floor 6 23,032 rentable square feet
Total 106,984 rentable square feet
Landlord shall use BOMA standards, consistently applied, in
determining the Rentable Area and the rentable area of the Building.
The Rentable Area shall include the area within the Leased Premises
plus a pro rata portion of the area covered by the
<PAGE> 39
common areas within the Building, as reasonably determined by
Landlord (applying BOMA standards) from time to time. Landlord's
determination of Rentable Area made in good faith shall
conclusively be deemed correct for all purposes hereunder,
including without limitation the calculation of Tenant's
Building Expense Percentage and Tenant's Minimum Annual Rent.
Landlord's measurement of the Rentable Area of Tenant shall be
subject to field verification by Tenant or its designated
representative.
C. Building Expense Percentage: 75.9% (Rentable Area of
Tenant/106,984 square feet divided by Rentable Area of
Building/140,984 square feet)
D. Minimum Annual Rent:
*July 18, 1996 - July 17, 2000 $1,091,952.96 (per year)
July 18, 2000 - July 17, 2005 $1,198,936.20 (per year)
E. Minimum Monthly Rent:
*July 18, 1996 - July 17, 2000 $90,996.08 (per month)
July 18, 2000 - July 17, 2005 $99,911.35 (per month)
*In the event that Tenant elects to occupy the Additional Space
prior to July 18, 1996, Tenant shall pay to Landlord as Minimum
Annual Rent a rental rate of Four Dollars and Ninety-eight Cents
($4.98) per square foot of occupied Additional Space plus
Operating Expenses from the date of occupancy through July 18,
1996. Thereafter, Minimum Annual Rent shall be paid in
accordance with Sections 1.02.D. and E. of these Basic Lease
Provisions.
2. Incorporation into Article 2. The following shall be added to
Article 2 of the Lease:
- ---------
Landlord agrees to provide Tenant with an allowance for tenant
finish improvements for the Additional Space. Duke Construction
will perform the work required. Tenant will determine the
improvements desired and communicate that to Landlord no later
than April 15, 1996. Landlord shall complete the Additional Space
as early as reasonably possible should Tenant desire to occupy
earlier than July 18, 1996. In any event, Landlord will complete
the Additional Space by July 18, 1996, subject to force majuere
and Tenant caused delays. Landlord shall provide an allowance
equal to Two Hundred Eighty-One Thousand Three Hundred
Eighty-Five Dollars ($281,385.00) for the tenant finish
improvements. Additional costs of tenant finish improvements, if
any, shall be borne by Tenant. Upon completion of the
<PAGE> 40
work in the Additional Space, Tenant shall execute a letter of
understanding as referred to in Section 2.03 of the Lease.
3. Amendment of Section 3.03. Contribution for Certain Tenant Finish
Improvements. Section 3.03 of the Lease is hereby deleted in its entirety and is
of no further force or effect.
4. Amendment of Section 18.21. Section 18.21 of the Lease is hereby
amended to allow Landlord to increase the stated termination fee to One Million
Six Hundred Sixty-One Thousand Ninety Dollars ($1,661,090.00), should Tenant
exercise its right to terminate the Lease in the forty-eighth (48th) month or to
Nine Hundred Sixty-Five Thousand Seven Hundred Forty-Five Dollars ($965,745.00)
should Tenant exercise its right to terminate the Lease in the eighty-fourth
(84th) month of the Lease Term.
5. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution of
this Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
6. Examination of Amendment. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
7. Definitions. Except as otherwise provided herein, the capitalized
terms used in this Amendment shall have the definitions set forth in the Lease.
8. Incorporation. This Amendment shall be incorporated into and made
a part of the Lease, and all provisions of the Lease not expressly modified or
amended hereby shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
WITNESSES:
/s/ James W. Gray By: Duke Realty Investments, Inc.
James W. Gray its General Partner
(Printed) By: /s/ Jeffrey G. Tulloch
/s/ Nicole C. Stevens Jeffrey G. Tulloch
Nicole C. Stevens Vice President and General
(Printed) Manager
TENANT:
WITNESSES: ENTEX INFORMATION SERVICES, INC.,
/s/ Thomas D. Neilly a Delaware corporation
Thomas D. Neilly
(Printed) By: /s/ Robert Auray
/s/ Barbara O'Connell Printed: Robert Auray
Barbara O'Connell Title: Executive Vice President, CFO
(Printed)
<PAGE> 41
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State,
personally appeared Jeffrey G. Tulloch, by me known and by me known to be the
Vice President and General Manager of Duke Realty Investments, Inc., an Indiana
corporation, the general partner of Duke Realty Limited Partnership, an Indiana
limited partnership, who acknowledged the execution of the foregoing "Second
Lease Amendment" on behalf of said partnership.
WITNESS my hand and Notarial Seal this 6 day of November, 1995.
/s/ Joan Wolpin
Notary Public
(Printed Signature)
My Commission Expires: __________________
My County of Residence: __________________ [Notarial Seal Not Shown]
STATE OF NEW YORK )
) SS:
COUNTY OF WESTCHESTER )
Before me, a Notary Public in and for said County and State,
personally appeared Robert Auray, by me known and by me known to be the
Executive Vice President, CFO of Entex Information Services, Inc., who
acknowledged the execution of the foregoing "Second Lease Amendment" on behalf
of said corporation.
WITNESS my hand and Notarial Seal this 6th day of November, 1995.
/s/ Lynne A. Burgess
Notary Public
Lynne A. Burgess
(Printed Signature)
My Commission Expires: __________________
My County of Residence: __________________ [Notarial Seal Not Shown]
<PAGE> 42
EXHIBIT A1
[FLOOR PLANS]
<PAGE> 43
THIRD LEASE AMENDMENT
---------------------
THIS THIRD LEASE AMENDMENT (the "Amendment") is executed this 18th
day of APRIL, 1996, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
limited partnership ("Landlord"), and ENTEX INFORMATION SERVICES, INC., a
Delaware corporation ("Tenant").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, Landlord and Tenant entered into a certain Lease dated May
15, 1995, as amended October 27, 1995 and November 6, 1995 (collectively, the
"Lease"), whereby Tenant leased from Landlord certain premises originally
consisting of approximately 81,972 square feet of space (the "Original
Premises") and 25,012 square feet of additional space ("Additional Space")
located in a building commonly known as 4705 Duke Drive, Mason, Ohio 45040; and
WHEREAS, Landlord and Tenant desire to expand the Original Premises
and Additional Space by approximately 4,208 rentable square feet (the "Second
Additional Space"). Collectively, the Original Premises, the Additional Space
and Second Additional Space shall hereinafter be referred to as the "Leased
Premises"; and
WHEREAS, Landlord and Tenant desire to amend certain provisions of
the Lease to reflect such expansion;
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants herein contained and each act performed hereunder by the
parties, Landlord and Tenant hereby enter into this Amendment.
1. Amendment of Article 1.
(a) Commencing on April 15, 1996, Section 1.01 of Article 1 of
the Lease is hereby amended by substituting Amended Exhibit A-1, attached hereto
and incorporated herein by reference, on which the Original Premises are striped
and the Additional Space is cross-hatched, in lieu of Exhibit A-1 attached to
the Lease.
(b) Commencing on July 18, 1996 or such earlier time as Tenant
occupies the Second Additional Space, Section 1.01 of Article 1 of the Lease is
hereby amended by adding Exhibit A-2, attached hereto and incorporated herein by
reference, on which the Second Additional Space is cross-hatched.
(c) Commencing April 15, 1996, Subsections B, C, D and E of
Section 1.02 of the Lease are hereby deleted and the following are substituted
in lieu thereof:
B. Rentable Area: approximately 106,984 rentable square feet
consisting of the following spaces;
<PAGE> 44
Floor 1 20,943 rentable square feet
Floor 2 14,014 rentable square feet
Floor 4 25,O12 rentable square feet
Floor 5 23,983 rentable square feet
Floor 6 23,032 rentable square feet
Total: 106,984 rentable square feet;
C. Building Expense Percentage: 75.9% (Rentable Area of
Tenant/106,984 square feet divided by Rentable Area of
Building/140,984 square feet);
D. Minimum Annual Rent
April 15, 1996 - July 17, 1996 $ 144,296.72
July 18, 1996 - July 17, 2000 $1,091,952.96
July 18, 2000 - July 17, 2005 $1,198,936.20;
E. Monthly Rental Installments:
April 15, 1996 - July 17, 1996 $ 46,823.43
July 18, 1996 - July 17, 2000 $ 90,996.08
July 18, 2000 - July 17, 2005 $ 99,911.35;
(d) Commencing July 18, 1996, Subsections B, C, D and E of Section
1.02 of the Lease are hereby deleted and the following are substituted in lieu
thereof:
B. Rentable Area: approximately 111,192 rentable square feet
consisting of the following spaces;
Floor 1 20,943 rentable square feet
Floor 2 18,222 rentable square feet
Floor 4 25,012 rentable square feet
Floor 5 23,983 rentable square feet
Floor 6 23,032 rentable square feet
Total: 111,192 rentable square feet;
C. Building Expense Percentage: 78.9% (Rentable Area of
Tenant/111,192 square feet divided by Rentable Area of
Building/140,984 square feet);
D. Minimum Annual Rent
July 18, 1996 - July 17, 2000 $1,134,158.40
July 18, 2000 - July 17, 2005 $1,245,350.40;
E. Monthly Rental Installments:
July 18, 1996 - July 17, 2000 $ 94,513.20
July 18, 2000 - July 17, 2005 $103,779.20;
(e) In the event that Tenant elects to occupy the Second Additional
Space prior to July 18, 1996, Tenant shall not pay Minimum Rent and Annual
Rental Adjustment to Landlord for such Second Additional Space. Thereafter,
Minimum Rent shall be paid in accordance with (d) above.
2. Incorporation into Article 2. The following shall be added to
Article 2 of the Lease:
Landlord agrees to provide an allowance of Forty-seven Thousand
Three Hundred Forty Dollars ($47,340.00) which represents Eleven Dollars and
Twenty-five Cents ($11.25) per
<PAGE> 45
square foot for the cost of tenant finish improvements for the
Second Additional Space (the "Allowance"). Tenant shall be granted
the right to set aside any unused portion of the Allowance as well
as any unused allowance from the Additional Space for future tenant
finish improvement costs for the Leased Premises. Tenant shall be
responsible for the costs of any tenant finish improvements which
exceed the Allowance.
Landlord agrees to perform and complete the work on the tenant
finish improvements for the Second Additional Space as set forth in
Exhibit B-1 attached hereto and shall give Tenant written notice of
the day on which Landlord expects to complete such work.
Upon completion of the work in the Second Additional Space,
Tenant shall execute a letter of understanding as referred to in
Section 2.03 of the Lease.
3. Amendment of Section 18.21. Option to Terminate. Section 18.21 of
the Lease is hereby amended to increase the stated termination fee to One
Million Six Hundred Ninety-seven Thousand Four Hundred Sixty-six Dollars
($1,697,466.00), should Tenant exercise its right to terminate the Lease at the
end of the forty-eighth (48th) month of the Lease Term and to Nine Hundred
Eighty-six Thousand Eight Hundred Ninety-four Dollars ($986,894.00), should
Tenant exercise its right to terminate the Lease at the end of the eighty-fourth
(84th) month of the Lease Term.
4. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution of
this Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
5. Examination of Amendment. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
6. Definitions. Except as otherwise provided herein, the capitalized
terms used in this Amendment shall have the definitions set forth in the Lease.
7. Incorporation. This Amendment shall be incorporated into and made
a part of the Lease, and all provisions of the Lease not expressly modified or
amended hereby shall remain in full force and effect.
<PAGE> 46
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
WITNESSES an Indiana limited partnership
/s/ Alice Battaglia
ALICE BATTAGLIA By: Duke Realty Investments, Inc.,
its general partner
(Printed)
/s/ Nicole C Stevens By: /s/ Jeffrey G. Tulloch
NICOLE C STEVEN Jeffrey G. Tulloch
(Printed) Vice President
TENANT:
WITNESSES: ENTEX INFORMATION SERVICES, INC.,
/s/ Robert A. Weber a Delaware corporation
Robert A. Weber
(Printed) By: /s/ Robert R. Auray
/s/ Dayatra D. Jones Printed: Robert R. Auray
DAYATRA D. JONES
(Printed) Title: CHIEF OPERATING OFFICER
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State,
personally appeared Jeffrey G. Tulloch, by me known and by me known to be the
Vice President of Duke Realty Investments, Inc., an Indiana corporation, the
general partner of Duke Realty Limited Partnership, an Indiana limited
partnership, who acknowledged the execution of the foregoing "Third Lease
Amendment" on behalf of said partnership.
WITNESS my hand and Notarial Seal this 18 day of April, 1996.
[SEAL OMITTED] Nicole C. Stevens
Notary Public
-----------------------
(Printed Signature)
My Commission Expires:___________________
My County of Residence: Clermont
<PAGE> 47
STATE OF New York )
) SS:
COUNTY OF WESTCHESTER )
Before me, a Notary Public in and for said County and State,
personally appeared Robert R. Auray, Jr., by me known and by me known to be the
COO of Entex Information Services, Inc., a Delaware corporation, who
acknowledged the execution of the foregoing "Third Lease Amendment" on behalf of
said corporation.
WITNESS my hand and Notarial Seal this 2nd day of April, 1996.
/s/ Margaret J. O'Hare
Notary Public
------------------------------
(Printed Signature)
My Commission Expires: ______________________ [stamp omitted]
My County of Residence: _____________________
<PAGE> 48
AMENDED EXHIBIT A1
[OMITTED]
<PAGE> 49
AMENDED EXHIBIT A-2
[OMITTED]
<PAGE> 50
FOURTH LEASE AMENDMENT
----------------------
THIS FOURTH LEASE AMENDMENT (the "Amendment") is executed this 1st
day of JULY, 1996, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
limited partnership ("Landlord"), and ENTEX INFORMATION SERVICES, INC., a
Delaware corporation ("Tenant").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, Landlord and Tenant entered into a certain Lease dated May
15, 1995, as amended October 27, 1995, November 6, 1995 and April 18, 1996
(collectively, the "Lease"), whereby Tenant leased from Landlord certain
premises originally consisting of approximately 81,972 square feet of space (the
"Original Premises") and 29,220 square feet of additional space ("Additional
Space") located in a building commonly known as 4705 Duke Drive, Mason, Ohio
45040; and
WHEREAS, Landlord and Tenant desire to expand the Original Premises
and Additional Space by approximately 721 rentable square feet (the "Third
Additional Space"). Collectively, the Original Premises, the Additional Space
and Third Additional Space shall hereinafter be referred to as the "Leased
Premises"; and
WHEREAS, Landlord and Tenant desire to amend certain provisions of
the Lease to reflect such expansion and changes to the Lease;
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants herein contained and each act performed hereunder by the
parties, Landlord and Tenant hereby enter into this Amendment.
1. Amendment of Article 1.
(a) Commencing on July 18, 1996 or such earlier time as Tenant
occupies the Third Additional Space, Section 1.01 of Article 1 of the Lease is
hereby amended by adding Exhibit A-3, attached hereto and incorporated herein by
reference, on which the Third Additional Space is cross-hatched.
(b) Commencing July 18, 1996, Subsections B, C, D and E of
Section 1.02 of the Lease are hereby deleted and the following are substituted
in lieu thereof:
B. Rentable Area: approximately 111,913 rentable square feet
consisting of the following spaces;
Floor 1 20,943 rentable square feet
Floor 2 18,943 rentable square feet
Floor 4 25,012 rentable square feet
Floor 5 23,983 rentable square feet
Floor 6 23,032 rentable square feet
Total: 111,913 rentable square feet;
C. Building Expense Percentage: 79.38% (Rentable Area of
Tenant/111,913 square feet divided by Rentable Area of Building/140,984 square
feet);
<PAGE> 51
D. Minimum Annual Rent
Original Premises and Additional Space:
July 18, 1996 - July 17, 2000 $1,134,l58.40
July 18, 2000 - July 17, 2005 $l,245,350.40
Third Additional Space:
July 18, 1996 - July 17, 2000 $ 7,173.96
July 18, 2000 - July 17, 2005 $ 7,894.92;
E. Monthly Rental Installments:
Original Premises and Additional Space:
July 18, 1996 - July 17, 2000 $ 94,513.20
July 18, 2000 - July 17, 2005 $ 103,779.20
Third Additional Space:
July 18, 1996 - July 17, 2000 $ 597.83
July 18, 2000 - July 17, 2005 $ 657.91;
(c) In the event that Tenant elects to occupy the Third Additional
Space prior to July 18, 1996, Tenant shall not pay Minimum Rent and Annual
Rental Adjustment to Landlord for such Third Additional Space. Thereafter,
Minimum Rent shall be paid in accordance with (b) above.
2. Incorporation into Article 2. The following shall be added to
Article 2 of the Lease:
"Landlord agrees to provide an allowance of Eight
Thousand One Hundred Eleven Dollars and Twenty-five Cents
($8,111.25) which represents Eleven Dollars and Twenty-five Cents
($11.25) per square foot for the cost of tenant finish improvements
for the Third Additional Space (the "Third Additional Space
Allowance"). Tenant shall be granted the right to set aside any
unused portion of the Third Additional Space Allowance for future
tenant finish improvement costs for the Leased Premises. Tenant
shall be responsible for the costs of any tenant finish improvements
which exceed the Third Additional Space Allowance.
Landlord agrees to perform and complete the work on the
tenant finish improvements for the Third Additional Space as set
forth in Exhibit B-2 attached hereto and shall give Tenant written
notice of the day on which Landlord expects to complete such work.
Upon completion of the work in the Third Additional
Space, Tenant shall execute a letter of understanding as referred to in Section
2.03 of the Lease."
3. Amendment of Section 18.21. Option to Terminate. Section 18.21
of the Lease is hereby amended to increase the stated termination fee to One
Million Seven Hundred Five Thousand Three Hundred Ninety-seven Dollars
($1,705,397.00), should Tenant exercise its right to terminate the Lease at the
end of the forty-eighth (48th) month of the Lease Term and to Nine Hundred
Ninety-one Thousand Nine Hundred Forty-one Dollars ($991,941.00), should Tenant
exercise its right to terminate the Lease at the end of the eighty-fourth (84th)
month of the Lease Term.
<PAGE> 52
4. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution of
this Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
5. Examination of Amendment. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
6. Definitions. Except as otherwise provided herein, the
capitalized terms used in this Amendment shall have the definitions set forth
in the Lease.
7. Incorporation. This Amendment shall be incorporated into and made
a part of the Lease, and all provisions of the Lease not expressly modified or
amended hereby shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
WITNESSES: an Indiana limited partnership
/s/ Alice Battaglia
ALICE BATTAGLIA By: Duke Realty Investments, Inc.,
its general partner
(Printed)
/s/ Nicole C. Stevens
NICOLE C. STEVENS By: /s/ Jeffrey G. Tulloch
(Printed) JEFFREY G. TULLOCH
Vice President
TENANT:
WITNESSES: ENTEX INFORMATION SERVICES, INC.,
/s/ signature unreadable a Delaware corporation
name unreadable
(Printed) By: /s/ D.H. Allardyce
/s/ Barbara 'O Connell Printed: D. H. Allardyce
BARBARA 'O CONNELL
(Printed) Title: EVP, Operations
<PAGE> 53
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State,
personally appeared JEFFREY G. TULLOCH, by me known and by me known to be the
Vice President of Duke Realty Investments, Inc., an Indiana corporation, the
general partner of Duke Realty Limited Partnership, an Indiana limited
partnership, who acknowledged the execution of the foregoing "Fourth Lease
Amendment" on behalf of said partnership.
WITNESS my hand and Notarial Seal this 11 day of July, 1996.
[SEAL OMITTED] /s/ Nicole C. Stevens
Notary Public
----------------------
(Printed Signature)
My Commission Expires: ___________________
My County of Residence: Hamilton
STATE OF N.Y )
) SS:
COUNTY OF Westchester )
Before me, a Notary Public in and for said County and State,
personally appeared DALE H ALLARDYCE, by me known and by me known to be the
E.V.P. OPERATIONS of Entex Information Services, Inc., a Delaware corporation,
who acknowledged the execution of the foregoing "Fourth Lease Amendment" on
behalf of said corporation.
WITNESS my hand and Notarial Seal this 1st day of JULY, 1996.
/s/ Margaret J. O'Hare
Notary Public
[STAMPED OMITTED]
My Commission Expires: 11-19-96
My County of Residence: WESTCHESTER
<PAGE> 54
EXHIBIT A-3
[FLOOR PLAN]
<PAGE> 55
AMENDED EXHIBIT A1
[OMITTED]
<PAGE> 56
AMENDED EXHIBIT A-2
[OMITTED]
<PAGE> 57
FOURTH LEASE AMENDMENT
----------------------
THIS FOURTH LEASE AMENDMENT (the "Amendment") is executed this 1st
day of JULY, 1996, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
limited partnership ("Landlord"), and ENTEX INFORMATION SERVICES, INC., a
Delaware corporation ("Tenant").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, Landlord and Tenant entered into a certain Lease dated May
15, 1995, as amended October 27, 1995, November 6, 1995 and April 18, 1996
(collectively, the "Lease"), whereby Tenant leased from Landlord certain
premises originally consisting of approximately 81,972 square feet of space (the
"Original Premises") and 29,220 square feet of additional space ("Additional
Space") located in a building commonly known as 4705 Duke Drive, Mason, Ohio
45040; and
WHEREAS, Landlord and Tenant desire to expand the Original Premises
and Additional Space by approximately 721 rentable square feet (the "Third
Additional Space"). Collectively, the Original Premises, the Additional Space
and Third Additional Space shall hereinafter be referred to as the "Leased
Premises"; and
WHEREAS, Landlord and Tenant desire to amend certain provisions of
the Lease to reflect such expansion and changes to the Lease;
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants herein contained and each act performed hereunder by the
parties, Landlord and Tenant hereby enter into this Amendment.
1. Amendment of Article 1.
(a) Commencing on July 18, 1996 or such earlier time as Tenant
occupies the Third Additional Space, Section 1.01 of Article 1 of the Lease is
hereby amended by adding Exhibit A-3, attached hereto and incorporated herein by
reference, on which the Third Additional Space is cross-hatched.
(b) Commencing July 18, 1996, Subsections B, C, D and E of
Section 1.02 of the Lease are hereby deleted and the following are substituted
in lieu thereof:
B. Rentable Area: approximately 111,913 rentable square feet
consisting of the following spaces;
Floor 1 20,943 rentable square feet
Floor 2 18,943 rentable square feet
Floor 4 25,012 rentable square feet
Floor 5 23,983 rentable square feet
Floor 6 23,032 rentable square feet
Total: 111,913 rentable square feet;
C. Building Expense Percentage: 79.38% (Rentable Area of
Tenant/111,913 square feet divided by Rentable Area of Building/140,984 square
feet);
<PAGE> 58
D. Minimum Annual Rent
Original Premises and Additional Space:
July 18, 1996 - July 17, 2000 $1,134,l58.40
July 18, 2000 - July 17, 2005 $l,245,350.40
Third Additional Space:
July 18, 1996 - July 17, 2000 $ 7,173.96
July 18, 2000 - July 17, 2005 $ 7,894.92;
E. Monthly Rental Installments:
Original Premises and Additional Space:
July 18, 1996 - July 17, 2000 $ 94,513.20
July 18, 2000 - July 17, 2005 $ 103,779.20
Third Additional Space:
July 18, 1996 - July 17, 2000 $ 597.83
July 18, 2000 - July 17, 2005 $ 657.91;
(c) In the event that Tenant elects to occupy the Third Additional
Space prior to July 18, 1996, Tenant shall not pay Minimum Rent and Annual
Rental Adjustment to Landlord for such Third Additional Space. Thereafter,
Minimum Rent shall be paid in accordance with (b) above.
2. Incorporation into Article 2. The following shall be added to
Article 2 of the Lease:
"Landlord agrees to provide an allowance of Eight
Thousand One Hundred Eleven Dollars and Twenty-five Cents
($8,111.25) which represents Eleven Dollars and Twenty-five Cents
($11.25) per square foot for the cost of tenant finish improvements
for the Third Additional Space (the "Third Additional Space
Allowance"). Tenant shall be granted the right to set aside any
unused portion of the Third Additional Space Allowance for future
tenant finish improvement costs for the Leased Premises. Tenant
shall be responsible for the costs of any tenant finish improvements
which exceed the Third Additional Space Allowance.
Landlord agrees to perform and complete the work on the
tenant finish improvements for the Third Additional Space as set
forth in Exhibit B-2 attached hereto and shall give Tenant written
notice of the day on which Landlord expects to complete such work.
Upon completion of the work in the Third Additional
Space, Tenant shall execute a letter of understanding as referred to in Section
2.03 of the Lease."
3. Amendment of Section 18.21. Option to Terminate. Section 18.21
of the Lease is hereby amended to increase the stated termination fee to One
Million Seven Hundred Five Thousand Three Hundred Ninety-seven Dollars
($1,705,397.00), should Tenant exercise its right to terminate the Lease at the
end of the forty-eighth (48th) month of the Lease Term and to Nine Hundred
Ninety-one Thousand Nine Hundred Forty-one Dollars ($991,941.00), should Tenant
exercise its right to terminate the Lease at the end of the eighty-fourth (84th)
month of the Lease Term.
<PAGE> 59
4. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution of
this Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
5. Examination of Amendment. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
6. Definitions. Except as otherwise provided herein, the
capitalized terms used in this Amendment shall have the definitions set forth
in the Lease.
7. Incorporation. This Amendment shall be incorporated into and made
a part of the Lease, and all provisions of the Lease not expressly modified or
amended hereby shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
WITNESSES: an Indiana limited partnership
/s/ Alice Battaglia
ALICE BATTAGLIA By: Duke Realty Investments, Inc.,
its general partner
(Printed)
/s/ Nicole C. Stevens
NICOLE C. STEVENS By: /s/ Jeffrey G. Tulloch
(Printed) JEFFREY G. TULLOCH
Vice President
TENANT:
WITNESSES: ENTEX INFORMATION SERVICES, INC.,
/s/ signature unreadable a Delaware corporation
name unreadable
(Printed) By: /s/ D.H. Allardyce
/s/ Barbara 'O Connell Printed: D. H. Allardyce
BARBARA 'O CONNELL
(Printed) Title: EVP, Operations
<PAGE> 60
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State,
personally appeared JEFFREY G. TULLOCH, by me known and by me known to be the
Vice President of Duke Realty Investments, Inc., an Indiana corporation, the
general partner of Duke Realty Limited Partnership, an Indiana limited
partnership, who acknowledged the execution of the foregoing "Fourth Lease
Amendment" on behalf of said partnership.
WITNESS my hand and Notarial Seal this 11 day of July, 1996.
[SEAL OMITTED] /s/ Nicole C. Stevens
Notary Public
----------------------
(Printed Signature)
My Commission Expires: ___________________
My County of Residence: Hamilton
STATE OF N.Y )
) SS:
COUNTY OF Westchester )
Before me, a Notary Public in and for said County and State,
personally appeared DALE H ALLARDYCE, by me known and by me known to be the
E.V.P. OPERATIONS of Entex Information Services, Inc., a Delaware corporation,
who acknowledged the execution of the foregoing "Fourth Lease Amendment" on
behalf of said corporation.
WITNESS my hand and Notarial Seal this 1st day of JULY, 1996.
/s/ Margaret J. O'Hare
Notary Public
[STAMPED OMITTED]
My Commission Expires: 11-19-96
My County of Residence: WESTCHESTER
<PAGE> 61
EXHIBIT A-3
[FLOOR PLAN]
<PAGE> 62
D. Minimum Annual Rent
Original Premises and Additional Space:
July 18, 1996 - July 17, 2000 $1,134,l58.40
July 18, 2000 - July 17, 2005 $l,245,350.40
Third Additional Space:
July 18, 1996 - July 17, 2000 $ 7,173.96
July 18, 2000 - July 17, 2005 $ 7,894.92;
E. Monthly Rental Installments:
Original Premises and Additional Space:
July 18, 1996 - July 17, 2000 $ 94,513.20
July 18, 2000 - July 17, 2005 $ 103,779.20
Third Additional Space:
July 18, 1996 - July 17, 2000 $ 597.83
July 18, 2000 - July 17, 2005 $ 657.91;
(c) In the event that Tenant elects to occupy the Third Additional
Space prior to July 18, 1996, Tenant shall not pay Minimum Rent and Annual
Rental Adjustment to Landlord for such Third Additional Space. Thereafter,
Minimum Rent shall be paid in accordance with (b) above.
2. Incorporation into Article 2. The following shall be added to
Article 2 of the Lease:
"Landlord agrees to provide an allowance of Eight
Thousand One Hundred Eleven Dollars and Twenty-five Cents
($8,111.25) which represents Eleven Dollars and Twenty-five Cents
($11.25) per square foot for the cost of tenant finish improvements
for the Third Additional Space (the "Third Additional Space
Allowance"). Tenant shall be granted the right to set aside any
unused portion of the Third Additional Space Allowance for future
tenant finish improvement costs for the Leased Premises. Tenant
shall be responsible for the costs of any tenant finish improvements
which exceed the Third Additional Space Allowance.
Landlord agrees to perform and complete the work on the
tenant finish improvements for the Third Additional Space as set
forth in Exhibit B-2 attached hereto and shall give Tenant written
notice of the day on which Landlord expects to complete such work.
Upon completion of the work in the Third Additional
Space, Tenant shall execute a letter of understanding as referred to in Section
2.03 of the Lease."
3. Amendment of Section 18.21. Option to Terminate. Section 18.21
of the Lease is hereby amended to increase the stated termination fee to One
Million Seven Hundred Five Thousand Three Hundred Ninety-seven Dollars
($1,705,397.00), should Tenant exercise its right to terminate the Lease at the
end of the forty-eighth (48th) month of the Lease Term and to Nine Hundred
Ninety-one Thousand Nine Hundred Forty-one Dollars ($991,941.00), should Tenant
exercise its right to terminate the Lease at the end of the eighty-fourth (84th)
month of the Lease Term.
<PAGE> 63
4. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution of
this Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
5. Examination of Amendment. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
6. Definitions. Except as otherwise provided herein, the
capitalized terms used in this Amendment shall have the definitions set forth
in the Lease.
7. Incorporation. This Amendment shall be incorporated into and made
a part of the Lease, and all provisions of the Lease not expressly modified or
amended hereby shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
WITNESSES: an Indiana limited partnership
/s/ Alice Battaglia
ALICE BATTAGLIA By: Duke Realty Investments, Inc.,
its general partner
(Printed)
/s/ Nicole C. Stevens
NICOLE C. STEVENS By: /s/ Jeffrey G. Tulloch
(Printed) JEFFREY G. TULLOCH
Vice President
TENANT:
WITNESSES: ENTEX INFORMATION SERVICES, INC.,
/s/ signature unreadable a Delaware corporation
name unreadable
(Printed) By: /s/ D.H. Allardyce
/s/ Barbara 'O Connell Printed: D. H. Allardyce
BARBARA 'O CONNELL
(Printed) Title: EVP, Operations
<PAGE> 64
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State,
personally appeared JEFFREY G. TULLOCH, by me known and by me known to be the
Vice President of Duke Realty Investments, Inc., an Indiana corporation, the
general partner of Duke Realty Limited Partnership, an Indiana limited
partnership, who acknowledged the execution of the foregoing "Fourth Lease
Amendment" on behalf of said partnership.
WITNESS my hand and Notarial Seal this 11 day of July, 1996.
[SEAL OMITTED] /s/ Nicole C. Stevens
Notary Public
----------------------
(Printed Signature)
My Commission Expires: ___________________
My County of Residence: Hamilton
STATE OF N.Y )
) SS:
COUNTY OF Westchester )
Before me, a Notary Public in and for said County and State,
personally appeared DALE H ALLARDYCE, by me known and by me known to be the
E.V.P. OPERATIONS of Entex Information Services, Inc., a Delaware corporation,
who acknowledged the execution of the foregoing "Fourth Lease Amendment" on
behalf of said corporation.
WITNESS my hand and Notarial Seal this 1st day of JULY, 1996.
/s/ Margaret J. O'Hare
Notary Public
[STAMPED OMITTED]
My Commission Expires: 11-19-96
My County of Residence: WESTCHESTER
<PAGE> 65
EXHIBIT A-3
[FLOOR PLAN]
<PAGE> 1
EXHIBIT 10.18
L E A S E
---------
ARTICLE 1
---------
Reference Data
--------------
1.1 Subject Referred To.
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this section 1.1.
Date of this Lease: February 29, 1992
Building: The Building in the Town of Norwood
constructed on a parcel of land shown as Lot
J7 on a plan dated December 5, 1984 and
recorded in Norfolk County Registry of
Deeds, and known and numbered as 725 Canton
Street (the Building and such parcel of land
hereinafter being collectively referred to
as the "Property").
Premises: A portion of the ground floor and the entire
first floor of the Building, substantially
as shown on Exhibit A hereto.
Rentable Floor
Area of Premises: 19,424 square feet
Rentable Floor
Area of Building: 39,640 square feet
Landlord: Rodger P. Nordblom, Peter C. Nordblom and
Russell J. Fogelin, as Trustees of Canton
Street Associates III under Declaration of
Trust dated September 24, 1986 and recorded
in Norfolk Registry of Deeds.
Original Notice
Address of
Landlord: c/o Nordblom Company
31 Third Avenue
Burlington, Massachusetts 01803
-1-
<PAGE> 2
Tenant: Extel/JWP Information Systems, Inc. a
Delaware corporation
Original Notice
Address of Tenant:
Term: Five (5) years
Commencement Date: March 1, 1992
Annual Fixed Rent Rate: $183,384.75
Monthly Fixed Rent Rate: $ 15,282.06
Security Deposit: $ 30,564.12
Base Operating Costs: The Operating Costs for the calendar year
1992
Tenant's Percentage: The ratio of the Rentable Floor
Area of the Premises to the total Rentable
Floor Area of the Building, which shall
initially be deemed to be forty-nine (49%)
percent.
Permitted Uses: General business offices for sales, service,
training (of customers and employees) and
repair and other uses incidental thereto.
Public Liability Insurance Limits:
Bodily Injury: $ 3,000,000 per person and
$ 5,000,000 for more than one person
Property Damage: $ 500,000
-2-
<PAGE> 3
1.2 Exhibits.
The Exhibits listed below in this section are incorporated in this Lease
by reference and are to be construed as a part of this Lease.
EXHIBIT A. Plan showing the Premises.
EXHIBIT B. Description of Tenant's Work.
EXHIBIT C. Janitorial Specifications.
EXHIBIT D. Rules and Regulations.
EXHIBIT E. Location of Tenant's Sign.
<TABLE>
<CAPTION>
1.3 Table of Articles and Sections.
<S> <C>
1.1 Subjects Referred To.................................................1
1.2 Exhibits.............................................................3
1.3 Table of Articles and Sections.......................................3
ARTICLE II - Premises and Term
2.1 Premises.............................................................6
2.2 Term.................................................................7
2.3 Termination by Tenant................................................7
ARTICLE III - Tenant Improvements
3.1 Condition of Premises................................................ 7
3.2 Pre-Commencement Work by Tenant...................................... 8
ARTICLE IV - Rent
4.1 The Fixed Rent....................................................... 9
4.2 Additional Rent...................................................... 9
4.2.1 Personal Property Taxes.............................................. 9
</TABLE>
-3-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
4.2.2 Operating Costs.............................................. 9
4.2.3 Insurance....................................................15
4.2.4 Utilities....................................................17
4.3 Late Payment of Rent ................................................18
4.4 Security Deposit.....................................................18
ARTICLE V - Landlord's Covenants
5.1 Affirmative Covenants................................................20
5.l.l Heat and Air Conditioning....................................20
5.1.2 Electricity ................................................20
5.1.3 Cleaning; Water..............................................21
5.l.4 Elevator; Lighting...........................................21
5.1.5 Repairs .....................................................21
5.1.6 Insurance....................................................22
5.2 Interruption.........................................................22
5.3 Outside Services.....................................................22
5.4 Payment of Tenant's Cost of Enforcement..............................23
ARTICLE VI - Tenant's Additional Covenants
6.1 Affirmative Covenants................................................23
6.l.l Perform Obligations.........................................23
6.1.2 Use .......................................................23
6.1.3 Repair and Maintenance......................................24
6.l.4 Compliance with Law.........................................25
6.1.5 Indemnification.............................................25
6.1.6 Landlord's Right to Enter...................................26
6.l.7 Personal Property at Tenant's Risk..........................26
6.1.8 Payment of Landlord's Cost of Enforcement...................27
6.1.9 Yield Up ................................................27
6.1.10 Rules and Regulations................:......................28
6.1.11 Estoppel Certificate........................................28
6.2 Negative Covenants...................................................29
6.2.1 Assignment and Subletting....................................29
6.2.2 Nuisance.....................................................32
6.2.3 Hazardous Wastes and Materials...............................32
6.2.4 Floor Load; Heavy Equipment..................................33
6.2.5 Installation, Alterations or Additions.......................33
6.2.6 Abandonment..................................................34
6.2.7 Signs .......................................................35
6.2.8 Parking and Storage.................. .......................35
</TABLE>
-4-
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE VII - Casualty or Taking
<S> <C>
7.1 Termination.........................................................35
7.2 Restoration.........................................................36
7.3 Termination by Tenant...............................................36
7.4 Award .............................................................37
ARTICLE VIII - Defaults
8.1 Events of Default...................................................37
8.2 Remedies............................................................39
8.3 Remedies Cumulative.................................................41
8.4 Landlord's Right to Cure Defaults...................................41
8.5 Effect of Waivers of Default........................................42
8.6 No Waiver, etc......................................................42
8.7 No Accord and Satisfaction..........................................42
ARTICLE IX - Rights of Holders
9.1 Rights of Holders...................................................43
9.2 Lease Superior or Subordinate to Mortgages..........................44
ARTICLE X - Miscellaneous Provisions
10.1 Notices From One Party to the Other.................................46
10.2 Quiet Enjoyment.....................................................46
10.3 Lease Not to be Recorded............................................47
10.4 Limitation of Landlord's Liability..................................47
10.5 Acts of God.........................................................48
10.6 Landlord's Default..................................................48
10.7 Brokerage...........................................................49
10.8 Applicable Law and Construction.....................................49
</TABLE>
-5-
<PAGE> 6
ARTICLE 2
---------
Premises and Term
-----------------
2.1 Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, subject to and with the benefit of the terms, covenants,
conditions and provisions of this Lease, the Premises, excluding exterior faces
of exterior walls, the common stairways, stairwells, elevators and elevator
shafts, and pipes, ducts, conduits, wires and appurtenant fixtures serving
exclusively or in common other parts of the Building, and if Tenant's space
includes less than the entire rentable area of any floor, excluding the central
core area of such floor. Tenant shall have, as appurtenant to the Premises,
rights to use in common, subject to reasonable rules of general applicability to
tenants of the Building from time to time made by Landlord of which Tenant is
given notice: (a) the common lobbies, hallways, stairways and elevators of the
Building, (b) the common pipes, ducts, conduits, wire and appurtenant fixtures
serving the Premises, (c) common walkways and driveways necessary for access to
the Building, (d) the common parking areas serving the Building, and (e) if the
Premises include less than the entire rentable area of any floor, the common
toilets and other common facilities in the central core area of such floor.
Landlord shall make available to Tenant during the term of this Lease
seventy-one (71) parking spaces. Landlord reserves the right from time to time
(with reasonable prior notice to Tenant, except in emergencies), in such manner
as to reduce to a minimum interference with Tenant's use of
-6-
<PAGE> 7
the Premises: (a) to install, use, maintain, repair, replace and relocate for
service to the Premises and other parts of the Building, or either, pipes,
ducts, conduits, wires and appurtenant fixtures, wherever located in the
Premises or Building, (b) to alter or relocate any other common facility, (c) to
make any repairs and replacements to the Premises which Landlord may deem
necessary, and (d) in connection with any excavation made upon adjacent land of
Landlord or others, to enter, and to license others to enter, upon the Premises
to do such work as the person causing such excavation deems necessary to
preserve the wall of the Building from injury or damage and to support the same.
2.2 Term. TO HAVE AND TO HOLD for a term (the "term") beginning on the
Commencement Date and continuing for the Term, unless sooner terminated as
hereinafter provided.
2.3 Termination by Tenant. Tenant shall have the right to terminate this
Lease as of the end of the third year of the term. If Tenant shall elect to
exercise the aforesaid right, it shall do so by giving written notice to
Landlord no later than August 30, 1994. Such notice shall be accompanied by a
termination payment in the amount of $20,000.00.
ARTICLE 3
---------
Tenant Improvements
-------------------
3.1 Condition of Premises. The Premises are leased in an "as is"
condition. Tenant acknowledges that, except as otherwise expressly provided in
this Lease, Landlord has made no warranties or representations as to the
condition thereof. Tenant further
-7-
<PAGE> 8
acknowledges that Landlord has no present or future intention to make any
alterations, renovations or improvements to the Premises. Landlord represents
and warrants that all Building mechanical, plumbing, electrical and structural
systems and facilities are working properly as designed for general office
space. Landlord further represents and warrants that the Building and the
Premises are in compliance with all applicable federal, state and local laws,
including, without limitation, those relating to environmental and zoning
matters.
3.2 Pre-Commencement Work by Tenant. Tenant shall cause to be performed
the work required by Exhibit B, Description of Tenant's Work. All such work
shall be done in accordance with, and Tenant shall comply with, the provisions
of Section 6.2.5 hereof. During the period of occupancy of the Premises by
Tenant prior to the commencement of the term, no rent shall accrue or be payable
but otherwise such occupancy shall be subject to all the terms, covenants and
conditions contained in this Lease. Tenant agrees to employ for such work one or
more responsible contractors and to cause such contractors employed by Tenant to
carry Worker's Compensation Insurance in accordance with the statutory
requirements and comprehensive liability insurance covering such contractors on
or about the Premises in amounts at least equal to the limits set forth in
Section 1.1 and to submit certificates evidencing such coverage to Landlord
prior to commencement of such work. With respect to heating, ventilating and
air-conditioning work, and electrical work, Tenant shall employ those
contractors
-8-
<PAGE> 9
designated by Landlord, provided they are reasonably competitive. with other
responsible contractors.
ARTICLE 4
---------
Rent
----
4.1 The Fixed Rent. Tenant covenants and agrees to pay rent to Landlord
at the Original Notice Address of Landlord or at such other place or to such
other person or entity as Landlord may by notice in writing to Tenant from time
to time direct, at the Annual Fixed Rent Rate, in equal installments at the
Monthly Fixed Rent Rate (which is 1/12th of the Annual Fixed Rent Rate), in
advance, on the first day of each calendar month included in the term; and for
any portion of a calendar month at the beginning or end of the term, at that
rate payable in advance for such portion,
4.2 Additional Rent. Tenant covenants and agrees to pay, as Additional
Rent, insurance costs, utility charges, personal property taxes and its pro rata
share of increases in operating costs with respect to the Premises as provided
in this Section 4.2 as follows:
4.2.1 Personal Property Taxes. Tenant shall pay all taxes charged,
assessed or imposed upon the personal property of Tenant in or upon the
Premises.
4.2.2 Operating Costs. Within a reasonable time after calendar year
1992, Landlord shall provide Tenant with an itemized statement of Base Operating
Costs, together with copies of all bills issued by governmental authorities with
respect to Taxes included in Base Operating Costs. If, during the term hereof,
-9-
<PAGE> 10
Operating Costs (as hereinafter defined) incurred by Landlord in any calendar
year shall exceed Base operating Costs, Tenant shall reimburse Landlord, as
additional rent, for Tenant's Percentage of any such excess (such amount being
hereinafter referred to as the "Operating Costs Excess"). Tenant shall remit to
Landlord, on the first day of each calendar month, estimated payments on account
of Operating Costs Excess, such monthly amounts to be sufficient to provide
Landlord, by the end of the calendar year, a sum equal to the operating Costs
Excess, as reasonably estimated by Landlord from time to time and set forth in a
statement delivered by Landlord to Tenant. If, at the expiration of the year in
respect of which monthly installments of Operating Costs Excess shall have been
made as aforesaid, the total of such monthly remittances is greater than the
actual Operating Costs Excess for such year, as shown on the Annual Statement
(as hereinafter defined) for such year, Landlord shall promptly pay to Tenant,
or credit against the next accruing payments to be made by Tenant pursuant to
this subsection 4.2.2, the difference; if the total of such remittances is less
than the Operating Costs Excess for such year, Tenant shall pay the difference
to Landlord within thirty (30) days from the date of Tenant's receipt of the
Annual Statement. Following each calendar year, Landlord shall furnish to Tenant
an itemized statement, in reasonable detail, of the Operating Costs Excess
during such year (the "Annual Statement"), prepared, allocated and computed in
accordance with generally accepted accounting principles.
-10-
<PAGE> 11
Any reimbursement for Operating Costs due and payable by Tenant with
respect to periods of less than twelve (12) months shall be equitably prorated.
The term "Operating Costs" shall mean all costs or expenses incurred for
the operation, cleaning, maintenance, repair and up-keep of the Property,
including, without limitation, all costs of maintaining and repairing the
Property (including snow removal, landscaping and grounds maintenance, parking
lot operation and maintenance, security, operation and repair of heating and
air-conditioning equipment, elevators, lighting and any other Building equipment
or systems) and of all repairs and replacements (other than maintenance, repairs
or replacements for which Landlord has received full reimbursement from
contractors, other tenants of the Building or from others or improvements or
services provided for the exclusive benefit of other tenants) necessary to keep
the Property in good working order, repair, appearance and condition; all costs,
including material and equipment costs, for cleaning and janitorial services to
the Building (including window cleaning of the Building); all costs of any
reasonable insurance carried by Landlord relating to the Property; all costs
related to provision of heat (including oil, electric, steam and/or gas),
air-conditioning, and water (including sewer charges) and other utilities to the
Building (exclusive of reimbursement to Landlord for any of same received as a
result of direct billing to any tenant of the Building); reasonable payments
under all service contracts relating to the foregoing; all compensation, fringe
benefits, payroll taxes and
-11-
<PAGE> 12
workmen's compensation insurance premiums related thereto with respect to any
employees of Landlord or its affiliates to the extent engaged in security and
maintenance of the Property (provided that payments to affiliates are not more
than would be paid to a third party in arms-length transactions in respect of
said services); attorneys' fees and disbursements (exclusive of any such fees
and disbursements incurred in the preparation of leases or enforcement of the
Landlord's rights against another tenant) and auditing and other professional
fees and expenses; all expenses, including reasonable attorneys' fees and
appraisers fees, incurred in connection with tax abatement proceedings; a
reasonable management fee; and all Taxes, which term shall mean all taxes,
assessments, betterments and other charges and impositions (including, but not
limited to, fire protection service fees and similar charges) levied, assessed
or imposed at any time during the term by any governmental authority upon or
against the Property, or taxes in lieu thereof, and additional types of taxes to
supplement real estate taxes due to legal limits imposed thereon. If, at any
time during the term of this Lease, any tax or excise on rents or other taxes,
however described, are levied or assessed against Landlord with respect to the
rent reserved hereunder, either wholly or partially in substitution for, or in
addition to, real estate taxes assessed or levied on the Property, such tax or
excise on rents shall be included in Taxes; however, Taxes shall not include
franchise, estate, inheritance, succession, capital levy, transfer, income or
excess profits taxes assessed on Landlord or affiliates, including
-12-
<PAGE> 13
beneficiaries. Taxes shall include any estimated payment made by Landlord on
account of a fiscal tax period for which the actual and final amount of taxes
for such period has not been determined by the governmental authority as of the
date of any such estimated payment.
There shall not be included in such operating Costs brokerage fees
(including rental fees) related to the operation of the Building or any other
expenditures made by Landlord in connection with any effort to lease, rent or
sell the Building or the Property, except as otherwise expressly provided in
this Lease; principal or interest payments on loans secured by mortgages or
trust deeds on the Property; depreciation charges incurred on the Property; or
expenditures made by Tenant with respect to (i) cleaning, maintenance and upkeep
of the Premises, and (ii) the provision of electricity to the Premises,
If, during the term of this Lease, Landlord shall replace any capital
items or make any capital expenditures in order to, in either case, comply with
law, effect savings in Operating Costs or keep the Property in good working
order, repair, appearance and condition (collectively called "capital
expenditures") the total amount of which is not properly includible in Operating
Costs for the calendar year in which they were made, there shall nevertheless be
included in Operating Costs for each calendar year in which and after such
capital expenditure is made the annual charge-off of such capital expenditure.
(Annual charge-off shall be determined by (i) dividing the original cost of the
capital expenditure by the number of years of
-13-
<PAGE> 14
useful life thereof [The useful life shall be reasonably determined by Landlord
in accordance with generally accepted accounting principles and practices in
effect at the time of acquisition of the capital item.); and (ii) adding to such
quotient an interest factor computed on the unamortized balance of such capital
expenditure based upon an interest rate reasonably determined by Landlord as
being the interest rate then being charged for long-term mortgages by
institutional lenders on like properties within the locality in which the
Building is located.)
If during any portion of any year for which operating Costs are being
computed, the Building was not fully occupied by tenants or if not all of such
tenants were paying fixed rent or if Landlord was not supplying all tenants with
the services being supplied hereunder, actual Operating Costs incurred shall be
reasonably extrapolated by Landlord to the estimated Operating Costs that would
have been incurred if the Building were fully occupied by tenants and all such
tenants were then paying fixed rent or if such services were being supplied to
all tenants, and such extrapolated amount shall, for purposes of this Section
4.2.3, be deemed to be the Operating Costs for such year.
Provided Landlord is not prosecuting an abatement with respect thereto,
Tenant may prosecute appropriate proceedings for abatement or reduction of any
Taxes with respect to which Tenant is required to make payments as hereinbefore
provided, such proceedings to be conducted jointly with any other parties,
including Landlord, who have contributed to the payment of such Taxes and Tenant
agrees to save Landlord harmless from all costs
-14-
<PAGE> 15
and expenses incurred on account of Tenant's participation in such proceedings
Landlord, without obligating itself to incur any costs or expenses in connection
with such proceedings shall cooperate with Tenant with respect to such
proceedings so far as reasonably necessary. Any abatement or reduction effected
for such proceedings shall accrue to the benefit of Tenant and Landlord and such
other parties as their interests may appear according to their respective
contributions to the Taxes involved in any such proceedings.
Tenant or its accountants shall have the right to inspect, at reasonable
times and in a reasonable manner, during the ninety (90) day period following
delivery of any Annual Statement of Landlord with regard to Operating Costs
Excess, such of Landlord's books of account and records as pertain to and
contain information concerning Operating Costs in order to verify the amounts
charged to Tenant in respect thereof.
4.2.3 Insurance. Tenant shall, at its expense, as Additional Rent, take
out and maintain throughout the term the following insurance protecting
Landlord:
4.2.3.1 Comprehensive liability insurance indemnifying Landlord
and Tenant against all claims and demands for death or any injury to person or
damage to property which may be claimed to have occurred on the Premises (or the
Property, insofar as used by customers, employees, servants or invitees of the
Tenant), in amounts which shall, at the beginning of the term, be at least equal
to the limits set forth in Section 1.1, and, which, from time to time during the
term, shall be for such higher
-15-
<PAGE> 16
limits, if any, as are customarily carried in the area in which the Premises are
located on property similar to the Premises and used for similar purposes; and
workmen's compensation insurance with statutory limits covering all of Tenant's
employees working on the Premises.
4.2.3.2 Fire insurance with the usual extended coverage
endorsements covering all Tenant's furniture, furnishings, fixtures and
equipment.
4.2.3.3 All such policies shall be obtained from responsible
companies qualified to do business and in good standing in Massachusetts, which
companies and the amount of insurance allocated thereto shall be subject to
Landlord's approval, Tenant agrees to furnish Landlord with certificates
evidencing all such insurance prior to the beginning of the term hereof and
evidencing renewal thereof at least thirty (30) days prior to the expiration of
any such policy. Each such policy shall be non-cancellable with respect to the
interest of Landlord without at least ten (10) days' prior written notice
thereto. In the event provision for any such insurance is to be by a blanket
insurance policy, the policy shall allocate a specific and sufficient amount of
coverage to the Premises.
4.2.3.4 All insurance which is carried by either party with
respect to the Building, Premises or to furniture, furnishings, fixtures or
equipment therein or alterations or improvements thereto, whether or not
required, shall include provisions which either designate the other party as one
of the insured or deny to the insurer acquisition by subrogation of
-16-
<PAGE> 17
rights of recovery against the other party to the extent such rights have been
waived by the insured party prior to occurrence of loss or injury, insofar as,
and to the extent that, any such waiver of subrogation provisions may be
effective without making it impossible to obtain insurance coverage without
additional premium from responsible companies qualified to do business in the
state in which the Premises are located or, if additional premium is required to
be paid, the other party offers to pay such premium after being given
notification thereof. Nothing contained in this subsection shall derogate from
or otherwise affect releases elsewhere herein contained of either party for
claims. Each party shall be entitled to have certificates of any policies
containing such provisions. Each party hereby waives all rights of recovery
against the other for loss or injury against which the waiving party is
protected by insurance containing said provisions, reserving, however, any
rights with respect to any excess of loss or injury over the amount recovered by
such insurance, provided, however, that in no event shall either party be liable
for any incidental or consequential damages on account of such loss or injury.
Tenant shall not acquire as insured under any insurance carried on the Premises
any right to participate in the adjustment of loss or to receive insurance
proceeds and agrees upon request promptly to endorse and deliver to Landlord any
checks or other instruments in payment of loss in which Tenant is named as
payee.
4.2.4 Utilities. Tenant shall pay all charges made by public authority
or utility for the cost of electricity furnished or consumed on the Premises,
all charges for any utilities
-17-
<PAGE> 18
supplied by Landlord pursuant to Subsections 5.1.1 and 5.1.3 which are
separately metered, and all charges for telephone and other utilities or
services not supplied by Landlord pursuant to Subsections 5.1.1 and 5.1.3,
whether designated as a charge, tax, assessment, fee or otherwise, all such
charges to be paid as the same from time to time become due. Except as otherwise
provided in Article 5, it is understood and agreed that Tenant shall make its
own arrangements for the installation or provision of all such utilities and
that Landlord shall be under no obligation to furnish any utilities to the
Premises and shall not be liable for any interruption or failure in the supply
of any such utilities to the Premises. Landlord shall insure that all utility
equipment which connects the outside services to be furnished by Landlord is
functioning and installed properly.
4.3 Late Payment of Rent. If any installment of rent is paid more than
ten (10) days after the date the same was due, and if on a prior occasion in the
twelve (12) month period prior to the date such installment was due an
installment of rent was paid more than ten (10) days after the same was due,
then Tenant shall pay Landlord a late payment fee equal to five (5%) percent of
the overdue payment.
4.4 Security Deposit. On or before March 20, 1992, Tenant shall deposit
with Landlord the Security Deposit, which Landlord shall deposit in its name in
a Bank of Boston Client Group Account (money market account). Said deposit shall
be held by Landlord as security for the faithful performance by Tenant of all
the terms of this Lease by said Tenant to be observed and performed. The
-18-
<PAGE> 19
security deposit shall not be mortgaged, assigned transferred or encumbered by
Tenant without the written consent of Landlord and any such act on the part of
Tenant shall be without force and effect and shall not be binding upon Landlord.
If the Fixed Rent or Additional Rent payable hereunder shall be overdue
and unpaid or should Landlord make payments on behalf of the Tenant, or Tenant
shall fail to perform any of the terms of this Lease, then Landlord may, at its
option and without prejudice to any other remedy which Landlord may have on
account thereof, appropriate and apply said entire deposit or so much thereof as
may be necessary to compensate Landlord toward the payment of Fixed Rent,
Additional Rent or other sums or loss or damage sustained by Landlord due to
such breach on the part of Tenant; and Tenant shall forthwith upon demand
restore said security to the original sum deposited. Should Tenant comply with
all of said terms and promptly pay all of the rentals as they fall due and all
other sums payable by Tenant to Landlord, said deposit and any interest earned
thereon shall be returned in full to Tenant at the end of the term.
In the event of bankruptcy or other creditor-debtor proceedings against
Tenant, all securities shall be deemed to be applied first to the payment of
rent and other charges due Landlord for all periods prior to the filing of such
proceedings.
If on or before March 20, 1992, Tenant delivers to Landlord a
certification by an executive officer of JWP, Inc. that Tenant has a net worth
of at least $25,000,000, Tenant shall not be required to deposit with Landlord
the Security Deposit.
-19-
<PAGE> 20
ARTICLE 5
---------
Landlord's Covenants
--------------------
5.1 Affirmative Covenants. Landlord covenants with Tenant:
5.1.1 Heat and Air-conditioning. To furnish to the Premises,
separately metered and at the direct expense of Tenant as hereinabove provided,
heat and air-conditioning (reserving the right, at any time, to change energy or
heat sources, provided that Landlord shall use best efforts not to unreasonably
interfere with Tenant's business or otherwise inconvenience Tenant) sufficient
to maintain the Premises at comfortable temperatures as generally maintained in
comparable office buildings within the municipality in which the Building is
located (subject to all federal, state and local regulations relating to the
provision of heat).
5.1.2 Electricity. To furnish to the Premises, separately
metered (such meter to be installed at Landlord's expense) and at the direct
expense of Tenant as hereinabove provided, electricity for Tenant's Permitted
Uses in amounts adequate for general office purposes. If Tenant shall require
electricity in excess of reasonable quantities for Tenant's Permitted Uses and
if (i) in the reasonable judgment of a qualified electrical engineer, Landlord's
facilities are inadequate for such excess requirements, or (ii) such excess use
shall result in an additional burden on the Building utilities systems and
additional cost to Landlord on account thereof, as the case may be, (a) Tenant
shall, upon demand, reimburse Landlord for such additional cost, as aforesaid,
or (b) Landlord, upon written
-20-
<PAGE> 21
request, and at the sole cost and expense of Tenant, will furnish and install
such additional wire, conduits, feeders, switchboards and appurtenances as
reasonably may be required to supply such additional requirements of Tenant (if
electricity therefor is then available to Landlord), provided that the same
shall be permitted by applicable laws and insurance regulations and shall not
cause permanent damage or injury to the Building or cause or create a dangerous
or hazardous condition or entail excessive or unreasonable alterations or
repairs.
5.1.3 Cleaning; Water. To provide cleaning to the Premises in
accordance with cleaning and janitorial standards set forth in Exhibit C; and to
furnish water for ordinary cleaning, lavatory and toilet facilities.
5.1.4 Elevator; Lighting. To furnish elevator service from the
lobby to the Premises; and to provide lighting to public and common areas of the
Building.
5.1.5 Repairs. Except as otherwise expressly provided herein, to
make such repairs and replacements to the roof, exterior walls, floor slabs and
other structural components of the Building, and to the common areas (including
pavement and parking area lighting), facilities and plumbing, electrical,
heating, ventilating and air-conditioning systems of the Building as may be
necessary to keep them in good repair and condition (exclusive of equipment
installed by Tenant and except for those repairs required to be made by Tenant
pursuant to Section 6.1.3 hereof and repairs or replacements occasioned by any
act or negligence of
-21-
<PAGE> 22
Tenant, its servants, agents, customers, contractors, employees, invitees, or
licensees).
5.1.6 Insurance. Landlord shall maintain casualty insurance in
an amount equal to at least eighty (80%) percent of the full replacement cost of
the Building.
5.2 Interruption. Landlord shall be under no responsibility or liability
for failure or interruption of any of the above described services, repairs or
replacements caused by breakage, accident, strikes, repairs, inability to obtain
supplies, labor or materials, or for any other causes beyond the control of the
Landlord, except where caused by Landlord's willful negligence or misconduct and
in no event for any indirect or consequential damages to Tenant; and failure or
omission on the part of the Landlord to furnish any of same for any of the
reasons set forth in this paragraph shall not be construed as an eviction of
Tenant, actual or constructive, nor entitle Tenant to an abatement of rent, nor
render the Landlord liable in damages, nor release Tenant from prompt
fulfillment of any of its covenants under this Lease.
5.3 Outside Services. In the event Tenant wishes to provide outside
services for the Premises over and above those services to be provided by
Landlord as set forth herein, Tenant shall first obtain the prior written
approval of Landlord for the installation and/or utilization of such services,
which approval shall not be unreasonably withheld or delayed. ("outside
services" shall include, but shall not be limited to, cleaning services,
television, so-called "canned music" services, security services
-22-
<PAGE> 23
and the like.) In the event Landlord approves the installation and/or
utilization of such services, such installation and utilization shall be at
Tenant's sole cost, risk and expense. Landlord acknowledges that Tenant, subject
to Landlord's approval, not to be unreasonably withheld, as to the identity of
the provider or the method of installation, shall have the right to have the
following within the Premises: vending, catering, security guard service and
security system.
5.4 Payment of Tenant's Cost of Enforcement. Landlord shall pay on
demand Tenant's expenses, including reasonable attorneys' fees, incurred in
enforcing any obligation of Landlord under this Lease.
ARTICLE 6
---------
Tenant's Additional Covenants
-----------------------------
6.1 Affirmative Covenants. Tenant covenants at all times during the term
and for such further time (prior or subsequent thereto) as Tenant occupies the
Premises or any part thereof:
6.1.1 Perform Obligations. To perform promptly all of the
obligations of Tenant set forth in this Lease; and to pay when due the Fixed
Rent and Additional Rent and all charges, rates and other sums which by the
terms of this Lease are to be paid by Tenant.
6.1.2 Use. To use the Premises only for the Permitted Uses, and
from time to time to procure all licenses and permits necessary therefor, at
Tenant's sole expense. With respect to any licenses or permits for which Tenant
may apply, pursuant to this
-23-
<PAGE> 24
subsection 6.1.2 or any other provision hereof, Tenant shall furnish Landlord
copies of applications therefor on or before their submission to the
governmental authority.
6.1.3 Repair and Maintenance. Except as otherwise provided
herein, to maintain the Premises in neat order and condition and to perform all
routine and ordinary repairs to the Premises and to any plumbing, heating,
electrical, ventilating and air-conditioning systems located within the Premises
and installed by Tenant such as are necessary to keep them in good working
order, appearance and condition, as the case may require, reasonable use and
wear thereof and damage by fire or by unavoidable casualty only excepted; to
keep all glass in windows and doors of the Premises (except glass in the
exterior walls of the Building) whole and in good condition with glass of the
same quality as that injured or broken; and to make as and when needed as a
result of misuse by, or neglect or improper conduct of Tenant or Tenant's
servants, employees, agents, invitees or licensees or otherwise, all repairs
necessary, which repairs and replacements shall be in quality and class equal to
the original work. (Landlord, upon default of Tenant hereunder and upon prior
notice to Tenant, may elect, at the reasonable expense of Tenant, to perform all
such cleaning and maintenance and to make any such repairs or to repair any
damage or injury to the Building or the Premises caused by moving property of
Tenant in or out of the Building, or by installation or removal of furniture or
other property, or by misuse by, or neglect, or improper conduct of,
-24-
<PAGE> 25
Tenant or Tenant's servants, employees, agents, contractors, customers, patrons,
invitees, or licensees.)
6.1.4 Compliance with Law. Except as required of Landlord
pursuant to section 5.1.5 herein, to make all nonstructural repairs,
alterations, additions or replacements to the Premises required by any law or
ordinance or any order or regulation of any public authority; to keep the
Premises equipped with all safety appliances so required; and to comply with the
orders and regulations of all governmental authorities with respect to zoning,
building, fire, health and other codes, regulations, ordinances or laws
applicable to the Premises, except that (i) Tenant shall not be required to
comply with any order or regulation in connection with any condition of the
Premises which existed and was not in compliance prior to Tenant's occupancy
thereof and (ii) Tenant may defer compliance so long as the validity of any such
law, ordinance, order or regulation shall be contested by Tenant in good faith
and by appropriate legal proceedings, if Tenant first gives Landlord appropriate
assurance or security against any loss, cost or expense on account thereof.
Landlord acknowledges that the Premises is currently free of any violation of
any governmental order or regulation.
6.1.5 Indemnification. To save Landlord harmless, and to
exonerate and indemnify Landlord from and against any and all claims,
liabilities or penalties asserted by or on behalf of any person, firm,
corporation or public authority on account of injury, death, damage or loss to
person or property in or upon the Premises and the Property arising out of the
use or occupancy of
-25-
<PAGE> 26
the Premises by Tenant or by any person claiming by, through or under Tenant
(including, without limitation, all patrons, employees and customers of Tenant),
or arising out of any delivery to or service supplied to the Premises, or on
account of or based upon anything whatsoever done on the Premises, except if the
same was caused by the negligence, fault or misconduct of Landlord, its agents,
servants or employees. In respect of all of the foregoing, Tenant shall
indemnify Landlord from and against all costs, expenses (including reasonable
attorneys' fees), and liabilities incurred in or in connection with any such
claim, action or proceeding brought thereon; and, in case of any action or
proceeding brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord and at Tenant's expense, shall resist or defend such action
or proceeding and employ counsel therefor reasonably satisfactory to Landlord.
6.1.6 Landlord's Right to Enter. To permit Landlord and its
agents to enter into and examine the Premises, to show the Premises and to make
repairs to the Premises. Except in emergencies, such entry shall be after
reasonable notice and at reasonable times.
6.1.7 Personal Property at Tenant's Risk. All of the
furnishings, fixtures, equipment, effects and property of every kind, nature and
description of Tenant and of all persons claiming by, through or under Tenant
which, during the continuance of this Lease or any occupancy of the Premises by
Tenant or anyone claiming under Tenant, may be on the Premises, shall be at the
sole risk and hazard of Tenant and if the whole or any part
-26-
<PAGE> 27
thereof shall be destroyed or damaged by fire, water or otherwise, or by the
leakage or bursting of water pipes, steam pipes, or other pipes, by theft or
from any other cause, no part of said loss or damage is to be charged to or to
be borne by Landlord, except that Landlord shall in no event be indemnified or
held harmless or exonerated from any liability to Tenant or to any other person,
for any injury, loss, damage or liability to the extent prohibited by law.
6.1.8 Payment of Landlord's Cost of Enforcement. To pay on
demand Landlord's expenses, including reasonable attorneys' fees, incurred in
enforcing any obligation of Tenant under this Lease or in curing any default by
Tenant under this Lease as provided in Section 8.4.
6.1.9 Yield Up. At the expiration of the term or earlier
termination of this Lease: to surrender all keys to the Premises; to remove all
of its trade fixtures and personal property in the Premises; to remove such
installations made by it as Landlord may request and all Tenant's signs wherever
located; to repair all damage caused by such removal and to yield up the
Premises (including all installations and improvements made by Tenant except for
trade fixtures and such of said installations or improvements as Landlord shall
request Tenant to remove), broom-clean and in the same good order and repair in
which Tenant is obliged to keep and maintain the Premises by the provisions of
this Lease. Any property not so removed after notice to Tenant shall be deemed
abandoned and may be removed and disposed of by Landlord in such manner as
Landlord shall determine and Tenant
-27-
<PAGE> 28
shall pay Landlord the reasonable cost and expense incurred by it in effecting
such removal and disposition and in making any incidental repairs and
replacements to the Premises and for use and occupancy during the period after
the expiration of the term and prior to its performance of its obligations under
this subsection 6.1.9. Tenant shall further indemnify Landlord against all loss,
cost and damage resulting from Tenant's failure and delay in surrendering the
Premises as above provided.
If the Tenant remains in the Premises beyond the expiration or earlier
termination of this Lease, such holding over shall be without right and shall
not be deemed to create any tenancy, but the Tenant shall be a tenant at
sufferance only at a daily rate of rent equal to two (2) times the rent and
other charges in effect under this Lease as of the day prior to the date of
expiration of this Lease.
6.1.10 Rules and Regulations. To comply with the Rules and
Regulations set forth in Exhibit D, and with all reasonable Rules and
Regulations of general applicability to all tenants of the Building hereafter
made by Landlord, of which Tenant has been given notice; Landlord shall not be
liable to Tenant for the failure of other tenants of the Building to conform to
such Rules and Regulations.
6.1.11 Estoppel Certificate. Upon not less than fifteen (15)
days' prior written request by Landlord, to execute, acknowledge and deliver to
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect and that Tenant has no defenses, offsets or counterclaims
-28-
<PAGE> 29
against its obligations to pay the Fixed Rent and Additional Rent and any other
charges and to perform its other covenants under this Lease (or, if there have
been any modifications, that the Lease is in full force and effect as modified
and stating the modifications and, if there are any defenses, offsets or
counterclaims, setting them forth in reasonable detail), and the dates to which
the Fixed Rent and Additional Rent and other charges have been paid. Any such
statement delivered pursuant to this subsection 6.1.11 may be relied upon by any
prospective purchaser or mortgagee of the Premises, or any prospective assignee
of such mortgage. Upon not less than fifteen (15) days' prior written request by
tenant, Landlord agrees to execute, acknowledge and deliver to Tenant a similar
estoppel certificate, including a statement as to whether Tenant is in default,
in a form reasonably acceptable to Landlord. Tenant shall also deliver to
Landlord such available financial information as may be reasonably required by
Landlord to be provided to any mortgagee or prospective purchaser of the
Premises.
6.2 Negative Covenants. Tenant covenants at all times during the term
and such further time (prior or subsequent thereto) as Tenant occupies the
Premises or any part thereof:
6.2.1 Assignment and Subletting. Not to assign, transfer,
mortgage or pledge this Lease or to sublease (which term shall be deemed to
include the granting of concessions and licenses and the like) all or any part
of the Premises or suffer or permit this Lease or the leasehold estate hereby
created or any other rights arising under this Lease to be assigned, transferred
-29-
<PAGE> 30
or encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the occupancy of the Premises by anyone other than
Tenant without the prior written consent of Landlord. Notwithstanding the
foregoing, Tenant shall have the right to assign this Lease or sublet all or a
portion of the Premises at any time without the necessity of obtaining
Landlord's consent, to (i) a corporation or other entity which controls, is
controlled by or is under common control with Tenant, (ii) a corporation or
other entity resulting from a reorganization of or merger with Tenant or (iii)
an entity which acquires substantially all of the assets of Tenant. In the event
Tenant desires to assign this Lease or sublet any portion or all of the Premises
in any instance requiring Landlord's consent, Tenant shall notify Landlord in
writing of Tenant's intent to so assign this Lease or sublet the Premises and
the proposed effective date of such subletting or assignment, and shall request
in such notification that Landlord consent thereto. Landlord may terminate this
Lease in the case of any such proposed assignment, or suspend this Lease pro
tanto for the period and with respect to the space involved in the case of any
such proposed subletting, by giving written notice of termination or suspension
to Tenant, with such termination or suspension to be effective as of the
effective date of such assignment or subletting. Upon such termination, Tenant
shall have no thereafter accruing obligations under this Lease. If Landlord does
not so terminate or suspend, Landlord's consent shall not be unreasonably
withheld or delayed to an assignment or to a subletting, provided that the
assignee or
-30-
<PAGE> 31
subtenant shall use the Premises only for the Permitted Uses, and further
provided, with respect to a subletting, that after such subletting the initial
Tenant named herein occupies at least fifty (50%) percent of the Rentable Floor
Area of the Premises. Tenant shall, as Additional Rent, reimburse Landlord
promptly for Landlord's reasonable legal expenses incurred in connection with
any request by Tenant for such consent. No subletting or assignment shall in any
way impair the continuing primary liability of Tenant hereunder, and no consent
to any subletting or assignment in a particular instance shall be deemed to be a
waiver of the obligation to obtain any required written approval of Landlord in
the case of any other subletting or assignment.
If for any assignment or sublease consented to by Landlord hereunder
Tenant receives rent or other consideration, either initially or over the term
of the assignment or sublease, in excess of the rent called for hereunder, or in
case of sublease of part, in excess of such rent fairly allocable to the part,
after appropriate adjustments to assure that all other payments called for
hereunder are appropriately taken into account and after deduction for
reasonable expenses of Tenant in connection with the assignment or sublease, to
pay to Landlord as additional rent fifty (50%) percent of the excess of each
such payment of rent or other consideration received by Tenant promptly after
its receipt.
Prior to listing the Premises or any part thereof with any other broker
for sublease or assignment, Tenant shall give
-31-
<PAGE> 32
Nordblom Company, as brokers, an exclusive listing for six (6) months with
respect to such sublease or assignment.
6.2.2 Nuisance. Not to injure, deface or otherwise harm the
Premises; nor commit any nuisance; nor permit in the Premises any vending
machine (except such as is used for the sale of merchandise to employees of
Tenant) or inflammable fluids or chemicals (except such as are customarily used
in connection with standard office equipment); nor permit any cooking to such
extent as requires special exhaust venting; nor permit the emission of any
objectionable noise or odor; nor make, allow or suffer any waste; nor make any
use of the Premises which is contrary to any law or ordinance or which will
invalidate any of Landlord's insurance; nor conduct any auction, fire, "going
out of business or bankruptcy sales.
6.2.3 Hazardous Wastes and Materials. Not to dispose of any
hazardous wastes, hazardous materials or oil on the Premises or the Property, or
into any of the plumbing, sewage, or drainage systems thereon, and to indemnify
and save Landlord harmless from all claims, liability, loss or damage arising on
account of the use or disposal by Tenant (or any person claiming by, through or
under Tenant including, without limitation, all customers, employees and
suppliers of Tenant) of hazardous wastes, hazardous materials or oil, including,
without limitation, liability under any federal, state, or local laws,
requirements and regulations, or damage to any of the aforesaid systems. Tenant
shall comply with all governmental reporting requirements with respect to
hazardous wastes, hazardous materials and oil, and
-32-
<PAGE> 33
shall deliver to Landlord copies of all reports filed with governmental
authorities.
6.2.4 Floor Load; Heavy Equipment. Not to place a load upon any
floor of the Premises exceeding the floor load per square foot area which such
floor was designed to carry and which is allowed by law, which for purposes of
this subsection, is 125 lbs. per square foot. Landlord reserves the right to
prescribe the weight and position of all heavy business machines and equipment,
including safes, which shall be placed so as to distribute the weight. Business
machines and mechanical equipment which cause vibration or noise shall be placed
and maintained by Tenant at Tenant's expense in settings sufficient to absorb
and prevent vibration, noise and annoyance. Tenant shall not move any safe,
heavy machinery, heavy equipment, freight or fixtures into or out of the
Premises except in such manner and at such time as Landlord shall in each
instance authorize.
6.2.5 Installation, Alterations or Additions. Not to make any
installations, alterations or additions in, to or on the Premises nor to permit
the making of any holes (other than by small nails and screws for hanging
pictures and the like) in the walls, partitions, ceilings or floors without on
each occasion obtaining the prior written consent of Landlord, and then only
pursuant to plans and specifications approved by Landlord in advance in each
instance (which consent, in the case of nonstructural, interior installations or
alterations that do not impair the structural integrity of the Building, reduce
its value or involve penetrations of the roof or exterior walls, shall not
-33-
<PAGE> 34
be unreasonably withheld if the work is $10,000 or more in cost, and shall not
be required if the work is less than $10,000 in cost, provided that in each
instance Tenant shall furnish Landlord with as-built plans upon completion of
such work); Tenant shall pay promptly when due the entire cost of any work to
the Premises undertaken by Tenant so that the Premises shall at all times be
free of liens for labor and materials, and at Landlord's request Tenant shall
furnish to Landlord a bond or other security acceptable to Landlord assuring
that any work commenced by Tenant will be completed in accordance with the plans
and specifications theretofore approved by Landlord and assuring that the
Premises will remain free of any mechanics' lien or other encumbrance arising
out of such work. In any event, Tenant shall forthwith bond against or discharge
any mechanics' liens or other encumbrances that may arise out of such work.
Tenant shall procure all necessary licenses and permits at Tenant's sole expense
before undertaking such work. All such work shall be done in a good and
workmanlike manner employing materials of good quality and so as to conform with
all applicable zoning, building, fire, health and other codes, regulations,
ordinances and laws. Tenant shall save Landlord harmless and indemnified from
all injury, loss, claims or damage to any person or property occasioned by or
growing out of such work.
6.2.6 Abandonment. Not to abandon or vacate the Premises during
the term, except that a temporary cessation of Tenant's business upon the
Premises shall not be considered abandonment or vacation where such cessation is
caused by (i)
-34-
<PAGE> 35
Tenant's employee vacation policy; (ii) temporary labor or economic conditions,
war or acts of God; or (iii) repairs, renovations or improvements conducted in
accordance with the terms of this Lease.
6.2.7 Signs. Not without Landlord's prior written approval to
paint or place any signs or place any curtains, blinds, shades, awnings,
aerials, or the like, visible from outside the Premises; provided, however, that
Tenant's identification sign, when approved by Landlord and subject to
conformance with applicable requirements of public authorities, may be placed on
the Building at the location shown on Exhibit E.
6.2.8 Parking and Storage. Not to permit any storage of
materials outside of the Premises; nor to permit the use of the parking areas
for either temporary or permanent storage of trucks, except that Tenant may park
up to two (2) service vans when not engaged in customer service; nor permit the
use of the Premises for any use for which heavy trucking would be customary.
ARTICLE 7
---------
Casualty or Taking
-------------------
7.1 Termination. In the event that the Premises or the Building, or any
material part thereof, shall be taken by any public authority or for any public
use, or shall be destroyed or damaged by fire or casualty, or by the action of
any public authority, then this Lease may be terminated at the election of
Landlord. Such election, which may be made notwithstanding the fact that
Landlord's entire interest may have been divested, shall
-35-
<PAGE> 36
be made by the giving of notice by Landlord to Tenant within sixty (60) days
after the date of the taking or casualty.
7.2 Restoration. If Landlord does not elect to so terminate, this Lease
shall continue in force and a just proportion of the rent reserved, according to
the nature and extent of the damages sustained by the Premises, shall be
suspended or abated, effective on the date of such casualty or taking, until the
Premises, or what may remain thereof, shall be put by Landlord in proper
condition for use, which Landlord covenants to do with reasonable diligence to
the extent permitted by the net proceeds of insurance recovered or damages
awarded for such taking, destruction or damage and subject to zoning and
building laws or ordinances then in existence. "Net proceeds of insurance
recovered or damages awarded" refers to the gross amount of such insurance or
damages less the reasonable expenses of Landlord incurred in connection with the
collection of the same, including without limitation, fees and expenses for
legal and appraisal services.
7.3 Termination by Tenant. Notwithstanding the foregoing provisions of
Article 7. Tenant may elect to terminate this Lease if (i) Landlord fails to
give written notice within sixty (60) days of any fire, casualty or taking of
its intention to restore the Premises; (ii) Landlord fails to restore the
Premises to a condition substantially suitable for their intended use within one
hundred eighty (180) days of said fire, casualty or taking; or (iii) any taking
or action by such public authority would render the Premises, after restoration
by Landlord, substantially
-36-
<PAGE> 37
unsuitable for Tenant's Permitted Uses. If Tenant elects to so terminate this
Lease, Tenant shall give written notice of termination to Landlord within thirty
(30) days following the lapsed time period described in Section 7.3(i) or (ii),
as applicable or within thirty (30) days following the date of any such taking
referred to in Section 7.3(iii); the termination date being specified in such
notice as a date not less than thirty (30) days after the day on which such
termination notice is given, provided, however, that such termination shall be
rendered ineffective in the case of 7.3(ii) if, prior to the specified
termination date, Landlord shall have completed such restoration.
7.4 Award. Irrespective of the form in which recovery may be had by law,
all rights to damages or compensation shall belong to Landlord in all cases, but
not including (i) relocation assistance payments by a government agency or
entity, (ii) any award specifically made to Tenant for interruption of its
business, and (iii) any award specifically made to Tenant for its trade
fixtures, equipment or personal property, provided such payments or awards to
Tenant do not reduce or otherwise adversely affect Landlord's award.
ARTICLE 8
---------
Defaults
--------
8.1 Events of Default. (a) If Tenant shall default in the performance of
any of its obligations to pay the Fixed Rent or Additional Rent hereunder and if
such default shall continue for ten (10) days after written notice from Landlord
designating such
-37-
<PAGE> 38
default or if within thirty (30) days after written notice from Landlord to
Tenant specifying any other default or defaults Tenant has not commenced
diligently to correct the default or defaults so specified or has not thereafter
diligently pursued such correction to completion, or (b) if any assignment shall
be made by Tenant or any guarantor of Tenant for the benefit of creditors, or
(c) if Tenant's leasehold interest shall be taken on execution, or (d) if a lien
or other involuntary encumbrance is filed against Tenant's leasehold interest,
and is not discharged within ten (10) days thereafter, or (e) if a petition is
filed by Tenant or any guarantor of Tenant for liquidation, or for
reorganization or an arrangement under any provision of any bankruptcy law or
code as then in force and effect, or (f) if an involuntary petition under any of
the provisions of any bankruptcy law or code is filed against Tenant or any
guarantor of Tenant and such involuntary petition is not dismissed within sixty
(60) days thereafter, then, and in any of such cases, Landlord and the agents
and servants of Landlord may, to the extent permitted by applicable law, in
addition to and not in derogation of any remedies for any preceding breach of
covenant, immediately or at any time thereafter without demand or notice and
with or without process of law (forcibly, if necessary) enter into and upon the
Premises or any part thereof in the name of the whole or mail a notice of
termination addressed to Tenant, and repossess the same as of Landlord's former
estate and expel Tenant and those claiming through or under Tenant and remove
its and their effects (forcibly, if necessary) without being deemed guilty of
any manner
-38-
<PAGE> 39
of trespass and without prejudice to any remedies which might otherwise be used
for arrears of rent or prior breach of covenant, and upon such entry or mailing
as aforesaid this Lease shall terminate, Tenant hereby waiving all statutory
rights to the Premises (including without limitation rights of redemption, if
any, to the extent such rights may be lawfully waived) and Landlord, without
notice to Tenant, may store Tenant's effects, and those of any person claiming
through or under Tenant, at the expense and risk of Tenant, and, if Landlord so
elects, may sell such effects at public auction or private sale and apply the
net proceeds to the payment of all sums due to Landlord from Tenant, if any, and
pay over the balance, if any, to Tenant.
8.2 Remedies. In the event that this Lease is terminated under any of
the provisions contained in Section 8.1 or shall be otherwise terminated for
breach of any obligation of Tenant, Tenant covenants to pay punctually to
Landlord all the sums and to perform all the obligations which Tenant covenants
in this Lease to pay and to perform in the same manner and to the same extent
and at the same time as if this Lease had not been terminated. In calculating
the amounts to be paid by Tenant pursuant to the preceding sentence Tenant shall
be credited with the net proceeds of any rent obtained by Landlord by reletting
the Premises, after deducting all Landlord's reasonable expense in connection
with such reletting, including, without limitation, all repossession costs,
brokerage commissions, fees for legal services and expenses of preparing the
Premises for such reletting (excluding the cost of any buildout incurred for any
new tenant), it being agreed by
-39-
<PAGE> 40
Tenant that Landlord may (i) relet the Premises or any part or parts thereof,
for a term or terms which may at Landlord's option be equal to or less than or
exceed the period which would otherwise have constituted the balance of the term
and may grant such concessions and free rent as Landlord in its sole judgment
considers advisable or necessary to relet the same and (ii) make such
alterations, repairs and decorations in the Premises as Landlord in its sole
judgment considers advisable or necessary to relet the same, and no action of
Landlord in accordance with the foregoing or failure to relet or to collect rent
under reletting shall operate or be construed to release or reduce Tenant's
liability as aforesaid. In lieu of the foregoing, Landlord may elect to recover,
and Tenant shall pay forthwith to Landlord, as compensation, the excess of the
total rent reserved for the residue of the term over the rental value of the
Premises for said residue of the term discounted at the then discount rate of
the Federal Reserve Bank of Boston. In calculating the rent reserved there shall
be included, in addition to the Fixed Rent and Additional Rent, the value of all
other considerations agreed to be paid or performed by Tenant for said residue.
In lieu of any other damages or indemnity and in lieu of full recovery
by Landlord of all sums payable under all the foregoing provisions of this
Section 8.2, Landlord may by written notice to Tenant, at any time after this
Lease is terminated under any of the provisions contained in section 8.1 or is
otherwise terminated for breach of any obligation of Tenant and before such full
recovery, elect to recover, and Tenant shall thereupon pay, as
-40-
<PAGE> 41
liquidated damages, an amount equal to the aggregate of the Fixed Rent and
Additional Rent accrued in the six (6) months ended next prior to such
termination plus the amount of rent of any kind accrued and unpaid at the time
of termination and less the amount of any recovery by Landlord under the
foregoing provisions of this Section 8.2 up to the time of payment of such
liquidated damages. Nothing contained in this Lease shall, however, limit or
prejudice the right of Landlord to prove for and obtain in proceedings for
bankruptcy or insolvency by reason of the termination of this Lease, an amount
equal to the maximum allowed by any statute or rule of law in effect at the time
when, and governing the proceedings in which, the damages are to be proved,
whether or not the amount be greater than, equal to, or less than the amount of
the loss or damages referred to above.
8.3 Remedies Cumulative. Any and all rights and remedies which Landlord
or Tenant may have under this Lease, and at law and equity, shall be cumulative
and shall not be deemed inconsistent with each other, and any two or more of all
such rights and remedies may be exercised at the same time insofar as permitted
by law.
8.4 Landlord's Right to Cure Defaults. Landlord may, but shall not be
obligated to, cure, at any time, without notice, any default by Tenant under
this Lease; and whenever Landlord so elects, all costs and expenses incurred by
Landlord, including reasonable attorneys' fees, in curing a default shall be
paid, as Additional Rent, by Tenant to Landlord on demand, together with
-41-
<PAGE> 42
lawful interest thereon from the date of payment by Landlord to the date of
payment by Tenant.
8.5 Effect of Waivers of Default. Any consent or permission by either
party hereunder to any act or omission which otherwise would be a breach of any
covenant or condition herein, shall not in any way be held or construed (unless
expressly so declared) to operate so as to impair the continuing obligation of
any covenant or condition herein, or otherwise, except as to the specific
instance, operate to permit similar acts or omissions.
8.6 No Waiver, etc. The failure of either party hereunder to seek
redress for violation of, or to insist upon the strict performance of, any
covenant or condition of this Lease shall not be deemed a waiver of such
violation nor prevent a subsequent act, which would have originally constituted
a violation, from having all the force and effect of an original violation. The
receipt by Landlord of rent with knowledge of the breach of any covenant of this
Lease shall not be deemed to have been a waiver of such breach by Landlord. No
consent or waiver, express or implied, by either party hereunder to or of any
breach of any agreement or duty shall be construed as a waiver or consent to or
of any other breach of the same or any other agreement or duty.
8.7 No Accord and Satisfaction. No acceptance by Landlord of a lesser
sum than the Fixed Rent, Additional Rent or any other charge then due shall be
deemed to be other than on account of the earliest installment of such rent or
charge due, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent or other charge be deemed an accord
-42-
<PAGE> 43
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
ARTICLE 9
---------
Rights of Mortgage Holders
---------------------------
9.1 Rights of Mortgage Holders. The word "mortgage" as used herein
includes mortgages, deeds of trust or other similar instruments evidencing other
voluntary liens or encumbrances, and modifications, consolidations, extensions,
renewals, replacements and substitutes thereof. The word "holder" shall mean a
mortgagee, and any subsequent holder or holders of a mortgage. Until the holder
of a mortgage shall enter and take possession of the Property for the purpose of
foreclosure, such holder shall have only such rights of Landlord as are
necessary to preserve the integrity of this Lease as security. Upon entry and
taking possession of the Property for the purpose of foreclosure, such holder
shall have all the rights of Landlord. No such holder of a mortgage shall be
liable either as mortgagee or as assignee, to perform, or be liable in damages
for failure to perform, any of the obligations of Landlord unless and until such
holder shall enter and take possession of the Property for the purpose of
foreclosure. Upon entry for the purpose of foreclosure, such holder shall be
liable to perform all of the obligations of Landlord, subject to and with the
benefit of the provisions of Section 10.4, provided that a discontinuance of any
foreclosure
-43-
<PAGE> 44
proceeding shall be deemed a conveyance under said provisions to the owner of
the equity of the Property.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a holder of a mortgage (particularly, without
limitation thereby, the covenants and agreements contained in this Section 9.1)
constitute a continuing offer to any person, corporation or other entity, which
by accepting a mortgage subject to this Lease, assumes the obligations herein
set forth with respect to such holder; such holder is hereby constituted a party
of this Lease as an obligee hereunder to the same extent as though its name were
written hereon as such; and such holder shall be entitled to enforce such
provisions in its own name. Tenant agrees on request of Landlord to execute and
deliver from time to time any agreement which may be necessary to implement the
provisions of this Section 9.1.
9.2 Lease Superior or Subordinate to Mortgages. It is agreed that the
rights and interest of Tenant under this Lease shall be (i) subject or
subordinate to any present or future mortgage or mortgages and to any and all
advances to be made thereunder, and to the interest of the holder thereof in the
Premises or any property of which the Premises are a part if Landlord shall
elect by notice to Tenant to subject or subordinate the rights and interest of
Tenant under this Lease to such mortgage or (ii) prior to any present or future
mortgage or mortgages, if Landlord shall elect, by notice to Tenant, to give the
rights and interest of Tenant under this Lease priority to such mortgage; in the
event of either of such elections and upon
-44-
<PAGE> 45
notification by Landlord to that effect, the rights and interest of Tenant under
this Lease should be deemed to be subordinate to, or have priority over, as the
case may be, said mortgage or mortgages, irrespective of the time of execution
or time of recording of any such mortgage or mortgages (provided that, in the
case of subordination of this Lease to any future mortgages, the holder thereof
agrees (i) to abide by the terms and conditions of this Lease and (ii) not to
disturb the possession of Tenant so long as Tenant is not in default hereunder).
Tenant agrees it will, upon request of Landlord, execute, acknowledge and
deliver any and all instruments deemed by Landlord necessary or desirable to
give effect to or notice of such subordination or priority. Tenant also agrees
that if it shall fail at any time to execute, acknowledge and deliver any such
instrument requested by Landlord, Landlord may, in addition to any other
remedies available to it, execute, acknowledge and deliver such instrument as
the attorney-in-fact of Tenant and in Tenant's name; and Tenant does hereby
make, constitute and irrevocably appoint Landlord as its attorney-in-fact,
coupled with an interest with full power of substitution, and in its name, place
and stead so to do. Any mortgage to which this Lease shall be subordinated may
contain such terms, provisions and conditions as the holder deems usual or
customary.
At the request of Tenant, Landlord shall use reasonable efforts to
obtain on Tenant's behalf an agreement from any present holder of a mortgage on
the Property that such holder, in exercising any of its rights under such
mortgage, shall not
-45-
<PAGE> 46
disturb the possession or any other rights of Tenant under this Lease and that
such mortgagee will accept Tenant as tenant of the Premises under the terms and
conditions of this Lease so long as Tenant performs its obligations hereunder
and agrees to attorn to such mortgagee.
ARTICLE 10
----------
Miscellaneous Provisions
------------------------
10.1 Notices from One Party to the Other. All notices required or
permitted hereunder shall be in writing and addressed, if to the Tenant, at the
Original Notice Address of Tenant or such other address as Tenant shall have
last designated by notice in writing to Landlord and, if to Landlord, at the
Original Notice Address of Landlord or such other address as Landlord shall have
last designated by notice in writing to Tenant. Any notice shall be deemed duly
given when mailed to such address postage prepaid, by registered or certified
mail, return receipt requested, or when delivered to such address by hand or by
Federal Express or comparable overnight courier.
10.2 Quiet Enjoyment. Landlord agrees that upon Tenant's paying the rent
and performing and observing the agreements, conditions and other provisions on
its part to be performed and observed, Tenant shall and may peaceably and
quietly have, hold and enjoy the Premises during the term hereof without any
manner of hindrance or molestation from Landlord or anyone claiming under
Landlord, subject, however, to the terms of this Lease.
-46-
<PAGE> 47
10.3 Lease not to be Recorded. Tenant agrees that it will not record
this Lease. Both parties shall, upon the request of either, execute and deliver
a notice or short form of this Lease in such form, if any, as may be permitted
by applicable statute.
10.4 Limitation of Landlord's Liability. The term "Landlord" as used in
this Lease, so far as covenants or obligations to be performed by Landlord are
concerned, shall be limited to mean and include only the owner or owners at the
time in question of the Property, and in the event of any transfer or transfers
of title to said property, the Landlord (and in case of any subsequent transfers
or conveyances, the then grantor) shall be concurrently freed and relieved from
and after the date of such transfer or conveyance, without any further
instrument or agreement, of all liability as respects the performance of any
covenants or obligations on the part of the Landlord contained in this Lease
thereafter to be performed, it being intended hereby that the covenants and
obligations contained in this Lease on the part of Landlord, shall, subject as
aforesaid, be binding on the Landlord, its successors and assigns, only during
and in respect of their respective successive periods of ownership of said
leasehold interest or fee, as the case may be. Tenant, its successors and
assigns, shall not assert nor seek to enforce any claim for breach of this Lease
against any of Landlord's assets other than Landlord's interest in the Property
and in the rents, issues and profits thereof, and Tenant agrees to look solely
to such interest for the satisfaction of any liability or claim against Landlord
under this Lease, it being specifically agreed
-47-
<PAGE> 48
that in no event whatsoever shall Landlord (which term shall include, without
limitation, any general or limited partner, trustees, beneficiaries, officers,
directors, or stockholders of Landlord) ever be personally liable for any such
liability. Landlord hereby covenants and represents that it is as of the Date of
this Lease the sole owner of the Building and the Property.
10.5 Acts of God. In any case where either party hereto is required to
do any act, delays caused by or resulting from Acts of God, war, civil
commotion, fire, flood or other casualty, labor difficulties, shortages of
labor, materials or equipment, government regulations, unusually severe weather,
or other causes beyond such party's reasonable control shall not be counted in
determining the time during which work shall be completed, whether such time be
designated by a fixed date, a fixed time or a "reasonable time", and such time
shall be deemed to be extended by the period of such delay.
10.6 Landlord's Default. Landlord shall not be deemed to be in default
in the performance of any of its obligations hereunder unless it shall fail to
perform such obligations and such failure shall continue for a period of thirty
(30) days or such additional time as is reasonably required to correct any such
default after written notice has been given by Tenant to Landlord specifying the
nature of Landlord's alleged default. Landlord shall not be liable in any event
for incidental or consequential damages to Tenant by reason of Landlord's
default, whether or not notice is given. Tenant shall have no right to terminate
this Lease for any
-48-
<PAGE> 49
default by Landlord hereunder and no right, for any such default, to offset or
counterclaim against any rent due hereunder.
10.7 Brokerage. Tenant warrants and represents that it has dealt with no
broker in connection with the consummation of this Lease, other than Nordblom
Company, and in the event of any brokerage claims, other than by Nordblom
Company, against Landlord predicated upon prior dealings with Tenant, Tenant
agrees to defend the same and indemnify and hold Landlord harmless against any
such claim.
10.8 Applicable Law and Construction. This Lease shall be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts
and, if any provisions of this Lease shall to any extent be invalid, the
remainder of this Lease shall not be affected thereby. There are no oral or
written agreements between Landlord and Tenant affecting this Lease, This Lease
may be amended, and the provisions hereof may be waived or modified, only by
instruments in writing executed by Landlord and Tenant. The titles of the
several Articles and Sections contained herein are for convenience only and
shall not be considered in construing this Lease. Unless repugnant to the
context, the words "Landlord" and "Tenant" appearing in this Lease shall be
construed to mean those named above and their respective heirs, executors,
administrators, successors and assigns, and those claiming through or under them
respectively. If there be more than one tenant the obligations imposed by this
Lease upon Tenant shall be joint and several.
-49-
<PAGE> 50
WITNESS the execution hereof under seal on the day and year first above
written.
Landlord:
/s/ signature illegible
/s/ signature illegible
as trustees
Tenant:
EXTEL/JWP INFORMATION SYSTEMS,
INC.
By /s/ signature illegible
Its
-50-
<PAGE> 51
[EXHIBIT C NOT SHOWN]
<PAGE> 52
EXHIBIT D
---------
RULES AND REGULATIONS
---------------------
1. The sidewalks, entrances, passages, corridors, vestibules, halls,
elevators or stairways in or about the Building shall not be obstructed by
Tenant.
2. Tenant shall not place objects against glass partitions, doors or
windows which would be unsightly from the Building corridor or from the exterior
of the Building.
3. Tenant shall not waste electricity or water in the Building premises
and shall cooperate fully with Landlord to assure the most effective operation
of the Building heating and air conditioning systems. All regulating and
adjusting of heating and air conditioning apparatus shall be done by the
Landlord's agents or employees.
4. Tenant shall not use the Premises so as to cause any increase above
normal insurance premiums on the Building.
5. No bicycles, vehicles or animals of any kind shall be brought into or
kept in or about the Premises. No space in the Building shall be used for
manufacturing or for the sale of merchandise of any kind at auction or for
storage thereof preliminary to such sale.
6. Tenant shall cooperate with Landlord in minimizing loss and risk
thereof from fire and associated perils.
7. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were designed and
constructed and no sweepings, rubbish, rags, acid or like substance shall be
deposited therein. All damages resulting from any misuse of the fixtures shall
be borne by the Tenant.
8. Landlord reserves the right to establish, modify and enforce
reasonable parking rules and regulations, provided such rules and regulations do
not diminish Tenant's rights under the Lease.
9. Landlord reserves the right at any time to rescind, alter or waive
any rule or regulation at any time prescribed for the Building and to impose
additional reasonable rules and regulations when in its judgment deems it
necessary, desirable or proper for its best interest and for the best interest
of the tenants and no alteration or waiver of any rule or regulation in favor of
one tenant shall operate as an alteration or waiver in favor of any other
tenant, provided such rules and regulations do not diminish Tenant's rights
under the Lease. Landlord shall not be responsible to any tenant for the
nonobservance or violation by any other tenant however resulting of any rules or
regulations at any time prescribed for the Building.
<PAGE> 53
[EXHIBIT E NOT SHOWN]
<PAGE> 54
FIRST AMENDMENT TO LEASE
------------------------
WHEREAS, on February 29, 1992, Rodger P. Nordblom, Peter C. Nordblom and
Russell J. Fogelin, Trustees of Canton Street Associates III entered into a
lease (the "Lease") with Extel/JWP Information Systems, Inc. covering a portion
of the premises now known as and numbered 725 Canton Street, Norwood,
Massachusetts (the "Property"); and,
WHEREAS, 725 C.W. Associates Limited Partnership (the "Landlord")
purchased the Property from Rodger P. Nordblom et.al., Trustees, on September
29, 1992; and,
WHEREAS, on August 9, 1993, ENTEX Information Services, Inc. (the
"Tenant") purchased substantially all of the assets of Extel/JWP Information
Systems, Inc.; and,
WHEREAS, the Landlord and Tenant have agreed to amend the Lease in order
to extend the Term thereof,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein and in the Lease contained, the parties hereto hereby agree to the
following amendments to the Lease:
The designation of the Landlord and Tenant as set forth in Article 1 of
the Lease is amended to read as follows:
LANDLORD: 725 C.W. Associates Limited Partnership
c/o Cornerstone Corporation
725 Canton Street
Norwood, MA 02062
ATTENTION: Robert L. Evans
TENANT: ENTEX Information Services, Inc.
Six International Drive
Rye Brook, NY 10573-1058
1) Article 1 is further amended to read as follows:
TERM: Seven and one half (7 1/2) years
COMMENCEMENT DATE: March 1, 1992
TERMINATION DATE: August 31, 1999
SECURITY DEPOSIT: None
<PAGE> 55
2) Capitalized terms not otherwise defined shall have the meaning for
such terms ascribed in the Lease.
3) In all other respects, the terms and provisions of the Lease are
hereby ratified and confirmed and remain in full force and effect.
WITNESS the execution hereof under seal this first day of December,
1994.
LANDLORD: C.W. Associates Limited Partnership
By /s/ Paul E. Tryder
Paul E. Tryder
Managing General Partner
TENANT: ENTEX Information Services, Inc.
By /s/ Robert A. Weber
Robert Weber, Manager Enterprise Facilities
<PAGE> 56
March 11, 1992
Extel/JWP Information Systems, Inc.
70 Shawmut Road
Canton, MA 02021
Re: 725 Canton Street, Norwood
Gentlemen:
Reference is made to the lease dated February 29, 1992 between the
undersigned as landlord and your company as tenant, with respect to a premises
at the above-referenced location. This letter shall set forth and confirm the
agreement between us with respect to the lease commencement date, and your
payment of utility charges prior thereto.
We have agreed as follows:
1. In Section 1.1 of the Lease, the definition of Commencement Date is
deleted and "April 1, 1992" is inserted in its place.
2. Notwithstanding the aforesaid Commencement Date, Section 4.2.4 of the
Lease, regarding utilities, shall be effective as of February 1, 1992, so that
you will be responsible for the payment of charges for utilities furnished to
the Premises commencing on such date.
If the foregoing accurately sets forth our agreement with respect to
lease commencement and payment of utility charges, please so confirm by signing
and returning to us the enclosed copy of this letter,
Very truly yours,
CANTON STREET ASSOCIATES III
By: /s/ signature not legible
Trustee, and not individually
Confirmed and Agreed:
EXTEL/JWP INFORMATION SYSTEMS, INC.
By: /s/ signature illegible
Its: Facility Manager
<PAGE> 57
AGREEMENT
---------
AGREEMENT made this 26th day of January, 1994 by and between
725 C.W. Associates Limited Partnership, a Massachusetts limited
partnership (hereinafter the "Landlord")
and
ENTEX Information Services, Inc., a Delaware corporation (hereinafter
the "Tenant")
WHEREAS, on February 29, 1992, Rodger P. Nordblom, Peter C. Nordblom and
Russell J. Fogelin, Trustees of Canton Street Associates III entered into a
lease (the "Lease") with Extel/JWP Information Systems, Inc. covering a portion
of the premises now known as and numbered 725 Canton Street, Norwood,
Massachusetts (the "Property"); and,
WHEREAS, the Landlord purchased the Property from Rodger P. Nordblom
et.al., Trustees, on September 29, 1992; and,
WHEREAS, on August 9, 1993, the Tenant purchased substantially all of
the assets of Extel/JWP Information Systems, Inc.; and,
WHEREAS, the parties desire to make certain agreements with respect to
the Lease,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein and in the Lease contained, the parties hereto hereby agree as follows:
1) A true and accurate copy of the Lease, including all amendments
thereto, is attached hereto marked Exhibit A.
2) The Lease represents the entire understanding between the Landlord
and the Tenant with respect to the leasing of the Premises.
3) The Landlord consents to the assignment of the Lease to the Tenant.
4) The Tenant assumes and agrees to perform each and every obligation of
Extel/JWP Information Systems, Inc. under the Lease.
5) There are no offsets, deductions or credits against the rents due and
payable under the Lease.
<PAGE> 58
6) To the best of the knowledge of the parties hereto, there exists no
default or state of facts which, with the passage of time or the giving of
notice, or both, could ripen into a default on the part of either party under
the Lease.
7) The parties acknowledge that the requirement that EXTEL/JWP Systems,
Inc. provide a security deposit has been waived and that the Landlord does not
hold a security deposit.
8) Under the provisions of Article 4.2.2., the Landlord is required to
provide the Tenant with a statement of Base Operating Costs for calendar year
1992. The parties agree that the Operating Costs itemized on Exhibit A are the
Landlord's actual 1992 base operating costs.
9) Capitalized terms not otherwise defined shall have the meaning for
such terms ascribed in the Lease.
10) In all other respects, the terms and provisions of the Lease are
hereby ratified and confirmed and remain in full force and effect.
WITNESS the execution hereof under seal this 26th day of January, 1994.
LANDLORD: C.W. Associates Limited Partnership
By /s/ Paul E. Tryder
Paul E. Tryder, General Partner
TENANT: ENTEX Information Services, Inc.
By /s/ signature illegible
<PAGE> 59
AGREEMENT
---------
AGREEMENT made this 26th day of January, 1994 by and between
725 C.W. Associates Limited Partnership, a Massachusetts limited
partnership (hereinafter the "Landlord")
and
ENTEX Information Services, Inc., a Delaware corporation (hereinafter
the "Tenant")
WHEREAS, on February 29, 1992, Rodger P. Nordblom, Peter C. Nordblom and
Russell J. Fogelin, Trustees of Canton Street Associates III entered into a
lease (the "Lease") with Extel/JWP Information Systems, Inc. covering a portion
of the premises now known as and numbered 725 Canton Street, Norwood,
Massachusetts (the "Property"); and,
WHEREAS, the Landlord purchased the Property from Rodger P. Nordblom
et.al., Trustees, on September 29, 1992; and,
WHEREAS, on August 9, 1993, the Tenant purchased substantially all of
the assets of Extel/JWP Information Systems, Inc.; and,
WHEREAS, the parties desire to make certain agreements with respect to
the Lease,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein and in the Lease contained, the parties hereto hereby agree as follows:
1) A true and accurate copy of the Lease, including all amendments
thereto, is attached hereto marked Exhibit A.
2) The Lease represents the entire understanding between the Landlord
and the Tenant with respect to the leasing of the Premises.
3) The Landlord consents to the assignment of the Lease to the Tenant.
4) The Tenant assumes and agrees to perform each and every obligation of
Extel/JWP Information Systems, Inc. under the Lease.
5) There are no offsets, deductions or credits against the rents due and
payable under the Lease.
<PAGE> 60
6) To the best of the knowledge of the parties hereto, there exists no
default or state of facts which, with the passage of time or the giving of
notice, or both, could ripen into a default on the part of either party under
the Lease.
7) The parties acknowledge that the requirement that EXTEL/JWP Systems,
Inc. provide a security deposit has been waived and that the Landlord does not
hold a security deposit.
8) Under the provisions of Article 4.2.2., the Landlord is required to
provide the Tenant with a statement of Base Operating Costs for calendar year
1992. The parties agree that the Operating Costs itemized on Exhibit A are the
Landlord's actual 1992 base operating costs.
9) Capitalized terms not otherwise defined shall have the meaning for
such terms ascribed in the Lease.
10) In all other respects, the terms and provisions of the Lease are
hereby ratified and confirmed and remain in full force and effect.
WITNESS the execution hereof under seal this 26th day of January, 1994.
LANDLORD: C.W. Associates Limited Partnership
By /s/ Paul E. Tryder
Paul E. Tryder, General Partner
TENANT: ENTEX Information Services, Inc.
By /s/ signature illegible
<PAGE> 1
EXHIBIT 10.19
THIS AGREEMENT IS SUBJECT TO THE TERMS OF A CERTAIN AMENDED AND RESTATED
INTERCREDITOR AGREEMENT DATED AS OF APRIL 21, 1995, AMONG IBM CREDIT
CORPORATION, ITT COMMERCIAL FINANCE CORP., HEWLETT-PACKARD COMPANY, FINOVA
CAPITAL CORPORATION, CITIBANK, N.A. AND ENTEX HOLDINGS, INC.(COLLECTIVELY, THE
"ENTEX LENDERS"), AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, AS THE SAME HAS
BEEN AND MAY BE AMENDED, SUPPLEMENTED, OR OTHERWISE MODIFIED FROM TIME TO TIME
IN ACCORDANCE WITH ITS TERMS (THE "INTERCREDITOR AGREEMENT"), AND THE OTHER
AGREEMENTS AS DEFINED THEREIN
DEALER LOAN AND SECURITY AGREEMENT
FINOVA Capital Corporation ENTEX INFORMATION SERVICES, INC.
1060 First Avenue Exact Legal Name
Suite 100
King of Prussia, PA 19406 SIX INTERNATIONAL DRIVE
Street Address
RYE BROOK, NY 10573-1058
City, State, Zip Code
Gentlemen:
1. We are an authorized dealer of goods manufactured and/or distributed by
various manufacturers and distributors (hereinafter called "Manufacturer"). As
such, we from time to time buy goods from Manufacturer to be held by us as our
inventory for sale by us in the normal course of our business. We may, as more
fully set forth herein, from time to time obtain loans from you in order to
finance the purchase of certain of such goods, including parts and accessories
therefor, from Manufacturer, and desire by this Agreement to set forth in
writing our understanding of our loan arrangements with you and secure repayment
of such loans and other related debts and liabilities we may have to you,
whether now existing or hereafter arising.
2. Upon our request from time to time, you may, at your sole discretion
and without any obligation to do so, make loans to us, under such terms and with
such conditions as you have specified in your letter dated April 17, 1995 as
such letter may be modified upon notice to us, to enable us to acquire rights in
Inventory from Manufacturers pre-approved by you for financing programs. We
understand that each such loan will be solely at your discretion, and we
expressly disclaim any right to expect otherwise, either from the course of our
dealing, our need therefor, your dealings with others, your arrangements with
Manufacturer, or otherwise. Conversely, nothing herein will prevent us from
obtaining financing from other sources, provided that you are completely
satisfied that such other financing will not jeopardize our ability to comply
with our financial obligations to you and that adequate procedures will be
<PAGE> 2
implemented to absolutely assure your ability to identify your Collateral.
Accordingly, with respect to other financing arrangements pursuant to which we
intend to grant a security interest or lien in the Collateral in which, pursuant
to the Intercreditor Agreement your lien and security interest is prior to the
liens and security interests of all other parties to the Intercreditor Agreement
(the "FINOVA Priority Collateral"), or except as otherwise agreed by you in the
Agreement between us and the ENTEX Lenders dated as of April 21, 1995, we will
obtain both your written permission prior to arranging such other financing and
such acknowledgements and undertakings from our other lenders to whom we grant a
lien or security interest in the FINOVA Priority Collateral as you may require.
We understand that certain terms and conditions applicable to loans
obtained by us from you will be set forth in materials to be made available from
time to time to us and other dealers, the terms of which, as revised from time
to time, being deemed incorporated herein by reference. We understand that these
materials are subject to change by you at any time and from time to time, and
expressly assume the responsibility of confirming directly with you, upon our
request for each loan, the exact terms and conditions then being stated by you,
including without limitation rate of interest and terms of repayment. In no
event will we view such materials as a commitment or other offer on your part to
lend, and we will have no right to any loan under any particular terms until
actually made and under the terms so made. We understand and agree that the full
amount of each loan will be paid to you on its due date without deduction for
any sums due from Manufacturer or any Credit Memo that may have been issued to
you, unless you have previously notified us that you have received and applied
the amount of the Credit Memo issued by the Manufacturer.
We understand that you may, from time to time, issue advices to us. Such
advices may include, but need not be limited to, periodic or monthly statements
of our account, periodic letter advices in the nature of statements of account,
issued from time to time, and letter forms or other forms of notices of due
dates of finance plan payments and of the specific terms of loans which we have
with you. Unless we, within fifteen (15) days from the date of any such advice,
give you written and itemized objection to the contents of such advice, we shall
be fully bound thereby and acknowledge that the content of such advice is true,
correct, and complete, and accurately reflects our obligations to you as of the
date thereof.
In connection with each loan requested, we will deliver to you such other
writings as you shall require, which may include notes or other appropriate
evidence of debt. Such notes or other evidence of debt, Manufacturer invoices,
and other like materials as may be revised from time to time ("Collateral
Documents"), together with this Agreement, contain our entire understanding, and
we acknowledge that we will not be relying upon any prior
2
<PAGE> 3
oral or written promises or undertakings or future oral promises between us. No
modification hereof or of the Collateral Documents will be binding upon you
unless in a writing duly executed on your behalf by an officer holding the rank
of Vice President or higher.
We hereby authorize you to disburse the proceeds of each loan directly to
Manufacturer on our behalf. Further, we shall and hereby authorize Manufacturer
to deliver its invoice for Inventory, together with all Certificates of Origin,
directly to you. You many assume that all such invoices so submitted are
authentic and accurate and that they have been submitted on our behalf and with
our permission. Receipt by you from us or Manufacturer of an invoice for
Inventory shall be your authority to make a loan to us under terms and
conditions then being stated by you. In addition we shall and hereby authorize
the Manufacturer to issue all Credit Memos directly to you.
We acknowledge that the term "Prime Rate", as used in the Collateral
Documents in reference to the rate of interest applicable to loans to us, will
mean the average of the Prime Rates (the base rate for corporate loans at large
U.S. money center commercial banks) quoted in the Wall Street Journal under the
caption "Money Rates", and agree that the interest rate applicable to our loans
from you will automatically change from time to time effective upon each change
in the published Prime Rate. We further agree that interest on our loans from
you will be calculated on the basis of a 360 day year but will be chargeable for
the actual days that principal is outstanding in the then current year.
3. We acknowledge that our financial arrangements with you are completely
independent of our arrangements with Manufacturer, and that neither you nor
Manufacturer are an agent for or acting on behalf of the other. We are not
relying, in our understanding with you, on any statements, promises or
representations, oral or written, made by Manufacturer, whether or not
purportedly on your behalf, relating to the subject matter hereof and of our
loans with you. Although we may receive official literature, brochures and other
written materials disseminated by you through Manufacturer, we expressly assume
the risk that the materials so received are the most current, up to date
materials then authorized by you to be disseminated. None of our obligations to
you will be affected or impaired, or be subject to any defense, set-off,
counterclaim, crossclaim or recoupment, by reason of any claim which we now or
hereafter have against Manufacturer or its agents, including without limitation
any claim for breach of express or implied warranty of title, or otherwise
related to the condition of the Collateral or our dealings with Manufacturer.
4. As used herein, the following terms shall have the following meaning:
a) "Inventory" means all present and future
3
<PAGE> 4
Inventory, as that term is defined in the New York Uniform Commercial Code
("Code"), together will all parts and accessories, and all replacements,
substitutions and additions thereof or thereto.
b) "Accounts" means all present and future Accounts, as that term is
defined in the Code.
c) "General Intangibles" means all present and future General
Intangibles, as that term is defined in the Code, and shall include, without
limitation, all Credit Memos and other sums due from Manufacturer, all books,
records, ledgers, journals, check books, computer tapes and disks, print outs
and other information and sources of information, and all licenses, permits,
franchises, tradenames and other rights and privileges used or useful in the
conduct of our business and the sale of Inventory.
d) "Proceeds" means present and future Proceeds, as that term is
defined in the Code, and shall include, without limitation, insurance payable by
reason of loss or damage to any of the Collateral.
e) "Collateral" means, individually and collectively, Inventory,
Accounts, General Intangibles and Proceeds.
5. a) In order to secure repayment to you of each loan made by you to us
the proceeds of which enable us to acquire rights in or the use of Inventory, we
hereby grant to you a purchase money security interest in such Inventory, the
Proceeds thereof and all General Intangibles related thereto, to secure
repayment of such loan. It is intended by this subparagraph (a) that only the
Inventory so acquired, with Proceeds and related General Intangibles, will
secure the loan the proceeds of which enabled us to acquire rights in or the use
of such Inventory.
b) In order to secure repayment to you of all debts and liabilities
we may now or hereafter have to you under this Agreement or any other agreement,
whether such debt or liability be obtained by you by assignment, negotiation or
otherwise, and whether direct or indirect, primary or secondary, absolute or
contingent, or otherwise, including but not limited to all loans made by you to
us to finance the purchase of Inventory, we hereby grant to you a security
interest in all of our Inventory, and in all Accounts and General Intangibles no
matter how obtained by us, whether now existing or hereafter acquired, and the
Proceeds of all of the foregoing.
c) All payments made by us will be deemed to be applied by you first
to the loan (i) the proceeds of which enabled us to acquire rights in or the use
of Inventory which we have previously sold and (ii) with the earliest due date.
6. We hereby represent to you that all information
4
<PAGE> 5
provided by us to you in connection with our application for each loan from you
is and will be complete and accurate in every material respect. WE WILL
IMMEDIATELY NOTIFY YOU IN WRITING OF ANY CHANGE IN ANY OF THIS INFORMATION.
7. We will from time to time execute and/or deliver or cause to be
executed and/or delivered to you such financing statements, amendments to
financing statements, continuation statements, documents of title,
manufacturers' certificates of origin, warehouse receipts, bills of lading,
vehicle titles, waivers, consents and such other manner of things, and take all
manner of actions, as you may from time to time request which are in your sole
opinion necessary or desirable in order to perfect, protect, maintain, continue,
realize and/or enforce your rights and security interests granted herein. This
shall include, without limitation, the written waiver by the landlord of each
location at which any FINOVA Priority Collateral is located. A carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement and may be filed in any public office as a financing
statement, provided, however, that you shall promptly provide us with a copy of
any such filing of this Agreement in any public office, with such copy
reflecting the acknowledgement of the filing by such public office.
8. We will maintain the Inventory unopened and in its original packaging,
except for such Inventory as we may configure (subject to normal wear and tear
incident to such configuration), and will comply with all applicable laws
relating to our use thereof. We will provide you or your designated
representatives with access, at any time, upon 48 hours prior notice (so long as
no event of default has occurred under this Agreement) to each location at which
any Collateral is located, to inspect and examine the Inventory and other
Collateral and business records, including without limitation all financial
records. If an event of default has occurred under this Agreement, we agree that
you do not have to provide us with notice prior to conducting such an inspection
or examination. We agree, at our sole cost, to keep all Inventory insured
against risks covered by standard forms of fire, theft and extended coverage and
such other risks as may be reasonably required by you and under policies issued
by an insurance company or companies and in amounts satisfactory to you. You
shall be named to the extent your interest may appear under a Lender's Loss
Payable Clause in such policy, which shall provide that the insurance cannot be
canceled without at least thirty (30) days prior written notice to you and shall
insure you notwithstanding any act or neglect on our part. At our expense, we
shall furnish you with evidence of the same in form satisfactory to you, and
shall provide you with a Certificate thereof naming you as certificate holder.
We will promptly remit to you in the form received, with all necessary
endorsements, any Proceeds of such insurance in excess of $200,000 in the
aggregate, except that if an event of default has occurred hereunder, we will
promptly remit to you in the form received, with all necessary endorsements, all
such Proceeds. You may make
5
<PAGE> 6
and settle insurance claims and endorse our name on any checks or drafts
constituting Proceeds of insurance. You may apply any Proceeds of insurance
which may be received by you toward payment of any obligations or liabilities
owed to you by us, whether or not then due, in such order of application as you
may determine.
Loss, damage or destruction of all or any of the Collateral shall
not affect or diminish our liabilities to you and we assume all responsibility
and risk for the existence, character, quality, condition, value, and delivery
of Inventory.
9. We will pay and/or cause to be paid all taxes, levies and other
governmental charges and assessments payable on or with respect to the
Collateral and any premises at which the Collateral is located, which if unpaid
may result in a lien or imposition thereon. Such taxes, levies, charges and
assessments will be paid prior to the date that any penalty for late payment may
be assessed with respect thereto, and if requested by you we will, at our
expense, provide you with receipts or other evidence of payment in form
satisfactory to you.
10. Except as provided in the Intercreditor Agreement, we will not suffer
or permit any lien, security interest, charge, claim or encumbrance to be placed
on any of the Collateral, other than in your favor, or suffer or permit any
interest to exist therein which is adverse to your own. We represent that we
are, and agree to remain, the sole and absolute owner of the Collateral, until
sold in the ordinary course of our business, and are and will remain qualified
under the terms of all applicable laws and under our dealership arrangements
with Manufacturer to conduct our business as presently conducted, with all
necessary governmental and other licenses, consents and authorizations having
been obtained.
11. At your option, without any obligation to do so, you may pay and
discharge taxes, liens, levies, security interests or other encumbrances against
the Collateral, may pay for insurance on and for the maintenance and
preservation of the Collateral and perform on our behalf any other obligation
required to be performed by us hereunder but which we have failed to so do,
provided, however, that you will provide us with written notice that you have
done any of the foregoing, as soon thereafter as is reasonably practicable under
the circumstances. We shall reimburse you on demand for any payment made or any
expense incurred by you pursuant to the authority hereof, with interest at the
highest rate chargeable on any of our loans with you, and will pay you a late
charge of 1.5% per month of the amount due to you, or the highest legally
permissible rate if lower.
12. We will furnish you such information regarding our business and
financial condition as you may request from time to time, including without
limitation such financial statements, in such form and bearing such
certifications, as you shall require. We agree that you may audit or cause to be
audited our books and
6
<PAGE> 7
records at any and all times, upon 48 hours prior notice (so long as no event of
default has occurred under this Agreement), during normal business hours, and to
permit you access to each location at which any of our General Intangibles
pertaining to the FINOVA Priority Collateral are located. If an event of default
has occurred under this Agreement, we agree that you do not have to provide us
with notice prior to conducting such an audit.
13. We will provide you with written notice of the following matters
immediately upon the occurrence thereof:
a) A change in any material information provided by us to you
herein, in any application made by us in connection with any loan, or otherwise,
including without limitation, any change in the location of any Collateral or in
any other circumstances regarding the Collateral or our business operations;
b) loss, theft, or substantial damage or destruction in excess of
$75,000 of any of the Collateral, or related to our business operations
generally at either our Rye Brook, NY headquarters, or our Erlanger Kentucky
location; or
c) Any other matter which might have a material adverse affect on
our financial condition or operations or which, upon the giving of notice or
passage of time, or both, would result in an event of default by us hereunder.
14. Any one or more of the following shall be an event of default by us
under this Agreement:
a) Failure by us or any person jointly or otherwise liable to you
for our obligations to you, as surety, guarantor or otherwise ("Other Obligor")
to pay any amount due you, as and when due, contained or referred to herein or
in any other instrument, document, or agreement to which we or such Other
Obligor are a party, or by which we or such Other Obligor are bound to you,
whether now existing or hereafter created; or
b) Failure by us or any Other Obligor to perform or comply with any
other obligation, covenant or liability contained or referred to herein or in
any other material instrument, document, or agreement to which we or such Other
Obligor are a party or by which we or such Other Obligor are bound to you,
whether now existing or hereafter created, and such failure, if reasonably
susceptible of cure, is not cured within fifteen (15) days of the occurrence
thereof; or
c) If any warranty, representation, or statement made or furnished
to you by us or on our behalf or on behalf of an Other Obligor, including any
representation made on our behalf by Manufacturer, proves to be false,
misleading or incomplete in any respect; or
7
<PAGE> 8
d) Loss, theft or substantial damage or destruction of any of the
Collateral, or the making of any levy, seizure, or attachment thereof or
thereon, in either case where the amount of the Collateral involved exceeds
$75,000; or
e) Dissolution, merger, consolidation, sale or other disposition of
a controlling interest in our ownership or of substantially all of our assets,
termination of existence, insolvency, business failure, appointment of a
receiver, trustee, sequestrator, conservator, or other judicial representative,
whether similar or dissimilar, for us or for all or any part of our property,
assignment by us for the benefit of creditors or the commencement of any
proceeding by or against us under any provision of any federal or state
bankruptcy or insolvency laws; or
f) Failure by us to pay any obligation(s) or liability(ies) in
excess of $5,000,000 whatsoever, past, present or future, when due to any other
creditor, or the occurrence of any event of default by us under any agreement
with any of our respective creditors pursuant to which our obligations exceed
$5,000,000, including without limitation the occurrence of an event of default
under any lease relating to any premises upon which all or any part of our
Inventory or other Collateral is located, provided, however, that any event of
default under any such lease which results in the lessor taking action against
us shall be considered an event of default hereunder, regardless of the dollar
amount involved; or
g) If we give notice of a Bulk Sale or intended Bulk Sale, or call a
meeting of our respective unsecured creditors or offer a composition or
extension to such creditors, or cease to operate our respective business.
15. Upon the occurrence of an event of default, you shall have the right
to repossess the Inventory and also any and all rights available under the Code,
including, without limitation, the right to declare any and all unpaid balances
of principal, interest, costs and expenses arising out of any and all of our
obligations or liabilities to you, whether past, present or future, direct or
indirect, matured or unmatured, liquidated or unliquidated, immediately due and
payable without notice to or demand on us. We irrevocably authorize you or your
agent to enter all premises to take possession of and remove the Inventory and
other Collateral and release you from any and all liability with respect to such
entry or removal. We shall in case of default, if you so request, assemble and
deliver the Inventory and other Collateral, at our expense, to a place to be
designated by you. We shall pay all of the costs you incur in the enforcement of
any of our obligations to you or the collection of any liabilities owed to you
by us, including, without limitation, costs, expenses and reasonable attorneys'
fees. If any notification of intended disposition of any of the Inventory or
other Collateral is required by law, such notification shall be
8
<PAGE> 9
deemed reasonably and properly given if mailed by ordinary mail or overnight
delivery service at least ten (10) days before such disposition, postage
prepaid, addressed to us, either at our address shown in this Agreement, or at
such other address as we may have designated to you in writing.
16. Any law, custom or usage to the contrary notwithstanding, you
shall have the right at all times to enforce the covenants and provisions of
this Agreement in strict accordance with the terms hereof, notwithstanding any
conduct or custom on your part in refraining from so doing at any time or times.
Your failure at any time to invoke your rights under the covenants and
provisions of this Agreement strictly in accordance with the same shall not be
construed as having created a custom in any way or manner contrary to the
specific terms and provisions of this Agreement or as having in any way or
manner modified, altered or waived the same. All of your remedies are cumulative
and not alternative, and can be exercised in any order and in any manner,
separately or simultaneously, and from time to time until all liabilities and
obligations to you are satisfied in full.
17. This Agreement may be assigned by you, but we may not assign
this Agreement without your prior written consent. If you assign this Agreement,
you shall have no further obligation hereunder. All of your rights hereunder
shall inure to the benefit of your successors and assigns and all our
obligations shall bind our successors and assigns. If there be more than one
party obligated to you under this Agreement, their obligations hereunder shall
be joint and several, and the terms "we" "us" or "our" as used herein shall
refer to them jointly and severally.
18. We authorize and empower you or your employees, agents or
representatives, on our behalf, and in our name, to complete and supply any
omission or blank spaces (addressing ministerial matters only) in this Agreement
and in any documents or financing statements executed by us and including
amendments and continuations thereof under the Code; to execute and/or have
acknowledged any form of security instruments, notes, drafts and documents; and
to make any requisite affidavits which may be necessary or required by you,
and/or which you may desire to evidence or secure advances made by you pursuant
to the terms of this Agreement. So long as the foregoing are consistent in all
material respects with the terms of this Agreement, all of the foregoing may be
executed in such form and substance as you in your sole discretion may deem
necessary or proper, and this power of attorney, being coupled with an interest,
is irrevocable.
19. Our officers, by execution hereof, warrant and represent to you
that we are a duly formed corporation and are qualified to do business in the
state(s) in which our place(s) of business is (are) located; and, at a Board of
Directors meeting duly convened, our officer(s) were properly authorized to
execute and deliver this Agreement and all other documents whether
9
<PAGE> 10
hereunder or otherwise; that the execution and delivery of this Agreement does
not contravene the Articles of Incorporation, By-Laws, or any agreement,
document or instrument to which we are a party or by the terms of which we are
bound.
20. Any provision or part thereof in this Agreement found upon judicial
interpretation or construction to be prohibited by law shall be ineffective to
the extent of such prohibition, without invalidating the remaining provisions
hereof. All words used shall be understood and construed to be of such gender or
number as the circumstances may reasonably require.
21. THIS AGREEMENT SHALL BE DEEMED EFFECTIVE WHEN ACCEPTED AND EXECUTED BY
YOU IN THE STATE OF NEW YORK, AND THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK.
22. AS AN INDEPENDENT COVENANT, WE IRREVOCABLY CONSENT TO THE SERVICE OF
PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO US AT THE ADDRESS AS SET
FORTH HEREIN OR ON YOUR RECORDS, AND IRREVOCABLY WAIVE JURY TRIAL AND THE RIGHT
THERETO IN ANY AND ALL ACTIONS BETWEEN US, WHETHER UNDER THIS AGREEMENT OR
OTHERWISE.
WE HEREBY ACKNOWLEDGE THAT WE HAVE READ AND UNDERSTAND ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT.
Intending to be legally bound, signed and delivered on April 21,
1995:
ENTEX INFORMATION SERVICES, INC.
(Corporate Name)
By: /s/ signature illegible
Vice President, Treasurer
Attest: /s/ Lynne A. Burgess
Assistant Secretary
(CORPORATE SEAL)
APPROVED AND ACCEPTED IN KING OF PRUSSIA, PENNSYLVANIA
FINOVA CAPITAL CORPORATION
(Secured Party)
BY: /s/ signature illegible
DATE: 4/25/95
10
<PAGE> 11
[FINOVA LETTERHEAD]
April 17, 1995
Mr. Frederic Rubin, Vice President and Treasurer
ENTEX Information Services, Inc. ("ENTEX")
Six International Drive
Rye Brook, NY 10573-1058
RE: Credit Line for Inventory Financing
Dear Mr. Rubin:
We are pleased to advise you that FINOVA Capital Corporation ("FINOVA") has
conditionally approved an inventory financing credit line of $20,000,000.00 (the
"Credit Line"), based upon completing the information listed below. In addition,
the Credit Line is subject to the terms and conditions set forth in the Dealer
Loan and Security Agreement to be executed in connection herewith (the
"Agreement"), and any default in the terms and conditions set forth herein shall
constitute an event of default under the Agreement.
The terms under which such financing will be provided will be Net 60 days for
Apple Computer, Inc. products. Invoices will be financed under a common due date
system where invoices will be grouped by date to provide approximately six
payment dates per month. From time to time, FINOVA may offer different terms to
be commensurate with Manufacturer programs. You will receive transaction
confirmations and monthly statements from us.
<PAGE> 12
Entex Information Services, Inc.
April 17, 1995
Page 2
In order to activate the Credit Line, the following documentation needs to be
completed:
All enclosed Loan and Security Documentation including but not limited to:
1. Standard Broad Lien UCC Documentation for determined locations.
2. Dealer Loan and Security Agreement.
3. Intercreditor Agreement with all lenders giving FINOVA a first lien
priority in all products financed and identifiable cash and insurance
proceeds.
4. FINOVA will complete an initial physical review of the inventory to
be financed and an overall review of the inventory control and
procedures at the ENTEX warehouse in Erlanger, KY.
5. Landlord lien waivers will be needed for all necessary locations.
These will need to be in place no later than 60 days from activation
of the Credit Line.
6. Insurance coverage will be needed in the amount of $20,000,000.00
naming FINOVA Capital Corporation as Lender's Loss Payee.
In addition, to maintain this Credit Line, you must maintain full
compliance with the following terms and conditions:
1. Weekly collateral monitoring and monthly collateral reconciliations
as outlined below:
a. FINOVA will receive weekly inventory reports of the products
being financed only. These reports will be delivered to FINOVA's
King of Prussia, PA location every Wednesday with the report
reflecting inventory as of the close of business the previous
Sunday.
b. FINOVA will also obtain weekly reports of credit memos, returns,
and price protections for products financed to cover the same
time period as the inventory report. The process for these items
will also be reviewed during the review of inventory prior to
activation.
<PAGE> 13
Entex Information Services, Inc.
April 17, 1995
Page 3
c. The items above will be reconciled to FINOVA's outstanding
balance as follows:
FINOVA outstandings ______________________
Less: Inventory Report ______________________
PP's, Rtns', CM's ______________________ MDF funds
will not be
eligible
Less: product invoiced to
ENTEX but not rec'd ______________________
Plus: Products rec'd by ______________________
ENTEX but not yet ______________________
invoiced ______________________
Net collateral (shortfall) ______________________
Plus: Amounts of next ______________________
two payments ______________________
Total collateral reconcil- ______________________
iation (shortfall) ______________________
d. This same calculation will be used to reconcile the collateral at
each ENTEX fiscal month end. If there is a shortfall in the total
collateral reconciliation at the end of each fiscal month, then
ENTEX will be required to make up this shortfall with a cash
payment to the FINOVA loan balance, immediately upon the results
of the reconciliation.
e. FINOVA will physically review the inventory at the Erlanger,
Kentucky location on a monthly basis for the first three (3)
months following the initial funding, and on a quarterly basis
for the year thereafter. Our analysis will include:
a) test costs of the inventory
b) spot verification of inventory report cost
versus invoice cost
c) credit memo verification
2. Quarterly financial reporting no later than 45 days after the end of
each fiscal quarter.
<PAGE> 14
Entex Information Services, Inc.
April 17, 1995
Page 4
3. Monthly Financial reporting will be required no more than thirty
days after the end of the month.
4. Audit fiscal financial statement will be required no more than 120
days after the end of the fiscal year end.
5. Projections for the next fiscal twelve months will be required not
later than 30 days before the end of the fiscal year.
To maintain this Credit Line, you must also maintain full compliance with the
terms and conditions of the Agreement. We reserve the right to discontinue this
Credit Line at any time at our sole discretion. Any invoice not paid within the
period listed above will be charged at a default rate of Prime Rate plus two
percent for any payments received between one and five days after the due date
and Prime Rate plus six percent from six days after the due date until the
payment is received. Offset to payments to your account are not to be made
unless authorized by FINOVA. Any authorized offsets will be charged the standard
default rate.
Your account, once activated will be handled on a daily basis by Account Manager
Dale Abernathy. If you have any questions concerning the items above please
contact Dale, or myself at your convenience.
We look forward to a lasting relationship with you and your company. Let me
take this opportunity to thank you for allowing us to be of service. If we can
be of further assistance, please feel free to contact us at 1-800-777-3731.
Please return the documents to us promptly, along with an acknowledgement copy
of this letter.
Sincerely,
/s/ PATRICK SMITH
- -----------------
Patrick Smith Acknowledged and Accepted
Vice President of Operations
By: /s/ FREDERIC E. RUBIN
---------------------
CC: John Reed Frederic E. Rubin
Jim Hoffman Vice President, Treasurer
Dale Abernathy ENTEX Information Services, Inc.
<PAGE> 15
[FINOVA LETTERHEAD]
May 17, 1996
Mr. Frederic Rubin, Vice President and Treasurer
ENTEX Information Services, Inc. ("ENTEX")
Six International Drive
Rye Brook, NY 10573-1058
RE: Credit Line for Inventory Financing
Dear Mr. Rubin:
We are pleased to advise you that FINOVA Capital Corporation ("FINOVA") has
conditionally approved an inventory financing credit line of $120,000,000.00
(the "Credit Line"), based upon completing the information listed below as well
as the continuation of participations totaling $20,000,000.00. The Credit Line
will be allocated under the following parameters: Maximum $95,000,000.00 in
aggregate outstandings (invoices purchased by FINOVA) and the balance of
$25,000,000.00 for open approvals (invoices approved for financing but not yet
purchased). In addition, the Credit Line is subject to the terms and conditions
set forth in the Dealer Loan and Security Agreement executed on April 21, 1995
in connection herewith (the "Agreement"), and any default in the terms and
conditions set forth herein shall constitute an event of default under the
Agreement.
Thank You.
Sincerely,
/s/ Patrick Smith
- --------------------------------
Patrick Smith
Vice President Portfolio Manager
<PAGE> 1
EXHIBIT 10.20
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING 1
-------------------------------------------------------------
W I T N E S S E T H 1
A G R E E M E N T 2
1 Line of Credit 2
--------------
2. Reporting Requirements 3
----------------------
3. Payment Terms 7
-------------
4. High Turnover Option 12
--------------------
5. Statements Regarding Borrower's Account 12
---------------------------------------
6. Security 12
--------
7. Location of Collateral and Inspection Rights 14
--------------------------------------------
8. Use of Collateral 15
----------------
9. Insurance of Collateral 15
-----------------------
10. Issues Involving Quality of Products 16
------------------------------------
ll. Additional Warranties, Representations and Covenants 16
----------------------------------------------------
12. Financial Covenants 29
------------------
13. Events of Default; Power of Attorney 31
------------------------------------
14. Warranty of Collateral 37
----------------------
15. Term; Termination 37
-----------------
16. Confidentiality Statement 38
-------------------------
17. Fees and Expenses; Indemnity 39
----------------------------
18. Miscellaneous 39
-------------
19. Definitions - General 41
---------------------
20. Accounting Terms and Determinations 51
-----------------------------------
21. Other Defined Terms 22
-------------------
22. Conditions Precedent to the Effectiveness of this Agreement 52
-----------------------------------------------------------
23. Conditions Precedent to Each Advance 54
--------------------------------------
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
24. Amendment and Restatement; Etc. 54
------------------------------
25. SUBMISSION AND CONSENT TO JURISDICTION 55
--------------------------------------
26. GOVERNING LAW 55
-------------
27. JURY TRIAL WAIVER 55
-----------------
Exhibits 57
--------
EXHIBIT A 58
---------
AUTHORIZED SUPPLIER CLAIMS REPORT 58
EXHIBIT B 59
---------
LOCKBOX BANK BALANCES 59
EXHIBIT C 60
---------
Additional Reporting Requirements 60
EXHIBIT D 62
---------
Locations Where Collateral Will Be Kept 62
EXHIBIT E 63
---------
Intellectual Property 63
EXHIBIT F-A 64
-----------
Existing Secured Indebtedness 64
EXHIBIT F-B 65
-----------
Other Existing Indebtedness 65
EXHIBIT G 66
---------
</TABLE>
1
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Existing Investments 66
EXHIBIT H 67
---------
UCC Financing Statement Filing Locations 67
EXHIBIT I 68
---------
List of Authorized Suppliers 68
EXHIBIT J 69
---------
COMPLIANCE CERTIFICATE 69
</TABLE>
2
<PAGE> 4
THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A CERTAIN AMENDED AND RESTATED
INTERCREDITOR AGREEMENT DATED AS OF APRIL 21, 1995 AMONG IBM CREDIT CORPORATION,
DEUTSCHE FINANCIAL SERVICES CORPORATION, FORMALLY KNOWN AS ITT COMMERCIAL
FINANCE CORP., CITIBANK N.A., HEWLETT-PACKARD COMPANY, FINOVA CAPITAL
CORPORATION, AND ENTEX HOLDINGS, INC., AND THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS, AS THE SAME HAS BEEN AND MAY BE AMENDED, SUPPLEMENTED OR OTHERWISE
MODIFIED FROM TIME TO TIME IN ACCORDANCE WITH ITS TERMS, AND THE OTHER
AGREEMENTS AS DEFINED THEREIN.
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
-------------------------------------------------------------
This Fourth Amended and Restated Agreement for Wholesale Financing (hereinafter
referred to as this "Agreement") is hereby made as of the 15 day of September,
1995 by and between IBM CREDIT CORPORATION, a Delaware corporation (hereinafter
referred to, together with its successors, as "IBM Credit"), and ENTEX
Information Services, Inc., a Delaware corporation, with its principal place of
business located at Six International Drive, Rye Brook, New York 10573-1058
(hereinafter referred to, together with its successors, as "Borrower").
W I T N E S S E T H:
WHEREAS, IBM Credit Corporation and Borrower are parties to that certain Third
Amended and Restated Agreement for Wholesale Financing dated as of August 6.
1993 (together with all amendments, addenda and supplements thereto executed
through the date hereof being referred to, collectively, as the "Existing
Agreement");
WHEREAS, this Agreement amends and restates the Existing Agreement in
full and in its entirety;
WHEREAS, in the course of Borrower's operation, Borrower purchases
products manufactured or sold by or bearing the trade name or trademark of the
companies listed in Exhibit I attached hereto an of the Effective Date of this
Agreement (together with their successors and any other Person which
manufactures, sells or distributes products purchased by Borrower that are
approved for financing under this Agreement by IBM Credit in writing, in each
case so long as Borrower is not notified in writing to the contrary by IBM
Credit in its sole discretion, are hereinafter referred to as, the "Authorized
Suppliers") (products approved for purposes of this Agreement by IBM Credit in
writing and in respect of which IBM Credit advances or commits to advance funds
to the applicable Authorized Supplier in connection with Borrower's acquisition
thereof, the "Financed Products") for distribution throughout the United States;
and
WHEREAS, Borrower has requested that IBM Credit finance
1
<PAGE> 5
the purchase by Borrower of the Financed Products from the Authorized Suppliers
and provide financing for other corporate purposes and IBM Credit is willing to
provide such financing to Borrower subject to the terms and conditions set forth
in this Agreement;
A G R E E M E N T:
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements contained in this Agreement, Borrower and IBM Credit
hereby agree as follows:
l. Line of Credit. IBM Credit hereby extends to Borrower a line of
credit ("Line of Credit") pursuant to which IBM Credit will make Advances (as
hereinafter defined) during the Revolving Period (as hereinafter defined), on
the terms and subject to the conditions set forth in this Agreement, in
connection with (i) purchases by Borrower of Financed Products from the
Authorized Suppliers and (ii) Working Capital Advances (as hereinafter defined).
The amount of the Line of Credit shall be $275,000,000 on any day, of which (x)
not more than $10,500,000 shall be available for Ingram Micro Advances (as
hereinafter defined) and (y) not more than $264,500,000 shall be available for
all other Advances (as hereinafter defined).] "Ingram Micro Advances" are
defined as the aggregate outstanding principal amount of all Advances made in
respect of Financed Products purchased or to be purchased by Borrower from
Ingram Micro. IBM Credit may at any time or from time to time in its sole
discretion reduce the amount of the Line of Credit upon sixty (60) days' prior
written notice to Borrower. Notwithstanding the foregoing, IBM Credit may
discontinue making Advances without notice to Borrower at any time following the
occurrence of an Event of Default (as defined in Section 13) or any event or
condition which, with the giving of notice or lapse of time or both, would,
unless cured or waived, become an Event of Default (a "Default"). For purposes
of this Agreement, "Advance" shall mean any loan or other extension of credit by
IBM Credit Agreement to Borrower pursuant to this Agreement and shall include
(x) any advance of funds made or committed to be made by IBM Credit to an
Authorized Supplier in respect of an invoice delivered by such Authorized
Supplier to IBM Credit describing Financed Products purchased or to be purchased
by Borrower, (y) all "Advances" to Borrower outstanding as of the date hereof
and (z) Working Capital Advances. Borrower hereby authorizes and directs IBM
Credit to pay the proceeds of Advances (other than any Working Capital Advances)
directly to Authorized Suppliers in respect of such invoices and acknowledges
that each such Advance constitutes a loan by IBM Credit to Borrower pursuant to
this Agreement. In no event shall IBM Credit be obligated to make any advance or
extend credit under the Line of Credit if, after giving effect to such advance
or extension of credit, the conditions precedent set forth in Section 23 are not
satisfied.
2
<PAGE> 6
2. Reporting Requirements.
(a) Borrower shall forward to IBM Credit by the twentieth (20th) day
of each month for the previous month end reporting period a report in form and
detail satisfactory to IBM Credit (it being understood that the degree of detail
provided in Exhibit A is satisfactory) which will disclose all claims for
rebates, discounts, credits, warranties and incentive payments which Borrower
has submitted to an Authorized Supplier or to Hewlett-Packard Company but for
which Borrower has not been paid (any such claims submitted to any Authorized
Supplier or to Hewlett-Packard Company being herein referred to as "Authorized
Supplier Claims") and in which IBM Credit has a valid, perfected, first priority
security interest under this Agreement. All Authorized Supplier Claims, except
for warranty claims, shall be submitted to the applicable Authorized Supplier by
the end of the prior month. Warranty claims will be included if received by the
applicable Authorized Supplier before the twenty-fifth (25th) day of the prior
month.
(b) Borrower shall provide the following reports to IBM Credit as
indicated:
(i) On each Business Day, a report, substantially in the form
attached to this Agreement as in form and detail satisfactory to IBM
Credit (it being understood that the form and degree of detail provided
in Exhibit B, attached hereto as an example, is satisfactory) listing as
of the end of the immediately preceding Business Day the balance of each
of Borrower's lockbox bank accounts. Upon request, Borrower shall
provide IBM Credit copies of all bank statements received by Borrower in
respect of such lockbox bank accounts.
(ii) Together with the quarterly and annual financial statements
required to be delivered pursuant to Section 2(c), a certification of an
authorized officer of Borrower that they have been prepared in
accordance with generally accepted accounting principles as in effect
from time to time ("GAAP") consistently applied (except, in the case of
any monthly or quarterly financial statements, for the absence of
notes), that they fairly present the financial condition of Borrower
and/or its consolidated Subsidiaries, as the case may be, (subject, in
the case of any monthly or quarterly financial statements, to normal
year-end adjustments) and that no condition or event exists, of which
such officer is aware, which would constitute a Default or an Event of
Default hereunder. A schedule shall also be included to show the
computations used by Borrower in determining compliance with the
financial covenants contained in Section 12.
3
<PAGE> 7
(iii) Together with the annual financial statements required to
be delivered pursuant to Section 2(c), an unqualified opinion of the
Auditors, which opinion shall be in scope and substance satisfactory to
IBM Credit (it being understood that such opinion shall not cover
comparative figures for the preceding fiscal year and budgeted
projections for the fiscal year then ended), and the Auditors' related
"Management Letter" to Borrower. A schedule (not audited by Auditors)
shall also be included to show the computations used by Borrower in
determining compliance with the financial covenants contained in Section
12.
(iv) (A) no later than thirty (30) days after the end of each
fiscal year of Borrower, the projected annual budget, balance sheet,
income statement, and cash flow of Borrower for the new fiscal year of
Borrower.
(v) Promptly upon the earlier of the mailing, filing or receipt
thereof, (A) copies of all 10-Ks, 10-Qs, 8-Ks, proxy statements, annual
reports, quarterly reports, registration statements and any other
filings made by Borrower or any of its Subsidiaries with the Securities
Exchange Commission from time to time, and (B) copies of all other
communications between or among Borrower and any of its creditors with
respect to borrowed money (other than communications relating to
ministerial matters under the related documents or requests for
information from any such creditor to Borrower) when such communications
involve matters that could materially affect the lending relationship
between Borrower and such creditor.
(vi) (A) Promptly and in any event within two (2) Business Days
after obtaining actual knowledge of the occurrence of a Default or Event
of Default, a certificate of the Chief Executive Officer, Chief
Financial Officer, or Vice President & Treasurer of Borrower specifying
the nature thereof and within five (5) Business Days after obtaining
actual knowledge of such occurrence, Borrower's proposed response
thereto, each in reasonable detail and (B) promptly and in any event
within two (2) Business Days after becoming aware of the existence of
any condition or event which would result in Borrower's failure to
satisfy the conditions precedent to Advances set forth in Section 23, a
certificate of the chief executive officer, chief financial officer, or
Vice President & Treasurer of Borrower specifying the nature of such
condition or event.
(vii) From time to time, such further information regarding the
Collateral, business affairs and financial condition of Borrower or any
of its Subsidiaries as IBM
4
<PAGE> 8
Credit may reasonably request.
(c) In addition to the information and reports required pursuant to
sections 2(a) and 2(b), Borrower shall deliver to IBM Credit:
(i) within (x) ninety (90) days after the end of each of
Borrower's fiscal years, the following financial statements, unaudited,
and (y) one hundred twenty (120) days after the end of each of
Borrower's fiscal years, the following financial statements, audited, in
each case for the fiscal year then ended, which financial statements
shall set forth in comparative form figures for the preceding fiscal
year and the budgeted projections for the fiscal year then ended:
(A) a consolidated balance sheet on a consolidated basis;
(B) a consolidated statement of cash flow consisting
of sources and uses of funds; and
(C) reasonably detailed consolidated profit and loss
statements for such fiscal year;
together with:
(I) a schedule prepared by the Chief Financial Officer or Vice President &
Treasurer of Borrower setting forth in reasonable detail all acquisitions and
locations of other businesses occurring during the fisal year then ended; and
(II) a schedule prepared by the Chief Financial Officer or Vice President &
Treasurer of Borrower setting forth in reasonable detail the amount and type of
each class of current and long-term assets to the extent that such assets would
be included under the heading "Other Assets" on the balance sheet of Borrower;
(ii) within forty five (45) days after the end of each
fiscal quarter, the following unaudited financial statements for the fiscal
quarter then ended which financial statements shall set forth in comparative
form figures for the comparable period in the immediately preceeding fiscal year
and the budgeted projections for the fiscal quarter then ended:
(A) a reasonably detailed consolidated balance sheet on a
consolidated basis;
5
<PAGE> 9
(B) a consolidated statement of cash flow consisting or
sources and uses of funds;
(C) reasonably detailed consolidated profit and loss
statements for such fiscal quarter; and
(D) a statement, if applicable, of any event since the end of
the prior fiscal quarter of Borrower that in the reasonable
opinion of Borrower could reasonably be expected to have a
Material Adverse Effect;
together with:
(I) in the case of the financial statements covering the matters referred to in
clauses (A), (B) and (C), a statement prepared by the Chief Financial Officer or
Vice President & Treasurer of Borrower stating that such financial statements
have been prepared in accordance with GAAP consistently applied by Borrower and
that there has not occurred during such Fiscal Quarter any Default or Event of
Default, whether or not the same is then continuing;
(II) a schedule prepared by the Chief Financial Officer or Vice President &
Treasurer of Borrower setting forth in reasonable detail all acquisitions and
locations of other businesses occuring during the fiscal quarter then ended; and
(III) a schedule prepared by the Chief Financial Officer or Vice President &
Treasurer of Borrower setting forth in reasonable detail the amount and type of
each class of current and long-term assets to the extent such assets would be
included under the heading "Other Assets" on the balance sheet of Borrower;
(iii) within thirty (30) days after the end of each calendar
month, the following unaudited financial statement for the calendar
month then ended:
(A) a consolidated balance sheet on a consolidated basis;
(B) reasonably detailed consolidated profit and loss
statements for such fiscal month;
(C) a consolidated statement of cash flows consisting of
sources and uses of funds;
together with:
(I) in the case of the financial statements covering the matters referred to in
clauses (A), (B) and (C), a statement prepared by the Chief Financial Officer or
Vice President & Treasurer of Borrower stating that such financial statements
are true and
6
<PAGE> 10
accurate in all material respects (subject to normal year-end adjustments), and
have been prepared in accordance with GAAP consistently applied by Borrower and
that there has not occurred during such calendar month any Default or Event of
Default, whether or not the same is then continuing.
3. Payment Terms.
(a) So long as there is no Shortfall Amount, and subject to the other
provisions of this Agreement, Borrower shall repay each Advance (other than the
Working Capital Advances) not later than the earlier of (x) the Common Due Date
approximating the one hundred eightieth (180th) day from and including the date
of the invoice in respect of which such Advance was made and (y) the last day of
the Revolving Period.
"Common Due Date" shall mean any of the fifth (5th), fifteenth (15th) and
twenty-fifth (25th) days of each month and, with respect to each Advance, shall
be determined on the basis of a year of twelve 30 day months. Each Advance for
Financed Products shall accrue a finance charge on the unpaid principal amount
thereof, for each day commencing on the day after the Free Financing Period, if
any, for such Advance ends, or if no such Free Financing Period shall be in
effect, from the date of invoice for such Advance, in each case, until the date
such Advance is due pursuant to the preceding sentence, at a rate per annum (the
"Base Finance Charge") equal to the sum of the Prime Rate for such day plus
0.875% (or such other rate Borrower and IBM Credit may agree to from time to
time). For Working Capital Advances, such finance charge will be as specified in
Section 3(d).
Borrower shall also pay IBM Credit: (i) a service charge in the amount
of $4,000 per month (or such other amount as Borrower and IBM Credit may agree
to from time to time), (ii) a flat fee of nine (9) basis points on the amount of
each invoice financed by IBM Credit when payments by Borrower to IBM Credit are
made via check (there shall be no such flat fee when payments by Borrower to IBM
Credit are made via wire transfer) and (iii) a fee equal to .25% of the amount
of each unpaid Shortfall Amount (including any unpaid Daily Shortfall Amount)
payable to IBM Credit. The charges due for such advances, including but not
limited to the service charge and the other fees referenced above, if
applicable, will be due and payable on the 10th day of the month following the
date of the IBM Credit invoice for such charges.
"Prime Rate" shall mean, for any day during any month, a rate per annum
equal to the greater of (x) 5.75% and (y) the average of the rates of interest
then most recently announced by Citibank, N.A., The Chase Manhattan Bank, N.A.
and Bank of America National Trust and Savings Association (or any successor
7
<PAGE> 11
banking organizations) as being its prime, or base, rate on and as of the last
Business Day of the preceding month. If the full amount of any amounts owed
under this Agreement is not paid by its due date, including but not limited to
any amounts due under Section 3(b) or as a result of the acceleration of the
obligations, the unpaid amount will bear interest from its due date until IBM
Credit receives payment thereof, at a per annum rate equal to the Prime Rate
plus 6.5%. The aforesaid interest rate will be applied to the average daily
balance of the outstanding payment(s) due for the delinquent time period. Such
finance charges shall be calculated based upon a year of 360 days and actual
days elapsed.
IBM Credit may apply payments to reduce interest first and then to the
principal amount owed by Borrower. IBM Credit may apply principal payments to
the oldest (earliest) invoices (and related Advances) first, unless otherwise
directed by Borrower, but, in every case, all principal payments made by
Borrower will be applied in respect of outstanding Advances made for the
Financed Products which have been sold by Borrower or in respect of outstanding
Working Capital Advances. Payments in respect of Authorized Supplier Claims
received by IBM Credit from Authorized Suppliers will be applied to outstanding
Advances unless they are clearly related to Financed Products as to which
Advances are no longer outstanding, in which case such payments shall be paid to
Borrower; provided, however, if an Event of Default shall have occurred and be
continuing IBM Credit may apply such payments against any of the Advances, or
any other obligations outstanding under this Agreement as IBM Credit may
determine in its sole discretion. IBM Credit will notify Borrower of how
payments are applied when no remittance instruction has been submitted by
Borrower. Advances with due dates that fall on a Saturday must be paid the prior
Business Day while Advances with due dates that fall on a Sunday or holiday must
be paid by the following Business Day.
(b) If as of the end of business on any Business Day, Borrower's
total outstanding indebtedness under this Agreement exceeds Value, as defined in
Section 3(c) below, as of such Business Day (any such excess being the
"Shortfall Amount"), Borrower shall promptly pay to IBM Credit such Shortfall
Amount no later than the end of business on the second succeeding Business Day
(the "Daily Shortfall Payment Date"). No Event of Default shall arise hereunder
as a result of Borrower's failure to make a payment pursuant to the immediately
preceding sentence if (i) Borrower has made a good faith determination based on
formulas or other methods approved in writing by IBM Credit, and Borrower
believes in good faith, that as of the end of business on such Business Day, no
Shortfall Amount existed and (ii) Borrower pays to IBM Credit any Shortfall
Amount determined to exist as of the end of business on the next day as of which
a collateral management report disclosing Value is required to be
8
<PAGE> 12
prepared pursuant to Exhibit C Of this Agreement, such payment to be made no
later than the end of business on the second succeeding Business Day (a
"Shortfall Payment Date"). An Event of Default shall arise hereunder if,
pursuant to the immediately preceding sentence, Borrower fails to make a payment
on a Shortfall Payment Date.
(c) "Value" shall mean at any time with respect to the items
specified below (i) which are owned by (and in the possession or under the
control of) Borrower and located in a jurisdiction in the United States in which
the Uniform Commercial Code has been adopted and (ii) except for the HP Special
Accounts Collateral (as defined below), as to which IBM Credit has a valid,
perfected first priority security interest, the sum of each percentage specified
opposite each such item of (x) in the case of any item of Eligible Ingram
Non-Financed Products, Financed Products, HP Special Inventory Collateral (as
defined below) or other inventory, the lower of such item's cost and fair market
value (in each case, net of applicable reserves), provided that the aggregate
Value of all Eligible Ingram Non-Financed Products shall not exceed $15,000,000,
and (y) in the case of Eligible Receivables, HP Special Accounts Collateral and
Authorized Supplier Claims described below, the outstanding face amount thereof;
provided, however, that the aggregate Value of the HP Special Inventory
Collateral and the HP Special Accounts Collateral shall be reduced by the
aggregate outstanding amount owing at such time by Borrower to Hewlett-Packard
Company. For purposes of this Agreement, (i) "HP Special Inventory Collateral"
at any time shall mean all inventory (x) which is owned by (and in the
possession or under the control of Borrower) and located in Borrower's Erlanger,
Kentucky; Canton, Massachusetts; Issaquah, Washington; or Golden Valley,
Minnesota warehouse, (y) as to which IBM Credit has a valid, perfected, first
priority security interest, and (z) which is eligible for repurchase by
Hewlett-Packard Company pursuant to an enforceable purchase or repurchase
agreement between IBM Credit and Hewlett-Packard Company in form and substance
satisfactory to IBM Credit in its sole discretion, in each case, at such time,
and (ii) "HP Special Accounts Collateral" at any time shall mean the accounts of
Borrower originated by the Washington D.C.-Federal division of Borrower which
satisfy the requirements of clauses (i) through (xi) of the definition of
"Eligible Receivables" and as to which Hewlett-Packard Company has a valid first
priority perfected security interest and IBM Credit has a valid second priority
perfected security interest.
9
<PAGE> 13
<TABLE>
<CAPTION>
<S> <C>
A. Financed Products and other inventory located in the Erlanger,
Kentucky; Canton, Massachusetts; Issaquah, Washington; or Golden Valley
Minnesota warehouse (or, in the case of IBM Products consisting of
"service parts" ("IBM Service Parts"), the PDC warehouse)
Obsolete or defective IBM Service Parts.............................. 0%
IBM Service Parts which are neither obsolete nor defective........... 25%
Financed Products on display for demonstration purposes.............. 0%
Financed Products constituting clearance or returned goods........... 0%
All other Financed Products.......................................... 100%
Eligible Ingram Non-Financed Products................................ 50%
NOTE: the total Value for Eligible Ingram Non-Financed Products
shall not exceed $15,000,000
HP Special Inventory Collateral...................................... 100%*
Other inventory...................................................... 20%
B. Financed Products and other inventory located outside of the Erlanger,
Kentucky; Canton, Massachusetts; Issaquah, Washington; or Golden Valley,
Minnesota warehouse (and, in the case of IBM Service parts, located
outside of the PDC warehouse)
IBM Service Parts ................................................... 0%
Financed Products on display for demonstration purposes.............. 0%
Financed Products constituting clearance or returned goods........... 0%
All other Financed Products.......................................... 80%
Eligible Ingram Non-Financed Products (other than Ingram Micro
Products)......................................................... 0%
Other inventory...................................................... 3%
C. Eligible Receivables..................................................... 80%
D. HP Special Accounts Collateral.......................................... 80%*
E. Authorized Supplier Claims............................................... 100%
</TABLE>
* The combined Value of Special Inventory Collateral and HP Special Accounts
Collateral to be included in Borrower's total Value shall be the Value of HP
Special Inventory Collateral PLUS the Value of HP Special Accounts Collateral
MINUS the
10
<PAGE> 14
aggregate outstanding amount owing at such time by
Borrower to Hewlett Packard Company
IBM Credit may change any of the above listed Value calculations (1) with sixty
(60) days written notice to Borrower or (2) if an Event of Default has occurred
and is continuing and such Event of Default has not been cured within thirty
(30) days after it has occurred. It is understood that the course of action
detailed in item (2) in the immediately preceding sentence is in addition to
those actions IBM Credit may take upon the occurrence of and Event of Default as
detailed in Section 13(b).
IBM Credit may, in its sole discretion, include other assets of Borrower
satisfying the conditions described in clauses (i) and (ii) of the foregoing
definition of "Value" in the calculation of Value, and the Value of such other
assets shall be such percentage of the value of such other assets as determined
by IBM Credit in its sole discretion. No value shall be given to any products
which are rented or leased.
(d) Provided no Default or Event of Default has occurred and is
continuing, Borrower may request a cash advance ("Working Capital Advance") to
be made on a' specific date ("Working Capital Advance Date") with a payment due
date of no later than the earlier of (x) the Common Due Date approximating the
one hundred eightieth (180th) day following the Working Capital Advance Date
("Working Capital Advance Period") and (y) the last day of the Revolving Period.
If at the end of the Working Capital Advance Period no Default or Event of
Default shall have occurred and be continuing and on or prior to one Business
Day prior to the end of such Working Capital Advance Period neither Borrower nor
IBM Credit shall have provided written notice to the other that the Working
Capital Advance corresponding to such Working Capital Advance Period shall not
be reborrowed, Borrower shall have been deemed to have made a request for a
Working Capital Advance pursuant to this Section 3(d) in an amount equal to the
Working Capital Advance then due and payable. In the event that Borrower
requests a Working Capital Advance IBM Credit shall receive a written
notification from Borrower's Treasurer or Chief Financial Officer of Borrower's
election under this Section 3(d), which notification shall specify the amount of
the requested Working Capital Advance and the requested Working Capital Advance
Date and shall certify to IBM Credit that, to the beat of such officer's
knowledge and belief, no Default or Event of Default shall have occurred and be
continuing and no Shortfall Amount currently exists and, immediately after
giving effect to such Working Capital Advance, will exist. If the amount of the
Working Capital Advance is $5,000,000 or greater the written notification must
be received by IBM Credit no later than 10 a.m. (Stamford, CT time) on the
Working Capital Advance Date. If such amount is for less than $5,000,000, the
written notification must be received by IBM Credit no later than 2 p.m.
(Stamford, CT time) on the Working Capital Advance Date. If these time
requirements are not met, the Working Capital Advance Date shall be the Business
Day immediately following the date the written notification is
11
<PAGE> 15
received by IBM Credit. Without the prior written approval of IBM Credit, the
total amount of Working Capital Advances outstanding may not exceed the lesser
of (i) one hundred percent (100%) of the Line of Credit and (ii) the most
recently reported amount, if any, by which Value exceeds Borrower's total
outstanding Indebtedness (other than Working Capital Advances) under this
Agreement. In the event that Borrower utilizes Working Capital Advances,
Borrower shall pay IBM Credit a finance charge equal to the product of the Base
Finance Charge multiplied by the average daily balance of the outstanding
Working Capital Advance for the applicable payment period. Such finance charges
shall be calculated based upon a year of 12 thirty-day months and actual days
elapsed.
4. High Turnover Option. IBM Credit currently makes available a "High
Turnover Option" ("HTO") to its customers with respect to Financed Products. The
HTO currently permits such customers to reduce their obligations with respect to
each invoice for inventory financed by IBM Credit by a percentage of the invoice
price based upon (x) the Prime Rate and (y) the applicable Free Financing
Period, if any, if the full invoice price for such an invoice is paid within
fifteen (15) days of the date of invoice. The available HTO discount will be set
forth in writing from time to time by IBM Credit. Borrower agrees and
acknowledges that the "HTO" may be changed or eliminated by IBM Credit from time
to time in its sole discretion upon written notice from IBM Credit. For payment
to be eligible for consideration under the HTO Borrower must indicate on the
accompanying remittance advice form that it is paying under the HTO.
5. Statements Regarding Borrower's Account. IBM Credit will send
statements of transactions as well as monthly billing statements to Borrower
with respect to Advances and other charges due on Borrower's account with IBM
Credit. Each statement of transaction and monthly billing statement shall be
deemed to be conclusive with respect to each amount or transaction described
therein unless Borrower notifies IBM Credit in writing within twenty-five (25)
days following the postmarked date of such statement of transaction or billing
statement that such amount or transaction is incorrectly described therein. Any
statement may be adjusted by IBM Credit at the end of each month to conform to
applicable law and this Agreement.
6. Security. (a) To secure the payment of all of Borrower's obligations
to IBM Credit whether now existing or hereafter incurred under this Agreement
(including, without limitation, the Advances), and any other agreement between
IBM Credit and Borrower, whether direct or contingent, including any obligations
of Borrower to IBM credit pursuant to any leases (the "Secured Obligations"),
Borrower grants to IBM Credit a security interest in all of Borrower's right,
title and interest in and to the following property, in each case whether now
owned or hereafter acquired or existing: (a) all inventory, equipment and
fixtures located in the United States and its possessions, and all attachments,
returns, exchanges, parts, accessions,
12
<PAGE> 16
accessories and replacements thereto, products thereof and documents therefor;
(b) all accounts, chattel paper, contract rights, instruments, reserves,
documents of title, deposit accounts, general intangibles and other obligations
of any kind, and all rights in or to all contracts and other property securing
or otherwise relating to any of the same ("Accounts"), and all rebates, refunds,
discounts, credits, warranties and incentive payments that are or may become due
to Borrower with respect to any inventory or equipment as to which a security
interest has been granted in clause (a) above, (c) all intellectual property,
including, without limitation, patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names,
technical knowledge and processes, formal or informal licensing arrangements
which are permitted to be assigned or pledged, blueprints, technical
specifications, computer software (including proprietary software), copyrights,
copyright applications and other trade secrets, and all embodiments thereof, and
rights thereto, and all of Borrower's rights to use the patents, trademarks,
service marks, or other property of the aforesaid nature of other Persons now or
hereafter licensed to Borrower, together with the goodwill of the business
symbolized by or connected with Borrower's trademarks, service marks, licenses
and the other rights referred to in this clause (c), and (d) all substitutions
and replacements for all of the foregoing, all books and records related to the
foregoing, all proceeds and insurance proceeds of all of the foregoing and all
proceeds of business interruption insurance (such property described in this
sentence should be hereinafter referred to as the "Collateral"). For purposes of
this Agreement, the term "First Lien Collateral" means all Financed Products and
all other Collateral (other than Collateral in which IBM Credit has expressly
subordinated its security interest in writing). Subject to the rights of third
parties who have senior security interests in certain of the Collateral and
proceeds thereof, Borrower will hold in trust for IBM Credit and immediately
remit to IBM Credit all Collateral and proceeds of the Collateral in accordance
with the terms of this Agreement, until Borrower has paid in full in cash all of
the Secured Obligations. IBM Credit's title or Lien shall not be impaired by
payments, either of the invoice price or any other amount Borrower may make to
the seller of any item of Collateral or anyone else, or by Borrower's failure or
refusal to account to IBM Credit for proceeds. Where permitted by law, IBM
Credit may perfect its security interest in the Collateral by filing a financing
statement signed only by IBM Credit. Borrower further agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement.
(b) Without limiting the generality of the foregoing, to secure the
payment and performance of the Secured Obligations, Borrower hereby assigns to
IBM Credit any and all claims (including all Authorized Supplier Claims), monies
and/or credits due to Borrower from any Authorized Supplier. Borrower hereby
authorizes IBM Credit, upon the occurrence and during the continuance of an
Event of Default, to offset such items against amounts owing by Borrower to IBM
Credit and authorizes and
13
<PAGE> 17
directs each Authorized Supplier to pay such claims, monies and/or credits
directly to IBM Credit. IBM Credit shall give notice to Borrower of any such
offsetting.
7. Location of Collateral and Inspection Rights. (a) The inventory,
equipment and other tangible Collateral shall be kept or sold at the addresses
as set forth in form and detail satisfactory to IBM Credit (it being understood
that the form and degree of detail provided in Exhibit D, attached hereto as an
example, is satisfactory) and said locations shall be certified quarterly to IBM
Credit. Borrower's principal place of business is located at Six International
Drive, Rye Brook, New York 10573-1058. Borrower shall give IBM Credit at least
ten (10) days' prior notice of any change in Borrower's identity, name or form
of ownership and of any change in Borrower's principal place of business or
Borrower's registered agent, or any additions of other business locations in the
United States and its possessions in which the Uniform Commercial Code is
adopted. Borrower shall notify IBM Credit of any discontinuances of other
business locations in the United States and its possessions in which the Uniform
Commercial Code is adopted within thirty (30) days of such discontinuance.
Further, Borrower represents and warrants that it keeps and maintains all of its
books and records at its principal place of business as designated above and
maintains all of its books and records pertaining to accounts at its Canton,
Massachusetts location, and agrees to give IBM Credit at least ten (10) days'
prior written notice before moving any such books and records to any other
location. In addition, IBM Credit shall have the right to request that Borrower
perform monthly audits as set forth below (which coincide with anticipated
monthly cycle accounts) of any location where such Collateral is kept or sold,
and Borrower shall perform such audits at Borrower's expense; provided, however,
that IBM Credit may not request an audit of Collateral representing more than
ten percent (10%) of the total inventory value in any month. IBM Credit shall
have the right to have its representatives accompany Borrower on the audit of
each location in order to:
(i) Examine the Collateral;
(ii) Appraise them as security;
(iii) Verify their condition;
(iv) Verify that all Collateral has been properly
accounted for and that this Agreement has been
complied with; and
(v) Examine, check, and make copies of the books,
records and files of Borrower relating to the
Collateral.
Upon IBM Credit's request, Borrower shall provide IBM Credit the name, address
and phone number of a contact person with respect to each obligor of an account
receivable of Borrower. All communication by IBM Credit to each obligor shall be
made through Borrower except (i) following an occurrence of an Event of Default
or (ii) with the consent of Borrower (which consent shall not be unreasonably
withheld).
14
<PAGE> 18
(b) In addition to the rights granted to IBM Credit under Section
7(a) above, (i) IBM Credit shall have the right to inspect the books and records
of Borrower and the Collateral at such times and as frequently as IBM Credit
shall determine, such inspections to be performed by IBM Credit or, if IBM
Credit shall so determine in its sole discretion, by an independent third party
auditor designated by IBM Credit with the expenses thereof to be shared equally
by Borrower and IBM Credit and (ii) IBM Credit or its agents may enter upon the
premises of Borrower at any time and from time to time, during normal business
hours and upon reasonable notice under the circumstances, and at any time at all
on and after the occurrence and during the continuance of an Event of Default
for the purposes of (A) inspecting the Collateral, (B) inspecting and/or copying
(at Borrower's expense) any and all records pertaining thereto, (C) discussing
the affairs, finances and business of Borrower with any officers, employees and
directors of Borrower or with the Auditors and (D) verifying Eligible Accounts,
Financed Products or other Collateral.
8. Use of Collateral. Borrower will pay all taxes, levies, license fees,
assessments and charges on the Collateral when due. If Borrower shall lend any
inventory, equipment or other tangible Collateral to a third party as permitted
by Section 11(c)(x) hereof, such Collateral will be identified on the Perpetual
Finished Goods Inventory Reconciliation Reports described on Exhibit C and will
be treated as sold by Borrower. Borrower shall pay any mortgage recording tax,
recording fee and other charge payable in connection with the filing and
recording of any documents, instruments and statements reasonably needed to be
filed to perfect IBM Credit's security interest in the Collateral when such tax,
fee or charge or any combination thereof for an individual filing and/or
recording is equal to or greater than $5,000.
9. Insurance of Collateral.
Borrower will be responsible for any loss of Collateral for my reason
whatsoever. Borrower will keep the Collateral insured for the greater of the
Line of Credit and the aggregate replacement cost of the Collateral against
fire, theft and for combined additional coverages, including vandalism and
malicious mischief, and those other risks and amounts as may be mutually agreed
upon, including earthquake damage where specified, in companies mutually
acceptable to IBM Credit and Borrower, with a lender's loss payable endorsement
or mortgagee clause in form and substance satisfactory to IBM Credit designating
that any loss payable thereunder with respect to the First Lien Collateral be
payable to IBM Credit. In addition, all policies covering the Collateral and all
liability policies maintained by Borrower are to name IBM Credit as an
additional insured. Borrower shall cause each insurer to agree, by endorsement
upon the applicable policy or by independent instrument furnished to IBM Credit,
that such insurer shall give IBM Credit at least thirty (30) days written notice
before any policy shall be altered or cancelled and that no act or default by
Borrower, or any other Person,
15
<PAGE> 19
shall affect IBM Credit's right to recover under such policy. If Borrower fails
to pay any cost, charges or any insurance premiums, or if Borrower fails to
insure the tangible Collateral, IBM Credit may pay such costs, charges, or any
insurance premiums. Any amounts paid by IBM Credit hereunder shall be considered
an additional debt owed by Borrower to IBM Credit and are due and payable upon
rendering of an invoice by IBM Credit. Borrower will promptly notify IBM Credit
of any loss, theft or destruction of, or damage to any of the Collateral.
Borrower shall diligently file and prosecute its claim or claims for any award
or payment in connection with any such loss, theft, destruction of, or damage
to, Collateral. Borrower shall, upon demand of IBM Credit, make, execute and
deliver any and all assignments and other instruments sufficient for the purpose
of assigning any such award or payment to IBM Credit, free and clear of any
encumbrance of any kind or nature whatsoever.
10. Issues Involving Quality of Products. Borrower will indemnify and
hold IBM Credit harmless from and against any claims or demands asserted against
it by any buyer of the Collateral arising out of any misrepresentation made
about the Collateral by any representative of Borrower or otherwise arising as a
result of any act, or failure to act, by Borrower. The aforesaid indemnity shall
not impair or jeopardize any rights or claims which Borrower may have against
any Authorized Supplier or any of their respective Affiliates except IBM Credit.
11. Additional Warranties, Representations and Covenants.
(a) Borrower hereby represents and warrants to IBM Credit as follows:
(i) Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has
all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business
as now being conducted. Borrower is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where failure so to qualify could
reasonably be expected to have a Material Adverse Effect.
(ii) The execution, delivery and performance by Borrower of this
Agreement and each other Credit Document to which it is a party is
within the corporate powers of Borrower, has been duly authorized by all
necessary corporate action, requires no action by or in respect of, or
filing with (other than the filing of UCC financing statements, which
have been made prior to the date hereof), any governmental body, agency
or official and does not contravene or constitute a default under, any
provision of applicable law or regulation or of the certificate of
incorporation or by-laws of Borrower or of any agreement, judgment,
injunction, order, decree or other instrument binding upon Borrower or
(except for the Liens created
16
<PAGE> 20
pursuant to this Agreement) result in the creation or imposition of any
Lien on any asset of Borrowers.
(iii) This Agreement and each of the other Credit Documents to
which Borrower is a party constitutes a valid and binding agreement of
Borrower, enforceable in accordance with its terms, except as (i) the
enforceability hereof may be limited by bankruptcy, insolvency, or
similar laws relating to creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability.
(iv) There is no action, suit or proceeding pending against, or
to the knowledge of Borrower threatened against or affecting, Borrower
before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse
decision which could have a Material Adverse Effect.
(v) Since July 3, 1994, there has occurred no change or
development or, to the best of Borrower's knowledge, event involving a
prospective change, which in any such case, has had or could reasonably
be expected to have a Material Adverse Effect.
(vi) All information heretofore furnished by Borrower to IBM
Credit for purposes of or in connection with this Agreement, any of the
other Credit Documents or any transaction contemplated hereby or thereby
is, and all such information hereafter furnished by Borrower to IBM
Credit will be, true and accurate in all material respects on the date
as of which such information is stated or certified. To the best of
Borrower's knowledge, Borrower has disclosed to IBM Credit (which
disclosure from and after the date hereof, shall have been made either
in writing or orally to either the Director of Remarketing Financing
Support of IBM Credit or the Director of Remarketer Financing Portfolio
of IBM Credit) any and all facts which could reasonably be expected to
have a Material Adverse Effect.
(vii) To the best of Borrower's knowledge, all taxes due pursuant
to all United States Federal income tax returns and all other material
tax returns required to be filed by Borrower and any other Person for
which Borrower may be liable with respect to taxes owing by such Person
or pursuant to any assessment received by Borrower or any such Person
have been paid, all taxes due pursuant to all United States Federal
income tax returns and all other material tax returns required to be
filed by Borrower and any other Person for which Borrower may be liable
with respect to taxes owing by such Person (other than, with respect to
any taxes due, or any returns to be filed, after August 6, 1993 by JWP
Inc. or any subsidiary of JWP Inc.) or pursuant to any assessment
received by Borrower or any such Person (other than assessments received
by JWP Inc. or any subsidiary of JWP Inc. after August 6, 1993 for
periods
17
<PAGE> 21
prior to August 6. 1993) have been paid, other than taxes contested in
good faith pursuant to appropriate proceedings. The charges, accruals
and reserves on the books of Borrower in respect of taxes or other
governmental charges are, in the opinion of Borrower, adequate, No tax
liens have been filed against Borrower or any of its property.
(viii) Borrower has good and marketable title to all of the
Collateral, free and clear of any Lien other than the Liens created
pursuant to, or Liens which do not cause a default under, this Agreement
or any of the other Credit Documents. The security interest granted
pursuant to this Agreement constitutes a valid security interest under
the Uniform Commercial Code. IBM Credit's security interest in the First
Lien Collateral constitutes a valid, perfected first priority security
interest in such property.
(ix) All financial statements relating to Borrower which have
been or may hereafter be delivered by or for Borrower to IBM Credit have
been and will be prepared in accordance with GAAP (in the case of any
interim financial statements, except for the absence of notes and
subject to normal year-end adjustments).
(x) Borrower is not aware of the existence of any default by
Borrower in the payment of any principal, interest or other charges
relating to any Indebtedness of Borrower and no event has occurred under
the terms or provisions of any agreement, instrument or other document
relating to any such Indebtedness or under any other Material Contract
which, with or without the passage of time and/or the giving of notice,
constitutes or would constitute an event of default thereunder.
(xi) Borrower has no direct or indirect Subsidiaries other than
Erlanger Land Co., Inc., a Delaware corporation, ENTEX Information
Services International, Limited, an Ireland corporation, ENTEX
Information Services of Michigan, Inc., a Michigan corporation, ENTEX
Services, Inc., a Delaware corporation and ENTEX Acquisition Corp., a
Colorado corporation.
(xii) Borrower and each other Credit Party has obtained all
authorizations, approvals and consents of, and has made all filings and
registrations with, any governmental authority or any other Person
necessary for the consummation of the transactions contemplated by the
grant of the Liens pursuant to this Agreement and the other Credit
Documents, the continuing operations of Borrower, and the execution,
delivery, performance, validity or enforceability of this Agreement or
the other Credit Documents.
(xiii) Borrower has not used any corporate or fictitious name
during the five (5) years preceding the date of this Agreement other
than the name "IS Management Acquisition Corp.".
18
<PAGE> 22
(xiv) There are no disputes pending or, to the best of Borrower's
knowledge after diligent inquiry, threatened between Borrower and any of
its employees which could reasonably be expected to have a Material
Adverse Effect.
(xv) Borrower and each ERISA Affiliate have fulfilled all
obligations related to the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan, are in compliance with
the currently applicable provisions of ERISA and of the internal Revenue
Code and have not incurred any liability (other than routine liability
for premiums) under Title IV of ERISA. No Termination Event has occurred
nor has any other event occurred that may result in a Termination Event.
No event or events have occurred in connection with which Borrower, any
ERISA Affiliate, any fiduciary of a Plan or any Plan, directly or
indirectly, could be subject to any liability, individually or in the
aggregate, under ERISA, the Internal Revenue Code or any other law or
under any agreement, instrument, statute, rule of law or regulation
pursuant to or under which any such entity has agreed to indemnify or is
required to indemnify any Person against liability incurred under, or
for a violation or failure to satisfy the requirements of, any such
statute, regulation or order.
(xvi) (A) The operations of Borrower comply in all material
respects with all applicable federal, state or local environmental,
health and safety statutes, regulations, directions, ordinances,
criteria and guidelines; (B) other than for those notices for which
Borrower has provided reasonable description, in the sole judgement of
IBM Credit, as to why the proceeding is wrongful, Borrower has not
received any written notice and no officer or director of Borrower has
received any oral notice, that any of its operations is the subject of
any judicial or administrative proceeding alleging the violation of any
federal, state or local environmental, health or safety statute,
regulation, direction, ordinance, criteria or guideline; (C) to the best
of Borrower's knowledge, none of the operations of Borrower is the
subject of any federal or state investigation evaluating whether
Borrower disposed of any hazardous or toxic waste, substance or
constituent or other substance at any site that may require remedial
action, or any federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any hazardous or
toxic waste, substance or constituent, or other substance into the
environment; (D) Borrower has not filed any notice under any federal or
state law indicating past or present treatment, storage or disposal of a
hazardous waste or reporting a spill or release of a hazardous or toxic
waste, substance or constituent, or other substance into the
environment; and, (E) Borrower does not have any contingent liability of
which Borrower has knowledge or reasonably should have knowledge in
connection with any release of any hazardous or toxic
19
<PAGE> 23
waste, substance or constituent, or other substance into the
environment, nor has Borrower received any notice, letter or other
indication of potential liability arising from the disposal of any
hazardous or toxic waste, substance or constituent or other substance
into the environment.
(xvii) Borrower possesses such assets, licenses, patents, patent
applications, copyrights, service marks, trademarks and trade names as
are necessary to continue to conduct its present and proposed business
activities. All of Borrower's patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade
names, copyrights, copyright applications and rights to any of the
foregoing are listed on Exhibit E hereto.
(xviii) Borrower is not (A) an investment company or a company
controlled by an investment company within the meaning of the Investment
Company Act of 1940, as amended, (B) a holding company or a Subsidiary
company of a holding company, or an Affiliate of a holding company or of
a Subsidiary company of a holding company, within the meaning of the
Public Utility Holding Company Act of 1935, as amended, or (C) subject
to any other law which purports to regulate or restrict its ability to
borrow money or to consummate the transactions contemplated by this
Agreement or the other Credit Documents or to perform its obligations
hereunder or thereunder.
(xix) Borrower has no obligation under any tax sharing agreement
or agreement regarding payments in lieu of taxes other than such
agreements entered into by Borrower with the prior written consent of
IBM Credit.
(xx) no assets included in Value, as defined in Section 3(c) is
owned by ENTEX Information Services of Michigan, Inc. or ENTEX Services,
Inc..
(b) Until termination of the Line of Credit and the indefeasible
payment and satisfaction of all Secured Obligations, Borrower, will:
(i) (A) Maintain its corporate existence, maintain in full force
and effect all licenses, bonds, franchises, leases and qualifications to
do business, and all contracts and other rights necessary or advisable
to the profitable conduct of its business and (B) continue in, and limit
its operations to, the same general lines of business as presently
conducted by it.
(ii) Maintain a system of accounting in accordance with GAAP.
(iii) Comply in all material respects with all laws, rules and
regulations (including, without limitation, all environmental and health
and occupational safety,
20
<PAGE> 24
regulations, directions, ordinances, criteria, guidelines, requirements
and permits and ERISA) applicable to or binding on Borrower or any of
its property or to the operation of its business.
(iv) Establish and maintain at all times Lockboxes (as defined
below) as provided in the Blocked Account Agreement and shall instruct
all obligors on the Accounts to remit all payments to one of its
Lockboxes. All amounts received by Borrower from any such obligor, in
addition to all other cash received from any other source, shall upon
receipt be deposited into an account in accordance with terms and
provisions of the Blocked Account Agreement and Borrower shall at all
times comply with the terms and conditions set forth in the Blocked
Account Agreement. "Lockboxes" shall mean the lockboxes of Borrower in
place and identified to IBM Credit as of the date of this Agreement and
such other lockboxes as are added in accordance with the terms of the
Blocked Account Agreement. "Blocked Account Agreement" shall mean that
certain letter agreement by and among Citibank as lender, Global Cash
Management (a division of Citibank) as depository, and IBM Credit as the
same may be amended, supplemented, restated or otherwise modified from
time to time. Borrower will also obtain IBM Credit's written permission
prior to changing the bank with which it has a Lockbox that is subject
to this Agreement and assist IBM Credit as required in entering into a
Blocked Account Agreement with any such new bank.
(v) Pay, when due, all taxes lawfully levied or assessed against
Borrower or any of the Collateral before any penalty or interest accrues
thereon; provided, however, that, unless such taxes have become a tax or
ERISA Lien on any of the assets of Borrower, no such tax need be paid if
the same is being contested, in good faith, by appropriate proceedings
promptly instituted and diligently conducted and if an adequate reserve
or other appropriate provision shall have been made therefor as required
in order to be in conformity with GAAP.
(vi) Maintain its fiscal year as a year ending on the Sunday
closest to June 30 unless required by law, in which case Borrower will
give IBM Credit at least thirty (30) days prior written notice thereof.
(vii) Do and cause to be done all things necessary to preserve
and keep in full force and effect all registrations of patents,
copyrights, trademarks, service marks and other marks, trade names or
other trade rights necessary or advisable for the profitable conduct of
its business. Promptly after obtaining any federal registration of any
patent, copyright, trademark, trade name or other trade right or the
filing of any application therefor, Borrower shall deliver to IBM Credit
a collateral assignment with respect to each such registration and
application, in form and substance satisfactory to IBM Credit.
21
<PAGE> 25
(viii) Keep all property useful and necessary to its respective
businesses in good working order and condition (ordinary wear and tear
excepted) in accordance with its past operating practices and not commit
or suffer any waste with respect to any of its properties.
(ix) Deliver to IBM Credit, at Borrower's expense, the following
information at the times specified below:
(A) within ten (10) Business Days after Borrower or any
ERISA Affiliate knows or has reason to know that a Termination
Event has occurred, a written statement of the chief financial
officer of Borrower describing such Termination Event and the
action, if any, which Borrower or any ERISA Affiliate has taken,
is taking or proposes to take with respect thereto, and when
known, any action taken or threatened by the Internal Revenue
Service, DOL or PBGC with respect thereto;
(B) within ten (10) Business Days after Borrower or any
ERISA Affiliate knows or has reason to know that a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the
Internal Revenue Code) has occurred which will result in any
liability being imposed directly, through any indemnification
obligation, or otherwise, a statement of the chief financial
officer of Borrower describing such transaction and the action
which Borrower or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto;
(C) within three (3) Business Days after the filing
thereof with the Internal Revenue Service, a copy of each funding
waiver request filed with respect to any Benefit Plan and all
communications received by Borrower or any ERISA Affiliate with
respect to such request;
(D) within ten (10) Business Days after the occurrence
thereof, notification of any increase in the benefits of any
existing Plan or the establishment of any new Plan or the
commencement of contributions to any Plan to which Borrower or
any ERISA Affiliate was not previously contributing;
(E) within three (3) Business Days after receipt by
Borrower or any ERISA Affiliate of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to
administer a Benefit Plan, copies of each such notice;
(F) within ten (10) Business Days after receipt by
Borrower or any ERISA Affiliate of any favorable or unfavorable
determination letter from the Internal Revenue Service regarding
the qualification of a Plan
22
<PAGE> 26
under Section 401(a) of the Internal Revenue Code, copies of each
such letter;
(G) within ten (10) Business Days after receipt by
Borrower or any ERISA Affiliate of a notice regarding the
imposition of withdrawal liability under Section 4201 of ERISA,
copies of each such notice;
(H) within ten (10) Business Days after Borrower or any
ERISA Affiliate fails to make a required installment or any other
required payment under Section 412 of the Internal Revenue Code
on or before the due date for such installment or payment, a
notification of such failure; and
(I) within three (3) Business Days after Borrower or any
ERISA Affiliate knows (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or
(c) the PBGC has instituted or will institute proceedings under
Section 4042 of ERISA to terminate a Multiemployer Plan, a
written statement setting forth any such event or information.
(x) At Borrower's reasonable expense, execute, deliver, file and
record any statement, assignment, instrument, document, agreement or
other paper and take any other action (including, without limitation,
any filings of financing or continuation statements under the Uniform
Commercial Code) that from time to time may be necessary or desirable,
or that IBM Credit may request, in order to create, preserve, upgrade in
rank (to the extent required by the provisions of this Agreement),
perfect, confirm or validate any security interest granted hereunder or
under any other Credit Document or to enable IBM Credit to obtain the
full benefits of this Agreement, or to enable IBM Credit to exercise and
enforce any of its rights, powers and remedies hereunder or under any
other Credit Document with respect to any of the Collateral.
(xi) Borrower will provide, when required by IBM Credit, a copy
of the Commercial Revolving Loan and Security Agreement and all
documents, instruments and agreements executed in connection therewith,
the Commercial Revolving Loan and Security Agreement and all such other
documents, instruments and agreements to be satisfactory in form and
substance to IBM Credit;
(xii) Borrower will provide, when required by IBM Credit, a copy
of all documents, instruments and agreements evidencing, or executed in
connection with, the Acquisition Subordinated Debt, all such documents,
instruments and agreements (including the terms of subordination,
interest rate, maturities and sinking fund requirements, covenants and
defaults) to be in form and substance satisfactory to IBM Credit;
23
<PAGE> 27
(c) Until termination of the Line of Credit and the indefeasible
payment and satisfaction of all Secured Obligations, Borrower, and with respect
to (xvii) of this Section 11(c), Borrower, ENTEX information Services of
Michigan, Inc. and ENTEX Services, Inc., will not:
(i) Store any of the Collateral with a bailee, warehouseman, or
similar party without the prior written consent of IBM Credit. In the
event IBM Credit shall so consent, Borrower will, concurrently with
delivery to such party, cause any such party to issue and deliver to IBM
Credit, in a form acceptable to IBM Credit, warehouse receipts in the
name of IBM Credit evidencing the storage of such Collateral if such
Collateral is First Lien Collateral.
(ii) Create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except: (A) Liens securing the
Secured Obligations, (B) Liens securing the Indebtedness to
Hewlett-Packard Company, (C) Liens existing on the date of this
Agreement securing obligations outstanding under the Commercial
Revolving Loan and Security Agreement in an aggregate principal amount
not exceeding $32,500,000, (D) Liens securing the Indebtedness listed on
Exhibit F-A hereto, (E) in the case of any asset not constituting First
Lien Collateral, any Lien on any such asset securing Indebtedness
incurred or assumed for the purpose of financing all or any part of the
cost of acquiring such asset, (F) in the case of any asset not
constituting First Lien Collateral, any Lien existing on any such asset
prior to the acquisition thereof by Borrower and not created in
contemplation of such acquisition, (G) in the case of any asset not
constituting First Lien Collateral, Liens arising in the ordinary course
of its business which (1) do not secure Indebtedness, (2) do not secure
obligations which in the aggregate exceed $10,000,000 and (3) do not in
the aggregate materially detract from the value of its assets or
materially impair the use thereof in the operation of its business and
(H) other Liens consented to in writing by IBM Credit and which, in the
case of any such Liens on any of the First Lien Collateral, are
subordinated pursuant to agreements in form and substance satisfactory
to IBM Credit in its sole discretion, provided, that with respect to
Liens securing Indebtedness permitted to be incurred pursuant to Section
11(c) (ix), such consent will not be unreasonably withheld.
(iii) (A) Declare, pay or accrue any dividend, royalty or other
distribution of assets, properties, cash, rights, obligations, warrants
or securities on account of the shares of any class of its capital stock
or declare, pay or accrue any management fees or (B) purchase, redeem,
retire or otherwise acquire for value any shares of any class of its
capital stock or any warrants, rights or options to acquire any such
shares now or hereafter outstanding, or return any capital in respect of
any such
24
<PAGE> 28
shares to any stockholder as such. In the case of (B) in the immediately
preceding sentence, Borrower may purchase from employees of Borrower who
are leaving the employ of Borrower, shares of its capital stock that
were purchased under an employee stock plan or similar plan of Borrower
as long as such purchase amount does not exceed $1,000,000 in any fiscal
year.
(iv) Merge (other than as a reincorporation or where Borrower
shall be the surviving entity) or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or a
series of transactions) all or substantially all of its assets (whether
now or hereafter acquired) to any Person.
(v) If it will cause Borrower to fail to meet any financial
covenants specified in Section 12 of this Agreement, prepay, redeem,
defease (whether actually or in substance) or purchase in any manner,
make any payment in respect of principal of, or interest on, any
Long-term Debt (including the BLI Subordinated Debentures and the
Acquisition Subordinated Debt). "Long-term Debt" shall be defined herein
as all Indebtedness of Borrower which matures more than one year from
the date of determination or matures within one year from such date but
is renewable or extendible at the option of Borrower to a date more than
one year from such date.
(vi) Form, establish or otherwise permit to exist any Subsidiary
other than (A) Erlanger Land Co., Inc. ("Erlanger") or permit Erlanger
to engage in any business or other activity other than the ownership of
the property currently owned by it in Erlanger, Kentucky and activities
incidental thereto, (B) ENTEX Information Services International Limited
("International"), provided, that Borrower's total investment in
International does not exceed $1,500,000, (C) ENTEX Information Services
of Michigan, Inc., (D) ENTEX Services, Inc., (E) ENTEX Acquisition
Corp., and (F) Random Access, Inc. (to be renamed ENTEX Information
Services of Colorado, Inc.) and subsidiaries thereof ("Random"),
provided, that the acquisition of Random is done in accordance with IBM
Credit's consent and commitment letters dated May 8, 1995 and the
Supplementary Letter Agreement of even date.
(vii) Acquire any material assets of any Person (other than
inventory acquired in the ordinary course of business).
(viii) Move, relocate or otherwise transfer any of its property
or assets constituting First Lien Collateral, or any interest therein,
to any office of, or operated by, its Washington D.C.-Federal division,
including without limitation, the offices of such division located in
Washington D.C. unless after such movement, relocation or transfer (A)
IBM Credit shall continue to have a perfected
25
<PAGE> 29
first priority security interest in such assets (excluding Accounts
constituting proceeds arising from the sale of Financed Products with
respect to which Accounts IBM Credit has subordinated its security
interest therein to the security interest of Hewlett-Packard Company
therein), (B) Borrower shall have delivered to IBM Credit such financing
statements, documents and other agreements as IBM Credit may request to
maintain its first priority perfected security interest in such
Collateral and (C) in the case of any such movement, relocation or other
transfer not consistent with Borrower's past practice, Borrower shall
have notified IBM Credit of such event,
(ix) Directly or indirectly, incur, create, assume or suffer to
exist any Indebtedness other than:
(A) Indebtedness arising under this Agreement and the
other Credit Documents;
(B) Indebtedness secured by Liens expressly permitted by
Section 11(c)(ii) (C) through (H) not to exceed $195,000,000 in
the aggregate outstanding at any one time;
(C) the BLI Subordinated Debentures; and
(D) Indebtedness listed on Exhibit F-B and any refinancing
of such Indebtedness; provided that any such Indebtedness created
to refinance existing Indebtedness shall not exceed the principal
amount of the Indebtedness so refinanced and shall contain terms
(including maturities) substantially equivalent to (or more
favorable to Borrower than) the terms of the Indebtedness being
refinanced, so long as such refinancing will not otherwise result
in a violation of any of the covenants contained in Section 12.
(x) Directly or indirectly, sell, lease, assign, transfer or
otherwise dispose of any assets other than (A) sales of inventory in the
ordinary course of business and short term rental of inventory as
demonstrations in amounts not material to Borrower, (B) individual items
of Collateral with a book value of less than $5,000,000 in the aggregate
during any fiscal year, (C) obsolete or worn out property disposed of in
the ordinary course of business and (D) other dispositions of assets,
provided that (1) such dispositions are for fair value, (2) the
aggregate consideration (whether in the form of cash, promissory notes
or other instruments) for such dispositions does not exceed $5,000,000
in the aggregate for any fiscal year and (3) such consideration is
either reinvested in the business of Borrower or used to repay the
Secured Obligations.
(xi) Directly or indirectly, make any Investment in any Person,
whether in cash, securities, or other property of any kind including,
without limitation, any
26
<PAGE> 30
Affiliate of Borrower, other than:
(A) advances or loans to officers and directors of
Borrower in an amount not to exceed $50,000 outstanding at any
one time to any one Person and $500,000 in the aggregate to all
such officers and directors outstanding at any one time;
(B) Cash Equivalents;
(C) Interest-bearing demand or time deposits (including
certificates of deposit) which are insured by the Federal Deposit
Insurance Corporation ("FDIC") or a similar federal insurance
program; provided, however, that Borrower may, in the ordinary
course of its business, maintain in their disbursement accounts
from time to time amounts in excess of then applicable FDIC or
other program insurance limits;
(D) Investments of Borrower existing on the date of this
Agreement and set forth on Exhibit G hereto;
(E) Investments by Borrower in the form of loans made to
Parent to enable Parent, upon the death, disability or
involuntary termination of employment without cause of an
employee of Borrower, to repurchase shares of the Parent's common
stock owned by such employee for cash pursuant to a management
stock incentive program so long as the aggregate amount of loans
shall not exceed $50,000 in any one year and $100,000 in the
aggregate, provided that any such loans to Parent shall not be
subordinated in right of payment to any other indebtedness or
obligations of Parent; and
(F) Such other Investments as IBM Credit may approve in
its sole discretion.
(xii) Except as otherwise expressly permitted by this Agreement,
directly or indirectly, enter into any transaction with or for the
benefit of, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service to, any Affiliate
of Borrower except upon fair and reasonable terms no less favorable to
Borrower than could be obtained in a comparable arm's-length transaction
with an unaffiliated Person; provided that (A) any Affiliate of Borrower
who is an individual may serve as a director, officer or employee of
Borrower and receive reasonable compensation or indemnification in
connection with his or her services in such capacity and (B) Borrower
may enter into any other transaction with or for the benefit of any
Affiliate of Borrower so long as the aggregate amount of all amounts
required to be paid to and other consideration permitted to be received
by all such Affiliates pursuant to such other transactions shall not
exceed $3,000,000 in the aggregate in any fiscal year of Borrower.
27
<PAGE> 31
(xiii) Directly or indirectly:
(A) Engage, or permit any ERISA Affiliate to engage, in
any prohibited transaction which could result in a civil penalty
or excise tax described in Sections 406 of ERISA or 4975 of the
Internal Revenue Code being imposed directly, through any
indemnification obligation, or otherwise, on the Borrower or any
ERISA Affiliate, for which a statutory or class exemption is not
available or a private exemption has not been previously obtained
from the DOL;
(B) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of
ERISA and 412 of the Internal Revenue Code), whether or not
waived;
(C) fail, or permit any ERISA Affiliate to fail, to timely
pay required contributions or annual installments due with
respect to any waived funding deficiency to any Benefit Plan;.
(D) terminate, or permit any ERISA Affiliate to terminate,
any Benefit Plan where such event would result in any liability
of Borrower or any ERISA Affiliate under Title IV of ERISA;
(E) fail, or permit any ERISA Affiliate to fail, to make
any required contribution or payment to any Multiemployer Plan;
(F) fail, or permit any ERISA Affiliate to fail, to pay
any required installment or any other payment required under
Section 412 of the Internal Revenue Code on or before the due
date for such installment or other payment;
(G) amend, or permit any ERISA Affiliate to amend, a Plan
resulting in an increase in current liability for the plan year
such that Borrower or any ERISA Affiliate is required to provide
security to such Plan under Section 401(a)(29) of the Internal
Revenue Code;
(H) withdraw, or permit any ERISA Affiliate to withdraw,
from any Multiemployer Plan where such withdrawal may result in
any liability of any such entity under Title IV of ERISA; or
(I) allow any representation made in Section 11(a)(xiv) to
be untrue at any time during the term of this Agreement.
(xiv) Directly or indirectly, (A) amend, modify, or permit the
amendment, modification, of its Certificate of
28
<PAGE> 32
Incorporation when such amendment or modification would materially
affect Customer's ability to fulfill its obligations and
responsibilities under this Agreement (it being understood that Customer
will notify IBM Credit within thirty (30) days after making or
permitting to be made any other amendment or modification to its
Certificate of Incorporation not included in (A)), (B) cancel or
terminate or permit the cancellation or termination of its Certificate
of incorporation, or (C), without prior written notice to IBM Credit,
amend, modify, cancel or terminate or permit the amendment,
modification, cancellation or termination of any instrument or agreement
governing or relating to any Indebtedness of Borrower, the Commercial
Revolving Loan and Security Agreement provided, however, that Borrower
may amend or otherwise modify the terms relating to compensation paid to
the provider of any such Indebtedness without notice to IBM Credit.
(xv) Directly or indirectly, create or otherwise cause or suffer
to exist or become effective, (A) any prohibition or restriction
(including any agreement to provide equal and ratable security to any
other Person in the event a Lien is granted to or for the benefit of IBM
Credit) on the creation or existence of any Lien upon the assets of
Borrower (other than those restrictions set forth in the agreements
relating to the Indebtedness set forth on Exhibit F-A as in effect on
the date of this Agreement), (B) any contractual obligation which may
restrict or inhibit IBM Credit's rights or ability to sell or otherwise
dispose of the Collateral or any part thereof after the occurrence of an
Event of Default or (C) any encumbrance or restriction on the ability of
any of the Subsidiaries of Borrower to (1) pay dividends or make any
other distributions on such Subsidiary's capital stock or pay any
Indebtedness owed to Borrower or a Subsidiary of Borrower, (2) make
loans or advances to Borrower or a Subsidiary of Borrower or (3)
transfer any of its properties or assets to Borrower.
(xvi) Move or otherwise relocate any computer equipment or
systems located in Borrower's facilities in Canton, Massachusetts or
Erlanger, Kentucky.
(xvii) Transfer or sell any assets included in the calculation of
Value as defined in Section 3(c) to ENTEX Information Services of
Michigan, Inc. or ENTEX Services, Inc. without obtaining IBM Credit's
prior written consent.
12. Financial Covenants. Borrower shall hold quarterly business reviews
of the following financial covenants with IBM Credit. Borrower covenants and
agrees with IBM Credit that:
29
<PAGE> 33
(a) Borrower shall at all times maintain a ratio of current assets to
current liabilities equal to at least 1.01 to 1 during Borrower's fiscal year
ending on June 30, 1996 or for any fiscal year thereafter.
(b) Borrower shall at all times maintain a ratio of (i) total
liabilities minus the aggregate outstanding principal amount of Subordinated
Debt to (ii) the sum of Tangible Net Worth and the aggregate outstanding
principal amount of Subordinated Debt of not more than 20 to 1 during Borrower's
fiscal year ending on June 30, 1996 or for any fiscal year thereafter.
(c) Borrower shall not permit the sum of Tangible Net Worth and the
aggregate outstanding principal amount of Subordinated Debt at any time to be
less than twenty-one million dollars ($21,000,000) at any time during Borrower's
fiscal year ending on June 30, 1996 or for any fiscal year thereafter.
(d) Borrower shall not permit, at the end of any fiscal quarter
beginning on or after the date hereof, the ratio of EBIT to Interest Expense for
the period of two consecutive fiscal quarters then ended to be less than 1.1 to
1 during Borrower's fiscal year ending on June 30, 1996 or for any fiscal year
thereafter.
(e) Beginning on or after the date hereof, Borrower shall not permit its
Consolidated Net Income for any Fiscal Quarter to be less than 0.2% of sales
during such Fiscal Quarter in Borrower's fiscal year ending on June 30, 1996 or
for any fiscal year thereafter.
(f) Borrower shall not permit the aggregate amount of Capital
Expenditures made in any fiscal year to exceed $10,000,000 net of dispositions
related to such Capital Expenditures.
(g) Borrower shall at all times maintain Working Capital of not less
than (i) thirteen million dollars ($13,000,000) at any time from and including
the date hereof to and including the last day of Borrower's second 1996 Fiscal
Quarter, (ii) thirteen million dollars ($13,000,000) PLUS seventy-five percent
(75%) of Borrower's net income after taxes earned by Borrower during Borrower's
second 1996 Fiscal Quarter ("Third 1996 Quarter W/C Minimum") at all times
during Borrower's third 1996 Fiscal Quarter, (iii) Third 1996 Quarter W/C
Minimum PLUS seventy-five percent (75%) of Borrower's net income after taxes
earned during Borrower's third 1996 Fiscal Quarter ("Fourth 1996 Quarter W/C
Minimum") at all times during Borrower's fourth 1996 Fiscal Quarter, (iv) the
greater of (a) seventeen million dollars ($17,000,000) and (b) the Fourth 1996
Quarter W/C Minimum PLUS seventy-five percent (75%) of Borrower's net income
after taxes earned in Borrower's fourth 1996 Fiscal Quarter ("First 1997 Quarter
W/C Minimum"), and (v) for each succeeding Borrower's Fiscal Quarter, the
minimum Working Capital for the immediately preceding Fiscal Quarter PLUS
seventy-five percent (75%) of Borrower's net income after taxes earned by
Borrower during such preceding Fiscal Quarter. "Working Capital" as of any date
shall mean current assets minus current liabilities, in each case as of such
date.
Borrower agrees that at such quarterly review with IBM Credit, Borrower
will provide a Compliance Certificate, in substantially the form of Exhibit J
hereto, signed by its Chief Executive Officer, Chief Financial Officer or Vice
President & Treasurer, that no default under this Agreement exists or if such
default exists, specifying the nature thereof.
30
<PAGE> 34
13. Events of Default; Power of Attorney. (a) There shall be an "Event
of Default" if:
(i) Borrower fails to pay (x) any principal amount or any finance
charges referred to in Section 3 payable to IBM Credit when due and (y)
any other amount within two (2) days of such other amount coming due; or
(ii) Borrower fails to comply with or observe any term, covenant
or agreement contained in Section 6, Section 11(a), 11(b)(iii) or (iv),
11(c) or Section 12 of this Agreement; or
(iii) Borrower or any of its Affiliates party to a Credit
Document (collectively, the "Credit Parties" and, individually a "Credit
Party") shall fail to perform or observe any term, covenant or agreement
contained in any Credit Document (other than this Agreement) or any
other document, instrument, or agreement evidencing or governing
obligations equal to or in excess of $3,000,000 in the aggregate by and
between IBM Credit or any Authorized Supplier (or any subsidiary of such
Authorized Supplier) and, or executed for the benefit of IBM Credit or
any Authorized Supplier (or any subsidiary of such Authorized Supplier)
by, Borrower or any such Credit Party (other than those terms, covenants
and agreements referred to in clauses (i) and (ii) above) and in the
sole opinion of IBM Credit, such failure is not susceptible to cure; or
(iv) Borrower or any other Credit Party shall fail to comply with
or observe any term, covenant or agreement contained in this Agreement,
any other Credit Document or any other document, instrument or agreement
evidencing or governing obligations equal to or in excess of $1,000,000
in the aggregate by and between IBM Credit or any Authorized Supplier
(or any subsidiary of such Authorized Supplier) and, or executed for the
benefit of IBM Credit or IBM Corporation (or any subsidiary of IBM
Corporation) by, Borrower or any such Credit Party (other than those
terms, covenants and agreements referred to in clauses (i), (ii) and
(iii) above), and such failure shall continue to unremedied for twenty
(20) days; or
31
<PAGE> 35
(v) any representation, warranty, certification or statement made
by Borrower or any other Credit Party in this Agreement or any other
Credit Document proves to have been incorrect in any material respect
when made (or deemed made); or
(vi) Borrower, Parent or any other Credit Party shall generally
not pay its debts as such debts become due, become or otherwise declare
itself insolvent, file a voluntary petition for bankruptcy protection,
have filed against it any involuntary bankruptcy petition which remains
undismissed for a period of forty-five (45) days, cease to do business
as a going concern, make any assignment for the benefit of creditors,
consent to the appointment of a custodian, receiver, trustee,
liquidator, administrator or person with similar powers or have any of
its properties seized or attached, or take any action to authorize, or
for the purpose of effectuating, any of the foregoing; or
(vii) under any agreement or instrument for borrowed money, trade
credit or other credit accommodation having a principal amount
outstanding in excess of $3,000,000 to which Borrower, Parent or any
other Credit Party is a party (A) there shall occur any payment default
by Borrower, Parent or any other Credit Party, (B) any non-payment
default by Borrower, Parent or any other Credit Party shall have
occurred and shall have been declared a default or event of default by
the creditor under such agreement or instrument, trade credit or other
credit accommodation, or (C) the principal amount of any such
indebtedness shall not be paid in full by Borrower, Parent or any such
Credit Party at its maturity; or
(viii) any Credit Party shall terminate, revoke, rescind,
disaffirm or fail to honor any of its obligations under any Credit
Document to which it is a party or any Credit Party shall assert in
writing its intention to take any of the aforementioned actions, any
Lien granted under any Collateral Document shall cease to have the
priority purported to be created thereby or by any subordination or
intercreditor agreement, or any Person party to a subordination or
intercreditor agreement with IBM Credit pursuant to which such Person
subordinates its Lien in any Collateral to the Lien of IBM Credit
granted pursuant to the Credit Documents shall terminate, revoke,
rescind, disaffirm or fail to honor any of its obligations under any
such agreement or any such Person shall assert in writing its intention
to take any of the aforementioned actions; or
(ix) any final judgment or final order for the payment of money,
shall be rendered against Borrower, Parent or any other Credit Party and
such judgment or order is in an amount in excess of $3,000,000 and
either (A) enforcement proceedings shall have been commenced upon such
judgment or order or (B) there shall be any period of ten (10)
consecutive days during which a stay of such enforcement of
32
<PAGE> 36
such judgment or order, including, but not by way of limitation, by
reason of a pending appeal or otherwise shall not be in effect; or
(x) (A) Dort A. Cameron III shall cease to own and/or control,
directly or indirectly, at least 60% of the issued and outstanding
capital stock of Parent, (B) Parent shall cease to own and/or control at
least 90% of the aggregate principal amount of Acquisition Subordinated
Debt outstanding at any time provided that, if Parent receives financing
from a creditor using the Senior Secured Note as collateral, such
creditor will be advised by Parent and will agree that such creditor's
security interest in the Senior Secured Note will be junior to IBM
Credit's security interest in such Note, (C) any Lien shall be granted,
or shall otherwise exist, on any of the capital stock of Borrower, or
Parent shall cease to own and/or control 100% of the issued and
outstanding capital stock of Borrower or (D) Parent shall engage in any
activity or business other than (x) holding such capital stock of
Borrower or (y) owning in part or in whole companies whose sole business
is providing information services training and/or computer training to
other companies unless IBM Credit approves such other activity or
business in advance and in writing; or
(xi) an event or circumstance occurs which could reasonably be
expected to have a Material Adverse Effect.
(b) Upon the occurrence of an Event of Default, IBM Credit may,
without notice to or demand upon Borrower or any other Credit Party, do any one
or more of the following:
(i) Declare all or any part of the Advances to be due and payable
immediately, together with all finance charges accrued thereon and all
court costs and other costs and expenses of IBM Credit's repossession
and collection activity, including reasonable attorney's fees and the
other fees and expenses specified in Sections 13(d) and 17; provided,
however, that all such amounts shall become immediately due and payable
without prior notice upon the occurrence of an Event of Default
specified in Section 13(a)(vi), In any such case, Borrower shall hold
and keep the Collateral in trust in good order and repair for the
benefit of IBM Credit and shall not exhibit or sell the Collateral
without the prior written consent of IBM Credit.
(ii) Exercise any or all of the rights and remedies provided for
by the applicable Uniform Commercial Code, specifically including,
without limitation, the right to recover the fees and expenses incurred
by IBM Credit in connection with the enforcement of this Agreement and
the other Credit Documents or in connection with Borrower's redemption
of the Collateral, including fees, expenses and disbursements of
attorneys and paralegals (including the allocated costs of inside
counsel).
33
<PAGE> 37
(iii) Require Borrower to assemble the Collateral or any part
thereof and make it available at one or more places as IBM Credit may
designate and deliver possession of the Collateral or any part thereof
to IBM Credit, who shall have full right to enter upon any or all of
Borrower's premises and property to exercise IBM Credit's rights
hereunder and under the other Credit Documents.
(iv) Use, manage, operate and control the Collateral and
Borrower's business and property to preserve the Collateral or its
value, including, without limitation, the rights to take possession of
all of the Collateral, to exclude any third parties from Borrower's
premises and property.
(v) Enforce one or more remedies hereunder and under the other
Credit Documents, successively or concurrently, and such action shall
not operate to estop or prevent IBM Credit from pursuing any other or
further remedy which it may have, and any repossession or retaking or
sale of the Collateral pursuant to the terms hereof shall not operate to
release Borrower from its obligations hereunder.
(vi) Proceed by an action or actions at law or in equity to
foreclose this Agreement or any of the other Credit Documents and sell
the Collateral, or any portion thereof, pursuant to a judgment or decree
of a court or courts of competent jurisdiction.
(vii) Terminate the Line of Credit as provided in Section 15
hereof.
(c) For the purpose of enabling IBM Credit to exercise its rights
and remedies under this Agreement, and for no other purpose, Borrower hereby
grants to IBM Credit, to the extent assignable, an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to
Borrower) to use, assign, license or sub-license any of the Collateral
consisting of intellectual property rights (including, without limitation,
copyrights, trademarks, trade names, trade secrets, patents and all rights and
other property relating thereto or arising therefrom) now owned or hereafter
acquired by Borrower, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof. Upon the payment in full of all Secured Obligations and
cancellation or termination of the Line of Credit or earlier release of the
Collateral, the license granted by Borrower pursuant to the immediately
preceding sentence shall be terminated,
(d) Upon the occurrence and during the continuance of an Event of
Default, IBM Credit shall have the right at any time to make any payments and do
any other acts IBM Credit may deem necessary to protect its security interests
in the Collateral, including, without limitation, the rights to pay, purchase,
34
<PAGE> 38
contest or compromise any encumbrance, charge or lien which, in the judgment of
IBM Credit, appears to be prior to or superior to the security interests granted
hereunder, and appear in and defend any action or proceeding purporting to
affect its security interests in, and/or the value of, the Collateral.
(e) Borrower hereby agrees to reimburse IBM Credit for all
payments made and expenses incurred under this Agreement and the other Credit
Documents including fees, expenses and disbursements of attorneys and paralegals
(including the allocated costs of inside counsel) acting for IBM Credit,
including any of the foregoing payments under or acts taken to protect its
security interests in the Collateral, which amounts shall be secured under this
Agreement and the other Credit Documents, and agrees it shall be bound by any
payment made or act taken by IBM Credit hereunder absent IBM Credit's gross
negligence or willful misconduct. IBM Credit shall have no obligation to make
any of the foregoing payments or perform any of the foregoing acts.
(f) Borrower hereby irrevocably authorizes and appoints IBM
Credit, or any Person or agent IBM Credit may designate, as Borrower's
attorney-in-fact, at Borrower's cost and expense, to exercise, to the extent
permitted by applicable law, all of the following powers, which being coupled
with an interest, shall be irrevocable until all of the Secured Obligations have
been paid and satisfied in full:
(i) Upon the occurrence and during the continuance of an Event of
Default, to receive, take, endorse, negotiate, sign, assign and deliver,
all in the name of IBM Credit or Borrower, any and all checks, notes,
drafts, and other documents or instruments relating to the Collateral;
(ii) To request, at any time from customers indebted on Accounts,
verification of information concerning the Accounts and the amounts
owing thereon;
(iii) Upon the occurrence and during the continuance of an Event
of Default, to receive, open and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for
delivery thereof to such address as IBM Credit may designate;
(iv) Upon the occurrence and during the continuance of an Event
of Default, to give customers indebted on Accounts notice of IBM
Credit's interest therein, and/or to instruct such customers to make
payment directly to IBM Credit for Borrower's account;
(v) Upon the occurrence and during the continuance of an Event of
Default, to file and prosecute any claim or claims of Borrower for any
award or payment in connection with any loss, theft, destruction of, or
damage to, any of the Collateral and to collect and receive any such
award or payment;
35
<PAGE> 39
(vi) Upon the occurrence and during the continuance of an Event
of Default, to demand, sue for, collect, receive and give acquaintance
for any and all other monies due or to become due on any Collateral or
by virtue thereof;
(vii) Upon the occurrence and during the continuance of an Event
of Default, to settle, compromise, compound, prosecute or defend any
action or proceeding with respect to any of the Collateral;
(viii) Upon the occurrence and during the continuance of an Event
of Default, to sell, transfer, assign or otherwise deal in or with any
of the Collateral, as fully and effectually as if IBM Credit were the
absolute owner thereof; and
(xi) Upon the occurrence and during the continuance of an Event
of Default, to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto.
IBM Credit's authority under this Section 13(f) shall include, without
limitation, the authority to execute and give receipt for any certificate of
ownership or any document, transfer title to any item of Collateral, sign
Borrower's name on all financing statements or any other documents deemed
necessary or appropriate to preserve protect or perfect the security interest in
the Collateral and to file the same, prepare, file and sign Borrower's name on
any notice of lien, assignment or satisfaction of lien or similar document in
connection with any of the Collateral and prepare, file and sign Borrower's name
on a proof of claim in bankruptcy or similar document against any customer of
Borrower, and to take any other actions arising from or incident to the powers
granted to IBM Credit in this Agreement and the other Credit Documents. Borrower
hereby ratifies all that IBM Credit shall lawfully do or cause to be done by
virtue of this Section 13(f).
(g) IBM Credit shall have and be entitled to exercise all powers
hereunder which are specifically granted to IBM Credit by the terms hereof,
together with such powers as are reasonably incident thereto. IBM Credit may
perform any of its duties hereunder or in connection with the Collateral by or
through agents or employees and shall be entitled to retain counsel and to act
in reliance upon the advice of counsel concerning all such matters. Neither IBM
Credit nor any director, officer, employee, attorney or agent of IBM Credit
shall be liable to Borrower or any other Credit Party for any action taken or
omitted to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct, nor shall IBM Credit be responsible for the
validity, effectiveness or sufficiency of this Agreement, any other Credit
Document or of any other document or security furnished pursuant hereto or
thereto. IBM Credit and its directors, officers, employees, attorneys and agents
shall be entitled to rely on any communication, instrument
36
<PAGE> 40
or document reasonably believed by it or them to be genuine and correct and to
have been signed or sent by the proper Person or Persons.
(h) In connection with any public or private sale under the applicable
Uniform Commercial Code, IBM Credit shall give Borrower at least ten days' prior
written notice of the time and place of any public sale of the Collateral or of
the time after which any private sale or other intended disposition thereof may
be made, which shall be deemed to be reasonable notice of such sale or other
disposition.
(i) If IBM Credit recovers possession of all or any part of the
Collateral pursuant to a writ of possession or other judicial process, whether
prejudgment or otherwise, IBM Credit may thereafter retain, sell or otherwise
dispose of such Collateral in accordance with this Agreement or the applicable
Uniform Commercial Code, and following such retention, sale or other
disposition, IBM Credit may voluntarily dismiss without prejudice the judicial
action in which such writ of possession or other judicial process was issued.
Borrower hereby consents to the voluntary dismissal by IBM Credit of such
judicial action, and Borrower further consents to the exoneration of any bond
that IBM Credit files in such action.
14. Warranty of Collateral. Borrower acknowledges that IBM Credit does
not warrant the Collateral. Borrower will be obligated to pay to IBM Credit in
full even if the Collateral is defective or fails to conform to the warranties
extended by the supplier. The obligations of Borrower to IBM Credit will not be
affected by any dispute Borrower may have with any manufacturer or distributor.
Borrower will not assert against IBM Credit any claim or defense which it may
have against any manufacturer or distributor.
15. Term; Termination. The Line of Credit may be terminated by either
Borrower or IBM Credit upon sixty (60) days' prior written notice to the other
party, which termination shall be effective on the sixtieth (60th) day after the
non-terminating party receives such notice unless earlier terminated as
otherwise provided in this Section 15. During said sixty (60) day period between
notice and the effective date of termination, IBM Credit shall continue to
finance the purchase by Borrower of Financed Products in accordance with the
terms and conditions set forth in this Agreement. Notwithstanding the foregoing,
the Line of Credit shall terminate on the last day of the Revolving Period. Upon
termination of the Line of Credit and provided that no Event of Default has
occurred, all of the indebtedness of Borrower to IBM Credit hereunder shall be
paid in accordance with the payment terms set forth in this Agreement. If any
party terminates the Line of Credit pursuant to this Section, neither party
hereunder shall be relieved from any obligation to the other with respect to
transactions under this Agreement which occur or are committed to before the
effective date of termination. In addition to the foregoing, IBM Credit may
terminate the Line of Credit immediately without prior notice if an Event of
Default has
37
<PAGE> 41
occurred; provided, however, that the Line of Credit shall automatically
terminate, and all outstanding indebtedness owing from Borrower to IBM Credit
under this Agreement shall become immediately due and payable, upon the
occurrence of an Event of Default specified in Section 13(a)(vi). After the
termination of the Line of Credit all Advances (if any) made by IBM Credit
pursuant to this Agreement shall be at IBM Credit's sole discretion.
16. Confidentiality Statement. (a) IBM Credit and Borrower acknowledge
that this Agreement, and any further exhibits, addendums or amendments thereto,
or any information disclosed under this Agreement, are strictly confidential,
and neither IBM Credit nor Borrower shall reproduce or disclose to any third
party any or all of such confidential matters unless the other party hereto
consents in writing to such reproduction or disclosure or except as required by
law including required filings with the Securities and Exchange Commission;
provided that the foregoing limitations shall not apply to information which (i)
is or becomes available to the general public other than as a result of a
disclosure by Borrower, (ii) was already in IBM Credit's possession on a
non-confidential basis prior to its disclosure by Borrower or (iii) becomes
available to IBM Credit on a non-confidential basis from a source other than
Borrower. Notwithstanding the foregoing, neither IBM Credit nor Borrower will be
prevented from disclosing confidential matters (i) to its legal counsel and
independent auditors, (ii) to any potential holder of a participating interest,
assignment or other interest in the obligations of Borrower under this Agreement
or any Person that provides or may provide credit insurance or similar service
to IBM Credit which, in each case, agrees in writing to maintain the
confidentiality of such information on terms, considered as a whole, no less
protective than those contained herein, (iii) to the extent reasonably required
in connection with any litigation to which IBM Credit or Borrower may be a
party, (iv) to the extent reasonably required in connection with the exercise of
any remedy hereunder or (v) upon the order of any court or administrative
agency. In addition to the foregoing, Borrower may provide a copy of this
Agreement to its creditors upon the request of any such creditor.
(b) In the event that IBM Credit or Borrower, as the case may be,
is requested or required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or other process)
to disclose any information subject to the provisions of Section 16(a), it is
agreed that such party will provide the other party with prompt notice of any
such request or requirement so that the other party may seek an appropriate
protective order or waive compliance with the provisions of this Agreement. If,
failing the entry of a protective order or the receipt of a waiver hereunder,
the party from whom disclosure is being requested or required is, in the opinion
of its counsel, compelled to disclose such confidential matters, such party may
disclose that portion of such confidential matters which its counsel advises
such party that such party is compelled to disclose,
38
<PAGE> 42
17. Fees and Expenses; Indemnity
(a) Borrower hereby agrees to pay to IBM Credit, promptly upon
demand therefor, all costs and expenses (including, without limitation, the fees
and disbursements of counsel including in-house counsel of IBM Credit) incurred
by IBM Credit from time to time in connection with the preparation, execution,
delivery, administration and enforcement of this Agreement, each of the other
Credit Documents and any other agreement, document or instruments executed in
connection herewith or therewith, the actions and transaction provided for
herein and therein or contemplated hereby or thereby.
(b) Borrower hereby agrees to indemnify and hold harmless IBM Credit
and its shareholders, officers, directors, agents, employees, legal
representatives, successors assigns and Affiliates (each an "indemnitee")
against any losses, claims, damages, liabilities or other expenses ("Losses") to
which any of them may become subject insofar as such Losses arise out of or are
based upon any event, circumstance or condition occurring or existing on or
before the date of this Agreement or relating to the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby or thereby, except that such indemnity obligations shall not
apply to any Loss to the extent such Loss arises from the gross negligence or
willful misconduct of the indemnitee seeking indemnification.
18. Miscellaneous.
(a) IBM Credit's failure to take action whenever Borrower defaults
shall not prevent IBM Credit from taking action or waive IBM Credit's right to
take action as to any default or any later default.
(b) Borrower waives to the extent permitted by law any and all
rights of set-off it may have against IBM Credit for any reason whatsoever.
Borrower further waives to the extent permitted by law presentment, demand and
protest, and, except as herein expressly provided, notices of nonpayment,
nonperformance, any right of contribution, dishonor, amount of indebtedness
outstanding, any other demands, and notices required by law.
(c) Borrower acknowledges that it may not assign this Agreement
without the prior written consent of IBM Credit. This Agreement shall protect
and bind the permitted successors and assigns of Borrower and the successors and
assigns of IBM Credit and any of the existing or future Affiliates of IBM Credit
that may extend credit to Borrower. Without limiting the generality of the
foregoing, IBM Credit may grant participating interests (without the consent of
Borrower) to one or more Persons in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of the Line of Credit, the Advances and/or the Term Loan owing to it);
provided that (i) IBM Credit's obligations under this Agreement shall remain
unchanged, (ii) IBM Credit shall remain solely responsible to Borrower for the
performance of such obligations
39
<PAGE> 43
(iii) Borrower shall continue to deal solely and directly with IBM Credit in
connection with IBM Credit's rights and obligations under this Agreement;
provided that the foregoing shall not limit IBM Credit's ability to transfer,
grant, assign or sell any participating interest in respect of which the
participant shall have rights to approve any amendment or waiver of this
Agreement. Notwithstanding the foregoing, IBM Credit hereby agrees that it will
not grant any such participating interests to any direct competitor of Borrower
or any other entity known by IBM Credit to be an Affiliate of any such
competitor.
(d) This Agreement can be varied only by a document signed by the
authorized representatives of Borrower and IBM Credit. If any provision of this
Agreement or its duplication is invalid, or unenforceable, the remainder of this
Agreement will not be affected.
(e) Any notice or other communication required or desired to be
given under this Agreement shall be in writing and mailed, by certified or
registered mail, return receipt requested, postage prepaid, if to Borrower as
follows:
ENTEX Information Services, Inc.
Six International Drive
Bye Brook, 10573-1058
Attention: Frederic Rubin
Vice President, Treasurer
Fax No.: 914-935-3630
or if to IBM Credit as follows:
IBM Credit Corporation
290 Harbor Drive
Stamford, CT 06904-2399
Attention: Director of Remarketing
Financing Support
Director of Remarketer
Financing Portfolio
Fax No.: 203-973-5210/5727
203-973-7902
or, in each such case, to such other address as either party may from time to
time in writing designate to the other. All such notices (except a notice of
change of address which shall be effective when actually received or when
delivery is refused) shall be deemed received when such receipt can be
documented, or, at the latest, on the fifth (5th) regular mail delivery date
following the postmark date it bears, unless this Agreement shall otherwise
provide for effectiveness of notice upon actual receipt of such notice.
(f) For any of the Collateral that is located in Louisiana, Borrower
agrees that IBM Credit will have a vendor's privilege granted under Louisiana
law to the fullest extent as if IBM Credit had actually sold the Collateral to
Borrower.
40
<PAGE> 44
(g) IBM Credit has and will at all times possess all the rights and
remedies of a secured party under law and its rights and remedies as such and
hereunder are and will always be cumulative. Borrower agrees that a private sale
by IBM Credit following the occurrence of an Event of Default of any of the
Collateral to a dealer in those types of goods is a commercially reasonable
sale. Further, Borrower agrees that following the occurrence of an Event of
Default, IBM Credit's delivery of any Financed Products to any Authorized
Supplier with a request that it repurchase those goods, as provided in any
repurchase agreement with IBM Credit, is a commercially reasonable disposition.
(h) Borrower waives any statutory right to notice of hearing prior
to IBM Credit's attachment, repossession or seizure of the Collateral to the
maximum extent permitted by law.
(i) IBM Credit hereby notifies Borrower that it will endorse any
checks for payments received from any Authorized Supplier.
(j) Borrower hereby waives any right to notice and hearing under
Chapter 903a of the Connecticut General Statutes, or as otherwise allowed by any
state or federal law, with respect to any prejudgment remedy which IBM Credit
may elect to pursue in the event of the occurrence of an Event of Default.
(k) Regardless of any other document, agreement or instrument
executed by or for the benefit of Borrower, Borrower hereby agrees that it shall
not receive from any Authorized Supplier or IBM Credit (or any Affiliate of any
of them) any price protection credits at any time unless (i) IBM Credit shall be
satisfied that Borrower has made all appropriate adjustments to its inventory
valuation appropriate in connection with such price protection credit, (ii) no
Shortfall Amount shall exist hereunder, and (iii) no Default or Event of Default
shall have occurred and be continuing.
(1) IBM Credit and Borrower agree that the intent of this Agreement
is to amend and restate the Existing Agreement in its entirety to set forth the
terms and conditions under which IBM Credit may hereafter make Advances to
Borrower. It is the intent of IBM Credit and Borrower that, commencing as of the
date hereof, this Agreement replace in its entirety the Existing Agreement and
that, from and after the date hereof, all rights accrued under the Existing
Agreement, to the extent not previously extinguished through payment, shall
continue in full force and effect under this Agreement.
19. Definitions - General. The following terms, as used herein, have the
following meanings or are defined in the Sections referred to below:
"Accounts" -- Section 6(a).
"Acquisition Subordinated Debt" - shall mean the
41
<PAGE> 45
Indebtedness of Borrower evidenced by that certain Senior Secured Note dated
August 6, 1993 made by Borrower and payable to Parent in the original principal
amount equal to $10,000,000.
"Advance" -- Section 1(a).
"Affiliate" shall mean, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by, or is under common
control with, such Person and, if such Person is an individual, any member of
the immediate family (including parents, siblings, spouse, children,
step-children, nephews, nieces and grandchildren) of such individual and any
trust whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member or
trust. For purposes of this definition, "control" shall mean the possession,
directly or indirectly, of power to direct or cause the direction of management
and policies of a business, whether through the ownership of securities or other
ownership interests, by contract or otherwise and either alone or in conjunction
with others or any group; provided that, in any event with respect to Borrower,
any Person which owns directly or indirectly, alone or in conjunction with
others or any group, 5% or more of the securities having ordinary voting power
for the election of directors or other governing body of Borrower or 5% or more
of the securities or other ownership interests of Borrower (including warrants
to acquire such ownership interests, whether or not then exercisable), and any
Affiliate of such Person, will be deemed to control Borrower. Notwithstanding
the foregoing, no individual shall be deemed to be an Affiliate of a corporation
solely by reason of his or her being an officer or director of such corporation.
"Agreement" - Preamble.
"Auditors" shall mean any nationally recognized firm of independent
public accountants selected by Borrower and satisfactory to IBM Credit in its
reasonable discretion.
"Authorized Supplier Claims" -- Section 2(a).
"Authorized Suppliers" Recitals.
"Base Finance Charge" Section 3(a).
"Base Financial Statements" -- Section 20.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) for which Borrower or any ERISA
Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"BLI Subordinated Debentures" shall mean 5.5% Convertible Subordinated
Debentures issued by Business Land, Inc. and due 2007 which have been assumed by
Borrower.
42
<PAGE> 46
"Blocked Account Agreement" -- Section 11(b)(iv),
"Borrower" -- Preamble.
"Business Day" shall mean any day excluding Saturday, Sunday and any
other day on which commercial banks are not required or authorized to close in
New York, New York,
"Capital Expenditures" shall mean, for any period, the sum of (a) all
expenditures capitalized for financial statement purposes in accordance with
GAAP plus, without duplication, (b) the entire principal amount of any
Indebtedness (including obligations under capitalized leases) assumed or
incurred in connection with any such expenditures; provided that Capital
Expenditures shall in any event include the purchase price paid in connection
with the acquisition of any Person (including through the purchase of a majority
of the capital stock or other ownership interests of such Person or through
merger or consolidation) to the extent allocable to property, plant or
equipment, Proceeds of insurance applied to the repair or replacement of the
property affected by a casualty loss shall not constitute Capital Expenditures.
"Cash Equivalents" shall mean (i) securities issued, guaranteed or
insured by the United States or any of its agencies with maturities of less than
one year from the date acquired; (ii) certificates of deposit with maturities of
less than one year from the date acquired issued by a U.S. federal or state
chartered commercial bank of recognized standing, which has capital and
unimpaired surplus in excess of $200,000,000 and which bank or its holding
company has a short-term commercial paper rating of at least A-1 or the
equivalent by Standard & Poor's Corporation and at least P-1 or the equivalent
by Moody's Investors Services, Inc.; (iii) reverse repurchase agreements with
terms of not more than seven days from the date acquired, for securities of the
type described In (i) above and entered into only with commercial banks having
the qualifications described in (ii) above; (iv) commercial paper, other than
commercial paper issued by Borrower or any of its Affiliates, issued by any
Person incorporated under the laws of the United States or any state thereof and
rated at least A-1 or the equivalent thereof by Standard & Poor's Corporation or
at least P-1 or the equivalent thereof by Moody's Investors Service, Inc., in
each case with maturities of less than one year from the date acquired; and (v)
investments in money market funds registered under the Investment Company Act of
1940, which have net assets of at least $200,000,000 and at least eighty-five
percent (85%) of whose assets consist of securities and other obligations of the
type described in clauses (i) through (iv) above.
"Collateral -- Section 6(a).
"Collateral Documents" shall mean all contracts, instruments and other
documents now or hereafter executed and delivered in connection with this
Agreement and the transactions contemplated hereby, pursuant to which liens and
security
43
<PAGE> 47
interests are granted to IBM Credit in property of any Person party thereto
and/or the obligations of Borrower hereunder are guaranteed to IBM Credit and
any document pursuant to which any creditor of Borrower subordinates its rights
with respect to all or any portion of the Indebtedness or other obligations
owing to, or the Liens granted to, such creditor to the rights of IBM Credit
hereunder or to the Liens granted to IBM Credit in connection herewith.
"Commercial Revolving Loan and Security Agreement" shall mean that
certain Commercial Loan and Security Agreement dated as of November 8, 1993, as
amended through the date of this Agreement among Borrower and, as Lender and
Agent, Citibank, N.A.
"Common Due Date" -- Section 3(a).
"Consolidated Net Income" shall mean for any period the consolidated net
income of Borrower and its consolidated Subsidiaries for such period as
determined in accordance with GAAP applied on a basis consistent with prior
practices.
"Credit Documents" shall mean, collectively, this Agreement, each of the
Collateral Documents, and all other documents, agreements, instruments,
guaranties opinions and certificates now or hereafter executed and delivered in
connection herewith or therewith, as the same may be modified, amended,
extended, restated or supplemented from time to time.
"Credit Parties" -- Section-13(a).
"DFS" shall mean Deutsche Financial Services Corporation.
"Daily Shortfall Amount" -- Section 3(b).
"Daily Shortfall Payment Date" -- Section 3(b).
"Default" -- Section l(a).
"DOL" shall mean the United States Department of Labor and any successor
department or agency.
"EBIT" shall mean, with respect to any fiscal period, the Consolidated
Net Income (other than extraordinary items) for such period, plus (i) the amount
of all Interest Expense and income tax expense of Borrower and its consolidated
Subsidiaries for such period and less (ii) gains and losses attributable to any
fixed asset sales by Borrower and its consolidated Subsidiaries during such
period.
"Eligible Ingram Non-Financed Products" at any time shall mean all
inventory (excluding IBM Service Parts and Financed Products) (i) which is owned
by (and in the possession or under the control Of Borrower) and located in
Borrower's Erlanger, Kentucky; Canton, Massachusetts; Issaquah, Washington; or
Golden Valley, Minnesota warehouse, (ii) as to which IBM
44
<PAGE> 48
Credit has a valid, perfected first priority security interest and (iii) which
is eligible for repurchase by Ingram Micro pursuant to the Ingram Micro Purchase
Agreement, in each case, at such time.
"Eligible Ingram Non-Financed Products Value" -Section 3(c).
"Eligible Receivables" shall mean the accounts of Borrower, provided,
however, the following accounts of Borrower will be deemed ineligible for the
purpose of this Agreement:
(i) accounts created from the sale of goods and services on
nonstandard terms and/or that allow for payment to be made more
than (x) sixty (60) days from the date of sale to any State of
California department or agency and (y) forty-five (45) days from
date of sale to any other account obligor to Borrower;
(ii) accounts unpaid more than ninety (90) days from date of invoice;
(iii) accounts owing by any obligor if fifty percent (50%) or more of
the aggregate amount of all accounts owing by such obligor to
Borrower remain unpaid for more than ninety (90) days from the
date of invoice;
(iv) accounts with respect to which the obligor is an officer,
employee, agent, parent, subsidiary or Affiliate of Borrower or
has common shareholders, officers, or directors with Borrower;
(v) consignment sales;
(vi) accounts with respect to which the payment by the obligor is or
may be conditional;
(vii) accounts with respect to which the obligor is not a resident of
the United States;
(viii) accounts owing by any obligor to which Borrower is liable for
goods sold or services rendered by such obligor to Borrower and
which Borrower's obligations to the obligor is greater than ten
percent (10%) of the amount of such accounts;
(ix) accounts in respect of goods purchased for a personal, family or
household purpose;
(x) accounts in respect of goods which have been used for
demonstration purposes or loaned by Borrower to another party;
(xi) accounts which are progress payment accounts or
45
<PAGE> 49
contra accounts;
(xii) accounts upon which IBM Credit does not have a valid, perfected,
first priority security interest;
(xiii) accounts as to which the obligor thereon has not been instructed
to remit the proceeds thereof to one of the Lockboxes referred to
in Section 11(b)(iv) hereof;
(xiv) accounts originated by the Washington D.C.-Federal division of
Borrower (or designated as branch no. 115 or by offices of
Borrower located in (a) Westport, Connecticut (or designated as
branch No. 103), (b) Oakbrook Terrace, Illinois (or designated as
branch #107), (c) Chicago, Illinois (or designated as branch No.
107), (d) Elmhurst, Illinois (or designated as branch No. 107),
(e) Pembroke Pines, Florida (or designated as branch No. 164
and/or 165), (f) Pittsburgh, Pennsylvania (or designated as
branch No. 111), (g) Philadelphia, PA (or designated as branch
No. 109), or New York, NY (or designated as branch No. 112) or
any successor office or branch;
(xv) accounts payable by an account debtor that Borrower knows is or
will become, subject to proceedings under United States
Bankruptcy Law or other law for the relief of debtors; and
(xvi) any and all other accounts which IBM Credit deems, in good faith,
to be ineligible; provided, however, that IBM Credit will provide
Borrower with ten (10) days' notice that IBM Credit has
classified a type of Account to be ineligible for purposes of
this Section;
provided, that, the aggregate unpaid balance of the accounts owing by any one
obligor (including all Affiliates of such obligor) which would otherwise qualify
as Eligible Receivables hereunder shall be limited (in inverse chronological
order) to the extent necessary so as to not exceed (y) $20,000,000 for obligors
who are rated BAA or better by Moody's Investor Service or are state government
entities and (z) three percent (3%) of the Eligible Receivables for all other
obligors.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute thereto and all final or
temporary regulations promulgated thereunder and published generally applicable
rulings entitled to precedential effect,
"ERISA Affiliate" shall mean any entity required at any relevant time to
be aggregated with Borrower under Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code.
46
<PAGE> 50
"Event of Default" -- Section 13(a).
"Financed Products" -- Recitals.
"First Lien Collateral" -- Section 6(a).
"Fiscal Months" shall mean, with respect to each Fiscal Quarter, each of
the first two consecutive four-week periods beginning on the first day of each
Fiscal Quarter and the immediately succeeding consecutive five-week period
thereafter in such Fiscal Quarter, as each such period may be adjusted to
conform to the end of such Fiscal Quarter.
"Fiscal Quarters" shall mean the first thirteen-week period beginning on
each July 1 of each fiscal year and each of the three consecutive thirteen-week
periods thereafter in such fiscal year, as each such period may be adjusted to
conform to a June 30 fiscal year end.
"Free Financing Period" shall mean for each Advance for a Financed
Product, the period, if any, in which IBM Credit does not charge Borrower a
financing charge. IBM Credit shall calculate the Borrower's Free Financing
Period utilizing a methodology that is consistent with the methodologies used
for similarly situated customers of IBM Credit. Borrower understands that
certain Authorized Supplier may not offer or may cease to offer a free financing
period for Borrower's purchase of Financed Products.
"GAAP" -- Section 2(b).
"HP Special Accounts Collateral" -- Section 3(c).
"HP Special Inventory Collateral" -- Section 3(c).
"IBM" -- IBM Corporation together with any of its Affiliates.
"IBM Claims" -- Section 2(a).
"IBM Corporation" -- International Business Machines Corporation, a New
York Corporation.
"IBM Credit" -- Preamble,
"IBM Products" -- Recitals.
"IBM Service Parts" -- Section 3(c).
"Indebtedness" shall mean, with respect to any Person, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than unsecured trade liabilities incurred
in the ordinary course of business and payable in accordance with customary
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under capital
47
<PAGE> 51
leases, (c) all obligations of such Person in respect of letters of credit,
banker's acceptances or similar obligations issued or created for the account of
such Person, (d) liabilities arising under Interest Rate Agreements of such
Person, (e) all obligations under guaranties of such Person, (f) all obligations
of such Person to redeem or otherwise retire any of its capital stock or any
other ownership interest, including, without limitation, any warrant or other
right to acquire any such capital stock or other ownership interest and (g) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof.
"indemnitee" -- Section 17(b).
"Ingram Micro" -- Ingram Micro Inc., together with its successors and
assigns,
"Ingram Micro Advances" -- Section 1
"Ingram Micro Purchase Agreement" shall mean a purchase or repurchase
agreement between IBM Credit and Ingram Micro, in form and substance
satisfactory to IBM Credit in its sole discretion, pursuant to which Ingram
Micro agrees to purchase or repurchase certain inventory of Borrower.
"Interest Expense" shall mean, for any period, the aggregate
consolidated interest expense of Borrower during such period in respect of
Indebtedness, determined on a consolidated basis in accordance with GAAP,
including, without limitation, amortization of original issue discount on any
Indebtedness and of all fees payable in connection with the incurrence of such
Indebtedness (to the extent included in interest expense), the interest portion
of any deferred payment obligation and the interest component of any capital
lease obligations.
"Interest Rate Agreement" shall mean any interest rate protection
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge or arrangement under which
Borrower is a party or beneficiary.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute thereto and all final or
temporary rules and regulations promulgated thereunder and published, generally
applicable rulings entitled to precedential effect to the extent such rules,
regulations or rulings are effective and applicable hereto.
"Investment" shall mean all expenditures made and all liabilities
incurred (contingently or otherwise) for or in connection with the acquisition
of stock or indebtedness of, or for loans, advances, capital contributions or
transfers of property to, or in respect of any guaranties (or other commitments
as described under Indebtedness) of obligations of, any Person. In determining
the aggregate amount of Investments outstanding at any particular time, (i) the
amount of any
48
<PAGE> 52
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be deducted in respect of each such Investment any amount received as a
return of capital (but only by repurchase, redemption, retirement, repayment,
liquidating dividend or liquidating distribution); (iii) there shall not be
deducted in respect of any Investment any amounts received as earnings on such
Investment, whether as dividends, interest or otherwise; and (iv) there shall
not be deducted from the aggregate amount of Investments any decrease in the
market value thereof.
"Lien" shall mean any lien, claim, charge, pledge, security interest,
deed of trust, mortgage, other encumbrance or, other arrangement having the
practical effect of the foregoing and shall include the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement.
"Line of Credit" -- Section 1(a).
"Lockboxes" -- Section 11(b)(iv).
"Long-term Debt" -- Section 11(c)(v).
"Losses" -- Section 17(b).
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of Borrower, (ii) the value of the
Collateral or the amount which IBM Credit would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in the
liquidation of such Collateral, (iii) Borrower's ability to perform its
obligations under the Credit Documents to which it Is a party, or (iv) the
rights and remedies of IBM Credit under any Credit Document.
"Material Contract" shall mean any contract or other arrangement, (other
than the Credit Documents), whether written or oral, to which Borrower is a
party as to which the breach, nonperformance, cancellation or failure to renew
by any party thereto could have a Material Adverse Effect.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA and (i) which is, or within the immediately
preceding six (6) years was, contributed to by Borrower or any ERISA Affiliate
or (ii) with respect to which Borrower may incur any liability.
"Parent" shall mean ENTEX Holdings, Inc., a Delaware corporation and the
owner of 100% of the issued and outstanding capital stock of Borrower,
"PBGC" shall mean the Pension Benefit Guaranty
49
<PAGE> 53
Corporation and any Person succeeding to the functions thereof,
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and, as applicable, the successors, heirs and assigns of
each.
"Plan" shall mean any employee benefit plan, program or arrangement,
whether oral or written, maintained or contributed to by Borrower, or with
respect to which Borrower may incur liability.
"Prime Rate" -- Section 3(a).
"Reportable Event" shall mean any of the events described in Section
4043 of ERISA and the regulations thereunder.
"Revenue" -- shall mean, for any period in respect of which the amount
thereof shall be determined, the aggregate of the consolidated total or gross
income or sales for such period (taken as a cumulative whole) of the Borrower as
determined in accordance with GAAP, exclusive of the write-up of any asset.
"Revolving Period" shall mean the period from and including the
effective date of this Agreement to and including the first anniversary of date
of this Agreement, the date first set forth above, (or if such date is not a
Business Day, the next succeeding Business Day), or such later date as IBM
Credit and Borrower may agree to in writing.
"Secured Obligations" -- Section 6(a).
"Shortfall Amount" -- Section 3(b).
"Shortfall Payment Date" -- Section 3(b).
"Subordinated Debt" shall mean, collectively, the Acquisition
Subordinated Debt and the BLI Subordinated Debentures,
"Subsidiary" shall mean as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.
"Tangible Net Worth" shall mean as to Borrower, (i) the excess of the
total assets over total liabilities of such Person
50
<PAGE> 54
(such assets and liabilities being determined by reference to the book value) of
such Person; plus (ii) the BLI Subordinated Debentures; plus (iii) the ENTEX
Holdings, Inc. subordinated note due August 2000; (iv) but excluding from the
determination of such assets: (A) goodwill; (B) expenses and charges relating to
or arising from the purchase of customer accounts or other similar expenses,
trademarks, names, trade names, copyrights, patents, patent applications,
privileges, franchises, licenses and rights in any thereof, and other similar
intangibles; (C) any write-up in the book value of any asset; (D) all accounts
receivable from officers, directors and stockholders of such Person; and (E) any
other assets as IBM Credit, in its sole discretion, deems to exclude; all of the
foregoing being determined in accordance with GAAP.
"Termination Event" shall mean (i) a Reportable Event with respect to
any Benefit Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or any
ERISA Affiliate from a Benefit Plan during a plan year in which such entity was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the
providing of notice of intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by the
PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Benefit Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
Borrower or any ERISA Affiliate from a Multiemployer Plan.
"Value" -- Section 3(c).
"Working Capital" -- Section 12(g).
"Working Capital Advance Date" -- Section 3(d)
"Working Capital Advance Option" Section 3(d)
"Working Capital Advance Period" Section 3(d)
20. Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms used herein shall have the meanings
customarily given in accordance with GAAP, and all financial computations
(including computation of reserves) to be made under this Agreement shall,
unless otherwise specifically provided herein, be made in accordance with GAAP
applied on a basis consistent in all material respects with the financial
statements of Borrower for the period ending July 3, 1994 previously delivered
to IBM Credit (the "Base Financial Statements"). All accounting determinations
for purposes of determining compliance with the covenants set forth in Section
12 shall be made in accordance with GAAP as in effect on the date of this
Agreement and applied on a basis consistent in all material respects with the
Base Financial Statements. The financial
51
<PAGE> 55
statements required to be delivered hereunder from and after the date hereof and
all financial records shall be maintained in accordance with GAAP as in effect
as of the date of the Base Financial Statements, or, if GAAP shall change from
the basis used in preparing the Base Financial Statements, the certificates
required to be delivered pursuant to Section 2 demonstrating compliance with the
covenants contained herein shall include calculations setting forth the
adjustments necessary to demonstrate how Borrower is in compliance with the
financial covenants based upon GAAP as in effect on the date of the Base
Financial Statements. If Borrower shall change its method of inventory
accounting from the first-in-first-out method to the last-in-first-out method,
all calculations necessary to determine compliance with the covenants contained
herein shall be made as if such method of inventory accounting had not been so
changed,
21. Other Defined Terms. Terms not otherwise defined herein which are
defined in the Uniform Commercial Code as in effect in the State of New York
(the "Code") shall have the meanings given them therein. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and references to Article, Section, Annex, Schedule, Exhibit and
like references are references to this Agreement unless otherwise specified. An
Event of Default shall "continue" or be "continuing" until such Event of Default
has been waived in writing by IBM Credit.
22. Conditions Precedent to the Effectiveness of this Agreement. The
effectiveness of this Agreement is subject to the satisfaction (or waiver
thereof by IBM Credit in its sole discretion) of the following conditions
precedent:
(a) IBM Credit shall have received on or prior to the date hereof
each of the following:
(i) (A) certified copies of the resolutions of the Board
of Directors of Borrower authorizing the execution, delivery and
performance of this Agreement and each other document executed and
delivered in connection herewith, and (B) a certificate of the Secretary
or an Assistant Secretary of Borrower, in form and substance
satisfactory to IBM Credit, certifying (1) the names and true signatures
of the officers of Borrower authorized to sign this Agreement and such
other documents and (2) that the Certificate of Incorporation and
by-laws of Borrower have not changed from the Certificate of
Incorporation and by-laws delivered by Borrower to IBM Credit with the
Existing Agreement;
(ii) certificates dated as of a recent date from the
Secretary of State or other appropriate authority evidencing the good
standing of Borrower in the jurisdiction of its organization and in each
other jurisdiction where the ownership or lease of its property or the
conduct of its business requires it to qualify to do business and where
the
52
<PAGE> 56
failure so to qualify could reasonably be expected to have a Material
Adverse Effect;
(iii) the favorable opinion(s) of counsel to Borrower, in
form and substance satisfactory to IBM Credit and its counsel;
(iv) copies of all approvals and consents from any Person,
in each case in form and substance satisfactory to IBM Credit, which are
required to enable any Credit Party to authorize, or are required in
connection with, (A) the execution, delivery or performance of each
Credit Document executed in connection herewith to which such Credit
Party is a party, or (B) the legality, validity, binding effect or
enforceability of each such Credit Document;
(v) loss payable endorsements in favor of IBM Credit as
required pursuant to Section 9;
(vi) acknowledgment copies not previously provided (or
other evidence of presentation for filing) of UCC-1 financing statements
naming IBM Credit as secured party and signed by Borrower as secured
party and filed in the jurisdictions set forth on Exhibit H and UCC-3
financing statements signed by Borrower amending all financing
statements on file as of the date hereof filed against Borrower and its
predecessors in favor of IBM Credit;
(vii) evidence in form and substance satisfactory to IBM
Credit that the ownership and control of all Lockboxes and the related
lockbox accounts have been transferred to IBM Credit, and Citibank, N.A.
pursuant to agreements in form and substance satisfactory to IBM Credit;
(viii) a certificate executed by the president, chief
financial officer or vice president treasurer of Borrower certifying
that, as of the date of this Agreement, (A) the representations and
warranties contained in this Agreement and in each other Credit Document
are true and correct, (B) no Default or Event of Default has occurred
and is continuing, and (C) no Shortfall Amount exists.
(ix) to the extent not previously provided by Borrower to
IBM Credit, a copy, if any, of all documents, instruments and agreements
evidencing or executed in connection with the loans and obligations made
by and owing to each of DFS and Hewlett-Packard Company;
(x) all such other statements, certificates, documents,
instruments, landlord and mortgagee waivers, financing statements,
agreements and other information with respect to the matters
contemplated by this Agreement as IBM Credit shall have reasonably
requested.
(b) All mortgage recording taxes, recording fees and
53
<PAGE> 57
other charges payable in connection with the filing and recording of the Credit
Documents have either been paid in full by Borrower or arrangements for the
payment of such amounts satisfactory to IBM Credit shall have been made.
(c) Completion satisfactory to IBM Credit of all filings and other
actions, including, without limitation the execution of intercreditor agreements
in form and substance satisfactory to IBM Credit and the filing of the financing
statements referred to in Section 22(a)(x), necessary or advisable for the
purpose of ensuring that IBM Credit has a valid perfected security interest in
all Collateral and a first priority security interest in all First Lien
Collateral.
(d) IBM Credit shall have received all fees and expenses owing to it
under the terms of this Agreement and arrangements for such other compensation
as Borrower or any of its Affiliates and IBM Credit shall have agreed.
23. Conditions Precedent to Each Advance. On the date of the making of
any Advance both before and after giving effect thereto and to the application
of the proceeds therefrom, the following statements shall be true to the
satisfaction of IBM Credit (and each request for an Advance or the acceptance by
Borrower of the proceeds or benefit of such Advance and such Term Loan, shall be
deemed to be a representation and warranty by Borrower that on the date of such
Advance, both before and after giving effect thereto and to the application of
the proceeds thereof, such statements are true):
(a) The representations and warranties contained in this Agreement
and in each other Credit Document are true and correct on and as of the date of
such Advance, as the case may be, as though made on and as of such date, except
to the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date);
(b) No Default or Event of Default has occurred and is continuing;
and
(c) Both before and after giving effect to the making of such
Advance, no Shortfall Amount exists.
24. Amendment and Restatement; Etc. (a) Notwithstanding anything
contained in any document to the contrary, it is understood and agreed by
Borrower and IBM Credit that the claims of IBM Credit arising hereunder and
existing as of the date hereof constitute continuing claims arising out of the
obligations of the Existing Agreement. Borrower acknowledges and agrees that the
Indebtedness represented by the Advances outstanding as of the date hereof has
not been satisfied or discharged and that this Agreement is not intended to
effect a novation of the obligations of Borrower which were evidenced by the
Existing Agreement,
54
<PAGE> 58
(b) Borrower acknowledges and agrees that IBM Credit shall have no
responsibility for the truth, accuracy or completeness of any representation,
warranty or other statement made for the performance of any party thereto of its
obligations thereunder. Borrower has made its own investigation of the foregoing
matters and is not relying in any respect on IBM Credit with respect thereto.
25. SUBMISSION AND CONSENT TO JURISDICTION. BORROWER HEREBY IRREVOCABLY
AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND ANY OTHER DOCUMENT EXECUTED IN
CONNECTION HEREWITH, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN
RESPECT THEREOF, TO THE NONEXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK AND APPELLATE COURTS FROM ANY THEREOF.
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME.
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO BORROWER AT ITS
ADDRESS SET FORTH IN SECTION 18(g) OR AT SUCH OTHER ADDRESS OF WHICH IBM CREDIT
SHALL HAVE BEEN NOTIFIED PURSUANT THERETO.
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO SUE IN ANY OTHER JURISDICTION.
(e) WAIVES DUE DILIGENCE, DEMAND, PRESENTMENT AND PROTEST AND ANY
NOTICES THEREOF AS WELL AS NOTICE OF NONPAYMENT.
26. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
27. JURY TRIAL WAIVER. EACH OF IBM CREDIT AND BORROWER WAIVES THE RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDINGS (INCLUDING ANY COUNTERCLAIM) OF
ANY TYPE IN WHICH BORROWER AND IBM CREDIT ARE PARTIES AS TO ALL MATTERS ARISING
DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, OR ANY DOCUMENT, INSTRUMENT OR
AGREEMENT EXECUTED IN CONNECTION HEREWITH.
(Signature Page Follows]
55
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the date first written above.
ENTEX INFORMATION SERVICES, INC.
By: /s/ Frederic E. Rubin
Name: Frederic E. Rubin
Title: Vice President, Treasure
IBM CREDIT CORPORATION
By: /s/ Paul M. Leiba
Name: PAUL M. LEIBA
Title: CREDIT MANAGER
56
<PAGE> 60
Exhibits
--------
Exhibit A Authorized Suppliers Claims Support
Exhibit B Lockbox Bank Report
Exhibit C Additional Reporting Requirements
Exhibit D Locations of Collateral
Exhibit E Intellectual Property
Exhibit F-A Existing Secured Indebtedness
Exhibit F-B Other Existing Indebtedness
Exhibit G Existing Investments
Exhibit H UCC Financing Statement Filing Locations
Exhibit I List of Authorized Suppliers
Exhibit J Compliance Certificate
57
<PAGE> 61
EXHIBIT A
---------
AUTHORIZED SUPPLIER CLAIMS REPORT
Summary Report: providing, at a minimum, the following detail:
- --------------
For IBM and Lexmark:
Balance of uncollected claims as of the date of the report
Less: Amount of claims greater than 90 days old
Plus: Product Returns filed with Proof of Delivery
Adjusted Balance as of the date of the report
For all other Authorized Suppliers:
Balance of uncollected claims as of the date of the report
Less: Amount of claims greater than 90 days old
Adjusted Balance as of the date of the report
PLUS
Detail Report: itemizing each claim included in the Summary Report, grouped by
Authorized Supplier.
58A
<PAGE> 62
EXHIBIT A (PART 1) [NOT SHOWN]
58B
<PAGE> 63
EXHIBIT A (PART 2) [NOT SHOWN]
58C
<PAGE> 64
EXHIBIT B
LOCKBOX BANK BALANCES
(NOT SHOWN)
59A
<PAGE> 65
EXHIBIT C
---------
Additional Reporting Requirements
Document
- -Daily Collections Report
- -Weekly and Month-end Perpetual Finished Goods Inventory Reconciliation by
Warehouse and IBM Credit UCC Filing Location
- -Weekly Inventory Valuation Detail Report, including detail of all Eligible
Ingram Non-Financed Products
- -Weekly and Month-end
Collateral Management Report for Borrower
- -Monthly and Weekly Accounts Receivables Aging Report for Borrower
- -Monthly IBM Accounts
Receivable Aging Report
Due to IBM Credit
Each Business Day
For each week, prepared as of the close of business on the last day (i.e.,
Saturday) of such week and delivered by the second Business Day of the following
week. For each Fiscal Month, prepared as of the last day of such Fiscal Month
and delivered by the 20th day of the following Fiscal Month,
For each week prepared, by the first Business Day of the following week
For each week, prepared as of the close of business on the last day (i.e.,
Saturday) of such week and delivered by the second Business Day of the following
week. For each Fiscal Month, prepared as of the last day of such Fiscal Month
and delivered by the 20th day of the following Fiscal Month.
For each Fiscal Month, by the 20th day of the following Fiscal Month For each
week, by the second Business Day of the following week
For each Fiscal Month, by the 20th day of the following Fiscal Month
60
<PAGE> 66
Exhibit C (cont)
Financial Reports
-----------------
<TABLE>
<CAPTION>
DOCUMENT Due
-------- ----
<S> <C>
Annual
- ------
Auditors Opinion 120 Days after fiscal year
end
Auditory Management Letter (same)
Balance Sheet, Profit & Loss, (same)
Cash Flow (Actual vs Budget
List of all acquisitions (same)
Other Asset Detail (Current/ (same)
Long Term)
Exhibit A 20th day of each month for
the prior month's claims
Warranty Claims to be included in Exhibit A
are those claims submitted
to Authorized Suppliers by
the 25th day of the prior
month
Quarterly
Balance Sheet, Profit & Loss, 45 days after end of Qtr
Cash Flow
Statement of Adverse Effect (same)
Statement that financial (same)
statement according to GAAP
List of all Acquisitions (same)
Other Assets Detail (current vs (same)
long term)
Monthly
Balance Sheet, Profit & Loss, 30 days after the calendar
Cash Flow month
Statement that financial statement (same)
according to GAAP
</TABLE>
61
<PAGE> 67
EXHIBIT D
---------
Locations Where Collateral Will Be Kept
(NOT SHOWN)
62
<PAGE> 68
EXHIBIT E
Intellectual Property
Registered Trademarks -- Federal
Solution Line
Solution Link
Technology Summit
Registered Trademarks - California
California Computer Source
Pending Federal Applications/Common Law Trademarks
Advanced Client Services
CAC-Corporate Account Center
Desktop Vision
ENTEX
ENTEX Excelerated Solutions Plus Design ENTEX Information Services ENTEX
Information Services Plus Design ENTEX Plus Design Excelerated Solution Network
NTS Plus Serviceline System Builder Technology Lifecycle The Enterprise
Technology Company TLG Co-Pilot
63
<PAGE> 69
EXHIBIT F-A
ENTEX Information Services, Inc.
Schedule of Secured Indebtedness
As of August 27,1995
<TABLE>
<CAPTION>
Amount
Secured Party Outstanding Type of Financing
- ------------- ----------- -----------------
<S> <C> <C>
IBM Credit Corp $273,233 Inventory, A/R and
Working Capital Loan
Deutsche Financial Services 40,660 Inventory Only
Citibank N.A. 31,261 Accounts Receivable Only
FINOVA Capital Corp. 53,753 Inventory Only
ENTEX Holding, Inc. 10,000 Inventory, A/R and
--------
Working Capital Loan
Total $408,907
========
</TABLE>
64
<PAGE> 70
EXHIBIT F-B
ENTEX Information Services, Inc.
Schedule of Other Indebtedness
As of August 27,1995
<TABLE>
<CAPTION>
Amount of
Party Indebtedness Type of Indebtedness
- ----- ------------ ---------------------
<S> <C> <C>
BusinessLand, Inc. 5.5% 43,172 Subordinated Convertible
Subordinated Convertible Debentures
Debentures
Erlanger Land Co. 5,725 Mortgage
</TABLE>
65
<PAGE> 71
EXHIBIT G
Existing Investments
NONE
66
<PAGE> 72
Exhibit H
ENTEX Information Services, Inc.,
IBM CREDIT CORPORATION UCC-1 FILINGS
------------------------------------
<TABLE>
<CAPTION>
Jurisdiction File Number Date of Filing
----------- ----------- --------------
<S> <C> <C>
Arkansas - Sec. of State 860958 7/2/93
Arkansas - Pulaski County 93 49783 7/27/93
Arizona - Sec. of State 752366 7/27/93
California - Sec. of State 93149233 7/27/93
Colorado - Sec. of State 932055999 7/27/93
Connecticut - Sec. of State 1022164 7/27/93
District of Columbia 12812 7/27/93
Delaware - Sec. of State 310046 7/27/93
Florida - Sec. of State 930000156759 7/27/93
Georgia - DeKalb County 93 05987 8/2/93
Georgia - Fulton County 000796140 7/27/93
Georgia - Gwinnett County 93-5496 7/27/93
Iowa - Sec of State 479163 7/27/93
Illinois - Sec. of State 3148717 7/27/93
Indiana - Sec. of State 1860143 7/27/93
Kansas - Sec. of State 1932292 7/27/93
Kentucky - Sec. of State 133786 7/27/93
Kentucky - Boone County (fixture filing) 205679 7/28/93
Kentucky - Fayette County 9302768 7/23/93
Kentucky - Franklin County 36200 7/27/93
Kentucky - Jefferson County 93 06710 7/27/93
Kentucky - Kenton County 372757 7/27/93
Louisiana - Caddo Parish 09-915135 7/27/93
</TABLE>
67A
<PAGE> 73
<TABLE>
<S> <C> <C>
Louisiana - Orleans Parish 36-75607 7/27/93
Massachusetts - Sec. of State 176104 7/27/93
Massachusetts - City of Boston 368340 7/29/93
Massachusetts - Norfolk County (fixture filing) 46717 7/27/93
Massachusetts - Town of Needham 157 7/27/93
Massachusetts - Town of Norwood 491710 8/05/93
Massachusetts - Town of Canton 5009 7/27/93
Massachusetts - Town of Framingham 12964 7/27/93
Maryland - Sec. of State 132088451 7/27/93
Maryland - City of Baltimore 538072 7/27/93
Maryland - Montgomery County 011913 8/4/93
Maryland - Prince George County 470258 7/30/93
Michigan - Sec. of State 33681B 7/27/93
Minnesota - Sec. of State 1604838 7/27/93
Missouri - Sec. of State 2292306 7/27/93
Missouri - Jackson County J324080 7/27/93
Missouri -St. Louis Independent City 4206 7/27/93
Missouri - St. Louis County 008880 7/27/93
North Carolina - Sec. of State 019635 7/27/93
North Carolina - Mecklenberg County 010503 7/27/93
Nebraska - Sec. of State 593346 7/27/93
New Jersey - Sec. of State 1522644 7/27/93
New Mexico - Sec. of State 930727054 7/27/93
Nevada - Sec. of State 93-07796 7/27/93
New York - Sec. of State 160522 7/26/93
New York - Albany County 93 04861 7/26/93
New York - Monroe County 93-5060 7/27/93
New York - New York County 93PN38697 7/28/93
</TABLE>
67B
<PAGE> 74
<TABLE>
<S> <C> <C>
New York - Suffolk County 12903 7/27/93
New York - Westchester County 93 07745 7/28/93
Ohio -Sec. of State 005163 7/27/93
Ohio - Cuyahoga County 1255979 7/27/93
Ohio - Hamilton County 93-128770 7/27/93
Oklahoma - Oklahoma County 039569 7/27/93
Oregon - Sec. of State R65672 7/27/93
Pennsylvania - Sec. of State 22210183 7/27/93
Pennsylvania - Allegheny County 05037 7/27/93
Pennsylvania - Chester County ST93 1805 7/27/93
Pennsylvania - Philadelphia County 93 3574 7/27/93
Rhode Island - Sec. of State 611214 7/27/93
South Carolina. - Sec. of State 930727-150737A. 7/27/93
Tennessee - Sec. of State 218182 7/27/93
Texas - Sec. of State 143525 7/27/93
Utah - Sec. of State 367526 7/27/93
Virginia - Sec. of State 930727 7702 7/27/93
Virginia - Arlington County 52624 7/27/93
Virginia - Fairfax County 93-006898 7/28/93
Virginia - Richmond Independent City 93-1754 7/27/93
Washington - Sec. of State 93-208-0001 7/27/93
Wisconsin - Sec. of State 1369725 7/27/93
</TABLE>
67C
<PAGE> 75
EXHIBIT I
---------
List of Authorized Suppliers
3 Com Corporation
Advanced Logic Research, Inc.
CMS Enhancements, Inc.
Centon Electronics, Inc.
Digital Equipment Corporation
Herold Marketing Associates, Inc. d/b/a Graphics Technology, Inc.
Ingram Micro Inc.
International Business Machines Corporation
Kingston Technology Corporation
Lexmark International, Inc.
Megahertz Corporation
Merisel, Inc.
Merisel FAB, Inc.
Micronet Technology, Inc.
NEC Technologies, Inc.
Procom Technology, Inc.,
QMS, Inc.
Radius, Inc.
Simple Technology Incorporated
Sony Electronics, Inc.
Storage Dimensions, Inc.
Toshiba American Informations Systems, Inc.
Zenith Data Systems
68
<PAGE> 76
EXHIBIT J
---------
COMPLIANCE CERTIFICATE
TO: IBM CREDIT CORPORATION
[INSERT RFC ADDRESS]
The undersigned authorized officers of ENTEX Information Services, Inc.
(the "Customer") hereby certify, with respect to the Agreement for Wholesale
Financing executed by and between the Customer and IBM Credit Corporation ("IBM
Credit") on _______________ __, 199_, as amended from time to time (the
"Agreement"), that (A) the Customer has been in compliance for the period
from_____________________ to_________________ with the financial covenants set
forth in Section 12 of the Agreement, as demonstrated below, and (B) no Default
has occurred and is continuing as of the date hereof, except, in either case, as
set forth below. All capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Agreement.
I. Financial Covenants
-------------------
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED (Fiscal Year) ACTUAL
- ----------------- ------- ------------ ------
<S> <C> <C> <C>
Current Assets to = or greater than 1.00 to 1 (1995)
Current Liabilities = or greater than 1.01 to I (after 1995)
Total Liabilities minus = or less than 20 to 1 (any)
Subord. Debt to Tangible = or less than 20 to 1
Net Worth plus Subord.
Debt
Tangible Net Worth plus = or greater than $18M (1995)
Subordinated Debt = or greater than $21M (after 1995)
EBIT to Interest Exp. less than 1.1 to 1 (any)
less than 1.1 to 1
Consolidated Net Income = or greater than 2% of Sales (any)
for the Fiscal Quarter = or greater than 2% of Sales
Capital Expenditures = or less than $10M (any)
Working Capital (see Section 12(g) Agreement) (any)
</TABLE>
69
<PAGE> 77
Exhibit J (cont)
Attached hereto are Financial Statements as of and for the end of the
fiscal_________ ended on the applicable date, as required by Section 2(c) of the
Agreement for Wholesale Financing.
Submitted by:
ENTEX Information Services. Inc.
By:_________________________________
Print Name:_________________________
Title:______________________________
70
<PAGE> 78
AMENDMENT NO. 1 TO THE
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment to the Fourth Amended and Restated Agreement for Wholesale
Financing (this "Amendment") is made as of September 19, 1995 by and between
Entex Information Services, Inc., a Delaware corporation ("Borrower") and IBM
Credit Corporation, a Delaware corporation ("IBM Credit").
RECITALS:
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995,
(as amended, supplemented or otherwise modified from time to time, the
"Agreement").
B. Borrower and IBM Credit have entered into that certain letter agreement
dated May 8, 1995 (the "Letter Agreement") and Borrower, ENTEX Holdings, Inc.
and IBM Credit have entered into that certain supplementary letter agreement to
the Letter Agreement, also dated May 8, 1995, (the "Supplementary Letter
Agreement") whereby IBM Credit agreed to make the Credit Facility, as defined in
the Letter Agreement, available to Borrower, based on certain terms and
conditions accepted by Borrower and ENTEX Holdings, Inc. contained in the Letter
Agreement and the Supplementary Letter Agreement, as applicable, for the purpose
of Borrower's purchase of Random Access, Inc.
C. The parties have agreed to modify the Agreement as more specifically
set forth below, upon and subject to the terms and conditions set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the mutual agreements provided for
below and for other valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
Section 2. Modifications to Agreement. The following modifications are made to
the Agreement, effective on the date the Loan, as defined in Section 3(e), is
advanced to Borrower (the "Loan Date") unless specified otherwise.
(A) Section 3(a) of the Agreement is hereby amended by increasing the Base
Finance Charge from the sum of the Prime Rate for such day Plus 0.875% to the
sum of the Prime Rate for such day plus 1.125%.
(B) Section 3(c) C. of the Agreement is hereby amended by increasing the
percentage specified for Eligible Receivables from 80% to 85%.
Page 1 of 7
<PAGE> 79
(C) Section 3 of the Agreement is hereby amended by inserting immediately
following paragraph (d) of such section the following new paragraph (e):
"(e) The loan to Borrower for the purpose of acquiring Random Access, Inc.
(the "Loan") shall be a single Advance and shall be in the form of a
Working Capital Advance. The Loan, however, shall accrue a finance charge
at a rate per annum equal to the Prime Rate plus 2.50% on the average
daily principal amount of the Loan outstanding during the applicable
payment period. The Working Capital Advance for the Loan will be
automatically renewed at the end of its then Working Capital Advance
Period, as defined in Section 3(d) of the Agreement, and, unless otherwise
agreed to by IBM Credit in writing, Borrower agrees to not pay any
principal of the Loan unless there are no other outstanding interest
bearing Advances under this Agreement. Notwithstanding the preceding
sentence, Borrower may pay down the Loan (i) in part by making a payment
of not more that one forty-eighth of the original principal amount of the
Loan per month for the first twelve months after the date of the loan and
(ii) in part or in full with any of the following: (A) proceeds from the
sale of any long term assets, such as buildings, (B) proceeds from the
retirement of any other non-current assets, and (C) funds received as a
result of an equity investment not contemplated by this Agreement;"
(D) Section 11(a) is hereby amended by deleting paragraph (xi) in its
entirety and substituting, in lieu thereof, the following paragraph (xi):
"(xi) Borrower has no direct or indirect Subsidiaries other than Erlanger
Land Co., Inc., a Delaware corporation, ENTEX Information Services
International, Limited, an Ireland corporation, ENTEX Information Services
of Michigan, Inc., a Michigan corporation, ENTEX Services, Inc., a
Delaware corporation, Random Access, Inc., a Colorado corporation to be
renamed ENTEX Information Services of Colorado, Inc., Total Access Limited
Liability Company, a Wyoming limited liability company, R.A. Holdings,
Inc. a Colorado corporation, and Network Access, Inc., a Colorado
corporation."
(E) Section 11(a) is hereby amended by deleting paragraph (xx) in its
entirety and substituting, in lieu thereof, the following paragraph (xx):
"(xx) no assets included in Value, as defined in Section 3(c) are owned by
ENTEX Information Services of Michigan, Inc., ENTEX Services, Inc., Random
Access, Inc., to be renamed ENTEX Information Services of Colorado, Inc.,
R.A. Holdings, Inc. or Network Access, Inc.
(F) Section 11(a) of the Agreement is hereby amended by inserting
immediately following paragraph (xx) of such section the following new paragraph
(xxi):
Page 2 of 7
<PAGE> 80
"(xxi) R.A. Holdings, Inc., and Network Access, Inc., which are
subsidiaries of Random Access, Inc., to be renamed ENTEX Information
Services of Colorado, Inc., do not have any assets included in Value, as
defined in Section 3(c) and are not conducting business."
(G) Section 11(c) is hereby amended by deleting the introductory clause
thereto and substituting, in lieu thereof, the following introductory clause:
"(c) Until termination of the Line of Credit and the indefeasible payment
and satisfaction of all Secured Obligations, Borrower (1) shall not, and
with respect to (xvii) of this Section 11(c) Borrower shall cause each of
Random Access, Inc., to be renamed and ENTEX Information Services of
Colorado, Inc., ENTEX Information Services of Michigan, Inc. and ENTEX
Services, Inc., and (2) with respect to (xviii) of this Section 11(c)
shall cause each of R.A. Holdings, Inc. and Network Access, Inc., not to:"
(H) Section 11(c) is hereby amended by deleting paragraph (xvii) thereof
in its entirety and substituting, in lieu thereof, the following paragraph
(xvii):
"(xvii) Transfer or sell any assets included in the calculation of Value
as defined in Section 3(c) to ENTEX Information Services of Michigan,
Inc., ENTEX Services, Inc., Random Access, Inc., to be renamed ENTEX
Information Services of Colorado, Inc., R.A. Holdings, Inc., or Network
Access, Inc. without obtaining IBM Credit's prior written consent."
(I) Section 11(c) of the Agreement is hereby amended by inserting
immediately following clause (xvii) thereof the following new clause (xviii):
"(xviii) conduct business or obtain any assets included in Value as
defined in Section 3(c) without IBM Credit's prior written consent."
(J) Section 12 of the Agreement is hereby amended as follows:
(a) Deleting paragraph (b) in its entirety and substituting, in lieu
thereof, the following paragraph (b):
"(b) Borrower shall at all times maintain a ratio of (i) total liabilities
minus the aggregate outstanding principal amount of Subordinated Debt to
(ii) the sum of Tangible Net Worth and the aggregate outstanding principal
amount of Subordinated Debt of not more than (A) 25 to 1 through
Borrower's second 1996 Fiscal Quarter and (B) 20 to 1 thereafter."
Page 3 of 7
<PAGE> 81
(b) Deleting paragraph (c) in its entirety and substituting, in lieu
thereof, the following paragraph (c):
"(c) Borrower shall not permit the sum of Tangible Net Worth and the
aggregate outstanding principal amount of Subordinated Debt at any
time (the "Tangible Net Worth Minimum") to be less than (i)
$17,500,000 during Borrower's fiscal year ending on June 30, 1996,
(ii) $21,000,000 during Borrower's first 1997 Fiscal Quarter ("First
1997 Fiscal Quarter Tangible Net Worth Minimum"), and (iii) for each
succeeding Borrower's Fiscal Quarter, the Tangible Net Worth Minimum
for the immediately preceding Fiscal Quarter plus fifty percent
(50%) of Borrower's net income after taxes earned by Borrower during
such preceding Fiscal Quarter."
(c) Deleting item (i) in paragraph (g) in its entirety and substituting,
in lieu thereof, the following item (i):
"(i) ten million dollars ($10,000,000) at any time from and
including the date hereof to and including the last day of
Borrower's second 1996 Fiscal Quarter,"
(K) Section 13(a) of the Agreement is hereby amended by inserting
immediately following clause (xi) thereof the following new clause (xii):
"(xii) Borrower makes any payment of principal of the Acquisition
Subordinated Debt to Parent prior to June 30, 1996, or Borrower makes any
payment of such principal after June 30, 1996 if before or after giving
effect to such payment,(l) a Default or Event of Default shall have
occurred and be continuing or (2) the ratio defined in Section 12(b) shall
be greater than 18 to 1. Notwithstanding the preceding sentence, to the
extent that payments relating to the amortization of principal on the
$5,000,000 loan from Citibank, N.A. to Parent are required and is
permitted to be made by Borrower to Parent under the existing
Subordination Agreement between IBM Credit and Parent dated August 6,
1993, such payments may be made in an amount equal to the lesser of the
amortization amount required by Citibank N.A. and $300,000."
Section 3. Loan Fee. Borrower agrees to pay to IBM Credit a fee of $50,000
promptly after the Loan Date.
Section 4. Conditions Precedent. The effectiveness of this Amendment and the
obligation of IBM Credit to make the Loan are subject to the prior or
simultaneous satisfaction by Borrower of the following conditions:
(A) IBM Credit shall have received counterparts of this Amendment executed
by a duly authorized officer of Borrower;
Page 4 of 7
<PAGE> 82
(B) IBM Credit shall have delivered to Borrower counterparts of this
Amendment executed by a duly authorized officer of IBM Credit;
(C) IBM Credit shall have received the favorable opinions of counsel to
Borrower, in form and substance satisfactory to IBM Credit and its counsel;
(D) IBM Credit shall have received a Collateralized Guaranty executed by
Random Access, Inc., to the renamed ENTEX Information Services of Colorado,
Inc., in form and substance satisfactory to IBM Credit;
(E) The Agreement and Plan of Merger, dated as of May 15, 1995, as amended
June 27, 1995, (the "Merger Agreement"), by and among Borrower, ENTEX
Acquisition Corp., a Colorado corporation and a wholly owned subsidiary of
Borrower, and Random Access, Inc. and the transactions contemplated thereby
shall have been approved and adopted by the requisite vote of the shareholders
of Random Access, Inc. required by applicable law or by Random Access, Inc.'s
Articles of Incorporation or By-Laws and all other conditions precedent to the
Effective Time of the Merger (as defined in the Merger Agreement) shall have
been satisfied or waived by the applicable party thereto;
(F) Both before and after giving effect to the Loan, (i) no Default or
Event of Default shall have occurred and be continuing and (ii) no Shortfall
Amount shall exist;
(G) No litigation, inquiry, injunction or restraining order shall be
pending, entered or threatened (including any proposed statute, rule or
regulation) which, in the opinion of IBM Credit, would be reasonably likely to
have a material adverse effect on (i) the Merger or the business or financial
condition of Borrower, (ii) the ability of Borrower to perform its obligations
under the Agreement or (iii) the rights and remedies of IBM Credit;
(H) All governmental and third party approvals necessary in connection
with the Merger and the financing contemplated hereby shall have been obtained
and be in full force and effect, and all applicable waiting periods shall have
expired without any action being taken or threatened by any competent authority
which could restrain, prevent or otherwise impose material adverse conditions on
Borrower;
(I) IBM Credit shall not have become aware of any previously undisclosed
information with respect to any existing or hereafter arising event or
circumstance that would be reasonably likely to have a material adverse effect
on (i) the Merger or the business or financial condition of Borrower, both
before and after giving effect to the Merger, (ii) the ability of Borrower to
perform its obligations under the Agreement or (iii) the rights or remedies of
IBM Credit under the Agreement;
Page 5 of 7
<PAGE> 83
(J) Deutsche Financial Services, Inc. , formally known as ITT Commercial
Finance Corp., terminates its security interest in Random Access, Inc.
Section 5. Name Change. Borrower agrees to change the name of Random Access,
Inc. to ENTEX Information Services of Colorado, Inc. within ten (10) days of the
execution of this Amendment by IBM Credit.
Section 6. Representations and Warranties. Borrower makes to IBM Credit the
following representations and warranties all of which are material and are
made to induce IBM Credit to enter into this Agreement.
6.1 Accuracy and Completeness of Warranties and Representations. All
representations made by Borrower in the Agreement were true, accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make the representations not
misleading.
6.2 Violation of Other Agreements. The execution and delivery of this
Agreement do not violate or cause Borrower not to be in compliance with the
terms of any agreement to which Borrower is a party.
6.3 Litigation. Except as has been disclosed by Borrower to IBM Credit in
writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against Borrower, which if adversely determined, would
materially adversely affect the ability of Borrower to perform its obligations
under the Agreement, and the other documents, instruments and agreements
executed in connection therewith or pursuant hereto.
6.4 Enforceability of Amendment. This Amendment has been duly authorized,
executed and delivered by Borrower and is enforceable against Borrower in
accordance with its terms.
Section 7. Ratification of Agreement. Except as specifically amended hereby, all
the provisions of the Agreement shall remain in full force and effect. Borrower
hereby ratifies, confirms and agrees that the Agreement, as amended hereby,
represents a valid and enforceable obligation of Borrower, and is not subject to
any claims, offsets or defenses.
Section 8. Governing Law. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
Section 9. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
Page 6 of 7
<PAGE> 84
IN WITNESS WHEREOF, this Amendment has been executed by the duly
authorized officers of the undersigned as of the day and year first above
written.
ENTEX INFORMATION SERVICES, INC. IBM CREDIT CORPORATION
By: /s/ Frederic Rubin By: /s/ Paul Leiba
Name: Frederic E. Rubin Name: Paul Leiba
Title: Vice President, Treasurer Title: Credit Manager
Page 7 of 7
<PAGE> 85
ACKNOWLEDGEMENT, WAIVER AND AMENDMENT No. 2
TO
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Acknowledgement, Waiver and Amendment ("Amendment") to the Fourth
Amended and Restated Agreement for Wholesale Financing is made as of May __,
1996 by and between ENTEX Information Services, Inc., a Delaware corporation
("Borrower") and IBM Credit Corporation, a Delaware corporation ("IBM Credit").
RECITALS:
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995
("AWF") (as amended, supplemented or otherwise modified from time to time, the
"Agreement").
B. Borrower is in default of one or more of its financial covenants
contained in the Agreement (as more specifically explained in Section 2 hereof).
C. IBM Credit is willing to waive such defaults subject to the conditions
set forth below.
AGREEMENT
NOW THEREFORE, in consideration of the premises set forth herein, and for
other good and valuable consideration, the value and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
Section 2. Acknowledgement.
(A) Borrower acknowledges that the financial covenants set forth in
Section 12 or the Agreement, as amended by Amendment No. 1 to the Agreement
executed by and between Borrower and IBM Credit on September 19, 1995 are
applicable to the financial results of Borrower for the Fiscal Quarter ending
December 31, 1995, and Borrower was required to maintain such financial
covenants at all times. Borrower further acknowledges its actual attainment was
as follows:
Page 1 of 4
<PAGE> 86
<TABLE>
<CAPTION>
Covenant Covenant Covenant
- -------- Requirement Actual
----------- --------
<S> <C> <C>
Ratio of total liabilities Equal to or less
minus the aggregate outstanding than 25 to 1.0 29.27 to 1.0
principal amount of Subordinated
Debt to the sum of Tangible
Net Worth and the aggregate
outstanding principal amount of
Subordinated Debt
</TABLE>
Section 3. Waivers to Agreement. IBM Credit hereby waives the defaults of
Borrower with the terms of the Agreement to the extent such defaults are set
forth in Section 2 hereof.
Section 4. Amendment. The Agreement is hereby amended as follows:
(A) Section 12 of the Agreement is hereby amended as follows:
(a) Deleting paragraph (b) in its entirety and substituting, in lieu
thereof, the following paragraph (b):
"(b) Borrower shall at all times maintain a ratio of (i) total
liabilities minus the aggregate outstanding principal amount of
Subordinated Debt to (ii) the sum of Tangible Net Worth and the
aggregate outstanding principal amount of Subordinated Debt of not
more than (A) 28 to 1 for the period from March 31, 1996 through
June 29, 1996 (B) 27 to 1 for the period from June 30, 1996 through
September 29, 1996, (C) 24 to 1 for the period from September 30,
1996 through December 30, 1996 and (D) 20 to 1 as of December 31,
1996 and thereafter."
(b) Deleting paragraph (c) in its entirety and substituting, in lieu
thereof, the following paragraph (c):
"(c) Borrower shall not permit the sum of Tangible Net Worth and the
aggregate outstanding principal amount of Subordinated Debt at any
time (the "Tangible Net Worth Minimum") to be less than (i)
$17,000,000 for the period from March 31, 1996 through June 29,
1996, (ii) $20,000,000 for the period from June 30, 1996 through
September 29, 1996, (iii) $25,000,000 for the period from September
30, 1996 through December 30, 1996 and (iv) $30,000,000 as of
December 31, 1996 and thereafter."
Page 2 of 4
<PAGE> 87
(c) Deleting paragraph (f) in its entirety and substituting, in lieu
thereof, the following paragraph (f):
"(f) Borrower shall not permit the aggregate of Capital Expenditures
made in any fiscal year to exceed $15,000,000 net of dispositions
related to such Capital Expenditures."
(d) Deleting paragraph (g) in its entirety and substituting, in lieu
thereof, the following paragraph (g):
"(g) Borrower shall at all times maintain Working Capital of not
less than (i) $6,000,000 for the period from March 31, 1996 through
June 29, 1996, (ii) $9,000,000 for the period from June 30, 1996
through September 29, 1996, (iii) $11,000,000 for the period from
September 30, 1996 through December 30, 1996 and (iv) $13,000,000 as
of December 31, 1996 and thereafter."
(B) For purposes of clarification, Section 24 of the Agreement is hereby
amended by inserting immediately following subsection 24(b) the following
paragraph as subsection 24(c):
"(c) Borrower and IBM Credit agree that all attachments, exhibits,
schedules and other addenda to this Agreement, including, without
limitation, Exhibits C and J, are specifically incorporated herein and
made a part of this Agreement."
Section 5. Rights and Remedies. Except to the extent specifically waived herein
IBM Credit reserves any and all rights and remedies that IBM Credit now has or
may have in the future with respect to Borrower, including any and all rights or
remedies which it may have in the future as a result of Borrower's failure to
comply with its financial covenants to IBM Credit. Except to the extent
specifically waived herein neither this Amendment, any of IBM Credit's actions
or IBM Credit's failure to act shall be deemed to be a waiver of any such rights
or remedies.
Section 6. Conditions Precedent. The effectiveness of this Amendment is subject
to the prior or simultaneous satisfaction by Borrower of the following
conditions:
(A) IBM Credit shall have received counterparts of this Amendment executed
by a duly authorized officer of Borrower;
(B) IBM Credit shall have delivered to Borrower counterparts of this
Amendment executed by a duly authorized officer of IBM Credit;
Section 7. Representations and Warranties. Borrower makes to IBM Credit the
following representations and warranties all of which are material and are made
to induce IBM Credit to enter into this Agreement.
Page 3 of 4
<PAGE> 88
7.1 Accuracy and Completeness of Warranties and Representations. All
representations made by Borrower in the Agreement were true, accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make the representations not
misleading.
7.2 Violation of Other Agreements. The execution and delivery of this
Agreement do not violate or cause Borrower not to be in compliance with the
terms of any agreement to which Borrower is a party.
7.3 Litigation. Except as has been disclosed by Borrower to IBM Credit in
writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against Borrower, which if adversely determined, would
materially adversely affect the ability of Borrower to perform its obligations
under the Agreement, and the other documents, instruments and agreements
executed in connection therewith or pursuant hereto.
7.4 Enforceability of Amendment. This Amendment has been duly authorized,
executed and delivered by Borrower and is enforceable against Borrower in
accordance with its terms.
Section 8. Ratification of Agreement. Except as specifically amended hereby, all
the provisions of the Agreement shall remain in full force and effect. Borrower
hereby ratifies, confirms and agrees that the Agreement, as amended hereby,
represents a valid and enforceable obligation of Borrower, and is not subject to
any claims, offsets or defenses.
Section 9. Governing Law. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
Section 10. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been executed by duly authorized
officers of the undersigned as of the day and year first above written.
ENTEX INFORMATION SERVICES, INC. IBM Credit Corporation
By: /s/ Frederic E. Rubin By: /s/ Paul M. Leiba
Name: FREDERIC E. RUBIN Name: PAUL M. LEIBA
Title: VICE PRESIDENT, TREASURER Title: Credit Manager
Page 4 of 4
<PAGE> 89
AMENDED AND RESTATED AMENDMENT NO. 3 TO THE
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amended and Restated Amendment No. 3 to the Fourth Amended and
Restated Agreement for Wholesale Financing (this "Amendment") amends and
restates that certain Amendment No. 3 to the Fourth Amended and Restated
Agreement for Wholesale Financing between ENTEX Information Services, Inc., a
Delaware corporation ("Borrower") and IBM Credit Corporation, a Delaware
corporation ("IBM Credit") ("Amendment No. 3") and is made as of June 28, 1996
by and between Borrower and IBM Credit.
RECITALS:
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995,
(as amended on September 19, 1995 and as further amended, supplemented or
otherwise modified from time to time, the "Agreement").
B. Concurrent with this Amendment, Borrower and ENTEX Holdings, Inc.
("Parent") have merged into one company with Borrower being the surviving
corporation in the merger (the "Merger").
C. Concurrent with, or prior to, the execution of this Amendment and the
Merger, Borrower has paid to Parent the amount of $4,161,271.12 as partial
satisfaction of the Senior Secured Note dated August 6, 1993 in the principal
amount of $10,000,000.00 (as amended by the Amendment and Waiver dated November
9, 1993 by and among Borrower, Parent and Citibank, N.A., the "Note").
Concurrent with, or prior to, the execution of this Amendment and the Merger,
Parent paid to Citibank, N.A. the amount of $4,161,271.12 as satisfaction in
full of the Citibank, N.A. Loan number 26008250 (the "Citibank Loan"), which
such Citibank Loan is the entire amount owed to Citibank, N.A. for the Note.
Concurrent with the execution of this Amendment and the Merger, Borrower assumed
the obligations of Parent for two notes, in the aggregate principal amount of
$5,062,500.00, and payable to Airlie Associates and Airlie Associates II.
D. The parties have agreed to modify the Agreement as more specifically
set forth below, upon and subject to the terms and conditions set forth herein.
1
<PAGE> 90
AGREEMENT
NOW THEREFORE, in consideration of the mutual agreements provided for
below and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Agreement.
Section 2. Waiver of Certain Financial Covenants.
(A) IBM Credit hereby waives compliance by Borrower with the financial
covenants set forth in Sections 12(b), 12(c), 12(d) and 12(e) for the fiscal
period ending June 30, 1996.
(B) IBM Credit hereby waives compliance by Borrower with the financial
covenants set forth in Section 12(d) of the Agreement during the Fiscal
Quarters ending September 30, 1996 and December 31, 1996.
Section 3. Modifications to Agreement. The following modifications are made to
the Agreement effective on the date of this Amendment unless indicated
otherwise:
(A) The term "Parent" is deleted wherever mentioned in the Agreement.
(B) Section 12(f) is hereby amended by deleting Section 12(f) in its
entirety and substituting, in lieu thereof, the following:
"(f) Borrower shall not permit the aggregate of Capital Expenditures
made in the fiscal year ending June 30, 1996 to exceed $16,500,000
net of dispositions related to such Capital Expenditures and shall
not permit the aggregate of Capital Expenditures made in any fiscal
year thereafter to exceed $15,000,000 net of dispositions related to
such Capital Expenditures."
(C) Section 13(a)(x) of the Agreement is hereby amended by deleting it
in its entirety and substituting, in lieu thereof, the following Section
13(a)(x):
"(x) (A) Dort A. Cameron III shall cease to own and/or control,
directly or indirectly, at least 35% of the issued and outstanding
capital stock of Borrower, (B) Dort A. Cameron III shall cease to
own and/or control at least 90% of the aggregate principal amount of
Acquisition Subordinated Debt outstanding at any time; provided
that, if Dort A. Cameron III receives financing from a creditor
using the Associates Notes as collateral, such creditor will be
advised by Dort A. Cameron III that the Associates Notes have been
ENTEX Amend & Restate 3 (6/96) 2
<PAGE> 91
subordinated to IBM Credit and such creditor will agree that such
creditor's interest in the Associates Notes will be junior to IBM Credit's
interest in such Associates Notes, (C) any Lien shall be granted, or shall
otherwise exist, on any of the capital stock, of Borrower; or"
(D) Section 13(a)(xii) is hereby amended by deleting it in its entirety
and substituting, in lieu thereof, the following Section 3(a)(xii):
"(xii) Borrower makes any payment of principal of the Acquisition
Subordinated Debt after June 30, 1996 if before or after giving effect to
such payment, (1) a Default or Event of Default shall have occurred and be
continuing or (2) the ratio defined in Section 12(b) shall be greater than
18 to 1."
(E) Section 19 is hereby amended as follows:
(1) the definition of Acquisition Subordinated Debt is amended by deleting
it in its entirety and substituting in lieu thereof, the following:
"Acquisition Subordinated Debt" shall mean the Indebtedness of Borrower
evidenced by those notes executed on or about June 30, 1996 made by
Borrower and payable to Airlie Associates and Airlie Associates II in the
original aggregate principal amount of $5,062,500 (the "Associates
Notes")."
(2) the following definition is added in its appropriate alphabetical
order:
""Associates Notes" - See definition of Acquisition Subordinated Debt."
(3) the definition of "Parent" is deleted in its entirety;
(4) the definition of "Tangible Net Worth" is amended by deleting item
(iii) of such definition in its entirety and substituting, in lieu thereof,
the following:
"(iii) the notes owed to Airlie Associates and Airlie Associates II
in the aggregate amount of $5,062,500 (the "Associates Notes"), provided
however, that such Associates Notes shall not be so added if, at any time after
July 31, 1996, the interests by the owners of such Associates Notes are not
satisfactorily, as determined by IBM Credit, subordinated to the interests of
IBM Credit;"
ENTEX Amend & Restate 3 (6/96) 3
<PAGE> 92
Section 4. Conditions Precedent. The effectiveness of this Amendment is subject
to the prior or simultaneous satisfaction by Borrower of the following
conditions:
(A) IBM Credit shall have received counterparts of this Amendment executed
by a duly authorized officer of Borrower;
(B) IBM Credit shall have delivered to Borrower counterparts of this
Amendment executed by a duly authorized officer of IBM Credit;
(C) IBM Credit shall have received evidence satisfactory to it that the
Merger has been completed.
Section 5. Representations and Warranties. Borrower makes to IBM Credit the
following representations and warranties all of which are material and are made
to induce IBM Credit to enter into this Agreement.
5.1 Accuracy and Completeness of Warranties and Representations. All
representations made by Borrower in the Agreement were true, accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make the representations not
misleading.
5.2 Violation of Other Agreements. The execution and delivery of this
Agreement do not violate or cause Borrower not to be in compliance with the
terms of any agreement to which Borrower is a party.
5.3 Litigation. Except as has been disclosed by Borrower to IBM Credit in
writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against Borrower, which if adversely determined, would
materially adversely affect the ability of Borrower to perform its obligations
under the Agreement, and the other documents, instruments and agreements
executed in connection therewith or pursuant hereto.
5.4 Enforceability of Amendment. This Amendment has been duly authorized,
executed and delivered by Borrower and is enforceable against Borrower in
accordance with its terms.
5.5 Assumption of Parent's Obligations. Borrower has not assumed any
obligations of Parent that could reasonably be expected to have a Material
Adverse Effect.
Section 6. Ratification of Agreement. Except as specifically amended hereby, all
the provisions of the Agreement shall remain in full force and effect. Borrower
hereby ratifies, confirms and agrees that the Agreement, as amended hereby,
represents a valid and enforceable obligation of Borrower, and is not subject to
any claims, offsets or defenses.
4
<PAGE> 93
Section 7. Governing Law. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
Section 8. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been executed by the duly
authorized officers of the undersigned as of the day and year first above
written.
ENTEX INFORMATION SERVICES, INC. IBM CREDIT CORPORATION
By: /s/ Frederic E. Rubin By: /s/ Paul M. Leiba
Name: FREDERIC E. RUBIN Name: PAUL M. LEIBA
Title: VICE PRESIDENT, TREASURER Title: Credit Manager
--------------------------
5
<PAGE> 94
AMENDMENT NO. 4 TO THE
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment to the Fourth Amended and Restated Agreement for
Wholesale Financing (this "Amendment") is made as of July 11, 1996 by and
between Entex Information Services, Inc., a Delaware corporation ("Borrower")
and IBM Credit Corporation, a Delaware corporation ("IBM Credit").
RECITALS:
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995,
(as amended on September 19, 1995 and as further amended, supplemented or
otherwise modified from time to time, the "Agreement").
B. Borrower has requested that certain Financial Covenants as defined in
the Agreement, be modified.
C. The parties have agreed to modify the Agreement as more specifically
set forth below, upon and subject to the terms and conditions set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the mutual agreements provided for
below and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
Section 2. Waiver of Certain Financial Covenants. IBM Credit hereby waives
compliance by Borrower with the financial covenants set forth in Sections 12(b)
and 12(c) of the Agreement for and during the Fiscal Quarter ending September
30, 1996 and through November 30, 1996.
Section 3. Amendment. Section 11(c)(vi) shall be amended to add a new subsection
(G) at the end of such section which shall read as follows:
"(G) Acquisition Subsidiary, Inc., a Delaware corporation
established for the purposes of acquiring FCP Technologies, Inc., a Delaware
corporation."
Section 4. Conditions Precedent. The effectiveness of this Amendment is subject
to the prior or simultaneous satisfaction by Borrower of the following
conditions:
1
<PAGE> 95
(A) IBM Credit shall have received counterparts of this Amendment executed
by a duly authorized officer of Borrower;
(B) IBM Credit shall have delivered to Borrower counterparts of this
Amendment executed by a duly authorized officer of IBM Credit;
(C) IBM Credit shall have received evidence satisfactory to it that the
Merger has been completed.
Section 5. Representations and Warranties. Borrower makes to IBM Credit the
following representations and warranties all of which are material and are made
to induce IBM Credit to enter into this Agreement.
5.1 Accuracy and Completeness of Warranties and Representations. All
representations made by Borrower in the Agreement were true, accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make the representations not
misleading.
5.2 Violation of Other Agreements. The execution and delivery of this
Agreement do not violate or cause Borrower not to be in compliance with the
terms of any agreement to which Borrower is a party.
5.3 Litigation. Except as has been disclosed by Borrower to IBM Credit in
writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against Borrower, which if adversely determined, would
materially adversely affect the ability of Borrower to perform its obligations
under the Agreement, and the other documents, instruments and agreements
executed in connection therewith or pursuant hereto.
5.4 Enforceability of Amendment. This Amendment has been duly authorized,
executed and delivered by Borrower and is enforceable against Borrower in
accordance with its terms.
Section 6. Ratification of Agreement. Except as specifically amended hereby, all
the provisions of the Agreement shall remain in full force and effect. Borrower
hereby ratifies, confirms and agrees that the Agreement, as amended hereby,
represents a valid and enforceable obligation of Borrower, and is not subject to
any claims, offsets or defenses.
Section 7. Governing Law. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
2
<PAGE> 96
Section 8. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been executed by the duly
authorized officers of the undersigned as of the day and year first above
written.
ENTEX INFORMATION SERVICES, INC. IBM CREDIT CORPORATION
By: /s/ Frederic E. Rubin By: Paul M. Leiba
Name: FREDERIC E. RUBIN Name: PAUL M. LEIBA
Title: VICE PRESIDENT, TREASURER Title: Credit Manager
3
<PAGE> 97
AMENDMENT NO. 5 TO THE
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
THIS AMENDMENT to the Fourth Amended and Restated Agreement for Wholesale
Financing (this "Amendment") is made as of the 9th day of August, 1996, by and
between ENTEX Information Services, Inc., a Delaware corporation ("Borrower"),
ENTEX Information Services of Michigan, a Michigan corporation and a wholly
owned subsidiary of Borrower ("ENTEX of Michigan"), and IBM Credit Corporation,
a Delaware corporation ("IBM Credit").
RECITALS:
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995
(as amended, supplemented or otherwise modified from time to time, the
"Agreement").
B. In connection with the execution and delivery of the Agreement, ENTEX
of Michigan executed and delivered to IBM Credit a Collateralized Guarantee
dated as of September 15, 1995 (the "Michigan Collateralized Guarantee"),
pursuant to which, among other things, ENTEX of Michigan has irrevocably and
unconditionally guaranteed the obligations of Borrower under the Agreement,
and has granted to IBM Credit a security interest in all property of ENTEX of
Michigan that would constitute "Collateral", as defined in the Agreement.
C. Borrower desires to assign and transfer to ENTEX of Michigan all
of its right, title and interest in and to all Intellectual Property (as
hereinafter defined) owned by Borrower, free and clear of all liens, claims,
charges and encumbrances, and IBM Credit has agreed to consent to such transfer,
on the terms and subject to the conditions set forth herein.
D. The parties have agreed to modify and amend the Agreement as
specifically set forth herein, upon and subject to the terms and conditions set
forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Agreement.
Section 2. Consent to Transfer of Intellectual Property. IBM Credit
hereby consents to the assignment, transfer
<PAGE> 98
and conveyance by Borrower to ENTEX of Michigan of all of Borrower's right,
title and interest in and to all intellectual property, including, without
limitation, patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names, technical knowledge and
processes, formal or informal licensing arrangements which are permitted to be
assigned, blueprints, technical specifications, computer software (including
proprietary software), copyrights, copyright applications and other trade
secrets, including, but not limited to, those set forth on Exhibit E to the
Agreement, and all of the rights of Borrower to use such patents, trademarks,
service marks or other property of the aforesaid nature of other persons now or
hereafter licensed to Borrower, together with the goodwill of the business
symbolized by or connected with the trademarks, service marks, licenses and
other rights (the "Intellectual Property"), free and clear of all liens, claims,
charges and encumbrances. Borrower has heretofore delivered to IBM Credit a copy
of the form of Assignment of Intellectual Property pursuant to which Borrower
intends to assign, transfer and convey the Intellectual Property to ENTEX of
Michigan.
Section 3. Consent to Release of Lien. IBM Credit hereby releases
the lien and security interest in the Intellectual Property granted pursuant to
Section 6(a) of the Agreement, and further agrees to execute and file, or
deliver to Borrower for filing, amendments to the financing statements on Form
UCC-1 of Borrower, reflecting such release.
Section 4. Amendment of Collateralized Guarantee. IBM Credit agrees
that notwithstanding any provision of the Collateralized Guarantee to the
contrary, the Intellectual Property transferred to ENTEX of Michigan pursuant to
Section 1 shall not constitute "Collateral" as such term is defined in the
Collateralized Guarantee, and shall not be subject to the lien and security
interest granted by ENTEX of Michigan to IBM Credit pursuant to the
Collateralized Guarantee, and ENTEX of Michigan and IBM Credit agree that the
Collateralized Guarantee shall be deemed to be hereby amended to give effect to
the provisions of this Section 4.
Section 5. Negative Pledge of Intellectual Property. Borrower and
ENTEX of Michigan each agree that, so long as any obligations of Borrower under
the Agreement remain outstanding, Borrower will cause ENTEX of Michigan not to
grant or permit to exist, and ENTEX of Michigan will not grant or permit to
exist, any lien on or security interest in any Intellectual Property transferred
to or hereafter acquired by ENTEX of Michigan, without the prior written consent
of IBM Credit.
Section 6. Negative Pledge of Stock. Borrower agrees that, so long
as any obligations of Borrower under the Agreement remain outstanding, Borrower
will not grant or permit to exist any lien on or security interest in the issued
and outstanding
-2-
<PAGE> 99
capital stock of ENTEX of Michigan, without the prior written consent of IBM
Credit.
Section 7. Conditions Precedent. The effectiveness of this Amendment
is subject to the prior or simultaneous satisfaction by Borrower of the
following conditions:
(a) IBM Credit shall have received counterparts of this Amendment
executed by a duly authorized officer of Borrower and ENTEX of Michigan;
(b) IBM Credit shall have delivered to Borrower and ENTEX of
Michigan counterparts of this Amendment executed by a duly authorized officer of
IBM Credit;
(c) IBM Credit shall have received a release by FINOVA Capital
Corporation of its lien on and security interest in the Intellectual Property,
in form and substance satisfactory to IBM Credit;
(d) IBM Credit shall have received a release by ENTEX Holdings, Inc.
of its lien on and security interest in the Intellectual Property, in form and
substance satisfactory to IBM Credit;
(e) Both before and after giving effect to the execution of this
Amendment, (i) no Default or Event of Default shall have occurred and be
continuing and (ii) no Shortfall Amount shall exist;
Section 8. Representations and Warranties. Borrower makes to IBM
Credit the following representations and warranties all of which are material
and are made to induce IBM Credit to enter into this Amendment.
(a) Accuracy and Completeness of Warranties and Representations. All
representations made by Borrower in the Agreement were true, accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make the representations not
misleading.
(b) Violation of Other Agreements. The execution and delivery of
this Agreement do not violate or cause Borrower not to be in compliance with the
terms of any agreement to which Borrower is a party.
(c) Enforceability of Amendment. This Amendment has been duly
authorized, executed and delivered by Borrower and ENTEX of Michigan and is
enforceable against Borrower and ENTEX of Michigan in accordance with its terms.
-3-
<PAGE> 100
Section 9. Ratification of Agreement. Except as specifically amended
hereby, all the provisions of the Agreement shall remain in full force and
effect. Borrower hereby ratifies, confirms and agrees that the Agreement, as
amended hereby, represents a valid and enforceable obligation of Borrower, and
is not subject to any claims, offsets or defenses.
Section 10. Governing Law. This Amendment shall be governed by and
interpreted in accordance with the laws of the State of New York, without
reference to the conflict of laws principles thereof.
Section 11. Counterparts. This Amendment may be executed in any
number of counterparts, each of which shall be an original and all of which
shall constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been executed by the duly
authorized officers of the undersigned as of the day and year first above
written.
ENTEX INFORMATION SERVICES, INC. IBM CREDIT CORPORATION
By: /s/ Frederic E. Rubin By: /s/ Paul M. Leiba
Name: FREDERIC E. RUBIN Name: PAUL M. LEIBA
Title: VICE PRESIDENT, TREASURER Title: Credit Manager
ENTEX INFORMATION SERVICES
OF MICHIGAN, INC.
By: /s/ Frederic E. Rubin
Name: FREDERIC E. RUBIN
Title: VICE PRESIDENT, TREASURER
-4-
<PAGE> 101
AMENDMENT NO. 6 TO THE
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment to the Fourth Amended and Restated Agreement for Wholesale
Financing (this "Amendment") is made as of August 21, 1996 by and between ENTEX
Information Services, Inc., a Delaware corporation ("Borrower") and IBM Credit
Corporation, a Delaware corporation ("IBM Credit").
RECITALS:
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995
(as amended on September 19, 1995 and as further amended, supplemented or
otherwise modified from time to time, the "Agreement").
B. The parties have agreed to modify the Agreement as more specifically
set forth below, upon and subject to the terms and conditions set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the mutual agreements provided for
below and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
Section 2. Modifications to Agreement. Section 19 of the Agreement is hereby
amended by deleting the definition of "Revolving Period" in its entirety and
substituting in lieu thereof, the following:
"Revolving Period" shall mean the period from and including the effective
date of this Agreement to and including September 15, 1997, or such later
date as IBM Credit and Borrower may agree in writing.
Section 3. Conditions Precedent. The effectiveness of this Amendment is subject
to the prior or simultaneous satisfaction by Borrower of the following
conditions:
1
<PAGE> 102
(A) IBM Credit shall have received counterparts of this Amendment executed
by a duly authorized officer of Borrower;
(B) IBM Credit shall have delivered to Borrower counterparts of this
Amendment executed by a duly authorized officer of IBM Credit;
Section 4. Representations and Warranties. Borrower makes to IBM Credit the
following representations and warranties all of which are material and are made
to induce IBM Credit to enter into this Agreement.
4.1 Accuracy and Completeness of Warranties and Representations. All
representations made by Borrower in the Agreement were true, accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make the representations not
misleading.
4.2 Violation of Other Agreements. The execution and delivery of this
Agreement do not violate or cause Borrower not to be in compliance with the
terms of any agreement to which Borrower is a party.
4.3 Litigation. Except as has been disclosed by Borrower to IBM Credit in
writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against Borrower, which if adversely determined, would
materially adversely affect the ability of Borrower to perform its obligations
under the Agreement, and the other documents, instruments and agreements
executed in connection therewith or pursuant hereto.
4.4 Enforceability of Amendment. This Amendment has been duly authorized,
executed and delivered by Borrower and is enforceable against Borrower in
accordance with its terms.
Section 5. Ratification of Agreement. Except as specifically amended hereby, all
the provisions of the Agreement shall remain in full force and effect. Borrower
hereby ratifies, confirms and agrees that the Agreement, as amended hereby,
represents a valid and enforceable obligation of Borrower, and is not subject to
any claims, offsets or defenses.
Section 6. Governing Law. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
Section 7. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
2
<PAGE> 103
IN WITNESS WHEREOF, this Amendment has been executed by the duly
authorized officers of the undersigned as of the day and year first above
written.
ENTEX INFORMATION SERVICES, INC. IBM CREDIT CORPORATION
By: /s/ FREDERIC E. RUBIN By: /s/ Paul M. Leiba
Name: FREDERIC E. RUBIN Name: Paul M. Leiba
Title: VICE PRESIDENT, TREASURER Title: Credit Manager
3
<PAGE> 104
AMENDMENT NO. 7 TO THE
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment to the Fourth Amended and Restated Agreement for Wholesale
Financing (this "Amendment") dated as of December 1, 1996 is made by and between
ENTEX Information Services, Inc., a Delaware corporation ("Borrower"), and IBM
Credit Corporation, a Delaware corporation ("IBM Credit").
RECITALS:
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995
(as amended on September 19, 1995 and as further amended, supplemented or
otherwise modified from time to time the "Agreement");
B. As of the date hereof there exists a "Shortfall Amount" (as defined in
the Agreement) and Borrower has requested that IBM Credit convert Fifty Five
Million Dollars ($55,000,000.00) of the indebtedness represented by the
Shortfall Amount to a short-term loan; and
C. IBM Credit is willing to convert the indebtedness represented by the
Shortfall Amount to a short-term loan on the conditions and subject to the terms
set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual agreements
provided for below and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
Section 2. Modifications to Agreement. The following modifications are made to
the Agreement effective as of the date hereof:
(A) Section 1 of the Agreement is hereby amended by deleting the second
sentence after the title "Line of Credit" of Section 1 in its entirety and
substituting in lieu thereof, the following:
"The amount of the Line of Credit shall be $525,000,000 on any day, of
which (x) not less than $10,500,000 shall be available for Ingram Micro
1
<PAGE> 105
Advances (as hereinafter defined) and (y) not more than $514,500,000 shall
be available for all other Advances (as hereinafter defined)."
(B) Section 1 of the Agreement is hereby amended by inserting immediately
following the phrase "shall include" in the sixth sentence thereof the following
new clause (w), "(w) the Short Term Loan and the Special Working Capital
Advance,"
(C) Subsection 2(b) of the Agreement is hereby amended by inserting
immediately following paragraph (vii) thereof the following additional
paragraphs (viii) and (ix):
"(viii) On each Business Day, a report, substantially in the form attached
to this Agreement as Exhibit K listing the collateral status and loan
status as of the immediately preceding Business Day and certified by the
Controller and Chief Financial Officer of Borrower, or their designees
satisfactory to IBM Credit.
(ix) On each Business Day, a report, in form and detail satisfactory to
IBM Credit, of the sources and uses of cash of Borrower for the
immediately preceding Business Day."
(D) Subsection 3(a) of the Agreement is hereby amended effective as of
December 1, 1996 by (1) changing the definition of Base Finance Charge contained
in the second paragraph of such subsection 3(a) from "the sum of Prime Rate for
such day plus 0.25%" to "the sum of Prime Rate for such day plus 0.50%" and (2)
deleting from the second line of the third paragraph thereof the amount "$4,000"
and substituting, in lieu thereof, the amount "$10,000.00".
(E) Subsection 3(b) of the Agreement is hereby amended by inserting
immediately following the phrase "under this Agreement" the phrase, "other than
any indebtedness under the Short-Term Loan,".
(F) Subsection 3(c) of the Agreement is hereby amended by deleting items
(A) through (E) thereof in their entirety and substituting, in lieu thereof, the
following items:
"A. Financed Products and other inventory located in the Erlanger,
Kentucky; Canton, Massachusetts; Frederick, Maryland; Kent, Washington;
Atlanta, Georgia; Rio Rancho, New Mexico; Dupont, Oregon; Santa Clara,
California; Folsom, California; Sacramento, California; Chandler, Arizona;
Wichita, Kansas; or Redmond, Washington warehouse.
<TABLE>
<S> <C>
Obsolete or defective Service Parts 0%
IBM Service Parts which are neither
obsolete nor defective 50%
</TABLE>
2
<PAGE> 106
<TABLE>
<S> <C>
Service parts which are neither IBM Service Parts
nor obsolete or defective 50%
Financed Products on display for
demonstration purposes 0%
Financed Product constituting
clearance or returned goods 0%
All other Financed Products 100%
Eligible Ingram Non-Financed Products 50%
Note: the total Value for Eligible Ingram Non-Financed Products
shall not exceed $15,000,000
HP Special Inventory Collateral 100%*
Other inventory 20%
B. Financed Products and other inventory located outside of the Erlanger,
Kentucky; Canton, Massachusetts; Frederick, Maryland; Kent, Washington;
Atlanta, Georgia; Rio Rancho, New Mexico; Dupont, Oregon; Santa Clara,
California; Folsom, California; Sacramento, California; Chandler, Arizona;
Wichita, Kansas; or Redmond, Washington warehouse
IBM Service Parts 0%
Financed Products on display for
demonstration purposes 0%
Financed Products constituting
clearance or returned goods 0%
All other Financed Products 80%
Eligible Ingram Non-Financed Products
(other than Ingram Micro Products) 0%
</TABLE>
3
<PAGE> 107
<TABLE>
<S> <C>
Other inventory 3%
C. Eligible Receivables 90%
D. HP Special Accounts Collateral 80%*
E. Authorized Supplier Claims 100%
</TABLE>
The combined Value of HP Special Inventory Collateral and HP Special
Accounts Collateral to be included in Borrower's total Value shall
be the Value of HP Special Inventory Collateral plus the Value of HP
Special Accounts Collateral minus the aggregate outstanding amount
owing at such time by Borrower to Hewlett-Packard Company."
(G) Subsection 3(d) of the Agreement is hereby amended effective as of
December 1, 1996 by deleting the penultimate sentence thereof in its entirety
and substituting, in lieu thereof, the following sentence:
"In the event that Borrower utilizes Working Capital Advances (other
than the Special Working Capital Advance), Borrower shall pay a
finance charge, equal to the product of the Base Finance Charge
multiplied by the average daily balance of such outstanding Working
Capital Advances for the applicable period."
(H) Section 3 of the Agreement is hereby amended by inserting immediately
following paragraph (e) thereof the following new paragraph (f):
"(f) Short Term Loan and Special Working Capital Advance. (1) For
purposes of restructuring the Short Fall Amount existing as of December 1,
1996, IBM Credit is hereby deemed to have made a Fifty Five Million Dollar
($55,000,000.00) Advance (the "Short Term Loan") to Borrower as of
December 1, 1996. Unless otherwise due at an earlier date (whether by
acceleration or otherwise), the principal balance of the Short Term Loan
shall be due and payable on the dates set forth in Exhibit L in the
amounts set forth opposite such dates. The Short Term Loan may be prepaid
in whole or in part at any time. Repayments of the Short Term Loan may not
be reborrowed. Except as otherwise expressly provided herein generally
with respect to Working Capital Advances and in particular with respect to
the Special Working Capital Advance (as hereinafter defined), and provided
that no Default or Event of Default shall have occurred and be continuing
or shall occur after giving effect to such application, all payments of
4
<PAGE> 108
principal made to IBM Credit with respect to Advances shall be applied
first to the next required installment payment of the Short Term Loan. The
proceeds of the Short Term Loan shall be deemed to be applied to Advances
outstanding under this Agreement as of December 1, 1996.
(2) IBM Credit is hereby deemed to have made a Twenty Million
Dollars ($20,000,000.00) Working Capital Advance (the "Special Working
Capital Advance") to Borrower as of December 1, 1996. Notwithstanding any
other term or provision of this Agreement or any other agreement between
Borrower and IBM Credit, the Special Working Capital Advance may not be
repaid by Borrower unless and until (i) the Short Term Loan shall have
been paid in full and (ii) Borrower's total outstanding indebtedness under
this Agreement after giving effect to such repayment shall be less than
Value, as Value was defined prior to giving effect to Amendment No. 7 to
this Agreement dated as of December 1, 1996. Unless otherwise due at an
earlier date (whether by acceleration or otherwise), the Special Working
Capital Advance shall be due and payable on the last day of the Revolving
Period. The proceeds of the Special Working Capital Advance shall be
deemed to be applied to Advances outstanding under this Agreement as of
December 1, 1996.
(3) The Short Term Loan and the Special Working Capital Advance
shall accrue a finance charge on the unpaid principal balance thereof from
December 1, 1996 through and including the date such principal is due and
owing, at a per annum rate equal to the lesser of (i) the Base Finance
Charge plus 2.00% and (ii) the highest rate from time to time permitted by
applicable law. If any portion of the Short Term Loan or the Special
Working Capital Advance is not paid on or prior to the date such payment
is due (including by way of acceleration), such unpaid principal amount
shall bear interest from the date such payment is due until IBM Credit
receives payment thereof at a per annum rate equal to the lesser of (i)
the Prime Rate plus 6.5% and (ii) the highest rate from time to time
permitted by applicable law. The aforesaid interest rates will be applied
to the average daily balance of the outstanding payments. Such finance
charges shall be calculated based upon a year of 360 days for the actual
days elapsed. If it is determined that amounts received from Borrower were
in excess of such highest rate, then the amount representing such excess
shall be considered reductions to principal of Advances."
5
<PAGE> 109
(I) Section 11 of the Agreement is hereby amended by inserting immediately
following paragraph 11 (b)(xii) thereof, the following new paragraph (xiii):
"(xii) Deliver to IBM Credit on or prior to February 28, 1997, a report,
in form and detail satisfactory to IBM Credit, describing Borrower's plan
to recapitalize itself."
(J) Section 12 of the Agreement is hereby amended by deleting paragraphs
(a) through (g) thereof in their entirety and substituting, in lieu thereof, the
following paragraphs (a) through (g):
"(a) Borrower shall at all times maintain a ratio of current assets
to current liabilities during each period set forth below equal to or greater
than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
12/31/96 through 3/30/97 0.87:1.00
3/31/97 through 6/29/97 0.88:1.00
6/30/97 and thereafter 0.89:1.00
</TABLE>
(b) Borrower shall maintain total liabilities minus the aggregate
outstanding principal amount of Subordinated Debt during each fiscal year in an
amount equal to or less then $800,000,000.00.
(c) Borrower shall not permit the sum of Tangible Net Worth plus the
aggregate outstanding principal amount of Subordinated Debt at any time during
each period set forth below to be less than the amount set forth opposite such
period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
12/31/96 through 3/30/97 ($72,700,000.00)
3/31/97 through 6/29/97 ($67,800,000.00)
6/30/97 and thereafter ($58,600,000.00)
</TABLE>
6
<PAGE> 110
(d) Borrower shall not permit, at the end of any fiscal quarter
ending on a date during any period set forth below, the ratio of EBIT to
Interest Expense for the period of two consecutive fiscal quarters then ended to
be less than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
12/31/96 through 3/30/97 1.07:1.00
3/31/97 through 6/29/97 1.20:1.00
6/30/97 and thereafter 1.50:1.00
</TABLE>
(e) Borrower shall not permit the ratio of Consolidated Net Income
for any Fiscal Quarter ending on a date during any period set forth below to
sales during such fiscal quarter to be less than the ratio set forth opposite
such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
12/31/96 through 3/30/97 0.10:1.00
3/31/97 through 6/29/97 0.30:1.00
6/30/97 and thereafter 0.70:1.00
</TABLE>
(f) Borrower shall not permit the aggregate amount of Capital
Expenditures made in any fiscal year to exceed $30,000,000.00 net of
dispositions related to such Capital Expenditures.
(g) Borrower shall at all times maintain Working Capital during each
period set forth below of not less than the amount set forth opposite such
period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
12/31/96 through 3/30/97 ($88,000,000.00)
3/31/97 through 6/29/97 ($86,000,000.00)
6/30/97 and thereafter ($75,000,000.00)
</TABLE>
"Working Capital" as of any date shall mean current assets minus current
liabilities, in each case as of such date.
7
<PAGE> 111
Borrower agrees that at such quarterly review with IBM Credit, Borrower
will provide a Compliance Certificate, in substantially the form of
Exhibit J hereto, signed by its Chief Executive Officer, Chief Financial
Officer or Vice President & Treasurer, that no default under this
Agreement exists or if such default exists, specifying the nature
thereof."
(K) The Agreement is hereby amended by adding as Exhibit K and Exhibit L
to the Agreement, respectively, the Exhibit K and Exhibit L attached hereto.
(L) IBM Credit and Borrower agree that the Revolving Period (as defined in
the Agreement) shall end on September 15, 1997.
Section 3. Waiver. IBM Credit hereby waives any Default or Event of Default by
Borrower by reason of the existence of any Shortfall Amount not to exceed
Seventy Five Million Dollars ($75,000,000.00) or the failure by Borrower to
comply with the financial covenants set forth in Section 12 of the Agreement
through the effective date of this Amendment. Except as specifically set forth
in this Section 3, IBM Credit does not waive any other Default or Event of
Default that may have occurred and be existing on the date hereof.
Section 4. Reliance. Borrower hereby acknowledges that IBM Credit has relied on
and is relying on the financial information provided by Borrower in the
Collateral Report dated as of December 22, 1996 delivered to IBM Credit on
December 23, 1996 and the Business Plan of Borrower delivered to IBM Credit on
December 27, 1996 in entering into this Amendment and waiving the defaults as
set forth in Section 3 above. Borrower represents that such financial
information (other than (i) financial information contained in the Business Plan
constituting projections and (ii) historical financial information for periods
prior to June 30, 1996) is true and correct in all material respects and agrees
that the failure of such financial information to be true and correct in all
material respects shall constitute an Event of Default under the Agreement.
Borrower represents that the financial projections contained in the Business
Plan were prepared in good faith and upon a reasonable basis.
Section 5. Conditions Precedent. The effectiveness of this Amendment is subject
to the prior or simultaneous satisfaction of the following conditions:
(A) IBM Credit shall have received counterparts of this Amendment executed
by a duly authorized officer of Borrower;
(B) IBM Credit shall have delivered to Borrower counterparts of this
Amendment executed by a duly authorized officer of IBM Credit;
(C) IBM Credit shall have received Pledge Agreements substantially in the
form attached hereto as Exhibit A executed by Dort Cameron, Entex Associates,
L.P., and John A. McKenna,
8
<PAGE> 112
Jr., pledging all of the capital stock and options to purchase capital stock of
Borrower, owned, directly or indirectly, by such Person;
(D) Borrower shall have paid to IBM Credit the documentation fees referred
to in the first sentence of Section 6 of this Amendment.
Section 6. Representations and Warranties. Borrower makes to IBM Credit the
following representations and warranties all of which are material and are made
to induce IBM Credit to enter into this Agreement.
6.1 Accuracy and Completeness of Warranties and Representations. All
representations made by Borrower in the Agreement were true, accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make the representations not
misleading.
6.2 Violation of Other Agreements. The execution and delivery of this
Agreement do not violate or cause Borrower not to be in compliance with the
terms of any agreement to which Borrower is a party.
6.3 Litigation. Except as has been disclosed by Borrower to IBM Credit in
writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against Borrower, which if adversely determined, would
materially adversely affect the ability of Borrower to perform its obligations
under the Agreement, and the other documents, instruments and agreements
executed in connection therewith or pursuant hereto.
6.4 Enforceability of Amendment. This Amendment has been duly authorized,
executed and delivered by Borrower and is enforceable against Borrower in
accordance with its terms.
Section 7. Ratification of Agreement. Except as specifically amended hereby, all
the provisions of the Agreement shall remain in full force and effect. Borrower
hereby ratifies, confirms and agrees that the Agreement, as amended hereby,
represents a valid and enforceable obligation of Borrower, and is not subject to
any claims, offsets or defenses.
Section 8. Documentation Fees. Borrower agrees to pay IBM Credit on or prior to
January 10, 1997, a documentation Fee in an amount equal to Twenty Five Thousand
Dollars ($25,000.00). In addition, Borrower hereby agrees to pay to IBM Credit,
promptly upon demand therefor, all costs and expenses (including, without
limitation, reasonable fees and disbursements of out-side counsel) incurred by
IBM Credit in connection with the preparation, negotiation, execution, delivery,
and enforcement of this Amendment, the Pledge Agreements and any other
agreement, document or instrument executed in connection herewith or therewith,
the actions and transactions provided for herein and therein or contemplated
hereby or thereby.
9
<PAGE> 113
Section 9. Governing Law. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
Section 10. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been executed by the duly
authorized officers of the undersigned as of the day and year first above
written.
ENTEX INFORMATION SERVICES, INC. IBM CREDIT CORPORATION
By: By: /s/ Allison R. Scheicher
Name: Name: Allison R. Scheicher
Title: Title: Vice President Finance
10
<PAGE> 114
Section 9. Governing Law, This Amendment shall be governed by and interpreted in
accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
Section 10. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS, WHEREOF, this Amendment has been executed by the duly authorized
officers of the undersigned as of the day and year first above written.
IN WITNESS WHEREOF, this Amendment has been executed by the duly
authorized officers of the undersigned as of the day and year first above
written.
ENTEX INFORMATION SERVICES, INC. IBM CREDIT CORPORATION
By: /s/ John McKenna Jr. By:
-------------------------------
Name: John McKenna Jr. Name:
-------------------------------
Title: President Title: Vice President Finance
10
<PAGE> 115
ENTEX INFORMATION SERVICES, INC.
EXHIBIT K
ACCOUNTS RECEIVABLE ("A/R") ADVANCE AUTHORIZATION FORM/
BORROWING CERTIFICATE ("BC")
Schedule #: 1 Accounts as of: 12/11/96 Report prepared: 12/12/96
<TABLE>
<CAPTION>
GROSS NET
OTHER COLLATERAL COLLATERAL
COLLATERAL STATUS VALUES VALUE ADV. % VALUE
------ ---------- ------ -----------
<S> <C> <C> <C> <C> <C>
1. Previous assigned A/R balance
(Prior line 4): $0.00
2. Additions to A/R (2A+B): $0.00
A. New Billings $0.00
B. Other Additions $0.00
3. Deductions from A/R (3A+B+C): $0.00
A. Cash Receipts $0.00
B. Credits / other deductions $0.00
4. New assigned A/R balance (1+2-3): $0.00
5. Less Ineligible A/R: $0.00
A. 50% rule accounts $0.00
B. Other accounts over 90 $0.00
C. Maintenance/ Service (2.5%) $0.00
D. Other $0.00
6. Total A/R Eligible Collateral
(L4-L5 X Adv./R.): $0.00 85% $0.00
7. IBM Credit Financed Eligible Inventory
A. Financed Erlanger and other $0.00 100% $0.00
B. Ingram($15M): 1. Non-financed $0.00 50% $0.00
2. Other Inv. Erl. $0.00 50% $0.00
C. IBM Service Parts (PDC & ESP) $0.00 25% $0.00
D. Financed at Branch (Excludes C/R) $0.00 80% $0.00
E. Other Inventories (Ingram at Branch) $0.00 3% $0.00
F. HP Net Collateral (F3+F4-F5): $0.00
1. HP Gross A/R $0.00
2. HP Ineligible A/R $0.00 HP Adv. Rate
------------
3. HP Net Eligible A/R (F1-F2X85%) $0.00 85% $0.00
4. HP Inventory at ERL $0.00
5. HP A/P Balance $0.00
8. Unpaid Claims: A. Returns $0.00 100% $0.00
B. Other Plans $0.00 100% $0.00
9. Total Net Eligible Collateral (6+7+8) $0.00
LOAN STATUS
10. Net IBM Credit Outstandings ("O/S") (10A-B-C-D): $0.00
A. Gross IBM Credit Outstandings (RFS) $0.00
B. Prior wires to IBM Credit(Unapplied) $0.00
C. QSAs $0.00
D. In Transit (6 Days) $0.00
11. Unavailable Funds in Lockbox (float): $0.00
12. O/S LOAN BALANCE (Line 10 - Line 11): $0.00
13. COLLATERAL S/F / EXCESS (Line 9 - Line 12): $0.00
14. Cash Advances from IBM Credit to Entex: $0.00
15. Today's wire from Entex to IBM Credit: $0.00
16. NEW COLLATERAL S/F EXCESS (LINE 13 - 14 + 15): $0.00
- Yesterday PM Lockbox wire to Entex $0.00
- Today AM Lockbox wire to Entex $0.00
</TABLE>
SIGNATURES:
- -------------------------- -----------------------------
Richard Bannon, Controller (Date) David Chemerow, C.F.O. (Date)
The undersigned officers or delegated individuals of Entex Information Services,
Inc. certify that they are authorized to provide this information on behalf of
Entex Information Services, Inc.
<PAGE> 116
EXHIBIT L
TO
FOURTH AMENDED AND RESTATED
AGREEMENT FOR WHOLESALE FINANCING
<TABLE>
<CAPTION>
Date Amount
- ---- ------
<S> <C>
March 31, 1997 Payment A Amount
April 30, 1997 $5,000,000.00
June 30, 1997 Payment B Amount
July 15, 1997 Unpaid Balance
</TABLE>
For purposes of this Exhibit L, "Payment A Amount" shall mean
$5,000,000.00 plus the sum of (i) $2,500,000.00 plus (ii) an amount equal to
sixty percent (60%) of (a) Excess Cash Flow for the period from January 1, 1997
through and including March 31, 1997 minus (b) $2,500,000.00.
For purposes of this Exhibit L, "Payment B Amount" shall mean the sum of
(i) $6,000,000.00 plus (ii) an amount equal to sixty percent (60%) of (a) Excess
Cash Flow for the period from April 1, 1997 through and including June 30, 1997
minus (b) $6,000,000.00.
For purposes of this Exhibit L, "Excess Cash Flow" shall mean, with
respect to any period, EBIT of Borrower for such period plus the aggregate
consolidated amortization and depreciation expense of Borrower during such
period determined on a consolidated basis in accordance with GAAP, minus the
amount of all cash of Borrower and its consolidated Subsidiaries applied to
Interest Expense, Capital Expenditures and taxes of Borrower and its
consolidated Subsidiaries during such period.
<PAGE> 117
ACKNOWLEDGMENT, WAIVER AND AMENDMENT NO. 8 TO THE
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Acknowledgment, Waiver and Amendment No. 8 to the Fourth Amended
and Restated Agreement for Wholesale Financing, dated as of July 15, 1997 (this
"Amendment"), is made by and between ENTEX Information Services, Inc., a
Delaware corporation ("Borrower"), and IBM Credit Corporation, a Delaware
corporation ("IBM Credit").
RECITALS:
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995
(as amended, supplemented or otherwise modified from time to time, the
"Agreement");
B. Pursuant to Amendment No. 7, dated as of December 1, 1996 ("Amendment
No. 7"), to the Fourth Amended and Restated Agreement For Wholesale Financing,
IBM Credit and Borrower agreed to restructure a "Shortfall Amount" (as defined
in the Agreement) in the amount of Fifty Five Million Dollars ($55,000,000.00)
(the "Original Shortfall Amount");
C. Pursuant to Amendment No. 7, Borrower has repaid Twenty Two Million
Five Hundred Thousand Dollars ($22,500,000.00) of the Original Shortfall Amount
(including the payment of $4,000,000.00 on July 15, 1997 referred to in the
following recital) and Thirty Two Million Five Hundred Thousand Dollars
($32,500,000.00) shall remain due and payable as of close of business on July
15, 1997;
D. Borrower has informed IBM Credit that it shall be able to repay only
Four Million Dollars ($4,000,000.00) of the outstanding balance of the Original
Shortfall Amount on July 15, 1997;
E. IBM Credit is willing to restructure the payment terms of the
remaining balance of the Original Shortfall Amount on the conditions and subject
to the terms set forth herein;
F. Borrower is in default of certain terms and conditions of the
Agreement and Borrower has requested that IBM Credit waive such defaults;
G. IBM Credit is willing to waive certain of such defaults (as more
specifically described in Section 2 hereof) subject to the terms and conditions
set forth herein.
ENTEX Amd 8 (7/96) 1
<PAGE> 118
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual agreements
provided for below and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Agreement.
Section 2. Acknowledgment.
(A) Borrower acknowledges that on February 3, 1997 a Shortfall Amount of
$7,386,000 was identified and that Borrower was required to pay such Shortfall
Amount on the Daily Shortfall Payment Date of February 5, 1997. Borrower further
acknowledges that such Shortfall Amount was not paid until March 27, 1997.
(B) Borrower further acknowledges that the following defaults occurred:
<TABLE>
<CAPTION>
Term Requirement Default
- ---- ----------- -------
<S> <C> <C>
(a) Financial Reports As required in Section 2(B)(ii), submit Certification was not
financial statements within 45 days from received with 1st, 2nd
the end of each fiscal quarter together & 3rd quarter 1996
with a certification of an authorized financial statements
officer
(b) Financial Reports As required in Section 2(B)(ii), submit Financial Statement
financial statements within 45 days from for fiscal third quarter
the end of each fiscal quarter 1996 received later
than 45 days after end
of fiscal quarter
(c) Financial Reports As required in Section 2(C)(ii)(I), submit Statement not
statement prepared by CFO or Vice- received with 1st, 2nd
President & Treasurer along with quarterly & 3rd quarter 1996
financial statements financial statements
(d) Financial Reports As required in Section 2(C)(ii)(III), Schedule was not
submit schedule prepared by CFO or received with 1st, 2nd
Vice-President and Treasurer along with & 3rd quarter 1996
quarterly financial statements financial statements
</TABLE>
ENTEX Amd 8 (7/96) 2
<PAGE> 119
<TABLE>
<S> <C> <C>
(e) Collateral Reports As required in Section 2(B)(viii), on each Certification was not
Business Day, submit collateral report received with
certified by the Controller and CFO or collateral reports
designees prior to June 1, 1997
(f) Business Plan As required in Section 4 of Amendment Historical financial
No. 7, submit Business Plan information in
containing true and correct Business Plan for
financial information for periods after periods after June
June 30, 1996 and Collateral Report 30, 1996, and in
dated December 23, 1996 containing Collateral Report
true and accurate financial information were not correct in all
material respects to
the extent notified by
Borrower on or prior
to the date hereof
(g) Recap Plan As required in Section 11(b)(xiii), submit recapitalization plan
a recapitalization plan on or prior to not delivered
February 28, 1997
</TABLE>
(C) Borrower acknowledges that the financial covenants set forth in
Section 12 of the Agreement are applicable to the financial results of Borrower
for the fiscal quarter ending December 29, 1996, and Borrower was required to
maintain such financial covenants at all times. Borrower further acknowledges
its actual attainment was as follows:
<TABLE>
<CAPTION>
Covenant Covenant
Covenant Requirement Actual
-------- ----------- --------
<S> <C> <C>
Current Assets to Equal to or greater 0.86:1.00
Current Liabilities than 0.87:1.00
EBIT to Interest Expense Ratio Not less than 0.73:1.00
1.07:1.00
Consolidated Net Income Not less than (1.54):1.00
0.10:1.00
Working Capital Not less than ($93,725,000.00)
($88,000.000.00)
</TABLE>
ENTEX Amd 8 (7/96) 3
<PAGE> 120
(D) Borrower acknowledges that the financial covenants set forth in Section
12 of the Agreement are applicable to the financial results of Borrower for the
fiscal quarter ending March 28, 1997, and Borrower was required to maintain such
financial covenants at all times. Borrower further acknowledges its actual
attainment was as follows:
Covenant Covenant
Covenant Requirement Actual
- -------- ----------- --------
Current Assets to Equal to or greater 0.85:1.00
Current Liabilities than 0.87:1.00
Tangible Net Worth plus Not less than ($79,645,000.00)
plus Subordinated Debt ($72,700,000.00)
EBIT to Interest Expense Ratio Not less than 0.20:1.00
1.07:1.00
Consolidated Net Income Not less than (0.94)%
0.10%
Working Capital Not less than ($100,911,000.00)
($88,000,000.00)
(E) Borrower acknowledges that the financial covenants set forth in
Section 12 of the Agreement are applicable to the financial results of Borrower
for the fiscal quarter ending June 29, 1997, and Borrower was required to
maintain such financial covenants at all times. Borrower further acknowledges
its actual attainment was as follows:
Covenant Covenant
Covenant Requirement Actual
- -------- ----------- --------
Current Assets to Equal to or greater 0.86:1.00
Current Liabilities than 0.88:1.00
Working Capital Not less than ($90,828,000.00)
($86,000,000.00)
(F) Borrower acknowledges that Section 11(b)(iii) of the Agreement
requires, among other things, that Borrower comply with all laws applicable to
or binding upon Borrower, and that the failure of Borrower to timely file with
the Securities Exchange Commission ("SEC") periodic reports required to be filed
under Section 12(g) of the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder, would constitute a failure by Borrower to
comply with the requirements of Section 11(b)(iii) of the Agreement, however,
Borrower has not filed any such periodic reports with the SEC on or prior to the
date hereof.
ENTEX Amd 8 (7/96) 4
<PAGE> 121
Section 3. Waivers to Agreement; Forbearance. IBM Credit hereby waives the
defaults of Borrower with the terms of the Agreement to the extent such defaults
are set forth in Section 2 hereof. Except as specifically set forth in this
Section 3, IBM Credit reserves its rights with respect to, and does not waive,
any Default or Event of Default that may be existing on the date hereof,
including, without limitation, as a result of Borrower's defaults with Microsoft
Corporation under the Warrant Purchase Agreement and Note dated June 21, 1996
(the "Microsoft Default"). Notwithstanding the foregoing sentence, IBM Credit
hereby agrees that it shall not enforce or exercise any rights or remedies
available to it as a result of the Microsoft Default unless and until such time
as Microsoft Corporation takes any action arising out of or as a result of the
Microsoft Default, but in any event no sooner than November 1, 1997.
Section 4. Modifications to Agreement. The following modifications are made to
the Agreement effective as of the date hereof:
(A) Section 3(a) of the Agreement is hereby amended by deleting the second
sentence of the third paragraph thereof in its entirety and substituting, in
lieu thereof, the following two sentences:
"If the full amount of any amounts owed under this Agreement
is not paid by its due date, excluding any amounts due under
Section 3(b) at any one time not to exceed Five Million
Dollars ($5,000,000.00) but including any amounts due under
Section 3(b) at any one time in excess of Five Million Dollars
($5,000,000.00), and including as a result of the acceleration
of the obligations, the unpaid amount will bear interest from
its due date until IBM Credit receives payment thereof, at a
per annum rate equal to the Prime Rate plus 6.5%. If any
amount due under Section 3(b), at any one time not to exceed
Five Million Dollars ($5,000,000.00), is not paid when due,
such unpaid amount will bear interest from its due date until
IBM Credit receives payment thereof, at a per annum rate equal
to the Prime Rate plus 2.5%."
(B) Section 3(f) of the Agreement is hereby amended by deleting the second
sentence of paragraph (2) thereof in its entirety and substituting, in lieu
thereof, the following sentence:
"Notwithstanding any other term or provision of this Agreement
or any other agreement between Borrower and IBM Credit, so
long as any other amounts are owing to IBM Credit by Borrower,
the Special Working Capital Advance may not be repaid by
Borrower unless and until (i) the Short Term Loan shall have
been paid in full, (ii) Borrower's total outstanding
indebtedness under this Agreement after giving effect to such
repayment shall be less than Value, as Value was defined prior
to giving effect to Amendment No. 7 to this Agreement
ENTEX Amd 8 (7/96) 5
<PAGE> 122
dated as of December 1, 1997, and (iii) Borrower shall have executed an
amendment to this Agreement, in form and substance satisfactory to IBM
Credit in its reasonable discretion, (1) modifying the definition of Value
to be substantially the same as Value was defined prior to giving effect to
Amendment No. 7 and (2) modifying the financial covenants set forth in
Section 12 of this Agreement following the consummation of any equity
investment or capital infusion in, or debt issuance by, Borrower."
(C) Section 3(f) of the Agreement is hereby amended by inserting
immediately following paragraph (3) thereof, the following new paragraph (4):
"(4) In addition to the scheduled payments set forth on Exhibit L, the
Short Term Loan shall be prepaid on the fifteenth (15th) calendar day of
each second month beginning on September 15, 1997 in an amount equal to the
average amount by which Value exceeds the sum of (i) Borrower's total
outstanding indebtedness (excluding the Short Term Loan) under this
Agreement for the two calendar months preceding such date plus (ii)
Seventeen Million Dollars ($17,000,000.00). Furthermore, the Short Term
Loan shall be prepaid on the date of the consummation of any equity
investment or capital infusion in, or debt issuance by, Borrower in an
amount equal to the proceeds thereof, net of reasonable and customary
expenses associated therewith. Any such mandatory prepayment shall be
applied to the scheduled payments set forth on Exhibit L, in the inverse
order of their maturity."
(D) Section 12 of the Agreement is hereby amended by deleting paragraphs
(a), (c), (d), (e) and (g) thereof in their entirety and substituting, in lieu
thereof, the following paragraphs (a),(c),(d),(e) and (g), respectively:
"(a) Borrower shall at all times maintain a ratio of current assets to
current liabilities during each period set forth below equal to or greater
than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ ----
<S> <C>
Fiscal quarter ending December 1996 0.87:1.00
Fiscal quarter ending March 1997 0.87:1.00
Fiscal quarter ending June 1997 0.88:1.00
</TABLE>
ENTEX Amd 8 (7/96) 6
<PAGE> 123
<TABLE>
<S> <C>
Fiscal quarter ending September 1997 0.83:1.00
Fiscal quarter ending December 1997 0.83:1.00
Fiscal quarter ending March 1998 0.83:1.00
Fiscal quarter ending June 1998 and thereafter 0.83:1.00"
</TABLE>
"(c) Borrower shall not permit the sum of Tangible Net Worth plus the
aggregate outstanding principal amount of Subordinated Debt at any time
during each period set forth below to be less than the amount set forth
opposite such period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Fiscal quarter ending December 1996 ($72,700,000.00)
Fiscal quarter ending March 1997 ($72,700,000.00)
Fiscal quarter ending June 1997 ($67,800,000.00)
Fiscal quarter ending September 1997 ($68,000,000.00)
Fiscal quarter ending December 1997 ($60,000,000.00)
Fiscal quarter ending March 1998 ($48,200,000.00)
Fiscal quarter ending June 1998 and thereafter ($38,700,000.00)"
</TABLE>
"(d) Borrower shall not permit, at the end of any fiscal quarter
ending on a date during any period set forth below, the ratio of EBIT to
Interest Expense for the period of two consecutive fiscal quarters then
ended to be less than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ ----
<S> <C>
Fiscal quarter ending December 1996 1.07:1.00
Fiscal quarter ending March 1997 1.07:1.00
</TABLE>
ENTEX Amd 8 (7/96) 7
<PAGE> 124
Fiscal quarter ending June 1997 1.20:1.00
Fiscal quarter ending September 1997 1.10:1.00
Fiscal quarter ending December 1997 1.40:1.00
Fiscal quarter ending March 1998 1.60:1.00
Fiscal quarter ending June 1998 and thereafter 1.70:1.00"
"(e) Borrower shall not permit the percentage of Consolidated
Net Income for any Fiscal Quarter ending on a date during any
period set forth below to sales during such fiscal quarter to
be less than the percentage set forth opposite such period:
Period Percentage
------ ----------
Fiscal quarter ending December 1996 0.10%
Fiscal quarter ending March 1996 0.10%
Fiscal quarter ending June 1997 0.30%
Fiscal quarter ending September 1997 0.40%
Fiscal quarter ending December 1997 0.70%
Fiscal quarter ending March 1998 1.00%
Fiscal quarter ending June 1998 and thereafter 1.00%"
"(g) Borrower shall at all times maintain Working Capital
during each period set forth below of not less than the amount
set forth opposite such period:
Fiscal quarter ending December 1996 ($88,000,000.00)
Fiscal quarter ending March 1997 ($88,000,000.00)
ENTEX Amd 8 (7/96) 8
<PAGE> 125
Fiscal quarter ending June 1997 ($86,000,000.00)
Fiscal quarter ending September 1997 ($105,000,000.00)
Fiscal quarter ending December 1997 ($100,500,000.00)
Fiscal quarter ending March 1998 ($92,300,000.00)
Fiscal quarter ending June 1998 and thereafter ($83,800,000.00)"
"Working Capital" as of any date shall mean current assets
minus current liabilities, in each case as of such date.
Borrower agrees that at such quarterly review with IBM Credit,
Borrower will provide a Compliance Certificate, in
substantially the form of Exhibit J hereto, signed by its
Chief Executive Officer, Chief Financial Officer or Vice
President & Treasurer, that no default under this Agreement
exists or if such default exists, specifying the nature
thereof."
(E) Section 19 of the Agreement is hereby amended by deleting the
definition of "Revolving Period" in its entirety and substituting in lieu
thereof, the following:
"Revolving Period" shall mean the period from and including
the effective date of this Agreement to and including
September 15, 1998, or such later date as IBM Credit and
Borrower may agree in writing."
(F) Exhibit L to the Agreement is hereby amended by deleting such
Exhibit L in its entirety and substituting, in lieu thereof, the Exhibit L
attached hereto.
Section 5. Documentation Fee. As additional consideration for the preparation,
negotiation and execution by IBM Credit of this Amendment, Borrower agrees to
pay to IBM Credit a documentation fee in the amount of Thirty Thousand Dollars
($30,000.00) on or prior to November 1, 1997.
Section 6. Conditions Precedent. The effectiveness of this Amendment is subject
to the prior or simultaneous satisfaction of the following conditions:
(A) IBM Credit shall have received counterparts of this Amendment executed
by a duly authorized officer of Borrower;
ENTEX Amd 8 (7/96) 9
<PAGE> 126
(B) IBM Credit shall have delivered to Borrower counterparts of this
Amendment executed by a duly authorized officer of IBM Credit;
(C) IBM Credit shall have received a Warrant Agreement in form and
substance satisfactory to IBM Credit granting IBM Credit warrants to buy shares
of common stock of Borrower.
Section 7. Representations and Warranties. Borrower makes to IBM Credit the
following representations and warranties all of which are material and are made
to induce IBM Credit to enter into this Agreement.
7.1 Accuracy and Completeness of Warranties and Representations. All
representations made by Borrower in the Agreement were true, accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof (except
to the extent any representation is not true, accurate and complete as a result
of Borrower's defaults with Microsoft Corporation under the Warrant Purchase
Agreement and Note entered into in June 1996), and do not fail to disclose any
material fact necessary to make the representations not misleading.
7.2 Violation of Other Agreements. The execution and delivery of this
Agreement do not violate or cause Borrower not to be in compliance with the
terms of any agreement to which Borrower is a party.
7.3 Litigation. Except as has been disclosed by Borrower to IBM Credit
in writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against Borrower, which if adversely determined, would
materially adversely affect the ability of Borrower to perform its obligations
under the Agreement, and the other documents, instruments and agreements
executed in connection therewith or pursuant hereto.
7.4 Enforceability of Amendment. This Amendment has been duly
authorized, executed and delivered by Borrower and is enforceable against
Borrower in accordance with its terms.
Section 8. Ratification of Agreement. Except as specifically amended or waived
hereby, all the provisions of the Agreement shall remain in full force and
effect. Borrower hereby ratifies, confirms and agrees that the Agreement, as
amended hereby, represents a valid and enforceable obligation of Borrower, and
is not subject to any claims, offsets or defenses.
Section 9. Governing Law. This Amendment shall be governed by and interpreted
in accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
10
<PAGE> 127
Section 10. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed by the duly
authorized officers of the undersigned as of the day and year first above
written.
ENTEX INFORMATION SERVICES, INC. IBM CREDIT CORPORATION
By: By: /s/ GLEN MIOTKE
---------------------------- ------------------------------------
Name: Name: Glen Miotke
-------------------------- ----------------------------------
Title: Title: Manager, Credit Selected Accounts
------------------------- ---------------------------------
ENTEX Amd 8 (7/96) 11
<PAGE> 128
Section 10. Counterparts. This Amendment may executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed by the duly
authorized officers of the undersigned as of the day and year first above
written.
ENTEX INFORMATION SERVICES, INC. IBM CREDIT CORPORATION
By: /s/ JOHN A. MCKENNA, JR. By:
---------------------------- ------------------------------------
Name: John A. Mckenna, Jr. Name:
-------------------------- ----------------------------------
Title: President Title:
------------------------- ---------------------------------
ENTEX Amd 8 (7/96) 11
<PAGE> 129
EXHIBIT J
COMPLIANCE CERTIFICATE
TO: IBM CREDIT CORPORATION
[INSERT RFC ADDRESS]
The undersigned authorized officers of ENTEX Information Services, Inc.
(the "Customer") hereby certify, with respect to the Agreement for Wholesale
Financing executed by and between the Customer and IBM Credit Corporation ("IBM
Credit") on _______________ __, 199_, as amended from time to time (the
"Agreement"), that (A) the Customer has been in compliance for the period from
________________________ to __________________ with the financial covenants set
forth in Section 12 of the Agreement, as demonstrated below, and (B) no Default
has occurred and is continuing as of the date hereof, except, in either case, as
set forth below. All capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Agreement.
I. Financial Covenants
FINANCIAL COVENANT REQUIRED (Fiscal Year) ACTUAL
- ------------------ -------- ------------ ------
Current Assets to = or > 1.00 to 1 (1995)
Current Liabilities = or > 1.01 to 1 (after 1995)
Total Liabilities minus = or < 20 to 1 (any)
Subord. Debt to Tangible = or < 20 to 1
Net Worth plus Subord.
Debt
Tangible Net Worth plus = or > $18M (1995)
Subordinated Debt = or > $21M (after 1995)
EBIT to Interest Exp < 1.1 to 1 (any)
< 1.1 to 1
Consolidated Net Income = or > 2% of Sales (any)
for the Fiscal Quarter = or > 2% of Sales
Capital Expenditures = or < $10M (any)
Working Capital (see Section 12(g) (any)
Agreement)
69
<PAGE> 130
Exhibit J (cont)
Attached hereto are Financial Statements as of and for the end of the
fiscal ___________ ended on the applicable date, as required by Section 2(c) of
the Agreement for Wholesale Financing.
Submitted by:
ENTEX Information Services, Inc.
By:
-------------------------------
Print Name:
-----------------------
Title:
----------------------------
70
<PAGE> 131
EXHIBIT L
To Fourth Amended and Restated
Agreement for Wholesale Financing
Effective Date: July 15, 1997
Date Amount
- ---- ------
March 31, 1997 $7,500,000.00
April 30, 1997 $5,000,000.00
June 30, 1997 $6,000,000.00
July 15, 1997 $4,000,000.00
July 30, 1997 $3,000,000.00
August 29, 1997 $2,000,000.00
September 30, 1997 $2,000,000.00
October 31, 1997 $3,000,000.00
November 28, 1997 $3,000,000.00
December 31, 1997 $3,000,000.00
January 30, 1998 $3,000,000.00
February 28, 1998 $3,000,000.00
March 31, 1998 Unpaid Balance
For purposes of this Exhibit L, "Unpaid Balance" shall mean any unpaid principal
balance of the Short Term Loan.
12
<PAGE> 132
AMENDMENT NO. 9 TO THE
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment No. 9 to the Fourth Amended and Restated Agreement for Wholesale
Financing (this "Amendment") is made as of September 26, 1997 by and between
ENTEX Information Services, Inc., a Delaware corporation ("Borrower") and IBM
Credit Corporation, a Delaware corporation ("IBM Credit").
RECITALS
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995
(as amended on September 19, 1995 and as further amended, supplemented or
otherwise modified from time to time, the "Agreement").
B. Borrower has requested that IBM Credit provide an Irrevocable Standby
Letter of Credit in favor of Mellon Bank, N.A. ("Bank") to secure certain
contingent obligations of Borrower to Bank.
C. IBM Credit is willing to establish the Irrevocable Standby Letter of
Credit subject to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and IBM Credit hereby agree as follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
Section 2. Modification of Agreement
A. Subsection 2(b) of the Agreement is hereby amended by inserting
immediately following the first sentence of paragraph (viii) thereof the
following sentence:
"The Net Outstandings set forth in such report shall at all times include
the Amount of Credit as of the date of such report."
B. Subsection 3 (b) of the Agreement is hereby amended by:
(a) inserting on the second line thereof immediately prior to the
phrase "Borrower's total outstanding indebtedness under this
Agreement, other than any indebtedness under the Short-Term Loan,"
the new phrase "the sum of"; and
page 1 of 4
<PAGE> 133
(b) inserting on the second line thereof Immediately following the
phrase "Borrowers total outstanding indebtedness under this
Agreement, other than any indebtedness under the Short-term Loan,"
the new phrase "plus the Amount of Credit as of the date thereof".
C. Subsection 3(d) of the Agreement is hereby amended by:
(a) inserting in the seventh sentence thereof immediately following
the phrase "Line of Credit" the new phrase "less the Amount of
Credit as of the date thereof"; and
(b) inserting in the seventh sentence thereof immediately following
the word "Indebtedness" the new phrase ", including the Amount of
Credit as of the date thereof,".
D. Agreement is hereby amended by inserting immediately following Section
3 thereof the following new Section 3A:
"3A. Irrevocable Standby Letter of Credit. Borrower hereby covenants
and agrees with IBM Credit as follows:
(a) IBM Credit shall issue an Irrevocable Standby Letter of Credit
No. 42127-01 dated as of September 25, 1997 in favor of Bank for the
account of Borrower (the letter of credit together with any
amendments or replacement letters of credit, the "ILOC"). Borrower
shall pay to IBM Credit a monthly fee (the "ILOC Fee") equal to
0.125% of the Amount of Credit (as defined in the ILOC or such other
amount as may be agreed to by IBM Credit, in writing, from time to
time). The ILOC Fee shall be set forth in Borrower's next monthly
billing statement following the date the ILOC is executed by IBM
Credit and in each monthly billing statement thereafter. The ILOC
Fee shall be due and payable by Borrower on the fifteenth (15th) day
of the month the billing statement is received by Borrower and each
month thereafter until all obligations, including contingent
obligations of IBM Credit, under such ILOC are terminated.
(b) Borrower shall upon the request of IBM Credit, during the
continuation of an Event of Default or following a termination of
the Line of Credit, establish an escrow account with IBM Credit in
an amount equal to the Amount of Credit of the ILOC (or such other
amount as may be agreed to by Borrower and IBM Credit, in writing,
from time to time). In the event Borrower fails to establish such
escrow account within thirty (30) days of such request, IBM Credit
shall have the right but not the obligation to establish such escrow
account on behalf of Borrower and make an Advance for the account of
Borrower to fund such escrow account.
page 2 of 4
<PAGE> 134
(c) Borrower acknowledges that Bank may make demand under the ILOC
for amounts for which Borrower may claim it is not liable. Borrower covenants
and agrees that, not withstanding any such dispute between Bank and Borrower,
any payments made by IBM Credit pursuant to the ILOC (including any amount paid
by IBM Credit to fund the escrow account) that is not immediately reimbursed by
Borrower shall constitute Working Capital Advances hereunder that shall be due
and payable by Borrower in accordance with the terms hereof."
E. Subsection 13(i) of the Agreement is hereby amended by inserting in the
second line thereof immediately following the phrase "in Section 3" the new
phrase "or Section 3A".
F. Section 19 of the Agreement is hereby amended by inserting immediately
following the definition of "Agreement" the following new definition "Amount of
Credit":
"Amount of Credit" shall mean the aggregate amount of credit under
all letters of credit issued by IBM Credit for the account of
Borrower set forth in each such letter of credit as the "Amount of
Credit".
Section 3. Representations and Warranties. Borrower makes to IBM Credit the
following representations and warranties all of which are material and are made
to induce IBM Credit to enter into this Amendment.
Section 3.1 Accuracy and Completeness of Warranties and Representations. All
representations made by Borrower in the Agreement were true and accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make representations not
misleading.
Section 3.2 Violation of Other Agreements. The execution and delivery of this
Amendment and the performance and observance of the covenants to be performed
and observed hereunder do not violate or cause Borrower not to be in compliance
with the terms of any agreement to which Borrower is a party.
Section 3.3 Litigation. Except as has been disclosed by Borrower to IBM Credit
in writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against Borrower, which if adversely determined, would
materially adversely affect Borrower's ability to perform Borrower's obligations
under the Agreement and the other documents, instruments and agreements executed
in connection therewith or pursuant hereto.
page 3 of 4
<PAGE> 135
Section 3.4 Enforceability of Amendment. This Amendment has been duly
authorized, executed and delivered by Borrower and is enforceable against
Borrower in accordance with its terms.
Section 4. Ratification of Agreement. Except as specifically amended hereby,
all of the provisions of the Agreement shall remain unamended and in full force
and effect. Borrower hereby, ratifies, confirms and agrees that the Agreement,
as amended hereby, represents a valid and enforceable obligation of Borrower,
and is not subject to any claims, offsets and defense.
Section 5. Governing Law. This Amendment shall be governed by and interpreted
in accordance with the laws of the State of New York.
Section 6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed by the authorized
officers of the undersigned as of the day and year first above written.
ENTEX INFORMATION SERVICES, INC.
By: /s/ Mike Archambault
---------------------------------------
Title: VP Treasurer
Accepted and Agreed:
IBM CREDIT CORPORATION
By: /s/ Glen Miotke
---------------------------------------
Title: Manager Credit-Selected Accounts
page 4 of 4
<PAGE> 136
IBM Credit Corporation In All Correspondence Phone: 800-678-6900
Remarketer Financing Center Quote Our Reference No.
1500 Riveredge Parkway Fax: (707) 644-4840
Atlanta, Georgia 30328
(770) 644-4900
- --------------------------------------------------------------------------------
IRREVOCABLE STANDBY | PLACE AND DATE OF ISSUE:
LETTER OF CREDIT NO. 42127-01 | WHITE PLAINS NY/SEPTEMBER 29, 1997
- --------------------------------------------------------------------------------
***BENEFICIARY*** | ***APPLICANT***
|
MELLON BANK, N.A. | ENTEX INFORMATION SERVICES, INC.
Three Mellon Bank Center | SIX INTERNATIONAL DRIVE
Room 3520 | RYE BROOK, NY 10573
Pittsburg, PA 15259 |
Attention: Conrad Tselepis |
- --------------------------------------------------------------------------------
***EXPIRY DATE/PLACE*** | ***AVAILABLE AT/BY***
EXPIRES ON SEPTEMBER 25, 1998 | OUR OFFICE ONLY BY PRESENTATION
FOR PRESENTATION AT OUR OFFICE | OF DOCUMENTS(S) REQUIRED AND YOUR
| DRAFT(S) DRAWN AT SIGHT.
- --------------------------------------------------------------------------------
AMOUNT OF CREDIT: NOT TO EXCEED, IN THE AGGREGATE $500,000.00 U.S. DOLLARS
(FIVE HUNDRED THOUSAND AND 00/100 U.S. DOLLARS)
- --------------------------------------------------------------------------------
GENTLEMEN,
AT THE REQUEST AND FOR THE ACCOUNT OF THE ABOVE NAMED APPLICANT, WE HEREBY
ESTABLISH OUR IRREVOCABLE LETTER OF CREDIT IN YOUR FAVOR WHICH IS AVAILABLE AS
INDICATED ABOVE AGAINST PRESENTATION OF YOUR DRAFT(S) DRAWN ON IBM CREDIT
CORPORATION, WHEN ACCOMPANIED BY EITHER OF THE FOLLOWING DOCUMENTS:
---DOCUMENTS REQUIRED---
A DATED STATEMENT BEARING AN ORIGINAL SIGNATURE PURPORTING TO BE AN AUTHORIZED
SIGNER FOR MELLON BANK, N.A. (INDICATING THE NAME AND TITLE/CAPACITY OF THE
SIGNER), READING AS FOLLOWS:
"WE HEREBY CERTIFY THAT THE AMOUNT OF $(SPECIFY) DRAWN UNDER IBM CREDIT
CORPORATION LETTER OF CREDIT 42127-01, AS EVIDENCED BY OUR DRAFT ACCOMPANYING
THIS STATEMENT IS PAYABLE TO MELLON BANK, N.A. BECAUSE ENTEX INFORMATION
SERVICES, INC. IS IN DEFAULT UNDER THE TERMS OF THAT CERTAIN (SPECIFY) AGREEMENT
DATED (SPECIFY) BETWEEN OURSELVES AND ENTEX INFORMATION SERVICES, INC."
OR A DATED STATEMENT BEARING AN ORIGINAL SIGNATURE PURPORTING TO BE AN
AUTHORIZED SIGNER FOR MELLON BANK, N.A. (INDICATING THE NAME AND TITLE/
CAPACITY OF THE SIGNER), READING AS FOLLOWS:
"WE HEREBY CERTIFY THAT THE AMOUNT OF $(SPECIFY) DRAWN UNDER THE IBM CREDIT
CORPORATION LETTER OF CREDIT 42127-01, AS EVIDENCED BY OUR DRAFT ACCOMPANYING
THIS STATEMENT IS PAYABLE TO MELLON BANK BECAUSE SUCH LETTER OF CREDIT IS SET
TO EXPIRE IN LESS THAN THIRTY DAYS FROM THE DATE OF OUR DRAFT AND SUCH LETTER
OF CREDIT HAS NEITHER BEEN RENEWED NOR REPLACED."
---OTHER CONDITIONS---
PARTIAL DRAWINGS ARE PERMITTED.
THIS LETTER OF CREDIT SHALL EXPIRE ON THE EXPIRY DATE SET FORTH ABOVE.
THE ORIGINAL OF THIS LETTER OF CREDIT MUST BE RETURNED TO US WITH ANY
DRAWING(S) HEREUNDER FOR OUR ENDORSEMENT OF ANY PAYMENT EFFECTED. WE UNDERTAKE
TO RETURN SAID ORIGINAL LETTER OF CREDIT TO YOU (UNLESS FULLY UTILIZED OR
EXPIRED) TOGETHER WITH OUR ADVICE OF SETTLEMENT. EACH DRAWING HONORED BY US
UNDER THIS LETTER OF CREDIT SHALL IMMEDIATELY REDUCE THE AMOUNT OF CREDIT BY
THE AMOUNT OF THE DRAWING.
EACH DRAFT DRAWN HEREUNDER MUST BE MARKED "DRAWN UNDER IBM CREDIT CORPORATION
LETTER OF CREDIT NO. 42127-01".
IF A DRAWING IS MADE BY YOU HEREUNDER AT OR PRIOR TO 12:00 NOON (ATLANTA, GA
TIME) ON A BUSINESS DAY (AS HEREINAFTER DEFINED), AND PROVIDED THAT SUCH DRAWING
AND THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH CONFORM TO THE TERMS AND
CONDITIONS HEREOF, PAYMENT SHALL BE MADE TO YOU IN IMMEDIATELY AVAILABLE FUNDS,
NOT LATER THAN 3:00 PM (ATLANTA, GA TIME) ON THE NEXT SUCCEEDING BUSINESS DAY.
IF A DRAWING IS MADE BY YOU HEREUNDER AFTER 12:00 NOON (ATLANTA, GA TIME) ON A
BUSINESS DAY AND PROVIDED THAT SUCH DRAWING AND THE DOCUMENTS PRESENTED IN
CONNECTION THEREWITH CONFORM TO THE TERMS AND CONDITIONS HEREOF, PAYMENTS SHALL
BE MADE TO YOU IN IMMEDIATELY AVAILABLE FUNDS, NOT LATER THAN 3:00 PM (ATLANTA,
GA TIME) ON THE SECOND SUCCEEDING BUSINESS DAY. AS USED HEREIN, "BUSINESS DAY"
SHALL MEAN ANY DAY OTHER THAN A SATURDAY, SUNDAY, PUBLIC HOLIDAY OR OTHER DAY ON
WHICH IBM CREDIT CORPORATION IS CLOSED.
UNLESS OTHERWISE EXPRESSLY STATED HEREIN, THIS LETTER OF CREDIT IS SUBJECT TO
THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, 1993 REVISION, ICC
PUBLICATION NO. 500 (THE "UCP"). AS TO MATTERS NOT COVERED BY THE UCP, THIS
LETTER OF CREDIT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
---ENGAGEMENT---
WE HEREBY AGREE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS CREDIT WILL BE DULY HONORED UPON PRESENTATION AND DELIVERY OF THE
DOCUMENTS AS SPECIFIED HEREIN IF PRESENTED TO THIS OFFICE ON OR BEFORE THE
EXPIRY DATE INDICATED ABOVE.
VERY TRULY YOURS,
IBM CREDIT CORPORATION
/s/ Signature Unreadable /s/ Glen Miotke
- --------------------------- ---------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
<PAGE> 137
AMENDMENT NO. 10 TO THE
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment No. 10 to the Fourth Amended and Restated Agreement for Wholesale
Financing (this "Amendment") is made as of October 14, 1997 by and between ENTEX
Information Services, Inc., a Delaware corporation ("Borrower") and IBM Credit
Corporation, a Delaware corporation ("IBM Credit").
RECITALS
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995
(as amended on September 19, 1995 and as further amended, supplemented or
otherwise modified from time to time, the "Agreement").
B. Borrower has requested that IBM Credit provide Irrevocable Standby
Letters of Credit in favor of certain creditors (each a "Creditor"), to secure
certain contingent obligations of Borrower.
C. IBM Credit is willing to establish such Irrevocable Standby Letters of
Credit subject to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and IBM Credit hereby agree as follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
Section 2. Modification of Agreement
Agreement is hereby amended by deleting Section 3A in its entirety, and
substituting, in lieu thereof, the following Section 3A:
"3A. Irrevocable Standby Letters of Credit. Borrower hereby covenants and
agrees with IBM Credit as follows:
(a) IBM Credit may, from time to time in its sole and absolute
discretion, issue an Irrevocable Standby Letter of Credit in favor of a Creditor
for the account of Borrower (each such letter of credit together with any
amendments or replacement letters of credit, an "ILOC"). Borrower shall pay to
IBM Credit a monthly fee for such ILOC equal to the percentage of the Amount of
Credit set forth in Exhibit M attached hereto (the "ILOC Fee") or such other
amount as may be agreed to by IBM Credit, in writing, from time to time. The
ILOC Fee shall accrue beginning the month in which such ILOC is issued by IBM
Credit and each month thereafter until all obligations, including contingent
obligations of IBM Credit, under such ILOCs is terminated. The ILOC Fee shall be
set forth in Borrower's monthly billing statement and shall be due and payable
on the fifteenth (15th) day of each month.
page 1 of 4
<PAGE> 138
(b) Borrower shall upon the request of IBM Credit, during the
continuation of an Event of Default or following a termination of the Line of
Credit, establish an escrow account with IBM Credit in an amount equal to the
Amount of Credit of the ILOCs (or such other amount as may be agreed to by
Borrower and IBM Credit, in writing, from time to time). In the event Borrower
fails to establish such escrow account within thirty (30) days of such request,
IBM Credit shall have the right but not the obligation to establish such escrow
account on behalf of Borrower and make an Advance for the account of Borrower to
fund such escrow account.
(c) Borrower acknowledges that a Creditor may make a demand under an
ILOC for amounts for which Borrower may claim it is not liable. Borrower
covenants and agrees that, not withstanding any such dispute between such a
Creditor and Borrower, any payments made by IBM Credit pursuant to such an ILOC
(including any amount paid by IBM Credit to fund the escrow account) that is not
immediately reimbursed by Borrower shall constitute Working Capital Advances
hereunder that shall be due and payable by Borrower in accordance with the terms
hereof."
Section 3. Representations and Warranties. Borrower makes to IBM Credit the
following representations and warranties all of which are material and are made
to induce IBM Credit to enter into this Amendment.
Section 3.1 Accuracy and Completeness of Warranties and Representations. All
representations made by Borrower in the Agreement were true and accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make representations not
misleading.
Section 3.2 Violation of Other Agreements. The execution and delivery of this
Amendment and the performance and observance of the covenants to be performed
and observed hereunder do not violate or cause Borrower not to be in compliance
with the terms of any agreement to which Borrower is a party.
Section 3.3 Litigation. Except as has been disclosed by Borrower to IBM Credit
in writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against Borrower, which if adversely determined, would
materially adversely affect Borrower's ability to perform Borrower's obligations
under the Agreement and the other documents, instruments and agreements executed
in connection therewith or pursuant hereto.
page 2 of 4
<PAGE> 139
Section 3.4 Enforceability of Amendment. This Amendment has been duly
authorized, executed and delivered by Borrower and is enforceable against
Borrower in accordance with its terms.
Section 4. Ratification of Agreement, Except as specifically amended hereby, all
of the provisions of the Agreement shall remain as unamended and in full force
and effect. Borrower hereby, ratifies, confirms and agrees that the Agreement,
as amended hereby, represents a valid and enforceable obligation of Borrower,
and is not subject to any claims, offsets or defense.
Section 5. Governing Law. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of New York.
Section 6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed by the authorized
officers of the undersigned as of the day and year first above written.
ENTEX INFORMATION SERVICES, INC.
By: /s/ John A. McKenna, Jr.
Title:
--------------------------------
Accepted and Agreed:
IBM CREDIT CORPORATION
By: /s/ Glen Miotke
Title: Manager Credit Selected Accounts
page 3 of 4
<PAGE> 140
EXHIBIT M
TO FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
Effective Date of this Exhibit M: October 14, 1997
This is Exhibit M to that certain Fourth Amended and Restated Agreement for
Wholesale Financing dated September 15, 1995, by and between ENTEX Information
Services, Inc.
("Borrower") and IBM Credit Corporation ("IBM Credit").
This Exhibit M supplements that certain Fourth Amended and Restated Agreement
for Wholesale Financing referred to above, and supersedes any other Exhibit M,
dated or undated, to such Agreement.
Description of Irrevocable Letters of Credit ("ILOC")
<TABLE>
<CAPTION>
Monthly
Name of Amount of ILOC Date of Date of
Beneficiary Credit Fee Issuance Expiration
- ----------- ------ --- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mellon Bank $500,000 0.125% 09/29/97 09/25/98
Knickerbocker
Properties,
Inc. XXI $125,000 0.125% 10/15/97 10/14/98
</TABLE>
IN WITNESS WHEREOF, the duly authorized representatives of IBM Credit and
Borrower have executed this Exhibit M, on the date set forth above.
IBM CREDIT CORPORATION ENTEX INFORMATION SERVICES, INC.
By: /s/ Glen Miotke By: /s/ John A. McKenna, Jr.
Title: Manager Credit Selected Accounts Title:
-------------------------
page 4 of 4
<PAGE> 141
IBM CREDIT CORPORATION IN ALL CORRESPONDENCE
REMARKETER FINANCING CENTER QUOTE OUR REFERENCE NO.
1500 RIVEREDGE PARKWAY
ATLANTA, GEORGIA 30329
TELEPHONE: [770-644-4900] FAX: [770-644-4840]
- -------------------------------------------------------------------------------
IRREVOCABLE STANDBY | PLACE AND DATE OF ISSUE: LETTER OF
CREDIT NO. 42127-02 | WHITE PLAINS, NY/OCTOBER 15, 1997
- -------------------------------------------------------------------------------
***BENEFICIARY*** | ***APPLICANT***
KNICKERBOCKER PROPERTIES, INC. XX1 | ENTEX INFORMATION SERVICES, INC.
335 MADISON AVENUE | SIX INTERNATIONAL DRIVE
SEVENTH FLOOR | RYE BROOK, NEW YORK 10573
NEW YORK, NEW YORK 10017 |
- -------------------------------------------------------------------------------
***EXPIRY DATE/PLACE*** | ***AVAILABLE AT/BY:***
EXPIRES ON OCTOBER 14, 1998 | OUR OFFICE ONLY BY PRESENTATION
FOR PRESENTATION AT OUR OFFICE | OF DOCUMENT(S) REQUIRED BY YOUR
(UNLESS EXTENDED AS PROVIDED | DRAFT(S) DRAWN AT SIGHT.
HEREIN)
- -------------------------------------------------------------------------------
AMOUNT OF CREDIT: NOT TO EXCEED, IN THE AGGREGATE $125,000 U.S. DOLLARS (ONE
HUNDRED TWENTY-FIVE THOUSAND DOLLARS AND NO CENTS)
- -------------------------------------------------------------------------------
GENTLEMEN,
AT THE REQUEST AND FOR THE ACCOUNT OF THE ABOVE NAMED APPLICANT, WE HEREBY
ESTABLISH OUR IRREVOCABLE LETTER OF CREDIT IN YOUR FAVOR WHICH IS AVAILABLE AS
INDICATED ABOVE AGAINST PRESENTATION OF YOUR DRAFT(S) DRAWN ON IBM CREDIT
CORPORATION, WHEN ACCOMPANIED BY THE FOLLOWING DOCUMENTS:
--DOCUMENTS REQUIRED--
A SIGHT DRAFT DRAWN HEREUNDER IDENTIFIED TO THE LETTER OF CREDIT AS HEREAFTER
SET FORTH.
A DATED STATEMENT BEARING AN ORIGINAL SIGNATURE PURPORTING TO BE AN AUTHORIZED
REPRESENTATIVE OF KNICKERBOCKER PROPERTIES, INC. XX1, A NEW YORK CORPORATION,
READING AS FOLLOWS:
"WE HEREBY CERTIFY THAT THE AMOUNT OF $(SPECIFY) AS EVIDENCED BY THE
ACCOMPANYING DRAFT DRAWN UNDER IBM CREDIT CORPORATION LETTER OF CREDIT NO.
42127-02 IS PAYABLE TO KNICKERBOCKER PROPERTIES, INC. XXI ("KPI") BECAUSE ENTEX
INFORMATION SERVICES, INC. ("TENANT") HAS FAILED TO PAY RENT OR PERFORM ONE OR
MORE OF ITS OBLIGATIONS UNDER THAT CERTAIN LEASE AGREEMENT AND ADDENDUM DATED
SEPTEMBER 12, 1997 AS AMENDED BY A FIRST LEASE MODIFICATION AGREEMENT DATED AS
OF OCTOBER 14, 1997 (THE "LEASE") EXECUTED BY AND BETWEEN TENANT AND KPI, OR IF
TENANT HAS FAILED TO REPLACE THIS LETTER OF CREDIT AT LEAST THIRTY (30) DAYS
PRIOR TO THE EXPIRY DATE SET FORTH ABOVE OR IF TENANT HAS FILED FOR RELIEF OR
CONSENTED TO RELIEF UNDER THE UNITED STATES BANKRUPTCY CODE.
<PAGE> 142
IBM CREDIT CORPORATION
REMARKETER FINANCING CENTER
1500 RIVEREDGE PARKWAY
ATLANTA, GEORGIA 30328
TELEPHONE: [770-644-4900]
OUR REF. NO. 42127-02
IN ALL CORRESPONDENCE
QUOTE OUR REFERENCE NO.
FAX: [770-644-4840]
PAGE 2
---OTHER CONDITIONS----
PARTIAL DRAWINGS ARE PERMITTED UNDER THIS LETTER OF CREDIT.
THIS LETTER OF CREDIT TERMINATES ON THE EARLIER OF (1) EXPIRY DATE SHOWN ABOVE
AND (2) THE DATE ANY PAYMENT BY US OF A DRAFT UNDER THIS LETTER OF CREDIT CAUSES
THE AVAILABLE AMOUNT TO EQUAL ZERO.
THE ORIGINAL OF THIS LETTER OF CREDIT MUST BE RETURNED TO US WITH ANY DRAWING(S)
HEREUNDER FOR OUR ENDORSEMENT OF ANY PAYMENT EFFECTED. WE UNDERTAKE TO RETURN
SAID ORIGINAL LETTER OF CREDIT TO YOU (UNLESS FULLY UTILIZED OR EXPIRED)
TOGETHER WITH OUR ADVICE OF SETTLEMENT.
EACH DRAFT DRAWN HEREUNDER MUST BE MARKED "DRAWN UNDER IBM CREDIT CORPORATION
LETTER OF CREDIT NO. L/C NO.42127-02 DATED OCTOBER 15, 1997."
IF A DRAWING IS MADE BY YOU HEREUNDER, TO OUR OFFICE LOCATED AT 1500 RIVEREDGE
PARKWAY, ATLANTA, GEORGIA 30328, ATTENTION ACCOUNT OPERATIONS MANAGER AT OR
PRIOR TO 12:OONOON (ATLANTA, GA TIME) ON A BUSINESS DAY (AS HEREINAFTER
DEFINED), AND PROVIDED THAT SUCH DRAWING AND THE DOCUMENTS PRESENTED IN
CONNECTION THEREWITH CONFORM TO THE TERMS AND CONDITIONS HEREOF, PAYMENT SHALL
BE MADE TO YOU IN IMMEDIATELY AVAILABLE FUNDS, NOT LATER THAN 3:00PM (ATLANTA,
GA TIME ) ON THE NEXT SUCCEEDING BUSINESS DAY. IF A DRAWING IS MADE BY YOU
HEREUNDER AFTER 12:OONOON (ATLANTA, GA TIME) ON A BUSINESS DAY AND PROVIDED THAT
SUCH DRAWING AND THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH CONFORM TO THE
TERMS AND CONDITIONS HEREOF, PAYMENT SHALL BE MADE TO YOU IN IMMEDIATELY
AVAILABLE FUNDS NOT LATER THAN 3:00PM (ATLANTA, GA TIME) ON THE SECOND
SUCCEEDING BUSINESS DAY. AS USED HEREIN, "BUSINESS DAY" SHALL MEAN ANY DAY OTHER
THAN A SATURDAY, SUNDAY, PUBLIC HOLIDAY OR OTHER DAY ON WHICH IBM CREDIT
CORPORATION IS CLOSED.
THIS LETTER OF CREDIT MAY BE TRANSFERRED OR ASSIGNED BY YOU, UPON RECEIVING
WRITTEN NOTICE THAT YOU HAVE TRANSFERRED ALL OF YOUR RIGHTS IN THIS LETTER OF
CREDIT, AND UPON PRESENTATION TO US OF THIS ORIGINAL LETTER OF CREDIT, WE WILL
REISSUE THIS LETTER OF CREDIT IN THE REMAINING UNDRAWN AMOUNT OF THIS LETTER OF
CREDIT NAMING THE TRANSFEREE AS BENEFICIARY.
OUR OBLIGATION UNDER THIS LETTER OF CREDIT SHALL NOT BE AFFECTED BY ANY
CIRCUMSTANCES, CLAIM OR DEFENSE, REAL OR PERSONAL, OF ANY PARTY AS TO THE
ENFORCEABILITY OF THE LEASE BETWEEN YOU AND TENANT, IT BEING UNDERSTOOD THAT OUR
OBLIGATION SHALL BE THAT OF A PRIMARY OBLIGOR AND NOT THAT OF A SURETY,
GUARANTOR OR ACCOMMODATION MAKER.
UNLESS OTHERWISE EXPRESSLY STATED HEREIN, THIS LETTER OF CREDIT IS SUBJECT TO
THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, 1993 REVISION, ICC
PUBLICATION NO. 500 (THE "UCP"). AS TO MATTERS NOT COVERED BY UCP, THIS LETTER
OF CREDIT SHALL BE GOVERNED BY THE STATE OF NEW YORK.
<PAGE> 143
IBM CREDIT CORPORATION
REMARKETER FINANCING CENTER
1500 RIVEREDGE PARKWAY
ATLANTA, GEORGIA 30328
TELEPHONE: [770-644-4900]
OUR REF. NO. 42127-02
IN ALL CORRESPONDENCE
QUOTE OUR REFERENCE NO.
FAX [770-644-4840]
PAGE 3
----ENGAGEMENT----
WE HEREBY AGREE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS CREDIT WILL BE DULY HONORED UPON PRESENTATION AND DELIVERY OF THE
DOCUMENTS AS SPECIFIED HEREIN IF PRESENTED TO THIS OFFICE ON OR BEFORE THE
EXPIRY DATE INDICATED ABOVE.
VERY TRULY YOURS,
/s/ Glen Miotke 10/14/97 /s/ signature unreadable 10-14-97
AUTHORIZED SIGNATURE DATE AUTHORIZED SIGNATURE DATE
