<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
REGISTRATION STATEMENT
ON FORM S-1
UNDER
THE SECURITIES ACT OF 1933
----------------
FUTRONIX SYSTEMS CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5063 76-0511867
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
12614 HEMPSTEAD HIGHWAY
HOUSTON, TEXAS 77092-4527
(713) 329-1100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
TERRENCE M. HUNT
PRESIDENT
FUTRONIX SYSTEMS CORP.
12614 HEMPSTEAD HIGHWAY
HOUSTON, TEXAS 77092-4527
(713) 329-1100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES OF ALL COMMUNICATIONS TO:
THOMAS J. SHARBAUGH, ESQ. SALVATORE J. VITIELLO, ESQ.
MORGAN, LEWIS & BOCKIUS LLP DORSEY & WHITNEY LLP
2000 ONE LOGAN SQUARE 250 PARK AVENUE
PHILADELPHIA, PENNSYLVANIA 19103-6993 NEW YORK, NEW YORK 10177
(215) 963-5000 (212) 415-9200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
AMOUNT MAXIMUM PROPOSED
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock,
$.01 par val-
ue............ 2,242,500 $14.00 $31,395,000.00 $10,830.00
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933, as amended.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1996
1,950,000 SHARES
[LOGO] FUTRONIX SYSTEMS CORP.
COMMON STOCK
($.01 PAR VALUE)
The 1,950,000 shares of Common Stock of Futronix Systems Corp. (the
"Company") offered hereby are being sold by the Company. Prior to this
offering, there has been no public market for the Common Stock of the Company.
It currently is anticipated that the initial public offering price will be
between $12.00 and $14.00 per share. See "Underwriting" for information
relating to the method of determining the initial public offering price.
The Company was formed in connection with the merger of Futronix Corporation
and Wire & Cable Specialties Corporation with and into the Company's wholly-
owned subsidiary. The merger will become effective simultaneously with the
closing of the sale of the Common Stock offered hereby.
Application has been made for quotation and trading of the Common Stock on
the Nasdaq National Market under the symbol "FXSC."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
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Total(3)................................... $ $ $
</TABLE>
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(1) See "Underwriting" for indemnification arrangements.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 292,500 shares of Common Stock at the Price to Public, less
Underwriting Discounts and Commissions shown above, solely to cover over-
allotments, if any. If this option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company will
be $ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock offered hereby are being offered by the several
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in
part. It is expected that the Common Stock will be available for delivery on or
about October , 1996 at the offices of Schroder Wertheim & Co. Incorporated,
New York, New York.
SCHRODER WERTHEIM & CO. OPPENHEIMER & CO., INC.
OCTOBER , 1996
<PAGE>
FUTRONIX SYSTEMS CORP.
[Map of United States showing locations of distribution centers and sales
offices of the Company.]
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
[Specialty wire and cable is maintained in inventory in a variety of gauge
sizes, numbers of conductors or pairs, shielding options, jacketing compounds,
insulation materials and color codes or combinations. Pictured are a selection
of wire and cable products sold by the Company in a variety of
configurations.]
<PAGE>
[The Company purchases over 10,000 types of specialty wire and cable in large
quantities and typically sells smaller cut-to-length quantities on a just-in-
time basis to over 1,000 electrical distributors. Pictured are several types
of specialty wire and cable in inventory at the Company's Houston distribution
center.]
[Specialty wire and cable products sold by the Company are typically used in
specific, often highly- sophisticated applications such as telecommunication
systems, factory automation, "intelligent" buildings and computer systems.
Pictured are certain of those products used in such applications.]
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the related unaudited pro forma combined financial statements
of the Company, and the notes thereto, and the audited financial statements of
each of Futronix Corporation ("Futronix") and Wire & Cable Specialties
Corporation ("Wire & Cable"), and the notes thereto, appearing elsewhere in
this Prospectus. References in this Prospectus to the Company include, unless
the context requires otherwise, the Company's wholly-owned subsidiary formed in
contemplation of the merger (the "Merger") of Futronix and Wire & Cable. The
Merger will become effective simultaneously with the closing of the sale of the
Common Stock (the "Common Stock") in this offering (this "Offering"). Unless
otherwise indicated, all information presented in this Prospectus assumes (i)
the businesses of Futronix and Wire & Cable have been combined and (ii) the
Underwriters have not exercised their over-allotment option.
THE COMPANY
GENERAL
The Company is a leading national master distributor of specialty wire and
cable, serving more than 1,000 electrical distributors throughout the United
States. The Company seeks to serve as an efficient single source of supply and
as the distributor of choice for electrical distributors by maintaining for
immediate delivery large quantities of over 10,000 specialty wire and cable
products purchased from more than 50 manufacturers worldwide, as well as
limited quantities of complementary products. The Company's products typically
are used in specific, often highly-sophisticated applications such as
telecommunications systems, factory automation, "intelligent" buildings and
computer systems. The Company believes that the products it sells are used
primarily within the telecommunications, electronics, process and manufacturing
industries and that a substantial portion of those products are used for
maintenance, retrofit and operations ("MRO") applications. The Company
generally does not sell commodity wire and cable, such as that used in
commercial and residential construction.
In recent years, the Company has experienced rapid growth which it attributes
to the growth of the estimated $2.4 billion specialty wire and cable market, as
well as several internal factors, including: (i) the opening of seven
distribution centers since January 1, 1995 (for a current total of 12),
creating a national distribution system; (ii) a significant increase in the
breadth and depth of the Company's inventory, providing greater opportunity to
secure a customer's order; (iii) the Company's ability to service consistently
the demands of its customers on a just-in-time basis; and (iv) an increase in
the number of sales personnel employed by the Company, many of whom have
substantial experience in the specialty wire and cable industry. In addition,
the Company believes that it has benefitted from its operating philosophy of
selling exclusively to electrical distributors and not directly to end-users,
such as construction contractors and installers.
The Company has assembled a knowledgeable team of industry executives and
sales managers, each of whom has many years of experience in the sale and
distribution of specialty wire and cable and firmly established customer and
supplier relationships. Terrence M. Hunt, the Company's President, founded
Futronix and co-founded in 1975 HWC Distribution Corp., a master distributor of
specialty wire and cable that completed its initial public offering in 1987 and
was sold to ALLTEL Corporation for $143 million in 1989. Mr. Hunt and many of
the Company's current employees were instrumental in HWC Distribution Corp.'s
growth from its inception to its sale. Theodore J. Bruno, who will be the Vice
Chairman of the Company, founded Wire & Cable and has over 25 years of
experience in the specialty wire and cable industry. Paul R. Monahan, who will
be the Company's Chief Financial
3
<PAGE>
Officer, served as Wire & Cable's chief operating officer and, together with
Mr. Bruno, developed Wire & Cable into a national master distributor of
specialty wire and cable. In addition, the branch sales managers of the
Company's distribution centers have an average of over 15 years of experience
in the specialty wire and cable industry. The senior executives and branch
sales managers of the Company will own approximately 39% of the outstanding
shares of Common Stock (on a fully diluted basis) upon consummation of this
Offering.
Historically, wire and cable manufacturers have sold their products through
several methods of distribution, such as direct sales and through independent,
non-exclusive manufacturers' representatives. An alternative channel of
distribution for specialty wire and cable has developed whereby master
distributors serve as a replacement for manufacturers' representatives and
other less efficient distribution methods. The principal activities undertaken
by master distributors are to purchase and inventory large quantities of
specialty wire and cable on a regular basis from many different manufacturers,
and market and sell such products to electrical distributors on an as-needed,
just-in-time basis. The Company believes that master distributors provide a
cost-effective alternative method of distribution which provides value to
distributors (the Company's customers) as well as to manufacturers (the
Company's primary suppliers).
. Value to Customers. The Company believes that it significantly reduces
the transaction and other costs of its customers, while improving their
overall level of service to end-users, by permitting them to: (i)
eliminate lead times typically required by manufacturers and thereby
respond on a same-day shipment basis to the majority of their customers'
orders; (ii) fill relatively small orders without being subject to
purchase order minimums typically required by manufacturers; and (iii)
reduce the amount of inventory that they must maintain.
. Value to Suppliers. The Company believes that it offers cost savings to
manufacturers of specialty wire and cable by typically placing large
orders at regular intervals, thereby meeting the lead time and purchase
order minimums required by manufacturers to achieve efficient and cost-
effective production planning and economies of scale. In addition, as a
master distributor, the Company reduces the marketing and sales effort
required by manufacturers to sell their products.
BUSINESS STRATEGY
The Company's objective is to become the leading national master distributor
of specialty wire and cable through strategic expansion and a focus on high
quality, value-added customer service. Specifically, the Company seeks to: (i)
penetrate additional markets through the expansion of its network of
distribution centers; (ii) market its national distribution capabilities to
electrical distributors which have national operations; (iii) expand product
offerings and increase the levels of inventory at its existing distribution
centers; (iv) utilize profitability-based incentive compensation for its sales
force; and (v) integrate and exploit its information technology to provide its
customers with immediate access to product and other key information.
THE MERGER
On August 7, 1996, Futronix, Wire & Cable and the Company entered into a
definitive agreement (the "Merger Agreement") with respect to the Merger, which
will be accounted for as a "pooling of interests" for financial reporting
purposes. The Merger will become effective simultaneously with the closing of
the sale of the Common Stock offered hereby (the "Closing"). As a result of the
Merger, the Company will become one of the largest national master distributors
of specialty wire and cable in the
4
<PAGE>
United States. The distribution centers of Futronix and Wire & Cable serve
geographically and economically distinct markets, resulting in minimal customer
overlap. The Company anticipates several benefits from the Merger, including:
(i) increased market share as a result of its national distribution
capabilities and expanded inventory; (ii) greater customer penetration, as each
sales person in the combined sales force will be able to focus on smaller,
defined territories; (iii) cost savings as a result of the consolidation of
certain functions; (iv) increased purchasing power and other economies
of scale; and (v) increased diversification of its customer base and markets.
The Company's executive offices are located at 12614 Hempstead Highway,
Houston, Texas 77092 and 5060 Avalon Ridge Parkway, Norcross, Georgia 30071,
and its telephone numbers are (713) 329-1100 and (770) 441-8900, respectively.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered................. 1,950,000 shares
Common Stock to be outstanding after
this Offering....................... 4,659,944 shares(1)
Use of Proceeds...................... To reduce indebtedness and for working
capital and general corporate purposes,
including the purchase of inventory. See
"Use of Proceeds."
Nasdaq National Market Symbol........ FXSC
</TABLE>
- ----------
(1) Includes: (i) the 1,950,000 shares of Common Stock offered hereby; (ii)
1,823,937 shares of Common Stock to be issued in the Merger simultaneously
with the Closing of this Offering; and (iii) 60,813 shares of Common Stock
to be issued in connection with the Value Appreciation Bonus. Also includes
Common Stock equivalents representented by (i) an aggregate of 334,204
shares of Common Stock reserved for issuance upon the exercise of Warrants
of the Company to be issued pursuant to the Merger Agreement (the
"Warrants") and (ii) an aggregate of 490,990 shares of Common Stock
reserved for issuance upon the conversion of the Convertible Preferred
Stock of the Company to be issued pursuant to the Merger Agreement (the
"Convertible Preferred Stock"). Does not include an aggregate of 54,254
shares of Common Stock reserved for issuance upon the exercise of options
to be issued following the Closing of this Offering pursuant to the
Company's Equity Compensation Plan (the "Equity Compensation Plan"), at an
exercise price equivalent to the initial public offering price per share.
See "The Merger" and "Management--Value Appreciation Bonus for Officer."
5
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The summary unaudited pro forma combined financial data of the Company
presented below were prepared using the "pooling of interests" method of
accounting as if Futronix and Wire & Cable have always operated as one company.
The unaudited pro forma combined financial data do not give effect to any cost
savings that may result from the Merger, costs incurred to operate as a public
company or transaction costs (estimated to be approximately $150,000) relating
to the Merger. The following data should be read in conjunction with "Selected
Unaudited Pro Forma Combined Financial Data," "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the related unaudited pro forma combined financial statements
of the Company, and the notes thereto, and the audited financial statements of
each of Futronix and Wire & Cable, and the notes thereto, appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales............................... $13,897 $26,193 $53,791 $ 22,256 $ 35,159
Gross profit........................ 4,502 7,863 13,439 6,043 7,732
Income from operations(1)........... 647 1,780 3,088 1,284 1,420
Income before income taxes(2)....... 524 1,282 2,056 856 746
Pro forma net income(3)............. 325 806 1,264 524 456
As adjusted(4):
Pro forma net income............... $ 1,904 $ 855
Pro forma net income per common
share............................. $ .41 $ .19
Weighted average common shares
outstanding(5).................... 4,598 4,598
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------
PRO FORMA AS ADJUSTED (4)
--------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Inventory........................................... $23,226 $23,226
Working capital..................................... 7,133(6) 28,965
Total assets........................................ 36,403(6) 43,270
Total debt.......................................... 18,427(7) 2,218
Stockholders' equity................................ 5,913(6) 28,988
</TABLE>
- ----------
(1) No adjustment has been made to reflect the non-recurring compensation
expense of $1,438,836, or $892,078 after tax, (assuming an initial public
offering price of $13.00 per share) to be incurred by the Company, seven
days after the Closing of this Offering, in connection with the Value
Appreciation Bonus. See "Management--Value Appreciation Bonus for Officer."
(2) Adjusted to reflect the interest that would have been incurred on the $2.2
million principal amount of the 7% subordinated notes to be issued by the
Company, pursuant to the Merger Agreement, in exchange for 2.2 million
shares of nonconvertible preferred stock of Futronix.
(3) Prior to this Offering, Wire & Cable was an S corporation for federal and
state income tax purposes. Prior to 1994, Futronix also was an S
corporation for federal and state income tax purposes. Net income and net
income per common share reflect a provision for income taxes at an assumed
effective combined federal and state income tax rate of 38% for all periods
in which Futronix or Wire & Cable were S corporations.
(4) Adjusted to reflect the sale of 1,950,000 shares of Common Stock in this
Offering and the application of the net proceeds therefrom to repay $16.2
million of indebtedness. Such amounts have not been adjusted to reflect
application of $4.0 million of the net proceeds of this Offering intended
to be used over the next six months to expand the Company's inventory. See
"Use of Proceeds."
(5) Includes: (i) the 1,950,000 shares of Common Stock offered hereby; (ii)
1,823,937 shares of Common Stock to be issued in the Merger simultaneously
with the sale of the Common Stock offered hereby; (iii) an aggregate of
334,204 shares of Common Stock reserved for issuance upon the exercise of
Warrants; and (iv) an aggregate of 490,990 shares of Common Stock reserved
for issuance upon the conversion of the Convertible Preferred Stock. Does
not include (i) an aggregate of 54,254 shares of Common Stock reserved for
issuance upon the exercise of options to be issued following the Closing of
this Offering pursuant to the Equity Compensation Plan and (ii) 60,813
shares of Common Stock to be issued in connection with the Value
Appreciation Bonus. See "The Merger" and "Management--Value Appreciation
Bonus for Officer."
(6) Adjusted to reflect the non-recurring compensation expense of $1,438,836,
or $892,078 after tax (assuming an initial public offering price of $13.00
per share) to be incurred by the Company, seven days after the Closing of
this Offering, in connection with the Value Appreciation Bonus. See
"Management--Value Appreciation Bonus for Officer."
(7) Adjusted to reflect the exchange, pursuant to the Merger Agreement, of 2.2
million shares of nonconvertible preferred stock of Futronix for $2.2
million principal amount of the 7% subordinated notes to be issued by the
Company.
6
<PAGE>
RISK FACTORS
Potential purchasers of the Common Stock should consider carefully the
following risk factors, as well as the other information contained in this
Prospectus, before deciding to purchase shares of the Common Stock offered
hereby.
INTEGRATION OF COMPANIES
The Company is a holding company whose wholly-owned subsidiary will conduct
the operations of the Company following the Merger which will occur
simultaneously with the Closing of this Offering. There can be no assurance
that the Company will be able to integrate successfully the operations,
facilities and management of Futronix and Wire & Cable or realize any benefits
of the Merger. Additionally, there can be no assurance that the Merger will
not have an adverse effect on the Company's relationships with customers or
suppliers of Futronix or Wire & Cable. Failure to successfully integrate the
businesses of Futronix and Wire & Cable could have a material adverse effect
on the Company's results of operations and financial condition. See "The
Merger."
MANAGEMENT OF GROWTH
In recent years, Futronix and Wire & Cable have expanded their respective
businesses, and the Company intends to continue to expand its business. To
effectively manage expansion, the Company will be required to evaluate the
adequacy of its existing systems and procedures, including, but not limited
to, its information management systems, financial and internal control systems
and management structure. In addition, if the Company enters new markets, the
Company will be required to, among other things, establish suitable
distribution centers, hire personnel and establish distribution channels.
There can be no assurance that management will adequately anticipate all of
the changing demands that growth will impose on the Company's systems,
procedures and structure or that the Company will be able to successfully
enter additional markets. Any failure to anticipate adequately and respond to
such changing demands could have a material adverse effect on the Company's
results of operations and financial condition. In addition, if the Company
expands through acquisitions, it may require further capital through public or
private equity offerings or financings in addition to the proceeds from this
Offering. There can be no assurance that additional capital will be available
to the Company or that, if available, it would be on terms acceptable to the
Company. See "Business--Business Strategy."
DEPENDENCE ON SIGNIFICANT SUPPLIER AND CUSTOMERS
For the year ended December 31, 1995, one supplier accounted for
approximately 42% of the Company's purchases of specialty wire and cable
products, the primary products purchased for resale by the Company. The
Company has a non-exclusive domestic distributor agreement with this supplier.
The agreement is terminable by the supplier upon the occurrence of certain
events and in any event by either party upon 30 days' notice. There can be no
assurance that such supplier will not terminate the distributor agreement, or
will continue to do business with the Company in the future. The loss of this
supplier would have a material adverse effect on the Company's results of
operations and financial condition. In addition, for the year ended December
31, 1995, one customer accounted for approximately 12% of the Company's sales.
The loss of this customer or other significant customers could have a material
adverse effect on the Company's results of operations and financial condition.
See "Business--Sources of Supply" and "Business--Marketing, Customers and
Distribution."
DEPENDENCE UPON KEY OFFICERS
The development of the business of Futronix has been largely dependent on
the services of Terrence M. Hunt, the President of the Company, and the
development of the business of Wire & Cable has been largely dependent on the
services of Theodore J. Bruno and Paul R. Monahan, who will become the Vice
Chairman and Chief Financial Officer of the Company, respectively, all of whom
7
<PAGE>
are parties to employment agreements with the Company. The continued
development of the business of the Company will be largely dependent on such
officers and the operations of the Company could be materially adversely
affected by the loss of the services of any of these officers. See
"Management."
IMPACT OF CHANGES IN PRICE OF RAW MATERIALS
The Company's operating results may be adversely impacted by changes in the
price of copper or petrochemical products, both of which are raw materials
used in the manufacture of certain specialty wire and cable products. The
Company generally has been able to pass through price increases in such raw
materials to its customers, but there can be no assurance that it will
continue to be able to do so. Any failure to pass through such price increases
to its customers could have a material adverse effect on the Company's results
of operations and financial condition. Additionally, because the Company
maintains and will continue to maintain significant inventory of specialty
wire and cable, in the event prices of such raw materials decline, competitors
may be able to purchase specialty wire and cable at lower prices and reflect
such lower prices to their customers. In such case, the Company may be
required to lower its prices, and the Company's profitability could, as a
result, be materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
COMPETITION
The specialty wire and cable industry is highly competitive and fragmented.
The Company competes mainly on the basis of price, product availability,
customer service, technical knowledge and delivery time. The Company competes
with wire and cable manufacturers (certain of which are suppliers of the
Company), two national master distributors and regional and other master
distributors (both domestic and foreign) that may have greater financial,
technical and marketing resources and distribution capabilities than those of
the Company. There can be no assurance that the Company will be able to
compete successfully against other national or regional master distributors or
manufacturers. To maintain or increase market share in light of competitive
pressures from current or future competitors, the Company may be required to
respond by taking certain actions which may include lowering its prices. Any
of such actions could have a material adverse effect on the Company's results
of operations and financial condition. See "Business--Competition."
DEPENDENCE ON SYSTEMS
The Company believes that its information systems are an integral part of
its business and growth strategies. The Company depends on its information
systems to process orders, to manage inventory and accounts receivable
collections, to purchase, sell and ship products efficiently and on a timely
basis, to maintain cost-effective operations and to maintain its desired level
of service to its customers. While the Company has taken precautions against
certain events that could disrupt the operation of its information systems,
there can be no assurance that such a disruption will not occur. Any such
disruption could have a material adverse effect on the Company's results of
operations and financial condition. See "Business--Information Systems."
CONTROL BY EXISTING STOCKHOLDERS
Upon the closing of this Offering, Terrence M. Hunt, who is the President
and a director of the Company, Theodore J. Bruno, who will be the Vice
Chairman and is a director of the Company, and a group of investors associated
with Bradford Associates (the "Bradford Investors"), including Barbara M.
Henagan, the Chairman and a director of the Company, and Bradford Mills, a
director of the Company, will beneficially own approximately 16%, 22% and 18%,
respectively, of the outstanding Common Stock (on a fully diluted basis).
Immediately after the Closing of this Offering, the former stockholders of
Futronix and Wire & Cable will beneficially own in the aggregate approximately
58% of the outstanding Common Stock (on a fully diluted basis). Accordingly,
each of Messrs. Hunt and Bruno
8
<PAGE>
and the Bradford Investors, acting together with one or more former
stockholders of Futronix and/or Wire & Cable, would be able to control the
management and policies of the Company. In addition, such stockholders, if
acting together, would have significant voting power with regard to actions
requiring stockholder approval, including the election of directors. See
"Principal Stockholders."
ANTI-TAKEOVER PROVISIONS
Through its ownership of Common Stock, management of the Company and the
other former stockholders of Futronix will have a significant influence with
respect to any decisions regarding a change in ownership of the Company. Such
a concentration of ownership may have the effect of delaying, deferring or
preventing a change of control of the Company and consequently could adversely
affect the market price of the Common Stock. See "Principal Stockholders."
The Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and bylaws contain certain provisions which could delay or
hinder the removal of incumbent directors and could discourage or make more
difficult a proposed merger, tender offer or proxy contest involving the
Company. Pursuant to the Certificate of Incorporation, shares of Series
Preferred Stock of the Company may be issued in the future without stockholder
approval and upon such terms and conditions as the Company's board of
directors may determine. The Company also will be subject to provisions of
Delaware corporate law that will restrict the Company from engaging in certain
business combinations with a person who, together with affiliates and
associates, owns 15% or more of the Common Stock, unless certain conditions
are met or the business combination is approved by the Company's board of
directors, and/or its stockholders in a prescribed manner. See "Description of
Capital Stock--Preferred Stock" and "Description of Capital Stock--Certain
Anti-Takeover Provisions."
SHARES ELIGIBLE FOR FUTURE SALE AND REGISTRATION RIGHTS
The 1,823,937 shares of Common Stock to be issued in the Merger will be
registered on a separate registration statement, in accordance with the
Securities Act of 1933, as amended (the "Securities Act"), simultaneously with
the registration of the shares offered hereby. Out of such shares, Mr. Bruno
will be issued 1,020,317 shares of Common Stock from which he will grant
options to Mr. Monahan and Joan Scott, who will be the Director of Finance of
the Company, to purchase from him an aggregate of 193,493 shares of Common
Stock. Following the Closing of this Offering, the Company will register for
resale the 193,493 shares of Common Stock covered by the options granted to
Mr. Monahan and Ms. Scott and the 60,813 shares of Common Stock to be issued
by the Company to Mr. Monahan in connection with the Value Appreciation Bonus.
However, pursuant to the Merger Agreement and/or agreements with the
representatives of the Underwriters, the holders of such 1,823,937 shares of
Common Stock (or options to acquire such shares, in the case of Mr. Monahan
and Ms. Scott) have agreed not to sell, offer to sell, grant any option to
purchase or otherwise dispose of any of such shares of Common Stock for a
period of 180 days after the date of the sale of the Common Stock offered
hereby. Following the termination of such 180-day period, an aggregate of
23,813 shares of Common Stock, which are held by non-affiliates of the
Company, will be freely tradeable without restriction. Following the
termination of such period, and pursuant to the Securities Act and agreements
between the representatives of the Underwriters and certain stockholders
(Mr. Monahan and Ms. Scott), the remaining 1,800,124 shares of Common Stock,
all of which will be held by affiliates of the Company, will be eligible for
resale only in accordance with the volume and other applicable limitations set
forth in Rule 144 under the Securities Act ("Rule 144"), unless otherwise
registered under the Securities Act or exempt from registration thereunder.
The holders of 1,800,124 of the 1,823,937 shares of Common Stock to be
issued in the Merger and the holders of shares of Convertible Preferred Stock
and Warrants to be issued in the Merger (which are convertible into or
exercisable for, as the case may be, an aggregate of 825,194 shares of Common
Stock), will be entitled to certain demand and piggyback registration rights
with respect to such shares of Common Stock, all of which shares will be held
by affiliates of the Company. In the
9
<PAGE>
event that demand registration rights are exercised, the Company will be
required to proceed with such demanded registration only if the aggregate fair
market value of the shares to be included exceeds $5 million, and only to the
extent the managing underwriter, if any, advises the Company that the number
of shares to be so included does not exceed the number of shares that can be
sold at a price reasonably related to fair market value of the Common Stock.
Such rights may not be exercised prior to the expiration of 180 days after the
date of the sale of the Common Stock offered hereby.
In addition, following the Closing of this Offering, the Company will issue
options to purchase 54,254 shares of Common Stock under the Company's Equity
Compensation Plan. An additional 195,746 shares will be reserved for issuance
under the Equity Compensation Plan. The Company intends to register the shares
of Common Stock issuable and reserved for issuance under the Equity
Compensation Plan as soon as practicable following the Closing of this
Offering. Except for such 250,000 shares and the 60,813 shares to be issued to
Mr. Monahan in connection with the Value Appreciation Bonus, the Company has
agreed not to offer to sell, grant any option to purchase or otherwise dispose
of any shares of Common Stock for a period of 180 days after the Closing of
this Offering without the prior written consent of the representatives of the
Underwriters.
Sales of substantial amounts of Common Stock in the public market, or the
perception that such sales may occur, following the Closing of this Offering
could adversely affect the market price of the Common Stock and could
adversely affect the Company's ability to raise capital at a time and on terms
favorable to the Company. No prediction can be made as to the effect, if any,
that future sales, or the availability of Common Stock for future sales, will
have on the market price of the Common Stock from time to time. See "The
Merger--Security Ownership Following the Merger," "Management--Value
Appreciation Bonus for Officer," "Description of Capital Stock--Registration
Rights" and "Shares Eligible for Future Sale."
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any cash dividends in the foreseeable
future. The Company currently intends to retain future earnings to finance
operations and the expansion of its business. Any future determination to pay
dividends will be at the discretion of the board of directors of the Company
and will be dependent upon the Company's financial condition, operating
results, capital requirements and such other factors as the board of directors
of the Company deems relevant. Further, the terms of the revolving credit
lines of each of Futronix and Wire & Cable include, and the terms of the
revolving credit line the Company intends to obtain contemporaneously with or
shortly after the Closing of this Offering may include, restrictions on the
ability of the Company to pay dividends. See "Use of Proceeds" and "Dividend
Policy."
DILUTION
Purchasers of Common Stock in this Offering will experience immediate and
substantial dilution in the net tangible book value per share of Common Stock.
See "Dilution."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market will
develop, or if developed, will be sustained after the Closing of this
Offering. The initial public offering price of the Common Stock offered hereby
will be determined through negotiations between the Company and the
representatives of the Underwriters and may not be indicative of future market
prices. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. Factors such as announcements
concerning the Company or its competitors, investor perception of the Company,
fluctuations in the Company's operating results and general market conditions
may cause the market price of the Common Stock to fluctuate significantly.
10
<PAGE>
THE MERGER
GENERAL
The Company was organized on August 5, 1996 in connection with the merger of
Futronix and Wire & Cable with and into Futronix Acquisition Company, a
wholly-owned subsidiary of the Company. The Merger will be treated as a
"pooling of interests" for financial reporting purposes and will become
effective simultaneously with the Closing of this Offering, at which time the
name of Futronix Acquisition Company will be changed to "Futronix
Corporation." All of the Company's business will be conducted through Futronix
Corporation. As a result of the Merger, Terrence M. Hunt, the president of
Futronix, will become President of the Company and Theodore J. Bruno and Paul
R. Monahan, the chief executive officer and chief operating officer of Wire &
Cable, respectively, will become the Vice Chairman and Chief Financial Officer
of the Company, respectively. Futronix was founded in September 1991 by Mr.
Hunt. Wire & Cable was founded in 1982 by Mr. Bruno. See "Business" and
"Management."
Both Futronix and Wire & Cable are master distributors of specialty wire and
cable serving the electrical distribution market. Futronix and Wire & Cable
target substantially different customer bases. Futronix has focused on major
metropolitan markets and has invested in inventory primarily targeted at
applications in industrial markets. Wire & Cable's customer base has been
developed through day-to-day servicing of secondary metropolitan markets and
smaller electrical distributors, and a higher percentage of its inventory is
targeted at applications in the electronics industry. Futronix operates a
total of seven distribution centers located in Charlotte, Chicago, Dallas,
Exton (PA), Houston, Sparks (NV) and Tampa and has sales offices located in
Baton Rouge and Portland (OR). Wire & Cable operates a total of six
distribution centers located in Atlanta, Baton Rouge, Denver, Chicago,
Livermore (CA) and Salem (NH). The distribution capabilities and inventories
of Futronix and Wire & Cable as separate entities will be combined to
establish a national distribution network comprised of 12 distribution
facilities. As a result of the combination, the Chicago distribution center of
Wire & Cable, upon the expiration of its lease term in the third quarter of
1996, will be consolidated into the Chicago distribution center of Futronix.
For the year ended December 31, 1995, Futronix and Wire & Cable had net sales
of $29.3 million and $24.5 million, respectively.
SECURITY OWNERSHIP FOLLOWING THE MERGER
In the Merger and simultaneously with the Closing of this Offering, all of
the stockholders of Futronix and Mr. Bruno, the sole stockholder of Wire &
Cable, will exchange all of the securities they hold of Futronix and Wire &
Cable, respectively, for securities of the Company, as follows:
<TABLE>
<CAPTION>
PRE-MERGER POST MERGER(1)
- ---------------------------------- ----------------------------------------------
NUMBER OF
SHARES OR
PRINCIPAL
NUMBER AMOUNT
SECURITY OF SHARES SECURITY OF NOTES
- ----------------------- --------- ---------------------------------- ----------
<S> <C> <C> <C>
Futronix Class A Common
Stock 1,243,985 Common Stock 610,784
Futronix Class B Common
Stock 344,250 Common Stock 169,023
Futronix Class C Common
Stock 48,500 Common Stock 23,813
Wire & Cable Common
Stock 1,000 Common Stock 1,020,317
Futronix Convertible
Preferred Stock 1,000,000 Convertible Preferred Stock 490,990
Futronix Nonconvertible
Preferred Stock 2,200,000 Company Subordinated Notes(2) $2,200,000
Warrants to purchase
Futronix Common Stock 680,673 Warrants to purchase Common Stock 334,204
</TABLE>
- ----------
(1) See "Description of Capital Stock."
(2) The Company will issue subordinated notes (the "Company Subordinated
Notes") in the principal amount of $1.00 for each share of nonconvertible
preferred stock of Futronix. The Company Subordinated Notes will be
payable by the Company in four equal annual installments commencing on
December 30, 2000, with interest payable at an annual rate of 7%.
11
<PAGE>
Pursuant to the Merger Agreement, Mr. Bruno is permitted to sell, prior to
the Closing of this Offering, up to 1% of the outstanding shares of Wire &
Cable common stock held by him (up to 10 of the 1,000 shares of the
outstanding Wire & Cable common stock, or up to 10,203 of the 1,020,317 shares
of Common Stock to be issued to Mr. Bruno pursuant to the Merger Agreement).
Such sale, if it were to occur, will be made to a currently unidentified
person or entity who will not, at the time of such sale or after giving effect
to such sale, be an affiliate of the Company, Wire & Cable, Futronix or any of
their respective affiliates, at a price per share which would be no less than
the equivalent of the mid-point of the range of the initial public offering
price per share of Common Stock shown on the cover page of this Prospectus.
Additionally, simultaneously with the Closing of this Offering and pursuant
to the Merger Agreement, Mr. Bruno will enter into option agreements with Mr.
Monahan and Joan Scott, who will be the Director of Finance of the Company,
pursuant to which Mr. Bruno individually will grant options to Mr. Monahan and
Ms. Scott to purchase from him 165,851 and 27,642 shares of Common Stock,
respectively, out of the 1,020,317 shares of Common Stock to be issued to Mr.
Bruno pursuant to the Merger Agreement. Such options will be provided in
exchange for options to purchase Wire & Cable common stock previously granted
by Mr. Bruno to Mr. Monahan in 1993 and to Ms. Scott in 1994. Further,
pursuant to the Merger Agreement, Mr. Monahan will receive the Value
Appreciation Bonus. See "Management--Options Granted by Officer,"
"Management--Value Appreciation Bonus for Officer" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
ANTICIPATED BENEFITS OF THE MERGER
The Merger will result in the combination of the distribution capabilities
and inventories of Futronix and Wire & Cable, which the Company believes are
complementary, and will establish one of the largest national master
distributors of specialty wire and cable in the United States. In general, the
distribution centers of the companies serve geographically and economically
distinct markets, resulting in minimal customer overlap. Because both Futronix
and Wire & Cable operate as master distributors, no significant start-up costs
or major capital investments will be necessary for the Company to establish
itself as a leading national master distributor. Anticipated benefits of the
Merger include the following:
Increased Market Share. The Company anticipates that its order volume will
increase as a result of its ability to provide a greater level of service.
Improved service levels are expected to result from an expanded distribution
network and increased inventory, both of which will improve the Company's
ability to fill customers' orders.
Greater Customer Penetration. With the addition of distribution centers in
numerous geographically distinct markets, sales representatives previously
responsible for large territories will be able to focus more specifically on
smaller geographic and market areas. The Company believes that this will
result in greater account penetration and enhanced customer service.
Cost Savings. The combination of the businesses of Futronix and Wire & Cable
will result in the consolidation of certain functions creating cost savings.
For example, certain duplicative administrative functions will be eliminated
and the Chicago area facilities of Futronix and Wire & Cable will be
consolidated. In addition, the Company's expanded national distribution
network is expected to result in reduced shipping costs associated with the
sale of wire and cable.
Economies of Scale. The combination of the businesses of Futronix and Wire &
Cable will provide the Company with increased ability to achieve economies of
scale, including increased purchasing power and better inventory management,
which the Company believes will contribute to increased efficiency and
improved profitability.
Knowledgeable and Experienced Personnel. The Merger brings together a
knowledgeable team of industry executives and sales managers with many years
of experience in the sale and distribution of specialty wire and cable and
firmly established customer and supplier relationships. The Merger also
creates a combined sales force in which the branch sales managers have an
average of over 15 years of experience in the specialty wire and cable
industry.
Increased Diversification of Customer Base and Markets. Historically,
Futronix and Wire & Cable have served distinct geographic markets and have
offered products which, to a great extent, are used in dissimilar
applications. The Merger will permit the Company to offer a broader product
line to a wider range of customers and geographic markets, thereby increasing
the diversity of its business.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from this Offering are expected to be
approximately $23.1 million ($26.6 million if the Underwriters' over-allotment
option is exercised in full), assuming an initial public offering price of
$13.00 per share and after deducting estimated underwriting discounts and
commissions and expenses of this Offering.
The Company estimates that it will use approximately $16.2 million of the
net proceeds to repay outstanding indebtedness and, over the next six months,
approximately $4.0 million of the net proceeds to purchase additional
inventory. The Company expects to use the remaining net proceeds for other
working capital and general corporate purposes. A portion of the net proceeds
also may be used for acquisitions, although the Company has not entered into
any definitive agreements or letters of intent with respect to any such
transactions and is not in any negotiations with respect to any written or
oral agreements or understandings regarding such transactions.
Of the $16.2 million of the net proceeds to be used to repay indebtedness,
approximately $15.0 million will be used to repay the principal, plus accrued
interest, if any, under the revolving credit lines of Futronix and Wire &
Cable described below, and approximately $1.2 million will be used to repay
the 7% subordinated promissory notes of Futronix dated October 5, 1994 (the
"Futronix Subordinated Notes"). The Futronix Subordinated Notes mature in 2002
and require four equal annual payments of principal, beginning in 1999, with
quarterly payments of interest at the rate of 7% per year. The Company intends
to borrow $648,267 under its revolving credit lines to fund the payment, seven
days after the Closing of this Offering, of the cash portion of the Value
Appreciation Bonus. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Management--Value Appreciation Bonus for Officer."
The agreement governing the revolving credit line of Futronix (the "Futronix
Revolving Credit Line") permits Futronix to borrow an amount limited to a
borrowing base, as defined, up to a maximum of $15.0 million. As of July 31,
1996, the borrowing base formula permitted borrowing by Futronix of
approximately $15.0 million and the principal amount outstanding was $11.9
million. Amounts outstanding under the Futronix Revolving Credit Line bear
interest at the lender's prime rate (8.25% at July 31, 1996) or the LIBOR rate
plus 2.5% (7.94% at July 31, 1996), as selected from time to time by Futronix,
and become due on June 30, 1997.
The agreement governing the revolving credit line of Wire & Cable (the "W&C
Revolving Credit Line," and together with the Futronix Revolving Credit Line,
the "Revolving Credit Lines") permits Wire & Cable to borrow an amount limited
to a borrowing base, as defined, up to a maximum of $4.5 million. As of July
31, 1996, the borrowing base formula permitted borrowing by Wire & Cable of
approximately $4.5 million and the principal amount outstanding was $3.1
million. Amounts outstanding under the W&C Revolving Credit Line bear interest
at the lender's prime rate (8.75% at July 31, 1996) or the LIBOR rate plus
2.5% (7.94% at July 31, 1996), as selected from time to time by Wire & Cable,
and become due on May 5, 1997. Messrs. Bruno and Monahan currently guarantee
the W&C Revolving Credit Line. Upon the repayment of the W&C Revolving Credit
Line with a portion of the net proceeds from this Offering, such guarantees
will no longer be in effect.
The Company intends to obtain a new revolving credit line having terms
substantially similar to the Revolving Credit Lines now held by Futronix and
Wire & Cable and to have such new credit line in place contemporaneously with
or shortly after the Closing of this Offering.
Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds of this Offering in short-term, investment
grade, interest-bearing securities. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
13
<PAGE>
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends in the foreseeable
future. The Company currently intends to retain future earnings to finance
operations and the expansion of its business. Any future determination to pay
cash dividends will be at the discretion of the board of directors of the
Company and will be dependent upon the Company's financial condition,
operating results, capital requirements and such other factors as the board of
directors of the Company deems relevant. Further, the terms of the Revolving
Credit Lines of each of Futronix and Wire & Cable include, and the terms of
the revolving credit line that the Company intends to obtain contemporaneously
with or shortly after the Closing of this Offering may include, restrictions
on the ability of the Company to pay dividends. See "Risk Factors--Absence of
Dividends."
14
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1996 the unaudited pro forma
capitalization of the Company (i) reflecting the combination of Futronix and
Wire & Cable using the "pooling of interests" method of accounting as if
Futronix and Wire & Cable were one company on June 30, 1996 and (ii) as
adjusted to reflect the issuance and sale of the 1,950,000 shares of Common
Stock offered hereby (at an assumed initial public offering price of $13.00
per share) and the application of the net proceeds therefrom to repay
indebtedness, after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company. See "Use of Proceeds."
This table should be read in conjunction with "Selected Unaudited Pro Forma
Combined Financial Data," "Selected Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the related
unaudited pro forma combined financial statements of the Company, and the
notes thereto, and the audited financial statements of each of Futronix and
Wire & Cable, and the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------
PRO FORMA(1) AS ADJUSTED
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Futronix Revolving Credit Line...................... $11,900 $ --
W&C Revolving Credit Line........................... 3,066 --
Futronix Subordinated Notes......................... 1,243 --
Company Subordinated Notes.......................... 2,200 2,200
Capital lease obligations........................... 18 18
------- -------
Total debt........................................ 18,427 2,218
------- -------
Stockholders' equity:
Series preferred stock, non-dividend paying, $.01
par value, $1.00 redemption value; 1,000,000 shares
authorized......................................... -- --
Convertible preferred stock, non-dividend paying,
$.01 par value, $2.04 redemption value; 490,990
shares authorized; 490,990 shares issued and
outstanding........................................ 1,000 1,000
Common Stock, $.01 par value; 15,000,000 shares
authorized; 1,884,750 issued and outstanding;
3,834,750 shares as adjusted(2).................... 19 38
Additional paid-in capital.......................... 2,389 25,445
Retained earnings................................... 2,505 2,505
------- -------
Total stockholders' equity........................ 5,913 28,988
------- -------
Total capitalization............................ $24,340 $31,206
======= =======
</TABLE>
- ----------
(1) Pursuant to the Merger Agreement, reflects the exchange of 2,200,000
shares of nonconvertible preferred stock of Futronix for $2,200,000
principal amount of Company Subordinated Notes. Also reflects the non-
recurring compensation expense to be incurred by the Company seven days
after the Closing of this Offering, including the issuance of 60,813
shares of Common Stock, in connection with the Value Appreciation Bonus.
See "Description of Capital Stock," "The Merger" and "Management--Value
Appreciation Bonus for Officer."
(2) Excludes 54,254 shares of Common Stock reserved for issuance upon the
exercise of options to be issued under the Equity Compensation Plan
following the Closing of this Offering at an exercise price equivalent to
the initial public offering price per share. Also excludes 334,204 shares
of Common Stock reserved for issuance upon the exercise of the Warrants.
15
<PAGE>
DILUTION
As of June 30, 1996, the net tangible book value of the Company on a pro
forma basis giving effect to the consummation of the Merger was $5.9 million
or $2.18 per share of Common Stock. "Net tangible book value" per share
represents the amount of total tangible assets of the Company reduced by the
amount of its total liabilities, divided by the number of shares of Common
Stock outstanding. As of June 30, 1996, the net tangible book value of the
Company, on a pro forma basis giving effect to the consummation of the Merger
and as adjusted for the sale of the 1,950,000 shares offered hereby and
application of the net proceeds therefrom of $23.1 million (based on an
assumed initial public offering price of $13.00 per share and after deducting
underwriting discounts and commissions and other estimated offering expenses),
would have been approximately $6.22 per share. This represents an immediate
increase of $4.04 per share to existing stockholders and an immediate dilution
of $6.78 per share to new investors. See "The Merger." The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $13.00
Net tangible book value per share before this Offering(1)......... $2.18
Increase per share attributable to new investors.................. 4.04
-----
Net tangible book value per share after this Offering............... 6.22
------
Dilution per share to new investors................................. $ 6.78
======
</TABLE>
The following table summarizes on a pro forma basis as of June 30, 1996
giving effect to the consummation of the Merger the differences between the
total consideration paid and the average price per share paid by the existing
stockholders and the new investors with respect to the number of shares of
Common Stock purchased from the Company (based on an assumed initial public
offering price of $13.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 2,709,944 58.2% $ 2,623,588 9.4% $ .97
New investors................... 1,950,000 41.8 25,350,000 90.6 13.00
--------- ----- ----------- -----
Total......................... 4,659,944 100.0% $27,973,588 100.0%
========= ===== =========== =====
</TABLE>
- ----------
(1) Pursuant to the Merger Agreement, includes: (i) 1,823,937 shares of Common
Stock to be issued in the Merger simultaneously with the Closing of this
Offering; (ii) 60,813 shares of Common Stock to be issued in connection
with the Value Appreciation Bonus seven days after the Closing of this
Offering; (iii) 490,990 shares of Common Stock issuable upon conversion of
the Convertible Preferred Stock; and (iv) 334,204 shares of Common Stock
reserved for issuance upon the exercise of the Warrants. Excludes 54,254
shares of Common Stock reserved for issuance upon the exercise of options
to be issued under the Equity Compensation Plan following the Closing of
this Offering at an exercise price equivalent to the initial public
offering price per share. To the extent that these options are exercised,
there may be further dilution to new investors. See "The Merger,"
"Management--Value Appreciation Bonus for Officer" and "Description of
Capital Stock."
16
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The Company is a holding company organized in 1996 in connection with the
merger of Futronix and Wire & Cable. The Merger will become effective
simultaneously with the Closing of this Offering.
The selected unaudited pro forma combined financial data of the Company
presented below reflect the combination of the businesses of Futronix and Wire
& Cable using the "pooling of interests" method of accounting as if Futronix
and Wire & Cable have always operated as one company. The unaudited pro forma
combined income statement and balance sheet data of the Company for and as of
the years ended December 31, 1993, 1994 and 1995 have been derived from the
audited financial statements of each of Futronix and Wire & Cable. The
unaudited pro forma combined income statement and balance sheet data of the
Company for and as of the six months ended June 30, 1995 and 1996 have been
derived from the unaudited financial statements of each of Futronix and Wire &
Cable, which, in the opinion of management of Futronix and Wire & Cable,
respectively, reflect all adjustments (consisting only of normal recurring
adjustments) that are necessary for a fair presentation of the results for
such periods.
The selected unaudited pro forma combined financial data do not give effect
to any cost savings that may result from the Merger, costs incurred to operate
as a public company or transaction costs (estimated to be approximately
$150,000) relating to the Merger. During the periods presented, Futronix and
Wire & Cable were not under common control or management and, as a result, the
selected unaudited pro forma combined financial data are not necessarily
indicative of or comparable to the financial position or operating results
that would have occurred had the Merger occurred as of or at the beginning of
the periods presented or that will occur following the Merger. See "Selected
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the related unaudited pro forma combined
financial statements of the Company, and the notes thereto, and the audited
financial statements of each of Futronix and Wire & Cable, and the notes
thereto, appearing elsewhere in this Prospectus.
17
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales........................... $13,897 $26,193 $53,791 $ 22,256 $ 35,159
Cost of products sold........... 9,395 18,329 40,352 16,213 27,427
------- ------- ------- -------- --------
Gross profit.................... 4,502 7,863 13,439 6,043 7,732
Operating expenses(1)........... 3,855 6,084 10,351 4,759 6,312
------- ------- ------- -------- --------
Income from operations.......... 647 1,780 3,088 1,284 1,420
Other expense(2)................ (123) (498) (1,032) (428) (674)
------- ------- ------- -------- --------
Income before income taxes...... 524 1,282 2,056 856 746
Income taxes(3)................. 199 476 792 332 290
------- ------- ------- -------- --------
Net income...................... $ 325 $ 806 $ 1,264 $ 524 $ 456
======= ======= ======= ======== ========
As adjusted(4):
Net income..................... $ 1,904 $ 855
Net income per common share.... $ .41 $ .19
Weighted average common shares
outstanding(5)................ 4,598 4,598
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Inventory....................... $ 3,755 $ 8,713 $17,436 $ 15,872 $ 23,226
Working capital(6).............. 1,254 5,398 6,974 5,460 7,133
Total assets(6)................. 7,011 14,959 28,313 24,177 36,403
Total debt(7)................... 3,328 6,606 13,197 13,987 18,427
Stockholders' equity(6)......... 1,725 3,323 5,558 3,826 5,913
</TABLE>
- ----------
(1) No adjustment has been made to reflect the non-recurring compensation
expense of $1,438,836, or $892,078 after tax (assuming an initial public
offering price of $13.00 per share) to be incurred by the Company, seven
days after the sale of the Common Stock offered hereby, in connection with
the Value Appreciation Bonus. See "Management--Value Appreciation Bonus
for Officer."
(2) Adjusted to reflect the interest that would have been incurred on the $2.2
million principal amount of the Company Subordinated Notes to be issued,
pursuant to the Merger Agreement, in exchange for 2.2 million shares of
nonconvertible preferred stock of Futronix.
(3) Prior to this Offering, Wire & Cable was an S corporation for federal and
state income tax purposes. Prior to 1994, Futronix also was an S
corporation for federal and state income tax purposes. Reflects a
provision for income taxes at an assumed effective combined federal and
state income tax rate of 38% for all periods in which Futronix or Wire &
Cable were S corporations.
(4) Adjusted to reflect the sale of 1,950,000 shares of Common Stock in this
Offering and the application of the net proceeds therefrom to repay $16.2
million of indebtedness. Such amounts have not been adjusted to reflect
application of $4.0 million of the net proceeds of this Offering intended
to be used over the next six months to expand the Company's inventory. See
"Use of Proceeds."
(5) Includes: (i) the 1,950,000 shares of Common Stock offered hereby; (ii)
1,823,937 shares of Common Stock to be issued in the Merger simultaneously
with the Closing of this Offering; (iii) an aggregate of 334,204 shares of
Common Stock reserved for issuance upon the exercise of Warrants; and (iv)
an aggregate of 490,990 shares of Common Stock reserved for issuance upon
the conversion of the Convertible Preferred Stock. Does not include (i) an
aggregate of 54,254 shares of Common Stock reserved for issuance upon the
exercise of options to be issued following the Closing of this Offering
pursuant to the Equity Compensation Plan or (ii) 60,813 shares of Common
Stock to be issued in connection with the Value Appreciation Bonus. See
"The Merger" and "Management--Value Appreciation Bonus for Officer."
(6) Adjusted to reflect the non-recurring compensation expense of $1,438,836,
or $892,078 after tax (assuming an initial public offering price of $13.00
per share) to be incurred by the Company, seven days after the Closing of
this Offering, in connection with the Value Appreciation Bonus. See
"Management--Value Appreciation Bonus for Officer."
(7) Adjusted to reflect the exchange, pursuant to the Merger Agreement, of 2.2
million shares of nonconvertible preferred stock of Futronix for $2.2
million principal amount of the Company Subordinated Notes to be issued by
the Company.
18
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data of Futronix as of and for the years
ended December 31, 1991, 1992, 1993, 1994 and 1995 and the selected financial
data of Wire & Cable as of and for the years ended December 31, 1993, 1994 and
1995 have been derived from the audited financial statements of each of
Futronix and Wire & Cable, respectively. The selected financial data of Wire &
Cable as of and for the years ended December 31, 1991 and 1992 have been
derived from the unaudited financial statements of Wire & Cable. The selected
financial data of each of Futronix and Wire & Cable as of and for the six
months ended June 30, 1995 and 1996 have been derived from the unaudited
financial statements of each of Futronix and Wire & Cable, which, in the
opinion of the management of Futronix and Wire & Cable, respectively, reflect
all adjustments (consisting only of normal recurring adjustments) that are
necessary for a fair presentation of the results for such periods. The
following data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the audited
financial statements of each of Futronix and Wire & Cable, and the notes
thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
STATEMENT OF INCOME SIX MONTHS ENDED
DATA: YEAR ENDED DECEMBER 31, JUNE 30,
- ------------------- ---------------------------------------- -----------------
1991(2) 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
FUTRONIX
Sales................... $ 332 $ 1,844 $ 2,874 $ 5,951 $29,280 $ 9,937 $ 22,581
Gross profit............ 141 1,084 1,562 2,927 7,806 3,121 4,878
Income (loss) from oper-
ations................. (96) 100 240 702 1,698 572 780
Income (loss) before in-
come taxes............. (99) 70 171 522 1,008 313 325
Net income (loss)....... (99) 70 171 301 614 188 195
Pro forma net income
(loss)(1).............. (61) 43 106 335 614 188 195
WIRE & CABLE
Sales................... $ 9,464 $ 8,020 $11,023 $20,242 $24,511 $ 12,319 $ 12,578
Gross profit............ 1,909 2,025 2,940 4,937 5,633 2,922 2,854
Income from operations.. 246 245 407 1,077 1,391 712 640
Income before income
taxes.................. 170 399 353 913 1,203 620 499
Net income.............. 170 399 353 913 1,203 620 499
Pro forma net income
(3).................... 105 247 219 566 746 384 309
<CAPTION>
BALANCE SHEET DATA: DECEMBER 31, JUNE 30,
- ------------------- ---------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
FUTRONIX
Inventory............... $ 605 $ 1,055 $ 2,056 $ 5,941 $14,005 $ 12,531 $ 18,232
Working capital......... 577 554 172 4,047 5,120 3,746 5,183
Total assets............ 1,016 1,763 2,732 8,298 21,120 16,803 26,672
Total debt.............. 100 678 1,950 2,643 8,893 9,493 13,143
Mandatorily redeemable
preferred stock........ -- -- -- 2,200 2,200 2,200 2,200
Stockholders' equity.... 873 943 414 1,692 3,306 1,880 3,550
WIRE & CABLE
Inventory............... $ 1,066 $ 1,215 $ 1,700 $ 2,772 $ 3,431 $ 3,341 $ 4,993
Working capital......... 1,031 1,009 1,184 1,453 1,956 1,815 2,051
Total assets............ 2,818 2,602 3,732 6,114 6,646 6,828 9,185
Total debt.............. 392 483 1,378 1,763 2,104 2,294 3,084
Stockholder's equity.... 1,289 1,251 1,413 1,733 2,353 2,047 2,465
</TABLE>
- ----------
(1) Adjusted to reflect the income taxes that would have been payable if
Futronix was a C corporation (rather than an S corporation) for federal
and state income tax purposes at an assumed combined effective federal and
state income tax rate of 38%.
(2) Includes historical income statement data for Futronix from its inception
on September 3, 1991 through December 31, 1991.
(3) Adjusted to reflect income taxes that would have been payable if Wire &
Cable was a C corporation (rather than an S corporation) for federal and
state income tax purposes at an assumed combined effective federal and
state income tax rate of 38%.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a national master distributor of specialty wire and cable
that sells to electrical distributors primarily located in the United States.
The Company was organized in 1996 as a holding company in connection with the
Merger of Futronix and Wire & Cable. The Merger will become effective
simultaneously with the Closing of this Offering and will be accounted for
under the "pooling of interests" method of accounting as discussed in Note 1
to the Notes to Unaudited Pro Forma Combined Financial Statements. The
following discussion describes the financial condition and results of
operations of each of Futronix and Wire & Cable. Brief descriptive financial
information for the Company also is provided.
From January 1, 1993 through June 30, 1996, Futronix opened six distribution
centers in markets it previously did not serve and added 89 employees,
including 35 sales personnel. The opening of new distribution centers has been
an important source of sales growth for Futronix. It has been the strategy of
Futronix to open and fully staff facilities that are larger than necessary to
support initial sales because Futronix has believed that such actions would
facilitate future market penetration and sales growth. In addition, beginning
in 1995, Futronix began incurring expansion-related costs that contributed to
a decline in income before income taxes as a percentage of sales. In certain
reporting periods, the full costs relating to the start-up of distribution
facilities were incurred even though such facilities were not operational for
the entire period. As a result, facility-related expenses, such as rent and
utilities, combined with payroll expenses of Futronix, increased $2.8 million,
or 228%, in 1995, as compared to 1994, and $1.0 million, or 62%, in the first
six months of 1996, as compared to the first six months of 1995. It has been
the experience of Futronix that after a new distribution center has become
fully operational in its market, the resulting increase in revenues and
profitability has offset the additional associated costs.
From January 1, 1993 through June 30, 1996, Wire & Cable opened three
distribution centers in markets that it previously did not serve and relocated
two distribution centers to larger facilities. The opening and relocation of
distribution centers has been an important source of sales growth for Wire &
Cable. The opening and relocation of these facilities did not result in a
significant increase in facility-related or payroll expenses as a percentage
of net sales. Wire & Cable has utilized a strategy of expanding into new
markets by opening smaller distribution centers with a lower level of
inventory and operating expenses, and expanding operations in line with sales
growth.
The Company believes that the depth, breadth and balance of its inventory
directly corresponds with its ability to serve effectively the specialty wire
and cable marketplace. In addition, the Company believes that appropriate
levels of inventory may improve profitability by, among other things, (i)
minimizing the need to purchase products from outside sources to fill customer
orders and (ii) reducing transportation and shipping costs associated with the
sale of wire and cable by having available the required products at the most
geographically desirable location for the customer. Since 1993, Futronix has
operated with a similar strategy. Futronix increased its level of inventory
$17.1 million, from $1.1 million as of December 31, 1992, to $18.2 million as
of June 30, 1996. Futronix believes that the increase in its inventory has
enabled it to meet more effectively the requirements of its customers,
contributing to its revenue growth since 1993. Wire & Cable increased its
level of inventory $3.8 million, from $1.2 million as of December 31, 1992, to
$5.0 million as of June 30, 1996. Wire & Cable has invested less aggressively
in inventory than Futronix, because Wire & Cable generally has employed a
strategy of operating in secondary metropolitan markets using internally
generated capital to fund growth. The Company expects that the majority of the
inventory purchased with the proceeds from this Offering will be allocated to
increase inventory at the distribution centers of Wire & Cable.
Futronix was organized in 1991 primarily for the purpose of distributing
electrical apparatus. In late 1994, Futronix began distributing specialty wire
and cable, which accounted for approximately 50%,
20
<PAGE>
86% and 91% of Futronix's revenues in 1994, 1995 and the first six months of
1996, respectively. Gross margins (gross profit as a percentage of net sales)
for specialty wire and cable generally are lower than those for electrical
apparatus. Therefore, as the revenue mix of Futronix has shifted to include a
greater proportion of specialty wire and cable, Futronix has experienced a
decline in gross margins.
Approximately one-third of the specialty wire and cable inventory maintained
by the Company has significant copper content. In late 1995, the price of raw
copper began a period of volatility during which copper prices fluctuated
between a high of $1.40 per pound on November 21, 1995 and a low of $.87 per
pound on July 16, 1996. Although the experience of Futronix and Wire & Cable
has been that changes in copper prices can be passed through to their
customers, both companies have been, and the Company will be, exposed to
fluctuations in copper prices to the extent that inventory is maintained.
Futronix estimates that changes in copper prices reduced gross margins by
approximately two percentage points in the first six months of 1996. Wire &
Cable estimates that changes in copper prices reduced gross margins by
approximately one percentage point in the first six months of 1996.
Prior to 1994, Futronix was an S corporation for federal and state income
tax purposes. Wire & Cable is and has been an S corporation for federal and
state income tax purposes. On January 1, 1994, Futronix became a C corporation
for federal and state income tax purposes and has been taxed as such since
that time. Futronix, as an S corporation, was taxed at a de minimis rate for
state franchise taxes in 1993. Wire & Cable, as an S corporation, was taxed at
a de minimis rate for state franchise taxes in 1993, 1994, 1995 and the six
months ended June 30, 1996. Currently, the federal tax rate for C corporations
ranges from 15% to a maximum rate of 35% for income over $10 million. As a
result, a change in form will affect the earnings and cash flows of the
Company by increasing the level of federal and state income tax. The pro forma
net income in the accompanying Unaudited Pro Forma Combined Financial
Statements of the Company included elsewhere in this Prospectus reflects
results as if both Futronix and Wire & Cable had always been C corporations.
RESULTS OF OPERATIONS
Futronix. The following table sets forth selected income statement data of
Futronix expressed as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------- ------------------
1993 1994 1995 1995 1996
----- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit.......................... 54.4 49.2 26.7 31.4 21.6
Operating expenses.................... 46.0 37.4 20.9 25.6 18.1
Income from operations................ 8.3 11.8 5.8 5.8 3.5
Interest expense...................... 2.4 2.5 2.4 2.6 2.0
Pro forma net income.................. 3.7 5.6 2.1 1.9 0.9
</TABLE>
Wire & Cable. The following table sets forth selected income statement data
of Wire & Cable expressed as a percentage of net sales for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------- ------------------
1993 1994 1995 1995 1996
----- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit.......................... 26.7 24.4 23.0 23.7 22.7
Operating expenses.................... 23.0 19.1 17.3 17.9 17.6
Income from operations................ 3.7 5.3 5.7 5.8 5.1
Interest expense...................... 0.7 0.8 0.8 0.7 0.9
Pro forma net income.................. 2.0 2.8 3.0 3.1 2.5
</TABLE>
21
<PAGE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
NET SALES. The Company's net sales increased $12.9 million, or 58%, to $35.2
million for the six months ended June 30, 1996, from $22.3 million for the six
months ended June 30, 1995.
Futronix. Net sales increased $12.7 million, or 127%, to $22.6 million for
the six months ended June 30, 1996, from $9.9 million for the six months ended
June 30, 1995. $12.3 million, or 98%, of the increase resulted from additional
wire and cable sales. The remaining 2% of the increase resulted from an
increase in electrical apparatus sales. Of the total net sales increase, $11.3
million was attributable to a full six months of operations in 1996 at the
Charlotte, Tampa and Exton (PA) distribution centers and the Dallas sales
office, all of which were opened during the first six months of 1995. Net
sales at these locations increased $6.9 million, or 157%, to $11.3 million for
the six months ended June 30, 1996, from $4.4 million for the six months ended
June 30, 1995. Such increase was the result of a larger inventory, expanded
lines of inventory and added sales support.
Wire & Cable. Net sales increased $259,000, or 2%, to $12.6 million for the
six months ended June 30, 1996, from $12.3 million for the six months ended
June 30, 1995. Sales growth moderated from prior periods primarily due to
planned inventory reductions at the end of 1995 in anticipation of the move of
Wire & Cable's Atlanta distribution center to a larger facility.
GROSS PROFIT. The Company's gross profit increased $1.7 million, or 27%, to
$7.7 million for the six months ended June 30, 1996, from $6.0 million for the
six months ended June 30, 1995.
Futronix. Gross profit increased $1.8 million, or 56%, to $4.9 million for
the six months ended June 30, 1996, from $3.1 million for the six months ended
June 30, 1995. Gross profit as a percentage of net sales decreased to 22% for
the six months ended June 30, 1996 from 31% for the six months ended June 30,
1995. This decrease was attributable to a shift in sales mix as sales of wire
and cable, which has a higher cost as a percentage of sales than that of
electrical apparatus, have grown faster than sales of electrical apparatus.
Wire and cable sales comprised approximately 91% of Futronix's revenues for
the six months ended June 30, 1996, compared to approximately 82% for the six
months ended June 30, 1995. In addition, gross profit as a percentage of net
sales was affected negatively by downward fluctuations in the price of copper.
Wire & Cable. Gross profit decreased $68,500, or 2%, to $2.85 million for
the six months ended June 30, 1996, from $2.92 million for the six months
ended June 30, 1995. Gross profit as a percentage of net sales decreased to
23% for the six months ended June 30, 1996 from 24% for the six months ended
June 30, 1995. This decrease primarily resulted from downward fluctuations in
the price of copper.
OPERATING EXPENSES. The Company's operating expenses increased $1.6 million,
or 33%, to $6.3 million for the six months ended June 30, 1996, from $4.8
million for the six months ended June 30, 1995.
Futronix. Operating expenses increased $1.6 million, or 61%, to $4.1 million
for the six months ended June 30, 1996, from $2.5 million for the six months
ended June 30, 1995. Operating expenses increased because a greater number of
distribution centers were operating during the six months ended June 30, 1996
than were operating during the six months ended June 30, 1995. Such expenses
decreased as a percentage of net sales to 18% for the six months ended June
30, 1996 from 26% for the six months ended June 30, 1995 because many of these
expenses were fixed.
Wire & Cable. Operating expenses were stable at $2.2 million for the six
months ended June 30, 1996 and 1995. Such expenses decreased as a percentage
of net sales to 17.6% for the six months ended June 30, 1996 from 17.9% for
the six months ended June 30, 1995 because some of these expenses were fixed.
INCOME FROM OPERATIONS. The Company's income from operations increased
$135,900, or 11%, to $1.4 million for the six months ended June 30, 1996, from
$1.3 million for the six months ended June 30, 1995.
22
<PAGE>
Futronix. Income from operations increased $207,700, or 36%, to $779,900 for
the six months ended June 30, 1996, from $572,200 for the six months ended
June 30, 1995 due to the factors described above.
Wire & Cable. Income from operations decreased $71,800, or 10%, to $640,300
for the six months ended June 30, 1996, from $712,100 for the six months ended
June 30, 1995 due to the factors described above.
INTEREST EXPENSE. The Company's interest expense increased $219,800, or 63%,
to $566,700 for the six months ended June 30, 1996, from $346,900 for the six
months ended June 30, 1995.
Futronix. Interest expense increased $196,200, or 76%, to $455,300 for the
six months ended June 30, 1996, from $259,100 for the six months ended June
30, 1995. This increase was attributable to the increase in indebtedness
incurred to finance additional inventory.
Wire & Cable. Interest expense increased $23,600, or 27%, to $111,400 for
the six months ended June 30, 1996, from $87,800 for the six months ended June
30, 1995. This increase was attributable to the increase in indebtedness to
finance additional working capital, primarily for inventory.
PRO FORMA NET INCOME. The Company's pro forma net income decreased $68,100,
or 14%, to $504,100 for the six months ended June 30, 1996, from $572,200 for
the six months ended June 30, 1995.
Futronix. Net income increased $6,800, or 4%, to $194,800 for the six months
ended June 30, 1996, from $188,000 for the six months ended June 30, 1995.
Futronix's combined effective federal and state income tax rate was 40% for
the six months ended June 30, 1996 and 1995.
Wire & Cable. Pro forma net income decreased $74,900, or 19%, to $309,300
for the six months ended June 30, 1996, from $384,200 for the six months ended
June 30, 1995.
Pro forma net income has been adjusted to reflect income taxes that would
have been payable by Wire & Cable if it was a C corporation instead of an S
corporation for federal and state income tax purposes during the six months
ended June 30, 1996 and 1995 at an assumed combined effective federal and
state income tax rate of 38%.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. The Company's net sales increased $27.6 million, or 105%, to
$53.8 million for 1995, from $26.2 million for 1994.
Futronix. Net sales increased $23.3 million, or 392%, to $29.3 million for
1995, from $6.0 million for 1994. $22.3 million, or 96%, of the increase
resulted from additional wire and cable sales. The remaining 4% of the
increase resulted from an increase in electrical apparatus sales. Of the total
net sales increase, $6.6 million resulted from increased sales from the
Houston distribution center and $16.7 million resulted from sales from the
sales office and distribution centers that were opened in Dallas, Charlotte,
Tampa and Exton (PA) during 1995.
Wire & Cable. Net sales increased $4.3 million, or 21%, to $24.5 million for
1995, from $20.2 million for 1994. This increase resulted from $785,000 in
sales from a new distribution center opened in the Denver area and $1.1
million in sales from a new distribution center relocated from New Jersey to
Salem (NH), which had a more favorable business climate. The remaining
increase of $2.4 million was attributable to increased sales at existing
distribution centers.
GROSS PROFIT. The Company's gross profit increased $5.6 million, or 71%, to
$13.4 million for 1995, from $7.9 million for 1994.
23
<PAGE>
Futronix. Gross profit increased $4.9 million, or 167%, to $7.8 million for
1995, from $2.9 million for 1994. Gross profit as a percentage of net sales
decreased to 27% for 1995 from 49% for 1994. This decrease was attributable to
a shift in sales mix as sales of wire and cable, which has a higher cost as a
percentage of sales than that of electrical apparatus, have grown faster than
sales of electrical apparatus. Wire and cable sales comprised approximately
86% of Futronix's revenues for 1995, compared to approximately 50% for 1994.
Wire & Cable. Gross profit increased $696,700, or 14%, to $5.6 million for
1995, from $4.9 million for 1994. Gross profit as a percentage of net sales
decreased to 23% for 1995 from 24% for 1994. This decrease was attributable to
Wire & Cable's strategy to become more competitive in its pricing in order to
gain market share.
OPERATING EXPENSES. The Company's operating expenses increased $4.3 million,
or 70%, to $10.4 million for 1995, from $6.1 million for 1994.
Futronix. Operating expenses increased $3.9 million, or 175%, to $6.1
million for 1995, from $2.2 million for 1994. This increase primarily resulted
from the opening of a sales office and three additional distribution centers.
Such expenses decreased as a percentage of net sales to 21% for 1995 from 37%
for 1994 because many of these expenses were fixed.
Wire & Cable. Operating expenses increased $383,400, or 10%, to $4.2 million
for 1995, from $3.9 million for 1994. Such expenses decreased as a percentage
of net sales to 17% for 1995 from 19% for 1994 because many of these expenses
were fixed.
INCOME FROM OPERATIONS. The Company's income from operations increased $1.3
million, or 73%, to $3.1 million for 1995, from $1.8 million for 1994.
Futronix. Income from operations increased $995,300, or 142%, to $1.7
million for 1995, from $702,400 for 1994 due to the factors described above.
Wire & Cable. Income from operations increased $313,300, or 29%, to $1.4
million for 1995, from $1.1 million for 1994 due to the factors described
above.
INTEREST EXPENSE. The Company's interest expense increased $555,500, or
173%, to $877,500 for 1995, from $322,000 for 1994.
Futronix. Interest expense increased $540,000, or 360%, to $690,100 for
1995, from $150,100 for 1994. This increase was attributable to the increase
in indebtedness incurred to finance inventory for the three additional
distribution centers.
Wire & Cable. Interest expense increased $15,500, or 9%, to $187,400 for
1995, from $171,900 for 1994. This increase was attributable to the increase
in indebtedness incurred for general corporate purposes.
PRO FORMA NET INCOME. The Company's pro forma net income increased $458,400,
or 51%, to $1.4 million for 1995, from $901,600 for 1994.
Futronix. Net income increased $279,000, or 83%, to $614,200 for 1995, from
pro forma net income of $335,200 for 1994. Futronix's combined effective
federal and state income tax rate for 1995 was 39%, compared to 42.3% for
1994.
Wire & Cable. Pro forma net income increased $179,300, or 32%, to $745,700
for 1995, from $566,400 for 1994.
Pro forma net income has been adjusted to reflect income taxes that would
have been payable by Wire & Cable if it was a C corporation instead of an S
corporation for federal and state income tax purposes during both 1995 and
1994 at an assumed combined effective federal and state income tax
24
<PAGE>
rate of 38%, and the elimination of $34,000 in deferred tax adjustments
related to Futronix's change in status from an S corporation to a C
corporation commencing January 1, 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
NET SALES. The Company's net sales increased $12.3 million, or 88%, to $26.2
million for 1994, from $13.9 million for 1993.
Futronix. Net sales increased $3.1 million, or 107%, to $6.0 million for
1994, from $2.9 million for 1993. This increase was attributable to the
relocation of the Houston distribution center to a larger facility that
provided additional capacity to increase inventory and commence wire and cable
sales.
Wire & Cable. Net sales increased $9.2 million, or 84%, to $20.2 million for
1994, from $11.0 million for 1993. This increase resulted from $3.2 million in
sales from a new distribution center opened in Livermore (CA) and $6.0 million
from increased sales at existing distribution centers resulting from increased
availability of inventory and additions to its sales force.
GROSS PROFIT. The Company's gross profit increased $3.4 million, or 75%, to
$7.9 million for 1994, from $4.5 million for 1993.
Futronix. Gross profit increased $1.3 million, or 87%, to $2.9 million for
1994, from $1.6 million for 1993. Gross profit as a percentage of net sales
decreased to 49% for 1994 from 54% for 1993. This decrease was attributable to
the commencement of wire and cable sales in late 1994, which has a higher cost
as a percentage of sales than that of electrical apparatus. Wire and cable
sales comprised approximately 50% of Futronix's revenues for 1994.
Wire & Cable. Gross profit increased $2.0 million, or 68%, to $4.9 million
for 1994, from $2.9 million for 1993. Gross profit as a percentage of net
sales decreased to 24% for 1994 from 27% for 1993. This decrease was
attributable to Wire & Cable's strategy to become more competitive in its
pricing in order to gain market share.
OPERATING EXPENSES. The Company's operating expenses increased $2.2 million,
or 58%, to $6.1 million for 1994, from $3.9 million for 1993.
Futronix. Operating expenses increased $901,600, or 68%, to $2.2 million for
1994, from $1.3 million for 1993. This increase primarily resulted from the
relocation of the Houston distribution center to a larger facility and the
related increase in sales and warehouse personnel required to support the new
facility. Such expenses decreased as a percentage of net sales to 37% for 1994
from 46% for 1993 because many of these expenses were fixed.
Wire & Cable. Operating expenses increased $1.4 million, or 52%, to $3.9
million for 1994, from $2.5 million for 1993. This increase primarily resulted
from higher sales personnel costs, start-up costs associated with opening and
relocating distribution centers and additional warehousing expenses. Such
expenses decreased as a percentage of net sales to 19% for 1994 from 23% for
1993 because some of these expenses were fixed.
INCOME FROM OPERATIONS. The Company's income from operations increased $1.1
million, or 175%, to $1.8 million for 1994, from $647,000 for 1993.
Futronix. Income from operations increased $462,600, or 193%, to $702,400
for 1994, from $239,800 for 1993 due to the factors described above.
Wire & Cable. Income from operations increased $670,100, or 165%, to $1.1
million for 1994, from $407,200 for 1993 due to the factors described above.
25
<PAGE>
INTEREST EXPENSE. The Company's interest expense increased $181,100, or
129%, to $322,000 for 1994, from $140,900 for 1993.
Futronix. Interest expense increased $81,000, or 117%, to $150,100 for 1994,
from $69,100 for 1993. This increase was attributable to the increase in
indebtedness incurred to finance inventory and capital expenditures for
equipment and improvements for a larger distribution center in Houston.
Wire & Cable. Interest expense increased $100,200, or 140%, to $171,900 for
1994, from $71,700 for 1993. This increase was attributable to the increase in
indebtedness incurred for general corporate purposes.
PRO FORMA NET INCOME. The Company's pro forma net income increased $576,800,
or 178%, to $901,600 for 1994, from $324,800 for 1993.
Futronix. Pro forma net income increased $229,400, or 217%, to $335,200 for
1994, from $105,800 for 1993. Futronix's combined effective federal and state
income tax rate for 1994 was 42.3%.
Wire & Cable. Pro forma net income increased $347,500, or 159%, to $566,400
for 1994, from $218,900 for 1993.
Pro forma net income has been adjusted to reflect income taxes that would
have been payable by each of Futronix and Wire & Cable if Futronix and Wire &
Cable were C corporations instead of S corporations for federal and state
income tax purposes during 1993 and if Wire and Cable was a C corporation
instead of an S corporation for federal and state income tax purposes during
1994. The assumed combined effective federal and state income tax rate during
these periods was 38%. Futronix's income taxes for 1994 reflect the
elimination of $34,000 in deferred tax adjustments related to its change in
status from an S corporation to a C corporation commencing January 1, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Both Futronix and Wire & Cable have required capital primarily to fund
working capital to support sales growth and, to a lesser extent, to fund
capital expenditures. The primary sources of financing for Futronix have been
the Futronix Revolving Credit Line, the issuance of the Futronix Subordinated
Notes in 1994 and the sale of equity-related securities of Futronix in 1995
and 1994. The primary sources of financing for Wire & Cable have been the W&C
Revolving Credit Line and cash flow from operations. Approximately $15.0
million of the net proceeds from this Offering will be used to repay all of
the amounts currently outstanding under the Revolving Credit Lines. In
addition, $1.2 million of the net proceeds from this Offering will be used to
retire the Futronix Subordinated Notes. The Company believes that the net
proceeds from this Offering, income from expanded operations as a result of
the Merger and the ability to borrow under the Revolving Credit Lines, or the
new revolving credit line which the Company intends to obtain
contemporaneously with or shortly after the Closing of this Offering, will be
sufficient to fund the Company's cash requirements for the foreseeable future.
Cash used by Futronix in operating activities was $3.8 million and $6.2
million for the six months ended June 30, 1996 and the year ended December 31,
1995, respectively. In order to achieve higher sales, Futronix opened
distribution centers in Chicago, Dallas and Sparks (NV) and a sales office in
Baton Rouge during the six months ended June 30, 1996, and it opened
distribution centers in Charlotte, Tampa and Exton (PA) and a sales office in
Dallas during the year ended December 31, 1995. These new facilities required
additional working capital which resulted in increases in accounts receivable
for the six months ended June 30, 1996 and the year ended December 31, 1995 of
$939,900 and $3.9 million, respectively, and increases in inventory for the
six months ended June 30, 1996 and the year ended December 31, 1995 of $4.2
million and $8.1 million, respectively. These increases in working capital
were partially offset by increases in accounts payable for the six months
ended June 30, 1996 and the year ended December 31, 1995 of $1.2 million and
$4.6 million, respectively.
26
<PAGE>
Cash used by Wire & Cable in operating activities was $544,300 for the six
months ended June 30, 1996. Cash provided by operating activities was $457,700
for the year ended December 31, 1995. Wire and Cable's cash requirements were
affected for the six months ended June 30, 1996 and the year ended December
31, 1995 by the need for increased working capital to achieve higher levels of
sales. Accounts receivable increased by $817,900 for the six months ended June
30, 1996 as a result of increased sales. Receivables decreased by $296,300 for
the year ended December 31, 1995 primarily because of a cash discount program
instituted by Wire & Cable for its customers in the beginning of 1995 which
resulted in faster payments. Inventory increased by $1.6 million for the six
months ended June 30, 1996 and by $658,400 for the year ended December 31,
1995 as a result of Wire & Cable's strategic decision to increase inventory
levels at certain distribution centers, which inventory increase was partially
offset by the planned inventory reductions at the Atlanta distribution center
at the end of 1995 in anticipation of the move of Wire & Cable's Atlanta
distribution center to a larger facility. The increase in working capital for
the six months ended June 30, 1996 was offset by an increase in accounts
payable of $1.6 million, which increase was directly related to the increase
in inventory levels. Accounts payable decreased by $382,300 for the year ended
December 31, 1995 because Wire & Cable received available cash discounts
offered by suppliers and as a result of the planned inventory reductions at
the Atlanta distribution center.
Futronix's cash used in investing activities related primarily to capital
expenditures incurred as a result of opening additional distribution centers.
Capital expenditures related to such expansion typically included the purchase
of office furniture and equipment, forklift trucks and wire cutting machinery
in amounts that were not material to Futronix's financial position. Capital
expenditures were $369,200, $829,700, $1.0 million and $33,700 for the six
months ended June 30, 1996, and for the years ended December 31, 1995, 1994
and 1993, respectively.
Wire & Cable's cash used in investing activities related to furniture and
equipment, routine replacements and upgrades of furniture and office and
warehouse equipment. Capital expenditures were $87,400, $252,800, $143,200 and
$103,200 for the six months ended June 30, 1996, and for the years ended
December 31, 1995, 1994 and 1993, respectively.
Futronix currently maintains the Futronix Revolving Credit Line which
permits borrowing equal to a defined borrowing base up to a maximum of $15.0
million. The amount outstanding under the Futronix Revolving Credit Line as of
June 30, 1996 was $11.9 million. Availability of advances under the Futronix
Revolving Credit Line expires on June 30, 1997. The Futronix Revolving Credit
Line primarily has been used to finance operations, expand inventory and
finance investing activities related to the acquisition of machinery and
equipment for the opening of additional sales offices and distribution
centers.
Wire & Cable currently maintains the W&C Revolving Credit Line which permits
borrowing equal to a defined borrowing base up to a maximum of $4.5 million.
The amount outstanding under the W&C Revolving Credit Line as of June 30, 1996
was $3.1 million. Availability of advances under the W&C Revolving Credit Line
expires on May 5, 1997. The W&C Revolving Credit Line primarily has been used
to finance working capital, including additional inventory.
Upon the closing of this Offering, the Revolving Credit Lines, after the
repayment of all of the outstanding amounts thereunder from a portion of the
net proceeds from this Offering, will have aggregate availability of
approximately $19.5 million.
The Company intends to finance the payment to Paul R. Monahan, seven days
after the Closing of this Offering, of the cash portion of the Value
Appreciation Bonus ($648,267) through available borrowings under one of the
Revolving Credit Lines. Because such amount and the aggregate value of the
Common Stock portion of the Value Appreciation Bonus paid to Mr. Monahan will
be expensed by the Company and will be fully deductible for federal and state
income tax purposes, the Company believes the effect of paying the cash
portion of the Value Appreciation Bonus on the Company's working capital will
not be significant.
27
<PAGE>
BUSINESS
GENERAL
The Company is a leading national master distributor of specialty wire and
cable, serving more than 1,000 electrical distributors throughout the United
States. The Company seeks to serve as an efficient single source of supply and
as the distributor of choice for electrical distributors by maintaining for
immediate delivery large quantities of over 10,000 specialty wire and cable
products purchased from more than 50 manufacturers worldwide, as well as
limited quantities of complementary products. The Company's products typically
are used in specific, often highly-sophisticated applications such as
telecommunications systems, factory automation, "intelligent" buildings and
computer systems. The Company believes that the products it sells are used
primarily within the telecommunications, electronics, process and
manufacturing industries and that a substantial portion of those products are
used for MRO applications. The Company generally does not sell commodity wire
and cable, such as that used in commercial and residential construction.
In recent years, the Company has experienced rapid growth which it
attributes to the growth of the estimated $2.4 billion specialty wire and
cable market as well as several internal factors, including: (i) the opening
of seven distribution centers since January 1, 1995 (for a current total of
12), creating a national distribution system; (ii) a significant increase in
the breadth and depth of the Company's inventory, providing greater
opportunity to secure a customer's order; (iii) the Company's ability to
service consistently the demands of its customers on a just-in-time basis; and
(iv) an increase in the number of sales personnel employed by the Company,
many of whom have substantial experience in the specialty wire and cable
industry. In addition, the Company believes that it has benefitted from its
operating philosophy of selling exclusively to electrical distributors and not
directly to end-users, such as construction contractors and installers.
The Company has assembled a knowledgeable team of industry executives and
sales managers, each of whom has many years of experience in the sale and
distribution of specialty wire and cable and firmly established customer and
supplier relationships. Terrence M. Hunt, the Company's President, founded
Futronix and co-founded in 1975 HWC Distribution Corp., a master distributor
of specialty wire and cable that completed its initial public offering in 1987
and was sold to ALLTEL Corporation for $143 million in 1989. Mr. Hunt and many
of the Company's current employees were instrumental in HWC Distribution
Corp.'s growth from its inception to its sale. Theodore J. Bruno, who will be
the Vice Chairman of the Company, founded Wire & Cable and has over 25 years
of experience in the specialty wire and cable industry. Paul R. Monahan, who
will be the Company's Chief Financial Officer, served as Wire & Cable's chief
operating officer and, together with Mr. Bruno, developed Wire & Cable into a
national master distributor of specialty wire and cable. In addition, the
branch sales managers of the Company's distribution centers have an average of
over 15 years of experience in the specialty wire and cable industry. The
senior executives and branch sales managers of the Company will own
approximately 39% of the outstanding shares of Common Stock (on a fully
diluted basis) upon consummation of this Offering.
INDUSTRY
Total revenues generated in 1995 from the sale of specialty wire and cable,
the market in which the Company participates, is estimated by the Company to
be approximately $2.4 billion. This represents 20% of the total revenues
generated in the overall wire and cable industry, which are estimated by
industry sources to be approximately $12 billion.
Specialty wire and cable generally is distinguished from commodity wire and
cable by its end uses. Specialty wire and cable principally is used in
specific, often highly-sophisticated applications such as data transmission,
telecommunications systems, factory automation, "intelligent" buildings,
computer
28
<PAGE>
systems, multimedia communications, process monitoring and control, and
security and fire monitoring and control. The Company believes that the use of
many of these applications is expanding, thereby resulting in increased demand
for specialty wire and cable. Commodity wire and cable generally is used in
less-specialized applications such as commercial and residential construction.
Specialty wire and cable is manufactured by hundreds of manufacturers
worldwide and historically has been sold by manufacturers directly to
electrical distributors through several methods of distribution, such as
direct sales and through independent, non-exclusive manufacturers'
representatives. Electrical distributors, which sell specialty wire and cable
to electrical contractors and other end-users, generally seek to avoid
maintaining significant levels of specialty wire and cable inventory because
of the difficulty of predicting the precise product requirements (type,
length, gauge, etc.) of their wire and cable customers. Therefore, electrical
distributors generally attempt to purchase specialty wire and cable directly
from manufacturers only on an as-needed basis in response to specific customer
orders. However, in order to achieve efficient and cost-effective production
planning and economies of scale, manufacturers of specialty wire and cable
typically impose upon electrical distributors long lead times and purchase
order minimums, making it difficult and costly for electrical distributors to
properly service their specialty wire and cable customers.
An alternative channel of distribution for specialty wire and cable has
developed whereby "master distributors" serve as a replacement for
manufacturers' representatives and other less efficient distribution methods.
The principal activities undertaken by master distributors are to purchase and
inventory large quantities of specialty wire and cable on a regular basis from
many different manufacturers and market and sell such products to electrical
distributors (or, the case of certain master distributors other than the
Company, directly to end-users) on an as-needed, just-in-time basis. By
undertaking these activities, master distributors of specialty wire and cable
seek to better meet the needs of electrical distributors and manufacturers.
The Company believes that master distributors permit electrical distributors
to respond more consistently on a same-day shipment basis to their customers'
specialty wire and cable orders, fill relatively small orders of specialty
wire and cable and reduce the amount of specialty wire and cable in their
inventory. The Company also believes that master distributors allow
manufacturers of specialty wire and cable to improve the efficiency and cost-
effectiveness of their production planning, achieve better economies of scale
and reduce the marketing and sales effort required by manufacturers to sell
their products.
The Company believes the benefits described above provided by master
distributors have supported a shift towards master distributors as the
distribution method of choice for manufacturers of specialty wire and cable
and electrical distributors. The Company also believes that there are
currently only two national master distributors of specialty wire and cable in
addition to the Company and that master distributors operate in a highly
fragmented market.
BUSINESS STRATEGY
The Company's objective is to become the leading national master distributor
of specialty wire and cable through strategic expansion and a focus on high
quality, value-added customer service. Specifically, the Company seeks to: (i)
penetrate additional markets through the expansion of its network of
distribution centers; (ii) market its national distribution capabilities to
electrical distributors which have national operations; (iii) expand product
offerings and increase the levels of inventory at its existing distribution
centers; (iv) utilize profitability-based incentive compensation for its sales
force; and (v) integrate and exploit its information technology to provide its
customers with immediate access to product and other key information.
29
<PAGE>
Expand Distribution Network. The Company has established a national
distribution network by opening seven additional distribution facilities (for
a current total of 12) since January 1, 1995. The Company has identified
specific markets in the United States which it believes can offer attractive
expansion opportunities for new specialty wire and cable distribution centers
and intends to pursue expansion over time into these markets. The Company will
also consider other expansion opportunities for its distribution network,
including acquisitions of regional master distributors and/or the
establishment of distribution centers in international markets. There can be
no assurance, however, that the Company will be able to establish new
distribution facilities or acquire new businesses, or that any facilities
established or businesses acquired will be successfully integrated into the
Company's operations.
Target National Distributors. The Company intends to market its recently
established national distribution capabilities to electrical distributors
which have national operations. The Company believes these distributors prefer
suppliers that can provide access to a larger and broader selection of
inventory, physical proximity to each of the local markets they serve, and
nationwide sales and customer service support. By emphasizing its ability to
provide service on a national basis, the Company believes it will capture a
larger share of national electrical distributor accounts.
Expand Product Offerings. The Company intends to use a portion of the net
proceeds from this Offering to expand its product offerings and increase the
levels of inventory at its distribution centers. With a broader and deeper
inventory, the Company believes it will be able to secure more orders and
respond more effectively to customers' requirements for just-in-time delivery.
The Company also believes that expanding the size and breadth of its inventory
establishes a level of service that is not easily duplicated by many of the
smaller regional master distributors against which the Company competes.
Utilize Profitability-Based Incentive Compensation. The Company maintains a
policy of linking the compensation incentives of its sales force directly to
profitability, rather than sales. The Company believes that this policy
encourages its sales force to focus on selling higher margin products, while
minimizing discretionary discounting of product prices.
Integrate and Exploit Information Technology. The Company seeks to provide
almost instantaneous product availability information to purchasers of
specialty wire and cable through the use of highly-trained, experienced
technical sales personnel and advanced information systems. The Company is
adopting in all of its distribution centers an advanced, custom-designed
information system (currently used by Futronix) which provides real-time
information with respect to inventory levels, purchasing and shipping status
as well as other key pricing and product availability data. In addition, the
Company will establish a "web" site on the Internet (http://www.futronix.com)
to promote the Company's product offerings and provide on-line technical
product information. By combining these information systems with the
considerable technical knowledge and experience of its sales force via
national telephone hotlines, the Company believes it better services its
existing customers and is well-positioned to secure orders from new customers.
PRODUCTS
The Company stocks over 10,000 inventory items, most of which are
specialized electronic and industrial wire and cable products. Specialty wire
and cable is maintained in inventory by the Company in a variety of gauge
sizes, numbers of conductors or pairs, shielding options, jacketing compounds,
insulation materials and color codes or combinations. Most of the numerous
configurations of specialty wire and cable that are sold by the Company are
used for a specific type of application in a specific industry.
30
<PAGE>
The types of specialty wire and cable sold by the Company include:
<TABLE>
<S> <C>
Electronic cables and cords Industrial cable
Data communication cable Control and tray cable
Telecommunication cable Armored cable (steel & aluminum)
Fiber optic cable Instrumentation cable
High temperature cable Automotive and aviation cable
Broadcast and audio cable Mining cable
Sound, security and fire alarm cable Power cable (5KV and 15KV)
Robotic and welding cable Portable cords
</TABLE>
Specialty wire and cable offered by the Company are typically products that
most electrical distributors do not inventory in depth or breadth. The Company
buys specialty wire and cable in large factory-run lots and typically sells
smaller cut-to-length quantities to its customers on an as-needed basis for
pre-sold end-user orders for which prompt shipment is required. The Company's
large inventory of specialty wire and cable contains many different items that
electrical distributors typically could not obtain from a single manufacturer.
Additionally, electrical distributors generally do not inventory the same
products as the Company because they cannot predict which of the thousands of
different types of wire combinations their end-users might need for a project.
By carrying a diverse and sizeable inventory at its 12 distribution centers
nationally, the Company seeks to be an "extension" of its customers'
inventories.
The primary industries that use the Company's products are
telecommunications, electronics, manufacturing, steel, pulp and paper,
petrochemical, environmental (wastewater treatment), automotive, textile,
aviation and shipbuilding. Within such industries, the Company's products are
used for a variety of applications, including data and power transmission,
instrumentation and control, telecommunications, computers, networking,
multimedia, broadcast, sound, video and security and fire alarm systems.
The Company also maintains a large inventory of and sells hard-to-find
electrical apparatus (non-wire) products. Examples of electrical apparatus
include electrical fittings, connectors and conduit pipe. The Company has
exploited a specific market for electrical apparatus by purchasing excess
electrical apparatus from electrical distributors and end-users and reselling
it on an as-needed basis to its customers. The Company purchases new and
unused excess electrical apparatus that represent overstocked or slower moving
inventory items or excess inventory from projects that were canceled or
completed, which, in some cases, may result in the Company holding incomplete,
obsolete or discontinued electrical apparatus items. The Company generally
purchases and resells only excess electrical apparatus manufactured by the
leading industrial electrical apparatus manufacturers.
INFORMATION SYSTEMS
The Company will adopt the advanced custom-designed information system
currently used by Futronix and intends to network its 12 distribution centers
and sales offices into this system. This system will be able to provide real-
time monitoring of inventory levels and shipping status at all of the
Company's distribution centers, enabling the Company to respond quickly and
efficiently to customer demands. The Company has made substantial investments
in the development of this system, which integrates sales, inventory control,
purchasing, financial control and internal communications. This system
contributes to the Company's ability to increase sales productivity by
enabling the sales force to provide customers with personalized service by
drawing on information contained in the system's database, and allows non-
technically trained personnel to provide technical product information while
marketing the Company's products. The Company is committed to the continued
utilization of advanced software applications with respect to information
technology and believes that its information systems can support significant
growth without requiring significant capital expenditures. See "Risk Factors--
Dependence on Systems."
The Company also uses information systems technology in other ways,
including Electronic Data Interchange ("EDI") software that permits customers
to place orders and receive invoices electronically
31
<PAGE>
to reduce their transaction costs. Additionally, the Company will establish a
"web" site on the Internet (http://www.futronix.com) to promote the Company's
product offerings and provide technical product information.
MARKETING, CUSTOMERS AND DISTRIBUTION
The Company markets its products through 43 inside and 12 field sales
employees who report to the Company's 12 branch sales managers. The inside
sales force operates from the Company's 12 distribution centers, maintains
contact with specific distributors and sells the Company's products by
telephone, facsimile and EDI. Each member of the Company's field sales force
has assigned geographical territories, makes sales and technical support calls
to electrical distributors and provides product specification services to end-
users. The Company's sales force includes experienced and highly-trained
employees who provide a level of customer service that the Company believes
will permit it to become the leading master distributor of specialty wire and
cable. The sales force receives ongoing product, technical and systems
training to support this goal.
The Company maintains toll-free marketing numbers. All calls to these
national toll-free telephone hotlines automatically are routed to the nearest
regional distribution center where they are received by a member of the
Company's inside sales force. The sales person receiving the call is then able
to respond to a customer's inquiry on a real-time basis by utilizing the
Company's information system. Information channeled through the system permits
the Company to track market changes on a daily basis. The Company believes
that having immediate access through its information system to information
such as product availability (including exact footage in inventory), product
pricing, current replacement cost and shipping information significantly
enhances its ability to secure a customer's order.
The Company generally is able to meet on a just-in-time basis the order
requirements of electrical distributors that may otherwise be subject to
purchase order minimums and long lead times when ordering directly from a
manufacturer. The Company imposes no purchase order minimums and inventories a
greater variety and depth of wire and cable products than any one manufacturer
can produce or supply to the electrical distribution market. A distributor can
often use the Company as a single source of supply in purchasing a variety of
products for a particular project and, in contrast to most manufacturers, the
Company will ship small orders on a rush basis. The Company maintains a policy
of selling only to electrical distributors, electrical and electronic
wholesalers and wire and cable representatives and not directly to end-users,
such as contractors or installers. The Company believes that this policy
fosters customer goodwill because the Company does not compete directly with
the distributors it serves.
During 1995, the Company recorded sales to more than 1,000 different
customers and the average sales price of an order filled by the Company was
less than $900. One customer, Graybar Electric Company, a national chain of
electrical distributors, accounted for approximately 12% of sales in 1995.
This percentage represents aggregate sales to more than 225 individual
electrical distribution outlets within the chain, each of which independently
places orders with the Company. See "Risk Factors--Dependence on Significant
Supplier and Customers."
The Company ships approximately 90% of its orders from its distribution
centers located in Atlanta, Baton Rouge, Charlotte, Chicago, Dallas, Denver,
Exton (PA), Houston, Livermore (CA), Salem (NH), Sparks (NV) and Tampa. The
remaining 10% of its orders is shipped directly from manufacturers' sites to
customers. The Company's out-of-town orders are shipped by common carrier and
many of its local deliveries are handled through national and local delivery
services. Shipment of most orders generally occurs on a same-day basis.
COMPETITION
The specialty wire and cable business is highly competitive and fragmented.
The Company competes mainly on the basis of price, product availability,
customer service, technical knowledge
32
<PAGE>
and delivery time. To compete successfully, the Company believes that it will
need to continue to distribute a broad range of technologically advanced
products, provide competitive pricing and prompt delivery of products, deliver
responsive customer service, establish and maintain strong relationships with
suppliers, and attract and retain highly qualified personnel. The Company
competes with wire and cable manufacturers (certain of which are suppliers of
the Company), two national master distributors and regional and other master
distributors (both domestic and foreign) that may have greater financial,
technical and marketing resources and distribution capabilities than those of
the Company. Foreign competition in the Company's markets has not been a
significant factor. See "Risk Factors--Competition."
SOURCES OF SUPPLY
The Company purchases more than 10,000 wire and cable products from
approximately 50 vendors worldwide. The Company is one of the nation's largest
distributors of Belden Wire and Cable Company ("Belden") products. For 1995,
Belden products accounted for approximately 42% of the Company's purchases of
specialty wire and cable products. Belden is the Company's largest supplier
and the loss of this vendor would have a material adverse effect on the
Company's business. The Company has a non-exclusive domestic distributor
agreement with Belden for the supply of Belden product throughout the
Company's distribution network that will remain in effect unless terminated by
either party. The agreement is terminable by Belden upon the occurrence of
certain events and may be terminated by either party upon 30 days' notice. The
Company has not encountered any material shortages or delays in delivery of
its products from its suppliers. See "Risk Factors--Dependence on Significant
Supplier and Customers."
The Company selectively purchases excess electrical apparatus (non-wire
items) from distributors and end-users for resale. The Company does not
purchase electrical apparatus directly from manufacturers. While the
availability of excess apparatus for purchase is not predictable, the Company
believes that opportunities for future purchases will remain available.
PROPERTY
The Company's distribution centers, all of which are leased, are described
in the table below. The Houston and Atlanta facilities also contain the
executive offices of the Company. As a result of the Merger, the Company is
consolidating two distribution centers in the metropolitan Chicago area. The
lease term for the consolidating facility ends on September 30, 1996,
coinciding with the Company's schedule for the consolidation.
<TABLE>
<CAPTION>
FACILITY EXPIRATION OF
DISTRIBUTION CENTER BUILDING AREA OPENED LEASE
------------------- ------------- --------- -------------
(SQUARE FEET)
<S> <C> <C> <C>
Atlanta, Georgia................................. 26,000 Jan. 1996(1) 2003
Baton Rouge, Louisiana........................... 11,100 Jun. 1993 1999
Charlotte, North Carolina........................ 34,000 Apr. 1995 1998
Chicago, Illinois................................ 16,000 Feb. 1996(2) 1999
Dallas, Texas.................................... 30,400 Feb. 1996 1999
Denver, Colorado................................. 5,000 Aug. 1995 1998
Exton, Pennsylvania.............................. 25,000 May 1995 1998
Houston, Texas................................... 151,000 Feb. 1994(3) 2003
Livermore, California............................ 13,824 Feb. 1996 2001
Salem, New Hampshire............................. 5,000 Jan. 1994 1997
Sparks, Nevada................................... 25,000 Apr. 1996 1997
Tampa, Florida................................... 30,000 Jan. 1995 1999
</TABLE>
- ----------
(1) A distribution center has been operated in the Atlanta area since 1982.
(2) A distribution center has been operated in the Chicago area since 1990.
(3) A distribution center has been operated in the Houston area since 1991.
33
<PAGE>
The Company also leases approximately 1,000 square feet of office space in
Portland, Oregon for the operation of a sales office. The Company believes
that all of its facilities are in good condition and are suitable for the
purposes for which they are being used.
EMPLOYEES
As of July 31, 1996, the Company employed 167 people, including 12 branch
sales managers, 55 sales personnel, 17 sales support personnel, 53 warehouse
personnel, 9 purchasing personnel and 21 corporate administration and senior
management personnel. None of the Company's employees are represented by
unions.
LITIGATION
There are currently no material legal proceedings pending against the
Company.
34
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information with respect to the Company's
executive officers and directors as of the Closing of this Offering, and their
ages as of July 31, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Barbara M. Henagan.... 37 Chairman of the Board and Director
Theodore J. Bruno....... 49 Vice Chairman, Treasurer and Director
Terrence M. Hunt........ 48 President, Chief Operating Officer and Director
Paul R. Monahan......... 38 Chief Financial Officer and Secretary
Bradford Mills.......... 69 Director
</TABLE>
In addition, the Company is currently evaluating other director candidates
and anticipates that two additional independent, non-management directors will
be added to the board of directors upon the Closing of this Offering or as
soon thereafter as practicable. The Company's independent, non-management
directors will represent a majority on each of the Company's three-member
Audit Committee and Compensation Committee, which the board of directors will
establish upon the election of such directors.
Each director holds office until the next annual meeting of stockholders of
the Company and until his or her successor has been elected and qualified.
Officers of the Company are elected by the board of directors and serve at the
discretion of the board. See "--Employment Agreements."
Barbara M. Henagan has been Chairman of the board of directors of the
Company since August 1996. Ms. Henagan has served as Chairman of the board of
directors of Futronix since 1994. She has been a Senior Managing Director
since 1992 and a Managing Director from 1990 to 1992 of Bradford Ventures,
Ltd., a private investment firm. Ms. Henagan is also a director of Central
Sprinkler Corporation. Ms. Henagan formerly was a director of HWC Distribution
Corp. Ms. Henagan is the daughter of Bradford Mills.
Theodore J. Bruno is a director of the Company and will be Vice Chairman and
Treasurer as of the Closing of this Offering. He founded Wire & Cable and has
been its Chief Executive Officer since 1982.
Terrence M. Hunt is the President, Chief Operating Officer and a director of
the Company as of the Closing of this Offering. He founded Futronix and has
been the President and a director of Futronix since 1991. Mr. Hunt co-founded
HWC Distribution Corp. and, from 1975 to 1991, was its President.
Paul R. Monahan will be Chief Financial Officer and Secretary of the Company
as of the Closing of this Offering. Mr. Monahan has been the Chief Operating
Officer of Wire & Cable since February 1992. From 1986 to 1992, Mr. Monahan
was a divisional Vice President of Atex, Inc., a subsidiary of Eastman Kodak
Company.
Bradford Mills is a director of the Company. He has served as a director of
Futronix since 1994. Mr. Mills is a partner of Bradford Associates, a private
investment firm. Mr. Mills formerly was the Chairman of the board of directors
of HWC Distribution Corp.
OTHER KEY EMPLOYEES
Joan Scott, 45, is a certified public accountant and will be Director of
Finance of the Company as of the Closing of this Offering. She has been the
Chief Financial Officer of Wire & Cable since May 1994. From 1991 to May 1994,
Ms. Scott was the sole proprietor of Groover & Associates, a certified public
accounting firm.
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<PAGE>
Jim P. Psencik, 48, is a certified public accountant and is the Controller
of the Company. He has been the Controller of Futronix since 1991. From 1982
to 1991, Mr. Psencik was a partner in Franks Branum & Co., a certified public
accounting firm. From 1977 to 1982, he was Controller of HWC Distribution
Corp.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no compensation for
serving on the board of directors. Non-employee directors of the Company will
receive $1,000 for each meeting of the board of directors attended in person
or participated in telephonically, as well as reimbursement for their expenses
for attending meetings. Non-employee directors also will receive $1,000 for
each committee meeting attended, as well as reimbursement for their expenses
for attending meetings. In addition, directors who are employees of the
Company will be eligible to receive stock options and other grants or awards
of securities and non-employee directors will be eligible to receive grants of
non-qualified stock options under the Company's Equity Compensation Plan. See
"--Equity Compensation Plan."
EXECUTIVE COMPENSATION
The Company has not conducted any operations since its date of inception on
August 5, 1996. The Company anticipates that during 1996 its most highly
compensated executive officers will be Messrs. Hunt, Bruno and Monahan (the
"Named Executive Officers"), each of whom will enter into an employment
agreement with the Company simultaneously with the Closing of this Offering.
See "--Employment Agreements." Cash compensation paid during 1995 to such
Named Executive Officers by the parties to the Merger was as follows: Terrence
M. Hunt--$36,872 (including $872 in matching contributions made by Futronix
under its 401(k) Profit Sharing Plan); Theodore J. Bruno--$222,411 (including
$15,530 in matching and discretionary contributions made by Wire & Cable under
its 401(k) Profit Sharing Plan and $6,688 in premiums paid by Wire & Cable for
term life insurance); and Paul R. Monahan--$207,123 (including $17,755 in
matching and discretionary contributions made by Wire & Cable under its 401(k)
Profit Sharing Plan and $568 in premiums paid by Wire & Cable for term life
insurance). See "--Value Appreciation Bonus for Officer" and "--Options
Granted by Officer."
The Named Executive Officers did not receive from Futronix or Wire & Cable,
or exercise, any stock options or stock appreciation rights during the year
ended December 31, 1995 or during the six months ended June 30, 1996.
EMPLOYMENT AGREEMENTS
Messrs. Hunt, Bruno and Monahan each will enter into an employment agreement
with the Company as of the Closing of this Offering. The term of each
agreement is from the date of the Closing of this Offering to December 31,
1999, with automatic one-year extensions unless 90 days' prior notice of non-
renewal is given by either party or the agreement is otherwise terminated in
accordance with its provisions. Each agreement provides for an annual base
salary of $150,000, which salary may be increased on an annual basis as
determined by the board of directors of the Company, and certain fringe
benefits. Subject to certain limitations (as described below), each agreement
also provides for an annual bonus to be paid to Messrs. Hunt, Bruno and
Monahan from January 1, 1997 to December 31, 1999, which bonus shall equal
2.34% for Messrs. Hunt and Bruno and .79% for Mr. Monahan of the Company's
consolidated pre-tax annual income (determined without taking into account
bonuses paid to such officers or other management-level employees of the
Company or its subsidiary).
For the year ended December 31, 1996, Messrs. Hunt, Bruno and Monahan are
each guaranteed a bonus of the prorated amount of each person's annualized
1996 salary (currently estimated to be approximately $30,000, $30,000 and
$30,000 respectively) (each a "1996 Guaranteed Bonus"), and for the year
ending December 31, 1997, Messrs. Hunt and Bruno are each guaranteed a bonus
of at least $150,000 and Mr. Monahan is guaranteed a bonus of at least $50,000
(each, a "1997 Guaranteed Bonus"). With respect to 1998 and 1999, the Company
will only be required to pay bonuses pursuant to the agreements if the Company
shall have achieved at least 80% of the
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<PAGE>
Company's budgeted consolidated pre-tax annual income for the applicable year
as approved by the board of directors of the Company. Pursuant to their
respective employment agreements, each of Messrs. Hunt, Bruno and Monahan may
request, from time to time in 1996 or 1997, an advance on his aggregate 1996
Guaranteed Bonus and 1997 Guaranteed Bonus. Approval of payment of each such
advance will be made by the Compensation Committee of the board of directors
of the Company, the majority of the members of which will be independent, non-
management directors. Such approval, if granted, will be made on such terms
and conditions as the Compensation Committee of the board of directors of the
Company determines in its sole discretion. In the event any of Messrs. Bruno,
Hunt or Monahan receives an advance and such person ceases to be employed by
the Company as a result of termination for cause or his resignation, such
person will be required to return to the Company the unearned portion of any
such advance, in accordance with the terms of his Employment Agreement. Mr.
Bruno currently intends to request an aggregate advance or advances from his
1996 Guaranteed Bonus and 1997 Guaranteed Bonus of up to $150,000.
In the event of termination without cause, Messrs. Hunt, Bruno and Monahan
each are entitled to a lump sum payment equal to his salary for the remainder
of the employment term plus a pro rata bonus for the remainder of the
employment term based upon the bonus amount paid in the year immediately
preceding such termination. In addition, each agreement provides for the
continuation of health benefits for Messrs. Hunt, Bruno and Monahan until the
earlier of 18 months after termination without cause or the date upon which
health benefits are obtained from another source. In the event of termination
with cause or resignation, Messrs. Hunt, Bruno and Monahan are each entitled
to receive all accrued and unpaid salary and fringe benefits through the date
of such termination or resignation.
BONUS PLAN DESCRIPTION
Effective as of the Closing of this Offering, the Company will adopt a bonus
plan (the "Bonus Plan") for the executive officers and certain significant
employees of the Company. The terms of the Bonus Plan will provide that
Terrence M. Hunt, Theodore J. Bruno, Paul R. Monahan, Joan Scott and Jim P.
Psencik shall be paid a bonus equal to 2.34%, 2.34%, .79%, .39% and .39%,
respectively, of the Company's consolidated pre-tax annual income (determined
without taking into account bonuses paid to such officers, significant
employees or other management-level employees of the Company or its
subsidiary). The participation of Messrs. Hunt, Bruno and Monahan in the Bonus
Plan will be provided for in their employment agreements with the Company. See
"--Employment Agreements." For the year ending December 31, 1997, Mr. Psencik
and Ms. Scott each will be guaranteed a minimum bonus of $25,000.
VALUE APPRECIATION BONUS FOR OFFICER
Pursuant to his existing employment agreement with Wire & Cable, Paul R.
Monahan, the Company's Chief Financial Officer, is entitled to receive a value
appreciation bonus upon the occurrence of certain events, including the sale
or merger of Wire & Cable, in the amount of 10% of the sale price or value
assigned for purposes of the sale or merger. In exchange for Mr. Monahan's
agreement to relinquish all rights to such bonus, the Company has agreed to
pay Mr. Monahan, upon his completion of seven days of employment with the
Company, a bonus of 60,813 shares of Common Stock and cash equal to 82% of
such number of shares multiplied by the value of a share of Common Stock at
the time such bonus is paid as determined for reporting such bonus for federal
income tax purposes (the "Value Appreciation Bonus"). The cash portion of the
Value Appreciation Bonus is intended to equal the estimated amount of federal
and state income taxes for which Mr. Monahan will be responsible in connection
with the Value Appreciation Bonus (both the stock and cash portions), assuming
an effective tax rate of 45%. Mr. Monahan shall not forfeit the Value
Appreciation Bonus in the event that he is unable to serve the Company for
such seven-day period as a result of his death, disability or termination
without cause.
OPTIONS GRANTED BY OFFICER
Pursuant to their respective option agreements, Mr. Monahan and Ms. Scott
were granted options to acquire shares of Wire & Cable's outstanding common
stock from Mr. Bruno. Pursuant to the Merger Agreement, Mr. Monahan and Ms.
Scott have agreed to relinquish their respective rights to such
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<PAGE>
options of Wire & Cable common stock in exchange for options to purchase an
equivalent number of shares of Common Stock based on the exchange ratio
reflected in "The Merger--Security Ownership Following the Offering."
Therefore, pursuant to the Merger Agreement, Mr. Bruno will grant options to
(i) Mr. Monahan to purchase up to 165,851 shares of Common Stock, exercisable
in whole or in part on or before February 26, 2013, at an exercise price of
$.08 per share of Common Stock and (ii) Ms. Scott to purchase up to 27,642
shares of Common Stock, exercisable in whole or in part on or before May 1,
2014, at an exercise price of $.38 per share of Common Stock.
EQUITY COMPENSATION PLAN
The Company intends to adopt the Equity Compensation Plan to be effective
upon the Closing of this Offering. The Equity Compensation Plan will provide
for grants of stock options ("Options") to purchase shares of Common Stock of
the Company, including Options intended to qualify as incentive stock options
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and so-called "non-qualified stock options" not
intended to qualify as ISOs ("NQSOs"), restricted stock, stock appreciation
rights, performance awards and other stock-based incentive awards
(collectively,"Awards") to employees, consultants and directors of the Company
or its subsidiaries. The Equity Compensation Plan will authorize a maximum of
an aggregate of 250,000 shares of Common Stock with respect to which Awards
may be granted. During any calendar year, no participant may receive Awards
under the Equity Compensation Plan for more than 5,000 shares of Common Stock.
The Equity Compensation Plan will be administered by a committee (the
"Committee") of the board of directors consisting of not fewer than two
persons appointed by the board of directors from among its members, each of
whom shall qualify as a "non-employee director" as defined in Rule 16b-3 under
the Securities Act of 1934, as amended (the "Exchange Act"), and an "outside
director" as defined by Section 162(m) of the Code. Awards may be made to any
employee, consultant or director of the Company or its subsidiaries.
Consultants to the Company are not eligible to receive ISOs and non-employee
directors of the Company are eligible only to receive NQSOs under the Equity
Compensation Plan. Following the Closing of this Offering, the Company intends
to grant options to employees of the Company or its subsidiary to purchase
54,254 shares of Common Stock at an exercise price equivalent to the initial
public offering price per share. None of such options will be granted to Named
Executive Officers.
The option price of any ISO granted under the Equity Compensation Plan may
not be less than the fair market value of the underlying shares of Common
Stock on the date of grant, except that the option price of an ISO granted to
an employee who owns more than 10% of the Company Stock may not be less than
110% of the fair market value of the underlying shares of Common Stock on the
date of grant. The aggregate fair market value (determined at the time of the
grant of the Award) of shares of Common Stock subject to ISOs which are
exercisable by one person for the first time during a particular calendar year
shall not exceed $100,000. The option price of a NQSO may be greater than,
equal to or less than the fair market value of the underlying shares of Common
Stock on the date of grant. The Committee shall determine the term of each
Option; provided, however, that the exercise period may not exceed ten years
from the date of grant, and the exercise period of an ISO granted to an
employee who owns more than 10% of the Common Stock may not exceed five years
from the date of grant. At the discretion of the Committee, a participant may
pay the option price: (i) in cash; (ii) by the tender of shares of Common
Stock; (iii) by a combination of the foregoing; or (iv) by issuing a
promissory note payable to the Company. The Committee may also allow a
participant to simultaneously exercise the Option and sell the shares of
Common Stock acquired thereby and use the proceeds from the sale as payment
for the purchase of such Common Stock.
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<PAGE>
In the event the Company is a party to a merger or consolidation, or
undergoes any reorganization or liquidation, the board of directors of the
Company shall have the power to cause the substitution of new Awards for, or
the assumption by another corporation of, any unexpired Awards outstanding
under the Equity Compensation Plan. In addition, in the event of a
reclassification, stock split, combination of shares (including a spin-off),
stock dividend or other similar change in capitalization, the Committee shall
conclusively determine the appropriate adjustment in the option prices of
outstanding Options, in the number and kind of shares or other securities as
to which outstanding Awards shall be exercisable and in the aggregate number
of shares with respect to which Awards may be granted. In the event of a
"change of control" of the Company, all Awards that have not expired and which
are then held by a participant shall become fully vested. A "change of
control" is defined as: (i) the acquisition by a third person, including a
"group" as defined in Section 13(d)(3) of the Exchange Act, of shares of the
Company having 50% or more of the total number of votes that may be cast for
the election of directors of the Company; (ii) stockholder approval of a
transaction for the acquisition of the Company, or the acquisition of
substantially all of its assets by another entity, or for a merger,
reorganization, consolidation or other business combination; or (iii) the
election during any period of 24 months or less of 50% or more of the
directors of the Company that were not in office immediately prior to such
period.
401(K) PROFIT SHARING PLAN
The Company intends to adopt a 401(k) Profit Sharing Plan, or combine the
existing 401(k) Profit Sharing Plans of Futronix and Wire & Cable, which plan
generally will be available to all full-time employees of the Company and its
subsidiary and will provide for discretionary contributions by the Company to
such employees.
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CERTAIN TRANSACTIONS
TRANSACTIONS RELATING TO SECURITY OWNERSHIP OF THE COMPANY AS A RESULT OF THE
MERGER
See "The Merger" for a description of the formation of the Company and
information relating to the Merger.
During 1995, certain persons who will become officers, directors and 5%
stockholders of the Company as a result of the Merger acquired shares of
convertible preferred stock of Futronix, (the "Futronix Convertible Preferred
Stock"), for a purchase price of $1.00 per share as follows: (i) Terrence M.
Hunt--464,333 shares (all of which are held by THMJH Family Trust, a trust for
which Mr. Hunt is the sole trustee); (ii) Overseas Equity Investor Partners--
227,658 shares; (iii) Bradford Venture Partners, L.P.--210,192 shares; (iv)
Bradford Mills, a director of the Company--30,608 shares (represents shares
held by two trusts of which Mr. Mills is the beneficiary); and (v) Barbara M.
Henagan, Chairman of the board of directors of the Company--17,450 shares
(includes shares held by two trusts for which Ms. Henagan is the sole
trustee). Pursuant to the Merger Agreement, all of such shares of Futronix
Convertible Preferred Stock will be exchanged for the following number of
shares of Convertible Preferred Stock simultaneously with the Closing of this
Offering: (i) Mr. Hunt--227,983 shares (all of which are held by THMJH Family
Trust, a trust for which Mr. Hunt is the sole trustee); (ii) Overseas Equity
Investor Partners--111,778 shares; (iii) Bradford Venture Partners, L.P.--
103,202 shares; (iv) Mr. Mills--15,028 shares (represents shares held by two
trusts of which Mr. Mills is the beneficiary); and (v) Ms. Henagan--8,568
shares (includes shares held by two trusts for which Ms. Henagan is the sole
trustee).
Mr. Mills and Ms. Henagan are partners of Bradford Associates, a partnership
that is the sole general partner of Bradford Venture Partners, L.P. Ms.
Henagan is co-chairman of the board of directors of Overseas Equity Investor
Partners and Bradford Associates is a partner of Overseas Equity Investor
Partners. Pursuant to agreements with Overseas Equity Investor Partners,
Bradford Associates is entitled to receive a portion of the net cumulative
gains realized by each of these entities from the sale of investments held in
their respective portfolios. The proceeds of any such sales will be considered
a gain for purposes of determining the existence of net gains for distribution
to Bradford Associates. In addition, Bradford Associates has a one percent
partnership interest in Overseas Equity Investor Partners. In its capacity as
general partner of Bradford Venture Partners, L.P., Bradford Associates is
entitled to receive a portion of the net profits received by Bradford Venture
Partners, L.P. from capital gains transactions. In addition, Bradford
Associates has a one percent partnership interest in Bradford Venture
Partners, L.P.
Pursuant to the Merger Agreement, the following persons will exchange shares
of common stock of Futronix for shares of Common Stock as follows: (i) Mr.
Hunt--382,106 (240,585 of which are held by THMJH Family Trust); (ii) Overseas
Equity Investor Partners--169,023; (iii) Bradford Venture Partners, L.P.--
154,652; (iv) Mr. Mills--22,725 (represents shares held by two trusts of which
Mr. Mills is the beneficiary); and (v) Ms. Henagan--12,955 (includes shares
held by two trusts for which Ms. Henagan is the sole trustee).
Pursuant to the Merger Agreement, the following persons will exchange
warrants to purchase shares of common stock of Futronix for Warrants to
purchase Common Stock, which Warrants will have an exercise price of $0.01 per
share, as follows: (i) Mr. Hunt--135,167; (ii) Overseas Equity Investor
Partners--89,591; (iii) Bradford Venture Partners, L.P.--78,999; (iv) Mr.
Mills--11,373 (represents warrants held by two trusts of which Mr. Mills is
the beneficiary); and (v) Ms. Henagan--6,484 (includes warrants held by two
trusts for which Ms. Henagan is the sole trustee).
Pursuant to the Merger Agreement, the following persons will exchange shares
of nonconvertible preferred stock of Futronix for Company Subordinated Notes
in principal amounts as follows: (i) Overseas Equity Investor Partners--
$934,995; (ii) Bradford Venture Partners, L.P.--$841,706;
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<PAGE>
(iii) Mr. Mills--$125,714 (represents amounts held by two trusts of which Mr.
Mills is the beneficiary); and (iv) Ms. Henagan--$71,658 (includes amounts
held by two trusts for which Ms. Henagan is the sole trustee).
Pursuant to the Merger Agreement, the Company will repay $1,243,193 in
aggregate principal amount of the Futronix Subordinated Notes with a portion
of the net proceeds from this Offering. The following persons are holders of
Futronix Subordinated Notes in principal amounts as follows: (i) Mr. Hunt--
$417,247; (ii) Overseas Equity Investor Partners--$351,027; (iii) Bradford
Venture Partners, L.P.--$327,823; (iv) Mr. Mills--$47,194 (represents amounts
held by two trusts of which Mr. Mills is the beneficiary); and (v) Ms.
Henagan--$26,904 (includes amounts held by two trusts for which Ms. Henagan is
the sole trustee).
Pursuant to the Merger Agreement, Theodore J. Bruno will become the Vice
Chairman, Treasurer and a director of the Company and will exchange 1,000
shares of common stock of Wire & Cable for 1,020,317 shares of Common Stock.
Mr. Bruno will grant options to Paul R. Monahan, who will become the Chief
Financial Officer of the Company, and to Joan Scott, who will become the
Director of Finance of the Company, to purchase 165,851 and 27,642 shares of
Common Stock, respectively, from the 1,020,317 shares of Common Stock he will
receive pursuant to the Merger Agreement. Further, pursuant to the Merger
Agreement, Mr. Monahan will receive the Value Appreciation Bonus after serving
as the Chief Financial Officer of the Company for seven days after Closing of
this Offering. See "Management--Value Appreciation Bonus for Officer."
Additionally, Messrs. Bruno and Monahan will be released from their personal
guarantees of the W&C Revolving Credit Line upon its repayment from a portion
of the net proceeds from this Offering. See "Use of Proceeds."
OFFICER NOTE
Pursuant to the terms of the Merger Agreement, simultaneously with the
Closing of this Offering, Mr. Bruno will issue a note to the Company in a
principal amount equal to (i) the amount by which distributions made to Mr.
Bruno by Wire & Cable from January 1, 1996 until the Closing of this Offering
on account of Mr. Bruno's potential tax liabilities for federal and state
income taxes with respect to income imputed to Mr. Bruno under the Subchapter
S provisions of the Code exceed Mr. Bruno's actual federal and state tax
liabilities and (ii) any amount by which the aggregate of other distributions
to Mr. Bruno exceeds 25% of the net income of Wire & Cable from January 1,
1996 until the Closing of this Offering. It is currently estimated that the
note will have a principal balance of $125,000 upon issuance. Such note will
have a term of three years and bear interest at the rate of 7% per annum.
OTHER TRANSACTIONS
Wire & Cable sells products to Industrial Distributors, Inc. ("IDI"), a
company of which Mr. Bruno's daughters are the sole stockholders. IDI supplies
wire not of the kind generally supplied by Wire & Cable to medical customers
and other speciality customers. Wire & Cable sells products to IDI at
prevailing market prices. Wire & Cable made $25,000, $59,820, $79,817 and
$110,146 in sales to IDI for the years ended December 31, 1993, 1994 and 1995
and for the current fiscal year, respectively.
The Company's executive offices and distribution center in Houston, Texas
are leased from a trust of which Mr. Hunt is the trustee. The Company's base
annual rental for the property is based on the Company's sales for the
preceding calendar year and is calculated each December 31 for the following
year's rent. The base annual rent is $156,072 when annual sales are equal to
or less than $9 million, $180,000 when annual sales are greater than $9
million, $210,000 when annual sales are greater than $15 million, $240,000
when annual sales are greater than $20 million and $300,000 when annual sales
are greater than $25 million. The Company is currently at a sales level
requiring it to pay an annual rent of $300,000, the maximum annual rent
permitted under the lease. The Company paid rent of
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$180,000 and $156,072 under the lease for the years ended 1995 and 1994,
respectively. In addition to the base amount of rent, the Company is
responsible for all expenses related to the operation of the property
including maintenance, utilities, taxes and insurance. The term of the lease
expires on December 31, 2003, and the Company has an option to renew the lease
for an additional five-year term. The Company believes that the terms of the
lease, including the annual rent, are on terms no less favorable than those
that could be obtained from an unrelated third party.
All future transactions between the Company and its officers, directors and
principal stockholders or their affiliates will be on terms no less favorable
to the Company than may be obtained from unrelated third parties, and any such
transactions will be approved by a majority of the disinterested directors of
the Company.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock after giving effect to the Merger and this
Offering, by: (i) each person known to own beneficially 5% or more of the
outstanding shares of Common Stock; (ii) each director of the Company; (iii)
each Named Executive Officer; and (iv) all executive officers and directors as
a group. Each of such stockholders has sole voting and investment power as to
shares shown, unless otherwise noted.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AFTER OFFERING(1)
-----------------------------
NUMBER PERCENT
--------------- -------------
<S> <C> <C>
Theodore J. Bruno(2)............................. 1,020,317 26.6%
Bradford Mills(3)................................ 759,557 17.9%
Terrence M. Hunt(4).............................. 745,255 17.8%
Barbara M. Henagan(5)............................ 738,437 17.4%
Overseas Equity Investor Partners(6)............. 365,392 9.1%
Bradford Venture Partners, L.P.(7)............... 336,852 8.4%
Paul R. Monahan(8)............................... 226,664 5.7%
All executive officers and directors as a group
(5 persons)..................................... 2,613,948 54.6%
</TABLE>
- ----------
(1) Includes shares of Common Stock issuable upon the conversion of
Convertible Preferred Stock and shares of Common Stock issuable upon the
exercise of Warrants to be issued in the Merger.
(2) The address of the stockholder is 5060 Avalon Ridge Parkway, Norcross,
Georgia 30071. Pursuant to the Merger Agreement, Mr. Bruno is permitted to
sell, prior to the sale of the Common Stock offered hereby, up to 1% of
the outstanding shares of Wire & Cable common stock held by him (up to 10
of the 1,000 shares of the outstanding Wire & Cable common stock, or up to
10,203 of the 1,020,317 shares of Common Stock to be issued to Mr. Bruno
pursuant to the Merger Agreement). Such sale, if it were to occur, will be
made to a currently unidentified person or entity who will not, at the
time of such sale or after giving effect to such sale, be an affiliate of
the Company, Wire & Cable, Futronix or any of their respective affiliates,
at a price per share which would be no less than the equivalent of the
mid-point of the range of the initial public offering price per share of
Common Stock shown on the cover page of this Prospectus.
(3) The address of the stockholder is 44 Nassau Street, Suite 365, Princeton,
New Jersey 08542. Includes 365,392 shares owned of record by Overseas
Equity Investor Partners, 336,852 shares owned of record by Bradford
Venture Partners, L.P., 8,187 shares owned of record by BVP Special
Situations, L.P. and 49,126 shares owned of record by two trusts of which
Mr. Mills is the beneficiary. Mr. Mills is a partner of Bradford
Associates, which is the sole general partner of Bradford Venture
Partners, L.P. and a general partner of Overseas Equity Investor Partners
and BVP Special Situations, L.P., and Mr. Mills may be deemed to share
voting and investment power with respect to such shares. Mr. Mills
disclaims beneficial ownership of the shares owned of record by Overseas
Equity Investor Partners, Bradford Venture Partners, L.P. and BVP Special
Situations, L.P.
(4) The address of the stockholder is 12614 Hempstead Highway, Houston, Texas
77092.
(5) The address of the stockholder is 1212 Avenue of the Americas, New York,
New York 10036. Includes 365,392 shares owned of record by Overseas Equity
Investor Partners, 336,852 shares owned of record by Bradford Venture
Partners, L.P., 8,187 shares owned of record by BVP Special Situations,
L.P. and 8,352 shares owned of record by two trusts for which Ms. Henagan
is the sole trustee. Ms. Henagan is a partner of Bradford Associates,
which is the sole general partner of Bradford Venture Partners, L.P. and a
general partner of Overseas Equity Investor Partners and BVP Special
Situations, L.P., and Ms. Henagan may be deemed to share voting and
investment power with respect to such shares. Ms. Henagan disclaims
beneficial ownership of the shares owned of record by Overseas Equity
Investor Partners, Bradford Venture Partners, L.P. and BVP Special
Situations, L.P.
(6) The address of the stockholder is Clarendon House, Church Street, Hamilton
5-31, Bermuda.
(7) The address of the stockholder is 44 Nassau Street, Suite 365, Princeton,
New Jersey 08542.
(8) The address of the stockholder is 5060 Avalon Ridge Parkway, Norcross,
Georgia 30071. Includes 60,813 shares of Common Stock to be issued to Mr.
Monahan seven days after the Closing of this Offering in connection with
the Value Appreciation Bonus and 165,851 shares issuable to Mr. Monahan
upon the exercise of an option to purchase shares of Common Stock to be
granted to him by Mr. Bruno pursuant to the Merger.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 15,000,000 shares of
Common Stock, par value $0.01 per share, 490,990 shares of Convertible
Preferred Stock, par value $0.01 per share, and 1,000,000 shares of Series
Preferred Stock, par value $0.01 per share. The Convertible Preferred Stock
and the Series Preferred Stock are referred to herein collectively as the
"Preferred Stock." Immediately after the sale of the 1,950,000 shares of
Common Stock offered hereby, there will be issued and outstanding 3,834,750
shares of Common Stock, 490,990 shares of Convertible Preferred Stock and no
shares of Series Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by the stockholders and do not have
cumulative voting rights. The election of directors is determined by a
plurality of the votes cast. Except as otherwise required by law and as may be
required by the terms of the Preferred Stock, all other matters are determined
by a majority of the votes cast. The holders of Common Stock are entitled to
receive dividends when, as and if declared by the board of directors out of
funds legally available for the payment thereof, subject to any preferential
dividend rights of outstanding Preferred Stock. Upon the liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to receive ratably the net assets of the Company available for distribution
after preferred distributions, if any, to the holders of Preferred Stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The shares of Common Stock that will be outstanding upon
the consummation of the Merger and the shares offered by the Company in this
Offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of Series Preferred Stock which the Company may designate and issue in
the future. See "Risk Factors--Anti-Takeover Provisions" and "--Preferred
Stock."
PREFERRED STOCK
At the Closing of this Offering, there will be outstanding 490,990 shares of
Convertible Preferred Stock and no shares of Series Preferred Stock. Except as
otherwise required by law and with respect to certain matters described below,
the holders of Convertible Preferred Stock are not entitled to vote on any
matter on which the stockholders of the Company shall be entitled to vote.
Holders of Convertible Preferred Stock are entitled to vote as a separate
class on any amendment to the Certificate of Incorporation that would increase
or decrease the authorized number of shares of Convertible Preferred Stock,
increase or decrease the par value of the Convertible Preferred Stock or
otherwise amend any provision so as to affect the Convertible Preferred Stock
adversely. The holders of Convertible Preferred Stock are not entitled to
dividends or other distributions. Upon the liquidation, dissolution or winding
up of the Company, holders of Convertible Preferred Stock are entitled to
receive from the assets of the Company available for distribution payment in
cash of $2.04 per share of Convertible Preferred Stock before any amount shall
be paid or set aside for, or any distribution of assets shall be made to, the
holders of Common Stock or other stock of the Company ranking junior to the
Convertible Preferred Stock with respect to liquidations. The holders of
Convertible Preferred Stock are not entitled to receive any further amount
upon any such liquidation, dissolution or winding up. Each holder of
Convertible Preferred Stock is entitled to convert any or all shares of
Convertible Preferred Stock held by such holder into the same number of shares
of Common Stock, subject to adjustments in certain circumstances, including in
the event of certain stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations or sales or other
dispositions of all or substantially all of the assets of the Company. The
Convertible Preferred Stock has mandatory redemption provisions which require
the redemption of specified percentages of outstanding Convertible Preferred
Stock beginning with 25% on December 30, 2000, and continuing
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<PAGE>
on each successive anniversary thereof until 100% of the Convertible Preferred
Stock shall be redeemed on December 31, 2003. The Convertible Preferred Stock
also is redeemable at the Company's option in whole or in part at any time or
from time to time prior to December 30, 2000. Holders of Convertible Preferred
Stock have no preemptive rights to subscribe for or purchase any securities of
the Company. The holders of the Convertible Preferred Stock have certain
demand and piggyback registration rights with respect to the registration of
the shares of Common Stock issuable upon conversion of the Convertible
Preferred Stock. See "--Registration Rights."
The Company also has authorized 1,000,000 shares of Series Preferred Stock
which the board of directors has discretion to issue in such series and with
such preferences and rights as it may designate without the approval of the
holders of Common Stock. Such preferences and rights may be superior to those
of the holders of Common Stock. For example, the holders of Series Preferred
Stock may be given a preference in payment upon liquidation of the Company, or
for the payment or accumulation of dividends before any distributions are made
to the holders of Common Stock. As of the date of this Prospectus, no Series
Preferred Stock has been designated or issued by the Company, and the Company
has no plans, agreements or understandings for the issuance of Series
Preferred Stock. For a description of the possible anti-takeover effects of
the Series Preferred Stock, see "Risk Factors--Anti-Takeover Provisions" and
"--Certain Anti-Takeover Provisions."
WARRANTS
Upon the consummation of the Merger simultaneously with the Closing of this
Offering, the Company will issue 334,204 Warrants to certain stockholders of
Futronix in exchange for warrants to purchase common stock of Futronix. Upon
the consummation of the Merger, the Warrants will be exercisable at an
exercise price of $0.01 per share, subject to adjustments in certain
circumstances including in the event of certain stock dividends, subdivisions
or combinations, reclassifications, mergers, consolidations or sales of the
assets of the Company, and will expire at the close of business on October 5,
2004. The holders of such Warrants have certain demand and piggyback
registration rights with respect to the registration of the shares of Common
Stock issuable upon exercise of the Warrants. See "--Registration Rights."
LIMITATION ON LIABILITY
The Certificate of Incorporation limits or eliminates the liability of the
Company's directors or officers to the Company or its stockholders for
monetary damages to the fullest extent permitted by the Delaware General
Corporation Law, as amended (the "DGCL"). The DGCL provides that a director of
the Company shall not be personally liable to the Company or its stockholders
for monetary damages for a breach of fiduciary duty as a director, except for
liability: (i) for any breach of such person's duty of loyalty; (ii) for acts
or omissions not in good faith or involving intentional misconduct or a
knowing violation of law; (iii) for the payment of unlawful dividends and
certain other actions prohibited by Delaware corporate law; and (iv) for any
transaction resulting in receipt by such person of an improper personal
benefit.
The Company intends to apply for directors' and officers' liability
insurance to provide directors and officers with insurance coverage for losses
arising from claims based on breaches of duty, negligence, error and other
wrongful acts to be effective contemporaneously with the Closing of this
Offering. At present, there is no pending litigation or proceeding, and the
Company is not aware of any threatened litigation or proceeding involving any
director, officer, employee or agent where indemnification will be required or
permitted under the DGCL or the bylaws of the Company.
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's bylaws provide that vacancies on the board of directors may be
filled only by a vote of the majority of the directors then in office, though
less than a quorum, or by a sole remaining
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director. Additionally, special meetings of stockholders of the Company may be
called only by the chairman of the board, a majority of the board of
directors, the president, or, subject to the rights of any holders of
Preferred Stock, at the written request of stockholders owning a majority of
the amount of the entire capital stock of the Company outstanding and entitled
to vote. The limitations on the filling of vacancies on the board of directors
and the calling of special meetings by stockholders could have the effect of
making it more difficult for a third party to acquire, or discouraging a third
party from acquiring, control of the Company.
The ability of the board of directors to establish the rights of, and to
issue, substantial amounts of Series Preferred Stock without the need for
stockholder approval, upon such terms and conditions, and having such rights,
privileges and preferences, as the board of directors may determine in the
exercise of its business judgment, may, among other things, be used to create
voting impediments with respect to changes in control of the Company or to
dilute the stock ownership of holders of Common Stock seeking to obtain
control of the Company. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, any Series Preferred Stock that
may be issued in the future. The issuance of Series Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions,
financings and other corporate transactions, may have the effect of
discouraging, delaying or preventing a change in control of the Company. The
Company has no present plans to issue any shares of Series Preferred Stock.
See "Risk Factors--Anti-Takeover Provisions," "--Common Stock" and "--
Preferred Stock."
SECTION 203 OF DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL prohibits certain business combinations between a
Delaware corporation and an "interested stockholder," which is defined as a
person who, together with any affiliates or associates of such person,
beneficially owns, directly or indirectly, 15% or more of the outstanding
voting shares of a Delaware corporation. For purposes of Section 203, business
combinations are defined broadly to include mergers, consolidations, sales or
other dispositions of assets having an aggregate value in excess of 10% of the
consolidated assets of the corporation, and certain transactions that would
increase the interested stockholder's proportionate share ownership in the
corporation. Section 203 prohibits any such business combination for a period
of three years commencing on the date the interested stockholder becomes an
interested stockholder, unless: (i) the business combination is approved by
the corporation's board of directors prior to the date the interested
stockholder becomes an interested stockholder; (ii) the interested stockholder
acquired at least 85% of the voting stock of the corporation (other than stock
held by directors who are also officers or by certain employee stock plans) in
the transaction in which it becomes an interested stockholder; or (iii) the
business combination is approved by a majority of the board of directors and
by the affirmative vote of 66 2/3% of the outstanding voting stock that is not
owned by the interested stockholder. See "Risk Factors--Anti-Takeover
Provisions."
REGISTRATION RIGHTS
Pursuant to the Merger Agreement, an aggregate of (i) 193,493 shares of
Common Stock of the 1,020,317 shares of Common Stock to be issued to Mr. Bruno
in the Merger (which 193,493 shares of Common Stock will be transferable to
Mr. Monahan and Ms. Scott upon the exercise of options to be granted by
Mr. Bruno to them pursuant to the Merger Agreement) and (ii) 60,813 shares of
Common Stock to be issued to Mr. Monahan seven days after the Closing of this
Offering in connection with the Value Appreciation Bonus will be registered
for resale by the Company following the Closing of this Offering. Absent such
registration, such shares, when transferred from Mr. Bruno to Mr. Monahan and
Ms. Scott upon exercise of the options, or upon issuance in connection with
the Value Appreciation Bonus, as the case may be, and unlike the shares of
Common Stock to be issued to Mr. Bruno or former stockholders of Futronix,
would be "restricted securities" as defined under Rule 144 under the
Securities Act and would be subject to a two-year holding period and other
limitations prior to resale
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<PAGE>
under Rule 144. As a result, to provide for equitable treatment of all
stockholders of the Company who will be entitled to receive shares of Common
Stock in connection with the Merger, the Company has agreed to register all of
such 254,306 shares for resale. Such registration is intended to become
effective prior to 180 days after the date of Closing of this Offering.
However, as is the case with all shares of Common Stock issued in the Merger,
pursuant to agreements with the representatives of the Underwriters, resales
of such 254,306 shares may not occur prior to 180 days after the date of the
Closing of this Offering. Further, Mr. Monahan and Ms. Scott have agreed to
sell only that number of such 254,306 shares during any three-month period as
they would each be permitted to sell under the volume limitations of Rule 144.
Additionally, holders of 1,800,124 shares of Common Stock to be issued in
the Merger (which shares will be held by affiliates of the Company and include
shares represented by the options held by Mr. Monahan and Ms. Scott and the
shares to be issued to Mr. Monahan pursuant to the Value Appreciation Bonus)
and the holders of 825,194 shares of Common Stock issuable upon the conversion
of the Convertible Preferred Stock and the exercise of the Warrants issued
pursuant to the Merger Agreement (collectively, the "Registrable Securities")
will be entitled to certain demand and piggyback registration rights with
respect to such shares of Common Stock. Demand registration rights may be
exercised only one time each by each of Bradford Venture Partners, L.P.,
Overseas Equity Investor Partners, Terrence M. Hunt and Theodore J. Bruno
(each, a "Significant Stockholder"). In the event that demand registration
rights are exercised, the Company will be required to proceed with such
registration only if the aggregate fair market value of the Registrable
Securities requested to be registered by such Significant Stockholder, as well
as the Registrable Securities to be registered for other securityholders in
such registration (including the Company's shares, if any), exceeds $5
million. To the extent that the managing underwriter, if any, advises the
Company that the number of Registrable Securities requested to be registered
exceeds the number of shares that can be sold at a price reasonably related to
the fair market value of the Common Stock, the Company shall reduce the number
of Registrable Securities to be offered in such demand registration by first,
registering on a pro rata basis the Registrable Securities requested to be
included in such demand registration by securityholders, and second, to the
extent permitted, registering shares on its own behalf.
In the event that piggyback registration rights are exercised, and to the
extent that the managing underwriter, if any, advises the Company that the
number of Registrable Securities to be included in such registration exceeds
the number of shares that can be sold at a price reasonably related to the
fair market value of the Common Stock, the Company shall reduce the number of
Registrable Securities to be offered in such piggyback registration by (i) in
the case of a primary registration, first registering the shares it proposes
to sell on its behalf and second, to the extent permitted, registering on a
pro rata basis, the Registrable Securities requested to be included in such
piggyback registration by securityholders and (ii) in the case of a secondary
registration, first register the Registrable Securities requested to be
included by the securityholders initiating such registration, and second, to
the extent permitted, registering on a pro rata basis the Registrable
Securities of all other securityholders requested to be included in such
registration.
The Company is not required to effect any demand registration within six
months after effectiveness of a demand registration or a registration in which
securityholders were given piggyback registration rights. Such registration
rights may not be exercised prior to the expiration of 180 days after the date
of Closing of this Offering. See "Risk Factors--Shares Eligible for Future
Sale" and "--Registration Rights."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has not been any public market for the Common
Stock. Sales of substantial amounts of Common Stock in the public market, or
the perception that such sales may occur, following this Offering could
adversely affect the market price of the Common Stock and adversely affect the
Company's ability to raise capital at a time and on terms favorable to the
Company. See "Risk Factors--Shares Eligible for Future Sale and Registration
Rights."
Following the Offering, the 1,950,000 shares of Common Stock offered hereby
will be freely tradeable without restriction or further registration under the
Securities Act, except by persons deemed to be "affiliates" of the Company or
acting as "underwriters" as those terms are defined in the Securities Act,
whose sales will be subject to the resale limitations of Rule 144. In general,
under Rule 144 as currently in effect, a person (including any affiliate of
the Company) who has beneficially owned, for at least two years, shares of
Common Stock that have not been registered under the Securities Act, or any
person who is an affiliate of the Company, if such shares have been
registered, is entitled to sell within any three-month period such number of
shares of Common Stock that does not exceed the greater of: (i) 1% of the then
outstanding shares of Common Stock (approximately 38,348 shares after giving
effect to this Offering), or (ii) the average weekly reported trading volume
during the four calendar weeks preceding filing of notice of such sales. Sales
under Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of certain public information with respect
to the Company. Finally, a person who is not an affiliate at any time during
the ninety days preceding a sale, and who has beneficially owned restricted
shares for at least three years, is entitled to sell such shares under Rule
144(k) without regard to the volume limitations, manner of sale provisions or
public information requirements of Rule 144.
Simultaneously with the registration of the shares offered hereby, the
1,823,937 shares of Common Stock to be issued in the Merger (the "Merger
Shares") will be registered in accordance with the Securities Act. Of the
Merger Shares, the resale of the 803,620 shares to be issued to Futronix
stockholders is restricted for a period of 180 days after the Closing of this
Offering by the Merger Agreement and by agreements with the representatives of
the Underwriters. Of such shares, approximately 23,813 will be held by non-
affiliates of the Company and will be freely tradeable at the end of such 180-
day period without restriction. The remaining approximately 779,807 of the
Merger Shares will be issued to affiliates of the Company and will be eligible
for sale in the public market at the end of such 180-day period, subject to
the volume limitations and other requirements of Rule 144. Holders of such
shares have certain demand and piggyback registration rights described in
"Description of Capital Stock--Registration Rights."
The remainder of the Merger Shares (1,020,317 shares) will be issued to
Theodore J. Bruno, the sole stockholder of Wire & Cable who will be the Vice
Chairman of the Company. Mr. Bruno has agreed not to offer to sell, grant any
option to purchase or otherwise dispose of shares of Common Stock for a period
of 180 days after the date of the sale of the Common Stock offered hereby
without the prior written consent of the representatives of the Underwriters,
except as described below.
Of the 1,020,317 shares of Common Stock to be issued in the Merger to Mr.
Bruno, pursuant to the Merger Agreement, Mr. Bruno will be permitted to grant
to Mr. Monahan and Ms. Scott options to purchase from him an aggregate of
193,494 shares of Common Stock. See "Management--Options Granted by Officer."
Also, pursuant to the Merger Agreement, Mr. Monahan is entitled to receive up
to 60,813 shares of the Common Stock seven days after Closing of this Offering
in connection with the Value Appreciation Bonus. See "Management--Value
Appreciation Bonus for Officer." Mr. Monahan and Ms. Scott have agreed not to
sell, offer to sell, grant any option to purchase or otherwise dispose of any
shares of Common Stock held by them for a period of 180 days after the date of
the sale of the Common Stock offered hereby without the prior written consent
of the representatives of the Underwriters. All of the 1,020,317 shares issued
to Mr. Bruno in the Merger (including shares received
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<PAGE>
by Mr. Monahan and Ms. Scott following exercise of the options granted by Mr.
Bruno) and the 60,813 shares which Mr. Monahan is entitled to receive in
connection with the Value Appreciation Bonus are eligible for demand and
piggyback registration as described in "Description of Capital Stock--
Registration Rights." Further, Mr. Monahan and Ms. Scott have agreed to sell
during any three-month period, following expiration of their respective 180-
day lock-up period, only such number of shares as they would be permitted to
sell as affiliates pursuant to Rule 144. See "Description of Capital Stock--
Registration Rights" and "The Merger--Security Ownership Following the
Merger."
In addition, following the Closing of this Offering, the Company will issue
options to purchase 54,254 shares of Common Stock under the Company's Equity
Compensation Plan. An additional 195,746 shares will be reserved for issuance
under the Equity Compensation Plan. The Company intends to register the shares
of Common Stock issuable and reserved for issuance under the Equity
Compensation Plan as soon as practicable following the date of this
Prospectus. Otherwise, the Company has agreed not to offer to sell, grant any
option to purchase or otherwise dispose of any shares of Common Stock for a
period of 180 days after the date of the sale of the Common Stock offered
hereby without the prior written consent of the representatives of the
Underwriters.
The Merger Agreement restricts for a period of 180 days the ability of
certain stockholders of Futronix to sell 490,990 shares of Common Stock
issuable upon the conversion of Convertible Preferred Stock and 334,204 shares
of Common Stock issuable upon the exercise of Warrants to be issued to such
holders in the Merger. Such additional 825,194 shares of Common Stock will be
"restricted securities," as defined by Rule 144, and will be tradeable upon
issuance in accordance with the holding period and resale restrictions of Rule
144 following such 180-day period. Such stockholders have certain demand and
piggyback registration rights described in "Description of Capital Stock--
Registration Rights."
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") between Schroder Wertheim & Co. Incorporated and
Oppenheimer & Co., Inc., the representatives (the "Representatives") of the
several underwriters (the "Underwriters"), the Company, Futronix Acquisition
Company, Futronix and Wire & Cable, the Underwriters named below through the
Representatives, have severally agreed to purchase from the Company the
aggregate number of shares of Common Stock set forth opposite their respective
names at the initial public offering price, less the underwriting discounts
and commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
UNDERWRITERS SHARES
- ------------ ---------
<S> <C>
Schroder Wertheim & Co. Incorporated..................................
Oppenheimer & Co., Inc................................................
Total............................................................... 1,950,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the shares of Common Stock offered hereby, if any such shares
are purchased. The Representatives have advised the Company that the
Underwriters propose to offer the shares of Common Stock to the public
initially at the initial public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per share to certain other dealers.
The initial public offering price and the concession and discount to dealers
may be changed by the Representatives after this Offering.
The Company has granted to the Underwriters an option, expiring at the close
of business on the 30th day after the date of the Underwriting Agreement, to
purchase up to an additional 292,500 shares of Common Stock, at the initial
public offering price less underwriting discounts and commissions, all as set
forth on the cover page of this Prospectus. The Underwriters may exercise the
option only to cover over-allotments, if any, in connection with the sale of
shares of Common Stock in this Offering. To the extent that the Underwriters
exercise this option, each Underwriter will be committed, subject to
50
<PAGE>
certain conditions, to purchase approximately the same percentage thereof that
the numbers of shares of Common Stock to be purchased by it shown in the above
table bears to the total number of shares being offered hereby and the Company
will be obligated, pursuant to the option, to sell such shares to the
Underwriters. If purchased, the Underwriters will offer such additional shares
on the same terms as those offered hereby.
The Company, with certain limited exceptions described below, each of the
directors and officers of the Company, with the exception of Theodore J. Bruno
to the extent described in the next sentence, and certain stockholders of the
Company have agreed not to offer to sell, grant any option to purchase or
otherwise dispose of any shares of Common Stock held by them for a period of
180 days after the date of the Closing of this Offering without the prior
written consent of the Representatives. Mr. Bruno will be permitted to grant
options to Paul R. Monahan and Joan Scott to purchase from him an aggregate of
193,493 shares of Common Stock. See "Management--Options Granted by Officer."
Mr. Monahan and Ms. Scott also have agreed not to offer to sell, grant any
option to purchase or otherwise dispose of any shares of Common Stock issuable
to them upon the exercise of such options for a period of 180 days after the
date of the Closing of this Offering of the Common Stock offered hereby
without the prior written consent of the Representatives. The Company will be
permitted to issue to employees of the Company 54,254 options to purchase
shares of Common Stock under the Company's Equity Compensation Plan and to
register the shares of Common Stock issuable and reserved for issuance under
the Equity Compensation Plan as soon as practicable following the date of this
Prospectus. In addition, the Company will be permitted to issue to Mr. Monahan
60,813 shares of Common Stock in connection with the Value Appreciation Bonus.
See "Management--Value Appreciation Bonus for Officer."
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.
The Underwriters have agreed to reserve up to 97,500 shares of the Common
Stock offered hereby for sale to certain employees of the Company and certain
other individuals at the initial public offering price set forth on the cover
page of this Prospectus. Such persons must purchase such shares as soon as
this Offering commences and any shares not so purchased will be immediately
reoffered by the Underwriters to the public.
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price will be negotiated between the
Company and the Representatives. Among the factors to be considered in
determining the initial public offering price, in addition to prevailing
market conditions, will be the historical performance of each of Futronix and
Wire & Cable, estimates of the business potential and earnings prospects of
the Company, an assessment of the Company's management and the consideration
of the above factors in relation to market valuation of companies in related
businesses.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or will
contribute to payments the Underwriters may be required to make in respect
thereof.
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EXPERTS
The balance sheet of the Company as of August 29, 1996 included in this
Prospectus has been audited by Deloitte & Touche LLP, independent public
accountants, as stated in their report appearing herein, and is included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The financial statements of Futronix included in this Prospectus as of and
for the year ended December 31, 1995 have been audited by Deloitte & Touche
LLP, independent public accountants, as stated in their report appearing
herein, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The financial statements of Futronix included in this Prospectus as of and
for the years ended December 31, 1993 and 1994 have been audited by Weinstein
Spira & Company, P.C., independent public accountants, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The financial statements of Wire & Cable included in this Prospectus as of
and for the years ended December 31, 1993, 1994 and 1995 have been audited by
Gross, Collins & Cress, P.C., independent public accountants, as stated in
their report appearing herein, and are included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Thomas J.
Sharbaugh, a partner of Morgan, Lewis & Bockius LLP, is a trustee of a trust
which is a stockholder of the Company. Certain legal matters in connection
with this Offering will be passed upon for the Underwriters by Dorsey &
Whitney LLP, New York, New York.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act with respect to
the Common Stock being offered pursuant to this Prospectus. This Prospectus
does not contain all information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. The Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Statements contained herein concerning the provisions of any documents are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement.
REPORTS TO SECURITY HOLDERS
The Company intends to distribute to its stockholders annual reports
containing audited financial statements and will make available copies of
quarterly reports for the first three quarters of each fiscal year containing
unaudited interim financial information.
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FUTRONIX SYSTEMS CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUTRONIX SYSTEMS CORP. PRO FORMA COMBINED (UNAUDITED):
Introduction to Unaudited Pro Forma Combined Financial Statements....... F-2
Pro Forma Combined Balance Sheet as of June 30, 1996 (Unaudited)........ F-3
Pro Forma Combined Statement of Income for the Year Ended
December 31, 1993 (Unaudited).......................................... F-4
Pro Forma Combined Statement of Income for the Year Ended
December 31, 1994 (Unaudited).......................................... F-5
Pro Forma Combined Statement of Income for the Year Ended
December 31, 1995 (Unaudited).......................................... F-6
Pro Forma Combined Statement of Income for the Six Months Ended
June 30, 1995 (Unaudited).............................................. F-7
Pro Forma Combined Statement of Income for the Six Months Ended
June 30, 1996 (Unaudited).............................................. F-8
Notes to Unaudited Pro Forma Combined Financial Statements.............. F-9
FUTRONIX SYSTEMS CORP.:
Report of Deloitte & Touche LLP......................................... F-11
Consolidated Balance Sheet as of August 29, 1996........................ F-12
Notes to Consolidated Balance Sheet..................................... F-13
FUTRONIX CORPORATION:
Report of Deloitte & Touche LLP......................................... F-14
Report of Weinstein Spira & Company, P.C................................ F-15
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(Unaudited)............................................................ F-16
Statements of Income for the Years Ended December 31, 1993, 1994 and
1995 and for the Six Months Ended June 30, 1995 and 1996 (Unaudited)... F-17
Statements of Changes in Shareholders' Equity for the Years Ended
December 31, 1993, 1994 and 1995 and for the Six Months Ended June 30,
1996 (Unaudited)....................................................... F-18
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995 and for the Six Months Ended June 30, 1995 and 1996 (Unaudited)... F-19
Notes to Financial Statements........................................... F-20
WIRE & CABLE SPECIALTIES CORPORATION:
Report of Gross, Collins & Cress, P.C................................... F-27
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(Unaudited)............................................................ F-28
Statements of Income for the Years Ended December 31, 1993, 1994 and
1995 and for the Six Months Ended June 30, 1995 and 1996 (Unaudited)... F-29
Statements of Changes in Shareholder's Equity for the Years Ended
December 31, 1993, 1994 and 1995 and for the Six Months Ended June 30,
1996 (Unaudited)....................................................... F-30
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995 and for the Six Months Ended June 30, 1995 and 1996 (Unaudited)... F-31
Notes to Financial Statements........................................... F-32
</TABLE>
F-1
<PAGE>
FUTRONIX SYSTEMS CORP.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined balance sheet as of June 30, 1996
and the unaudited pro forma combined statements of income for each of the
three years in the period ended December 31, 1995 and the six months ended
June 30, 1995 and 1996 (the "Unaudited Pro Forma Combined Financial
Statements") reflect the merger (the "Merger") of Futronix Corporation
("Futronix") and Wire & Cable Specialties Corporation ("Wire & Cable") with
and into Futronix Acquisition Company, a wholly-owned subsidiary of Futronix
Systems Corp. (the "Company"), using the "pooling of interests" method of
accounting as if Futronix and Wire & Cable have always operated as one
company. The unaudited pro forma combined balance sheet of the Company
reflects the combination of the historical balance sheets of Futronix and Wire
& Cable as of June 30, 1996, adjusted for a bonus payment due seven days after
the closing of the initial public offering of common stock of the Company to
an executive officer of the Company and the conversion of mandatorily
redeemable preferred stock into 7% subordinated notes. The unaudited pro forma
combined statements of income of the Company reflect the combination of the
historical operating results of Futronix and Wire & Cable for the periods
indicated above, adjusted for the interest expense which would have been
incurred on the 7% subordinated notes as if they were outstanding for the
periods for which the nonconvertible preferred stock of Futronix was
outstanding and the estimated income tax expense that Futronix and Wire &
Cable would have incurred if they each had been a C corporation instead of an
S corporation for all periods presented. No amounts are included in the
Unaudited Pro Forma Combined Financial Statements for the Company because it
had no operations prior to the Merger.
The Unaudited Pro Forma Combined Financial Statements are not necessarily
indicative of the results of operations or financial position that actually
would have occurred had the Merger been consummated on the dates indicated or
that may be obtained in the future. The Unaudited Pro Forma Combined Financial
Statements should be read in conjunction with the related historical financial
statements and notes thereto of each of Futronix and Wire & Cable included in
this Prospectus.
F-2
<PAGE>
FUTRONIX SYSTEMS CORP.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------------------------
HISTORICAL COMPANY PRO FORMA
------------------------ ---------------------------------------
FUTRONIX WIRE & CABLE TOTAL ADJUSTMENTS COMBINED
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents.......... $ 388,004 $ 3,391 $ 391,395 $ -- $ 391,395
Receivables:
Trade................. 5,885,187 3,485,656 9,370,843 -- 9,370,843
Other................. 124,306 190,594 314,900 -- 314,900
Federal income tax
receivable.......... 74,262 -- 74,262 546,758 (2) 621,020
Inventory.............. 18,232,490 4,993,060 23,225,550 -- 23,225,550
Prepaid expenses....... 89,149 -- 89,149 -- 89,149
Deferred federal income
taxes................ 15,000 -- 15,000 -- 15,000
Other current assets... -- 92,185 92,185 -- 92,185
----------- ---------- ----------- ----------- -----------
Total current
assets........... 24,808,398 8,764,886 33,573,284 546,758 34,120,042
----------- ---------- ----------- ----------- -----------
PROPERTY AND EQUIPMENT:
Furniture and office
equipment............ 1,045,138 260,997 1,306,135 -- 1,306,135
Machinery and
equipment............ 730,204 724,781 1,454,985 -- 1,454,985
Vehicles............... -- 80,561 80,561 -- 80,561
Leasehold
improvements......... 677,580 -- 677,580 -- 677,580
Less accumulated
depreciation........ (594,158) (683,189) (1,277,347) -- (1,277,347)
----------- ---------- ----------- ----------- -----------
1,858,764 383,150 2,241,914 -- 2,241,914
----------- ---------- ----------- ----------- -----------
OTHER ASSETS:
Organization costs--
net.................. 4,693 -- 4,693 -- 4,693
Other assets........... -- 36,666 36,666 -- 36,666
----------- ---------- ----------- ----------- -----------
4,693 36,666 41,359 -- 41,359
----------- ---------- ----------- ----------- -----------
TOTAL ASSETS........... $26,671,855 $9,184,702 $35,856,557 $ 546,758 $36,403,315
=========== ========== =========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable-line of
credit............... $11,900,000 $3,066,000 $14,966,000 $ -- $14,966,000
Accounts payable:
Trade................. 7,150,704 3,406,388 10,557,092 -- 10,557,092
Current portion of
long-term debt....... -- 11,520 11,520 -- 11,520
Accrued expenses....... 574,389 210,297 784,686 648,267 (2) 1,432,953
Reserve for shareholder
distribution for
taxes................ -- 19,500 19,500 -- 19,500
----------- ---------- ----------- ----------- -----------
Total current
liabilities...... 19,625,093 6,713,705 26,338,798 648,267 26,987,065
----------- ---------- ----------- ----------- -----------
LONG-TERM DEBT.......... 1,243,193 6,231 1,249,424 2,200,000 (2) 3,449,424
----------- ---------- ----------- ----------- -----------
DEFERRED FEDERAL INCOME
TAXES................. 54,000 -- 54,000 -- 54,000
----------- ---------- ----------- ----------- -----------
MANDATORILY REDEEMABLE
PREFERRED STOCK....... 2,200,000 -- 2,200,000 (2,200,000)(2) --
----------- ---------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Capital Stock:
Common stock.......... 16,367 1,000 17,367 1,481 (2) 18,848
Convertible preferred
stock............... 1,000,000 -- 1,000,000 1,000,000
Additional paid-in
capital.............. 1,509,415 90,000 1,599,415 789,088 (2) 2,388,503
Retained earnings...... 1,023,787 2,373,766 3,397,553 (892,078)(2) 2,505,475
----------- ---------- ----------- ----------- -----------
Total stockholders'
equity........... 3,549,569 2,464,766 6,014,335 (101,509) 5,912,826
----------- ---------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY.. $26,671,855 $9,184,702 $35,856,557 $ 546,758 $36,403,315
=========== ========== =========== =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-3
<PAGE>
FUTRONIX SYSTEMS CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
------------------------------------------------------------
HISTORICAL COMPANY PRO FORMA
----------------------- ------------------------------------
ADJUSTMENTS
------------------------
S CORPORATION INTEREST
FUTRONIX WIRE & CABLE INCOME TAXES EXPENSE COMBINED
---------- ------------ ------------- -------- -----------
<S> <C> <C> <C> <C> <C>
Sales................... $2,873,772 $11,023,490 $ -- $ -- $13,897,262
---------- ----------- ---------- ----- -----------
Operating costs and
expenses:
Costs of products
sold................. 1,311,331 8,083,533 -- -- 9,394,864
Operating expenses..... 1,322,632 2,532,750 -- -- 3,855,382
---------- ----------- ---------- ----- -----------
Total operating
costs and
expenses......... 2,633,963 10,616,283 -- -- 13,250,246
---------- ----------- ---------- ----- -----------
Income from operations.. 239,809 407,207 -- -- 647,016
---------- ----------- ---------- ----- -----------
Other expenses:
Interest expense:
Related parties....... -- -- -- -- --
Other................. (69,138) (71,719) -- -- (140,857)
Other.................. -- 17,655 -- -- 17,655
---------- ----------- ---------- ----- -----------
Total other
expenses......... (69,138) (54,064) -- -- (123,202)
---------- ----------- ---------- ----- -----------
Income before income
taxes.................. 170,671 353,143 -- -- 523,814
Income taxes............ -- -- 199,049(3) -- 199,049
---------- ----------- ---------- ----- -----------
Net income.............. $ 170,671 $ 353,143 $(199,049) $ -- $ 324,765
========== =========== ========== ===== ===========
Earnings per common
share.................. $ .18
===========
Weighted average shares
outstanding............ 1,822,786
===========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-4
<PAGE>
FUTRONIX SYSTEMS CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------------------------------------
HISTORICAL COMPANY PRO FORMA
----------------------- ------------------------------------------
ADJUSTMENTS
--------------------------
S CORPORATION INTEREST
FUTRONIX WIRE & CABLE INCOME TAXES EXPENSE COMBINED
---------- ------------ ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Sales................... $5,950,633 $20,241,965 $ -- $ -- $26,192,598
---------- ----------- ---------- ---------- -----------
Operating costs and
expenses:
Costs of products
sold................. 3,023,935 15,305,308 -- -- 18,329,243
Operating expenses..... 2,224,253 3,859,369 -- -- 6,083,622
---------- ----------- ---------- ---------- -----------
Total operating
costs and
expenses......... 5,248,188 19,164,677 -- -- 24,412,865
---------- ----------- ---------- ---------- -----------
Income from operations.. 702,445 1,077,288 -- -- 1,779,733
---------- ----------- ---------- ---------- -----------
Other expenses:
Interest expense:
Related parties....... (20,504) -- -- (154,000)(3) (174,504)
Other................. (129,581) (171,909) -- -- (301,490)
Other.................. (30,285) 8,148 -- -- (22,137)
---------- ----------- ---------- ---------- -----------
Total other
expenses......... (180,370) (163,761) -- (154,000) (498,131)
---------- ----------- ---------- ---------- -----------
Income before income
taxes................. 522,075 913,527 -- (154,000) 1,281,602
Income taxes............ 220,904 -- 313,140(3) (58,520) 475,524
---------- ----------- ---------- ---------- -----------
Net income.............. $ 301,171 $ 913,527 $ (313,140) $ (95,480) $ 806,078
========== =========== ========== ========== ===========
Earnings per common
share................. $ .40
===========
Weighted average shares
outstanding........... 2,021,728
===========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-5
<PAGE>
FUTRONIX SYSTEMS CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------
HISTORICAL COMPANY PRO FORMA
------------------------ -----------------------------------------
FUTRONIX WIRE & CABLE ADJUSTMENTS COMBINED
----------- ------------ -------------------------- -----------
S CORPORATION INTEREST
INCOME TAXES EXPENSE
------------- ----------
<S> <C> <C> <C> <C> <C>
Sales................... $29,279,781 $24,511,091 $ -- $ -- $53,790,872
----------- ----------- ---------- ---------- -----------
Operating costs and
expenses:
Costs of products
sold................. 21,474,056 18,877,741 -- -- 40,351,797
Operating expenses..... 6,108,005 4,242,762 -- -- 10,350,767
----------- ----------- ---------- ---------- -----------
Total operating
costs and
expenses......... 27,582,061 23,120,503 -- -- 50,702,564
----------- ----------- ---------- ---------- -----------
Income from operations.. 1,697,720 1,390,588 -- -- 3,088,308
----------- ----------- ---------- ---------- -----------
Other expenses:
Interest expense:
Related parties....... (87,024) -- -- (154,000)(3) (241,024)
Other................. (603,047) (187,382) -- -- (790,429)
Other.................. -- (513) -- -- (513)
----------- ----------- ---------- ---------- -----------
Total other
expenses......... (690,071) (187,895) -- (154,000) (1,031,966)
----------- ----------- ---------- ---------- -----------
Income before income
taxes................. 1,007,649 1,202,693 -- (154,000) 2,056,342
Income taxes............ 393,404 -- 457,023(3) (58,520) 791,907
----------- ----------- ---------- ---------- -----------
Net income.............. $ 614,245 $ 1,202,693 $(457,023) $ (95,480) $ 1,264,435
=========== =========== ========== ========== ===========
Earnings per common
share................. $ .48
===========
Weighted average shares
outstanding........... 2,647,946
===========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-6
<PAGE>
FUTRONIX SYSTEMS CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
---------------------------------------------------------------
HISTORICAL COMPANY PRO FORMA
---------------------- ----------------------------------------
ADJUSTMENTS
-------------------------
S CORPORATION INTEREST
FUTRONIX WIRE &CABLE INCOME TAXES EXPENSE COMBINED
---------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sales................... $9,936,997 $12,319,134 $ -- $ -- $22,256,131
---------- ----------- ---------- --------- -----------
Operating costs and
expenses:
Costs of products
sold................. 6,816,228 9,396,814 -- -- 16,213,042
Operating expenses..... 2,548,608 2,210,250 -- -- 4,758,858
---------- ----------- ---------- --------- -----------
Total operating
costs and
expenses......... 9,364,836 11,607,064 -- -- 20,971,900
---------- ----------- ---------- --------- -----------
Income from operations.. 572,161 712,070 -- -- 1,284,231
---------- ----------- ---------- --------- -----------
Other expenses:
Interest expense:
Related parties....... (43,512) -- -- (77,000)(3) (120,512)
Other................. (215,550) (87,813) -- -- (303,363)
Other.................. -- (4,503) -- -- (4,503)
---------- ----------- ---------- --------- -----------
Total other
expenses......... (259,062) (92,316) -- (77,000) (428,378)
---------- ----------- ---------- --------- -----------
Income before income
taxes................. 313,099 619,754 -- (77,000) 855,853
Income taxes............ 125,176 -- 235,507(3) (29,260) 331,423
---------- ----------- ---------- --------- -----------
Net income.............. $ 187,923 $ 619,754 $(235,507) $(47,740) $ 524,430
========== =========== ========== ========= ===========
Earnings per common
share................. $ .20
===========
Weighted average shares
outstanding........... 2,647,946
===========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-7
<PAGE>
FUTRONIX SYSTEMS CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
-----------------------------------------------------------------
HISTORICAL COMPANY PRO FORMA
------------------------ ----------------------------------------
ADJUSTMENTS
-------------------------
S CORPORATION INTEREST
FUTRONIX WIRE & CABLE INCOME TAXES EXPENSE COMBINED
----------- ------------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sales................... $22,580,795 $12,578,175 $ -- $ -- $35,158,970
----------- ----------- ---------- --------- -----------
Operating costs and
expenses:
Costs of products
sold................. 17,702,663 9,724,321 -- -- 27,426,984
Operating expenses..... 4,098,211 2,213,598 -- -- 6,311,809
----------- ----------- ---------- --------- -----------
Total operating
costs and
expenses......... 21,800,874 11,937,919 -- -- 33,738,793
----------- ----------- ---------- --------- -----------
Income from operations.. 779,921 640,256 -- -- 1,420,177
----------- ----------- ---------- --------- -----------
Other expenses:
Interest expense:
Related parties....... (43,512) -- -- (77,000)(3) (120,512)
Other................. (411,795) (111,380) -- -- (523,175)
Other.................. -- (30,045) -- -- (30,045)
----------- ----------- ---------- --------- -----------
Total other
expenses......... (455,307) (141,425) -- (77,000) (673,732)
----------- ----------- ---------- --------- -----------
Income before income
taxes................. 324,614 498,831 -- (77,000) 746,445
Income taxes............ 129,846 -- 189,556(3) (29,260) 290,142
----------- ----------- ---------- --------- -----------
Net income.............. $ 194,768 $ 498,831 $(189,556) $(47,740) $ 456,303
=========== =========== ========== ========= ===========
Earnings per common
share................. $ .17
===========
Weighted average shares
outstanding........... 2,647,946
===========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-8
<PAGE>
FUTRONIX SYSTEMS CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying Unaudited Pro Forma Combined Financial Statements reflect
the merger (the "Merger") of Futronix Corporation ("Futronix") and Wire &
Cable Specialties Corporation ("Wire & Cable") with and into Futronix
Acquisition Company, a wholly-owned subsidiary of Futronix Systems Corp. (the
"Company").
The Merger is a business combination which will be accounted for by the
Company using the "pooling of interests" method of accounting. Accordingly:
(i) assets and liabilities are recorded at their book value as they existed on
the books of Futronix and Wire & Cable at the time of the Merger (i.e.,
goodwill is not recorded); (ii) stock issued to effect the Merger is recorded
on the books of the Company at its par value; (iii) retained earnings is
recorded on the books of the Company as it existed on the books of each of
Futronix and Wire & Cable at the time of the Merger; and (iv) any adjustment
necessary to make the entry balance is made through the additional paid-in
capital accounts. The Unaudited Pro Forma Combined Statements of Income
reflect the Merger as if the companies have always been combined. The
Unaudited Pro Forma Combined Balance Sheet reflects the Merger as if it had
occurred on June 30, 1996. The Unaudited Pro Forma Combined Financial
Statements reflect adjustments described in Notes 2 and 3 below.
The Unaudited Pro Forma Combined Financial Statements are presented for
illustrative purposes only and do not give effect to any cost savings that may
result from the Merger. Additionally, the Unaudited Pro Forma Combined
Financial Statements do not include any transaction costs related to the
Merger (which are estimated to be approximately $150,000). Differences in
accounting policies do not have a material effect on either the pro forma
financial position or pro forma results of operations and have not been
reflected in the Unaudited Pro Forma Combined Financial Statements.
The Unaudited Pro Forma Combined Financial Statements are not necessarily
indicative of the results of operations or financial position that actually
would have occurred had the Merger been consummated on the dates indicated or
that may be obtained in the future. These Unaudited Pro Forma Combined
Financial Statements should be read in conjunction with the related historical
financial statements and notes thereto of each of Futronix and Wire & Cable
included in this Prospectus. No amounts are included in the Unaudited Pro
Forma Combined Financial Statements for the Company because it had no
operations prior to the Merger.
2. PRO FORMA ADJUSTMENTS--BALANCE SHEET
The pro forma adjustments to the Unaudited Pro Forma Combined Balance Sheet
reflect the issuance of the Company common shares pursuant to the Merger, the
conversion of 2,200,000 shares of mandatorily redeemable preferred stock to
$2,200,000 aggregate principal amount of 7% subordinated notes, and a bonus
payment due seven days after the closing of the Merger to an executive officer
of the Company and its related income tax effect. See "Management--Value
Appreciation Bonus for Officer."
3. PRO FORMA ADJUSTMENTS--STATEMENTS OF INCOME
The pro forma adjustments to the Unaudited Pro Forma Combined Statements of
Income reflect the estimated income taxes (federal and state) that would have
been paid by Wire & Cable and Futronix if they had been taxable entities for
all periods presented at an assumed combined rate of 38%. Wire & Cable was an
S corporation for federal and state income purposes for all periods presented.
Futronix was an S corporation for the year ended December 31, 1993. S
corporations do
F-9
<PAGE>
FUTRONIX SYSTEMS CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
not pay income taxes themselves. Instead, similar to partnerships, their
income is taxed directly to the stockholders of the S corporation. The pro
forma adjustments also include the interest expense (and related income tax
effect) which would have been incurred during each period assuming that the
conversion of $2,200,000 of mandatorily redeemable preferred stock into 7%
subordinated notes had occurred at the beginning of each period presented. The
pro forma adjustments do not include the non-recurring bonus payment of
$1,438,836 ($892,078 after income taxes) mentioned in Note 2 above.
4. PRO FORMA EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of shares
of common stock and common stock equivalents outstanding during the periods
based on the exchange ratios listed under "The Merger--Security Ownership
Following the Merger." Common stock equivalents include common stock options
issued in April 1996, an aggregate of 490,990 shares of common stock reserved
for issuance upon the conversion of convertible preferred stock to be issued
pursuant to the Merger Agreement and an aggregate of 334,204 shares of common
stock reserved for issuance upon the exercise of warrants to be issued
pursuant to the Merger Agreement. In addition, in accordance with Staff
Accounting Bulletin No. 83 of the Securities and Exchange Commission, all
stock, stock options and stock warrants issued since September 5, 1995 (one
year before filing of a registration statement for an initial public offering)
have been considered outstanding for all periods. The weighted average number
of shares used to compute earnings per common share was:
<TABLE>
<CAPTION>
WIRE & PRO FORMA
FUTRONIX CABLE COMBINED
--------- --------- ---------
<S> <C> <C> <C>
Year ended December 31:
1993......................................... 802,469 1,020,317 1,822,786
1994......................................... 1,001,411 1,020,317 2,021,728
1995......................................... 1,627,629 1,020,317 2,647,946
Six months ended June 30:
1995......................................... 1,627,629 1,020,317 2,647,946
1996......................................... 1,627,629 1,020,317 2,647,946
</TABLE>
F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Futronix Systems Corp.
Houston, Texas
We have audited the accompanying consolidated balance sheet of Futronix
Systems Corp. as of August 29, 1996. This financial statement is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. These 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, such financial statement referred to above presents fairly,
in all material respects, the financial position of Futronix Systems Corp. as
of August 29, 1996 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Houston, Texas
August 29, 1996
F-11
<PAGE>
FUTRONIX SYSTEMS CORP.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AUGUST 29, 1996
---------------
<S> <C>
ASSETS
Cash.......................................................... $1,000
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable--Futronix Corporation........................ 1,000
------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 15,000,000 shares authorized,
none issued................................................. --
Convertible preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued..................................... --
Series preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued..................................... --
------
Total stockholders' equity................................ --
------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................... $1,000
======
</TABLE>
F-12
<PAGE>
FUTRONIX SYSTEMS CORP.
NOTES TO CONSOLIDATED BALANCE SHEET
1. ORGANIZATION
Futronix Systems Corp. (the "Company"), a Delaware corporation, was
organized on August 5, 1996 in connection with the merger (the "Merger") of
Futronix Corporation ("Futronix"), a Texas corporation, and Wire & Cable
Specialties Corporation ("Wire & Cable"), a Georgia corporation, with and into
Futronix Acquisition Company ("Acquisition"), a Texas corporation and wholly-
owned subsidiary of the Company . The Merger will be treated as a "pooling of
interests" for financial reporting purposes and will become effective
simultaneously with the closing of the initial public offering of 1,950,000
shares of Common Stock of the Company (the "Offering"), at which time the name
of Acquisition will be changed to "Futronix Corporation." All of the Company's
business will be conducted through Futronix Corporation.
In the Merger and simultaneously with the closing of the Offering, all of
the stockholders of Futronix and Theodore J. Bruno, the sole stockholder of
Wire & Cable, will exchange all of the securities they hold of Futronix and
Wire & Cable, respectively, for securities of the Company. Holders of
1,243,985 shares of Class A Common Stock, par value $.01 per share, of
Futronix, 344,250 shares of Class B Common Stock, par value $.01 per share, of
Futronix and 48,500 shares of Class C Common Stock, par value $.01 per share,
of Futronix will exchange such shares for 803,620 shares of Common Stock of
the Company. Theodore J. Bruno will exchange 1,000 shares of Common Stock, par
value $1.00 per share, of Wire & Cable for 1,020,317 shares of Common Stock of
the Company. Holders of 1,000,000 shares of Convertible Preferred Stock, par
value $1.00 per share, of Futronix, will exchange such shares for 490,990
shares of Convertible Preferred Stock of the Company. Holders of 2,200,000
shares of Nonconvertible Preferred Stock, par value $1.00 per share, of
Futronix will exchange such shares for the right to receive a 7% Subordinated
Note of the Company in the principal amount of $1.00 per share of
Nonconvertible Preferred Stock of Futronix (the "Company Subordinated Notes").
The Company Subordinated Notes will be issued by the Company in an aggregate
principal amount of $2,200,000, payable in four equal annual installments on
December 30 of 2000 through 2003, with interest payable at an annual rate of
7%. Holders of 680,673 warrants to purchase capital stock of Futronix will
exchange such warrants for 334,204 Warrants of the Company. In addition,
pursuant to the Merger, after serving as the Company's Chief Financial Officer
for seven days following the closing of the Offering, Mr. Monahan will receive
a value appreciation bonus of 60,813 shares of Common Stock of the Company and
cash equal to 82% of such number of shares multiplied by the value of a share
of Common Stock at the time such bonus is paid as determined for reporting
such bonus for federal income tax purposes. See "Management--Value
Appreciation Bonus for Officer."
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheet includes the accounts of Acquisition, the
Company's wholly-owned subsidiary. All intercompany balances have been
eliminated in consolidation.
F-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Futronix Corporation
Houston, Texas
We have audited the accompanying balance sheet of Futronix Corporation as of
December 31, 1995, and the related statements of income, changes in
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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, such financial statements referred to above present fairly,
in all material respects, the financial position of Futronix Corporation as of
December 31, 1995, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Houston, Texas
April 26, 1996
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Futronix Corporation
Houston, Texas
We have audited the accompanying balance sheet of Futronix Corporation (dba
Futronix Cable Depot) as of December 31, 1994, and the related statements of
earnings, changes in shareholders' equity and cash flows for the years ended
December 31, 1994 and 1993. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Futronix Corporation (dba
Futronix Cable Depot) as of December 31, 1994, and the results of its
operations and cash flows for the years ended December 31, 1994 and 1993, in
conformity with generally accepted accounting principles.
Weinstein Spira & Company, P.C.
Houston, Texas
April 14, 1995
F-15
<PAGE>
FUTRONIX CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1994 1995 1996
---------- ----------- -----------
UNAUDITED
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................. $ 114,017 $ 236,023 $ 388,004
Receivables:
Trade-less allowance for doubtful
accounts of $10,000 and $30,000 in 1994
and 1995 and $70,000 in 1996,
respectively............................ 1,026,299 4,945,296 5,885,187
Other..................................... 30,241 127,664 124,306
Federal income tax receivable............. -- -- 74,262
Inventory.................................. 5,941,481 14,005,376 18,232,490
Prepaid expenses........................... 61,903 106,788 89,149
Deferred federal income tax................ 8,500 15,000 15,000
---------- ----------- -----------
Total current assets................... 7,182,441 19,436,147 24,808,398
---------- ----------- -----------
PROPERTY AND EQUIPMENT:
Furniture and office equipment............. 403,306 917,929 1,045,138
Machinery and equipment.................... 251,684 496,089 730,204
Leasehold improvements..................... 611,001 669,691 677,580
---------- ----------- -----------
1,265,991 2,083,709 2,452,922
Less accumulated depreciation.............. 160,989 406,658 594,158
---------- ----------- -----------
1,105,002 1,677,051 1,858,764
---------- ----------- -----------
OTHER ASSETS................................ 10,257 6,462 4,693
---------- ----------- -----------
TOTAL....................................... $8,297,700 $21,119,660 $26,671,855
========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable............................... $1,400,000 $ 7,650,000 $11,900,000
Accounts payable:
Trade..................................... 1,304,727 5,943,740 7,150,704
Due to related party...................... 53,210 -- --
Accrued expenses........................... 330,791 603,598 574,389
Federal income taxes payable............... 46,723 118,828 --
---------- ----------- -----------
Total current liabilities.............. 3,135,451 14,316,166 19,625,093
LONG-TERM DEBT-SHAREHOLDERS................. 1,243,193 1,243,193 1,243,193
DEFERRED FEDERAL INCOME TAXES............... 27,000 54,000 54,000
---------- ----------- -----------
4,405,644 15,613,359 20,922,286
---------- ----------- -----------
MANDATORILY REDEEMABLE PREFERRED STOCK, non-
dividend paying, $1 par value, $1
redemption value, 2,500,000 shares
authorized, 2,200,000 shares issued and
outstanding............................... 2,200,000 2,200,000 2,200,000
---------- ----------- -----------
SHAREHOLDERS' EQUITY:
Capital stock:
Class A common stock, $.01 par value,
5,000,000 shares authorized, 1,243,985
shares issued and outstanding........... 12,440 12,440 12,440
Class B common stock, $.01 par value,
1,300,000 shares authorized, 344,250
shares issued and outstanding........... 3,442 3,442 3,442
Class C common stock, $.01 par value,
1,000,000 shares authorized, 48,500
shares issued and outstanding........... -- -- 485
Convertible preferred stock, non-dividend
paying, $1 par value, $1 redemption
value, 1,200,000 shares authorized,
1,000,000 shares outstanding............ -- 1,000,000 1,000,000
Series preferred stock, $1 par value,
3,000,000 shares authorized, none
issued.................................. -- -- --
Additional paid-in capital................. 1,461,400 1,461,400 1,509,415
Retained earnings.......................... 214,774 829,019 1,023,787
---------- ----------- -----------
Total shareholders' equity............. 1,692,056 3,306,301 3,549,569
---------- ----------- -----------
TOTAL....................................... $8,297,700 $21,119,660 $26,671,855
========== =========== ===========
</TABLE>
See notes to financial statements.
F-16
<PAGE>
FUTRONIX CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ---------- -----------
UNAUDITED
<S> <C> <C> <C> <C> <C>
SALES................... $2,873,772 $5,950,633 $29,279,781 $9,936,997 $22,580,795
---------- ---------- ----------- ---------- -----------
OPERATING COSTS AND
EXPENSES:
Cost of products sold.. 1,311,331 3,023,935 21,474,056 6,816,228 17,702,663
Operating expenses:
Lease payments to
related party....... 156,072 156,072 180,000 90,000 150,000
Other operating
expenses............ 1,166,560 2,068,181 5,928,005 2,458,608 3,948,211
---------- ---------- ----------- ---------- -----------
Total operating
costs and
expenses......... 2,633,963 5,248,188 27,582,061 9,364,836 21,800,874
---------- ---------- ----------- ---------- -----------
INCOME FROM OPERATIONS.. 239,809 702,445 1,697,720 572,161 779,921
---------- ---------- ----------- ---------- -----------
OTHER EXPENSE:
Interest expense:
Related parties....... -- (20,504) (87,024) (43,512) (43,512)
Other................. (69,138) (129,581) (603,047) (215,550) (411,795)
Loss on sale of
assets............... -- (30,285) -- -- --
---------- ---------- ----------- ---------- -----------
Total other
expense.......... (69,138) (180,370) (690,071) (259,062) (455,307)
---------- ---------- ----------- ---------- -----------
INCOME BEFORE INCOME
TAXES................. 170,671 522,075 1,007,649 313,099 324,614
INCOME TAXES............ -- 220,904 393,404 125,176 129,846
---------- ---------- ----------- ---------- -----------
NET INCOME.............. $ 170,671 $ 301,171 $ 614,245 $ 187,923 $ 194,768
========== ========== =========== ========== ===========
PRO FORMA NET INCOME
(ADJUSTED ONLY FOR
INCOME TAXES OF S
CORPORATION).......... $ 105,816 $ 335,171 $ 614,245 $ 187,923 $ 194,768
========== ========== =========== ========== ===========
PRO FORMA EARNINGS PER
COMMON SHARE.......... $ .06 $ .16 $ .19 $ .06 $ .06
========== ========== =========== ========== ===========
</TABLE>
See notes to financial statements.
F-17
<PAGE>
FUTRONIX CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CONVERTIBLE
COMMON STOCK COMMON STOCK COMMON STOCK PREFERRED STOCK ADDITIONAL RETAINED TOTAL
-------------------- -------------- ------------- -------------------- PAID-IN EARNINGS SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
--------- ---------- ------- ------ ------ ------ --------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY
1, 1993......... 500,000 $ 500,000 $ 471,848 $ (28,916) $ 942,932
Net income...... 170,671 170,671
Distributions... (471,848) (228,152) (700,000)
--------- ---------- ------- ------ ------ ---- --------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER
31, 1993........ 500,000 500,000 (86,397) 413,603
Recapitalization
of Class A
common stock... (39,265) (495,393) 127,500 $1,275 494,118
Issuance of
Class A common
stock.......... 783,250 7,833 775,417 783,250
Issuance of
Class B common
stock.......... 216,750 2,167 214,583 216,750
Issuance of
Class A and
Class B common
stock purchase
warrants....... 6,807 6,807
Costs related to
issuance of
common stock... (29,525) (29,525)
Net income...... 301,171 301,171
--------- ---------- ------- ------ ------ ---- --------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER
31, 1994........ 1,243,985 12,440 344,250 3,442 1,461,400 214,774 1,692,056
Issuance of
Convertible
Preferred
Stock.......... 1,000,000 $1,000,000 1,000,000
Net income...... 614,245 614,245
--------- ---------- ------- ------ ------ ---- --------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER
31, 1995........ 1,243,985 12,440 344,250 3,442 1,000,000 1,000,000 1,461,400 829,019 3,306,301
Issuance of
Class C common
stock.......... 48,500 $485 48,015 48,500
Net income
(unaudited).... 194,768 194,768
--------- ---------- ------- ------ ------ ---- --------- ---------- ---------- ---------- ----------
BALANCE, JUNE 30,
1996
(unaudited)..... 1,243,985 $ 12,440 344,250 $3,442 48,500 $485 1,000,000 $1,000,000 $1,509,415 $1,023,787 $3,549,569
========= ========== ======= ====== ====== ==== ========= ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-18
<PAGE>
FUTRONIX CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- -------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------
UNAUDITED
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income............. $ 170,671 $ 301,171 $ 614,245 $ 187,923 $ 194,768
Adjustments to
reconcile net income
to net cash used in
operating activities:
Depreciation and
amortization........ 65,172 121,648 256,750 132,499 189,269
Bad debt expense...... 31,925 7,651 20,000 26,350 40,000
Loss on sale of
assets.............. 30,285
Deferred federal
income tax.......... 18,500 20,500
Effect of changes in:
Receivables.......... (17,053) (789,444) (4,028,654) (2,438,624) (976,533)
Inventory............ (1,000,742) (3,885,356) (8,063,895) (6,589,270) (4,227,114)
Prepaid expenses..... (9,253) (31,748) (44,885) 7,435 17,639
Accounts payable..... 42,638 1,187,599 4,639,013 3,417,879 1,206,964
Accrued expenses..... 68,770 201,556 272,807 147,897 (29,209)
Federal income tax... 46,723 72,105 (26,217) (193,090)
------------ ------------ ------------ ------------ ------------
NET CASH USED IN
OPERATING ACTIVITIES.. $ (647,872) $(2,791,415) $(6,242,014) $(5,134,128) $(3,777,306)
============ ============ ============ ============ ============
CASH FLOWS FROM
INVESTING ACTIVITIES:
Acquisition of property
and equipment........ (33,702) (1,031,431) (829,718) (594,589) (369,213)
Organizational costs... (8,344)
Proceeds from related
party receivable..... 124,290
Proceeds from sale of
assets............... 6,000 4,714
------------ ------------ ------------ ------------ ------------
NET CASH USED IN
INVESTING ACTIVITIES.. (42,046) (901,141) (825,004) (594,589) (369,213)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net borrowings
(payments) under line
of credit agreement.. 1,272,000 (550,000) 6,250,000 6,850,000 4,250,000
Net advances from
(payments to)
shareholder.......... 114,808 (69,089) (60,976) (60,976)
Proceeds from issuance
of long-term debt.... 1,243,193
Proceeds from issuance
of mandatorily
redeemable preferred
stock................ 2,200,000
Proceeds from issuance
of convertible
preferred stock...... 1,000,000
Proceeds from sale of
common stock--net.... 970,475 48,500
Proceeds from sale of
stock warrants....... 6,807
Distributions made to
shareholder.......... (700,000)
------------ ------------ ------------ ------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES.. 686,808 3,801,386 7,189,024 6,789,024 4,298,500
------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS........... (3,110) 108,830 122,006 1,060,307 151,981
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD............. 8,297 5,187 114,017 114,017 236,023
------------ ------------ ------------ ------------ ------------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD................ $ 5,187 $ 114,017 $ 236,023 $ 1,174,324 $ 388,004
============ ============ ============ ============ ============
NONCASH INVESTING AND
FINANCING ACTIVITIES--
Proceeds in the form
of a related party
receivable, from sale
of leasehold
improvements.......... $ 124,290
============
</TABLE>
See notes to financial statements.
F-19
<PAGE>
FUTRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Futronix Corporation ("Futronix") operates as an independent wholesale
distributor of specialty wire and cable and new electrical surplus material
that are sold exclusively to electrical wholesalers and other specialty
distributors in the United States, Canada and Mexico. As of December 31, 1995,
warehouse facilities were located in Houston, Texas; Charlotte, North
Carolina; Exton, Pennsylvania; and Tampa, Florida, with the main offices in
Houston.
2. ACCOUNTING POLICIES
Futronix maintains its accounts on the accrual basis of accounting in
accordance with generally accepted accounting principles. Accounting
principles followed by Futronix and the methods of applying those principles
which materially affect the determination of financial position, the results
of operations and cash flows are summarized below:
UNAUDITED FINANCIAL STATEMENTS--The accompanying consolidated financial
statements and information as of June 30, 1996 and for the six months ended
June 30, 1995 and 1996 are unaudited, and include all adjustments (consisting
of only normal recurring adjustments), that are necessary, in the opinion of
management, for a fair presentation.
INCOME RECOGNITION--Sales are recognized at the date of merchandise
shipment, and accounts receivable are recorded at that time. Earnings are
charged with a provision for doubtful accounts based on a current review of
collectibility of accounts. Accounts deemed uncollectible are applied against
the allowance for doubtful accounts.
INVENTORY--Inventory consists of specialty wire and cable and electrical
parts and equipment held for sale in the ordinary course of business. This
merchandise is valued at the lower of average cost or market.
PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost.
Depreciation is computed at rates considered sufficient to amortize the cost
of the assets over their estimated useful lives, using the straight-line
method of accounting. Depreciation is based on the following estimated useful
lives:
<TABLE>
<S> <C>
Furniture and fixtures 7 years
Machinery and equipment 3-7 years
Leasehold improvements 3-15 years
</TABLE>
FEDERAL INCOME TAX--Effective January 1, 1994, Futronix became subject to
federal income taxes under the C corporation provisions of the Internal
Revenue Code. Under these provisions, Futronix computes federal income tax
based on rates prevailing at year end.
Income taxes are provided for all taxable income included in the
determination of earnings, regardless of when such income is reported for
income tax purposes.
Futronix provides deferred income taxes for the expected future tax
consequences of temporary differences between the tax bases and financial
reporting bases of assets and liabilities.
In 1993, Futronix was taxed under the S Corporation provisions of the
Internal Revenue Code. Under those provisions, Futronix did not pay federal
corporate income taxes on its taxable income.
F-20
<PAGE>
FUTRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Instead, the shareholder was liable for individual federal income taxes on
Futronix's taxable income and received the benefit of any taxable losses.
Financial Instruments--Futronix's financial instruments consist of cash and
cash equivalents, receivables, payables and debt. As of December 31, 1995, the
estimated fair value of such financial instruments has been based on quoted
market prices and the borrowing rates available for debt with similar terms.
Organization Costs--Organization costs are recorded at cost and are being
amortized on a straight-line basis over sixty months.
Cash and Cash Equivalents--For purposes of the statements of cash flows,
Futronix considers all short-term investments with an original maturity of
three months or less when purchased to be cash equivalents.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Earnings Per Common Share--Earnings per common share are based on the
weighted average number of common stock and common stock equivalents
outstanding during the period. Common stock equivalents include common stock
options, common stock warrants and convertible preferred stock. In addition,
in accordance with Staff Accounting Bulletin No. 83 of the Securities and
Exchange Commission all stock, stock options and stock warrants issued since
September 5, 1995 (one year before filing of a registration statement for an
initial public offering) have been considered outstanding for all periods. The
weighted average number of shares used to compute earnings per common share
was:
<TABLE>
<S> <C>
Year ended December 31:
1993............................................................. 1,634,389
1994............................................................. 2,039,576
1995............................................................. 3,314,994
Six months ended June 30:
1995............................................................. 3,314,994
1996............................................................. 3,314,994
</TABLE>
3. NOTES PAYABLE
Short-term debt at December 31, 1994 and 1995, was as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Note payable to a bank under a $12,000,000 revolving
line-of-credit, secured by accounts receivable,
inventory, equipment, general intangibles, and life
insurance proceeds, with interest at the prime rate
plus 1/2%, due December 9, 1996.................... $1,400,000 $7,650,000
========== ==========
</TABLE>
F-21
<PAGE>
FUTRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Long-term debt at December 31, 1994 and 1995, was as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Subordinated notes payable to shareholders, due in
four annual installments, commencing on October 1,
1999 through 2002, plus quarterly interest at 7%,
beginning January 1995............................. $1,243,193 $1,243,193
========== ==========
</TABLE>
Future payments on long-term debt are as follows:
<TABLE>
<S> <C>
Year Ending December 31:
1999............................................................ $ 310,798
2000............................................................ 310,798
Later years....................................................... 621,597
----------
$1,243,193
==========
</TABLE>
The revolving line-of-credit note contains certain covenants and
restrictions, including the maintenance of certain financial statement ratios.
As of December 31, 1995, Futronix was in compliance with these covenants.
The fair value of the note payable to a bank and the subordinated notes
payable to shareholders at December 31, 1995 totaled $7,650,000 and
$1,050,000, respectively.
4. OPERATING LEASES
On January 1, 1994, Futronix commenced a ten-year lease with an option for a
five year extension of the Houston warehouse and office facilities with a
related party. Monthly rent began at $13,006 and effective January 1, 1996,
escalated to the maximum monthly rate of $25,000, based on the amount of sales
of Futronix in the preceding year. Futronix paid rent of $156,072, $156,072
and $180,000 to the related party for the years ended December 31, 1993, 1994
and 1995, respectively, out of a total rental expense of $156,072, $156,072
and $447,327.
During fiscal year 1995, Futronix had leased warehouse and office facilities
in Tampa, Florida; Charlotte, North Carolina; and Exton, Pennsylvania. The
lease terms for the facilities range from three to five years. The facilities
in Exton and Charlotte have options to extend for a period of three years at
the option of Futronix. Also, Futronix has leased office facilities in Dallas,
Texas and Baton Rouge, Louisiana for periods of no more than one year. These
leases are classified as operating leases in accordance with Financial
Accounting Standards ("FAS") No. 13 "Accounting for Leases."
F-22
<PAGE>
FUTRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Future minimum base lease payments are as follows:
<TABLE>
<S> <C>
Year Ending December 31:
1996............................................................ $ 709,779
1997............................................................ 752,568
1998............................................................ 609,468
1999............................................................ 478,848
2000............................................................ 300,000
Later Years....................................................... 900,000
----------
$3,750,663
==========
</TABLE>
5. RELATED PARTY TRANSACTIONS
Futronix had advances payable to a shareholder in the amount of $53,210 at
December 31, 1994. No interest had been accrued or paid on the advances.
As disclosed in Note 3, Futronix has subordinated notes payable to
shareholders. For the years ended December 31, 1994 and 1995, $20,504 and
$87,024, respectively, of interest was accrued on these notes.
6. PROFIT SHARING PLAN
Futronix established a profit sharing plan during the year ended December
31, 1993, under Section 401(k) of the Internal Revenue Code, that covers
substantially all of its employees. Employees may make contributions to the
plan by electing to defer from 1% to 15% of their compensation. A
discretionary contribution may be made by the employer as determined by the
Board of Directors. Futronix's contributions to the plan were $25,000, $50,000
and $72,000 for the years endedDecember 31, 1993, 1994 and 1995, respectively.
7. INCOME TAX
Futronix recognized current federal income tax expense of $196,723 and
$320,137, deferred federal income tax expense of $18,500 and $20,500, and
state income tax expense of $5,681 and $52,767 in 1994 and 1995, respectively.
The following is a reconciliation of federal income taxes computed at the
statutory rate with income taxes recorded in the Statements of Income for the
years ended December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Federal income tax expense at statutory rates............. $177,506 $342,601
Nondeductible items....................................... 9,865 10,736
After-tax effect of state income taxes.................... 5,681 34,826
Cumulative FAS No. 109 adjustment resulting from change in
status from S Corporation to taxation as a C Corpora-
tion..................................................... 34,000
Other..................................................... (6,148) 5,241
-------- --------
$220,904 $393,404
======== ========
</TABLE>
F-23
<PAGE>
FUTRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The components of the deferred tax asset and liability as of December 31,
1994 and 1995, were as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Allowances for doubtful accounts.......................... $ 3,400 $10,000
Accrued vacation.......................................... 5,100 5,000
------- -------
8,500 15,000
======= =======
Deferred tax liability--accumulated depreciation............ $27,000 $54,000
======= =======
</TABLE>
8. SHAREHOLDERS' EQUITY
During 1994, Futronix filed amended Articles of Incorporation that
authorized the following changes in Futronix's equity structure:
. Authorized issuance of 5,000,000 shares of Class A voting common stock at
$.01 par value per share.
. Authorized issuance of 1,000,000 shares of Class B nonvoting common stock
at $.01 par value per share.
. Authorized issuance of 1,000,000 shares of Class C nonvoting common stock
at $.01 par value per share.
. Class B common stock may be converted to Class A common stock on a one-to-
one basis at the option of the holder. Class C nonvoting common stock is
not convertible.
. Authorized issuance of 5,000,000 shares of non-dividend paying preferred
stock, $1.00 par value per share. The shares are redeemable at any time at
the option of Futronix and are subject to mandatory redemption at the
seventh, eighth, ninth and tenth anniversary dates, beginning at January 1,
1994. The redemption price is $1.00 per share and is redeemable as follows:
<TABLE>
<CAPTION>
DATE OF REDEMPTION PERCENTAGE TO BE REDEEMED
------------------ --------------------------
<S> <C>
January 1, 2001 25% of outstanding shares
January 1, 2002 33% of outstanding shares
January 1, 2003 50% of outstanding shares
January 1, 2004 100% of outstanding shares
</TABLE>
On January 1, 1994, Futronix converted the existing 500,000 shares of
outstanding common stock at $1 par value into 460,735 shares of Class A common
stock at $.01 par value and 127,500 shares of Class B common stock at $.01 par
value.
On January 1, 1994 and October 5, 1994, Futronix sold 1,450,000 and 750,000
shares of mandatorily redeemable preferred stock to third parties for
$1,450,000 and $750,000, respectively.
F-24
<PAGE>
FUTRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
On October 5, 1994, Futronix sold 783,250 shares of Class A common stock and
216,750 shares of Class B common stock to existing shareholders for $783,250
and $216,750, respectively.
On October 5, 1994, Futronix sold Class A and Class B common stock purchase
warrants to existing shareholders for $6,807. The purchase price of warrants
was $.01 per warrant, which enabled the holder to purchase one share of common
stock for $.01. A total of 680,673 warrants were sold, of which 172,286
represented Class B warrants and 508,387 were Class A warrants.
Total costs related to capital transactions amounted to $29,525 for the 1994
period. Accordingly, these costs were offset against additional paid-in
capital.
At December 19, 1995, Futronix filed amended Articles of Incorporation that
authorized the following changes in Futronix's equity structure:
. Increased the authorized number of Class B common shares from 1,000,000 to
1,300,000.
. Decreased the authorized number of mandatorily redeemable preferred shares
from 5,000,000 to 2,500,000.
. Authorized issuance of 1,200,000 shares of nondividend-paying convertible
preferred stock at $1.00 par value per share that are convertible at any
time to Class A and Class B common stock on a one-to-one basis at the
option of the holder. The liquidation preference of mandatorily redeemable
preferred stock is superior to convertible preferred stock.
. Authorized the issuance of 3,000,000 shares of series preferred stock with
rights and preferences to be determined when issued.
On December 21, 1995, Futronix issued 1,000,000 shares of convertible
preferred stock for $1,000,000.
9. INCENTIVE STOCK OPTION PLAN
In November 1995, the Board of Directors approved an incentive plan (1995
Omnibus Plan) offering incentives to its key employees, consultants, and
directors. The 1995 Omnibus Plan is administered by a compensation committee
made up from the Board of Directors. The incentives include stock options,
performance awards, and other common stock equivalents which are issued at the
discretion of the committee. The 1995 Omnibus Plan limits the awards to
163,500 shares of common stock; and no more than 10,000 shares to any
individual within one calendar year. No options were granted in 1995. In April
1996, options for 50,000 shares of Class C common stock were granted at an
exercise price of $1.00 per share, 48,500 of which were exercised prior to the
expiration of the term of the options in June 1996.
10. CONTINGENT LIABILITY
As of December 31, 1995, Futronix was a guarantor on certain loans to
employees of Futronix. At year end, the total exposure related to these loans
was approximately $70,000.
F-25
<PAGE>
FUTRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
11. MAJOR CUSTOMERS
During 1995, one customer accounted for 10% of Futronix's total sales.
During 1994 and 1993, there were no customers with sales over 10% of total
sales.
12. GEOGRAPHIC INFORMATION
Less than 10% of Futronix's revenues and identifiable assets relate to
foreign operations and export sales.
F-26
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Wire & Cable Specialties Corporation
Atlanta, Georgia
We have audited the accompanying balance sheets of
WIRE & CABLE SPECIALTIES CORPORATION
as of December 31, 1994 and 1995, and the related statements of income,
shareholder's equity, and cash flows for the three years in the period ended
December 31, 1995. These financial statements are the responsibility of Wire &
Cable Specialties Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wire & Cable Specialties
Corporation as of December 31, 1994 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles.
Gross, Collins & Cress, P.C.
Atlanta, Georgia
July 22, 1996
F-27
<PAGE>
WIRE & CABLE SPECIALTIES CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1994 1995 1996
---------- ---------- ----------
UNAUDITED
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................... $ 4,942 $ 3,634 $ 3,391
Accounts receivable
Trade, less allowance for doubtful accounts
of $23,666 in 1994 and $19,006 in 1995
and 1996 (Notes 2 and 3).................. 2,964,018 2,667,734 3,485,656
Inventory (Note 3)........................... 2,772,322 3,430,753 4,993,060
Account receivable shareholder............... -- 10,000 190,594
Other current assets......................... 66,978 122,464 92,185
---------- ---------- ----------
TOTAL CURRENT ASSETS..................... 5,808,260 6,234,585 8,764,886
---------- ---------- ----------
PROPERTY AND EQUIPMENT
Furniture and office equipment............... 193,332 223,268 260,997
Machinery and equipment...................... 531,447 678,208 724,781
Vehicles..................................... 42,416 77,429 80,561
Leasehold improvements....................... 18,444 -- --
Less accumulated depreciation................ (554,812) (623,188) (683,189)
---------- ---------- ----------
230,827 355,717 383,150
---------- ---------- ----------
OTHER ASSETS.................................. 75,086 55,999 36,666
---------- ---------- ----------
TOTAL ASSETS............................. $6,114,173 $6,646,301 $9,184,702
========== ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Line of credit (Note 3)...................... $1,722,000 $2,078,000 $3,066,000
Current portion of long-term debt (Note 4)... 14,834 11,520 11,520
Accounts payable
Trade....................................... 2,164,836 1,782,525 3,406,388
Accrued expenses............................. 453,776 406,762 210,297
Reserve for shareholder distribution for
taxes...................................... -- -- 19,500
---------- ---------- ----------
TOTAL CURRENT LIABILITIES................ 4,355,446 4,278,807 6,713,705
---------- ---------- ----------
LONG-TERM DEBT (Note 4)....................... 26,116 14,596 6,231
---------- ---------- ----------
SHAREHOLDER'S EQUITY..........................
Common stock, $1 par value, 500,000 shares
authorized,1,000 shares issued and
outstanding................................ 1,000 1,000 1,000
Additional paid-in capital................... 90,000 90,000 90,000
Retained earnings............................ 1,641,611 2,261,898 2,373,766
---------- ---------- ----------
TOTAL SHAREHOLDER'S EQUITY............... 1,732,611 2,352,898 2,464,766
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY................................. $6,114,173 $6,646,301 $9,184,702
========== ========== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
F-28
<PAGE>
WIRE & CABLE SPECIALTIES CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------- -----------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
UNAUDITED
<S> <C> <C> <C> <C> <C>
SALES................... $11,023,490 $20,241,965 $24,511,091 $12,319,134 $12,578,175
----------- ----------- ----------- ----------- -----------
OPERATING COSTS AND
EXPENSES
Cost of products sold.. 8,083,533 15,305,308 18,877,741 9,396,814 9,724,321
Operating expenses..... 2,532,750 3,859,369 4,242,762 2,210,250 2,213,598
----------- ----------- ----------- ----------- -----------
TOTAL OPERATING
COSTS AND
EXPENSES......... 10,616,283 19,164,677 23,120,503 11,607,064 11,937,919
----------- ----------- ----------- ----------- -----------
INCOME FROM OPERATIONS.. 407,207 1,077,288 1,390,588 712,070 640,256
----------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest expense....... (71,719) (171,909) (187,382) (87,813) (111,380)
Other income (loss).... 7,570 5,524 3,990 -- (30,045)
Gain (loss) from sale
of assets............ 10,085 2,624 (4,503) (4,503) --
----------- ----------- ----------- ----------- -----------
TOTAL OTHER INCOME
(EXPENSE)........ (54,064) (163,761) (187,895) (92,316) (141,425)
----------- ----------- ----------- ----------- -----------
NET INCOME BEFORE PRO
FORMA INCOME TAXES OF
S CORPORATION......... $ 353,143 $ 913,527 $ 1,202,693 $ 619,754 $ 498,831
=========== =========== =========== =========== ===========
ADDITIONAL S CORPORATION DISCLOSURE
UNAUDITED
PRO FORMA INCOME TAXES
(COMPUTED AT 38% OF S
CORPORATION INCOME)... $ 134,194 $ 347,140 $ 457,023 $ 235,507 $ 189,556
NET INCOME AFTER PRO
FORMA INCOME TAXES.... $ 218,949 $ 566,387 $ 745,670 $ 384,248 $ 309,275
=========== =========== =========== =========== ===========
EARNINGS PER COMMON
SHARE LESS PRO FORMA
INCOME TAXES OF S
CORPORATION........... $ 218.95 $ 566.39 $ 745.67 $ 384.25 $ 309.28
=========== =========== =========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
F-29
<PAGE>
WIRE & CABLE SPECIALTIES CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------- PAID-IN RETAINED SHAREHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1993.... 1,000 $1,000 $90,000 $1,159,982 $1,250,982
Net income................. 353,143 353,143
Distributions.............. (191,424) (191,424)
----- ------ ------- ---------- ----------
BALANCE, December 31, 1994 1,000 1,000 90,000 1,321,701 1,412,701
Net income................. 913,527 913,527
Distributions.............. (593,617) (593,617)
----- ------ ------- ---------- ----------
BALANCE, December 31, 1994.. 1,000 1,000 90,000 1,641,611 1,732,611
Net income................. 1,202,693 1,202,693
Distributions.............. (582,406) (582,406)
----- ------ ------- ---------- ----------
BALANCE, December 31, 1995.. 1,000 1,000 90,000 2,261,898 2,352,898
Net income (unaudited)..... 498,831 498,831
Distributions (unaudited).. (386,963) (386,963)
----- ------ ------- ---------- ----------
BALANCE, June 30, 1996
(unaudited)............... 1,000 $1,000 $90,000 $2,373,766 $2,464,766
===== ====== ======= ========== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
F-30
<PAGE>
WIRE & CABLE SPECIALTIES CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------- -----------------------
1993 1994 1995 1995 1996
---------- ------------ ---------- ---------- ------------
UNAUDITED
<S> <C> <C> <C> <C> <C>
RECONCILIATION OF NET
INCOME TO NET CASH
PROVIDED BY (USED
IN) OPERATING
ACTIVITIES
Net income.......... $ 353,143 $ 913,527 $1,202,693 $ 619,754 $ 498,831
Gain (loss) on sale
of assets......... (10,085) (2,624) 4,503 4,503 --
Adjustments to
reconcile net
income to net cash
provided by (used
in) operating
activities
Depreciation and
amortization...... 96,068 141,673 110,084 75,000 60,000
Accounts
receivable........ (560,320) (1,302,121) 296,284 (168,554) (817,922)
Inventory........... (484,627) (1,072,697) (658,431) (568,698) (1,562,307)
Other current
assets............ (42,819) 434 (68,102) (32,071) (150,315)
Accounts payable.... 24,987 1,345,913 (382,311) 71,380 1,623,863
Accrued expenses.... 47,923 332,080 (47,014) (248,841) (196,465)
---------- ------------ ---------- ---------- ------------
NET CASH PROVIDED
BY (USED IN)
OPERATING
ACTIVITIES..... (575,730) 356,185 457,706 (247,527) (544,315)
---------- ------------ ---------- ---------- ------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Acquisition of
property and
equipment......... (103,157) (143,227) (252,812) (43,609) (87,433)
Other assets........ (10,478) (44,583) 19,087 19,133 19,333
Proceeds from sale
or exchange of
assets............ 17,585 13,250 15,951 500 --
---------- ------------ ---------- ---------- ------------
NET CASH USED IN
INVESTING
ACTIVITIES..... (96,050) (174,560) (217,774) (23,976) (68,100)
---------- ------------ ---------- ---------- ------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from line
of credit, net of
repayments........ 880,000 403,000 356,000 539,000 988,000
Proceeds from long-
term debt......... 52,523 -- -- -- --
Payments on long-
term debt......... (37,239) (18,521) (14,834) (7,856) (8,365)
Dividends paid...... (191,424) (593,619) (582,406) (259,980) (367,463)
---------- ------------ ---------- ---------- ------------
NET CASH PROVIDED
BY (USED IN)
FINANCING
ACTIVITIES..... 703,860 (209,140) (241,240) 271,164 612,172
---------- ------------ ---------- ---------- ------------
NET INCREASE
(DECREASE) IN CASH
AND CASH
EQUIVALENTS......... 32,080 (27,515) (1,308) (339) (243)
CASH AND CASH
EQUIVALENTS,
BEGINNING OF
PERIOD.............. 377 32,457 4,942 4,942 3,634
---------- ------------ ---------- ---------- ------------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD.............. $ 32,457 $ 4,942 $ 3,634 $ 4,603 $ 3,391
========== ============ ========== ========== ============
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
F-31
<PAGE>
WIRE & CABLE SPECIALTIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS--Wire & Cable Specialties Corporation ("Wire &
Cable") was incorporated on November 11, 1979, as a New Jersey corporation and
has subsequently been reincorporated in the State of Georgia. Its operations
consist primarily of supplying wire and cable to electrical and electronic
wholesale distributors. Wire & Cable has six distribution facilities at the
following locations: Atlanta, Georgia; Salem, New Hampshire; Elgin, Illinois;
Baton Rouge, Louisiana; Livermore, California; and Denver, Colorado.
The significant accounting policies followed by Wire & Cable are as follows:
CASH AND CASH EQUIVALENTS--Wire & Cable considers cash on deposit and
investments with original maturities of three months or less to be cash
equivalents.
INVENTORY VALUATION--Inventory is stated at the lower of cost or market.
Cost has been determined on the average cost basis.
DEPRECIATION AND AMORTIZATION--The straight-line and declining-balance
methods are used for computing depreciation on substantially all property and
equipment. Depreciation is based on estimated useful lives as follows:
furniture and fixtures, 5--7 years; machinery and equipment, 5 years;
vehicles, 5 years.
INCOME TAXES--Wire & Cable has elected S corporation status under the
provisions of the Internal Revenue Code. Accordingly, the shareholder is
responsible for paying income taxes on Wire & Cable's income. Therefore, there
is no provision for income taxes in the financial statements. Wire & Cable's
policy is to pay dividends to its shareholder for the payment of income taxes
on corporate income.
ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of estimates based
on management's knowledge and experience. Due to their prospective nature,
actual results could differ from those estimates.
INTERIM FINANCIAL INFORMATION--The unaudited financial statements for the
six months ended June 30, 1995 and 1996 are presented for comparative purposes
only and have been prepared on a basis substantially consistent with that of
the audited financial statements included herein. In the opinion of
management, such unaudited financial statements include all adjustments, which
are of a normal and recurring nature, considered necessary for a fair
presentation.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of receivables from customers arising in the
ordinary course of business. The reserve for bad debts is based on
management's estimate. Wire & Cable performs ongoing credit evaluations of its
customers' financial condition and generally requires no collateral from its
customers. Financial instruments that potentially subject Wire & Cable to
concentrations of credit risk consist principally of trade accounts
receivables. Concentration of credit risk with respect to trade receivables is
limited due to the large number of customers comprising Wire & Cable's
customer base and their dispersion across different industries and geographic
areas.
F-32
<PAGE>
WIRE & CABLE SPECIALTIES CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. LINE OF CREDIT
Wire & Cable has a $4.5 million revolving line of credit with a bank.
Interest accrues on the unpaid principal portion at the bank prime rate. Under
the terms of the note, Wire & Cable may elect at the end of each interest
period to convert to 1-month LIBOR rate plus 2.5% or remain at the bank prime
rate. The line of credit is secured by Wire & Cable's accounts receivable,
inventory, and the personal guarantees of the shareholder and an officer of
Wire & Cable. The bank is assigned a $2.0 million insurance policy on the life
of the shareholder. In accordance with the terms of the line of credit
agreement, shareholder distributions are limited to amounts required to cover
income taxes resulting from the election of S corporation status, plus an
additional $300,000 in 1996 ($75,000 in 1995) to cover the shareholder's life
insurance premiums, property taxes and other living expenses. The line of
credit expires May 5, 1997, and is renewable annually at the bank's
discretion. The LIBOR rate as of December 31, 1995 and June 30, 1996 was
5.9375% and 5.4961%, respectively.
During 1995, Wire & Cable entered into an interest rate swap agreement with
a commercial bank to reduce the impact of changes in interest rates on its
floating rate line of credit. This agreement effectively changes Wire &
Cable's interest rate exposure on $1.0 million of its floating rate debt due
May 5, 1996, to a fixed 9.15% rate. The interest swap agreement matures on May
5, 1997. Wire & Cable is exposed to credit loss in the event of nonperformance
by the other party to the interest rate swap agreement. However, Wire & Cable
does not anticipate nonperformance by the counterparty.
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------- --------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
13.21% installment note payable; originated in March
1993, with 60 monthly payments of $1,201 including
principal and interest. Secured by equipment....... $ 36,329 $ 26,116 $ 17,751
16.29% installment note payable; originated in
August 1990, with monthly payments of $297
including principal and interest. Secured by
equipment.......................................... 2,499 -- --
12.8% installment note payable; originated in July
1990, with 60 monthly payments of $367 including
principal and interest. Secured by machinery....... 2,122 -- --
-------- -------- --------
Subtotal.......................................... 40,950 26,116 17,751
Less current portion.............................. (14,834) (11,520) (11,520)
-------- -------- --------
Noncurrent portion................................ $ 26,116 $ 14,596 $ 6,231
======== ======== ========
</TABLE>
Maturities of long-term debt are summarized as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1996............................... $11,520
1997............................... 13,409
1998............................... 1,187
-------
Total maturities..................... $26,116
=======
</TABLE>
F-33
<PAGE>
WIRE & CABLE SPECIALTIES CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. OPERATING LEASE COMMITMENTS
Wire & Cable leases office facilities and equipment under noncancellable
operating leases. Total rent expense on Wire & Cable's office facilities and
equipment totaled $253,858, $383,059, and $393,650 for the years ended
December 31, 1993, 1994 and 1995, respectively. Minimum rental commitments for
all operating leases are as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1996............................ $ 332,276
1997............................ 247,282
1998............................ 241,335
1999............................ 231,591
2000............................ 236,790
----------
Total............................. $1,289,274
==========
</TABLE>
6. EMPLOYEE BENEFIT PLAN
Effective January 1, 1989, Wire & Cable established a profit sharing plan
for the benefit of all eligible employees. Contributions by Wire & Cable are
determined annually at the discretion of the Board of Directors, but may not
exceed the maximum allowable deduction permitted under the Internal Revenue
Code at the time of the contribution. Participants may voluntarily contribute
to the plan up to 15% of their compensation subject to limitations as defined
in the plan. Wire & Cable matches the employees' contributions up to a maximum
of 4% of their compensation. Wire & Cable made contributions of $60,000,
$74,247, and $120,683 to the profit sharing plan for the years ended December
31, 1993, 1994 and 1995, respectively.
7. MAJOR CUSTOMERS
Several customers on an individual basis customarily provide more than 10%
of Wire & Cable's sales. During 1993, 1994 and 1995, one customer represented
approximately 15%, 16% and 17%, respectively, of Wire & Cable's total sales.
F-34
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THOSE COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE
AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION, OR AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS UNQUALIFIED TO DO SO OR IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR THE
AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS FURNISHED OR
THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
The Merger............................................................... 11
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Unaudited Pro Forma Combined Financial Data .................... 17
Selected Financial Data.................................................. 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 28
Management............................................................... 35
Certain Transactions..................................................... 40
Principal Stockholders................................................... 43
Description of Capital Stock............................................. 44
Shares Eligible for Future Sale.......................................... 48
Underwriting............................................................. 50
Experts.................................................................. 52
Legal Matters............................................................ 52
Additional Information................................................... 52
Reports to Security Holders.............................................. 52
Index to Financial Statements............................................ F-1
</TABLE>
-----------------
UNTIL , 1996 (25 DAYS AFTER THE DATE HEREOF), ALL DEALERS EFFECTING
TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,950,000 SHARES
[LOGO]
FUTRONIX SYSTEMS CORP.
COMMON STOCK
($.01 PAR VALUE)
SCHRODER WERTHEIM & CO.
OPPENHEIMER & CO., INC.
October , 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses, other than
underwriting discounts and commissions, in connection with the issuance and
distribution of the shares of Common Stock being registered, all of which will
be paid by the Company:
<TABLE>
<S> <C>
Registration fee.................................................... $10,830
NASD filing fee..................................................... 3,640
Transfer agent and registrar fees................................... 5,000
Printing and engraving.............................................. *
Legal fees.......................................................... *
Blue Sky fees and expenses.......................................... 20,000
Nasdaq National Market listing fee.................................. 24,175
Accounting fees..................................................... *
Miscellaneous....................................................... *
-------
Total............................................................. *
=======
</TABLE>
----------
*To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. Section 145 of the Delaware General Corporation Law ("Section 145")
permits indemnification of directors, officers and agents of a corporation
under certain conditions and subject to certain limitations. Section 145
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that such person is or was a director, officer or agent
of the corporation or another enterprise if serving at the request of the
corporation. Depending on the character of the proceeding, a corporation may
indemnify against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner the person reasonably believed to be in or not opposed to, the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. In the case of an action by or in the right of the corporation, no
indemnification may be made with respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court of chancery or the court in which
such action or suit was brought shall determine that despite the adjudication
of liability such person is fairly and reasonably entitled to indemnity for
such expenses which the court shall deem proper. Section 145 further provides
that to the extent a director or officer of a corporation has been successful
in the defense of any action, suit or proceeding referred to above or in
defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually or
reasonably incurred by such person in connection therewith.
B. As permitted by the Delaware General Corporation Law, the Company has
included a provision in its Certificate of Incorporation (Exhibit 3.1 hereto)
that, subject to certain limitations, eliminates the ability of the Company
and its stockholders to recover monetary damages from a director of the
Company for breach of fiduciary duty as a director. Article VII of the
Company's Bylaws (Exhibit 3.2 hereto) provides for indemnification of the
Company's directors and officers and advancement of expenses to the extent
permitted by Section 145.
C. Reference is made to the Underwriting Agreement to be filed as Exhibit 1
hereto which provides for indemnification among the Company and the
Underwriters. Reference is made to
II-1
<PAGE>
Section 14 of the Reorganization Agreement (Exhibit 2 hereto) which provides
for indemnification among the Company, its officers and directors and certain
stockholders of the Company with respect to the registration of the securities
hereunder.
D. As authorized by Section 145 of the Delaware General Corporation Law and
Article VII of the Company's Bylaws, the Company intends to apply for, on
behalf of its directors and officers, insurance protection against certain
liabilities arising out of the discharge of their duties, as well as insurance
covering the Company for indemnification payments made to its directors and
officers for certain liabilities, to be effective contemporaneously with the
Closing of this Offering. The premiums for such insurance are to be paid by
the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Described below are the only transactions within the past three years in
which the Company issued securities which were not registered under the
Securities Act.
The Company was formed August 5, 1996 and currently has no stockholders.
Pursuant to the Merger Agreement and simultaneously with the Closing of this
Offering, all of the stockholders of Futronix and Theodore J. Bruno, the sole
stockholder of Wire & Cable, will exchange all of the securities they hold of
Futronix and Wire & Cable, respectively, for securities of the Company.
Holders of 1,243,985 shares of Class A Common Stock, par value $.01 per share,
of Futronix, 344,250 shares of Class B Common Stock, par value $.01 per share,
of Futronix and 48,500 shares of Class C Common Stock, par value $.01 per
share, of Futronix will exchange such shares for 803,620 shares of Common
Stock. Theodore J. Bruno will exchange 1,000 shares of common stock, par value
$1.00 per share, of Wire & Cable for 1,020,317 shares of Common Stock. The
Company intends to file a Registration Statement on Form S-4 under the
Securities Act to register the 1,823,937 shares of Common Stock to be issued
pursuant to the Merger Agreement, which Registration Statement is intended to
become effective before or contemporaneously with this Registration Statement
on Form S-1. Holders of 1,000,000 shares of Convertible Preferred Stock, par
value $1.00 per share, of Futronix, will exchange such shares for 490,990
shares of Convertible Preferred Stock. Holders of 2,200,000 shares of
Nonconvertible Preferred Stock, par value $1.00 per share, of Futronix will
exchange such shares for the right to receive a Company Subordinated Note in
the principal amount of $1.00 per share of Nonconvertible Preferred Stock of
Futronix. Holders of 680,673 warrants to purchase capital stock of Futronix
will exchange such warrants for 334,204 Warrants. In addition, pursuant to the
Merger Agreement, after serving as the Company's Chief Financial Officer for
seven days following the Closing of this Offering, Mr. Monahan will receive
the Value Appreciation Bonus of 60,813 shares of Common Stock of the Company
and cash equal to 82% of such number of shares multiplied by the value of a
share of Common Stock at the time such bonus is paid as determined for
reporting such bonus for federal income tax purposes.
Additionally, following the Closing of this Offering, the Company will grant
options to purchase an aggregate of 54,254 shares of Common Stock to employees
of the Company or its subsidiary pursuant to the Equity Compensation Plan at
an exercise price equivalent to the per share price to the public in this
Offering.
The Company believes that (i) the issuance of those securities described
above which will not be registered under the Securities Act and (ii) the
grants of options described above, will not involve a public offering and will
be exempt from registration under Section 4(2) of the Securities Act because
such issuances and grants are to be made to a limited group of persons, each
of whom is believed to be a sophisticated investor or has a pre-existing
business or personal relationship with Futronix, Wire & Cable or the Company
and because each such person will be acquiring such securities for
II-2
<PAGE>
investment without a view to further distribution. With respect to securities
which are not registered under the Securities Act, restrictive legends will be
placed on stock certificates and will be contained in warrant and stock option
agreements evidencing such securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following is a list of exhibits filed as part of this Registration
Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1** Form of Underwriting Agreement.
2.1* Reorganization Agreement, dated as of August 7, 1996, among the
Registrant, Futronix Acquisition Company, Futronix Corporation, Wire
& Cable Specialties Corporation, Terrence M. Hunt, certain
stockholders of Futronix Corporation and Theodore J. Bruno.
2.2* Form of Amendment to Reorganization Agreement.
3.1* Amended and Restated Certificate of Incorporation.
3.2* Bylaws.
4.1* Form of 7% Subordinated Note due 2002.
4.2** Form of 7% Subordinated Note due 2003.
4.3** Form of Warrant.
5** Opinion of Morgan, Lewis & Bockius LLP regarding legality of the
shares of Common Stock being registered.
10.1* Amended Loan Agreement between Futronix Corporation and Southwest Bank
of Texas, N.A., dated as of June 30, 1996, and Restated Revolving
Credit Note of Futronix Corporation, dated June 30, 1996.
10.2* Line of Credit Agreement between Wire & Cable Specialties Corporation
and First Union National Bank of Georgia, dated as of June 5, 1996,
as amended July 31, 1996, and Promissory Note of Wire & Cable
Specialties Corporation, dated June 14, 1996.
10.3* Domestic Distributor Agreement, dated as of October 6, 1994, between
Belden Wire & Cable Company and Wire & Cable Specialties Corporation.
10.4* Lease Agreement, dated as of November 12, 1993, between Futronix
Corporation and T.M. Hunt, Trustee.
10.5* Lease Agreement, dated as of October 27, 1994, between Futronix
Corporation and Anderson/Tampa II Joint Venture.
10.6* Lease Agreement, dated as of February 28, 1995, between Futronix
Corporation and SCI North Carolina Limited Partnership.
10.7* Lease Agreement, dated as of April 5, 1995, between Futronix
Corporation and Pickering Acquisition Associates.
10.8* Lease Agreement, dated as of January 8, 1996, between Futronix
Corporation and NBD Bank.
10.9* Lease Agreement, dated as of May 1, 1995, between Futronix Corporation
and Fremont Funding (Texas).
10.10** Sublease Agreement, dated as of May 1, 1996, between Futronix
Corporation and Wesco Distribution, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.11* Lease Agreement, dated as of April 28, 1993, between Wire & Cable
Specialties Corporation and SLIP Trust.
10.12* Lease Agreement, dated as of June 9, 1995, between Wire & Cable
Specialties Corporation and A.G. No. 3, LLC.
10.13* Lease Agreement, dated as of October 24, 1995, between Wire & Cable
Specialties Corporation and Catellus Development Corporation.
10.14* Lease Agreement, dated as of December 2, 1994, between Wire & Cable
Specialties Corporation and GHK Company, L.L.C.
10.15* Lease Agreement, dated as of July 26, 1993, between Wire & Cable
Specialties Corporation and Principal Mutual Life Insurance Company.
10.16* Lease Agreement, dated as of June 9, 1995, between Wire & Cable
Specialties Corporation and Mr. Joe Schmitt.
10.17+** Futronix Systems Corp. Equity Compensation Plan.
10.18+* Form of Employment Agreement between Terrence M. Hunt and the
Registrant.
10.19+* Form of Employment Agreement between Theodore J. Bruno and the
Registrant.
10.20+* Form of Employment Agreement between Paul R. Monahan and the
Registrant.
10.21+* Agreement, dated as of August 7, 1996, among the Registrant, Futronix
Acquisition Company, Futronix Corporation, Wire & Cable Specialties
Corporation, Theodore J. Bruno and Paul R. Monahan.
10.22* Form of Registration Rights Agreement among certain stockholders of
the Registrant, Paul R. Monahan, Joan Scott and the Registrant.
10.23* Form of Option Agreement between Theodore J. Bruno and Paul R.
Monahan.
10.24* Form of Option Agreement between Theodore J. Bruno and Joan Scott.
11* Statement re: Computation of Per Share Earnings.
21* Subsidiaries of the Registrant.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of Weinstein Spira & Company, P.C.
23.3* Consent of Gross, Collins & Cress, P.C.
23.4** Consent of Morgan, Lewis & Bockius LLP (included in its opinion filed
as Exhibit 5 hereto).
24.1* Power of Attorney (included on signature page to this Registration
Statement).
27* Financial Data Schedule.
</TABLE>
- ----------
* Filed herewith.
** To be filed by amendment.
+ Compensation plans and arrangements for executives and others.
(b) Financial Statement Schedules.
None.
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
II-4
<PAGE>
B. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
C. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN HOUSTON, TEXAS ON
SEPTEMBER 5, 1996.
Futronix Systems Corp.
By: /s/ Terrence M. Hunt
---------------------------------
TERRENCE M. HUNT
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
EACH PERSON IN SO SIGNING ALSO MAKES, CONSTITUTES AND APPOINTS TERRENCE M.
HUNT AND BARBARA M. HENAGAN, AND EACH OF THEM ACTING ALONE, HIS OR HER TRUE
AND LAWFUL ATTORNEY-IN-FACT, WITH FULL POWER OF SUBSTITUTION, TO EXECUTE AND
CAUSE TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, ANY AND ALL AMENDMENTS
AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT, AND INCLUDING
ANY REGISTRATION STATEMENT FOR THE SAME OFFERING THAT IS TO BE EFFECTIVE UPON
FILING PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, WITH EXHIBITS THERETO
AND OTHER DOCUMENTS IN CONNECTION THEREWITH, AND HEREBY RATIFIES AND CONFIRMS
ALL THAT SAID ATTORNEY-IN-FACT OR HIS OR HER SUBSTITUTE OR SUBSTITUTES MAY DO
OR CAUSE TO BE DONE BY VIRTUE HEREOF.
NAME CAPACITY DATE
---- -------- ----
/s/ Terrence M. Hunt President (principal September 5, 1996
- ------------------------------------- executive officer)
TERRENCE M. HUNT and Director
/s/ Jim P. Psencik Controller September 5, 1996
- ------------------------------------- (principal
JIM P. PSENCIK financial and
accounting officer)
/s/ Barbara M. Henagan Chairman of the September 5, 1996
- ------------------------------------- Board of Directors
BARBARA M. HENAGAN
/s/ Theodore J. Bruno Director September 5, 1996
- -------------------------------------
THEODORE J. BRUNO
/s/ Bradford Mills Director September 5, 1996
- -------------------------------------
BRADFORD MILLS
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
1** Form of Underwriting Agreement.
2.1* Reorganization Agreement, dated as of August 7, 1996, among the
Registrant, Futronix Acquisition Company, Futronix
Corporation, Wire & Cable Specialties Corporation, Terrence M.
Hunt, certain stockholders of Futronix Corporation and
Theodore J. Bruno.
2.2* Form of Amendment to Reorganization Agreement.
3.1* Amended and Restated Certificate of Incorporation.
3.2* Bylaws.
4.1* Form of 7% Subordinated Note due 2002.
4.2** Form of 7% Subordinated Note due 2003.
4.3** Form of Warrant.
5** Opinion of Morgan, Lewis & Bockius LLP regarding legality of
the shares of Common Stock being registered.
10.1* Amended Loan Agreement between Futronix Corporation and
Southwest Bank of Texas, N.A., dated as of June 30, 1996, and
Restated Revolving Credit Note of Futronix Corporation, dated
June 30, 1996.
10.2* Line of Credit Agreement between Wire & Cable Specialties
Corporation and First Union National Bank of Georgia, dated as
of June 5, 1996, as amended July 31, 1996, and Promissory Note
of Wire & Cable Specialties Corporation, dated June 14, 1996.
10.3* Domestic Distributor Agreement, dated as of October 6, 1994,
between Belden Wire & Cable Company and Wire & Cable
Specialties Corporation.
10.4* Lease Agreement, dated as of November 12, 1993, between
Futronix Corporation and T.M. Hunt, Trustee.
10.5* Lease Agreement, dated as of October 27, 1994, between Futronix
Corporation and Anderson/Tampa II Joint Venture.
10.6* Lease Agreement, dated as of February 28, 1995, between
Futronix Corporation and SCI North Carolina Limited
Partnership.
10.7* Lease Agreement, dated as of April 5, 1995, between Futronix
Corporation and Pickering Acquisition Associates.
10.8* Lease Agreement, dated as of January 8, 1996, between Futronix
Corporation and NBD Bank.
10.9* Lease Agreement, dated as of May 1, 1995, between Futronix
Corporation and Fremont Funding (Texas).
10.10** Sublease Agreement, dated as of May 1, 1996, between Futronix
Corporation and Wesco Distribution, Inc.
10.11* Lease Agreement, dated as of April 28, 1993, between Wire &
Cable Specialties Corporation and SLIP Trust.
10.12* Lease Agreement, dated as of June 9, 1995, between Wire & Cable
Specialties Corporation and A.G. No. 3, LLC.
10.13* Lease Agreement, dated as of October 24, 1995, between Wire &
Cable Specialties Corporation and Catellus Development
Corporation.
10.14* Lease Agreement, dated as of December 2, 1994, between Wire &
Cable Specialties Corporation and GHK Company, L.L.C.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
10.15* Lease Agreement, dated as of July 26, 1993, between Wire &
Cable Specialties Corporation and Principal Mutual Life
Insurance Company.
10.16* Lease Agreement, dated as of June 9, 1995, between Wire &
Cable Specialties Corporation and Mr. Joe Schmitt.
10.17+** Futronix Systems Corp. Equity Compensation Plan.
10.18+* Form of Employment Agreement between Terrence M. Hunt and the
Registrant.
10.19+* Form of Employment Agreement between Theodore J. Bruno and the
Registrant.
10.20+* Form of Employment Agreement between Paul R. Monahan and the
Registrant.
10.21+* Agreement, dated as of August 7, 1996, among the Registrant,
Futronix Acquisition Company, Futronix Corporation, Wire &
Cable Specialties Corporation, Theodore J. Bruno and Paul R.
Monahan.
10.22* Form of Registration Rights Agreement among certain
stockholders of the Registrant, Paul R. Monahan, Joan Scott
and the Registrant.
10.23* Form of Option Agreement between Theodore J. Bruno and Paul R.
Monahan.
10.24* Form of Option Agreement between Theodore J. Bruno and Joan
Scott.
11* Statement re: Computation of Per Share Earnings.
21* Subsidiaries of the Registrant.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of Weinstein Spira & Company, P.C.
23.3* Consent of Gross, Collins & Cress, P.C.
23.4** Consent of Morgan, Lewis & Bockius LLP (included in its
opinion filed as Exhibit 5 hereto).
24.1* Power of Attorney (included on signature page to this
Registration Statement).
27* Financial Data Schedule.
</TABLE>
- ----------
* Filed herewith.
** To be filed by amendment.
+ Compensation plans and arrangements for executives and others.
<PAGE>
EXHIBIT 2.1
________________________________________________________________________________
REORGANIZATION AGREEMENT
AMONG
FUTRONIX SYSTEMS CORP.
(A DELAWARE CORPORATION),
FUTRONIX ACQUISITION COMPANY
(A TEXAS CORPORATION),
FUTRONIX CORPORATION
(A TEXAS CORPORATION),
WIRE & CABLE SPECIALTIES CORPORATION
(A GEORGIA CORPORATION),
AND
THE STOCKHOLDERS OF SUCH CORPORATIONS
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. Definitions....................................................................... 1
2. Plan of Merger.................................................................... 10
2.1 Surviving Corporation........................................................ 10
2.2 Effective Time............................................................... 10
2.3 Effects of the Merger........................................................ 10
2.4 Name of the Surviving Corporation; Certificate of Incorporation and Bylaws... 10
2.5 Directors and Officers....................................................... 10
2.6 Conversion of Futronix Securities............................................ 10
2.7 Conversion of W&C Shares..................................................... 11
2.8 Acquisition Company Capital Stock Not Converted.............................. 12
2.9 Approval by Stockholders..................................................... 12
2.10 Merger Closing............................................................... 12
2.11 Dissenting Shares............................................................ 13
2.12 Exchange of Converted Shares and Futronix Warrants........................... 13
2.13 No Further Transfer of Shares................................................ 14
3. Closing........................................................................... 14
3.1 Location, Date............................................................... 14
3.2 Deliveries................................................................... 15
4. Representations and Warranties of the Futronix Companies.......................... 15
4.1 Corporate Status............................................................. 15
4.2 Authorization................................................................ 15
4.3 Consents and Approvals....................................................... 15
4.4 Capitalization and Stock Ownership........................................... 16
4.5 Financial Statements......................................................... 17
4.6 No Company or Acquisition Company Assets, Liabilities or Business............ 17
4.7 Title to Assets and Related Matters.......................................... 18
4.8 Real Property................................................................ 18
4.9 Certain Personal Property.................................................... 18
4.10 Non-Real Estate Leases....................................................... 18
4.11 Accounts Receivable.......................................................... 19
4.12 Inventory.................................................................... 19
4.13 Liabilities.................................................................. 19
4.14 Taxes........................................................................ 19
4.15 Subsidiaries................................................................. 19
4.16 Legal Proceedings and Compliance with Law.................................... 20
4.17 Contracts.................................................................... 20
4.18 Insurance.................................................................... 21
4.19 Intellectual Property and Confidential Information........................... 22
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
4.20 Employee Relations.......................................................... 35
4.21 ERISA....................................................................... 22
4.22 Corporate Records........................................................... 24
4.23 Absence of Certain Changes.................................................. 24
4.24 Previous Sales; Warranties.................................................. 25
4.25 Customers and Suppliers..................................................... 25
4.26 Finder's Fees............................................................... 25
4.27 Additional Information...................................................... 25
4.28 Accuracy of Information..................................................... 26
5. Representations and Warranties of W&C............................................. 26
5.1 Corporate Status............................................................ 26
5.2 Authorization............................................................... 26
5.3 Consents and Approvals...................................................... 26
5.4 Capitalization and Stock Ownership.......................................... 26
5.5 Financial Statements........................................................ 27
5.6 Title to Assets and Related Matters......................................... 27
5.7 Real Property............................................................... 27
5.8 Certain Personal Property................................................... 28
5.9 Non-Real Estate Leases...................................................... 28
5.10 Accounts Receivable......................................................... 28
5.11 Inventory................................................................... 28
5.12 Liabilities................................................................. 29
5.13 Taxes ...................................................................... 29
5.14 Subsidiaries................................................................ 29
5.15 Legal Proceedings and Compliance with Law................................... 29
5.16 Contracts................................................................... 30
5.17 Insurance................................................................... 31
5.18 Intellectual Property and Confidential Information.......................... 31
5.19 Employee Relations.......................................................... 32
5.20 ERISA ...................................................................... 32
5.21 Corporate Records........................................................... 33
5.22 Absence of Certain Changes.................................................. 34
5.23 Previous Sales; Warranties.................................................. 34
5.24 Customers and Suppliers..................................................... 34
5.25 Finder's Fees............................................................... 34
5.26 Additional Information...................................................... 35
5.27 Accuracy of Information..................................................... 35
6. Representations and Warranties of Bruno and the Futronix Stockholder Parties...... 35
6.1 Authorization............................................................... 35
6.2 Consents and Approvals...................................................... 35
6.3 Stock Ownership............................................................. 36
6.4 Finder's Fees............................................................... 36
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
7. Covenants Related to Public Offering and Registration of Shares................... 36
7.1 Initial Registration Statements.............................................. 36
7.2 Nasdaq National Market....................................................... 38
7.3 Use of Proceeds.............................................................. 38
7.4 Escrow of Closing Documents.................................................. 38
7.5 Changes in Capitalization.................................................... 39
7.6 Secondary Registration Statement............................................. 39
8. Covenants of the Company, Futronix and the Futronix Stockholder Parties........... 41
8.1 Fulfillment of Closing Conditions............................................ 41
8.2 Conduct of the Business...................................................... 42
8.3 Access to Information........................................................ 42
8.4 No Solicitation.............................................................. 42
8.5 Futronix Special Meeting..................................................... 43
8.6 Rule 145 Affiliates.......................................................... 43
8.7 Appointment of Directors and Officers........................................ 43
8.8 Value Appreciation Bonus..................................................... 43
8.9 Employment Agreements........................................................ 43
8.10 Registration Rights.......................................................... 44
8.11 Stock Option Plan............................................................ 44
8.12 Release of Indebtedness Guarantee............................................ 44
8.13 Expenses..................................................................... 44
8.14 Related Parties.............................................................. 44
8.15 Continuation of Certain Employment Arrangements after Merger................. 44
8.16 Termination of Futronix Shareholders Agreement............................... 44
9. Covenants of W&C and Bruno........................................................ 44
9.1 Fulfillment of Closing Conditions............................................ 44
9.2 Conduct of the Business...................................................... 45
9.3 Access to Information........................................................ 45
9.4 No Solicitation.............................................................. 45
9.5 W&C Consent.................................................................. 46
9.6 Rule 145 Affiliates.......................................................... 46
9.7 New Bruno Options............................................................ 46
9.8 Employment Agreements........................................................ 46
9.9 Registration Rights.......................................................... 46
9.10 [INTENTIONALLY OMITTED.]..................................................... 46
9.11 Expenses..................................................................... 46
9.12 Related Parties.............................................................. 47
9.13 Assets Transfer and Stockholder Loan......................................... 47
10. Payment of Subchapter S Liabilities............................................... 47
10.1 1996 Tax Liabilities......................................................... 47
10.2 1996 Income Distributions.................................................... 47
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C> <C> <C>
10.3 Subchapter S Income......................................................... 48
10.4 Tax Liabilities............................................................. 48
10.5 Final Payment............................................................... 48
10.6 Prior Periods............................................................... 48
10.7 Reimbursement............................................................... 49
11. Conditions Precedent to Obligations of All Parties................................ 49
11.1 Legality.................................................................... 49
11.2 Public Offering............................................................. 49
11.3 Nasdaq National Market...................................................... 49
11.4 Pooling..................................................................... 49
11.5 Tax Opinion................................................................. 49
11.6 Approval by Stockholders.................................................... 49
11.7 Futronix Stockholder Parties................................................ 50
12. Conditions Precedent to Obligations of the Futronix Parties....................... 50
12.1 Representations and Warranties.............................................. 50
12.2 Agreements, Conditions and Covenants........................................ 50
12.3 Certificates................................................................ 50
12.4 Required Consents........................................................... 50
12.5 Ancillary Documents......................................................... 50
12.6 Legal Opinion............................................................... 50
12.7 [INTENTIONALLY OMITTED.].................................................... 50
13. Conditions Precedent to Obligations of W&C and Bruno.............................. 51
13.1 Representations and Warranties.............................................. 51
13.2 Agreements, Conditions and Covenants........................................ 51
13.3 Certificates................................................................ 51
13.4 Required Consents........................................................... 51
13.5 Ancillary Documents......................................................... 51
13.6 Legal Opinion............................................................... 51
14. Indemnification................................................................... 51
14.1 By Bruno and Monahan........................................................ 51
14.2 By the Futronix Stockholder Parties......................................... 52
14.3 Procedure for Claims........................................................ 52
14.4 Third Party Claims.......................................................... 53
15. Termination....................................................................... 54
15.1 Grounds for Termination..................................................... 54
15.2 Effect of Termination....................................................... 54
16. Survival of Representations, Warranties and Covenants............................. 55
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C> <C>
17. Public Announcements.............................................................. 56
18. Contents of Agreement............................................................. 56
19. Amendment, Parties in Interest, Assignment, Etc................................... 56
20. Interpretation.................................................................... 57
21. Notices........................................................................... 57
22. Governing Law..................................................................... 58
23. Counterparts...................................................................... 58
</TABLE>
-v-
<PAGE>
REORGANIZATION AGREEMENT
THIS REORGANIZATION AGREEMENT is made as of August 7, 1996 by and among
Futronix Systems Corp., a Delaware corporation (the "Company"), Futronix
Acquisition Company, a Texas corporation (the "Acquisition Company"), Futronix
Corporation, a Texas corporation ("Futronix"), Wire & Cable Specialties
Corporation, a Georgia corporation ("W&C"), Terrence M. Hunt, a Texas resident
("Hunt"), Theodore J. Bruno, a Georgia resident ("Bruno"), and the other
signatories to this Agreement (together with Hunt, the "Futronix Stockholder
Parties" and, together with all other Persons who have executed and delivered a
signature page to this Agreement, the "Parties"). Certain other terms are used
herein as defined below in Section 1 or elsewhere in this Agreement.
Background
----------
This Agreement sets forth the terms and conditions under which (a) Futronix
and W&C will merge with and into the Acquisition Company (the "Merger"), and (b)
the Company will sell shares of its Common Stock pursuant to a public offering.
The Parties intend that, upon completion of the Transactions (defined
below), (a) the Acquisition Company will be a wholly-owned subsidiary of the
Company, (b) for federal income tax purposes, the Merger shall constitute a tax-
free transaction under the Internal Revenue Code of 1986, as amended (the
"Code"), and (c) for accounting purposes, the Merger will be accounted for as a
pooling of interests under United States generally accepted accounting
principles ("GAAP").
Witnesseth
----------
NOW, THEREFORE, in consideration of the respective covenants contained
herein and intending to be legally bound hereby, the Parties hereto agree as
follows:
1. Definitions
-----------
For convenience, certain terms used in more than one part of this Agreement
are listed in alphabetical order and defined or referred to below (such terms as
well as any other terms defined elsewhere in this Agreement shall be equally
applicable to both the singular and plural forms of the terms defined).
"Accounts Receivable" mean as of any date any trade accounts receivable,
notes receivable, bid or performance deposits, employee advances and other
miscellaneous receivables included in the Assets of Futronix or W&C, as
indicated by the context in which used.
"Acquisition Company" is defined above in the preamble.
"Acquisition Proposal" is defined in Section 8.4.
<PAGE>
"Affiliates" means, with respect to a particular Party, Persons or entities
controlling, controlled by or under common control with that Party, as well as
any officers, directors and majority-owned entities of that Party and of its
other Affiliates. For the purposes of the foregoing, ownership, directly or
indirectly, of 20% or more of the voting stock or other equity interest shall be
deemed to constitute control.
"Agreement" means this Agreement and the Exhibits and Disclosure Schedules
hereto.
"Applicable Lockup Period" is defined in Section 7.6(a).
"Applicable Registration Period" is defined in Section 7.6(a).
"Articles of Merger" is defined in Section 2.2.
"Assets" means with respect to a particular Party all of the assets,
properties, goodwill and rights of every kind and description, real and
personal, tangible and intangible, wherever situated and whether or not
reflected in such Party's most recent Financial Statements, that are owned or
possessed by such Party.
"Balance Sheet Date" is defined in Section 4.5.
"Benefit Plan" means: (i) as to employees employed in the US, any (y)
"employee benefit plan" as defined in Section 3(3) of ERISA, and (z)
supplemental retirement, bonus, deferred compensation, severance, incentive
plan, program or arrangement or other employee fringe benefit plan, program or
arrangement; and (ii) as to employees employed outside the US, all employee
benefit, health, welfare, supplemental unemployment benefit, bonus, pension,
profit sharing, deferred compensation, stock compensation, stock purchase,
retirement, hospitalization insurance, medical, dental, legal, disability and
similar plans or arrangements or practices.
"Bruno" is defined above in the preamble.
"Bruno Note" is defined in Section 10.2.
"Business" means with respect to a particular Party its entire business,
operations and facilities.
"Certificates" is defined in Section 2.12(a).
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Closing" is defined in Section 3.1.
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<PAGE>
"Closing Common Shares" means the shares of Company Common Stock to be
issued to the Futronix Stockholders as specified in Exhibit "A" and the shares
of Company Common Stock to be issued to Bruno hereunder.
"Closing Date" is defined in Section 3.1.
"Code" is defined above in the Background.
"Company" is defined above in the preamble.
"Company Common Stock" means the common stock, par value $0.01 per share,
of the Company.
"Company Convertible Preferred Stock" means the convertible preferred
stock, par value $0.01 per share, of the Company.
"Company Securities" means the Company Common Stock, the Company
Convertible Preferred Stock, the Company Subordinated Notes and the Company
Warrants.
"Company Series Preferred Stock" means the series preferred stock, par
value $0.01 per share, of the Company.
"Company Subordinated Notes" means the 7% Subordinated Notes of the Company
in the aggregate principal amount of $2,200,000, with interest payable at an
annual rate of 7% and principal payable in four equal annual installments on
December 30 of 2000 through 2003.
"Company Warrants" means warrants to purchase Company Common Stock at a
price of $0.01 per share.
"Confidential Information" means any confidential information or trade
secrets of Futronix or W&C, as indicated by the context in which used, including
personnel information, know-how and other technical information, customer lists,
customer information and supplier information.
"Contract" means any written or oral contract, agreement, lease,
instrument, or other commitment that is binding on any person or its property
under applicable law.
"Converted Shares" is defined in Section 2.6(a).
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
"Corporate Party" is defined in Section 7.1(a).
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<PAGE>
"Court Order" means any judgment, decree, injunction, order or ruling of
any federal, state, local or foreign court or governmental or regulatory body or
authority that is binding on any person or its property under applicable law.
"Default" means (a) a breach, default or violation, (b) the occurrence of
an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration or a right to receive damages or a payment of
penalties.
"Disclosure Schedules" means the Futronix Disclosure Schedule and the W&C
Disclosure Schedule.
"Dissenting Shares" is defined in Section 2.11.
"Effective Time" is defined in Section 2.2.
"Employment Agreements" is defined in Section 8.9.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"Environmental Law" means all Laws and Court Orders relating to pollution
or protection of the environment as well as any principles of common law under
which a Party may be held liable for the release or discharge of any materials
into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-1 Registration Statement" is defined in Section 7.1(a).
"Form S-4 Registration Statement" is defined in Section 7.1(a).
"Futronix Assets" means the Assets of Futronix.
"Futronix Balance Sheet" is defined in Section 4.5.
"Futronix Business" means the Business of Futronix.
"Futronix Class A Common Stock" means the Class A common stock, par value
$.01 per share, of Futronix.
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<PAGE>
"Futronix Class B Common Stock" means the Class B common stock, par value
$.01 per share, of Futronix.
"Futronix Class C Common Stock" means the Class C common stock, par value
$.01 per share, of Futronix.
"Futronix Common Stock" means the Futronix Class A Common Stock, the
Futronix Class B Common Stock and the Futronix Class C Common Stock.
"Futronix Company" means any of the Company, Futronix and the Acquisition
Company.
"Futronix Convertible Preferred Stock" means the convertible preferred
stock, par value $1.00 per share, of Futronix.
"Futronix Disclosure Schedule" means the Disclosure Schedule containing
information relating to the Futronix Companies pursuant to Section 4 and other
provisions hereof that has been provided to the other Parties on the date
hereof.
"Futronix Environmental Condition" is defined in Section 4.16(b).
"Futronix Financial Statements" is defined in Section 4.5.
"Futronix's knowledge" or "knowledge of Futronix" means the actual
knowledge of any director or officer of Futronix.
"Futronix Nonconvertible Preferred Stock" means the preferred stock, par
value $1.00 per share, of Futronix.
"Futronix Non-Real Estate Leases" is defined in Section 4.10.
"Futronix Preferred Stock" means the Futronix Convertible Preferred Stock
and the Futronix Nonconvertible Preferred Stock.
"Futronix Real Estate Leases" is defined in Section 4.8.
"Futronix Real Property" is defined in Section 4.8.
"Futronix Representative" is defined in Section 9.3.
"Futronix Required Consents" is defined in Section 4.3.
"Futronix Securities" means the Futronix Common Stock, the Futronix
Convertible Preferred Stock, the Futronix Nonconvertible Preferred Stock and the
Futronix Warrants.
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<PAGE>
"Futronix Shareholders Agreement" means the Futronix Shareholders Agreement
among Futronix and the Futronix Stockholders, dated as of January 1, 1994, as
amended.
"Futronix Special Meeting" is defined in Section 2.9(a).
"Futronix Stockholder" means an owner of any Futronix Securities.
"Futronix Stockholder Party" is defined above in the preamble.
"Futronix Warrants" means any warrants to purchase Futronix Common Stock
that are outstanding and exercisable immediately prior to the Closing.
"GAAP" is defined above in the Background.
"GBCC" means the Georgia Business Corporation Code, as amended.
"Governmental Permits" means all governmental permits, licenses,
registrations, certificates of occupancy, approvals and other governmental
authorizations.
"Hazardous Substances" means any toxic or hazardous gaseous, liquid or
solid material or waste that may or could pose a hazard to the environment or
human health or safety including (i) any "hazardous substances" as defined by
the federal Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. (S)(S) 9601 et seq., (ii) any "extremely hazardous substance,"
-- ----
"hazardous chemical," or "toxic chemical" as those terms are defined by the
federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. (S)(S)
11001 et seq., (iii) any "hazardous waste," as defined under the federal Solid
-- ----
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., (iv) any "pollutant," as defined under the federal
-- ----
Water Pollution Control Act, 33 U.S.C. (S)(S) 1251 et seq., and (v) any
-- ----
regulated substance or waste under any Laws or Court Orders that currently exist
concerning protection of the environment.
"Holder" is defined in Section 2.12(a).
"Hunt" is defined above in the preamble.
"Immaterial Lease" is defined in Section 4.10.
"Initial Registration Statements" is defined in Section 7.1(a).
"Intellectual Property" means any Copyrights, Patents, Trademarks,
technology rights and licenses, trade secrets, franchises, know-how, inventions
and other intellectual property.
"Inventory" means all inventory, including raw materials, supplies, work in
process and finished goods.
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<PAGE>
"IPO Price" means the price at which shares of Company Common Stock are
offered to the public in the Public Offering.
"Joint Proxy Statement" is defined in Section 7.1(a).
"Law" means any statute, law, ordinance, regulation, order or rule of any
federal, state, local, foreign or other governmental agency or body or of any
other type of regulatory body, including those covering environmental, energy,
safety, health, transportation, bribery, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Material Adverse Effect" means a material adverse effect on the Futronix
Business or on the W&C Business, as indicated by the context in which used,
including the Assets, financial condition, results of operations, liquidity,
products, competitive position, customers and customer relations thereof.
"Merger" is defined above in the Background section.
"Merger Consideration" is defined in Section 2.6.
"Minor Contract" means any Contract that is terminable by a party on not
more than 30 days' notice without any Liability and any Contract under which the
executory obligation of a party involves an amount of less than $10,000.
"Monahan" means Paul Monahan, a Georgia resident.
"Monahan Agreement" means the agreement being entered into on the date
hereof among Monahan and the Corporate Parties.
"Nasdaq National Market" means the Nasdaq National Market of The Nasdaq
Stock Market, Inc.
"New Option Plan" is defined in Section 8.11.
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent with past practices.
"Party" is defined above in the preamble.
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<PAGE>
"Patents" means all patents and patent applications.
"PBGC" is defined in Section 4.21(e).
"Person" means any natural person, corporation, partnership, limited
liability company, proprietorship, association, trust or other legal entity.
"Plan of Merger" is the plan of merger set forth in Section 2.
"Prime Rate" means the prime lending rate as announced from time to time in
The Wall Street Journal.
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"Public Offering" is defined in Section 7.1(a).
"Public Shares" means the shares of Company Common Stock issued in the
Public Offering.
"Registered Holders" is defined in Section 7.6(a).
"Registered Shares" is defined in Section 7.6(a).
"Registration Rights Agreement" is defined in Section 8.10.
"Resale Form S-1" is defined in Section 7.6(a).
"Scott" means Joan Scott, a Georgia resident.
"Scott Agreement" means the agreement being entered into on the date hereof
among Scott and the Corporate Parties.
"SEC" means the Securities and Exchange Commission.
"Secondary Registration Statement" is defined in Section 7.6(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Act Affiliates" is defined in Section 8.6.
"Securityholder Documents" is defined in Section 2.12.
"Surviving Corporation" is defined in Section 2.1.
"Taxes" means all taxes, duties, charges, fees, levies or other assessments
imposed by any taxing authority including, without limitation, income, gross
receipts, value-added, excise, withholding, personal property, real estate,
sale, use, ad valorem, license, lease, service, severance,
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<PAGE>
stamp, transfer, payroll, employment, customs, duties, alternative, add-on
minimum, estimated and franchise taxes (including any interest, penalties or
additions attributable to or imposed on or with respect to any such assessment).
"TBCA" means the Texas Business Corporation Act, as amended.
"Termination Date" is defined in Section 15.1.
"Trademarks" means registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks.
"Transaction Documents" means this Agreement, the Articles of Merger, the
Employment Agreements, the Monahan Agreement, the Registration Rights Agreement
and the Scott Agreement.
"Transactions" means the Merger and the other transactions contemplated by
the Transaction Documents.
"US" means the United States of America.
"Value Appreciation Bonus" means the bonus payable to Monahan pursuant to
Sections 3 and 4 of the Monahan Agreement.
"W&C Assets" means the Assets of W&C.
"W&C Balance Sheet" is defined in Section 5.5.
"W&C Business" means the Business of W&C.
"W&C Common Stock" means the common stock, par value $1.00 per share, of
W&C.
"W&C Consent" is defined in Section 2.9(b).
"W&C Disclosure Schedule" means the Disclosure Schedule containing
information relating to W&C pursuant to Section 5 that has been provided to the
other Parties on the date hereof.
"W&C Environmental Condition" is defined in Section 5.15(b).
"W&C Financial Statements" is defined in Section 5.5.
"W&C Individual" means any of Bruno, Monahan or Scott.
"W&C's knowledge" or "knowledge of W&C" means the actual knowledge of any
director or officer of W&C.
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<PAGE>
"W&C Non-Real Estate Leases" is defined in Section 5.9.
"W&C Options" means the options granted by Bruno to Monahan and Scott to
purchase a portion of the W&C Common Stock owned by Bruno.
"W&C Real Estate Leases" is defined in Section 5.7.
"W&C Real Property" is defined in Section 5.7.
"W&C Representative" is defined in Section 8.3.
"W&C Required Consents" is defined in Section 5.3.
"Welfare Plan" is defined in Section 4.21(g).
2. Plan of Merger.
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2.1 Surviving Corporation. Upon the terms and subject to the conditions
---------------------
hereof, and in accordance with the relevant provisions of the TBCA and the GBCC,
Futronix and W&C shall be merged with and into the Acquisition Company in
accordance with the Plan of Merger set forth in this Section 2 as soon as
practicable, but in any event within three business days following the
satisfaction or waiver of the conditions set forth in Sections 11, 12 and 13.
Following the Merger, the Acquisition Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall continue its existence under
the laws of the State of Texas, and the separate corporate existence of Futronix
and W&C shall cease.
2.2 Effective Time. The Merger shall be consummated by filing with the
--------------
Secretary of State of the State of Georgia and with the Secretary of State of
the State of Texas articles of merger (the "Articles of Merger") that set forth
the Plan of Merger and are otherwise in such form as may be required under, and
are executed in accordance with, the relevant provisions of the TBCA and the
GBCC. The Merger shall be effective at the time of such filing in the State of
Georgia and as of the issuance of a certificate of merger by the Secretary of
State of the State of Texas, the later of which times is referred to herein as
the "Effective Time."
2.3 Effects of the Merger. The Merger shall have the effects set forth in
---------------------
Section 5.06 of the TBCA and in Section 14-2-1106 of the GBCC.
2.4 Name of the Surviving Corporation; Certificate of Incorporation and
-------------------------------------------------------------------
Bylaws. At the Effective Time, the name of the Surviving Corporation shall be
- ------
changed to "Futronix Corporation." The Articles of Incorporation of the
Acquisition Company shall be the Articles of Incorporation of the Surviving
Corporation. The Bylaws of the Acquisition Company shall be the Bylaws of the
Surviving Corporation.
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<PAGE>
2.5 Directors and Officers. The Persons who are the directors and
----------------------
officers of the Acquisition Company immediately prior to the Effective Time
shall be the directors and officers of the Surviving Corporation at the
Effective Time.
2.6 Conversion of Futronix Securities.
---------------------------------
(a) Each share of Futronix Common Stock 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 (defined below) thereof, be
converted into the right to receive one share of Company Common Stock. Any
shares of Futronix Common Stock held in the treasury of Futronix shall be
cancelled. The securities to be issued pursuant to this Section 2.6 and Section
2.7 are referred to as the "Merger Consideration," and shares of Futronix Common
Stock, Futronix Nonconvertible Preferred Stock and Futronix Convertible
Preferred Stock or W&C Common Stock that are issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares, as defined in Section
2.11) are referred to herein collectively as the "Converted Shares."
(b) Each share of Futronix Convertible Preferred Stock 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 the right to receive one share of Company Convertible Preferred Stock. Any
shares of Futronix Convertible Preferred Stock held in the treasury of Futronix
shall be cancelled .
(c) Each share of Futronix Nonconvertible Preferred Stock 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 the right to receive a Company Subordinated Note in a principal amount of
$1.00 per share of Futronix Nonconvertible Preferred Stock, but each Holder of
any shares of Futronix Nonconvertible Preferred Stock shall be issued one
Company Subordinated Note with respect to all of such Holder's shares of
Futronix Nonconvertible Preferred Stock. Any shares of Futronix Nonconvertible
Preferred Stock held in the treasury of Futronix shall be cancelled.
(d) Each Futronix Warrant that is outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and with the consent of the
Holder thereof hereunder, be converted into the right to receive a Company
Warrant in the ratio of the right to purchase one share of Company Common Stock
for each share of Futronix Common Stock issuable under the Futronix Warrant
being converted.
(e) The Surviving Corporation shall deliver the Merger
Consideration specified in this Section 2.6 upon the surrender of the
certificates and other documentation specified in Section 2.12.
(f) The Company shall take all steps necessary to provide the
Surviving Corporation with the Company Securities, as of the Effective Time, in
an amount sufficient to issue all of the securities contemplated by this Section
2.6 at the Effective Time in accordance with Section 2.12.
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<PAGE>
2.7 Conversion of W&C Shares.
------------------------
(a) All of the shares of W&C Common Stock 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 the
right to receive an aggregate of 2,078,081 shares of Company Common Stock. Any
shares of W&C Common Stock held in the treasury of W&C shall be cancelled.
(b) The Surviving Corporation shall deliver the Merger
Consideration specified in this Section 2.7 upon the surrender of the
certificates and other documentation specified in Section 2.12.
(c) The Company shall take all steps necessary to provide the
Surviving Corporation with the shares of Company Common Stock, as of the
Effective Time, in an amount sufficient to issue all of the shares contemplated
by this Section 2.7 at the Effective Time in accordance with Section 2.12.
2.8 Acquisition Company Capital Stock Not Converted. Each share of
-----------------------------------------------
capital stock of the Acquisition Company issued and outstanding immediately
prior to the Effective Time shall not be converted or exchanged by virtue of the
Merger, and each such share shall remain outstanding as one share of capital
stock of the Surviving Corporation.
2.9 Approval by Stockholders.
------------------------
(a) Consistent with applicable law, Futronix shall cause a meeting
of its stockholders to be duly called and held as soon as reasonably practicable
for the purpose of considering and taking action upon the Merger (the "Futronix
Special Meeting"). If the Board of Directors of Futronix so desires, it may
present the Merger to its stockholders for consideration by soliciting their
written consent in accordance with applicable requirements of the TBCA. If such
a consent is solicited, the references herein to the "Futronix Special Meeting"
shall be deemed to be the process of soliciting such consent unless the context
indicates otherwise. The Board of Directors of Futronix will recommend that its
stockholders approve the Merger.
(b) Consistent with applicable law, W&C shall request the sole
stockholder of W&C to approve the Merger by written consent in accordance with
applicable requirements of the GBCC (the "W&C Consent").
(b) The stockholder vote required for the adoption of this
Agreement and the Merger by Futronix and the Acquisition Company shall be the
vote required by the TBCA. The stockholder vote required for the adoption of
this Agreement and the Merger by W&C shall be the vote required by the GBCC.
(c) The Company, as the sole stockholder of the Acquisition
Company, hereby approves the Merger and this Agreement.
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<PAGE>
2.10 Merger Closing. At the Closing, (a) the Acquisition Company,
--------------
Futronix and W&C shall deliver to the Secretary of State of each of the State of
Texas and the State of Georgia a duly executed and verified copy of the Articles
of Merger, as required by the TBCA and the GBCC, and (b) the Parties shall take
all such other and further actions as may be required by the TBCA and GBCC and
any other applicable Law to make the Merger effective upon the terms and subject
to the conditions hereof. In addition, at the Closing, the Surviving
Corporation shall deliver the Merger Consideration to those Holders who shall
have delivered the appropriate documents under Section 2.12.
2.11 Dissenting Shares. Notwithstanding anything in this Agreement to
-----------------
the contrary, shares of Futronix Class A Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by a
stockholder who did not vote in favor of the Merger and who complies with all of
the relevant provisions of Section 5.12 of the TBCA (the "Dissenting Shares")
shall not be converted into the right to receive the Merger Consideration,
unless and until such Holder shall have failed to perfect or shall have
effectively withdrawn or lost such Holder's rights to appraisal under the TBCA;
and any such Holder shall have only such rights in respect of the Dissenting
Shares owned by such Holder as are provided by Sections 5.11 and 5.12 of the
TBCA. If any such Holder shall have failed to perfect or shall have effectively
withdrawn or lost such rights, such Holder's Dissenting Shares shall thereupon
be deemed to have been converted into and to have become exchangeable, as of the
Effective Time, for the right to receive the Merger Consideration without any
interest thereon, pursuant to the terms of Section 2.6.
2.12 Exchange of Converted Shares and Futronix Warrants.
--------------------------------------------------
(a) At and after the Effective Time, the Surviving Corporation
shall issue to each record holder (a "Holder"), as of the Effective Time, of (i)
an outstanding certificate or certificates that immediately prior to the
Effective Time represented Converted Shares (the "Certificates"), or (ii) a
Futronix Warrant, upon the Holder's delivery of the respective Securityholder
Documents (defined below), the respective Merger Consideration specified for
such Holder under Section 2.6 or Section 2.7. The documents to be delivered by
Holders of Converted Shares or Futronix Warrants by and after the Effective Time
(the "Securityholder Documents") shall be (x) in the case of Converted Shares,
the Certificates representing the Converted Shares and a duly executed letter of
transmittal in the form provided by the Company (the "Letter of Transmittal"),
and (y) in the case of the Futronix Warrants, the document constituting the
Futronix Warrant and the Letter of Transmittal. All such surrendered
Certificates and Futronix Warrants shall be cancelled upon their delivery.
Futronix shall send the Letter of Transmittal to the owners of the Futronix
Securities along with the notice of the Futronix Special Meeting and shall
request the return of an executed Letter of Transmittal from each such
stockholder at the time of the Futronix Special Meeting. Except as provided in
Section 2.12(c), the Surviving Corporation shall pay any transfer or similar
taxes required by reason of the exchange of Converted Shares and Futronix
Warrants.
(b) With respect to each Certificate not so surrendered at the
Closing, the Surviving Corporation shall promptly thereafter mail to the Holder
thereof a Letter of Transmittal (which shall specify that delivery shall be
effected, and risk of loss of title to such Certificate shall
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<PAGE>
pass, only upon proper delivery of the Certificate and such Letter of
Transmittal to the Surviving Corporation) and instructions for delivering such
Certificate in exchange for delivery of the Merger Consideration. Upon delivery
to the Surviving Corporation of such Certificate, together with such Letter of
Transmittal, the Company or the Surviving Corporation shall deliver to the
Holder of the Certificate in exchange therefor the Merger Consideration to which
such Holder is entitled hereunder, and such Certificate shall then be cancelled.
The Company and the Surviving Corporation shall follow a similar procedure with
respect to any Futronix Warrants to the extent that the respective
Securityholder Documents shall not have been delivered at the Effective Time.
(c) No interest will be paid or accrued on the Merger Consideration
to be delivered upon the surrender of the Securityholder Documents. If delivery
is to be made to a Person other than the Person in whose name a Certificate or
Futronix Warrant surrendered is registered, it shall be a condition of payment
that the Certificate or Futronix Warrant so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the Person requesting
such payment shall pay any transfer or similar taxes required by reason of the
payment to a Person other than the Holder of the Certificate or Futronix Warrant
surrendered or shall establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable. Until surrendered in
accordance with the provisions of this Section 2.12, each Certificate (other
than Certificates evidencing Dissenting Shares) and Futronix Warrant shall
represent for all purposes solely the right to receive the respective Merger
Consideration specified in Section 2.6 or Section 2.7 with respect to such
Converted Shares or Futronix Warrants.
(d) Neither the Company nor the Surviving Corporation shall be
liable to any Holder of Converted Shares or Futronix Warrants for any Merger
Consideration delivered by the Company or the Surviving Corporation in good
faith to a public official pursuant to an applicable abandoned property, escheat
or similar law.
(e) None of the shares of Company Common Stock issued with respect
to any Futronix Securities in connection with the Merger, including any shares
of Company Common Stock issuable upon conversion of the Company Convertible
Preferred Stock and upon exercise of the Company Warrants, may be transferred in
any manner for a period of 180 days after the Closing. Each certificate for such
shares of Company Common Stock shall bear a legend describing the foregoing
restrictions.
2.13 No Further Transfer of Shares. After the Effective Time, there
-----------------------------
shall be no transfers of Converted Shares or Futronix Warrants that were
outstanding immediately prior to the Effective Time on the stock transfer books
of the Surviving Corporation. If, after the Effective Time, Certificates or
Futronix Warrants are presented to the Surviving Corporation for transfer, they
shall be cancelled and exchanged for the respective Merger Consideration
specified in Section 2.6 or Section 2.7. At the Effective Time, the stock
ledgers of Futronix and W&C shall be closed.
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<PAGE>
3. Closing.
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3.1 Location, Date. The closing for the Transactions (the "Closing")
--------------
shall be held contemporaneously with the closing of the Public Offering at the
offices of Paul, Hastings, Janofsky & Walker, in Atlanta, Georgia, as promptly
as practicable (and in any event within three business days) after satisfaction
or waiver of the conditions to the consummation of the Transactions set forth in
Sections 11, 12 and 13, unless the Parties hereto agree in writing to another
date or place. The date on which the Closing occurs is referred to herein as
the "Closing Date."
3.2 Deliveries. At the Closing,
----------
(a) the Surviving Corporation shall deliver the respective Merger
Consideration to the Holders who have complied with Section 2.12, with such
Merger Consideration all registered in the names of the respective Holders,
or their designees, and in due and proper form;
(b) the Acquisition Company, Futronix and W&C shall consummate the
Merger as provided in Section 2.10; and
(c) the Parties shall also deliver to each other the respective
agreements, legal opinions and other documents and instruments specified
with respect to them in Sections 11, 12 and 13 and such other items as may
be reasonably requested.
4. Representations and Warranties of the Futronix Companies.
--------------------------------------------------------
The Futronix Companies hereby represent and warrant to W&C as follows:
4.1 Corporate Status. Each Futronix Company is a corporation duly
----------------
organized, validly existing and in good standing under the laws under which it
was organized and is qualified to do business as a foreign corporation in any
jurisdiction where it is required to be so qualified except where the failure to
so qualify would not have a Material Adverse Effect. The Charter Documents and
bylaws of each Futronix Company that have been delivered to W&C as of the date
hereof are effective under applicable Laws and are current, correct and
complete.
4.2 Authorization. Each Futronix Company has the requisite power and
-------------
authority to own its Assets and to carry on its Business. Each Futronix Company
has the requisite power and authority to execute and deliver the Transaction
Documents to which it is a party and to perform the Transactions performed or to
be performed by it. Such execution, delivery and performance by any Futronix
Company have been duly authorized by all necessary corporate action, other than
approval by the stockholders of Futronix. Each Transaction Document executed
and delivered by any Futronix Company has been duly executed and delivered by
such Party and constitutes a valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms.
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4.3 Consents and Approvals. Except for any consents specified in the
----------------------
FUTRONIX DISCLOSURE SCHEDULE (the "Futronix Required Consents") and except for
any approvals or filings required by the SEC and by state securities law
agencies in connection with the Public Offering, neither the execution and
delivery by any Futronix Company of the Transaction Documents to which it is a
party, nor the performance of the Transactions performed or to be performed by
any Futronix Company, require any filing, consent or approval, constitute a
Default or cause any payment obligation to arise under (a) any Law or Court
Order to which any Futronix Company is subject, (b) the Charter Documents or
bylaws of any Futronix Company or (c) any material Contract, Governmental Permit
or other document to which any Futronix Company or any Futronix Stockholder
Party is a party or by which the properties or other assets of any of them may
be subject.
4.4 Capitalization and Stock Ownership.
----------------------------------
(a) The total authorized capital stock of the Company consists of (i)
15,000,000 shares of Company Common Stock, of which (a) no shares are issued and
outstanding on the date hereof and (b) the Closing Common Shares and the Public
Shares will be the only issued and outstanding shares as of the consummation of
the Closing, (ii) 1,000,000 shares of Company Convertible Preferred Stock, of
which (a) no shares are issued and outstanding on the date hereof and (b)
1,000,000 shares will be the only issued and outstanding shares as of the
consummation of the Closing, and (iii) 1,000,000 shares of Common Series
Preferred Stock, of which (a) no shares are issued and outstanding on the date
hereof and (b) no shares will be issued and outstanding as of the consummation
of the Closing. Except as contemplated by Section 8.11 of this Agreement and
except for the rights under the Company Convertible Preferred Stock and the
Company Warrants to be issued at the Closing, there are no existing options,
warrants, calls, commitments or other rights of any character (including
conversion or preemptive rights) relating to the acquisition of any issued or
unissued capital stock or other securities of the Company. All of the Closing
Common Shares, Public Shares and shares of Company Convertible Preferred Stock
that will be issued and outstanding immediately following consummation of the
Transactions at the Closing, and all of the shares of Company Common Stock
issuable upon conversion or exercise of the Company Convertible Preferred Stock
and the Company Warrants upon issuance in accordance with the terms thereof,
will be duly and validly authorized and issued, fully paid and non-assessable.
As of the Effective Time, the Form S-4 Registration Statement will be in effect
in accordance with the Securities Act with respect to the shares of Company
Common Stock to be issued as part of the Merger Consideration, and such shares
will be issued in compliance with the Securities Act and the rules and
regulations thereunder.
(b) The total authorized capital stock of Futronix consists of (i)
5,000,000 shares of Futronix Class A Common Stock, of which 1,243,985 shares are
issued and outstanding, (ii) 1,300,000 shares of Futronix Class B Common Stock,
of which 344,250 shares are issued and outstanding, (iii) 1,000,000 shares of
Futronix Class C Common Stock, of which 48,500 shares are issued and
outstanding, (iv) 1,200,000 shares of Futronix Convertible Preferred Stock, of
which 1,000,000 shares are issued and outstanding, (v) 2,500,000 shares of
Futronix Nonconvertible Preferred Stock, of which 2,200,000 shares are issued
and outstanding, and (vi) 3,000,000 shares of Futronix Series Preferred Stock,
par value $1.00 per share, of which no shares are issued and outstanding. All
such issued and outstanding amounts are the amounts issued and outstanding on
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the date hereof and also as of immediately prior to the Closing, except to the
extent that securities may be issued and cancelled in connection with the
exercise or conversion of currently outstanding Futronix Convertible Preferred
Stock or Futronix Warrants. Except for the rights under the Futronix Class B
Common Stock, the Futronix Convertible Preferred Stock and the Futronix
Warrants, there are no existing options, warrants, calls, commitments or other
rights of any character (including conversion or preemptive rights) relating to
the acquisition of any issued or unissued capital stock or other securities of
Futronix. All of the shares of Futronix Common Stock and Futronix Preferred
Stock are, and all of the shares of Futronix Common Stock issuable upon
conversion or exercise of the Futronix Convertible Preferred Stock and the
Futronix Warrants upon issuance in accordance with the terms thereof, will be
duly and validly authorized and issued, fully paid and non-assessable. The
FUTRONIX DISCLOSURE SCHEDULE lists all of the record owners of the Futronix
Common Stock, the Futronix Preferred Stock and the Futronix Warrants.
(c) The total authorized capital stock of the Acquisition Company consists
of 1,000 shares of common stock, par value $0.01 per share, of which 100 shares
are issued and outstanding on the date hereof and will be issued and outstanding
as of the Closing. There are no existing options, warrants, calls, commitments
or other rights of any character (including conversion or preemptive rights)
relating to the acquisition of any issued or unissued capital stock or other
securities of the Acquisition Company. All of such shares are duly and validly
authorized and issued, fully paid and non-assessable. The Company owns all of
such shares of the Acquisition Company.
4.5 Financial Statements. Futronix has delivered to W&C correct and
--------------------
complete copies of unaudited monthly financial statements for Futronix
consisting of a balance sheet as of the end of each month from January 1996
through May 1996 and the related statements of income and cash flows for the
periods then ended. Futronix has also delivered to W&C correct and complete
copies of financial statements consisting of a balance sheet of Futronix as of
December 31, 1993, 1994 and 1995 and the related statements of income for the
fiscal years then ended, which were audited by the firm of Weinstein Spira &
Co., P.C. with respect to 1993 and 1994 and by the firm of Deloitte & Touche LLP
with respect to 1995. All such unaudited and audited financial statements are
referred to herein collectively as the "Futronix Pre-Signing Financial
Statements." The unaudited financial statements of Futronix to be delivered in
connection with any Initial Registration Statement are referred to herein as the
"Futronix Post-Signing Financial Statements," and, together with the Futronix
Pre-Signing Financial Statements, as the "Futronix Financial Statements." The
Futronix Pre-Signing Financial Statements are, and the Futronix Post-Signing
Financial Statements will be, consistent in all material respects with the books
and records of Futronix, and there have not been or will not be any material
transactions by or concerning Futronix that have not been or will not be
recorded in the accounting records underlying such Financial Statements. The
Futronix Pre-Signing Financial Statements have been, and the Futronix Post-
Signing Financial Statements will be, prepared in accordance with GAAP
consistently applied, and the Futronix Pre-Signing Financial Statements present,
and the Futronix Post-Signing Financial Statements will present, fairly the
financial position and assets and liabilities of Futronix as of the dates
thereof, and the results of its operations for the periods then ended, subject
in the case of unaudited Financial Statements to normal recurring year-end
adjustments and the absence of notes. The balance sheet of Futronix as
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of March 31, 1996 that is included in the Financial Statements is referred to
herein as the "Futronix Balance Sheet," and the date thereof is referred to as
the "Balance Sheet Date."
4.6 No Company or Acquisition Company Assets, Liabilities or Business.
-----------------------------------------------------------------
Except for any rights and Liabilities that the Company and the Acquisition
Company may have with respect to this Agreement and the Company's ownership of
the capital stock of the Acquisition Company, neither the Company nor the
Acquisition Company has any Assets or Liabilities, nor has either the Company or
the Acquisition Company conducted any Business other than in connection with the
Transactions.
4.7 Title to Assets and Related Matters. Futronix has good and marketable
-----------------------------------
title to, valid leasehold interests in or valid licenses to use, all of the
Futronix Assets, free from any Encumbrances except those specified in the
FUTRONIX DISCLOSURE SCHEDULE. The use of the Futronix Assets is not subject to
any Encumbrances (other than those specified in the preceding sentence), and
such use does not materially encroach on the property or rights of anyone else.
All Futronix Real Property and tangible personal property (other than Inventory)
included in the Futronix Assets are suitable for the purposes for which they are
used, in good working condition, reasonable wear and tear excepted, and are free
from any known defects, except such minor defects that would not have a Material
Adverse Effect.
4.8 Real Property. The FUTRONIX DISCLOSURE SCHEDULE describes all real
-------------
estate used in the operation of the Futronix Business as well as any other real
estate that is in the possession of or leased by Futronix and the improvements
(including buildings and other structures) located on such real estate
(collectively, the "Futronix Real Property"), and lists any leases under which
any such Futronix Real Property is possessed (the "Futronix Real Estate
Leases"). Futronix does not have any ownership interest in any real property.
The FUTRONIX DISCLOSURE SCHEDULE also describes any other real estate previously
owned, leased or otherwise operated by Futronix or any predecessor thereof
during the past 10 years and the time periods of any such ownership, lease or
operation. All of the Futronix Real Property (a) is usable in the ordinary
course of business and (b) conforms in all material respects with any applicable
Laws relating to its construction, use and operation. The Futronix Real
Property complies with applicable zoning Laws. Futronix or the landlord of any
Futronix Real Property leased by Futronix has obtained all licenses and rights-
of-way from governmental entities or private parties that are necessary to
ensure vehicular and pedestrian ingress and egress to and from the Futronix Real
Property.
4.9 Certain Personal Property. The FUTRONIX DISCLOSURE SCHEDULE describes
-------------------------
all items of tangible personal property that were included in the balance sheet
of Futronix as of May 31, 1996. Except as specified in the FUTRONIX DISCLOSURE
SCHEDULE and excluding purchases of Inventory in the ordinary course of
business, since the Balance Sheet Date, Futronix has not acquired any items of
tangible personal property that have a carrying value in excess of $25,000, or
an aggregate carrying value in excess of $50,000. All of such personal property
included in the FUTRONIX DISCLOSURE SCHEDULE is, and any such personal property
acquired after the date hereof in accordance with Section 8.2 will be, usable in
the ordinary course of business, and all such personal property included in the
FUTRONIX DISCLOSURE SCHEDULE conforms, and all of such personal property
acquired
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<PAGE>
after the date hereof will conform, in all material respects with any applicable
Laws relating to its construction, use and operation. Except for those items
subject to the Futronix Non-Real Estate Leases, no Person other than Futronix
owns any vehicles, equipment or other tangible assets located on the Futronix
Real Property that are used in the Futronix Business or that are necessary for
the operation of the Futronix Business.
4.10 Non-Real Estate Leases. The FUTRONIX DISCLOSURE SCHEDULE lists
----------------------
all assets and property (other than Futronix Real Property) that are possessed
by Futronix under an existing lease, including all trucks, automobiles,
forklifts, machinery, equipment, furniture and computers, except for any lease
under which the aggregate annual payments are less than $10,000 (each, an
"Immaterial Lease"). The FUTRONIX DISCLOSURE SCHEDULE also lists the leases
under which such assets and property listed in the FUTRONIX DISCLOSURE SCHEDULE
are possessed. All of such leases (excluding Immaterial Leases) are referred to
herein as the "Futronix Non-Real Estate Leases."
4.11 Accounts Receivable. The Accounts Receivable included in the
-------------------
Futronix Assets are bona fide Accounts Receivable created in the ordinary course
of business. Except for Accounts Receivable for which reserves have been
established, all of the Accounts Receivable included in the Futronix Assets are
collectible within 90 days from the respective dates of sale. Futronix does not
know of any facts or circumstances (other than general economic conditions) that
are likely to result in any material increase in the uncollectability of such
Accounts Receivable in excess of any reserves therefor set forth in the Futronix
Balance Sheet.
4.12 Inventory. The Inventory included in the Futronix Assets
---------
consists of items of good, usable and merchantable quality in all material
respects and does not include obsolete or discontinued items except as described
on the FUTRONIX DISCLOSURE SCHEDULE. Such Inventory is of such quality as may
be required to satisfy applicable governmental quality control standards. All
finished goods included in such Inventory are saleable as current inventories at
the current price thereof in the ordinary course of business. Such Inventory is
recorded in the Futronix Financial Statements at the lower of average cost or
market value determined in accordance with GAAP, and except as set forth in the
FUTRONIX DISCLOSURE SCHEDULE, no write-down of such Inventory has been made or
should have been made pursuant to GAAP during the past two years. The FUTRONIX
DISCLOSURE SCHEDULE lists the locations of all items of the Inventory.
4.13 Liabilities. Futronix does not have any Liabilities, except (a)
-----------
as specified in the FUTRONIX DISCLOSURE SCHEDULE, (b) as contemplated by the
Futronix Balance Sheet (except as heretofore paid or discharged), (c)
Liabilities incurred in the ordinary course since the Balance Sheet Date that,
individually or in the aggregate, are not material to the Futronix Business, or
(d) Liabilities under any Contracts included in the Futronix Assets that are
specifically disclosed in the FUTRONIX DISCLOSURE SCHEDULE (or not required to
be disclosed because of the term or amount involved) and that were not required
under GAAP to have been specifically disclosed or reserved for on the Futronix
Balance Sheet.
4.14 Taxes. Except as set forth in the FUTRONIX DISCLOSURE SCHEDULE,
-----
Futronix has duly filed all returns for Taxes that are required to be filed and
has paid all material Taxes shown as being
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<PAGE>
due pursuant to such returns or pursuant to any assessment received. All Taxes
that Futronix has been required by Law to withhold or to collect have been duly
withheld and collected and have been paid over to the proper governmental
authorities or are properly held by Futronix for such payment. There are no
proceedings or other actions, nor to the knowledge of Futronix is there any
basis for any proceedings or other actions, for the assessment and collection of
additional Taxes of any kind with respect to Futronix for any period for which
returns have or should have been filed.
4.15 Subsidiaries. Futronix does not own, directly or indirectly, any
------------
interest or investment (whether equity or debt) in any corporation, partnership,
limited liability company, trust, joint venture or other legal entity.
4.16 Legal Proceedings and Compliance with Law.
-----------------------------------------
(a) Except as set forth in the FUTRONIX DISCLOSURE SCHEDULE, there is no
Litigation that is pending or, to Futronix's knowledge, threatened against
Futronix. There has been no Default under any Laws applicable to Futronix,
including Laws relating to pollution or protection of the environment, except
for any Defaults that would not have a Material Adverse Effect, and Futronix has
not received any notices from any governmental entity regarding any alleged
Defaults under any Laws. There has been no Default with respect to any Court
Order applicable to Futronix.
(b) Without limiting the generality of Section 4.16(a), there has not been
any Futronix Environmental Condition created by Futronix or any Affiliate of
Futronix or, to the knowledge of Futronix, created by any other Person (i) at
the premises at which the Futronix Business is currently conducted, (ii) at any
property owned, leased or operated during the past 10 years by Futronix, any
Person controlled by Futronix or any predecessor of any of them, or (iii) at any
property at which wastes have been deposited or disposed during the past 10
years by or at the behest or direction of any of the foregoing, nor has Futronix
received written notice of any such Futronix Environmental Condition. "Futronix
Environmental Condition" means any condition or circumstance, including the
presence of Hazardous Substances, at or relating to any such property or
premises that (i) requires abatement or correction under an Environmental Law,
(ii) gives rise to any material civil or criminal liability on the part of
Futronix under an Environmental Law, or (iii) has created a public or private
nuisance.
(c) Futronix has delivered to W&C complete copies of any written reports,
studies or assessments in the possession or control of Futronix that relate to
any Futronix Environmental Condition and to the Futronix Business or any
Futronix Assets.
(d) Except in those cases where the failure would not have a Material
Adverse Effect, (i) Futronix has obtained and is in full compliance with all
Governmental Permits, all of which are listed in the FUTRONIX DISCLOSURE
SCHEDULE along with their respective expiration dates, that are required for the
operation of the Futronix Business as currently operated, (ii) all of such
Governmental Permits are currently valid and in full force and (iii) Futronix
has filed such timely and complete renewal applications as may be required with
respect to its Governmental Permits. To Futronix's knowledge, no revocation,
cancellation or withdrawal thereof has been threatened.
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<PAGE>
4.17 Contracts.
---------
(a) The FUTRONIX DISCLOSURE SCHEDULE lists all Contracts of the following
types to which Futronix is a party or by which it is bound, except for Minor
Contracts:
(i) Contracts with any present or former stockholder, director,
officer, employee, partner or consultant of Futronix or any Affiliate
thereof.
(ii) Contracts for the future purchase of, or payment for,
supplies or products, or for the lease of any Asset from or the
performance of services by a third party, in excess of $25,000 in any
individual case;
(iii) Contracts to sell or supply products or to perform services
that involve an amount in excess of $25,000 in any individual case or
with respect to any one supplier or other party;
(iv) Contracts to lease to or to operate for any other party any
asset that involve an amount in excess of $25,000 in any individual
case;
(v) Any notes, debentures, bonds, conditional sale agreements,
equipment trust agreements, letter of credit agreements, reimbursement
agreements, loan agreements or other Contracts for the borrowing or
lending of money (including loans to or from officers, directors,
partners, stockholders or Affiliates of Futronix or any members of
their immediate families), agreements or arrangements for a line of
credit or for a guarantee of, or other undertaking in connection with,
the indebtedness of any other Person;
(vi) Any Contracts under which any Encumbrances exist; and
(vii) Any other Contracts (other than Minor Contracts and those
described in any of (i) through (vi) above) not made in the ordinary
course of business.
(b) The Contracts listed in the FUTRONIX DISCLOSURE SCHEDULE and the
Contracts excluded from the FUTRONIX DISCLOSURE SCHEDULE based on the term or
amount thereof (other than Minor Contracts) are referred to herein as the
"Futronix Contracts." Futronix is not in Default under any Futronix Contracts
(including any Futronix Real Estate Leases and Futronix Non-Real Estate Leases),
which Default could result in a Liability on the part of Futronix in excess of
$25,000 in any individual case, and the aggregate Liabilities that could result
from all such Defaults do not exceed $50,000. Futronix has not received any
communication from, or given any communication to, any other party indicating
that Futronix or such other party, as the case may be, is in Default under any
Futronix Contract where such Default could have a Material Adverse Effect. To
the knowledge of Futronix, none of the other parties in any such Futronix
Contract is in Default thereunder.
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4.18 Insurance. The FUTRONIX DISCLOSURE SCHEDULE lists all policies
---------
or binders of insurance held by or on behalf of Futronix, specifying with
respect to each policy the insurer, the amount of the coverage, the type of
insurance, the risks insured, the expiration date, the policy number and any
pending claims thereunder. There is no Default with respect to any such policy
or binder, nor has there been any failure to give any notice or present any
claim under any such policy or binder in a timely fashion or in the manner or
detail required by the policy or binder, except for any of the foregoing that
would not, individually or in the aggregate, have a Material Adverse Effect.
There is no notice of nonrenewal or cancellation with respect to, or
disallowance of any claim under, any such policy or binder that has been
received by Futronix, except for any of the foregoing that would not,
individually or in the aggregate, have a Material Adverse Effect.
4.19 Intellectual Property and Confidential Information.
--------------------------------------------------
(a) Futronix does not currently use nor has it previously used in the
development, production or marketing of its products and services any
Copyrights, Patents or Trademarks except for those listed in the FUTRONIX
DISCLOSURE SCHEDULE. Futronix either owns the entire right, title and interest
in, to and under, or has a valid license to use all material Intellectual
Property that has been used in the operation of the Futronix Business, in the
ordinary course or otherwise. All of the Intellectual Property listed in the
FUTRONIX DISCLOSURE SCHEDULE is owned by Futronix, free and clear of any
Encumbrances, or used pursuant to an agreement that is described in the FUTRONIX
DISCLOSURE SCHEDULE. Futronix has not infringed upon or unlawfully or
wrongfully used any Intellectual Property rights owned or claimed by another
Person. Futronix is not in Default, nor has it received any notice of any claim
of infringement or any other claim or proceeding, with respect to any such
Intellectual Property. Except for any rights under written licenses or other
written Contracts, no current or former employee of Futronix and no other Person
owns or has any proprietary, financial or other interest, direct or indirect, in
whole or in part, and including any right to royalties or other compensation, in
any of the Intellectual Property.
(b) To Futronix's knowledge, (i) none of its Confidential Information has
been used, divulged or appropriated (A) for the benefit of any Person other than
Futronix or (B) otherwise to the detriment of Futronix, (ii) no employee or
consultant of Futronix is subject to any contractual or legal restrictions that
might interfere with the use of his or her best efforts to promote the interests
of Futronix, (iii) no employee or consultant of Futronix has used any other
Person's trade secrets or other information that is confidential in the course
of his or her work with respect to the Futronix Business, and (iv) no employee
or consultant of Futronix is in Default under any term of any employment
contract, agreement or arrangement relating to the Intellectual Property, or any
confidentiality agreement or any other Contract or any restrictive covenant
relating to the Intellectual Property, or the development or exploitation
thereof.
4.20 Employee Relations. Futronix is not (a) a party to, involved in
------------------
or, to Futronix's knowledge, threatened by, any labor dispute or unfair labor
practice charge, or (b) currently negotiating any collective bargaining
agreement. Futronix has not experienced during the last three years any work
stoppage. Futronix has delivered to W&C a complete and correct list of the
names
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and salaries, bonus and other cash compensation of all employees (including
officers) of Futronix whose cash compensation was for 1995 or is expected to be
for 1996 at least $50,000.
4.21 ERISA.
-----
(a) The FUTRONIX DISCLOSURE SCHEDULE contains a complete list of all
Benefit Plans sponsored or maintained by Futronix or under which Futronix is
obligated. Futronix has delivered to W&C (i) accurate and complete copies of
all such Benefit Plan documents and all other material documents relating
thereto, including (if applicable) all summary plan descriptions, summary annual
reports and insurance contracts, (ii) accurate and complete detailed summaries
of all unwritten Benefit Plans, (iii) accurate and complete copies of the most
recent financial statements and actuarial reports with respect to all such
Benefit Plans for which financial statements or actuarial reports are required
or have been prepared and (iv) accurate and complete copies of all annual
reports for all such Benefit Plans (for which annual reports are required)
prepared within the last three years. Each such Benefit Plan providing benefits
that are funded through a policy of insurance is indicated by the word "insured"
placed by the listing of the Benefit Plan in the FUTRONIX DISCLOSURE SCHEDULE.
(b) All such Benefit Plans conform (and at all times have conformed) in
all material respects to, and are being administered and operated (and have at
all times been administered and operated) in material compliance with, the
requirements of ERISA, the Code and all other applicable Laws. All returns,
reports and disclosure statements required to be made under ERISA and the Code
with respect to all such Benefit Plans have been timely filed or delivered or
requests for filing extensions have been timely made. There have not been any
"prohibited transactions," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA involving any of the Benefit Plans, that could subject
Futronix to any material penalty or tax imposed under the Code or ERISA.
(c) Except as is set forth in the FUTRONIX DISCLOSURE SCHEDULE, any such
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
and exempt from tax under Section 501(a) of the Code has been determined by the
Internal Revenue Service to be so qualified or an application for such
determination is pending. Any such determination that has been obtained remains
in effect and has not been revoked, and with respect to any application that is
pending, the Company has no reason to suspect that such application for
determination will be denied. Nothing has occurred since the date of any such
determination that is reasonably likely to affect adversely such qualification
or exemption, or result in the imposition of excise taxes or income taxes on
unrelated business income under the Code or ERISA with respect to any such
Benefit Plan.
(d) Futronix does not sponsor a defined benefit plan subject to Title IV
of ERISA, nor does it have a current or contingent obligation to contribute to
any multiemployer plan (as defined in Section 3(37) of ERISA). Futronix does not
have any liability with respect to any employee benefit plan (as defined in
Section 3(3) of ERISA) other than with respect to the Benefit Plans.
(e) There are no pending or, to the knowledge of Futronix, threatened
claims by or on behalf of any such Benefit Plans, or by or on behalf of any
individual participants or beneficiaries of any such Benefit Plans, alleging any
breach of fiduciary duty on the part of Futronix or any of its
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officers, directors or employees under ERISA or any other applicable
regulations, or claiming benefit payments (other than those made in the ordinary
operation of such plans), nor is there, to the knowledge of Futronix, any basis
for such claim. The Benefit Plans are not the subject of any pending (or to the
knowledge of Futronix, any threatened) investigation or audit by the Internal
Revenue Service, the Department of Labor or the Pension Benefit Guaranty
Corporation ("PBGC").
(f) Futronix has timely made all required contributions under such Benefit
Plans including the payment of any premiums payable to the PBGC and other
insurance premiums.
(g) With respect to any such Benefit Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) (a "Welfare Plan")
and except as specified in the FUTRONIX DISCLOSURE SCHEDULE, (i) each Welfare
Plan for which contributions are claimed by Futronix as deductions under any
provision of the Code is in material compliance with all applicable requirements
pertaining to such deduction, (ii) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a Welfare Plan, there
is no disqualified benefit (within the meaning of Section 4976(b) of the Code)
that would result in the imposition of a tax under Section 4976(a) of the Code,
(iii) any Benefit Plan that is a group health plan (within the meaning of
Section 4980B(g)(2) of the Code) complies, and in each and every case has
complied, with all of the applicable material requirements of Section 4980B of
the Code, ERISA, Title XXII of the Public Health Service Act and the Social
Security Act, and (iv) all Welfare Plans may be amended or terminated at any
time on or after the Closing Date. Except as specified in the FUTRONIX
DISCLOSURE SCHEDULE, no Benefit Plan provides any health, life or other welfare
coverage to employees of Futronix beyond termination of their employment with
Futronix by reason of retirement or otherwise, other than coverage as may be
required under Section 4980B of the Code or Part 6 of ERISA, or under the
continuation of coverage provisions of the laws of any state or locality.
4.22 Corporate Records. The minute book of Futronix contains
-----------------
complete, correct and current copies of its Charter Documents and bylaws and of
all minutes of meetings, resolutions and other proceedings of its Board of
Directors and stockholders. The stock record books of Futronix are complete,
correct and current.
4.23 Absence of Certain Changes. Except as contemplated by this
--------------------------
Agreement and as specified in the FUTRONIX DISCLOSURE SCHEDULE, since the
Balance Sheet Date, Futronix has conducted the Futronix Business in the ordinary
course and there has not been with respect to the Futronix Business:
(a) any change that has had or is reasonably likely to have a
Material Adverse Effect;
(b) any distribution or payment declared or made in respect of its
capital stock by way of dividends, purchase or redemption of shares or
otherwise;
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(c) any increase in the compensation payable or to become payable
to any director, officer, employee or agent, except for increases for non-
officer employees made in the ordinary course of business, nor any other
change in any employment or consulting arrangement;
(d) any sale, assignment or transfer of Assets, or any additions to
or transactions involving any Assets, other than those made in the ordinary
course of business;
(e) other than in the ordinary course of business, any waiver or
release of any claim or right or cancellation of any debt held; or
(f) any payments to any Affiliate of Futronix.
4.24 Previous Sales; Warranties. Futronix has not breached any
--------------------------
express or implied warranties in connection with the sale or distribution of
goods or the performance of services, except for breaches that, individually and
in the aggregate, would not have a Material Adverse Effect.
4.25 Customers and Suppliers. Futronix has used its reasonable
-----------------------
business efforts to maintain and currently maintains, good working relationships
with all of its customers and suppliers. The FUTRONIX DISCLOSURE SCHEDULE
contains a list of the names of each of the ten customers that, in the
aggregate, for the year ended December 31, 1995, were the largest dollar volume
customers of products or services, or both, sold by Futronix, and the dollar
volume of sales to such customers for the years ended December 31, 1993 and
1994. Except as specified in the FUTRONIX DISCLOSURE SCHEDULE, none of such
customers has given Futronix notice terminating, cancelling or threatening to
terminate or cancel any Contract or relationship with Futronix. The FUTRONIX
DISCLOSURE SCHEDULE also contains a list of the names of each of the ten
suppliers that, in the aggregate, for the year ended December 31, 1995, were the
largest dollar volume suppliers of products or services, or both, purchased by
Futronix, and the dollar volume of purchases from such suppliers for the years
ended December 31, 1993 and 1994. Except as specified in the FUTRONIX
DISCLOSURE SCHEDULE, none of such suppliers has given Futronix notice
terminating, cancelling or threatening to terminate or cancel any Contract or
relationship with Futronix.
4.26 Finder's Fees. Except for compensation payable in connection
-------------
with the Public Offering, no Person retained by Futronix is or will be entitled
to any commission or finder's or similar fee in connection with the
Transactions.
4.27 Additional Information. The FUTRONIX DISCLOSURE SCHEDULE
----------------------
accurately lists the following:
(a) the names of all officers and directors of Futronix;
(b) the names and addresses of every bank or other financial
institution in which Futronix maintains an account (whether checking,
saving or otherwise),
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lock box or safe deposit box, and the account numbers and names of Persons
having signing authority or other access thereto;
(c) the names of all Persons authorized to borrow money or incur or
guarantee indebtedness on behalf of Futronix;
(d) the names of any Persons holding powers of attorney from
Futronix and a summary statement of the terms thereof; and
(e) all names under which Futronix has conducted any part of its
Business or which it has otherwise used at any time during the past five
years.
4.28 Accuracy of Information. No representation or warranty by Futronix in
-----------------------
any Transaction Document, and no information contained therein or otherwise
delivered by or on behalf of Futronix to W&C pursuant to any Transaction
Document, including the Futronix Financial Statements, contains any untrue
statement of any material fact or omits to state any material fact necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances under which such statements were made.
5. Representations and Warranties of W&C.
-------------------------------------
W&C hereby represents and warrants to Futronix and the Futronix
Stockholders as follows:
5.1 Corporate Status. W&C is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the State of Georgia and is
qualified to do business as a foreign corporation in any jurisdiction where it
is required to be so qualified except where the failure to so qualify would not
have a Material Adverse Effect. The Charter Documents and bylaws of W&C that
have been delivered to Futronix as of the date hereof are effective under
applicable Laws and are current, correct and complete.
5.2 Authorization. W&C has the requisite power and authority to own the
-------------
W&C Assets and to carry on the W&C Business. W&C has the requisite power and
authority to execute and deliver the Transaction Documents to which it is a
party and to perform the Transactions performed or to be performed by it. Such
execution, delivery and performance by W&C have been duly authorized by all
necessary corporate action. Each Transaction Document executed and delivered by
W&C has been duly executed and delivered by W&C and constitutes a valid and
binding obligation of W&C, enforceable against W&C in accordance with its terms.
5.3 Consents and Approvals. Except for any consents specified in the W&C
----------------------
DISCLOSURE SCHEDULE (the "W&C Required Consents"), neither the execution and
delivery by W&C of the Transaction Documents to which it is a party, nor the
performance of the Transactions performed or to be performed by W&C, require any
filing, consent or approval, constitute a Default or cause any payment
obligation to arise under (a) any Law or Court Order to which W&C is subject,
(b) the Charter Documents or bylaws of W&C or (c) any material Contract,
Governmental Permit or other
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<PAGE>
document to which W&C or any W&C Individual is a party or by which the
properties or other assets of any of them may be subject.
5.4 Capitalization and Stock Ownership. The total authorized capital
----------------------------------
stock of W&C consists of 500,000 shares of W&C Common Stock, of which 1,000
shares are issued and outstanding on the date hereof and also as of immediately
prior to the Closing. Except for the W&C Options, there are no existing
options, warrants, calls, commitments or other rights of any character
(including conversion or preemptive rights) relating to the acquisition of any
issued or unissued capital stock or other securities of W&C. All of the shares
of W&C Common Stock are duly and validly authorized and issued, fully paid and
non-assessable. The W&C DISCLOSURE SCHEDULE lists all of the record owners of
the W&C Common Stock.
5.5 Financial Statements. W&C has delivered to Futronix correct and
--------------------
complete copies of unaudited monthly financial statements for W&C consisting of
a balance sheet as of the end of each month from January 1996 through May 1996
and the related statements of income and cash flows for the periods then ended.
W&C has also delivered to Futronix correct and complete copies of financial
statements consisting of a balance sheet of W&C as of December 31, 1993, 1994
and 1995 and the related statements of income for the fiscal years then ended,
which were audited by the firm of Gross Collins Cress, P.C., independent public
accountants. All such unaudited and audited financial statements are referred
to herein collectively as the "W&C Pre-Signing Financial Statements." The
unaudited financial statements of W&C to be delivered in connection with any
Initial Registration Statement are referred to herein as the "W&C Post-Signing
Financial Statements," and, together with the Pre-Signing Financial Statements,
as the "W&C Financial Statements." The W&C Pre-Signing Financial Statements
are, and the W&C Post-Signing Financial Statements will be, consistent in all
material respects with the books and records of W&C, and there have not been or
will not be any material transactions by or concerning W&C that have not been or
will not be recorded in the accounting records underlying such Financial
Statements. The W&C Pre-Signing Financial Statements have been, and the W&C
Post-Signing Financial Statements will be, prepared in accordance with GAAP
consistently applied, and the W&C Pre-Signing Financial Statements present, and
the W&C Post-Signing Financial Statements will present, fairly the financial
position and assets and liabilities of W&C as of the dates thereof, and the
results of its operations for the periods then ended, subject in the case of
unaudited Financial Statements to normal recurring year-end adjustments and the
absence of notes. The balance sheet of W&C as of March 31, 1996 that is
included in the W&C Financial Statements is referred to herein as the "W&C
Balance Sheet."
5.6 Title to Assets and Related Matters. W&C has good and marketable
-----------------------------------
title to, valid leasehold interests in or valid licenses to use, all of the W&C
Assets, free from any Encumbrances except those specified in the W&C DISCLOSURE
SCHEDULE. The use of the W&C Assets is not subject to any Encumbrances (other
than those specified in the preceding sentence), and such use does not
materially encroach on the property or rights of anyone else. All W&C Real
Property and tangible personal property (other than Inventory) included in the
W&C Assets are suitable for the purposes for which they are used, in good
working condition, reasonable wear and tear excepted, and are free from any
known defects, except such minor defects that would not have a Material Adverse
Effect.
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<PAGE>
5.7 Real Property. The W&C DISCLOSURE SCHEDULE describes all real
-------------
estate used in the operation of the W&C Business as well as any other real
estate that is in the possession of or leased by W&C and the improvements
(including buildings and other structures) located on such real estate
(collectively, the "W&C Real Property"), and lists any leases under which any
such W&C Real Property is possessed (the "W&C Real Estate Leases"). W&C does
not have any ownership interest in any real property. The W&C DISCLOSURE
SCHEDULE also describes any other real estate previously owned, leased or
otherwise operated by W&C or any predecessor thereof during the past 10 years
and the time periods of any such ownership, lease or operation. All of the W&C
Real Property (a) is usable in the ordinary course of business and (b) conforms
in all material respects with any applicable Laws relating to its construction,
use and operation. The W&C Real Property complies with applicable zoning Laws.
W&C or the landlord of any W&C Real Property leased by W&C has obtained all
licenses and rights-of-way from governmental entities or private parties that
are necessary to ensure vehicular and pedestrian ingress and egress to and from
the W&C Real Property.
5.8 Certain Personal Property. The W&C DISCLOSURE SCHEDULE describes all
-------------------------
items of tangible personal property that were included in the balance sheet of
W&C as of December 31, 1995. Except as specified in the W&C DISCLOSURE SCHEDULE
and excluding purchases of Inventory in the ordinary course of business, since
the Balance Sheet Date, W&C has not acquired any items of tangible personal
property that have a carrying value in excess of $20,000, or an aggregate
carrying value in excess of $90,000. All of such personal property included in
the W&C DISCLOSURE SCHEDULE is, and any such personal property acquired after
the date hereof in accordance with Section 9.2 will be, usable in the ordinary
course of business, and all such personal property included in the W&C
DISCLOSURE SCHEDULE conforms, and all of such personal property acquired after
the date hereof will conform, in all material respects with any applicable Laws
relating to its construction, use and operation. Except for those items subject
to the W&C Non-Real Estate Leases, no Person other than W&C owns any vehicles,
equipment or other tangible assets located on the W&C Real Property that are
used in the W&C Business or that are necessary for the operation of the W&C
Business.
5.9 Non-Real Estate Leases. The W&C DISCLOSURE SCHEDULE lists all assets
----------------------
and property (other than W&C Real Property) that are possessed by W&C under an
existing lease, including all trucks, automobiles, forklifts, machinery,
equipment, furniture and computers, except for Immaterial Leases. The W&C
DISCLOSURE SCHEDULE also lists the leases under which such assets and property
listed in the W&C DISCLOSURE SCHEDULE are possessed. All of such leases
(excluding Immaterial Leases) are referred to herein as the "W&C Non-Real Estate
Leases."
5.10 Accounts Receivable. The Accounts Receivable included in the W&C
-------------------
Assets are bona fide Accounts Receivable created in the ordinary course of
business. Except for Accounts Receivable for which reserves have been
established and except as described in the W&C DISCLOSURE SCHEDULE, all of the
Accounts Receivable included in the W&C Assets are collectible within 90 days
from the respective dates of sale. W&C does not know of any facts or
circumstances (other than general economic conditions) that are likely to result
in any material increase in the uncollectability of such Accounts Receivable in
excess of any reserves therefor set forth in the W&C Balance Sheet.
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<PAGE>
5.11 Inventory. The Inventory included in the W&C Assets consists of
---------
items of good, usable and merchantable quality in all material respects and does
not include obsolete or discontinued items except as described on the W&C
DISCLOSURE SCHEDULE. Such Inventory is of such quality as may be required to
satisfy applicable governmental quality control standards. All finished goods
included in such Inventory are saleable as current inventories at the current
price thereof in the ordinary course of business. Such Inventory is recorded in
the W&C Financial Statements at the lower of average cost or market determined
in accordance with GAAP, and no write-down of such Inventory has been made or
should have been made pursuant to GAAP during the past two years. The W&C
DISCLOSURE SCHEDULE lists the locations of all items of the Inventory.
5.12 Liabilities. W&C does not have any Liabilities, except (a) as
-----------
specified in the W&C DISCLOSURE SCHEDULE, (b) as contemplated by the W&C Balance
Sheet (except as heretofore paid or discharged), (c) Liabilities incurred in the
ordinary course since the Balance Sheet Date that, individually or in the
aggregate, are not material to the W&C Business, or (d) Liabilities under any
Contracts included in the W&C Assets that are specifically disclosed in the W&C
DISCLOSURE SCHEDULE (or not required to be disclosed because of the term or
amount involved) and that were not required under GAAP to have been specifically
disclosed or reserved for on the W&C Balance Sheet.
5.13 Taxes. W&C has duly filed all returns for Taxes that are
-----
required to be filed and has paid all material Taxes shown as being due pursuant
to such returns or pursuant to any assessment received. W&C has elected to
qualify and has met the requirements of Subchapter S of the Code for
qualification and treatment as an S corporation at all times since November 1,
1988. All Taxes that W&C has been required by Law to withhold or to collect
have been duly withheld and collected and have been paid over to the proper
governmental authorities or are properly held by W&C for such payment. There
are no proceedings or other actions, nor to the knowledge of W&C is there any
basis for any proceedings or other actions, for the assessment and collection of
additional Taxes of any kind with respect to W&C for any period for which
returns have or should have been filed.
5.14 Subsidiaries. Except as set forth in the W&C Disclosure
------------
Schedule, W&C does not own, directly or indirectly, any interest or investment
(whether equity or debt) in any corporation, partnership, limited liability
company, trust, joint venture or other legal entity.
5.15 Legal Proceedings and Compliance with Law.
-----------------------------------------
(a) Except as set forth in the W&C DISCLOSURE SCHEDULE, there is no
Litigation that is pending or, to W&C's knowledge, threatened against W&C.
There has been no Default under any Laws applicable to W&C, including Laws
relating to pollution or protection of the environment, except for any Defaults
that would not have a Material Adverse Effect, and W&C has not received any
notices from any governmental entity regarding any alleged Defaults under any
Laws. There has been no Default with respect to any Court Order applicable to
W&C.
(b) Without limiting the generality of Section 5.15(a), there has not been
any W&C Environmental Condition created by W&C or any Affiliate of W&C or, to
the knowledge of W&C,
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created by any other Person (i) at the premises at which the W&C Business is
currently conducted, (ii) at any property owned, leased or operated during the
past 10 years by W&C, any Person controlled by W&C or any predecessor of any of
them, or (iii) at any property at which wastes have been deposited or disposed
during the past 10 years by or at the behest or direction of any of the
foregoing, nor has W&C received written notice of any such W&C Environmental
Condition. "W&C Environmental Condition" means any condition or circumstance,
including the presence of Hazardous Substances, at or relating to any such
property or premises that (i) requires abatement or correction under an
Environmental Law, (ii) gives rise to any material civil or criminal liability
on the part of W&C under an Environmental Law, or (iii) has created a public or
private nuisance.
(c) W&C has delivered to Futronix complete copies of any written reports,
studies or assessments in the possession or control of W&C that relate to any
W&C Environmental Condition and to the W&C Business or any W&C Assets.
(d) Except in those cases where the failure would not have a Material
Adverse Effect, (i) W&C has obtained and is in full compliance with all
Governmental Permits, all of which are listed in the W&C DISCLOSURE SCHEDULE
along with their respective expiration dates, that are required for the
operation of the W&C Business as currently operated, (ii) all of such
Governmental Permits are currently valid and in full force and (iii) W&C has
filed such timely and complete renewal applications as may be required with
respect to its Governmental Permits. To W&C's knowledge, no revocation,
cancellation or withdrawal thereof has been threatened.
5.16 Contracts.
---------
(a) The W&C DISCLOSURE SCHEDULE lists all Contracts of the following types
to which W&C is a party or by which it is bound, except for Minor Contracts:
(i) Contracts with any present or former stockholder, director,
officer, employee, partner or consultant of W&C or any Affiliate
thereof.
(ii) Contracts for the future purchase of, or payment for,
supplies or products, or for the lease of any Asset from or the
performance of services by a third party, in excess of $25,000 in any
individual case;
(iii) Contracts to sell or supply products or to perform
services that involve an amount in excess of $25,000 in any individual
case or with respect to any one supplier or other party;
(iv) Contracts to lease to or to operate for any other party any
asset that involve an amount in excess of $25,000 in any individual
case;
(v) Any notes, debentures, bonds, conditional sale agreements,
equipment trust agreements, letter of credit agreements, reimbursement
agreements, loan agreements or other Contracts for the borrowing or
lending
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of money (including loans to or from officers, directors, partners,
stockholders or Affiliates of W&C or any members of their immediate
families), agreements or arrangements for a line of credit or for a
guarantee of, or other undertaking in connection with, the
indebtedness of any other Person;
(vi) Any Contracts under which any Encumbrances exist; and
(vii) Any other Contracts (other than Minor Contracts and those
described in any of (i) through (vi) above) not made in the ordinary
course of business.
(b) The Contracts listed in the W&C DISCLOSURE SCHEDULE and the Contracts
excluded from the W&C DISCLOSURE SCHEDULE based on the term or amount thereof
(other than Minor Contracts) are referred to herein as the "W&C Contracts." W&C
is not in Default under any W&C Contracts (including any W&C Real Estate Leases
and W&C Non-Real Estate Leases), which Default could result in a Liability on
the part of W&C in excess of $25,000 in any individual case, and the aggregate
Liabilities that could result from all such Defaults do not exceed $50,000. W&C
has not received any communication from, or given any communication to, any
other party indicating that W&C or such other party, as the case may be, is in
Default under any W&C Contract where such Default could have a Material Adverse
Effect. To the knowledge of W&C, none of the other parties in any such W&C
Contract is in Default thereunder.
5.17 Insurance. The W&C DISCLOSURE SCHEDULE lists all policies or
---------
binders of insurance held by or on behalf of W&C, specifying with respect to
each policy the insurer, the amount of the coverage, the type of insurance, the
risks insured, the expiration date, the policy number and any pending claims
thereunder. There is no Default with respect to any such policy or binder, nor
has there been any failure to give any notice or present any claim under any
such policy or binder in a timely fashion or in the manner or detail required by
the policy or binder, except for any of the foregoing that would not,
individually or in the aggregate, have a Material Adverse Effect. There is no
notice of nonrenewal or cancellation with respect to, or disallowance of any
claim under, any such policy or binder that has been received by W&C, except for
any of the foregoing that would not, individually or in the aggregate, have a
Material Adverse Effect.
5.18 Intellectual Property and Confidential Information.
--------------------------------------------------
(a) W&C does not currently use nor has it previously used in the
development, production or marketing of its products and services any
Copyrights, Patents or Trademarks except for those listed in the W&C DISCLOSURE
SCHEDULE. W&C either owns the entire right, title and interest in, to and
under, or has a valid license to use all material Intellectual Property that has
been used in the operation of the W&C Business, in the ordinary course or
otherwise. All of the Intellectual Property listed in the W&C DISCLOSURE
SCHEDULE is owned by W&C, free and clear of any Encumbrances, or used pursuant
to an agreement that is described in the W&C DISCLOSURE SCHEDULE. W&C has not
infringed upon or unlawfully or wrongfully used any Intellectual Property
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rights owned or claimed by another Person. W&C is not in Default, nor has it
received any notice of any claim of infringement or any other claim or
proceeding, with respect to any such Intellectual Property. Except for any
rights under written licenses or other written Contracts, no current or former
employee of W&C and no other Person owns or has any proprietary, financial or
other interest, direct or indirect, in whole or in part, and including any right
to royalties or other compensation, in any of the Intellectual Property.
(b) To W&C's knowledge, (i) none of its Confidential Information has been
used, divulged or appropriated (A) for the benefit of any Person other than W&C
or (B) otherwise to the detriment of W&C, (ii) no employee or consultant of W&C
is subject to any contractual or legal restrictions that might interfere with
the use of his or her best efforts to promote the interests of W&C, (iii) no
employee or consultant of W&C has used any other Person's trade secrets or other
information that is confidential in the course of his or her work with respect
to the W&C Business, and (iv) no employee or consultant of W&C is in Default
under any term of any employment contract, agreement or arrangement relating to
the Intellectual Property, or any confidentiality agreement or any other
Contract or any restrictive covenant relating to the Intellectual Property, or
the development or exploitation thereof.
5.19 Employee Relations. W&C is not (a) a party to, involved in or,
------------------
to W&C's knowledge, threatened by, any labor dispute or unfair labor practice
charge, or (b) currently negotiating any collective bargaining agreement. W&C
has not experienced during the last three years any work stoppage. W&C has
delivered to Futronix a complete and correct list of the names and salaries,
bonus and other cash compensation of all employees (including officers) of W&C
whose cash compensation was for 1995 or is expected to be for 1996 at least
$50,000.
5.20 ERISA.
-----
(a) The W&C DISCLOSURE SCHEDULE contains a complete list of all Benefit
Plans sponsored or maintained by W&C or under which W&C is obligated. W&C has
delivered to Futronix (i) accurate and complete copies of all such Benefit Plan
documents and all other material documents relating thereto, including (if
applicable) all summary plan descriptions, summary annual reports and insurance
contracts, (ii) accurate and complete detailed summaries of all unwritten
Benefit Plans, (iii) accurate and complete copies of the most recent financial
statements and actuarial reports with respect to all such Benefit Plans for
which financial statements or actuarial reports are required or have been
prepared and (iv) accurate and complete copies of all annual reports for all
such Benefit Plans (for which annual reports are required) prepared within the
last three years. Each such Benefit Plan providing benefits that are funded
through a policy of insurance is indicated by the word "insured" placed by the
listing of the Benefit Plan in the W&C DISCLOSURE SCHEDULE.
(b) All such Benefit Plans conform (and at all times have conformed) in
all material respects to, and are being administered and operated (and have at
all times been administered and operated) in material compliance with, the
requirements of ERISA, the Code and all other applicable Laws. All returns,
reports and disclosure statements required to be made under ERISA and the Code
with respect to all such Benefit Plans have been timely filed or delivered.
There have not been any
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"prohibited transactions," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA involving any of the Benefit Plans, that could subject
W&C to any material penalty or tax imposed under the Code or ERISA.
(c) Except as is set forth in the W&C DISCLOSURE SCHEDULE, any such
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
and exempt from tax under Section 501(a) of the Code has been determined by the
Internal Revenue Service to be so qualified or an application for such
determination is pending. Any such determination that has been obtained remains
in effect and has not been revoked, and with respect to any application that is
pending, the Company has no reason to suspect that such application for
determination will be denied. Nothing has occurred since the date of any such
determination that is reasonably likely to affect adversely such qualification
or exemption, or result in the imposition of excise taxes or income taxes on
unrelated business income under the Code or ERISA with respect to any such
Benefit Plan.
(d) W&C does not sponsor a defined benefit plan subject to Title IV of
ERISA, nor does it have a current or contingent obligation to contribute to any
multiemployer plan (as defined in Section 3(37) of ERISA). W&C does not have
any liability with respect to any employee benefit plan (as defined in Section
3(3) of ERISA) other than with respect to the Benefit Plans.
(e) There are no pending or, to the knowledge of W&C, threatened claims by
or on behalf of any such Benefit Plans, or by or on behalf of any individual
participants or beneficiaries of any such Benefit Plans, alleging any breach of
fiduciary duty on the part of W&C or any of its officers, directors or employees
under ERISA or any other applicable regulations, or claiming benefit payments
(other than those made in the ordinary operation of such plans), nor is there,
to the knowledge of W&C, any basis for such claim. The Benefit Plans are not
the subject of any pending (or to the knowledge of W&C, any threatened)
investigation or audit by the Internal Revenue Service, the Department of Labor
or the PBGC.
(f) W&C has timely made all required contributions under such Benefit
Plans including the payment of any premiums payable to the PBGC and other
insurance premiums.
(g) With respect to any such Benefit Plan that is a Welfare Plan and
except as specified in the W&C DISCLOSURE SCHEDULE, (i) each Welfare Plan for
which contributions are claimed by W&C as deductions under any provision of the
Code is in material compliance with all applicable requirements pertaining to
such deduction, (ii) with respect to any welfare benefit fund (within the
meaning of Section 419 of the Code) related to a Welfare Plan, there is no
disqualified benefit (within the meaning of Section 4976(b) of the Code) that
would result in the imposition of a tax under Section 4976(a) of the Code, (iii)
any Benefit Plan that is a group health plan (within the meaning of Section
4980B(g)(2) of the Code) complies, and in each and every case has complied, with
all of the applicable material requirements of Section 4980B of the Code, ERISA,
Title XXII of the Public Health Service Act and the Social Security Act, and
(iv) all Welfare Plans may be amended or terminated at any time on or after the
Closing Date. Except as specified in the W&C DISCLOSURE SCHEDULE, no Benefit
Plan provides any health, life or other welfare coverage to employees of W&C
beyond termination of their employment with W&C by reason of retirement or
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otherwise, other than coverage as may be required under Section 4980B of the
Code or Part 6 of ERISA, or under the continuation of coverage provisions of the
laws of any state or locality.
5.21 Corporate Records. The minute book of W&C contains complete,
-----------------
correct and current copies of its Charter Documents and bylaws and of all
minutes of meetings, resolutions and other proceedings of its Board of Directors
and sole stockholder. The stock record books of W&C are complete, correct and
current.
5.22 Absence of Certain Changes. Except as contemplated by this
--------------------------
Agreement and as specified in the W&C DISCLOSURE SCHEDULE, since the Balance
Sheet Date, W&C has conducted the W&C Business in the ordinary course and there
has not been with respect to the W&C Business:
(a) any change that has had or is reasonably likely to have a
Material Adverse Effect;
(b) any distribution or payment declared or made in respect of its
capital stock by way of dividends, purchase or redemption of shares or
otherwise;
(c) any increase in the compensation payable or to become payable
to any director, officer, employee or agent, except for increases for non-
officer employees made in the ordinary course of business, nor any other
change in any employment or consulting arrangement;
(d) any sale, assignment or transfer of Assets, or any additions to
or transactions involving any Assets, other than those made in the ordinary
course of business;
(e) other than in the ordinary course of business, any waiver or
release of any claim or right or cancellation of any debt held; or
(f) any payments to any Affiliate of W&C.
5.23 Previous Sales; Warranties. W&C has not breached any express or
--------------------------
implied warranties in connection with the sale or distribution of goods or the
performance of services, except for breaches that, individually and in the
aggregate, would not have a Material Adverse Effect.
5.24 Customers and Suppliers. W&C has used its reasonable business
-----------------------
efforts to maintain and currently maintains, good working relationships with all
of its customers and suppliers. The W&C DISCLOSURE SCHEDULE contains a list of
the names of each of the ten customers that, in the aggregate, for the year
ended December 31, 1995, were the largest dollar volume customers of products or
services, or both, sold by W&C, and the dollar volume of sales to such customers
for the years ended December 31, 1993 and 1994. Except as specified in the W&C
DISCLOSURE SCHEDULE, none of such customers has given W&C notice terminating,
cancelling or threatening to terminate or cancel any Contract or relationship
with W&C. The W&C DISCLOSURE SCHEDULE also contains
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a list of the names of each of the ten suppliers that, in the aggregate, for the
year ended December 31, 1995, were the largest dollar volume suppliers of
products or services, or both, purchased by W&C. Except as specified in the W&C
DISCLOSURE SCHEDULE, none of such suppliers has given W&C notice terminating,
cancelling or threatening to terminate or cancel any Contract or relationship
with W&C.
5.25 Finder's Fees. No Person retained by W&C is or will be entitled
-------------
to any commission or finder's or similar fee in connection with the
Transactions.
5.26 Additional Information. The W&C DISCLOSURE SCHEDULE accurately
----------------------
lists the following:
(a) the names of all officers and directors of W&C;
(b) the names and addresses of every bank or other financial
institution in which W&C maintains an account (whether checking, saving or
otherwise), lock box or safe deposit box, and the account numbers and names
of Persons having signing authority or other access thereto;
(c) the names of all Persons authorized to borrow money or incur or
guarantee indebtedness on behalf of W&C;
(d) the names of any Persons holding powers of attorney from W&C
and a summary statement of the terms thereof; and
(e) all names under which W&C has conducted any part of its
Business or which it has otherwise used at any time during the past five
years.
5.27 Accuracy of Information. No representation or warranty by W&C in
-----------------------
any Transaction Document, and no information contained therein or otherwise
delivered by or on behalf of W&C to Futronix pursuant to any Transaction
Document, including the W&C Financial Statements, contains any untrue statement
of any material fact or omits to state any material fact necessary in order to
make the statements contained herein or therein not misleading in light of the
circumstances under which such statements were made.
6. Representations and Warranties of Bruno and the Futronix Stockholder
--------------------------------------------------------------------
Parties.
- -------
Bruno and each Futronix Stockholder Party (each a "Representing Party")
hereby represents and warrants, with respect to himself, herself or itself only,
to the other Parties as follows:
6.1 Authorization. In the case of any Representing Party that is not a
-------------
natural person, such Representing Party has the requisite power and authority to
execute and deliver the Transaction Documents to which it is a party and to
perform the Transactions to be performed by it, and such execution, delivery and
performance by such Representing Party (if applicable) have been duly
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authorized by all necessary corporate, partnership or trust action. Each
Transaction Document executed and delivered by the Representing Party has been
duly executed and delivered by such Representing Party and constitutes a valid
and binding obligation of such Representing Party, enforceable against such
Representing Party in accordance with its terms.
6.2 Consents and Approvals. Neither the execution and delivery by the
----------------------
Representing Party of the Transaction Documents to which it is a party, nor the
performance of the Transactions by such Representing Party, require any filing,
consent or approval or constitute a Default under (a) any Law or Court Order to
which such Representing Party is subject, (b) in the case of any Representing
Party that is not a natural person, the Charter Documents or any bylaws of such
Representing Party or (c) any material Contract, Governmental Permit or other
document to which the Representing Party is a party or by which the properties
or other assets of such Representing Party may be subject.
6.3 Stock Ownership. In the case of each Representing Party other than
---------------
Bruno, the Representing Party owns all of the Futronix Securities specified for
such Representing Party in Exhibit "A", free and clear of any Encumbrances.
Bruno owns 1,000 shares of W&C Common Stock, which constitute all of the issued
and outstanding shares of capital stock of W&C, free and clear of any
Encumbrances other than the W&C Options.
6.4 Finder's Fees. No Person retained by such Representing Party is or
-------------
will be entitled to any commission or finder's or similar fee in connection with
the Transactions.
7. Covenants Related to Public Offering and Registration of Shares.
---------------------------------------------------------------
7.1 Initial Registration Statements.
-------------------------------
(a) Futronix will, and will cause the Company to, prepare and file with
the SEC as soon as reasonably practicable after the date hereof a registration
statement on Form S-1 under the Securities Act for purposes of registering
shares of Company Common Stock for sale pursuant to an underwritten public
offering that results in the Company Common Stock being included for quotation
on the Nasdaq National Market (the "Public Offering"). Such registration
statement and any amendments or supplements thereto are referred to herein as
the "Form S-1 Registration Statement." In addition, Futronix will, and will
cause the Company to, prepare and file with the SEC as soon as reasonably
practicable after the date hereof (i) a registration statement on Form S-4 under
the Securities Act for purposes of registering the Closing Common Shares to be
issued in the Merger under Section 2 and (ii) a joint proxy statement to be
distributed by Futronix and W&C in connection with the Futronix Special Meeting
and the W&C Consent (the "Joint Proxy Statement"). Such registration statement
on Form S-4 and any amendments or supplements thereto are referred to herein as
the "Form S-4 Registration Statement" and, together with the Form S-1
Registration Statement, as the "Initial Registration Statements." Futronix will,
and will cause the Company to use, commercially reasonable efforts to have the
Initial Registration Statements declared effective under the Securities Act as
promptly as practicable after such filings, and W&C shall use commercially
reasonable efforts to cooperate with Futronix and the Company to cause the
Initial
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<PAGE>
Registration Statements to be declared effective. Futronix, the Company, the
Acquisition Company and W&C (the "Corporate Parties") shall also take such
action as may be reasonably required to cause the shares covered by the Initial
Registration Statements to be registered or to obtain an exemption from
registration under applicable state "blue sky" or securities laws. In
connection with the foregoing, W&C will furnish to Futronix and the Company all
information concerning W&C as Futronix or its counsel may reasonably request
that is required or customary for inclusion in the Initial Registration
Statements. Without the prior written consent of W&C, however, Futronix shall
not permit the Company to enter into an underwriting agreement with respect to
the Public Offering unless the product of 2,251,938 multiplied by the proposed
price to the public in such underwriting agreement is at least $15 million.
(b) Futronix and the Company each covenant that each Initial Registration
Statement (i) will comply in all material respects with the applicable
provisions of the Securities Act and the rules and regulations promulgated
thereunder and (ii) will not at the time such document is filed with the SEC and
at all times after it becomes effective under the Securities Act and until the
Closing contain any untrue statement of any material fact or omit 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 misleading, or necessary to correct any statement in any earlier filing with
the SEC of any Initial Registration Statement; provided, however, that no
representation, covenant or agreement is made by Futronix or the Company with
respect to information supplied by or on behalf of W&C for inclusion in any
Initial Registration Statement.
(c) W&C covenants that each Initial Registration Statement as it relates
to W&C (i) will comply in all material respects with the applicable provisions
of the Securities Act and the rules and regulations promulgated thereunder and
(ii) will not at the time such document is filed with the SEC and at all times
after it becomes effective under the Securities Act and until the Closing
contain any untrue statement of any material fact or omit 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
misleading, or necessary to correct any statement in any earlier filing with the
SEC of any Initial Registration Statement.
(d) The Company and Futronix shall cause to be delivered to W&C a letter
of Deloitte & Touche LLP, and W&C shall cause to be delivered to the Company and
Futronix, a letter of Gross Collins Cress, P.C., dated the date of the Initial
Registration Statements, and addressed to such other Corporate Parties, in form
and substance reasonably satisfactory to such other Corporate Parties (with such
changes to which such other Corporate Parties shall consent, it being understood
that such consent shall not be unreasonably withheld) to the effect that:
(i) they are independent certified public accountants within the
meaning of the Securities Act, including the applicable published
regulations thereunder;
(ii) the financial statements of the applicable Corporate Party
certified by them and included in the Initial Registration Statements
comply as to form in all
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<PAGE>
material respects with the applicable accounting requirements of the
Securities Act, including the published regulations thereunder; and
(iii) they have carried out procedures to a specified date not more
than three business days prior to the effective date of any Initial
Registration Statement that do not constitute an audit in accordance with
GAAP of the financial statements of the applicable Corporate Party, as
follows: (A) read the unaudited financial statements of the applicable
Corporate Party included in any Initial Registration Statement, (B) read
the unaudited financial statements of the applicable Corporate Party for
the period from the date of the most recent financial statements included
in any Initial Registration Statement through the date of the latest
available interim financial statements, (C) read the minutes of the
meetings of stockholders and Boards of Directors of the applicable
Corporate Party from the date of the most recent financial statements of
the applicable Corporate Party included in any Initial Registration
Statement to such date not more than three business days prior to the
effective date of such Initial Registration Statement and (D) consulted
with certain officers of the applicable Corporate Party responsible for
financial and accounting matters as to whether any of the changes or
decreases referred to below has occurred, and based on such procedures,
nothing has come to their attention which would cause them to believe that
(1) any unaudited financial statements of the applicable Corporate Party
included in any Initial Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act and of the published regulations thereunder; (2) such
unaudited financial statements are not fairly presented in conformity with
GAAP (except as permitted by Form 10-Q promulgated by the SEC) applied on a
basis substantially consistent with that of the audited financial
statements of the applicable Corporate Party included in any Initial
Registration Statement; (3) as of such date not more than five business
days prior to the effective date of any Initial Registration Statement,
there was not, except as set forth in such letter, any (a) change in
capital stock, treasury stock or long-term debt of the applicable Corporate
Party, or (b) any decrease in capital in excess of par value, retained
earnings, net assets, net current assets or investments of the applicable
Corporate Party, in each case as compared with the amounts shown in the
most recent balance sheet of the applicable Corporate Party included in
such Initial Registration Statement; or (4) for the period from the date of
such balance sheet to the end of the month immediately preceding the
effective date of any Initial Registration Statement, there were not,
except as set forth in such letter, any decreases, as compared with the
corresponding period in the preceding year, in revenues or in the total or
per share amounts of income before extraordinary items, income before
income taxes or net income of the applicable Corporate Party.
7.2 Nasdaq National Market. Futronix will, and will cause the Company to,
----------------------
prepare and file an application with the National Association of Securities
Dealers, Inc. to list on the Nasdaq National Market the Closing Common Shares
and the Public Shares effective as of the Closing Date
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<PAGE>
and will use commercially reasonable efforts to cause such application to be
approved by the Closing Date.
7.3 Use of Proceeds. Futronix and the Company each covenant that, subject
---------------
to the agreement of the underwriter or underwriters for the Public Offering, the
net proceeds of the Public Offering shall be used to repay at the Closing all
principal and interest outstanding at the Closing under the 7% Subordinated
Promissory Notes issued by Futronix, to repay outstanding borrowings from
financial institutions and for working capital.
7.4 Escrow of Closing Documents. The Company shall give each of the other
---------------------------
Parties hereto (each, an "Other Party") at least five days' notice of the date
on which the Company expects to enter into an underwriting agreement with
respect to the Public Offering. Each Party to the extent practical shall
deliver to the Company on or before such execution date all of the respective
Securityholder Documents to be delivered under Section 2.12 (in the case of each
Futronix Stockholder Party and Bruno) and the other documents to be delivered by
such Party at the Closing pursuant to Sections 11, 12 and 13 or any other
provision hereof (the "Closing Documents"), all of which shall be duly executed
but undated as of such delivery. Each such other Party hereby authorizes the
Company to hold its respective Closing Documents in escrow pending the Closing
and to date and deliver such Closing Documents at the Closing on behalf of such
other Party if the respective conditions applicable to such other Party in
Sections 11, 12 and 13 have been satisfied or waived in accordance with the
terms hereof.
7.5 Changes in Capitalization. Notwithstanding the other provisions
-------------------------
hereof, in connection with the Public Offering, the Company may amend its
Charter Documents to change its authorized capital and may change the exchange
ratios specified in Section 2 so long as the Company makes the corresponding
changes contemplated by this Section 7.5. The Company may change the exchange
ratios specified in Section 2.6 for the purpose of issuing Company Securities in
exchange for the Futronix Securities if the Company makes a corresponding
proportionate adjustment to the exchange ratio specified in Section 2.7 for the
purpose of issuing Company Common Stock in exchange for the W&C Common Stock.
The securities issued pursuant to any such change shall be rounded to the
nearest whole share. As part of any such change, the Company shall make
proportionate corresponding changes to the conversion rate for the Company
Convertible Preferred Stock and the exercise price for the Company Warrants to
be issued in exchange for the Futronix Securities under Section 2.6. In
addition, upon any such change in the exchange ratios, the other share amounts
specified herein for the Company Common Stock as of the Closing shall also be
changed, including the share amounts for the New Option Plan, the options to be
granted by Bruno under Section 9.7 and the Value Appreciation Bonus, so that
such share amounts bear the same respective ratios to the total shares of
Company Common Stock outstanding as of the Closing.
7.6 Secondary Registration Statement.
--------------------------------
(a) The Company shall file a Registration Statement on Form S-1,
pursuant to Rule 415, under the Securities Act (the "Resale Form S-1") for
purposes of registering for resale from time to time through market or private
sales all the shares of Company Common Stock issued
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<PAGE>
to Bruno under Section 2.7, including the shares of Bruno's Company Common Stock
issuable to Monahan and Scott pursuant to the W&C Options, and all of the shares
of Company Common Stock to be issued to Monahan in connection with the Value
Appreciation Bonus (collectively, the "Registered Shares"). The Company shall
take such actions as are commercially reasonably required to permit Bruno,
Monahan and Scott (the "Registered Holders") to sell during the Applicable
Registration Period (defined below) the Registered Shares pursuant to such
registration statement or any Form S-3 registration statement that the Company
may file as a replacement to the Resale Form S-1 registration statement. The
Resale Form S-1, any such replacement Form S-3 registration statement and any
amendments or supplements thereto are referred to herein as the "Secondary
Registration Statement." The "Applicable Registration Period" means (i) with
respect to Bruno, the period beginning with the effective date of the Resale
Form S-1 and ending with the second anniversary of the Closing Date and (ii)
with respect to Monahan and Scott, a period of four years. The Company shall use
commercially reasonable efforts to publish preliminary financial results for its
1996 fiscal year and to have the Secondary Registration Statement declared
effective under the Securities Act by February 15, 1997. Notwithstanding the
effective date of the Secondary Registration Statement, none of the Registered
Holders shall be able to sell any Registered Shares prior to the expiration of
any "lockup" period applicable to such Registered Holders pursuant to the
underwriting agreement for the Public Offering (the "Applicable Lockup Period"),
nor shall any Registered Holder be able to sell any Registered Shares until
Deloitte & Touche LLP shall have confirmed to the Company that any proposed sale
would not adversely affect the treatment of the Merger hereunder as a "pooling"
under GAAP. In negotiating arrangements with the underwriter or underwriters
for the Public Offering, Futronix will not, and will cause the Company not to,
enter into any arrangements that provide for an Applicable Lockup Period of more
than 180 days in the case of Monahan and Scott and the period from the effective
date of the Form S-1 Registration Statement through February 15, 1997 in the
case of Bruno, and each of the Registered Holders shall enter into such
reasonable arrangements as may be required under any such underwriting agreement
in order to confirm their agreement to such Applicable Lockup Periods.
(b) After Bruno and Monahan shall have sold Registered Shares under
the Secondary Registration Statement with an aggregate value of $3 million
(allocated between them as they shall mutually agree), neither of them shall
thereafter sell any Registered Shares under the Secondary Registration Statement
in an amount greater than each such Registered Holder could sell from time to
time under Rule 144 promulgated under the Securities Act or any similar rule
that may be adopted by the SEC.
(c) In order to fulfill its covenant to maintain the effectiveness
of the Secondary Registration Statement during the Applicable Registration
Period, at any time that the Secondary Registration Statement would require
updating prior to its use to include additional financial information of the
Company in accordance with the rules and regulations of the SEC, the Company
shall promptly prepare and file a post-effective amendment to the Secondary
Registration Statement (or take such other action as is permissible under the
rules and regulations of the SEC for the updating of registration statements)
for the purpose of including such additional financial information, and
thereafter shall use commercially reasonable efforts to cause such post-
effective amendment to promptly become effective. Further, if any Registered
Holder proposes to sell any
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<PAGE>
Registered Shares pursuant to the Secondary Registration Statement, such
Registered Holder shall notify the Company of his or her intent to do so at
least three business days prior to such sale, and the provision of such notice
to the Company shall be deemed to establish an agreement by such Registered
Holder to comply with the registration provisions contained herein. Such notice
shall also be deemed a representation that any information previously supplied
by such Registered Holder for inclusion in the Secondary Registration Statement
is accurate as of the date of such notice. Within such three-day period, the
Company shall notify such Registered Holder whether the Secondary Registration
Statement must be updated prior to its use to comply with the rules and
regulations of the SEC. If such updating is required, the Company shall
promptly prepare and file a post-effective amendment to the Secondary
Registration Statement (or take such other action as is permissible under the
rules and regulations of the SEC) to incorporate the required additional
information and thereafter shall use commercially reasonable efforts to cause
such post-effective amendment to promptly become effective; provided, however,
that upon receipt of notice from a Registered Holder of its desire to sell
Registered Shares pursuant to the Secondary Registration Statement, the Company
may suspend the use of the Secondary Registration Statement if (i) in the
opinion of counsel for the Company, the Company would thereby be required to
disclose information relating to pending corporate developments or business
transactions involving the Company or its subsidiaries not otherwise then
required by law to be publicly disclosed and (ii) in the good faith judgment of
the Board of Directors of the Company, such disclosure at such time could have a
Material Adverse Effect on the Company or any such corporate development or
business transaction contemplated by the Company or its subsidiaries. If notice
of suspension of the Secondary Registration Statement is provided pursuant to
this Section 7.6(c), the Company shall use commercially reasonable efforts to
permit sales of Registered Shares pursuant to the Secondary Registration
Statement as soon thereafter as practicable; provided, however, that the
foregoing shall not require the Company to alter its actions with respect to any
pending corporate developments or business transactions of the nature described
above. Notwithstanding the foregoing, the period during which the Company shall
be able to bar a Registered Holder's sale of Registered Shares hereunder shall
not exceed 30 consecutive days.
(d) The Company covenants that the Secondary Registration Statement
(i) will comply in all material respects with the applicable provisions of the
Securities Act and the rules and regulations promulgated thereunder and (ii)
will not at the time such document is filed with the SEC and at the time it
becomes effective under the Securities Act contain any untrue statement of any
material fact or omit 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 misleading, or necessary to
correct any statement in any earlier filing with the SEC of the Secondary
Registration Statement; provided, however, that no representation, covenant or
agreement is made by the Company with respect to information supplied by or on
behalf of any Registered Holder for inclusion in the Secondary Registration
Statement. As a condition to the effectiveness of the Secondary Registration
Statement, each Registered Holder shall have confirmed to the Company that none
of the respective information related to him or her in the Secondary
Registration Statement contains an untrue statement of any material fact 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
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<PAGE>
under which they were made, not misleading or necessary to correct any statement
in any earlier filing with the SEC of the Secondary Registration Statement.
(e) The Company shall use commercially reasonable efforts to effect
the listing of the Registered Shares on the principal securities exchange or
trading system on which the Company Common Stock is then traded. If the Company
Common Stock is listed on a national securities exchange as described in Rule
153 under the Securities Act, the Company will keep on file with such exchange
such number of copies of the prospectus relating to the Registered Shares as is
required to comply with Rule 153. If the Company Common Stock is not so listed,
the Company will provide to each Registered Holder at any time resales are to be
effected such number of copies of such prospectus as are reasonably requested by
such Registered Holder for delivery in accordance with the prospectus delivery
requirements of the Securities Act.
8. Covenants of the Company, Futronix and the Futronix Stockholder Parties.
-----------------------------------------------------------------------
8.1 Fulfillment of Closing Conditions. At and prior to the Closing,
---------------------------------
Futronix shall use commercially reasonable efforts to fulfill, and to cause the
Company to fulfill, the conditions specified in Sections 11 and 13 to the extent
that the fulfillment of such conditions is within its control, except that
Futronix shall not be required to pay or expend any material amount of funds
that may be necessary to correct any Default under the representations and
warranties of the Company or Futronix or to fulfill any of such conditions. In
connection with the foregoing, Futronix will, and will cause the Company to, (a)
refrain from any actions that would cause any of its representations and
warranties to be inaccurate in any material respect as of the Closing, (b)
execute and deliver the agreements and other documents referred to in Section
13, (c) comply in all material respects with all applicable Laws in connection
with its execution, delivery and performance of this Agreement and the
Transactions, (d) use commercially reasonable efforts to obtain in a timely
manner all necessary waivers, consents and approvals required under any Laws,
Contracts or otherwise, including any Futronix Required Consents, and (e) use
commercially reasonable efforts to take, or cause to be taken, all other actions
and to do, or cause to be done, all other things reasonably necessary, proper or
advisable to consummate and make effective as promptly as practicable the
Transactions. Futronix shall give W&C prompt written notice of any event or
development that occurs or fails to occur (and that is known to Futronix) that
gives Futronix reason to believe that the conditions set forth in Sections 11
and 13 will not be satisfied prior to the Termination Date.
8.2 Conduct of the Business. Futronix shall not, and shall cause the
-----------------------
Company, not to, do any of the following prior to the Closing unless waived by
W&C in writing: amend its Charter Documents or bylaws; merge or consolidate
with, or purchase substantially all of the assets of, or otherwise acquire any
business of, any corporation, partnership or other business organization or
business division thereof; issue (other than upon the exercise or conversion of
existing rights) additional shares of or split, combine or reclassify its
outstanding capital stock; enter into any Contract or otherwise incur any
Liability outside the ordinary course of business unless the executory
obligation on the part of Futronix in any such individual case is less than
$100,000; discharge or satisfy any Encumbrance or pay or satisfy any material
Liability except pursuant to the terms thereof; compromise, settle or otherwise
adjust any material claim or litigation; or make any
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<PAGE>
capital expenditure involving in any individual case more than $100,000;
provided, however, that Futronix may change the compensation arrangements for
its executive officers, which changes have been agreed to by Futronix and such
officers prior to the date hereof and which have been disclosed to W&C in
writing prior to the date hereof. Nothing contained in this Agreement shall
give W&C, directly or indirectly, the right to control or direct Futronix's
operations.
8.3 Access to Information. Futronix shall, and shall cause the Company
---------------------
to, give W&C and its representatives (including W&C's accountants, counsel and
employees, each, a "W&C Representative"), upon reasonable notice and during
normal business hours, full access to the properties, contracts, books, records
and affairs of Futronix and the Company. Futronix shall cause its officers and
employees, and the officers and employees of the Company, to furnish to W&C all
documents, records and information (and copies thereof) as W&C may reasonably
request.
8.4 No Solicitation. From and after the date hereof, Futronix, without
---------------
the prior written consent of W&C, will not, and will not authorize or permit any
of the Futronix Representatives to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing information) or take any other action
to facilitate knowingly any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to an Acquisition Proposal
from any Person, or engage in any discussion or negotiations relating thereto or
accept any Acquisition Proposal. Futronix shall notify W&C orally and in writing
of any such inquiries, offers or proposals (including the terms and conditions
of any such proposal and the identity of the person making it), within 24 hours
of the receipt thereof, shall keep W&C informed of the status and details of any
such inquiry, offer or proposal, and shall give W&C five days' advance notice of
any agreement to be entered into with, or any information to be supplied to, any
Person making such inquiry, offer or proposal. As used herein, "Acquisition
Proposal" means a proposal or offer (other than pursuant to this Agreement) for
a tender or exchange offer, merger, consolidation or other business combination
involving any proposal to acquire in any manner a substantial equity interest
in, or all or substantially all of the assets of, (i) Futronix, in the case of
this Section 8.4, and (ii) W&C, in the case of Section 9.4.
8.5 Futronix Special Meeting. In connection with the Futronix Special
------------------------
Meeting, Futronix shall (a) deliver to its stockholders as promptly as
practicable the Joint Proxy Statement and all other proxy materials for such
meeting (or action by written consent), (b) use all reasonable efforts to obtain
the necessary approvals by its stockholders of the Merger and this Agreement and
(c) otherwise comply with all legal requirements applicable to such meeting (or
action by written consent).
8.6 Rule 145 Affiliates. Prior to the Closing, Futronix shall identify in
-------------------
a letter to the Company all Persons who might, at the time of the Futronix
Special Meeting, be deemed to be "affiliates" of the Company for the purposes of
Rule 145 under the Securities Act (the "Securities Act Affiliates"). Futronix
shall use its best efforts to cause each Person who is identified as a possible
Securities Act Affiliate to enter into prior to the Effective Time an agreement
in form and substance reasonably acceptable to the Company pursuant to which
each such Person acknowledges such Person's responsibilities as a Securities Act
Affiliate.
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8.7 Appointment of Directors and Officers. At the Effective Time,
-------------------------------------
Futronix shall cause the Boards of Directors of the Company and of the Surviving
Corporation each to (a) expand its size to a total of six members, (b) appoint
the following Persons to fill the newly-created positions: Bruno, a Person
designated by Bruno who is not an employee of any Corporate Party and one other
Person who is approved by the other members of such Boards of Directors and (c)
remove any officers of the applicable Corporate Party who have not resigned and
to appoint the following Persons to the respective offices of the applicable
Corporate Party: Barbara M. Henagan--Chairman of the Board; Hunt--President and
Chief Operating Officer; Bruno--Vice Chairman of the Board and Monahan--Chief
Financial Officer and Secretary.
8.8 Value Appreciation Bonus. The Company shall pay to Monahan the Value
------------------------
Appreciation Bonus pursuant to the terms and conditions of the Monahan
Agreement.
8.9 Employment Agreements. The Company and the Surviving Corporation
---------------------
shall enter into Employment Agreements at the Closing with each of Bruno, Hunt
and Monahan in the respective forms of such agreements attached hereto as
Exhibits "B," "C" and "D" (the "Employment Agreements"). Hunt shall enter into
such respective Employment Agreement at the Closing with the Company and the
Surviving Corporation.
8.10 Registration Rights. The Company and the Futronix Stockholder
-------------------
Parties shall enter into a Registration Rights Agreement with Bruno, Monahan and
Scott in the form of such agreement attached hereto as Exhibit "E" (the
"Registration Rights Agreement").
8.11 Stock Option Plan. The Company will adopt an employee stock option
-----------------
plan (the "New Option Plan") substantially identical to the stock option plan
maintained by Futronix on the date hereof. The Company will grant options as of
the Closing Date at the IPO Price and for the respective shares specified in the
FUTRONIX DISCLOSURE SCHEDULE and in the W&C DISCLOSURE SCHEDULE.
8.12 Release of Indebtedness Guarantee. As promptly as practicable
----------------------------------
after the Closing, the Company and the Surviving Corporation will take such
actions as are necessary to release Bruno and Monahan from their personal
guarantees of any indebtedness of W&C that exists on the Closing Date.
8.13 Expenses. Futronix, the Surviving Corporation or the Company
--------
shall pay all of the legal, accounting and other expenses incurred by Futronix
or the Company in connection with the Transactions, including the following:
fees and other costs payable with respect to the Initial Registration Statements
and the Secondary Registration Statement (including printing); fees and expenses
of Deloitte & Touche LLP for work related to the Company or Futronix; fees and
expenses of legal counsel to the Company and Futronix; fees of the Company's
transfer agent; fees related to listing the Company Common Stock on securities
markets; travel expenses of representatives of Futronix or the Company in
connection with meetings with potential investors and analysts; and all amounts
payable to the underwriters in connection with the Public Offering, except for
any underwriting discounts applicable to the sale of any shares by any
stockholders of the Company.
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8.14 Related Parties. Futronix shall cause the Company to perform its
---------------
obligations hereunder and under any other Transaction Document, and the Futronix
Stockholder Parties, to the extent that they have the power to do so, shall
cause Futronix to perform its obligations hereunder and under any other
Transaction Document.
8.15 Continuation of Certain Employment Arrangements after Merger.
------------------------------------------------------------
The Surviving Corporation shall not, for a period of one year after the Merger
or such other period as the Parties may agree in writing, terminate, reassign or
reduce the compensation of those employees of W&C listed in the W&C DISCLOSURE
SCHEDULE, without the prior consent of Hunt and Bruno.
8.16 Termination of Futronix Shareholders Agreement. The Futronix
----------------------------------------------
Stockholder Parties hereby terminate the Futronix Shareholders Agreement as of
the Effective Time and confirm their consent to the Transactions for purposes of
the Futronix Shareholders Agreement.
9. Covenants of W&C and Bruno.
--------------------------
9.1 Fulfillment of Closing Conditions. At and prior to the Closing, W&C
---------------------------------
shall use commercially reasonable efforts to fulfill the conditions specified in
Sections 11 and 12 to the extent that the fulfillment of such conditions is
within its control, except that W&C shall not be required to pay or expend any
material amount of funds that may be necessary to correct any Default under the
representations and warranties of W&C or to fulfill any of such conditions. In
connection with the foregoing, W&C will (a) refrain from any actions that would
cause any of its representations and warranties to be inaccurate in any material
respect as of the Closing, (b) execute and deliver the agreements and other
documents referred to in Section 12, (c) comply in all material respects with
all applicable Laws in connection with its execution, delivery and performance
of this Agreement and the Transactions, (d) use commercially reasonable efforts
to obtain in a timely manner all necessary waivers, consents and approvals
required under any Laws, Contracts or otherwise, including any W&C Required
Consents, and (e) use commercially reasonable efforts to take, or cause to be
taken, all other actions and to do, or cause to be done, all other things
reasonably necessary, proper or advisable to consummate and make effective as
promptly as practicable the Transactions. W&C shall give Futronix prompt
written notice of any event or development that occurs or fails to occur (and
that is known to W&C) that gives W&C reason to believe that the conditions set
forth in Sections 11 and 12 will not be satisfied prior to the Termination Date.
9.2 Conduct of the Business. W&C shall not do any of the following prior
-----------------------
to the Closing unless waived by Futronix in writing: amend its Charter Documents
or bylaws; merge or consolidate with, or purchase substantially all of the
assets of, or otherwise acquire any business of, any corporation, partnership or
other business organization or business division thereof; issue (other than upon
the exercise or conversion of existing rights) additional shares of or split,
combine or reclassify its outstanding capital stock; enter into any Contract or
otherwise incur any Liability outside the ordinary course of business unless the
executory obligation on the part of W&C in any such individual case is less than
$100,000; discharge or satisfy any Encumbrance or pay or satisfy any material
Liability except pursuant to the terms thereof; compromise, settle or otherwise
adjust any material claim or litigation; or make any capital expenditure
involving in any individual case more
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than $100,000. Nothing contained in this Agreement shall give the Company or
Futronix, directly or indirectly, the right to control or direct W&C's
operations prior to the Effective Time.
9.3 Access to Information. W&C shall give Futronix and its
---------------------
representatives (including Futronix's accountants, counsel and employees, each,
a "Futronix Representative"), upon reasonable notice and during normal business
hours, full access to the properties, contracts, books, records and affairs of
W&C. W&C shall cause its officers and employees to furnish to Futronix all
documents, records and information (and copies thereof) as Futronix may
reasonably request.
9.4 No Solicitation. From and after the date hereof, W&C, without the
---------------
prior written consent of Futronix, will not, and will not authorize or permit
any of the W&C Representatives to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing information) or take any other action
to facilitate knowingly any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to an Acquisition Proposal
from any Person, or engage in any discussion or negotiations relating thereto or
accept any Acquisition Proposal. W&C shall notify Futronix orally and in
writing of any such inquiries, offers or proposals (including the terms and
conditions of any such proposal and the identity of the person making it),
within 24 hours of the receipt thereof, shall keep Futronix informed of the
status and details of any such inquiry, offer or proposal, and shall give
Futronix five days' advance notice of any agreement to be entered into with, or
any information to be supplied to, any Person making such inquiry, offer or
proposal.
9.5 W&C Consent. In connection with the W&C Consent, W&C shall (a)
-----------
deliver to its stockholder as promptly as practicable the Joint Proxy Statement
and all other materials that may be required for the W&C Consent, (b) use all
reasonable efforts to obtain the necessary approvals by its stockholder of the
Merger and this Agreement and (c) otherwise comply with all legal requirements
applicable to such consent.
9.6 Rule 145 Affiliates. Prior to the Closing, W&C shall identify in a
-------------------
letter to the Company all Persons who might, at the time of the W&C Consent, be
deemed to be Securities Act Affiliates. W&C shall use its best efforts to cause
each Person who is identified as a possible Securities Act Affiliate to enter
into prior to the Effective Time an agreement in form and substance reasonably
acceptable to the Company pursuant to which each such Person acknowledges such
Person's responsibilities as a Securities Act Affiliate.
9.7 New Bruno Options. Bruno shall grant to each of Monahan and Scott at
-----------------
the Closing an option to purchase from Bruno shares of Company Common Stock
issuable to Bruno under Section 2.7 in the form of the Option Agreement agreed
to by Bruno, Monahan and Scott on the date hereof, which Option Agreement
provides for (a) in the case of Monahan, the option to purchase 337,790 shares
of Company Common Stock, (b) in the case of Scott, the option to purchase 56,299
shares of Company Common Stock and (c) in the case of Monahan and Scott, the
cancellation of their respective W&C Options.
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9.8 Employment Agreements. Bruno shall enter into an Employment
---------------------
Agreement at the Closing with the Company and the Surviving Corporation in the
form of such agreement attached hereto as Exhibit "B."
9.9 Registration Rights. Bruno shall enter into the Registration Rights
-------------------
Agreement at the Closing with the Company and the Futronix Stockholder Parties.
9.10 [INTENTIONALLY OMITTED.]
9.11 Expenses. W&C (or the Surviving Corporation if the Merger
--------
becomes effective) shall pay all of the legal, accounting and other expenses
incurred by W&C in connection with the Transactions, including the following:
fees and other costs payable with respect to providing information for inclusion
in the Initial Registration Statements; fees and expenses of Gross Collins
Cress, P.C. for work related to W&C; fees and expenses of legal counsel to W&C;
and travel expenses of representatives of W&C in connection with meetings with
potential investors and analysts.
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<PAGE>
9.12 Related Parties. Bruno shall cause W&C to perform its
---------------
obligations hereunder and under any other Transaction Document.
9.13 Assets Transfer and Stockholder Loan. In addition to the amounts
------------------------------------
to be included in the Bruno Note pursuant to the provisions of Sections 10.2 and
10.5, the principal amount thereunder shall additionally include the book value
of the assets transferred to Bruno by W&C prior to the Closing Date as reflected
in the W&C Disclosure Schedule and the $10,000 loan made by W&C to Bruno prior
to the date of this Agreement with a repayment date subsequent to the Closing.
If the Bruno Note shall not have been issued pursuant to the provisions of
Section 10.2 or 10.5, then Bruno shall issue a note to the Surviving Corporation
in a principal amount equal to the book value of such assets plus the amount of
such loan, which note shall have the terms specified for the Bruno Note in
Section 10.2.
10. Payment of Subchapter S Liabilities.
-----------------------------------
10.1 1996 Tax Liabilities. Notwithstanding any other provision of
--------------------
this Agreement, during the Interim Period (defined below), W&C may distribute to
Bruno an amount equal to the aggregate liabilities of Bruno, as the sole
stockholder of W&C, for federal and state income taxes (other than any interest
or penalties) with respect to the Subchapter S Income (defined below) for the
Interim Period (the "1996 Tax Liabilities"). The aggregate amount of the 1996
Tax Liabilities distributed by W&C to Bruno during the Interim Period is
referred to herein as the "Prior 1996 Tax Distributions." For the purposes of
this obligation, Bruno shall be deemed to be taxed at the maximum federal and
state income tax rates for Georgia residents. The remainder of any payments due
to or from Bruno with respect to the 1996 Tax Liabilities shall be paid in
accordance with Section 10.5 below.
10.2 1996 Income Distributions. Notwithstanding any other provision
-------------------------
of this Agreement, W&C may distribute to Bruno an amount equal to 25% of the net
income of W&C determined in accordance with GAAP (the "Allowed Distribution
Amount") during the Interim Period (the "1996 Income Distributions"). If,
during the period from January 1, 1996 through the date hereof (the "Pre-Signing
Period"), W&C shall have made distributions to Bruno (other than amounts
distributed by W&C to Bruno with respect to 1996 Tax Liabilities, distributions
made for the sole purpose of reimbursing Bruno for tax liabilities attributable
to Subchapter S Income for W&C's fiscal years ended December 31, 1993 and 1995
or amounts paid to Bruno as wages and compensation with respect to Bruno's role
as an employee) (the "Income Distributions") that in the aggregate exceed the
Allowed Distribution Amount for the Pre-Signing Period (the "Excess Distribution
Amount"), W&C shall not make any further Income Distributions to Bruno prior to
the Closing Date except as otherwise permitted hereunder. During the period
from the date immediately following the date hereof through the Closing Date
(the "Post-Signing Period"), on the tenth business day following the end of each
month during the Post-Signing Period, W&C shall determine the Allowed
Distribution Amount (the "Allowed Distribution Determination") for such month or
such shorter period if the date hereof is not the last day of a month, as the
case may be (any such month or period being referred to herein as the
"Determination Period") and the Excess Distribution Amount shall be reduced by
the Allowed Distribution Amount determined for such Determination Period, or
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increased by an amount equal to 25% of the net loss as determined in accordance
with GAAP for such Determination Period, as the case may be. Prior to the
Closing Date, such Allowed Distribution Determinations shall continue until the
Excess Distribution Amount shall have been reduced to zero. In the event that
the Excess Distribution Amount shall not have been reduced to zero prior to the
Closing Date, Bruno shall issue a note to the Surviving Corporation at the
Closing in a principal amount equal to the remaining Excess Distribution Amount
(the "Bruno Note"). The Bruno Note shall (i) have a term of three years, (ii)
bear interest at 7% per annum, which interest shall be payable quarterly, and
(iii) be payable in full on the third anniversary of its issuance. If the
Excess Distribution Amount is reduced to zero prior to the Closing Date, W&C may
resume making Income Distributions to Bruno beginning the date on which the
Excess Distribution Amount is reduced to zero and up to and including the
Closing Date (the "Remaining Distribution Period"); provided, however, that such
Income Distributions shall not exceed the Allowed Distribution Amount for the
Remaining Distribution Period. The aggregate amount of the Income Distributions
made to Bruno during the Interim Period is referred to herein as the "Prior 1996
Income Distributions." The remainder of any payments due to or from Bruno with
respect to the 1996 Income Distributions shall be paid in accordance with
Section 10.5 below.
10.3 Subchapter S Income. For the purposes of this Agreement,
-------------------
"Subchapter S Income" means the income of W&C that is required to be included in
Bruno's income under the "pass through" rules for S corporations under Section
1366 of the Code.
10.4 Tax Liabilities. Following the Closing, the Surviving
---------------
Corporation will cause its accountants to prepare financial statements for W&C
in accordance with GAAP (the "Closing Financial Statements") for the period from
January 1, 1996 through and including the Closing Date (the "Interim Period").
Those accountants shall also compute the Subchapter S Income for the Interim
Period, the 1996 Tax Liabilities and the 1996 Income Distributions.
10.5 Final Payment. Promptly after delivery of the Closing Financial
-------------
Statements and the Surviving Corporation's reasonable approval thereof, the
Surviving Corporation shall promptly pay to Bruno an amount (if any) equal to
(i) the sum of (A) the 1996 Tax Liabilities and (B) the 1996 Income
Distributions, minus (ii) the sum of (Y) the Prior 1996 Tax Distributions and
(Z) the Prior 1996 Income Distributions. If such computation results in a
negative number, the Bruno Note (if any) shall be amended to increase the
principal thereunder by such negative amount. If the Bruno Note shall not have
been issued pursuant to the provisions of Section 10.2, then Bruno shall issue a
note to the Surviving Corporation in a principal amount equal to such negative
amount, which note shall have the terms specified for the Bruno Note in Section
10.2.
10.6 Prior Periods. The Company shall reimburse Bruno for any
-------------
Liabilities that he may have for federal and state income taxes (including any
interest or penalties) in excess of the taxes he reported with respect to the
Subchapter S Income for periods prior to the Closing, except that the total
amount of such reimbursements by the Company shall not exceed $50,000. Bruno
represents that he is not aware of any such Liabilities on the date hereof.
Bruno shall notify the Company promptly of any such Liabilities (or of any
events causing him to believe that such Liabilities may
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exist) and shall cooperate with the Company to the extent that it may choose to
contest any such Liabilities.
10.7 Reimbursement. If it is determined by applicable tax authorities
-------------
that the Company and the Surviving Corporation shall not be entitled to deduct
for tax purposes any part of the Value Appreciation Bonus, Bruno shall use
commercially reasonable efforts to take advantage of such disallowed deduction,
including amending prior federal and state tax returns, in his role as the owner
of W&C prior to the Closing. Upon Bruno's receipt of any benefits in connection
with such disallowed deduction (including any interest), Bruno shall promptly
pay to the Company all such benefits, net of any professional fees incurred by
Bruno in order to obtain such benefits, up to the aggregate amount of the
benefits that would have inured to the Company if the Company could have taken
advantage of such deduction.
11. Conditions Precedent to Obligations of All Parties.
--------------------------------------------------
All obligations of the Parties to consummate the Transactions are subject
to the satisfaction of each of the following conditions:
11.1 Legality. No Law or Court Order shall have been enacted,
--------
entered, promulgated or enforced by any court or governmental authority that is
in effect and has the effect of (a) making the Merger illegal or otherwise
prohibiting the consummation of the Merger or (b) creating a Material Adverse
Effect on Futronix or W&C.
11.2 Public Offering. The Initial Registration Statements shall have
---------------
become effective, no stop order suspending the effectiveness of any Initial
Registration Statement shall then be in effect, and no proceedings for that
purpose shall then be threatened by the SEC or shall have been initiated by the
SEC and not concluded or withdrawn. All state securities or blue sky permits or
approvals required to carry out the Transactions shall have been received. The
Public Offering shall be closed contemporaneously with the Closing hereunder.
11.3 Nasdaq National Market. The Company Common Stock issuable in
----------------------
connection with the Transactions and the Public Offering shall have been duly
approved for quotation on the Nasdaq National Market, subject to official notice
of issuance.
11.4 Pooling. Each of Futronix and W&C shall have received a letter
-------
from Deloitte & Touche LLP, dated as of the Closing Date, to the effect that the
Transactions will qualify for pooling of interests accounting treatment.
11.5 Tax Opinion. Each of Futronix and W&C shall have received an
-----------
opinion of Morgan, Lewis & Bockius LLP, dated as of the Closing Date, to the
effect that the Merger will qualify as a tax-free reorganization under Section
368 of the Code. Such opinion will be based in part on appropriate
representations of Futronix, W&C and Bruno.
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11.6 Approval by Stockholders.
------------------------
(a) The Merger shall have been approved by the Futronix
Stockholders in accordance with the TBCA and none of such stockholders shall
hold Dissenting Shares.
(b) The Merger shall have been approved by the stockholder of W&C.
11.7 Futronix Stockholder Parties. All holders of Futronix Securities
----------------------------
other than holders of Futronix Class C Common Stock shall have become parties to
this Agreement.
12. Conditions Precedent to Obligations of the Futronix Parties.
-----------------------------------------------------------
All obligations of the Futronix Companies and the Futronix Stockholder
Parties to consummate the Transactions are subject to the satisfaction (or
waiver by Futronix) prior thereto of each of the following conditions:
12.1 Representations and Warranties. The representations and
------------------------------
warranties of W&C and Bruno contained in this Agreement shall be true and
correct on the date hereof and (except to the extent such representations and
warranties speak as of an earlier date) shall also be true and correct on and as
of the Closing Date, except for changes permitted under Section 9.2 hereof or
otherwise contemplated by this Agreement, with the same force and effect as if
made on and as of the Closing Date; provided, however, that for purposes of this
Section 12.1 only, such representations and warranties shall be deemed to be
true and correct unless the failure or failures of such representations and
warranties to be so true and correct (without regard to materiality qualifiers
contained therein), individually or in the aggregate, results or would
reasonably be expected to result in a Material Adverse Effect on W&C or the
Company.
12.2 Agreements, Conditions and Covenants. W&C and Bruno shall have
------------------------------------
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by
them on or before the Effective Time.
12.3 Certificates. Futronix shall have received a certificate of an
------------
executive officer of W&C to the effect set forth in Sections 12.1 and 12.2.
12.4 Required Consents. W&C shall have obtained the W&C Required
-----------------
Consents without any modification that Futronix deems unacceptable.
12.5 Ancillary Documents. W&C, Bruno, Monahan and Scott shall have
-------------------
tendered executed copies of the respective Transaction Documents to which they
are intended to be parties, including the Employment Agreements, the Monahan
Agreement, the Scott Agreement and the Registration Rights Agreement.
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12.6 Legal Opinion. W&C and Bruno shall have tendered a legal opinion
-------------
of Paul, Hastings, Janofsky & Walker, counsel to W&C and Bruno, in a form
reasonably requested by the Futronix Companies.
12.7 [INTENTIONALLY OMITTED.]
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13. Conditions Precedent to Obligations of W&C and Bruno.
----------------------------------------------------
All obligations of W&C and Bruno to consummate the Transactions are subject
to the satisfaction (or waiver by W&C and Bruno) prior thereto of each of the
following conditions:
13.1 Representations and Warranties. The representations and
------------------------------
warranties of the Futronix Companies and the Futronix Stockholder Parties
contained in this Agreement shall be true and correct on the date hereof and
(except to the extent such representations and warranties speak as of an earlier
date) shall also be true and correct on and as of the Closing Date, except for
changes permitted under Section 8.2 hereof or otherwise contemplated by this
Agreement, with the same force and effect as if made on and as of the Closing
Date; provided, however, that for purposes of this Section 13.1 only, such
representations and warranties shall be deemed to be true and correct unless the
failure or failures of such representations and warranties to be so true and
correct (without regard to materiality qualifiers contained therein),
individually or in the aggregate, results or would reasonably be expected to
result in a Material Adverse Effect on Futronix or the Company.
13.2 Agreements, Conditions and Covenants. The Futronix Companies and
------------------------------------
the Futronix Stockholder Parties shall have performed or complied in all
material respects with all agreements, conditions and covenants required by this
Agreement to be performed or complied with by them on or before the Effective
Time.
13.3 Certificates. W&C shall have received a certificate of an
------------
executive officer of Futronix to the effect set forth in Sections 13.1 and 13.2
with respect to the Futronix Companies.
13.4 Required Consents. Futronix shall have obtained the Futronix
-----------------
Required Consents without any modification that W&C deems unacceptable.
13.5 Ancillary Documents. The Futronix Companies and the Futronix
-------------------
Stockholder Parties shall have tendered executed copies of the respective
Transaction Documents to which they are intended to be parties, including the
Employment Agreements, the Monahan Agreement, the Scott Agreement and the
Registration Rights Agreement.
13.6 Legal Opinion. The Company and Futronix shall have tendered a
-------------
legal opinion of Morgan, Lewis & Bockius LLP, counsel to the Futronix Companies,
in a form reasonably requested by W&C.
14. Indemnification.
---------------
14.1 By Bruno and Monahan. From and after the Closing Date, Bruno to
--------------------
the extent provided in this Section 14 and Monahan to the extent provided in the
Monahan Agreement shall indemnify and hold harmless the Futronix Companies and
the Futronix Stockholder Parties, and any of their respective successors,
assigns, officers, directors, employees, stockholders, agents and Affiliates and
any Person who controls any of them within the meaning of the Securities Act or
the Exchange Act (each, a "W&C Indemnified Party") from and against any
liabilities, claims, demands,
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judgments, losses, costs, damages or expenses whatsoever (including reasonable
attorneys', consultants' and other professional fees and disbursements of every
kind, nature and description incurred by such W&C Indemnified Party in
connection therewith) (collectively, "Damages") that such W&C Indemnified Party
may sustain, suffer or incur and that result from, arise out of or relate to any
breach of any representation, warranty, covenant or agreement of W&C or Bruno
contained in Section 7.1(c) of this Agreement; provided, however, that in no
event shall Bruno be liable under this Section 14.1 or Monahan be liable under
the Monahan Agreement for an amount greater than (a)(i) in the case of Bruno,
the product of 75% of the number of shares of Company Common Stock issued to him
hereunder (the "Bruno Base Shares") multiplied by the IPO Price or (ii) in the
case of Monahan, the product of 25% of the number of shares of Company Common
Stock issued to Bruno hereunder (the "Monahan Base Shares") multiplied by the
IPO Price or (b) Bruno's or Monahan's, whichever is applicable, proportionate
share of such Damages, based on the ratio of the Bruno Base Shares or the
Monahan Base Shares, whichever is applicable, to the sum of the Bruno Base
Shares plus the Monahan Base Shares.
14.2 By the Futronix Stockholder Parties. From and after the Closing
-----------------------------------
Date, to the extent provided in this Section 14, each Futronix Stockholder Party
shall indemnify and hold harmless the Company, the Surviving Corporation and
Bruno, and any of their respective successors, assigns, officers, directors,
employees, stockholders, agents and Affiliates and any Person who controls any
of them within the meaning of the Securities Act or the Exchange Act (each, a
"Futronix Indemnified Party") from and against any Damages that such Futronix
Indemnified Party may sustain, suffer or incur and that result from, arise out
of or relate to any breach of any representation, warranty, covenant or
agreement of the Company or Futronix contained in Section 7.1(b) of this
Agreement; provided, however, that in no event shall any Futronix Stockholder
Party be liable under this Section 14.2 for an amount greater than (a) the
product of the number of shares of Company Common Stock issued to such Futronix
Stockholder Party hereunder multiplied by the IPO Price or (b) such Futronix
Stockholder Party's proportionate share of such Damages, based on the ratio of
the shares of Futronix Common Stock exchanged by such Futronix Stockholder Party
hereunder to the total number of shares of Futronix Common Stock exchanged by
all Futronix Stockholders hereunder.
14.3 Procedure for Claims.
--------------------
(a) A W&C Indemnified Party or a Futronix Indemnified Party that desires
to seek indemnification under any part of this Section 14 (each, an "Indemnified
Party") shall give notice (a "Claim Notice") to each Party responsible or
alleged to be responsible for indemnification hereunder (an "Indemnitor") prior
to the third anniversary of the Closing Date. Such notice shall briefly explain
the nature of the claim and the parties known to be involved, and shall specify
the amount thereof. If the matter to which a claim relates shall not have been
resolved as of the date of the Claim Notice, the Indemnified Party shall
estimate the amount of the claim in the Claim Notice, but also specify therein
that the claim has not yet been liquidated (an "Unliquidated Claim"). If an
Indemnified Party gives a Claim Notice for an Unliquidated Claim, the
Indemnified Party shall also give a second Claim Notice (the "Liquidated Claim
Notice") within 60 days after the matter giving rise to the claim becomes
finally resolved, and the Second Claim Notice shall specify the amount of the
claim. Each Indemnitor to which a Claim Notice is given shall respond to any
Indemnified
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Party that has given a Claim Notice (a "Claim Response") within 20 days (the
"Response Period") after the later of (i) the date that the Claim Notice is
given or (ii) if a Claim Notice is first given with respect to an Unliquidated
Claim, the date on which the Liquidated Claim Notice is given. Any Claim Notice
or Claim Response shall be given in accordance with the notice requirements
hereunder, and any Claim Response shall specify whether or not the Indemnitor
giving the Claim Response disputes the claim described in the Claim Notice. If
any Indemnitor fails to give a Claim Response within the Response Period, such
Indemnitor shall be deemed not to dispute the claim described in the related
Claim Notice. If any Indemnitor elects not to dispute a claim described in a
Claim Notice, whether by failing to give a timely Claim Response or otherwise,
then the amount of such claim shall be conclusively deemed to be an obligation
of such Indemnitor.
(b) If any Indemnitor shall be obligated to indemnify an Indemnified Party
hereunder, such Indemnitor may pay to such Indemnified Party within 30 days
after the last day of the Claim Response Period the amount to which such
Indemnified Party shall be entitled. At the election of an Indemnitor, such
Indemnitor may pay such any such amount (and any interest due under this Section
14.3(b)) by the delivery of shares of Company Common Stock having an aggregate
Indemnity Value (defined below) equal to such amount. If there shall be a
dispute as to the amount or manner of indemnification under this Section 14, the
Indemnified Party may pursue whatever legal remedies may be available for
recovery of the Damages claimed from any Indemnitor. If any Indemnitor fails to
pay all or part of any indemnification obligation when due, then such Indemnitor
Party shall also be obligated to pay to the applicable Indemnified Party
interest on the unpaid amount for each day during which the obligation remains
unpaid at an annual rate equal to the Prime Rate, and the Prime Rate in effect
on the first business day of each calendar quarter shall apply to the amount of
the unpaid obligation during such calendar quarter. The term "Indemnity Value"
means with respect to any share of Company Common Stock (i) the IPO Price or
(ii) if as of the time of payment, the shares of Company Common Stock are traded
or quoted on a national securities exchange or national quotation system,
including the Nasdaq National Market, the lower of the IPO Price and the average
closing sale price for the 10 most recent trading days as reported on such stock
exchange or system.
14.4 Third Party Claims. An Indemnified Party that desires to seek
------------------
indemnification under any part of this Section 14 with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give each Indemnitor prompt notice of a
third party's institution of such Action. After such notice, any Indemnitor
may, or if so requested by such Indemnified Party, any Indemnitor shall,
participate in such Action or assume the defense thereof, with counsel
satisfactory to such Indemnified Party; provided, however, that such Indemnified
Party shall have the right to participate at its own expense in the defense of
such Action; and provided, further, that the Indemnitor shall not consent to the
entry of any judgment or enter into any settlement, except with the written
consent of such Indemnified Party (which consent shall not be unreasonably
withheld). Any failure to give prompt notice under this Section 14.4 shall not
bar an Indemnified Party's right to claim indemnification under this Section 14,
except to the extent that an Indemnitor shall have been harmed by such failure.
-55-
<PAGE>
15. Termination.
-----------
15.1 Grounds for Termination. This Agreement may be terminated at any
-----------------------
time before the Effective Time, in each case as authorized by the respective
Board of Directors of Futronix and W&C:
(a) By mutual written consent of each of Futronix and W&C;
(b) By either Futronix or W&C if the Merger shall not have been
consummated on or before December 31, 1996 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 15.1(b)
shall not be available to any Party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date;
(c) By either Futronix or W&C if a court of competent jurisdiction
or govern mental, regulatory or administrative agency or commission shall have
issued a Court Order (which Court Order the Parties shall use their best efforts
to lift) that permanently restrains, enjoins or otherwise prohibits the
Transactions, and such Court Order shall have become final and nonappealable;
(d) By Futronix if W&C or Bruno shall have breached, or failed to
comply with, any of its or his obligations under this Agreement or any
representation or warranty made by W&C or Bruno shall have been incorrect when
made, and such breach, failure or misrepresentation is not cured within 20 days
after notice thereof, and in either case, any such breaches, failures or
misrepresentations, individually or in the aggregate, results or would
reasonably be expected to result in a Material Adverse Effect;
(e) By W&C if the Company, the Acquisition Company, Futronix or any
Futronix Stockholder Party shall have breached, or failed to comply with, in any
material respect, any of its obligations under this Agreement or any
representation or warranty made by it shall have been incorrect in any material
respect when made, and such breach, failure or misrepresentation is not cured
within 20 days after notice thereof, and in either case, any such breaches,
failures or misrepresentations, individually or in the aggregate, results or
would reasonably be expected to result in a Material Adverse Effect.
15.2 Effect of Termination.
---------------------
(a) If this Agreement is terminated under Section 15.1 hereof, this
Agreement shall become void and there shall be no Liability on the part of any
of the Parties, except as set forth in this Section 15.2.
(b) If this Agreement is terminated by Futronix under Section
15.1(d) as a result of any breach by W&C or Bruno, W&C shall pay to Futronix an
amount equal to all of the expenses incurred by Futronix in connection with the
Transactions up to a maximum of $100,000, except that
-56-
<PAGE>
in the case of a termination due to a breach existing on the date hereof that
was known to exist on the date hereof by W&C or Bruno or a termination due to a
wilful breach by W&C or Bruno, W&C shall pay to Futronix all of such expenses
without any limitation.
(c) If this Agreement is terminated by Futronix under Section
15.1(b) as a result of the failure of W&C to obtain all required approvals of
the Merger by the W&C stockholder, W&C shall pay to Futronix an amount equal to
all of the expenses incurred by Futronix in connection with the Transactions
without any limitation.
(d) If this Agreement is terminated by W&C under Section 15.1(e) as
a result of any breach by the Company, the Acquisition Company, Futronix or any
of the Futronix Stockholder Parties, Futronix shall pay to W&C an amount equal
to all of the expenses incurred by W&C in connection with the Transactions up to
a maximum of $100,000, except that in the case of a termination due to a breach
existing on the date hereof that was known to exist on the date hereof by
Futronix or any of the Futronix Stockholder Parties or a termination due to a
wilful breach by the Company, the Acquisition Company, Futronix or any of the
Futronix Stockholder Parties, Futronix shall pay to W&C all of such expenses
without any limitation, but in the case of any such knowing or wilful breach, if
during the 180 days following the date of such termination by W&C, the Company
or Futronix sells shares of its common stock in a public offering pursuant to a
registration statement on Form S-1 under the Securities Act, Futronix shall pay
to W&C an amount equal to the product resulting from multiplying the total
amount of such expenses by three up to an aggregate limitation (after such
multiplication) of $300,000.
(e) If this Agreement is terminated by Futronix under Section
15.1(b) as a result of the failure of Futronix to obtain all required approvals
of the Merger by the Futronix Stockholders, Futronix shall pay to W&C an amount
equal to all of the expenses incurred by W&C in connection with the Transactions
without any limitation, but if during the 180 days following the date of such
termination by W&C, the Company or Futronix sells shares of its common stock in
a public offering pursuant to a registration statement on Form S-1 under the
Securities Act, Futronix shall pay to W&C an amount equal to the product
resulting from multiplying the total amount of such expenses by three up to an
aggregate limitation (after such multiplication) of $300,000 .
(f) The agreements contained in Sections 15.2(b), (c), (d) and (e)
are an integral part of the Transactions and constitute liquidated damages and
not a penalty. If one Party fails to promptly pay to the other any amounts due
under such Sections, the defaulting Party shall pay the costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid damages at the Prime Rate from the
date such damages were required to be paid.
-57-
<PAGE>
16. Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
Except for any agreements to be performed at least in part after the
Effective Time, the representations, warranties, covenants and other agreements
contained herein and in any certificate delivered pursuant hereto shall not
survive the Effective Time.
17. Public Announcements.
--------------------
The Parties hereto will consult with each other before issuing any press
release or making any public statement with respect to this Agreement and the
Transactions and, except as may be required by applicable law or any stock
exchange regulations, no Party shall issue any such press release or make any
such public statement without the consent of the other Parties hereto.
18. Contents of Agreement.
---------------------
This Agreement, together with the other Transaction Documents, sets forth
the entire understanding of the Parties hereto with respect to the Transactions
and supersedes all prior agreements or understandings among the Parties
regarding those matters.
19. Amendment, Parties in Interest, Assignment, Etc.
-----------------------------------------------
(a) This Agreement may be amended, modified or supplemented only by a
written instrument duly executed by each of the Parties hereto, except that with
respect to the Futronix Stockholder Parties, this Agreement may be amended,
modified or supplemented by the written agreement of those Futronix Stockholder
Parties that hold a majority of the Futronix Common Stock, but no such action by
the holders of a majority of the Futronix Class A Common Stock and of the
Futronix Class B Common Stock (the "Futronix Majority Holders") may impose any
obligation on any Futronix Stockholder that does not give its written consent to
such action.
(b) This Agreement shall be binding on the Parties hereto upon the
execution and delivery hereof by the Corporate Parties, Bruno and the Futronix
Majority Holders. This Agreement shall also be binding upon and inure to the
benefit of any Futronix Stockholder Party who signs a signature page of this
Agreement after the date hereof to the same extent as if such Futronix
Stockholder Party had been a Party as of the date hereof.
(c) If any provision of this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
(d) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the respective heirs, legal representatives, successors and
permitted assigns of the Parties hereto. No Party hereto shall assign this
Agreement or any right, benefit or obligation hereunder.
-58-
<PAGE>
(e) Any term or provision of this Agreement may be waived at any time by
the Party entitled to the benefit thereof by a written instrument duly executed
by such Party.
(f) The Parties hereto shall execute and deliver any and all documents and
take any and all other actions that may be deemed reasonably necessary by their
respective counsel to complete the Transactions.
20. Interpretation.
--------------
Unless the context of this Agreement clearly requires otherwise, (a)
references to the plural include the singular, the singular the plural, the part
the whole, (b) references to any gender include all genders, (c) "or" has the
inclusive meaning frequently identified with the phrase "and/or," (d)
"including" has the inclusive meaning frequently identified with the phrase "but
not limited to" and (e) references to "hereunder" or "herein" relate to this
Agreement. The section and other headings contained in this Agreement are for
reference purposes only and shall not control or affect the construction of this
Agreement or the interpretation thereof in any respect. Section, subsection,
Schedule, Disclosure Schedule and Exhibit references are to this Agreement
unless otherwise specified. Each accounting term used herein that is not
specifically defined herein shall have the meaning given to it under GAAP.
21. Notices.
-------
All notices that are required or permitted hereunder shall be in writing
and shall be sufficient if personally delivered or sent by mail, facsimile
message or Federal Express or other delivery service. Any notices shall be
deemed given upon the earlier of the date when received at, or the third day
after the date when sent by registered or certified mail or the day after the
date when sent by Federal Express to, the address or fax number set forth below,
unless such address or fax number is changed by notice to the other Party
hereto:
If to any Futronix Company or any Futronix Stockholder Party:
Futronix Corporation
12614 Hempstead Highway
Houston, TX 77092
FAX: 713-329-1111
Attention: President
-59-
<PAGE>
with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
FAX: 215-963-5299
Attention: Thomas J. Sharbaugh, Esquire
If to W&C or Bruno:
5060 Avalon Ridge Parkway
Norcross, GA 30071
FAX: 770-409-9663
Attention: Mr. Theodore J. Bruno
with a required copy to:
Paul, Hastings, Janofsky & Walker
600 Peachtree Street N.E.
Suite 2400
Atlanta, GA 30308-2222
FAX: 404-815-2424
Attention: Philip J. Marzetti, Esquire
22. Governing Law.
-------------
This Agreement shall be construed and interpreted in accordance with the
laws of the State of Delaware without regard to its provisions concerning
conflict of laws.
23. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of which
shall be binding as of the date first written above, and all of which shall
constitute one and the same instrument. Each such copy shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart .
-60-
<PAGE>
[SIGNATURE PAGE FOR REORGANIZATION AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above .
FUTRONIX CORPORATION FUTRONIX SYSTEMS CORP.
By: /s/ Terrence M. Hunte By: /s/ Terrence M. Hunt
------------------------------- ---------------------------------
TERRENCE M. HUNT TERRENCE M. HUNT
/s/ Terrence M. Hunt
- -----------------------------------
TERRENCE M. HUNT
OVERSEAS EQUITY INVESTOR PARTNERS BRADFORD VENTURE PARTNERS, L.P.
By: Overseas Equity Investors Ltd. By: Bradford Associates, General
General Partner Partner
By: /s/ Cummings Zuill By: /s/ Barbara M. Henagan
------------------------------- ---------------------------------
Director Barbara M. Henagan
General Partner
/s/ Bradford Mills
- -----------------------------------
BRADFORD MILLS REVOCABLE TRUST BVP SPECIAL SITUATIONS, L.P
NO. 1 U/D/T 12/3/91
By: Bradford Associates, General
Partner
/s/ Bradford Mills By: /s/ Barbara M. Henagan
- ----------------------------------- --------------------------------
BRADFORD MILLS REVOCABLE TRUST Barbara M. Henagan
NO.2 U/D/T 12/3/91 General Partner
/s/ Robert J. Simon /s/ Barbara M. Henagan
- ----------------------------------- -----------------------------------
ROBERT J. SIMON BARBARA M. HENAGAN
/s/ Elizabeth M. Hardie /s/ Bradford Alan Mills
- ----------------------------------- -----------------------------------
ELIZABETH M. HARDIE BRADFORD ALAN MILLS
/s/ Thomas J. Sharbaugh /s/ Cheryl A. Mills
- ----------------------------------- -----------------------------------
THOMAS J. SHARBAUGH AS SUCCESSOR CHERYL A. MILLS, TRUSTEE U/A/D 3/2 8/89
TRUSTEE TO JOHN R. PETTY, TRUSTEE F/B/O BRADFORD TAYBROOK MILLS
U/A/D 3/17/69
/s/ Barbara L. Mills /s/ Barbara L. Mills
- ----------------------------------- -----------------------------------
BARBARA L. MILLS, TRUSTEE U/A/D BARBARA L. MILLS, TRUSTEE U/A/D 2/26/88
12/26/84 F/B/O FRANCES LEE HARDIE F/B/O KENNETH IAN HARDIE
<PAGE>
[SIGNATURE PAGE FOR REORGANIZATION AGREEMENT]
/s/ Bradford Alan Mills /s/ Erwin Hosono
- --------------------------------- -----------------------------------
BRADFORD ALAN MILLS, TRUSTEE U/A/D ERWIN HOSONO
11/4/78 F/B/O ROSS D. MILLS
/s/ Thomas L. Ferguson /s/ Thomas F. Ruhm
- --------------------------------- -----------------------------------
THOMAS L. FERGUSON THOMAS F. RUHM
/s/ Robert J.S. Roriston, /s/ Christopher F. O. Gabrieli
Attorney-In-Fact
- --------------------------------- -----------------------------------
WARD W. WOODS CHRISTOPHER F. O. GABRIELI
/s/ Neill H. Brownstein /s/ Rodney A. Cohen
- --------------------------------- -----------------------------------
NEILL H. BROWNSTEIN RODNEY A. COHEN
/s/ Adam Godfrey /s/ Robert D. Lindsay
- --------------------------------- -----------------------------------
ADAM GODFREY ROBERT D. LINDSAY
/s/ Richard R. Davis
- ---------------------------------
RICHARD R. DAVIS
WIRE & CABLE SPECIALTIES CORPORATION
By: /s/ Theodore J. Bruno /s/ Theodore J. Bruno
---------------------------- -----------------------------------
THEODORE J. BRUNO THEODORE J. BRUNO
<PAGE>
[SIGNATURE PAGE FOR REORGANIZATION AGREEMENT]
FUTRONIX ACQUISITION COMPANY
By: /s/ Terrence M. Hunt
---------------------------
TERRENCE M. HUNT
<PAGE>
EXHIBIT 2.2
AMENDMENT TO REORGANIZATION AGREEMENT
THIS AMENDMENT (the "Amendment") is made as of __________, 1996, to that
certain Reorganization Agreement (the "Agreement"), dated August 7, 1996, by and
among Futronix Systems Corp., a Delaware corporation (the "Company"), Futronix
Acquisition Company, a Texas corporation (the "Acquisition Company"), Futronix
Corporation, a Texas corporation ("Futronix"), Wire & Cable Specialties
Corporation, a Georgia corporation ("W&C"), Terrence M. Hunt, a Texas resident
("Hunt"), Theodore J. Bruno, a Georgia resident ("Bruno"), and the other
signatories thereto (together with Hunt, the "Futronix Stockholder Parties" and,
together with all other Persons who have executed and delivered a signature
thereto, the "Parties").
WITNESSETH:
----------
WHEREAS, the Parties entered into the Agreement as of August 7, 1996
to provide the terms and conditions under which (a) Futronix and W&C will merge
with and into the Acquisition Company (the "Merger"), and (b) the Company will
sell shares of its Common Stock pursuant to a public offering;
WHEREAS, subsequent to the execution of the Agreement, the Parties
have agreed upon certain changes to the terms of the Merger to facilitate the
sale of shares of Common Stock by the Company and to protect the treatment of
the Merger as a pooling of interests;
WHEREAS, the Parties wish to amend the Agreement, pursuant to Section
19(a) thereof, to reflect such changes to the terms of the Merger; and
WHEREAS, capitalized terms used herein but not defined herein shall
have the definitions assigned thereto in the Agreement.
NOW, THEREFORE, in consideration of the respective covenants contained
herein and intending to be legally bound hereby, the Parties agree as follows:
1. Section 2, Plan of Merger, of the Agreement is hereby amended by
--------------
the addition of a new Section 2.14 as follows:
2.14 Sale of Securities by Bruno. Notwithstanding any provision of
---------------------------
this Agreement to the contrary, Bruno shall be permitted to sell, prior to the
Closing, up to 1% of the outstanding shares of W&C Common Stock held by him
(i.e., up to 10 of the 1,000 shares of the outstanding W&C Common Stock held by
- -----
him); provided that such sale is made to a person or entity who will not, at the
time of such sale or after giving effect to such sale, be an affiliate of the
Company, W&C, Futronix, the Futronix Stockholders or any of their respective
affiliates, and is effected at a price per share which is no less than the
equivalent of the mid-point of the range of the initial public offering price
per share of the Company Common Stock established by the underwriters of the
Public Offering. If such
<PAGE>
sale is effected, all references to the Holder of W&C Common Stock shall be
deemed a reference to all of the Holders thereof.
2. Section 7.6(a) and (b) of the Agreement, relating to the Secondary
Registration Statement, are hereby amended to read in their entirety as follows:
7.6 Secondary Registration Statement.
--------------------------------
(a) The Company shall file a Registration Statement on
Form S-1, pursuant to Rule 415, under the Securities Act (the "Resale Form S-1")
for purposes of registering for resale from time to time through market or
private sales the shares of Bruno's Company Common Stock issuable to Monahan and
Scott pursuant to the W&C Options and all of the shares of Company Common Stock
to be issued to Monahan in connection with the Value Appreciation Bonus
(collectively, the "Registered Shares"). The Company shall take such actions as
are commercially reasonably required to permit Monahan and Scott (the
"Registered Holders") to sell during the Applicable Registration Period (defined
below) the Registered Shares pursuant to such registration statement or any Form
S-3 registration statement that the Company may file as a replacement to the
Resale Form S-1 registration statement. The Resale Form S-1, any such
replacement Form S-3 registration statement and any amendments or supplements
thereto are referred to herein as the "Secondary Registration Statement." The
"Applicable Registration Period" means a period of four years. The Company shall
use commercially reasonable efforts to have the Secondary Registration Statement
declared effective prior to expiration of any Lockup Period, as defined below.
Notwithstanding the effective date of the Secondary Registration Statement, no
Registered Holder shall be able to sell any Registered Shares prior to the
expiration of any "lockup" period applicable to such Registered Holder pursuant
to the underwriting agreement for the Public Offering (the "Lockup Period"). In
negotiating arrangements with the underwriter or underwriters for the Public
Offering, Futronix will not, and will cause the Company not to, enter into any
arrangements that provide for a Lockup Period of more than 180 days in the case
of any Registered Holder and each of the Registered Holders shall enter into
such reasonable arrangements as may be required under any such underwriting
agreement in order to confirm their agreement to such Lockup Period.
(b) In addition to the other restrictions set forth in this
Section 7.6, no Registered Holder shall sell any Registered Shares under the
Secondary Registration Statement in an amount greater than such Registered
Holder could sell from time to time under Rule 144 promulgated under the
Securities Act or any similar rule that may be adopted by the SEC.
The Registered Holders, by execution of the Joinder to this Amendment,
confirm their agreement with the restrictions set forth in Section 7.6(a) and
(b) above.
2
<PAGE>
3. Section 1, Definitions, of the Agreement is hereby amended by the
-----------
deletion of the following definition:
"Applicable Lockup Period" is defined in Section 7.6(a).
4. Section 1, Definitions, of the Agreement is hereby amended by the
-----------
addition of the following definition:
"Lockup Period" is defined in Section 7.6(a).
5. Section 8, Covenants of the Company, Futronix and the Futronix
---------------------------------------------------
Stockholder Parties, of the Agreement is hereby amended by the addition of a new
- -------------------
Section 8.17 as follows:
8.17 Lockup Period Applicable to Bruno. In negotiating
---------------------------------
arrangements with the underwriter or underwriters for the Public Offering,
Futronix will not, and will cause the Company not to, enter into any
arrangements that prohibit the sale of shares by Bruno for a period of more than
180 days from the closing of the Public Offering.
6. Section 9, Covenants of W&C and Bruno, of the Agreement is hereby
--------------------------
amended by the deletion of Section 9.13 in its entirety.
7. The Parties hereby agree that the form of Employment Agreements
to be entered into between the Company and Hunt, Bruno and Monahan attached as
Exhibits B, C and D, respectively, to the Agreement shall be revised by the
addition of the following sentences in Section 4(b) of each such agreement:
Notwithstanding the above, the Company, with the approval of the
Compensation Committee of the Board of Directors of the Company, may
advance from time to time, upon request from the Employee, up to the full
amount of bonus payable for 1996 and the threshold amount of bonus payable
with respect to 1997. In the event the Employee receives an advance and the
Employee ceases to be employed by the Company as a result of termination
for "cause" (as defined below) or his resignation, the Employee shall be
required to return to the Company the unearned portion of any such advance,
in accordance with the terms of this Agreement.
8. The terms of this Agreement, as modified by this Amendment, shall
remain in full force and effect until further modified, amended or terminated.
9. This Amendment may be executed in two or more counterparts, each
of which shall be binding as of the date first written above, and all of which
shall constitute one and the same instrument. Each such copy shall be deemed an
original, and it shall not be necessary in making proof of this Amendment to
produce or account for more than one such counterpart.
3
<PAGE>
[SIGNATURE PAGE FOR AMENDMENT TO REORGANIZATION AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first written above.
<TABLE>
<CAPTION>
FUTRONIX CORPORATION FUTRONIX SYSTEMS CORP.
By:________________________________ By:__________________________________
TERRENCE M. HUNT TERRENCE M. HUNT
___________________________________
TERRENCE M. HUNT
<S> <C>
OVERSEAS EQUITY INVESTOR PARTNERS BRADFORD VENTURE PARTNERS, L.P.
By: Overseas Equity Investors Ltd. By: Bradford Associates, General Partner
General Partner
By:______________________________ By:_________________________________
Barbara M. Henagan
General Partner
___________________________________
BRADFORD MILLS REVOCABLE TRUST NO. 1 BVP SPECIAL SITUATIONS, L.P.
U/D/T 12/3/91
By: Bradford Associates, General Partner
___________________________________ By:_________________________________
BRADFORD MILLS REVOCABLE TRUST NO. 2 Barbara M. Henagan
U/D/T 12/3/91 General Partner
___________________________________ ___________________________________
ROBERT J. SIMON BARBARA M. HENAGAN
___________________________________ ___________________________________
ELIZABETH M. HARDIE BRADFORD ALAN MILLS
___________________________________ ___________________________________
THOMAS J. SHARBAUGH AS SUCCESSOR CHERYL A. MILLS, TRUSTEE U/A/D 3/28/89
TRUSTEE TO JOHN R. PETTY, TRUSTEE F/B/O BRADFORD TAYBROOK MILLS
U/A/D 3/17/69
___________________________________ ___________________________________
BARBARA L. MILLS, TRUSTEE U/A/D BARBARA L. MILLS, TRUSTEE U/A/D 2/26/88
12/26/84 F/B/O FRANCES LEE HARDIE F/B/O KENNETH IAN HARDIE
</TABLE>
<PAGE>
[SIGNATURE PAGE FOR AMENDMENT TO REORGANIZATION AGREEMENT]
____________________________________ ___________________________________
BRADFORD ALAN MILLS, TRUSTEE U/A/D ERWIN HOSONO
11/4/78 F/B/O ROSS D. MILLS
___________________________________ ___________________________________
THOMAS L. FERGUSON THOMAS F. RUHM
___________________________________ ___________________________________
WARD W. WOODS CHRISTOPHER F. O. GABRIELI
___________________________________ ___________________________________
NEILL H. BROWNSTEIN RODNEY A. COHEN
___________________________________ ___________________________________
ADAM GODFREY ROBERT D. LINDSAY
___________________________________
RICHARD R. DAVIS
WIRE & CABLE SPECIALTIES CORPORATION
By:________________________________ __________________________________
THEODORE J. BRUNO THEODORE J. BRUNO
<PAGE>
[SIGNATURE PAGE FOR AMENDMENT TO REORGANIZATION AGREEMENT]
FUTRONIX ACQUISITION COMPANY
By:________________________________
TERRENCE M. HUNT
<PAGE>
JOINDER
The undersigned hereby join in this Amendment to Reorganization Agreement
solely to confirm their agreement with the restrictions set forth in Section
7(a) and (b) as set forth herein.
--------------------------------------
Paul R. Monahan
--------------------------------------
Joan Scott
<PAGE>
Exhibit 3.1
AMENDED & RESTATED CERTIFICATE OF INCORPORATION
OF
FUTRONIX SYSTEMS CORP.
The undersigned, being the Chairman of the Board of Directors of Futronix
Systems Corp., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: The Certificate of Incorporation originally filed on August 5, 1996,
as amended, be and it hereby is amended and restated in its entirety to read as
follows:
FIRST. Name. The name of the Corporation is Futronix Systems Corp. (the
----
"Corporation").
SECOND. Purpose and Powers. The purpose for which the Corporation is
------------------
organized is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware
(the "DGCL").
THIRD. Capitalization. The total number of shares of stock that the
--------------
Corporation shall have authority to issue is 16,490,990 shares, consisting of
15,000,000 shares of Common Stock, par value $0.01 per share (the "Common
Stock"), 490,990 shares of Convertible Preferred Stock, par value $0.01 per
share (the "Convertible Preferred Stock"), and 1,000,000 shares of Series
Preferred Stock, par value $0.01 per share (the "Series Preferred Stock"). The
Convertible Preferred Stock and the Series Preferred Stock are referred to
herein collectively as the "Preferred Stock." The Board of Directors of the
Corporation shall have the full authority permitted by law to establish series
of unissued shares of the Series Preferred Stock by fixing by resolution full,
limited or no voting powers and such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of the shares of any series so established to the same extent
that such designations, preferences, rights, qualifications, limitations and
restrictions could be stated if fully set forth herein, but subject to and
within the limitations set forth herein.
The voting powers, designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of the classes of stock of the Corporation are as follows:
<PAGE>
A. Common Stock.
------------
(1) Voting Rights. Except as set forth herein or as otherwise required by
-------------
law, the holders of Common Stock shall be entitled to one vote per share on each
matter on which the stockholders of the Corporation shall be entitled to vote.
(2) Dividends. The Board of Directors of the Corporation may cause
---------
dividends or other distributions to be paid to the holders of Common Stock out
of funds legally available for the payment of dividends by declaring an amount
per share as a dividend or other distribution and after payment shall have been
made to the holders of Preferred Stock of the full amount to which they may be
entitled.
(3) Liquidation Rights.
------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, and after payment
shall have been made to the holders of Preferred Stock of the full amount to
which they may be entitled, the holders of Common Stock shall be entitled, to
the exclusion of the holders of Preferred Stock, to share ratably according to
the number of shares of Common Stock held by them in all remaining assets of the
Corporation available for distribution to its stockholders.
(b) Neither a consolidation or merger of the Corporation with or into
any other corporation, nor a merger of any other corporation into the
Corporation, nor a reorganization of the Corporation, nor the purchase or
redemption of all or part of the outstanding shares of any class or classes of
the Corporation, nor a sale or transfer of all or any part of its assets shall
be considered a liquidation, dissolution or winding up of the Corporation within
the meaning of this Section A(3).
B. Preferred Stock.
---------------
(1) Voting Rights. Except as set forth herein or as otherwise required by
-------------
law, the holders of Convertible Preferred Stock (the "Convertible Preferred
Stockholders") shall not be entitled to vote on any matter on which the
stockholders of the Corporation shall be entitled to vote, and shares of
Convertible Preferred Stock shall not be included in determining the number of
shares voting or entitled to vote on any such matters. The Convertible
Preferred Stockholders shall be entitled to vote as a separate class upon a
proposed amendment to this Certificate of Incorporation if the amendment would
increase or decrease the aggregate number of authorized shares of Convertible
Preferred Stock, increase or decrease the par value of the Convertible Preferred
Stock, or change any portion of this Section B of ARTICLE THIRD so as to affect
the Convertible Preferred Stock adversely.
-2-
<PAGE>
(2) Dividends. The Convertible Preferred Stockholders shall not be
---------
entitled to dividends or other distributions.
(3) Liquidation.
-----------
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, the Convertible Preferred Stockholders shall be entitled to receive
from the assets of the Corporation payment in cash, in the case of any voluntary
or involuntary liquidation, dissolution or winding up, of $2.04 per share before
any amount shall be paid or set aside for, or any distribution of assets shall
be made to, the holders of shares of Common Stock or other stock of the
Corporation ranking junior to the Convertible Preferred Stock with respect to
liquidations, but the Convertible Preferred Stockholders shall not be entitled
to receive any further amount upon any such liquidation, dissolution or winding
up.
(b) If, upon such liquidation, dissolution or winding up, the amounts
available for distribution to the Convertible Preferred Stockholders shall be
insufficient to permit the payment in full to such holders of the preferential
amounts to which they are entitled, then such amounts shall be paid ratably
among the shares of the Convertible Preferred Stock in accordance with the
preferential amounts payable with respect thereto if paid in full.
(c) Neither a consolidation or merger of the Corporation with or into
any other corporation, nor a merger of any other corporation into the
Corporation, nor a reorganization of the Corporation, nor the purchase or
redemption of all or part of the outstanding shares of any class or classes of
the Corporation, nor a sale or transfer of all or any part of its assets shall
be considered a liquidation, dissolution or winding up of the Corporation within
the meaning of this Section B(3).
(4) Conversion.
----------
(a) Conversion of Convertible Preferred Stock. Subject to and upon
-----------------------------------------
compliance with the provisions of Section B(4)(b), each record holder of
Convertible Preferred Stock shall be entitled to convert, at its option and at
any time and from time to time, any or all of the shares of Convertible
Preferred Stock held by such holder into the same number of shares of Common
Stock.
(b) Conversion Procedure.
--------------------
(i) Each conversion of shares of Convertible Preferred Stock into
Common Stock will be accomplished by the surrender of the certificate or
certificates representing the shares to be converted (the "Converting Shares")
at the principal office of the Corporation (or such other office or agency of
the Corporation as the Corporation may designate by written notice to the
holders of Convertible Preferred Stock) at any time during its usual business
hours, together with written notice by the holder of such Converting Shares, (A)
stating that such holder
-3-
<PAGE>
desires to convert the Converting Shares, or a specified number of shares
represented by such certificate or certificates, into shares of Common Stock on
the basis set forth in Section B(4)(a) (the "Converted Shares") and (B) giving
the name(s) (with addresses) and denominations in which the certificate(s)
evidencing the Converted Shares shall be issued, and instructions for the
delivery thereof. Subject to any applicable transfer restrictions, upon receipt
of the notice described in the first sentence of this Section, together with the
certificate(s) evidencing the Converting Shares, the Corporation shall issue and
deliver in accordance with such instructions the certificate(s) evidencing the
Converted Shares issuable upon such conversion and a certificate representing
any shares that were represented by the certificate(s) surrendered to the
Corporation in connection with such conversion but that were not Converting
Shares and, therefore, were not converted (which new certificate(s) shall
contain such legends, if any, as were set forth on the surrendered
certificate(s) unless in the opinion of counsel to the Corporation any such
legend is no longer advisable). Such conversion of Converting Shares shall be
deemed to have been accomplished as of the close of business on the date on
which such certificate(s) shall have been surrendered and such written notice
shall have been received by the Corporation, and at such time the rights of the
holder of such Converting Shares as such holder shall cease, and the person(s)
in whose name or names any certificate(s) evidencing the Converted Shares are to
be issued upon such conversion will be deemed to have become the holder or
holders of record of the Converted Shares.
(ii) Upon the issuance of shares of Common Stock in accordance with
this Section B(4)(b), such shares shall be deemed to be duly authorized, validly
issued, fully paid and non-assessable.
(iii) The Corporation will at all times reserve and keep available
out of its authorized but unissued shares of Common Stock or its treasury
shares, solely for the purpose of issue upon conversion of shares of Convertible
Preferred Stock, such number of shares of Common Stock as shall then be issuable
upon the conversion of all outstanding shares of Convertible Preferred Stock.
(iv) Shares of Convertible Preferred Stock that are converted
into shares of Common Stock may not be reissued.
(v) The issuance of certificates evidencing shares of Common Stock
upon conversion of shares of Convertible Preferred Stock shall be made without
charge to the holders of such shares for any issue tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion;
provided, however, that the Corporation shall not be required to pay any tax
- -------- -------
that may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
shares of Convertible Preferred Stock converted.
(c) Stock Splits; Adjustments.
-------------------------
-4-
<PAGE>
(i) If the Corporation shall in any manner subdivide (by stock split,
stock dividend or otherwise) or combine (by reverse stock split or otherwise)
the outstanding shares of the Common Stock, the outstanding shares of the
Convertible Preferred Stock shall be proportionately subdivided or combined and
effective provision shall be made for the protection of all conversion and
redemption rights hereunder.
(ii) In case of any reorganization, reclassification or change of
Common Stock (other than a change in par value as a result of a subdivision or
combination, or a change from par value to no par value), or in case of any
consolidation of the Corporation with one or more other corporations or a merger
of the Corporation with another corporation (other than a merger in which the
Corporation is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of Common Stock), or in case of
any sale, lease or other disposition to another corporation (other than a wholly
owned subsidiary of the Corporation) of all or substantially all the assets of
the Corporation, each holder of shares of Convertible Preferred Stock shall have
the right at any time thereafter, if and so long as the conversion right
hereunder with respect to such shares of Convertible Preferred Stock would exist
had such event not occurred, to convert such shares of Convertible Preferred
Stock into the kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reorganization, reclassification,
change, consolidation, merger, sale, lease or other disposition by a holder of
the number of shares of Common Stock into which such shares of Convertible
Preferred Stock could have been converted had such reorganization,
reclassification, change, consolidation, merger, sale, lease or other
disposition not occurred. In the event of such a reorganization,
reclassification, change, consolidation, merger, sale, lease or other
disposition, effective provision shall be made in the Certificate or Articles of
Incorporation of the resulting or surviving corporation, as the case may be, or
otherwise for the protection of the conversion rights of the shares of
Convertible Preferred Stock, as nearly as reasonably may be, into any such other
shares of stock and other securities and property deliverable upon conversion,
exchange or other disposition of the shares of Common Stock into which such
shares of Convertible Preferred Stock could have been converted had such event
not occurred. In the case of any of the actions specified in this Section, the
holders of a majority of the shares of the Convertible Preferred Stock may
approve a treatment of such class in connection with any such action that
differs from the treatment specified in this Section, and such differing
treatment, if otherwise approved by all other classes of stockholders that may
be required to take action thereon pursuant to law or the applicable Certificate
or Articles of Incorporation, as the case may be, shall be binding upon all
holders of the shares of the Convertible Preferred Stock as so approved by
majority action.
(5) Redemption.
----------
(a) Mandatory Redemption. The Corporation shall redeem on each of the
--------------------
fourth, fifth, sixth and seventh anniversary dates of December 30, 1996 (each a
"Mandatory Redemption Date") the following percentages of the total number of
shares of Convertible Preferred Stock that are outstanding at that time:
-5-
<PAGE>
<TABLE>
<CAPTION>
Anniversary Date Percentage to be Redeemed
---------------- -------------------------
<S> <C>
4th 25
5th 33
6th 50
7th 100
</TABLE>
Each such redemption shall be made by payment of the sum of $2.04 per share of
Convertible Preferred Stock being redeemed (the "Redemption Price").
(b) Optional Redemption. Prior to the first Mandatory Redemption Date
-------------------
specified in Section B(5)(a), the Corporation, at its option, may by resolution
of the Board of Directors, at any time and from time to time, redeem outstanding
shares of Convertible Preferred Stock in whole or in part by payment of the
Redemption Price therefor.
(c) Manner of Redemption. The Corporation shall give notice of
--------------------
redemption hereunder by first-class mail, not less than 20 nor more than 60 days
prior to each Mandatory Redemption Date or prior to any redemption date under
Section B(5)(b) (an "Optional Redemption Date"), to the holders of record of the
shares of Convertible Preferred Stock at their respective addresses then
appearing on the records of the Corporation. The notice of redemption shall
state:
(i) that shares of Convertible Preferred Stock are to be
redeemed,
(ii) the applicable Mandatory or Optional Redemption Date,
(iii) the Redemption Price, and
(iv) the place or places where the certificates representing the
shares of Convertible Preferred Stock to be redeemed (the "Redemption
Certificates") are to be surrendered for payment of the Redemption Price.
(d) Promptly after a holder's delivery of the Redemption Certificates,
the Corporation shall pay to each holder an amount equal to the Redemption Price
multiplied by the number of shares represented by such delivered Redemption
Certificates.
(e) Shares of Convertible Preferred Stock redeemed by the Corporation
shall be cancelled at the time that they are surrendered to the Corporation, and
shall not be reissued by the Corporation unless none of the shares of
Convertible Preferred Stock initially issued shall at that time be outstanding.
FOURTH. Pre-emptive Rights. No holder of securities of the Corporation
------------------
shall be entitled as a matter of right, preemptive or otherwise, to subscribe
for or purchase any securities
-6-
<PAGE>
of the Corporation now or hereafter authorized to be issued or securities held
in the treasury of the Corporation whether issued or sold for cash or other
consideration or as dividend or otherwise. Any such securities may be issued or
disposed of by the Board of Directors to such persons and on such terms as in
its discretion it shall deem advisable.
FIFTH. Elections by Ballot. Elections of directors need not be by written
-------------------
ballot.
SIXTH. Amendment of Bylaws. The Board of Directors shall have the power,
-------------------
in addition to the stockholders, to make, alter or repeal the bylaws of the
Corporation.
SEVENTH. Limit on Liability. To the full extent that the DGCL, as it
------------------
exists on the date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of directors or officers, neither a director nor an
officer of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages.
EIGHTH. Amendment of Certificate of Incorporation. The Corporation
-----------------------------------------
reserves the right to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders are granted subject to this
reservation.
NINTH. Registered Office. The registered office of the corporation is to
-----------------
be located at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, in the County of New Castle, in the State of Delaware. The name of
its registered agent at that address is The Corporation Trust Company.
TENTH: That the corporation has not received any payment for any of its
stock.
ELEVENTH: That the amendment was duly adopted in accordance with the
provisions of Section 241 and Section 245 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, I have signed this certificate this 4th day of
September, 1996.
/s/ Barbara M. Henagan
---------------------------
Barbara M. Henagan
Chairman of the Board of Directors
-7-
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
FUTRONIX SYSTEMS CORP.
(a Delaware Corporation)
ARTICLE I
OFFICES AND FISCAL YEAR
-----------------------
SECTION 1.01. Registered Office. The registered office of the
-----------------
corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware until otherwise established by a vote of a majority of the board of
directors in office, and a statement of such change is filed in the manner
provided by statute.
SECTION 1.02. Other Offices. The corporation may also have offices
-------------
at such other places within or without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation
requires.
SECTION 1.03. Fiscal Year. The fiscal year of the corporation shall
-----------
end on the 31st of December in each year unless the board of directors
determines otherwise.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
SECTION 2.01. Place of Meeting. All meetings of the stockholders of
----------------
the corporation shall be held at the registered office of the corporation, or at
such other place within or without the State of Delaware as shall be designated
by the board of directors in the notice of such meeting.
SECTION 2.02. Annual Meeting. The board of directors shall fix the
--------------
date and time of the annual meeting of the stockholders, and at said meeting the
stockholders then entitled to vote shall elect directors and shall transact such
other business as may properly be brought before the meeting.
SECTION 2.03. Special Meetings. Special meetings of the stockholders
----------------
of the corporation for any purpose or purposes for which meetings may lawfully
be called, may be called at any time by the chairman of the board, a majority of
the board of directors, the president, or, subject to the rights of the holders
of any series of stock having a preference
<PAGE>
over the common stock of the corporation as to dividends or upon liquidation
(the "Preferred Stock") with respect to such series of Preferred Stock, at the
request, in writing, of stockholders owning a majority of the amount of the
entire capital stock of the corporation issued and outstanding and entitled to
vote. At any time, upon written request of any person or persons who have duly
called a special meeting, which written request shall state the purpose or
purposes of the meeting, it shall be the duty of the secretary to fix the date
of the meeting to be held at such date and time as the secretary may fix, not
less than ten nor more than sixty days after the receipt of the request, and to
give due notice thereof. If the secretary shall neglect or refuse to fix the
time and date of such meeting and give notice thereof, the person or persons
calling the meeting may do so.
SECTION 2.04. Notice of Meetings. Written notice of the place, date
------------------
and hour of every meeting of the stockholders, whether annual or special, shall
be given to each stockholder of record entitled to vote at the meeting not less
than ten nor more than sixty days before the date of the meeting. Every notice
of a special meeting shall state the purpose or purposes thereof.
SECTION 2.05. Quorum, Manner of Acting and Adjournment. The holders
----------------------------------------
of a majority of the stock issued and outstanding (not including treasury stock)
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute, by the certificate of
incorporation or by these bylaws. If, however, such quorum shall not be present
or represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At any such
adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. When a quorum is present at any meeting, the
vote of the holders of the majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of the
applicable statute, the certificate of incorporation or these bylaws, a
different vote is required in which case such express provision shall govern and
control the decision of such question. Except upon those questions governed by
the aforesaid express provisions, the stockholders present in person or by proxy
at a duly organized meeting can continue to do business until adjournment,
notwithstanding withdrawal of enough stockholders to leave less than a quorum.
-2-
<PAGE>
SECTION 2.06. Organization. At every meeting of the stockholders,
------------
the chairman of the board, if there be one, or in the case of a vacancy in the
office or absence of the chairman of the board, one of the following persons
present in the order stated: the vice chairman, if one has been appointed, the
president, the vice presidents in their order or rank, a chairman designated by
the board of directors or a chairman chosen by the stockholders entitled to cast
a majority of the votes which all stockholders present in person or by proxy are
entitled to cast, shall act as chairman, and the secretary, or, in his or her
absence, an assistant secretary, or in the absence of the secretary and the
assistant secretaries, a person appointed by the chairman, shall act as
secretary.
SECTION 2.07. Voting. Each stockholder shall at every meeting of the
------
stockholders be entitled to one vote in person or by proxy for each share of
capital stock having voting power held by such stockholder. No proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. Every proxy shall be executed in writing by the
stockholder or by such stockholder's duly authorized attorney-in-fact and filed
with the secretary of the corporation. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a proxy shall not
be effective until notice thereof has been given to the secretary of the
corporation. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of such
death or incapacity is given to the secretary of the corporation.
SECTION 2.08. Consent of Stockholders in Lieu of Meeting. Subject to
------------------------------------------
the rights of the holders of any series of Preferred Stock with respect to such
series of Preferred Stock, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Every written
consent shall bear the date of signature of each stockholder who signs the
consent and no written consent shall be effective to take the corporate action
referred to therein unless, within sixty days of the earliest dated consent
delivered in the manner required above to the corporation, written consents
signed by a sufficient number of holders to take action are delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are
-3-
<PAGE>
recorded. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
SECTION 2.09. Voting Lists. The officer who has charge of the stock
------------
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting. The list shall be arranged in alphabetical order showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 2.10. Inspectors of Election. All elections of directors
----------------------
shall be by written ballot, unless otherwise provided in the certificate of
incorporation; the vote upon any other matter need not be by ballot. In advance
of any meeting of stockholders the board of directors may appoint inspectors of
election, who need not be stockholders, to act at such meeting or any
adjournment thereof. If inspectors of election are not so appointed, the
chairman of any such meeting may, and upon the demand of any stockholder or such
stockholder's proxy at the meeting and before voting begins shall, appoint
inspectors of election. The number of inspectors shall be either one or three,
as determined, in the case of judges appointed upon demand of a stockholder, by
stockholders present entitled to cast a majority of the votes which all
stockholders present are entitled to cast thereon. No person who is a candidate
for office shall act as an inspector. In case any person appointed as an
inspector fails to appear or fails or refuses to act, the vacancy may be filled
by appointment made by the board of directors in advance of the convening of the
meeting, or at the meeting by the chairman of the meeting.
If inspectors of election are appointed as aforesaid, they shall
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, receive votes or ballots, hear and determine all
challenges and questions in any way arising in connection with the right to
vote, count and tabulate all votes, determine the result, and do such acts as
may be proper to conduct the election or vote with fairness to all stockholders.
If there be three inspectors of election, the decision, act or certificate of a
majority shall be effective in all respects as the decision, act or certificate
of all.
-4-
<PAGE>
On request of the chairman of the meeting or of any stockholder or
such stockholder's proxy, the inspectors shall make a report in writing of any
challenge or question or matter determined by them, and execute a certificate of
any fact found by them.
ARTICLE III
BOARD OF DIRECTORS
------------------
SECTION 3.01. Powers. The board of directors shall have full power
------
to manage the business and affairs of the corporation; and all powers of the
corporation, except those specifically reserved or granted to the stockholders
by statute, the certificate of incorporation or these bylaws, are hereby granted
to and vested in the board of directors.
SECTION 3.02. Number and Term of Office. The board of directors
-------------------------
shall consist of such number of directors, not less than one nor more than
twelve, as may be determined from time to time by resolution of the board of
directors. Each director shall serve until the next annual meeting of the
stockholders and until his or her successor shall have been elected and
qualified, except in the event of his or her death, resignation or removal. All
directors of the corporation shall be natural persons, but need not be residents
of Delaware or stockholders of the corporation.
SECTION 3.03. Vacancies. Subject to the rights of the holders of any
---------
series of Preferred Stock with respect to such series of Preferred Stock,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, though less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual election and until
their successors are duly elected and shall qualify, unless sooner displaced.
If there are no directors in office, then an election of directors may be held
in the manner provided by statute. Whenever the holders of any class or classes
of stock or series thereof are entitled to elect one or more directors by the
provisions of the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled by a majority of
the directors elected by such class or classes or series thereof then in office,
or by a sole remaining director so elected. If, at the time of filling any
vacancy or any newly created directorship, the directors then in office shall
constitute less than a majority of the whole board (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent of the total number of
the shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office.
-5-
<PAGE>
SECTION 3.04. Resignations. Any director of the corporation may
------------
resign at any time by giving written notice to the president or the secretary of
the corporation. Such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 3.05. Organization. At every meeting of the board of
------------
directors, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the vice chairman of the board,
if there be one, the president, the vice presidents in their order of rank and
seniority, or a chairman chosen by a majority of the directors present, shall
preside, and the secretary, or, in his or her absence, an assistant secretary,
or in the absence of the secretary and the assistant secretaries, any person
appointed by the chairman of the meeting, shall act as secretary.
SECTION 3.06. Place of Meeting. The board of directors may hold its
----------------
meetings, both regular and special, at such place or places within or without
the State of Delaware as the board of directors may from time to time appoint,
or as may be designated in the notice calling the meeting.
SECTION 3.07. Organization Meeting. The first meeting of each newly
--------------------
elected board of directors shall be held at such time and place as shall be
fixed by the vote of the stockholders at the annual meeting and no notice of
such meeting shall be necessary to the newly elected directors in order legally
to constitute the meeting, provided a quorum shall be present. In the event of
the failure of the stockholders to fix the time or place of such first meeting
of the newly elected board of directors, or in the event such meeting is not
held at the time and place so fixed by the stockholders, the meeting may be held
at such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors.
SECTION 3.08. Regular Meetings. Regular meetings of the board of
----------------
directors may be held without notice at such time and place as shall be
designated from time to time by resolution of the board of directors. If the
date fixed for any such regular meeting be a legal holiday under the laws of the
State where such meeting is to be held, then the same shall be held on the next
succeeding business day, not a Saturday, or at such other time as may be
determined by resolution of the board of directors. At such meetings, the
directors shall transact such business as may properly be brought before the
meeting.
SECTION 3.09. Special Meetings. Special meetings of the board of
----------------
directors shall be held whenever called by the president or by two or more of
the directors. Notice of each such meeting shall be given to each director by
telephone or in writing, including by
-6-
<PAGE>
facsimile message, to such telephone number or address as a director may
designate from time to time at least 24 hours (in the case of notice by
telephone or facsimile message) or 48 hours (in the case of notice by overnight
delivery service) or three days (in the case of notice by mail) before the time
at which the meeting is to be held. Each such notice shall state the time and
place of the meeting to be so held. Any notice by telephone shall be deemed
effective if a message regarding the substance of the notice is given on a
director's behalf to the director's secretary or assistant or to a member of the
director's family.
SECTION 3.10. Quorum, Manner of Acting and Adjournment. At all
----------------------------------------
meetings of the board a majority of the directors shall constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting
of the board of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Unless otherwise restricted by the certificate of incorporation or
these bylaws, any action required or permitted to be taken at any meeting of the
board of directors or of any committee thereof may be taken without a meeting,
if all members of the board consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board.
SECTION 3.11. Executive and Other Committees. The board of directors
------------------------------
may, by resolution adopted by a majority of the whole board, designate an
executive committee and one or more other committees, each committee to consist
of one or more directors and to have such authority as may be specified by the
board of directors, subject to the General Corporation Law of Delaware (the
"DGCL"). The board may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of a member, and the
alternate or alternates, if any, designated for such member, of any committee
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another director to act at the meeting in the place of any such absent or
disqualified member. Any such committee shall be governed by the procedural
provisions of these bylaws that govern the operation of the full board of
directors, including with respect to notice and quorum, except to the extent
specified otherwise by the board of directors.
SECTION 3.12. Compensation of Directors. Unless otherwise restricted
-------------------------
by the certificate of incorporation, the board of directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each
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meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
SECTION 3.13. Conference Telephone Meetings. One or more directors
-----------------------------
may participate in a meeting of the board, or of a committee of the board, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this section shall constitute presence in
person at such meeting.
ARTICLE IV
OFFICERS
--------
SECTION 4.01. Number, Qualifications and Designation. The officers
--------------------------------------
of the corporation shall be chosen by the board of directors and shall be a
president, one or more vice presidents, a secretary, a treasurer, and such other
officers as may be elected in accordance with the provisions of Section 4.03 of
this Article. Any number of offices may be held by the same person. Officers
may, but need not, be directors or stockholders of the corporation. The board of
directors may elect from among the members of the board a chairman of the board
and a vice chairman of the board who may be executive officers of the
corporation if so designated by the board of directors. The president shall be
the senior executive officer of the corporation, except as otherwise resolved by
the board of directors. All officers elected by the board of directors shall
each have such powers and duties as generally pertain to their respective
offices, subject to the specific provisions of this Article IV. Such officers
shall also have such powers and duties as may from time to time be conferred by
the board of directors or by any committee thereof.
SECTION 4.02. Election and Term of Office. The officers of the
---------------------------
corporation, except those elected by delegated authority pursuant to the last
sentence of Section 4.03 of this Article, shall be elected annually by the board
of directors, but each such officer shall hold office until a successor is
elected and qualified, or until his or her earlier resignation or removal.
SECTION 4.03. Subordinate Officers, Committees and Agents. The board
-------------------------------------------
of directors may from time to time elect such other officers and appoint such
committees, employees or other agents as it deems necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as are provided in these bylaws, or as the board of directors may from
time to time determine. The board of directors may delegate
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to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
SECTION 4.04. Removal. Any officer elected, or agent appointed, by
-------
the board of directors may be removed by the affirmative vote of a majority of
the whole board whenever, in their judgment, the best interests of the
corporation would be served thereby. Any officer or agent appointed by another
officer by delegated authority pursuant to the last sentence of Section 4.03 may
be removed by such other officer whenever, in such officer's judgment, the best
interests of the corporation would be served thereby. No elected officer shall
have any contractual rights against the corporation for compensation by virtue
of such election beyond the date of the election of such officer's successor,
such officer's death, such officer's resignation or such officer's removal,
whichever event shall first occur, except as otherwise provided in an employment
contract or under an employee deferred compensation plan.
SECTION 4.05. Vacancies. A newly created elected office and a
---------
vacancy in any elected office because of death, resignation, or removal may be
filled by the board of directors for the unexpired portion of the term at any
meeting of the board of directors. Any vacancy in an office appointed by
another officer by delegated authority pursuant to Section 4.03 because of
death, resignation, or removal may be filled by such other officer.
SECTION 4.06. The Chairman and Vice Chairman of the Board. The
-------------------------------------------
chairman of the board, if there be one, or in the absence of the chairman, the
vice chairman of the board, if there be one, shall preside at all meetings of
the stockholders and of the board of directors, and shall perform such other
duties as may from time to time be assigned to them by the board of directors.
SECTION 4.07. The President. The president shall have general
-------------
supervision over the business, operations and affairs of the corporation,
subject, however, to the control of the board of directors. The president
shall, in general, perform all duties incident to the office of the president,
and shall perform such other duties as may from time to time be assigned by the
board of directors.
SECTION 4.08. The Vice Presidents. The vice presidents shall perform
-------------------
such duties as may from time to time be assigned to them by the board of
directors or by the chief executive officer.
SECTION 4.09. The Secretary. The secretary, or an assistant
-------------
secretary, shall attend all meetings of the stockholders and of the board of
directors and shall record the proceedings of the stockholders and of the
directors and of committees of the board in a book
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or books to be kept for that purpose; shall see that notices are given and
records and reports properly kept and filed by the corporation as required by
law; shall be the custodian of the seal of the corporation and see that it is
affixed to all documents to be executed on behalf of the corporation under its
seal; and, in general, shall perform all duties incident to the office of
secretary, and such other duties as may from time to time be assigned by the
board of directors or the chief executive officer.
SECTION 4.10. The Treasurer. The treasurer, or an assistant
-------------
treasurer, shall have or provide for the custody of the funds or other property
of the corporation; shall collect and receive or provide for the collection and
receipt of moneys earned by or in any manner due to or received by the
corporation; shall deposit all funds in his or her custody as treasurer in such
banks or other places of deposit as the board of directors may from time to time
designate; whenever so required by the board of directors, shall render an
account showing his or her transactions as treasurer and the financial condition
of the corporation; and, in general, shall discharge such other duties as may
from time to time be assigned by the board of directors or the chief executive
officer.
SECTION 4.11. Officers' Bonds. No officer of the corporation need
---------------
provide a bond to guarantee the faithful discharge of the officer's duties
unless the board of directors shall by resolution so require a bond in which
event such officer shall give the corporation a bond (which shall be renewed if
and as required) in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of office.
SECTION 4.12. Salaries. The salaries of the officers and agents of
--------
the corporation elected by the board of directors shall be fixed from time to
time by the board of directors.
ARTICLE V
NOTICE - WAIVERS
----------------
SECTION 5.01. Notice, What Constitutes. Whenever, under the
------------------------
provisions of the statutes of Delaware or the certificate of incorporation or of
these bylaws, notice is required to be given to any director or stockholder, it
shall not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at such
stockholder's address as it appears on the records of the corporation, with
postage thereon prepaid, and such notice shall be deemed to be given at the time
when the same shall be deposited in the United States mail. Notice to directors
may also be given in accordance with Section 3.09 of Article III hereof.
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SECTION 5.02. Waivers of Notice. Whenever any written notice is
-----------------
required to be given under the provisions of the certificate of incorporation,
these bylaws, or by statute, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Except in the
case of a special meeting of stockholders, neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the stockholders,
directors, or members of a committee of directors need be specified in any
written waiver of notice of such meeting.
Attendance of a person, either in person or by proxy, at any meeting,
shall constitute a waiver of notice of such meeting, except where a person
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting was not lawfully called or convened.
SECTION 5.03. Exception to Requirements of Notice. Whenever notice
-----------------------------------
is required to be given, under any provision of the DGCL or of the certificate
of incorporation or these bylaws, to any person with whom communication is
unlawful, the giving of such notice to such person shall not be required and
there shall be no duty to apply to any governmental authority or agency for a
license or permit to give such notice to such person. Any action or meeting
which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any section of the DGCL,
the certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such persons
with whom communication is unlawful.
Whenever notice is required to be given, under any provision of the
DGCL or the certificate of incorporation or these bylaws, to any stockholder to
whom (i) notice of two consecutive annual meetings, and all notices of meetings
or of the taking of action by written consent without a meeting to such person
during the period between such two consecutive annual meetings, or (ii) all, and
at least two, payments (if sent by first class mail) of dividends or interest on
securities during a 12 month period, have been mailed addressed to such person
at such stockholder's address as shown on the records of the corporation and
have been returned undeliverable, the giving of such notice to such person shall
not be required. Any action or meeting which shall be taken or held without
notice to such person shall have the same force and effect as if such notice had
been duly given. If any such person shall deliver to the corporation a written
notice setting forth such stockholder's then current address, the requirement
that notice be given to such person shall be reinstated. In the event that the
action taken by the corporation is such as to require the filing of a
certificate under any section of the DGCL, the certificate need not state that
notice was not given to persons to whom notice was not required to be given
pursuant to this section.
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ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER, ETC.
-------------------------------------
SECTION 6.01. Issuance. Each stockholder shall be entitled to a
--------
certificate or certificates for shares of stock of the corporation owned by such
stockholder upon such stockholder's request therefor. The stock certificates of
the corporation shall be numbered and registered in the stock ledger and
transfer books of the corporation as they are issued. They shall be signed by
the chairman of the board, the president or a vice president and by the
secretary or an assistant secretary or the treasurer. It shall not be necessary
for any such certificate to bear the corporate seal unless required by law. Any
of or all the signatures upon such certificate may be a facsimile, engraved or
printed. In case any officer, transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon, any share certificate shall have
ceased to be such officer, transfer agent or registrar, before the certificate
is issued, it may be issued with the same effect as if he were such officer,
transfer agent or registrar at the date of its issue.
SECTION 6.02. Transfer. Upon surrender to the corporation or the
--------
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. No transfer shall be made which would be
inconsistent with the provisions of Article 8, Title 6 of the Delaware Uniform
Commercial Code-Investment Securities.
SECTION 6.03. Stock Certificates. Stock certificates of the
------------------
corporation shall be in such form as provided by statute and approved by the
board of directors or by such committee or officer authorized by the board of
directors to approve the form of certificate. The stock record books and the
blank stock certificates books shall be kept by the secretary or by any agency
designated by the board of directors for that purpose.
SECTION 6.04. Lost, Stolen, Destroyed or Mutilated Certificates. The
-------------------------------------------------
board of directors may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or such stockholder's legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against
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any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
SECTION 6.05. Record Holder of Shares. The corporation shall be
-----------------------
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
SECTION 6.06. Determination of Stockholders of Record. In order that
---------------------------------------
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the board
of directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the board of
directors. If no record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by the DGCL, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded.
Delivery made to a corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the board of directors
is required by the DGCL, the record date for determining stockholders entitled
to consent to corporate
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<PAGE>
action in writing without a meeting shall be at the close of business on the day
on which the board of directors adopts the resolution taking such prior action.
In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights of the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
board of directors adopts the resolution relating thereto.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND
OTHER AUTHORIZED REPRESENTATIVES
------------------------------------------
SECTION 7.01. Indemnification of Authorized Representatives in Third
------------------------------------------------------
Party Proceedings. The corporation shall indemnify any person who was or is an
- -----------------
authorized representative of the corporation, and who was or is a party, or is
threatened to be made a party to any third party proceeding, by reason of the
fact that such person was or is an authorized representative of the corporation,
against expenses, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such third
party proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal third party proceeding, had no
reasonable cause to believe such conduct was unlawful. The termination of any
third party proceeding by judgment, order, settlement, indictment, conviction or
upon a plea of nolo contendere or its equivalent, shall not of itself create a
presumption that the authorized representative did not act in good faith and in
a manner which such person reasonably believed to be in or not opposed to, the
best interests of the corporation, and, with respect to any criminal third party
proceeding, had reasonable cause to believe that such conduct was unlawful.
SECTION 7.02. Indemnification of Authorized Representatives in
------------------------------------------------
Corporate Proceedings. The corporation shall indemnify any person who was or is
- ---------------------
an authorized representative of the corporation and who was or is a party or is
threatened to be made a party to any corporate proceeding, by reason of the fact
that such person was or is an authorized representative of the corporation,
against expenses actually and reasonably incurred by such person in connection
with the defense or settlement of such corporate action if such person
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acted in good faith and in a manner reasonably believed to be in, or not opposed
to, the best interests of the corporation, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such corporate proceeding was
pending shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such authorized
representative is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
SECTION 7.03. Mandatory Indemnification of Authorized
---------------------------------------
Representatives. To the extent that an authorized representative of the
- ---------------
corporation has been successful on the merits or otherwise in defense of any
third party or corporate proceeding or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses actually and
reasonably incurred by such person in connection therewith.
SECTION 7.04. Determination of Entitlement to Indemnification. Any
-----------------------------------------------
indemnification under Section 7.01, 7.02 or 7.03 of this Article (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the authorized representative
is proper in the circumstances because such person has either met the applicable
standard of conduct set forth in Section 7.01 or 7.02 or has been successful on
the merits or otherwise as set forth in Section 7.03 and that the amount
requested has been actually and reasonably incurred. Such determination shall
be made:
(1) By the board of directors by a majority of a quorum consisting of
directors who were not parties to such third party or corporate proceeding,
or
(2) If such a quorum is not obtainable, or, even if obtainable, a
majority vote of such a quorum so directs, by independent legal counsel in
a written opinion, or
(3) By the stockholders.
SECTION 7.05. Advancing Expenses.
------------------
(1) Expenses actually and reasonably incurred in defending a third
party or corporate proceeding shall be paid on behalf of a director or
other authorized representative by the corporation in advance of the final
disposition of such third party or corporate proceeding upon receipt of an
undertaking by or on behalf of the director or other authorized
representative to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the corporation as
authorized in this Article.
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(2) The financial ability of any director or other authorized
representative to make a repayment contemplated by this Section shall not
be a prerequisite to the making of an advance.
SECTION 7.06. Definitions. For purposes of this Article:
-----------
(1) "authorized representative" shall mean a director or officer of
the corporation, or a person serving at the request of the corporation as a
director, officer, or trustee, of another corporation, partnership, joint
venture, trust or other enterprise;
(2) "corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation of merger which, if its separate
existence had continued, would have had power and authority to indemnify
its directors, officers, employees or agents, so that any person who is or
was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this Article with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued;
(3) "corporate proceeding" shall mean any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor or investigative proceeding by the corporation;
(4) "criminal third party proceeding" shall include any action or
investigation which could or does lead to a criminal third party
proceeding;
(5) "expenses" shall include attorneys' fees and disbursements;
(6) "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan;
(7) "not opposed to the best interests of the corporation" shall
include actions taken in good faith and in a manner the authorized
representative reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan;
(8) "other enterprises" shall include employee benefit plans;
(9) "party" shall include the giving of testimony or similar
involvement;
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(10) "serving at the request of the corporation" shall include any
service as a director, officer or employee of the corporation which imposes
duties on, or involves services by, such director, officer or employee with
respect to an employee benefit plan, its participants, or beneficiaries;
and
(11) "third party proceeding" shall mean any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right
of the corporation.
SECTION 7.07. Insurance. The corporation may purchase and maintain
---------
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the corporation would have the
power or the obligation to indemnify such person against such liability under
the provisions of this Article.
SECTION 7.08. Scope of Article. The indemnification of authorized
----------------
representatives and advancement of expenses, as authorized by the preceding
provisions of this Article, shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any statute, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another
capacity. The indemnification and advancement of expenses provided by or
granted pursuant to this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be an
authorized representative and shall inure to the benefit of the heirs, executors
and administrators of such a person.
SECTION 7.09. Reliance on Provisions. Each person who shall act as
----------------------
an authorized representative of the corporation shall be deemed to be doing so
in reliance upon rights of indemnification provided by this Article, with the
same effect as if such person and the corporation entered into a binding
contract under which the corporation agreed to provide the indemnification
provided by this Article.
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ARTICLE VIII
GENERAL PROVISIONS
------------------
SECTION 8.01. Dividends. Dividends upon the capital stock of the
---------
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock of the corporation, subject to the provisions of the
certificate of incorporation. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 8.02. Annual Statements. The board of directors shall
-----------------
present at each annual meeting, and at any special meeting of the stockholders
when called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
SECTION 8.03. Contracts. Except as otherwise provided in these
---------
bylaws, the board of directors may authorize any officer or officers including
the chairman and vice chairman of the board of directors, or any agent or
agents, to enter into any contract or to execute or deliver any instrument on
behalf of the corporation and such authority may be general or confined to
specific instances.
SECTION 8.04. Checks. All checks, notes, bills of exchange or other
------
orders in writing shall be signed by the president, any vice president, the
treasurer and such other person or persons as the board of directors may from
time to time designate.
SECTION 8.05. Corporate Seal. The corporate seal shall have
--------------
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
SECTION 8.06. Deposits. All funds of the corporation shall be
--------
deposited from time to time to the credit of the corporation in such banks,
trust companies, or other depositories as the board of directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by such
one or more officers or employees as the board of directors shall from time to
time determine.
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SECTION 8.07. Corporate Records. Every stockholder shall, upon
-----------------
written demand under oath stating the purpose thereof, have a right to examine,
in person or by agent or attorney, during the usual hours for business, for any
proper purpose, the stock ledger, books or records of account, and records of
the proceedings of the stockholders and directors, and make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in Delaware or at its principal place of business. Where the
stockholder seeks to inspect the books and records of the corporation, other
than its stock ledger or list of stockholders, the stockholder shall first
establish (1) compliance with the provisions of this section respecting the form
and manner of making demand for inspection of such document; and (2) that the
inspection sought is for a proper purpose. Where the stockholder seeks to
inspect the stock ledger or list of stockholders of the corporation and has
complied with the provisions of this section respecting the form and manner of
making demand for inspection of such documents, the burden of proof shall be
upon the corporation to establish that the inspection sought is for an improper
purpose.
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director. The court may summarily
order the corporation to permit the director to inspect any and all books and
records, the stock ledger and the stock list and to make copies or extracts
therefrom. The court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or award such other and further
relief as the court may deem just and proper.
SECTION 8.08. Amendment of Bylaws. These bylaws may be altered,
-------------------
amended or repealed or new bylaws may be adopted by the stockholders or by the
board of directors, when such power is conferred upon the board of directors by
the certificate of incorporation, at any regular meeting of the stockholders or
of the board of directors or at any special meeting of the stockholders or of
the board of directors if notice of such alteration, amendment, repeal or
adoption of new bylaws be contained in the notice of such special meeting.
-19-
<PAGE>
Exhibit 4.1
This Note has not been registered under the Securities Act of 1933. This Note
has been acquired for investment and may not be sold, transferred or assigned in
the absence of an effective registration statement under the Securities Act of
1933 or an opinion of counsel satisfactory to the Company that registration
under the Act is not required.
A purchaser of the securities offered herein must bear the economic
risk of the investment for an indefinite period of time because the securities
have not been registered under applicable securities laws of Texas and therefore
cannot be resold unless they are subsequently registered or an exemption from
registration is available. Purchasers in Texas must agree in writing not to sell
the securities without registration under applicable securities laws or an
exemption therefrom. Any action contrary to these restrictions may place the
purchaser and the issuer in violation of the Texas Securities Act.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 NOR UNDER THE SECURITIES LAWS OF ANY STATE AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OR AN EXEMPTION THEREFROM.
October 5, 1994
FUTRONIX CORPORATION
--------------------
7% Subordinated Promissory Note
-------------------------------
Futronix Corporation (hereinafter called the "Company"), a Texas
corporation, for value received, hereby promises to pay to
___________________________________, subject to the conditions hereinafter
stated, the principal sum of $______ in four equal annual installments
commencing on the 1st day of October of each year from 1999 through 2002, and to
pay interest on the unpaid principal amount outstanding from time to time
hereunder from the date of this Note until payment in full of all amounts due
hereunder at an annual rate of 7%. Such interest shall be payable quarterly,
beginning on the first day of January 1995, and continuing on the first day of
April, July, October, and January of each year until payment in full of all
amounts due hereunder. Payments of principal and interest shall be made in
lawful money of the United States of America at the company's principal office
in Houston, Harris County, Texas.
<PAGE>
ARTICLE I
---------
Subordination
-------------
1.1. The Company, for itself, its successors and assigns, covenants
and agrees, and the holder of this Note, by its acceptance hereof, for itself,
its successors and assigns, likewise covenants and agrees, that the payment of
the principal of and interest on this Note is hereby expressly subordinated in
right of payment, to the extent and in the manner hereinafter set forth, to the
prior payment in full of all Senior Indebtedness (hereinafter defined):
A. No payment on account of principal or interest on this Note
shall be made unless full payment of amounts then due for principal,
premium, if any, and interest on all Senior Indebtedness has been made
in cash. No payment on account of principal or interest on this Note
shall be made if, at the time of such payment or immediately after
giving effect thereto, there shall exist under any Senior Indebtedness
or any agreement pursuant to which any such Senior Indebtedness is
issued any default as to which a notice of default or acceleration of
the due date has been received by the Company within 30 days after the
occurrence of such default, and such default shall not have been cured
or waived or shall not have ceased to exist.
B. Upon any acceleration of the principal amount due on any
Senior Indebtedness or upon any distribution of all or substantially
all of the assets of the Company or any payment or distribution of
assets of the Company of any kind or character, whether in cash,
property or securities, to creditors in connection with any
dissolution, winding-up, total or partial liquidation or
reorganization of the Company whether voluntary or involuntary and
whether in bankruptcy, insolvency, receivership, arrangement or other
proceedings, or upon an assignment for the benefit of creditors, or
upon any other marshalling of the assets and liabilities of the
Company, all principal, premium, if any, and interest due or to become
due upon all Senior Indebtedness shall first be paid in full in cash
before the holder of this Note shall be entitled to receive any
payments for principal or interest on this Note; and upon any such
acceleration, payment or distribution of assets, dissolution, winding
up, total or partial liquidation, reorganization, assignment for the
benefit of creditors, marshalling of assets or liabilities, or similar
proceedings, any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to
which the holder of this Note, would, except for the provisions
hereof, be entitled, shall be paid or delivered by the Company, or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, directly to the
holders of Senior Indebtedness pro rata upon the basis of the
respective amounts of Senior Indebtedness held by such holders, to the
extent necessary to pay all principal, premium, if any, and interest
due or to be come due upon all Senior Indebtedness
-2-
<PAGE>
in full in cash (after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness) before any
payment or distribution is made to the holder of this Note.
C. Upon any such acceleration, payment or distribution of
assets, dissolution, winding-up, total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary and
whether in bankruptcy, insolvency, receivership, arrangement or other
proceedings, or upon an assignment for the benefit of creditors, or
upon any other marshalling of the assets and liabilities of the
Company, any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, which
shall be received by the holder of this Note before the entire
principal, premium, if any, and interest on the Senior Indebtedness
shall have been paid in full in cash, shall be held in trust for the
benefit of and promptly paid over to the holders of Senior
Indebtedness pro rata as aforesaid, for application to the payment of
Senior Indebtedness remaining unpaid until all principal, premium, if
any, and interest due or to become due upon all Senior Indebtedness
shall have been paid in full in cash, after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.
D. Subject to the payment in full of all Senior Indebtedness,
the holder of this Note shall, together with others so entitled, be
subrogated to the rights of the holders of Senior Indebtedness to
receive payments and distribution of assets or securities of the
Company applicable to the Senior Indebtedness until the principal of
and interest on this Note shall be paid in full, and no such payments
or distributions applicable to the Senior Indebtedness shall, as
between the Company, its creditors other than the holders of Senior
Indebtedness, and the holders of this Note, be deemed to be a payment
of the Company to or on account of this Note.
E. Notwithstanding the foregoing provisions of this Note, the
holder of this Note shall be entitled to receive shares of the stock
or other securities of the Company issued as part of a reorganization
or readjustment of securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, provided
that such stock is subordinated at least to the same extent as this
Note to the payment of all Senior Indebtedness which may at the time
be outstanding, provided that the rights of the holders of Senior
Indebtedness are not altered by such reorganization or readjustment.
1.2. The foregoing provisions are solely for the purpose of defining
the relative rights of the holders of Senior Indebtedness on the one hand and
the holder of the Note on the other hand, and nothing herein shall impair, as
between the Company and the holder of this Note, the obligation of the Company,
which is unconditional and absolute, to pay to the holder hereof the principal
hereof and interest hereon in accordance with its terms, nor shall anything
herein
-3-
<PAGE>
prevent the holder of this Note from exercising all remedies otherwise permitted
by applicable law or under this Note upon default hereunder, subject to the
rights set forth above of holders of Senior Indebtedness to receive cash,
property or securities otherwise payable or deliverable to the holder of this
Note.
The term "Senior Indebtedness" shall mean the principal of, and
premium, if any, and interest (including interest accruing following the filing
of any bankruptcy action by or against the Company) on, and attorney's fees,
court costs and any other sums related to, indebtedness or any guarantee of
indebtedness, whether outstanding at the date of original execution of this Note
or thereafter incurred, created or assumed, of the Company or any of its
subsidiaries or affiliates for money borrowed by the Company or any such
subsidiary or affiliate from any bank or other institutional financing
organization. For the purposes hereof, "Senior Indebtedness" shall be deemed
to include without limitation all indebtedness of the Company to Southwest Bank
of Texas, N.A., and any extensions, renewals, modifications or replacements of
such indebtedness.
ARTICLE II
----------
Investment Intent
-----------------
2.1. The holder of this Note warrants, represents and agrees that the
Note is being acquired by the holder for the holder's own account and interest
for investment and not with a view to resale or distribution; that it is the
holder's present intention to continue to hold such Note for investment; and
that the holder will not sell or otherwise dispose of this Note (a) unless a
registration statement under the Securities Act of 1933 covering this Note is in
effect, or (b) unless the availability of an exemption from registration for the
proposed distribution of this Note is established to the satisfaction of counsel
for the Company.
ARTICLE III
-----------
Covenant of the Company
-----------------------
3.1 So long as any indebtedness remains outstanding under the
Subordinated Notes (as defined in Section 5.2), the Company shall not incur
Senior Indebtedness in excess of an aggregate of $10,000,000.
ARTICLE IV
----------
Events of Default
-----------------
Each of the following shall constitute an event of default under this
Note:
-4-
<PAGE>
4.1. Failure to Make Payments. The failure of the Company to make
------------------------
when due any principal or interest payment upon this Note.
4.2. Breach of Covenants. The failure of the Company to comply with
-------------------
any covenant contained herein.
4.3. Defaults on Other Obligations. The occurrence of any default by
-----------------------------
the Company under any note, loan or other agreement for borrowed money not cured
within any applicable grace period therein provided.
4.4. Certain Events.
--------------
(a) The Company shall (i) apply for or consent to the
appointment of a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property, (ii) be generally unable to pay its debts
as such debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect), (v) file a petition seeking to take advantage of
any other law providing for the relief of debtors, (vi) fail to controvert in a
timely or appropriate manner, or acquiesce in writing to, any petition filed
against the Company in any involuntary case under such Bankruptcy Code, or (vii)
take any corporate action for the purpose of effecting any of the foregoing; or
(b) a proceeding or case shall be commenced against the
Company in any court of competent jurisdiction for the (i) winding up, or
composition or readjustment of debts, of the Company, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Company or of all or
any substantial part of its assets, (iii) similar relief in respect of the
Company under any law providing for the relief of debtors, and such proceeding
or case shall continue undismissed, or unstayed and in effect, for a period of
60 days, or an order for relief against the Company shall be entered in an
involuntary case under such Bankruptcy Code.
Upon the occurrence of an event of default as defined above, the
balance of principal of and all accrued interest upon this Note shall become
immediately due and payable without demand, presentation or notice of any kind.
ARTICLE V
---------
Miscellaneous
-------------
5.1. Prepayment. The Company may prepay any amount of principal due
----------
and owing on this Note, together with accrued interest on the amount so prepaid,
at any time without premium or penalty.
-5-
<PAGE>
5.2. Allocation Among Noteholders. The Company is issuing other 7%
----------------------------
Subordinated Promissory Notes contemporaneously with the issuance of this Note.
Such other Notes have or will have terms (except for the amount) which are
identical to the terms of this Note. Such other Notes and this Note are
referred to collectively as the "Subordinated Notes." Unless agreed to by the
holders of all of the Subordinated Notes, or pursuant to a court order, the
Company shall not repurchase or make any payment of principal or interest under
any Subordinated Note unless it contemporaneously makes a proportionate
repurchase or payment for the same purpose under all of the other Subordinated
Notes.
5.3. Amendments; Modifications. The terms of the Subordinated Notes
--------------------------
may not be amended or modified in any manner without the consent of the holders
of at least 65% of the then outstanding principal amount of the Subordinated
Notes and any such amendment or modification shall be effective as to all of the
then outstanding Subordinated Notes.
5.4. Notices. Any notice or other communication given hereunder,
-------
whether to the Company or the holder of this Note, shall be given by certified
mail, return receipt requested, to the address as designated by the Company or
the holder of this Note.
5.5. Governing Law. This Note shall be governed by the laws of the
-------------
State of Texas.
-6-
<PAGE>
IN WITNESS WHEREOF, FUTRONIX CORPORATION has caused this Note to be
executed and signed as of the day and year first above written.
FUTRONIX CORPORATION
By:_________________________________
Name:
Title:
-7-
<PAGE>
Exhibit 10.1
________________________________________________________________________________
________________________________________________________________________________
AMENDED LOAN AGREEMENT
By and Between
FUTRONIX CORPORATION
and
SOUTHWEST BANK OF TEXAS, N.A.
$15,000,000.00 Revolving Line of Credit
Dated as of
June 30, 1996
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
The Table of Contents is not a part of the Loan
Agreement but for convenience of reference only.)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties .......................................................................1
ARTICLE I
GENERAL TERMS
Section 1.01 Terms Defined Above .............................................1
Section 1.02 Certain Definitions .............................................1
Section 1.03 Accounting Principles ...........................................8
ARTICLE II
AMOUNT AND TERMS OF LOAN
Section 2.01 The Loans and Commitment ........................................8
Section 2.02 Interest Rate and Other Fees ....................................8
Section 2.03 Notice and Manner of Revolving Credit Borrowing ................10
Section 2.04 Application of Cash Sums .......................................10
Section 2.05 Computation ....................................................11
Section 2.06 Voluntary Prepayments and Reborrowings .........................11
Section 2.07 Mandatory Prepayments ..........................................11
Section 2.08 Cross-collateralization and Default ............................11
Section 2.09 Prepayment in Full .............................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Corporate Existence ............................................12
Section 3.02 Corporate Power and Authorization ..............................12
Section 3.03 Binding Obligations ............................................12
Section 3.04 No Legal Bar or Resultant Lien .................................12
Section 3.05 No Consent .....................................................12
Section 3.06 Financial Condition ............................................13
Section 3.07 Investments and Guaranties .....................................13
Section 3.08 Issuance of Stock ..............................................13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 3.09 Liabilities ....................................................13
Section 3.10 Taxes; Governmental Charges ....................................13
Section 3.11 Titles, etc ....................................................13
Section 3.12 Defaults .......................................................13
Section 3.13 Use of Proceeds; Margin Stock ..................................14
Section 3.14 Compliance with the Law ........................................14
Section 3.15 ERISA ..........................................................14
Section 3.16 Subsidiaries ...................................................15
Section 3.17 Direct Benefit From Loans ......................................15
Section 3.18 RICO ...........................................................15
ARTICLE IV
AFFIRMATIVE COVENANTS
Section 4.01 Financial Statements and Reports ...............................15
Section 4.02 Annual Audits ..................................................16
Section 4.03 Compliance with Laws, Payment of Taxes and Other Claims ........16
Section 4.04 Maintenance ....................................................17
Section 4.05 Further Assurances .............................................17
Section 4.06 Performance of Obligations .....................................17
Section 4.07 Reimbursement of Expenses ......................................17
Section 4.08 Insurance ......................................................18
Section 4.09 Right of Inspection ............................................18
Section 4.10 Notice of Certain Events .......................................18
Section 4.11 ERISA Information and Compliance ...............................19
Section 4.12 Environmental Requirements .....................................19
Section 4.13 Management of Borrower .........................................19
ARTICLE V
NEGATIVE COVENANTS
Section 5.01 Debts, Guaranties and Other Obligations ........................20
Section 5.02 Liens ..........................................................20
Section 5.03 Investments, Loans and Advances ................................21
Section 5.04 Dividends, Distributions and Redemptions .......................21
Section 5.05 Sale of Properties .............................................21
Section 5.06 Nature of Business .............................................22
Section 5.07 Mergers, Consolidations, etc ...................................22
Section 5.08 ERISA Compliance ...............................................22
Section 5.09 Issuance of Stock ..............................................22
Section 5.10 Tangible Net Worth .............................................22
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.11 Minimum Current Ratio ...........................................22
Section 5.12 Ratio of Debt to Tangible Net Worth .............................22
Section 5.13 Minimum Losses ..................................................23
Section 5.14 Changes in Accounting Methods ...................................23
Section 5.15 Transactions With Affiliates ....................................23
Section 5.16 Use of Proceeds .................................................23
Section 5.17 RICO ............................................................23
Section 5.18 Minimum Working Capital .........................................23
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events ..........................................................23
Section 6.02 Remedies ........................................................26
Section 6.03 Prohibition of Transfer, Assignment and Assumption ..............26
Section 6.04 Right of Set-off ................................................26
ARTICLE VII
CONDITIONS
Section 7.01 Closing .........................................................27
Section 7.02 Notes ...........................................................27
Section 7.03 Charter; By-laws ................................................27
Section 7.04 Secretary's Certificates ........................................27
Section 7.05 [Intentionally deleted ..........................................28
Section 7.06 Counsel of Lender ...............................................28
Section 7.07 No Default ......................................................28
Section 7.08 No Material Adverse Changes .....................................28
Section 7.09 Other Security Instruments and Information ......................28
Section 7.10 [Intentionally deleted ..........................................28
Section 7.11 [Intentionally deleted ..........................................28
Section 7.12 [Intentionally deleted ..........................................29
Section 7.13 Additional Matters ..............................................29
Section 7.14 Advances ........................................................29
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Notices .........................................................29
Section 8.02 Deviation from Covenants ........................................29
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
Section 8.03 Invalidity ......................................................30
Section 8.04 Survival of Agreements ..........................................30
Section 8.05 Successors and Assigns ..........................................30
Section 8.06 Renewal, Extension or Rearrangement .............................30
Section 8.07 Waivers .........................................................30
Section 8.08 Cumulative ......................................................31
Section 8.09 Construction ....................................................31
Section 8.10 Interest ........................................................31
Section 8.11 Multiple Originals ..............................................31
Section 8.12 Exhibits ........................................................31
Section 8.13 No Triparty Loan ................................................31
Section 8.14 Applicable Rate Ceiling .........................................32
Section 8.15 Performance and Venue ...........................................32
Section 8.16 Negotiation of Documents ........................................32
Section 8.17 Notices Received by Lender ......................................32
Section 8.18 Debtor-Creditor Relationship ....................................32
Section 8.19 No Third-Party Beneficiaries ....................................32
Section 8.20 DTPA Waiver .....................................................32
Section 8.21 Final Expression ................................................33
ARTICLE IX
ADDITIONAL PROVISIONS
Section 9.01 Defenses ........................................................33
Section 9.02 Limitations .....................................................34
Section 9.03 Continuance of Indebtedness and Liens ...........................34
Section 9.04 Release .........................................................34
Signatures ....................................................................35
</TABLE>
Exhibits
- --------
Exhibit "A" Restated Revolving Credit Note
iv
<PAGE>
AMENDED LOAN AGREEMENT
----------------------
THIS AMENDED LOAN AGREEMENT made and entered into as of this 30th day of
June, 1996, by and between FUTRONIX CORPORATION, a Texas corporation, with
principal offices and mailing address at 12614 Hempstead Highway, Houston 77092,
Houston, Harris County, Texas (hereinafter called the "Borrower") and SOUTHWEST
BANK OF TEXAS, N.A., with offices and mailing address at 4295 San Felipe,
Houston, Harris County, Texas 77027 (hereinafter called the "Lender");
WITNESSETH:
----------
A. Lender and Borrower entered into that certain Loan Agreement (as
modified, the "Original Loan Agreement") dated as of February 3, 1994, executed
by and between Lender and Borrower.
B. The Original Loan Agreement was modified by that certain (i) First
Modification to Note, Loan Agreement and Assignment of Life Insurance Policy
Note Collateral dated as of September 16, 1994, (ii) Second Modification to
Note, Loan Agreement and Assignment of Life Insurance Policy Note Collateral
dated as of June 27, 1995, and (iii) Third Modification to Note and Loan
Agreement dated as of December 21, 1995.
C. Lender and Borrower mutually desire to amend the Original Loan
Agreement and to further amend same to incorporate all of the modifications
described above all is set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements herein contained and of the loans and commitment hereinafter referred
to, the Borrower and the Lender agree as follows:
ARTICLE I
---------
GENERAL TERMS
-------------
Section 1.01 Terms Defined Above. As used in this Agreement, the terms
-------------------
"Borrower" and "Lender" shall have the meanings indicated above.
Section 1.02 Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the following meanings, unless the context otherwise
requires:
"Accounts Advance Amount" shall mean at any time an amount equal to the
product of' Eligible Accounts times a percentage, which shall initially be
eighty percent (80%).
<PAGE>
"Affiliate" shall mean any Person controlling, controlled by or under
common control with any other Person. For purposes of this definition, "control"
(including, "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise. Without limiting the generality of
the foregoing, for purposes of this Agreement, Borrower and its Subsidiaries
shall be deemed to be Affiliates of one another.
"Agreement" shall mean this Loan Agreement, as the same may from time to
time be amended or supplemented.
"Borrowing Base" shall mean at any time an amount not to exceed the lesser
of: (1) FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) or (2) the sum of
(a) the Accounts Advance Amount determined as of the date the Borrowing Base is
calculated, plus (b) the Inventory, Advance Amount determined as of the date the
Borrowing Base is calculated. The Borrowing Base will not include any Properties
of Subsidiaries.
"Business Day" shall mean (a) any day on which Lender is open for the
conduct of general banking business and (b) with respect to all notices,
determinations, fundings and payments in connection with the LIBOR Rate or LIBOR
Rate Loans, any day that is a Business Day pursuant to clause (a) above and that
is also a day on which banks in the city of London are generally open for
interbank or foreign exchange transactions.
"Closing" shall mean the date and time for closing the transaction
contemplated hereby, described in Section 7.01 hereof'.
"Commitment" shall mean the obligation of the Lender to make revolving
credit loans to the Borrower under Section 2.01 hereof, up to the maximum amount
therein stated.
"Default" shall mean the occurrence of any of the events Specified in
Article VI hereof, whether or not any retirement for notice or lapse of time or
other condition precedent has been satisfied.
"Drawdown Termination Date" shall mean June 30, 1997.
"DTPA" shall mean the Texas Deceptive Trade Practices-Consumer Protection
Act, Subchapter E of Chapter 17 of the Texas Business and Commerce Code.
"Eligible Accounts" shall mean at any time an amount equal to the aggregate
net invoice or ledger amount owing on all trade accounts receivable of the
Borrower for goods sold or leased or services rendered, in which the Tender has
a perfected, first priority lien or security interest (except for Liens
permitted under Section 5.02 hereof), after deducting (a) the amount on all such
accounts unpaid for ninety (90) days or more after the date of original invoice,
(b) the amount of
2
<PAGE>
all discounts, allowances, rebates, credits and adjustments to such accounts,
(c) all contra-accounts less than $5,000 per vendor, and all setoffs, defenses
or counterclaims asserted by or available to the Persons obligated on such
accounts, (d) all such accounts owing by officers or employees of the Borrower
or by Subsidiaries or any other Person in which the Borrower may have an equity
interest, (e) all such accounts owed by account debtors which are insolvent, in
any bankruptcy proceeding, or otherwise which the Lender, in its sole
discretion, deems not acceptable, (f) all such accounts for which the majority
of the outstanding aggregate balance owed by any account debtor, is unpaid for
ninety (90) days or more after the date of the original invoices, (g) the amount
owed by any account debtor on such accounts which exceeds twenty percent (20%)
of the total of all Eligible Accounts of the Borrower, provided, however, the
percentage will be increased to thirty percent (30%) for all Eligible Accounts
of the Borrower from Cameron & Barkley, Greybar, Wesco, Wholesale Electric, GE
Supply, CED, and Summers Electric, and (h ) unless otherwise agreed to in
writing by the Lender, all accounts owed by account debtors that are not
domestic corporations or are located outside of the United States. Standards pf
eligibility may be set and may be revised from time to time solely by the Lender
in its exclusive judgment.
"Eligible Inventory" shall mean an amount equal to the value of all of
Borrower's Inventory in which Lender has a perfected, first priority lien or
security interest, valued at the lesser of (a) cost or (b) current market value.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" shall mean the occurrence of any of the events specified
in Article VI hereof, provided that any requirement for notice or lapse of time
or any other condition precedent has been satisfied.
"Financial Statements" shall mean the consolidated and consolidating
financial statement or statements of the Borrower and its Subsidiaries described
or referred to in Section 3.06 hereof.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Indebtedness" shall mean any and all amounts owing or to be owing by the
Borrower to the Lender in connection with the Notes, this Agreement, and other
liabilities of the Borrower to the Lender from time to time existing, including
without limitation guaranties of indebtedness, letters of credit and obligations
acquired from third Persons, whether in connection with this or other
transactions, and all amounts owing or to be owing by the Borrower to any agent
bank of Lender pursuant to any letter of credit agreement, overdraft agreement
or other agreement or financial accommodation.
"Inventory" shall mean any goods held by Borrower for sale or lease and
shall not include
3
<PAGE>
goods held on consignment or goods which the Lender, in its reasonable
discretion, deems not acceptable.
"Inventory Advance Amount" shall mean at any time an amount equal to the
lesser of (a) $9,800,000.00, or (b) the product of all Eligible Inventory of the
Borrower times fifty-five percent (55%).
"LIBOR Period" shall mean, as to any LIBOR Rate Loan. each period
commencing on a Business Day selected by Borrower pursuant to this Agreement and
ending one, two or three months thereafter, as selected by Borrower's
irrevocable notice to Lender as set forth in subsection 2.02.1.(b) hereof,
---------------------
provided that the foregoing provision relating to LIBOR Periods is subject to
- --------
the following:
(1) if any LIBOR Period pertaining to a LIBOR Rate Loan would otherwise
end on a day that is not a Business Day, such LIBOR Period shall be
extended to the next succeeding Business Day unless the result of such
extension would be to carry such LIBOR Period into another calender
month in which event such LIBOR Period shall end on the immediately
preceding Business Day;
(2) any LIBOR Period that would otherwise extend beyond the Drawdown
Termination Date shall end two (2) Business Days prior to such date;
(3) any LIBOR Period pertaining to a LIBOR Rate Loan that begins on the
last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of
such LIBOR Period) shall end on the last Business Day of the calendar
month;
(4) Borrower shall select LIBOR Periods so as not to require a principal
payment or prepayment of any LIBOR Rate Loan during a LIBOR Period for
such Loan; and
(5) Borrower shall select LIBOR Periods so that there shall be not more
than five (5) separate LIBOR Rate Loans in existence at any one time.
"LIBOR Rate" shall mean for each LIBOR Rate Loan for the relevant LIBOR
Period, a rate of interest determined by Lender equal to:
(a) the offered rate for deposits in United States Dollars which appears
on Telerate Page 3750 as of 11:00 a.m., London time, two (2) Business
Days prior to the beginning of such LIBOR Period (unless such date is
not a Business Day, in which event the previous Business Day will be
used) for the applicable LIBOR Period and in an amount approximately
equal to the amount of the LIBOR Rate Loan; divided by
4
<PAGE>
(b) a number equal to 1.0 minus the aggregate (but without duplication) of
-----
the rates (expressed as a decimal fraction) of reserve requirements in
effect on the day which is two (2) Business Days prior to the
beginning of such LIBOR Period (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of
the Board of Governors of the Federal Reserve system or other
governmental authority having jurisdiction with respect thereto, as
now and from time to time in effect) for Eurocurrency funding
(currently referred to as "Eurocurrency liabilities" in Regulation D
of such Board), which are required to be maintained by a member bank
of the Federal Reserve System.
If such interest rates shall cease to be available from Telerate News
Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to Lender and
Borrower.
"LIBOR Rate Loan" shall mean an advance under the Revolving Credit Note
bearing interest by reference to the LIBOR Rate.
"Lien" shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest or lien arising from a mortgage, security
agreement, deed of trust, assignment, collateral mortgage, chattel mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment,
bailment for security purposes or certificate of title lien. The term "Lien"
shall include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement, financing
lease or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.
"Maximum Nonusurious Interest Rate" shall mean the maximum nonusurious
interest rate allowable under applicable United States federal law and under the
laws of the State of Texas as presently in effect and, to the extent allowed by
such laws, as such laws may be amended from time to time to increase such rate.
"Notes" shall mean the promissory note or notes (whether one or more) of
the Borrower described in Section 2.01 hereof, together with any and all
renewals, extensions. increases or rearrangements thereof. The "Notes" shall
include, without limitation, the Original Revolving Credit Note as restated by
the Restated Revolving Credit Note.
"Original Revolving Credit Note" shall mean the promissory note of Borrower
dated February 3, 1994, in the original principal sum of $3,000,000.00, and all
renewals, extensions, modifications and rearrangements after the date thereof.
5
<PAGE>
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, trustee, unincorporated
organization, government or any agency or political subdivision thereof, or any
other form of entity.
"Plan" shall mean any Plan subject to Title IV of ERISA and maintained by
the Borrower or any Subsidiary, or any such plan to which the Borrower or any
Subsidiary is required to contribute on behalf of its employees.
"Prime Rate" shall mean that variable rate of interest per annum
established by Lender from time to time as its "prime rate." Such rate is set by
Lender as a general reference rate of interest, taking into account such factors
as Lender may deem appropriate, it being understood that many of' Lender's
commercial or other loans are priced in relation to such rate, that it is not
necessarily the lowest or best rate actually charged to any customer and that
Lender may make various commercial or other loans at rates of interest having no
relationship to such rate. In the event that Lender does not have a rate
designated by it as its "prime rate," then the "Prime Rate" hereunder shall be
deemed to be the variable rate of interest per annum which is the general
reference rate designated by Lender as its "reference rate," "base rate" or
other similar rate and which is comparable to the "Prime Rate" as described
above. In the event that Lender shall cease to have any of the rates described
in the preceding sentence, then the prime rate shall be that variable rate of
interest per annum established by any one of the following-described
institutions as its "prime rate," subject to the factors described hereinabove,
which institution may be chosen by Lender in its sole discretion, and changed by
Lender in its sole discretion from time to time; such institutions shall
include: Citibank, N.A., Chemical Bank, and Bankers Trust Company. Such
institution may be changed at Lender's discretion, such change to be effective
at the end of any month.
"Prime Rate Loan" shall mean an advance under the Revolving Credit Note
bearing interest by reference to the Prime Rate.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Restated Revolving Credit Note" shall mean the promissory note of the
Borrower described in Subsection 2.01 hereof and being in the form of note
attached as Exhibit "A" hereto, and all renewals. extensions, modifications and
rearrangements thereof.
"RICO" shall mean the Racketeer Influence and Corrupt Organization Act of
1970, as amended.
"Security Instruments" shall mean this Agreement. the agreements or
instruments described or referred to in Sections 7.09, 7.10 and 7.12 hereof, and
any and all other agreements or instruments now or hereafter executed and
delivered by the Borrower, any Subsidiary or any other Person (other than solely
by the Lender and/or any bank or creditor participating in the
6
<PAGE>
benefits of loans evidenced by the Notes or any collateral or security therefor)
in connection with, or as security for the payment or performance of, the Notes
or this Agreement, including, but not limited to the following:
(1) that certain Security Agreement (Accounts, Equipment, General
Intangibles, Instruments and/or Inventory) (the "Security Agreement")
dated as of February 3, 1994, executed by Borrower;
(2) that certain Assignment of Life Insurance Policy as Collateral dated
as of September 16, 1994, executed by Borrower in favor of Lender;
(3) that certain Financing Statement executed by Borrower in favor of
Lender and filed with the Texas Secretary of State under financing
statement number 94-054872;
(4) that certain Financing Statement executed by Borrower in favor of
Lender and filed with the North Carolina Secretary of State under
Financing Statement Number 1242263;
(5) that certain Financing Statement executed by Borrower in favor of
Lender and filed with the Florida Secretary of State under Financing
Statement Number 95-12778; and
(6) that certain Financing Statement executed by Borrower in favor of
Lender and filed with the Pennsylvania Secretary of State under
Financing Statement Number 24500254.
"Subsidiary" shall mean any corporation of which more than fifty percent
(50%) of the issued and outstanding securities having ordinary voting power for
the election of directors is owned or controlled, directly or indirectly, by the
Borrower and/or one or more of its subsidiaries.
"Tangible Net Worth" shall mean, as of any date, the amount by which the
Borrower's assets plus (i) any liabilities owed to shareholders that are
subordinated to Indebtedness, (iii) redeemable, convertible preferred stock
issued in a form satisfactory to Lender and (ii) mandatory redeemable
convertible preferred stock, less (i) patents, copyrights, trademarks,
tradenames, franchises, goodwill, experimental expenses and other similar
intangibles net of accumulated amortization, (ii) unamortized debt discount and
expense, (iii) assets located, and notes and accounts receivable due from
obligors domiciled outside the United States of America, and (iv) obligations
due to the Borrower from shareholders or other related parties', as of such date
exceed the Borrower's liabilities as of such date.
"Working Capital" shall mean current assets according to generally accepted
accounting
7
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principles less current liabilities according to generally accepted accounting
principles.
Section 1.03 Accounting Principles. Where the character or amount of any
---------------------
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with generally
accepted accounting principles, consistently applied, except where such
principles are inconsistent with the requirements of this Agreement.
ARTICLE II
-----------
AMOUNT AND TERMS OF LOAN
------------------------
Section 2.01 The Loans and Commitment. Subject to the terms and
------------------------
conditions and relying on the representations and warranties contained in this
Agreement, the Lender agrees to make the following loans to the Borrower:
Revolving Credit Loans. From the date of this Agreement through the
----------------------
Drawdown Termination Date, the Lender may make revolving credit loans
to the Borrower from time to time on any Business Day in such amounts
as the Borrower may request up to the maximum amount hereinafter
stated, and the Borrower may make borrowings, prepayments and
reborrowings (as permitted or required in Sections 2.06 and 2.07
hereof) in respect thereof; provided, however, that the aggregate
principal amount of all such revolving credit loans at any one time
outstanding under the Restated Revolving Credit Note plus the
aggregate face amount of all outstanding letters of credit issued by
Lender on behalf of Borrower shall not exceed the Borrowing Base. To
evidence the revolving credit loans made by the Lender pursuant to
this subsection, the Borrower will issue, execute and deliver the
Restated Revolving Credit Note dated as of the date of this Agreement
and payable on the Drawdown Termination Date. Interest on the
Restated Revolving Credit Note shall accrue at the rate provided in
Section 2.02 hereof and shall be payable monthly on the first day of
each month during its term.
Section 2.02 Interest Rate and Other Fees.
----------------------------
1. The Notes shall bear interest at the following rates:
(a) The Restated Revolving Credit Note shall bear interest from the
date thereof until maturity at a varying rate per annum which is equal to the
daily average Prime Rate, as the same may change from day to day, calculated as
of the last day of each month (but in no event to exceed the Maximum Nonusurious
Interest Rate) or, at the election of Borrower in accordance with subsection (b)
hereof, at a varying rate per annum which is 2.5 percent (2.5%)
8
<PAGE>
above the applicable LIBOR Rate (but in no event to exceed the Maximum
Nonusurious Interest Rate).
(b) Provided no Default shall have occurred and be continuing, the
Borrower may elect by 11:00 a.m., Central standard time, on the third (3rd)
Business Day prior to (i) the date of any proposed advance under the Restated
Revolving Credit Note which is to bear interest at the LIBOR Rate, (ii) the end
of each LIBOR Period with respect to any LIBOR Rate Loan, or (iii) the date on
which the Borrower wishes to convert any Prime Rate Loan to a LIBOR Rate Loan,
to have all or some portion of the Indebtedness under the Restated Revolving
Credit Note bear interest at the LIBOR Rate for the next succeeding LIBOR Period
as designated by the Borrower in such election. Borrower shall evidence such
election by the delivery of a written notice to Lender. If no election is
received with respect to a LIBOR Rate Loan by 11:00 a.m., Central standard time,
on the third (3rd) Business Day prior the end of the LIBOR Period with respect
to such LIBOR Rate Loan, such LIBOR Rate Loan shall be converted to an Prime
Rate Loan at the end of the LIBOR Period. Each election shall be made by
delivery of a written notice to Lender, by telecopy or overnight courier.
Borrower shall have the option to (i) convert at any time all or any part of its
outstanding Indebtedness under the Restated Revolving Credit Note equal to
$100,000,00 and integral multiples of $50,000.00 in excess of that amount from
LIBOR Rate Loans to Prime Rate Loans or from Prime Rate Loans to LIBOR Rate
Loans, or (ii) upon the expiration of any LIBOR Period applicable to a LIBOR
Rate Loan, to continue all or any portion of such loan equal to $100,000.00 and
integral multiples of $50,000.00 in excess of that amount as a LIBOR Rate Loan
and the succeeding LIBOR Periods(s) of such continued Loan shall commence on the
last day of the LIBOR Period of the loan to be continued; provided that LIBOR
Rate Loans may only be converted into Prime Rate Loans on the expiration date of
a LIBOR Period applicable thereto; and provided further, that no outstanding
loan may be made or continued as, or be converted into, a LIBOR Rate Loan when
any Default as occurred and is continuing.
(c) Upon the occurrence of a Default or an Event of Default,
principal and past due interest (to the extent permitted by law) in respect of
the Notes shall bear interest at a rate which is three percent (3%) per annum in
excess of the rate set forth in Subsections 2.02(a) hereinabove (but in no event
to exceed the Maximum Nonusurious Interest Rate) irrespective of whether the
maturity of the Indebtedness has been accelerated.
(d) Notwithstanding anything to the contrary contained herein, if the
introduction of any change in or in the interpretation of any law or regulation
shall make it unlawful, or any central bank or other Governmental Authority
shall assert that it is unlawful, for Lender to agree to make or to make or to
continue to fund or maintain any LIBOR Rate Loan, then, on notice thereof and
demand therefor by Lender to Borrower (i) the obligation of Lender to agree to
make or to make or to continue to fund or maintain LIBOR Rate Loans shall
terminate and (ii) Borrower shall forthwith prepay in full all outstanding LIBOR
Rate Loans. together with interest accrued thereon, unless Borrower, within five
(5) Business Days after the delivery of such notice and demand, converts all
such LIBOR Rate Loans into a Prime Rate
9
<PAGE>
Loans.
(e) Interest calculations are subject to certain recapture provisions
set forth in the Notes.
2. The fee to Lender for letters of credit issued by Lender on behalf of
Borrower shall equal the greater of 1% per annum of the amount of the letter of
credit or $250.00.
3. From the date hereof until maturity, the Borrower shall pay a
commitment fee to the Lender equal to one quarter of one percent (.25%) per
annum of the unadvanced portion of the Revolving Credit Note; one twelfth (1/12)
of such fee shall be paid each month based on the unadvanced portion of the
Revolving Credit Note for that month.
Section 2.03 Notice and Manner of Revolving Credit Borrowing. The amount
-----------------------------------------------
and date of each revolving credit loan shall be made as set forth in this
Section. Advances under the Restated Revolving Credit Note may be made by the
Lender (i) pursuant to the terms of any written agreement executed in connection
herewith between Borrower and Lender, or (ii) at the oral or written request of
the Borrower or of any officer or agent of Borrower designated by or acting
under the authority of resolutions of the board of directors of Borrower, if a
corporation, or other written authorization of Borrower if other than a
corporation, a duly certified or executed copy of which shall be furnished to
the Lender, until written notice of the revocation of such authority is received
by the Lender. Borrower covenants and agrees to furnish to the Lender written
confirmation of any such oral request within five (5) days of the resulting loan
or advance, but any such loan or advance shall be deemed to be made under and
entitled to the benefits of the Restated Revolving Credit Note irrespective of
any failure by Borrower to furnish such written confirmation. Any loan or
advance shall be conclusively presumed to have been made under the terms of the
Restated Revolving Credit Note to or for the benefit of Borrower when made
pursuant to the terms of any written agreement executed in connection therewith
between Borrower and Lender, or in accordance with such requests and directions,
or when said advances are deposited to the credit of the account of Borrower
with Lender regardless of the fact that persons other than those authorized
hereunder may have authority to draw against such account, or may have requested
an advance. Unless requested by Borrower in writing all requests for advances
shall be presumed to be for an advance on the Restated Revolving Credit Note.
Section 2.04 Application of Cash Sums. All cash sums paid to and
------------------------
received by the Lender on account of any Property upon which the Lender has a
Lien (i) shall be promptly applied by the Lender on the Indebtedness whether or
not such Indebtedness shall have, by its terms, matured, such application to be
made to principal or interest or expenses as the Lender may elect; provided,
however, the Lender need not apply or give credit for any item included in such
sums until the Lender has received final credit therefor from its bank in
accordance with normal banking practices (at least three [3] business days shall
be allowed for collection of all items through normal banking channels) or has
received solvent credits accepted as such by the
10
<PAGE>
Lender; provided, further, however, the Lender's failure to so apply any such
sums shall not be a waiver of the Lender's right to so apply such sums or any
other sums at any time, or (ii) prior to the happening of any Default or Event
of Default, at the option of the Lender, shall be released to the Borrower for
use in the Borrower's business.
Section 2.05 Computation. All payments of interest shall be computed on
-----------
the per annum basis of a year of three hundred sixty (360) days and for the
actual number of days (including the first but excluding the last day) elapsed
unless such calculation would result in a usurious rate, in which case interest
shall be calculated on a per annum basis of a year of three hundred sixty five
(365) or three hundred sixty six (366) days, as the case may be.
Section 2.06 Voluntary Prepayments and Reborrowings. The unpaid
--------------------------------------
principal balance of each Note at any time shall be the total amounts loaned or
advanced under each Note by the Lender, less the amount of payments or
prepayments of principal made on each Note by or for the account of Borrower.
It is contemplated that by reason of prepayments thereon there may be times when
no Indebtedness is owing thereunder; but notwithstanding such occurrences, each
Note shall remain valid and be in full force and effect as to loans or advances
made pursuant to and under the terms of each Note subsequent to each such
occurrence. All loans or advances and all payments or prepayments made
thereunder on account of principal or interest may be evidenced by Lender, or
any subsequent holder, maintaining in accordance with its usual practice an
account or accounts evidencing the Indebtedness of the Borrower resulting from
all loans or advances and all payments or prepayments thereunder from time to
time and the amounts of principal and interest payable and paid from time to
time thereunder, in which event, in any legal action or proceeding in respect of
the Notes, the entries made in such account or accounts shall be conclusive
evidence of the existence and amounts of the obligations of the Borrower therein
recorded.
Section 2.07 Mandatory Prepayments. If at any time the outstanding
---------------------
principal balance under the Restated Revolving Credit Note exceeds the Borrowing
Base, then the Borrower shall forthwith prepay the amount of such excess for
application towards reduction of the outstanding principal balance of the
Restated Revolving Credit Note. Said prepayment shall be without premium or
penalty, and shall be made together with the payment of accrued interest on the
amount prepaid.
Section 2.08 Cross-collateralization and Default. The Security
-----------------------------------
Instruments, including this Agreement, the Notes and any other instrument given
in connection with, or as security for, any Indebtedness of the Borrower or any
Subsidiary, shall serve as security one for the other, and an event of default
under the Notes or any such instrument shall constitute an event of default
under all such other Notes and instruments.
Section 2.09 Prepayment in Full. The Borrowers may at any time prepay in
------------------
full the loans evidenced by the Notes.
11
<PAGE>
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender (which representations and warranties will
survive the delivery of the Notes and the making of the loans thereunder) that:
Section 3.01 Corporate Existence. The Borrower and each Subsidiary is a
-------------------
corporation duly organized, legally existing and in good standing under the laws
of the jurisdiction in which it is incorporated and is duly qualified as a
foreign corporation in all Jurisdictions wherein it maintains a place of
business.
Section 3.02 Corporate Power and Authorization. The Borrower is duly
---------------------------------
authorized and empowered to create and issue the Notes; and the Borrower and
each Subsidiary is duly authorized and empowered to execute, deliver and perform
the Security Instruments, including this Agreement, to which it is a party; and
all corporate action on the Borrower's or any Subsidiary's part requisite for
the due creation and issuance of the Notes and for the due execution, delivery
and performance of the Security Instruments, including this Agreement, to which
the Borrower or any Subsidiary is a party has been duly and effectively taken.
The Board of Directors of the Borrower acting pursuant to a duly called and
constituted meeting, after proper notice, or pursuant to valid and unanimous
consent, has determined (i) that entry into and performance of this Agreement
and each of the other documents to which the Borrower is a party, directly or
indirectly benefits the Borrower and (ii) that adequate and fair consideration
and reasonably equivalent value has been received by the Borrower to execute and
perform this Agreement and each of the other documents to which it is a party.
Section 3.03 Binding Obligations. This Agreement does, and the Notes and
-------------------
other Security Instruments to which the Borrower and any Subsidiaries are
parties upon their creation, issuance, execution and delivery will, constitute
valid and binding obligations of the Borrower or the Subsidiary, as the case may
be, enforceable in accordance with their terms.
Section 3.04 No Legal Bar or Resultant Lien. The Notes and the Security
------------------------------
Instruments, including this Agreement, to which the Borrower or any Subsidiary
is a party, do not and will not violate any provisions of the articles or
certificates of incorporation or bylaws of the Borrower or any such Subsidiary,
or any contract, agreement, law, regulation, order, injunction, judgment, decree
or writ to which the Borrower or such Subsidiary is subject, or result in the
creation or imposition of any Lien upon any Properties of the Borrower or such
Subsidiary, other than those contemplated by this Agreement.
Section 3.05 No Consent. The execution, delivery and performance of the
----------
Notes and the Security Instruments, including this Agreement, to which the
Borrower or any Subsidiary is a party do not require the consent or approval of
any other Person, including without limitation any
12
<PAGE>
regulatory authority or governmental body of the United States or any state
thereof or any political subdivision of the United States or any state thereof.
Section 3.06 Financial Condition. The unaudited consolidated and
-------------------
consolidating financial statements of the Borrower and its Subsidiaries dated
May 31, 1996, which have been delivered to the Lender, are complete and correct,
have been prepared in accordance with generally accepted accounting principles,
consistently applied, and fully and accurately reflect the financial condition
and results of the operations of the Borrower and its Subsidiaries as at the
date or dates and for the period or periods stated (subject only to normal year-
end audit adjustments with respect to any unaudited interim statements). No
material adverse change, either in any case or in the aggregate, has since
occurred in the condition, financial or otherwise, of the Borrower or any
Subsidiary, except as disclosed to the Lender in writing.
Section 3.07 Investments and Guaranties. Neither the Borrower nor any
--------------------------
Subsidiary has made investments in, advances to or guaranties of the obligations
of any Person, except as reflected in the Financial Statements or disclosed to
the Lender in writing.
Section 3.08 Issuance of Stock. There are no outstanding subscriptions,
-----------------
warrants, options, calls, commitments, convertible securities or other
agreements to which Borrower is a party or by which it is bound, calling for the
issuance of any capital stock or securities convertible into capital stock of
Borrower.
Section 3.09 Liabilities. Except for liabilities incurred in the normal
-----------
course of business, neither the Borrower nor any Subsidiary has any material
(individually or in the aggregate) liabilities, direct or contingent, except as
disclosed or referred to in the Financial Statements or as disclosed to the
Lender in writing. Except as described in the Financial Statements, or as
other-wise disclosed to the Lender in writing, there is no litigation, legal or
administrative proceeding, investigation or other action of any nature pending
or, to the knowledge of the Borrower, threatened against or affecting the
Borrower or any Subsidiary which involves the possibility of any judgment or
liability not fully covered by insurance, and which may materially and adversely
affect the business or the Properties of the Borrower or any Subsidiary or their
ability to carry on business as now conducted.
Section 3.10 Taxes; Governmental Charges. The Borrower and each
---------------------------
Subsidiary has filed all tax returns and reports required to be filed and has
paid all taxes, assessments, fees and other governmental charges levied upon it.
Section 3.11 Titles, etc. The Borrower and each Subsidiary has good
-----------
title to its respective material (individually or in the aggregate) Properties,
free and clear of all Liens except those referred to in the Financial
Statements.
Section 3.12 Defaults. Neither the Borrower nor any Subsidiary is in
--------
default (in any respect which materially and adversely affects its respective
business, Properties, operations or
13
<PAGE>
condition, financial or otherwise) under any indenture, mortgage, deed of trust,
agreement or other instrument to which the Borrower or any Subsidiary is a party
or by which the Borrower or any Subsidiary is bound, except as disclosed to the
Lender in writing. No Default hereunder has occurred and is continuing.
Section 3.13 Use of Proceeds; Margin Stock. The proceeds of the Restated
-----------------------------
Revolving Credit Note will be used by the Borrower for working capital and for
issuing letters of credit. None of such proceeds will be used for, and neither
the Borrower nor any Subsidiary are engaged in, the business of extending credit
for the purpose of purchasing or carrying any "margin stock" as defined in
Regulations G or U of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 221), or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry a margin stock or for any
other purpose which might constitute this transaction a "purpose credit" within
the meaning of said Regulations G or U. No part of the proceeds of the loans
evidenced by the Notes will be used for any purpose which violates Regulation X
of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 224).
All loans evidenced by the Notes are and shall be "business loans" as such term
is used in the Depository Institutions Deregulation and Monetary Control Act of
1980, as amended, and such loans are for business, commercial, investment or
other similar purposes and not primarily for personal, family, household or
agricultural use, as such terms are used and defined in Chapter 1 of the Texas
Credit Code, Title 79, Texas Revised Civil Statutes. Neither the Borrower nor
any Subsidiary nor any Person acting on behalf of the Borrower or any Subsidiary
has taken or will take any action which might cause the Notes or any of the
Security Instruments, including this Agreement, to violate Regulations G or U or
any other regulation of the Board of Governors of the Federal Reserve System or
to violate the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereafter be in
effect.
Section 3.14 Compliance with the Law. Neither the Borrower nor any
-----------------------
Subsidiary:
(a) is in violation of any law, ordinance, or governmental rule or
regulation to which the Borrower or any Subsidiary or any of their respective
Properties are subject including but not limited to those laws, ordinances and
governmental rules and regulations regarding employee wages and overtime;
(b) has failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of their respective
Properties or the conduct of their respective businesses;
which violation or failure might adversely affect the business, prospects,
profits, Properties or condition (financial or otherwise) of the Borrower or any
Subsidiary.
Section 3.15 ERISA. The Borrower and its Subsidiaries are in compliance
-----
in all material respects with the applicable provisions of ERISA, and no
"reportable event," as such term is defined in Section 4043 of ERISA, has
occurred with respect to any of the Borrower or any
14
<PAGE>
Subsidiary.
Section 3.16 Subsidiaries. The Borrower has no Subsidiaries.
------------
Section 3.17 Direct Benefit From Loans. The Borrower has received, or,
-------------------------
upon the execution and funding thereof, will receive (i) direct benefit from the
making and execution of this Agreement and the other documents to which it is a
party, and (ii) fair and independent consideration for the entry into, and
performance of, this Agreement and the other documents to which it is a party.
Section 3.18 RICO. The Borrower is not in violation of any laws,
----
statutes or regulations, including, without limitation, RICO, which contain
provisions which could potentially override Lender's security interest in the
Collateral (as that term is defined in the Security Instruments).
ARTICLE IV
-----------
AFFIRMATIVE COVENANTS
---------------------
A deviation from the provisions of this Article IV shall not constitute a
Default under this Agreement if such deviation is consented to in writing (in
the manner hereinafter provided in Section 8.02) by the Lender. Without the
prior written consent of the Lender, the Borrower will at all times comply with
the covenants contained in this Article IV, from the date hereof and for so long
as any part of the Notes or the Commitment is outstanding.
Section 4.01 Financial Statements and Reports. The Borrower and the
--------------------------------
Subsidiaries will promptly furnish to the Lender from time to time upon request
such information regarding the business and affairs and financial condition of
the Borrower and its Subsidiaries as the Lender may reasonably request, and will
furnish to the Lender:
(a) Annual Financial Statements. As soon as available and in any event
---------------------------
within one hundred twenty (120) days after the close of each fiscal year of the
Borrower, the audited consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at the end of such year and the audited
consolidated and consolidating operating statements of the Borrower and its
Subsidiaries as at the end of such year (showing income, expenses and surplus),
setting forth in each case in comparative form figures for the previous fiscal
year, all prepared in accordance with generally accepted accounting principles
and accompanied by the unqualified opinion of an independent certified public
accountant acceptable to the Lender;
(b) Monthly Financial Statements. As soon as available and in any event
----------------------------
within thirty (30) days after the end of each calendar month, (i) the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such month, (ii) the consolidated and
consolidating operating statements of the Borrower and its Subsidiaries for such
month (showing income, expenses and surplus for such month and for the period
from the
15
<PAGE>
beginning of the fiscal year to the end of such month) and (iii) a compliance
report calculating the financial covenants set forth in Sections 5.10, 5.11,
5.12 and 5.18 of this Agreement;
(c) Accounts Ages. As soon as available and in any event within thirty
-------------
(30) days after the end of each calendar month, an aging of all accounts
receivable, showing each such account which is thirty (30), sixty (60), ninety
(90) and over ninety (90) days past due and customer statements detailing the
balance of each account;
(d) Inventory Report. As soon as available, upon the request of Lender, a
----------------
schedule of Inventory, indicating product type, location and cost and a schedule
of accounts payable; and
(e) Monthly Borrowing Base Report. As soon as available and, in any event,
-----------------------------
within 30 days after the end of each calendar month, a report in such form as
Lender may reasonably request, reflecting the Eligible Accounts and Eligible
Inventory of Borrower as of the last day of the previous calendar month and
calculating the Accounts Advance Amount and Inventory Advance Amount based
thereon. Such report shall also reflect such other information as Lender may
reasonably request.
All such balance sheets and other financial statements referred to in this
Section 4.01 above shall be in such detail as the Lender may reasonably request
and shall conform to generally accepted accounting principles applied on a basis
consistent with those of the Financial Statements, except only for such changes
in accounting principles or practice with which independent certified public
accountants concur.
Section 4.02 Annual Audits. Borrower and its Subsidiaries shall allow
-------------
Lender or Lender's agents to conduct annual accounts receivable and inventory
audits. Borrower shall pay for all costs and expenses associated with such
audits.
Section 4.03 Compliance with Laws, Payment of Taxes and Other Claims.
-------------------------------------------------------
The Borrower will and will cause each Subsidiary to observe and comply with (a)
all laws, statutes, codes, acts, ordinances, rules, regulations, directions and
requirements of all federal, state, county, municipal and other governments,
departments, commissions, boards, courts, authorities, officials and officers
applicable to it and where the failure to observe or comply would have a
material adverse effect on the condition, financial or otherwise, of Borrower;
and (b) pay and discharge promptly all taxes, assessments and governmental
charges or levies imposed upon the Borrower or any Subsidiary or upon the income
or any Property of the Borrower or any Subsidiary as well as all claims of any
kind (including claims for labor, materials, supplies and rent) which, if
unpaid, might become a lien upon any or all of the Property of the Borrower or
any Subsidiary; provided, however, that, subject to the written approval of the
Lender, neither the Borrower nor any Subsidiary shall be required to pay any
such tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings diligently conducted and if the Borrower or its Subsidiary shall
have set up reserves therefor adequate under generally accepted accounting
principles.
16
<PAGE>
Section 4.04 Maintenance. The Borrower will and will cause each
-----------
Subsidiary to (i) maintain its corporate existence, rights and franchises; (ii)
observe and comply with all valid laws, statutes, codes, acts, ordinances,
judgments, injunctions, rules, regulations, certificates, franchises, permits
and licenses (including without limitation applicable statutes, regulations,
orders and restrictions relating to environmental standards or controls or to
energy regulations) of all federal, state, county, municipal and other
governmental authorities; (iii) maintain its Properties (and any Properties
leased by or consigned to it or held under title retention or conditional sales
contracts) in good and workable condition (ordinary wear and tear excepted) at
all times and make all repairs, replacements, additions, betterments and
improvements to its Properties as are needful and proper so that the business
carried on in connection therewith may be conducted properly and efficiently at
all times; and (iv) maintain and keep books of records and accounts, all in
accordance with generally accepted accounting principles, consistently applied,
of all dealings and transactions in relation to its business and activity.
Section 4.05 Further Assurances. The Borrower will and will cause each
------------------
Subsidiary to cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of the Security Instruments, including this
Agreement. The Borrower at its expense will promptly execute and deliver to the
Lender upon request all such other and further documents, agreements and
instruments to effectuate the agreements of the Borrower or any of its
Subsidiaries in the Security Instruments, including in this Agreement, or to
further evidence and more fully describe the collateral intended as security for
the Notes, or to correct any omissions in the Security Instruments, or more
fully to state the security obligations set out herein or in any of the Security
Instruments, or to perfect, protect or preserve any Liens created pursuant to
any of the Security Instruments, or to make any recordings, to file any notices,
or obtain any consents, all as may be necessary or appropriate in connection
therewith.
Section 4.06 Performance of Obligations. The Borrower will pay the Notes
--------------------------
according to the reading, tenor and effect thereof; and the Borrower will do and
perform every act and discharge all of the obligations provided to be performed
and discharged by the Borrower under the Security Instruments, including this
Agreement, at the time or times and in the manner specified, and cause each of
its Subsidiaries to take such action with respect to their obligations to be
performed and discharged under the Security Instruments to which they
respectively are parties.
Section 4.07 Reimbursement of Expenses. The Borrower will pay all
-------------------------
reasonable legal fees incurred by the Lender in connection with the preparation,
amendment, interpretation, administration and enforcement of this Agreement and
any and all other Security Instruments contemplated hereby. The Borrower will,
upon request, promptly reimburse the Lender for all amounts expended, advanced
or incurred by the Lender to satisfy any obligation of the Borrower under this
Agreement or any other Security Instrument, or to protect the Properties or
business of the Borrower or any Subsidiary or to collect the Notes, or to
enforce the rights of the Lender under this Agreement, the Notes, or any other
Security Instrument, which amounts will include all court costs, attorneys'
fees, fees of auditors and accountants, and investigation expenses
17
<PAGE>
reasonably incurred by the Lender in connection with any such matters, together
with interest at either (i) if a Default or Event of Default shall have occurred
and be continuing, the rate specified in Section 2.02(b) on each such amount
from the date that the same is expended, advanced or incurred by the Lender
until the date of reimbursement to the Lender, or (ii) if no Default or Event of
Default shall have occurred and be continuing, the rate specified in Section
2.02(a) on each such amount from the date that the same is expended, advanced or
incurred by the Lender until the date of written demand or request by the Lender
for the reimbursement of same, and thereafter at the rate specified in Section
2.02(b) until the date of reimbursement to the Lender.
Section 4.08 Insurance. The Borrower and each Subsidiary now maintains
---------
and will continue to maintain with financially sound and reputable insurers,
insurance with respect to its respective Properties and businesses against such
liabilities, casualties, risks and contingencies and in such types and amounts
as is customary in the case of corporations engaged in the same or similar
businesses and similarly situated but in any event, all fixed assets of the
Borrower shall be insured for an amount at least equal to the unpaid principal
balance of the Notes, from time to time outstanding. All such policies shall
name the Lender as loss payee. Upon request of the Lender, the Borrower will
furnish or cause to be furnished to the Lender from time to time a summary of
the insurance coverage of the Borrower and its Subsidiaries in form and
substance satisfactory to the Lender and if requested will furnish the Lender
copies of the applicable policies.
Section 4.09 Right of Inspection. The Borrower will permit and will cause
-------------------
each Subsidiary to permit any officer, employee or agent of the Lender to visit
and inspect any of the Properties of the Borrower or any Subsidiary, examine the
Borrower's or any Subsidiary's books of record and accounts, take copies and
extracts therefrom, and discuss the affairs, finances and accounts of the
Borrower or any Subsidiary with the Borrower's or Subsidiary's officers,
employees, accountants and auditors, all at such times and as often as the
Lender may reasonably desire.
Section 4.10 Notice of Certain Events. The Borrower shall promptly
------------------------
notify the Lender if the Borrower learns of the occurrence of (i) any event
which constitutes a Default, together with a detailed statement by a responsible
officer of the Borrower of the steps being taken to cure the effect of such
Default; or (ii) the receipt of any notice from, or the taking of any other
action by, the holder of any promissory note, debenture or other evidence of
indebtedness of the Borrower or any Subsidiary or of any security (as defined in
the Securities Act of 1933, as amended) of the Borrower or any Subsidiary with
respect to a claimed default, together with a detailed statement by a
responsible officer of the Borrower specifying the notice given or other action
taken by such holder and the nature of the claimed default and what action the
Borrower or its Subsidiary is taking or proposes to take with respect thereto;
or (iii) any legal, judicial or regulatory proceedings affecting the Borrower or
any Subsidiary or any of the Properties of the Borrower or any Subsidiary in
which the amount involved is material and is not covered by insurance or which,
if adversely determined, would have a material and adverse effect on the
business or the financial condition of the Borrower or any Subsidiary; or (iv)
any dispute between the Borrower
18
<PAGE>
or any Subsidiary and any governmental or regulatory body or any other Person
which, if adversely determined, might materially interfere with the normal
business operations of the Borrower or any Subsidiary; or (v) any material
adverse changes, either in any case or in the aggregate, in the assets,
liabilities, financial condition, business, operations, affairs or circumstances
of the Borrower or any Subsidiary, from those reflected in the Financial
Statements or by the facts warranted or represented in any Security Instrument,
including this Agreement.
Section 4.11 ERISA Information and Compliance. The Borrower will promptly
--------------------------------
furnish to the Lender (i) if requested by the Lender, promptly after the filing
thereof with the United States Secretary of Labor or the Pension Benefit
Guaranty Corporation, copies of each annual and other report with respect to
each Plan or any trust created thereunder, and (ii) immediately upon becoming
aware of the occurrence of any "reportable event," as such term is defined in
Section 4043 of ERISA, or of any "prohibited transaction," as such term is
defined in Section 4975 of the Internal Revenue Code of 1986, as amended, in
connection with any Plan or any trust created thereunder, a written notice
signed by the President or the principal financial officer of the Borrower
specifying the nature thereof, what action the Borrower or any of its
Subsidiaries is taking or proposes to take with respect thereto, and, when
known, any action taken by the Internal Revenue Service with respect thereto.
The Borrower will fund, or will cause its Subsidiaries to fund, all current
service pension liabilities as they are incurred under the provisions of all
Plans from time to time in effect for the benefit of employees of the Borrower
or any of its Subsidiaries, and comply with all applicable provisions of ERISA.
Section 4.12 Environmental Requirements. Borrower shall comply with all
--------------------------
federal laws, state statutes, municipal ordinances and all other governmental
standards, rules and regulations applicable to Borrower or to its Property in
respect to occupational health and safety, hazardous waste and substances and
environmental matters. Borrower shall promptly notify Lender of its receipt of
any notice of a violation or an alleged violation of any such federal laws,
state statutes, municipal ordinances or other governmental standards, rules or
regulations. Borrower shall indemnify and hold Lender harmless from all loss,
cost, damages, claim and expense incurred by Lender on account of the Borrower's
failure to perform the obligations of this Section.
Section 4.13 Management of Borrower. Except in the event of Terrence M.
----------------------
Hunt's death or a disability which prevents Terrence M. Hunt from working,
Terrence M. Hunt shall manage Borrower, shall be the president of Borrower and
shall be a member of the board of directors of Borrower during the term of this
Agreement.
ARTICLE V
---------
NEGATIVE COVENANTS
------------------
A deviation from the provisions of this Article V shall not constitute a
Default under this Agreement if such deviation is consented to in writing (in
the manner hereinafter provided in
19
<PAGE>
Section 8.02) by the Lender. Without the prior written consent of the Lender,
the Borrower will at all times comply with the covenants contained in this
Article V, from the date hereof and for so long as any part of the Notes or the
Commitment is outstanding.
Section 5.01 Debts, Guaranties and Other Obligations. Neither the
---------------------------------------
Borrower nor any Subsidiary will incur, create, assume or in any manner become
or be liable in respect of any indebtedness (including obligations for the
payment of rentals); and neither the Borrower nor any Subsidiary will guarantee
or otherwise in any way become or be responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of any other Person or
agreement for the furnishing of funds to any other Person through the purchase
or lease of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging the
indebtedness of any other Person, or otherwise, except that the foregoing
restrictions shall not apply to
(a) the Notes or other Indebtedness to the Lender;
(b) liabilities, direct or contingent, of the Borrower and its
Subsidiaries existing on the date of this Agreement which are reflected in the
Financial Statements or have been disclosed to the Lender in writing, but not
any renewals and extensions thereof;
(c) endorsements of negotiable or similar instruments for collection or
deposit in the ordinary course of business;
(d) trade payables or similar obligations from time to time incurred in
the ordinary course of business other than for borrowed money;
(e) taxes, assessments or other government charges which are not yet due
or are being contested pursuant to Section 4.03 hereof; and
(f) indebtedness which is subordinated to the Notes by terms satisfactory
to the Lender, in its sole discretion.
Section 5.02 Liens. Neither the Borrower nor any Subsidiary will create,
-----
incur, assume or permit to exist any Lien on any of its Properties (now owned or
hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness to the Lender;
(b) Liens for taxes, assessments, or other governmental charges not yet
due or which are being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as shall be required by
generally accepted accounting principles shall have been made therefor;
(c) Liens of landlords, vendors, carriers, warehousemen, mechanics,
laborers and
20
<PAGE>
materialmen arising by law in the ordinary course of business for sums not yet
due or, subject to the written approval of the Lender. being contested in good
faith by appropriate action promptly initiated and diligently conducted, if such
reserve as shall be required by generally accepted accounting principles shall
have been made therefor;
(d) Liens existing on Property owned by the Borrower or any Subsidiary on
the date of this Agreement which have been disclosed to the Lender in writing
but not any renewals and extensions thereof;
(e) pledges or deposits made in the ordinary course of business in
connection with workmen's compensation, unemployment insurance, social security
and other like laws; and
(f) inchoate liens arising under ERISA to secure the contingent liability
of the Borrower or any Subsidiary permitted by Section 4.11 hereof.
Section 5.03 Investments, Loans and Advances. Neither the Borrower nor
-------------------------------
any Subsidiary will make or permit to remain outstanding any loans or advances
to or investments in any Person, except that the foregoing restriction shall not
apply to:
(a) loans, advances or investments the material details of which have been
set forth in the Financial Statements or have been otherwise disclosed to the
Lender in writing prior to the execution of this Agreement;
(b) investments in direct obligations of the United States of America or
any agency thereof;
(c) investments in certificates of deposit issued by Lender or commercial
banks in the United States having a combined capital and surplus in excess of
One Hundred Million Dollars ($100,000,000.00); and
(d) investments in commercial paper with the best rating by Standard &
Poor's, Moody's Investors Service, Inc., or any other rating agency satisfactory
to the Lender issued by companies in the United States with a combined capital
and surplus in excess of One Hundred Million Dollars ($100,000,000.00).
Section 5.04 Dividends, Distributions and Redemptions. The Borrower will
----------------------------------------
not declare or pay any dividend, purchase, redeem or otherwise acquire for value
any of its stock now or hereafter outstanding, return any capital to its
stockholders, or make any distribution of its assets to its stockholders as
such.
Section 5.05 Sale of Properties. Neither the Borrower nor any Subsidiary
------------------
will sell, transfer or otherwise dispose of all or any substantial portion or
integral part of its Properties except in the ordinary course of business, or
enter into any arrangement, directly or indirectly,
21
<PAGE>
with any Person whereby the Borrower or any Subsidiary shall sell or transfer
any Property, whether now owned or hereafter acquired, and whereby the Borrower
or any Subsidiary shall then or thereafter rent or lease as lessee such Property
or any part thereof or other Property which the Borrower or any Subsidiary
intends to use for substantially the same purpose or purposes as the Property
sold or transferred.
Section 5.06 Nature of Business. Neither the Borrower nor any Subsidiary
------------------
will permit any material change to be made in the character of its business as
carried on at the date hereof.
Section 5.07 Mergers, Consolidations, etc. Neither the Borrower nor any
----------------------------
Subsidiary will amend its certificate or articles of incorporation or otherwise
change its corporate name or structure, or consolidate with or merge into or
acquire any Person, or permit any other Person to consolidate with or merge into
or acquire the Borrower or any Subsidiary or acquire the stock of any
corporation or form any Subsidiary.
Section 5.08 ERISA Compliance. The Borrower will not at any time permit
----------------
any Plan maintained by it or any Subsidiary to:
(a) engage in any "prohibited transaction" as such term is defined in
Section 4975 of the Internal Revenue Code of 1986, as amended;
(b) incur any "accumulated funding deficiency" as such term is defined in
Section 302 of ERISA; or
(c) terminate any such Plan in a manner which could result in the
imposition of a Lien on the Property of the Borrower or any Subsidiary pursuant
to Section 4068 of ERISA.
Section 5.09 Issuance of Stock. During the term of this Agreement,
-----------------
Borrower will not issue any additional shares of stock which would substantially
change the voting rights of shareholders of Borrower as of the date of this
Agreement.
Section 5.10 Tangible Net Worth. During the term of this Agreement,
------------------
Borrower shall not permit its Tangible Net Worth on a consolidated basis to be
less than $6,700,000.00.00. Such determination shall be made each month.
Section 5.11 Minimum Current Ratio. During the term of this Agreement,
---------------------
the Borrower shall not permit its ratio of (i) current assets according to
generally accepted accounting principles to (ii) current liabilities according
to generally accepted accounting principles, to be less than 1.20 to 1.0.
Section 5.12 Ratio of Debt to Tangible Net Worth. During the term of
-----------------------------------
this Agreement, the Borrower shall not permit its ratio of (i) all liabilities
according to generally accepted accounting principles, including without
limitation, current lease obligations, but excluding any
22
<PAGE>
liabilities that are subordinated to the Indebtedness to (ii) Tangible Net Worth
on a consolidated basis to be greater than 2.75 to 1.0. Such determination shall
be made each month.
Section 5.13 Minimum Losses. During the term of this Agreement, the
--------------
Borrower shall not permit its net income to be less than zero for two
consecutive quarters or on an annual basis.
Section 5.14 Changes in Accounting Methods. The Borrower will not make
-----------------------------
any change in its accounting method as in effect on the date of this Agreement
or change its fiscal year ending date from December 31, unless such changes have
the prior written approval of the Lender.
Section 5.15 Transactions With Affiliates. The Borrower will not,
----------------------------
directly or indirectly, enter into any transaction (including, but not limited
to, the sale or exchange of property or the rendering of any service) with any
Affiliate, other than in the ordinary course of its business and upon
substantially the same or better terms as it could obtain in an arm's length
transaction with a Person who is not an Affiliate.
Section 5.16 Use of Proceeds. The Borrower will not use the proceeds of
---------------
the Restated Revolving Credit Note for purposes other than those set forth in
Section 3.13.
Section 5.17 RICO. The Borrower will not violate any laws, statutes or
----
regulations, whether federal or state, for which forfeiture of its properties is
a potential penalty, including, without limitation, RICO.
Section 5.18 Minimum Working Capital. During the term of this Agreement,
-----------------------
the Borrower shall not permit its Working Capital to be less than
$3,000,000.00."
ARTICLE VI
-----------
EVENTS OF DEFAULT
-----------------
Section 6.01 Events. Any of the following events shall be considered an
------
"Event of Default" as that term is used herein:
(a) Principal and Interest Payments. Default is made in the payment or
-------------------------------
prepayment when due of any installment of principal or interest on the Notes or
any other Indebtedness; or
(b) Representations and Warranties. Any representation or warranty made by
------------------------------
the Borrower or any Subsidiary in any Security Instrument, including this
Agreement, proves to have been incorrect in any material respect as of the date
thereof; or any representation, statement (including financial statements),
certificate or data furnished or made by the Borrower or any Subsidiary (or any
officer, accountant or attorney of the Borrower or any Subsidiary) under any
Security Instrument, including this Agreement, proves to have been untrue in any
material
23
<PAGE>
respect, as of the date as of which the facts therein set forth were stated or
certified; or
(c) Affirmative Covenants. Default is made in the due observance or
---------------------
performance of any of the covenants or agreements contained in Article IV of
this Agreement, or
(d) Negative Covenants. Default is made in the due observance or
------------------
performance by the Borrower or any Subsidiary of any of the covenants or
agreements contained in Article V of this Agreement; or
(e) Conditions Precedent. The Borrower fails to satisfy, or cause to be
--------------------
satisfied, any of the conditions precedent contained in Article VII hereof which
are not to be completed as of the date of this Agreement; or
(f) Other Security Instrument Obligations. Default is made in the due
-------------------------------------
observance or performance by the Borrower or any Subsidiary of any of the
covenants or agreements contained in any Security Instrument other than this
Agreement, and such default continues unremedied beyond the expiration of any
applicable grace period which may be expressly allowed under such Security
Instrument; or
(g) Involuntary Bankruptcy Proceedings. A receiver, conservator,
----------------------------------
custodian, liquidator, creditors' committees board of inspectors, rehabilitator,
trustee or similar individual officer or committee of the Borrower or any
Subsidiary, or of any of their Property, is created, engaged, retained,
procured, authorized, or appointed in the United States or under any law of any
foreign country by the order or decree of any court or agency or supervisory
authority having jurisdiction; or the Borrower or any Subsidiary becomes a
debtor under the Bankruptcy Code of the United States or under the law of any
foreign country, or is the subject of an order for relief, or becomes a bankrupt
or insolvent; or any of the Borrower's or any Subsidiary's Property is
sequestered, seized, or attached in the United States or under any law of any
foreign country by court order or decree; or a complaint, petition or similar
pleading is filed against the Borrower or any Subsidiary under any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution, or liquidation
law of any jurisdiction, in the United States or in any foreign country, whether
such law is now in existence or hereafter in effect; or
(h) Voluntary Petitions. The Borrower or any Subsidiary files a petition
-------------------
in bankruptcy or reorganization or seeks relief under any provision of any
bankruptcy, reorganization, insolvency, readjustment of debt, dissolution, or
liquidation law of any jurisdiction, in the United States or in any foreign
country, whether such law is now in existence or hereafter in effect, or the
Borrower or any Subsidiary is the subject of an order for relief or winding-up
petition entered by any bankruptcy court, or the Borrower or any Subsidiary
consents to the filing of any petition against it under and such law in the
United States or in any foreign country; or
(i) Assignments, Conveyances, or Transfers for Benefit of Creditors. The
---------------------------------------------------------------
Borrower
24
<PAGE>
or any Subsidiary makes an assignment, conveyance, or transfer for the benefit
of its creditors, or for the purpose of enforcing a lien against its Property,
or admits in writing its inability to pay its debts generally as they become
due, or is generally not paying its debts as such debts become due, or consents
to the appointment of a custodian, receiver, trustee, assignee, or liquidator of
all, substantially all, less than substantially all, or any part of its Property
for the purpose of enforcing, a lien against its Property; or
(j) Discontinuance of Business. The Borrower or any Subsidiary
--------------------------
discontinues its usual business; or
(k) Default on Other Debt or Security. The Borrower or any Subsidiary
---------------------------------
fails to make any payment due on any indebtedness or security (as "security" is
defined in the Securities Act of 1933, as amended) or any event shall occur or
any condition shall exist in respect of any indebtedness or security of the
Borrower or any Subsidiary, or under any agreement securing or relating to such
indebtedness or security, the effect of which is (i) to cause or to permit any
holder of such indebtedness or other security or a trustee to cause (whether or
not such holder or trustee elects to cause) such indebtedness or security, or a
portion thereof, to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment, or (ii) to permit a trustee or the holder
of any security (other than common stock of the Borrower or any Subsidiary) to
elect (whether or not such holder or trustee does elect) a majority of the
directors on the board of directors of the Borrower or such Subsidiary; or
(l) Undischarged Judgments. If judgment for the payment of money in excess
----------------------
of Twenty-Five Thousand and No/100 Dollars ($25,000.00) is rendered by any court
or other governmental body against the Borrower or any Subsidiary and the
Borrower or Subsidiary does not immediately discharge the same or provide for
its immediate discharge in accordance with its terms, or procure a stay of
execution thereof within ten (10) days from the date of entry thereof, and
within said period of ten (10) days from the date of entry thereof or such
longer period during which execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such appeal
while providing such reserves therefor as may be required under generally
accepted accounting principles; or
(m) Insolvency. If the Borrower shall be or become insolvent; or
----------
(n) Fraudulent Transfers. The Borrower shall have concealed, removed, or
--------------------
permitted to be concealed or removed, any part of its Property, with intent to
hinder, delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its Property which may be fraudulent under any bankruptcy,
fraudulent transfer or similar law; or shall have made any transfer of its
Property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or shall have suffered or permitted,
while insolvent, any creditor to obtain a Lien upon any of its Property through
legal proceedings or distraint or other process which is not vacated within 60
days from the date thereof; or
25
<PAGE>
(o) Forfeiture. The filing of formal charges under a federal or state law
----------
for which forfeiture of Borrower's Property is a potential penalty; or
(p) Process Against Borrower. The issuance of an injunction or order of
------------------------
attachment, or any other process which is prior to a final judgment, for a claim
of $50,000.00 or more against Borrower, or any of the Borrower's Property, or
any Property pledged to secure the Indebtedness; or
(q) failure of the Borrower, any Subsidiary or the Property pledged to
secure the Indebtedness to comply with Regulations G, U or X of the Board of
Governors of the Federal Reserve System, as amended.
Notwithstanding the foregoing, the occurrence of any of the events described in
Subsection (a) of this Section shall not constitute an Event of Default unless
the same shall continue unremedied for five (5) days or more. Notwithstanding
the foregoing, the occurrence of any of the events described in Subsections (c),
(d) and (p) of this Section shall not constitute an Event of Default unless
Lender provides written notice to Borrower of such event and the event shall
continue unremedied for fifteen (15) days or more. However, upon and after
Lender's acceleration of the indebtedness as permitted in Section 6.02 below,
Borrower shall no longer be entitled to any grace period with respect to any
defaults described in Subsections (a), (c), (d), or (p).
Section 6.02 Remedies. Upon demand or the happening of any Event of
--------
Default specified Section 6.01, (i) the Lender may declare the entire principal
amount of all Indebtedness then outstanding including interest accrued thereon
to be immediately due and payable (provided, that the occurrence of any event
described in Subsections 6.01(g) or (h) shall automatically accelerate the
maturity of the Indebtedness, without the necessity of any action by the Lender)
without presentment, demand, protest, notice of protest or dishonor, notice of
default, notice of intent to accelerate the maturity thereof, notice of
acceleration of the maturity thereof, or other notice of any kind, all of which
are hereby expressly waived by the Borrower and each Subsidiary; and (ii) all
obligations, if any, of the Lender hereunder, including the Commitment, shall
immediately cease and terminate unless and until the Lender shall reinstate same
in writing.
Section 6.03 Prohibition of Transfer, Assignment and Assumption. This
--------------------------------------------------
Agreement pertains to the extension of debt financing and financial
accommodations for the benefit of the Borrower and the Subsidiaries and cannot
be transferred to, assigned to or assumed by any other person or entity either
voluntarily or by operation of law. In the event Borrower or any Subsidiary
becomes a debtor under the Bankruptcy Code of the United States or under the law
of any foreign country, any trustee or debtor in possession may not assume or
assign this agreement nor delegate the performance of any provision hereunder.
Section 6.04 Right of Set-off. Upon the occurrence of any Event of
----------------
Default, or if the Borrower becomes insolvent, however evidenced, the Lender and
any agent bank of the Lender
26
<PAGE>
is hereby authorized at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower), to set-off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by the
Lender or any agent bank of the Lender to or for the credit or the account of
the Borrower against any and all of the Indebtedness of the Borrower,
irrespective of whether or not the Lender shall have made any demand under this
Agreement or the Notes and although such obligations may be unmatured. The
Lender agrees promptly to notify the Borrower after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have. The rights
contained in this Section 6.04 shall inure to the benefit of any participant in
any loans made hereunder.
ARTICLE VII
-----------
CONDITIONS
----------
The obligation of the Lender to make the loans to be evidenced by the Notes
is subject to the accuracy of each and every representation and warranty of the
Borrower and its Subsidiaries made or referred to in each Security Instrument,
including this Agreement, or in any certificate delivered to the Lender pursuant
to or in connection with any Security Instrument, including this Agreement, to
the performance by the Borrower of its obligations to be performed hereunder on
or before the date of the loan, and to the satisfaction of the following further
conditions which must be satisfied as of the date of this Agreement or advance
under the Restated Revolving Credit Note.
Section 7.01 Closing. The delivery of all instruments and certificates
-------
referred to in this Article VII not theretofore delivered and for the making of
the loans provided for in Article II of this Agreement shall occur
contemporaneously with the execution hereof.
Section 7.02 Notes. The Borrower shall have duly and validly issued,
-----
executed and delivered the Restated Revolving Credit Note to the Lender.
Section 7.03 Charter; By-laws. The Lender shall have received a copy,
----------------
certified as true by the Secretary or Assistant Secretary of the Borrower or the
Subsidiary, respectively, of the articles or certificate of incorporation and
the by-laws of the Borrower and any Subsidiary which is to execute this
Agreement or any Security Instrument pursuant to this Agreement.
Section 7.04 Secretary's Certificates. The Lender shall have received,
------------------------
on or before the date of Closing, certificates of the Secretary of the Borrower
and any Subsidiary which is to execute any Security Instrument pursuant to this
Agreement setting forth (i) resolutions of its board of directors in form and
substance satisfactory to the Lender with respect to the
27
<PAGE>
authorization of the Notes, this Agreement and any other Security Instruments
provided herein and the officers authorized to sign such instruments, and (ii)
specimen signatures of the officers so authorized.
Section 7.05 [This section has been intentionally deleted.]
Section 7.06 Counsel of Lender. At the time of the loans hereunder, all
-----------------
legal matters incident to the transactions herein contemplated shall be
satisfactory to counsel of the Lender.
Section 7.07 No Default. At the time of each loan hereunder, no Default
----------
shall have occurred, and there shall not have occurred any condition. event or
act which constitutes, or with notice or lapse of time (or both) would
constitute a default or event of default under any loan agreement, note
agreement or trust indenture to which the Borrower or any Subsidiary is a party.
Section 7.08 No Material Adverse Changes. Prior to each loan, there
---------------------------
shall have occurred, in the opinion of the Lender, no material adverse changes,
either in any case or in the aggregate, in the assets, liabilities, financial
condition, business, operations, affairs or circumstances of the Borrower or any
Subsidiary, from those reflected in the Financial Statements or by the facts
warranted or represented in any Security Instrument, including this Agreement.
Section 7.09 Other Security Instruments and Information. Borrower shall
------------------------------------------
have duly and validly executed and delivered, or caused to be executed and
delivered, to Lender, in a form and substance satisfactory to Lender, (i) an
amendment to that certain Security Agreement dated as of February 3, 1994,
executed by Borrower in favor of Lender (ii) Financing Statements covering the
collateral described in the Security Agreement which is located at :
1392 Senlac Drive 1432-B Tampa East Blvd.,
Suite 100, Tampa, Florida 33619,
Farmers Branch, Texas 75234
1171 Glendale Avenue 216 Philips Road
Sparks, NV 89431 Exton, Pennsylvania 19341
1142 N. Main Street 2205 Distribution Center Drive
Lombard, IL 60148 Charlotte, North Carolina 28269
and (iii) an amendment to that certain Assignment of Life Insurance Policy as
Collateral dated as of February 3, 1994, executed by Borrower and Lender.
Section 7.10 [This section has been intentionally deleted.]
Section 7.11 [This section has been intentionally deleted.]
28
<PAGE>
Section 7.12 [This section has been intentionally deleted.]
Section 7.13 Additional Matters. The Lender shall have received all
------------------
exhibits, annexes and schedules herein referenced and such additional reports,
certificates, documents, statements, legal opinions, agreements and instruments,
in form and substance reasonably satisfactory to the Lender, as the Lender shall
have reasonably requested from the Borrower and its counsel.
Section 7.14 Advances. Advances under the Restated Revolving Credit Note
--------
shall further be subject to the following specific conditions:
(a) There shall have been no default under this Agreement or under any of
the other Security Instruments; and
(b) The Financial Statements and all other financial information required
by the Lender shall have been furnished and shall be, as of the date of the
requested advance, true and correct.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
Section 8.01 Notices. All communications under or in connection with
-------
this Agreement or the Notes shall be in writing and shall be mailed by
registered or certified mail, return receipt requested, postage prepaid, or
personally delivered to an officer of the receiving party. All such
communications shall be mailed or delivered as follows:
(a) If to the Borrower, to its address shown at the beginning of this
Agreement, or to such other address or to such individual's or department's
attention as it may have furnished the Lender in writing;
(b) If to the Lender, to its address shown at the beginning of this
Agreement, or to such other address or to such individual's or department's
attention as it may have furnished to the Borrower in writing.
Any notice so addressed and mailed by registered or certified mail, return
receipt requested, shall be deemed to be given when so mailed, and any notice so
delivered in person shall be deemed to be given when receipted for by, or
actually received by, an authorized officer of the Borrower or the Lender, as
the case may be.
Section 8.02 Deviation from Covenants. The procedure to be followed by
------------------------
the Borrower to obtain the consent of the Lender to any deviation from the
covenants contained in this
29
<PAGE>
Agreement or any other Security Instrument shall be as follows:
(a) The Borrower shall send a written notice to the Lender setting forth
(i) the covenant(s) relevant to the matter, (ii) the requested deviation from
the covenant(s) involved, and (iii) the reason for the requested deviation from
the covenant(s); and
(b) The Lender will within a reasonable time send a written notice to the
Borrower, signed by an authorized officer of the Lender, permitting or refusing
the request; but in no event will any deviation from the covenants of this
Agreement or any other Security Instrument be effective without the written
consent of the Lender.
Section 8.03 Invalidity. In the event that any one or more of the
----------
provisions contained in the Notes, this Agreement or in any other Security
Instrument shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of the Notes, this Agreement or any other Security
Instrument.
Section 8.04 Survival of Agreements. All representations and warranties
----------------------
of the Borrower herein, and all covenants and agreements herein not fully
performed before the effective date of this Agreement, shall survive such date.
Section 8.05 Successors and Assigns. All covenants and agreements
----------------------
contained by or on behalf of the Borrower or any Subsidiary in the Notes, this
Agreement and any other Security Instrument shall bind its successors and
assigns and shall inure to the benefit of the Lender and its successors and
assigns; except that neither the Borrower nor any Person acting on behalf of any
of the Borrower may assign any of their rights hereunder without the prior
written consent of Lender. In the event that the Lender sells participation in
the Notes, or other Indebtedness of the Borrower incurred or to be incurred
pursuant to this Agreement, to other lenders, each of such other lenders shall
have the rights of set off against such Indebtedness and similar rights or Liens
to the same extent as may be available to the Lender.
Section 8.06 Renewal, Extension or Rearrangement. All provisions of this
-----------------------------------
Agreement relating to the Notes or other Indebtedness shall apply with equal
force and effect to each and all promissory notes hereinafter executed which in
whole or in part represent a renewal, extension, increase or rearrangement of
any part of the Indebtedness originally represented by the Notes or of any part
of such other Indebtedness. Any provision of this Agreement to be performed
during the "term of this Agreement," "term hereof" or similar language, shall
include any extension period.
Section 8.07 Waivers. No course of dealing on the part of the Lender,
-------
its officers, employees, consultants or agents, nor any failure or delay by the
Lender with respect to exercising any right, power or privilege of the Lender
under the Notes, this Agreement or any other Security Instrument shall operate
as a waiver thereof, except as otherwise provided in
30
<PAGE>
Section 8.02 hereof.
Section 8.08 Cumulative. Rights and remedies of the Lender under the
----------
Notes, this Agreement and each other Security Instrument shall be cumulative,
and the exercise or partial exercise of any such right or remedy shall not
preclude the exercise of any other right or remedy.
Section 8.09 Construction. This Agreement is, and each of the Notes will
------------
be, a contract made under and shall be construed in accordance with and governed
by the laws of the State of Texas.
Section 8.10 Interest. It is the intention of the parties hereto to
--------
conform strictly to applicable usury laws now in force. Accordingly, if the
transactions contemplated hereby would be usurious under applicable law, then,
in that event, notwithstanding anything to the contrary in the Notes, this
Agreement or in any other Security Instrument or agreement entered into in
connection with or as security for the Notes, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is contracted for, charged or received under the Notes, this Agreement or
under any of the other aforesaid Security Instruments or agreements or otherwise
in connection with the Notes shall under no circumstances exceed the maximum
amount of interest permitted by applicable law, and any excess shall be credited
on the Notes by the holder thereof (or, if the Notes shall have been paid in
full, refunded to the Borrower); (ii) determination of the rate of interest for
determining whether the loans hereunder are usurious shall be made by
amortizing, prorating, allocating and spreading, during the full stated term of
such loans, all interest at any time contracted for, charged or received from
the Borrower in connection with such loans, and any excess shall be canceled,
credited or refunded as set forth in (i) herein; and (iii) in the event that the
maturity of the Notes is accelerated by reason of an election of the holder
thereof resulting from any Default or Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the maximum
amount permitted by applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically as of the date of
such acceleration or prepayment and, if theretofore paid, shall be credited on
the Notes (or, if the Notes shall have been paid in full, refunded to the
Borrower).
Section 8.11 Multiple Originals. This Agreement may be executed in two
------------------
(2) or more copies; each fully executed copy shall be deemed an original, but
all of which together shall constitute one and the same instrument.
Section 8.12 Exhibits. All exhibits to this Agreement are incorporated
--------
herein by this reference for all purposes. The exhibits may be attached hereto,
or bound together with or separately from this Agreement, and such binding shall
be effective to identify such exhibits as if attached to this Agreement.
Section 8.13 No Triparty Loan. Texas Revised Civil Statutes Annotated,
----------------
Title 79,
31
<PAGE>
chapter 15 (which regulates certain revolving loan accounts and revolving
triparty accounts) shall not apply to the loans evidenced by this Agreement or
the Notes.
Section 8.14 Applicable Rate Ceiling. Unless changed in accordance with
-----------------------
law, the applicable rate ceiling under Texas law shall be the indicated (weekly)
rate ceiling from time to time in effect as provided in Texas Revised Civil
Statutes Annotated article 5069-1.04, as amended.
Section 8.15 Performance and Venue. The obligations of Borrower
---------------------
contained herein are performable at Lender's offices in Houston, Harris County,
Texas, and venue for any action in connection therewith shall be in Harris
County, Texas.
Section 8.16 Negotiation of Documents. This Agreement, the Notes and all
------------------------
other Security Instruments have been negotiated by the parties at arm's length,
each represented by its own counsel, and the fact that the documents have been
prepared by the Lender's counsel, after such negotiation, shall not be cause to
construe any of such documents against the Lender.
Section 8.17 Notices Received by Lender. Any instrument in writing,
--------------------------
telex, telegram, telecopy or cable received by the Lender in connection with any
loan hereunder, which purports to be dispatched or signed by or on behalf of the
Borrower, shall conclusively be deemed to have been signed by such party, and
Lender may rely thereon and shall have no obligation, duty or responsibility to
determine the validity or genuineness thereof or authority of the Person or
Persons executing or dispatching the same.
Section 8.18 Debtor-Creditor Relationship. None of the terms of this
----------------------------
Agreement or of any other document executed in conjunction herewith or related
hereto shall be deemed to give the Lender the rights or powers to exercise
control over the business or affairs of the Borrower. The relationship between
the Borrower and the Lender created by this Agreement is only that of debtor-
creditor.
Section 8.19 No Third-Party Beneficiaries. This Agreement is for the
----------------------------
sole and exclusive benefit of the Borrower and Lender. This Agreement does not
create, and is not intended to create, any rights in favor of or enforceable by
any other Person. This Agreement may be amended or modified by the agreement of
the Borrower and Lender, without any requirement or necessity for notice to, or
the consent of or approval of any other Person.
Section 8.20 DTPA Waiver. Borrower acknowledges and agrees, on its own
-----------
behalf and on behalf of any permitted assigns and successors hereafter, that the
DTPA is not applicable to this transaction. Accordingly, Borrower's rights and
remedies with respect to the transaction contemplated under this Agreement and
with respect to all acts or practices of Lender, past, present or future, in
connection with such transaction, shall be governed by legal principles other
than the DTPA. In furtherance thereof, Borrower agrees as follows:
32
<PAGE>
(a) Borrower represents that it has knowledge and experience in financial
and business matters that enable it to evaluate the merits and risks of the
business transaction that is the subject of this Agreement. Borrower also
represents that it is not in a significantly disparate bargaining position in
relation to Lender. Borrower has negotiated the loan documents with Lender at
arm's length and has willingly entered into the loan documents.
(b) LENDER HAS ADVISED BORROWER TO HAVE THE LEGAL COUNSEL OF ITS CHOICE
REVIEW THIS AGREEMENT AND THE TRANSACTIONS AND DOCUMENTS CONTEMPLATED HEREBY.
BORROWER HAS DECIDED, AGAINST THE EXPRESS ADVICE OF LENDER, TO FORGO ANY LEGAL
REPRESENTATION IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS AND
DOCUMENTS CONTEMPLATED BY THIS AGREEMENT.
(c) This Agreement relates to a transaction involving total consideration
by Borrower of more than $100,000.00 and does not involve the Borrower's
residence.
Borrower agrees, on its own behalf and on behalf of its permitted assigns and
successors, that all of the Borrower's rights and remedies under the DTPA are
WAIVED AND RELEASED, including specifically, without limitation, all rights and
remedies under the DTPA resulting from or arising out of any and all acts or
practices of Lender in connection with this transaction, whether such acts or
practices occur before or after the execution of this Agreement; provided,
however, notwithstanding anything to the contrary herein, Borrower does not
waive Section 17.555 of the DTPA.
In furtherance thereof, Borrower agrees that by signing this Agreement Borrower
and any permitted assigns and successors are bound by the following waiver:
Waiver of Consumer Rights. Borrower waives its rights under the Deceptive
-------------------------
Trade Practices--Consumer Protection Act, Section 17.41 et seq., Business &
Commerce Code, a law that gives consumers special rights and protection.
After consultation with an attorney of Borrower's own selection, Borrower
voluntarily consents to this waiver.
Section 8.21 Final Expression. THIS WRITTEN LOAN AGREEMENT, THE NOTES
----------------
AND THE SECURITY INSTRUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
ARTICLE IX
-----------
ADDITIONAL PROVISIONS
---------------------
Section 9.01 Defenses. Borrower hereby warrants and represents that no
--------
offset or
33
<PAGE>
defense exists on the part of Borrower or any other person as to the
repayment of the Notes through the date hereof.
Section 9.02 Limitations. It is understood and agreed that nothing
-----------
contained herein shall in any manner or way release, affect or impair: (a) the
existence of the Indebtedness or the liens and security interests created by the
Security Instruments, (b) the enforceability of the liens and security interests
created by, and the rights and remedies of Lender under the Security
Instruments, or (c) the liability of Borrower under the Notes and the Security
Instruments.
Section 9.03 Continuance of Indebtedness and Liens. Except as expressly
-------------------------------------
modified by the terms and provisions of this Agreement: (i) each and every one
of the terms and provisions of the Notes and the Security Instruments to the
extent the same are not inconsistent with the terms and provisions of this
Agreement, are hereby confirmed and ratified as in full force and effect, and
(ii) all rights, remedies, titles, liens, security interests and equities
evidenced by the Security Instruments are hereby acknowledged by the Borrower to
be valid and subsisting and are hereby recognized, renewed, modified, extended
and continued in full force and effect to secure the payment of the
Indebtedness.
Section 9.04 Release. In consideration of the modifications to the
-------
Original Loan Agreement herein granted, Borrower hereby releases, acquits and
forever discharges Lender, and each of Lender's subsidiaries, divisions,
shareholders, partners, affiliated corporations, trustees, beneficiaries,
officers, directors, agents, employees, servants, attorneys and representatives,
as well as their respective heirs, executors, legal representatives,
administrators, successors and assigns (herein collectively called the "Released
Parties") from any and all claims, demands, debts, liabilities, suits, offsets
against the Indebtedness and the Security Instruments, actions, causes of action
or claims for relief of whatever kind or nature, whether known or unknown,
suspected or unsuspected by Borrower, which Borrower may have or which may
hereafter accrue against the Released Parties, for or by reason of any matter,
cause or thing whatsoever occurring prior to the date hereof, unless caused by
Lender's gross negligence or willful misconduct, which relate to, in whole or in
part, directly or indirectly: (a) the Notes, the Security Instruments, the
Original Loan Agreement or the loan transaction evidenced thereby, including
without implied limitation, the disbursements under the Notes, the negotiation
of the Notes or the Security Instruments, the terms thereof, or the approval,
administration or servicing thereof, or (b) any notices of default in reference
to the Security Instruments, or any other matter pertaining to the collection or
enforcement by the Released Parties of the Indebtedness and the Security
Instruments, or any right or remedy under the Notes or the Security Instruments,
or (c) any purported oral agreements or understandings by and between the
Released Parties and Borrower in reference to the Notes, the Security
Instruments or the loan transaction evidenced thereby.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly
34
<PAGE>
executed as of the date first above written.
BORROWER:
--------
FUTRONIX CORPORATION
By: /s/ T. M. Hunt
-------------------------------------
T.M. Hunt, President
LENDER:
SOUTHWEST BANK OF TEXAS, N.A.
By: /s/ Jackie Brown
----------------------------------------
Jackie Brown, Senior Vice President
35
<PAGE>
RESTATED REVOLVING CREDIT LINE
$15,000,000.00 Houston, Texas June 30, 1996
On or before June 30, 1997, the undersigned, FUTRONIX CORPORATION, a
Texas corporation (hereinafter called "Maker") promises to pay to the order of
SOUTHWEST BANK OF TEXAS, N.A. (hereinafter called "Lender"), at its offices at
4295 San Felipe, Houston, Harris County, Texas 77027, with mailing address at
P.O. Box 27459, Houston, Texas 77227-7459, in lawful money of the United States
of America, up to the sum of FIFTEEN MILLION AND NO/ 100 DOLLARS
($15,000,000.00), or so much thereof as may be advanced from time to time
pursuant to that certain Amended Loan Agreement (herein so called) of even date
herewith between Maker and Lender, together with interest on the unpaid
principal balance hereof from time to time outstanding at a varying rate per
annum which is zero percent (O%) per annum (hereinafter called the "Margin
Percentage") above the daily average Prime Rate (as defined in the Amended Loan
Agreement), as the same may change from day to day, calculated as of the last
day of each month (hereinafter called the "Monthly Average Prime Rate") or, at
the election of Borrower in accordance with Section 2.02. 1.(b) of the Amended
Loan Agreement, at a varying rate per annum which is 2.5 percent (2.5%) above
the applicable LIBOR Rate (as defined in the Amended Loan Agreement), but in no
event to exceed the maximum rate of nonusurious interest allowed from time to
time by law as now or, to the extent allowed by law, as may hereafter be in
effect (hereinafter called the "Maximum Nonusurious Interest Rate"), with
adjustments due to changes in the Maximum Nonusurious Interest Rate to be made
on the effective date of any change in the Maximum Nonusurious Interest
Rate.Upon the occurrence of a Default or an Event of Default as defined in the
Amended Loan Agreement, the Margin Percentage shall equal a varying rate per
annum which is three percent (3%) per annum above the rate specified in the
immediately preceding sentence (but in no event to exceed the Maximum
Nonusurious Interest Rate) from such Default or Event of Default until paid.
Unless otherwise specified below, interest shall be computed on a per annum
basis of a year of 360 days and for the actual number of days (including the
first but excluding the last day) elapsed unless such calculation would result
in a usurious rate, in which case interest shall be calculated on a per annum
basis of a year of 365 or 366 days, as the case may be.
Notwithstanding the foregoing, if at any time the sum of the Margin
Percentage plus the Monthly Average Prime Rate exceeds the Maximum Nonusurious
Interest Rate, the rate of interest to accrue on this note shall be limited to
the Maximum Nonusurious Interest Rate, but any subsequent reductions in the
Monthly Average Prime Rate shall not reduce the rate of interest to accrue on
this note below the Maximum Nonusurious Interest Rate until the total amount of
interest accrued on this note equals the amount of interest which would have
accrued if a varying rate per annum equal to the sum of the Margin Percentage
plus the Monthly Average Prime Rate had at all times been in effect.
1
<PAGE>
If at maturity or final pavment of this note the total amount of interest
paid or accrued under the foregoing provisions is less than the total amount of
interest which would have accrued if a varying rate per annum equal to the sum
of the Margin Percentage plus the Monthly Average Prime Rate had at all times
been in effect, then Maker agrees to the extent allowed by law, to pay to Lender
an amount equal to the difference between (a) the lesser of (i) the amount of
interest which would have accrued on this note if the Maximum Nonusurious
Interest Rate had at all times been in effect or (ii) the amount of interest
which would have accrued if a varying rate per annum equal to the sum of the
Margin Percentage plus the Monthly Average Prime Rate had at all times been in
effect and (b) the amount of interest accrued in accordance with the other
provisions of this note.
Accrued interest is due and payable monthly commencing August 1, 1996, and
on the same day of each and every succeeding month thereafter during the term
hereof and at maturity; provided, that upon any prepayment of principal, at the
option of Lender, it may demand (at any time at or after prepayment) all accrued
and unpaid interest with respect to the principal amount prepaid through the
date of prepayment.
The unpaid principal balance hereof shall at no time exceed the sum of
FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00). The unpaid principal
balance of this note at any time shall be the total amounts loaned or advanced
hereunder by the holder hereof, less the amount of payments or prepayments of
principal made hereon by or for the account of Maker. The Maker shall not make,
and Lender shall not be required to accept, any prepayments hereon which would
reduce the outstanding principal balance hereof below One Hundred and No/1 00
Dollars ($100.00) at any time except in the case of payment in full upon
maturity. All loans or advances and all payments or prepayments made hereunder
on account of principal or interest may be evidenced by Lender, or any
subsequent holder, maintaining in accordance with its usual practice an account
or accounts evidencing the indebtedness of the Maker resulting from all loans or
advances and all payments or prepayments hereunder from time to time and the
amounts of principal and interest payable and paid from time to time hereunder,
in which event, in any legal action or proceeding in respect of this note, the
entries made in such account or accounts shall be conclusive evidence of the
existence and amounts of the obligations of the Maker therein recorded. In the
event that the unpaid principal amount hereof at any time, for any reason,
exceeds the maximum amount hereinabove specified, Maker covenants and agrees to
pay the excess principal amount forthwith upon demand; such excess principal
amount shall in all respects be deemed to be included among the loans or
advances made pursuant to the other terms of this note and shall bear interest
at the rates hereinabove stated.
Advances hereunder may be made by the holder hereof (i) pursuant to the
terms of any written agreement executed in connection herewith between Maker and
Lender, or (ii) at the oral or written request of any of the undersigned or of
any officer or agent of Maker designated by or acting under the authority of
resolutions of the board of directors of Maker, if a corporation, or other
written authorization of Maker if other than a corporation, a duly certified or
executed copy of which shall be furnished to the holder hereof, until written
notice of the revocation of such authority is received by the holder hereof.
Maker covenants and agrees to furnish to the holder
2
<PAGE>
hereof written confirmation of any such oral request within five (5) days of the
resulting loan or advance, but any such loan or advance shall be deemed to be
made under and entitled to the benefits of this note, irrespective of any
failure by Maker to furnish such written confirmation. Any loan or advance
shall be conclusively presumed to have been made under the terms of this note to
or for the benefit of Maker when made pursuant to the terms of any written
agreement executed in connection herewith between Maker and Lender, or in
accordance with such requests and directions or when said advances are deposited
to the credit of the account of Maker with Lender regardless of the fact that
persons other than those authorized hereunder may have authority to draw against
such account, or may have requested an advance.
If any installment or payment of'principal or interest of this note is not
paid when due; or if a default occurs under any instrument now or hereafter
executed in connection with or as security for this note including, without
limitation, the Amended Loan Agreement; thereupon, or upon demand, at the option
of Lender, the principal and unpaid accrued interest on this note and any and
all other indebtedness of Maker to Lender shall become due and payable forthwith
without demand, notice of default or of intent to accelerate the maturity
hereof, notice of acceleration, notice of nonpayment, presentment, protest or
notice of dishonor, all of which are hereby expressly waived by Maker and each
other liable party.
If this note is not paid at maturity whether by acceleration or otherwise
and is placed in the hands of an attorney for collection, or suit is filed
hereon, or proceedings are had in probate, bankruptcy, receivership,
reorganization, arrangement or other legal proceedings for collection, Maker and
each drawer, accepter, endorser, guarantor, surety, accommodation party or other
person now or hereafter primarily or secondarily liable upon or for payment of
all or any part of this note (each hereinafter called an "other liable party")
agree to pay Lender its collection costs, including reasonable attorney's fees,
but in no event to exceed the maximum amount permitted by law. Maker and each
other liable party are and shall be directly and primarily, jointly and
severally, liable for the payment of all sums called for hereunder, and Maker
and each other liable party hereby expressly waive bringing of suit and
diligence in taking any action to collect any sums owing hereon and in the
handling of any security, and Maker and each other liable party hereby consent
to and agree to remain liable hereon regardless of any renewals, extensions for
any period or rearrangements hereof, or partial prepayments hereon, or any
release or substitution of security herefor, in whole or in part, with or
without notice, from time to time, before or after maturity.
It is the intention of Maker and Lender to conform strictly to applicable usury
laws. Accordingly, if the transactions contemplated hereby would be usurious
under applicable law then, in that event, notwithstanding anything to the
contrary in any agreement entered into in connection with or as security for
this note, it is agreed as follows: (i) the aggregate of all consideration which
constitutes interest under applicable law that is taken, reserved, contracted
for, charged or received under this note or under any of the other aforesaid
agreements or otherwise in connection with this note shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be credited on this note by the holder hereof (or, if this
note shall havebeen paid in full, refunded to Maker); (ii) determination of the
rate of interest for determining whether the
3
<PAGE>
loans hereunder are usurious shall be made by amortizing, prorating, allocating
and spreading, during the full stated term of such loans (including any renewals
of the term hereof) all interest at any time contracted for, charged or received
from the Maker in connection with such loans, and any excess shall be cancelled,
credited or refunded as set forth in (i) herein; and (iii) in the event that
maturity of this note is accelerated by reason of an election by the holder
hereof resulting from any default hereunder or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest may never include more than the maximum amount allowed by applicable
law, and excess interest, if any, provided for in this note or otherwise shall
be cancelled automatically as of the date of such acceleration or prepayment
and, if theretofore prepaid, shall be credited on this note (or if this note
shall have been paid in full, refunded to Maker).
As contemplated by that certain Amended Loan Agreement of even date
herewith by and between Maker and Lender, this note is a restatement of, and not
in novation or discharge, of that certain Revolving Credit Note dated February
3, 1994, in the original principal amount of $3,000,000, as amended, including
as amended by the amendments set forth in that certain (i) First Modification to
Note, Loan Agreement and Assignment of Life Insurance Policy as Collateral dated
as of September 16, 1994, by and between Maker and Lender, (ii) Second
Modification to Note, Loan Agreement and Assignment of Life Insurance Policy as
Collateral dated as of June 27, 1995 by and between Maker and Lender, and (iii)
Third Modification to Note and Loan Agreement dated as of December 21, 1995, by
and between Maker and Lender. All liens and security interests given in
connection with or as security for such prior note are hereby renewed and
extended to secure the indebtedness evidenced by this note; such liens and
security interests are hereby ratified and confirmed and Maker agrees that the
same are valid and subsisting and in full force and effect.
This note shall be construed under and governed by the laws of the State of
Texas and applicable federal law, but Texas Revised Civil Statutes Annotated,
Title 79, chapter 15 (which regulates certain revolving loan accounts and
revolving triparty accounts) shall not apply to the loan evidenced by this note.
Unless changed in accordance with law, the applicable rate ceiling under
Texas law shall be the indicated (weekly) rate ceiling from time to time in
effect as provided in Texas Revised Civil Statutes Annotated, article 5069-1.04,
as amended.
4
<PAGE>
Wherefore, intending to be legally bound hereby, Maker has executed this
note.
MAKER:
------
Address: FUTRONIX CORPORATION
12614 Hempstead Highway
Houston, Texas 77092
By: /s/ T.M. Hunt
-------------------------------
Name:_____________________________
Title:____________________________
5
<PAGE>
EXHIBIT 10.2
FIRST UNION NATIONAL BANK OF GEORGIA
Post Office Box 740074
Atlanta, Georgia 30374
July 31, 1996
Mr. Theodore J. Bruno
Chief Executive Officer
Wire & Cable Specialties Corporation of Georgia
5060 Avalon Ridge Parkway
Norcross, GA 30071-4714
RE: Note Modification to Lower Pricing on the $4,500,000 Line of Credit
Dear Ted:
First Union National Bank of Georgia ("Bank") is pleased to offer a reduction in
your pricing on your $4,500,000 line of credit as follows:
INTEREST RATE:
At the election of Borrower, the interest rate on the principal balance shall be
the rates of interest described below for the interest periods indicated. If
the Borrower does not elect an interest rate at any time, the principal balance
shall bear interest at First Union's Prime Rate, as that rate may change from
time to time. Borrower may change the interest rate at the end of an interest
period by giving notice of the election not later than 11:00 a.m. local time at
the office of First Union shown above (a) on the same business day as each
proposed borrowing or interest rate conversion at a prime rate, and (b) at least
two (2) business days before each borrowing or rate conversion for a LIBOR rate.
1-month LIBOR Rate plus 2.50% (250 basis points). The 1-month LIBOR Rate shall
be determined in accordance with First Union's adjusted LIBOR Rate formula, with
changes to occur monthly on the fifth day of each month.
All other terms and conditions of the Commitment Letter dated June 5, 1996 and
Note dated June 14, 1996 remain in full force and affect.
<PAGE>
Wire & Cable Specialties Corporation of Georgia
July 31, 1996
Page 2
Please indicate your acceptance of this offer and the terms and conditions
contained herein by signing below and returning one executed copy of this letter
to the undersigned.
Best regards,
FIRST UNION NATIONAL BANK OF GEORGIA
By: /s/ Michalene Donegan
--------------------------------------
Michalene Donegan
Assistant Vice President
BORROWER'S ACCEPTANCE OF NOTE MODIFICATION
The above Note Modification is hereby accepted on the terms and conditions
outlined.
WIRE & CABLE SPECIALTIES CORPORATION OF GEORGIA
BY: /s/ Theodore J. Bruno DATE: Aug. 6, 1996
-------------------------------------- --------------------------------
Theodore J. Bruno
Chief Executive Officer
<PAGE>
FIRST UNION NATIONAL BANK OF GEORGIA
4570 Ashford Dunwoody Road
Atlanta, Georgia 30346
June 5, 1996
Mr. Theodore J. Bruno
Chief Executive Officer
Wire & Cable Specialties Corporation of Georgia
5060 Avalon Ridge Parkway
Norcross, GA 30071-4714
Dear Ted:
First Union National Bank of Georgia ("Bank") is pleased to offer you a
commitment to lend on the following terms and conditions:
BORROWER:
Wire & Cable Specialties Corporation of Georgia ("Borrower").
LOAN AMOUNT:
Four million five hundred thousand dollars ($4,500,000.00).
PURPOSE:
The purpose of this Line of Credit is to finance both short term investments in
receivables and inventory as well as investments in more permanent level of
trading assets required for new branches.
INTEREST RATE:
At the election of Borrower, the interest rate on the principal balance shall be
the rates of interest described below for the interest periods indicated. If the
Borrower does not elect an interest rate at any time, the principal balance
shall bear interest at First Union's Prime Rate plus 0.50% (50 basis points), as
that rate may change from time to time. Borrower may change the interest rate at
the end of an interest period by giving notice of the election not later than
11:00 a.m. local time at the office of First Union shown above (a) on the same
business day as each proposed borrowing or interest rate conversion at a prime
rate, and (b) at least two (2) business days before
<PAGE>
Wire & Cable Specialties Corporation of Georgia
July 5, 1996
Page 2
each borrowing or rate conversion for a LIBOR rate.
1-month LIBOR Rate plus 3.0% (300 basis points). The 1-month LIBOR Rate shall
be determined in accordance with First Union's adjusted LIBOR Rate formula, with
changes to occur monthly on the fifth day of the each month.
TERMS:
Repayable in daily payments of accrued interest pursuant to the Controlled
Cashflow Plus Services Description referenced in the Master Agreement dated
January 4, 1994, but at no time shall the outstanding balance exceed the Loan
Amount or the Borrowing Base, as defined in this Commitment Letter until May 5,
1997 when all remaining principal and interest shall be due.
Borrower may prepay the loan in whole or in part only if Borrower pays such
additional amounts deemed necessary by First Union to compensate First Union for
any losses, costs or expenses which First Union may be deemed to incur as a
result of such prepayments.
FEES:
Borrower has option of Either
. a 1/8% Commitment Fee on the Line of Credit due at closing, or
. a 1/4% Unused Fee on the Unused portion of the line, paid monthly in
arrears.
COLLATERAL:
A security interest in all of the Borrower's inventory, accounts receivable,
either presently existing or hereafter acquired, and all proceeds of the
foregoing. This security shall be evidenced by an Instrument and Security
Agreement, and UCC's filed with the states and counties of appropriate
jurisdiction. Bank shall also be assigned insurance policies on the life of
Theodore Bruno in the aggregate amount of $2,000,000.00.
GUARANTY:
This Line of Credit requires the joint and several Unconditional Guaranties of
Theodore Bruno and Paul Monahan, III. The Unconditional Guaranty shall contain
such terms, conditions, representations, and warranties as Bank requires.
Guarantors will provide Guarantor's financial statements on an annual basis,
which financial statement shall disclose all of Guarantor's assets and
liabilities, income and contingent liabilities.
BORROWING BASE:
The Borrowing Base is defined as the sum of (1) 75% of Eligible Accounts
Receivable plus (2) 50% of inventory, with the amount advanced on inventory
capped at $2,500,000.00.
<PAGE>
Wire & Cable Specialties Corporation of Georgia
July 5, 1996
Page 3
"Eligible Accounts Receivable" is defined as total accounts receivable
less:
(a) Accounts which remain unpaid for more than ninety days after the
original invoice date including all Accounts with more than 25% of its
balance owing already ineligible;
(b) Accounts due from a customer whose principal place of business is
located outside the United States of America, unless such Account is backed
by a letter of credit issued or confirmed by a bank organized under the
laws of the United States of America or a State thereof, having capital and
surplus acceptable to the Bank; provided that such letter of credit has
been delivered to the Bank as additional collateral under the Security
Documents;
(c) Accounts with respect to which the customer is an Affiliate of
Borrower or a director, officer, agent, stockholder or employee of Borrower
or any of its Affiliates.
"Eligible Inventory" is defined as total inventory less any obsolete or
slow moving inventory, supplies, and consigned sale inventory.
FINANCIAL REPORTS:
Borrower shall deliver to Bank (1) within 120 days of year end, audited annual
financial statements, including, without limitation, a balance sheet and related
statements of income and retained earnings and cash flows for the year then
ended, with supporting schedules, prepared in conformity with generally accepted
accounting principles and certified, without qualification, by a CPA acceptable
to Bank, (2) within 45 days of month end, monthly internally prepared balance
sheet and profit and loss statement statements; (3) within 45 days of month end,
monthly accounts receivable agings and summary inventory reports.
COVENANTS:
In addition to the covenants customarily required by First Union for similar
loans, the covenants described below will be required.
. Tangible Net Worth. Borrower shall at all times maintain a Tangible
------------------
Net Worth of at least two million two hundred thousand dollars
($2,200,000). "Tangible Net Worth" shall mean the total assets minus
total liabilities, including debt fully subordinated to the loan,
after subtracting therefrom the aggregate amount of any intangible
assets including, without limitation, goodwill, franchises, licenses,
patents, trademarks, trade names, copyrights, service marks, and brand
names.
. Total Liabilities to Tangible Net Worth Ratio. Borrower shall at all
---------------------------------------------
times maintain a total liabilities, including debt fully subordinated
to the loan, to Tangible Net
<PAGE>
Wire & Cable Specialties Corporation of Georgia
July 5, 1996
Page 4
Worth ratio of not more than 3.25 to 1.00. For purposes of this
computation, "total liabilities" shall mean all liabilities, including
capitalized leases and all reserves for deferred taxes and other
deferred sums appearing on the liabilities side of a balance sheet, in
accordance with generally accepted accounting principles applied on a
consistent basis.
. Fixed Assets. Borrower shall not during any fiscal year expend on
------------
gross fixed assets (including gross leases to be capitalized under
generally accepted accounting principles and leasehold improvements)
an amount exceeding two hundred thousand dollars ($200,000) in the
aggregate.
. Distributions. Distributions limited to $300,000.00 to cover
-------------
Theodore Bruno's life insurance premiums, property taxes and other
living expenses, and an amount sufficient to satisfy any shareholders'
tax liabilities resulting from Borrower's election of "Subchapter S"
status.
. Funded Debt to Cash Flow Ratio. Borrower shall at all times maintain
------------------------------
a Debt to Cash Flow Ratio of not more than 4.00 to 1.00. "Debt to
Cash Flow" shall mean the sum of all Funded Debt over the sum of net
profit, interest, depreciation, amortization and taxes. "Funded Debt"
shall mean, as applied to any person, the sum of all indebtedness for
borrowed money (including, without limitation, capital lease
obligations and unreimbursed drawings under letters of credit) or
evidenced by a note, bond, debenture or similar instrument of that
person.
. Borrower shall provide a monthly borrowing base and covenant
compliance certificate to Bank within 45 days of month end.
ADDITIONAL PROVISIONS:
Depository Accounts: Borrower agrees to maintain primary depository
accounts at Bank.
Hazard Insurance: Borrower must maintain hazard insurance policies in form
and substance satisfactory to Bank and issued by issuers acceptable to
Bank. The Bank is to be named as mortgagee/loss payee on the policies.
COSTS:
Borrower shall pay all costs, expenses and fees (including, without limitation,
appraisal, survey,
insurance, environmental assessment, attorneys' fees, and recording fees)
associated with this transaction.
LOAN DOCUMENTATION:
<PAGE>
Wire & Cable Specialties Corporation of Georgia
July 5, 1996
Page 5
The loan will be evidenced by documents prepared by and acceptable to First
Union.
OTHER PROVISIONS:
The preceding terms and conditions are not exhaustive, and this commitment is
subject to certain other terms and closing conditions customarily required by
First Union for similar transactions. This commitment will expire unless it is
closed on or before June 20, 1996. The transaction will be evidenced by
documents in form and content acceptable to First Union, and this commitment
letter shall not survive closing.
Borrower represents and agrees that all financial statements and other
information delivered to First Union are correct and complete. No material,
adverse change may occur in, nor any adverse circumstance be discovered as to,
the business or financial condition of the Borrower or the Guarantors prior to
closing. First Union's obligations under this commitment are conditioned on the
fulfillment to First Union's sole satisfaction of each term and condition
referenced by this commitment.
This commitment supersedes all prior commitments and proposals with respect to
this transaction, whether written or oral, including any previous loan proposals
made by First Union or anyone acting with its authorization. No modification
shall be valid unless made in writing and signed by an authorized officer of
First Union. This commitment is not assignable, and no party other than
Borrower shall be entitled to rely on this commitment.
Please indicate your acceptance of this offer and the terms and conditions
contained herein by signing on the next page and returning one executed copy of
this commitment letter to the undersigned. This offer of commitment shall
expire unless the acceptance is received by the undersigned on or before June
20, 1996.
Best regards,
FIRST UNION NATIONAL BANK OF GEORGIA
By: /s/ Dana Tucker
-------------------------
Dana Tucker
Vice President
<PAGE>
Wire & Cable Specialities Corporation of Georgia
June 5, 1996
Page 6
BORROWER'S ACCEPTANCE OF COMMITMENT LETTER AND AGREEMENT
The above Commitment Letter and Agreement is hereby accepted on the terms and
conditions outlined.
WIRE & CABLE SPECIALTIES CORPORATION OF GEORGIA
BY: /s/ Theodore J. Bruno DATE: 6/11/96
-------------------------------------------- -------------
Theodore J. Bruno
Chief Executive Officer
GUARANTOR:
By: /s/ Theodore J. Bruno DATE: 6/11/96
-------------------------------------------- -------------
Theodore J. Bruno
GUARANTOR:
By: /s/ Paul Monahan DATE: 6/11/96
-------------------------------------------- -------------
Paul Monahan, III
<PAGE>
PROMISSORY NOTE
$4,500,000.00 June 14, 1996
Wire & Cable Specialties Corporation of Georgia
5060 Avalon Ridge Parkway
Norcross, Georgia 30071-4714
(Individually and collectively "Borrower")
First Union National Bank of Georgia
999 Peachtree Street - GA9104
Atlanta, Georgia 30309
(Hereinafter referred to as the "Bank")
RENEWAL/MODIFICATION. This Promissory Note renews, extends and/or modifies that
certain Promissory Note and Security Agreement dated May 12, 1995 (the
"Promissory Note and Security Agreement"), evidencing an original principal
indebtedness of $4,000,000.00 of which $0.00 is currently outstanding. Except
as expressly provided herein, all terms and conditions relating to the pledge of
collateral contained in the Promissory Note and Security Agreement remain in
full force and effect, and such collateral continues to secure the Obligations
herein and as provided in the Promissory Note and Security Agreement. This
Promissory Note is not a novation.
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Four Million Five Hundred Thousand and no/100 Dollars
($4,500,000,00) or such sum as may be advanced from time to time with interest
on the unpaid principal balance at the rate and on the terms provided in this
Promissory Note (including all renewals, extensions or modifications hereof,
this "Note").
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, personal
property collateral described in that certain Security Agreement dated June 1 4,
1 996.
INTEREST RATE DEFINITIONS.
LIBOR RATE. 1-month LIBOR Rate plus 3.0% (300 basis points) ("LIBOR-Based
Rate'). "LIBOR" is the rate (rounded to the next higher 1 /1 00 of 1 %) for U.S.
dollar deposits of that many months maturity as reported on Telerate page 3750
as of 11:00 a.m., London time, on the second London business day before the
relevant Interest Period begins (or if not so reported, then as determined by
Bank from another recognized source of interbank quotation), adjusted for
reserves by dividing that rate by 1.00 minus the LIBOR Reserve. "LIBOR Reserve"
is the maximum percentage reserve requirement (rounded to the next higher 1/100
of 1 % and expressed as a decimal) in effect for any day during the Interest
Period under the Federal Reserve Board's Regulation D for Eurocurrency
Liabilities as defined therein.
<PAGE>
PRIME RATE. The rate of Bank's Prime Rate plus .5% (50 basis points) as that
rate may change from time to time with changes to occur on the date Bank's Prime
Rate changes ("Prime-Based Rate"). Bank's Prime Rate shall be that rate
announced by Bank from time to time as its prime rate and is one of several
interest rate bases used by Bank. Bank lends at rates both above and below
Bank's Prime Rate, and Borrower acknowledges that Bank's Prime Rate is not
represented or intended to be the lowest or most favorable rate of interest
offered by Bank.
INTEREST RATE SELECTION AND ADJUSTMENT.
INTEREST RATE OPTIONS. Subject to the provisions hereof, at the election of
Borrower, the unpaid principal balance of this Note shall bear interest from the
date hereof at the LIBOR-Based Rate or Prime-Based Rate (each, an "Interest
Rate"). Borrower shall elect the Interest Rate, except the Prime-Based Rate,
the period of time such Interest Rate will continuously apply (each, an
"Interest Period"), if any, applicable thereto at the time of each borrowing and
each rate conversion pursuant to the subparagraph entitled "Notice and Manner of
Borrowing and Rate Conversion" below. There shall be no more than one Interest
Rate in effect at any time.
When the Prime-Based Rate is elected, it shall be adjusted daily and the Prime-
Based Rate shall continue to apply until another Interest Rate option is elected
pursuant to the subparagraph entitled "Notice and Manner of Borrowing and Rate
Conversion." When the LIBOR-Based Rate is elected, such rate shall be fixed for
the Interest Period and shall apply for successive Interest Periods at the then
prevailing successive rate until another Interest Rate option is elected
pursuant to the subparagraph entitled "Notice and Manner of Borrowing and Rate
Conversion." When Borrower has not duly specified an Interest Rate as provided
herein, the Note shall bear interest at the Prime-Based Rate.
INTEREST PERIODS. In connection with each LIBOR-Based Rate, Borrower, by giving
notice at the times described in the subparagraph entitled "Notice and Manner of
Borrowing and Rate Conversion" below, shall select an Interest Period to be
applicable thereto, which Interest Period shall be a period of 1 month. No
Interest Period selection is required for the Prime-Based Rate.
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (defined herein) occurs and as long as a Default continues, (a) Borrower
shall no longer have the option to request LIBOR-Based Rate and (b) all
outstanding Obligations shall bear interest at the Prime-Based Rate plus 3%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
NOTICE AND MANNER OF BORROWING AND RATE CONVERSION. Borrower shall give Bank
irrevocable telephonic notice (confirmed in writing) of each proposed borrowing
or rate conversion not later than 11:00 a.m. local time at the office of Bank
first shown above (a) on the same business day as each proposed borrowing or
rate conversion at a Prime-Based Rate and (b) at least 2 business days before
each proposed borrowing or rate conversion at a LIBOR-Based Rate. Each such
notice shall specify (i) the date of such borrowing or rate conversion, which
shall
Page 2
<PAGE>
be a business day, (ii) the amount to be borrowed or converted, (iii) the
Interest Rate or Interest Rates selected by Borrower, and (iv) except for the
Primed-Based Rate, the duration of any Interest Period applicable thereto, which
period must equal the Interest Rate option. Notices received after 11:00 a.m.
local time at the office of Bank first shown above shall be deemed received on
the next business day.
INDEMNIFICATION AND ADDITIONAL COSTS.
INDEMNIFICATION. Borrower indemnifies Bank against Bank's loss or expense in
employing deposits as a consequence (a) of Borrower's failure to make any
payment when due under this Note or (b) any payment, prepayment or conversion of
any loan on a date other than the last day of the Interest Period ("Indemnified
Loss or Expense").
ADDITIONAL COSTS. If, at any time, a new, or a revision in any existing law or
interpretation or administration (including reversals) thereof by any government
authority, central bank or comparable agency imposes, increases or modifies any
reserve or similar requirement against assets, deposits or credit extended by
Bank, or subjects Bank to any tax, duty or other charge (except tax on Bank's
net income), and any of the foregoing increase the cost to Bank of maintaining
its commitment or reduce the amount of any sum received or receivables by Bank
under this Note, within 15 days after demand by Bank, Borrower agrees to pay
Bank such additional amounts as will compensate Bank for such increased costs or
reduction ("Additional Costs").
MATCH FUNDING. The amount of such (a) Indemnified Loss or Expense or (b)
Additional Costs outlined above shall be determined, in Bank's sole discretion,
based upon the assumption that Bank funded 100% that portion of the loan to
which the LIBOR-Based Rate or CD-Based Rate applies respectively in the
applicable London interbank or domestic certificate of deposit market.
UNAVAILABILITY OF INTEREST RATE. If, at any time, (a) Bank shall determine that,
by reasons of circumstances affecting foreign exchange and interbank markets
generally, LIBOR or CD deposits in the applicable amounts are not being offered
to Bank; or (b) a new, or a revision in any existing law or interpretation or
administration (including reversals) thereof by any government authority,
central bank or comparable agency shall make it unlawful or impossible for Bank
to honor its obligations under this Note, (i) Bank's obligation to make,
maintain or convert into a LIBOR-Based Rate shall be suspended; and (ii) the
applicable LIBOR-Based Rate shall immediately be converted to the Prime-Based
Rate for the remainder of the Interest Period.
INTEREST COMPUTATION. (ACTUAL/360). Interest shall be computed on the basis of a
360-day year for the actual number of days in the interest period ("Actual/360
Computation"). The Actual/360 Computation determines the annual effective
interest yield by taking the stated (nominal) interest rate for a year's period
and then dividing said rate by 360 to determine the daily periodic rate to be
applied for each day in the interest period. Application of the Actual/360
Computation produces an annualized effective interest rate exceeding that of the
nominal rate.
Page 3
<PAGE>
REPAYMENT TERMS. This Note shall be due and payable as set forth in Schedule A
attached hereto and made a part hereof. All remaining principal and interest
shall be due and payable on May 5, 1 997.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
LOAN DOCUMENTS AND OBLIGATIONS. The term "Loan Documents" used in this Note and
other Loan Documents refers to all documents executed in connection with the
loan evidenced by this Note and may include, without limitation, a commitment
letter that survives closing, a loan agreement, this Note, guaranty agreements,
security agreements, security instruments, financing statements, mortgage
instruments, letters of credit and any renewals or modifications, but however,
does not include swap agreements as defined in 11 U.S.C. (S) 101 whenever
executed.
The term "Obligations" used in this Note refers to any and all indebtedness and
other obligations under this Note, all other obligations as defined in the
respective Loan Documents, and all obligations under any swap agreements as
defined in 11 U.S.C. (S) 101 between Borrower and Bank whenever executed.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 15 or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
If this Note is secured by owner-occupied residential real property located
outside the state in which the office of Bank first shown above is located, the
late charge laws of the state where the real property is located shall apply to
this Note, or if permitted under the law of that state, 5% of each payment past
due for 10 or more days.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations,
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative
Page 4
<PAGE>
proceeding, or in any appellate or bankruptcy proceeding.
USURY. Regardless of any other provision of this Note or other Loan Documents,
if for any reason the effective interest should exceed the maximum lawful
interest, the effective interest shall be deemed reduced to, and shall be, such
maximum lawful interest, and (i) the amount which would be excessive interest
shall be deemed applied to the reduction of the principal balance of this Note
and not to the payment of interest, and (ii) if the loan evidenced by this Note
has been or is thereby paid in full, the excess shall be returned to the party
paying same, such application to the principal balance of this Note or the
refunding of excess to be a complete settlement and acquittance thereof.
BORROWER'S ACCOUNTS. Except as prohibited by law, Borrower grants Bank a
security interest in all of Borrower's accounts with Bank and any of its
affiliates.
DEFAULT. If any of the following occurs, a default ("Default") under this Note
shall exist: Nonpayment; Nonperformance. The failure of timely payment or
performance of the Obligations under this Note or any other Loan Documents.
False Warranty. A warranty or representation made in the Loan Documents or
furnished Bank in connection with the loan evidenced by this Note proves
materially false, or if of a continuing nature, becomes materially false. Cross
Default. At Bank's option, any default in payment or performance of any
obligation under any other loans, contracts or agreements of Borrower, any
Subsidiary or Affiliate of Borrower, any general partner of or the holder(s) of
the majority ownership interests of Borrower with Bank or its affiliates
("Affiliate" shall have the meaning as defined in 11 U.S.C. (S) 101, except that
the term "debtor" therein shall be substituted by the term "Borrower" herein;
"Subsidiary" shall mean any corporation of which more than 50% of the issued and
outstanding voting stock is owned directly or indirectly by Borrower).
Cessation; Bankruptcy. The death of, appointment of guardian for, dissolution
of, termination of existence of, loss of good standing status by, appointment of
a receiver for, assignment for the benefit of creditors of, or commencement of
any bankruptcy or insolvency proceeding by or against the Borrower, its
Subsidiaries or Affiliates, if any, or any general partner of or the holder(s)
of the majority ownership interests of Borrower, or any party to the Loan
Documents. Material Capital Structure or Business Alteration. Without prior
written consent of Bank, (i) a material alteration in the kind or type of
Borrower's business or that of its Subsidiaries or Affiliates, if any; (ii) the
acquisition of substantially all of Borrower's, any Subsidiary's, any
Affiliate's, or guarantor's business or assets, or a material portion (10% or
more) of such business or assets if such a sale is outside Borrower's, any
Subsidiary's, any Affiliate's or any guarantor's, ordinary course of business,
or more than 50% of its outstanding stock or voting power in a single
transaction or a series of transactions; (iii) the acquisition of substantially
all of the business or assets or more than 50% of the outstanding stock or
voting power of any other entity; or (iv) should any Borrower, Subsidiary,
Affiliate, or guarantor enter into any merger or consolidation.
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions: Bank
Lien and Set-off. Exercise its
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right of set-off or to foreclose its security interest or lien against any
account of any nature or maturity of Borrower with Bank without notice.
Acceleration Upon Default. Accelerate the maturity of this Note and all other
Obligations, and all of the Obligations shall be immediately due and payable.
Cumulative. Exercise any rights and remedies as provided under the Note and
other Loan Documents, or as provided by law or equity.
LINE OF CREDIT ADVANCES. Borrower may borrow, repay and reborrow, and Bank may
advance and readvance under this Note respectively from time to time, so long as
the total indebtedness outstanding at any one time does not exceed the principal
amount stated on the face of this Note. Bank's obligation to advance or
readvance under this Note shall terminate if Borrower is in Default under this
Note. Cash Management CCF+. Loan advances and readvances under this Note will be
made from time to time, into the specified account(s) with Bank pursuant to the
Controlled Cash Flow Plus Services Description and Master Agreement (the
"Services Agreement") dated January 4, 1994 between Bank and Borrower and any
amendments or modifications thereto. No loan advance(s) will be made (i) in an
amount less than $1,000.00 and each loan advance will be made in increments of
$1,000.00, (ii) if the Services Agreement has been breached or terminated, or
(iii) if this line of credit is not renewed. All outstanding principal and
interest will be repaid daily from the specified Depository Account(s) under the
Agreement before any advance or readvance of funds is made under this Note.
LOAN AGREEMENT. This Note is subject to the provisions of that certain
Commitment Letter and Loan Agreement between Bank and Borrower dated June 5,
1996.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may extend, modify or renew
this Note or make a novation of the loan evidenced by this Note for any period
and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any Borrower or any person
liable under this Note or other Loan Documents, all without notice to or consent
of any Borrower or any person who may be liable under this Note or other Loan
Documents and without affecting the liability of Borrower or any person who may
be liable under this Note or other Loan Documents.
MISCELLANEOUS PROVISIONS. Assignment. This Note and other Loan Documents shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal
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representatives, successors and assigns. Bank's interests in and rights under
this Note and other Loan Documents are freely assignable, in whole or in part,
by Bank. Borrower shall not assign its rights and interest hereunder without the
prior written consent of Bank, and any attempt by Borrower to assign without
Bank's prior written consent is null and void. Any assignment shall not release
Borrower from the Obligations. Applicable Law; Conflict Between Documents. This
Note and other Loan Documents shall be governed by and construed under the laws
of the state where Bank first shown above is located without regard to that
state's conflict of laws principles. If the terms of this Note should conflict
with the terms of the loan agreement or any commitment letter that survives
closing, the terms of this Note shall control. Jurisdiction. Borrower
irrevocably agrees to non-exclusive personal jurisdiction in the state in which
the office of Bank first shown above is located. Severability. If any provision
of this Note or of the other Loan Documents shall be prohibited or invalid under
applicable law, such provision shall be ineffective but only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Note or other such document.
Notices. Any notices to Borrower shall be sufficiently given, if in writing and
mailed or delivered to the Borrower's address shown above or such other address
as provided hereunder, and to Bank, if in writing and mailed or delivered to
Bank's office address shown above or such other address as Bank may specify in
writing from time to time. In the event that Borrower changes Borrower's address
at any time prior to the date the Obligations are paid in full, Borrower agrees
to promptly give written notice of said change of address by registered or
certified mail, return receipt requested, all charges prepaid. Plural; Captions.
All references in the Loan Documents to Borrower, guarantor, person, document or
other nouns of reference mean both the singular and plural form, as the case may
be, and the term "person" shall mean any individual, person or entity. The
captions contained in the Loan Documents are inserted for convenience only and
shall not affect the meaning or interpretation of the Loan Documents. Binding
Contract. Borrower by execution of and Bank by acceptance of this Note agree
that each party is bound to all terms and provisions of this Note. Advances.
Bank in its sole discretion may make other advances and readvances under this
Note pursuant hereto. Posting of Payments. All payments received during normal
banking hours after 2:00 p.m. local time at the office of Bank first shown above
shall be deemed received at the opening of the next banking day. Joint and
Several Obligations. Each Borrower is jointly and severally obligated under this
Note. Fees and Taxes. Borrower shall promptly pay all documentary, intangible
recordation and/or similar taxes on this transaction whether assessed at closing
or arising from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Note and other Loan Documents
("Disputes") between or among parties to this Note shall be resolved by binding
arbitration as provided herein. Institution of a judicial proceeding by a party
does not waive the right of that party to demand arbitration hereunder. Disputes
may include, without limitation, tort claims, counterclaims, disputes as to
whether a matter is subject to arbitration, claims brought as class actions,
claims arising from Loan Documents executed in the future, or claims arising out
of or connected with the transaction reflected by this Note.
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Arbitration shall be conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in the city in which the office of Bank first stated above is
located. The expedited procedures set forth in Rule 51 et seq. of the
------
Arbitration Rules shall be applicable to claims of less than $1,000,000.00. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted or if such person is not available to serve, the
single arbitrator may be a licensed attorney. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements.
PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the preceding binding
arbitration provisions, Bank and Borrower agree to preserve, without diminution,
certain remedies that any party hereto may employ or exercise freely,
independently or in connection with an arbitration proceeding or after an
arbitration action is brought. Bank and Borrower shall have the right to proceed
in any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any real
or personal property or other security by exercising a power of sale granted
under Loan Documents or under applicable law or by judicial foreclosure and
sale, including a proceeding to confirm the sale; (ii) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
Borrower and Bank agree that they shall not have a remedy of punitive or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
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Wire & Cable Specialties Corporation of Georgia
Taxpayer Identification Number: 58-6236414
CORPORATE By: /s/ Theodore J. Bruno
--------------------------------------------
SEAL Theodore J. Bruno, Chief Executive Officer
By: /s/ Paul Monahan
--------------------------------------------
Paul Monahan, III, Chief Operating Officer
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EXHIBIT 10.3
BELDEN WIRE & CABLE COMPANY
DOMESTIC DISTRIBUTOR AGREEMENT
#104432
1. APPOINTMENT. Belden Wire & Cable Company, a Delaware corporation
("COMPANY"), appoints Wire & Cable Specialties ("DISTRIBUTOR") as a non-
exclusive Distributor for the products ("PRODUCTS") listed in Schedule 1.
2. AREA OF PRIMARY RESPONSIBILITY. Schedule 2 lists the area (the "AREA OF
PRIMARY RESPONSIBILITY") in which the Distributor will be measured in
fulfilling his responsibilities.
3. SCOPE. This Agreement consists of pages 1 through 12. Company shall have
the right to change any schedule during the term of this Agreement. The
modifications will become effective thirty (30) days after the Company
provides notice of the changes to the Distributor. The changes cannot be
materially inconsistent with other provisions of the Agreement.
4. COMPANY'S RESPONSIBILITIES. During this Agreement, the Company shall:
--------------------------
4.1. Sell Products to Distributor for resale to users of Products. Sales
of Products to Distributor shall be made at prices as the Company
may establish from time to time.
4.2. Use reasonable efforts to supply Products ordered by Distributor in
the quantities and at the times requested by Distributor on the
then current Terms and Conditions of Sale. Schedule 3 sets out the
Company's current Terms and Conditions of Sale.
4.3. Extend credit to Distributor as Company may deem appropriate. The
Company may change or withdraw credit. When credit is extended, the
Company will establish the terms of payment applicable to sales to
Distributor. If the Company does not extend credit, the payment
terms of the Terms and Conditions of Sale will apply. If the
Distributor has an overdue debt to the Company, the Company may
withhold shipments to Distributor until the Distributor pays the
debt.
5. FORCE MAJEURE AND MINIMUM ORDERS.
5.1. Company's performance of its obligations is subject to acts of God,
embargoes, governmental actions, or other causes beyond the
reasonable control of Company ("Force Majeure events"). The Company
shall not be liable to Distributor for any damage or loss that
results from a Force Majeure event.
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5.2. The Company may add a service charge or refuse to accept orders for
Products that are for less than the minimum dollar values listed on
the Company's then current Terms and Conditions of Sale.
6. DISTRIBUTOR'S RESPONSIBILITIES. During this Agreement, the Distributor
shall:
6.1. Use its best efforts to sell and promote the sale and use of Products
in its Area of Primary Responsibility, and to fulfill the sales
targets established by Company from time to time.
6.2. Order and maintain an inventory of Products sufficient to anticipate
and meet the normal needs of customers.
6.3. Receive representatives of Company for inventory consultation and
cooperation in connection with the promotion and sale of Products and
for periodic audits to assess compliance with this Agreement.
6.4. At Company's request, provide Company point-of-sale (P.0.S.)
information as required by Schedule 5 ("Point of Sale Record
Description"); cooperate with Company in meeting the needs of users of
the Products; and cooperate with Company by notifying Company of any
product liability or product defect claims and by providing such
documentation as Company may request.
6.5. Employ an adequate number of sales personnel to solicit orders for
Products and to demonstrate and exhibit Products throughout its Area
of Primary Responsibility. To determine whether the Distributor has
fulfilled these requirements, the Company will give primary
consideration to: (i) Distributor's sales achievements in its Area of
Primary Responsibility as compared to sales achieved by other Company
Distributors and (ii) Distributor's action regarding improvements in
its operations necessary to promote the sale of products.
6.6. Maintain suitable places of business.
6.7. Pay Company invoices in accordance with the terms stated on Company
price bulletins issued from time to time.
6.8. Notify the Company immediately of any pirating, infringement or
misrepresentation of Products.
6.9. Become informed on how Products are used in its Area of Primary
Responsibility and promptly report to Company all accidents involving
Products which result in personal injury or property damage.
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7. TERMS AND CONDITIONS OF SALES TO DISTRIBUTOR.
7.1. All sales of Products to Distributor by Company shall be subject to
this Agreement. Any conflicting terms in any agreement or order
furnished by Distributor shall be void, unless accepted in writing
by a Company representative, other than by a routine
acknowledgment.
7.2. WARRANTY. Company warrants that all Products delivered shall be
free from defects in workmanship and material. THERE ARE NO EXPRESS
OR IMPLIED WARRANTIES WHETHER OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR OTHERWISE, EXCEPT FOR TITLE, WHICH EXTEND
BEYOND THE WARRANTY STATED ABOVE. Company's liability for breach of
warranty is limited solely to (i) repair or replace non-conforming
material of Company's manufacture or (ii) refund the purchase price
of the non-conforming material. Upon discovery of a defect,
Distributor shall notify Company in writing, within thirty (30)
days of delivery of stock items and within ten (10) days of
delivery of special items made to order, of any claim Distributor
may have regarding any delivered item. Failure to give timely
notice will constitute an unqualified acceptance and waiver of all
claims. All inspection and returns shall be in accordance with
Section 12. The Company will not be liable for materials or
components supplied by vendors. To the extent permissible, the
Company will permit Distributor to assert any vendor warranty
applicable to the non-conforming material or component. Repairs to,
alteration of, or work done on warranted material without Company's
prior written authorization shall void all warranties.
7.3. LIMITATION OF LIABILITY: IN NO EVENT SHALL COMPANY BE LIABLE FOR
SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES.
7.4. Company shall not be responsible for any claim asserted against
Company because the Distributor gave a different or greater
warranty than the Company's. Distributor shall defend and indemnity
the Company for such claims.
7.5. The Distributor will indemnify and defend the Company against any
claim asserted against the Company arising out of Distributor's
operations. Distributor agrees to furnish the Company with a
Certificate of Insurance showing insurance coverage adequate to
fulfill Distributor's obligations under this Agreement and showing
that the carrier will notify the Company at least thirty (30) days
prior to a material adverse change in insurance coverage or any
cancellation of policy.
7.6. The Company, without liability to Distributor, may discontinue or
limit its production of any Product, terminate or limit deliveries
of any Product, alter the design or construction of any Product or
add new products to its line.
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8. TERM AND TERMINATION. This Agreement will begin on the date the Company
signs this Agreement and will continue until either party terminates as
provided below:
8.1. By the mutual written consent of the parties;
8.2. By Company, upon one (1) day's notice in writing, by facsimile,
certified mail, or personal delivery, if (i) Distributor attempts
to assign this Agreement without Company's prior written consent,
(ii) there is a change in the control or management of Distributor
which is unacceptable to Company, (iii) the Distributor stops
conducting business in the normal course, (iv) the Distributor
consents to the appointment of a receiver, trustee or liquidator of
itself, a subsidiary, or over a substantial part of its property,
or shall make a general assignment for the benefit of creditors or
otherwise show evidence of insolvency, or (v) Distributor breaches
this Agreement or acts in any manner deemed by the Company to be
detrimental to the best interest of the Company; or
8.3. Except as provided by applicable law, either party may terminate
this Agreement without cause and solely for the convenience of the
terminating party by giving thirty (30) days' notice of its
election to do so by the means listed in Section 8.2.
9. OBLIGATIONS UPON TERMINATION.
9.1. Within thirty (30) days after termination, the Company will
repurchase from Distributor at the net price paid by Distributor
all of the Products which Company deems commercially useable.
Credit for the repurchased Products will be subject to a 10%
restocking charge if the termination is without cause and is
initiated by the Company. Repurchased Products shall be returned
freight prepaid by Distributor to Richmond, Indiana, or to other
locations as the Company may designate.
9.2. Upon termination, the Distributor shall stop using the Trade Names
listed in Section 6, shall remove any Trade Names from buildings or
other property under the Distributor's control, and shall insure
the cessation of use and removal by all persons claiming to have
received the right to such use from the Distributor.
9.3. The acceptance of any order or the sale of any Products to
Distributor after the expiration or termination of this Agreement
shall not be construed as a renewal or extension of the Agreement
or as a waiver of termination. Such transactions will be on an
order-to-order basis and will be governed by the terms of this
Agreement.
9.4. Upon termination for any reason, the Company will not be liable to
Distributor for the loss of prospective profits on anticipated
sales or on account of expenditures,
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investments, leases or commitments in connection with the business
or goodwill of the Distributor. Distributor waives any claim for
such compensation under applicable laws because of the termination
of this Agreement.
9.5. Termination shall not release either party from the payment of any
amount owing to the other or terminate any other Distributor
obligation. Company may apply any amount due, or to become due,
which the Company owes to Distributor against any amounts (whether
contingent or matured) which the Distributor owes to Company.
10. COMPANY TRADE NAMES AND TRADEMARKS. "Trade Names" shall mean the names or
trademarks "Belden" and the names or marks listed in Schedule 6 or any
variation or abbreviation thereof, and all applications and registrations
of such names or trademarks and any trademark, trade name, or service mark
of which the Company provides notice to Distributor. Distributor will not
use the Trade Names as part of its trade name, trademark, company or firm
name, nor will it permit such use by any party. Distributor will comply
with the rules and regulations furnished to Distributor by Company
regarding the use of any Trade Names and will identify its relationship
with Company. Distributor will not cause to be published any advertising or
initiate any practice which might mislead or deceive the public or might be
detrimental to the Trade Names or goodwill of Company. Distributor agrees,
upon request, to discontinue any advertising or practice deemed by Company
to have such effect or any use of the Trade Names inconsistent with this
Agreement. Distributor shall stop using the Trade Names upon termination of
this Agreement. Distributor will make no use of the Trade Names in any
other business of Distributor and will not use the Trade Names except as
set out in this Agreement.
11. CONFIDENTIAL INFORMATION. Confidential information means all inventions,
designs, drawings, computer programs, specifications, technical
information, data and any other information provided to Distributor by
Company, written or otherwise, that is customarily considered confidential
or which is identified as proprietary, secret or confidential (or words of
similar import). Distributor warrants that it will adopt reasonable
procedures to protect Confidential Information. As part of this process,
the Distributor will implement procedures that exclude from access to such
information all persons who do not require access in the course of
Distributor's business. Distributor agrees that termination of this
Agreement shall not relieve it from protecting Confidential Information and
agrees that it will not use or knowingly permit the use of Confidential
Information to the disadvantage of Company or for the profit of Distributor
or any other party.
12. TERMS AND CONDITIONS OF SALE: Sales by Company to Distributor under this
Agreement shall be subject to the following Terms and Conditions:
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12.1. Delivery and shipment dates for Products listed on the Company's
quotations or acknowledgements of orders are estimated only and not
guaranteed. All prices shown on quotations or acknowledgements are
Company's prices in effect on the date the quotation is made or
order is acknowledged. Shipments will be billed at Company's prices
in effect on the date of shipment.
12.2. Cash discount terms are those stated in Company's current price
bulletins. CASH DISCOUNTS WILL BE ALLOWED ON PRODUCTS ONLY AND
SHALL EXCLUDE FREIGHT CHARGES. SERVICE CHARGES WILL BE ADDED TO THE
PURCHASE PRICE AFTER THE DUE DATE AT THE RATE OF 1% PER MONTH OR
12% PER ANNUM.
12.3. Distributors should refer to Company's current price bulletins for
freight allowances. All shipments under this Agreement will be
F.O.B. at factory location. No allowances will be made for customer
pickups at Belden locations.
12.4. Except for Products that fail to meet applicable warranty
standards, special or custom-built products cannot be returned for
credit. Standard material may be returned for credit by Distributor
upon WRITTEN PERMISSION from the Company, but Company retains the
sole discretion to determine the value at which Products so
returned will be credited. COMPANY RESERVES THE RIGHT TO SCRAP ANY
UNAUTHORIZED RETURNS OF MATERIAL AN A NO CREDIT BASIS.
12.5. The Distributor may not cancel any order without the Company's
consent. Any cancellation charge which the Company may require as a
condition to giving its consent will be consistent with the
expenses incurred by the Company at the time of cancellation.
12.6. In addition to the price for Products, Distributor agrees to pay
Company any additional cost arising from any Federal, State or
local laws imposed as a processing or any other tax on the raw
materials or manufactured Products for which Company may be liable.
12.7. The minimum acceptable order value under this Agreement is $200.00.
12.8. Return privileges will be granted to Distributors in order to
adjust their inventory during the calendar year. As a guideline,
the amount of the return should not exceed 3% of the prior year's
purchases. A non-negotiable 5% reprocessing/ repackaging charge
will apply to all stock adjustments. Schedule 4 details return
procedures ("Return Material Policy").
12.9. All the material which the Distributor believes to be defective
shall be personally inspected by the Company Sales Representative
when time permits. The Distributor may not return material until it
receives a written Return Material
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Authorization. Upon receipt of a Return Material Authorization, the
Distributor may return the merchandise to Company at Richmond,
Indiana, freight collect, and will receive credit if the Company
Inspection Department finds the material defective. In lieu of a
credit, the Company may replace the materials.
12.10. When the Distributor receives a shipment from Company and the
number of pieces delivered is less than what is shown on the
freight bill, the shortage must be noted on the freight bill and
signed by the driver. A formal claim should then be filed by the
Distributor directly with the carrier. If the carrier delivers all
pieces shown on the freight bill, but the Distributor subsequently
discovers shorted material, a claim should be filed directly with
the Company within ninety (90) days of the delivery. Claims filed
later than ninety (90) days will not be honored. When the second
type of shortage is verified by the Company, credit will be issued
to the Distributor's account.
13. GENERAL PROVISIONS.
13.1. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. The
Distributor's rights or obligations cannot be assigned or delegated
without the Company's prior consent.
13.2. RELATIONSHIP OF PARTIES. The relationship of the parties shall be
that of independent contractors and vendor and vendee. Distributor
shall not be considered the Company's agent or legal
representative. The Distributor shall have no right to assume or
incur a liability for the Company.
13.3. CONTROLLING LAWS. This Agreement is subject to all applicable laws.
This Agreement shall be deemed to have been made at Richmond,
Indiana. Indiana law shall govern its construction.
13.4. FAILURE TO ENFORCE. The failure of either party to enforce this
Agreement shall not be construed as a waiver to enforce this
Agreement.
13.5. EXECUTION AND MODIFICATION.
13.5.1. This Agreement constitutes the entire agreement between
the parties regarding the subject matter.
13.5.2. This Agreement supersedes any previous or contemporaneous
agreement with respect to the subject matter. This
Agreement shall not become effective until the Company
authorized representative signs the document. Any
modification or extension of this Agreement must be in
writing and signed by the Company's authorized
representative.
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13.5.3. All purchase orders entered through either the Belden
Information Network system ("BIN") or Electronic Data
Inter-change ("EDI") shall be subject to this Agreement.
Distributor acknowledges that BIN AND EDI transactions
contain confidential and proprietary information and are
subject to Section 11.
13.6. NOTICES. Any notices may be given by personal delivery, by first
class mail or by facsimile to the addresses for Company and
Distributor shown below their signature lines on the signature page
of this Agreement. These addresses for notice may be changed in the
same manner. Notices sent by certified mail will be effective upon
the earlier of actual receipt or five (5) days after mailing.
Notices provided by personal delivery will be effective upon
delivery. Notices provided by facsimile will be effective upon
sender's receipt of written confirmation of transmittal.
13.7. DIRECT SALES. Company reserves the right for itself and its
affiliates to deal directly with any party in the Area of Primary
Responsibility.
13.8. SEVERABILITY. The provisions of this Agreement are severable.
Should any court hold any provision of this Agreement to be
unlawful, the holding shall not invalidate the entire Agreement.
Rather, the unlawful clause shall be severed from this Agreement
and the remaining provisions of this Agreement shall be enforced.
13.9. HEADINGS. The section headings are for convenience only and are not
to be used in interpreting this Agreement.
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Belden Wire & Cable Company Distributor
By: /s/Mike Murphy By: /s/ Theodore J. Bruno
--------------------- ----------------------
Name: Mike Murphy Name: Theodore J. Bruno
Title: Vice President Domestic Sales Title: President/CEO
Date: 10/6/94 Date: 10/1/94
----------------- -------------------
Address: Address:
P.O. Box 1980 Wire & Cable Specialities
2200 U.S. Highway 27 South 5855 Peachtree Corners East
Richmond, Indiana 47375 Norcross, GA 30092
____________________________________________________________________
Belden Cord Products
--------------------
By:_______________________
Name:_____________________
Title:____________________
Date:_____________________
Address:
P.O. Box 1980
2200 U.S. Highway 27 South
Richmond, Indiana 47375
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EXHIBIT 10.4
LEASE AGREEMENT
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
This Lease Agreement ("Lease") is made and entered into by and between
T. M. HUNT, TRUSTEE, hereinafter referred to as "Landlord", and FUTURONIX
CORPORATION, a Texas corporation, hereinafter referred to as "Tenant".
In consideration of the mutual covenants herein, Landlord hereby
demises and leases to Tenant and Tenant hereby leases from Landlord, subject to
all the terms and conditions herein set forth, those certain premises
hereinafter referred to as the "Leased Premises" set forth in Item 1 of the
Basic Lease Provisions. The building in which the Leased Premises is located,
the land on which the building is situated and all improvements and
appurtenances to the buildings are referred to collectively herein as the
"Project".
BASIC LEASE PROVISIONS
1. Legal description: All of Lots One (1), Two (2), Three (3), Four (4), Five
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(5) and Six (6), in Block One (1), of WEAVER INDUSTRIAL PARK, according to the
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map or plat thereof, recorded in Volume 164, page 139 of the Map Records of
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Harris County, Texas, also being located in the William C. Wallace Survey,
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Abstract No. 848, in Harris County, Texas, said tract of land being more
- ------------------------------------------------------------------------
particularly described by metes and bounds on Exhibit "A" attached hereto and
- ------------------------------------------------------------------------------
made a part hereof for all purposes, also known as 12614 Hempstead Highway,
- ---------------------------------------------------------------------------
Houston, Harris County, Texas.
- -----------------------------
2. Base Monthly Rent: See attached Exhibit "B"
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3. Term: Ten (10) years _________________________________
------------------------
4. Commencement Date: January 1, 1994
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5. Security Deposit: $ -0-
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6. Broker(s): None
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7. Permitted Use: Industrial and Warehouse
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8. Addresses for notices under this Lease:
Landlord: Tenant:
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<PAGE>
7930 Blankenship 12614 Hempstead Highway
---------------------------------- -------------------------------
Houston, Texas Houston, Texas 77092
---------------------------------- -------------------------------
TERMS, COVENANTS AND CONDITIONS
a. Commencement and Expiration. The term of this Lease shall be the
---------------------------
period of time specified in Item 3 of the Basic Lease Provisions. The term
shall commence on the Commencement Date set forth in Item 4 of the Basic Lease
Provisions or such later date as the Lease Premised shall be tendered to Tenant,
or such earlier date as Tenant takes possessions or commences use of the Leased
Premises for any purpose, and shall terminate, without notice to Tenant, upon
the expiration of the term of this Lease as set forth in Item 3 of the Basic
Lease Provisions. If the Lease commences on a day other than the first day of
the calendar month, the term of the Lease shall be extended by that part of one
(1) month necessary to cause the expiration of the term to be on the last day of
a calendar month.
b. Rent. Tenant agrees to and shall pay Landlord at the address for
----
Landlord specified in Item 8 of the Basic Lease Provisions, or at such other
place as Landlord shall designate from time to time in writing, as rent for the
Leased Premises the monthly sum shown in Item 2 of the Basic Lease Provisions.
The Base Rent shall be payable in advance, without demand, deduction or set off,
for the entire term hereof. A monthly installment of Base Rent shall be due and
payable on the first day of each calendar month after the commencement date
during the term hereof, except that the rental for any fractional calendar month
at the commencement of the Lease period shall be prorated.
c. Security Deposit. Not Applicable.
----------------
d. Use of the Lease Premises. The Leased Premises shall be used for the
-------------------------
purposes set forth in Item 7 of the Basic Lease Provisions and no other purpose.
Tenant will not occupy or use, or permit any portion of the Leased Premises to
be occupied or used for any business or purposes which is unlawful, disreputable
or deemed to be extra-hazardous on account of fire, or permit anything to be
done (including without limitation any method of storage) which would in any way
increase the rate of fire insurance coverage for the Project and/or its contents
or render such insurance void.
e. Utilities. Tenant shall pay all charges for utility services to the
---------
Leased Premises, together with any taxes, penalties, surcharges or the like
pertaining thereto and any maintenance charges for utilities.
f. Taxes. 1) Each year during the term of this Lease, Landlord shall pay
real estate taxes assessed against the Leased Premises prior to their
delinquency. As additional rental, tenant agrees to reimburse Landlord the
amount of such real estate taxes upon receipt of a statement from Landlord and
evidence that Landlord has paid such real estate taxes prior to their
delinquency. Tenant's failure to reimburse Landlord within fifteen (15) days for
such real estate
-2-
<PAGE>
taxes paid for the prior year against the Leased Premises shall constitute a
default under the terms of this Lease. 2) As to personal property taxes, Tenant
shall pay within fifteen (15) days of presentation by Landlord of a tax
statement, as rent, all taxes levied against personal property and trade
fixtures placed by Tenant on the premises or located on the premises. If any
such taxes for which Tenant is liable are levied against Landlord or Landlord's
property and if Landlord elects to pay the same or if the assessed value
Landlord's's property is increased by inclusion of personal property and trade
fixtures placed by Tenant on the premises or located on the premises and
Landlord elects to pay the taxes based on such increase, Tenant shall pay to
Landlord within fifteen (15) days of presentation by Landlord of a tax statement
that part of such taxes for which Tenant is primarily liable hereunder.
g. Insurance. Landlord shall pay for fire and extended coverage
---------
insurance covering the Project of which the Leased Premises are a part and such
other insurance as Landlord may from time to time elect to carry on the Project.
Tenant shall reimburse Landlord, during the term hereof, the cost of such fire
and extended coverage insurance and such other insurance as Landlord may elect
upon receipt of a statement by Landlord from Tenant advising Tenant of the
amount of such insurance premiums so paid by Landlord. Any failure of Tenant to
reimburse Landlord for such insurance premiums after fifteen (15) days of
receipt of such from Tenant by Landlord shall constitute a default hereunder.
Tenant shall provide public liability and property damage insurance for Tenant's
business operations on the Leased Premises in the amount of not less than
$300,000.00 per occurrence in respect of injury to persons (including death),
and in the amount of not less than $50,000.00 per occurrence in respect of
property damage or destruction, including loss of use thereof, which policies
shall cover the Landlord as well as the Tenant. Said insurance policies
required to be provided by Tenant herein shall name Landlord as an insured and
shall be issued by an insurance company approved by Landlord. Tenant shall
provide Landlord with certificates of insurance evidencing the coverage required
herein. Tenant shall be solely responsible for fire and casualty insurance on
Tenant's property on or about the Leased Premises. If Tenant does not maintain
such insurance in full force and effect, Landlord may notify Tenant of such
failure and if Tenant does not deliver to Landlord within ten (10) days after
such notice certification showing all such insurance to be in full force and
effect, Landlord may, at its option, take out the necessary insurance to comply
with the provisions hereof and pay the premiums on the items specified in such
notice. Tenant shall reimburse Landlord upon demand any amount so paid or
expended in the payment of the insurance premiums required hereby and specified
in the notice, with interest thereon at the rate of eighteen percent per annum
from the date of such payment by Landlord until repaid by Tenant.
h. Condition of the Leased Premises. Tenant has examined and accepts
--------------------------------
the Leased Premises in its present "AS IS" condition as suitable for the
purposes for which are leased, and does hereby accept the Leased Premises
regardless of reasonable deterioration between the date of this Lease and the
date Tenant begins occupying the Leased Premises unless Landlord and Tenant
agree to repairs or refurbishment as noted in Special Provisions.
-3-
<PAGE>
i. Maintenance and Repairs. Tenant shall keep the Leased Premises in a
-----------------------
good, clean condition and shall at its sole cost and expense, make all needed
repairs and replacements, including replacement of cracked or broken glass. If
any repairs required to be made by Tenant hereunder are not made within ten (10)
days after written notice delivered to Tenant by Landlord, Landlord may at its
option make such repairs without liability to Tenant for any loss or damage
which may result by reason of such repairs, and Tenant shall pay to Landlord
upon demand as additional rent hereunder the cost of such repairs plus interest.
At the termination of this Lease, Tenant shall deliver the Leased Premises in
good order and condition, reasonable wear and tear excepted.
j. Alterations. All alterations, additions and improvements,
-----------
except trade fixtures, installed at expense of Tenant, shall become the property
of Landlord and shall remain upon and be surrendered with the Leased Premises as
a part thereof on the termination of this Lease. Such alterations, additions
and improvements may only be made with the prior written consent of Landlord.
If consent is granted for the making of improvements or alterations to the
Leased Premises, such improvements and alterations shall not commence until
Tenant has furnished to Landlord a certificate of insurance showing coverage in
an amount satisfactory to Landlord protecting Landlord from liability for injury
to any person and damage to any personal property, on or off the Leased
Premises, in connection with the making of such improvements or alterations.
At the termination of this Lease, Tenant shall deliver the Leased Premises in
good order and condition, natural deterioration only excepted. Any damage
caused by the installation or removal of trade fixtures shall be repaired at
Tenant's expense prior to the expiration of the Lease term. All alterations,
improvements, additions and repairs made by Tenant shall be made in a good and
workmanlike manner.
k. Compliance with Laws and Regulations. Tenant shall, at its own
------------------------------------
expense, comply with all laws, orders and requirements of all governmental
entities with reference to the use and occupancy of the Leased Premises. Tenant
and Tenant's agents, employees and invitees shall fully comply with any rules
and regulations governing the use of the building or other improvements to the
Leased Premises as required by Landlord. Landlord may make reasonable changes
in such rules and regulations from time to time as deemed advisable for the
safety, care and cleanliness of the Leased Premises, provided same are in
writing and are not in conflict with this Lease.
l. Assignment and Subletting. Tenant shall not assign this Lease nor
-------------------------
sublet the Leased Premises or any interest therein without first obtaining the
written consent of Landlord. Any assignment or subletting without the written
consent of Landlord shall be void and shall, at the option of Landlord,
terminate this Lease.
m. Destruction. In the event the Leased Premises is partially damaged
-----------
or destroyed or rendered partially unfit for occupancy by fire or other
casualty, Tenant shall give immediate notice to Landlord. Landlord may repair
the damage and restore the Leased Premises to substantially the same condition
as immediately prior to the occurrence of the casualty. Such
-4-
<PAGE>
repairs shall be made at Landlord's expense unless due to Tenant's negligence.
Landlord shall allow Tenant a fair reduction of rent during the time the Leased
Premises are partially unfit for occupancy by fire or other casualty, or if
Landlord shall decide not to repair or rebuild, this Lease shall terminate and
the rent shall be paid to the time of such casualty.
n. Tenant Default. The following events shall be events of default by
--------------
Tenant under this Lease:
(1) Tenant shall fail to pay any installment of the rent herein
reserved when due, or any payment with respect to taxes
hereunder when due, or any other payment or reimbursement to
Landlord required herein when due, and such failure shall
continue for a period of five (5) days from the date such
payment was due.
(2) Tenant shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit
of creditors.
(3) Tenant shall file a petition under any section or chapter of
the United States Bankruptcy Code, as amended, or under any
similar law or statute of the United States or any state
thereof; or Tenant shall be adjudged bankrupt or insolvent in
proceedings filed against Tenant thereunder.
(4) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant.
(5) Tenant shall desert or vacate any substantial portion of the
Leased Premises.
(6) Tenant shall fail to comply with any term, provision or
covenant of this Lease (other than the foregoing in this
Section 14) , and shall not cure such failure within twenty
(20) days after written notice thereof to Tenant.
o. Remedies. Upon the occurrence of any such event of default described
--------
in foregoing Section, Landlord shall have the option to pursue any one or more
of the following remedies without any notice or demand whatsoever:
(1) Terminate this Lease, in which event Tenant shall immediately
surrender the Lease Premises to Landlord, and if Tenant fail so to do,
Landlord may, without prejudice to any other remedy which it may have
for possession or arrearage in rent, enter upon and take possession of
the Leased Premises and expel or remove
-5-
<PAGE>
Tenant and any other person who may be occupying such Leased Premises
or any part thereof, by force if necessary, without being liable for
prosecution or any claim for damages therefor; and Tenant agrees to
pay Landlord on demand the amount of all loss and damage which
Landlord may suffer by reason of such termination, whether through
inability to relet the Leased Premises on satisfactory terms or
otherwise.
(2) Enter upon and take possession of the Leased Premises and expel or
remove Tenant or any other person which may be occupying such Leased
Premises or any part thereof, by force if necessary, without being
liable for prosecution or any claim for damages therefor, and relet
the Leased Premises and receive the rent therefor; and Tenant agrees
to pay to Landlord on demand any deficiency that may arise by reason
of such reletting. In the event Landlord is successful in reletting
the Leased Premises at a rental in excess of that agreed to be paid by
Tenant pursuant to the terms of this Lease, Landlord and Tenant each
mutually agree that Tenant shall not be entitled, under any
circumstances, to such excess rental, and Tenant does hereby
specifically waives any claim to such excess rental.
(3) Enter upon the Leased Premises by force if necessary, without being
liable for prosecution or any claim for damages therefor, and do
whatever Tenant is obligated to do under the terms of this Leased;
and Tenant agrees to reimburse Landlord on demand for any expenses
which Landlord may incur in thus effecting compliance with Tenant's
obligations under this Lease, and Tenant further agrees that
Landlord shall not be liable for any damages resulting to the Tenant
from such action, whether caused by the negligence of Landlord or
otherwise.
The following provisions shall override and control any conflicting
provisions of Section 91.002 of the Texas Property Code, as well as any
successor statute governing the right of a landlord to change the door locks of
commercial tenants. In the event of the failure or refusal by Tenant to make the
timely and punctual payment of any rent or other sums payable under this Lease
when and as the same shall become due and payable, or in the event of any
default by Tenant as described in Paragraph n. above, Landlord is entitled and
is hereby authorized, without any notice to Tenant, whatsoever, to enter upon
the Leased Premises by use of master key, a duplicate key or other peaceable
means, and to change, alter and/or modify the door locks on all entry doors of
the Leased Premises, thereby permanently excluding Tenant, and its officers,
principals, agents, employees and representatives therefrom. In the event that
Landlord has either permanently repossessed the Leased Premises pursuant to the
foregoing provisions of this Lease, or has terminated that Lease by reasons of
Tenant's default, Landlord shall not thereafter be obligated to provide Tenant
with a key to the Leased Premises at any time, regardless of the amounts
subsequently paid by Tenant; provided, however, that in any such instance,
during Landlord's normal business hours and at the convenience of Landlord, and
upon receipt of
-6-
<PAGE>
written request from Tenant accompanied by such written waivers and releases as
the Landlord may require, Landlord will either (at Landlord' s option) (1)
escort Tenant or its authorized personnel to the Leased Premises to retrieve any
personal belongings or other property of Tenant not subject to the Landlord's
statutory lien or Landlord's contractual lien and security interest described in
Paragraph p. below; or (2) obtain a list from Tenant of such personal property
as Tenant intends to remove, whereupon Landlord shall remove such property and
make it available to Tenant at a time and place designated by Landlord. However,
if Landlord elects option (2), Tenant shall pay, in cash in advance, all costs
and expenses estimated by Landlord to be incurred in removing such property and
making it available to Tenant and all moving and/or storage charges theretofore
incurred by Landlord with respect to such property. If Landlord elects to
exclude Tenant from the Leased Premises without permanently repossessing or
terminating pursuant to the foregoing provisions of this Lease, then Landlord
shall not be obligated to provide Tenant a key to reenter the Leased Premises
until such time as all delinquent rental and other amounts due under this Lease
have been paid in full and all other defaults, if any, have been completely
cured to Landlord's satisfaction (if such cure occurs prior to any actual
permanent repossession or termination) , and Landlord has been given assurance
reasonably satisfactory to Landlord evidencing Tenant's ability to satisfy its
remaining obligations under this Lease. During any such temporary period of
exclusion, Landlord will, during Landlord's regular business hours and at
Landlord's convenience, upon receipt of written request from Tenant (accompanied
by such written waivers and releases as Landlord may require) , escort Tenant or
its authorized personnel to the Leased Premises to retrieve personal belongings
of Tenant or its employees, and such other property of Tenant as is not subject
to the Landlord's statutory lien or Landlord's contractual lien and security
interest described in Paragraph p. below. This remedy of Landlord shall be in
addition to, and not in lieu of, any of its other remedies set forth in this
Lease, or otherwise available to Landlord at law or in equity.
p. Landlord's Lien. Landlord is granted an express contractual lien, in
---------------
addition to any lien provided by law, and a security interest in all property of
Tenant found on the Leased Premises to secure the compliance by Tenant with all
terms of this Lease. In the event of default, Landlord or its agents may
peaceably enter the Leased Premises and remove all property and dispose of same
as Landlord shall see fit.
q. Subordination. Landlord is hereby irrevocably vested with full power
-------------
and authority to subordinate this Lease to any mortgage, Deed of trust other
lien hereafter placed on the Leased Premises and Tenant agrees on demand to
execute such further instruments subordinating this Lease as Landlord may
request, provided such subordination shall be on the express condition that this
Lease shall be recognized by the mortgagee, and the rights of Tenant shall
remain in full force and effect during the term of this Lease so long as Tenant
shall continue to perform all of the covenants and conditions of this Lease.
r. Indemnity. Landlord and its employees and agents shall not be liable
---------
to Tenant or to Tenant's employees, patrons, visitors, invitees or any other
persons or for any damage to personal property caused by an act, omission or
neglect of Tenant or Tenant's agents or of any
-7-
<PAGE>
other tenant of the Project. Tenant agrees to indemnify and hold Landlord and
its employees and agents harmless from any and all claims for such injury and
damages, whether the injury occurs on or off the Leased Premises.
s. Signs. Tenant shall not post or paint any signs at, on or about the
-----
Leased Premises or paint the exterior walls of the building except with the
prior written consent of the Landlord. Landlord shall have the right to remove
any sign or signs in order to maintain the Leased Premises or to make any
repairs or alterations thereto.
t. Condemnation. If the whole or any substantial part of the Leased
------------
Premises is taken for any public or quasi-public use under any governmental law,
ordinance or regulation or by right of eminent domain or should the Leased
Premises be sold to a condemning authority under threat of condemnation, this
Lease shall terminate and the rent shall be abated during the unexpired portion
of the Lease effective from the date of the physical taking of the Leased
Premises.
u. Notices. Notices to Tenant shall be by certified mail or other
-------
delivery to the Leased Premises. Notices to Landlord shall be by certified
mail to the address set out in Item 8 of the Basic Lease Provisions.
v. Default by Landlord. In the event Landlord breaches any covenant,
-------------------
warranty, term or obligation of this Lease, and Landlord fails to cure same or
commence a good faith effort to cure same within thirty (30) days after written
notice thereof by Tenant, Tenant shall be entitled to cure the default and make
any necessary repairs. Any reasonable expenses incurred by Tenant shall be
reimbursed by the Landlord after reasonable notice of the repairs and expenses
incurred. Tenants specifically agrees to look solely to Landlord's interest in
the Project for the recovery of any judgment from Landlord, it being agreed that
Landlord shall never be personally liable for any such judgment.
w. Rights of Entry. Landlord shall have the right during normal
---------------
business hours to enter the Leased Premises: (a) to inspect the general
condition and state of repair thereof; (b) to make repairs required or permitted
under this Lease; or (c) for any other reasonable purpose. The Leased Premises
may be shown at reasonable times to prospective purchasers or tenants. During
the last ninety (90) days of this Lease, a "For Sale" sign and/or a "For Lease"
sign may be displayed on the Leased Premises.
x. Hold Over. Should Tenant, or any of its successors in interest, hold
---------
over the Leased Premises, or any part thereof, after the expiration of the term
of this Lease, unless otherwise agreed in writing, such holding over shall
constitute and be construed as tenancy from month-to-month only, at a monthly
rental equal to one and one-half times the rent paid for the last month of the
term of this Lease.
-8-
<PAGE>
y. Waiver of Breach. The waiver by Landlord of any breach of any
----------------
provision of this Lease shall not constitute a continuing waiver or a waiver of
any subsequent breach of the same or a different provision of this Lease.
z. Time of Essence. Time is expressly declared to be of the essence in
---------------
this Lease.
aa. Binding of Heirs and Assigns. Subject to the provisions of this
----------------------------
Lease pertaining to assignment of the Tenant's interest, all provisions of this
Lease shall extend to and bind, or inure to the benefit not only of the parties
to this Lease but to each and every one of the heirs, executors,
representatives, successors and assigns of Landlord or Tenant.
bb. Rights and Remedies Cumulative. The rights and remedies by this Lease
------------------------------
Agreement are cumulative and the use of any one right or remedy by either party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
cc. Texas Law to Apply. This Agreement shall be construed under and in
------------------
accordance with the laws of the State of Texas.
dd. Legal Construction. In case any one or more of the provisions
------------------
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never ben
contained herein.
ee. Prior Agreements Superseded. This Agreement constitutes the sole and
---------------------------
only agreement of the parties to this Lease and supersedes any prior
understandings or written or oral agreements between the parties respecting the
subject matter of this Lease.
ff. Amendment. No amendment, modification or alteration of the terms
---------
hereof shall be binding unless it is in writing, dated subsequent to the date
hereof and duly executed by the parties.
gg. Attorney' s Fees. Any signatory to this Lease Agreement who is the
----------------
prevailing party in any legal proceeding against any other signatory brought
under or with relation to this Lease Agreement or this transaction shall be
additionally entitled to recover court costs, reasonable attorneys fees, and all
other out-of -pocket costs of litigation, including deposition, travel and
witness costs, from the non-prevailing party.
hh. Special Provisions. This is a lease for a primary term of ten (10)
------------------
years only, and it is understood and agreed that no option to extend the lease
nor right of first refusal with respect to subsequent leases of the property or
sale of the property are granted herein or herewith.
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<PAGE>
EXECUTED this 12th day of November, 1993.
LANDLORD:
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/s/ T.M. Hunt
-----------------------------------
T. M. HUNT, TRUSTEE
TENANT:
------
FUTRONIX CORPORATION,
A Texas Corporation
By: /s/ T.M. Hunt
--------------------------------
Name: President
------------------------------
Title: T.M. Hunt
-----------------------------
<PAGE>
EXHIBIT "A"
All of Lots One (1), Two (2), Three (3), Four (4), Five (5) and Six (6), in
Block One (1), of WEAVER INDUSTRIAL PARK, according to the map or plat thereof
recorded in Volume 164, page 139 of the Harris County Map Records, also being
located in the William C. Wallace Survey, Abstract No. 848, in Harris County,
Texas, said tract of land being more particularly described by metes and bounds
as follows:
TRACT I:
All of that 7.71 acre tract of land (335,817 square feet) located in the William
C. Wallace Survey, Abstract No. 848, Harris County, Texas, also being all of Lot
1 and the southwesterly part of Lot 2, Block 1, WEAVER INDUSTRIAL PARK,
according to the map or plat of which is recorded in Volume 164, Page 139 of the
Map Records of Harris County, Texas, said 7.71 acre tract of land being more
particularly described by metes and bounds as follows, to-wit:
BEGINNING at a 5/8 inch iron rod set in the northeasterly right-of-way line of
Old U.S. Highway No. 290 (Hempstead Highway), for the most westerly west corner
of Lot 1, Block 1, Weaver Industrial Park and the most westerly west corner of
the herein described tract;
THENCE north 36 degrees 10' 15" East, along the northwesterly line of the said
Weaver Industrial Park, a total distance of 273.58 degrees feet to a 5/8 inch
iron rod set for its interior corner and an interior corner of the herein
described tract;
THENCE, 51 degrees 07' 38" West, along a southwesterly line of the said Weaver
Industrial Park, a total distance of 100.03 feet to a 5/8 inch axle found for an
ell corner of the said Weaver Industrial Park and an ell corner of the herein
described tract;
THENCE North 36 degrees 22' 03" East, along the northwesterly line of the said
Weaver Industrial Park, at 408.06 feet pass the north corner of Lot 1 and the
west corner of Lot 2, in all a total distance of 451.12 feet to a 1/2 inch iron
rod set for the north corner of the herein described tract;
THENCE South 51 degrees 07' 00" East, across the southwesterly part of said Lot
2, a total distance of 517.74 feet to an "X" cut in concrete in the
northwesterly right-of-way line of Way Out West Drive for the east corner of the
herein described tract, said point is also in curve whose Center is located
North 52 degrees 12' 22" West, 285.00 feet;
THENCE in a southwesterly direction along the said right-of-way line following
said curve to the right having a Central Angle of 01 degrees 05' 22", a Radius
of 285.00 feet, a Length of 5.42 feet and a Long Chord which bears South 38
degrees 00' 19" West, 5.42 feet to a "X" cut in concrete for the Point of
Tangent;
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<PAGE>
THENCE South 38 degrees 53' 00" West, continuing along the said northwesterly
right-of-way line of Way Out West Drive, at 37.60 feet pass the south corner of
Lot 2 and the east corner of Lot 1, in all a total distance of 708.52 feet to an
5/8 inch iron rod set for an angle point.
THENCE, South 83 degrees 53' 00" West, along the said northwesterly right-of-way
line, a total distance of 14.14 feet to a 5/8 inch iron rod set for its
intersection with the said northeasterly right-of-way line of Old U.S. Highway
No. 290;
THENCE, North 51 degrees 07' 00" West, along the said northeast right-of-way
line of Old U.S. Highway No. 290, a total distance of 375.00 to the PLACE OF
BEGINNING and containing 7.71 acres of land.
TRACT II:
All of that certain 5.44616 acre (237, 235 square feet) tract of land located in
the William C. Wallace Survey, Abstract No. 848, Harris County, Texas, also
being all of Lots 3, 4, 5 and 6 and the northeasterly part of Lot 2, Block 1,
WEAVER INDUSTRIAL PARK, according to the map or plat or which is recorded in
Volume 164, Page 139 of the Map Records of Harris County, Texas, said 5.44616
acre tract of land being more particularly described by metes and bounds as
follows:
BEGINNING at 1/2 inch iron rod found in the southerly right-of-way line of West
Forty-Third Street, based on a width of 100.00 feet, for the most northerly west
corner of the said Lot 6, Block 1, said 1/2 inch iron rod is in a curve whose
center is located South 10 degrees 49' 27.5" East, 1831.54 feet;
THENCE, in an easterly direction, along and with the said southerly right-of-way
line of West Forty-Third Street, following said curve to the right having a
Central Angle of 08 degrees 01' 47", a Radius of 1831.54 feet, a Length of
256.68 feet and a Long Chord which bears North 83 degrees 11' 26" East, 256.47
feet to a 1/2 inch iron rod set for the cutback corner at it's intersection with
the westerly right-of-way line of Way Out West Drive;
THENCE South 45 degrees 30' 00" East, along and with the cutback line, a total
distance of 14.10 feet to a 1/2 inch iron rod found for an angle point;
THENCE South 00 degrees 30' 00" East, along and with the west right-of-way line
of Way Out West Drive, based on a width of 60.00 feet, a total distance of
704.98 feet to a 1/2 inch iron rod found for the Point of Curve of a curve to
the right;
THENCE in a southwesterly direction, continuing along and with the said west
right-of-way line of Way Out West Drive, following said curve to the right
having a Central Angle of 38 degrees 17' 38", a Radius of 285.00 feet, a Length
of 190.48 feet and a Long Chord which bears South 18 degrees 38'
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<PAGE>
49" West, 186.96 feet to an "X" cut in concrete for the southeasterly corner of
the herein described tract;
THENCE, North 51 degrees 07' 00" West, along and with the northeasterly line of
a 7.7100 acre tract of land out of the southwesterly part of the said Lot 2 and
Lot 1, Block 1, a total distance of 517.74 feet to a 1/2 inch iron rod set in
the northwesterly line of said Lot 2 for the most southerly west corner of the
herein described tract;
THENCE North 36 degrees 22' 03" East, along and with the northwesterly line of
Block 1, a total distance of 538.42 feet to a 5/8 inch iron rod set for an
interior corner of the said Block 1 and interior corner of the herein described
tract;
THENCE North 51 degrees 01' 46" West, along and with a southwest line of the
said Block 1, a total distance of 163.80 feet to the PLACE OF BEGINNING and
beginning and containing 5.44616 acres of land.
NOTE: The Company does not represent that the above average or square footage
calculations are correct.
-13-
<PAGE>
EXHIBIT "B"
BASE MONTHLY RENT
The Base Monthly Rent due from Tenant to Landlord shall be calculated on
December 31 of each year for the following years rent. Such rental shall be
based upon Tenant's sales for the preceding calendar year as determined by
Tenant and approved by Landlord. Using the above perimeters, the Base Monthly
Rent shall be set forth as follows:
Level 1 $13,006.00 per month until sales are greater than $ 4 MM Annually
Level 2 $15,000.00 per month until sales are greater than $ 9 MM Annually
Level 3 $17,500.00 per month until sales are greater than $15 MM Annually
Level 4 $20,000.00 per month until sales are greater than $20 MM Annually
Level 5 $25,000.00 per month until sales are greater than $25 MM Annually
By way of explanation, inasmuch as the lease commences on January 1, 1994,
the annual sales for Tenant for calendar year 1993 will be determined on or
about December 31, 1993 and such sales shall be the basis for the calculation of
the monthly rental due for each and every month of the calendar year 1994. The
same calculation shall be made annually to determine the level of monthly
rentals for the ensuing calendar year through and including the termination of
this lease. Further, the definition of sales for Tenant for each calendar year
shall be limited to those sales arising out of Tenant's operation only at the
leased premises. In the event Tenant has sales or derives income from any other
locations or sources other than the leased premises, such sales from other
locations will not be included in the sales figures for purposes of calculation
of Base Monthly Rent.
-14-
<PAGE>
ADDENDUM ONE TO LEASE AGREEMENT AS OF JANUARY 1, 1995
ATTACHED TO AND A PART OF THE LEASE AGREEMENT DATED NOVEMBER
12, 1993, BETWEEN T. M. HUNT, TRUSTEE, AS LANDLORD, AND FUTRONIX,
CORPORATION AS TENANT
In the event of any conflict between the terms and provisions of the lease
and the terms and provisions of this addendum, the terms and provisions of this
addendum shall supersede and control.
1. Provided that as of the time of the giving of the extension notice and the
commencement date of the extension term, (A) Tenant is the Tenant originally
named herein, (B) Tenant actually occupies all of the Premises initially demised
under this lease and any space added to the premises, and (C) no event of
Default exists, or would exist but for the passage of time or the giving of
notice, or both; then Tenant shall have the right to extend the Lease term for
an additional term of five (5) years (such additional term is hereinafter called
the "extension term") commencing on the day following the expiration of the
Lease Term (hereinafter call the "Commencement Date of the Extension Term").
Tenant shall give Landlord notice (hereinafter call the "Extension Notice") of
its election to extend the term of the Lease Term at least six (6) months, but
not more than twelve (12) months, prior to the scheduled expiration date of the
Lease Term. Further, the definition of sales for tenant for each calendar year
shall include all sales of the company.
Landlord:
/s/ T.M. Hunt
- ---------------------------------
T.M. Hunt, Trustee
Tenant:
/s/ Jim Psencik
- ---------------------------------
Jim Psencik, Treasurer
-15-
<PAGE>
EXHIBIT 10.5
LEASE AGREEMENT
THIS LEASE, made this 27 day of October, 1994, by and between
-- ------- --
ANDERSON/TAMPA (II) JOINT VENTURE, a Florida joint venture (hereinafter referred
to as "Lessor "); and Futronix Corporation (hereinafter referred to as
--------------------
"Lessee").
1. Basic Lease Provisions: All entries set forth below in this Paragraph 1
----------------------
relate to provisions of this Lease and are referenced hereto for convenience:
<TABLE>
<S> <C> <C>
1.1 Premises 30,000 s.f. See Paragraph 2
1.2 Building Address 1432-B Tampa East Blvd. See Paragraph 2
1.3 Lease Term 60 months See Paragraph 3
1.4 Lease Commencement Date January 1, 1995 See Paragraph 3
1.5 Rent Commencement Date January 1, 1995 See Paragraph 3
<CAPTION> Year One Per Month
-------- ---------
<S> <C> <C> <C> <C>
1.6 Base Rent $93,900.00 $7,825.00 See Paragraph 4(a)
1.7 First Tax Escalation Year 1996 See Paragraph 4(c)
1.8 Base Taxes Per Square Foot $0.32 See Paragraph 4(c)
1.9 First Insurance Escalation Year 1996 See Paragraph 4(c)
1.10 Base Insurance Cost Per Square Foot $0.05 See Paragraph 4(c)
1.11 Security Deposit $ 7,825.00 See Paragraph 4(b)
1.12 Lessee's Address Futronix Corporation
12614 Hempstead Highway
Houston, TX 77092-4527
1.13 Lessor's Address Anderson/Tampa (II) J.V.
c/o Northwestern Mutual Life
One Tampa City Center, #1724
Tampa, FL 33602
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
1.14 Manager's Address Southland Management Company
9720 Princess Palm Ave. #122, Box 106
Tampa, FL 30619-8346
1.15 Documents Attached:
(a) Exhibit "A", Floor Plan(s)
(b) Exhibit "B", Rules and Regulations
(c) Exhibit "C", Insurance Questionnaire
(d) Exhibit "D", Work Letter
N/A
(f) Addendum (I) & (II), consisting of page 1, which deletes,
-
alters, changes, supplements or amends the following Articles,
and/or Sections of this Lease:______________________
____________________________________________________
</TABLE>
2
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease, consisting
of this Paragraph 1 and Paragraphs 2-40 which follow hereafter, on the
respective dates set forth below.
Witnessed: LESSOR
------
By:/s/ APRIL A. WEBB Anderson/Tampa (II) Joint Venture
------------------------
Northwestern Mutual Life
Insurance Company, Partner
By:/s/ ROBIN G. SMITH By:/s/ BARBARA C. SIMON
------------------------ ---------------------------------
Its: SENIOR REAL ESTATE OFFICER -
----------------------------------
ASSET MANAGEMENT
Date: 11-9-94
---------------------------
Witnessed: LESSEE
------
FUTRONIX CORPORATION
--------------------
By:/s/ PATRICIA ROMANO By:/s/ Jim Psencik, TREASURER
------------------------ ------------------------------------
Its:___________________________________
By:/s/ IRENE L. JONES
----------------------- By:____________________________________
Its:___________________________________
Date:__________________________________
3
<PAGE>
INDEX
<TABLE>
<CAPTION>
Paragraph Page
--------- ----
<S> <C>
1. Basic Lease Provisions.............................................. 1
2. Premises............................................................ 6
3. Term and Commencement of Lease...................................... 6
4. Rent Payments....................................................... 6
5. Repairs and Maintenance............................................. 9
6. Utility............................................................. 9
7. Signs............................................................... 11
8. Usage............................................................... 11
9. Compliance with Laws, Rules and Regulations......................... 11
10. Relocation.......................................................... 12
11. Insurance........................................................... 12
12. Property Insurance.................................................. 13
13. Waiver of Subrogation............................................... 13
14. Lessor Improvements................................................. 13
15. Alteration and Improvements......................................... 14
16. Mechanics Liens..................................................... 14
17. Condemnation........................................................ 14
18. Hazardous Substances................................................ 15
19. Radon............................................................... 17
20. Fire and Casualty................................................... 17
21. Hold Harmless....................................................... 18
22. Quiet Enjoyment..................................................... 18
23. Lessor's Right of Entry............................................. 18
24. Assignment or Sublease.............................................. 18
25. Lessor's Lien....................................................... 19
26. Uniform Commercial Code............................................. 19
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
27. Default by Lessee................................................... 19
28. Remedies for Lessee's Default....................................... 20
29. Waiver of Default or Remedy......................................... 21
30. Acts of God......................................................... 21
31. Attorney's Fees..................................................... 21
32. Holding Over........................................................ 21
33. Rights of First Mortgagee........................................... 21
34. Estoppel Certificates............................................... 22
35. Successors.......................................................... 22
36. Guarantee of Lease.................................................. 22
37. Definitions......................................................... 22
38. Construction of Language............................................ 23
39. Notice.............................................................. 23
40. Agreement and Limitation of Warranties.............................. 24
</TABLE>
5
<PAGE>
Witnesseth:
2. Premises: Lessor hereby leases to Lessee and Lessee hereby rents from
--------
Lessor the Premises described in Paragraph 1.1 of the Basic Lease Provisions and
further outlined on the Floor Plan attached hereto as Exhibit "A" and made a
part hereof (the "Premises"). The Premises are situated in the building located
at the address described in Paragraph 1.2 of the Basic Lease Provisions (the
"Building). The Building and the land upon which it is located is hereinafter
referred to as the "Project".
3. Term and Commencement of Lease: This Lease shall be for the length of term
------------------------------
set forth in Paragraph 1.3 of the Basic Lease Provisions, commencing on the
Lease Commencement Date described in Paragraph 1.4 of the Basic Lease
Provisions. The rent shall commence on the date described in Paragraph 1.5 of
the Basic Lease Provisions. If Lessor, for any reason whatsoever, cannot deliver
possession of the Premises to Lessee at the Lease Commencement Date, this Lease
shall not be void or voidable, nor shall Lessor be liable for any loss or damage
resulting therefrom; however, if the delay is caused by Lessor's actions, there
shall be a proportionate reduction of rent covering the period between the Lease
Commencement Date and the date when Lessor can deliver possession. The Lease
Term shall be extended by such delay for any equal period. In the event Lessor
shall not for any reason whatsoever, other than an act of force majeure as
described in Section 30 hereof or by reason of a Lessee delay, deliver
possession of the Premises within one hundred twenty (120) days after the date
in which the plans are deemed approved by Lessee (plans must be approved by
Lessee within ten (10) days of receipt) and full execution of Lease, the Lessee
shall have the right to terminate the Lease.
4. Rent Payments:
-------------
(a) During the term of this Lease Lessee agrees to pay to Lessor the Base
Rent described in Paragraph 1.6 of the Basic Lease Provisions, payable in
equal monthly installments, in advance, on the first day of each and every
calendar month during the term of Lease, as adjusted in accordance with
Paragraph 4(f) hereof; delivered to the Manager's Address described in
Paragraph 1.14 of the Basic Lease Provisions or at any other address as
designated from time to time. One monthly installment of rent shall be
payable by Lessee the date of execution of this Lease for the first month's
rent. If the Lease Commencement Date occurs on a day other than the first
day of the calendar month, the rent for the partial month, at the
commencement of the term of the Lease, shall be prorated for each date at
the rate of one-thirtieth (1/30) of the full monthly installment of rent.
Lessee shall pay, as additional rental, all other sums due under this
lease.
(b) On the date of execution of this Lease by Lessee, Lessee shall pay to
Lessor a security deposit in the amount described in Paragraph 1.11 of the
Basic Lease Provisions to be held for the performance by Lessee of Lessee's
covenants and obligations under this Lease, it being expressly understood
that the deposit shall not be considered an advance payment of rental or a
measure of Lessor's damage in case of default by Lessee. Upon
6
<PAGE>
the occurrence of any event of default by Lessee or breach by Lessee of
Lessee's covenants under this Lease, Lessor may, from time to time, without
prejudice to any other remedy, use the security deposit to the extent
necessary to make good any arrears of rent and/or any damage, injury,
expense or liability caused to Lessor by the event of default or breach of
covenant, with any remaining balance of the security deposit to be returned
by Lessor to Lessee thirty (30) days after termination of this Lease.
(c) In addition to the foregoing, Lessee shall pay as additional rent an
amount of money equal to:
i) Commencing on the First Tax Insurance Escalation Year described
in Paragraph 1.7 of the Basic Lease Provisions and continuing
thereafter during each year of the term of this Lease, in the event
Lessor's per square foot cost of taxes, and general and special
assessments on the Project increases above the Base Taxes Per Square
Foot described in Paragraph 1.8 of the Basic Lease Provisions, then
Lessee shall pay as additional rent the amount of such increase
computed by multiplying the gross leasable area of the Premises
described in Paragraph 1.1 of the Basic Lease Provisions by the amount
of such increase (hereinafter the "Tax Escalation"). The term "taxes"
shall include every type of tax assessed against the Project but not
including inheritance, estate, transfer, gift, franchise, corporation,
net income, profit, or capital gains taxes or levies or upon the
operation of the Project, including, without limitation, ad valorem
real estate taxes and any new tax not presently in effect but which
may hereafter be levied, assessed or imposed upon the Lessor or upon
the Project, if such tax shall be based upon or arise out of the
ownership, use or operation of the Premises but not including
inheritance, estate, transfer, gift, franchise, corporation, net
income, profit, or capital gains taxes or levies and,
ii) Commencing on the First Insurance Escalation Year described in
Paragraph 1.9 of the Basic Lease Provisions and continuing thereafter
during each year of the term of this Lease, in the event Lessor's per
square foot cost of fire and casualty insurance on the Building
increases above the Base Insurance Cost Per Square Foot described in
Paragraph 1.10 of the Basic Lease Provisions, then Lessee shall pay to
Lessor as additional rent the amount of such increase computed by
multiplying the gross leasable area of the Premises by the amount of
such increase (hereinafter the "Insurance Cost Increases"). The term
"Insurance" shall include all fire and extended casualty insurance on
the Building and all liability coverage on the grounds, sidewalks,
driveways, parking areas and any other exterior or interior areas,
together with such other insurance protection as is from time to time
reasonably deemed necessary by Lessor, and
iii) The amount of all costs to Lessor of operating and maintaining
the Project including, without limitation, all utilities for the
Building not separately metered
7
<PAGE>
(including, without limitation, electricity, water, sewer, and sewer
service), common area maintenance, landscaping costs, security costs,
if any, and other charges levied against the Building, if any and the
cost of all repairs to the Building made by Lessor which are not
Lessor's express responsibility, such costs and charges to be
equitably prorated if the Premises occupy less then all of the
Building (hereinafter "Operating Costs"). The term "landscaping costs"
shall include without limitation all landscaping, planting, lawn and
ground care, all improvements, repair and maintenance to the grounds
and other common areas including, sidewalks, driveways and parking
areas. The term "prorated" shall mean a fraction, the numerator being
the number of square feet of gross leasable area in the Premises and
the denominator being the total number of square feet of gross
leasable area in the building. Operating Costs increase shall not
exceed seven percent (7%) per year.
Tax Escalations, Insurance Cost Increases, and Operating Costs shall
be paid by Lessee within thirty (30) days of billing by Lessor, or, at
Lessor's option, in equal Monthly Installments in an amount equal to
one-twelfth (1/12th) of the amount of the Tax Escalations, Insurance
Cost Increases, and Operating Costs as estimated by Lessor from time
to time in written notice to Lessee prior to or during each year of
the term of the Lease. Within a reasonable amount of time after the
actual amount of Tax Escalations, Insurance Cost Increases, and
Operating Costs can be determined for each year, Lessor shall deliver
to Lessee a written statement, setting forth the calculation of the
Tax Escalations, Insurance Cost Increases, and Operating Costs for
such year. If the aggregate amount of estimated monthly payments made
by Lessee in any year for Tax Escalations, Insurance Cost Increases,
and Operating Costs are less than the actual amount set forth on
Lessor's statement, then Lessee shall pay to Lessor as additional rent
upon demand the amount of such deficiency; if the aggregate amount of
monthly estimated payments made by Lessee to Lessor exceed the actual
amount as set forth on Lessor's statement, and if Lessee is not
otherwise in default hereunder, the amount of such excess will be
applied by Lessor to reduce the installments of such additional rent
due hereunder for the next year; and if there is any such excess for
the last year of the term and if Lessee is not otherwise in default
hereunder, the amount thereof will be refunded by Lessor to Lessee.
(d) In addition to other remedies for nonpayment of rent, if the monthly
rental payment is not received by Lessor on or before the tenth day of the
month for which rent is due, or if any other payment due Lessor by Lessee
is not received by Lessor on or before the tenth day of the month following
the month in which Lessee was invoiced, a service charge of ten percent
(10%) of such past due amount shall become due and payable in addition to
such amounts owed under this Lease. Time is of the essence in this Lease.
8
<PAGE>
(e) No payment by Lessee or receipt by Lessor of a lesser amount of
monthly rent or any other sum due hereunder, shall be deemed to be other
than on account of the earliest due rent or payment, nor shall any
endorsement or statement on any check or any letter accompanying any such
check or payment be deemed an accord and satisfaction, and Lessor may
accept such check or payment without prejudice to Lessor's right to recover
the balance of such rent or payment or pursue any other remedy available in
this Lease, at law or in equity. Lessor may accept any partial payment from
Lessee without invalidation of any contractual notice required to be given
herein (to the extent such contractual notice is required) and without
invalidation of any notice required by any law pertaining to eviction or
summary remedy for regaining possession of real property in the event of
tenant default.
See Addendum I, Item 1 Rent Schedule
(g) Lessee shall pay and be liable for all rental, sales and use taxes or
other similar taxes, if any, levied or imposed by any city, state, county
or other governmental body having authority, such payments to be in
addition to all other payments required to be paid to Lessor by Lessee
under the terms of this Lease. Any such payment shall be paid concurrently
with the payment of the rent upon which the tax is based as set forth
above.
5. Repairs and Maintenance:
-----------------------
(a) Unless otherwise expressly provided, Lessor shall not be required to
make any improvements, replacements or repairs of any kind or character to
the Premises during the term of this Lease except those repairs set forth
in this paragraph. Lessor shall maintain only the roof, including all roof
leaks not caused by Lessee, foundation, paving, landscaping, sprinkler
system and the structural soundness of the exterior walls (excluding all
windows, window glass, plate glass and all doors) of the building in good
repair and condition except for reasonable wear and tear. Lessor shall be
responsible for repainting the building's exterior (except for exterior
doors). Lessee shall repair and pay for any damage including those repairs
which are the responsibility of Lessor, as stated above, caused by any
negligent or intentional act or omission of Lessee or Lessee's agents,
employees and invites. Lessee shall immediately give written notice to
Lessor of the need for repairs, which repairs shall be made by Lessor
beginning not more than fifteen (15) days after written notice by Lessee.
Lessor shall not be liable to Lessee for any damage or inconvenience caused
by making of repairs unless due to the gross negligence of Lessor, its
agents or employees and Lessee shall not be entitled to any abatement or
reduction of rent by reason of any repairs, alterations or additions made
by Lessor under this Lease. All notices for repairs or maintenance that are
the responsibility of Lessor pursuant to this Lease must be made in writing
to Lessor at the Manager's Address referenced above or at other place as
designated from time to time.
9
<PAGE>
(b) Lessor shall have the right, but shall not be obligated, to enter the
Premises at all reasonable hours for the purpose of making any repairs,
alterations, or additions which Lessor shall deem necessary for the safety,
preservation, or improvement of the Premises or the Building, and Lessor
shall be allowed to take all materials into and upon the Premises that may
be required to make such repairs, improvements, and additions, or any
alterations for the benefit of Lessee without Lessor in any way being
deemed or held guilty of an eviction of Lessee; and the rent payable under
this Lease shall in no way abate while said repairs, alterations, or
additions are being made; and Lessee shall not be entitled to maintain a
set-off or counterclaim for damage against Lessor by reason of loss or
interruption to the business of Lessee as a result of such work and Lessor
shall use its best efforts not to unreasonably interfere with the
operations of Lessee's business. All such repairs, decorations, additions
and improvements shall be done during ordinary business hours, or, if any
such work is at the request of Lessee to be done during any other hours,
Lessee shall pay for all overtime costs.
(c) Lessee shall, at its own expense, maintain all parts of the project
not required to be maintained by Lessor under paragraph 5(a), in good
repair and condition (including all necessary replacements), including, but
not limited to, downspouts, HVAC equipment, dock bumpers, pest control and
extermination, regular removal of debris. Lessee shall pay its prorata
share of maintenance of the spur railroad track, if any, servicing the
Lease Premises and agrees to sign a joint maintenance agreement with the
railroad company servicing the Premises, if requested by the railroad
company. Lessee shall take good care of all the property and its fixtures.
If Lessee neglects to keep and maintain the Premises, then Lessor shall
have the right, but not the obligation, to have the work done and the costs
shall be charged to Lessee as additional rent and shall become payable by
Lessee with the payment of rent next due hereunder.
(d) In connection with Lessee's maintenance and repair of the heating,
ventilating, and air conditioning (HVAC) system, Lessee shall provide
Lessor during the term of this Lease and any renewal hereof with a
duplicate original of a maintenance contract in form and substance
acceptable to Lessor, with a reputable HVAC maintenance firm. If Lessee
fails to provide Lessor with a duplicate original of a maintenance contract
within 45 days after the commencement date, as defined in paragraph 3 of
this Lease, Lessor shall have the right, but not the obligation, to obtain
on behalf of Lessee, a maintenance contract. The cost for such contract
shall be charged to Lessee as additional rental and shall become payable by
Lessee with the payment of rent next due hereunder. In the event of a
replacement of a part of portion of the HVAC equipment which is warranted
by the manufacturer and/or guaranteed by the installer, Lessee shall
provide the Lessor with a duplicate original of the warranty and/or
guarantee. See Addendum I, Item 2 HVAC.
(e) Lessee shall not allow any damage to be committed on any portion of
the Premises. Lessee shall deliver the Premises to Lessor in as good
condition as existed at the Commencement Date of this Lease, ordinary wear
and tear damage by fire or other
10
<PAGE>
casualty excepted. The cost of any repairs necessary to restore the
condition of the Premises shall be borne by Lessee, and if Lessor
undertakes to restore the Premises it shall have a right of reimbursement
against Lessee which right shall survive the termination of this Lease.
Subject to Section 20 below.
6. Utility: Lessor shall provide the normal utility service connections into
-------
the Building. Lessee shall pay the cost of all utility services, including, but
not limited to, initial connection charges and all charges for gas, water and
electricity used on the Premises. However, Lessor may provide water to the
Premises, in which case Lessee agrees to pay to Lessor its prorata share of the
cost of such water. Lessee shall pay all costs caused by Lessee introducing
excessive pollutants or solids other than ordinary human waste into the sanitary
sewer system, including permits, fees and charges levied by any governmental
subdivision for any such pollutants or solids. Lessee shall be responsible for
the installation and maintenance of any dilution tanks, holding tanks, settling
tanks, sewer sampling devices, sand traps or similar devices as may be required
by any governmental subdivision because of Lessee's use of the sanitary sewer
system. Lessee shall pay all surcharges levied due to Lessee's use of sanitary
sewer or waste removal services insofar as such surcharges affect Lessor or
other tenants in the building. Lessor shall not be required to pay for any
utility services, supplies or upkeep in connection with the Premises. Lessor
shall in no way or event be liable for loss or interruption of utility service
on or to the Premises.
7. Signs: Lessee shall not place on the Project, any exterior signs or
-----
advertisements, nor any interior signs or advertisements that are visible from
the exterior of the Premises, without the Lessor's prior written consent which
shall not be unreasonably withheld or delayed which Lessor reserves the right to
withhold for any reason in its sole judgment. The cost of installation and
regular maintenance of any such signs approved by the Lessor shall be at the
sole expense of the Lessee. At the termination of this Lease, or any extension
thereof, the Lessee shall remove all of Lessee's signs. Any damage caused by the
installation or removal of Lessee's signs shall be repaired at Lessee's expense.
8. Usage: Lessee warrants and represents to Lessor that the Premises shall be
-----
used and occupied only for the purposes of warehousing & distribution of
-----------------------------
electrical wire and cable including cutting and winding equipment. Lessee shall
- -----------------------------------------------------------------
occupy the Premises, conduct its business and control its agents, employees,
invites and visitors in such a way as is lawful, reputable and will not create
any nuisance or otherwise interfere with, annoy or disturb any other tenant or
Lessor in its management of the Building.
9. Compliance with Laws, Rules and Regulations: Lessee, shall, at its sole
-------------------------------------------
cost and expense, comply with all applicable federal, state, county and
municipal laws, rules and regulations now or hereafter in force, including the
Americans with Disabilities Act of 1990. See Addendum II attached. Lessee will
comply with the Rules and Regulations of the Project adopted by Lessor which are
set forth in Exhibit "B" to this Lease. Lessor shall have the right at any time
to change the rules and regulations in any reasonable manner provided the same
11
<PAGE>
uniformly applies to all tenants. All changes and amendments in the rules and
regulations will be sent by Lessor to Lessee in writing and shall thereafter be
carried out and observed by Lessee.
10. Relocation: Relocate Lessee to other space in the Project designated by
----------
Lessor, provided such other space is comparable to the Premises. Lessor shall
pay all out-of-pocket expenses of any such relocation, including the expenses of
moving and reconstruction of all Lessee furnished and Lessor furnished
improvements. In the event of such relocation, this Lease shall continue in full
force and effect without any change in the terms or other conditions, but with
the new location substituted for the old location set forth in paragraph 1 of
this Lease.
11. Insurance:
---------
(a) Lessee shall not permit the Premises to be used in any way which
would, in the opinion of Lessor, create a fire hazard or increase premiums
or void the fire insurance on leasehold improvements or contents belonging
to other tenants in the Building. Lessee warrants to Lessor that the
insurance questionnaire (filled out by Lessee, signed and presented to
Lessor prior to the execution of this Lease) accurately reflects Lessee's
intended use of the Premises. The insurance questionnaire is made a part of
this Lease by reference as though fully copied and recorded herein. If any
at time during the term of this Lease the State Board of Insurance or other
insurance authority disallows any of the Lessor's sprinkler credits or
imposes an additional penalty or surcharge in Lessor's insurance premiums
because of any act of Lessee, Lessee agrees to pay as additional rental the
increase in Lessor's insurance premiums.
(b) Lessee shall obtain and maintain in force throughout the term of this
Lease a comprehensive general liability policy in the amount of not less
than $2,000,000.00. Said policy shall name both Lessor and Lessee as
insureds (with a cross-liability endorsement), shall be issued by an
insurance company or companies authorized to do business in the State of
Florida, shall be issued as a primary policy and shall contain a provision
requiring the insurer to give Lessor at least thirty (30) calendar days'
prior written notice before any termination or expiration of said policy
for any reason. Prior to the commencement of this Lease and prior to the
expiration of the term of each such policy, Lessee may maintain such
insurance in the form of a blanket policy with an insurance company
authorized to do business in the state of Florida. Lessee shall deliver to
Lessor the original of such policy or a proper certificate from the
insurer.
12. Property Insurance:
------------------
(a) Lessor shall, at all times during the term of this Lease and at
Lessor's sole discretion, either self insure against all risk of direct
physical loss; or shall maintain a policy or policies of insurance,
insuring the Building against all risk of direct physical loss in an amount
Lessor deems appropriate; provided, that Lessor shall not be obligated in
any way or manner to insure any personal property (including, but not
limited to, any
12
<PAGE>
furniture, machinery, goods or supplies) of Lessee or which Lessee may have
upon or within the Premises or any fixtures installed by or paid for by
Lessee upon or within the Premises or any additional improvements which
Lessee may construct on the Premises.
(b) If Lessor determines to self-insure or insures with a deductible,
Lessor reserves the right to allocate an amount equivalent to the expense
that would be incurred as if Lessor had purchased standard insurance
coverage for the Building and said allocated expense shall be considered an
operating expense for the property as defined in subparagraph 4(c).
(c) Lessee shall maintain in full force and effect on all of its fixtures
and equipment in the Premises, a policy or policies of fire insurance with
extended coverage endorsement in the amount necessary to negate the effect
of a co-insurance provision. Said policy shall be issued by an insurance
company or companies authorized to do business in the State of Florida.
During the lease term, the proceeds from any such policy or policies of
insurance shall be used for the repair or replacement of the fixtures and
equipment so insured. Lessor shall have no interest in the insurance upon
Lessee's equipment and fixtures.
13. Waiver of Subrogation: Anything in this Lease to the contrary
---------------------
notwithstanding, Lessor and Lessee hereby waive and release each other of and
from any and all rights of recovery, claim, action or cause of action, against
each other, their agents, officers and employees, for any loss or damage that
may occur to the Premises, improvements to the Building of which the Premises
are a part, or personal property (building contents) within the Building, by
reason of fire or the elements regardless of cause or origin, including
negligence of Lessor or Lessee and their agents, officers and employees. Because
this paragraph will preclude the assignment of any claim by way of subrogation
or otherwise to an insurance company or any other person, each party to this
Lease agrees immediately to give written notice of this waiver to each of its
insurance companies, and to have its insurance policies properly endorsed, if
necessary, to prevent the invalidation of the insurance coverages by reason of
the mutual waivers contained in this paragraph.
14. Lessor Improvements: If construction on the Premises is to be performed by
-------------------
Lessor prior to commencement of this Lease, Lessor will complete the
construction of the improvements in accordance with the Work Letter, if any,
attached as Exhibit "D" hereto, and the plans and specifications agreed to by
the parties and made a part of this Lease by reference. The plans, cost and
specifications shall be approved and signed by the parties prior to the
commencement of construction. The cost of any construction which is reimbursable
by Lessee to Lessor shall be billed as additional rent to Lessee when
construction is completed and is due within ten (10) days following the receipt
of the invoice or as may be agreed upon by Lessor and Lessee. Any changes or
modifications to the Work Letter and/or approved plans and specifications shall
be made and accepted by written change order signed by Lessor and Lessee and
shall constitute an amendment to this Lease. Occupying all or any portion of the
Premises by Lessee shall be conclusive that the Premises are in satisfactory
condition and acceptable to the Lessee.
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15. Alteration and Improvements: Lessee shall not make or allow to be made any
---------------------------
alterations or physical additions in or to the Premises without first obtaining
the written consent of Lessor. Any alterations, physical additions or
improvements to the Premises made by Lessee shall at once become property of
Lessor and shall be surrendered to Lessor upon the termination of this Lease.
Lessor, at its option, may require Lessee to remove any physical additions
and/or to repair any alterations in order to restore the Premises to the
condition existing at the time Lessee took possession, all costs of removal
and/or alterations to be borne by Lessee. This clause shall not apply to
moveable equipment or furniture owned by Lessee which may be removed by Lessee
without damage to this Premises.
16. Mechanics Liens: No mechanic's or other lien shall attach to or be allowed
---------------
to stand against the estate of Lessor by reason of any improvements made by
Lessee. Lessee shall pay promptly all persons furnishing labor or materials with
respect to any work performed by Lessee or its contractor(s) in, on or about the
Premises. In the event any mechanic's or other lien shall at any time be filed
against the Premises by reason of work, labor, services or materials performed
or furnished, or alleged to have been performed or furnished, for Lessee or for
anyone holding the Premises through or under Lessee, Lessee shall cause the same
to be discharged of record or bonded to the satisfaction of Lessor. If Lessee
shall fail to cause such lien to be so discharged or bonded after being notified
of the filing thereof, then, in addition to any other right of remedy of Lessor,
Lessor may discharge the same by paying the amount claimed to be due, and the
amount so paid by Lessor (including actual attorney's fees and expenses incurred
by Lessor either defending against such lien or in procuring the discharge of
such lien), together with interest thereon, shall be due and payable by Lessee
to Lessor as additional rental. Nothing herein contained shall be construed as a
consent by Lessor to make any alteration, improvement, installation or addition
so as to give rise to any right to any laborer or material man to file any
mechanic's lien or any notice thereof, or any other lien purporting to affect
the Project.
17. Condemnation:
------------
(a) If, during the term (or any extension or renewal) of this Lease, all
or at least twenty-five percent (25%) of the Premises is taken for any
public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof,
and the taking would prevent or materially interfere with the use of the
Premises for the purpose for which they are then being used, at the option
of Lessee this Lease shall terminate effective sixty (60) days prior to the
date physical possession is taken by the condemning authority. All
compensation and damages awarded for the partial or total taking of the
Premises shall belong to and be the sole property of Lessor. Lessee shall
be entitled to make its own claims for and receive any award that may be
made for Lessee's improvements, moving expenses, and the removal of
Lessee's trade fixtures, equipment and furnishings.
(b) If a portion of the Premises shall be taken for any public or quasi-
public use under any governmental law, ordinance or regulation, or by right
of eminent domain or by
14
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purchase in lieu thereof, and this Lease is not terminated as provided in
paragraph 17(a) above, Lessor may, at Lessor's sole risk and expense,
restore and reconstruct the Building and other improvements on the Premises
to the extent necessary to make it reasonably tenantable. The rent payable
under this Lease during the unexpired portion of the term shall be prorated
based on the portion of Premises which are reasonably usable by Lessee. All
compensation and damages awarded for the partial taking of the Premises
shall belong to and be the sole property of Lessor. Lessee shall be
entitled to make its own claims for and receive any award that may be made
for Lessee's improvements, moving expenses, and the removal of Lessee's
trade fixtures, equipment and furnishing.
18. Hazardous Substances:
--------------------
(a) The term "Hazardous Substance(s)" as used in the Lease is defined as
follows: Any element, compound, mixture, solution, particle or substance,
which presents danger or potential danger for damage or injury to health,
welfare or to the environment including, but not limited to: (i) those
substances which are inherently or potentially radioactive, explosive,
ignitable, corrosive, reactive, carcinogenic or toxic and (ii) those
substances which have been recognized as dangerous or potentially dangerous
to health, welfare or to the environment by any federal, municipal, state,
county or other governmental or quasi-governmental authority and/or any
department or agency thereof.
(b) Lessee represents and warrants to Lessor that at all times during the
term of this Lease and any extensions or renewals thereof, Lessee shall:
i) obtain Lessor's prior written consent, which consent shall be
granted or withheld in Lessor's sole discretion, to the manufacturing,
processing, distributing, using, producing, treating, storing (above
or below ground level), disposing of, or allowing to be present (the
"Presence") of any hazardous substance in or about the Premises. In
connection with each such consent requested by Lessee, Lessee shall
submit to Lessor a description, including the composition, quantity
and all other information requested by Lessor concerning the proposed
Presence of any hazardous substance. Lessor's consent to the Presence
of any hazardous substance may be deemed given only by inclusion of a
description of the composition and quantity of the proposed hazardous
substance on Schedule A to this Lease. The term Allowed Substance as
used in this lease is defined as any hazardous substance which Lessor
has agreed to the Presence thereof. Lessor's consent to the Presence
of any hazardous substance at any time during the lease term or
renewal thereof shall not waive the requirement of obtaining Lessor's
consent to the subsequent Presence of any other, or increased
quantities of, hazardous substance in or about the Premises. If Lessor
subsequently consents to the Presence of any other hazardous
substance, or to increased quanitities of any hazardous substance,
such consent shall be deemed given only by amendment of Schedule A to
this Paragraph 18.
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<PAGE>
ii) refrain from (and prohibit others from) allowing the Presence of
any hazardous substance in or about the Premises which is not an
Allowed Substance;
iii) promptly comply at Lessee's own cost and expense, with all laws,
orders, rules, regulations, certificates of occupancy, or other
requirements, as the same now exist or may hereafter be enacted,
amended or promulgated, of any federal, municipal, state, county or
other governmental or quasi-governmental authorities and/or any
department or agency thereof relating to the Presence of hazardous
substances in or about the Premises, whether or not such substances
are Allowed Substances.
iv) indemnify and hold Lessor, its agents and employees, harmless
from any and all demands, claims, causes of action, penalties,
liabilities, judgments, damages (including consequential damages) and
expenses including, without limitation, court costs and reasonable
attorneys' fees incurred by Lessor as a result of (a) Lessee's failure
or delay in complying, to Lessor's satisfaction, with the provisions
of sections (b)(i) or (ii) above; (b) Lessee's failure or delay in
properly complying with such law, order, rule, regulation, certificate
of occupancy or other requirement referred to in section (b)(iii),
above or (c) any adverse effect which results from the Presence of any
hazardous substance in or about the Premises, whether or not such
hazardous substance is an Allowed Substance. If any action or
proceeding is brought against Lessor, its agents or employees by
reason of any such claim, Lessee, upon notice from Lessor, will defend
such claim at Lessee's expense with counsel reasonably satisfactory to
Lessor. This indemnification by Lessee of Lessor shall survive the
termination of the Lease.
v) promptly disclose to Lessor by delivering, in the manner
prescribed for delivery of notice in the Lease, a copy of any forms,
submissions, notices, reports, or other written documentation
(communications) relating to the Presence of any hazardous substance
in or about the Premises, whether or not such hazardous substance is
an Allowed Substance, and whether such Communications are delivered to
Lessee or are requested of Lessee by any federal, municipal, state,
county or other government or quasi-governmental authority and/or any
department or agency thereof.
vi) notwithstanding any other provisions of this Lease, allow
Lessor, and any authorized representative of Lessor, access and the
right to enter and inspect the Premises for the Presence of any
hazardous substance, whether or not such hazardous substance is an
Allowed Substance, at any time deemed reasonable by Lessor, without
prior notice to tenant.
(c) Compliance by Lessee with any provision of this Paragraph 18 shall not
be deemed a waiver of any other provision. Without limiting the foregoing,
Lessor's consent to the
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<PAGE>
Presence of any Allowed Substance shall not relieve Lessee of its indemnity
obligations under the terms of this Paragraph 18.
19. Radon Gas: Radon is a naturally occurring radioactive gas that, when it
---------
has accumulated in a building in sufficient quantities, may present health risks
to persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
20. Fire and Casualty:
-----------------
(a) If, the Premises are totally destroyed by fire or other casualty, or
if the Premises are so damaged so that rebuilding cannot reasonably be
completed within one hundred twenty (120) working days after the date of
written notification by Lessee to Lessor of the destruction, this Lease
shall terminate effective as of the date of the written notification.
(b) If the Premises are partially damaged by fire or other casualty, and
rebuilding or repairs can reasonably be completed within ninety (90)
working days from the date of written notification by Lessee to Lessor of
the destruction, this Lease shall not terminate and Lessor will at its sole
cost and expense proceed with reasonable diligence to rebuild or repair the
Premises to substantially the same condition they existed prior to the
damage, provided, however, Lessor shall have no obligation to restore or
repair any alterations or improvements made by either Lessor or Lessee to
the Premises at Lessee's cost. If the Premises are to be rebuilt or
repaired and are untenantable in whole or in part following the damage, and
the damage or destruction was not caused or contributed to by act or
negligence of Lessee, its agents, employees, invites or those for whom
Lessee is responsible, the rent payable under this Lease during the period
for which the Premises are untenantable shall be prorated. In the event
Lessor fails to substantially complete the necessary repairs or rebuilding
within ninety (90) working days from the date of written notification by
Lessee to Lessor of the destruction, Lessee or Lessor may terminate this
lease by delivering written notice of termination to the other.
(c) Whenever Lessor/Lessee shall be required by the terms of this Lease or
otherwise to make any improvements or repairs, to furnish any services, to
repair or reconstruct the premises or to fulfill any other obligation
hereunder, and Lessor/Lessee shall be delayed in or prevented from so doing
for reasons beyond Lessor's reasonable control, Lessor/Lessee shall not be
deemed thereby to be in default and this Lease and the obligation of Lessee
to pay rent hereunder and to perform all of the other covenants and
agreements hereunder on the part of Lessee to be performed shall in no way
be affected, impaired, or excused, and any time limit herein fixed for
Lessor/Lessee performance thereof shall be extended by length of delay, if
and so long as Lessor/Lessee nonperformance, delay or default shall be
caused by reason of governmental controls,
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war, riots or civil disturbances, strikes, labor disputes, power shortages,
acts of God, or any other cause beyond Lessor/Lessee reasonable control.
21. Hold Harmless: Lessor shall not be liable to Lessee's employees, agents,
-------------
invitees, licensees or visitors, or to any other persons, for any injury to
person or damage to property on or about the Premises, unless caused by the
gross negligence of Lessor, its agents or employees. Lessee agrees to indemnify
and hold harmless Lessor from any loss, expenses, including attorney's fees or
claims arising out of any such damage or injury.
22. Quiet Enjoyment: Lessor warrants that it has full right to execute and to
---------------
perform this Lease and to grant the estate demised and that Lessee, upon payment
of the required rents and performing the terms, conditions, covenants and
agreements contained in this Lease, shall peaceably and quietly have, hold and
enjoy the Premises during the full term of this Lease as well as any extension
or renewal thereof. Lessor shall not be responsible for the acts or omissions of
any other tenant or third party that may interfere with Lessee's use and
enjoyment of the Premises.
23. Lessor's Right of Entry:
-----------------------
(a) Lessor shall have the right, at all reasonable hours, to enter the
Premises for the following reasons: inspection; cleaning or making repairs;
making alterations or additions as Lessor may deem necessary or desirable;
determining Lessee's use of the Premises; or determining if an act of
default under this Lease has occurred. Lessor shall use its best efforts
not to unreasonably interfere with Lessee's use of the Premises.
(b) Lessor shall have the right, at all reasonable hours, to enter the
Premises during the last six months of this Lease for the purpose of
showing the Premises to prospective tenants, and the Lessor shall also have
the right to post on the exterior of the Premises the usual notice and/or
signs advertising the Premises "For Rent" or other such similar advertising
as Lessor deems necessary.
24. Assignment or Sublease:
----------------------
(a) Lessor shall have the right to transfer and assign this Lease along
with any transfer or assignment, in whole or in part, of Lessor's rights
and obligations in the Property. Lessee shall not assign this Lease or
sublet all or any part of the Premises without the prior written consent of
Lessor which shall not be unreasonably withheld or delayed. Lessor shall
have the option, upon receipt from Lessee of a written request for Lessor's
consent to assign or sublet, to terminate this Lease as of the effective
date of the requested subletting or assignment. The option shall be
exercised, if at all, within fifteen (15) days following Lessor's receipt
of such written request by delivery to Lessee of a written notice of said
termination. In the event of any assignment or subletting, Lessee shall
nevertheless at all times remain fully responsible and liable for the
payment of rent and
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for compliance with all other obligations under the terms, provisions and
covenants of this Lease. Lessor reserves the right to receive one half of
rental money obtained from the assignment or sublease as the case may be in
excess of the base rent. Upon the occurrence of an "event of default" as
defined below, if all or any part of the Premises are then assigned or
sublet, Lessor, in addition to any other remedies provided by this Lease or
provided by law, may, at its option, collect directly from the assignee or
subtenant all rents becoming due to Lessee by reason of the assignment or
sublease, and Lessor shall have a security interest in all properties on
the Premises to secure payment of such sums. Any collection directly by
Lessor from the assignee or subtenant shall not be construed to constitute
a novation or a release of Lessee from the further performance of its
obligations under this Lease.
(b) Any request by Lessee for an assignment or sublease shall be
accomplished by: (1) a copy of the proposed assignment or sublease; (2) a
written statement by Lessee as to the proposed assignee or sublessee's
intended use of the Premises; (3) a Dunn and Bradstreet report or an
equivalent report acceptable to the Lessor of the proposed assignee or sub-
lessee; (4) financial statements including the most current annual income
statement and balance sheet (as defined by generally accepted accounting
practices) for the proposed assignee or sublessee; and (5) at the Lessor's
discretion, banking and business references for the proposed assignee or
sublessee. Lessor reserves the right to request such other information as
necessary to qualify the proposed assignee or sublessee.
See Addendum I, Item 3 Assignment.
26. Uniform Commercial Code: This Lease is intended as and constitutes a
-----------------------
security agreement within the meaning of the Uniform Commercial Code of the
state in which the Premises are situated, and Lessor, in addition to the right
prescribed in this Lease, shall have all of the rights, titles, liens and
interests in and to Lessee's property now or hereafter located upon the Premises
which are granted a secured party, as that term is defined, under the Uniform
Commercial Code to secure the payment to Lessor of the various amounts provided
in this Lease. Lessee will on request execute and deliver to Lessor a financing
statement for the purpose of perfecting Lessor's security interest under this
Lease or Lessor may file this Lease or a copy thereof as a financing statement.
27. Default by Lessee: Any of the following shall constitute an event of
-----------------
default by Lessee under this Lease:
(a) Lessee fails to pay when due any installment of rent or any other
payment required pursuant to this Lease;
(b) Lessee abandons (as defined in paragraph 33(a) of this Lease) any
substantial portion of the Premises;
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(c) Lessee fails to comply with any term, provision or covenant of this
Lease, other than the payment of rent, and the failure is not cured within
thirty (30) days after written notice to Lessee;
(d) Any proceeding against Lessee seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief is
not dismissed within 60 days after the commencement thereof, or if, any
trustee, receiver or liquidator is appointed for Lessee, or of any material
part of its properties, and appointment is not vacated within 60 days after
such appointment; or
(e) Lessee does or permits to be done any act which results in a lien
being filed against the Premises or the Project.
See Addendum I, Item 4 Default.
28. Remedies for Lessee's Default: Upon the occurrence of any event of default
-----------------------------
set forth in this Lease, Lessor shall have the option to pursue any one or more
of the following remedies without any notice or demand:
(a) Terminate this Lease, in which event Lessee shall immediately
surrender the Premises to Lessor. If Lessee fails to surrender the
Premises, Lessor may, without prejudice to any other remedy it has for
possession or arrearages in rent, enter upon and take possession of the
Premises, by picking or changing locks if necessary, and lock out, expel,
or remove Lessee and any other person who may be occupying all or any part
of the Premises by any peaceable means without being liable for prosecution
of any claim for damages. Lessee agrees to pay on demand the amount of all
loss and damage which Lessor suffers by reason of the termination of the
Lease including inability to relet the Premises on satisfactory terms.
(b) Enter upon and take possession of the Premises, by picking or changing
locks if necessary, and lock out, expel or remove Lessee and any other
person who may be occupying all or any part of the Premises by any
peaceable means without being liable for any claim for damages, and relet
the Premises on behalf of Lessee and receive directly the rent by reason of
the reletting. Lessee agrees to pay Lessor on demand any deficiency that
arises by reason of any reletting of the Premises; further, Lessee agrees
to reimburse Lessor for any expenditures made by it for remodeling or
repairing the Premises.
(c) Enter upon the Premises, by picking or changing locks if necessary,
without being liable for prosecution of any claim for damages, and do
whatever Lessee is obligated to do under the terms of this Lease. Lessee
agrees to reimburse Lessor on demand for any expenses which Lessor incurs
in effecting compliance with Lessee's obligations under this Lease;
further, Lessee agrees that Lessor shall not be liable for any damages
20
<PAGE>
resulting to Lessee from effecting compliance with Lessee's obligations
under this subparagraph caused by the negligence of Lessor or otherwise.
(d) All rights and remedies of the Lessor herein enumerated in the event
of a default shall be cumulative and nothing herein shall exclude any other
right or remedy allowed by law.
29. Waiver of Default or Remedy: Failure of Lessor to declare an event of
---------------------------
default immediately upon its occurrence, or delay in taking any action in
connection with an event of default, shall not constitute a waiver of the
default, but Lessor shall have the right to declare the default at any time and
take such action as is lawful or authorized under this Lease. Failure by Lessor
to enforce one or more of the remedies provided upon an event of default shall
not be deemed or construed to constitute a waiver of the default or of any other
violation or breach of any of the terms, provisions and covenants contained in
this Lease.
30. Acts of God: Lessor/Lessee shall not be required to perform any covenant
-----------
or obligation in this Lease, or be liable in damages to Lessee/Lessor so long as
the performance or non-performance of the covenant or obligation is delayed,
caused by or prevented by an act of God or force majeure.
31. Attorney's Fees: In the event Lessee defaults in the performance of any of
---------------
the terms, covenants, agreements or conditions contained in this Lease and
Lessor retains an attorney to enforce all or any part of this Lease, the
collection of any rent due or to be come due or recovery of the possession of
the Premises, Lessee agrees to pay Lessor reasonable attorney's fees for the
services of the attorney, whether suit is actually filed or not.
32. Holding Over: In the event of holding over by Lessee after the expiration
------------
or termination of this Lease, the holdover shall be as a tenant at will and all
of the terms and provisions of this Lease shall be applicable during that
period, except that Lessee shall pay Lessor as rental for the period of such
holdover an amount equal to one and one half (1-1/2) times the rent. Lessee
agrees to vacate and deliver the Premises to Lessor upon Lessee's receipt of
notice from Lessor to vacate. The rental payable during the holdover period
shall be payable to Lessor on demand. No holding over by Lessee, whether with or
without consent of Lessor, shall operate to extend this Lease.
33. Rights of First Mortgagee: Lessee accepts this Lease subject and
-------------------------
subordinate to any recorded first mortgage or deed of trust lien presently
existing or hereafter created upon the Premises. Lessee agrees upon demand to
execute additional instruments subordinating this Lease as Lessor may require
provided that such instrument shall recognize this Lease and provide that no
extinguishment of this Lease shall occur upon foreclosure. If the interests of
Lessor under this Lease are transferred by reason of foreclosure or other
proceedings for enforcement of any first mortgage or deed of trust on the
Premises, Lessee shall be bound to the transferee (sometimes called the
"Purchaser"), at the option of the Purchaser, under the
21
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terms, covenants and conditions of this Lease for the balance of the term
remaining, and any extensions or renewals, with the same force and effect as if
the Purchaser were Lessor under this Lease.
34. Estoppel Certificates: Within ten (10) days after request by Lessor or
---------------------
Lessor's mortgagee, Lessee agrees to furnish a statement certifying that Lessee
is in possession of the Premises; the Premises are acceptable; the Lease is in
full force and effect; the Lease is unmodified; Lessee claims no present charge,
lien, or claim of offset against rent; the rent is paid for the current month,
but is not prepaid for more than one month and will not be prepaid for more than
one month in advance; there is no existing default by reason of some act or
omission by Lessor; and such other matters as may be reasonably required by
Lessor or Lessor's mortgagee. If Lessee believes any of the statements requested
of Lessor in such Estoppel Certificate not to be true or correct, Lessee shall
state the circumstances relative thereto with specificity in the statement.
Lessee's failure to deliver such statement within the time specified herein
shall cause Lessor to be automatically appointed as Lessee's attorney-in-fact
for the purpose of issuing such statement.
35. Successors: This lease shall be binding upon and inure to the benefit of
----------
Lessor and Lessee and their respective permitted heirs, personal
representatives, successors and assignees. It is hereby covenanted and agreed
that should Lessor's interest in the Premises cease to exist for any reason
during the term of this Lease, then notwithstanding the happening of such event
this Lease nevertheless shall remain unimpaired and in full force and effect and
Lessee hereunder agrees to attorn to the then owner of the Premises.
36. Guarantee of Lease: Under appropriate circumstances, at Lessor's option,
------------------
Lessee may be required to provide a Guarantee of Lease in the form attached
hereto as Exhibit "E" executed by a guarantor satisfactory to Lessor.
37. Definitions: The following definitions apply to the terms set forth below
-----------
as used in this Lease:
(a) "abandon " means the vacating of all or a substantial portion of the
Premises by Lessee, whether or not Lessee is in default of the rental
payments due under this Lease.
(b) An "act of God" or "force majeure" means strikes, lockouts, sit-downs,
material or labor restrictions, unusual transportation delays, riots,
floods, washouts, explosions, earthquakes, fire, storms, weather (including
wet grounds or inclement weather which prevents construction), acts of the
public enemy, wars, insurrections and any other cause not reasonably within
the control of Lessor/Lessee and which by the exercise of due diligence
Lessor/Lessee is unable, wholly or in part, to prevent or overcome.
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38. Construction of Language: The captions appearing in this Lease are
------------------------
inserted for convenience and in no way define, limit, construe or describe the
scope or intent of such paragraph. If any provision of this Lease shall ever be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Lease, and such other provisions shall
continue in full force and effect.
39. Notice:
------
(a) All rent and other payments required to be made by Lessee shall be
payable to Lessor at the address set forth below, or at any other address
as Lessor may specify from time to time by written notice.
(b) All payments required to be made by Lessor to Lessee shall be payable
to Lessee at the address set forth below, or at any other address within
the United States as Lessee may specify from time to time by written
notice.
(c) Any notice or document required or permitted to be delivered by this
Lease shall be deemed to be delivered (whether or not actually received)
when deposited in the United States Mail, postage prepaid, certified mail,
return receipt requested, addressed to the parties at the respective
addresses set out below:
LESSOR: LESSEE:
Anderson/Tampa (II) Joint Venture Futronix Corporation
c/o Northwestern Mutual Life Insurance 12614 Hempstead Highway
Real Estate Investment Office Houston, TX 77092-4527
Attn: Asset Management Attn: Jim Psencik, Treasurer
One Tampa City Center, Suite 1724
Tampa, Florida 33602
copy to:
Northwestern Mutual Life Insurance
Attn: Real Estate Investment-
Asset Management
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Southland Management
Attn: Mr. Michael Ray
6220 South Orange Blossom Trail
Suite 160
Orlando, Florida 32809
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40. Agreement and Limitation of Warranties: It is expressly agreed by Lessee,
--------------------------------------
as a material consideration for the execution of this Lease, that this Lease,
with the specific references to written extrinsic documents, is the entire
agreement of the parties; that there are, and were, no oral representations,
warranties, understandings, stipulations, agreements or promises pertaining to
this lease or the expressly mentioned written extrinsic documents not
incorporated in writing in this Lease. Lessor and Lessee expressly agree that
there are and shall be no implied warranties of merchantability, habitability,
fitness, for a particular purpose or of any other kind arising out of this Lease
and there are no warranties which extend beyond those expressly set forth in
this Lease. It is likewise agreed that this Lease may not be altered, waived,
amended or extended except by an instrument in writing signed by both Lessor and
Lessee.
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[FLOOR PLAN]
EXHIBIT "A"
<PAGE>
RULES AND REGULATIONS
Exhibit "B"
To insure minimizing of inconvenience to Lessor or Lessee and the providing
of proper maintenance of the Premises and the Building, the following Rules and
Regulations are provided and are applicable to all lessees, its officers,
agents, employees, customers, visitors or invitees:
1) No sidewalks or entry passages shall be obstructed or used for any
purpose other than for ingress and egress.
2) No rooms shall be occupied or used as sleeping or lodging quarters at
any time.
3) Nothing shall be thrown out of the windows or doors of the Premises.
4) In no event shall Lessee, or third parties doing business with Lessee,
store items overnight or otherwise outside of the Building without
prior written consent of Lessor.
5) Tractor-trailers may park only at truck doors and may not be parked
more than 36 continuous hours.
6) No occupant shall (without Lessor's written consent) put up or operate
any steam engine, machinery or stove upon the leased Premises, or
carry on any mechanical business thereon, or do any cooking thereon,
or use or allow to be used upon the Premises any oil, burning fluids,
camphor, gasoline or kerosene for heating, warming or lighting. No
article deemed extra hazardous on account of fire and no explosives
shall be brought into the Premises or the Building. No offensive gases
or liquids will be permitted.
7) Lessee will refer all contractors, contractor's representatives and
installation technicians, rendering any service on the Premises for
Lessee, to Lessor's approval before performance of any contractual
service. This provision shall apply to all installations affecting
floors, walls, woodwork, trim, windows, ceilings, equipment or any
other physical portion of the building.
8) The waterclosets and other water apparatus shall not be used for any
other purpose than those for which they were constructed, and no
sweeping, rubbish, or other obstructing substances shall be thrown
therein.
<PAGE>
9) No additional locks shall be placed on the doors of the Premises by
Lessee, nor shall any existing locks be changed without prior written
consent of Lessor. Lessor will without charge furnish Lessee with two
keys for each lock existing upon the entrance doors when Lessee
assumes possession with the understanding that at termination of the
Lease these keys shall be returned. Additional keys will be furnished
at a nominal charge. Lessor may at all times keep a pass key to the
Premises.
10) Lessor will not be responsible for lost or stolen personal property,
equipment, money or jewelry from Lessee's area or public rooms
regardless of whether such loss occurs when area is locked against
entry or not.
11) No fish, birds, reptiles or any kind of animal shall be brought into
or kept in or about the Premises.
12) In no event shall Lessee cause or allow any outside storage of trash,
refuse, or anything else, whether in the area of a dumpster or
otherwise.
13) Lessee shall not do or permit to be done within the Premises anything
which would unreasonably annoy or interfere with the rights of other
Lessees of the building.
14) Lessee shall give Lessor prompt notice of all accidents to or defects
in air conditioning equipment, plumbing, electric facilities or any
appurtenance of the Premises.
15) Lessee shall not install any antenna, serial wires or any other
equipment without Lessor's prior written consent and upon such terms
and conditions as may be specified by Lessor in every instance.
16) The Lessee shall not install in the Premises any equipment which uses
a substantial amount of electricity without the advance written
consent of the Lessor. The Lessee shall ascertain from the Lessor the
maximum amount of electrical current which can safely be used in the
Premises, taking into account the capacity of the electric wiring in
the building and the Premises and the needs of other tenants in the
building and shall not use more than such safe capacity. The Lessor's
consent to the installation of electric equipment shall not relieve
the Lessee from the obligation not to use more electricity than such
safe capacity.
2
<PAGE>
The Lessor reserves the right to make such other and further reasonable
rules and regulations as in its judgement may from time to time be needful, for
the safety, care and cleanliness of the Premises.
Lessee Acknowledgment: /s/ JIM PSENCIK, TREASURER
--------------------------
Date: 10-31-94
--------------------------
3
<PAGE>
EXHIBIT "D"
WORK LETTER
Interior Work - Office
- ----------------------
Landlord shall furnish and install in the Demised Premises approximately 2,640
s.f. of office space consisting of the following.
Partitions
Door and Frame
Hardware
Ceilings
Floor Covering
Painting
Heating, Ventilating and Air Conditioning
Plumbing
Electrical
Sprinklers - Office area design is based on light hazard, with spacing one
(1) sprinkler head per 250 square feet, maximum.
Warehouse Work
- --------------
Ceilings - Exposed
Floor - Exposed Concrete
Walls - Exposed
Electrical - Existing lighting fixtures
Sprinklers
Loading Docks
Exterior - Ramp
Lessor shall only be responsible for $50,000 towards the above work. Lessor will
repair any major breaks in the concrete floor.
<PAGE>
ADDENDUM I
1. Rent Schedule
<TABLE>
<CAPTION>
YEAR MONTHS ANNUALLY MONTHLY
- -----------------------------------------------------------------
<S> <C> <C> <C>
1 01-12 $ 93,900.00 $7,825.00
- -----------------------------------------------------------------
2 13-24 $105,000.00 $8,750.00
- -----------------------------------------------------------------
3 25-36 $112,500.00 $9,375.00
- -----------------------------------------------------------------
4 37-48 * *
- -----------------------------------------------------------------
5 49-60 * *
- -----------------------------------------------------------------
</TABLE>
*The rent in Year 4 shall be defined as Year 3 rent
increased by the annual Consumer Price Index (CPI). The
rent in Year 5 shall be defined as Year 4 rent
increased by the annual CPI. For purposes of this Lease
the CPI used shall be the Consumer Price Index (all
items) for All Urban Consumers, U.S. City Average (1982-
1984=100) published by the U.S. Department of Labor,
Bureau of Labor Statistics. In no event, however, will
rent for the fourth or fifth year of the Lease be less
than the third year of the Lease. This escalation will
be implemented on the anniversary of the Lease at the
end of the third and fourth years' respectively.
2. HVAC
Lessor represents and warrants that on the date hereof and continuing thereafter
for a period of one year, the HVAC and all other mechanical systems in the
demised Premises are and shall be in good working order and repair.
3. Assignment
Notwithstanding anything herein to the contrary, Lessee shall have the right to
--------
assign this Lease or sublet the Premises to an entity (a) which owns or
- ------ ----- ------------ ---------
controls, is owned or controlled by, or is under common control or ownership
with Lessee, (b) resulting from a merger, consolidation or reorganization with
---------
Lessee, or (c) which acquires all or substantially all of the assets of Lessee
or the outstanding capital stock of Lessee provided, however, that the entity
has substantially the same or greater net worth as Lessee.
4. Default
Notwithstanding anything in this Lease to the contrary, an event of default
shall not be deemed to have occurred under this Lease until (a) if such default
consists of failure to pay any sum of money hereunder, after the expiration of
five (5) days following written notice from Lessor to
<PAGE>
Lessee, and (b) if such default consists of any failure to comply with the terms
of this Lease in any manner other than for the payment of money, after the
expiration of thirty (30) days following written notice from Lessor to Lessee.
2
<PAGE>
ADDENDUM II
SPECIAL PROVISIONS RELATING TO
THE AMERICANS WITH DISABILITIES ACT OF 1990
Compliance and Allocation of Responsibility under the Americans with
- --------------------------------------------------------------------
Disabilities Act of 1990.
- ------------------------
As between Lessor and Lessee, Lessor shall be responsible for providing access
from the parking lot to and including the front door of the Premises to comply
with the requirements of Title III of the Americans with Disabilities Act of
1990 (42 U.S.C. 12181, et. seq. The Provisions Governing Public Accommodations
and Services Operated by Private Entities), and all regulations promulgated
thereunder, and all amendments, revisions or modifications thereto now or
hereafter, adopted or in effect in connection therewith (hereinafter
collectively referred to as the "ADA"), and to take such actions and make such
alterations, and improvements as are necessary for such compliance.
As between Lessor and Lessee, Lessee, at its sole cost and expense, shall be
responsible that the Premises, excluding the front door, and all alterations and
improvements in the Premises, excluding the front door, and Lessee's use and
occupancy of the Premises, excluding the front door, and Lessee's performance of
its obligations under this Lease, comply with the requirements of the ADA, and
to take such actions and make such alterations and improvements as are necessary
for such compliance; provided, however, that Lessee shall not make any such
alterations or improvements except upon Lessor's prior written consent pursuant
to the terms and conditions of this Lease. If Lessee fails to diligently take
such actions or make such alterations or improvements as are necessary for such
compliance, Lessor may but shall not be obligated to take such actions and make
such alterations and improvements and may recover all of the costs and expenses
of such actions, alterations and improvements from Lessee as additional rent.
Notwithstanding anything in this Lease contained to the contrary, no act or
omission of Lessor, including any approval, consent or acceptance by Lessor or
Lessor's agents, employees or other representatives, shall be deemed an
agreement, acknowledgment, warranty or other representation by Lessor that
Lessee has complied with the ADA or that any action, alteration or improvement
by Lessee complies or will comply with the ADA or constitutes a waiver by Lessor
of Lessee's obligations to comply with the ADA under this Lease or otherwise.
Any failure of Lessor to comply with the obligations of the ADA shall not
relieve Lessee from any of its obligations under this Lease or constitute or be
construed as a constructive or other eviction of Lessee or disturbance of
Lessee's use and possession of the Premises or any part of the Project.
<PAGE>
EXHIBIT 10.6
LEASE AGREEMENT
THIS LEASE AGREEMENT is made this 28 day of February, 1995, between SCI
--
NORTH CAROLINA LIMITED PARTNERSHIP ("Landlord"), and the Tenant named below.
Tenant: FUTRONIX CORPORATION, a Texas corporation
Tenant's representative, Mr. Terry Hunt; 12614 Hempstead Highway
address, and phone no.:
Houston, Texas 77092; (713) 329-1100
--------
Premises: Approximately 32,000 square feet as shown on
Exhibit A.
Project: Charlotte Distribution Center
Building (if not the same
as the Project): Building #1, Distribution Center Drive,
Charlotte, North Carolina
Tenant's Proportionate
Share of Project: 63%
Tenant's Proportionate
Share of Building: 63%
Lease Term: Beginning on the Commencement Date and ending on
the last day of the 36th full calendar month
thereafter.
Commencement Date: June 1, 1995 (See Addendum One)
----------------
Monthly Base Rent: $10,020.00
Estimated Monthly 1. Utilities: $ N/A
Operating Expense
Payments: 2. Common Area Charges: $480.00
(estimates only and
subject to adjustment to 3. Others: $ N/A
actual costs and expenses
according to the provisions
of this Lease)
<PAGE>
Total Estimated Monthly
Operating Expense Payments: $480.00
Total Monthly Base Rent
and Operating Expense
Payments: $10,500.00
Base Year: Taxes - $0.30 per sq. ft./year; Insurance - $0.04
per sq. ft./year
Security Deposit: None
Broker: Trammell Crow, SE, Inc.
Addenda: Addendum One (Additional Provisions); Addendum
Two (Construction); Addendum Three (Right to
Extend Term); Exhibit A
1. GRANTING CLAUSE. In consideration of the obligation of Tenant to pay
rent as herein provided and in consideration of the other terms, covenants, and
conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord,
the Premises, to have and to hold for the Lease Term, subject to the terms,
covenants and conditions of this Lease.
2. ACCEPTANCE OF PREMISES. Tenant accepts the Premises in its condition
as of the date hereof, subject to all applicable laws, ordinances and
regulations; provided, however, Landlord agrees to install the tenant
improvements (the "Initial Tenant Improvements") described in the Construction
Addendum, if any, attached hereto. Tenant acknowledges that Landlord has made
no representation or warranty as to the suitability of the Premises for the
conduct of Tenant's business, and Tenant waives any implied warranty that the
Premises are suitable for Tenant's intended purposes. The taking of possession
of the Premises shall be conclusive evidence that Tenant accepts the Premises
and that the Premises were in good condition at the time possession was taken
except for any punch list items agreed to in writing by Landlord and Tenant. In
no event shall Landlord be liable for any defects in the Premises or for any
limitation on its use. See Addendum One.
----------------
3. USE. The Premises shall be used only for the purpose of receiving,
storing, shipping and selling (but limited to wholesale sales) products,
materials and merchandise made and/or distributed by Tenant and for such other
lawful purposes as may be incidental thereto; provided, however, with Landlord's
prior written consent, Tenant may also use the Premises for light manufacturing.
Tenant shall not conduct or give notice of any auction, liquidation, or going
out of business sale on the Premises. Tenant will use the Premises in a
careful, safe and proper manner and will not commit waste thereon.
2
<PAGE>
Tenant, at its sole expense, shall comply with all laws (including,
without limitation, Environmental Requirements, as defined herein, and laws
regarding access for handicapped or disabled persons), ordinances and
regulations, and all declarations, covenants, and restrictions, applicable to
Tenant's use or occupation of the Premises, and with all governmental orders and
directives of public officers which impose any duty or restriction with respect
to the use or occupation of the Premises. Outside storage, including without
limitation, storage of trucks and other vehicles, is prohibited without
Landlord's prior written consent. No use shall be made of the Premises that
would constitute the Project as a place of public accommodation under the
Americans with Disabilities Act or similar state statutes or local ordinances or
any regulations promulgated thereunder, all as may be amended from time to time
(the "ADA"); and Tenant shall cause the Premises (and, to the extent required by
improvements to the Premises, the Project) to comply with the ADA. SEE ADDENDUM
------------
ONE.
- ---
Tenant shall not permit any objectionable or unpleasant odors, smoke,
dust, gas, noise, or vibrations to emanate from the Premises, or take any other
action that would constitute a nuisance or would disturb, unreasonably interfere
with, or endanger Landlord or any other tenants of the Project. Tenant will not
use or permit the Premises to be used for any purpose or in any manner that
would void Tenant's or Landlord's insurance, increase the insurance risk, or
cause the disallowance of any sprinkler credits. If any increase in the cost of
any insurance on the Premises or the Project is caused by Tenant's use of the
Premises, or because Tenant vacates the Premises, then Tenant shall pay the
amount of such increase to Landlord. SEE ADDENDUM ONE.
----------------
4. BASE RENT. Tenant shall pay Base Rent in the amount set forth above.
The first month's Base Rent, and the first monthly installment of estimated
Operating Expenses (as hereinafter defined) shall be due and payable on the
Commencement Date hereof, and Tenant promises to pay to Landlord in advance,
without demand, deduction or set-off, monthly installments of Base Rent on or
before the first day of each calendar month succeeding the Commencement Date.
Payments of Base Rent for any fractional calendar month shall be prorated. All
payments required to be made by Tenant to Landlord hereunder shall be payable at
such address as Landlord may specify from time to time by written notice
delivered in accordance herewith. The obligation of Tenant to pay Base Rent
and other sums to Landlord and the obligations of Landlord under this Lease are
independent obligations. Tenant shall have no right at any time to abate,
reduce, or set-off any rent due hereunder except where expressly provided in
this Lease. Tenant waives and releases all statutory liens and offset rights as
to rent.
If Tenant is delinquent in any monthly installment of Base Rent or of
estimated Operating Expenses for more than 10 days, Tenant shall pay to Landlord
on demand a late charge equal to 5 percent of such delinquent sum. The
provision for such late charge shall be in addition to all of Landlord's other
rights and remedies hereunder or at law and shall not be construed as a penalty.
3
<PAGE>
5. SECURITY DEPOSIT. INTENTIONALLY DELETED
---------------------
6. OPERATING EXPENSE PAYMENTS. During each month of the Lease Term, on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal
to 1/2 of the annual cost, as estimated by Landlord from time to time, of
Tenant's Proportionate Share (hereinafter defined) of Operating Expenses for the
Project. Payments thereof for any fractional calendar month shall be prorated.
The term "Operating Expenses" means all costs and expenses incurred by Landlord
with respect to the ownership, maintenance, and operation of the Project
including, but not limited to costs of: utilities (to the extent not separately
metered); maintenance and repair of all portions of the Project, including
without limitation, paving and parking areas, roads, roofs, alleys, and
driveways, mowing, landscaping, exterior painting, utility lines, mechanical
systems and other items described in Paragraph 11 below; amounts paid to
contractors and subcontractors for work or services performed in connection with
any of the foregoing; charges or assessments of any association to which the
Project is subject; fees payable to tax consultants and attorneys for
consultation and contesting taxes; property management fees payable to a
property manager, including any affiliate of Landlord, or if there is no
property manager, an administration fee of 15 percent of Operating Expenses
payable to Landlord; security services, if any; trash collection, sweeping and
removal; and additions or alterations made by Landlord to the Project in order
to comply with applicable laws or codes as amended from time to time or that are
appropriate to the continued operation of the Project as a bulk warehouse
facility in the market area, provided that the cost of such additions or
alterations that are required to be capitalized for federal income tax purposes
shall be amortized on a straight line basis over a period equal to the lesser of
the useful life thereof for federal income tax purposes or 10 years. In
addition, Operating Expenses shall include (i) the amount by which Taxes
(hereinafter defined) for each calendar year during the Lease term exceeds Taxes
for the Base Year, and (ii) the amount by which the cost of insurance maintained
by Landlord for the Project for each calendar year during the Lease term exceeds
the cost of such insurance for the Base Year. Operating Expenses do not include
costs or expenses or depreciation or amortization for capital repairs and
capital replacements required to be made by Landlord under Paragraph 10 of this
Lease, debt service under mortgages or ground rent under ground leases, costs of
restoration to the extent of net insurance proceeds received by Landlord with
respect thereto, leasing commissions, or the costs of renovating space for
tenants.
If Tenant's total payments for any year are less than Tenant's
Proportionate Share of actual Operating Expenses for such year, Tenant shall pay
the difference to Landlord within 30 days after demand. If the total payments
of Tenant for any year are more than Tenant's Proportionate Share of actual
Operating Expenses for such year, Landlord shall retain such excess and credit
it against Tenant's next payments. For purposes of calculating Tenant's
Proportionate Share of Operating Expenses, a year shall mean a calendar year
except the first year, which shall begin on the Commencement Date, and the last
year, which shall end on the expiration of this Lease. With respect to
Operating Expenses which Landlord allocates to the entire Project, Tenant's
"Proportionate Share" shall be the percentage set forth on the first page
4
<PAGE>
of this Lease as Tenant's Proportionate Share of the Project as reasonably
adjusted by Landlord in the future for changes in the physical size of the
Premises or Project; and, with respect to Operating Expenses which Landlord
allocates only to the Building, Tenant's "Proportionate Share" shall be the
percentage set forth on the first page of this Lease as Tenant's Proportionate
Share of the Building as reasonably adjusted by Landlord in the future for
changes in the physical size of the Premises or the Building. The estimated
Operating Expenses for the Premises set forth on the first page of this Lease
are only estimates, and Landlord makes no guaranty or warranty that such
estimates will be accurate.
7. UTILITIES. Tenant shall pay for all water, gas, electricity, heat,
light, power, telephone, sewer, sprinkler services, refuse and trash collection,
and other utilities and services used on the Premises (to the extent separately
metered), all maintenance charges for utilities, and any storm sewer charges or
other similar charges for utilities imposed by any governmental entity or
utility provider, together with any taxes, penalties, surcharges or the like
pertaining to Tenant's use of the Premises. Landlord shall have the right to
cause at Tenant's expense any of said services to be separately metered or
charged directly to Tenant by the provider. Tenant shall pay its share of all
charges for jointly metered utilities based upon consumption, as reasonably
determined by Landlord. Landlord shall not be liable for any interruption or
failure of utilities or any other service to the Premises and no such
interruption or failure shall result in the abatement of rent hereunder.
Tenant agrees to limit use of water and sewer for normal restroom use and
nothing herein contained shall impose upon Landlord any duty to provide sewer or
water usage for other than normal restroom usage.
8. TAXES. Landlord agrees to pay all taxes, assessments and governmental
charges of any kind and nature (collectively referred to as "Taxes") that accrue
against the Project during the Lease Term, provided Landlord shall have the
right to contest by appropriate legal proceedings the amount, validity, or
application of any Taxes or liens thereof. All capital levies or other taxes
assessed or imposed on Landlord upon the rents payable to Landlord under this
Lease and any franchise tax, any excise, transaction, sales or privilege tax,
assessment, levy, or charge measured by or based, in whole or in part, upon
such rents from the Premises and/or the Project or any portion thereof shall be
paid by Tenant to Landlord monthly in estimated installments or upon demand, at
the option of Landlord, as additional rent; provided, however, in no event shall
Tenant be liable for any net income taxes imposed on Landlord unless such net
income taxes are in substitution for any Taxes payable hereunder. If any such
tax or excise is levied or assessed directly against Tenant, then Tenant shall
be responsible for and shall pay the same at such times and in such manner as
the taxing authority shall require. Tenant shall be liable for all taxes levied
or assessed against any personal property or fixtures placed in the Premises,
whether levied or assessed against Landlord or Tenant.
9. INSURANCE. Landlord shall maintain fire and extended coverage
insurance covering the Project as Landlord deems appropriate. Landlord may, but
is not obligated to, maintain such other insurance and additional coverages as
it may deem necessary, including, but not limited to, commercial liability
insurance and rent loss insurance. All such insurance shall be
5
<PAGE>
included as part of the Operating Expenses charged to Tenant hereunder. The
Project may be included in a blanket policy (in which case the cost of such
insurance allocable to the Project will be determined by Landlord based upon the
insurer's cost calculations). Tenant shall also reimburse Landlord for any
increased premiums or additional insurance which Landlord deems reasonably
necessary as a result of Tenant's use of the Premises. SEE ADDENDUM ONE.
----------------
Tenant, at its expense, shall maintain during the Lease Term a policy
or policies of: fire and extended coverage insurance covering the replacement
cost of all property and improvements, installed or placed in the Premises by
Tenant at Tenant's expense; worker's compensation insurance with no less than
the minimum limits required by law; employer's liability insurance with such
limits as required by law; commercial liability insurance, with liability limits
of not less than $2,000,000 combined single limit per occurrence (together with
such umbrella coverage as Landlord may reasonably require) for property damage,
personal injuries, or deaths of persons occurring in or about the Premises;
provided, however, that Landlord may from time to time require reasonable
increases in any such limits. The commercial liability policies shall name
Landlord as an additional insured, insure on an occurrence and not a claims-made
basis, be issued by insurance companies which are reasonably acceptable to
Landlord, not be cancelable unless 30 days prior written notice shall be given
to Landlord, and provide primary coverage to Landlord (any policy issued to
Landlord providing duplicate or similar coverage shall be deemed excess over
Tenant's policies). Such policies or certificates thereof shall be delivered to
Landlord by Tenant upon commencement of the Lease Term and upon each renewal of
said insurance.
The fire and extended coverage insurance obtained by Landlord and
Tenant shall include a waiver by subrogation by the insurers and all rights
based upon an assignment from its insured, against Landlord or Tenant, their
officers, directors, employees, managers, agents, invitees and contractors, in
connection with any loss or damage thereby insured against. Neither party nor
its officers, directors, employees, managers, agents, invitees or contractors
shall be liable to the other for loss or damage caused by any risk covered by
fire and extended coverage property insurance, and each party waives any claims
against the other party, and its officers, directors, employees, managers,
agents, invitees and contractors for such loss or damage. The failure of a
party to insure its property shall not void this waiver.
10. LANDLORD'S REPAIRS. Landlord shall maintain, at its expense, only the
structural soundness of the roof, foundation, and exterior walls of the building
of which the Premises are a part in good repair, reasonable wear and tear and
casualty losses and damages caused by Tenant excluded. The term "walls" as used
in this Paragraph 10 shall not include windows, glass or plate glass, doors or
overhead doors, special store fronts, dock bumpers, dock plates or levelers, or
office entries. Tenant shall immediately give Landlord written notice of any
repair required by Landlord pursuant to this Paragraph 10, after which Landlord
shall have a reasonable opportunity to repair. SEE ADDENDUM ONE.
----------------
6
<PAGE>
11. TENANT'S REPAIRS. Landlord shall maintain in good repair and
condition all parts of the Premises and the parking areas, driveways, alleys,
spur tracks, and landscape and grounds surrounding the Premises. Such
maintenance shall be at Tenant's cost and expense except as to those repairs for
which Landlord is responsible under Paragraph 10; provided, however, if Tenant
leases less than the entire Project, Tenant shall only be responsible for its
Proportionate Share of the costs of maintaining any items outside its Premises.
Landlord shall at Tenant's expense maintain the heating and air conditioning and
other mechanical systems and components of the Premises, including lighting,
electrical systems, and plumbing lines and equipment. Tenant shall reimburse
Landlord for all such costs and expenses in accordance with the provisions of
Paragraph 6 above, except to the extent such repairs and replacements are
covered by insurance on the Project under policies naming Landlord as the
insured. Notwithstanding the foregoing, Landlord may at any time require Tenant
to assume the maintenance and repair obligations set forth in this paragraph as
they relate to the Premises. In such case, Tenant, at its own cost and expense
and subject to Landlord's prior right to contract for such services, shall enter
into and deliver to Landlord one or more maintenance service contracts
acceptable to Landlord with a contractor(s) approved by Landlord for hot water,
heating and air conditioning, and other mechanical systems and equipment within
or serving the Premises. At Landlord's request, Tenant shall also sign a joint
maintenance agreement with the railroad company, if any, serving the Premises.
The service and maintenance contract(s) must include all services required by
Landlord and must become effective within 30 days after Landlord's request. In
the event Tenant does not so deliver the service contract(s), Landlord shall
have the right to contract for said service without notice to Tenant, and Tenant
shall upon demand reimburse Landlord for the full cost thereof. Subject to the
provisions of Paragraph 15, Tenant shall repair and pay for any damage to the
Premises or the Project caused by Tenant or Tenant's employees, agents, or
invitees, or caused by Tenant's default hereunder.
12. TENANT IMPROVEMENTS AND TRADE FIXTURES. Any alterations, additions,
or improvements made by or on behalf of Tenant to the Premises ("Tenant
Improvements") shall be subject to Landlord's prior written consent. All Tenant
Improvements shall comply with insurance requirements and with applicable laws,
ordinances, and regulations, including, without limitation and to the extent
applicable, laws and regulations regarding removal or alteration of structural
or architectural barriers to handicapped or disabled persons (and Tenant shall
construct at its expense any alteration required by such laws or regulations, as
they may be amended). All Tenant Improvements shall be constructed in a good
and workmanlike manner and only good grades of materials shall be used. All
plans and specifications for any Tenant Improvements shall be submitted to
Landlord for its approval, and Landlord may monitor construction of the Tenant
Improvements. Landlord may post on and about the Premises notices and give
notices that Landlord shall not be liable on account of any damage or claim in
connection with such construction, and Tenant shall provide Landlord with the
identities and mailing addresses of all persons performing work or supplying
materials, prior to beginning such construction. Landlord's right to review
plans and specifications and monitor construction shall be solely for its
benefit, and Landlord shall have no duty to see that such plans and
specifications or construction comply with applicable laws, codes, rules, or
regulations. At
7
<PAGE>
Landlord's request, Tenant shall obtain payment and performance bonds for any
Tenant Improvements which bonds shall be delivered to Landlord prior to
commencement of work on the Tenant Improvements and shall be in form and
substance satisfactory to Landlord. Upon completion of any Tenant Improvements,
Tenant shall deliver to Landlord sworn statements setting forth the names of all
contractors and subcontractors who did work on the Tenant Improvements and final
lien waivers from all such contractors and subcontractors. SEE ADDENDUM ONE.
----------------
Tenant, at its own cost and expense, may erect such shelves, bins,
machinery and trade fixtures (collectively "Trade Fixtures") as it desires
provided that such items do not alter the basic character of the Premises or the
Project, do not overload or damage the same, and may be removed without injury
to the Premises, and provided that the construction, erection, and installation
thereof complies with all applicable governmental laws, ordinances, regulations
and with Landlord's reasonable requirements. Subject to Paragraph 38 below,
upon the expiration of the Lease Term, Tenant shall remove its Trade Fixtures
and shall repair any damage caused by such removal (reasonable wear and tear
excepted), by the last day of the Lease Term.
13. SIGNS. Tenant shall not make any changes to the exterior of the
Premises, install any exterior lights, decorations, balloons, flags, pennants,
banners, or painting, or erect or install any signs, windows or door lettering,
placards, decorations, or advertising media of any type which can be viewed from
the exterior of the Premises, without Landlord's prior written consent. Upon
vacation of the Premises, Tenant shall remove all signs and repair, paint,
and/or replace the building facia surface to which its signs are attached
(reasonable wear and tear excepted). Tenant shall obtain all applicable
governmental permits and approvals for sign and exterior treatments. All signs,
decorations, advertising media, blinds, draperies and other window treatment or
bars or other security installations visible from outside the Premises shall be
subject to Landlord's approval and conform in all respects to Landlord's
requirements. SEE ADDENDUM ONE.
----------------
14. PARKING. Tenant shall be entitled to park in common with other
tenants of the Project in those areas designated for nonreserved parking.
Landlord may allocate parking spaces among Tenant and other tenants in the
Project if Landlord determines that such parking facilities are becoming
crowded. Landlord shall not be responsible for enforcing Tenant's parking
rights against any third parties. SEE ADDENDUM ONE.
----------------
15. FIRE AND CASUALTY DAMAGE. If at any time during the Lease Term, the
Premises or the Project is damaged by fire or other casualty, Landlord shall
notify Tenant, within 45 days after such damage, as to the amount of time
Landlord reasonably estimates it will take to repair such damage. If the amount
of such time exceeds 4 months, either Landlord or Tenant may elect, upon notice
to the other party delivered as soon as practicable but not later than 30 days
after Landlord's notice, to terminate this Lease. If neither party elects to
terminate this Lease or if Landlord estimates that the damage will take 4 months
or less to repair, Landlord shall promptly repair and reconstruct the
improvements, subject to delays arising from the collection of insurance
proceeds or from Force Majeure events, except that Landlord shall not be
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required to repair and reconstruct any fixtures, additions or other improvements
paid for by Tenant; and this Lease shall remain in full force and effect
provided that the Lease Term will be extended for a time equal to the period
beginning on the date the loss or damage was suffered until the repairs and
replacement are completed. Tenant at Tenant's expense shall promptly perform,
subject to delays arising from the collection of insurance proceeds, all repairs
or restoration not required to be done by Landlord and shall promptly reenter
the Premises and commence doing business in accordance with this Lease.
Notwithstanding the foregoing, either party may terminate this Lease if the
improvements are damaged during the last year of the Lease Term and Landlord
reasonably estimates that it will take more than one month to repair such
damage.
If the Premises or a portion thereof is not usable as a result of
damage by fire or other casualty to the Premises or building in which the
Premises are located, and Landlord elects to repair and /or reconstruct the
damaged improvements, Base Rent shall be abated for the period of repair and
reconstruction in the proportion which the area of the Premises which is not
usable by Tenant bears to the total area of the Premises. Such abatement shall
be the sole remedy of Tenant, and to the extent permitted by applicable law, and
except as provided herein, Tenant waives any right to terminate the Lease by
reason of damage or casualty loss.
16. CONDEMNATION. If any part of the Premises or the Project should be
taken for any public or quasi-public use under governmental law, ordinance, or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof (a "Taking" or "Taken"), and the Taking would prevent or materially
interfere with Tenant's use of the Premises or in Landlord's judgment would
materially interfere with or impair its ownership or operation of the Project,
then upon written notice by Landlord this Lease shall terminate and Base Rent
shall be apportioned as of said date. If part of the Premises shall be Taken,
and this Lease is not terminated as provided above, the Base Rent payable
hereunder during the unexpired Lease Term shall be reduced to such an extent as
may be fair and reasonable under the circumstances. In the event of any such
Taking, Landlord shall be entitled to receive the entire price or award from any
such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord
Tenant's interest, if any, in such award. Tenant shall have the right, to the
extent that same shall not diminish Landlord's award, to make a separate claim
against the condemning authority (but not Landlord) for such compensation as may
be separately awarded or recoverable by Tenant for moving expenses and damage to
Tenant's Trade Fixtures, if a separate award for such items is made to Tenant.
17. ASSIGNMENT AND SUBLETTING. Without Landlord's prior written consent,
Tenant shall not assign this Lease or sublease the Premises or any part thereof
or mortgage, pledge, or hypothecate its leasehold interest or grant any
concession or license within the Premises and any attempt to do any of the
foregoing shall be void and of no effect. For purposes of this paragraph, a
transfer of the ownership controlling Tenant shall be deemed an assignment of
this Lease unless Tenant's ownership interests are publicly traded.
Notwithstanding the above, Tenant may assign or sublet the Premises, or any part
thereof, to any
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entity controlling Tenant, controlled by Tenant or under common control with
Tenant (a "Tenant Affiliate"), without the prior written consent of Landlord.
Tenant shall reimburse Landlord for all of Landlord's reasonable out-of-pocket
expenses in connection with any assignment or sublease. Upon Landlord's receipt
of Tenant's written notice of a desire to assign or sublet the Premises, or any
part thereof (other than to a Tenant Affiliate), Landlord may, by giving written
notice to Tenant within 30 days after receipt of Tenant's notice, terminate this
Lease with respect to the space described in Tenant's notice, as of the date
specified in Tenant's notice for the commencement of the proposed assignment or
sublease.
Notwithstanding any assignment or subletting, Tenant and any guarantor
or surety of Tenant's obligations under this Lease at all times remain fully
responsible and liable for the payment of the rent and for compliance with all
of Tenant's other obligations under this Lease (regardless of whether Landlord's
approval has been obtained for any such assignments or sublettings). SEE
---
ADDENDUM ONE. In the event that the rent due and payable by a sublessee or
- -------------
assignee (or a combination of the rental payable under such sublease or
assignment plus any bonus or other consideration therefor or incident thereto)
exceeds the rental payable under this Lease, then Tenant shall be bound and
obligated to pay Landlord as additional rent hereunder all such excess rental
and other excess consideration within 10 days following receipt thereof by
Tenant.
If this Lease be assigned or if the Premises be subleased (whether in
whole or in part) or in the event of the mortgage, pledge, or hypothecation of
Tenant's leasehold interest or grant of any concession or license within the
Premises or if the Premises be occupied in whole or in part by anyone other than
Tenant, then upon a default by Tenant hereunder Landlord may collect rent from
the assignee, sublessee, mortgagee, pledgee, party to whom the leasehold
interest was hypothecated, concession or licensee or other occupant and, except
to the extent set forth in the preceding paragraph, apply the amount collected
to the next rent payable hereunder; and all such rentals collected by Tenant
shall be held in trust for Landlord and immediately forwarded to Landlord. No
such transaction or collection of rent or application thereof by Landlord,
however, shall be deemed a waiver of these provisions or a release of Tenant
from the further performance by Tenant of its covenants, duties or obligations
hereunder.
18. INDEMNIFICATION AND WAIVER. Except for Landlord's negligence and to
the extent permitted by law, Tenant agrees to indemnify, defend and hold
harmless Landlord, and Landlord's agents and employees, from and against any and
all losses, liabilities, damages, costs, and expenses (including attorneys'
fees) resulting from claims by third parties for injuries to any person and
damage to or theft or misappropriation or loss of property occurring in or about
the Project and arising from the use and occupancy of the Premises or from any
activity, work, or thing done, permitted or suffered by Tenant in or about the
Premises or due to any other act or omission of Tenant, its subtenants,
assignees, invitees, employees, contractors and agents. The furnishing of
insurance required hereunder shall not be deemed to limit Tenant's obligations
under the provisions of this Paragraph 18.
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Landlord and its agents and employees shall not be liable for, and
Tenant hereby waives all claims against such parties for, damage to property
sustained by Tenant or any person claiming through Tenant resulting from any
accident or occurrence in or upon the Premises or in or about the Project from
any cause whatsoever, including without limitation, damage caused in whole or in
part, directly or indirectly, by the negligence of Landlord or its agents or
employees; provided, however, such waiver as to Tenant's tangible personal
property shall only be effective to the extent such property is insurable.
19. INSPECTION AND ACCESS. Landlord and its agents, representatives, and
contractors may enter the Premises at any reasonable time to inspect the
Premises and to make such repairs as may be required or permitted pursuant to
this Lease and for any other business purpose. Landlord and Landlord's
representatives may enter the Premises during business hours for the purpose of
showing the Premises to prospective purchasers or, during the last year of the
Lease Term, to prospective tenants; in addition, Landlord shall have the right
to erect a suitable sign on the Premises stating the Premises are available to
let or that the Project is available for sale.
20. QUIET ENJOYMENT. If Tenant shall perform all of the covenants and
agreements herein required to be performed by Tenant, Tenant shall, subject to
the terms of this Lease, at all times during the Lease Term, have peaceful and
quiet enjoyment of the Premises against any person claiming by, through or under
Landlord.
21. SURRENDER. Upon termination of the Lease Term or earlier termination
of Tenant's right of possession, Landlord may, by notice to Tenant, require
Tenant at Tenant's expense to remove any or all Trade Fixtures and/or any or all
Tenant Improvements, including the Initial Tenant Improvements, and to repair
any damage caused by such removal. Any Trade Fixtures or Tenant Improvements
not so removed by Tenant as permitted or required herein shall be deemed
abandoned and stored, removed, and disposed of by Landlord at Tenant's expense,
and Tenant waives all claims against Landlord for any damages resulting from
Landlord's retention and disposition of such property. All Tenant Improvements
except those which Landlord requires Tenant to remove shall remain in the
Premises as the property of Landlord. All obligations of Tenant hereunder not
fully performed as of the termination of the Lease Term shall survive the
termination of the Lease Term, including without limitation, all payment
obligations with respect to Operating Expenses and all obligations concerning
the condition and repair of the Premises.
22. HOLDING OVER. If, for any reason, Tenant retains possession of the
Premises after the termination of the Lease Term, unless otherwise agreed in
writing, such possession shall be subject to immediate termination by Landlord
at any time, and all of the other terms and provisions of this Lease (excluding
any expansion or renewal option or other similar right or option) shall be
applicable during such holdover period, except that Tenant shall pay Landlord
from time to time, upon demand, as Base Rent for the holdover period, an amount
equal to 150% of the Base Rent in effect on the termination date, computed on a
monthly basis for each month
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or part thereof during such holding over. All other payments shall continue
under the terms of this Lease. In addition, Tenant shall be liable for all
damages incurred by Landlord as a result of such holding over. No holding over
by Tenant, whether with or without consent of Landlord, shall operate to extend
this Lease except as otherwise expressly provided, and this Paragraph 22 shall
not be construed for Tenant to retain possession of the Premises.
23. EVENTS OF DEFAULT. Each of the following events shall be an event of
default ("Event of Default") by Tenant under this Lease:
(i) Tenant shall fail to pay any installment of Base Rent or any
other payment required herein when due, and such failure shall continue for a
period of 5 days from the date such payment was due.
(ii) Tenant or any guarantor or surety of Tenant's obligations
hereunder shall (A) make a general assignment for the benefit of creditors; (B)
commence any case, proceeding or other action seeking to have an order for
relief entered on its behalf as a debtor or adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or of
any substantial part of its property (collectively a "Bankruptcy Proceeding");
(C) become the subject of any Bankruptcy Proceeding which is not dismissed
within 60 days of its filing or entry; or (D) die or suffer a legal disability
(if Tenant, guarantor, or surety is an individual) or be dissolved or otherwise
fail to maintain its legal existence (if Tenant, guarantor or surety is a
corporation, partnership or other entity).
(iii) Any insurance required to be maintained by Tenant pursuant to
this Lease shall be canceled or terminated or shall expire or shall be reduced
or materially changed, except, in each case, as permitted in this Lease.
(iv) Tenant shall not occupy or shall vacate the Premises or shall
fail to continuously operate its business at the Premises for the permitted use
set forth herein, whether or not Tenant is in monetary or other default under
this Lease SEE ADDENDUM ONE.
-----------------
(v) Tenant shall attempt or there shall occur any assignment,
subleasing or other transfer of Tenant's interest in or with respect to this
Lease except as otherwise permitted in this Lease.
(vi) Tenant shall fail to discharge any lien placed upon the
Premises in violation of this Lease within 30 days after any such lien or
encumbrance is filed against the Premises.
(vii) Tenant shall fail to comply with any provision of this Lease
other than those specifically referred to in this Paragraph 23, and except as
otherwise expressly provided
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therein, such default shall continue for more than 30 days after Landlord shall
have given Tenant written notice of such default.
24. LANDLORD'S REMEDIES. Upon each occurrence of an Event of Default and
so long as such Event of Default shall be continuing, Landlord may at any time
thereafter at its election: (i) terminate this Lease or Tenant's right of
possession, but Tenant shall remain liable as hereinafter provided; and/or (ii)
pursue any remedies provided for under this Lease or at law or in equity. Upon
the termination of this Lease or termination of Tenant's right of possession, it
shall be lawful for Landlord, without formal demand or notice of any kind, to
re-enter the Premises by summary dispossession proceedings or any other action
or proceeding authorized by law and to remove Tenant and all persons and
property therefrom. If Landlord re-enters the Premises, Landlord shall have the
right to keep in place and use, or remove and store, all of the furniture,
fixtures and equipment at the Premises.
If Landlord terminates this Lease, Landlord may recover from Tenant
the sum of: all Base Rent and all other amounts accrued hereunder to the date of
such termination; the cost of reletting the whole or any part of the Premises,
including without limitation brokerage fees and/or leasing commissions incurred
by Landlord, and costs of removing and storing Tenant's or any other occupant's
property, repairing, altering, remodeling, or otherwise putting the Premises
into condition acceptable to a new tenant or tenants, and all reasonable
expenses incurred by Landlord in pursuing its remedies, including reasonable
attorneys' fees and court costs; and the excess of the then present value of the
Base Rent and other amounts payable by Tenant under this Lease as would
otherwise have been required to be paid by Tenant to Landlord during the period
following termination of this Lease measured from the date of such termination
to the expiration date stated in this Lease, over the present value of any net
amounts which Tenant establishes Landlord can reasonably expect to recover by
reletting the Premises for such period, taking into consideration the
availability of acceptable tenants and other market conditions affecting
leasing. Such present values shall be calculated at a discount rate equal to
the 90-day U.S. Treasury bill rate at the date of such termination.
If Landlord terminates Tenant's right of possession (but not this
Lease), Landlord may, but shall be under no obligation to, relet the Premises
for the account of Tenant for such rent and upon such terms as shall be
satisfactory to Landlord without thereby releasing Tenant from any liability
hereunder and without demand or notice of any kind to Tenant. For the purpose
of such reletting Landlord is authorized to make any repairs, changes,
alterations, or additions in or to the Premises as Landlord deems reasonably
necessary or desirable. If the Premises are not relet, then Tenant shall pay to
Landlord as damages a sum equal to the amount of the rental reserved in this
Lease for such period or periods, plus the cost of recovering possession of the
Premises (including attorneys' fees and costs of suit), the unpaid Base Rent and
other amounts accrued hereunder at the time of repossession, and the costs
incurred in any attempt by Landlord to relet the Premises. If the Premises are
relet and a sufficient sum shall not be realized from such reletting [after
first deducting therefrom, for retention by Landlord, the unpaid Base Rent and
other amounts accrued hereunder at the time of reletting, the cost of
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recovering possession (including attorneys' fees and costs of suit), all of the
costs and expense of repairs, changes, alterations, and additions, the expense
of such reletting (including without limitation brokerage fees and leasing
commissions) and the cost of collection of the rent accruing therefrom] to
satisfy the rent provided for in this Lease to be paid, then Tenant shall
immediately satisfy and pay any such deficiency. Any such payments due Landlord
shall be made upon demand therefor from time to time and Tenant agrees that
Landlord may file suit to recover any sums falling due from time to time.
Notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect in writing to terminate this Lease for such previous breach.
Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
Premises and/or a termination of this Lease by Landlord, whether by agreement or
by operation of law, it being understood that such surrender and/or termination
can be effected only by the written agreement of Landlord and Tenant. Any law,
usage, or custom to the contrary notwithstanding, Landlord shall have the right
at all times to enforce the provisions of this Lease in strict accordance with
the terms hereof; and the failure of Landlord at any time to enforce its rights
under this Lease strictly in accordance with same shall not be construed as
having created a custom in any way or manner contrary to the specific terms,
provisions, and covenants of this Lease or as having modified the same. Tenant
and Landlord further agree that forbearance or waiver by Landlord to enforce its
rights pursuant to this Lease or at law or in equity, shall not be a waiver of
Landlord's right to enforce one or more of its rights in connection with any
subsequent default. A receipt by Landlord of rent or other payment with
knowledge of the breach of any covenant hereof shall not be deemed a waiver of
such breach, and no waiver by Landlord of any provision of this Lease shall be
deemed to have been made unless expressed in writing and signed by Landlord. To
the greatest extent permitted by law, Tenant waives the service of notice of
Landlord's intention to re-enter as provided for in any statute, or to institute
legal proceedings to that end, and also waives all right of redemption in case
Tenant shall be dispossessed by a judgment or by warrant of any court or judge.
The terms "enter," "re-enter," "entry" or "re-entry," as used in this Lease, are
not restricted to their technical legal meanings. Any reletting of the Premises
shall be on such terms and conditions as Landlord in its sole discretion may
determine (including without limitation a term different than the remaining
Lease Term, rental concessions, alterations and repair of the Premises, lease of
less than the entire Premises to any tenant and leasing any or all other
portions of the Project before reletting the Premises). Landlord shall not be
liable, nor shall Tenant's obligations hereunder be diminished because of,
Landlord's failure to relet the Premises or collect rent due in respect of such
reletting.
25. TENANT'S REMEDIES/LIMITATIONS OF LIABILITY. Landlord shall not be in
default hereunder and Tenant shall not have any remedy or cause of action unless
Landlord fails to perform any of its obligations hereunder within 30 days after
written notice from Tenant specifying such failure (unless such performance
will, due to the nature of the obligation, require a period of time in excess of
30 days, then after such period of time as is reasonably necessary). All
obligations of Landlord hereunder shall be construed as covenants,
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not conditions; and, except as may be otherwise provided in this Lease, Tenant
may not terminate this Lease for breach of Landlord's obligations hereunder. All
such obligations of Landlord under this Lease will be binding upon Landlord only
during the period of its ownership of the Premises and not thereafter. The term
"Landlord" in this Lease shall mean only the owner, for the time being of the
Premises, and in the event of the transfer by such owner of its interest in the
Premises, such owner shall thereupon be released and discharged from all
obligations of Landlord thereafter accruing, but such obligations shall be
binding during the Lease Term upon each new owner for the duration of such
owner's ownership. Any liability of Landlord under this Lease shall be limited
solely to its interest in the Project, and in no event shall any personal
liability be asserted against Landlord in connection with this Lease nor shall
any recourse be had to any other property or assets of Landlord. SEE ADDENDUM
------------
ONE.
- ---
26. WAIVER OF JURY TRIAL. INTENTIONALLY DELETED.
----------------------
27. SUBORDINATION. This Lease and Tenant's interest and rights hereunder
are and shall be subject and subordinate at all times to the lien of any first
mortgage, now existing or hereafter created on or against the Project or the
Premises, and all amendments, restatements, renewals, modifications,
consolidations, refinancing, assignments and extensions thereof without the
necessity of any further instrument or act on the part of Tenant. Tenant
agrees, at the election of the holder of any such mortgage, to attorn to any
such holder. Tenant agrees upon demand to execute, acknowledge and deliver such
instruments, confirming such subordination and such instruments of attornment as
shall be requested by any such holder. Tenant hereby appoints Landlord attorney
in fact for Tenant irrevocably (such power of attorney being coupled with an
interest) to execute, acknowledge and deliver any such instrument and
instruments for and in the name of the Tenant and to cause any such instrument
to be recorded. Notwithstanding the foregoing, any such holder may at any time
subordinate its mortgage to this Lease, without Tenant's consent, by notice in
writing to Tenant, and thereupon this Lease shall be deemed prior to such
mortgage without regard to their respective dates of execution, delivery or
recording and in that event such holder shall have the same rights with respect
to this Lease as though this Lease had been executed prior to the execution,
delivery and recording of such mortgage and had been assigned to such holder.
The term "mortgage" whenever used in this Lease shall be deemed to include deeds
of trust, security assignments and any other encumbrances, and any reference to
the "holder" of a mortgage shall be deemed to include the beneficiary under a
deed of trust. SEE ADDENDUM ONE.
-----------------
28. MECHANIC'S LIENS. Tenant has no express or implied authority to
create or place any lien or encumbrance of any kind upon, or in any manner to
bind the interest of Landlord or Tenant in, the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Tenant covenants and agrees that it will pay or cause
to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Landlord harmless from all loss, cost or
expense based on or arising out of asserted claims or
15
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liens against the leasehold estate or against the interest of Landlord in the
Premises or under this Lease. Tenant shall give Landlord immediate written
notice of the placing of any lien or encumbrance against the Premises and cause
such lien or encumbrance to be discharged within 30 days of the filing or
recording thereof; provided, however, Tenant may contest such liens or
encumbrances as long as such contest prevents foreclosure of the lien or
encumbrance and Tenant causes such lien or encumbrance to be bonded or insured
over in a manner satisfactory to Landlord within such 30 day period.
29. ESTOPPEL CERTIFICATES. Tenant agrees, from time to time, within 10
days after request of Landlord, to execute and deliver to Landlord, or
Landlord's designee, any estoppel certificate reasonably requested by Landlord,
stating that this Lease is in full force and effect, the date to which rent has
been paid, that Landlord is not in default hereunder (or specifying in detail
the nature of Landlord's default), the termination date of this Lease and such
other matters pertaining to this Lease as may be reasonably requested by
Landlord. Tenant's obligation to furnish each estoppel certificate in a timely
fashion is a material inducement for Landlord's execution of this Lease. No
cure or grace period provided in this Lease shall apply to Tenant's obligations
to timely deliver an estoppel certificate. Tenant hereby irrevocably appoints
Landlord as its attorney in fact to execute on its behalf and in its name any
such estoppel certificate if Tenant fails to execute and deliver the estoppel
certificate within 10 days after Landlord's written request thereof.
30. ENVIRONMENTAL REQUIREMENTS. Tenant shall not permit or cause any
party to bring any Hazardous Material upon the Premises or store or use any
Hazardous Material in or about the Premises without Landlord's prior written
consent. Tenant, at its sole cost and expense, shall operate its business in
the Premises in compliance with all Environmental Requirements, and shall
immediately remediate any Hazardous Materials released on or from the Project by
Tenant, its agents, employees, contractors, subtenants or invitees. The term
"Environmental Requirements" means all applicable present and future statutes,
regulations, ordinances, rules, codes, judgments, orders or other similar
enactments of any governmental authority or agency regulating or relating to
health, safety, or environmental conditions on, under, or about the Premises or
the environment, including without limitation, the following: the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"); the Resource
Conservation and Recovery Act; and all state and local counterparts thereto, and
any regulations or policies promulgated or issued thereunder. The term
"Hazardous Materials" means and includes petroleum (as defined in CERCLA) and
any substance, material, waste, pollutant, or contaminant listed or defined as
hazardous or toxic, under any Environmental Requirements.
Tenant shall indemnify, defend, and hold Landlord harmless from and
against any and all losses (including, without limitation, diminution in value
of the Premises or the Project and loss of rental income from the Project),
claims, demands, actions, suits, damages (including, without limitation,
punitive damages), expenses (including, without limitation, remediation,
corrective action, or cleanup expenses), and costs (including, without
limitation, actual attorneys'
16
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fees, consultant fees or expert fees) which are brought or recoverable against,
or suffered or incurred by Landlord as a result of any breach of the obligations
under this Paragraph 30 by Tenant, its agents, employees, contractors,
subtenants, or invitees, regardless of whether Tenant had knowledge of such
noncompliance. The indemnification and hold harmless obligations of Tenant
shall survive any termination of this Lease.
Landlord shall have access to, and a right to perform inspections and
tests of, the Premises as it may require to determine Tenant's compliance with
Environmental Requirements and Tenant's obligations under this Paragraph 30.
Access shall be granted to Landlord upon Landlord's prior notice to Tenant and
at such times so as to minimize, so far as may be reasonable under the
circumstances, any disturbance to Tenant's operations. Such inspections and
tests shall be conducted at Landlord's expense, unless such inspections or tests
reveal that Tenant has not complied with any Environmental Requirement, in which
case Tenant shall reimburse Landlord for the cost of such inspection and tests.
Landlord's receipt of or satisfaction with any environmental assessment in no
way waives any rights that Landlord holds against Tenant.
31. RULES AND REGULATIONS. Tenant shall, at all times during the Lease
Term and any extension thereof, comply with all reasonable rules and regulations
at any time or from time to time established by Landlord covering use of the
Premises and the Project. The current rules and regulations are attached
hereto. In the event of any conflict between said rules and regulations and
other provisions of this Lease, the other terms and provisions of this Lease
shall control. Landlord shall not have any liability or obligation for the
breach of any rules or regulations by other tenants in the Project. SEE
---
ADDENDUM ONE.
- -------------
32. SECURITY SERVICE. Tenant acknowledges and agrees that, while Landlord
may patrol the Project, Landlord is not providing any security services with
respect to the Premises and that Landlord shall not be liable to Tenant for, and
Tenant waives any claim against Landlord with respect to, any loss by theft or
any other damage suffered or incurred by Tenant in connection with any
unauthorized entry into the Premises or any other breach of security with
respect to the Premises.
33. FORCE MAJEURE. Landlord shall not be held responsible for delays in
the performance of its obligations hereunder when caused by strikes, lockouts,
labor disputes, acts of God, inability to obtain labor or materials or
reasonable substitutes therefor, governmental restrictions, governmental
regulations, governmental controls, enemy or hostile governmental action, civil
commotion, fire or other casualty, and other causes beyond the reasonable
control of Landlord ("Force Majeure").
34. ENTIRE AGREEMENT. This Lease constitutes the complete agreement of
Landlord and Tenant with respect to the subject matter hereof. No
representations, inducements, promises or agreements, oral or written, have been
made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant,
which are not contained herein, and any prior
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agreements, promises, negotiations or representations are superseded by this
Lease. This Lease may not be amended except by an instrument in writing signed
by both parties hereto.
35. SEVERABILITY. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this Lease shall
not be affected thereby. It is also the intention of the parties to this Lease
that in lieu of each clause or provision of this Lease that is illegal, invalid
or unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in terms to such illegal, invalid or unenforceable clause or
provision as may be possible and be legal, valid and enforceable.
36. BROKERS. Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction and that no
broker, agent or other person brought about this transaction, other than the
broker, if any, set forth on the first page of this Lease, and Tenant agrees to
indemnify and hold Landlord harmless from and against any claims by any other
broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this leasing
transaction.
37. MISCELLANEOUS. (a) Any payments or charges due from Tenant to
Landlord hereunder shall be considered rent for all purposes of this Lease.
(b) If and when included within the term "Tenant," as used in this
instrument, there is more than one person, firm or corporation, each shall be
jointly and severally liable for the obligations of Tenant.
(c) All notices required or permitted to be given under this Lease shall
be in writing and shall be sent by registered or certified mail, return receipt
requested, or by a reputable national overnight courier service, postage
prepaid, or by hand delivery addressed to the parties at their addresses below.
Either party may by notice given aforesaid change its address for all subsequent
notices. Except where otherwise expressly provided to the contrary, notice
shall be deemed given upon delivery.
(d) Except as otherwise expressly provided in this Lease or as otherwise
may be required by applicable law, Landlord's granting or withholding of any
consent or approval shall be at its complete discretion.
(e) At Landlord's request from time to time Tenant shall furnish Landlord
with true and complete copies of its most recent annual financial statements
prepared by Tenant or Tenant's accountants and any other financial information
or summaries that Tenant typically provides to its lenders or shareholders. SEE
---
ADDENDUM ONE.
- -------------
18
<PAGE>
(f) Neither this Lease nor a memorandum of lease shall be filed by or on
behalf of Tenant in any public record. Landlord may prepare and file, and upon
request by Landlord Tenant will execute, a memorandum of lease.
(g) The normal rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any exhibits or amendments hereto.
(h) The submission by Landlord to Tenant of this Lease shall have no
binding force or effect, shall not constitute an option for the leasing of the
Premises, nor confer any right or impose any obligation upon either party until
execution of this Lease by both parties.
(i) Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provision hereof, or in any
way affect the interpretation of this Lease.
(j) Any amount not paid by Tenant within 5 days after its due date in
accordance with the terms of this Lease shall bear interest from such due date
until paid in full at the lesser of the highest rate permitted by applicable law
or 15 percent per year. It is expressly the intent of Landlord and Tenant at
all times to comply with applicable law governing the maximum rate or amount of
any interest payable on or in connection with this Lease. If applicable law is
ever judicially interpreted so as to render usurious any interest called for
under this Lease, or contracted for, charged, taken, reserved, or received with
respect to this Lease, then it is Landlord's and Tenant's express intent that
all excess amounts theretofore collected by Landlord be credited on the
applicable obligation (or, if the obligation has been or would thereby be paid
in full, refunded to Tenant), and the provisions of this Lease immediately shall
be deemed reformed and the amounts thereafter collectible hereunder reduced,
without the necessity of the execution of any new document, so as to comply with
the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder.
(k) Construction and interpretation of this Lease shall be governed by the
laws of the state in which the Project is located, excluding any principles of
conflicts of laws.
(l) Time is of the essence as to the performance of Tenant's obligations
under this Lease.
(m) All exhibits and addenda attached hereto are incorporated into this
Lease and made a part hereof. In the event of any conflict between such
exhibits or addenda and the terms of this Lease, such exhibits or addenda shall
control.
19
<PAGE>
38. LANDLORD'S LIEN/SECURITY INTEREST. INTENTIONALLY DELETED.
----------------------
39. LIMITATION OF LIABILITY OF TRUSTEES, SHAREHOLDERS, AND OFFICERS OF
SECURITY CAPITAL INDUSTRIAL TRUST. Any obligation or liability whatsoever of
Security Capital Industrial Trust, a Maryland real estate investment trust,
which may arise at any time under this lease or any obligation or liability
which may be incurred by it pursuant to any other instrument, transaction, or
undertaking contemplated hereby shall not be personally binding upon, nor shall
resort for the enforcement thereof be had to the property of, its trustees,
directors, shareholders, officers, employees or agents, regardless of whether
such obligation or liability is in the nature of contract, tort, or otherwise.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
day and year first above written.
TENANT: LANDLORD:
FUTRONIX CORPORATION SCI NORTH CAROLINA LIMITED PARTNERSHIP
By:/s/ T.M. Hunt By: /s/ John W. Seiple
------------------- ------------------------------------------
NAME:TERRY HUNT Name: JOHN U. SEIPLE
----------------- ----------------------------------------
Title:PRESIDENT Title: VICE PRESIDENT
---------------- ---------------------------------------
Address: Address:
______________________ _____________________________________________
______________________ _____________________________________________
______________________ _____________________________________________
With a copy to:
Security Capital Industrial Trust
14100 East 35th Place
Aurora, Colorado 80011
20
<PAGE>
RULES AND REGULATIONS
---------------------
1. The sidewalk, entries, and driveways of the Project shall not be
obstructed by Tenant, or its agents, or used by them for any purpose
other than ingress and egress to and from the Premises.
2. Tenant shall not place any objects, including antennas, outdoor
furniture, etc., in the parking areas, landscaped areas or other areas
outside of its Premises, or on the roof of the Project.
3. Except for seeing-eye dogs, no animals shall be allowed in the
offices, halls, or corridors in the Project.
4. Tenant shall not disturb the occupants of the Project or adjoining
buildings by the use of any radio or musical instrument or by the
making of loud or improper noises.
5. If Tenant desires telegraphic, telephonic or other electric
connections in the Premises, Landlord or its agent will direct the
electrician as to where and how the wires may be introduced; and,
without such direction, no boring or cutting of wires will be
permitted. Any such installation or connection shall be made at
Tenant's expense.
6. Tenant shall not install or operate any steam or gas engine or boiler,
or other mechanical apparatus in the Premises, except as specifically
approved in the Lease. The use of oil, gas or inflammable liquids for
heating, lighting or any other purpose is expressly prohibited.
Explosives or other articles deemed extra hazardous shall not be
brought into the Project.
7. Parking any type of recreational vehicles is specifically prohibited
on or about the Project. No vehicle of any type shall be stored in
the parking areas at any time. In the event that a vehicle is
disabled, it shall be removed within 48 hours. There shall be no "For
Sale" or other advertising signs on or about any parked vehicles. All
vehicles shall be parked in the designated parking areas in conformity
with all signs and other markings. All parking will be open parking,
and no reserved parking, numbering or lettering of individual spaces
will be permitted except as specified by Landlord. SEE ADDENDUM ONE.
-----------------
8. Tenant shall maintain the Premises free from rodents, insects and
other pests.
9. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or
21
<PAGE>
drugs or who shall in any manner do any act in violation of the Rules
and Regulations of the Project.
10. Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and
cleanliness. Landlord shall not be responsible to Tenant for any loss
of property on the Premises, however occurring, or for any damage done
to the effects of Tenant by the janitors or any other employee or
person. SEE ADDENDUM ONE.
----------------
11. Tenant shall give Landlord prompt notice of any defects in the water,
lawn sprinkler, sewage, gas pipes, electrical lights and fixtures,
heating apparatus, or any other service equipment affecting the
Premises.
12. Tenant shall not permit storage outside the Premises, including
without limitation, outside storage of trucks and other vehicles, or
dumping of waste or refuse or permit any harmful materials to be
placed in any drainage system or sanitary system in or about the
Premises.
13. All moveable trash receptacles provided by the trash disposal firm for
the Premises must be kept in the trash enclosure areas, if any,
provided for that purpose.
14. No auction, public or private, will be permitted on the Premises or
the Project.
15. No awnings shall be placed over the windows in the Premises except
with the prior written consent of Landlord.
16. The Premises shall not be used for lodging, sleeping or cooking or for
any immoral or illegal purposes or for any other than that specified
in the Lease. No gaming devices shall be operated in the Premises.
17. Tenant shall ascertain from Landlord the maximum amount of electrical
current which can safely be used in the Premises, taking into account
the capacity of the electrical wiring in the Project and the Premises
and the needs of other tenants, and shall not use more than such safe
capacity. Landlord's consent to the installation of electric
equipment shall not relieve Tenant from the obligation not to use more
electricity than such safe capacity.
18. Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage.
22
<PAGE>
19. Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not directly related to Tenant's
ordinary use of the Premises and shall keep all such machinery free of
vibration, noise and air waves which may be transmitted beyond the
Premises.
23
<PAGE>
ADDENDUM ONE TO LEASE AGREEMENT
-------------------------------
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY ___, 1995, BETWEEN
SCI NORTH CAROLINA LIMITED PARTNERSHIP, AS LANDLORD,
AND
FUTRONIX CORPORATION, AS TENANT
In the event of any conflict between the terms and provisions of the Lease
and the terms and provisions of this Addendum, the terms and provisions of this
Addendum shall supersede and control.
1. Tenant shall have the right to occupy and use the Premises as soon as the
building in which the Premises will be situated has been substantially
completed and the "Initial Tenant Improvements" provided for in Addendum
Two to this Lease have been completed to the extent described in Paragraph
(d) of said Addendum Two. The estimated date for such initial occupancy by
Tenant is March 15, 1995, subject to Force Majeure. As soon as such level
of completion is achieved, Tenant shall be entitled to occupy and use the
Premises in accordance with said Paragraph (d) of Addendum Two. All terms
and provisions of this Lease (except Tenant's obligation to pay Base Rent
and Operating Expenses, for which there shall be no obligation until the
Commencement Date of the Lease) shall apply from and after the actual date
of Tenant's occupancy of the Premises, even though the Commencement Date of
this Lease shall remain June 1, 1995.
2. The Premises will be part of a new building currently being constructed by
Landlord. Landlord represents and warrants to Tenant that said building,
and the Initial Tenant Improvements provided for in the Construction
Addendum attached as Addendum Two to this Lease, shall be constructed in
compliance with all applicable laws, codes, ordinances, and regulations,
including (without limitation) the "ADA" as defined in Paragraph 3 of this
Lease.
3. With respect to the last sentence of the second paragraph of Paragraph 3 of
the Lease, captioned "USE," and the second sentence of Paragraph 12 of the
Lease, captioned "TENANT IMPROVEMENTS AND TRADE FIXTURES," each relating to
compliance with the "ADA," Tenant's obligations thereunder shall relate
only to the interior of the Premises and any changes to the Project that
relate solely to the specific manner of use of the Premises by Tenant; and
Landlord, at its expense, shall make all other additions to or
modifications of the Project required from time to time by the ADA.
4. With respect to the last paragraph of Paragraph 3 of the Lease, captioned
"USE," Tenant has indicated to Landlord that the Premises will be used for
the storage and wholesale sale of electrical products such as electrical
wire, cable, conduit and other electrical
24
<PAGE>
equipment (but not for transformers or other electrical equipment
containing polychlorinated biphenyls or "PCBs"). Landlord acknowledges and
agrees that such use of the Premises by Tenant will not void Landlord's
insurance or increase the premiums of Landlord's casualty insurance policy
covering the Project.
5. With respect to Paragraph 9 of the Lease, captioned "INSURANCE," Landlord
agrees that Tenant's Proportionate Share of the insurance premiums charged
for any and all policies of insurance maintained by Landlord under the
Lease (regardless of the types or amounts of coverage maintained by
Landlord from time to time) shall not increase during the initial Lease
Term by more than $0.01 per square foot of the Premises per year over the
amount set forth on page one of this Lease.
6. The last sentence of Paragraph 10 of the Lease, captioned "LANDLORD'S
REPAIRS," is deleted in its entirety and the following provisions are
substituted therefor:
Tenant shall immediately give Landlord written notice of any repair
required by Landlord pursuant to this Paragraph 10, after which
Landlord shall have the applicable time period set forth in Paragraph
25 of this Lease in which to perform such repair (but without
affecting Tenant's self-help rights in the event of an emergency as
expressly provided for in the following paragraph, if applicable).
In the event of an emergency (being defined as an imminent threat of
personal injury to Tenant's employees or material damage to Tenant's
equipment or other property at the Premises), Tenant shall have the
right to make such temporary, emergency repairs to the roof,
foundation, floors and exterior walls of the building of which the
Premises are a part, as may be reasonably necessary to prevent such
material damage to the equipment or property of Tenant situated in the
Premises, or such personal injury to Tenant's employees, provided
Tenant has no reasonable alternative and has either (i) notified
Landlord's representative of such emergency by telephone (with
subsequent written notice as soon as practicable), and Landlord has
failed to initiate emergency repairs within twenty-four (24) hours of
such notification, or (ii) Tenant has attempted in good faith to
notify Landlord's representative of such emergency by telephone (with
subsequent written notice as soon as practicable) and has been
unsuccessful in its attempts to contact such representative for a
period of twenty-four (24) hours. The provisions of this paragraph do
not constitute an authorization by Landlord for Tenant to enter the
premises of any other tenant of the Project, and Tenant has not been
designated as Landlord's agent for the purposes of any such entry.
Landlord shall reimburse Tenant for the reasonable, out-of-pocket
costs incurred by Tenant in making such emergency repairs to the roof,
foundation or exterior walls, as applicable, up to (but not to exceed)
$5,000.00 with respect to each such occurrence, within thirty (30)
days after submission by Tenant to Landlord of an invoice therefore,
accompanied by reasonable supporting documentation for the
25
<PAGE>
costs so incurred. In the event Landlord fails or refuses to
reimburse Tenant for such costs within such thirty (30) day period and
Tenant brings an action for recovery of such amounts from Landlord as
provided for in this Lease, then Tenant shall be entitled to recover,
in addition to the amount of such costs, interest on such amounts from
the date incurred by Tenant until recovered from Landlord, at the rate
provided in Paragraph 37(j) of this Lease, and the reasonable
attorney's fees and other costs of court incurred by Tenant in
pursuing such action.
7. Paragraph 12 of the Lease, captioned "TENANT IMPROVEMENTS AND TRADE
FIXTURES," is revised to include the following additional provisions:
Landlord agrees that it shall not require payment and performance
bonds for Tenant Improvements proposed by Tenant from time to time
that will cost (in the aggregate, with respect to each such proposal)
less than $100,000.00.
8. With respect to Paragraph 13 of the Lease, captioned "SIGNS," Landlord
agrees that it shall not unreasonably withhold, delay or condition its
approval of any signage submitted thereunder identifying Tenant or Tenant's
business in and from the Premises. Tenant's initial signage will be
approved as part of the plan review and approval process provided for in
Paragraph (a) of the Construction Addendum attached as Addendum Two to this
Lease.
9. Notwithstanding the provisions of Paragraph 14 of the Lease, captioned
"PARKING," and/or the provisions of Rule 7 of the Rules and Regulations
attached to this Lease, Landlord agrees that Tenant shall at all times
during the Lease Term be entitled to the use of twenty (20) automobile
parking spaces to be designated as reserved for use by Tenant, its
employees and business invitees in the area indicated on the site plan
attached as Exhibit A to this Lease. Such reserved spaces shall be so
---------
marked or designated by Tenant in a manner approved by Landlord. As
provided for in said Paragraph 14, Landlord shall not be responsible for
enforcing Tenant's reserved parking rights.
10. Notwithstanding the provisions of the first sentence of the second
paragraph of Paragraph 17 of the Lease, captioned "ASSIGNMENT AND
SUBLETTING," Landlord agrees that in the event of any assignment of the
Lease (but not a subletting of the Premises) by Tenant pursuant to the
provisions of said Paragraph 17 in circumstances in which Landlord's
consent is required by the terms of the Lease and may be withheld or
granted in Landlord's sole discretion under the Lease and/or applicable
law, then if Landlord grants its consent to such assignment (to be
evidenced only by written document), Tenant shall be released from
liability for all obligations under this Lease arising or accruing after
the effective date of the assumption of this Lease by Tenant's approved
assignee by written assumption agreement reasonably acceptable to Landlord.
26
<PAGE>
11. Notwithstanding the provisions of Subparagraph 23(iv) of the Lease,
Tenant's vacating of the Premises shall not constitute an Event of Default
if, prior to vacating the Premises, Tenant has made arrangements reasonably
acceptable to Landlord to (a) insure that Tenant's insurance for the
Premises will not be voided or canceled with respect to the Premises as a
result of such vacancy, (b) insure that the Premises are secure and not
subject to vandalism, and (c) insure that the Premises will be properly
maintained in accordance with this Lease after such vacation. Tenant shall
inspect the Premises at least once each month and report quarterly in
writing to Landlord the condition of the Premises.
12. Paragraph 25 of the Lease, captioned "TENANT'S REMEDIES/LIMITATION OF
LIABILITY," is revised to delete the first sentence thereof and to
substitute therefor the following provision:
Landlord shall not be in default hereunder and Tenant shall not have
any remedy or cause of action unless Landlord fails to perform any of
its obligations hereunder within thirty (30) days after written notice
from Tenant specifying such failure (however, if the nature of the
circumstances giving rise to Landlord's obligation constitute an
emergency, as defined in Paragraph 10 of this Lease, as reasonably
determined by a qualified, unaffiliated third party, then landlord
shall have only fifteen (15) days to perform such obligation);
provided, however, that Landlord shall not be in default under the
circumstances described in this Paragraph 25 if Landlord has exercised
commercially reasonable efforts to commence to cure such default
within the thirty (30) day period described above (or fifteen (15) day
period in an emergency, as described above), and thereafter proceeds
continuously and diligently to cure such default within a reasonable
time.
13. Paragraph 27 of the Lease, captioned "SUBORDINATION," is revised to include
the following provision:
Landlord represents to Tenant that the Project is not subject to or
burdened by a mortgage or deed of trust as of the Commencement Date of
this Lease. Further, Tenant shall not be obligated to subordinate the
Lease or its interest therein to any mortgage or deed of trust
subsequently placed on the Project unless concurrently with such
subordination the holder of such mortgage or deed of trust agrees in
writing not to disturb Tenant's possession of the Premises (so long as
no default exists under the Lease) in the event such holder acquires
title to the Premises through foreclosure, deed in lieu of foreclosure
or otherwise.
14. With respect to Paragraph 31 of the Lease, captioned "RULES AND
REGULATIONS," Landlord agrees to use commercially reasonable efforts to
cause all tenants of the Project
27
<PAGE>
to observe the Project rules and regulations. However, Tenant acknowledges
that Landlord has no on-site management office and is not at the Project on
a daily basis.
15. The following provisions are hereby added to Paragraph 37(e) of the Lease:
Landlord agrees that Tenant shall not be obligated to provide such
financial information more than once per calendar year. Landlord
shall use commercially reasonable efforts to maintain the
confidentiality of the financial information provided by Tenant to
Landlord pursuant to this Lease; provided, however, that Landlord
shall have the right to provide such information to its accountants,
lenders and attorneys, and Landlord shall not be liable for disclosure
of such information if disclosed or provided pursuant to a court order
or a subpoena ancillary to a legal or administrative proceeding.
16. With respect to Rule 10 of the Rules and Regulations attached to the Lease,
any claim of Tenant for the loss of Tenant's tangible personal property on
the Premises that is caused by Landlord, its agents, employees or
contractors, shall be waived only to the extent such property is insurable.
28
<PAGE>
ADDENDUM TWO
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY ___, 1995, BETWEEN
SCI NORTH CAROLINA LIMITED PARTNERSHIP, AS LANDLORD,
AND
FUTRONIX CORPORATION, AS TENANT
(a) Landlord agrees to furnish or perform at Landlord's sole cost
and expense the construction of the building in which the Premises will be
situated, and those items of construction and those improvements (the "Initial
-------
Tenant Improvements") specified as follows:
- -------------------
Approximately 2535 square feet of office space, warehouse lighting, heat
and demising wall, one (1) concrete ramp with oversized overhead door, and
two (2) dock levelers, as shown on Page 2 of Exhibit A to this Lease, and
---------
as to be more particularly specified in the final plans and specifications
prepared pursuant to the following provisions:
(i) Landlord shall, within five (5) business days after execution
of this Lease, provide Tenant with final plans and specifications (the
"Final Plans") which shall be consistent with the specifications for the
-----------
Premises set forth above and depicted on Page 2 of Exhibit A to this Lease,
---------
for constructing the Initial Tenant Improvements. Tenant shall respond
promptly to any inquiries by Landlord regarding the Final Plans for the
Premises and shall cooperate with Landlord, to the extent requested by
Landlord in developing the Final Plans. Landlord shall submit the Final
Plans (together with the specifications for any signage to be installed by
Tenant) to Tenant for its approval, and Tenant shall advise Landlord,
within five (5) days, of its approval or disapproval of such Final Plans.
Tenant's right to disapprove the proposed Final Plans shall be limited to
factors which are inconsistent with this Paragraph (a), and any such
disapproval (or any objection to the signage criteria) objected to by
Tenant. To the extent that the proposed Final Plans or portions thereof are
consistent with the specifications for the Premises set forth above and
depicted on Page 2 of Exhibit A to this Lease, Tenant shall not be entitled
---------
to object thereto. If Tenant shall not object in writing to the proposed
Final Plans or any element or aspect thereof (or signage criteria) within
the time period set forth herein, then such Final Plans or the portions not
objected to by Tenant shall be deemed approved.
(ii) In the event that Tenant objects in writing ("Objection") as
---------
herein provided to some portion of the proposed Final Plans (or signage
criteria), Landlord shall consult with Tenant with respect thereto, and
Landlord and Tenant shall use all reasonable efforts to promptly resolve
any disputed elements of such proposed Final Plans (or signage criteria).
Landlord and Tenant agree that if after consultation with each other and
Landlord's architect they are unable to resolve any disputed items within 5
days of Tenant's Objection, then within 5 days thereafter (a) Landlord's
architect shall select an architect who is unaffiliated with Landlord to
resolve the dispute (the "Arbitrator")
----------
29
<PAGE>
and (b) each party shall state to the Arbitrator its final position in
writing as respects the disputed matter(s). The Arbitrator shall decide on
each disputed matter within 15 days of the date of his selection, based
solely on such written submissions and the consistency of the parties'
submissions with the provisions of this paragraph (a), the Tenant's
permitted use of the Premises and the general nature and design of the
Project and adjacent properties. The parties consent to the jurisdiction
of any appropriate court to enforce and enter judgments upon the decision
of the arbitrator. The losing party shall pay the cost of the Arbitrator,
but each party shall otherwise bear its own costs and expenses in
connection with the dispute.
(iii) Any delays resulting from negotiations between the parties
regarding the Final Plans or resulting from submission of any disputes to
the Arbitrator shall be in the nature of Force Majeure (as defined in the
Lease).
(iv) Landlord may commence construction of the Initial Tenant
Improvements prior to finalization of the Final Plan and Tenant agrees that
it shall cooperate with Landlord to review and approve portions of the
Final Plans for different stages or elements of the work so that
construction can proceed on a "fast track" basis. The approval process for
such portions of the Final Plans shall be substantially as set forth above,
provided, however, that any Objection may not be inconsistent with
previously approved portions of the Final Plans.
(b) If Tenant shall desire any changes to the Initial Tenant
Improvements or the Final Plans, Tenant shall so advise Landlord in writing and
Landlord shall determine whether such changes can be made in a reasonable and
feasible manner. Any and all costs of reviewing any requested changes, and any
and all costs of making any changes to the Initial Tenant Improvements which
Tenant may request and which Landlord may agree to shall be at Tenant's sole
cost and expense and shall be paid to Landlord upon demand and before execution
of the change order.
(c) Landlord shall proceed with and complete the construction of
the Initial Tenant Improvements. As soon as such improvements have been
Substantially Completed, Landlord shall notify Tenant in writing of the date
that the Initial Tenant Improvements were Substantially Completed. Such date,
unless a later date is specified as the Commencement Date in this Lease or
otherwise agreed to in writing between Landlord and Tenant, shall be the
"Commencement Date," unless the completion of such improvements was delayed due
-----------------
to Tenant's fault, including as a result of changes made to such improvements by
Tenant, in which case the Commencement Date shall be the date such improvements
would have been completed but for the delays caused by Tenant (but not sooner
than the date indicated on page one of the Lease). The Initial Tenant
Improvements shall be deemed substantially completed ("Substantially Completed")
when, in the opinion of the construction manager (whether an employee or agent
of Landlord or a third party construction manager), the Premises are
substantially completed except for punch list items which do not prevent in any
material way the
30
<PAGE>
use of the Premises for the purposes for which they were intended. After the
Commencement Date Tenant shall, upon demand, execute and deliver to Landlord a
letter of acceptance of delivery of the Premises. The failure of Tenant to take
possession of or to occupy the Premises shall not serve to relieve Tenant of
obligations arising on the Commencement Date or delay the payment of rent by
Tenant.
(d) As provided for in Paragraph 1 of Addendum One to the Lease,
but subject to applicable ordinances and building codes governing Tenant's right
to occupy or perform in the Premises and subject to the provisions of Paragraph
12 of the Lease, it is the intention of Landlord and Tenant that Tenant be
allowed to install its tenant improvements, machinery, equipment, fixtures, or
other property on the Premises (and to occupy and use the Premises, to the
extent feasible) as soon as practicable during the final stages of completion of
construction, provided that Tenant does not thereby interfere with the
completion of construction of the Premises or the building in which the Premises
will be situated, or cause any labor dispute as a result of such installations
and use; and provided further that Tenant does hereby agree to assume all risk
of loss or damage to such improvements, machinery, equipment, fixtures, and
other property and to indemnify, defend, and hold Landlord harmless from any
loss or damage to such property, and all liability, loss, or damage arising from
any injury to the Project or the property of Landlord, its contractors,
subcontractors, or materialmen, and any death or personal injury to any person
or persons arising out of such installations and use.
(e) Except for incomplete punch list items, Tenant upon the date of
Substantial Completion of the Premises shall have and hold the Premises as the
same shall then be without any liability or obligation on the part of Landlord
for making any further alterations or improvements of any kind or in or about
the Premises.
31
<PAGE>
ADDENDUM THREE
ONE RENEWAL OPTION AT CPI INDEX
-------------------------------
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY ___, 1995, BETWEEN
SCI NORTH CAROLINA LIMITED PARTNERSHIP, AS LANDLORD,
AND
FUTRONIX CORPORATION, AS TENANT
(a) Provided that as of the time of the giving of the Extension Notice and
the Commencement Date of the Extension Term, (x) Tenant is the Tenant originally
named herein, (y) Tenant actually occupies all of the Premises initially demised
under this Lease and any space added to the Premises, and (z) no Event of
Default exists, or would exist but for the passage of time or the giving of
notice, or both; then Tenant shall have the right to extend the Lease Term for
an additional term of three (3) years (such additional term is hereinafter
called the "Extension Term") commencing on the day following the expiration of
--------------
the Lease Term (hereinafter referred to as the "Commencement Date of the
------------------------
Extension Term"). Tenant shall give Landlord notice (hereinafter called the
- --------------
"Extension Notice") of its election to extend the term of the Lease Term at
- -----------------
least six (6) months, but not more than twelve (12) months, prior to the
scheduled expiration date of the Lease Term.
(b) The Base Rent payable by Tenant to Landlord during the Extension Term
shall be the greater of the following:
(i) the Base Rent in effect immediately prior to such Extension
Term expressed as an annual rent per square foot of floor area,
multiplied by a fraction, the numerator of which is the CPI-U
(hereinafter defined) for the month nearest the Commencement
Date of the Extension Term for which the CPI-U is available and
the denominator of which is the CPI-U for the same calendar
month preceding the Commencement Date, provided that such
fraction, expressed as a number, shall not be less than one;
and
(ii) the Base Rent on the Commencement Date increased by four
percent (4%) per annum from the Commencement Date to the
beginning of the Extension Term.
The "CPI-U" means the Consumer Price Index for All Urban Consumers, U.S. City
-----
Average (All Items: 1982-84=100) as issued by the U.S. Department of Labor,
Bureau of Labor Statistics. If the Department of Labor ceases to issue the CPI-
U, the Landlord may select a substitute index or measure of cost of living to
calculate the appropriate cost of living increase.
32
<PAGE>
(c) The determination of Base Rent does not reduce the Tenant's obligation
to pay or reimburse Landlord for operating expenses and other reimbursable items
as set forth in the Lease, and Tenant shall reimburse and pay Landlord as set
forth in the Lease with respect to such operating expenses and other items with
respect to the Premises during the Extension Term without regard to any cap on
such expenses set forth in the Lease.
(d) Except for the Base Rent as determined above, Tenant's occupancy of
the Premises during the Extension Term shall be on the same terms and conditions
as are in effect immediately prior to the expiration of the initial Lease Term;
provided, however, Tenant shall have no further right to any allowances, credits
or abatements or options to expand, contract, renew or extend the Lease.
(e) If Tenant does not give the Extension Notice within the period set
forth in paragraph (a) above, Tenant's right to extend the Lease Term shall
automatically terminate. Time is of the essence as to the giving of the
Extension Notice.
(f) Landlord shall have no obligation to refurbish or otherwise improve
the Premises for the Extension Term. The Premises shall be tendered on the
Commencement Date of the Extension Term in "as-is" condition.
(g) If the Lease is extended for the Extension Term, then Landlord shall
prepare and Tenant shall execute an amendment to the Lease confirming the
extension of the Lease Term and the other provisions applicable thereto.
(h) If Tenant exercises its rights to extend the term of the Lease for the
Extension Term pursuant to this Addendum, the term "Lease Term" as used in the
Lease, shall be construed to include, when practicable, the Extension Term
except as provided in (d) above.
33
<PAGE>
EXHIBIT A
[FLOOR PLAN]
Page 1 of 2
<PAGE>
EXHIBIT A
[FLOOR PLAN]
Page 2 of 2
<PAGE>
EXHIBIT 10.7
LEASE AGREEMENT
---------------
THIS AGREEMENT, (hereinafter called "Lease"), dated 4-5 , 1995 by
-------------
and between Pickering Acquisition Associates (hereinafter called "Landlord") and
Futronix Corporation, a Texas Corporation (hereinafter called "Tenant").
1. (a) The Leased Premises. Landlord hereby demises and leases unto
-------------------
Tenant and Tenant does lease and take from Landlord, that certain portion of the
industrial building known as Building 73 (the "Building") located at 216 Philips
Road consisting of approximately 25,100 square feet, with the improvements
erected thereon, situated in the Pickering Creek Industrial Park complex in
Uwchlan Township, Chester County, Pennsylvania and more particularly described
in the floor plan attached hereto and made a part hereof as Exhibit A (the
"Leased Premises"), upon the terms, conditions and provisions hereinafter set
forth.
(b) Term. The initial term of this Lease shall commence upon
----
occupancy of the Leased Premises by Tenant and shall continue for three (3)
years, terminating at midnight of the last day of the calendar month in which
the first anniversary of the commencement date occurs except as provided for
herein, provided, however, that Tenant shall not be obligated to commence paying
the annual fixed rent as provided for herein until May 1, 1995, notwithstanding
paragraph 2a. Unless otherwise indicated, the word "Term" shall refer to the
stated term of this Lease, as extended, renewed, or earlier terminated in
accordance with the terms hereof.
(c) Other Defined Terms. Each reference in this Lease to any of the
-------------------
following terms shall be construed to incorporate the following data stated
opposite each item.
(1) Tenant's Uses. Tenant may use the Leased Premises only
-------------
for the purpose of receiving, storing, shipping and selling (but limited to
wholesale sales) products, materials and merchandise made and/or distributed by
Tenant and for such other lawful purposes as may be incidental thereto, as well
as light manufacturing; provided however that Tenant may not conduct any
dangerous, hazardous, noxious or offensive uses. Tenant shall first obtain all
governmental permits and licenses at its sole cost and expense as may be
required for Tenant's use and occupancy of the Leased Premises; and Tenant at
all times shall promptly comply with all laws, ordinances, orders and
regulations affecting the Leased Premises and their cleanliness, safety,
occupation, operation and use including without limitation Uwchlan Township
building and fire codes, Pennsylvania Department of Labor and Industry codes and
the Americans with Disabilities Act (the "ADA"). Landlord covenants and agrees
that the Improvements (as hereafter defined) when completed will comply with the
applicable provisions of the ADA based upon the review and approval of the
Tenant Improvement Plan (as hereafter defined) by the Pennsylvania Department of
Labor and Industry and further based upon Tenant's representation and warranty
hereby made to Landlord that none of Tenant's employees is under any disability
or requires any special accommodations covered by the ADA. Tenant agrees to be
solely liable for complying with any requirements of the ADA applicable to the
Leased Premises from and after
<PAGE>
the commencement of the Term of this Lease not arising out of Landlord's failure
to comply with the foregoing covenant. Tenant shall not do or permit anything
to be done in or about the Leased Premises or bring or keep anything in the
Leased Premises that will in any way increase the existing rated insurance
premium or cause suspension or termination of the fire insurance or any other
insurance upon the Leased Premises. Tenant will not perform any act or carry on
any practices that may injure or damage the Leased Premises or be a nuisance or
menace to tenants of adjoining premises. Tenant shall not permit open storage
on the Leased Premises detrimental to the appearance of a garden-type industrial
development and without Landlord's prior written consent. Tenant shall require
loading and unloading and parking of cars for employees, customers and visitors,
in connection with Tenant's business, to be done so far as practical on the
premises and not on adjacent streets.
(2) Tenant shall not, at any time, permit or cause any Contamination (as
hereafter defined) of the Leased Premises or any part of Landlord's property
underlying or adjoining the Leased Premises. For purposes hereof,
"Contamination" shall mean the uncontained presence of any hazardous wastes or
substances as defined in or as may require remediation under any applicable law,
ordinance or regulation. Tenant shall, prior to vacating the Leased Premises
and/or upon any termination of this Lease, secure and deliver to Landlord a
certification executed by an authorized officer of Tenant ("Tenant's
Environmental Certification") which shall state that (i) Tenant, it's employees,
agents and invitees did not permit or cause any contamination to or of the
Leased Premises, Building or surrounding land during occupancy of the Leased
Premises by Tenant, (ii) Tenant has properly removed and/or disposed of any
chemicals, solvents or other substances used at the Leased Premises and (iii)
the Leased Premises is free of Contamination. Tenant shall be solely
responsible at Tenant's sole cost and expense, for any required remediation or
clean up of any Contamination caused, used, generated, treated or disposed of by
Tenant in violation of any applicable laws, ordinances or regulations, and shall
cause the same to be commenced immediately upon discovery or receipt of any
notification of the existence thereof and shall thereafter diligently pursue the
same until completed in accordance with applicable laws. Tenants obligation to
pay fixed rent, additional rent and all other sums due under this Lease shall
continue until Tenant has provided Tenant's environmental certification to
Landlord, notwithstanding that Tenant's right of occupancy of the Leased
Premises may have ended, and shall also continue during the period of any
remediation or clean up required as a result of Tenant's activities at the
Leased Premises, notwithstanding that the Leased Premises may be untenable on
account of such remediation or clean up. Tenant shall fully indemnify and hold
harmless Landlord and its officers, directors, agents and employees from and
against any and all costs, expenses, claims, liabilities and charges, including
penalties and/or judgments and/or awards which Landlord may incur, suffer or be
exposed to as a result of Tenant's breach or failure to comply with this
paragraph 1 (c) (2) or otherwise caused by Tenant's use and/or occupancy of the
premises.
2
<PAGE>
(3) Landlord's Address:
-------------------
200 Philips Road, Exton, PA 19341-1326
(4) Tenant's Address at Leased Premises:
------------------------------------
216 Philips Road
Exton, PA 19341
(5) Tenant's Address at Home Office:
--------------------------------
12614 Hempstead Highway
Houston, Texas 77092-4527
(6) Liability Insurance Amounts:
----------------------------
Bodily injury: single limit $1,000,000.00
Property damage: single limit $1,000,000.00
(7) Scheduled Occupancy Date:
-------------------------
May 1, 1995
(d) Attachments to Lease. The following exhibits are attached to
--------------------
this Lease and are incorporated herein by reference and are to be construed as
part of this Lease:
Addendum to Lease Agreement
Description of Premises - Exhibit A
Protective Restrictions - Exhibit B
Tenant Improvement Plan - Exhibit C
2. (a) Annual Fixed Rate and Adjustment Thereto. Tenant agrees to pay
----------------------------------------
Landlord an annual rental in the amount of One Hundred Four Thousand Four
Hundred Dollars ($104,400) in equal monthly installments of Eighty Seven Hundred
Dollars ($8,700) in advance on the first day of each and every calendar month
included within the initial Term of this Lease except as provided for in the
Addendum. If the term hereof does not commence on the first day of a calendar
month, such rent shall be apportioned. Any monthly installments of rent not
paid within ten (10) days of the due date shall be subject to a late charge of
five percent (5%) per month. All other rent, additional rent and all other
payments becoming due hereunder shall bear interest at the rate of twelve
percent (12%) per annum from and after the first calendar day following the date
when the same shall become due and payable.
3
<PAGE>
(b) Security Deposit. Tenant shall, upon execution of this Lease,
----------------
deposit with Landlord as security for the performance of all of the terms,
covenants and conditions of this Lease the sum of Ten Thousand Dollars
($10,000). Such sum shall be retained by Landlord until the expiration of the
initial term, or any renewal thereof, provided that Tenant shall have complied
with all of the terms, covenants and conditions hereof. In the event of any
default by Tenant, so much of said deposit as may be necessary to cure such
default may be retained by Landlord, and the balance, if any, shall be returned
to Tenant within thirty (30) days after the expiration of the initial term or
any renewal thereof. It is understood that said deposit is not to be construed
as the last rental payment due under this Lease.
3. Subordination. This Lease shall be subject and subordinate at all
-------------
times to all ground and underlying leases which now exist or may hereafter be
executed affecting the Leased Premises, and to the lien of any mortgages in any
amount or amounts whatsoever now or hereafter placed on or against the land and
Building or either thereof, or on Landlord's interest or estate therein, or
portion thereof, or on or against any ground or underlying lease, without the
necessity of the execution and delivery of any further instrument on the part of
Tenant to effectuate such subordination; provided however, that so long as
Tenant is not in default, the terms of this Lease shall not be affected by
termination proceedings in respect to such ground or underlying lease or
foreclosure or other proceedings under such mortgages, Tenant hereby agreeing,
at the written request of the Landlord under such ground or underlying lease or
mortgagee or purchaser of the mortgaged premises in such foreclosure or other
proceedings to attorn to such Landlord or to such mortgagee or purchaser, or
upon request by such Landlord, mortgagee or purchaser, to enter into a new Lease
for the balance of the Lease Term upon the same terms and provisions as are
contained in this Lease. Notwithstanding the foregoing, Tenant shall execute
and deliver, upon demand, such further instrument or instruments evidencing such
subordination of this Lease to the lien of any such mortgage or mortgages as may
be required to Landlord.
4. Additional Rent. Tenant shall pay as additional rent, its pro rata
---------------
share of all real estate taxes, public utility assessments and insurance costs
with respect to the Leased Premises.
(a) Payment of Real Estate Taxes. Tenant shall pay to the Landlord
----------------------------
its pro rata share of all real estate taxes and special or betterment
assessments, levied or assessed upon the Leased Premises for all tax periods
wholly included in the Term, and the corresponding fraction of the real estate
taxes assessed for any fraction of a tax period in the Term at the beginning or
end. The expression "real estate taxes" as used herein shall mean all real
property taxes imposed on the Leased Premises and any other taxes as may be
levied in lieu of or in substitution for or supplementary to such taxes, but
shall not include any income, excess profits, estate, inheritance, succession,
transfer, franchise, capital or other tax or assessment upon Landlord or upon
the rents payable under the Lease, all of which shall be the obligation of the
Landlord. Landlord shall bill Tenant and shall submit to Tenant copies of the
real estate tax bills for each tax period. Such tax payments shall be made not
later than thirty (30) days after the Landlord presents the bills to Tenant. If
Landlord is required by his mortgage lender to escrow taxes, Tenant shall pay
the
4
<PAGE>
opening escrow balance and monthly escrow payments as adjusted from time to
time. Landlord is not required to escrow taxes as of the date of this Lease.
Landlord must provide Tenant with the calculations of the opening escrow balance
and the basis for the monthly escrow payments as they pertain to the Leased
Premises.
(b) Utilities. Landlord shall not be required to furnish any
---------
utilities to the Leased Premises, including but not limited to heat, water,
sewer, power, telephone or other communication service, gas or electric, and
shall not be liable for any failure of supply of any such utility service.
Tenant shall pay all charges, costs and fees for said utilities and shall
indemnify Landlord against any liability or damages on such account. Tenant has
the full responsibility of maintaining and replacing the heating/air
conditioning system.
(c) Evidence of Payment and Right of Tenant to Contest Assessment.
-------------------------------------------------------------
Tenant shall promptly furnish Landlord with appropriate evidence of each tax and
assessment payment by Tenant to public authority. Tenant may bring appropriate
proceedings in the name of Landlord or Tenant or both, to contest the validity
or amount of any taxes or assessments, or to recover payments therefore, and
agrees to save Landlord harmless from all damages and costs and expenses in
connection therewith. Landlord shall cooperate with Tenant with respect to the
proceedings so far as reasonably necessary. Tenant shall be entitled to amounts
recovered to the extent that such funds are refunds or reimbursements of
payments made by Tenant.
(d) Insurance Responsibility. Upon request by Landlord, Tenant
------------------------
shall pay to Landlord its pro rata share of the amount of any insurance premium
actually billed to or paid by the Landlord incident to such insurance coverage
which Landlord may, in its sole discretion, deem necessary or advisable,
including but not limited to:
(1) Insurance providing for payment of replacement costs
against damage by fire, including debris removal, and if required by Landlord,
demolition, in an amount at least equal to the replacement cost of the building
(above foundation walls), improvements and betterments as from time to time
determined by agreement or by appraisal made at the expense of Tenant by an
accredited insurance appraiser, approved by Landlord; and
(2) Insurance against damage by the hazards now included in
the insurance customarily referred to as "All Risks" coverage, in amounts equal
to the replacement costs, including debris removal of the property insured, and
insurance in such amounts as Landlord may reasonably require against damages by
such other hazards as any mortgage lending institution holding a mortgage on the
Leased Premises, or mortgage lending institutions generally, may from time to
time require in case of similar properties; and
(3) Insurance against abatement or loss of rent in case of
fire or other casualty similarly insured against, in an amount at least equal to
the fixed rent and real estate tax payments to be made by Tenant during one year
next ensuing as reasonably determined by Landlord; and
5
<PAGE>
(4) Plate glass coverage on all building glass in excess of
fifty dollars ($50.00); and
(5) Broad form boiler and machinery coverage on all equipment
and delivery systems for heat, cooling and water for the Leased Premises.
(e) Additional Provisions Respecting Insurance. Tenant shall
------------------------------------------
obtain and keep in force for the benefit of Landlord and Tenant comprehensive
liability insurance (including bodily injury and property damage insurance) with
limits at least as high as the amounts respectively stated therefor under
paragraph 1 (c) (6) of this Lease, or such higher limits in any case as Landlord
may reasonably require in case of an increase in risk resulting from Tenant's
use and occupancy of the Leased Premises provided, however, that Landlord agrees
that Tenant's continued use and occupancy of the Leased Premises in a manner
consistent with the uses authorized in paragraph 1 (c) 1 shall not result in any
requirements for higher limits as set forth immediately above. Such insurance
shall be at the Tenant's sole cost and expense and shall name Landlord as an
additional name insured. Insurance shall be written in companies reasonably
satisfactory to both parties and in forms customarily in use from time to time
in the locality of the Leased Premises. All insurance required to be maintained
by Tenant may be maintained by Tenant under a blanket policy covering the Leased
Premises and other premises of Tenant and/or its affiliated business
organizations. Tenant shall deposit with such mortgage holders as Landlord or
such mortgage holders may from time to time require, policies, duplicates or
certificates, and shall in all cases furnish Landlord with policies, duplicates
or certificates, together with evidence of payment of all premiums thereon, from
time to time, as the same become due on issue, renewal or otherwise. All
required insurance shall bear an endorsement stating that the same not be
altered, amended or canceled unless and until Landlord shall have been given
thirty (30) days advance written notice of intention to do so.
(f) Waiver of Subrogation. All insurance, whether or not required,
---------------------
carried by either party with respect to the Leased Premises or occurrences
thereon, if either party so requests and such coverage is obtainable, and if it
does not result in additional premium or the requesting party agrees to pay any
additional premium, shall include either provisions denying to the insurer
acquisition by subrogation or rights of recovery against the requesting party to
the extent the rights have been waived by the insured prior to occurrence of
loss or injury. The requesting party shall be entitled to have duplicates or
certificates of the policies containing either provisions. The proceeds of such
insurance shall be payable only to Landlord and under no circumstances shall
Tenant receive such proceeds directly from the carrier. Each party,
notwithstanding any provision of this Lease to the contrary, waives any rights
of recovery against the other for loss or injury against which the waiving party
is protected by insurance containing provisions denying to the insurer
acquisition of rights by subrogation reserving, however, any rights with respect
to any excess of loss or injury over the amount covered by the insurance.
5. Tenant's Covenants. Tenant agrees during the Term, and so long as
------------------
Tenant's occupancy continues:
6
<PAGE>
(a) To pay when due the fixed rent, additional rent, and all
charges by public authority, Landlord, or utility for water, electricity,
telephone, gas, sewer, and other services rendered to the Leased Premises and
service inspections made therefor, whether called charge, service, tax
assessment, fee, or otherwise, and to pay any deposits for utilities required by
Landlord or utility provider upon signing this Lease.
(b) To refrain from committing, or suffering any waste upon the
Leased Premises, or any nuisance, or any other act or thing which may disturb
quiet enjoyment of any other tenant in the Pickering Creek Industrial Park.
(c) To make all ordinary repairs as needed (except as provided in
Section 6), including without limitation by their inclusion, interior and
exterior repainting; replacement of glass injured or broken and of floor and
wall covering worn or damaged; keeping exterior windows and doors water tight,
and all doors, walls, floors ceilings, plumbing, lighting, heating, air-
conditioning, and other utility systems in good operating condition, and good
repair. Landlord shall be responsible for any repairs or replacements to the
roof or structural elements of the Leased Premises unless such repairs or
replacements are necessitated by the abuse, direct or deliberate acts, or
negligence of Tenant, it's employees, agents, guests, and invitees in which case
Tenant shall be responsible for such repairs or replacements at it's sole cost
and expense. In any event, Tenant shall promptly notify Landlord of any leaks
or damage to the roof or structural elements of the Leased Premises. Tenant
shall notify Landlord in writing should any penetration or additional loads to
the roof or walls be contemplated and the same shall not be undertaken without
Landlord's prior written approval which shall not be unreasonably withheld.
Landlord shall be relieved of any liability for repair to roof, and Tenant shall
be liable for repair to roof, if Tenant in any way damages roof during the Term
and so long as Tenant's occupancy continues.
(d) To maintain as presented to Tenant or as modified during the
Term, and at all times, all landscaped and planted areas including but not
limited to lawns, trees, shrubs, planting beds, storm water facilities and
reflecting ponds on the Leased Premises, and to keep in good repair all walks,
parking and loading areas thereon, and any sidewalks abutting or contiguous with
the Leased Premises, and keep the roadways, walks, parking and loading areas and
sidewalks in use clean and free of snow and ice, and the exterior of the Leased
Premises neat and clean.
(e) To make no alterations or additions to the Leased Premises
without the prior written consent of Landlord which consent will not be
unreasonably withheld or delayed. Tenant further agrees that (i) any
alterations or additions to the Leased Premises, excepting movable trade
fixtures, shall, at Landlord's option, become part of the realty and belong to
Landlord; (ii) any alterations or additions to the Leased Premises made by
Tenant (without limitation of Landlord's rights against Tenant in case of
alterations or additions made without Landlord's consent), unless designated by
Landlord as to be part of the realty and Landlord's property (which designation
may be made either in conjunction with Landlord's approval of such alterations
or additions being made or any time thereafter, but at least thirty (30) days
prior to the
7
<PAGE>
expiration of the Term) shall be removed by Tenant and the Leased Premises
restored to its previous condition by the expiration of the Lease: Landlord
shall have the right to make such alterations as referred to above at Tenant's
expense; and if Tenant requests bids for alterations, Landlord shall have the
right to meet the lowest bid within thirty (30) days.
(f) Not to overload or deface the Leased Premises or building, nor
permit any use contrary to law, or lawful ordinance, regulation or order of
public authority, whether with respect to safety appliances or to alterations,
repairs to additions required as a condition for continuance of use, or
otherwise.
(g) Without Landlord's consent, Tenant shall not assign, mortgage,
or hypothecate this Lease, or any interest in this Lease, or sublet or otherwise
permit the use of the Leased Premises or any part thereof by any person or
persons other than Tenant. Any transfer of this Lease from Tenant by merger,
consolidation, or liquidation shall constitute an assignment for the purposes of
this Lease. Any attempted assignment or subletting without Landlord's consent
shall be void and shall at the option of Landlord terminate this Lease. Consent
by Landlord to any assignment or subletting shall not release Tenant from its
primary liability under the Lease, and Landlord's consent to one assignment,
subletting or occupation or use by other parties shall not be deemed a consent
to other subleases or assignments or occupation or use by other parties. Upon
request by Landlord, Tenant shall promptly reimburse Landlord for reasonable
counsel fees and other expenses of reviewing each such assignment, sublease and
agreement and in connection with each approval given under this Section (g).
Tenant shall remain primarily liable on all Tenant's obligations hereunder
notwithstanding any assignments, subleases or approvals.
(h) To indemnify and save Landlord harmless from any liability or
injury, loss, accident or damage to any person or property, and from any claims,
actions, proceedings and costs in connection therewith, including reasonable
counsel fees, arising from any wrongful act or negligence of Tenant, or arising
from any use made or thing done on or about the land, Building or the Leased
Premises, or otherwise occurring thereon, and not due to wrongful act or
negligence of Landlord; and to keep all Tenant's employees working in the Leased
Premises covered by Workmen's Compensation insurance furnishing Landlord with
certificates thereof. Tenant, as a material part of the consideration to be
rendered to Landlord, hereby waives all claims and agrees not to assert, at law
or in equity or otherwise, any claims or actions against Landlord for damages to
goods, wares and merchandise in, upon or about the Leased Premises or for injury
to Tenant, its agents, employees, invitees, or third persons in or about the
Leased Premises provided said claims or actions are not due to wrongful act or
negligence of Landlord, it's agents, employees or invitees.
(i) To not affix any sign, decoration, notice, equipment or other
attachment of any kind or description on or to any part of the outside of the
Building without express written permission of Landlord. All signs shall be of
such color, size and style and affixed only in such place or places as may be
designated by Landlord in its sole and absolute discretion and in accordance
with the signage manual as it may exist. The expense for such signs shall be
borne
8
<PAGE>
by Tenant, except that, Landlord shall, at its cost and expense, place Tenant's
name on the lawn mounted identification sign identifying the Building.
(j) To permit Landlord to make routine periodic inspections of the
Leased Premises during reasonable business hours and in emergencies at any time.
During the six (6) months prior to expiration of the Term, Landlord shall have
access to the Leased Premises to make reasonable inspections thereof, and to
show the Leased Premises to prospective purchasers and tenants, and to keep
affixed in suitable places, without obstructing Tenant's signs or displays,
notices for letting and selling.
(k) At the expiration or earlier termination of the Term, promptly
to yield up, clean and neat, the Leased Premises and all improvements,
alterations and additions thereto, and all fixtures and equipment servicing the
building, and to remove Tenant's signs, goods and any machinery, trade fixtures
and equipment used in the conduct of Tenant's business not servicing the
building, and to repair any damage caused by such removal and restore the Leased
Premises to its previous condition, prior to Tenant's occupancy, reasonable wear
and tear excepted.
6. Damage by fire or other Casualty.
--------------------------------
(a) In the event of damage or destruction to the Leased Premises,
Tenant shall provide immediate notice thereof to Landlord, and
(i) if such damage or destruction is caused by the act or
omission of Tenant or its agents, employees, contractors or invitees, Tenant
shall promptly repair or restore any such damage or destruction, and
(ii) with respect to any other damage or destruction,
Landlord shall undertake to make repairs and restorations as and to the extent
provided below, unless this Lease shall be terminated by Landlord or unless any
mortgagee which is entitled to receive casualty insurance proceeds fails to make
available to Landlord a sufficient amount of such proceeds to cover the cost of
such repairs and restoration.
(b) With respect to casualty damage not caused by the act or
omission of Landlord, its agents, employees, contractors or invitees, if
(i) the damage is of such nature or extent, in Landlord's
good faith judgment, more than ninety (90) consecutive days would be required to
repair and restore the part of the Leased Premises which have been damaged, or
(ii) the Leased Premises or the rest of the Building is so
damaged that, in Landlord's reasonable judgment, it is uneconomic to restore or
repair the Leased Premises, Landlord shall so advise Tenant promptly; and either
Landlord or Tenant, for a period of ten (10) days thereafter, shall have the
right to terminate this Lease by written notice to the other as of the
9
<PAGE>
date specified in such notice, which shall be no later than thirty (30) days
after the date of such notice.
(c) In the event of such fire or other casualty, if this Lease is
not terminated pursuant to the terms of this paragraph and if sufficient
insurance proceeds are available to Landlord for the repair and restoration of
the Leased Premises, Landlord shall proceed promptly and diligently to restore
the Leased Premises to substantially its condition prior to the occurrence of
the damage, provided that Landlord shall not be obligated to repair or restore
any alterations, additions or fixtures which Tenant or any other tenant may have
installed unless Tenant, in a manner satisfactory to Landlord, assures payment
in full of all costs as may be incurred by Landlord in connection therewith.
(d) In the case of casualty loss to the Leased Premises not caused
by the negligence or other tortious acts of Tenant, its agents, employees or
invitees, and which is of a nature or extent that Tenant's continued occupancy
is substantially impaired, in Tenant's reasonable judgment, the rent otherwise
payable by Tenant hereunder shall be equitably abated or adjusted for the
duration of such impairment as determined by Landlord.
7. (a) Eminent Domain. In the event that the whole of the Leased
--------------
Premises are condemned by the exercise of eminent domain, this Lease shall
terminate as of the date on which Tenant is required by the condemnor to vacate
the Leased Premises and there shall be no further liability upon Landlord or
Tenant hereunder. If only a portion of the Leased Premises is condemned which
(1) reduces the floor area of the building by more than 20 percent, or (2)
renders the portion of the Leased Premises not taken unsuitable in Tenant's
reasonable judgment for the conduct of Tenant's business, Tenant may, if it
shall so elect, terminate this Lease as of the date on which Tenant is required
by condemnor to vacate the Leased Premises by giving Landlord written notice of
the exercise of such election not less than 20 days prior to such vacation date.
If after exercise of eminent domain this Lease is not terminated, Landlord shall
do such work as may be reasonably necessary to restore the remainder of the
Leased Premises to tenable condition for Tenant's uses, but shall not be
required to expend for restoration more than the balances of damages Landlord
received for the condemnation and reasonably has available for restoration. The
work shall be commenced promptly after the date when Tenant is required by the
condemnor to vacate the Leased Premises taken and completed with due diligence,
except for delays due to governmental regulations, acts of God, unusual scarcity
of or inability to obtain labor or materials, labor disputes, or other causes
beyond Landlord's control. If the balance of damages available for restoration
exceeds the cost of restoration, the excess shall be retained by and be the
property of the Landlord. Tenant shall have the right to continue the Lease of
the Leased Premises remaining after condemnation with a mutually acceptable
abatement of rent covering the portion of premises which are taken by
condemnation.
(b) Payment of Damages. No condemnation or condemnation award
------------------
shall prejudice the rights of either Landlord or Tenant to recover compensation
from the condemning authority.
10
<PAGE>
8. Remedies of Landlord. If the Tenant:
--------------------
(a) Fails to pay in full, when due, any and all installment of
rent, additional rent and/or any other charge or payment herein reserved,
included, or agreed to be treated or collected as rent, additional rent and/or
any other charge, expense, or cost herein agreed to be paid by the Tenant, and
such failure is not cured within fifteen (15) days after written notice from
Landlord to Tenant of such failure; or
(b) Violates or fails to perform or otherwise breaks any covenant
or agreement (other than those covered in 8(a) above), and such failure or
violation is not cured within fifteen (15) days after written notice from
Landlord to Tenant of such failure or violation, or in the case of a failure or
violation which cannot be cured within said thirty (30) day period, the Tenant
has not commenced to cure such failure or violation within the thirty (30) day
period or has not diligently pursued the completion of such cure and such cure
is not completed within sixty (60) days after the aforesaid notice; or
(c) Vacates the Leased Premises without first having paid and
satisfied the Landlord in full for all rent, additional rent and other charges
then due or that may thereafter become due until the expiration of the then
current term, as set forth herein; or,
(d) Becomes insolvent, makes an assignment for the benefit of
creditors, if a petition in bankruptcy is filed by or against the Tenant, or a
bill in equity or other proceeding for the appointment of a receiver for the
Tenant is filed, if proceedings for reorganization or for composition with
creditors under any State or Federal law be instituted by or against Tenant, of
if the real or personal property of the Tenant shall be sold or levied upon by a
Sheriff, Marshall or Constable, provided, however, the provisions of this
paragraph shall not constitute a default if such proceedings are dismissed or
disposed of within sixty (60) days after the date of such filings;
Then, upon written election, but without entry or other action, Landlord
shall have the right to:
(1) Accelerate and collect the rent and additional rent for
the entire unexpired balance of the Term of this Lease and/or any other charge
or payment herein reserved, included, or agreed to be treated or collected as
rent or additional rent; all other charges, payments, costs and expenses herein
agreed to be paid by the Tenant or at the option of Landlord any part of the
rent and additional rent and other charges, payments, costs and expenses; all
costs and officers' commissions; watchman's' wages; the five (5%) percent
chargeable by Act of Assembly; and reasonable attorney's fees incurred or to be
incurred to Landlord, shall, in addition to any and all installments of rent and
additional rent, already due and payable and in arrears and/or other charge or
payment herein reserved, included or agreed to be treated or collected as rent,
additional rent and/or any other charge, expense or cost herein agreed to be
paid by the Tenant which may be due and payable and in arrears, be taken to be
due and payable and in
11
<PAGE>
arrears as if by the terms and provisions of this Lease, the whole balance of
unpaid rent, additional rent and other charges, payments, taxes, costs, and
expenses were on that date payable in advance.
(2) Accelerate and collect and receive from any assignee or
sub-tenant the rents and additional rent or other charges reserved herein as
rent and additional rent due by such assignee of subleasee and apply the same to
the rent and additional rent due hereunder. Receipt of such sums by Landlord
shall in no way affect Tenant's obligations to pay any unpaid balance of rent
and additional rent due hereunder. No payment by sub-tenant to assignor shall
give such sub-tenant or assignor any rights greater than those existing between
Landlord and Tenant.
(3) Terminate this Lease without any right on the part of the
Tenant to save the forfeiture by payment of any sum due by other performance of
any condition, term or covenant broken; whereupon, Landlord shall be entitled to
recover damages for such breach in an amount of rent and additional rent
reserved for the balance of the term of this Lease, less the fair rental value
of the said demised premises, for the residue of said term.
(4) Terminate Tenant's right of continued possession of the
Leased Premises and, from time to time, without terminating this Lease and
without prejudice to any right of Landlord under this Lease, to relet the Leased
Premises or any part thereof for the account and in the name of Tenant, for any
such term or terms and conditions as Landlord in its sole discretion may deem
advisable with the right to make alterations and repairs to the Leased Premises
deemed by Landlord to be necessary in conjunction with such reletting; and
Tenant shall pay to Landlord, as soon as ascertained, the costs and expenses
incurred by Landlord in such reletting and in making such alterations and
repairs. Rents received by Landlord from such reletting may be applied first,
to the payment of any indebtedness, other than rent, due hereunder from Tenant
to Landlord; second, to the payment of the cost of any alterations and repairs
to the Leased Premises necessary to return the Leased Premises to good
condition, normal wear and tear excepted, for uses permitted by this Lease and
the cost of storing any of Tenant's property left on the Leased Premises at the
time of reletting; third, to the payment of rent and additional rent due and
unpaid hereunder; the residue, if any, shall be held by Landlord and applied in
payment of future rent and additional rent or damages in the event of
termination as the same may become due and payable hereunder and the balance, if
any at the end of the Lease Term shall be paid to Tenant. Should such rents
received from time to time form such reletting during any month be less than
that amount which this Lease requires be paid during that month by Tenant
hereunder, the Tenant shall pay such deficiency to Landlord. Such deficiency
shall be calculated and paid monthly. No such reletting of the Leased Premises
by Landlord pursuant to this subparagraph shall be construed as an election on
its part to terminate this Lease unless a notice of such intention be given by
Landlord to Tenant or unless the termination thereof be decreed by a court of
competent jurisdiction; and notwithstanding any such reletting without
termination, Landlord may at any time hereafter elect to terminate this Lease
for such previous breach provided it has not been cured.
12
<PAGE>
9. Further Remedies of Landlord.
----------------------------
Intentionally omitted.
10. CONFESSION OF JUDGMENT.
----------------------
(a) CONFESSION OF JUDGMENT FOR PAYMENT.
----------------------------------
Intentionally Omitted.
(b) FOR POSSESSION. WHEN THIS LEASE AND THE TERM THEREOF SHALL
HAVE BEEN TERMINATED ON ACCOUNT OF ANY DEFAULT BY TENANT HEREUNDER, OR WHEN THE
TERM HEREBY CREATED SHALL HAVE EXPIRED, OR WHEN TENANT'S RIGHT TO POSSESSION OF
THE LEASED PREMISES SHALL HAVE BEEN TERMINATED ON ACCOUNT OF ANY DEFAULT BY
TENANT HEREUNDER, IT SHALL BE LAWFUL FOR ANY ATTORNEY TO APPEAR AS ATTORNEY FOR
TENANT AS WELL AS FOR ALL PERSONS CLAIMING BY, THROUGH OR UNDER TENANT, AND TO
CONFESS JUDGMENT AGAINST TENANT AND AGAINST ALL PERSONS CLAIMING BY, THROUGH OR
UNDER TENANT FOR THE RECOVERY BY LANDLORD OF POSSESSION OF THE LEASED PREMISES,
FOR WHICH THIS LEASE SHALL BE A SUFFICIENT WARRANT, WHEREUPON, IF LANDLORD SO
DESIRES, AN APPROPRIATE WRIT OF POSSESSION MAY ISSUE FORTHWITH, WITHOUT ANY
PRIOR WRIT OR PROCEEDINGS WHATSOEVER, TENANT HEREBY RELEASING AND AGREEING TO
RELEASE LANDLORD FROM ALL PROCEDURAL DEFECTS AND ERRORS IN ENTERING SUCH ACTION
OR JUDGMENT OR IN CAUSING SUCH WRIT OR PROCESS TO BE ISSUED OR IN ANY
PROCEEDINGS THEREON OR CONCERNING THE SAME, PROVIDED THAT LANDLORD SHALL HAVE
FILED IN SUCH ACTION AN AFFIDAVIT MADE ON LANDLORD'S BEHALF SETTING FORTH THE
FACTS NECESSARY TO AUTHORIZE THE ENTRY OF SUCH JUDGMENT ACCORDING TO THE TERMS
OF THIS LEASE, OF WHICH FACTS SUCH AFFIDAVIT SHALL BE PRIMA FACIE EVIDENCE. IF
FOR ANY REASON AFTER SUCH ACTION SHALL HAVE BEEN COMMENCED THE SAME SHALL BE
DETERMINED AND THE POSSESSION OF THE LEASED PREMISES REMAIN IN OR BE RESTORED TO
TENANT, LANDLORD SHALL HAVE THE RIGHT FOR THE SAME DEFAULT AND UPON ANY
SUBSEQUENT DEFAULT OR DEFAULTS, OR UPON THE TERMINATION OF THIS LEASE AS
HEREINBEFORE SET FORTH, TO BRING ONE OR MORE FURTHER ACTION OR ACTIONS TO
RECOVER THE POSSESSION OF THE LEASED PREMISES AND CONFESS JUDGMENT FOR THE
RECOVERY OF POSSESSION OF THE LEASED PREMISES AS HEREINBEFORE PROVIDED.
13
<PAGE>
11. Waivers by Tenant of Errors, Right of Appeal, Stay Exemption,
-------------------------------------------------------------
Inquisition.
- ------------
Intentionally Omitted.
12. Right of Assignee of Landlord.
-----------------------------
Intentionally Omitted.
13. Remedies Cumulative. All of the remedies hereinbefore given to
-------------------
Landlord and all rights and remedies given to it by law and equity shall be
cumulative and concurrent. No determination of this Lease or the taking or
recovering of the Leased Premises shall deprive Landlord of any of its remedies
or actions against the Tenant for rent and/or additional rent then due, or rent
and/or additional rent which, under the terms hereof, would in the future become
due as if there has been no determination, or for any and all sums due at the
time of which, under the terms hereof, would in the future become due as if
there had been no determination, nor shall the bringing of any action for rent
and/or additional rent or breach of covenant, or the resort to any other remedy
herein provided for the recovery of rent and/or additional rent be construed as
a waiver of the right to obtain possession of the Leased Premises.
14. Miscellaneous Provisions.
------------------------
(a) Requirements of Landlord's Mortgage. Tenant agrees to
-----------------------------------
cooperate with Landlord with respect to the requirements of Landlord's mortgage
and to execute such documents as Landlord's mortgagee, Landlord's mortgage and
Landlord may require respecting the status of this Lease and the Leased
Premises.
(b) Waiver. No consent or waiver, express or implied, by
------
Landlord or Tenant to or of any breach of any agreement or duty to the other
shall be construed as a consent or waiver of any other breach of the same or any
other agreement or duty.
(c) Approval or Consent. Whenever any approval or consent by
-------------------
Landlord or Tenant is expressly required by this Lease, the approval or consent
shall not be withheld unreasonably.
(d) Notices. Whenever any notice, approval, consent or request
-------
is given pursuant to this Lease, it shall be in writing. Communications and
payments, unless otherwise specified by fifteen (15) days prior written notice,
from the recipient or payee shall be addressed to the party's address stated in
paragraph 1 (c), (3), (4) and (5). All notices to Tenant shall be sent to both
addresses provided for in paragraph 1 (c) 4 and 1 (c) 5 with a copy to Keith
Mullin, Esquire, 1400 Post Oak Boulevard, Suite 400, Houston, Texas 77056. Any
communication so addressed shall be deemed duly served if posted by registered
or certified mail, with sufficient postage prepaid, return receipt requested.
If Landlord by notice to Tenant at any time designates an agent to receive
payments or notices, all payments or notices from Tenant to Landlord shall be
sent to
14
<PAGE>
said agent until such time as Tenant shall have received from Landlord written
notice of Landlord's termination of such agency.
(e) Cost and Expense. Wherever provision is made in this Lease
----------------
for the doing of any act by any person, it is understood and agreed that said
act shall be done by such person at its own cost and expense unless a contrary
intent is expressed.
(f) Binding Nature. Subject to Article 5 (g), the terms and
--------------
provisions of this Lease shall be binding upon and inure to the benefit of the
respective heirs, executors, administrators, successors and assigns of Landlord
and Tenant, provided that, in any event, Landlord's liability hereunder shall be
limited to Landlord's title or interest in the Building and Leased Premises.
(g) Time as Essence. The time of payment for rent and all other
---------------
times referred to for the performance of any obligation of this Agreement are
hereby agreed to be of the essence of this Agreement.
15. Law Governing - Interpretation. This Lease shall be governed by and
------------------------------
interpreted in accordance with the law of the Commonwealth of Pennsylvania. If
any provisions of this Lease or the application of any provision to any person
or any circumstances shall be determined to be invalid or unenforceable, then
such determination shall not affect any other provisions of this Lease or the
application of said provision to any other person or circumstance, all of which
other provisions shall remain in full force and effect. If any provision of
this Lease is capable of two constructions, one of which would render the
provision void and the other of which would render the provision valid, the
construction of which would render the provision valid shall prevail.
16. Landlord's Right to Cure. If Tenant shall default in the performance
------------------------
or observance of any agreement or condition in this Lease other than an
obligation to pay money, and shall not cure such default within thirty (30) days
after notice from Landlord specifying the default, Landlord may, at its option,
without waiving any claim for damages for breach of agreement, at any time
thereafter, cure such default for the account of Tenant and Tenant agrees to
reimburse Landlord therefor or save Landlord harmless therefrom; provided that
Landlord may cure any such default as aforesaid prior to the expiration of said
waiting period but after notice to Tenant, if the curing of such default prior
to the expiration of said waiting period but after notice to Tenant, is
reasonably necessary to protect the real estate or Landlord's property. If
Tenant shall fail upon demand to reimburse Landlord for any amount paid for the
account of Tenant hereunder, said amount shall be added to and become due as a
part of the next payment of rent due hereunder.
17. Liability of Landlord. The term "Landlord" as used in this Lease
---------------------
means the fee owner of the Leased Premises from time to time or, if different,
the party from time to time holding and exercising the right as against all
others to possession of the Leased Premises. Landlord represents that it is the
holder of such right as of the date hereof. In the event of a
15
<PAGE>
voluntary or involuntary transfer of such ownership or right to a successor in
interest of Landlord, Landlord shall be discharged and relieved of all liability
and obligations hereunder which shall thereafter accrue and Tenant shall look
solely to such successor in interest for the performance of the covenants and
obligations of Landlord hereunder which shall thereafter accrue. The liability
of Landlord and its successor in interest under or with respect to this Lease
shall be strictly limited to and enforceable only out of its or their interest
in the Leased Premises and shall not be enforceable out of any other assets.
Landlord agrees that any conveyance of the Leased Premises will be made under
and subject to this Lease.
18. Broker. Tenant represents that it has dealt with no Realtors, brokers
------
or agents, other than Promark Realty Group in connection with the negotiation of
this Lease and the renting of the Leased Premises hereunder. Should any claim
be made for brokerage commissions, other than by Promark Realty Group, through
or as a result of dealings of Tenant or its agents or representatives, Tenant
shall indemnify and hold Landlord harmless against any liability in connection
therewith. Landlord shall pay commissions to brokers including Promark Realty
Group only pursuant to separate written agreements between Landlord and such
brokers.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Landlord and
Tenant, by their duly authorized officers, have executed this Lease Agreement as
of the date first above written.
Landlord:
PICKERING ACQUISITION
ASSOCIATES
By its General Partner as follows:
PBS PROPERTIES, LTD.
By its Sole General Partner as follows:
Attest: PBS PROPERTIES, INC.
/s/ David M. Boucher /s/ Peter O. Schultz
- --------------------------- ----------------------------------------
David M. Boucher, Secretary Peter O. Schultz, President
Attest: Tenant:
FUTRONIX CORPORATION
By:____________________________ By:/s/ T.M. Hunt
-------------------------------------
Title: Title: President
16
<PAGE>
ADDENDUM TO LEASE AGREEMENT
---------------------------
THIS ADDENDUM TO LEASE AGREEMENT made by and between Pickering Acquisition
Associates (hereinafter called "Landlord") and Futronix Corporation (hereinafter
called "Tenant").
19. Improvements To Leased Premises.
-------------------------------
(a) Landlord shall improve the Leased Premises as provided for in
accordance with the plan more particularly described in Exhibit C to be attached
hereto and made a part hereof (the "Tenant Improvement Plan") and the
improvements to be made pursuant thereto, (the "Improvements"). The
Improvements shall include the following:
(i) renovation of office area in accordance with the Tenant Improvement
Plan to include the removal of existing interior walls and interior doors, close
existing openings in walls, reattach ceiling and related work;
(ii) repaint renovated office area;
(iii) recarpet renovated office area; and
(iv) install necessary hardware and fixtures to create one handicapped
accessible restroom.
In addition to the Improvements outlined above, the Leased Premises will be
fully cleaned prior to occupancy by Tenant and all mechanical systems will be
properly serviced. The Improvements contemplated hereby shall be completed by
Landlord at it's sole cost and expense prior to May 1, 1995.
<PAGE>
20. Option to Extend Term. Tenant shall have the option to extend the
---------------------
Term of this Lease for an additional period of three (3) years (such additional
period, the "Extension Period") provided that (a) there is not in existence at
the expiration of the initial Term of this Lease an event of the default
hereunder or event or circumstance which, with the giving of notice or the
passage of time or both would constitute a default hereunder and (b) Tenant
gives Landlord written notice of its intent to exercise such option at least One
Hundred Eighty (180) days prior to the expiration of the initial Term (the
"Option Notice"). During the Extension Period all other terms, conditions and
provisions of this Lease, except rent as provided for below, and as otherwise
contained in this Addendum, shall be applicable. In the event Tenant fails to
give the Option Notice to Landlord as aforesaid, this Lease and all of Tenant's
rights to possession of the Leased Premises hereunder shall expire at midnight
on the last day of the initial Term. During each of the first two years of the
Extension Period, Tenant shall pay an annual fixed rent of One Hundred Seventeen
Thousand Nine Hundred Sixty Dollars ($117,960) in equal monthly installments of
Nine Thousand Eight Hundred Thirty Dollars ($9,830) as well as additional rent
required to be paid during the initial Term of this Lease, all at the times and
places provided for during the initial Term. The amount of annual fixed rent
payable during the third year of the Extension Period shall be calculated as set
forth in paragraph 21 below.
21. Rental Adjustment. Commencing on the first day of (i) the third
-----------------
year of the initial Term of this Lease, (ii) the third year of the Extension
Period of this Lease, and (iii) any Renewal Period (as hereafter defined) (any a
"Rent Adjustment Date") and continuing until the expiration thereof, the annual
fixed rent shall be an amount equal to the product obtained by multiplying (i)
the annual fixed rental during the first year of the initial Term ($104,400)
with respect to the rent
2
<PAGE>
payable during the third year of the initial Term, and (ii) the annual fixed
rent during the first year of the Extension Period ($117,960) with respect to
the rent payable during the third year of theExtension Period or any Renewal
Period (as hereafter defined) , by a fraction, the numerator of which shall be
the Consumer Price Index (Consumer Price Index for Urban Wage Earners and
Clerical Workers US City Average Rent Series C-1 (1982-1984 = 100) as published
by the United States Department of Labor) for the fourth month prior to the
applicable Rent Adjustment Date and the denominator of which shall be the same
index for (i) the month of February 1995 with respect to the rent payable during
the third year of the initial Term or (ii) the month of February 1998, with
respect to the rent payable during the Extension Period or any Renewal Period,
except that the annual fixed rent as adjusted during the initial Term, Extension
Period or any Renewal Period shall increase not less than 3% per year nor more
than 5% per year. In the event the Department of Labor changes the base period
used in computing the aforesaid index, an adjustment shall be made to reflect
the intent of the parties hereto to provide for rental increases which relate to
United States governmental financial indices. If, for any reason, the aforesaid
index shall be discontinued, another appropriate financial index published by a
United States governmental agency or by a reputable financial institution shall
be used. If the parties cannot mutually agree upon a financial index to be
used, the same shall be determined by the chairman of the Department of
Economics, West Chester University, West Chester, PA.,
22. Termination; Renewal. In the event Tenant exercises its option to
--------------------
extend the initial Term of this Lease pursuant to paragraph 21 above, and the
Term is so extended, the Term of this Lease shall be further extended for
successive one (1) year periods (each, a "Renewal Period") upon the same terms,
conditions and provisions in force immediately prior to the end of the
3
<PAGE>
Extension Period or the then current Renewal Period (except for the amount of
rent which shall be calculated as set forth in paragraph 21 above), unless and
until, at least 180 days prior to the end of the Extension Period or the then
current Renewal Period, as the case may be, Landlord or Tenant gives the other
party written notice that it intends to terminate this Lease upon the expiration
of the Extension Period or the then current Renewal Period. Notwithstanding any
termination of this Lease, Tenant and Landlord acknowledge and agree that all
payment and performance obligations that, by their nature, are intended to
survive any such termination shall survive until paid or performed in full by
the applicable party.
23. Tenant's Option to Purchase. Tenant shall have a one time option to
---------------------------
purchase the property known as 216 Philips Road (Tax Parcel #33-5 20.8)
including the Building and all other improvements located thereon, (the
"Property"), for a purchase price of $1,800,000 payable in cash at closing (the
"Purchase Option"). The Terms and conditions of the sale, including but not
limited to responsibility for the payment for surveys, title reports and other
closing costs, as well as real estate tax and rent adjustment will be those that
are customary for the sale of industrial properties in Uwchlan Township, Chester
County, Pennsylvania. Tenant may only exercise the Purchase Option by giving
written notice received by Landlord before midnight September 1, 1995 (the
"Option Notice") and by completing the purchase before midnight on December 1,
1995 (the "Closing Date"). In the event Tenant fails to give the Option Notice
in the manner and by the time specified in this paragraph or fails to complete
closing by the Closing Date, the Purchase Option shall expire and be of no
further force and effect. Upon the request of Landlord from time to time during
the Term of this Lease, Tenant agrees to provide landlord with a written
certification (a) stating that the Purchase Option has or has not
4
<PAGE>
been exercised or has or has not expired, as the case may be, (b) confirming the
purchase price payable pursuant to the Purchase Option, (c) acknowledging that
the purchase of the Property will be under and subject to any and all mortgages
of record on the date the Property is to be conveyed to Tenant unless the same
have been satisfied in full by Landlord and/or (d) agreeing to pay the proceeds
of the Purchase Option to any mortgagee of record on the date the Property is to
be conveyed to Tenant in satisfaction of such mortgagee's lien against the
Property. Notwithstanding anything to the contrary contained herein, any
termination of this Lease shall also act as a termination of the Purchase Option
without any further act on the part of Landlord or the acknowledgment of such
termination by Tenant.
24. Additional Rent.
---------------
a. Tenant shall, notwithstanding the provisions of paragraph 4d, pay
or reimburse Landlord, as additional rent, the actual charges or costs for
insurance actually billed to or paid by Landlord as provided for in paragraph 4d
of the Lease except that the costs paid by Tenant to Landlord shall not exceed
($3,000) during each of the first two years of the initial Term of this Lease
and ($3,150) during the third year of the initial Term of this Lease. Costs or
charges for insurance during the Extension Period or any Renewal Period shall be
based on actual charges incurred by Landlord relating to the Leased Premises
without limitation.
b. Tenant shall, not withstanding the provisions of paragraph 5d,
pay or reimburse Landlord, as additional rent, the actual charges or costs for
exterior maintenance which shall include the maintenance of all landscaped and
planted areas, including but not limited to lawns, trees, shrubs, planting beds
and storm water facilities on the Leased Premises and snow removal including but
not limited to walkways, parking areas, loading areas and roadways on the
5
<PAGE>
Leased Premises except that the costs paid by Tenant shall not exceed ($5,300)
per year during each of the first two years of the initial Term of this Lease
and ($5,565) during the third year of the initial Term of this Lease. Costs or
charges for exterior maintenance during the Extension Period or any Renewal
Period shall be based on actual charges incurred by Landlord relating to the
Leased Premises without limitation.
25. Tenant's Prorata Share. For purposes of this Lease, Tenant's "Prorata
----------------------
Share" shall be 64.3%, determined by dividing the rentable area of the Leased
Premises, being 25,100 square feet, by the total rental area of the building,
being 39,037 square feet.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Landlord and
Tenant, by their duly authorized officers, have executed this Addendum to Lease
Agreement as of the date first above written.
PICKERING ACQUISITION ASSOCIATES
By its General Partner as follows:
PBS PROPERTIES, LTD.
By its Sole General Partner as follows:
Attest: PBS PROPERTIES, INC.
/s/ David M. Boucher /s/ Peter O. Schultz
- --------------------------- ---------------------------------------
David M. Boucher, Secretary Peter O. Schultz, President
Attest: Tenant:
FUTRONIX CORPORATION
By:____________________________ By:/s/ T.M. Hunt
------------------------------------
Title: Title: President
6
<PAGE>
Exhibit 10.8
L E A S E
---------
THIS LEASE MADE and entered into this 8th day of January, 1996, by and
between Futronix Corporation, a Texas Corporation (TENANT) and NBD BANK,
SUCCESSOR TRUSTEE TO NBD Trust Co. of Illinois, not personally but as Trustee
under Trust Agreement dated the 24th day of November, 1992, and known as Trust
Number 1317-CH (LANDLORD).
W I T N E S S E T H:
-------------------
DEMISE
------
LANDLORD does hereby LEASE to TENANT and TENANT hereby lets from LANDLORD
those certain premises (the "PREMISES"), which PREMISES are situated in that
certain building (the "BUILDING") located at 1140-1152 N. Main St. in Lombard,
Illinois 60148, and TENANT's address shall be 1142 N. Main St., Lombard, IL.
The BUILDING and the real estate on which it is located are hereinafter referred
to as the "PROPERTY".
Such letting and hiring is upon and subject to the terms, covenants and
conditions herein set forth and TENANT and LANDLORD covenant as a material part
of the consideration for this LEASE to keep and perform each and all of said
terms, covenants and conditions by them to be kept and performed and that this
LEASE is made upon the condition of such performance.
1.
PURPOSE
-------
The PREMISES are to be used for office and ancillary warehouse, assembly or
storage purposes other related purposes in connection with TENANTS wire and
cable basis, and for no other purpose without the prior written consent of the
LANDLORD.
2.
TERM
----
The Term ("Term") of this LEASE shall be for a period beginning January 15,
1996, and ending February 28, 1999 except as otherwise expressly provided in
this LEASE.
<PAGE>
3.
POSSESSION
----------
TENANT hereby takes possession of the PREMISES "As Is" subject to Sections
9 and 10 herein. It is further understood that within 48 hours of initial
occupancy, the parties shall jointly inspect the PREMISES and prepare a "punch
list" of incomplete items to be completed by LANDLORD within a reasonable period
of time after occupancy. TENANT agrees to provide a supplemental "punch list"
within thirty (30) days after occupancy encompassing all items not then
completed except for latent defects.
4.
DEFINITIONS AS USED IN THIS LEASE
---------------------------------
A. The Term "COMMENCEMENT DATE" is the date of the beginning of the LEASE
as defined in Section Two (2) of this LEASE.
B. The Term "TENANT's PROPORTIONATE SHARE" shall mean 16%. For the
purposes of this LEASE, the Rentable Square Footage of the PREMISES and the
BUILDING shall be deemed to be 8,000 square feet and 50,020 square feet,
respectively .
C. The Term "TAXES" means any and all TAXES of every kind and nature
whatsoever which LANDLORD shall pay or become obligated to pay for each calendar
year of the Term (including any extensions or renewals) of this LEASE which were
assessed or incurred against the PROPERTY regardless of when such TAXES are
payable on account of the ownership, leasing and operation of the PROPERTY
including without limitation: 1) real estate TAXES, personal property TAXES,
sewer rents, water rents, special assessments, transit TAXES, or any tax or
charge for fire protection, streets, sidewalks, road maintenance, refuse or
other services provided to the building by any Governmental Agency; 2) any
reasonable expenses (including legal fees, tax consultant fees, court costs)
charged for the protest or reduction of property TAXES and/or assessments in
connection with the PREMISES including the Building; 3) any tax or excise on
rent or any other tax (however described) on account of rental received for use
and occupancy of any or all of the Building and/or the PREMISES, whether any
such TAXES are imposed by the United States, the State of Illinois, the County
of DuPage, or any local governmental municipality, authority or agency or any
political subdivision of any thereof. TAXES shall not include any net income,
capital stock, estate or inheritance TAXES; provided, however, if at any time
during the Term hereof a tax or excise on rents or income or other tax however
described (herein called "Rent Tax") is levied or assessed by the United States
or the State of Illinois or any political subdivision thereof on account of the
rents hereunder or the interest of LANDLORD under this LEASE, and if such Rent
Tax is in lieu of or as a substitute for, in whole or in part, real estate TAXES
or other ad valorem TAXES such Rent Tax shall constitute TAXES.
2
<PAGE>
D. The Term "OPERATING COSTS" means any and all expenses, costs and
disbursements (other than TAXES as defined in Section 4(C)) of every kind and
nature whatsoever incurred by LANDLORD in connection with the management,
maintenance, operation and repair of the Property (including without limitation,
any and all common area expenses in the development in which the PROPERTY is
located, including but not limited to landscaping; water and sewer charges
levied by the Village of Lombard; pest extermination; Energy Costs, common area
rubbish removal; sprinkler system monitoring fees and utility charge; snow
removal; patching, paving, sealing and striping of parking areas, driveways and
dock areas; exterior gutters and downspouts, and any other maintenance which
benefits the PROPERTY; insurance costs and routine repairs, maintenance and
decorating; amortization (along with reasonable financing charges) of capital
improvements made to the PROPERTY which may be required by any government
authority or which will improve the operating efficiency of the PROPERTY, which
LANDLORD shall be or become obligated to pay in respect of a calendar year
regardless of when such OPERATING COSTS were incurred), except that OPERATING
COSTS shall not include expenditures for the following: (i) costs of alterations
of the Premises; (ii) costs of capital improvements on the Premises or the
Building and costs of curing construction defects, if any; (iii) depreciation
(except on any capital improvements made or installed after the Commencement
Date for the purpose of saving labor or otherwise reducing applicable OPERATING
COSTS); (iv) interest and principal payments on mortgages, if any; (v) real
estate brokers' leasing commissions or compensation; (vi) any cost or
expenditure (or portion thereof) for which LANDLORD is reimbursed, whether by
insurance proceeds or otherwise; (vii) property management fees; and (viii) any
costs or expenditures by LANDLORD for the roof, exterior walls, foundation, or
structural members thereof, except if such damage is caused by any negligence or
intentional act or omission of TENANT, or TENANT's agents, employees, or
invitees.
D. The term "Energy Costs": means the cost to LANDLORD for all electric
power and other utilities furnished by LANDLORD, not separately metered to and
paid for by a specific tenant.
5.
BASE RENT
---------
Except as otherwise provided herein, TENANT shall pay as initial Base Rent
to R & M Associates, as Agent for the LANDLORD, and mailed in care of ROTHBART
REALTY COMPANY, 1935 TECHNY ROAD, SUITE 15, NORTHBROOK, ILLINOIS 60062-5357,
the sum of FIFTY-TWO THOUSAND DOLLARS ($52,000) per annum in equal monthly
payments of FOUR THOUSAND, THREE HUNDRED AND THIRTY-THREE 33/100 DOLLARS
($4,333.33) beginning on JANUARY 15, 1996 and on the first day of each calendar
month thereafter during the Term and at the same rate for fractions of a month
if the Term shall begin on any day except the first day or shall end on any day
except the last day of a calendar month.
3
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Notwithstanding the foregoing, no Base Rent shall be due for the following
months January 15 - 31, 1996 and February, 1996 (the "Abatement Months"),
collectively if LANDLORD delivers possession of the PREMISES to TENANT in
accordance with the terms and provisions of this LEASE on or before January 15,
1996. If LANDLORD does not deliver possession of the PREMISES to TENANT as
aforesaid, the term Abatement Months shall mean a period equal to Forty-Five
(45) consecutive days after the date that LANDLORD delivers possession of the
PREMISES to TENANT in accordance with the terms and conditions of this LEASE.
TENANT shall pay all ADDITIONAL RENT Obligations during said Abatement Months
under Sections 6 and 7 of this LEASE. The entire Base Rent otherwise due and
payable for the Abatement Months shall become immediately due and payable upon
the occurrence of an event of an uncured default by TENANT under this LEASE.
Any rent (whether Base Rent or ADDITIONAL RENT) or other amount due from
TENANT to LANDLORD under this LEASE not paid, within 7 days OF when due shall
bear interest from the date due until the date paid at the annual rate of TWO
(2%) PERCENT above the prime rate charged by the FIRST NATIONAL BANK OF CHICAGO
(also called the Corporate Base Rate by said Bank) on ninety (90) day commercial
loans to its largest customers from time to time during such period but the
payment of such interest shall not excuse or cure any default by TENANT under
this LEASE. The covenants herein to pay rent (both Base Rent and ADDITIONAL
RENT) shall be independent of any other covenant set forth in this LEASE.
6.
ADDITIONAL RENT - TAXES AND OPERATING COSTS
ADDITIONAL RENT
---------------
It is further agreed between the parties hereto that in addition to the
Base Rent provided for herein that TENANT shall also pay during the Term of this
LEASE as ADDITIONAL RENT TENANT's PROPORTIONATE SHARE of the TAXES and OPERATING
COSTS as hereinbefore defined. To insure the payment of such TAXES and
OPERATING COSTS, TENANT shall pay to LANDLORD beginning on January 15, 1996, and
on the first day of each and every month thereafter at the time of payment of
the rental provided for herein one-twelfth (1/12th) of TENANT's PROPORTIONATE
SHARE of the estimated TAXES AND OPERATING COSTS against the PROPERTY. The
initial payment for the year 1996 shall be from January 15, 1996 to January 31,
1996 - ONE HUNDRED AND SEVENTY DOLLARS ($170.00) and beginning on February 1,
1996 - THREE HUNDRED AND FIFTY DOLLARS ($350.00) DOLLARS per month. The monies
paid by TENANT as aforesaid shall be used by LANDLORD to pay the TAXES and
OPERATING COSTS when the bills become available.
4
<PAGE>
7.
ADDITIONAL RENT - ADJUSTMENT PAYMENT
------------------------------------
As soon as practicable during each calendar year of Term of this LEASE and
the next calendar year following the year in which this LEASE terminates,
LANDLORD shall deliver to TENANT a written statement setting forth in reasonable
detail TENANT's PROPORTIONATE SHARE of the ADDITIONAL RENT (TAXES and OPERATING
COSTS as hereinbefore defined) for the immediately preceding calendar year.
Within thirty (30) days after delivery of such statement, TENANT shall pay to
LANDLORD the sum of ADDITIONAL RENT due to LANDLORD less the amount of all
estimated payments on account of such ADDITIONAL RENT paid by the TENANT during
the preceding calendar year ("Net Rental Adjustments"). Subsequent monthly
ADDITIONAL RENT payments shall thereafter be increased by the sum of: (1) one-
twelfth (1/12th) of such estimated Net Rental Adjustment; and (2) such estimated
Net Rental Adjustment for the present calendar year multiplied by the number of
monthly rental payment dates having elapsed for such calendar year divided by
the number of monthly rental payment dates remaining in such present calendar
year.
In the event that any such statement required above indicates that the
total ADDITIONAL RENT paid by TENANT during the preceding calendar year exceeds
the aggregate ADDITIONAL RENT payable by TENANT for such calendar year pursuant
to Sections 6 and 7 herein, LANDLORD shall apply such excess on any amounts of
ADDITIONAL RENT next falling due under this LEASE as long as TENANT is not then
in default of any of the terms and provisions of this LEASE.
The annual determination and statement of TAXES and OPERATING COSTS shall be
prepared in accordance with generally acceptable accounting principles. In the
event of any dispute as to any ADDITIONAL RENT due hereunder, TENANT shall have
the right to inspect LANDLORD's accounting records relative to TAXES and
OPERATING COSTS at LANDLORD's accounting office during normal business hours at
any time within forty-five (45) Business days following the furnishing by
LANDLORD to TENANT of such statement provided that TENANT is not in default of
any terms and conditions of this LEASE. If TENANT shall dispute any item or
items included in the OPERATING COSTS or TAXES for such year, and such dispute
is not resolved by the parties within seventy (70) Business days after such
statement is delivered to TENANT, then either party may at its sole expense,
within seventy (70) Business days thereafter, request that a firm of independent
certified public accountants mutually selected by LANDLORD and TENANT render to
the parties an opinion as to whether or not the disputed item or items should
have been included in the OPERATING COSTS and/or TAXES for such year; and the
opinion of such firm on such matter shall be conclusive and binding upon both
parties. LANDLORD and TENANT agree that the firm's opinion shall be confidential
and shall not be disclosed to any other party whatsoever, and
5
<PAGE>
such independent certified public accountant's fee shall not be compensated on a
Contingency Fee basis.
In no event shall any rent adjustment result in a decrease of the Base Rent
as set forth in Section 5 hereof.
In the event of the Termination of this LEASE by expiration of the stated
term or for any other cause or reason whatsoever prior to the determination of
the ADDITIONAL RENT -as hereinabove set forth, LANDLORD shall prorate the last
known TAXES and OPERATING COSTS at 110% on the basis of which the number of days
in such partial year and/or full year bears to three hundred sixty (360) days,
with LANDLORD and TENANT reserving the right to re-prorate when actual costs
become available. TENANT's agreements to pay ADDITIONAL RENT up to the time of
Termination of this LEASE shall survive the expiration or termination of the
LEASE as shall LANDLORD's obligation to refund any excess ADDITIONAL RENT
deposits.
8.
HOLDING OVER
------------
If TENANT holds possession of the Premises after the Termination of this
LEASE, by lapse of time or otherwise, TENANT shall become a tenant from month to
month only upon each and all of the terms herein provided as may be applicable
to such month to month tenancy and any such holding over shall not constitute an
extension of this LEASE; provided, however, during such holding over, TENANT
shall pay Base Rent plus ADDITIONAL RENT (as adjusted pursuant to Sections 5, 6
and 7, all as estimated by LANDLORD) at 150% of the rate payable for the month
immediately preceding said holding over and in addition, TENANT shall pay
LANDLORD all damages, consequential as well as direct, sustained by reason of
TENANT's holding over. The provisions of this paragraph do not exclude the
LANDLORD'S rights of re-entry or any other right hereunder.
9.
MAINTENANCE OF THE BUILDING
---------------------------
(A) MAINTENANCE BY TENANT. During the Term of this LEASE or any extension
or renewal period, TENANT shall at its sole cost and expense maintain and
operate the leased PREMISES in good condition and repair including replacements;
such repairs, maintenance, and replacements shall include but not be limited to
plate and window glass; floor coverings; heating, air-conditioning, and
mechanical appurtenances and or fixtures; dock levelators and dock or drive-in
doors; lighting; power wiring and electrical fixtures; plumbing systems and
fixtures; hot water heater; rubbish removal; janitorial services; and removing
the snow and ice from the sidewalk, abutting the Premises. TENANT shall also
make arrangements directly with the appropriate utility
6
<PAGE>
companies for the supply of gas, electric, telephone or other communication
services and shall pay all fees, expenses and charges. LANDLORD shall make
available to the TENANT the benefit of any and all guarantees or warranties
relating to the HVAC (heating and air-conditioning), or electrical or plumbing
systems. It is understood that LANDLORD shall procure a heating and air-
conditioning maintenance contract, the cost of which shall be treated as on
OPERATING COSTS and TENANT shall be responsible for the costs of any and all
repairs, maintenance and replacement of the heating and air-conditioning systems
attributable to the PREMISES which are not included in OPERATING COSTS.
(B) MAINTENANCE BY LANDLORD. Except for damage caused by any negligence
or intentional act or omission of TENANT, or of TENANT's agents, employees or
invitees, LANDLORD agrees that it will keep and maintain in good condition and
repair (1) the exterior of the Premises (including the landscaping, parking area
and driveways), (2) the roof (excluding any heating or cooling or ventilating
units mounted on the roof), structural soundness of the concrete floors and
exterior walls, and (3) those portions of the water, plumbing, sewer, and
electrical systems that are not within the possession or control of the TENANT.
(C) MAINTENANCE BY LANDLORD-TENANT. Notwithstanding Section 9(A) above
and except for any damage caused by any negligence or intentional act or
omission of TENANT, or of TENANT's agents, employees or invitees, LANDLORD shall
if so required repair and pay for during the first Sixty (60) days of TENANT's
occupancy, the electrical, plumbing, hot water heater, and as to the HVAC
equipment: the heating to MARCH 31, 1996 and the air-conditioning to AUGUST 30,
1996 in the Premises. Thereafter as herein provided, TENANT shall be responsible
for all of the maintenance, repairs and replacements.
Notwithstanding the above (9A, 9B, or 9C), any damage to the heating/air-
conditioning and electrical systems due to fumes and/or emissions caused by
TENANT's use and occupancy of the Premises, shall be TENANT's sole
responsibility to replace, repair and maintain said units.
All of the required maintenance, repairs and replacements required
hereunder; (i) shall be completed expeditiously in a good and workmanlike
manner; (ii) shall be in compliance with all legal requirements and applicable
building codes; (iii) shall become part of the demised Premises; and (iv) shall
be subject to the terms of this LEASE.
10.
CONDITION OF THE PREMISES
-------------------------
Subject to "punch lists" referred to in section 3 hereof, by taking
possession of the PREMISES, TENANT shall be deemed to have agreed that the
PREMISES were as of the date of taking possession, in good order, repair and
condition. It is understood that the PREMISES are being let on an "As Is" basis
with no promises of the LANDLORD to alter, remodel, decorate, clean
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<PAGE>
or improve the PREMISES or the Building and no representation or warranty
expressed or implied, respecting the condition of the PREMISES or the Building
has been made by the LANDLORD to TENANT, unless the same is contained herein or
made a part hereof.
The parties acknowledge that the Americans With Disabilities Act of 1990
(42 U.S.C. (S)12101 et seq.) and regulations and guidelines promulgated
thereunder, as all of the same may be amended and supplemented from time to time
(collectively referred to herein as the "ADA") establish requirements under
Title III of the ADA ("Title III") pertaining to business operations,
accessibility and barrier removal, and that such requirements may be unclear and
may or may not apply to the PREMISES and the Building depending on, among other
things: (1) whether TENANT's business operations are deemed a "place of public
accommodation" or a "commercial facility," (2) whether compliance with such
requirements is "readily achievable" or "technically infeasible," and (3)
whether a given alteration affects a "primary function area" or triggers so-
called "path of travel" requirements.
11.
EXAMINATION OF PREMISES PRIOR TO TERMINATION OF LEASEHOLD
---------------------------------------------------------
At the Termination of this Term or any renewal or extension period, TENANT
shall yield possession of the Premises to LANDLORD in good condition and repair,
loss by fire or other casualty (except if such fire or other casualty is due to
the negligence of the TENANT) and ordinary wear and tear excepted, which shall
include but not be limited to removing any and all debris from the interior and
exterior of the Premises; repairing and/or replacing any and all heating, air-
conditioning and mechanical appurtenance and/or fixtures so that same are in
good working order; replacing any and all broken glass in and about the
Premises; cleaning the Premises so that they are returned to LANDLORD in a clean
and orderly condition including removal of any and all foreign materials on the
floor and walls of the Premises (including oil and other chemicals), and
delivering the keys to LANDLORD at the place of payment of the rent.
It is understood that whenever possible the parties will mutually inspect
the Premises prior to the Termination of the within LEASE for the purpose of
evaluating any and all repair or restoration work to be performed by TENANT in
order to return the Premises to LANDLORD in its condition prior to TENANT's
taking possession of the Premises. It is further understood that upon vacation
of the Premises by TENANT that LANDLORD shall re-inspect the Premises for the
purpose of determining whether or not all repairs and restoration required of
TENANT have been made, and that after such inspection any and all deposits with
LANDLORD shall be returned to TENANT, after deducting therefrom the estimated
costs of any and all repairs and/or restoration required to be performed by
TENANT which have not been made as of the time of TENANT's vacation of the
Premises and after the further deduction therefrom of any and all monies
estimated to be due to LANDLORD for the payment of any TAXES, OPERATING COSTS,
or other obligations of TENANT hereunder. TENANT shall be responsible for all
consequential damages
8
<PAGE>
to LANDLORD as a result of TENANT's failure to surrender the Premises in
accordance with this LEASE, and this clause shall survive the Termination of the
LEASE. If the Premises are not surrendered as aforesaid, TENANT shall indemnify
LANDLORD against any loss or liability resulting from the delay by TENANT in so
surrendering the Premises including, without limitation, any claims made by any
succeeding tenant. Upon finalization of any amounts estimated hereunder, any
additional amounts owed by TENANT to LANDLORD shall immediately be paid to
LANDLORD; and any additional amounts retained by LANDLORD shall be returned to
TENANT.
12.
USES PROHIBITED
---------------
TENANT shall not use, or permit the PREMISES or any part thereof to be
used, for any purpose or purposes other than as specified in Section 1 of this
LEASE. No use shall be made or permitted to be made of the PREMISES, nor acts
done, which will increase the existing rate of insurance upon the Building, or
cause a cancellation of any insurance policy covering the Building, or any part
thereof, nor shall TENANT sell, or permit to be kept, used or sold, in or about
the PREMISES, any article which may be prohibited by LANDLORD'S insurance
policies. The sale or serving of alcoholic beverages without LANDLORD's express
written consent and without first obtaining Dramshop Insurance naming LANDLORD
and its beneficiaries and the management agent as additional insured is hereby
prohibited. TENANT shall not commit or suffer to be committed, any waste upon
the PREMISES, or any public or private nuisance or other act or thing which may
disturb the quiet enjoyment of any other tenant in the Building, nor, without
limiting the generality of the foregoing, shall TENANT allow the PREMISES to be
used for any improper, immoral, unlawful or objectionable purpose. TENANT
agrees at all times to cause the PREMISES to be operated in compliance with all
federal, state, local or municipal environmental protection agency health and
safety laws, statutes, ordinances, and rules and regulations, so that no clean-
up claim or other obligation or responsibility arises from a violation of any of
the foregoing, and TENANT further agrees to promptly cure any such violation at
its own expense, and shall furthermore defend and indemnify LANDLORD, its Agents
and beneficiaries, mortgagees, and officers, agents, and employees thereof
respectively, for any and all liability, loss, costs (including reasonable
attorneys' fees and expenses), damages, responsibilities or obligations incurred
as a result of any violation of any of the foregoing. TENANT shall upon request
of LANDLORD certify in writing that it is to best of Tenant's knowledge in
compliance with applicable local, state and federal environmental rules,
regulations, statutes and laws for the preceding year. At the request of the
LANDLORD, TENANT shall submit to the LANDLORD, or shall make available for
inspection and copying upon reasonable notice and at reasonable times, any or
all of the documents and materials prepared by or for TENANT pursuant to any
environmental law or regulation or submitted to any governmental regulatory
agency in conjunction therewith. LANDLORD shall have reasonable access to the
PREMISES to inspect the same to confirm that the TENANT is using the PREMISES in
accordance with local, state and federal environmental rules, regulations,
statutes and laws. However, TENANT shall immediately notify LANDLORD in
writing, and provide copies of all written complaints,
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<PAGE>
claims, citations, demands, or inquiries relating to the condition of the
PREMISES or compliance with environmental laws. LANDLORD shall have reasonable
access to the PREMISES to inspect the same to confirm that the TENANT is using
the PREMISES in accordance with local, state and federal environmental rules,
regulations, statutes and laws. The provisions within this paragraph shall
survive Termination of this LEASE and shall be binding upon and shall inure to
the benefit of the parties hereto, their respective successors and assigns, and
mortgagees thereof.
13.
COMPLIANCE WITH LAW
-------------------
TENANT shall not use the PREMISES or permit anything to be done in or about
the PREMISES which in any way conflict with any law, statute, ordinance or
governmental rule or regulation now in force or which may hereafter be enacted
or promulgated. TENANT shall, at its sole cost and expense, promptly comply
with all laws, statutes, ordinances and governmental rules, regulations or
requirements now in force or which may hereafter be in force and with the
requirements of any board of fire underwriters, insurance companies or other
similar body now or hereafter constituted relating to or affecting the
condition, use or occupancy of the PREMISES, excluding structural changes not
related to or affected by TENANT's improvements or acts. The judgment of any
court of competent jurisdiction or the admission of TENANT in an action against
TENANT whether LANDLORD be a party thereto or not, that TENANT has violated any
law, statute, ordinance or governmental rule, regulation or requirement shall be
conclusive of that fact as between LANDLORD and TENANT.
14.
ALTERATIONS AND REPAIRS
-----------------------
TENANT shall not erect any partitions, make any alterations in or additions
other than those set forth on Appendix "A", or changes to the PREMISES without
the LANDLORD'S prior written approval in each and every instance, such consent
shall not be unreasonably withheld. Unless otherwise provided by written
agreement, all Tenant's Improvements upon the PREMISES and any replacements
therefore, including, but not limited to all air-conditioning or heating
systems, decorations, partitions, electrical systems affixed to the Premises,
except furniture or movable trade fixtures installed at the expense of TENANT,
shall become the property of the LANDLORD and shall remain upon, and be
surrendered with, the PREMISES as a part thereof at the termination of this
LEASE, without compensation to TENANT; unless, however, LANDLORD, by notice
given the TENANT, shall elect to have TENANT remove any or all such Tenant
Improvements. Thereupon TENANT shall accomplish such removal at its sole cost,
repair any damage caused by such removal, and restore the PREMISES to their
former condition. If TENANT does not remove said additions, decorations,
fixtures, hardware, non-trade fixtures and improvements after request
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<PAGE>
to do so by LANDLORD, LANDLORD may remove the same and TENANT shall pay the cost
of such removal to LANDLORD upon demand. TENANT hereby agrees to hold LANDLORD
and LANDLORD'S beneficiaries, their agents and employees harmless from any and
all liabilities of every kind and description which may arise out of or be
connected in any way with said alterations or additions. Any mechanic's lien
filed against PREMISES, or the Building or the Property, for work claimed to
have been furnished to TENANT shall be discharged of record by TENANT within ten
(10) days thereafter, at TENANT's expense, provided however TENANT shall have
the right to contest any such lien on the posting of reasonably sufficient
security.
15.
ABANDONMENT
-----------
During the Term, if TENANT shall abandon, vacate or surrender (whether at
the end of the stated Term or otherwise) the PREMISES, or be dispossessed by
process of law, or otherwise, any personal property belonging to TENANT and left
on the PREMISES shall be deemed abandoned, at the option of the LANDLORD.
16.
ASSIGNMENT AND SUBLETTING
-------------------------
TENANT shall not assign this LEASE, or any interest therein and shall not
sublet the PREMISES or any part thereof, or any right or privilege appurtenant
thereto, or suffer any other person to occupy or use the PREMISES, or any
portion thereof, without the written consent of LANDLORD first had and obtained
which consent shall not be unreasonably withheld or delayed.
TENANT shall, by notice in writing, advise LANDLORD of its intention from
on and after a stated date (which shall not be less than sixty (60) days after
the date of TENANT's notice) to assign or to sublet any such part or all of the
PREMISES for the balance or any part of the Term, and, in such event LANDLORD
shall have the right, to be exercised by giving written notice to TENANT thirty
(30) days after receipt of TENANT's notice, to recapture the space described in
TENANT's notice and such recapture notice shall, if given, cancel and terminate
this LEASE with respect to the space therein described as of the date stated in
TENANT's notice. TENANT's notice shall state the name and address of the
proposed subtenant or assignee and a true and complete copy of the proposed
sublease or assignment shall be delivered to LANDLORD with said notice. If
TENANT's notice shall cover all of the space hereby demised and if LANDLORD
shall give the aforesaid recapture notice with respect thereto, the Term of this
LEASE shall expire and end on the date stated in TENANT's notice as fully and
completely as if that date had been herein definitely fixed for the expiration
of the Term. If, however, this LEASE be cancelled pursuant to the foregoing
with respect to less than the entire PREMISES, the rental shall be adjusted on
the basis of the number of square feet retained by TENANT in proportion to the
rent, and this LEASE as so
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<PAGE>
amended shall continue thereafter in full force and effect. If LANDLORD, upon
receiving TENANT's said notice with respect to any such space, shall not
exercise its right to cancel as aforesaid, LANDLORD will not unreasonably
withhold its consent to TENANT's assigning or subletting the space covered by
its notice, provided; (i) at the time thereof TENANT is not in default under
this LEASE, (ii) LANDLORD, in its sole discretion reasonably exercised,
determines that the reputation, business, proposed use of the PREMISES and
financial responsibility of the proposed sublessee or occupant, as the case may
be, of the PREMISES are satisfactory to LANDLORD, (iii) any assignee or
subtenant shall expressly assume all the obligations of this LEASE on TENANT's
part to be performed; (iv) such consent if given shall not release TENANT of any
of its obligations (including, without limitation, its obligation to pay Base
Rent and ADDITIONAL RENT) under this LEASE, (v) TENANT agrees specifically to
pay over to LANDLORD, as ADDITIONAL RENT, all sums received by TENANT under the
Terms and conditions to such assignment or sublease, which are in excess of the
amounts otherwise required to be paid pursuant to the LEASE; and (vi) a consent
to one assignment, subletting occupation or use shall be limited to such
particular assignment, sublease or occupation and shall not be deemed to
constitute LANDLORD'S consent to an assignment or sublease to or occupation by
another person. Any such assignment or subletting without such consent shall be
void and shall, at the option of LANDLORD, constitute a default under this
LEASE. TENANT will pay all of LANDLORD'S costs associated with any such
assignment or subletting including but not limited to reasonable legal fees.
Notwithstanding the above, TENANT may, with prior written notice to
LANDLORD, assign or sub-let to any corporate parent, sister, or subsidiary
corporation or limited liability company, or partnership or trust with equal or
greater financial net worth. Upon any such assignment or subletting, TENANT
shall supply to LANDLORD such reasonable documentation to evidence same.
17.
SIGNS
-----
At LANDLORD'S sole cost, LANDLORD shall affix TENANT's name on the
BUILDING's directory and front and rear steel doors.
18.
DAMAGE TO PROPERTY - INJURY TO PERSONS
--------------------------------------
TENANT, as a material part of the consideration to be rendered to LANDLORD
under this LEASE, to the extent permitted by law, hereby waives all claims
except: (a) claims caused by or resulting from the non-performance of the
LANDLORD after written notice, or (b) willful and wanton conduct or negligence
of LANDLORD, its agents, servants or employees which TENANT
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or TENANT's successor or assigns may have against LANDLORD, or its agents,
servants, or employees for loss, theft or damage to the property and for
injuries to persons in, upon or about the PREMISES or the Building from any
cause whatsoever.
TENANT will hold LANDLORD, its agents, servants, and employees exempt and
harmless from and on account of any damage or injury to any person, or to the
goods, wares, and merchandise of any person, arising from the uses of the
PREMISES by TENANT or arising from the failure of TENANT to keep the PREMISES in
good condition as herein provided if non-performance by the LANDLORD or
negligence of the LANDLORD, its agents, servants or employees does not
contribute thereto. Neither LANDLORD nor its agents, servants, employees shall
be liable to TENANT for any damage by or from any act or negligence of any co-
tenant or other occupant of the same Building, or by any owner or occupant of
adjoining or contiguous property. TENANT agrees to pay for all damage to the
Building or the PREMISES, as well as all damage to tenants or occupants thereof
caused by TENANT's misuse or neglect of the PREMISES, its apparatus or
appurtenances or caused by any licensee, contractor, agent or employees of
TENANT. Notwithstanding the foregoing provisions, neither LANDLORD nor TENANT
shall be liable to one another for any loss, damage or injury caused by its act
or neglect to the extent that the other party has recovered the amount of such
loss, damage or injury from insurance and the insurance company is bound by this
waiver of liability.
Particularly, but not in limitation of the foregoing paragraph, all
property belonging to TENANT or any occupant of the PREMISES that is in the
Building or the PREMISES shall be there at the risk of TENANT or other person
only, and LANDLORD or its agent, servants, or employees (except in case of non-
performance by the LANDLORD or negligence or willful and wanton conduct of
LANDLORD or its agents, servants, employees) shall not be liable for: damage to
or theft of or misappropriation of such property; nor for any damage to property
entrusted to LANDLORD, its agents, servants, or employees, if any; nor for the
loss of or damage to any property by theft or otherwise, by any means
whatsoever, nor for any injury or damage to persons or property resulting from
fire, explosion, falling plaster, gas, electricity, snow, rain water which may
leak from the PREMISES or from the pipes, appliances or plumbing works therein
or from the roof, street or subsurface or from any other place or resulting from
dampness or any other cause whatsoever. TENANT shall give prompt written notice
to LANDLORD in case of fire or accidents in the PREMISES or in the Building or
of defects therein or in the fixtures or equipment.
In case any action or proceeding be brought against LANDLORD by reason of
any obligation on TENANT's part to be performed under the Term of this LEASE, or
arising from any act or negligence of the TENANT, or of its agents or employees,
TENANT, upon notice from LANDLORD shall defend the same at TENANT's expense by
counsel reasonably satisfactory to LANDLORD.
TENANT shall maintain in full force and effect during the Term of this
LEASE (including any period prior to the beginning of the Term during which
TENANT has taken possession in responsible companies with a Best Guide rating of
B+7 or better (i) Fire and Extended coverage
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insurance including an endorsement for vandalism and malicious mischief)
covering all TENANT's property in, on or about the PREMISES, with full waiver of
subrogation rights between LANDLORD and TENANT in an amount equal to the
replacement cost of such Property, (ii) Comprehensive General Liability
Insurance, including Broad Form Comprehensive General Liability Option, insuring
TENANT against all claims, demands or actions for injury to or death of any one
person and damage to property in an amount of not less than ONE MILLION
($1,000,000.00) DOLLARS combines single limit per occurrence plus TEN MILLION
($10,000,000.00) DOLLARS excess liability coverage; and furthermore fire-legal
and/or TENANT's legal liability in an amount not less than ONE HUNDRED THOUSAND
($100,000.00 DOLLARS, and (iii) workman compensation insurance as required by
law. All liability policies shall cover the entire PREMISES.
All such policies, shall name LANDLORD, any mortgagees of LANDLORD, and all
other parties designated by LANDLORD as Additional Insured. All insurance
policies shall indicate that at least thirty (30) days prior written notice
shall be delivered to all additional parties insured by the insurer prior to
termination of cancellation of such insurance and TENANT shall provide
Certificates of Insurance, not less than ten (10) days prior to the COMMENCEMENT
DATE, evidencing the aforesaid coverage to all insured parties. TENANT shall
not violate or permit a violation of any of the conditions or terms of any such
insurance policies and shall perform and satisfy all reasonable requirements of
the insurance company issuing such policies.
19.
DAMAGE OR DESTRUCTION
---------------------
In the event the PREMISES or the Building are damaged by fire or other
insured casualty and the insurance proceeds have been made available therefor by
the holder or holders of any mortgages or deeds of trust covering the Building,
the damage shall be repaired by and at the expense of LANDLORD to the extent of
such insurance proceeds available therefor, provided such repairs can, in
LANDLORD'S sole opinion, be made within ninety (90) days after the occurrence of
such damage without the payment of overtime or other premiums. Until such
repairs are completed, the Base Rent shall be abated in proportion to the part
of the PREMISES which is unusable by TENANT in the conduct of its business. If
repairs cannot, in LANDLORD'S sole and reasonable opinion be made within ninety
(90) days, LANDLORD shall notify TENANT within thirty (30) days of the date of
occurrence of such damage as to whether or not LANDLORD elects to make such
repairs and if no such notice is given, LANDLORD shall be deemed to have elected
to make such repairs. If LANDLORD elects not to make such repairs or such
repairs cannot be made within ninety (90) days of notice, then either party may,
by written notice to the other, cancel this LEASE as of the date of the
occurrence of such damage. Except as provided in this Section, there shall be
no abatement of rent and no liability of LANDLORD by reason of any injury to or
interference with TENANT's business or property arising from any such fire or
other casualty or from the making or not making of any repairs, alterations or
improvements in or to any portion of the Building or the PREMISES or in or to
fixtures, appurtenances and equipment therein. TENANT
14
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understands that LANDLORD will not carry insurance of any kind on TENANT's
furniture or furnishings or inventory or on any fixtures or equipment removable
by TENANT under the provisions of this LEASE and that LANDLORD shall not be
obliged to repair any damage thereto or replace the same. LANDLORD shall not be
required to repair any injury or damage caused by fire or other cause, or to
make any repairs or replacements to or of improvements installed in the PREMISES
by TENANT.
20.
ENTRY BY LANDLORD
-----------------
LANDLORD and its agents shall have the right to enter the PREMISES at all
reasonable times after reasonable prior notice to TENANT except in case of an
emergency for the purpose of examining or inspecting the same, and any other
service to be provided by LANDLORD to TENANT hereunder, to show the same to
prospective purchasers or tenants of the Building, and make such alterations,
repairs, improvements, or additions, whether structural or otherwise, to the
PREMISES or to the Building as LANDLORD may deem necessary or desirable.
LANDLORD may enter by means of master key without liability to TENANT except for
any failure to exercise due care for TENANT's property and without affecting
this LEASE. LANDLORD shall use reasonable efforts on any such entry not to
unreasonably interrupt or interfere with TENANT's use and occupancy of the
PREMISES.
21.
INSOLVENCY OR BANKRUPTCY
------------------------
If at any time during the Term demised or prior thereto there shall be
filed by or against TENANT in any court pursuant to any statute, either of the
United States or of any state, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of TENANT's property, and within thirty (30) days thereof TENANT fails
to secure a discharge thereof, or if TENANT makes an assignment for the benefit
of creditors, this LEASE, at the option of LANDLORD, exercised within a
reasonable time after notice of the happening of any one or more of such events,
may be cancelled and terminated and in which event neither TENANT nor any person
claiming through or under TENANT by virtue of any statute or of an order of any
court shall be entitled to possession or to remain in possession of the PREMISES
demised but shall forthwith quit and surrender the PREMISES, and LANDLORD, in
addition to the other rights and remedies LANDLORD has by virtue of any other
provision herein or elsewhere in this LEASE contained or by virtue of any
statute or rule of law, may retain as liquidated damages any rent, security
deposit or monies received by it from TENANT or others in behalf of TENANT.
Notwithstanding anything to the contrary herein contained, the event of
cancellation of this LEASE as provided in this paragraph, LANDLORD shall upon
such Termination be entitled to recover
15
<PAGE>
damages in an amount equal to the present value of the rent specified under
Sections Five (5), Six (6), and Seven (7).
22.
DEFAULT
-------
If any of the following events of default shall occur, to wit:
(a) TENANT defaults for more than five (5) days after notice of default
after the due date therefor in the payment of rent (whether Base Rent
or ADDITIONAL RENT) or any other sum required to be paid hereunder, or
any part thereof, or
(b) TENANT defaults in the prompt and full performance of any other (i.e.
other than payment of rent or any other sum) covenant, agreement or
condition of this LEASE and such other default shall continue for a
period of twenty (20) days after notice thereof from LANDLORD to
TENANT, provided, however that such period shall be extended for a
reasonable time not to exceed thirty (30) days, provided that tenant
is diligently attempting to cure such default (unless such other
default involves a hazardous condition, in which event it shall be
cured forthwith), or
(c) The leasehold interest of TENANT be levied upon under execution or be
attached by process of law, or if TENANT abandons the PREMISES, or
(d) Bankruptcy or insolvency of TENANT
then in any such event, LANDLORD, besides other rights or remedies, it may have,
shall have the immediate right of re-entry and may remove all persons and
property from the PREMISES; such Property may be removed and stored in any other
place in the Building in which the PREMISES are situated or in any other place,
for the account of and at the expense and at the risk of TENANT.
TENANT hereby waives all claims for damages which may be caused by the re-
entry of LANDLORD and taking possession of the PREMISES or removing or storing
the furniture and property as herein provided, and will save LANDLORD harmless
from any loss, costs, or damages occasioned LANDLORD thereby, and no such re-
entry shall be considered or construed to be a forcible entry.
Should LANDLORD elect to re-enter, as herein provided, or should it take
possession pursuant to legal proceedings or pursuant to any notice provided for
by law; it may either terminate this LEASE or it may from time to time, without
terminating this LEASE, re-let the PREMISES or any part thereof for such Terms
and at such rental or rentals and upon such other Terms and
16
<PAGE>
conditions as LANDLORD in its sole discretion may deem advisable, with the right
to make alterations and repairs to the PREMISES.
LANDLORD may elect to apply rentals received by it (i) to the payment of
any indebtedness, other than rent, due hereunder from TENANT to LANDLORD; (ii)
to the payment of any cost of such re-letting including but not limited to any
broker's commissions or fees in connection therewith; (iii) to the payment of
the cost of any alterations and repairs to the PREMISES; (iv) to the payment of
rent due and unpaid hereunder; (v) the residue, if any, shall be held by
LANDLORD and applied in payment of future rent as the same may become due and
payable hereunder. Should such rentals received from such re-letting after
application by LANDLORD to the payments described in foregoing clauses (i)
through (iv) during any month be less than that agreed to be paid during that
month by TENANT hereunder, then TENANT shall pay such deficiency to LANDLORD.
Such deficiency shall be calculated and paid monthly on demand by LANDLORD.
In lieu of electing to receive and apply rentals as provided in the
immediately preceding paragraph, LANDLORD may elect to receive from TENANT as
and for LANDLORD'S liquidated damages for TENANT's default, an amount equal to
the entire amount of Base Rent provided for in this LEASE for the remainder of
the Term, which amount shall be forthwith due and payable by TENANT upon its
being advised of such election by LANDLORD.
No such re-entry or taking possession of the PREMISES by LANDLORD shall be
construed as an election on its part to terminate this LEASE unless a written
notice of same is given to TENANT or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any such re-letting
without termination, LANDLORD may at any time thereafter elect to terminate this
LEASE for such previous breach.
Nothing herein contained shall limit or prejudice the right of LANDLORD to
provide for and obtain as damages by reason of any such termination of this
LEASE or of possession an amount equal to the maximum allowed by any statute or
rule of law in effect at the time when such termination takes place, whether or
not such amount be greater, equal to or less than the amounts of damages which
LANDLORD may elect to receive as set forth above. Notwithstanding anything to
the contrary herein contained or any other rights exercised by LANDLORD
hereunder, upon the occurrence of an event of a monetary or material default by
TENANT under the Terms of this LEASE, rent which otherwise would be due or would
have been due shall be immediately due and payable.
LANDLORD shall not be in default hereunder and TENANT shall not have any
remedy or cause of action unless LANDLORD fails to perform any of its
obligations hereunder within THIRTY (30) days after written notice from TENANT
specifying such failure (unless such performance will, due to the nature of the
obligation, require a period of time in excess of THIRTY (30) days, then after
such period of time as is reasonably necessary). All obligations of LANDLORD
hereunder shall be construed as covenants, not conditions; and, except as may be
otherwise provided in this LEASE, TENANT may not terminate this LEASE for breach
of
17
<PAGE>
LANDLORD's obligations hereunder. All such obligations of LANDLORD under this
LEASE will be binding upon LANDLORD only during the period of its ownership of
the PREMISES and not thereafter. The term "LANDLORD" in this LEASE shall mean
only the owner, for the time being of the PREMISES, and in the event of the
transfer by such owner of its interest in the PREMISES, such owner shall
thereupon be released and discharged from all obligations of LANDLORD thereafter
accruing, but shall obligations shall be binding during the LEASE Term upon each
new owner provided such successor assumes LANDLORD's obligations hereunder for
the duration of such owner's ownership.
23.
NON REAL ESTATE TAXES
---------------------
During the Term hereof, TENANT shall pay prior to delinquency all TAXES
assessed against and levied upon fixtures, furnishings, equipment and all other
personal property of TENANT contained in the PREMISES, and TENANT shall cause
said fixtures, furnishing, equipment and other personal property to be assessed
and billed separately from the real property of LANDLORD. In the event any or
all of the TENANT's fixtures, furnishings, equipment and other personal property
shall be assessed and taxed with the LANDLORD'S real property, the TENANT shall
pay to LANDLORD its share of such TAXES within ten (10) days after delivery to
TENANT by LANDLORD of a statement in writing setting forth the amount of such
TAXES applicable to the TENANT's property.
24.
EMINENT DOMAIN
---------------
If the PROPERTY, or a substantial part thereof or a substantial part of
the PREMISES, shall be lawfully taken or condemned or conveyed in lieu thereof,
(or conveyed under threat of such taking or condemnation), for any public or
quasi-public use or purpose, the Term of this LEASE shall end the day before the
taking of possession by the condemning authority and without apportionment of
the award. TENANT hereby assigns to LANDLORD TENANT's interest, if any, in such
award and specifically agrees that any such award shall be the entire property
of LANDLORD in which TENANT shall not be entitled to share. TENANT further
waives any right to challenge the right of condemning authority to proceed with
such taking. Current rent shall be apportioned as of the date of such
Termination. If any part of the PROPERTY other than the PREMISES or not
constituting a substantial part of the PREMISES, shall be so taken or condemned
(or conveyed under threat of such taking or condemnation), LANDLORD shall have
the right to cancel this LEASE upon not less than ninety (90) days notice prior
to the date of cancellation designated in the notice. No money or other
consideration shall be payable by LANDLORD to TENANT for the right of
cancellation, and TENANT shall have no right to share in any
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condemnation award or in any judgment for damages or in any proceeds of any sale
made under any threat of condemnation or taking. TENANT shall have the right to
separately pursue its own award in the event of such condemnation proceedings.
25.
SUBORDINATION
-------------
LANDLORD has heretofore and may hereafter from time to time execute and
deliver mortgages or trust deeds in the nature of a mortgage, both referred to
herein as "Mortgages" against the Land and Building, or any interest therein.
If requested by the Mortgagee or trustee under any Mortgage, TENANT will either
(a) subordinate its interest in this LEASE to said Mortgages, and to any and all
advances made thereunder and to the interest thereon, and to all renewals,
replacements, modifications and extensions thereof, or (b) make TENANT's
interest in this LEASE inferior thereto; and TENANT will promptly execute and
deliver such agreement or agreements as may be reasonably required by such
mortgage or trustee under any Mortgage, provided however that any such
subordination shall provide that so long as TENANT is not in default hereunder,
its tenancy and rights of quiet enjoyment shall not be disturbed.
It is further agreed that (a) if any Mortgage shall be foreclosed (i) the
liability of the mortgagee or trustee thereunder or purchaser at such
foreclosure sale or the liability of a subsequent owner designated as LANDLORD
under this LEASE shall exist only so long as such trustee, mortgagee, purchaser
or owner is the owner of the Building and such liability shall not continue or
survive after further transfer of ownership; and (ii) upon request of the
mortgagee or trustee, TENANT will attorn, as TENANT under this LEASE, to the
purchaser at any foreclosure sale under any mortgage, and TENANT will execute
such instruments as may be necessary or appropriate to evidence such attornment;
and (b) this LEASE may not be modified or amended so as to reduce the rent or
shorten the Term provided hereunder, or so as to adversely affect in any other
respect to any material extent the rights of the LANDLORD, nor shall this LEASE
be cancelled or surrendered without the prior written consent, in each instance
of the mortgagee or trustee under any Mortgage. It is understood that TENANT's
tenancy and rights of quiet enjoyment shall not be disturbed so long as TENANT
is not in default under this LEASE.
LANDLORD is hereby irrevocably appointed and authorized as agent and
attorney-in-fact of TENANT to execute all such subordination instruments in the
event TENANT fails to execute said instruments within five (5) days after notice
from LANDLORD demanding the execution thereof. Said notice may be given in the
manner hereinafter provided for giving notice.
TENANT agrees to give any mortgagees and/or trust deed holders, by
registered mail, a copy of any notice of default served upon the LANDLORD by
TENANT provided that prior to such notice TENANT has received notice (by way of
service on TENANT of a copy of an assignment of rents and leases, or otherwise)
of the address of such mortgagees and/or trust deed holders.
19
<PAGE>
TENANT further agrees that if LANDLORD shall have failed to cure such default
within the time provided for in this LEASE, then the mortgagees and/or trust
deed holders shall have an additional thirty (30) days after receipt of notice
thereof within which to cure such default or if such default cannot be cured
within that time, then such additional time as may be necessary, if, within such
thirty (30) days, any mortgagee and/or trust deed holder has commenced and is
diligently pursuing the remedies necessary to cure such default (including but
not limited to commencement of foreclosure proceedings, if necessary to effect
such cure). Such period of time shall be extended by any period within which
such mortgagee and/or trust deed holder is prevented from commencing or pursuing
such foreclosure proceedings by reason of LANDLORD'S bankruptcy. Until the time
allowed as aforesaid for mortgagee and/or trust deed holder to cure such
defaults has expired without cure, TENANT shall have no right to and shall not
terminate this LEASE on account of default.
No mortgagee and no person acquiring title to the demised premises by
reason of foreclosure of any mortgage or by conveyance in lieu of foreclosure
shall have any obligation or liability to TENANT on account of any security
deposit unless such mortgagee or title holder shall receive such security
deposit in cash.
26.
WAIVER
------
The waiver of LANDLORD of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition or any subsequent breach of the same or any other term, covenant, or
condition herein contained. The acceptance of rent hereunder shall not be
construed to be a waiver of any breach by TENANT of any term, covenant or
condition of this LEASE. It is understood and agreed that the remedies herein
given to LANDLORD shall be cumulative, and the exercise of any one remedy by
LANDLORD shall not be to the exclusion of any other remedy. It is also agreed
that after the service of notice or the commencement of a suit or judgment for
possession of the PREMISES, LANDLORD may collect and receive any monies due, and
the payment of said monies shall not waive or affect said notice, suit or
judgment.
27.
INABILITY TO PERFORM
--------------------
This LEASE and the obligation of TENANT to pay Rent (Base and Additional)
hereunder and perform all of the other covenants and agreements hereunder on
part of TENANT to be performed shall not be affected, impaired or excused, nor
shall LANDLORD at any time be deemed to be in default hereunder because LANDLORD
is unable to fulfill any of its obligations under this LEASE or to supply or is
delayed in supplying any service expressly or by implication to be supplied
20
<PAGE>
or is unable to make, or is delayed in making any TENANT improvement, repair,
additions, alterations, or decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if LANDLORD is prevented or delayed from so
doing by reason of strike or labor troubles or any outside cause whatsoever
beyond the reasonable control of LANDLORD, including but not limited to riots
and civil disturbances or energy shortages or governmental preemption in
connection with a national emergency or by reason of any rule, order, or
regulation of any department or subdivision thereof of any government agency or
by reason of the conditions of supply and demand which have been or are affected
by war or other emergency.
28.
SUBROGATION
-----------
The parties hereto agree to use good faith efforts to have any and all
fire, extended coverage or any and all material damage insurance which may be
carried endorsed with a subrogation clause substantially as follows: "This
insurance shall not be invalidated should the insured waive in writing prior to
a loss any or all right of recovery against any party for loss occurring to the
property described herein"; and each party hereto waives all claims for recovery
from the other party for any loss or damage (whether or not such loss or damage
is caused by negligence of the other party and notwithstanding any provision or
provisions contained in this LEASE to the contrary) to any of its property
insured under valid and collectible insurance policies to the extent of any
recovery collectible under such insurance, subject to the limitation that this
waiver shall apply only when it is permitted by the applicable policy insurance.
29.
SALE BY LANDLORD
----------------
In the event of a sale or conveyance by LANDLORD of the PROPERTY containing
the PREMISES, the same shall operate to release LANDLORD from any future
liability upon any of the covenants or conditions, expressed or implied, herein
contained in favor of TENANT, and in such event TENANT agrees to look solely to
the responsibility of the successor in interest of LANDLORD in and to this LEASE
provided such successor assumes LANDLORD'S obligations hereunder. If any
security deposit has been made by TENANT hereunder, LANDLORD may transfer such
security deposit to such successor in interest of LANDLORD and thereupon
LANDLORD shall be released from any further obligations hereunder, provided that
LANDLORD notifies TENANT as to the transfer of the Security Deposit. This LEASE
shall not be affected by any such sale, and the TENANT agrees to attorn to the
Purchaser or assignee.
30.
21
<PAGE>
RIGHTS OF LANDLORD TO PERFORM
-----------------------------
All covenants and agreements to be performed by TENANT under any of the
terms of this LEASE shall be performed by TENANT at TENANT's sole cost and
expense and without any abatement of rent. If TENANT shall fail to pay any sum
of money, other than rent, required to be paid it hereunder, or shall fail to
perform any other act on its part to be performed hereunder, and such failure
shall continue for fifteen (15) days after notice thereof by LANDLORD, LANDLORD
may, but shall not be obligated so to do, and without waiving or release TENANT
from any obligations of TENANT, make any such payment or perform any such other
act on TENANT's part to be made or performed as in this LEASE provided. All sums
so paid by LANDLORD and all necessary incidental costs together with interest
thereon at the rate set forth in Section 5 of this LEASE computed from the date
of such payment by LANDLORD shall be payable to LANDLORD and the LANDLORD shall
have (in addition to any other right or remedy of LANDLORD) the same rights and
remedies in the event of the non-payment thereof by TENANT as in the case of
default by TENANT in the payment of rent.
31.
ATTORNEYS' FEES
---------------
In the event of any litigation between TENANT and LANDLORD to enforce any
provision of this LEASE, the unsuccessful litigant in such litigation, shall pay
to the successful litigant all costs and expenses, including reasonable
attorney's fees, incurred by the successful litigant at trial and on any appeal
therein. Moreover, if LANDLORD or TENANT, without fault is made a party to any
litigation instituted by or against the other, the other shall indemnify the
faultless one against and save it harmless from all other costs and expenses,
including reasonable attorneys' fees incurred by it in connection therewith.
32.
ESTOPPEL CERTIFICATE
--------------------
TENANT shall at any time and from time to time upon not less than ten (10)
days' prior written notice from LANDLORD execute, acknowledge and deliver to
LANDLORD a statement in writing certifying that this LEASE is unmodified and in
full force and effect (or if modified, stating the nature of the modification
and certifying that this LEASE, as so modified, is in full force and effect) and
the dates to which the rental and other charges are paid and acknowledging that
there are not, to TENANT's knowledge, any uncured defaults on the part of
LANDLORD hereunder or specifying such defaults if any are claimed. It is
expressly understood and agreed that any such statement may be relied upon by
any prospective purchaser or encumbrancer of all or any portion of the real
property of which the PREMISES are a part. TENANT's failure to deliver such
statement
22
<PAGE>
within such time shall be conclusive upon TENANT that this LEASE is in full
force and effect, without modification except as may be represented by LANDLORD,
that there are no uncured defaults in LANDLORD'S performance and that not more
than two (2) months' rental has been paid in advance.
33.
PREPARATION
-----------
LANDLORD, at its sole expense, agrees to cause the PREMISES to be completed
in accordance with the plans, approved by both parties and attached hereto as
Appendix "A" and made a part of this LEASE.
34.
NOTICE
------
Any notice from LANDLORD to TENANT or from TENANT to LANDLORD may be served
personally or by mail, or by any nationally recognized overnight courier. If
any notice is transmitted by facsimile transmission or similar means, the same
shall be deemed served or delivered upon telephone confirmation of receipt of
the transmission thereof, provided a copy is also delivered via delivery or
mail. If served by mail, notice shall be deemed served on the second day after
mailing by registered or certified mail, addressed to TENANT at the PREMISES
with a copy to TENANT at 12614 Hempstead Highway, Houston, TX 77092-4627 or to
LANDLORD at the place from time to time established for the payment of rent. If
served by overnight courier, notice shall be deemed served on the first business
day after delivery to the courier.
35.
DEPOSIT
-------
TENANT shall deposit with LANDLORD's beneficiaries the sum of FOUR
THOUSAND-FIVE HUNDRED ($4,500) DOLLARS payable upon execution of the LEASE as
security deposit for the full and faithful performance of every provision of
this LEASE to be performed by TENANT. If TENANT defaults with respect to any
provision of this LEASE, including but not limited to the provisions relating to
the payment of rent, LANDLORD may use, apply or retain all or any part of this
security deposit or any other deposit made under this LEASE, for the payment of
any rent and any other sum in default, or for the payment of any other amount
which LANDLORD may spend or become obligated to spend by reason of TENANT's
default or to compensate LANDLORD for any other loss or damage which LANDLORD
may suffer by reason of TENANT's default. If any
23
<PAGE>
portion of said deposit is to be used or applied, TENANT shall within five (5)
days after written demand therefor deposit cash with LANDLORD in an amount
sufficient to restore the security deposit to its original amount and TENANT's
failure to do so shall be a material breach of this LEASE. LANDLORD shall not be
required to keep this security deposit separate from its general funds and
TENANT shall not be entitled to interest on such deposit. If TENANT shall fully
and faithfully perform every provision of this LEASE to be performed by it, the
security deposit or any balance thereof shall be returned to TENANT (or at
LANDLORD'S option to the last assignee of TENANT's interest hereunder) at the
expiration of the LEASE Term and upon TENANT's vacation of the PREMISES.
36.
OMIT
----
37.
QUIET ENJOYMENT
---------------
So long as TENANT shall observe and perform its covenants and agreements
hereunder, TENANT shall, at all times during the Term herein granted, peacefully
and quietly have and enjoy possession of the Premises without any encumbrance or
hindrance by, from or through LANDLORD, its successors or assigns.
38.
RIGHTS RESERVED
---------------
LANDLORD reserves the following rights, exercisable without notice and
without liability to TENANT for damage or injury to property, person or business
and without effecting an eviction, constructive or actual or disturbance of
TENANT's use of possession or giving rise to any claim for set-off or abatement
of rent:
(a) To change the Building's name;
(b) To install, affix and maintain any and all signs on the exterior of
the Building and to prescribe the location and style of the unit
number and identification sign or lettering for the PREMISES occupied
by TENANT;
24
<PAGE>
(c) To designate and approve, prior to installation, all types of window
shades, blinds, drapes, awnings;
(d) No locks or bolts shall be altered, changed or added without the prior
written consent of LANDLORD;
(e) To enter the PREMISES at reasonable hours for reasonable purposes, to
provide the services to be provided to TENANT hereunder;
(f) From time to time to make and adopt such reasonable rules and
regulations for the protection and welfare of the Building and its
tenants and occupants, as the LANDLORD may determine, and the TENANT
agrees to abide by all such rules and regulations;
(g) To have and retain a paramount title to the PROPERTY free and clear of
any act of TENANT;
(h) Omit;
(i) To allocate parking on a reasonable basis.
(j) During the last six (6) months of the Leasehold Term, LANDLORD hereby
reserves the right to place marketing signs on the Property offering
said Property for lease.
39.
OMIT
----
40.
REAL ESTATE BROKER
------------------
TENANT/LANDLORD represents that TENANT/LANDLORD has dealt directly with and
only with ROTHBART REALTY COMPANY as broker in connection with this LEASE and
agrees to indemnify and hold LANDLORD harmless from all claims or demands of any
other broker or brokers for any commission alleged to be due such broker of
brokers in connection with its participating in the negotiation with
TENANT/LANDLORD of this LEASE. The Principals of Rothbart Realty Company have
an ownership interest in the Property which is the subject matter of this LEASE.
25
<PAGE>
41.
USE OF LOADING DOCK AND COMMON AREAS
------------------------------------
TENANT shall use and cause all employees, agents, invitees and licensees to
use the common areas of the BUILDING and PROPERTY, including but not limited to
the sidewalks, driveways, parking lot, and the loading dock on the PROPERTY, in
such a manner as to prevent disruption to other tenants and LANDLORD. No
vehicles or material shall be permitted to block sidewalks or driveways nor
shall any vehicle be parked in the parking lot for longer than is necessary for
the customary business purposes of TENANT. All vehicles using a loading dock
shall unload in an expedient manner. If, after three (3) notices to TENANT by
LANDLORD, of a violation of this Section, and such violation is not cured,
LANDLORD may remove such vehicles or material as are in violation of this
Section and TENANT shall pay LANDLORD's expenses in connection therewith, on
demand. LANDLORD shall have no responsibility for loss or damage to such
vehicles or material, it being understood that the removal is at TENANT's sole
risk.
42.
OMIT
----
43.
ACCORD AND SATISFACTION
-----------------------
No payment by TENANT or receipt by LANDLORD of a lesser amount than any
installment or payment of Base Rent and or ADDITIONAL RENT due shall be deemed
to be other than on account of the amount due, and no endorsement or statement
on any check or payment of Base Rent and or ADDITIONAL RENT shall be deemed an
accord and satisfaction. LANDLORD may accept such check or payment without
prejudice to LANDLORD's right to recover the balance of such installment or
payment of Base Rent and or ADDITIONAL RENT, or pursue any other remedies
available to LANDLORD.
44.
MISCELLANEOUS PROVISIONS
------------------------
(a) The Term "OFFICE" or "OFFICES" wherever used in this LEASE, shall not
be construed to mean or permit the PREMISES to be used as a store or
stores, for the sale or display, at any time, of goods, wares, or
merchandise of any kind, or as a
26
<PAGE>
restaurant, shop, booth. The words "RE-ENTER" or "RE-ENTRY" as used in
this LEASE, are not restricted to their technical legal meaning. The
Term "LANDLORD" as used in this LEASE means only the LANDLORD from
time to time and upon conveying its interest, such conveying LANDLORD
shall be relieved from any further obligation or liability provided
such successor assumes LANDLORD'S obligations hereunder.
(b) Time is of the essence of this LEASE and each and all of its
provisions.
(c) Submission of this instrument for examination or signature by TENANT
does not constitute a reservation or offer or option for LEASE, and it
is not effective as a LEASE or otherwise.
(d) The invalidity or unenforceability of any provision hereof shall not
affect or impair any other provisions.
(e) This LEASE shall be governed by and construed pursuant to the
laws of the State of Illinois.
(f) Should any mortgage require a modification of this LEASE, which
modifications will not bring about any increased cost or expense to
TENANT or in any other way substantially change the rights and
obligations of TENANT hereunder, then and in such event, TENANT agrees
not to unreasonably withhold its consent so that this LEASE may be so
modified. If within fifteen (15) days after written notice from
LANDLORD to TENANT, TENANT fails or refuses to execute such
modification, LANDLORD shall have the right to execute any instrument
for and on behalf of TENANT as its attorney-in-fact. In acknowledgment
thereof, TENANT hereby appoints LANDLORD as its irrevocable attorney-
in-fact solely to execute any instruments required to carry out the
intent of this Section on behalf of TENANT.
(g) TENANT agrees to provide to LANDLORD, upon request and not more often
than once a year, a current Balance Sheet of TENANT certified by an
authorized representative of TENANT to be true and correct, and
further agrees to provide any other credit, banking, or financial
information reasonably requested by LANDLORD.
(h) All rights and remedies of LANDLORD under this LEASE, or that may be
provided by law, may be exercised by LANDLORD in its own name
individually, or in its name by its agent, and all legal
proceedings for the enforcement of any such rights or remedies,
including distress for rent, forcible detainer, and any other
legal or equitable proceedings, may be commenced and
prosecuted to final judgment and execution by LANDLORD in its
own name individually or in its name or by its agent. TENANT
conclusively agrees that
27
<PAGE>
LANDLORD has full power and authority to execute this LEASE and
to make and perform the agreements herein contained and TENANT
expressly stipulates that any rights or remedies available to
LANDLORD either by the provision of this LEASE or otherwise may
be enforced by LANDLORD in its own name individually or in its
name by agent or principal.
(i) Any of the covenants and conditions of this LEASE shall survive
Termination of the LEASE.
(j) The marginal headings and titles to the paragraphs of this LEASE are
not a part of this LEASE and shall have no effect upon the
construction or interpretation of any part hereof.
(k) If TENANT is a corporation and if at any time during the LEASE Term
the person or persons who owns a majority of its voting shares at the
time of the execution of this LEASE cease to own a majority of such
shares (except as a result of transfers by gift, bequest or
inheritance) TENANT shall so notify LANDLORD and LANDLORD may
Terminate this LEASE by notice to TENANT given within ninety (90)
days thereafter. This Section shall not apply whenever TENANT is a
corporation, the outstanding voting stock of which is listed on a
recognized security exchange or if at least ninety (90%) percent of
its voting stock is owned by another corporation, the voting stock of
which is so listed. For the purposes of this Section, stock ownership
shall be determined in accordance with the principles set forth in
Section 544 of the Internal Revenue Code of 1954 as the same existed
on August 16, 1954, and the Term "voting stock" shall refer to shares
of stock regularly entitled to vote for the election of directors of
the corporation.
If TENANT is a limited or general partnership (or is comprised of two
(2) or more persons, individually or as co-partners), the change or
conversion of TENANT to (i) a limited liability company, (ii) a
limited liability partnership, or (iii) any other entity which
possesses the characteristics of limited liability (any such limited
liability company, limited liability partnership, or entity is
collectively referred to as a "Successor Entity") shall be prohibited
unless the prior written consent of LANDLORD is obtained, which
consent may be withheld in LANDLORD's sole discretion. LANDLORD agrees
not to unreasonably withhold or delay such consent provided that: (1)
the Successor Entity succeeds to all or substantially all of TENANT's
business and assets; (2) the Successor Entity shall have a net worth
("Net Worth") not less than the greater of the Net Worth of TENANT on
(i) the date of execution of the LEASE, or (ii) the day immediately
preceding the proposed effective date of such conversion; (3) TENANT
is not in default of any of the terms, covenants, or conditions of
this LEASE on the proposed effective date of such conversion; and (4)
TENANT shall cause each partner of TENANT to execute and deliver to
LANDLORD an agreement in form and substance satisfactory to
28
<PAGE>
LANDLORD, wherein each such partner agrees to remain personally liable
for all of the terms, covenants, and conditions of the LEASE that are
to be observed and performed by the Successor Entity.
(l) AUTHORITY: TENANT represents and warrants that it is duly formed and
in good standing, and has full corporate or partnership power and
authority, as the case may be, to enter into this LEASE and has taken
all corporate or partnership action, as the case may be, necessary to
carry out the transaction contemplated herein, so that when executed,
this LEASE constitutes a valid and binding obligation enforceable in
accordance with its terms.
(m) This LEASE includes Appendix A which constitute a part of this LEASE.
(n) WAIVER OF RIGHT TO TRIAL BY JURY. LANDLORD and TENANT hereby waive
any right to a trial by jury in any action or proceeding based upon,
or related to, a monetary matter of this LEASE. This waiver is
knowingly, intentionally, and voluntarily made by each of parties
hereto and each party acknowledges to the other that neither the other
party nor any person acting on its respective behalf has made any
representations to induce this waiver of trial by jury or in any way
to modify or nullify its effect. The parties acknowledge that they
have read and understand the meaning and ramifications of this waiver
provision and have elected same of their own free will.
(o) In the event carpeting is furnished by LANDLORD, TENANT will be fully
responsible for and upon LANDLORD's request will pay for any damage to
carpeting caused by lack of protection mats under desk chairs or
equipment or any other abnormal puncture and wearing of carpet.
(p) TENANT shall not paint the block walls of the leased Premises without
the LANDLORD's prior written consent.
(q) TENANT agrees to store all waste, scrap, garbage, etc in enclosed
metal containers and agrees not to permit any non-operating motor
vehicles to be stored on Premises. Waste containers are to be stored
within the rentable portion of the building. No outside storage of
materials and equipment shall be permitted. TENANT shall not store any
items on the deck above any plant washroom areas, or offices.
(r) Whenever a provision in this LEASE is stated to apply to the Term of
this LEASE, or words of similar import, the same shall be deemed to
mean and include any Extended or Option Terms as well, unless specific
reference is made to such provision as having applicability only to
all or any portions of the Initial Term (from JANUARY 15, 1996 through
FEBRUARY 28, 1999) and/or any Extended or Option Term or Extended
Option Terms.
29
<PAGE>
(s) Whenever a reference is made in this LEASE, or in an Amendment to this
LEASE, to either the Commencement Date or the date by which TENANT
initially took Possession of the Premises, for the purpose of
determining the condition to which the Premises are to be restored
upon Termination of the LEASE or the condition of the Premises at the
time the TENANT first took Possession of the Premises, then in either
such event, the Commencement Date for the aforementioned purposes
shall be deemed to be the earlier of JANUARY 15, 1996, which was the
original Commencement Date or date by which the Tenant initially took
Possession of the Premises under this LEASE.
45.
OPTION TO EXTEND
----------------
A) Provided TENANT is not in default under the terms and conditions of
the LEASE, at the time of TENANT's exercise of this Option and at the time that
the Extension is scheduled to commence, TENANT shall have the option exercisable
by written notice to LANDLORD given no later than AUGUST 31, 1998 to extend the
Term of this LEASE for an additional period of THREE (3) years, commencing on
MARCH 1, 1999 and ending on FEBRUARY 28, 2002, on the same terms and conditions
hereunder except for the Base Rent. If said written notification of the exercise
of Option is not so given and received, this Option shall automatically expire.
Notwithstanding Section 16 herein, TENANT hereby acknowledges that the within
Option shall not be transferred or assigned.
B) The Annual Base Rent for each year of the First Extension Term shall
be the Fair Market Rent for comparable properties in DuPage County, Illinois or
an agreed to Base Rent, but in no event less than the Annual Base Rent of
$52,000. In the event an Agreement as to the First Extension Base Rent is not
obtained by SEPTEMBER 30, 1998, TENANT's rights under this Option shall
automatically terminate.
C) Omit.
D) One-Twelfth (1/12th) of the adjusted Base Rent as determined in the
foregoing Section 45(B) shall be the Monthly Base Rent, but in no event shall
the adjusted Monthly Base Rent be less than the Monthly Base Rent or adjusted
Monthly Base Rent in the immediately preceding month.
46.
TENANT-CORPORATION OR PARTNERSHIP
---------------------------------
30
<PAGE>
In case TENANT is a corporation, TENANT represents and warrants that this
LEASE has been duly authorized, executed and delivered by and on behalf of the
TENANT and constitutes the valid and binding agreement of the TENANT in
accordance with the Terms hereof.
47.
SUCCESSORS AND ASSIGNS
----------------------
The covenants and conditions herein contained shall apply to and bind the
respective heirs, successors, Executors, administrators, and assigns of the
parties hereto. The Terms "LANDLORD" and "TENANT" shall include the successors
and assigns of either such party, whether immediate or remote.
48.
RIDER ATTACHED TO AND MADE A PART OF LEASE DATED January 8, 1996.
---------------
This LEASE is executed by NBD BANK, successor Trustee to NBD TRUST COMPANY
OF ILLINOIS, not personally but solely as Trustee as aforesaid, in the exercise
of the power and authority conferred upon and vested in it as such Trustee, and
under express direction of the beneficiary(ies) of a certain Trust Agreement
dated November 24,1992, and known as Trust Number 1317-CH at NBD BANK, Successor
----------- -- -------
Trustee to NSD TRUST COMPANY OF ILLINOIS, to all provisions of which Trust
Agreement this is expressly made subject, it is expressly made subject, it is
expressly understood and agreed that nothing herein or in said contained shall
be construed as creating any liability whatsoever against said Trustee
personally, and in particular without limiting the generality of the foregoing,
there shall be no personal liability to pay any indebtedness accruing hereunder
or to perform any covenant, either express or implied, herein contained, or to
keep, preserve or sequester any property of said Trustee, and that all personal
liability of said Trustee of every sort, if any, is hereby expressly waived by
said Lessee, and by every person now or hereafter claiming any right or security
hereunder; and that so far as the said Trustee is concerned the owner of any
indebtedness or liability accruing hereunder shall look solely to the premises
hereby leased for payment thereof. It is further understood and agreed that the
said Trustee has no agents or employees and merely holds naked title to the
property herein described; that said Trustee has no control over, and under this
LEASE, assumes no responsibility for (1) the management or control of such
property; (2) the upkeep, inspection, maintenance or repair of such property;
(3) the collection of rents, deposits, security or otherwise all representations
and undertakings of the lessor herein or those of its beneficiary(ies) only,
including those as to title and warranties, or the rental of such property; (4)
the conduct of any business which carries on upon such premises; or (5) the
constructions of the Trust premises.
31
<PAGE>
It is expressly understood and agreed by every person, firm, or corporation
claiming any interest under this document that NBD BANK, Successor Trustee to
NBD TRUST COMPANY OF ILLINOIS, shall have no liability, contingent or otherwise,
arising out of, or in any way related to, (i) the presence, disposal, release or
threatened release of any hazardous materials on, over, under, from or affecting
the property, soil, water, vegetation, building, personal property, persons or
animals thereof; (ii) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to such hazardous
materials; (iii) any lawsuit brought or threatened, settlement reached or
government order relating to such hazardous materials, and/or (iv) any violation
of laws, orders, regulations, requirements or demands of government authorities,
or any policies or requirements of the Trustee which are based upon or in any
way related to such hazardous materials including without limitations,
attorneys' and consultants' fees, investigation and laboratory fees, court
costs, and litigation expenses.
32
<PAGE>
In the event of any conflict between the provisions of this exculpatory
rider and the provisions of the document to which it is attached, the provisions
of this rider shall govern.
LANDLORD:
NBD BANK, SUCCESSOR TRUSTEE TO
NBD TRUST CO. OF ILLINOIS, as Trustee under Trust
No. 1317-CH, and not personally
EXONERATION PROVISION RESTRICTING
ANY LIABILITY OF NBD BANK ATTACHED
HERETO IS HEREBY EXPRESSLY MADE A
PART HEREOF.
BY: /s/ Joseph F. Sochacki
-----------------------------------------------
JOSEPH F. SOCHACKI TRUST OFFICER
ATTEST: /s/ David Rosenfeld
-------------------------------------------
David Rosenfeld
Asst. Vice Pres./Trust Officer
TENANT:
FUTRONIX CORPORATION, A Texas Corporation
BY: /s/ T.M. Hunt President
-----------------------------------------------
ATTEST: /s/ Jim Psencik, Treasurer
-------------------------------------------
Lease is subject to a separate Landlord's Subordination Agreement.
33
<PAGE>
EXHIBIT 10.9
DISTRIBUTION WAREHOUSE LEASE AGREEMENT
PROJECT: TWO VALWOOD PARK
----------------
1. DEFINITIONS AND BASIC PROVISIONS
A. Date of Lease: May 1, 1995
----- --
B. "Landlord": FREMONT FUNDING (TEXAS), a Delaware
corporation
C. Address: c/o Paragon Group Property Services, Inc.
7557 Rambler Road, Suite 1300
Dallas, Texas 75231
D. "Tenant": FUTRONIX CORPORATION, a Texas corporation
E. Address: 1430 Valwood Park, Suite 125
Carrollton, Texas 75006
F. "Building": The structure commonly known as Two Valwood Park
----------------
and which is located on the tract of land (the "Land") more particularly
described on Exhibit "B" attached hereto and made a part hereof for all
purposes.
G. "Premises": 30,400 square feet of rentable area in the
------
Building, irrespective of any variation resulting from construction, as outlined
and hatched on the floor plan attached hereto as Exhibit "A" and made a part
hereof for all purposes.
H. "Project": The Building, the parking facilities, and other
structures, improvements, landscaping, fixtures, appurtenances and other common
areas now or hereafter, constructed or erected on the Land.
I. "Rentable area in the Project" shall be 126,800 square feet of
-------
rentable area, unless modified as provided herein.
J. "Tenant's Proportionate Share" shall be twenty-four percent
-----------
(24%), which is the ratio between the rentable area in the Premises and the
--
rentable area in the Project. If the number of rentable square feet in the
Premises and/or the Project changes, Tenant's Proportionate Share shall be
adjusted effective as of the date of such change.
K. "Commencement Date": February 15, 1996, or the date upon which
----------- --
Tenant occupies the Premises with the prior written consent of Landlord,
whichever shall first occur. Upon request of either party hereto, Landlord and
Tenant agree to execute and deliver a written declaration in recordable form
expressing the Commencement Date hereof.
<PAGE>
L. "Term": Commencing on the Commencement Date and ending Forty-
------
Two (42) months after the Commencement Date, plus any partial calendar month
- --- --
following the Commencement Date, unless sooner terminated as provided herein.
M. "Base Rental": $0 per month for the first four (4) months of
--------
the Term of this Lease; $8664.00 per month for the next thirty-eight (38) months
------- -----------------
of the Term of this Lease; each such monthly installment shall be due and
payable on the first day of each calendar month, monthly in advance without
demand and without setoff or deduction whatsoever.
N. "Prepaid Rental": $8664.00 to be applied to the first accruing
-------
monthly installments of rental.
O. "Security Deposit": None
----
P. "Permitted Use": The Premises shall be used only for the
purposes of general office and sales and distribution for Tenant's wiring and
-----------------------------------------------------------------
cable business.
- --------------
Q. "Common Area": That part of the Project designated by landlord
from time to time for the common use of all tenants, including among other
facilities, sidewalks, service corridors, curbs, truckways, loading areas,
private streets and alleys, lighting facilities, mechanical and electrical
rooms, janitors' closets, halls, lobbies, delivery passages, drinking fountains,
public toilets, parking areas, desks and other parking facilities, landscaping
and other common rooms and common facilities.
R. "Broker": Matt Bukin
----------
Each of the foregoing definitions and basic provisions shall be
construed in conjunction with the references thereto contained in the other
provisions of this Lease and shall be limited by such other provisions. Each
reference in this lease to any of the foregoing definitions and basic provisions
shall be construed to incorporate each term set forth above under such
definition or provision.
2. GRANTING CLAUSE. In consideration of the obligations of Tenant to pay
rent as herein provided and in consideration of the other terms, covenants and
conditions hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby leases from Landlord, the Premises as described above, to have and to
hold such premises for the Term of the Lease, all upon the terms and conditions
set forth in this Lease. If this Lease is executed before the Premises become
vacant, or if any present tenant or occupant of the Premises holds over and
Landlord cannot acquire possession of the Premises prior to the Commencement
Date, Landlord shall not be deemed to be in default hereunder, and Tenant agrees
to accept possession of the Premises at such time as Landlord is able to tender
the same and such date shall be deemed to be the Commencement Date and, Landlord
hereby waives payment of rent covering any period prior to the date of such
tender.
-2-
<PAGE>
3. BASE RENTAL. As rental for the lease and use of the Premises, Tenant
will pay Landlord or Landlord's assigns, without demand and without deduction,
abatement or setoff (except as otherwise expressly provided for herein in
Paragraph 17 hereof and Paragraph 19 hereof), the Base Rental in the manner
specified in Paragraph 1.M. hereof, in lawful money of the United States. If
the Term of this Lease does not commence on the first day of a calendar month,
Tenant shall pay to Landlord in advance a pro rata part of such sum as rental
for such first partial month. Tenant shall not pay any installment of rental
more than one (1) month in advance. All past due installments of rental or
other payment specified in this Lease shall bear interest at the highest lawful
rate per annum from the date due until paid. In addition, Tenant shall pay
Landlord upon demand a late charge in an amount equal to five percent (5%) of
any installments of rental or other payments specified herein if not paid within
ten (10) days of the date when due and payable.
If Tenant fails to timely pay two (2) consecutive installments of Base
Rental, or other payment specified herein, or any combination thereof, Landlord
may require Tenant to pay (in addition to any interest) Base Rental and other
payments specified herein (as estimated by Landlord, if necessary) quarterly in
advance, and, in such event, all future payments shall be made on or before the
due date in cash or by cashier's check or money order, and the delivery of
Tenant's personal or corporate check shall no longer constitute payment thereof.
Any acceptance of Tenant's personal or corporate check thereafter by Landlord
shall not be construed as a waiver of the requirement that such payments be made
in cash or by cashier's check or money order. Any amount so estimated by
Landlord and paid by Tenant shall be adjusted promptly after actual figures
become available and paid or credited to Landlord or Tenant, as the case may be.
4. ADDITIONAL RENTAL AND OPERATING EXPENSES.
4.1 The term "Operating Expenses" shall mean all expenses, costs
and disbursements of every kind and nature which Landlord shall pay or become
obligated to pay because of or in connection with the ownership, operation,
maintenance, repair, replacement, protection and security of the Project,
determined on an accrual basis or cash method (at Landlord's option), including,
without limitation the following: (1) salaries and wages of all employees
engaged in the operation, maintenance and security of the Project, including
taxes, insurance and benefits (including pension, retirement and fringe
benefits) relating thereto; (2) cost of all supplies and materials used in the
operation, maintenance and security of the Project; (3) cost of all water, power
and sewage service supplied to, and all heating, lighting, air-conditioning and
ventilating of the Project, with the sole exception of utility services supplied
to tenants of the Project at their respective premises and directly paid for by
such tenants; (4) cost of all maintenance and service agreements for the Project
and the equipment therein, including, without limitation, alarm service, parking
facilities, security (both on-site and off-site), janitorial service,
landscaping, fire protection, sprinklers, trash removal, window cleaning and
elevator maintenance; (5) cost of all insurance relating to the Project,
including the cost of casualty, rental and liability insurance applicable to the
Project and Landlord's personal property used in connection therewith; (6) all
taxes, assessments and governmental charges (foreseen or unforeseen, general or
special, ordinary or extraordinary) whether federal, state, county or municipal
and whether they be levied by taxing districts or authorities presently taxing
the Project or by others subsequently created or
-3-
<PAGE>
otherwise, and any other taxes and assessments attributable to the Project or
its operation, and all taxes of whatsoever nature that are imposed in
substitution for or in lieu of' any of the taxes, assessments or other charges
herein defined (collectively, the "Taxes"); provided, however, that Operating
Expenses shall not include taxes paid by tenants of the Project as a separate
charge on the value of their leasehold improvements, death taxes, excess profits
taxes, franchise taxes and state and federal income taxes; (7) cost of repairs
and general maintenance and reasonable depreciation charges applicable to all
equipment used in repairing and maintaining the Project, but specifically
excluding repairs and general maintenance paid by proceeds of insurance or by
Tenant or by other third parties; (8) cost of improvement items including
installation thereof which are acquired primarily for the purpose of reducing
Operating Expenses and/or complying with laws, ordinances or regulations of
governmental authorities or agencies having jurisdiction over the Project; (9)
cost of repair and maintenance of the landscaping and parking areas; and (10)
reasonable management fees paid by Landlord to third parties or to management
companies owned by, or management divisions of, Landlord. To the extent that any
Operating Expenses are attributable to the Project and other projects of
Landlord, a fair and reasonable allocation of such Operating Expenses shall be
made between the Project and such other projects. Notwithstanding anything to
the contrary contained herein, Operating Expenses shall not include
depreciation, interest and principal payments on mortgage and other nonoperating
debts of Landlord, and leasing commissions.
4.2 Landlord shall have the right to estimate the amount of
Operating Expenses which will be incurred with respect to each calendar year
during the Term of this Lease. Tenant shall pay to Landlord monthly on the first
day of each calendar month during such calendar year in question, as additional
rental, an amount equal to one-twelfth (1/12th) of the amount of Tenant's
Proportionate Share of such estimated Operating Expenses. Until such time as an
estimate of Operating Expenses with respect to any particular calendar year is
delivered to Tenant, Tenant shall pay to Landlord, on the first day of January
and the first day of each calendar month thereafter during such calendar year in
question until such estimate is delivered to Tenant, the amount of such
additional rental which shall have been payable by Tenant under this paragraph
with respect to the month of December immediately preceding such calendar year.
Thereafter, at such time as the estimate of Operating Expenses with respect to
such calendar year is delivered to Tenant, Tenant shall pay to Landlord within
ten (10) days following receipt of such estimate the amount by which (i) the
product of one-twelfth (1/12th) of the amount of Tenant's Proportionate Share of
such estimated Operating Expenses multiplied by the number of calendar months in
such calendar year which shall have wholly or partially expired exceeds (ii) the
amount of such additional rental which shall have been theretofore paid under
this paragraph with respect to such calendar months. Landlord agrees to provide
to Tenant a statement of the Operating Expenses incurred with respect to each
calendar year on or about ninety (90) days (or as soon thereafter as reasonably
possible) following the end of such respective calendar year. If Tenant's
Proportionate Share of Operating Expenses actually incurred with respect to any
calendar year exceeds Tenant's Proportionate Share of the estimated Operating
Expenses theretofore paid by Tenant for such calendar year, then Tenant shall
pay to Landlord the amount of such excess within ten (10) days following receipt
of notice from Landlord setting forth Tenant's Proportionate Share of Operating
Expenses for the calendar year in question; if Tenant's Proportionate Share of
Operating Expenses
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with respect to any calendar year is less than Tenant's Proportionate Share of
estimated Operating Expenses theretofore paid by Tenant for such calendar year,
then Landlord shall credit the difference to Tenant against the next due
installments of Tenant's Proportionate Share of estimated Operating Expenses. In
no event shall Tenant ever be entitled to a credit with respect to any calendar
year in excess of the additional rental payments made under this paragraph with
respect to such calendar year. If the Commencement Date of this Lease is not the
first day of a calendar year or the expiration or termination date of this Lease
is not the last day of a calendar year, then Tenant's Proportionate Share of
Operating Expenses with respect to such calendar year shall be prorated. The
provisions of this paragraph shall survive the expiration or earlier termination
of this Lease.
4.3 Notwithstanding any other provision herein to the contrary, it
is agreed that if the Project is not fully occupied during any calendar year,
then an adjustment shall be made in computing the Operating Expenses for such
calendar year so that the Operating Expenses are computed as though the Project
had been fully occupied during such calendar year.
4.4 Landlord agrees to keep books and records reflecting the
Operating Expenses of the Project. Tenant, at its expense, shall have the
right, within six (6) months after receiving Landlord's statement of Operating
Expenses for a particular calendar year, to audit Landlord's books and records
respectively relating to Operating Expenses for such calendar year; or, at
Landlord's sole option, Landlord may provide such audit prepared by a certified
public accountant selected by Landlord. If within such six (6) month period
Tenant does not give Landlord written notice stating in reasonable detail any
objection to the statement of Operating Expenses, Tenant shall be deemed to have
approved such statement in all respects.
4.5 Should Tenant desire any additional services beyond those which
Landlord is expressly obligated to provide pursuant to this Lease or should
Tenant desire rendition of any of such services outside the normal times of
Landlord for providing such service, Landlord may (at Landlord's option), upon
reasonable advance notice from Tenant to Landlord, furnish such services, and
Tenant agrees to pay Landlord such charges as may be agreed on between Landlord
and Tenant, but in no event at a charge less than Landlord's actual cost plus
overhead for the additional services provided.
5. TAXES.
5.1 Tenant shall be liable for the timely payment of all taxes
levied or assessed against personal property, furniture or fixtures or equipment
placed by Tenant in the Premises; provided, however, that Tenant shall have the
right to in good faith initiate appropriate proceedings contest or protest any
such taxes, and in connection therewith Tenant may withhold payment thereof
pending the resolution of proceedings to determine any such protest so long as
no lien on any portion of the Project or liability on the part of Landlord
arises by virtue of Tenant's failure to pay any taxes levied or assessed. If any
such taxes for which Tenant is liable are levied or assessed against Landlord or
Landlord's property and if Landlord elects to pay the same, or if the assessed
value of Landlord's property is increased by inclusion of personal property,
furniture
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or fixtures or equipment placed by Tenant in the Premises, and Landlord elects
to pay the taxes based on such increase, Tenant shall pay to Landlord upon
demand that part of such taxes for which Tenant is liable hereunder.
5.2 If at any time during the Term of this Lease a tax or excise on
rental, a sales tax or other tax however described (except any inheritance,
estate, gift, income or excess profit tax imposed upon Landlord) is levied or
assessed against Landlord by any taxing authority having jurisdiction on account
of Landlord's interest in this Lease, or the rentals or other charges payable
hereunder, as a substitute in whole or in part for, or in addition to, the taxes
described elsewhere in this paragraph, Tenant shall pay to Landlord as
additional rental upon demand the amount of such tax or excise. In the event
that any such tax or excise is levied or assessed directly against Tenant,
Tenant shall pay the same at such times and in such manner as such taxing
authority shall require.
6. PREPAID RENTAL AND SECURITY DEPOSIT. Landlord acknowledges receipt
from Tenant of the sum stated in Paragraph 1.N. hereof to be applied to the
first accruing monthly installments of rental. Landlord further acknowledges
receipt from Tenant of a Security Deposit in the amount stated in Paragraph 1.0.
hereof to be held by Landlord, without obligation for interest, as security for
Tenant's performance hereunder, it being expressly understood that the Security
Deposit is not an advance rental deposit or measure of Landlord's damages in
case of Tenant's default. Upon the occurrence of any default hereunder by
Tenant, Landlord may, without prejudice to any other remedy provided herein or
by law, use the Security Deposit to pay any arrears in rent and any other
damage, injury, expense (including legal expenses) or liability caused by such
default. If any or all of such Security Deposit is so used, Tenant agrees
promptly following demand by Landlord to restore such Security Deposit. If
Tenant is not then in default hereunder, any remaining balance of such Security
Deposit shall be returned by Landlord to Tenant upon termination of this Lease
less the cost of restoring the Premises to its original condition, normal wear
and tear excluded. If Landlord sells or transfers the Premises, or a
substantial part thereof, Landlord shall have the right to transfer such
Security Deposit to the transferee, and Landlord shall be thereupon released
from all liability for return of such Security Deposit, and Tenant shall look
solely to such transferee for the return and thereof.
7. ACCEPTANCE OF PREMISES. Taking possession of the Premises by Tenant
shall be conclusive evidence that Tenant: (a) accepts the Premises as suitable
for the purposes for which they are leased; (b) accepts the Building and every
part and appurtenance thereof as being in a good and satisfactory condition; and
(c) waives any defects (other than latent defects in equipment servicing or
directly affecting the occupancy of the Premises, except such equipment which is
installed by Tenant or by others at Tenant's direction or request) in the
Premises or the Building, except for the completion of those items, if any, on
Landlord's punch list or any defects as to which Tenant has given Landlord
written notice specifying the nature and extent thereof within one hundred
eighty (180) from the date of the commencement of the term of this Lease;
provided, however, that the foregoing waiver of defects by Tenant shall not
limit or waive any maintenance and/or repair obligation of Landlord imposed by
the terms of this Lease. By taking possession of the Premises, Tenant, to the
full extent permitted by law, waives any and all implied warranties currently
existing or hereinafter created, relating to the condition of the Premises,
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including, without limitation, any warranty of suitability or fitness for a
particular purpose. Landlord shall not be liable, except for gross negligence or
willful misconduct, to Tenant or any of its agents, employees, licensees,
servants, or invitees for any injury or damage to person or property due to the
condition or design of or any defect in the Project or its mechanical system and
equipment which may exist or occur, and Tenant, for itself and its agents,
employees, licensees, servants, and invitees, expressly assumes all risks of
injury or damage to person or property, either proximate or remote, resulting
from the condition of the Premises or the Project.
8. USE OF PREMISES. The Premises shall be used and occupied only for the
permitted use stated in Paragraph 1.P. hereof and not otherwise. Notwithstanding
the foregoing, without Landlord's prior written consent, Tenant shall not
receive, store or otherwise handle any product, material or merchandise which is
explosive, or highly inflammable or hazardous. Tenant will conduct its business
and control its agents in such a manner that such use of the Premises will not
create any nuisance or interfere with, annoy or disturb other tenants of the
Project, if any there are. Tenant shall, at its own expense, obtain any and all
governmental licenses and permits necessary for its use.
9. REPAIR AND MAINTENANCE.
9.1 Landlord shall maintain and make necessary repairs of damage to
the roof, foundation, and the structural soundness of the exterior walls
(excluding all windows, window glass, plate glass, and all doors). Tenant shall
give immediate written notice to Landlord of the need for maintenance, repairs
or corrections. In addition, Landlord shall maintain landscaping and parking
areas. Landlord shall not be required to make any improvements, replacements or
repairs of any kind or character to the Premises except as expressly set forth
in this section. In addition to the provisions of Paragraph 4 above, it is
expressly understood that Tenant shall pay for any damage to the roof,
foundation or to the structural soundness of exterior walls, which is caused by
the act of Tenant, or of Tenant's employees, agents or invitees, or which is
caused by Tenant's default hereunder.
9.2 Tenant shall, at its own risk and expense, maintain all other
parts of the Premises in good repair and condition (including all necessary
replacements), including, but not limited to, all fixtures installed by Tenant,
walls, carpeting and other floor covering, plumbing (other than underground
plumbing leaks caused by other tenants or plumbing problems that are caused by
soil conditions), windows, window glass, plate glass, doors, heating system, air
conditioning system, fire protection sprinkler system (if any), downspouts, dock
bumpers and other electrical, mechanical, and electromotive installation,
equipment, and fixtures and also including trash removal, all utility repairs in
ducts, conduits, pipes and wiring, and any sewer stoppage located in, under, and
above the Premises. Tenant shall take good care of all leasehold improvements
and its fixtures, and suffer no waste. Tenant shall be responsible for all pest
control and extermination. Should Tenant neglect to keep and maintain the
Premises, then Landlord shall have the right, but not the obligation, to have
the work done and any reasonable costs therefor shall be charged to Tenant as
additional rental and shall become payable by Tenant with the payment of the
rental next due and shall bear interest thereon at the maximum rate allowable
from
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the date of demand until paid. At the termination of this Lease, Tenant shall
deliver the Premises "broom clean" in the same good order and condition as
existed at the Commencement Date ordinary wear and tear excepted.
Throughout the Term of the Lease, except as specifically otherwise
hereinafter provided, Tenant shall contract with a qualified and properly
insured heating, ventilation, and air conditioning ("HVAC") HVAC contractor to
have the HVAC units for the Premises serviced at a minimum of once every six (6)
months. Such service shall include, but not be limited to, cleaning of the coil
and condenser units on each unit; checking the electrical connections, the oil
and refrigerant for leaks, the safety device, the blower belt for wear, tension
and alignment, the expansion valve, coil temperature, and condensate drain; and
maintaining the lubrication and addition of Freon. Unless Tenant is excused from
doing so by virtue of the exception set forth in the last sentence of this
paragraph, Tenant shall secure, at its sole cost and expense, and shall provide
Landlord with a copy of the service contract, providing for the maintenance as
described in this paragraph above, within sixty (60) days following the
Commencement Date of this Lease, and thereafter, Tenant shall renew the service
contract and provide a copy of the renewal service contract to Landlord prior to
expiration of the then existing service contract. Landlord acknowledges that
Tenant may use its maintenance staff to perform the services required herein,
provided that a verifiable record of such service is kept by Tenant. Upon
Tenant's request, Landlord shall grant to Tenant the right to invoke Landlord's
rights, if any, under any HVAC unit manufacturer's or vendor's service warranty
in respect of any HVAC unit within the Premises then in force in favor of
Landlord, and Tenant may utilize the services rendered by such manufacturer or
vendor in fulfilling Tenant's obligations under this paragraph and,
notwithstanding the provisions of the first sentence of this paragraph, Tenant
shall not be required to contract with an HVAC contractor during any period of
time in which an HVAC unit manufacturer or vendor is providing the required
service specified in the foregoing provisions of this paragraph.
9.3 Tenant agrees it shall not locate or install or cause to be
located or installed on the sidewalk and service area (if any) immediately
adjoining the Premises any bike racks, newspaper holder stands, vending machines
of any kind, mailboxes, telephone booths, mobile homes, fences, or any other
device of a similar nature which would impede or obstruct the sidewalks and
service area. Tenant further agrees to keep said sidewalk and service area
swept and free from trash, rubbish, garbage and other refuse, and additionally
to maintain in a neat and clean condition that area to the rear of the Premises
designated as the garbage or refuse collection area for the use of Tenant.
10. ALTERATIONS, ADDITIONS. AND IMPROVEMENTS.
10.1 Tenant shall not create any openings in the roof or exterior
walls, or make any alterations, additions, or improvements to the Premises or
install any structures or equipment on the roof of the Building or any portion
of the Common Area of the Project without the prior written constant of
Landlord. Tenant expressly agrees to indemnify Landlord for any and all damages
resulting from or caused by Tenant penetrating the roof or exterior walls of the
Premises. Tenant shall have the right to erect or install shelves, bins and
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machinery, provided that Tenant complies with all applicable governmental laws,
ordinances, and regulations. Tenant shall have the right to remove at the
termination of this Lease, such items so installed by Tenant, provided Tenant is
not then in default; however, Tenant shall, prior to the termination of this
Lease, repair any damage caused by such removal and, if requested by Landlord,
offer Landlord (prior to such removal) sufficient security to insure Landlord
that the proper repairs will be made. All alterations, additions or improvements
made by Tenant (including, without limitation, heating and air conditioning
systems, offices and improvements in and pertaining to such offices, partitions,
floor coverings, etc.), together with such other property as Tenant leaves in or
on the Premises at the termination of this Lease, shall become the property of
Landlord at the termination of this Lease; however, Tenant shall promptly
remove, if Landlord so elects, any or all alterations, additions, and
improvements specified by Landlord, and any other property placed in the
Premises by Tenant, and Tenant shall repair any damage caused by such removal.
The provisions of this paragraph shall survive the expiration or earlier
termination of this Lease.
10.2 Landlord retains the exclusive right to make additions, changes
or improvements, whether structural or otherwise, in and about the Building, or
any part thereof, and for such purposes to enter upon the Premises, and, during
the continuance of any of said work, to temporarily close doors, entryways,
public space and corridors in the Building, to interrupt or temporarily suspend
Building services and facilities, and to change the arrangement and location of
entrances or passageways, doors and doorways, corridors, elevators, stairs,
toilets, or other public parts of the Building, all without abatement of rent or
affecting any of Tenant's obligations hereunder, so long as the Premises are
reasonably accessible.
11. SIGNS. Tenant shall not, without Landlord's prior written consent
(a) install, alter or replace any exterior lighting, decorations, paintings,
awnings, canopies or the like, or (b) erect, install, alter or replace any
signs, window or door lettering, placards, decorations or advertising media of
any type which can be viewed from the exterior of the Premises. All signs,
lettering, placards, decorations and advertising media shall conform in all
respects to the sign criteria established by Landlord for the Project from time
to time in the exercise of its sole discretion, and shall be subject to the
prior written approval of Landlord as to construction, method of attachment,
size, shape, height, lighting, color and general appearance, which shall not be
unreasonably withheld if the requested signage, lettering, or other form of
decoration is consistent with the standards customarily observed for high
quality first class industrial park projects. Tenant shall be solely
responsible for all costs associated with the installation and maintenance of
such signs. All signs are subject to applicable laws and deed restrictions and
shall conform to any national, local or municipal ordinance or regulation. All
signs shall be kept in good condition and in proper operating order at all
times. At Landlord's option and request, Tenant shall remove all signs at the
termination of this Lease, and shall repair any damage and close any holes
caused by such removal, with such repairs to be made in good workmanlike manner.
Tenant shall not erect any signs on the roof or paint or otherwise deface the
exterior walls of the Building.
12. INSURANCE.
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12.1 Tenant shall not permit the Premises to be used in any way
which would, be extra hazardous (on account of fire or otherwise) or in any way
increase the cost of or render void any insurance coverage in place with respect
to the Building or any contents in the Building belonging to other tenants in
the Building. Tenant warrants to Landlord that the insurance questionnaire
(filled out by Tenant, signed and presented to Landlord prior to the execution
of this Lease) accurately reflects Tenant's original intended use of the
Premises, and that the minimum insurance coverage shall be obtained by Tenant
and in force as of the Commencement Date of the Lease. The insurance
questionnaire is made a part of this Lease by reference as though fully copied
and recorded herein. If, at any time during the Term of this Lease, the State
Board of Insurance or other insurance authority, or any insurer disallows any of
Landlord's sprinkler credits or imposes an additional penalty or surcharge in
Landlord's sprinkler credits or imposes an additional penalty or surcharge in
Landlord's insurance premiums because of Tenant's original or subsequent
placement or use of storage racks or bins, method of storage or nature of
Tenant's inventory or any other act of Tenant, Tenant agrees to pay as
additional rental the increase in Landlord's insurance premiums. If an increase
in the fire and extended coverage premium paid by Landlord for the Building is
caused by hazards arising from the nature of Tenant's use or occupancy of the
Premises, or if Tenant wrongfully vacates the Premises and causes an increase,
then Tenant shall pay as additional rental the amount of such increase to
Landlord.
12.2 Landlord shall maintain fire and extended coverage insurance on
the Building and the Premises in such amounts as Landlord's mortgagees shall
require. Payments for losses thereunder shall be made solely to Landlord or the
mortgagees of Landlord as their respective interests shall appear. Tenant shall
maintain at its expense, in an amount equal to full replacement cost, fire and
extended coverage insurance, issued by and binding upon a company approved by
Landlord, on all of its personal property, including removable trade fixtures,
located in the Premises. Tenant shall, at Landlord's request from time to time,
provide Landlord with current certificates of insurance evidencing Tenant's
compliance with this Subsection 12.2 and Subsection 12.3, and Tenant shall
obtain the agreement of Tenant's insurers to notify Landlord of any material
change in coverage or change in insurance company or that a policy is due to
expire at least thirty (30) days prior to such expiration.
12.3 Tenant shall maintain, at its expense, a policy or policies of
commercial general liability insurance with respect to the respective activities
of each of Tenant, its employees, contractors, licensees, and invitees in the
Building with the premiums thereon fully paid on or before the due date, issued
by and binding upon an insurance company approved by Landlord, such insurance to
afford minimum protection of not less than $1,000,000 combined single limit
coverage of bodily injury, property damage or combination thereof. Lessee may
maintain such insurance in the form of a blanket policy with an insurance
company authorized to do business in the state of Texas. Tenant's liability
insurance shall name Landlord as an additional insured. Landlord shall not be
required to maintain insurance against thefts within the Premises or the
Building.
12.4 Except as otherwise provided herein, any insurance which may be
carried by Landlord or Tenant against any loss or damage to the Building and
other improvements situated on
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the Project or in the Premises shall be for the sole benefit of the party
carrying such insurance and under its sole control.
13. WAIVER OF SUBROGATION. Notwithstanding any provision in this Lease
to the contrary, Landlord and Tenant each hereby waives any and all rights of
recovery, claim, action, or cause of action, against the other, its agents,
officers, or employees, for any loss or damage that may occur to the Premises,
or any improvements thereto, or the Building of which the Premises are a part,
or any improvements thereto, or any personal property of such party therein, by
reason of fire, the elements, or any other cause which is or would be insured
against under the terms of the property insurance policies carried or required
to be carried under the terms of this Lease by the respective parties hereto,
regardless of cause or origin, including negligence of the other party hereto,
its agents, officers, or employees, and Landlord and Tenant each covenants that
no insurer shall hold any right of subrogation against such other party (and all
such insurance policies shall be amended or endorsed to reflect such waiver of
subrogation). This waiver of subrogation provision shall be effective to the
full extent, but only to the extent that it does not impair the effectiveness of
insurance policies of Landlord and Tenant.
14. LANDLORD'S RIGHT OF ENTRY.
14.1 Landlord and its authorized agents shall have the right to
enter the Premises during normal working hours for the following purposes: (a)
inspecting the general conditions and state of repair of the Premises, (b)
making of repairs required or authorized herein, (c) showing the Premises to any
current or prospective purchaser, tenant, mortgagee or any other party, (d) or
for any other reasonable purpose. During the final 180-day period of the Term of
this Lease, Landlord and its authorized agents shall have the right to erect on
or about the Premises a customary sign advertising the property for lease or for
sale. Furthermore, in the event of any emergency (defined to be any situation in
which Landlord reasonably perceives imminent danger or injury to person and/or
damage or loss of property), Landlord and its authorized agents shall have the
right to enter the Premises at any time without notice.
14.2 In any circumstance where Landlord is permitted to enter upon
the Premises during the Term of this Lease, whether for the purpose of curing
any default of Tenant, repairing damage resulting from fire or other casualty or
an eminent domain taking or is otherwise permitted hereunder or by law to go
upon the Premises, no such entry shall constitute an eviction or disturbance of
Tenant's use and possession of the Premises or a breach by Landlord of any of
Landlord's obligations hereunder or render Landlord liable for damages for loss
of business or otherwise or entitle Tenant to be relieved from any of Tenant's
obligations hereunder or grant Tenant any right of setoff or recoupment or other
remedy; and in connection with any such entry incident to performance of
repairs, replacements, maintenance or construction; all of the aforesaid
provisions shall be applicable notwithstanding that Landlord may elect to take
building materials in, to or upon the Premises that may be required or utilized
in connection with such entry by Landlord.
15. UTILITY SERVICES.
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15.1 Landlord shall provide, at the beginning of this Lease, the
normal and customary utility connections into the Premises. Tenant shall pay the
cost of all initial utility connection charges and all utility usage charges for
utilities that are separately metered with respect to the Premises, including,
but not limited to, all charges for telephone, gas, water and electricity used
on the Premises. Tenant shall also pay for replacement of all electric light
lamps, bulbs or tubes. Landlord shall have the right at any time and from time
to time during the Term of this Lease to install equipment within the Premises
for the purpose of measuring Tenant's electrical usage therein.
15.2 No interruption or malfunction of any of such services shall
constitute an eviction or disturbance of Tenant's use and possession of the
Premises or the Building or a breach by Landlord of any of Landlord's
obligations hereunder or render Landlord liable for damages or entitle Tenant to
be relieved from any of Tenant's obligations hereunder (including the obligation
to pay rental) or grant Tenant any right of setoff or recoupment. In the event
of any such interruption, however, Landlord shall use reasonable diligence
during normal business hours to restore such service or cause same to be
restored in any circumstances in which such restoration is within the reasonable
control of Landlord and the interruption was not caused in whole or in part by
Tenant's fault. Tenant expressly agrees to notify any utility service
requesting or requiring such notice of Tenant's intention to vacate the
Premises. This notice requirement shall be in addition to any other notice
requirement specified herein.
16. ASSIGNMENT AND SUBLEASING. Tenant may not, without the prior written
consent of the Landlord, assign this Lease (or permit any assignment of this
Lease by operation of law) or sublet the Premises or any portion thereof or
mortgage, pledge or hypothecate its leasehold interest or grant any license
within the Premises, and any attempt to do any of the foregoing without the
prior written consent of Landlord shall be void and no effect. In any case
where Landlord consents to an assignment, sublease, mortgage, pledge or
hypothecation of the leasehold, the undersigned Tenant will nevertheless remain
directly and primarily liable for the performance of all covenants, duties and
obligations of Tenant hereunder (including, without limitation, the obligation
to pay all rental and other sums provided to be paid), and Landlord shall be
permitted to enforce the provisions of this Lease against the undersigned Tenant
and/or any assignee, subtenant or other transferee without demand upon or
proceeding in any way against any other person. The acceptance of an assignment
or subletting of the Premises by any assignee or subtenant shall be construed as
a promise on the part of such assignee or subtenant to be bound by and perform
all of the terms, conditions and covenants by which Tenant herein is bound.
Landlord shall have the option, upon receipt from tenant of written request for
Landlord's consent to subletting or assignment, to cancel this Lease as to the
portion of the Premises in question as of the date the requested Subletting or
assignment is to be effective. The option shall be exercised, if at all, within
fifteen (15) days following Landlord's receipt of written notice by delivery to
Tenant of written notice of Landlord's intention to exercise the option. No
such assignment or subletting shall be construed to constitute a novation or to
waive the requirement for obtaining consent to any subsequent assignment or
subletting. In the event of default by Tenant after this Lease has been
assigned or while the Premises are sublet, Landlord, in addition to any other
remedies provided herein (or provided by law), may at Landlord's option, collect
directly from such assignee or subtenant all rents becoming due to Tenant under
such assignment or subletting, and Landlord may apply such rent against any sums
due to Landlord by Tenant hereunder. No direct collection by Landlord from any
such
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assignee or subtenant shall release Tenant from Tenant's primary responsibility
under the Lease (as aforesaid) and from the further performance of Tenant's
obligations hereunder. If Landlord consents to any subletting or assignment by
Tenant as hereinabove provided, and subsequently any rental or other sums
received by Tenant under any such sublease are in excess of the rent and other
sums payable by Tenant under this Lease, or any additional consideration is paid
to Tenant by the assignee under any such assignment, then Landlord may, at its
option, either (1) declare such excess rental under any sublease or such
additional consideration for an assignment to be due and payable by Tenant to
Landlord as additional rent hereunder, or (2) elect to cancel this Lease as
provided in the immediately preceding paragraph with respect to any proposed
assignment or subletting.
Landlord agrees that Landlord shall consent to any request by Futronix
Corporation to assign this Lease or sublet the Premises to any corporation which
is a parent or subsidiary corporation of Futronix Corporation, provided that
Landlord is furnished with evidence reasonably satisfactory to Landlord that the
proposed assignee or sublessee is a corporation which is a parent or subsidiary
corporation of Futronix Corporation. Also, Landlord agrees that Landlord shall
not unreasonably withhold Landlord's consent to any request by Futronix
Corporation to assign this Lease or sublet the Premises to any partnership or
other type of entity which is controlled by Futronix Corporation, provided that
Landlord is furnished with evidence reasonably satisfactory to Landlord that the
proposed assignee or sublessee is a partnership or other type of entity which is
controlled by Futronix Corporation.
Landlord shall have the right to transfer, assign, mortgage, convey and
sublease all or any part of the Premises and this Lease, and nothing contained
in this Lease shall be construed as a restriction upon Landlord's right to do
any of the foregoing. If Landlord transfers this Lease, either specifically or
by virtue of a transfer of all or any part of the Premises, then Landlord shall
thereby be released from all obligations arising hereunder after such transfer,
and Tenant agrees to look solely to such assignee for performance of such
obligations.
17. FIRE AND CASUALTY DAMAGE.
17.1 If the Building or the Premises should be damaged or destroyed
by fire, tornado or other casualty, Tenant shall give immediate written notice
thereof to Landlord.
17.2 If at any time during the Term of this Lease, the Premises or
any portion of the Building shall be damaged or destroyed by fire or other
casualty, then Landlord shall have the election to terminate this Lease or to
repair and reconstruct the Premises and the Building to substantially the same
condition in which they existed immediately prior to such damage or destruction,
except that Landlord shall not be required to rebuild, repair or replace any
part of the partitions, fixtures and other improvements which may have been
installed by Tenant or other tenants within the Building.
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17.3 In the event Landlord elects to repair and restore the
Premises, then in the event that the Premises are damaged or destroyed by fire
or other casualty, or a portion of the Building is damaged or destroyed by fire
or other casualty so as to materially impair the use and occupancy by Tenant of
the Premises, then Landlord shall be obligated to provide written notice (the
"Restoration Notice") to Tenant within sixty (60) days of such event of casualty
stating a good faith estimate, certified by an independent architect, of the
period of time (the "Stated Restoration Period") which shall be required for the
repair and restoration of the Premises and/or the Building. Tenant shall have
the right, at its election, to terminate the Lease if either (i) the Stated
Restoration Period shall be in excess of two hundred ten (210) days following
the event of casualty and Tenant terminates this Lease with written notice
thereof to Landlord within ten (10) days following delivery of the Restoration
Notice, or (ii) Landlord shall fail to substantially complete the repair and
restoration of the Premises or the Building within the Stated Restoration Period
(subject to delays arising from shortages of labor or material, acts of God, war
or other conditions beyond Landlord's reasonable control) and Tenant delivers
written notice of such termination to Landlord within ten (10) days following
the expiration of the restoration deadline.
17.4 In any of the aforesaid circumstances, rental shall abate
proportionately during the period and to the extent that the Premises are unfit
for use by Tenant in the ordinary conduct of Tenant's business. If Landlord has
elected to repair and restore the Premises, this Lease shall continue in full
force and effect. In the event that this Lease is terminated as herein
permitted, Landlord shall refund to Tenant the prepaid rental (unaccrued as of
the date of damage or destruction) less any sum then owing Landlord by Tenant.
If Landlord has elected to repair and reconstruct the Premises, then the Term of
this Lease shall be extended by a period of time equal to the period of such
repair and reconstruction. Any insurance which may be carried by Landlord or
Tenant against loss or damage to the Building or to the Premises shall be for
the sole benefit of the party carrying such insurance under its control, and it
is understood that Landlord shall in no event be obligated to carry insurance on
Tenant's contents.
18. HOLD HARMLESS. Landlord shall not be liable to Tenant or Tenant's
employees, agents or invitees or to any other person whomsoever, for any injury
to person or damage to property on or about the Premises caused by the
negligence or misconduct of Tenant, its employees, invitees, licensees or agents
or caused by the Building or the Premises becoming out of repair, and Tenant
agrees to defend and indemnify Landlord and hold Landlord harmless from any
loss, expense or claims arising out of any such damage or injury, including but
not limited to, court costs and reasonable attorneys' fees. The provisions of
this paragraph shall survive the expiration or earlier termination of this
Lease.
19. CONDEMNATION.
19.1 If, during the Term of this Lease or any extension or renewal
thereof, all or substantially all of the Premises should be taken for any public
or quasi-public use under any governmental law, ordinance or regulation or by
right of eminent domain, or should be sold to the condemning authority under
threat of condemnation, this Lease shall terminate and the rent shall
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be abated during the unexpired term of this Lease, effective as of the date of
taking of the Premises by the condemning authority.
19.2 If less than substantially all of the Premises shall be taken
for any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, or should be sold to the condemning
authority under threat of condemnation, this Lease shall not terminate but
Landlord may, at Landlord's sole option, forthwith, at its sole cost and
expense, repair or modify the Building and the Premises, provided such repairs
or modifications shall make the Premises reasonably tenantable and suitable for
the uses for which they are leased as described herein. If, at Landlord's
option, the Building and the Premises are to be repaired or modified, and the
Premises are untenantable in whole or in part following such taking or sale, the
rent payable hereunder during the period in which they are untenantable shall be
adjusted equitably. In the event that Landlord chooses not to make such repairs
or modifications, this Lease shall terminate, the rent shall be abated for the
unexpired term of this Lease and all rights and obligations relating to the
unexpired term of this Lease shall cease. Tenant shall have claim to any portion
of the condemnation award.
20. HOLDING OVER. If Tenant should remain in possession of the Premises
after the expiration of the Term of this Lease, without the execution by
Landlord and Tenant of a new lease or an extension of this Lease, then Tenant
shall be deemed to be occupying the Premises as a tenant-at-sufferance, subject
to all the covenants and obligations of this Lease and at a daily rental of one
hundred fifty percent (150%) of the per day rental provided for the last month
of the Term of this Lease, computed on the basis of a thirty (30) day month.
The inclusion of the preceding sentence shall not be construed as Landlord's
consent for Tenant to hold over. If any property not belonging to Landlord
remains at the Premises after the expiration of the Term of this Lease, Tenant
hereby authorizes Landlord to make such disposition of such property as Landlord
may desire without liability for compensation or damages to Tenant in the event
that such property is the property of Tenant; and in the event that such
property is the property of someone other than Tenant. Tenant agrees to
indemnify and hold Landlord harmless from all suits, actions, liability, loss,
damages and expenses in connection with or incident to any removal, exercise or
dominion over and/or disposition of such property by Landlord.
21. DEFAULTS.
21.1 Each of the following acts or omissions of Tenant or
occurrences shall constitute an "Event of Default":
(1) Failure or refusal by Tenant to timely pay rental
or other payments hereunder.
(2) Failure to perform or observe any covenant or
condition of this Lease by Tenant to be performed or observed,
other than the payment of rental or other payments hereunder,
upon the expiration of a period of ten (10) days following
written notice to Tenant of such failure.
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(3) Abandonment or vacating of the Premises or any
significant portion thereof without giving Landlord at least
thirty (30) days' prior written notice and/or Tenant's failure
to continue to do business in the Premises without giving
Landlord at least thirty (30) days' prior written notice.
(4) The filing or execution or occurrence of any one
of the following: (i) a petition in bankruptcy or other
insolvency proceeding by or against Tenant, (ii) petition or
answer seeking relief under any provision of the Bankruptcy
Act, (iii) an assignment for the benefit of creditors or
composition, (iv) a petition or other proceeding by or against
Tenant for the appointment of a trustee, receiver or liquidator
of Tenant or any of Tenant's property, or (v) a proceeding by
any governmental authority for the dissolution or liquidation
of Tenant.
21.2 This Lease and the Term and estate hereby granted and the
demise hereby made are subject to the limitation that if and whenever any Event
of Default shall occur, Landlord may, at Landlord's option, in addition to all
other rights and remedies given hereunder or by law or equity, do any one (1) or
more of the following:
(1) Terminate this Lease, in which event Tenant shall
immediately surrender possession of the Premises to Landlord.
(2) Enter upon and take possession of the Premises and
expel or remove Tenant and any other occupant therefrom, with
or without having terminated the Lease.
(3) Alter locks and other security devices at the
Premises.
21.3 Exercise by Landlord of any one (1) or more remedies hereunder
granted or otherwise available shall not be deemed to be an acceptance of
surrender of the Premises by Tenant, whether by agreement or by operation of
law, it being understood that such surrender can be effected only by the written
agreement of Landlord and Tenant. No such alteration of security devices and no
removal or other exercise of dominion by Landlord over the property of Tenant or
others at the Premises shall be deemed unauthorized or constitute a conversion,
Tenant hereby consenting, after any Event of Default, to the aforesaid exercise
of dominion over Tenant's property within the Building. All claims for damages
by reason of such re-entry and/or possession and/or alteration of locks or other
security devices are hereby waived, as are all claims for damages by reason of
any distress warrant, forcible detainer proceedings, sequestration proceedings
or other legal process. Tenant agrees that any re-entry by Landlord may be
pursuant to judgment obtained in forcible detainer proceedings or other legal
proceedings or without the necessity for any legal proceedings, as Landlord may
elect, and Landlord shall not be liable in trespass or otherwise.
21.4 In the event that Landlord elects to terminate this Lease by
reason of an Event of Default, then, notwithstanding such termination, Tenant
shall be liable for and shall pay to
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Landlord the sum of all rental and other indebtedness accrued to the date of
such termination, plus, as damages, an amount equal to the then present value of
the rental reserved hereunder for the remaining portion of the Term of this
Lease (had such Term not been terminated by Landlord prior to the expiration of
the Term of this Lease), less the then present value of the fair rental value of
the Premises for such period, the undersigned parties hereby stipulating that
such fair rental value shall in no event be deemed to exceed sixty percent (60%)
of the then present value of the rental reserved for such period.
In the event that Landlord elects to terminate the Lease by reason of
an Event of Default, in lieu of exercising the rights of Landlord under the
preceding paragraph of this Paragraph 21.4, Landlord may instead hold Tenant
liable for all rental and other indebtedness accrued to the date of such
termination, plus such rental and other indebtedness as would otherwise have
been required to be paid by Tenant to Landlord during the period following
termination of the Term of this Lease measured from the date of such termination
by Landlord until the expiration of the Term of this Lease (had Landlord not
elected to terminate the Lease on account of such Event of Default) diminished
by any net sums thereafter received by Landlord through reletting the Premises
during said period (after deducting expenses incurred by Landlord as provided in
Paragraph 21.6 hereof). Actions to collect amounts due by Tenant provided for in
this paragraph of this Paragraph 21.4 may be brought from time to time by
Landlord during the aforesaid period, on one (1) or more occasions, without the
necessity of Landlord's waiting until the expiration of such period, and in no
event shall Tenant be entitled to any excess of rental (or rental plus other
sums) obtained by reletting over and above the rental provided for in this
Lease.
21.5 In the event that Landlord elects to repossess the Premises
without terminating this Lease, then Tenant shall be liable for and shall pay to
Landlord all rental and other indebtedness accrued to the date of such
repossession, plus rental required to be paid by Tenant to Landlord during the
remainder of the Term of this Lease until the expiration of the Term of this
Lease, diminished by any net sums thereafter received by Landlord through
reletting the Premises during said period (after deducting expenses incurred by
Landlord as provided in Paragraph 21.6 hereof). In no event shall Tenant be
entitled to any excess of any rental obtained by reletting over and above the
rental herein reserved. Actions to collect amounts due by Tenant as provided in
this Paragraph 21.5 may be brought from time to time, on one (1) or more
occasions, without the necessity of Landlord's waiting until the expiration of
the Term of this Lease.
21.6 In case of an Event of Default, Tenant shall also be liable for
and shall pay to Landlord in addition to any sum provided to be paid above: (i)
broker's fees incurred by Landlord in connection with reletting the whole or in
part of the Premises, (ii) the cost of removing and storing Tenant's or other
occupant's property, (iii) the cost of repairing, altering, remodeling or
otherwise putting the Premises into condition acceptable to a new tenant or
tenants, and (iv) all reasonable expenses incurred by Landlord in enforcing
Landlord's remedies, including reasonable attorneys' fees. Past due rental and
other past due payments shall bear interest from maturity at the highest lawful
rate per annum until paid.
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21.7 In the event of termination or repossession of the Premises for
an Event of Default, Landlord shall not have any obligation to relet or attempt
to relet the Premises, or any portion thereof, or to collect rental after
reletting; but Landlord shall have the option to relet or attempt to relet; and
in the event of reletting, Landlord may relet the whole or any portion of the
Premises for any period to any tenant and for any use and purpose. Tenant hereby
waives, to the full extent permitted by law, any obligation of Landlord to
mitigate damages to Landlord caused by an Event of Default by Tenant hereunder
and/or to relet or attempt to relet the Premises after an Event of Default by
Tenant.
21.8 If Tenant should fail to make any payment or cure any default
hereunder within the time herein permitted, Landlord, without being under any
obligation to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account of Tenant (and enter
the Premises for such purpose), and thereupon Tenant shall be obligated to, and
hereby agrees to, pay Landlord, upon demand, all costs, expenses and
disbursements (including reasonable attorneys' fees) incurred by Landlord in
taking such remedial action.
21.9 In the event of any default by Landlord, Tenant's exclusive
remedy shall be an action for damages (Tenant hereby waiving the benefit of any
laws granting Tenant a lien upon the property of Landlord and/or upon rental due
Landlord), but prior to any such action Tenant will give Landlord written notice
specifying such default with particularity, and Landlord shall thereupon have
thirty (30) days (plus such additional reasonable period as may be required in
the exercise by Landlord of Unless and such notice, due diligence) in which to
cure any such default. until Landlord fails to so cure any default after Tenant
shall not have any remedy or cause of action by reason thereof. All obligations
of Landlord hereunder will be construed as covenants, not conditions; and all
such obligations will be binding upon Landlord only during the period of
Landlord's possession of the Building and not thereafter. Under no circumstances
whatsoever shall Landlord ever be liable hereunder for consequential damages or
special damages.
21.10 The liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease shall be limited to the proceeds of sale on
execution of the interest of Landlord in the Building and in the Land, and
neither Landlord, nor any party comprising Landlord, shall be personally liable
for any deficiency. This clause shall not be deemed to limit or deny any
remedies which Tenant may have in the event of default by Landlord hereunder
which do not involve the personal liability of Landlord.
21.11 No waiver by the parties hereto of any default or breach of any
term, condition, or covenant of this Lease shall be deemed to be a waiver of any
subsequent default or breach of the same or of any other term! condition, or
covenant contained herein. No receipt of money by Landlord from Tenant after
the expiration of the Term of this Lease, or after the service of any notice, or
after the commencement of any suit, or after final judgment for possession of
the Premises, shall reinstate, continue or extend the Term of this Lease or
affect any such notice, demand or suit or imply consent for any action for which
Landlord's consent is required.
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21.12 The term "Landlord" shall mean only the owner, for the time
being, of the Building, and in the event of the transfer by such owner of its
interest in the Building, such owner shall thereupon be released and discharged
from all covenants and obligations of the Landlord thereafter accruing, but such
covenants and obligations shall be binding during the Term of this Lease upon
each new owner for the duration of such owner's ownership.
22. LANDLORD'S LIEN. In addition to the statutory landlord's lien,
Landlord shall have at all times a valid security interest to secure payment of
all rentals and other sums of money becoming due hereunder from Tenant, and to
secure payment of any damages or loss which Landlord may suffer by reason of the
breach by Tenant of any covenant, agreement or condition contained herein, upon
all goods, wares, equipment, fixtures, furniture, improvements and other
personal property of Tenant presently, or which may hereafter be, situated in
the Premises, and all proceeds therefrom, and such property shall not be removed
therefrom without the consent of Landlord until all arrearages in rental as well
as any and all other sums of money then due to Landlord hereunder shall first
have been paid and discharged and all the covenants, agreements and conditions
hereof have been fully complied with and performed by Tenant. Upon the
occurrence of an Event of Default as set forth in Paragraph 21 hereof by Tenant,
Landlord may, to the extent permitted by law and in addition to any other
remedies provided herein, enter upon the Premises and take possession of any and
all goods, wares, equipment, fixtures, furniture, improvements and other
personal property of Tenant situated in the Premises, without liability for
trespass or conversion, and sell the same as public or private sale, with or
without having such property at the sale, after giving Tenant reasonable notice
of the time and place of any public sale or of the time after which any private
sale is to be made, at which sale Landlord or Landlord's assigns may purchase
unless otherwise prohibited by law. Unless otherwise provided by law, and
without intending to exclude any other manner of giving Tenant reasonable
notice, the requirement of reasonable notice shall be met if such notice is
given in the manner prescribed in this Lease at least ten (10) days before the
time of sale. Any sale made pursuant to the provisions of this Paragraph 22
shall be deemed to have been a public sale conducted in a commercially
reasonable manner if held in the Premises or where the property is located after
the time, place and method of sale and a general description of the types of
property is located after the time, place and method of sale and a general
description of the types of property to be sold have been advertised in a daily
newspaper published in the County in which the Building is located, for five (5)
consecutive days before the date of the sale. The proceeds from any such
disposition, less any and all expenses connected with the taking of possession,
holding and selling of the property (including reasonable attorneys' fees) shall
be applied as a credit against the indebtedness secured by the security interest
granted in this Paragraph 22. Any surplus shall be paid to Tenant or as
otherwise required by law; Tenant shall pay any deficiencies forthwith. Upon
request of Landlord, Tenant agrees to execute Uniform Commercial Code financing
statements relating to the aforesaid security interest, or Landlord may file
this Lease or a copy of this Lease as a financing statement. Notwithstanding any
term or provision of this Paragraph 22 to the contrary, Landlord agrees that
Landlord's lien and/or security interest under this Paragraph 22 shall be
subordinate and inferior to any lien and/or security interest securing the
payment and performance of any prior, present or future indebtedness and/or any
other obligations on the part of Futronix Corporation to Southwest Bank of
Texas.
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23. SUBORDINATION. Tenant accepts this Lease subject and subordinate to
any ground lease, mortgage, deed of trust or other lien hereafter placed upon
the Premises or upon the Building or any part thereof [provided that Landlord or
its mortgagee delivers to Tenant a non-disturbance agreement pursuant to which
(A) Tenant shall agree that (1) the Lease is subordinate to the deed of trust
and all modifications, renewals, and extensions of the deed of trust and the
indebtedness secured thereby, (2) Tenant shall attorn to the purchaser at any
foreclosure sale under the deed of trust, (3) the mortgagee shall have no
obligations nor incur any liability under the Lease beyond such mortgagee's
equity in the Project, and (4) Tenant shall not terminate the Lease until it has
given written notice of Landlord's default to such mortgagee and the default has
not been cured within thirty days thereafter, and (B) the mortgagee shall agree
that (1) the Lease shall not be terminated in any foreclosure pursuant to the
deed of trust, and (2) the purchaser at foreclosure sale shall take title to the
Project subject to the terms of this Lease and Tenant's occupancy shall not be
disturbed except in accordance with the terms of this Lease], and to any
renewals, modifications, extensions and refinancings thereof, which might now or
hereafter constitute a lien upon the Building or any part thereof, and to zoning
ordinances and other building and fire ordinances and governmental regulations
regulating relating to the use of the Premises; but Tenant agrees that any such
ground lessor, mortgagee and/or beneficiary of any deed of trust or other lien
("Landlord's Mortgagee") and/or Landlord shall have the right at any time to
subordinate such ground lease, mortgage, deed of trust or other lien to this
Lease on such terms and subject to such conditions as such Landlord's Mortgagee
may deem appropriate in its discretion. Upon demand, Tenant agrees to execute
such further instruments subordinating this Lease, as Landlord may request, and
such nondisturbance and attornment agreements, as any such Landlord's Mortgagee
shall request, in form reasonably satisfactory to Landlord's Mortgagee. Upon
foreclosure of the Building or upon acceptance of a deed in lieu of such
foreclosure, Tenant hereby agrees to attorn to the new owner of such property
after such foreclosure or acceptance of a deed in lieu of foreclosure, if so
requested by such new owner or the Building.
24. COMPLIANCE WITH LAWS, RULES AND REGULATIONS.
24.1 Tenant, at Tenant's own expense, (a) shall comply with all
federal, state, municipal, fire underwriting and other laws, ordinances, orders,
rules and regulations applicable to the Premises and the business conducted
therein by Tenant, (b) shall not engage in any activity which would cause
Landlord's fire and extended coverage insurance to be canceled or the rate
therefor to be increased (or, at Landlord's option, Tenant shall pay any such
increase to Landlord immediately upon demand as additional rental in the event
of such rate increase by reason of such activity), (c) shall not commit, and
shall cause Tenant's agents, employees and invitees not to commit, any act which
is a nuisance or annoyance to Landlord or to other tenants, or which might, in
the exclusive judgment of Landlord, damage Landlord's goodwill or reputation, or
tend to injure or depreciate the Building, (d) shall not commit or permit waste
in the Premises or the Building, (e) shall not paint, erect or display any sign,
advertisement, placard or lettering which is visible in the corridors or lobby
of the Building or from the exterior of the Building without Landlord's prior
written approval, and (f) shall not occupy or use, or permit any portion of the
Premises to be occupied or used, for any business or purpose other than the
Permitted Use specified in Paragraph 1.P. hereof. If a controversy arises
concerning Tenant's compliance with any federal, state,
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municipal or other laws, ordinances, orders, rules or regulations applicable to
the Premises and the business conducted therein by Tenant, Landlord may retain
consultants of recognized standing to investigate Tenant's compliance. If it is
determined that Tenant has not complied as required, Tenant shall reimburse
Landlord on demand for all consulting and other costs incurred by Landlord in
such investigation. Landlord shall cause the Building in shell form, its
exterior, and the parking lot to comply with the applicable requirements of the
Americans With Disabilities Act in effect on the Commencement Date. Tenant shall
be entitled to the use of ten (10) designated parking spaces during the term of
this lease.
24.2 Tenant, and Tenant's agents, employees and invitees shall
comply fully with all requirements of the rules and regulations of the Building
which are attached hereto as Exhibit C and made a part hereof. Landlord shall at
all times have the right to change such rules and regulations or to amend or
supplement them in such manner as may be deemed advisable for the safety, care
and cleanliness of the Premises and the Building and for preservation of good
order therein, all of which rules and regulations, changes and amendments shall
be forwarded to Tenant and shall be carried out and observed by Tenant. Tenant
shall further be responsible for the compliance with such rules and regulations
by the employees, agents and invitees of Tenant. Landlord hereby reserves the
right to designate, or otherwise control the allocation of, parking spaces for
the Premises. All changes and amendments in the rules and regulations of the
Building will be sent by Landlord to Tenant in writing and shall thereafter be
carried out and observed by Tenant. No outside storage or accumulation of
supplies, inventory, building materials or debris shall be permitted without
prior written consent from the Landlord; provided, however, that Tenant may
store supplies and inventory within the fenced storage area to be depicted in
the Plans (as defined in Exhibit D to this Lease). Tenant expressly agrees to
comply with and conform to all restrictive covenants of record or subsequently
filed of record affecting the Premises.
25. NOTICES. Any notice which may or shall be given under the terms of
this Lease shall be in writing and shall be either delivered by hand (including
Federal Express, Express Mail, United Parcel Service, DHL Express or
commercially recognized messenger and express mail service, provided that a
receipt is secured for any such hand delivery by any service other than Federal
Express, Express Mail, United Parcel Service, or DHL Express) or sent by United
States Mail, registered or certified, return receipt requested, postage prepaid,
if for Landlord, to the Building office and at the address specified in
Paragraph 1.C. hereof, or if for Tenant, to the Premises or, if prior to the
Commencement Date, at the address specified in Paragraph 1.E. hereof, or at such
other addresses as either party may have theretofore specified by written notice
delivered in accordance herewith. Such address may be changed from time to time
by either party by giving notice as provided herein. Notice shall be deemed
given when delivered (if delivered by hand) or, whether actually received or
not, when postmarked (if sent by mail). If the term "Tenant" as used in this
Lease refers to more than one (1) person and/or entity, any notice given as
aforesaid to any one of such persons and/or entities shall be deemed to have
been duly given to Tenant.
26. FINANCIAL STATEMENTS. Tenant shall, upon request by Landlord (but
not more often than once per annum), provide current certified financial
statements to Landlord during the
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Term of this Lease. Such financial statements shall be compiled using generally
accepted accounting principles. Any financial statement so furnished to Landlord
shall be held by Landlord in confidence and shall not be disclosed by Landlord
to third parties other than Landlord's management company and attorneys,
accountants, and other professionals retained by Landlord and/or Landlord's
management company, and prospective or actual mortgagees and/or purchasers of
the Project.
27. SPRINKLERS. If there now is or shall be installed in the Building a
sprinkler system, and such system or any of its components shall be damaged or
injured or not in proper working order by reason of any act or omission of
Tenant, Tenant's agents servants, employees, licensees or visitors, Tenant shall
forthwith restore the same to good working condition at Tenant's own expense;
and if the Board of Fire Underwriters or any bureau, department or official of
the state or local government require or recommend that any changes,
modifications, alterations or additional sprinkler heads or other equipment be
made or supplied by reason of Tenant's business, or the location of partitions,
trade fixtures or other contents of the Premises, or for any other reason, or if
any such changes, modifications alterations, additional sprinkler heads or other
equipment become necessary to prevent the imposition of a penalty or charge
against the full allowance for a sprinkler system in the fire insurance rate as
fixed by the Board of Fire Underwriters, or by any fire insurance company,
Tenant shall, at Tenant's expense, promptly make and supply such changes,
modifications, alterations, additional sprinkler heads or other equipment.
28. INTENTIONALLY DELETED.
29. COMMON AREA. The Common Area, as defined in Paragraph 1.Q. hereof,
shall be subject to Landlord's sole management and control and shall be operated
and maintained in such manner as Landlord in Landlord's discretion shall
determine. Landlord reserves the right to change from time to time the
dimensions and location of the Common Area, to construct additional stories on
the Building and to place, construct or erect other improvements on any part of
the Land without the consent of Tenant. Tenant, and Tenant's employees and
invitees shall have the nonexclusive right to use the Common Area as constituted
from time to time, such use to be in common with Landlord, other tenants of the
Building and other persons entitled to use the same, and subject to such
reasonable and non-discriminatory rules and regulations governing use as
Landlord may from time to time prescribe. Tenant shall not solicit business or
display merchandise within the Common Area, or distribute handbills therein, or
take any action which would interfere with the rights of other persons to use
the Common Area. Landlord may temporarily close any part of the Common Area for
such periods of time as may be necessary to prevent the public from obtaining
prescriptive rights or to make repairs or alterations.
30. BROKERAGE. Landlord and Tenant each represents and warrants to the
other that it has dealt with no other broker, agent or other person in
connection with this transaction and that no broker, agent or other person
brought about this transaction, other than Broker specified in Paragraph 1.R.
hereof, and each party agrees to indemnify and hold the other party harmless
from and against any claims by any other broker, agent or other person claiming
a commission or other
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form of compensation by virtue of having dealt with such party with regard to
this leasing transaction. The provisions of this Paragraph 30 shall survive the
termination of this Lease.
31. HAZARDOUS WASTE. The term "Hazardous Substances," as used in this
Lease shall mean pollutants, contaminants, toxic or hazardous wastes, or any
other substances, the use and/or the removal of which is required or the use of
which is restricted, prohibited or penalized by any "Environmental Law," which
term shall mean any federal, state or local law, ordinance or other statute of a
governmental or quasi-governmental authority relating to pollution or protection
of the environment. Tenant hereby agrees that (i) no activity will be conducted
on the Premises that will produce any Hazardous Substance; (ii) the Premises
will not be used in any manner for the storage of any Hazardous Substances;
(iii) no portion of the Premises will be used as a landfill or a dump; (iv)
Tenant will not install any underground tanks of any type; (v) Tenant will not
allow any surface or subsurface conditions to exist or come into existence that
constitute, or with the passage of time may constitute a public or private
nuisance; (vi) Tenant will not permit any Hazardous Substances to be brought
onto the Premises, and if so brought thereon, then the same shall be immediately
removed with proper disposal, and all required cleanup procedures shall be
diligently undertaken pursuant to all Environmental Laws. Landlord or Landlord's
representative shall have the right but not the obligation to enter the Premises
for the purpose of ensuring compliance with all Environmental Laws. If Tenant so
contaminates the Premises, then Tenant shall diligently institute proper and
thorough cleanup procedures at Tenant's sole cost, and Tenant agrees to
indemnify and hold Landlord harmless from all claims, demands, actions,
liabilities, costs, expenses, damages and obligations of any nature arising from
or as a result of Tenant's failure to comply with this Paragraph 31 and/or the
presence of Hazardous Substances in or on the Premises. The foregoing
indemnification and the responsibilities of Tenant shall survive the termination
or expiration of this Lease.
32. THEFT OR BURGLARY. Landlord shall not be liable to Tenant for losses
to Tenant's property or personal injury caused by criminal acts or entry by
unauthorized persons into the Premises, the Building or the Common Area.
33. ESTOPPEL CERTIFICATE. Tenant agrees that Tenant shall from time to
time upon request by Landlord execute and deliver to Landlord a statement in
recordable form certifying (i) that the Lease is unmodified and in full force
and effect (or, if there have been modifications, that the same is in full force
and effect as so modified), (ii) the dates to which rental and other charges
payable under this Lease have been paid, and (iii) that Landlord is not in
default hereunder (or, if Landlord is in default, specifying the nature of such
default). Tenant further agrees that Tenant shall from time to time upon
request by Landlord execute and deliver to Landlord an instrument in recordable
form acknowledging Tenant's receipt of any notice of assignment of this Lease by
Landlord.
34. BANKRUPTCY AND INSOLVENCY.
34.1 In the event that Tenant shall become a debtor in a case filed
under Chapter 7 of the Bankruptcy Code and Tenant's trustee or Tenant shall
elect to assume this Lease for the
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purpose of assigning the same or, otherwise, such election and assignment may be
made only if the provisions of paragraph 34.2 and 34.4 are satisfied as if the
election to assume were made in a case filed under Chapter 11 of the Bankruptcy
Code. If Tenant or Tenant's trustee shall fail to elect to assume this Lease
within ninety (90) days after the filing of such petition or such additional
time as provided by the court within such 90-day period, this Lease shall be
deemed to have been rejected. Immediately thereupon, Landlord shall be entitled
to possession of the Premises without further obligation to Tenant or Tenant's
trustee and this Lease upon the election of Landlord shall terminate, but
Landlord's right to be compensated for damages (including, without limitation,
liquidated damages pursuant to any provision hereof) or the exercise of any
other remedies in any such proceeding shall survive, whether or not this Lease
shall be terminated.
34.2 In the event that Tenant shall become a debtor in a case filed
under Chapter 11 of the Bankruptcy Code, or in a case filed under Chapter 7 of
the Bankruptcy Code which is transferred to Chapter 11, Tenant's trustee or
Tenant, as debtor-in-possession, must elect to assume this Lease in whole within
one hundred twenty (120) days from the date of the filing of the petition under
Chapter 11 or the transfer thereto or Tenant's trustee or the debtor-in-
possession shall be deemed to have rejected this Lease. In the event that
Tenant, Tenant's trustee or the debtor-in-possession has failed to perform all
of Tenant's obligations under this Lease within the time periods (excluding
grace periods) required for such performance, no election by Tenant's trustee or
the debtor-in-possession to assume this Lease, whether under Chapter 7 or
Chapter 11, shall be permitted or effective unless each of the following
conditions have been satisfied:
(a) Tenant's trustee or the debtor-in-possession has cured all
defaults under this lease, or has provided Landlord with Assurance (as defined
below) that it will cure all defaults susceptible of being cured by the payment
of money within ten (10) days from the date of such assumption and that it will
cure all other defaults under this Lease which are susceptible of being cured by
the performance of any act promptly after the date of such assumption.
(b) Tenant's trustee or the debtor-in-possession has
compensated Landlord, or has provided Landlord with Assurance that within ten
(10) days from the date of such assumption, it will compensate Landlord for any
actual pecuniary loss incurred by Landlord arising from the default of Tenant,
Tenant's trustee, or the debtor-in-possession as indicated in any statement of
actual pecuniary loss sent by Landlord to Tenant's trustee or the debtor-in-
possession.
(c) Tenant's trustee or the debtor-in-possession has provided
Landlord with Assurance of the future performance of each of the obligations of
Tenant, Tenant's trustee or the debtor-in-possession under this Lease, and,
Tenant's trustee or the debtor-in-possession shall also (i) deposit with
Landlord, as security for the timely payment of rent hereunder, an amount equal
to three (3) installments of Base Rental (at the rate then payable) which shall
be applied to installments of Base Rental in the inverse order in which such
installments shall become due, provided all the terms and provisions of this
Lease shall have been complied with, and (ii) pay in advance to Landlord on the
date each installment of Base Rental is payable a pro rata share of Tenant's
annual obligations for additional rent and other sums pursuant to this Lease,
such that Landlord shall hold funds sufficient to satisfy all such obligations
as they become due. The
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obligations imposed upon Tenant's trustee or the debtor-in-possession by this
paragraph shall continue with respect to Tenant or any assignee of this Lease
after completion of bankruptcy proceedings.
(d) The assumption of this Lease will not breach or cause a
default under any provision of any other lease, mortgage, financing arrangement
or other agreement by which Landlord is bound .
For purposes of this paragraph 34, Landlord and Tenant acknowledge that
"Assurance" shall mean no less than: Tenant's trustee or the debtor-in-
possession has and will continue to have sufficient unencumbered assets after
the payment of all secured obligations and administrative expenses to assure
Landlord that sufficient funds will be available to fulfill the obligations of
Tenant under this Lease and (x) there shall have been deposited with Landlord,
or the Bankruptcy Court shall have entered an order segregating, sufficient cash
payable to Landlord, and/or (y) Tenant's trustee or the debtor-in-possession
shall have granted a valid and perfected first lien and security interest in,
and/or mortgage on, the property of Tenant, Tenant's trustee or the debtor-in-
possession, acceptable as to value and kind to Landlord, to secure to Landlord
the obligation of Tenant, Tenant's trustee or the debtor-in-possession to cure
the defaults under this Lease, monetary and/or nonmonetary, within the time
periods set forth above.
34.3 In the event that this Lease is assumed in accordance with
paragraph 34.2 and thereafter Tenant is liquidated or files or has filed against
it a subsequent petition under Chapter 7 or Chapter 11 of the Bankruptcy Code,
Landlord may, at its option, terminate this Lease and all rights of Tenant
hereunder by giving Tenant notice of election to so terminate within thirty (30)
days after the occurrence of any such event.
34.4 If Tenant's trustee or the debtor-in-possession has assumed
this Lease pursuant to the terms and provisions of paragraphs 34.1 or 34.2 for
the purpose of assigning (or elects to assign) this Lease, this Lease may be so
assigned only if the proposed assignee (the "Assignee") has provided adequate
assurance of future performance of all of the terms, covenants and conditions of
this Lease to be performed by Tenant. Landlord shall be entitled to receive all
cash proceeds of such assignment. As used herein "adequate assurance of future
performance" shall mean no less than that each of the following conditions has
been satisfied:
(a) The Assignee has furnished Landlord with either (i)(A) a
copy of a credit rating of Assignee which Landlord reasonably determines to be
sufficient to assure the future performance by Assignee of Tenant's obligations
under this Lease, and (B) a current financial statement of Assignee audited by a
certified public accountant indicating a net worth and working capital in
amounts which Landlord reasonably determines to be sufficient to assure the
future performance by Assignee of Tenant's obligations under this Lease, or (ii)
a guarantee or guarantees, in form and substance satisfactory to Landlord, from
one or more persons with a credit rating and net worth which Landlord reasonably
determines to be sufficient to assure the future performance by Assignee of
Tenant's obligations under this Lease.
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(b) Landlord has obtained all consents or waivers from others
required under any lease, mortgage, financing arrangement or other agreement by
which Landlord is bound to permit Landlord to consent to such assignment.
(c) The proposed assignment will not release or impair any
guaranty of the obligations of Tenant (including the Assignee) under this Lease.
34.5 When, pursuant to the Bankruptcy Code, Tenant's trustee or the
debtor-in-possession shall be obligated to pay reasonably use and occupancy
charges for the use of the Premises, such charges shall not be less than the
Base Rental, additional rent and other sums payable by Tenant under this Lease.
34.6 Neither the whole nor any portion of Tenant's interest in this
Lease or its estate in the Premises shall pass to any Trustee, receiver,
assignee for the benefit creditors, or any other person or entity, by operation
of law or otherwise under the laws of any state having jurisdiction of the
person or property of Tenant unless Landlord shall have consented to such
transfer. No acceptance by Landlord of rent or any other payments from any such
trustee, receiver, assignee, person or other entity shall be deemed to
constitute such consent by Landlord nor shall it be deemed a waiver of
Landlord's right to terminate this Lease for any transfer of Tenant's interest
under this Lease without such consent.
34.7 Tenant expressly waives any right it might have to offset
rentals or to terminate this Lease upon the bankruptcy of Landlord .
35. MISCELLANEOUS.
35.1 QUIET ENJOYMENT. Tenant, upon payment of the rent and
performance of the covenants herein contained, shall quietly have, hold and
enjoy the Premises subject to the terms and provisions of this Lease.
35.2 LIENS BY TENANT. In no event shall Tenant have the right to
create or permit there to be established any lien or encumbrance of any nature
against the Premises or the Building for any improvement or improvements by
Tenant, and Tenant shall fully pay the cost of any improvement or improvements
made or contracted for by Tenant. Any mechanic's lien filed against the Premises
or the Building for work claimed to have been done, or materials claimed to have
been furnished to Tenant, shall be duly discharged by Tenant within ten (10)
days after the filing of the lien.
35.3 ATTORNEYS' FEES. If, on account of any breach or default by
Tenant or Landlord of its obligations to Landlord under the terms, conditions
and covenants of this Lease, it shall become necessary for either party to
employ an attorney to enforce or defend any of its rights or remedies hereunder,
then the prevailing party in any litigation between Landlord and Tenant shall be
entitled to reasonable attorneys' fees, court costs and related expenses
incurred therein, as part of the judgement awarded to such prevailing party.
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35.4 FORCE MAJEURE. Whenever a period of time is herein described
for the taking of action by Landlord, Landlord shall not be liable or
responsible for, and there shall be excluded from the computation of such period
of time, any delays due to strikes, riots, acts of God, shortages of labor or
materials, war, governmental laws, regulations or restrictions, or any other
cause not reasonably within the control of Landlord and which Landlord, by the
exercise of due diligence, is unable, wholly or in part, to prevent or overcome.
35.5 INDEPENDENT OBLIGATIONS OF TENANT. The obligation of Tenant to
pay all rental and other sums hereunder provided to be paid by Tenant and the
obligation of Tenant to perform Tenant's other covenants and duties hereunder
constitute independent, unconditional obligations to be performed at all times
provided for hereunder, save and except only when an abatement thereof or
reduction therein is hereinabove expressly provided for and not otherwise.
Tenant waives and relinquishes all rights which Tenant might have to claim any
nature of lien against or withhold, or deduct from or offset against any rental
and other sums provided hereunder to be paid Landlord by Tenant. Tenant waives
and relinquishes any right to assert, either as a claim or as a defense, that
Landlord is bound to perform or is liable for the nonperformance of any implied
covenant or implied duty of Landlord not expressly herein set forth.
35.6 TIME IS OF ESSENCE. In all instances where Tenant or Landlord
is required to pay any sum or do any act at a particular indicated time or
within an indicated period, it is understood that time is of the essence.
35.7 RECORDATION. This Lease shall not be recorded by either party
without the consent of the other.
35.8 APPLICABLE LAW AND VENUE. All monetary obligations of Landlord
and Tenant (including, without limitation, any monetary obligation of Landlord
or Tenant for damages for any breach of the respective covenants, duties or
obligations of Landlord or Tenant hereunder) are performable in the county in
which the Building is located and in the county in which Landlord's principal
business office is located. The laws of the State in which the Building is
located shall govern the interpretation, validity, performance and enforcement
of this Lease.
35.9 JOINT AND SEVERAL LIABILITY. If Tenant is composed of more
than one (1) person or entity, each person and/or entity comprising Tenant shall
be jointly and severally liable for the performance of the obligations of Tenant
under this Lease, including specifically, without limitation, the payment of
rental and all other sums payable hereunder.
35.10 SUBMISSION OF LEASE NOT AN OFFER. Submission of this Lease for
examination does not constitute an offer, right of first refusal, reservation
of, or option for, the Premises or any other premises in the Building. This
Lease shall become effective only upon execution and delivery by both Landlord
and Tenant.
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35.11 AUTHORITY TO DO BUSINESS. Tenant warrants that Tenant is, and
shall remain throughout the Term of this Lease, authorized to do business and in
good standing in the State in which the Building is located. Tenant agrees, upon
request by Landlord, to furnish Landlord satisfactory evidence of Tenant's
authority for entering into this Lease.
35.12 RELATIONSHIP OR PARTIES. Nothing herein contained shall be
deemed or construed by the parties hereto, nor by any third party, as creating
the relationship of principal and agent, or of partnership or of joint venture
between the parties hereto, it being unders tood and agreed that neither the
method of the computation of rental, nor any other provision contained herein,
nor any acts of the parties hereto, shall be deemed to create any relationship
between the parties hereto other than the relationship of landlord and tenant.
35.13 USE OF LANGUAGE. Words of any gender used in this Lease shall
be held and construed to include any other gender, and words in the singular
shall be held to include the plural, unless the context otherwise requires. The
captions or headings of paragraphs in this Lease are inserted for convenience
only, and shall not be considered in construing the provisions hereof, if any
question of intent should arise.
35.14 SUCCESSORS. The provisions of this Lease shall be binding upon
and inure to the benefit of the heirs, personal representatives, successors and
assigns of the parties, but this provision shall in no way alter the restriction
herein in connection with assignment, subletting and other transfer by Tenant.
All rights, powers, privileges, immunities and duties of Landlord under this
Lease, including, but not limited to, any notices required or permitted to be
delivered by Landlord to Tenant hereunder, may, at Landlord's option, be
exercised or performed by Landlord's attorney or agent .
35.15 SEVERABILITY. If any term or provision of this Lease shall, to
any extent, be held invalid or unenforceable by a final judgment of a court of
competent jurisdiction, the remainder of this Lease shall not be affected
thereby.
36. ENTIRE AGREEMENT. It is expressly agreed by Tenant, as a material
consideration for the execution of this Lease, that this Lease with the specific
references to written extrinsic documents, is the entire agreement of the
parties; that no prior representations, warranties, understandings,
stipulations, agreements or promises pertaining to this Lease or the Premises
shall be binding on Landlord unless such representations, warranties,
understandings, stipulations, agreements or promises are expressly stated in
this Lease or the documents incorporated herein. Exhibits "A" and "B" and "C"
and "D" and "E" attached hereto and referred to herein shall be considered a
part hereof for all purposes with the same force and effect as if copied at full
length herein. It is likewise agreed that this Lease may not be altered, waived,
amended or extended except by an instrument in writing, signed by both Landlord
and Tenant.
EXECUTED as of the day and year first above written.
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LANDLORD:
FREMONT FUNDING (TEXAS),
a Delaware corporation
By: Paragon Group Property Services, Inc.
as its Agent
By:/s/ Barry E. Nelson
-----------------------------------
Barry E. Nelson,
Senior Vice President, Development
TENANT:
FUTRONIX CORPORATION,
a Texas corporation
By:/s/ T. M. Hunt
----------------------------------------
Name: Terry M. Hunt
Title: President
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EXHIBIT "A"
Diagram of "Site Plan" in original
A-1
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EXHIBIT "B"
LOT 1, BLOCK 1 TWO VALWOOD PARK BEING A REPLAT OF LOT 6 BLOCK 4 OF
VALWOOD PARK, FARMERS BRANCH, TEXAS PHASE TWO .
B-1
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EXHIBIT "C"
BUILDING RULES AND REGULATIONS
1. Landlord agrees to furnish Tenant two keys without charge. Additional
keys will be furnished at a fee. Tenant agrees to deposit a reasonable amount
fixed by Landlord from time to time for each key issued by Landlord to Tenant
for Tenant's offices, and upon termination of this Lease, Tenant agrees to
return all keys to Landlord. Landlord shall refund any amount deposited upon
return of all keys .
2. Tenant shall not alter any lock or install any new or additional locks
or any bolts or windows of the Premises, without the prior written consent of
Landlord .
3. No Tenant shall at any time occupy any part of the Premises as
sleeping or lodging quarters.
4. Landlord will not be responsible for lost or stolen personal property,
equipment, money or jewelry from the Premises, the Building or the Common Area
regardless of whether such loss occurs when area is locked against entry or not.
5. No birds, fowl, or animals shall be brought into or kept in or about
the Premises .
6. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse, or the defacing or injury of any part of the
Premises shall be borne by the person who shall occasion it. No person shall
waste water by interfering with the faucets or otherwise.
7. No person shall disturb the other occupants of the Building by the use
of any musical instruments, the making of unseemly noises, causing objectionable
odors, or other unreasonable use.
8. Any action or condition not meeting the highest standard of dignity
and good taste should be reported directly to Landlord.
9. Tenant shall refer all contractors, contractor's representatives and
installation technicians rendering any service to Tenant, to Landlord for
Landlord's supervision, approval and control before performance of any
contractual service. This provision shall apply to all work performed in the
Building, including, without limitation, installation of telephones, telegraph
equipment, electrical devices and attachments and installations of any nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any
other physical portion of the Building.
10. No signs, advertisements or notices shall be allowed in any form on
windows or doors inside or outside the Premises or any other part of the
Building, and no signs except in uniform
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location and uniform styles fixed by Landlord shall be permitted on exterior
identification pylons, if any, in the public corridors or on corridor doors or
entrances to the Premises. All signs shall be contracted for by Landlord for
Tenant at the rate fixed by Landlord from time to time, and Tenant shall be
billed and pay for such service accordingly upon demand.
11. No draperies, shutters, or other window covering shall be installed on
exterior windows or walls or windows and doors facing public corridors without
Landlord's written approval. Landlord shall have the right to require
installation and continued use of uniform window covering for such windows.
12. Tenant shall not place, install or operate in the Premises or in any
other part of the Building any engine, stove or cook thereon or therein, or
place or use in or about the Premises any explosives, gasoline, kerosene, oil,
acids, caustics or any (other than with a microwave oven) other inflammable,
explosive or hazardous materials, fluid or substance without the prior written
consent of Landlord.
13. Employees of Landlord shall not receive or carry messages for or to
any tenant or other person, nor contract with or render free or paid services to
any tenant or tenant's agents, employees or invitees. In the event any of
Landlord's employees perform any such services, such employee shall be deemed to
be the agent of any such tenant regardless of whether or how payment is arranged
for services, and Landlord is expressly relieved from and all liability in
connection with any such services and any associated injury or damage to person
or property .
14. None of the entries, sidewalks, vestibules, elevator shafts, passages,
doorways or hallways and similar areas shall be blocked or obstructed, or any
rubbish, litter, trash or material of any nature placed, emptied or thrown into
such areas, or such areas be used at any time for any purpose except for ingress
or egress by Tenant, Tenant's agents, employees or invitees to and from the
Premises and for going from one to another part of the Building.
15. Tenant and Tenant's employees, agents and invitees shall observe and
comply with the driving and parking signs and markers on the premises or parking
facilities surrounding the Building.
16. Landlord shall have the right to prescribe the weight and position of
safes, computers and other heavy equipment which shall, in all cases, in order
to distribute their weight, stand on supporting devices approved by Landlord.
All damage done to the Premises or to the Building by placing in or taking out
any property of Tenant, or done by Tenant's property while in the Premises or
the Building, shall be repaired immediately at the sole expense of Tenant.
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<PAGE>
EXHIBIT "D"
WORK LETTER
It is agreed that Landlord will complete construction of the initial Premises in
accordance with the following terms and provisions:
1. (a) Landlord and Tenant hereby approve certain contemplated "blue
line" plans and specifications (the "Initial Plans") dated 4-12-95 issued under
Job Number 9502.28 prepared by CFA Architects in respect of the construction of
the tenant improvements to the Premises contemplated to be performed pursuant to
this Exhibit "D" (the "Improvements"). The Initial Plans evidence the intentions
of Landlord and Tenant with respect to the nature and scope of the Improvements,
but are preliminary in nature. Based upon the Initial Plans, Landlord and Tenant
anticipate that the total amount of the costs and expenses incurred in respect
of designing and constructing the Improvements as contemplated in the Initial
Plans (which shall for all purposes hereof be deemed to include any contractor's
fee and the cost of supervision and coordination) (the "Construction Costs")
will not exceed Seventy-Five Thousand dollars ($75,000.00) (the "Anticipated
--------------------- ---------
Sum"). No later than August 1, 1995, Tenant shall submit to Landlord Tenant's
-------- --
proposed complete, architectural, electrical and mechanical plans and
specifications (the "Preliminary Plans") for the construction of the
Improvements. Landlord shall make available to Tenant the services of its
architect (the "Architect") to assist Tenant in the preparation of the
Preliminary Plans, which shall be subject to Landlord's final approval. Tenant
will at all times cooperate with the Architect, furnishing all reasonable
information and material concerning Tenant's organization, staffing, growth
expectations, physical facility needs (including, without limitation, needs
arising by reason of the provisions of the Texas architectural barriers statute,
the Americans With Disabilities Act of 1990, and any interpretations or
regulations promulgated thereunder and/or amendments thereto, together with any
successor statutes or similar enactments or governmental requirements
(collectively, the "Disability Acts"), equipment, inventory, etc., necessary for
the Architect to efficiently and expeditiously prepare the Preliminary Plans.
The Preliminary Plans shall be prepared so as to be consistent with the nature
and scope of the work contemplated by the Initial Plans and, to the extent not
inconsistent therewith, Landlord's standard specifications for tenant
improvements in the Project then in effect. The cost of preparing the
Preliminary Plans shall be applied against the Allowance (as hereinafter
defined).
(b) Within five (5) days following the date of Landlord's receipt of
the Preliminary Plans, Landlord will advise Tenant of Landlord's approval or
disapproval of the Preliminary Plans. If Landlord disapproves any aspect of the
Preliminary Plans, Landlord shall so notify Tenant and specify the reasons for
such disapproval (including, without limitation, any change in the nature or
scope of the work contemplated by the Initial Plans or which Landlord reasonably
determines would increase the cost of designing and constructing the
Improvements). Landlord shall, to the extent that it is reasonably possible to
do so, also specify how any such disapproved item may be made reasonably
acceptable to Landlord, and Tenant shall, within five (5) days thereafter,
deliver to Landlord revised Preliminary Plans incorporating the revisions
required by Landlord. The
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<PAGE>
foregoing process shall be repeated until Landlord and Tenant have approved the
Preliminary Plans in writing.
(c) Tenant shall promptly provide Landlord and the Architect with all
information needed to cause the construction of the Improvements to be completed
such that Tenant, the Premises and the Improvements (as constructed) will be in
compliance with the Disability Acts. Tenant shall be responsible for and shall
indemnify, defend and hold harmless Landlord from and against any and all
claims, liabilities and expenses (including, without limitation reasonable
attorneys' fees and expenses) incurred by or asserted against Landlord by reason
of or in connection with any violation of the Disability Acts arising from or
out of (i) information or design and space plans or the Initial Plans or the
Preliminary Plans furnished to Landlord and/or the Architect by Tenant (or the
lack of complete and accurate information so furnished) concerning the
Improvements, (ii) Tenant's employer-employee obligations, or (iii) after the
Commencement Date, violations by Tenant and/or Tenant's Improvements or the
Premises not being in compliance with the Disability Acts as the result of
changes in regulations or law or interpretations thereof not in effect on the
Commencement Date. Notwithstanding the foregoing, Landlord shall indemnify
Tenant that the Improvements shall conform to generally accepted design
principles so as to comply with generally applicable ADA requirements. The
foregoing indemnities shall not include any claims, liabilities or expenses
(including reasonable attorneys' fees and expenses) arising out of the willful
misconduct or gross negligence of the indemnified party or the indemnified
party's employees, agents or contractors. Without limiting the foregoing, if
Landlord constructs the Improvements based on any special requirements or
improvements required by Tenant, or upon information furnished by Tenant that
later proves to be inaccurate or incomplete resulting in any violation of the
Disability Acts, Tenant shall be solely liable to correct such violations and to
bring the Improvements into compliance with the Disability Acts as promptly as
is practicable or otherwise comply with a ruling by an authorized governmental
agency or court to comply with the Disability Acts as promptly as possible.
2. Following the approval in writing by Landlord and Tenant of the
Preliminary Plans, which approval shall be a condition precedent to Landlord's
obligation to construct the Improvements, Landlord shall construct the
Improvements in accordance with the approved Preliminary Plans (such approved
Preliminary Plans being hereinafter referred to as the "Plans").
3. Unless Tenant requests any changes with respect to any aspect of the
Initial Plans or the nature or extent of the work contemplated thereby or any
changes to the Plans, all costs and expenses incurred in the design and
construction of the Improvements to be performed by Landlord pursuant hereto
shall be borne by Landlord; provided, however, that if Tenant requests and
Landlord agrees to approve or perform any changes then in such event all costs
and expenses (including any contractor's fee and supervision and coordination
costs) incurred in the design and construction of the changes to be performed by
Landlord pursuant hereto shall be borne by Tenant (and are sometimes hereinafter
referred to as "Tenant's Costs"). The amount of Tenant's Costs shall be payable
as follows:
(a) Tenant shall pay, within five (5) days from delivery of
Landlord's invoice to
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<PAGE>
Tenant therefor, to Landlord prior to the commencement of construction
of the Improvements, an amount equal to one hundred percent (100%) of such
Tenant's Costs (as then estimated by Landlord);
(b) As soon as the final accounting can be prepared and submitted to
Tenant, Tenant shall pay to Landlord, within five (5) days from delivery of
Landlord's invoice to Tenant therefor, the entire unpaid balance of the actual
Tenant's Costs based on the final amount of Tenant's Costs.
The amounts payable hereunder shall constitute rent due pursuant to this Lease
at the times specified herein and failure to make any such payments when due
shall constitute an event of default under this Lease, entitling Landlord to all
of its remedies hereunder as well as all remedies otherwise available to
Landlord.
4. If Tenant requests any changes in the Plans, Tenant shall present
Landlord with revised drawings and specifications for Landlord's approval. If
Landlord approves such changes, Landlord shall incorporate such changes in the
improvements following Landlord's receipt of a change order therefor executed by
Tenant and Landlord's receipt of any additional cash advance against the
Tenant's Costs required pursuant to this Paragraph 4. Landlord, however, may
require, prior to proceeding with any changes, additional cash advances against
the Tenant's Costs in the event Landlord determines that Tenant's proposed
changes will increase the amount of the Tenant's Costs.
5. Should Landlord be delayed in substantially completing the work to be
performed hereunder as a result of (i) Tenant's failure to submit the
Preliminary Plans or revised Preliminary Plans to Landlord as provided in
Paragraph 1 hereof or (ii) Tenant's requests for changes in the Plans which
delay said work or (iii) the performance of any work contemplated herein by a
contractor or agent employed by Tenant (any such contractor or agent being
subject to the prior written approval of Landlord) or (iv) any other delay
caused by Tenant, its agents or employees (including, without limitation,
Tenant's failure to timely pay to Landlord the amount of any estimated Tenant's
Costs when due), then Tenant's obligation to pay rent under the Lease shall
nevertheless commence on the date specified in Paragraph 1.K. of this Lease and
the Commencement Date under this Lease shall not be delayed, unless such delays
for which Tenant is responsible are in addition to delays for which Landlord is
responsible, in which case the Commencement Date and Rental Commencement Date
under this Lease shall, as Tenant's sole and exclusive remedy in respect of any
such delay, be extended for a period equal to the number of days by which the
period of delays for which Landlord was responsible exceeds period of delays for
which Tenant is responsible..
6. For the purposes of this Work Letter, the term "substantial
completion" of the Improvements or of the work of constructing such Improvements
shall mean completion of such Improvements in all material respects excepting
only minor finish and touch-up work which does not interfere with the occupancy
of the Premises by Tenant, as determined by the Architect, whose determination
shall be binding upon Landlord and Lessee, and receipt of a final certificate of
occupancy issued by the City of Farmers Branch, Texas.
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<PAGE>
7. Tenant hereby waives all claims against Landlord for damages to goods,
wares and merchandise in, and upon, or about the Premise and/or any portion of
the Project from any incident arising at any time during the period in which
Landlord is engaged in constructing the Improvements or when Tenant or any of
its agents are installing signs, fixtures, or any other equipment and/or
constructing any improvements in the Premises. Tenant will also indemnify,
defend and hold Landlord and its property manager and agents harmless from and
against any claim, cost, damage, suit, or liability in respect of any damage or
injury to any person arising from any construction activities engaged in by
Tenant or any agent or independent contractor thereof (or by any agent or sub-
contractor of any such party) other than caused by the gross negligence or
willful misconduct of Landlord.
The tenant improvements contemplated by the initial plans include the
following:
1. Two (2) Rite Hite Corporation; Edge-O-Dock Model 400, hinged lip
mechanical, 30,000 lb. capacity, 72" width.
2. 60 (sixty) duplex receptacles 20 amp., 125v outlets.
3. 12 (twelve) dedicated duplex receptacles, 20 amp, 125v outlets.
5. 10 (ten) data outlets, flush mount in wall with pullcord.
6. 30 (thirty) telephone outlets, flush mount in wall with pullcord.
7. 1 (one) plugmold 2000 with 12 outlets #206B606. (Paid for by
Tenant)
8. 2 (two) 230V, 3 phase, 60 amp, circuits for cutting machine in
warehouse adjacent to dock area with fuses.
9. 2 (two) 230V, 1 phase, 30 amp., circuits for Belden machine with
fuses. (Paid for by Tenant)
10. Outside storage fence.
11. 1 (one) concrete remp from dock to grade.
12. 1 (one) dishwasher. (Paid for by Tenant)
13. 1 (one) Scottsman icemaker. (Paid for by Tenant)
14. Upgrade to 500 amp service. (Paid for by Tenant)
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<PAGE>
EXHIBIT "E"
RENEWAL OPTION
A. If no Event of Default has occurred hereunder, Tenant shall have the
right to renew the Term of this Lease for one (1) additional period of thirty-
six (36) months upon the same terms, conditions and provisions (other than in
respect of any rental abatement, tenant finish improvement allowance, or any
other form of tenant inducement concession) applicable to the primary term of
this Lease (unless otherwise expressly provided herein), except that the Base
Rental for such additional term shall be the greater of either:
(a) the product of (i) the number of rentable square feet then
contained in the Premises multiplied by (ii) an amount equal to the then
prevailing market base rental rate per rentable square foot per annum
charged for comparable space in comparable buildings; or
(b) the product of (i) the number of square feet of rentable area
then contained in the Premises multiplied by (ii) the Base Rental rate in
effect with respect to the Premises during the immediately preceding term
of this Lease.
B. Tenant shall exercise its right of renewal by delivering to Landlord
written notice ("Tenant's Notice") of Tenant's desire to renew the Term of this
Lease as aforesaid that is received by Landlord at least twelve (12) months (but
not more than eighteen (18) months) prior to the expiration of the then current
Term of this Lease. Within thirty (30) days following delivery of Tenant's
Notice, Landlord shall deliver to Tenant a written notice ("Landlord's Notice")
specifying the Base Rental rate per rentable square foot per annum for the
additional term. Tenant shall have thirty (30) days following delivery of
Landlord's Notice to deliver written notice received by Landlord within such
thirty (30) day period of Tenant's exercise of its rights to renew the Term
hereof. Landlord's determination of the applicable Base Rental rate as set
forth in Landlord's Notice shall be binding upon Tenant unless Tenant notifies
Landlord in Tenant's notice to Landlord of its exercise of its renewal option
delivered in accordance with the immediately preceding sentence. Failure to so
notify Landlord within such period or to timely deliver Tenant's Notice shall
automatically extinguish Tenant's rights to renew. Tenant shall have no right
to renew the Term of this Lease following the expiration of the renewal term(s)
detailed herein.
C. If Tenant exercises its renewal option as required in the immediately
preceding Paragraph B. but disputes the amount of the Base Rental, Tenant shall
so advise Landlord at the time of Tenant's exercise of its renewal option, and
Landlord and Tenant shall each within twenty (20) days thereafter appoint an
independent real estate appraiser who is a member of the American Institute of
Real Estate Appraisers (or its equivalent should the American Institute of Real
Estate Appraisers not then be in existence) to assist in the determination of
the Base Rental. Upon appointment, the two appraisers shall be sworn to
determine faithfully and fairly the Base Rental
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and shall, with all possible speed, make the respective determinations in
writing and give notice thereof to Landlord and Tenant. If both of the
appraisers determine that the then prevailing market base rental rate per
rentable square foot for comparable buildings is less than or equal the Base
Rental rate in effect with respect to the Premises prior to the
commencement of the renewal term, then the Base Rental for the renewal term
shall be the Base Rental rate in effect with respect to the Premises prior to
the commencement of the renewal term; if the two appraisers agree on a
prevailing market base rental rate per square foot of rentable area that is
greater than the Base Rental rate per square foot of rentable area in effect
with respect to the Premises prior to the commencement of the renewal term, then
such rate shall thereupon be binding upon Landlord and Tenant as the Base Rental
rate per square foot of rentable area for the renewal term. In any other case,
if there is a variance in the market rents determined by the two appraisers, the
appraisers, within ten (10) days after both appraisers have made their
determinations, shall appoint in writing a third appraiser and give written
notice of such appointment to Landlord and Tenant. If the two appraisers shall
fail to appoint or agree upon a third appraiser within the ten (10) day period,
a third appraiser shall be selected by Landlord and Tenant if they so agree upon
such third appraiser within a further period of ten (10) days. If any appraiser
shall not be appointed or agreed upon with the time herein provided, either
Landlord or Tenant may apply to the appropriate court of Dallas County, Texas,
for the appointment of such-appraiser. The third appraiser shall be sworn to
determine faithfully and fully, pursuant to the procedures set forth above, the
question at issue. The third appraiser's determination of value shall be
controlling. The decisions of the appraisers under this paragraph shall be
final and binding on Landlord and Tenant and shall be specifically enforceable
in a court having jurisdiction.
(1) Appointment of Appraisers. If (i) Landlord or Tenant fails to appoint
-------------------------
an appraiser within twenty (20) days after its receipt of the notice from the
other party hereto setting forth the name of its appraiser, or (ii) a third
appraiser is not appointed as provided above, or (iii) any person appointed as
an appraiser by or on behalf of either Landlord or Tenant dies, fails to act,
resigns or becomes disqualified and the party by or on behalf of whom such
appraiser was appointed shall fail to appoint a substitute appraiser within ten
(10) days after being requested to do so by the other party, the appraiser in
question shall be appointed by the then judge of the lowest level state court of
general jurisdiction for the district in which the Project is located (acting in
his nonjudicial capacity or, to the extent he refuses to act in that capacity,
in his judicial capacity) upon application of either Landlord or Tenant.
(2) Costs of Appraisal. Each party shall bear and pay the cost of the
------------------
appraiser appointed by (or for) it, and the cost of the third appraiser shall be
borne and paid equally by Landlord and Tenant. Landlord and Tenant shall be
given reasonable advance notice of the time and place of any appraisal
proceedings, and both shall have the right to be present, heard and represented
by counsel. The appraisers shall not have the power to add to or subtract from
or otherwise change the terms and provisions of this Lease, and their
determination shall be consistent and in accordance with the terms and
provisions of this Lease. The appraisers shall give prompt notice of their
decision to Landlord and Tenant.
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<PAGE>
(3) Delay in Determinination of Base Rental. Landlord and Tenant will use
---------------------------------------
reasonable diligence to cause their appointed appraisers to perform in good
faith and in a timely manner in order to make the determination of the Base
Rental on or before the beginning of the renewal period. In the event such
appraisers shall not make such determination prior to the beginning of the
renewal period, this Lease shall nevertheless continue in full force and effect
until such determination is made by the appraisers, with Tenant continuing to
pay the Base Rental then in effect immediately prior to the commencement of the
Renewal term. Upon the determination by such appraisers of the Base Rental for
the renewal period, the payment of the new Base Rental shall commence on the
first day of the month following the date of such determination, and in addition
to such monthly installment of Base Rental, Tenant shall pay to Landlord the
increase in the Base Rental payable hereunder, if any, and Landlord shall pay to
Tenant the decrease, if any, applicable from the beginning of the renewal period
to the payment of the first installment at the new Base Rental rate. Landlord
and Tenant shall each bear the cost of their respective appraisers and shall
share equally the cost of the third appraisers.
D. Notwithstanding the generality of the foregoing, the rights of Tenant
and the obligations of Landlord contained in this Exhibit shall apply solely for
the benefit of Tenant and shall not apply in favor of any assignee or sublessee
of Tenant.
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<PAGE>
EXHIBIT 10.11
SOUTHERN LOUISIANA INDUSTRIAL PROPERTIES LEASE
THIS LEASE AGREEMENT ("Lease") is made this 28th day of April, 1993, by
---- ----- ----
SLIP Trust, a Louisiana trust (hereinafter referred to as "Lessor"), and Wire &
------
Cable Specialties Corp. of Georgia with its principal offices at 5855 Peachtree
- ---------------------------------- --------------
Corners East, Norcross, GA 30092 (hereinafter referred to as "Lessee").
- --------------------------------
WITNESSETH:
THE PARTIES HEREBY COVENANT AND AGREE AS FOLLOWS:
1. Leased Premises: Lessor hereby leases to the Lessee and the Lessee
hereby leases from the Lessor the following described property (hereinafter
referred to as the "leased premises"), to-wit:
Space designated as Space # 130 , comprising approximately 11,100
-----
square feet as shown on Exhibit A attached hereto and made a part hereof,
being located at 6565 Exchequer Drive, Baton Rouge, Louisiana (hereinafter
----------------------------------------------
referred to as the "Building").
2. Term: Lessee to have and to hold the leased premises for a term of
three (3) year(s) and one half (1/2) month(s) commencing on May 15, 1993, and
- --------- -------------- ------ --
terminating on May 31, 1996, pursuant to and in accordance with the terms and
------ --
conditions as set forth herein.
3. (a) Rent: Lessee hereby covenants and agrees to pay without demand,
together with any and all sales and use taxes levied upon the use and occupancy
of the leased premises as set forth in Paragraph 6, during the term hereof, to
the Lessor, in advance beginning on the commencement date of this Lease and on
the first day of each and every month thereafter, a monthly Base Rent of
$3,237.50. Notwithstanding the foregoing, no monthly base rent or rent
--------
adjustments and prorata expenses (as hereinafter defined) shall be due for the
first month, of the term, but further provided that the entire monthly base rent
adjustments and prorata expenses (as hereinafter defined) otherwise due for such
first month shall become immediately due and payable upon the occurrence of a
default by Lessee under this Lease. Unless otherwise directed by Lessor, rent
shall be paid to:
SLIP Trust
c/o Heitman Properties of Louisiana Ltd.
520 Elmwood Park Boulevard
Suite 115
Jefferson, Louisiana 70123
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<PAGE>
If Lessee's possession commences on other than the first day of the month,
Lessee shall occupy the leased premises under the terms, conditions and
provisions of this Lease, and the pro rata portion of the monthly rent for said
month shall be paid during such portion of the month, but the term of this Lease
shall commence on the first day of the month following that in which possession
is given and such first day of the month shall be referred to as the
"commencement date."
Lessee also covenants and agrees to pay a Late Charge for any payment of
monthly rent not received by Lessor on or before the 10th day of each month and
for any other payment not paid on or before the 10th day after being due Lessor
pursuant to the terms and provisions hereof. Said Late Charge shall be computed
from the first day of the month in the case of monthly rent and after five (5)
days from date of demand in the case of any other payment, all at the lower of
18% per annum or the highest rate of interest permitted in Louisiana until paid.
In the event any Late Charge is due to Lessor, Lessor shall advise the Lessee in
writing and Lessee shall pay said Late Charge along with and in addition to the
next payment of monthly rent. With respect to the payment of rent and all other
provisions hereof, time is of the essence in this Lease.
All sums due and payable pursuant to the terms and provisions of this Lease
shall be payable only in lawful money of the United States of America which
shall be legal tender in payment of all debts and dues, public and private, at
the time of payment.
4. Security: Lessee has deposited with Lessor the sum of $6,475.00 as
--------
security for the faithful performance and observance by Lessee of the terms,
provisions and conditions of this Lease, and Lessee hereby assigns, pledges,
transfers, and delivers to Lessor and grants Lessor a security interest in the
security deposit hereunder. It is agreed that in the event Lessee defaults in
respect of any of the terms, provisions and conditions of this Lease, including,
but not limited to, the payment of rent and additional rent, and the repair of
damages over and above normal wear and tear, Lessor may use, apply or retain all
or any part of the security so deposited to the extent required for the payment
of any rent and additional rent or any other sum as to which Lessee is in
default or for any sum which Lessor may expend or may be required to expend by
reason of Lessee's default in respect to any of the terms, covenants and
conditions of this Lease, including but not limited to, any damages or
deficiency in the reletting of the leased premises, whether such damages or
deficiency accrued before or after judicial proceedings or other reentry by
Lessor. If any portion of said deposit is to be used or applied, Lessee shall
within five (5) days after written demand therefor deposit cash with Lessor in
an amount sufficient to restore the security deposit to the amount that existed
immediately prior to such use or application and Lessee's failure to do so shall
be a material breach of this lease. In the event that Lessee shall fully and
faithfully comply with all of the terms, provisions, covenants and conditions of
this Lease, $3,237.50 of the security shall be returned to Lessee, without
interest after May 31, 1994 and the balance of the security shall be returned to
Lessee, without interest, after the date fixed as the end of the Lease and after
delivery of entire possession of the leased premises to Lessor. In the event of
a sale of the land and Building of which the leased premises form a part or of
all the buildings of the complex (such of Lessor's buildings in the complex
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<PAGE>
being hereinafter referred to as the "buildings"), or leasing of the Building,
Lessor shall have the right to transfer the security to the vendee or lessee and
Lessor shall thereupon be released by Lessee from all liability for the return
of such security and Lessee agrees to look to the new Lessor solely 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 lessor. Lessee
further covenants that it will not assign or encumber or attempt to assign or
encumber the funds deposited herein as security and that neither Lessor nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
In the event of any bankruptcy or other proceeding against Lessee, it is
agreed that all such security deposit held hereunder shall be deemed to be
applied by Lessor to rent, sales tax and other charges due to Lessor for the
last month of the lease term and each preceding month until such security
deposit is fully applied.
5. Notices: Lessor may from time to time designate some one person, firm
or corporation, which may or may not be the Lessor, to receive notices, rental
payments, tenders, documents, etc. which Lessee is required or permitted to
deliver to or serve upon it respectively and will furnish Lessee the address of
such designated person. Any notice required or permitted to be given by Lessor
to Lessee herein or required by law as a prerequisite to legal action shall be
deemed given if and when personally delivered or when mailed in a sealed
wrapper, by United States registered or certified mail, postage prepaid,
properly addressed to Lessee. Any notice herein required or permitted to be
given by Lessee to Lessor shall be deemed given if and when personally delivered
or when so mailed (pursuant to the preceding sentence) to Lessor, or if they
shall have designated some one person, firm or corporation, then to such
designated person. Until changed as hereinafter provided, notices and
communications shall be addressed to Lessor and Lessee at the respective
addresses shown below:
Lessee: Wire & Cable Specialties Corp.
5855 Peachtree Corners East
Norcross, GA 30092
with copy to:
David S. Delugas, Esquire
Suite 200
2550 Cobb Parkway
Smyrna, GA 30080
Lessor: Heitman Properties of Louisiana Ltd.
520 Elmwood Park Boulevard
Suite 115
Jefferson, Louisiana 70123
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<PAGE>
with copy to: Heitman Properties Ltd.
Attn: Terry Wachsner
180 North LaSalle Street
Suite 3600
Chicago, Illinois 60601
Each party shall have the right to specify as its proper address any other
address in the United States of America by giving to the other party at least
fifteen (15) days written notice thereof.
6. Sales and Use Tax: Lessee hereby covenants and agrees to pay monthly
to the Lessor along with the payment of rent, any sales, use or other tax,
excluding State and/or Federal Income Tax, now or hereafter imposed upon any and
all rents or other sum due and payable hereunder by the United States of
America, the state, or any political subdivisions thereof, notwithstanding the
fact that such statute, ordinance or enactment imposing the same may endeavor to
impose the tax on the Lessor.
7. Real Estate Taxes: Lessor shall be responsible for the payment of all
general and special ad valorem taxes, including assessments for local
improvements, and other governmental charges which may lawfully be charged,
assessed or imposed upon the buildings of the complex ("real estate taxes"); and
the Lessor shall pay the same before they become delinquent. However if the
assessed real estate taxes are deemed excessive by Lessor, Lessor may defer
compliance therewith to the extent permitted by the laws of the jurisdiction in
which the taxes are levied, so long as the validity or amount thereof is
contested by Lessor in good faith, and so long as Lessee's occupancy of the
leased premises is not disturbed or threatened thereby.
Lessee shall throughout the term of this Lease pay to Lessor that portion
of such real estate taxes which is computed by multiplying the real estate taxes
by a fraction, the numerator of which is a total gross square footage of floor
area in the leased premises and the denominator which is the total gross square
footage of the building. Lessee's share of the real estate taxes shall be
equitably adjusted for and with respect to any portion of the term of this Lease
which does not include an entire tax year. When the applicable tax bill is not
available prior to the end of the term hereof, then a tentative computation
should be made on the basis of the previous year's real estate taxes, with a
final adjustment to be made between Lessor and Lessee promptly after Lessor has
received the tax bill for such period.
Payments on account of Lessee's share shall be made monthly at the times
and in the fashion herein provided for the payment of rent. Lessor shall have
the same rights and remedies for the nonpayment by Lessee of any amounts due on
account of real estate taxes as Lessor has hereunder for the failure of Lessee
to pay rent. Lessee's monthly installment on account shall be equal to one-
twelfth (1/12) of Lessee's share of the real estate taxes determined by Lessor
in accordance with the above provisions and based on the preceding year's levy
of real estate taxes
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<PAGE>
adjusted by any known or projected changes. Once the actual amount of real
estate taxes are known for an applicable period, Lessor shall bill Lessee for
any additional amount necessary if the monthly amounts collected from Lessee
were insufficient, or Lessor shall credit to Lessee's next payment for real
estate taxes any excess already paid.
8. Lessee's Share of Insurance Premiums: In addition to all other
payments herein provided to be made by Lessee to Lessor, Lessee shall pay Lessor
throughout the term of this Lease a proportionate share of the premiums payable
by Lessor for hazard, liability and all other insurance coverage obtained by
Lessor in connection with or relating to the complex. The amount of annual
premiums for such insurance shall be estimated annually and included as an
expense under Paragraph 12(b).
9. Use and Possession: It is understood that the leased premises are to
be used for general office and storage and distribution of wire and wire
products and for no other purpose whatsoever. No toxic or hazardous materials
shall be stored, kept or used on the leased premises. In the event Lessee uses
the leased premises for purposes not expressly permitted herein, Lessor may
terminate this Lease or, without notice to Lessee, restrain said improper use by
injunction. Lessee shall not use the leased premises for any unlawful purpose or
so as to constitute a nuisance. The Lessee, at the expiration of the term, shall
leave the leased premises in good repair and condition, broom clean with all
debris removed, and all air conditioning, heating, and other mechanical
equipment of every nature, whether or not installed by Lessor, shall be in good
working order, reasonable use and ordinary wear and tear excepted. Lessee
acknowledges that neither Lessor nor the Leasing Broker (as defined in Paragraph
38) or any other agent of Lessor has made any representation or warranty as to
the suitability of the leased premises for the conduct of Lessee's business.
10. Ordinances and Regulations:
(a) Lessee hereby covenants and agrees to comply promptly and
completely with all the rules and regulations of the Board of Fire
Underwriters, Officers or Boards of the City, Parish, County and/or
State having jurisdiction over the leased premises, and with all
ordinances and regulations of governmental authorities wherein the
leased premises are located, at Lessee's sole cost and expense, but
only insofar as any of such rules, ordinances and regulations pertain
to the manner in which the Lessee shall use the leased premises; the
obligation to comply in every other case and also all cases where such
rules, regulations and ordinances require repairs, alterations,
changes or additions to the building (including the leased premises,
but not caused by Lessee's use thereof) or building equipment, or any
part of either, being hereby expressly assumed by Lessor, and Lessor
covenants and agrees to comply with all such rules, regulations and
ordinances with which Lessee has not herein expressly agreed to
comply. Lessee agrees to hold Lessor financially harmless including,
without limitation, attorneys' fees, (i) from the consequences of any
violations of such laws,
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<PAGE>
ordinances or regulations, and (ii) from any claims for damages on
account of injuries, death or property damage resulting from such
violation.
(b) Lessee agrees to be bound by the rules and regulations set forth
on the schedule attached hereto as Exhibit B, initialed by the parties
and made a part hereof. Lessor shall have the right, from time to
time, to issue reasonable additional or amended rules and regulations
regarding the use of the leased premises. When so issued the same
shall be considered a part of this Lease and Lessee covenants that
said additional or amended rules and regulations shall likewise be
faithfully observed by Lessee, the employees of Lessee and all persons
invited by Lessee into the leased premises; provided, that said
additional or amended rules are made applicable to at least a majority
(on a square foot basis) of all tenants in the Building. Lessor shall
not be liable to Lessee for the violation of any of the said rules and
regulations, or the breach of any covenant or condition in any lease,
by any other tenant in the buildings. Any failure of Lessee to abide
by the aforesaid rules and regulations shall constitute a default
under this Lease.
11. Signs: Lessee shall not be permitted to paint, place, erect or cause
to be painted, placed or erected signs on the front, back or side portions of
the building or on the grounds of the premises without first obtaining written
consent from the Lessor, which consent will not be unreasonably withheld by
Lessor provided the proposed signage complies with all Building sign
specifications. At or prior to the termination and/or expiration of this lease,
or any renewal thereof, Lessee shall remove any signs so painted, placed or
erected, and shall restore the walls and other portions of the leased premises
to which any of the said signs were attached to their former condition, ordinary
wear and tear excepted.
12. Services:
(a) Lessor shall provide the normal utility service connection into the
leased premises. Lessee shall pay for all water, gas, heat, light, power,
sweeping and other janitorial services, rubbish and trash disposal, sewer and
any other utilities and services supplied in, about or related to the leased
premises, together with any taxes thereon, connection charges and deposits, and
also shall pay for all electrical light bulbs, lamps and tubes in connection
therewith. If any such utilities and services are not separately metered to
Lessee, Lessee shall pay a reasonable portion to be determined by Lessor of all
charges jointly metered with other premises. If Lessee shall require electricity
or water in excess of that which is to be supplied by Lessor hereunder, then
Lessee shall first secure the consent of the Lessor (which consent shall not
unreasonably be withheld), and Lessee shall pay all costs of installation of all
facilities necessary to furnish such excess capacity and shall also pay for any
increased electricity or water in connection therewith. Lessor reserves the
right during the term of this Lease to grant easements or servitudes for public
utility purposes on, over, or below the leased premises without any abatement in
rent, provided that said easements or servitudes do not unreasonably interfere
with
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<PAGE>
the normal operation of the business conducted by Lessee on the leased premises.
Lessor shall not be required to pay for any service, supplies or upkeep in
connection with the leased premises. Lessee shall arrange for and pay for all
telephone service and equipment, including any additions or alterations to the
existing telephone service boards and conduit.
(b) Lessee shall also pay to Lessor throughout the term of this Lease,
Lessee's pro-rata share of all costs, expenses, insurance premiums, fees and
disbursements (including, without limitation, such expenses as relate to seeking
or obtaining reductions in or refunds of real estate taxes, or any other expense
or charge, which in accordance with generally accepted accounting and management
principles, would be considered as an expense of owning, managing, operating,
maintaining or repairing the Building and the cost of wages, salaries and fringe
benefits of all persons engaged in the maintenance and repair of the Building)
paid or incurred by or on behalf of the Lessor for owning, managing, operating,
insuring, maintaining and repairing the Building (including, without limitation,
the repairs specified in Paragraph 13(a) below) and all personal property used
in conjunction therewith, including repair and replacement of any appurtenances
to such Building such as landscaping, parking lots, driveways and other areas
provided for the non-exclusive use and enjoyment of the occupants of the
Building and other buildings in the complex and the cost of utilities and trash
removal for the common areas. In no event shall Lessee's total prorata share of
operating expenses, real estate taxes and insurance for each calendar year
increase by more than seven (7) percent of the total prorata share of operating
expenses, real estate taxes and insurance for the immediately preceding calendar
year. Lessee's pro-rata share of such costs, expenses, fees and disbursements
(which shall be in addition to those specified in Paragraphs 7, 8, and 13 hereof
or in any other part of this Lease) shall be computed by multiplying such costs,
expenses, fees and disbursements by a fraction, the numerator of which is the
total gross square footage in the leased premises and the denominator of which
is the total gross square footage in the Building. Payments on account of
Lessee's pro-rata share shall be made at the times and in the fashion herein
provided for the payment of rent. Lessee's monthly installment on account shall
be equal to one-twelfth (1/12) of Lessee's pro-rata share as estimated, from
time to time, by Lessor. Once the actual amount of such costs, expenses, fees
and disbursements are known for an applicable period, Lessor shall immediately
bill Lessee for any additional amount necessary if the monthly amounts collected
from Lessee were insufficient, or Lessor shall credit to Lessee's next payment
under this Paragraph 12(b) any excess already paid.
All costs payable pursuant to Paragraph 12(b) shall hereinafter be defined
as Expenses.
(c) If the aggregate space in the Building is not one hundred percent
(100%) occupied by lessees during all or a portion of any Adjustment Year, the
Lessor shall make an appropriate adjustment for such year of those components of
Expenses, and, if applicable, taxes, which may vary depending upon the occupancy
level of the Building, employing generally accepted accounting principles, so
that all of such variable components of Expenses paid or incurred by Lessor are
ratably allocated to the lessees then occupying space in the Building. Any such
adjustments shall also be deemed expenses paid or incurred by Lessor and
included in Expenses
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<PAGE>
for such year, as if the Building had been one hundred percent (100%) occupied
and the Lessor had paid or incurred such expenses. If Lessor does not furnish
during any Adjustment Year any particular work or service (the cost of which, if
performed by Lessor, would constitute an Expense) to a lessee who has undertaken
to perform such work or service in lieu of the performance thereof by Lessor,
Expenses shall be deemed to be increased by an amount equal to the additional
expense which would reasonably have been incurred during such Adjustment Year by
Lessor if it had, at its own expense, furnished such work or service to such
lessee.
(d) The cost of any capital improvements to the Building made after the
date of this lease which are intended to reduce expenses or which are required
under any governmental laws, regulations or ordinances which were not applicable
to the Building at the time it was constructed, amortized over such reasonable
period as Lessor shall determine, together with interest on the unamortized cost
of any such improvement (at the prevailing construction loan rate available to
Lessor on the date the cost of such improvement was incurred) shall be included
in Expenses.
(e) Anything to the contrary in this Lease notwithstanding, Lessor does
not warrant that any utility service, connections, or facilities whatsoever or
any other services supplied in, about, or related to the leased premises will be
free from interruptions. No interruption of, delay in, or inability to provide
any utility service, connections, or facilities or any other services for any
cause or reason whatsoever shall be deemed to be an eviction or disturbance of
Lessee's use or possession of the leased premises or to cause Lessor to be
liable to Lessee in damages, or to relieve Lessee from performance of its
obligation to pay rent or any of Lessee's other obligations under this Lease.
13. Maintenance, Alterations, Mechanic's Liens:
(a) Lessee, by occupancy hereunder, accepts the leased premises as
being in good repair and tenable condition. Lessee has no obligation to
construct any improvements and any improvements intended must be
constructed in compliance with plans and specifications which have received
Lessor's prior review and approval in accordance with subparagraph (e)
hereinbelow. Unless otherwise expressly provided, Lessor shall not be
required to make any improvements, replacements or repairs of any kind or
character on the leased premises during the term of this Lease except such
repairs as are set forth in this subparagraph. Lessor shall at its expense
maintain only the roof, foundation, and the structural soundness of the
exterior walls (excluding all windows, window glass, plate glass, all doors
and pest control and extermination) of the Building in good repair and
condition except for reasonable wear and tear. Lessor shall maintain, at
Lessee's expense (subject to the payment provisions of Paragraph 12(b)
above), the downspouts and fire safety sprinkler system. Lessee shall, at
its sole cost, pay for any damage to the roof, foundation and external
walls caused by Lessee's action, negligence or fault. Lessee shall
immediately give written notice to Lessor of the need for repairs, and
Lessor shall proceed promptly, after having had a reasonable opportunity to
make the
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repairs. Lessor shall not be liable to Lessee, except as expressly provided
in this Lease, for any damage or inconvenience. Lessee shall not be
entitled to any abatement or reduction of rent by reason of any repairs,
alterations or additions made by Lessor under this Lease.
(b) Lessee shall, at its own risk and expense, maintain all other
parts of the Building and other improvements on the leased premises in good
repair and condition (including all necessary replacements), including, but
not limited to, HVAC, all glass elements, doors (including dock doors),
dock bumpers, regular removal of debris. Lessor shall perform lawn and
other common area maintenance and Lessee agrees to pay Lessor for lawn and
other common area maintenance on a pro rata basis as provided in Paragraph
12(b) above. Lessee shall repaint the exterior doors or other exposed parts
of the Building which reasonably require periodic repainting to prevent
deterioration. Lessee shall take good care of all property and its
fixtures, including all landscaping, and suffer no waste. Lessee shall
engage a certified pest control firm to perform regular (not less frequent
than monthly but more frequent if Lessor determines the need therefor)
extermination for pests including but not limited to roaches, rodents and
termites. Should Lessee neglect to keep and maintain the leased premises
including the HVAC system as required herein, then Lessor shall have the
right, but not the obligation, to have the work done and any reasonable
costs plus a ten percent (10%) overhead charge therefore shall be charged
to Lessee as additional rental and shall become payable by Lessee with the
payment of the rental next due. In connection with Lessee's maintenance and
repair of the heating and air conditioning system, Lessee shall provide
Lessor during the term of this Lease and any renewal hereof with a
duplicate original of a maintenance contract, in form and substance
acceptable to Lessor, with a reputable air conditioning maintenance firm.
(c) In addition to and not in lieu or limitation of Lessee's
maintenance, repair, and replacement obligations under Paragraph 13(b),
Lessee shall, at its own cost and expense, repair or replace any damage or
injury to all or any part of the leased premises and Building, caused by
Lessee or Lessee's agents, employees, invitees, licensees or visitors;
provided, however, if Lessee fails to make the repairs or replacements
promptly, Lessor may, at its option, make the repairs or replacements and
Lessee shall reimburse the cost plus a 10% overhead charge therefor to
Lessor on demand.
(d) Lessee shall not commit or allow any waste or damage to be
committed on any portion of the leased premises, and at the termination of
this Lease, by lapse of time or otherwise, Lessee shall deliver the leased
premises to Lessor in as good condition as at the date of first possession
of Lessee, ordinary wear and tear excepted. The cost and expense of any
repairs necessary to restore the condition of the leased premises shall be
borne by Lessee, and if Lessor undertakes to restore the leased premises,
it shall have a right of reimbursement against Lessee for all costs and
expenses of such repairs together with a 10% overhead charge therefor.
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(e) Without Lessor's prior written consent, Lessee shall not make or
cause to be made any exterior, interior, structural, electrical,
ventilation, air conditioning or other type of alterations, improvements,
additions, changes or repairs in or to the leased premises or the Building.
As a condition to granting its consent, Lessor may impose reasonable
requirements, including, without limitation, requirements as to the manner
and time for performance of any such work and the type and amount of
insurance and bonds Lessee must acquire and maintain in connection
therewith. In addition, at Lessor's option, Lessor shall have the right: to
approve the contractors or mechanics performing the work; to approve all
plans and specifications relating to the work; to review the work of
Lessee's architects, engineers, contractors or mechanics and to control any
construction or other activities being undertaken within the Building, with
Lessor to be reimbursed for any costs incurred in connection with such
review and/or control; and to order reasonable changes in the work in
instances in which materials or workmanship is defective or not in
accordance with plans or specifications previously approved by Lessor.
Except as expressly provided herein, all alterations, improvements,
additions, changes or repairs shall be provided by and paid for by Lessee
at its sole expense, but shall become the property of Lessor and shall be
surrendered with the leased premises upon termination of this Lease without
any obligation on the part of Lessor to reimburse or otherwise pay Lessee
or any other person or entity therefor; provided, however, that Lessor may,
by written notice to Lessee as provided in subsection (f) of this Section
13, require Lessee at Lessee's sole cost and expense, to remove any or all
improvements, alterations, additions or fixtures installed or made by
Lessee on or to the leased premises and to repair any damages to the leased
premises caused by such removal. All work in connection with any
alterations, improvements, changes, additions or repairs in the leased
premises or the Building made by or for the benefit of Lessee shall be
performed in full compliance with all laws, ordinances, regulations, rules
and requirements of all governmental entities having jurisdiction and in
full compliance with all insurance rules, orders, directions, regulations
and requirements. If there is now or if there shall be installed in the
Building a sprinkler system, and if any fire rating bureau or any similar
body having jurisdiction or any governmental authority having jurisdiction
requires or recommends that any changes, modifications, alterations,
additional sprinkler heads or other equipment be made or supplied by reason
of Lessee's business or the improvements it has added or the location of
partitions, trade fixtures or other contents of the leased premises, or if
any such changes, modifications, alterations, additions or other equipment
become necessary to prevent imposition of a penalty or charge against the
full allowance for a sprinkler system in the fire insurance rate as fixed
by said bureau or by any fire insurance company, Lessee shall, at its own
cost, promptly make and supply all such changes, modifications,
alterations, additional sprinkler heads or other equipment. No action taken
under this Paragraph by Lessor including, without limitation, the review
and approval of plans and specifications, the approval of contractors and
mechanics or the review of any construction, or the omission of Lessor with
regards thereto, shall be deemed to impose any liability whatsoever upon
Lessor, any such liability, expressed or implied, being hereby waived by
Lessee, nor shall the same be deemed to imply any
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representation on behalf of Lessor that the plans and specifications (and
the work covered thereby) are in compliance with applicable law or are
proper, either from a construction standpoint or with respect to the use
and purpose intended thereby.
(f) All fixtures and all panelling, partitions, railings and like
installations, installed in the leased premises at any time, either by
Lessee or by Lessor in Lessee's behalf, shall become the property of Lessor
without any obligation on the part of Lessor to reimburse or otherwise pay
Lessee or any other person or entity therefor, and shall remain upon and be
surrendered with the leased premises unless Lessor, by notice to Lessee no
later than twenty (20) days prior to the date fixed as the termination of
this Lease, elects to have them removed by Lessee, in which event, the same
shall be removed from the leased premises by Lessee forthwith, at Lessee's
expense prior to the expiration of this Lease. Nothing in this paragraph
shall be construed to prevent Lessee's removal of trade fixtures,
furnishings or equipment (as provided for below), but upon removal of any
such trade fixtures, furnishings and equipment from the leased premises or
upon removal of other installations as may be required by Lessor, Lessee
shall immediately and at its expense, repair and restore the leased
premises to the condition existing prior to installation and repair any
damage to the leased premises or the Building due to such removal. All
property permitted or required to be removed by Lessee at the end of the
term remaining in the leased premises after Lessee leaves the leased
premises shall be deemed abandoned and may, at the election of Lessor,
either be retained as Lessor's property without any obligation on the part
of Lessor to reimburse or otherwise pay Lessee or any other person or
entity therefor, or may be removed from the leased premises by Lessor at
Lessee's expense.
(g) Lessee shall, before making any alterations, additions,
installations, or improvements of any kind, at its expense, obtain all
permits, approvals and certificates required by any governmental or quasi-
governmental bodies and (upon completion) certificates of final approval
thereof and shall deliver promptly duplicates of all such permits,
approvals and certificates to Lessor. Lessee agrees to carry workman's
compensation, general liability, personal and property damage insurance as
Lessor may require and shall deliver to Lessor certificates evidencing such
insurance prior to the commencement of any such work. Lessee agrees to
obtain and deliver to Lessor, written and unconditional waivers of liens or
privileges upon Lessee's interest in the leased premises and real property
and any liens or privileges filed in contravention of this Agreement upon
the interest of Lessor, for all work, labor and services to be performed
and materials to be furnished in connection with such work, signed by all
contractors, subcontractors, materialmen and laborers to become involved in
such work. Nothing herein shall be construed to give Lessee or any
contractor, subcontractor, materialman or laborer any right to a mechanic's
lien upon Lessor's interest in the real property. Notwithstanding the
foregoing, if any liens or privileges are filed against the leased premises
or the Building for work claimed to have been done for, or materials
furnished to, Lessee, whether or not done pursuant to this paragraph,
Lessee shall (i) give written
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notice thereof immediately to Lessor and (ii) cause the same at Lessee's
expense to be discharged of record within twenty (20) days after the date
of filing the same, either by payment, deposit or bond pursuant to
Louisiana law or other applicable provisions of the Private Works Act. If
Lessee shall fail to discharge any such lien or privilege within such
period, then, in addition to any other right or remedy of Lessor, Lessor
may, but shall not be obligated to, procure the discharge of the same
either by paying the amount claimed to be due by deposit in court or by
bonding, and Lessor shall be entitled, if Lessor so elects, to compel the
prosecution of an action for the foreclosure of such lien or privilege by
the lienor or privilege holder and to pay the amount of the judgment, if
any, in favor of the lienor or privilege holder, with interest, costs and
allowances. Any amount paid or deposited by Lessor for any of the aforesaid
purposes, and all costs and other expenses of Lessor, including reasonable
attorneys fees, in defending any such action or in or about procuring the
discharge of such lien, or privilege with all necessary disbursements in
connection therewith, together with a ten percent (10%) overhead charge and
interest on the amount expended by Lessor and the overhead charge at the
lower of eighteen percent (18%) or the highest interest rate permitted in
Louisiana from the date of payment or deposit and until paid by Lessee,
shall be payable by Lessee to Lessor upon demand as additional rent but no
later than the next succeeding monthly rent payment date.
(h) Lessee shall not cause or permit any Hazardous Material (as
defined herein) to be released, brought upon, stored, produced, emitted,
disposed of or used upon, about or beneath the premises by Lessee, its
agents, employees, contractors or invitees.
Lessee shall indemnify, defend, and hold Lessor harmless from and
against any and all Environmental Damages which arise from: (i) the
presence upon, about or beneath the leased premises of any "Hazardous
Materials" (as defined in this Lease) or of any chemical substance
requiring remediation under any federal, state or local statute,
regulation, ordinance or policy; or; (ii) the breach of any of the
provisions of this lease. For the purpose of this Lease, "Environmental
Damages" shall mean: (i) all claims, judgments, damages, penalties, fines,
costs, liabilities and losses (including, without limitation, diminution in
the value of the leased premises, damages for the loss of or restriction on
use of rentable or usable space or of any amenity of the premises and from
any adverse impact on Lessor's marketing of space); (ii) all sums paid for
settlement of claims, attorneys fees, consultant's fees and expert's fees;
and (iii) all costs incurred by Lessor in connection with investigation of
Hazardous Material (as defined herein) upon, about or beneath the leased
premises, the preparation of any feasibility studies or reports and the
performance of any cleanup, remediation, removal or restoration work
required by any federal, state or local governmental agency or political
subdivision necessary for Lessor to make full economic use of the leased
premises, or otherwise required under this Lease. Lessee's obligations
under this Section shall survive the expiration of this Lease.
Notwithstanding any other obligation of Lessee to indemnify Lessor
pursuant to this lease, Lessee shall, at its sole cost and expense,
promptly take all actions required by
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any federal, state or local governmental agency or political subdivision or
necessary for Lessor to make full economic use of the leased premises,
which requirements or necessity arise from the presence upon, about or
beneath the leased premises of any Hazardous Materials (as defined in this
Lease). Such actions shall include, but not be limited to, the
investigation of the environmental condition of the leased premises, the
preparation of any feasibility studies or reports and the performance of
any cleanup, remedial, removal or restoration work. Lessee shall take all
actions necessary to restore the leased premises to the condition existing
prior to the introduction of the Hazardous Material upon, about or beneath
the leased premises, notwithstanding any lesser standard of remediation
allowable under applicable law or governmental policies. Lessee shall
nevertheless obtain Lessor's approval prior to undertaking any activities
required by this Section, which approval shall not be unreasonably withheld
so long as such actions would not potentially have a material adverse long-
term or short-term effect on the leased premises. The obligations of Lessee
pursuant to this Section shall not apply to situations where Hazardous
Materials are released, brought upon, stored, produced, emitted, disposed
of or used upon, about or beneath the leased premises at a time or times
other than during the term of this Lease except where such event occurs as
a result of the acts or omissions of lessee, its agents, employees,
contractors or invitees or as a result of the acts or omissions of any
agent, employee, contractor or invitee of any permitted sublessee or
assignee of Lessee. Lessee's obligations under this Section shall survive
the expiration of this Lease.
"Hazardous Material" means any material or substance: (i) defined as a
"hazardous substance" pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and
amendments thereto and regulations promulgated thereunder; (ii) containing
gasoline, oil, diesel fuel or other petroleum products; (iii) defined as a
"hazardous waste" pursuant to the Federal Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.) and amendments thereto and
regulations promulgated thereunder; (iv) containing polychlorinated
biphenyls (PCBs); (v) containing asbestos; (vi) radioactive; (vii)
biological or (viii) the presence of which requires investigation or
remediation under any federal, state or local statute, regulation,
ordinance or policy or which is or becomes defined as a "hazardous waste"
or "hazardous substance" under any federal, state or local statute,
regulation or ordinance and any toxic, explosive, corrosive or otherwise
hazardous substance, material or waste which is or becomes regulated by any
federal, state or local governmental authority, or which causes a nuisance
upon or waste to the leased premises.
(i) All equipment installations on the leased premises shall be
commenced, performed and completed promptly after commencement of the term
of this Lease and Lessee does hereby warrant to Lessor that such
installation shall be made in correctly designed and workmanlike manner in
full compliance with all applicable public codes and regulations and that
Lessor shall be held harmless from the costs and liability thereof and that
same shall be deemed personal property and not part of the leased premises
and
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that Lessee shall cause all of the same to be removed from the leased
premises which shall be restored to the condition preexisting same
forthwith upon termination of this Lease for any cause.
14. Quiet Enjoyment: Provided the Lessee performs all of its covenants
and obligations hereunder, the Lessor covenants that the Lessee shall have the
peaceful and quiet enjoyment of the leased premises and that the Lessor will
defend the Lessee in the peaceful and quiet enjoyment of the leased premises
against the lawful claim of all persons claiming by, through or under the
Lessor. All obligations of the Lessee under this Lease are material and of equal
importance.
15. Lessor's Right to Inspect and Display: The Lessor shall have the
right, at reasonable times during the term of this Lease, to enter the leased
premises for the purpose of examining or inspecting same and of making such
repairs or alterations therein as the Lessor shall deem necessary is Lessee
shall fail to do so. Within ninety (90) days prior to the termination of this
Lease, Lessor shall also have the right to enter the leased premises at all
reasonable hours for the purpose of displaying said leased premises to
prospective tenants, and Lessor may affix a notice for letting the leased
premises on any suitable portion thereof. The Lessor shall have the right to
enter the leased premises at any reasonable time for the purpose of showing the
leased premises to a prospective buyer of the Building. If, during the last
month of the term, Lessee shall have removed all or substantially all of
Lessee's property, Lessor may immediately enter the leased premises and prepare
them for any future Lessee. Furthermore, the Lessor may allow such future Lessee
to occupy the leased premises. These acts shall have no effect upon Lessee's
obligation under this Lease and Lessee shall be entitled to no abatement or
diminution of rent as a result thereof, except that in the event such future
Lessee makes any payment for the period up until the expiration of this Lease,
Lessee shall be entitled to a credit to the extent of such payment.
16. Damage or Destruction:
(a) If by fire or other casualty the leased premises are totally
destroyed or the Building is partially damaged or destroyed to the extent
of seventy-five per cent (75%) or more of the replacement cost thereof,
even though the leased premises may not be damaged, Lessor shall have the
option of terminating this Lease or any renewal thereof by serving written
notice upon the Lessee within thirty (30) days from the date of the
casualty and any prepaid rent shall be prorated as of time of destruction
and unearned rent refunded without interest.
(b) If by fire or other casualty the leased premises are damaged or
partially destroyed to the extent of twenty-five per cent (25%) or more of
the replacement cost thereof and the provisions of (a) above are not
applicable, then (1) if the unexpired term of the Lease is less than one
year, excluding any unexercised renewal option, Lessor may either terminate
this Lease by serving written notice upon Lessee within ten (10) days of
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the date of destruction or Lessor shall restore the leased premises, or (2)
if the unexpired term of the Lease is more than one year, including any
exercised renewal option, Lessor shall restore the leased premises.
(c) If by fire or other casualty the leased premises are damaged or
partially destroyed to the extent of less than twenty-five per cent (25%)
of the replacement cost thereof and the provisions of (a) above are not
applicable, Lessor shall restore the leased premises.
(d) In the event of restoration by Lessor, all rents paid in advance
shall be proportioned as of the date of damage or destruction and all rent
thereafter accruing shall be equitably and proportionately adjusted
according to the nature and extent of the destruction or damage, pending
completion of rebuilding, restoration and repair. In the event the
destruction or damage is so extensive as to make it unfeasible for the
lessee to conduct Lessee's business on the leased premises, the rent shall
be completely abated until the leased premises are restored by the Lessor.
The Lessor shall not be liable for any damage to or any inconvenience or
interruption of business of the Lessee or any of its employees, agents or
invitees occasioned by fire or other casualty.
(e) Said restoration, rebuilding or repairing shall be sufficient to
return the leased premises to the condition existing prior to the damage
and shall be at Lessor's sole cost and expense. Lessor shall have no duty
pursuant to this Section 17 to repair or restore any portion of the
alterations, additions or improvements made by Lessee in the leased
premises or to expend for any repair or restoration amounts in excess of
insurance proceeds paid to the Lessor and available for repair or
restoration. Repairs, replacement or restoration of improvements, additions
or fixtures placed in the leased premises by Lessee, as well as Lessee's
equipment, furnishings, stock in trade and other personal property are at
Lessee's risk and shall be restored or replaced at Lessee's expense.
17. Eminent Domain: If the whole or any part of the leased premises shall
be acquired or condemned by Eminent Domain for any public or quasi-public use or
purpose, then and in that event the term of this Lease shall cease and terminate
from the date of title vesting in such proceeding and Lessee shall have no claim
against Lessor or against the total award for the value of any unexpired portion
of the Lease terms or otherwise, and Lessee shall not be entitled to any part of
any award that may be made for such taking, nor to any damages therefore except
that the rent shall be adjusted as of the date of such termination of this
Lease.
18. Assignment or Subletting:
(a) Lessee shall not, either voluntarily or by operation of law,
directly or indirectly, sell, hypothecate, assign or transfer this Lease,
or sublet the leased premises or any part thereof, or permit the leased
premises or any part thereof to be occupied by anyone other than Lessee or
Lessee's employees, without the prior written consent of
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Lessor in each instance. A transfer of stock control in Lessee, if Lessee
is a corporation, or the transfer of a greater than forty-nine percent
(49%) partnership interest in Lessee, if Lessee is a partnership, shall be
deemed an act of assignment hereunder. Subject to the provisions of
subparagraphs (b) and (c) of this Paragraph, Lessor's consent to assignment
or subletting (subject to the procedures set forth in subparagraph (b) of
this Paragraph) shall not be unreasonably withheld, provided the proposed
assignee or sublessee: (i) is satisfactory to Lessor as to credit,
character and professional standing; (ii) will meet any other tenant
requirements then generally imposed by Lessor with respect to new tenants
in the building; and (iii) will use the leased premises for purposes not
inconsistent with Lessor's commitments to other tenants. Lessor may,
however, withhold such consent if, in Lessor's reasonable judgment, the
occupancy of the proposed assignee or sublessee will tend to impair the
character or dignity of the building or impose any additional burden upon
the Lessor in the operation of the building. Any sale, assignment,
mortgage, transfer or subletting of this Lease which is not in compliance
with the provisions of this Paragraph shall be void and shall, at the
option of the Lessor, terminate this Lease. The consent by Lessor to an
assignment or subletting shall not be construed as relieving Lessee from
obtaining the express prior written consent of Lessor to any further
assignment or subletting or as releasing Lessee from any liability or
obligation hereunder, whether or not then accrued. Lessee agrees and in no
event will it attempt to assign or sublet to any existing tenant or
subtenant in the buildings. Further, all advertising with respect to the
leasing, subletting, or assignment of space in the Building must be
approved in writing by Lessor prior to publication. Should Lessor permit
any assignment or subletting by Lessee and should the moneys received as a
result of such assignment or subletting (when compared to the moneys still
payable by Lessee to Lessor) be greater than would have been received
hereunder had not Lessor permitted such assignment or subletting, then the
excess shall be payable by Lessee to Lessor, it being the parties'
intention that Lessor, and not Lessee, shall be the party to receive any
profit from any assignment or subletting. Lessee shall pay all of Lessor's
costs, charges and expenses, including attorneys' fees incurred in
connection with any assignment or sublease requested or made by Lessee.
(b) As conditions precedent to any assignment of the whole or any
part of Lessee's interest in this Lease or the subletting by Lessee of the
whole or any part of the leased premises, (i) at least thirty (30) days
prior to any proposed assignment or subletting, Lessee must submit to
Lessor a statement containing (A) the name and address of the proposed
assignee or sublessee; (B) a financial statement of the proposed assignee
or sublessee containing therein bank and other credit references; (C) the
type of use proposed for the leased premises; and (D) all of the principal
terms and conditions of the proposed assignment or subletting including,
but not limited to, the proposed commencement and expiration dates of the
term thereof and the amount of rent to be payable by the assignee or
sublessee and, unless the proposed assigned or sublet area constitutes an
entire floor or floors, such statement shall be accompanied by a floor plan
delineating the proposed assigned or sublet area; and if Lessor approves
the assignment
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or subletting (ii) Lessee shall deliver to Lessor an original assignment or
sublease executed by Lessee and the proposed assignee or sublessee together
with a form approved by Lessor which shall expressly provide (A) for the
assumption by such proposed assignee or sublessee of all of Lessee's
obligations under the terms of this Lease; (B) that Lessee shall indemnify
and hold Lessor harmless from any and all claims, obligations and
liabilities (including reasonable attorneys fees) arising from such
assignees or sublessees occupancy and use of the leased premises, or any
portion thereof, whether such claim, obligation or liability arises from
such assignee or sublessee's conduct, activity, work or any other matter
in, on or about the leased premises and/or the building; (C) that Lessee
shall further indemnify and hold Lessor harmless from any costs,
obligations or liabilities (including reasonable attorneys fees) arising
from any act or negligence of such assignee or sublessee, or any officer,
employee, agent or invitee of such assignee or sublessee, and from any
claim, action or proceeding brought thereon; (D) that in no event shall
Lessee, by reason of Lessor's approval of the assignment or sublease, be
deemed relieved from any obligation or liability under this Lease,
including but not limited to, the obligation to obtain Lessor's consent to
any further assignment or subletting; and (E) that such proposed assignment
or sublease shall not be deemed effective for any purpose unless and until
Lessor's written consent thereto is obtained.
(c) In lieu of consenting or not consenting, Lessor may, at its
option: (i) in the case of the proposed assignment or subletting of
Lessee's entire leasehold interest, terminate Lessee's Lease in its
entirety; or (ii) terminate Lessee's Lease as to that portion of the leased
premises which Lessee has proposed to assign or sublet. In the event Lessor
elects to terminate this Lease pursuant to clause (ii) above, Lessee's
obligation as to rent shall be reduced in the same proportion that the
rentable area of the portion of the leased premises taken by the proposed
assigned or sublessee bears to the total rentable area of the leased
premises.
19. Holdover: If Lessee remains in the leased premises after the
expiration or termination of this Lease for any reason whatsoever without the
prior written consent of Lessor, Lessee shall pay to Lessor, as liquidated
damages, and not as a penalty, three (3) times the rent per day for each day
that Lessee occupies any part of the leased premises after the date on which
this Lease is terminated, together with all other sums that may become due
during that period. No holding over by Lessee after the expiration of this Lease
shall operate to extend this Lease, and the provisions of this section shall not
operate as a waiver by Lessor of Lessor's right to enforce a default of the
Lease or to evict Lessee. In the event of any unauthorized holding over, Lessee
shall indemnify, defend, and hold harmless Lessor against all claims and causes
of action for damages or other relief by any other person or entity to whom
Lessor may have leased any part of the leased premises, effective upon
termination of this Lease, including, without limitation, all payments,
settlements, judgments, damages, losses, liabilities, interest, cost of defense,
attorneys' fees, and other expenses in connection therewith.
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20. Abandonment or Vacating Premises: Lessee shall, during the term of
this Lease, occupy the leased premises and shall retain and maintain during
normal business hours the furniture, fixtures and other personal property of
Lessee on the leased premises under the supervision or control of one or more
officers or employees of Lessee. In the event of a default in payment of rent,
accompanied by either (i) a removal without Lessor's written consent of Lessee's
furniture or fixtures, or (ii) a failure of officers or employees of Lessee to
conduct their normal business activities on and from the leased premises for a
period of ten (10) business days, then such event may, at Lessor's option and
without notice to Lessee, be deemed a default and an abandonment by the Lessee
of the leased premises and its contents entitling Lessor to retake possession of
the leased premises and pursue such remedies as set forth in Paragraph 24.
21. Subordination:
(a) This Lease and Lessee's rights and interests hereunder
(collectively "Lessee's Leasehold") shall have priority over, and shall be
superior to, each mortgage against the land underlying the Building (the
"Land") and the Building, or any interest therein, now or hereafter in
effect, and to the rights and interests of the holder from time to time (a
"Mortgagee"), of any such mortgage and all advances made thereunder
together with interest thereon (each such mortgage and all such rights,
interests, advances and interest thereon are collectively hereinafter
referred to as a "Mortgage"); provided that the rights of a Mortgagee to
the proceeds of any condemnation award or of any insurance policies
affecting the Land and/or the Building as provided in such Mortgage (or any
other instrument related to the loan secured by such Mortgage) shall have
priority over all rights of Lessee with respect to such proceeds. If
requested by a Mortgagee, Lessee shall promptly execute and deliver such
instruments as such Mortgagee may reasonably require either, as the case
may be, to effectuate or to evidence and confirm the foregoing priority of
Lessee's Leasehold over its Mortgage.
(b) Notwithstanding the foregoing, Lessee agrees that the holder of
any Mortgage which at such time represents the first priority mortgage lien
on the Land and Building ("First Mortgage") may, at any time during the
term of this Lease, elect to cause Lessee's Leasehold to be made
subordinate to such First Mortgage by providing Lessee with written notice
of such election. Such subordination shall be self-executing upon delivery
to Lessee of such notice of election in accordance with the notice
provisions of this Lease and thereupon Lessee's Leasehold immediately shall
become subordinate in all respects to such First Mortgage. In addition, if
requested by the holder of such First Mortgage, Lessee shall promptly
thereafter execute such instruments as such holder may reasonably require
to evidence and confirm that the subordination of Lessee's Interest to such
First Mortgage has been effectuated. Lessee agrees that it will not
subordinate Lessee's leasehold to any Mortgage other than a First Mortgage
without the prior written consent of the holder of the First Mortgage.
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(c) Lessor and Lessee hereby acknowledge and agree that Sub-Sections
(a) and (b) of this Section 21 have been incorporated into this Lease for
the express benefit of all present and prospective Mortgagees, and
consequently each such Mortgagee has and shall have throughout the term of
this Lease the right and power as a third party beneficiary to enforce the
provisions of this Section as applicable to such Mortgagee. Moreover,
failure of Lessee to execute and deliver any instrument required by a
Mortgagee pursuant to Sub-Sections 21 (a) or (b) within 10 days after
written demand therefor, shall constitute a material default under this
Lease. In the event of any such default, Lessor and any "Successor Lessor"
[as defined in Sub-Section 21(d)] shall be entitled to exercise all
remedies available under Section 24 of this Lease or, in the alternative,
Lessor and any Successor Lessor may elect and shall be entitled to exercise
any and all remedies as may be available either at law or in equity or by
statute, including, without limitation, specific performance of such
obligations of Lessee. Lessee also agrees that its obligation to execute
and deliver the instruments described in Sub-Sections 21 (a) and (b) shall
be specifically enforceable and if Lessor or any Successor Lessor elects to
seek specific performance of such obligations of Lessee, Lessee hereby
waives the defense that Lessor or such Successor Lessor has an adequate
remedy at law, Lessee hereby agreeing that such Lessor or Successor Lessor
will have no adequate remedy at law.
(d) It is further agreed that (1) if any Mortgage shall be foreclosed
or the Building or Land shall be transferred to a Mortgagee or other
transferee pursuant to a dation en paiment (i) the liability of such
Mortgagee, such transferee, or the purchaser at such foreclosure sale
(collectively "Successor Lessor") as Lessor under this Lease shall exist
only so long as such Successor Lessor is the owner of the Building or Land
and such liability shall not continue or survive after further transfer of
ownership, and (ii) upon request of any such Successor Lessor, Lessee will
attorn, as Lessee under this Lease, to such Successor Lessor, and Lessee
will execute such instruments as such Successor Lessor may reasonably
require to evidence such attornment; and (2) this Lease may not be modified
or amended so as to reduce the rent or shorten the term provided hereunder,
or so as to adversely affect in any other respect to any material extent
the rights of Lessor, nor shall this Lease be canceled or surrendered
without the prior consent, in each instance, of the holder of the First
Mortgage and of any lessor under any ground lease or other underlying lease
of the Land or the Land and Building.
Lessee agrees that if the Land or the Land and Building are now or
hereafter subject to any ground lease or underlying lease which has
priority over this Lease and title to the leasehold interest under such
ground lease or underlying lease shall be merged into the ownership
interest in the Land and Building, this Lease shall not terminate and
Lessee shall attorn to the owner of the fee simple interest as Lessor under
this Lease.
(e) Should the holder of any First Mortgage require a modification or
modifications of this Lease, which modification or modifications will not
cause any
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increased cost or expense to Lessee or in any other way materially and
adversely change the rights and obligations of Lessee hereunder, then and
in such event, Lessee agrees that this Lease may be so modified and agrees
to promptly execute and deliver whatever documents are required therefor
and deliver the same to Lessor within 10 days following the request
therefor. Should any Mortgagee require execution of a memorandum of lease
for recording (containing the names of the parties, a description of the
leased premises and the term of this Lease and any other matter required by
applicable law) or a certification from Lessee concerning the Lease and
such form as may be required by such Mortgagee, Lessee agrees to execute
such short form of lease or certification and deliver the same to Lessor
within 10 days following the request therefor.
(f) Failure of Lessee to execute and deliver any instrument required
by the holder of the First Mortgage pursuant to Sub-Sections 21(d) or (e)
within 10 days after written demand therefor shall constitute a material
default under this Lease. In addition to any other remedies provided for
herein, if Lessee fails, within 10 days after written demand therefor, to
execute and deliver any instruments as may be necessary or proper to
effectuate or confirm any of the covenants of Lessee set forth above in
this Section 21, Lessee hereby makes, constitutes and irrevocably grants
Lessor a power-of-attorney coupled with an interest in the demised premises
to execute and deliver any such instruments for and in the name of Lessee.
22. Indemnification: The Lessor shall not be liable for any personal
injury or death or any property loss or damage, whether it be the person or
property of the Lessee, the Lessee's employees, agents, guests, or invitees, or
otherwise, by reason of Lessee's occupancy of the leased premises or because of
fire, flood, windstorm, acts of God, or by reason of any hidden or apparent
defect or deficiency in or about the leased premises or the Building, or any
condition, circumstance, event, or occurrence in or about the leased premises or
the Building, or otherwise, even if such injury, death, loss or damage arose
from the acts, negligence, or fault of Lessor or from a matter for which Lessor
is strictly liable. The Lessee agrees to reimburse the Lessor for and to
indemnify, defend, and save harmless the Lessor from and against any and all
loss, damage, claim, demand, liability, or expense by reason of Lessee's breach
of any covenants contained in this Lease (including, without limitation, the
covenants contained in Paragraph 13(h) hereof), or any personal injury or death
or property loss or damage (whether to Lessor's personnel or property or to the
personnel or property of any other person or entity whatsoever) that may arise
or be claimed to have arisen in whole or in part as a result of or that is in
any way attributable to or connected with the occupancy or use of the leased
premises and adjacent areas by the lessee or any other person or entity during
the term of this Lease, or the acts or omissions of Lessee, its employees,
agents, guests, invitees, or contractors, or any hidden or apparent defect or
deficiency in or about the leased premises, or any condition, circumstance,
event, or occurrence in, on, or about the leased premises or in any other way
arising on account of any injury, death, loss, or damage caused to any person or
property in, on, or about the leased premises, whether any such personal injury
or death or property loss or damage with respect to which Lessee has agreed to
reimburse Lessor and against which Lessee has agreed to indemnify
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Lessor herein arises from the acts, negligence, or fault of Lessor or from a
matter for which Lessor is strictly liable, or otherwise, providing, however,
that the Lessee shall not be required to reimburse or indemnify Lessor as to
loss or damage due to the sole gross negligence of Lessor. Lessee's
reimbursement and indemnity obligations set out herein and in the other
provisions of this Lease shall include, without limitation, any and all
payments, settlements, judgments, damages, fines, assessments, losses,
liabilities, interest, costs of defense, attorneys' fees and other legal costs,
and other expenses, and shall survive the expiration or other termination of
this Lease.
23. Limitation of Liability: The term Lessor as used in this Lease shall
be limited to mean and include only the owner or owners at the time in question
of the ownership interest in the leased premises and in no event shall such term
or any covenant be construed to impose a personal obligation upon the property
manager or the leasing broker who is an independent contractor authorized by the
owner of the leased premises to secure leases for the property of such owner.
Nothing herein shall be construed to imply or impose a general agency
relationship upon the property manager, the leasing broker or the owner of the
leased premises. In the event of any transfer of title to such ownership
interest, the Lessor herein shall be automatically freed and relieved from all
applicable liability with respect to performance of any covenant or obligation
on the part of Lessor, provided any deposits or advance rents held by Lessor are
turned over to the grantee and said grantee expressly assumes, subject to the
limitations of this paragraph, all the terms, covenants and conditions of this
Lease to be performed on the part of Lessor, it being intended hereby that the
covenants and obligations contained in this Lease on the part of Lessor shall,
subject to all the provisions of this Section 23, be binding on Lessor, its
successors and assigns, only during their respective successive periods of
ownership.
Notwithstanding anything to the contrary contained in this Lease or in any
Riders or Addenda hereto attached (collectively the "LEASE DOCUMENTS"), it is
expressly understood and agreed by and between the parties hereto that:
(a) The recourse of Lessee or its successors or assigns against Lessor
with respect to the alleged breach by or on the part of Lessor of any
representation, warranty, covenant, undertaking or agreement contained
in any of the Lease Documents (collectively, "LESSOR'S LEASE
UNDERTAKINGS") shall extend only to Lessor's interest in the real
estate of which the premises demised under the Lease Documents are a
part ("LESSOR'S REAL ESTATE") and not to any other assets of Lessor or
its beneficiaries;
(b) Neither Heitman Advisory Corporation, Heitman Properties Ltd. nor
Heitman Properties of Louisiana Ltd. nor any of their respective
directors, officers, employees or agents shall have any personal
liability whatsoever with respect to any breach by Lessor of any of
Lessor's Lease Undertakings; and
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(c) Except to the extent of Lessor's interest in Lessor's Real Estate, no
personal liability or personal responsibility of any sort with respect
to any of Lessor's Lease Undertakings is assumed by, or shall at any
time be asserted or enforceable against, Lessor, its beneficiaries,
Heitman Advisory Corporation, Heitman Properties Ltd. or Heitman
Properties of Louisiana Ltd., or against any of their respective
directors, officers, employees, agents, constituent partners,
beneficiaries, trustees or representatives.
24. Events of Default and Lessor's Remedies:
(a) It shall be a material default and breach of this Lease if at any
time during the term of this Lease (and regardless of the pendency of any
bankruptcy, reorganization, receivership, insolvency or other proceeding,
in law, in equity, or before any administrative tribunal, which have or
might have the effect of preventing the Lessee from complying with the
terms of this Lease):
(i) Lessee shall fail to make payment of any installment of
rent or of any other sum herein specified to be paid by Lessee, and if
any such default shall not be cured within five (5) days after written
notice of such failure to make any payment, or
(ii) Lessee shall fail to observe or perform any of the
Lessee's other covenants, agreements or obligations hereunder, and if
such default shall not be cured within thirty (30) days after the
Lessor shall have given to the Lessee written notice specifying such
default or defaults, other than payment of money, or
(iii) Lessee shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit of
creditors, or
(iv) Lessee shall voluntarily file, or have filed against it, a
petition under any section or chapter of the Bankruptcy Code, as
amended, or under any similar law or statute of the United States or
any state thereof; or Lessee shall be adjudged bankrupt or insolvent
in proceedings filed by or against Lessee thereunder, or
(v) a receiver or trustee shall be appointed for all or
substantially all of the assets of Lessee, or
(vi) Lessee shall vacate or abandon the leased premises.
(b) In the event of any such default, the Lessor shall have the
following rights at its election, then or at any time thereafter, and while
such default or defaults shall
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continue, but without any further notice or putting in default, such notice
and putting in default being hereby waived:
(i) to proceed for all past due rent and other charges and all
damages caused by such default, reserving its right to proceed later
for the remaining rent and other charges becoming due hereunder and to
enforce later its legal remedies hereunder; or
(ii) to proceed for all past due rent and other charges and all
damages caused by such default, to declare all unpaid installments of
rent for the entire term of this Lease immediately due and payable,
and to proceed to enforce its legal remedies hereunder, reserving its
right to proceed later for payment of additional rent and other
charges as such amounts become due; or
(iii) to proceed for all past due rent and other charges and all
damages caused by such default and to cancel and terminate this Lease,
which cancellation shall be effective immediately, without putting
Lessee in default, Lessee hereby assenting thereto and expressly
waiving all legal notice to vacate as provided in Article 4701 of the
Louisiana Code of Civil Procedure.
(c) If Lessor elects option (b)(iii) and terminates this Lease,
Lessee shall peacefully and quietly surrender to the Lessor the leased
premises and all structures, buildings, improvements, and equipment located
therein, and will execute and deliver to Lessor such instrument or
instruments as shall be required by Lessor as will properly evidence
termination of Lessee's rights hereunder and its interest therein. Upon
such termination, Lessor will have the immediate right, but not the
obligation, to re-lease the leased premises for such price and on such
terms as may be immediately obtainable, and Lessee shall be and remain
liable, not only for all rent and other charges due and all other
obligations incurred up to the date of termination, but also for stipulated
or liquidated damages for its nonperformance equal to the sum of the
following:
(i) the amount by which the total amount of all rent, and
other charges that Lessee was to have paid under this Lease from the
date on which Lessor's termination became effective to the originally
fixed expiration date of this Lease (including, without limitation,
the expiration date of any renewal term, if Lessee has exercised any
right to renew), exceeds, at Lessor's option either (A) the total
amount of rent and other charges payable by the new tenant of the
leased premises during such period, or (B) the fair rental value of
the Premises during such period; plus
(ii) all expenses that Lessor may incur in reentering the
leased premises, putting the leased premises and all structures,
buildings, improvements and equipment located therein in proper
repair, making such modifications as
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shall be required for any new tenants, protecting and preserving the
leased premises by placing watchmen and caretakers therein, reletting
the leased premises, including attorneys' fees and disbursements,
sheriff's fees, and brokerage fees in doing so, and any and all
expenses that Lessor may incur during the occupancy of the new tenant.
In any case, Lessor may remove or cause to be removed, at
Lessee's expense, any and all furniture and movable (personal)
property whatsoever situated upon the leased premises and store the
same in Lessor's or Lessee's name, all at the cost, expense, and risk
of Lessee, without liability to Lessor for loss or injury thereto, and
without prejudice to Lessor's lien and privilege securing all sums
under this Lease. Lessor is hereby irrevocably authorized to sell any
or all of such property at public or private sale, with or without
legal proceedings, and with or without notice, demand, advertisement,
appraisement, putting Lessee in default, or any other formality, and
Lessor may purchase such contents at public or private sale and the
proceedings thereof, after deducting all costs, charges, attorneys'
fees, and expenses of such sale, shall be applied to the payment of
rent, and all other sums and charges due under this lease, and the
balance remaining after the payment of said rent and satisfaction of
all other sums and charges shall belong and be paid to Lessee.
(d) As an alternative to, and without limiting Lessor's remedies set
out above, if Lessee abandons the leased premises, then Lessor will have
the immediate right, at its option, to re-enter and take possession of the
leased premises without legal proceedings as agent for lessee, to remove
any and all property therefrom and deal with the same in accordance with
the last paragraph of subparagraph (c), and to re-lease the leased premises
on behalf of Lessee for such price and on such terms as may be immediately
obtainable, all without incurring any liability to Lessee and without being
deemed to have canceled this Lease, evicted Lessee, or relieved Lessee of
any of its obligations under this Lease. Upon such re-entry and re-lease of
the leased premises by Lessor, Lessee will receive the benefit of any rent
collected from the new Lessee (after deduction therefrom by the Lessor of
the costs, fees, and expenses of collection, the costs and expenses
described in subparagraph (c)(ii) above, and all past due rent and other
charges), but Lessee will remain liable for all of its obligations under
this Lease.
(e) The failure of Lessor to strictly and promptly enforce any of the
above rights or any other right Lessor may have under this Lease, or to
declare any default immediately upon the occurrence thereof, or any delay
in taking any action in connection therewith, or the acceptance of any
payment or rent or other charges after the date on which it is due, shall
not constitute a waiver of any of Lessor's rights, Lessor expressly
reserving the right always to enforce all the terms of this Lease, to cure
any default of the Lessee and be reimbursed for all costs incurred or to
exercise any of the options set forth in this Lease, as well as all rights
belonging to Lessor by law, regardless of any extension
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or indulgence previously granted. Lessor shall have the right to declare
any such default at anytime and to take any such action as might be lawful
under this Lease, at law, or in equity. No right or remedy herein conferred
upon or reserved to the Lessor is intended to be exclusive of any other
right or remedy, and each and every right and remedy shall be cumulative
and in addition to any right or remedy of Lessor given hereunder, or now or
hereafter existing at law or in equity.
(f) If Lessee is in default in the performance of any terms,
covenants, agreements, or conditions contained in this Lease, and Lessor
places the enforcement of this Lease or any part thereof, or the collection
of any rent or other charges due or to become due hereunder, or recovery of
possession of the leased premises in the hands of an attorney, Lessee
agrees to pay, on demand, all attorneys' fees and other expenses and fees
incurred by Lessor in connection with such actions. In addition, the Lessee
shall pay on demand all costs, charges, and expenses, including, without
limitation, all attorneys' fees and other expenses and fees, incurred by
Lessor in any litigation, negotiation, or transaction in which Lessee
causes Lessor to become involved or concerned.
26. Increase in Insurance: Lessee shall not do or permit any thing to be
done upon, or bring or keep or permit anything to be brought or kept into or on,
the leased premises which shall increase the rate of insurance on the buildings
or on the property located therein. If by reason of the failure of Lessee to
comply with the terms of this Lease, or by reason of Lessee's occupancy (even
though permitted or contemplated by this Lease), the insurance rate shall at any
time be higher than it would otherwise be, Lessee shall reimburse Lessor for
that part of all insurance premiums charged because of such violation or
occupancy by Lessee. If the Lessee installs any electrical equipment that
overloads the lines in or leading to the leased premises, the Lessee shall, at
Lessee's expense, repair any resulting damage and make whatever changes are
necessary to comply with the requirements of the insurance underwriters and
governmental authorities having jurisdiction. Lessee agrees to comply with any
requirements or recommendations made by Lessor's insurance underwriter
inspectors.
27. Floor Load Limits: Lessee shall not place a load upon any floor of
the leased premises exceeding the floor load per square foot area which it was
designed to carry and which is allowed by law. Lessor reserves the right to
prescribe the weight and position of all safes, business machines and mechanical
equipment. Such installations shall be placed and maintained by Lessee, at
Lessee's expense, in settings sufficient, in Lessor's judgment, to absorb and
prevent vibration, noise and annoyance to occupants of the Building or adjacent
property.
28. Representations: Lessee has examined and knows the condition of the
leased premises and has received the same in good order and repair, and no
representations as to the condition of repair or otherwise have been made by
Lessor or the agent of Lessor prior to or at the execution of this Lease that
are not expressed herein. LESSEE HEREBY ACCEPTS THE LEASED PREMISES "AS IS" AND
EXPRESSLY WAIVES ALL EXPRESS OR IMPLIED WARRANTIES AS TO THE LEASED PREMISES AND
ALL MATTERS WHATSOEVER IN
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CONNECTION WITH THE LEASED PREMISES, INCLUDING, WITHOUT LIMITATION, ALL EXPRESS
OR IMPLIED WARRANTIES WITH RESPECT TO THEIR CONDITION, THEIR FITNESS FOR ANY
PARTICULAR USE OR PURPOSE, THEIR QUALITY, THE ABSENCE OF HIDDEN OR APPARENT
DEFECTS IN OR ABOUT THE LEASED PREMISES OR THE BUILDING, AND THE COMPLIANCE OF
THE LEASED PREMISES OR THE BUILDING WITH REQUIREMENTS OF ANY OF LAW OR
REGULATION OF ANY GOVERNMENTAL AUTHORITY.
29. Cross-Default: If the term of any lease, other than this Lease, made
by the Lessee for any space in the buildings shall be terminated or terminable
after the making of this Lease because of any default by the Lessee under such
other lease, then a default will be deemed to have occurred under this Lease,
and Lessor will have the right, at its option, to exercise any or all of its
rights and remedies provided under Paragraph 24 hereof.
30. Insurance Requirements: The Lessee agrees to reimburse the Lessor for
and to indemnify, defend, and save harmless the Lessor from and against any and
all loss, damage, claim, demand, liability, or expense by reason of Lessee's
breach of any covenants contained in this Lease (including, without limitation,
the covenants contained in Paragraph 13(h) hereof), or any personal injury or
death or property loss or damage (whether to Lessor's personnel or property or
to the personnel or property of any other person or entity whatsoever) that may
arise or be claimed to have arisen in whole or in part as a result of or that is
in any way attributable to or connected with the occupancy or use of the leased
premises and adjacent areas by the Lessee or any other person or entity during
the term of this Lease, or the acts or omissions of Lessee, its employees,
agents, guests, invitees, or contractors, or any hidden or apparent defect or
deficiency in or about the leased premises, or any condition, circumstance,
event, or occurrence in, on, or about the leased premises or in any other way
arising on account of any injury, death, loss, or damage caused to any person or
property in, on, or about the leased premises, whether any such personal injury
or death or property loss or damage with respect to which Lessee has agreed to
reimburse Lessor and against which Lessee has agreed to indemnify Lessor herein
arises from the acts, negligence, or fault of Lessor or from a matter for which
Lessor is strictly liable, or otherwise, providing, however, that the Lessee
shall not be required to reimburse or indemnify Lessor as to loss or damage due
to the sole gross negligence of Lessor. Lessee's reimbursement and indemnity
obligations set out herein and in the other provisions of this Lease shall
include, without limitation, any and all payments, settlements, judgments,
damages, fines, assessments, losses, liabilities, interest, costs of defense,
attorneys' fees and other legal costs, and other expenses, and shall survive the
expiration or other termination of this Lease.
Lessee agrees to maintain in full force and effect at all times during the
term of this Lease, at its own expense, for the protection of Lessee and Lessor,
as their interest may appear, policies of insurance issued by a responsible
carrier or carriers acceptable to Lessor which afford the following coverages:
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(a) Comprehensive General Liability Insurance--Not less than
$1,000,000 Combined Single Limit for both bodily injury and property
damage.
(b) Fire and Extended Coverage, Vandalism and Malicious Mischief,
Sprinkler Leakage (where applicable) insurance, to cover all of Lessee's
stock in trade, fixtures, furniture, furnishings, removable floor
coverings, trade equipment, signs and all other decorations placed by
Lessee in or upon the leased premises.
(c) Worker's Compensation and other insurance as required by
Louisiana statutes.
(d) Employer's Liability--Not less than $100,000.
Lessee shall deliver to Lessor at least ten (10) days prior to the first
time such insurance is required to be carried by Lessee, and thereafter at least
thirty (30) days prior to expiration of such policy, Certificates of Insurance
evidencing the above coverage with limits not less than those specified above.
Such Certificates shall name Lessor, its subsidiaries, directors, officers,
partners, agents and employees, as listed on Exhibit C attached hereto and made
a part hereof, as additional insureds and shall expressly provide that the
interest of same therein shall not be affected by any breach by Lessee of any
policy provision for which such Certificates evidence coverage. Further, all
Certificates shall expressly provide that no less than thirty (30) days prior
written notice (in accordance with Paragraph 5 hereof) shall be given Lessor in
the event of material alteration to, or cancellation of, the coverages evidenced
by such Certificates.
A FAILURE TO PROVIDE SUCH INSURANCE COVERAGE SHALL BE DEEMED A DEFAULT IN THIS
LEASE.
If, on account of the failure of Lessee to comply with the foregoing
provisions, Lessor is adjudged a co-insurer by its insurance carrier, then any
loss or damage Lessor shall sustain by reason thereof shall be borne by Lessee
and shall be immediately paid by Lessee upon receipt of a bill thereof and
evidence of such loss.
Lessor makes no representation that the limits of liability specified to be
carried by Lessee under the terms of this Lease are adequate to protect Lessee,
and in the event Lessee believes that any such insurance coverage called for
under this Lease is insufficient, Lessee shall provide at its own expense, such
additional insurance as Lessee deems adequate.
Lessor shall at all times during the term of this Lease, at its expense,
maintain a policy or policies of insurance, issued by and binding upon some
solvent insurance company, insuring the buildings against loss or damage by
fire, explosion or other hazards and contingencies for the full insurable value,
provided that Lessor shall not be obligated to insure any furniture, equipment,
machinery, goods or supplies not covered by this Lease which Lessee may bring or
obtain upon
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leased premises, or any additional improvements which Lessee may construct on
the leased premises. Lessor reserves the right to self-insure such buildings.
Anything in the Lease to the contrary notwithstanding, Lessor and Lessee
hereby waive and release each other of and from any and all rights of recovery,
claim, action or cause of action, against each other, their agents, officers and
employees, for any loss or damage that may occur to the leased premises, the
Building and the buildings, improvements to the Building and buildings of which
the leased premises are a part, (movable) personal property (building contents)
within the Building and the buildings, any furniture, equipment, machinery,
goods or supplies not covered by this Lease which Lessee may bring or obtain
upon the leased premises or any additional improvements which Lessee may
construct on the leased premises, by reason of fire, the elements or any other
cause which could be insured against under the terms of standard fire and
extended coverage insurance policies, regardless of cause or origin, including
negligence of Lessor or Lessee and their agents, officers and employees. Because
this paragraph will preclude the assignment of any claim mentioned in it by way
of subrogation (or otherwise) to an insurance company (or any other person),
each party to this Lease agrees immediately to give to each insurance company,
written notice of the terms of the mutual waivers contained in this paragraph,
to have the insurance policies properly endorsed to prevent the invalidation of
the insurance coverages by reason of the mutual waivers contained in this
paragraph, and to have each insurance policy contain a waiver of subrogation
clause in form and substance satisfactory to the other party in which each
underwriter waives all of it rights, under legal or conventional subrogation, or
otherwise, against the other party. Lessee also waives and releases Lessor, its
agents, officers and employees, of and from any and all rights of recovery,
claim, action, or cause of action for any loss or damage insured against under
any other policies of insurance carried by Lessee, and will require each such
insurance policy to contain a waiver of subrogation clause in which each
underwriter waives all of its rights under legal or conventional subrogation, or
otherwise, against Lessor, its agents, officers and employees.
31. Partial Invalidity: If any term or provision of this Lease or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Lease or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby and such term and
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
32. Default by Lessor: Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within thirty (30) days after written
notice by Lessee to Lessor, specifying wherein Lessor has failed to perform such
obligations, providing that if the nature of Lessor's obligation is such that
more than (30) days are required for performance, then Lessor shall not be in
default if Lessor commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.
-28-
<PAGE>
33. Estoppel Letters: At any time, and from time to time, upon not less
than fifteen (15) days prior written request by Lessor, Lessee shall execute,
acknowledge and deliver to the Lessor a statement in writing certifying whether
this Lease is unmodified and in full force and effect (or if there have been
modifications that the same is in full force and effect as modified), stating
the modifications and the dates to which the annual rent and other charges have
been paid and stating whether or not to the best knowledge of the signer of the
certificate, the Lessor is in default in performance of any other covenants,
agreements or condition contained in this Lease and, if so, specifying each such
default of which the signer may have knowledge. It is intended that any such
statement furnished by Lessee may be relied upon by Lessor, any prospective
purchaser or encumbrancer of the leased premises, or by any other person or
persons having a valid interest therein.
Lessee's failure to deliver such statement within such time shall be
conclusive upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance. If Lessor desires to finance, refinance
or sell immovable (real) property a part of which are the leased premises,
Lessee hereby agrees to deliver to any prospective lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. All such financial statements shall be
received by Lessor in confidence and shall be used only for the purposes herein
set forth.
34. Easements and Servitudes: It is expressly agreed that the Lessee does
not hereby and shall not by any use hereafter, acquire any right, easement, or
servitude to the use of any door or passageway in any portion of the Building or
in any premises adjoining such Building, except the easement or servitude of
necessity for ingress and egress, if any, in the doors and passageway directly
connecting with the leased premises, provided however, it is expressly agreed
that the Lessor shall have the right to close or obstruct any door or passageway
into or from or connecting with the leased premises and to interfere with the
use thereof, whenever Lessor deems it necessary to effect alterations or repairs
thereto or in and about any premises adjoining such doorways or passageways.
The use of any door or passageway into or from or connecting with any premises
or building adjoining the Building in which the leased premises are situated,
may be regulated, discontinued, or prohibited at any time by the Lessor without
notice to the Lessee.
Lessor hereby expressly reserves an easement and servitude through the
walls and across the ceiling of the leased premises for the purpose of putting
in and maintaining any utility lines servicing any portion of the Building in
which the leased premises is a part.
35. Non-Reinstatement: No receipt of money by the Lessor from the Lessee
after the termination of this Lease or after the service of any notice or after
the commencement of any suit, or after final judgment for possession of the
leased premises shall reinstate, continue or extend the term of this Lease or
affect any such notice, demand or suit.
-29-
<PAGE>
36. Effect of Submission: Submission of this instrument for examination
and consideration does not constitute a reservation of or option for the leased
premises. The instrument becomes effective as a lease only upon execution and
delivery by both Lessor and Lessee.
37. Leasing Broker: Lessee warrants that it has had no dealings with any
broker or agent in connection with this Lease other than Heitman Properties of
Louisiana Ltd. and Reynolds, Sumrow & Scruggs, Inc. and covenants to pay, hold
harmless and indemnify Lessor from and against any and all costs, expenses or
liability for any compensation, commissions, and charges claimed by any other
broker or agent (other than the broker named above) with respect to this Lease
or the negotiation thereof with whom Lessee had dealings. Lessor will pay to
Reynolds, Sumrow & Scruggs, Inc. in accordance with a separate commission
agreement a real estate leasing commission of $4,597.25 upon the execution of a
Suite Acceptance Agreement by Lessee for the premises leased under this Lease
agreement.
38. Relocation of Lessee: Lessor reserves the right after the execution
or during the term of this Lease, at its sole cost and expense to remove the
Lessee from the leased premises specified herein and relocate Lessee in some
other space of Lessor's choosing of approximately the same dimensions and size
within the buildings which other space shall be decorated by Lessor at Lessor's
expense and in its discretion to use such decorations and materials from the
existing premises or other materials so that the space in which Lessee is
relocating shall be comparable in its interior design and decoration to the
premises from which Lessee is removed; provided however, that if Lessor
exercises its election to remove and relocate the Lessee in other space within
the buildings, which is at that time leasing for a higher rate of base rent,
then Lessee shall not be required to pay the difference between the base rent of
the leased premises and the higher base rent of the space in which Lessee is
relocated; provided, further that if Lessee is removed and relocated in other
space within the buildings which is then leasing at a base rent less than the
base rent of the premises at that time, Lessee's rent shall be reduced to the
base rent then being charged for the space in which Lessee has been relocated.
Lessee, by the execution of this Lease acknowledges the foregoing right of
Lessor, and no rights herein granted to Lessee, including but not limited to the
right of peaceful and quiet enjoyment, shall be deemed or construed to have been
breached or interfered with by reason of Lessor's exercise of the rights herein
reserved in this Paragraph 38. The removal and relocation of Lessee, and
Lessor's sole obligation for costs and expenses of removal and relocation shall
be the actual cost of relocating and decorating the space in which Lessee is
relocated, and Lessee agrees that Lessor's exercise of its election to remove
and relocate Lessee shall not terminate the Lease or release the Lessee in whole
or in part from Lessee's obligation to pay rents and perform the covenants and
agreements hereunder for the full term of this Lease.
39. Administrative Charges: In the event any check, bank draft or
negotiable instrument given for any money payment hereunder shall be dishonored
at any time and from time to time, for any reason whatsoever not attributable to
Lessor, Lessor shall be entitled, in
-30-
<PAGE>
addition to any other remedy that may be available, (i) to make an
administrative charge of $25.00, or ten percent (10%) of the face value of the
check, bank draft or negotiable instrument, whichever is greater, and (ii) at
Lessor's sole option, to require Lessee to make all future rental payments in
cash or cashiers check.
40. Non-Waiver: No waiver of any covenant or condition of this Lease by
either party shall be deemed to imply or constitute a further waiver of the same
covenant or condition or any other covenant or condition of this Lease.
41. Construction of Language: The terms "Lease", "Lease Agreement" or
"Agreement" shall be inclusive of each other, also to include renewals,
extensions or modifications of the Lease. Words of any gender used in this Lease
shall be held to include any other gender and words in the singular shall be
held to include the plural and the plural to include the singular when the sense
requires. The paragraph headings, titles and margin notations are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.
42. Parking: Lessee shall abide by all rules and regulations regarding
the use of the parking area as may now exist or as may hereinafter be
promulgated by Lessor. Lessor reserves the right to modify, restripe and
otherwise change the location of drives, parking spaces and parking areas.
Lessor may, but shall have no obligation to, designate certain parking spaces
for trucks, handicapped persons or designated tenants as Lessor, in its sole
discretion, may deem necessary for the professional and efficient operation of
the complex. Lessor shall have the right to reasonably restrict the location of
truck/tractor trailers for the overall benefit of all tenants, it being agreed
by Lessee that it is not the intent of this Lease to provide unrestricted
parking for truck/tractor trailers. Lessee agrees not to overburden the parking
facilities and agrees to cooperate with Lessor and other tenants in the use of
parking facilities. Lessee will reimburse Lessor upon demand for any damage
caused to the parking surfaces or facilities caused by Lessee's or any of its
employees', agents', or invitees' trucks/tractor trailers or any other vehicles.
Lessor reserves the right in its absolute discretion to determine whether
parking facilities are becoming crowded and, in such event, to allocate parking
spaces among Lessee and other tenants. At no time shall the parking of any
vehicle be permitted in the fire lanes serving Lessor's property.
43. Delay of Possession: In the event Lessor is unable to tender
possession of the leased premises because of the unauthorized holding over of
any tenant or tenants or due to delays in construction or any other reason, as
long as such inability continues, a per diem abatement of the rent shall be
allowed to Lessee but nothing shall operate to extend the term of this Lease
beyond the original expiration date and said abatement of rent shall be the
total limit of liability of Lessor to Lessee for any losses or damages incurred
by Lessee due or related to such delay in obtaining possession of the leased
premises.
-31-
<PAGE>
44. Waiver: To the extent allowed by law, Lessee hereby waives (i) the
right to a jury trial in any action or proceeding regarding this Lease and the
tenancy created thereunder and (ii) the right to interpose any counterclaim
(except a mandatory counterclaim under Louisiana law or procedure) if Lessor
pursues any action or proceeding for possession of the leased premises.
45. Termination by Lessee: This Lease shall not be terminable for any
reason by the Lessee, except as expressly provided for in this instrument.
Without limiting the generality of the foregoing, damage to or destruction of
any portion or all of the buildings, structures and fixtures upon the premises
by fire, the elements or any other cause whatsoever, whether or not without
fault on the part of the Lessee shall not terminate this Lease or entitle the
Lessee to surrender the leased premises, or entitle the Lessee to any abatement
of or reduction in rent payable by the Lessee hereunder, except as specifically
provided in this Lease, or otherwise affect the respective obligations of the
parties hereto, any present or future law to the contrary notwithstanding.
46. Entire Agreement: This Lease contains and embodies the entire
agreement of the parties hereto and no representations, inducements or
agreements, oral or otherwise, between the parties not contained and embodied
herein shall be of any force or effect, and that same may not be modified,
changed, amended or terminated in whole or in part orally or in any other manner
than by an agreement in writing duly signed by all of the parties hereto.
47. Miscellaneous:
(a) Successors. This Lease, subject to the provisions on assignment
and insolvency, shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties hereto. Any transfer of
this Lease whether by Lessee or by any assigns of Lessee by operation of
law or by voluntary assignment, with or without the consent of Lessor,
shall not diminish, alter, or prejudice the direct and primary liability of
Lessee under this Lease and the covenants hereof.
(b) Construction. This Lease shall be construed according to the
laws of the State of Louisiana.
(c) Interest on past due obligations. Except as expressly herein
otherwise provided, any amount due from Lessee not paid when due shall bear
interest at the rate of 18% interest per annum from the date due. Payment
of such interest shall not excuse or cure any default by Lessee under this
Lease.
(d) Time of essence. Time is of the essence in the performance of
all conditions hereunder of which time is a factor.
-32-
<PAGE>
(e) Section Headings. The heading of Sections are for convenience
only and do not limit, expand or construe the contents of the Sections.
(f) Accord and Satisfaction. No payment by Lessee or receipt by
Lessor of a lesser amount than any installment or payment of rent or other
amounts due shall be deemed to be other than on account of the amount due,
and no endorsement or statement on any check or any letter accompanying any
check or payment shall be deemed an accord and satisfaction, and Lessor may
accept such check or payment without prejudice to Lessor's rights to
recover the balance of such installment or payment or pursue any other
remedies available to Lessor under this Lease or at law or in equity.
(g) Survival. Each and every covenant, agreement and obligation of
Lessee hereunder shall survive the expiration or termination of this Lease
until such covenant, agreement or obligation has been fully performed by
Lessee.
48. This Lease will not be binding upon Lessor unless it is signed by
three co-trustees of SLIP Trust.
49. Leasehold Improvements will be performed in accordance with the Work
Letter Exhibit E attached hereto.
IN WITNESS WHEREOF, Lessee and Lessor have caused this instrument to be
executed as of the date first above written, by their respective officers of
parties thereunto duly authorized.
Signed and sealed in the presence of: LESSOR:
/s/ Mary Ann Moss Stephen Perlmutter, Howard J. Edelman,
- ------------------------------------
Daniel P. Poulin, Herbert W. Kuehnle,
Roger E. Smith, Marla Freeman and Stuart
C. Katz, not individually, but solely as
co-trustees of
/s/ [signature illegible] SLIP Trust, a Louisiana trust
- ------------------------------------
/s/ [signature illegible] By:/s/ [signature illegible]
- ------------------------------------ -------------------------------------
a trustee
/s/ Jeannine M. Solkowski
- ------------------------------------
By:/s/ Howard J. Edelman
-------------------------------------
a trustee
/s/ [signature illegible]
- ------------------------------------
By:/s/ [signature illegible]
-------------------------------------
a trustee
/s/ [signature illegible]
- ------------------------------------
(CORPORATE SEAL)
-33-
<PAGE>
Signed and sealed in the presence of: LESSEE:
/s/ Judith E. Rush WIRE CABLE SPECIALTIES CORP.
- ------------------------------------
OF GEORGIA
/s/ [signature illegible] By:/s/ Paul R. Monahan
- ------------------------------------ -------------------------------------
Its:Vice President
-----------------------------
Attest:_________________________________
Its:______________________
(CORPORATE SEAL)
Notary Public, Fulton County, Georgia
My commission expires September 12, 1995
/s/ Judith E. Rush
- ----------------------------------------
-34-
<PAGE>
RIDER TO LEASE dated April 28, 1993 between SLIP Trust, a Louisiana trust,
(hereinafter referred to as "Lessor"), and Wire & Cable Specialties Corp. of
Georgia, (hereinafter referred to as "Lessee").
50. Lessor and Lessee agree that this Lease shall be amended to include the
following renewal option:
A. If at that time delivery of notice is required to exercise this
option, and if at the time the subject renewal term is to commence,
Lessee is not in default with respect to any terms and conditions
contained herein, the Lessee, but not any assignee or sublessee, shall
have an option to renew ("Renewal Option") this Lease for three (3)
years ("Renewal Term") which shall commence on June 1, 1996 and expire
on May 31, 1999, on the same terms and conditions as set forth herein,
provided that Lessee gives Lessor written notice six (6) months prior
to the expiration of the then current term, except that the rental for
the Renewal Term shall be based on the then prevailing rental rate for
this property, but in no event shall the rental rate for the Renewal
Term be less than the then adjusted rental rate during the last year
of the prior term.
For purposes of the preceding sentence, "prevailing rental rate" shall
mean the total rental rate being quoted by landlord to third party
tenants at the time of the relevant renewal for similar space,
including all fixed and/or indexed rental adjustments and all rental
adjustments for taxes and expenses for the leased premises, within the
Building.
B. In the event Lessee exercises the Renewal Option, Lessor and Lessee
shall execute and deliver an amendment to this Lease reflecting the
renewal of the Term of this Lease on the terms herein provided, which
amendment shall be executed and delivered promptly after written
notice is received.
C. Lessee agrees to accept the Leased Premises in an "as-is" physical
condition on the commencement date of the Renewal Term and Lessee
shall not be entitled to any credit or allowance from Lessor for the
improvement hereof or otherwise.
D. The Renewal Option herein granted shall automatically terminate upon
the earlier to occur of (i) expiration or termination of this Lease,
(ii) the termination of Lessee's right to possession of the Leased
Premises, (iii) the assignment of this Lease by Lessee or the sublease
by Lessee of the Leased Premises, or any part thereof, or (iv) the
failure of Lessee to timely or properly exercise the Renewal Option.
-35-
<PAGE>
EXHIBIT A
FLOOR PLAN OR LAYOUT OF LEASED PREMISES
(APPROXIMATELY 11,100 SQ. FT.)
------
(OFFICE 1,496 SQ. FT.)
-----
(WAREHOUSE 9,604 SQ. FT.)
-----
LESSEE WIRE AND CABLE SPECIALTIES CORP. OF GEORGIA
--------------------------------------------------------------------------
[Floor Plan diagram appears on original]
-A-1-
<PAGE>
EXHIBIT B
RULES AND REGULATIONS
1. Lessee, its officers, agents, servants and employees shall not block
or obstruct any of the entries, passages, doors, hallways or stairways of
building or garage, or place, empty or throw any rubbish, litter, trash or
material of any nature into such areas, or permit such areas to be used at any
time except for ingress or egress of Lessee, its officers, agents, servants,
employees, patrons, licensees, customers, visitors or invitees.
2. The movement of furniture, equipment, machines, merchandise or
materials within, into or out of the leased premises or the building not in the
ordinary course of Lessee's business as permitted herein, shall be restricted to
time, method and routing of movement as determined by Lessor upon request from
Lessee and Lessee shall assume all liability and risk to property, the leased
premises and the building in such movement. The movement of furniture,
equipment, machines, merchandise or materials within, into or out of the leased
premises in the ordinary course of Lessee's permitted business shall also be at
Lessee's sole risk and responsibility and shall be conducted in such a fashion
as not to cause damage or injury to the leased premises or the building or to
disturb other occupants thereof. Lessee shall not move furniture, machines,
equipment, merchandise or materials within, into or out of the leased premises
or the building not in the ordinary course of Lessee's permitted business
without having first obtained a written permit from Lessor twenty-four (24)
hours in advance. Safes and other heavy fixtures, equipment or machines intended
to be kept permanently in the leased premises shall be moved into the leased
premises or the building only with Lessor's written consent and placed where
directed by Lessor.
3. Lessor will not be responsible for lost or stolen personal property,
equipment, money or any article taken from leased premises, regardless of how or
when loss occurs.
4. Lessee, its officers, agents, servants and employees shall not install
or operate any refrigerating, heating or air conditioning apparatus or carry on
any mechanical operation or bring into leased premises any inflammable fluids or
explosives without written permission of Lessor.
5. Lessee, its officers, agents, servants or employees shall not use
leased premises, for housing, lodging or sleeping purposes or for the cooking or
preparation of food without written permission of Lessor.
6. Lessee, its officers, agents, servants, employees, patrons, licensees,
customers, visitors or invitees shall not bring into the leased premises or keep
on leased premises any fish, fowl, reptile, insect or animal without prior
written consent of Lessors.
7. No additional locks shall be placed on any door in building without
the prior written consent of Lessor. Lessor will furnish two keys to each lock
on doors in the leased
-B-1-
<PAGE>
premises and Lessor, upon request of Lessee, shall provide additional duplicate
keys at Lessee's expense. Lessor may at all times keep a pass key to the leased
premises. All keys shall be returned to Lessor promptly upon termination of this
Lease.
8. Lessee, its officers, agents, servants or employees shall do no
painting or decorating in leased premises; or mark, paint or cut into, drive
nails or screw in to nor in any way deface any part of leased premises or
building without the prior written consent of Lessor. If Lessee desires signal,
communication, alarm or other utility or service connection installed or
changed, such work shall be done at expense of Lessee, with the approval and
under the direction of Lessor.
9. Lessee, its officers, agents, servants and employees shall not permit
the operation of any musical or sound-producing instruments or device which may
be heard outside leased premises, or which may emanate electrical waves or x-
rays or other emissions which will impair radio or television broadcasting or
reception from or in building, or be hazardous to health, well-being or
condition of persons or property.
10. Lessee, its officers, agents, servants and employees shall, before
leaving leased premises unattended, close and lock all doors and shut off all
lights, business equipment and machinery. Damage resulting from failure to do so
shall be paid by Lessee. Each Lessee, before closing for the day and leaving the
leased premises shall see that all doors are locked.
11. All plate and other glass now in leased premises or building which is
broken through cause attributable to Lessee, its officers, agents, servants,
employees, patrons, licensees, customers, visitors or invitees shall be replaced
by and at expense of Lessee under the direction of Lessor.
12. Lessee shall give Lessor prompt notice of all accidents to or defects
in air conditioning equipment, plumbing, electric facilities or any part or
appurtenance of leased premises.
13. The plumbing facilities shall not be used for any other purpose than
that for which they are constructed, and no foreign substance of any kind shall
be thrown therein, and the expense of any breakage, stoppage, or damage
resulting from a violation of this provision shall be borne by Lessee, who
shall, or whose officers, employees, agents, servants, patrons, customers,
licensees, visitors or invitees shall, have caused it. Lessor shall not be
responsible for any damage due to stoppage, backup or overflow of the drains or
other plumbing fixtures.
14. All contractors and/or technicians performing work for Lessee within
the leased premises, building or garage facilities shall be referred to Lessor
for approval before performing such work. This shall apply to all work
including, but not limited to, installation of telephones, telegraph equipment,
electrical devices and attachments, and all installations affecting floors,
walls, windows, doors, ceilings, equipment or any other physical feature of the
building, leased
<PAGE>
premises or garage facilities. None of this work shall be done by Lessee without
Lessor's prior written approval.
15. No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the building, without the prior written consent of
Lessor.
16. Neither Lessee nor any officer, agent, employee, servant, patron,
customer, visitor, licensee or invitee of any Lessee shall go upon the roof of
the building, without the written consent of the Lessor.
17. In the event Lessee must dispose of crates, boxes, etc. which will not
fit into wastepaper baskets, it will be the responsibility of Lessee to dispose
of same properly.
18. If the leased premises shall become infested with vermin, roaches, or
other undesirable creatures, Lessee, at its sole cost and expense, shall cause
the leased premises to be professionally treated from time to time to the
satisfaction of Lessor and shall employ such exterminators for this purpose as
shall be approved by Lessor.
19. Lessee shall not install any antenna or aerial wires, radio or
television equipment or any other type of equipment inside or outside of the
building without Lessor's prior approval in writing and upon such terms and
conditions as may be specified by Lessor in each and every instance.
20. Lessee shall not make or permit any use of leased premises, building
or garage facilities which, directly or indirectly, is forbidden by law,
ordinance or governmental or municipal regulation, code or order or which may be
disreputable or dangerous to life, limb or property.
21. Lessee shall not advertise the business, profession or activities of
Lessee in any manner which violates the letter or spirit of any code of ethics
adopted by any recognized association or organization pertaining thereto, use
the name of the building for any purpose other than that of the business address
of Lessee or use any picture or likeness of building or the building name in any
letterheads, envelopes, circulars, notices, advertisements, containers or
wrapping material without Lessor's express consent in writing.
22. Lessee shall not conduct its business and/or control its officers,
agents, employees, servants, patrons, customers, licensees and visitors in such
a manner as to create any nuisance or interfere with, annoy or disturb any other
tenant or Lessor in its operation of the building or commit waste or suffer or
permit waste to be committed in leased premises.
23. The Lessee shall not install in the leased premises any equipment
which uses a substantial amount of electricity without the advance written
consent of the Lessor. The Lessee shall ascertain from the Lessor the maximum
amount of electrical current which can safely be
-B-3-
<PAGE>
used in the leased premises, taking into account the capacity of the electric
wiring in the Building and the leased premises and the needs of other tenants in
the buildings and shall not use more than such safe capacity. The Lessor's
consent to the installation of electric equipment shall not relieve the Lessee
from the obligation not to use more electricity than such safe capacity.
24. The Lessee, without the prior written consent of Lessor, shall not lay
linoleum or other similar floor covering.
25. No outside storage of any materials, pallets, disabled vehicles, etc.,
will be permitted including but not limited to trash, except in approved
containers.
INITIALS:
Lessee:
Lessor:
-B-4-
<PAGE>
EXHIBIT C
ADDITIONAL INSUREDS
Additional insured pursuant to the requirements outlined in Section 30:
SLIP Trust, a Louisiana trust, all trustees and successors thereof and
beneficiaries thereunder; Heitman Advisory Corporation; Heitman Properties
Ltd.; Heitman Properties of Louisiana Ltd.; and their respective agents,
and employees.
The Insurance Certificate should be sent to: Heitman Properties of
Louisiana Ltd.
520 Elmwood Park Boulevard
Suite 115
Jefferson, Louisiana
Attention: Property Manager
-C-1-
<PAGE>
EXHIBIT D
GUARANTY
THIS PAGE WAS INTENTIONALLY OMITTED
-----------------------------------
-D-1-
<PAGE>
EXHIBIT E
WORK LETTER AGREEMENT
---------------------
[LESSOR PERFORMS WORK]
[ALLOWANCE]
This Work Letter Agreement "Work Letter") is executed simultaneously with
that certain Office Lease (the "Lease") between Wire & Cable Specialties Corp.
------------------------------
of Georgia, as "Lessee", and SLIP Trust, a Louisiana Trust, as "Lessor",
- ----------
relating to demised premises ("Premises") at the building commonly know as 6565
----
Exchequer Drive, Baton Rouge, Louisiana (the "Building"), which Premises are
- --------------- -----------
more fully identified in the Lease. Capitalized terms used herein, unless
otherwise defined in this Work Letter, shall have the respective meanings
ascribed to them in the Lease.
For and in consideration of the agreement to lease the Premises and the
mutual covenants contained herein and in the Lease, Lessor and Lessee hereby
agree as follows:
1. LESSEE'S INITIAL PLANS: THE WORK. Lessee desires Lessor to perform
---------------------------------
certain leasehold improvement work in the Premises in substantial accordance
with the plan or plans (collectively, the "Initial Plan") prepared by Tilt-Up
-------
Concrete Construction dated April 26, 1993, a copy or copies of which is/are
- --------------------- --------------
attached hereto as Lease Exhibit A. Such work, as shown in the Initial Plan and
as more fully detailed in the Working Drawings (as defined and described in
Paragraph 2 below), shall be hereinafter referred to as the "Work". Not later
than May 1, 1993, Lessee shall furnish to Lessor such additional plans,
-----------
drawings, specifications and finish details as Lessor may reasonably request to
enable Lessor's architects and engineers to prepare mechanical, electrical and
plumbing plans and to prepare the Working Drawings, including a final telephone
layout and special electrical connection requirements, if any. All plans,
drawings, specifications and other details describing the Work which have been
or are hereafter furnished by or on behalf of Lessee shall be subject to
Lessor's approval, which Lessor agrees shall not be unreasonably withheld.
Lessor shall not be deemed to have acted unreasonably if it withholds its
approval of any plans, specifications, drawings or other details or of any
Additional Work (as defined in Paragraph 7 below) because, in Lessor's
reasonable opinion, the work, as described in any such item, or the Additional
Work, as the case may be: (a) is likely to adversely affect Building systems,
the structure of the Building or the safety of the Building and/or its
occupants; (b) might impair Lessor's ability to furnish services to Lessee or
other tenants in the building; (c) would increase the costs of operating the
Building; (d) would violate any governmental laws, rules or ordinance (or
interpretations thereof); (e) contains or uses hazardous or toxic materials or
substances; (f) would adversely affect the appearance of the Building; (g) might
adversely affect another tenant's premises; (h) is prohibited by and ground
lease affecting the Building or any mortgage, trust deed or other instrument
encumbering the building; or (i) is likely to be substantially delayed because
of unavailability or shortage of labor or materials necessary to perform such
work or the difficulties or unusual nature of such work.
-E-1-
<PAGE>
The foregoing reasons, however, shall not be the only reasons for which Lessor
may withhold its approval, whether or not such other reasons are similar of
dissimilar to the foregoing. Neither the approval by Lessor of the Work or the
Initial Plan or any other plans, drawings, specifications or other items
associated with the Work not Lessor's performance, supervision or monitoring of
the Work shall constitute any warranty by Lessor to Lessee of the adequacy of
the design for Lessee's intended use of the Premises.
2. WORKING DRAWINGS. If necessary for the performance of the Work and
-----------------
not included as part of the Initial Plan attached hereto, Lessor shall prepare
or cause to be prepared final working drawings and specifications for the Work
(the "Working Drawings") based on and consistent with the Initial Plan and the
other plans, drawings, specifications, finish details and other information
furnished by Lessee to Lessor and approved by Lessor pursuant to Paragraph 1
above. So long as the Working Drawings are consistent with the Initial Plan,
Lessee shall approve the Working Drawings within three (3) days after receipt of
same from Lessor by initialing and returning to Lessor each sheet of the Working
Drawings or by executing Lessor's approval form then in use, whichever method of
approval Lessor may designate.
3. PERFORMANCE OF THE WORK: ALLOWANCE. Except as hereinafter provided to
-----------------------------------
the contrary, Lessor shall cause the performance of the Work using (except as
may be stated or shown otherwise in the Working Drawings) building standard
materials, quantities and procedures then in use by Lessor ("Building
Standards"). Lessor shall pay for a portion of the "Cost of the Work" (as
defined below) in an amount not to exceed $72,285.00 (such amount being $6.51
---------- ----
per rentable square foot of the Premises which is to be improved, as described
in the Working Drawings) (the "Allowance"), and Lessee shall pay for the entire
Cost of Work in excess of the Allowance. Lessee shall not be entitled to any
credit, abatement or payment from Lessor in the event that the amount of the
Allowance specified above exceeds the Cost of the Work. For purposes of this
Agreement, the term "Cost of the Work" shall mean and include any and all costs
and expenses of the Work, including, without limitation, the cost of the Working
Drawings and of all labor (including overtime) and materials constituting the
Work.
4. PAYMENT. Prior to commencing the Work, Lessor shall submit to Lessee
a written statement of the total Cost of the Work (which shall include the
amount of any overtime projected as necessary to substantially complete the Work
by the Commencement Date specified in the Lease) as then known by Lessor, and
such statement shall indicate the amount, if any, by which the total Cost of the
Work exceeds the Allowance (the "Excess Costs"). Lessee agrees, within three (3)
days after submission to it of such statement, to execute and deliver to Lessor,
in the form then in use by Lessor, an authorization to proceed with the Work,
and Lessee shall also then pay to Lessor an amount equal to the Excess Costs. No
Work shall be commenced until Lessee has fully complied with the preceding
provisions of this Paragraph 4. In the event, and each time, that any change
order by Lessee, unknown field condition, delay caused by acts beyond Lessor's
control or other event or circumstance causes the Cost of the Work to be
increased after the time that Lessor delivers to Lessee the aforesaid initial
statement of the Cost of the Work, Lessor shall deliver to Lessee a revised
statement of the total Cost of the Work,
-E-2-
<PAGE>
indicating the revised calculation of the Excess Costs, if any. Within three (3)
days after submission to Lessee of any such revised statement, Lessee shall pay
to Lessor an amount equal to the Excess Costs, as shown in such revised
statement, less the amounts previously paid by Lessee to Lessor on account of
the Excess Costs, and Lessor shall not be required to proceed further with the
Work until Lessee has paid such amount. Delays in the performance of the Work
resulting from the failure of Lessee to comply with the provisions of this
Paragraph 4 shall be deemed to be delays caused by Lessee.
5. SUBSTANTIAL COMPLETION. Except for installation of the 480 volt 3
-----------------------
phase electrical service, construction of the warehouse demising walls and
sealing of the warehouse floor which will be completed as soon as possible after
full execution of the Lease, landlord shall cause the Work to be "substantially
completed" on or before June 15, 1993, subject to delays caused by strikes,
lockouts, boycotts or other labor problems, casualties, discontinuance of any
utility or other service required for performance of the Work, unavailability or
shortages of materials or other problems in obtaining materials necessary for
performance of the Work or any other matter beyond the control of Lessor (or
beyond the control of Lessor's contractors or subcontractors performing the
Work) and also subject to "Lessee Delays" (as defined and described in Paragraph
6 of this Work Letter). The Work shall be deemed to be "substantially completed"
for all purposes under this Work Letter and the Lease if and when Lessor's
architect issues a written certificate to Lessor and Lessee, certifying that the
Work has been substantially completed (i.e., completed except for "punch list"
items listed in such architect's certificate) in substantial compliance with the
Working Drawings, or when Lessee first takes occupancy of the office space to be
constructed in the Premises, whichever first occurs. If the Work is not deemed
to be substantially completed on or before June 15, 1993, (a) Lessor agrees to
use reasonable efforts to complete the Work as soon as practicable thereafter,
(b) the Lease shall remain in full force and effect, (c) Lessor shall not be
deemed to be in breach or default of the Lease or this Work Letter as a result
thereof and Lessor shall have no liability to Lessee as a result of any delay in
occupancy (whether for damages, or otherwise), (d) Lessee's obligation to pay
Base Rent and additional rent for the Premises shall be abated for each day of
any delay in occupancy. At the request of either Lessor or Lessee in the event
of such delay in Lessee's obligation to pay Base Rent and additional rent for
the Premises, Lessee and Lessor shall execute and deliver an amendment to the
Lease reflecting such delay. Landlord agrees to use reasonable diligence to
complete all punch list work listed in the aforesaid architect's certificate
promptly after substantial completion.
6. LESSEE DELAYS. There shall be no extension of the scheduled
--------------
commencement or expiration date of the term of the Lease (as otherwise
permissibly extended under Paragraph 5 above) if the Work has not been
substantially completed on said scheduled commencement date by reason of any
delay attributable to Lessee ("Lessee Delays"), including without limitation:
(i) the failure of Lessee to furnish all or any plans, drawings,
specifications, finish details or the other information required under Paragraph
1 above on or before the date stated in Paragraph 1;
-E-3-
<PAGE>
(ii) the failure of Lessee to grant approval of the Working Drawings
within the time required under Paragraph 2 above;
(iii) the failure of Lessee to comply with the requirements of
Paragraph 4 above;
(iv) Lessee's requirements for special work or material, finishes,
or installations other than the Building Standards or Lessee's requirements for
special construction staging or phasing;
(v) the performance of any Additional Work (as defined in Paragraph
7 below) requested by Lessee or the performance of any work in the Premises by
any person, firm or corporation employed by or on behalf of Lessee, or any
failure to complete or delay in completion of such work; or
(vi) any other act or omission of Lessee.
7. ADDITIONAL WORK. Upon Lessee's request and submission by Lessee (at
----------------
Lessee's sole cost and expense) of the necessary information and/or plans and
specifications for work other than the Work described in the Working Drawings
("Additional Work") and the approval by Lessor of such Additional Work, which
approval Lessor agrees shall not be unreasonably withheld, Lessor shall perform
such Additional Work, at Lessee's sole cost and expense, subject, however, to
the following provisions of this Paragraph 7. Prior to commencing any Additional
Work requested by Lessee, Lessor shall submit to Lessee a written statement of
the cost of such Additional Work, which cost shall include a fee payable to
Lessor in the amount of 15% of the total cost of such Additional Work as
compensation to Lessor for monitoring the Additional Work and for
administration, overhead and field supervision associated with the Additional
Work and an additional charge payable to Lessor in the amount of 5% of the total
Cost of the Work as compensation for Lessor's general conditions (such fee and
additional charge being hereinafter referred to collectively as "Lessor's
Additional Compensation"), and, concurrently with such statement of cost, Lessor
shall also submit to Lessee a proposed tenant extra order (the "TEO") for the
Additional Work in the standard form then in use by Lessor. Lessee shall execute
and deliver to Lessor such TEO and shall pay to Lessor the entire cost of the
Additional Work, including Lessor's Additional Compensation (as reflected in
Lessor's statement of such cost), within five (5) days after Lessor's submission
of such statement and TEO of Lessee. If Lessee fails to execute or deliver such
TEO or pay the entire cost of such Additional Work within such 5-day period,
then Lessor shall not be obligated to do any of the Additional Work and may
proceed to do only the Work, as specified in the Working Drawings.
9. LEASE PROVISION. The terms and provisions of the Lease, insofar as
----------------
they are applicable to this Work Letter, are hereby incorporated herein by
reference. All amounts payable by Lessee to Lessor hereunder shall be deemed to
be additional Rent under the Lease and, upon
-E-4-
<PAGE>
any default in the payment of same, Lessor shall have all of the rights and
remedies provided for in the Lease.
10. MISCELLANEOUS.
(a) This Work Letter shall be governed by the laws of the state in
which the Premises are located.
(b) This Work Letter may not be amended except by a written
instrument signed by the party or parties to be bound thereby.
(c) Any person signing this Work Letter on behalf of Lessee warrants
and represents he/she has authority to sign and deliver this Work Letter and
bind Lessee.
(d) Notices under this Work Letter shall be given in the same manner
as under the Lease.
(e) The headings set forth herein are for convenience only.
(f) This Work Letter set forth the entire agreement of Lessee and
Lessor regarding the Work.
(g) In the event that the final working drawings and specifications
are included as part of the Initial Plan attached hereto, or in the event Lessor
performs the Work without the necessity of preparing working drawings and
specifications, then whenever the term "Working Drawings" is used in this
Agreement, such term shall be deemed to refer to the Initial Plan and all
supplemental plans and specifications approved by Lessor.
11. EXCULPATION OF LESSOR AND HEITMAN. Notwithstanding anything to the
----------------------------------
contrary contained in this Work Letter, it is expressly understood and agreed by
and between the parties hereto that:
(a) The recourse of Lessee or its successors or assigns against
Lessor with respect to the alleged breach by or on the part of Lessor of any
representation, warranty, covenant, undertaking or agreement contained in any of
the Lease Documents (collectively, "LESSOR'S LEASE UNDERTAKINGS") shall extend
only to Lessor's interest in the real estate of which the premises demised under
the Lease Documents are a part ("LESSOR'S REAL ESTATE") and not to any other
assets of Lessor or its beneficiaries;
(b) Neither Heitman Advisory Corporation, Heitman Properties Ltd. nor
Heitman Properties of Louisiana Ltd. nor any of their respective directors,
officers, employees or agents shall have any personal liability whatsoever with
respect to any breach by Lessor of any of Lessor's Lease Undertakings; and
-E-5-
<PAGE>
(c) Except to the extent of Lessor's interest in Lessor's Real
Estate, no personal liability or personal responsibility of any sort with
respect to any of Lessor's Lease Undertakings is assumed by, or shall at any
time be asserted or enforceable against, Lessor, its beneficiaries, Heitman
Advisory Corporation, Heitman Properties Ltd. or Heitman Properties of Louisiana
Ltd., or against any of their respective directors, officers, employees, agents,
constituent partners, beneficiaries, trustees or representatives.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the 28th
----
day of April, 1993.
-----------
WITNESSES: LESSEE:
WIRE & CABLE SPECIALTIES CORP.
OF GEORGIA
/s/ Judith E. Rush By:/s/ Paul R. Monahan
- ----------------------------------- -------------------------------------
/s/ [signature illegible] Its: Vice President
- ----------------------------------- -----------------------------------
WITNESSES: LESSOR:
Stephen Perlmutter, Howard J. Edelman,
Herbert Kuehnle, Roger E. Smith, Marla
Freeman, Daniel Poulin and Stuart Katz,
not individually, but solely as co-
trustees of SLIP Trust, a Louisiana
trust
/s/ Mary Ann Moss By: /s/ [signature illegible]
- ----------------------------------- ------------------------------------
/s/ [signature illegible]
- -----------------------------------
/s/ [signature illegible] By: /s/ Howard J. Edelman
- ----------------------------------- ------------------------------------
/s/ Jeannine M. Solkowski
- -----------------------------------
/s/ [signature illegible] By: /s/ [signature illegible]
- ----------------------------------- -------------------------------------
/s/ [signature illegible]
- -----------------------------------
-E-6-
<PAGE>
RENEWAL AND AMENDMENT TO LEASE
------------------------------
THIS RENEWAL AND AMENDMENT TO LEASE is made this 20th day of October, 1995, by
BR/NO LA. Properties, LLC (hereinafter referred to as "Lessor"), and Wire &
Cable Specialties Corp. of Georgia, with its principal offices at 5855 Peachtree
Corners East, Norcross Georgia 30092, (hereinafter referred to as the "Lessee").
WITNESSETH
----------
A. Lessor and Lessee hereby confirm and ratify, except as modified below, all
of the terms and conditions and covenants in that certain written lease
agreement dated April 28, 1993 between Lessor's predecessor and Lessee as
amended by that certain Modification and Ratification of Lease dated July 30,
1993, (collectively, the "Lease") between Lessor's predecessor in interest and
Lessee for the leasing of the following described property:
Approximately 11,100 square feet of office/warehouse space (the "Leased
Premises") located at 6565 Exchequer Drive, Baton Rouge, Louisiana 70809
(the "Building").
B. Lessee warrants that the Lessee has accepted and is now in possession of
the Leased Premises and Lessor and Lessee warrant that the Lease is valid and
presently in full force and effect. Lessee has accepted the Leased Premises in
its present "as-is" condition.
C. The Lease is hereby modified and amended as follows:
1. Lessor and Lessee agree to extend the term of the Lease for three (3)
years, (the "Renewal Term") so that the expiration date shall be changed from
June 30, 1996 to June 30, 1999.
2. Lessee hereby covenants and agrees to pay without demand during the
Renewal Term hereof, to Lessor, in advance beginning on July 1, 1996, and on the
first day of each and every month thereafter, a monthly Base Rent equal to
$3,607.50 per month.
3. Lessee and Lessor each warrants to the other that it has had no
dealings with any broker or agent in connection with this Lease other than Sealy
& Company, Inc. and covenants to pay, hold harmless and indemnify each other
from and against any and all costs, expenses or liability for any compensation,
commissions, and charges claimed by any other broker or agent (over than the
broker named above) with respect to this Lease or the negotiation thereof with
whom such indemnifying party had dealings.
4. Lessor and Lessee agree that this Lease shall be amended to include
the following renewal option:
-1-
<PAGE>
A. If at that time delivery of notice is required to exercise this
option, and if at the time the subject renewal term is to commence, Lessee is
not in default with respect to any terms and conditions contained in the lease,
the Lessee, but not any assignee or sublessee, shall have an option to renew
("Second Renewal Option") this Lease for three (3) years ("Second Renewal Term")
which shall commence on July 1, 1999 and expire on June 30, 2002, on the same
terms and conditions as set forth herein, provided that Lessee give Lessor
written notice six (6) months prior to the expiration of the then current term,
except that the rental for the Second Renewal Term shall be based on the then
prevailing rental rate for this property, but in no event shall the rental rate
for the Second Renewal Term be less than the then adjusted rate during the last
year of the prior term.
For purposes of the preceding sentence, "prevailing rental rate" shall
mean the total rental rate being quoted by landlord to third party tenants at
the time of the relevant renewal for similar space, including all fixed and/or
indexed rental adjustments and all rental adjustments for taxes and expenses for
the leased premises, within the Building.
B. In the event Lessee exercises the Second Renewal Option, Lessor
and Lessee shall execute and deliver an amendment to this Lease reflecting the
renewal of the Term of this Lease on the terms herein provided, which amendment
shall be executed and delivered promptly after written notice is received.
C. Lessee agrees to accept the Leased Premises in an "as-is"
physical condition on the commencement date of the Second Renewal Term and
Lessee shall not be entitled to any credit or allowance from Lessor for the
improvement hereof or otherwise.
D. The Second Renewal Option herein granted shall automatically
terminate upon the earlier to occur of (i) expiration or termination of this
Lease, (ii) the termination of Lessee's right to possession of the Leased
Premises, (iii) the assignment of this Lease by Lessee or the sublease by Lessee
of the Leased Premises, or any part thereof, (iv) the failure of Lessee to
timely or properly exercise the Second Renewal Option.
WITNESSETH that the Lessor and Lessee agree and reaffirm that, except as
otherwise specifically provided in the Renewal and Amendment to Lease, all other
terms and conditions of the Lease remain in full force and effect.
WITNESSES: LESSEE:
WIRE & CABLE SPECIALTIES CORP. OF GEORGIA
/s/ Judith E.Klug By: /s/ Paul R. Monahan
- -------------------------------- ------------------------------------
/s/ [signature illegible] Its: Vice President
- -------------------------------- ------------------------------------
-2-
<PAGE>
WITNESSES: LESSOR:
_________________________ BR/NO LA. PROPERTIES, LLC
_________________________ By: SPM Industrial, LLC
-----------------------------
Its: Manager
----------------------------
/s/ Mark P. Sealy
--------------------------------
Mark P. Sealy
Administrative Member
-3-
<PAGE>
EXHIBIT 10.12
STATE OF GEORGIA
COUNTY OF GWINNETT
STANDARD OFFICE/WAREHOUSE LEASE
THIS LEASE, made on the date of the later execution and acceptance hereof
by Lessor or Lessee, as the case may be, by and between Lessor and Lessee:
W I T N E S S E T H:
1. PREMISES. Lessor does hereby rent and lease to Lessee, and Lessee does
--------
hereby rent and hire from Lessor, that certain space containing approximately
26,000 rentable square feet, as shown on the floor plan attached hereto as
Exhibit A (said space being herein referred to as the "Premises"). The Premises
- ---------
are located in Lessor's building (herein referred to as the "Building") known as
5060 Avalon Ridge Parkway, Norcross, Gwinnett County, Georgia. The Building is
located on that certain real property described on Exhibit B attached hereto and
---------
by this reference made a part hereof (herein referred to as the "Land"). No
easement for light or air is included in the Premises.
2. LEASE TERM.
----------
(a) The term of this Lease shall commence on January 1, 1996
(herein, as adjusted from time to time as provided below, referred to as
the "Commencement Date"), and expire on the last day of the seventh (7th)
"Lease Year" (as herein defined), at midnight (herein referred to as the
"Termination Date"). All references to the "term of this Lease" refer to
the term of the Lease as it is renewed, extended or sooner terminated. The
"Commencement Date" shall not occur prior to completion of the Building and
the Premises so that Lessee can occupy and use the Premises for the
purposes for which leased, as evidenced by the issuance of a certificate of
occupancy. Anything contained in this Lease to the contrary
notwithstanding, if the Commencement Date does not occur by the "Outside
Date" (as herein defined), as adjusted from time to time as provided
herein, this Lease shall automatically terminate and, thereafter, neither
party shall have any further rights, duties or obligations hereunder.
(b) If Lessor is unable to give possession of the Premises to
Lessee on the Commencement Date because (i) the Premises are not
sufficiently completed to render the Premises ready for occupancy, or (ii)
a tenant or occupant remains in possession of the Premises, or (iii) for
any other reason, then Lessor shall not be liable for such failure, and no
such failure shall affect the validity of this Lease; provided, however,
Lessee shall not be required to pay rent for any period during which Lessor
is prevented from giving possession of the Premises to Lessee.
The "Commencement Date" shall have the meaning specified above and the
"Outside Date" shall mean and refer to March 31, 1996; however, the Outside
Date and the Commencement Date shall be extended by the number of business
days equal to (i) the number of business days delay caused by "Force
Majeure" (as herein defined), and (ii) the number of business days delay
caused by "Lessee Delays" (as herein defined), and (iii) the number of
business days following June 7, 1995, until this Lease is fully executed by
Lessor and Lessee.
PROVIDED, HOWEVER, in the event of any delay arising from Lessee
Delays, the Commencement Date shall occur and Lessee shall commence payment
of rent as set forth
<PAGE>
herein on the date that the Commencement Date would have occurred but for
the Lessee Delays.
PROVIDED, FURTHER, if the Premises are not ready for occupancy by the
Commencement Date, solely by reason of delays within Lessor's control
(i.e., not caused by Force Majeure or Lessee Delays), then, in that event,
Lessor shall pay to Lessee, on the first (lst) day of each month an amount
equal to $10,490.00 (which Lessee represents is the amount in excess of its
base rent it is required to pay as a result of holding over at its present
premises located at 5855 Peachtree Corners East, Norcross, Georgia 30092).
"Lessee Delays", as used herein, shall mean and refer to delays (A)
attributable to or caused by Lessee or Lessee's employees or agents, and
(B) attributable to or caused by Lessee's requests for changes to the
"Plans and Specifications" (as herein defined), and (C) Lessee's failure to
approve the final construction drawings for the Premises by July 15, 1995
(provided the same have been submitted by Lessor to Lessee by July 1,
1995).
"Force Majeure", as used herein, shall mean a delay, not within
Lessor's control, in Lessor's performance hereunder due to acts of God,
adverse weather, fire, earthquake, flood, explosion, war, invasion,
insurrection, riot, mob violence, sabotage, vandalism, failure of
transportation, strikes, lockouts, litigation, condemnation, requisition,
governmental restrictions including inability or delay in obtaining
governmental consents or permits, laws or orders of governmental, civil,
military or naval authorities, or any other cause, whether similar or
dissimilar to the foregoing, not within Lessor's control.
(c) Upon delivery of possession of the Premises to Lessee, Lessee
agrees to execute and deliver to Lessor a Tenant's Acceptance of Premises,
in the form attached hereto as Exhibit C.
---------
3. BASE RENT.
---------
(a) Commencing on the Commencement Date, Lessee shall pay to Lessor
at Lessor's office, or such other place as Lessor shall from time to time
designate in writing, an annual Base Rent of $143,000.00 in equal monthly
installments of $11,916.67, to be paid without notice, demand, deduction,
or set-off, on the first (lst) day of each month in advance.
(b) Effective the first (lst) day of each Lease Year following the
first (lst) Lease Year, the annual Base Rent payable for that Lease Year
will be determined as follows:
<TABLE>
<CAPTION>
LEASE YEAR ANNUAL BASE RENT MONTHLY INSTALLMENTS
---------- ---------------- --------------------
<S> <C> <C>
2 $148,200.00 $12,350.00
3 $153,400.00 $12,783.33
4 $158,600.00 $13,216.67
5 $163,800.00 $13,650.00
6 $169,000.00 $14,083.33
7 $174,200.00 $14,516.67
</TABLE>
(c) As used herein, the term "Lease Year" shall mean each term of
twelve (12) consecutive calendar months commencing on the Commencement Date
or on the first (lst) day of the first (lst) calendar month following the
Commencement Date, if the
2
<PAGE>
Commencement Date does not fall on the first (lst) day of a calendar month;
provided, however, that the first (lst) Lease Year shall include the
partial month, if any, caused by the Commencement Date's falling on other
than the first (lst) day of a calendar month.
(d) Rental payments not received by Lessor within five (5) calendar
days of the due date thereof shall be subject to a late charge due and
payable by Lessee to Lessor on the sixth (6th) calendar day after the due
date thereof in an amount equal to five (5%) percent of such past due
rental.
(e) As used in this Lease, the term "rent" or "rental" shall
include all Base Rent payable pursuant to this Paragraph 3 and all
additional rent and other additional charges or sums payable to Lessor
hereunder.
(f) Lessee shall pay the first (lst) month's Base Rent on the date
of Lessee's prior to occupancy.
4. Additional Rent. In addition to the Base Rent, Lessee shall pay to
---------------
Lessor, as additional rent, the amounts described in subparagraphs 4(a), 4(b),
and 4(c) below:
(a) (i) Commencing on the Commencement Date and continuing
thereafter during each calendar year of the term of this Lease, in the
event Lessor determines that Lessor's cost of "taxes and assessments", as
hereinafter defined, will increase above $0.33 per square foot of rentable
area in the Building, then Lessee shall, in equal monthly installments with
the Base Rent, pay to Lessor as additional rent the pro rata amount of such
--- ----
anticipated increase attributable to the Premises. The term "taxes and
assessments" shall include every type of tax, charge, or imposition now or
hereafter assessed against the Building or the Land, including, but not
limited to, ad valorem taxes, special assessments, and governmental charges
-- -------
excepting only income taxes imposed upon Lessor; the term "taxes and
assessments" shall include any tax levied or imposed upon or assessed
against the rent reserved hereunder or income arising herefrom to the
extent the same is in lieu of or a substitute for any of the taxes and
assessments hereinabove described; and such term shall also include any
reasonable expenses, including fees and disbursements of attorneys, tax
consultants, arbitrators, appraisers, experts and other witnesses, incurred
by Lessor in contesting any taxes or the assessed valuation of all or any
part of the Building or the Land.
(ii) Prior to January 1 of each calendar year during the
term of this Lease, Lessor shall estimate the increase for that calendar
year in taxes and assessments and shall deliver to Lessee a statement of
Lessee's share of such increase. Lessee shall deliver the prorated, monthly
amount of such increase (for the period prior to receipt of such statement)
to Lessor with the next regular payment of Base Rent. Promptly following
receipt of the actual tax bills, Lessor shall notify Lessee of the actual
increase and any adjustment necessary shall be made to the additional
rental payments next coming due under this subparagraph 4(a).
(iii) Lessee shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed during the term of this
Lease, upon all improvements installed by Lessee in the Premises, Lessee's
other leasehold improvements, equipment, furniture, fixtures, and any other
personal property located on the Premises. In the event any or all of said
improvements, Lessee's other leasehold improvements, equipment, furniture,
fixtures, and other personal property shall be assessed and taxed with the
Building or the Land, Lessee shall pay to Lessor its share of such taxes
within ten (10) calendar days after delivery to Lessee by Lessor of a
statement in writing setting forth the amount of such taxes attributable to
the above property.
3
<PAGE>
(b) (i) Commencing on the Commencement Date and continuing
thereafter during each calendar year of the term of this Lease, in the
event Lessor determines that Lessor's cost of "insurance", as hereinafter
defined, will increase above $0.05 per square foot of rentable area in the
Building, then Lessee shall, in equal monthly installments with the Base
Rent, pay to Lessor as additional rent the pro rata amount of such
--- ----
anticipated increase attributable to the Premises. The term "insurance"
shall include all fire and extended casualty insurance on the Building and
all liability coverage on the common areas of the Building, and the
grounds, sidewalks, driveways and parking areas on the Land, together with
such other insurance protection, including, but not limited to, business
interruption insurance,
as are from time to time obtained by Lessor.
(ii) Prior to January 1 of each calendar year during the
term of this Lease, Lessor shall estimate the increase for that calendar
year in insurance and shall deliver to Lessee a statement of Lessee's share
of such increase. Lessee shall deliver the prorated, monthly amount of such
increase (for the period prior to receipt of such statement) to Lessor with
the next regular payment of Base Rent. Promptly following receipt of the
actual bills for the insurance, Lessor shall notify Lessee of the actual
increase and any adjustment necessary shall be made to additional rental
payments next coming due under this subparagraph 4(b).
(c) (i) The pro rata amount of all common area electrical,
--- ----
grounds maintenance charges, security services, and other common area
charges and expenses for the Building and the Land (the "CAM Charges"),
shall be paid by Lessee to Lessor, as additional rent, as provided in
subparagraph (c) (ii) below. The term "grounds maintenance" shall include,
without limitation, all landscaping, planting, lawn and grounds care, all
improvements to the grounds and other common areas adjacent to the Premises
and the Building and to all sidewalks, driveways, truck courts and parking
areas. Said additional rental shall be $O.35 per square foot, per annum,
during the first (lst) Lease Year. Said fee shall not increase more than
five percent (5%) each Lease Year during the term of this Lease, on a
cumulative basis.
(ii) Prior to January 1 of each calendar year, Lessor shall
deliver to Lessee an estimate of the total CAM Charges for that calendar
year and the amount thereof attributable to the Premises. Lessee shall
thereafter, during that calendar year, pay to Lessor one-twelfth (1/12) of
the amount set forth in said statement at the same time its monthly
installments of Base Rent hereunder are due and payable. In the event the
January installment of Base Rent is already due and payable or has been
paid at the time said statement is delivered to Lessee, Lessee shall,
within ten (10) days following receipt of said statement, deliver to Lessor
one-twelfth (1/12) of the amount set forth on said statement in payment
thereof. At such time as Lessor is able to determine the
actual CAM Charges for each calendar year, Lessor shall
deliver to Lessee a statement thereof and, in the event
the estimated CAM Charges differ from the actual CAM
Charges, any adjustment necessary shall be made to
additional rental payments next coming due under this
subparagraph 4(c).
(d) Lessor's failure to deliver a statement to Lessee prior to
January 1 of each year with the estimated additional rent payments due
under subparagraphs (a), (b), and (c) above shall not preclude Lessor from
later collecting the past due amounts shown thereon, all of which shall be
paid by Lessee within ten (10) days following receipt of such statement.
5. SECURITY DEPOSIT. Simultaneously with the execution of this Lease,
----------------
Lessee has paid to Lessor a security deposit in the amount of $11,916.67. The
security deposit shall be held by
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Lessor for the performance of Lessee's covenants and obligations under this
Lease, it being expressly understood that the deposit shall not be considered an
advance payment of rental or a measure of Lessor's damage in case of default by
Lessor. Upon the occurrence of any Event of Default by Lessee or breach by
Lessee of Lessee's covenants under this Lease, Lessor may, from time to time,
without prejudice to any other remedy, use the security deposit to the extent
necessary to make good any arrears of rent, or to repair any damage or injury,
or pay any expense or liability incurred by Lessor as a result of the Event of
Default or breach of covenant, and any remaining balance of the security deposit
shall be returned by Lessor to Lessee upon termination of this Lease. If any
portion of the security deposit is so used or applied, Lessee shall upon ten
days' written notice from Lessor, deposit with Lessor by cash or cashier's check
an amount sufficient to restore the security deposit to its original amount.
6. UTILITIES. Lessee shall promptly pay all charges for utilities and
---------
other services furnished to the Premises by Lessor or the applicable utility
company, including, but not limited to, gas, water, electricity, fuel, light and
heat, and Lessee shall promptly pay all charges for garbage collection services
and for all other sanitary services rendered to the Premises or used by Lessee
in connection herewith. In the event any utilities furnished to the Premises
are not separately metered, Lessee shall pay to Lessor, as additional rental,
Lessee's pro rata share of the utilities used by Lessee, within ten (10)
--- ----
calendar days following receipt of a statement showing the amount due. Lessee's
prorated amount shall be determined on the basis of the size of the Premises,
unless Lessor determines that Lessee's use of the Premises justifies a
disproportionate allocation of utility costs to Lessee.
7. USE. The Premises shall be used for wholesale distribution of
---
electronic wire and cable, and for no other purpose. The Premises shall not be
used for any illegal purposes; nor in violation of any regulation of any
governmental body; nor in any manner to create any nuisance or trespass; nor in
any manner to vitiate the insurance or increase the rate of insurance on the
Premises or on the Building. Lessee agrees to use the Premises only for the
purposes herein leased until the expiration of the term of this Lease. Lessee
shall take possession of the Premises on or before the Commencement Date.
8. REPAIRS BY LESSOR.
-----------------
(a) Lessee accepts the Premises in their present condition and as
suited for the uses intended by Lessee, subject only to Lessor's agreement
to complete the Lessor's Work described in Exhibit A. Except as otherwise
---------
expressly provided in this Lease, Lessor shall not be required to make any
repairs or improvements to the Premises. Lessor shall make repairs to the
foundation, floor, exterior walls (excluding plate glass and doors) and
roof of the Building as necessary for safety and tenantability. Lessor's
duties shall also include repairs to underground utility and sewer pipes
outside the exterior walls of the Building, or under or within the floor of
the Premises. Lessee shall bear the expense of any repairs to the
foregoing items which are Lessor's responsibility if made necessary by the
negligence or misuse of Lessee, its employees, or agents; and Lessee shall
bear the cost of repairs to the floor if made necessary by the nature of
Lessee's use of the Premises.
(b) Lessor shall be responsible for the maintenance of those areas
around the Building, including parking areas, planted areas, and landscaped
areas which are from time to time designated by Lessor and open for the
joint use by tenants of the Building or the public.
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9. REPAIRS BY LESSEE. Lessee shall repair, maintain, replace as
-----------------
necessary and keep in good, clean and safe repair all portions of the Premises
and all equipment, fixtures and systems therein which are not specifically set
forth as the responsibility of Lessor in Paragraph 8 of this Lease. Lessee's
repairs and replacements shall include without limitation all electrical,
plumbing, heating and air conditioning systems, parts, components and fixtures
within or relating to the Premises. In connection therewith, Lessee shall
maintain in force at all times a maintenance contract for the heating,
ventilation, and air conditioning equipment acceptable in form and content to
Lessor and with a service organization acceptable to Lessor. Lessee shall also
promptly repair or replace all partitions and all glass and plate glass within
the Premises immediately when cracked or broken. Lessor gives to Lessee
exclusive control of the Premises and shall
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<PAGE>
be under no obligation to inspect the Premises. Lessee shall at once report in
writing to Lessor any defective conditions known to Lessee which Lessor is
required to repair, and failure to promptly report such defects shall make
Lessee liable to Lessor for any liability incurred by Lessor by reason of such
defects, and Lessee indemnifies and holds harmless Lessor from and against all
loss, cost and damage (including reasonable attorney's fees) arising from or
related to Lessee's failure to so report such defective conditions.
Notwithstanding the provisions of this Paragraph 9, upon completion of
Lessor's work required under Paragraph 10, below, Lessor shall guarantee, for
the one-year period following the Commencement Date, the materials and
workmanship for such work. Upon the expiration of the one-year guarantee
period, Lessor shall, upon Lessee's request, during the period of Lessee's
possession of the Premises, permit Lessee to jointly exercise with Lessor the
rights and benefits occurring under the warranties, guaranties, and service
agreements, if any, covering those portions of the Premises for which Lessee is
responsible under Paragraph 9 hereof.
10. LESSOR'S FINISH WORK. Lessor agrees that it will finish out the
--------------------
Premises as depicted and described on Exhibit A attached hereto (the "Plans and
---------
Specifications"), which were submitted, reviewed and approved by Lessor and
Lessee prior to the execution hereof; said finish work is herein referred to as
the "Lessee Finish Work." The Plans and Specifications shall incorporate the
specifications set forth on Exhibit E, attached hereto and by this reference
---------
made a part hereof. The Building shall be constructed substantially in
accordance with the guidelines set forth on Exhibit F, attached hereto and by
---------
this reference made a part hereof. In the event that Lessee shall desire, or
Lessor shall find it necessary to make, any modifications or changes to the
Plans and Specifications, the party desiring or requiring said changes shall
give the other party written notice thereof. No change to the Plans and
Specifications shall be effective unless and until it has been approved in
writing by Lessor and Lessee. The Plans and Specifications, as amended, shall
thereafter, for all purposes, be considered the "Plans and Specifications"
hereunder. Lessor shall provide Lessee an allowance of $193,000.00 for the
installation and construction of the Lessee Finish Work (herein referred to as
the "Lessee Finish Allowance"). The Lessee Finish Allowance will provide a
turn-key project based on the Plans and Specifications. In the event that the
total cost of construction is increased above the Lessee Finish Allowance as a
result of changes requested by Lessee, Lessee shall be responsible for all such
excess costs and shall pay the same to Lessor within thirty (30) days following
receipt of a statement thereof, accompanied by supporting documentation; if such
amount is not paid within thirty (30) days following receipt of such statement,
such amount shall bear interest at the "Default Rate of Interest" (as herein
defined)
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until such amount and all interest accrued at the Default Rate of Interest have
been paid in full.
11. RIGHT OF ENTRY. Lessor shall have the right, but not the obligation,
--------------
and upon reasonable notice, to enter the Premises at reasonable hours to exhibit
same to prospective purchasers, lenders or tenants; to inspect the Premises to
see that Lessee is complying with all Lessee's obligations hereunder; and to
make repairs required of Lessor under the terms of this Lease or repairs or
modifications to any adjoining space.
12. LESSOR'S RIGHT TO ACT FOR LESSEE. If Lessee fails to pay any
--------------------------------
additional rent or make any other payment (except Base Rent) or take any other
action when and as required under this Lease, Lessor may, without demand upon
Lessee and without waiving or releasing Lessee from any duty, obligation, or
liability under this Lease, pay any such additional rent, make any such other
payment or take any such action required of Lessee. The actions which Lessor
may take shall include, but are not limited to, the performance of maintenance
or repairs and the making of replacements to the Premises, the payment of
insurance premiums which Lessee is required to pay under this Lease and the
payment of taxes and assessments which Lessee is required to pay under this
Lease. Lessor may pay all incidental costs and expenses incurred in exercising
its rights hereunder, including, without limitation, reasonable attorneys' fees
and expenses, penalties, reinstatement fees, late charges and interest. All
amounts paid by Lessor pursuant to this Paragraph, and all costs and expenses
incurred by Lessor in exercising Lessor's rights under this Paragraph, shall
bear interest at the lesser of (i) eighteen percent (18%) per annum or (ii) the
highest rate permitted under applicable law (herein referred to as the "Default
Rate of Interest") , from the date of payment by Lessor and shall be payable by
Lessee to Lessor upon demand.
13. DEFAULT.
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(a) Each of the following events shall constitute an "Event of
Default" by Lessee under this Lease:
(i) if Lessee shall fail to pay when due any rent or other
payment to be made by Lessee hereunder and shall not cure such failure
within ten (10) days after the due date (as to the scheduled monthly rental
payments) or within five (5) business days after written notice thereof
from Lessor (as to nonscheduled payments), as the case may be; or
(ii) if Lessee shall violate or breach, or shall fail fully
and completely to observe, keep, satisfy, perform, and comply with, any
agreement, term, covenant, condition, requirement, restriction, or
provision of this Lease (other than the payment of rent or any other
payment to
8
<PAGE>
be made by Lessee), and shall not cure such failure within thirty (30) days
after Lessor gives Lessee written notice thereof; or
(iii) if the Premises are deserted or abandoned; or
(iv) if Lessee's interest in the Premises is levied upon; or
(v) if any petition is filed by or against Lessee under any
Section or Chapter of the Federal Bankruptcy Code, and in the case of a
petition filed against Lessee, such petition is not dismissed within sixty
(60) days of such filing; or if Lessee becomes insolvent or transfers
property in fraud of creditors; or if Lessee makes an assignment for the
benefit of creditors; or if a receiver is appointed for any of Lessee's
assets.
For the purposes of the Events of Default specified in clause (v) above, the
word "Lessee" shall include, without limitation; (i) any party comprising
Lessee, should more than one person or entity execute this Lease as Lessee, or
any general partner or joint venturer of Lessee or any such party; and (ii) any
person or entity now or hereafter liable, whether primarily, secondarily, or
contingently, for the performance of the duties and obligations of Lessee under
this Lease, including without limitation any principal, maker, endorser,
guarantor or surety.
(b) Upon the occurrence of any Event of Default, Lessor may pursue any one
or more of the following remedies, in addition to any other remedies provided
under this Lease, at law or in equity, separately or concurrently or in any
combination, without any notice (except as specifically provided herein) or
demand whatsoever and without prejudice to any other remedy which it may have
for possession of the Premises or for arrearages in rent or other amounts
payable to Lessor:
(i) Lessor may terminate this Lease by giving Lessee written
notice of termination, in which event Lessee shall immediately quit and
vacate the Premises and deliver and surrender possession of the Premises to
Lessor, and this Lease shall be terminated at the time designated by Lessor
in its notice of termination to Lessee; provided, however, that no
termination of this Lease prior to the normal expiration hereof shall
affect Lessor's right to collect rent for the period prior to termination;
or
(ii) with or without terminating this Lease, Lessor may enter upon
and take possession of the Premises and expel or remove Lessee and any
other person who may be occupying the
9
<PAGE>
Premises, by force if necessary, without being liable for prosecution or
any claim for damages; or
(iii) Lessor may re-let the Premises or any part thereof, on such
terms and conditions as Lessor may deem satisfactory, and receive the rent
for any such re-letting, in which event Lessee shall pay to Lessor on
demand any deficiency that may arise by reason of such re-letting;
provided, further, that Lessee shall pay over to Lessor on demand any and
all costs and expenses incurred in renovating or altering the Premises to
make it suitable for re-letting; or
(iv) Lessor may declare immediately due and payable the present
value (using a discount rate of eight percent (8%) per annum) of all rent
and other sums due or to become due under this Lease immediately due and
payable; provided, however, that such payment shall not constitute a
penalty or forfeiture or liquidated damages, but shall merely constitute
payment in advance of the rent for the remainder of the term of this
Lease. Upon making such payment, Lessee shall be entitled to receive from
Lessor all rents actually received by Lessor from other assignees, tenants,
and subtenants on account of the Premises during the term of this Lease,
provided that the monies to which Lessee shall so become entitled shall in
no event exceed the entire amount actually paid by Lessee to Lessor
pursuant to this subparagraph (iv), less all costs, expenses and attorneys'
fees of Lessor incurred in connection with the reletting of the Premises.
(c) Lessor's pursuit of any one or more of the remedies provided in
this Lease shall not constitute an election of remedies excluding the
election of another remedy or other remedies, or a forfeiture or waiver of
any rent or other amounts payable under this Lease by Lessee or of any
damages or other sums accruing to Lessor by reason of Lessee's violation of
any provision of this Lease. No action taken by or on behalf of Lessor
shall be construed to mean acceptance of a surrender of this Lease. No
failure of Lessor to pursue or exercise any of Lessor's powers, rights, or
remedies or to insist upon strict and exact compliance by Lessee with any
provision of this Lease, and no custom or practice at variance with the
terms of this Lease, shall constitute a waiver by Lessor of the right to
demand strict and exact compliance with the terms and conditions of this
Lease.
14. RIGHTS CUMULATIVE. All rights, remedies, powers, and privileges
-----------------
conferred under this Lease on Lessor shall be cumulative of and in addition to,
but not restrictive of or in lieu of, those conferred by law.
15. LIENS. Lessee hereby indemnifies Lessor against, and shall keep the
-----
Premises, the Building, and the Land free from liens for any work performed,
material furnished or obligations incurred by Lessee. Should any liens or
claims be filed against the Premises, the Building, or the Land by reason of
Lessee's acts or omissions, Lessee shall cause same to be discharged by bond or
otherwise within ten (10) days after filing. If Lessee fails to cause any such
lien or claim to be discharged within the required time, Lessor may cause same
to be discharged and may make any payment that Lessor, in its sole judgment,
considers necessary, desirable, or proper in order to do so. All amounts paid by
Lessor shall bear interest at the Default Rate of Interest from the date of
payment by Lessor and shall be payable by Lessee to Lessor upon demand.
16. LESSEE'S PROPERTY; IMPROVEMENTS TO THE PREMISES.
-----------------------------------------------
(a) Lessee shall not remove any personal property, fixtures, or
equipment from the Premises at any time during which Lessee is in default
under this Lease. Upon any termination of this Lease at a time at which
Lessee shall be liable in any amount to Lessor
10
<PAGE>
under this Lease, Lessor shall have a lien upon the personal property and
effects of Lessee within the Premises, and Lessor shall have the right, at
Lessor's election, without notice to Lessee, to sell at a private,
commercially reasonable sale all or part of said property and effects for
such price as against any amounts due under this Lease from Lessee to
Lessor, including the expenses of such sale. If Lessee shall not remove all
Lessee's effects from the Premises at any expiration or other termination
of this Lease, Lessor shall have the right, at Lessor's election, to remove
all or part of said effects in any manner that Lessor shall choose and
store the same without liability to Lessee for loss thereof, and Lessee
shall be liable to Lessor for all expenses incurred in such removal and
also for the cost of storage of said effects.
(b) Lessee shall not make any alterations, additions, or
improvements to the Premises, exterior or interior, without the prior
written consent of Lessor, except for unattached movable fixtures which may
be installed without drilling, cutting, or otherwise defacing the Premises.
If any such alterations, additions, or improvements are made, then, at the
expiration of the term of this Lease, Lessee agrees to restore the Premises
to the condition prior to making same, at Lessee's sole cost and expense,
reasonable wear and tear excepted, provided that if Lessor does not require
removal, then all such alterations, additions, or improvements shall become
the sole property of Lessor. Lessee may not use or penetrate the roof of
the Premises for any purpose whatsoever without Lessor's prior written
consent. All construction work done by Lessee in the Premises shall be
performed in a good
11
<PAGE>
and workmanlike manner, in compliance with all governmental requirements,
and at such times and in such manner as will cause a minimum of
interference with other construction in progress and with the transaction
of business in the Building. Lessee covenants and agrees that all
contractors, subcontractors, and other persons or entities performing work
for Lessee at the Premises will carry liability insurance in amounts
acceptable to Lessor.
17. SUBLETTING AND ASSIGNMENT.
-------------------------
(a) Lessee shall not, directly or indirectly, without the prior
written consent of Lessor, endorsed hereon, sell, assign, hypothecate, or
otherwise transfer this Lease or any interest hereunder, or sublet the
Premises or any part thereof, or permit the use of the Premises by any
party other than Lessee. Consent to any assignment or sublease shall not
be deemed a waiver of the right of Lessor to approve any further assignment
or subletting. Notwithstanding any permitted assignment or subletting,
Lessee shall remain liable for the full and complete performance,
satisfaction, and compliance with each and every agreement, term, covenant,
condition, requirement, provision, and restriction of this Lease, as
principal and not as surety or guarantor, and as if no such assignment or
subletting had been made.
(b) In the event that during the term of this Lease Lessee desires
to sublease the Premises or assign this Lease, Lessee shall give written
notice thereof to Lessor, which notice shall contain (i) the name of the
proposed subtenant or assignee; (ii) the terms of any sublease; and (iii)
such other information as Lessor shall reasonably request; whereupon Lessor
shall consider such proposed subtenant or assignee and notify Lessee with
reasonable promptness as to Lessor's choice, at Lessor's sole discretion,
of the following: (x) that Lessor consents to a subleasing of the Premises
or assignment of this Lease to such proposed subtenant or assignee; or (y)
that upon such proposed subtenant's or assignee's entering into a mutually
satisfactory new lease of the Premises with Lessor, then Lessee shall be
released from all further obligations and liabilities under this Lease
(excepting only any unpaid rentals or any unperformed covenants then past
due or unperformed under this Lease); or (z) that Lessor declines to
consent to such sublease or assignment due to insufficient or
unsatisfactory documentation furnished to Lessor to establish the proposed
subtenant's or assignee's financial strength and proposed use of and
operations upon the Premises.
(c) In the event that Lessee sublets the Premises or any part
thereof, or sells, assigns, or transfers this Lease and at any time
receives rent and/or other consideration which exceeds that which Lessee
would at that time be obligated to pay to Lessor, Lessee shall pay to
Lessor 100% of the gross excess in such rent as such rent is received by
Lessee and 100% of any other consideration received by Lessee from such
subtenant in connection with such sublease or, in the case of an assignment
of this Lease by Lessee, Lessor shall receive 100% of any consideration
paid to Lessee by such assignee in connection with such assignment. In
addition, should Lessor agree to an assignment or sublease agreement,
Lessee will pay to Lessor on demand a sum equal to all of Lessor's costs,
including reasonable attorneys' fees, incurred in connection with such
assignment or transfer.
18. DAMAGE OR DESTRUCTION. If the Premises or any portion thereof are
---------------------
destroyed by storm, fire, lightning, earthquake, or other casualty, Lessee shall
immediately notify Lessor. In the event the Premises cannot, in Lessor's
judgment, be restored within one hundred eighty (180) days of the date of such
damage or destruction, this Lease shall terminate as of the date of such
destruction, and all rent and other sums payable by Lessee hereunder shall be
accounted for as between Lessor and Lessee as of that date. Lessor shall
notify Lessee within thirty (30) days of the date of the damage or destruction
whether the Premises can be restored within one hundred eighty (180) days. If
this Lease is not terminated as provided in this Paragraph, Lessor shall, to the
extent insurance proceeds payable on account of such damage or destruction are
available to Lessor (with
12
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the excess proceeds belonging to Lessor), within a reasonable time, repair,
restore, rebuild, reconstruct, or replace the damaged or destroyed portion of
the Premises to a condition substantially similar to the condition which existed
prior to the damage or destruction. Provided, however, Lessor shall only be
required to repair, restore, rebuild, reconstruct, and replace the Lessor's Work
shown on Exhibit A, and Lessee shall, at its sole cost and expense, upon
---------
completion of the Lessor's Work, repair, restore, rebuild, reconstruct, and
replace, as required, any and all improvements installed in the Premises by
Lessee and all trade fixtures, personal property, inventory, signs, and other
contents in the Premises, and all other repairs not specifically required of
Lessor hereunder, in a manner and to at least the condition existing prior to
the damage. Lessee's obligations to pay Base Rent shall abate until Lessor has
repaired, restored, rebuilt, reconstructed, or replaced the Premises, as
required herein, in proportion to the part of the Premises which are unusable by
Lessee. If the damage or destruction is due to the act, neglect, fault, or
omission of Lessee, there shall be no rent abatement. Notwithstanding the
foregoing, if any such damage or destruction occurs within the final two (2)
years of the term hereof, then Lessor, in its sole discretion, may, without
regard to the aforesaid 180-day period, terminate this Lease by written notice
to Lessee.
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19. CONDEMNATION.
------------
(a) In the event of a taking of all or substantially all of the
Premises (so that the untaken portion is unsuitable for the continued
feasible and economic operation of the Premises by Lessee for substantially
the same purposes as immediately prior to such taking), then this Lease
shall automatically terminate and all rent and other sums payable by Lessee
hereunder shall be apportioned and paid through and including the date of
such taking.
(b) In the event of a taking of less than substantially all of the
Premises, Lessor may, at Lessor's option, terminate this Lease by giving
written notice of such termination to Lessee, in which event this Lease
shall terminate, and all rent and other sums payable by Lessee hereunder
shall be apportioned and paid through the date of such taking.
(c) In the event of a taking of a type described in subparagraph
19(b) hereof and if Lessor does not terminate this Lease, then this Lease
and all of the duties and obligations of Lessee hereunder shall remain
unmodified and in full force and effect; provided, however, that the rent
payable after the taking shall be reduced to an amount which bears the same
ratio to the rent payable immediately prior to the taking as the rental
value of the Premises after taking bears to the rental value of the
Premises immediately prior to the taking.
(d) Lessor shall be entitled to all awards, damages, compensation,
or proceeds payable by reason of any taking, and Lessee shall not be
entitled to any portion thereof, and shall have no claim for, and hereby
transfers, assigns, conveys, and sets over unto Lessor all of its right,
title, and interest, if any, in or to any award, damages, compensation, or
proceeds payable by reason of any taking; and, without limiting the
generality of the foregoing, Lessee shall have no claim against Lessor or
the condemning authority, or otherwise, for any award, damages,
compensation, or proceeds for (i) the value of any unexpired term of this
Lease, or (ii) the value of any fixtures or improvements installed by
Lessee in the Premises. Nothing herein shall be construed, however, to
preclude Lessee from prosecuting any claim directly against the condemning
authority for loss of business, moving expenses, damage to, and cost of
removal of, trade fixtures, furniture, and other personal property
belonging to Lessee; provided, however, that Lessee shall make no claim
which shall diminish or adversely affect any award claimed or received by
Lessor.
20. INDEMNITY. Lessee shall, at all times, except to the extent of the
---------
negligence of Lessor, its agents and employees,
14
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indemnify and hold harmless Lessor and Lessor's officers, employees, and agents
from, against, and in respect of, all liabilities, damages, losses, costs,
expenses (including all reasonable attorneys' fees), causes of action, suits,
claims, demands, and judgments of any nature whatsoever arising, in whole or in
part, out of, by reason of, or in connection with: (a) injury to or the death
of persons or damage to property (i) on the Premises, or (ii) in any manner
arising out of, by reason of, or in connection with, the use, nonuse or
occupancy of the Premises, or (iii) resulting from the condition of the
Premises; (b) the violation or breach of, or the failure of Lessee to fully and
completely keep, observe, satisfy, perform, and comply with, any agreement,
term, covenant, condition, requirement, provision, or restriction of this Lease;
or (c) the violation of any law affecting the Premises or the use or occupancy
thereof. Lessee, on behalf of itself and all persons and entities claiming
through Lessee, waives all claims against Lessor for damage to any property or
injury to, or death of, any person in, upon, or about the Premises, the
Building, or the Land arising at any time and from any cause (including without
limitation fire, explosion, water, rain, flood, or leaks from any part of the
Premises or from the pipes, appliances, plumbing works, roof, or subsurface of
any floor or ceiling, or from the street, or any other place), except to the
extent caused by the negligence or willful misconduct of Lessor, its agents,
employees, representatives, or contractors.
21. INSURANCE.
---------
(a) Lessee shall maintain in force at all times comprehensive
general public liability insurance in an amount of not less than
$3,000,000.00 combined single limit coverage for bodily injury, death, and
property damage. Such insurance shall include contractually assumed
liability; and such insurance shall be primary and not in excess of or
contributory with other insurance carried by other persons. Said policy
shall name both Lessor and Lessee as insureds and shall contain a provision
requiring the insurer to give Lessor at least fifteen (15) calendar days'
prior written notice before any termination or expiration of said policy or
any reason. Prior to the commencement of this Lease and prior to the
expiration of each term of such policy, Lessee shall deliver to Lessor the
original of such policy or a proper certificate from the insurer.
(b) Lessee hereby agrees to insure any improvements installed by
Lessee in the Premises and its merchandise, trade fixtures, personal
property, furnishings, supplies, inventory, signs, and other contents of
the Premises against fire, with all risk coverage, for the full replacement
value thereof. Lessor shall have no responsibility whatsoever for any
damage, theft, or other casualty to or involving the same.
15
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(c) Each policy of insurance obtained by Lessee hereunder or
otherwise with respect to the Premises shall contain a waiver of
subrogation clause reasonably acceptable to Lessor.
(d) Lessor shall insure the Building against damage with casualty
insurance not less than the replacement value of the Building and with such
deductibles as Lessor reasonably deems appropriate and with comprehensive
general public liability insurance in such amounts and with such
deductibles as Lessor reasonably deems appropriate.
22. SIGNAGE. Exterior signage shall be provided by Lessee, at Lessee's
-------
sole cost and expense. Said signage is to be standard throughout the Building;
and said signage will be on the front facade above the entryway. Signage is
also permitted on the entry door or the glass panel immediately adjacent to the
entry door. Lessee shall not install any signs visible from outside the
Premises except with the prior written consent of Lessor. However, Lessor will
not withhold its consent to signage which is consistent with the other buildings
in the vicinity of the Building which are owned by Lessor or its affiliates.
Any permitted signs shall be maintained in compliance with applicable
governmental rules and regulations governing such signs, and Lessee shall be
responsible to Lessor for any damage caused by the installation, use, or
maintenance of said signs. Lessee agrees, upon removal of said signs, to repair
all damage incident thereto.
23. ATTORNEYS' FEES. In the event that either party is required to
---------------
enforce the provisions of this Lease, such party, if it prevails, shall be
entitled to receive from the other party all costs and expenses incurred at
trial and on appeal in connection with such enforcement, including but not
limited to reasonable attorneys' fees.
24. PARTIES. "Lessor" as used in this Lease shall include Lessor's
-------
assigns and successors in title to the Premises. "Lessee" shall include Lessee
and, if this Lease shall be validly assigned or the Premises validly sublet,
shall include such assignee or subtenant, its successors and permitted assigns.
"Lessor" and "Lessee" shall include male and female, singular and plural,
corporation, partnership, or individual, as may fit the particular parties.
25. LANDLORD AND TENANT RELATIONSHIP. This Lease shall create the
--------------------------------
relationship of landlord and tenant between Lessor and Lessee; no estate shall
pass out of Lessor; Lessee has only an usufruct not subject to levy and sale.
26. HOLDING OVER. If Lessee remains in possession of the Premises after
------------
expiration of the term of this Lease, with Lessor's acquiescence and without any
distinct agreement of parties, Lessee
16
<PAGE>
shall be a tenant at will at a rental rate equal to 150% of the rate in effect
at the end of this Lease; there shall be no renewal of this Lease by operation
of law.
27. SALE BY LESSOR. In the event of any sale, conveyance, transfer, or
--------------
assignment by Lessor of its interest in and to the Premises, all obligations
under this Lease of the party selling, conveying, transferring, assigning, or
otherwise disposing shall cease and terminate and Lessee releases said party
from same and Lessee shall thereafter look only and solely to the party to whom
or which the Premises were sold, conveyed, transferred, assigned, or otherwise
disposed of for performance of all of Lessor's duties and obligations under this
Lease.
28. SURRENDER OF THE PREMISES. At the termination of this Lease, Lessee
-------------------------
shall surrender the Premises and keys thereof to Lessor in at least as good a
condition as at commencement of the term of this Lease, normal wear and tear and
casualty only excepted.
29. NOTICES. Lessee hereby appoints as Lessee's agent to receive the
-------
service of all dispossessory or distraint proceedings and notices thereunder,
and all notices required or permitted under this Lease, the person in charge of
or occupying the Premises at that time; and if no person is in charge of or
occupying same, then such service or notice may be made by attaching the same on
the main entrance to the Premises. All notices to Lessor shall be delivered by
hand or sent by certified mail, return receipt requested, postage prepaid, to
Lessor's principal office set forth at the beginning of this Lease.
30. COVENANT OF QUIET ENJOYMENT. So long as Lessee observes and performs
---------------------------
the covenants and agreements contained herein to be observed and performed by
Lessee, Lessor covenants and agrees that Lessee shall at all times during the
term of this Lease peacefully and quietly have and enjoy possession of the
Premises, but always subject to the terms hereof.
31. SUBORDINATION AND ATTORNMENT.
----------------------------
(a) This Lease shall be subordinate to the right, title, and
interest of any lender or other party holding a security interest in or a
lien upon the Premises under any and all mortgage instruments or deeds to
secure debt presently encumbering the Premises or the Building and to any
and all other deeds to secure debt or mortgage instruments hereafter
encumbering the Premises or the Building. Lessee shall at any time
hereafter, on demand of Lessor or the holder of any such deed to secure
debt or mortgage instrument, execute any instruments which may reasonably
be required by such party for the purpose of evidencing the subordination
of this Lease to the lien or security of such party.
17
<PAGE>
(b) The following provisions shall be applicable to the
subordinations provided under subparagraph (a) above: (i) Lessor agrees to
use its reasonable efforts following full execution and delivery of this
Lease to obtain from its present lender a nondisturbance agreement
providing that, in the event the deed to secure debt or mortgage instrument
is foreclosed, Lessee's possession of the Premises shall not be disturbed
so long as no Event of Default shall have occurred and is continuing and so
long as Lessee continues to comply with the terms of this Lease (a
"Nondisturbance Agreement"); and (ii) as to any deed to secure debt or
mortgage instrument that is placed against the Premises or the Building
after the date of this Lease, the foregoing subordination shall not be
effective unless the holder of such deed to secure debt or mortgage
instrument shall execute and deliver to Lessee a Nondisturbance Agreement.
(c) Lessee shall, upon demand, at any time or times, execute,
acknowledge, and deliver to Lessor or the holder of any such instruments or
deeds to secure debt, without expense, any and all documents that may be
necessary to make this Lease superior to the lien of any of the same.
(d) If the holder of any of said instruments or deeds to secure
debt shall hereafter succeed to the rights of Lessor under this Lease,
Lessee shall, at the option of such holder or a purchaser at any
foreclosure or sale under power, attorn to and recognize such successor as
Lessee's landlord under this Lease. Lessee shall promptly execute,
acknowledge, and deliver any instrument that may be necessary to evidence
such attornment. Upon such attornment, this Lease shall continue in full
force and effect as a direct lease between each successor Lessor and
Lessee, subject to all of the terms, covenants, and conditions of this
Lease.
(e) If Lessee fails at any time to execute, acknowledge, and
deliver any of the documents provided for by this Paragraph within ten (10)
days after Lessor's notice so to do, in addition to the remedies allowed by
Paragraph 13 hereof, or otherwise, Lessor may execute, acknowledge, and
deliver any and all such documents as the attorney-in-fact of Lessee in its
name, place, and stead and Lessee hereby appoints Lessor, its successors
and assigns as such attorney-in-fact, such power of attorney being coupled
with an interest and being irrevocable by death, dissolution or merger of
Lessee.
32. ESTOPPEL CERTIFICATE. At any time and from time to time, Lessee, on
--------------------
or before the date specified in a request therefor made by Lessor, which date
shall not be earlier than ten (10) days from the making of such request, shall
execute, acknowledge, and deliver to Lessor a certificate evidencing whether or
not (a) this Lease
18
<PAGE>
is in full force and effect; (b) this Lease has been amended in any way; (c)
there are any existing defaults on the part of Lessor hereunder, to the
knowledge of Lessee, and specifying the nature of such defaults, if any; (d) the
date to which rent and other amounts due hereunder, if any, have been paid; and
(e) such other matters requested by Lessor. Each certificate delivered pursuant
to this Paragraph may be relied on by any prospective purchaser of the Building
or transferee of Lessor's interest hereunder or by any holder or prospective
holder of any mortgage instrument or deed to secure debt now or hereafter
encumbering the Building.
33. GOVERNMENTAL REGULATIONS. Lessee agrees, at is sole expense, promptly
------------------------
to comply with all requirements of any legally constituted public authority made
necessary by reason of Lessee's use or occupancy of the Premises. Lessor agrees
promptly to comply with any such requirements if not made necessary by reason of
Lessee's use or occupancy of the Premises. It is mutually agreed, however,
between Lessor and Lessee, that if in order to comply with such requirements the
cost to Lessor or Lessee, as the case may be, shall exceed a sum equal to one
(1) year's Base Rent under this Lease at the time compliance is required, then
the party who is obligated to comply with such requirement is entitled to
terminate this Lease by giving written notice of termination to the other party,
which termination shall become effective sixty (60) days after receipt of such
notice, and which notice shall eliminate necessity of compliance with such
requirement by the party giving such notice, unless the party receiving such
notice of termination shall, before the termination becomes effective, pay to
the party giving notice all costs of compliance in excess of one (1) year's Base
Rent, or secure payment of said sum in a manner satisfactory to the party giving
notice.
34. RELOCATION. INTENTIONALLY DELETED.
----------
35. SUCCESSORS AND ASSIGNS. The provisions of this Lease shall inure to
----------------------
the benefit of and be binding upon Lessor and Lessee and their respective
successors, heirs, legal representatives, and assigns, subject, however, in the
case of Lessee, to the restrictions on assignment and subletting contained in
this Lease.
36. LIMITATION OF LIABILITY. Lessor's obligations and liability to Lessee
-----------------------
with respect to this Lease shall be limited solely to Lessor's interest in the
Building, and neither Lessor, nor any joint venturer, partner, officer,
director, or shareholder of Lessor or any of the joint venturers of Lessor shall
have any personal liability whatsoever with respect to this Lease.
37. AGENT'S COMMISSION.
------------------
(a) Brannen/Goddard Company and Carter & Associates, Ltd.
(collectively, "Agent") shall be entitled to receive a
19
<PAGE>
commission in the amounts, and upon the terms and conditions, contained in
a commission agreement between Lessor and Agent.
(b) Lessee warrants and represents to Lessor that, except as set
forth above, no other party is entitled, as a result of the actions of
Lessee, to a commission or other fee resulting from the execution of this
Lease; and in the event Lessee extends or renews this Lease, or expands the
Premises, and Agent is entitled to a commission under the above referenced
commission agreement, Lessee shall pay all commissions and fees payable to
any party (other than Agent) engaged by Lessee to represent Lessee in
connection therewith. Lessor warrants and represents to Lessee that, except
as set forth above, no other party is entitled, as a result of the actions
of Lessor, to a commission or other fee resulting from the execution of
this Lease. Lessor and Lessee agree to indemnify and hold each other
harmless from any loss, cost, damage, or expense (including reasonable
attorneys' fees) incurred by the non-indemnifying party as a result of the
untruth or incorrectness of the foregoing warranty and representation, or
failure to comply with the provisions of this subparagraph.
(c) Carter & Associates, Ltd. is representing Lessee in connection
with this Lease, and is not representing Lessor. Brannen/Goddard Company
is representing Lessor in connection with this Lease, and is not
representing Lessee.
38. RULES AND REGULATIONS. Lessee accepts the Premises subject to and
---------------------
hereby agrees with Lessor to abide by the Rules and Regulations attached to this
Lease as Exhibit D, and incorporated herein by reference, together with such
---------
additional Rules and Regulations or amendments thereto as may hereafter from
time to time be reasonably established by Lessor, and such additions or
amendments shall be binding on Lessee upon receipt of same by Lessee.
39. HAZARDOUS SUBSTANCES. Lessee covenants and agrees that it shall not
--------------------
cause or permit any Hazardous Substances (as hereinafter defined) to be
generated, used, treated, stored, released or disposed of in, on, at, or under
the Premises, the Building, or the Land without Lessor's prior written consent.
Lessee further covenants and agrees to indemnify Lessor for any loss, cost,
damage, liability, or expense (including without limitation, attorneys' fees),
as well as environmental impairment damages, that Lessor might ever incur
because of Lessee's failure to comply with the provisions of the immediately
preceding sentence, this indemnification to survive the expiration or other
termination of this Lease. For the purposes of this Paragraph 39, Hazardous
Substances shall mean and refer to (a) all those substances, elements,
materials, compounds, or wastes defined or classified as hazardous or restricted
under (i) the Comprehensive
20
<PAGE>
Environmental Response, Compensation, and Liability Act of 1980, as amended
from time to time, the regulations promulgated thereunder and analogous state
statutes and regulations, (ii) the Resource Conservation and Recovery Act of
1976, as amended from time to time, the regulations promulgated thereunder and
analogous state statutes and regulations, (iii) the Toxic Substances Control
Act, as amended from time to time, the regulations promulgated thereunder and
analogous state statutes and regulations; and (b) petroleum products, including,
without limitation, waste oils; and (c) "asbestos", as defined in 29 C.F.R. Sec.
1910.1001 et seq. (or analogous regulations promulgated under the Occupational
------
Safety and Health Act of 1970, as amended from time to time, and the regulations
promulgated thereunder); and (d) "PCBs", as defined in 40 C.F.R. Sec. 761 et
--
seq., and "TCDD", as defined in 40 C.F.R. Sec. 775 et seq. (or in either case
- --- ------
analogous regulations promulgated under the Toxic Substances Control Act, as
amended from time to time); and (e) any other substance, element, material, or
compound defined or restricted as a hazardous, toxic, radioactive, or dangerous
substance, material, or waste by the Environmental Protection Agency or by any
other ordinance, statute, law, code, or regulation of any federal, state, or
local governmental entity or any agency, department or other subdivision
thereof, whether now or later enacted, issued, or promulgated.
40. MISCELLANEOUS. Time is of the essence of this Lease. This Lease
-------------
contains the entire agreement of Lessor and Lessee and no representations or
agreements, oral or otherwise, between the parties not embodied herein shall be
of any force or effect. No failure of Lessor to exercise any power given Lessor
hereunder, or to insist upon strict compliance by Lessee of any obligations
hereunder, and no custom or practice of the parties at variance with the terms
hereof shall constitute a waiver of Lessor's right to demand exact compliance
with the terms hereof. If any clause or provision of this Lease is illegal,
invalid, or unenforceable under applicable present or future laws or regulations
effective during the term of this Lease, the remainder of this Lease shall not
be affected. In lieu of each clause or provision of this Lease which is illegal,
invalid, or unenforceable, there shall be added as part of this Lease a clause
or provision as nearly identical as may be possible and as may be legal, valid,
and enforceable. This Lease shall be governed by, construed under, and
interpreted and enforced in accordance with the laws of the State of Georgia.
Neither this Lease, nor any memorandum of this Lease or reference hereto, shall
be recorded by Lessee without Lessor's consent endorsed hereon. Lessor shall be
excused from the performance of any of its obligations under this Lease for the
period of any delay resulting from any cause beyond its control, including,
without limitation, all labor disputes, governmental regulations or controls,
fires or other casualties, inability to obtain any material, or services or acts
of God. If Lessee executes this Lease as a corporation, each of the persons
executing this Lease on behalf of Lessee does hereby personally represent and
warrant that Lessee is a duly authorized and existing corporation, that Lessee
is qualified to do business in the state in which the Premises are located, that
the corporation has full right and authority to enter into this Lease, and that
each person signing on behalf of the corporation is authorized to do so. In
the event any representation or warranty is false, all persons who execute this
Lease shall be liable, individually, as Lessee. The owner of record of the
Premises is the Lessor. The person authorized to manage the Premises is the
Manager.
41. SPECIAL STIPULATIONS. In the event any Special Stipulations are
--------------------
attached to this Lease, the terms thereof shall control in the event of a
conflict between the provisions of this Lease and the provisions thereof.
42. GUARANTY. INTENTIONALLY DELETED.
--------
43. INCORPORATION OF EXHIBITS. All exhibits referred to in this Lease are
-------------------------
hereby incorporated herein by this reference.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease
to be executed, under seal, in their respective names and on their
behalf by their duly authorized officials, the day and year indicated below.
LESSOR:
A.G. NO. 3, LLC, a Georgia limited liability company
By:/s/ Mark C. West [SEAL]
-------------------------------
Mark C. West
Its: Manager
Date of Execution by Lessor:
June 9, 1995
- ---------------------
Lessee:
WIRE & CABLE SPECIALTIES, INC.
By:/s/ Theodore J. Bruno
-------------------------------
President
Attest:/s/ Antoinette M. Shields
---------------------------
Secretary
(CORPORATE SEAL)
Date of Execution by Lessee:
June 8, 1995
- ---------------------
22
<PAGE>
EXHIBIT B
AVALON RIDGE SITE 12 Date: June 7, 1995
LEGAL DESCRIPTION
All that tract and parcel of land lying in Land Lot 270 of the 6th District
containing 7.74 acres which is further described in the following.
Starting at the Southwestern point of intersection of the right-of-way of Avalon
Ridge Place and the Southern right-of-way of Avalon Ridge Parkway, thence
running South along the right-of- way of Avalon Ridge Parkway South 52 degrees
04'00" West, 340.93' to a point, thence running along an arc of radius 471.10'
further described by a chord of bearing South 44 degrees 33'36" West, 123.09' to
a point, thence running along an arc of radius 47.10' further described by a
chord of bearing South 14 degrees 18'21" West, 364.32' to a point, thence
running along an arc of radius 632.46' further described by a chord of bearing
South 19 degrees 04'51" East, 233.53' to a point, thence running South 29
degrees 43'11" East, 187.46' to a point, which is the True Point of Beginning.
Starting at the True Point of Beginning, thence running North 82 degrees 40'56"
East, 810.00' to a point, thence running South 07 degrees 19'04" East 441.57' to
a point on the right-of-way of Avalon Ridge Parkway, thence running along such
right-of-way South 68 degrees 22'26" West, 329.58' to a point, thence running
along an arc of radius 170.51' and length of 80.58' further described by a chord
of bearing South 81 degrees 54'45" West, 79.83' to a point, thence running along
an arc of radius 462.47' and length of 208.72' further described by a chord of
bearing North 71 degrees 37'11" West, 206.95' to a point, thence running along
an arc of radius 334.60' and length of 169.18' further described by a chord of
bearing North 44 degrees 12'18" West, 167.39' to a point, thence running North
29 degrees 43'11" West, 325.00' to a point which is the True Point of Beginning.
<PAGE>
EXHIBIT C
TENANT'S ACCEPTANCE OF PREMISES
Lessee: ____________________________________________________________
Lessor: ____________________________________________________________
Date Lease Signed: _____________________________________________________
Term of Lease: ______________________________________________ Months
Address of Premises:____ Avalon Ridge Parkway, Norcross,
Gwinnett County, Georgia
Suite Number: _________________, containing approximately
_________________ square feet
Commencement Date: _______________________________________________
Termination Date: _______________________________________________
The above described Premises are accepted by Lessee as suitable for the
purposes for which they were let. The above described lease term commences and
expires on the dates set forth above. Lessee acknowledges that it has received
from Lessor __ number of keys to the Premises. It is understood that there is a
punch list which will be completed after move-in and will be an exhibit to the
Tenant Estoppel Certificate.
LESSEE:
______________________________
(Type Name of Lessee)
By:___________________________
(Signature)
Type Name and Title:
______________________________
Date of Execution by Lessee:
______________________________
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
1. SIGN DISPLAY. Lessor will provide at Lessor's expense signage for the
------------
Premises. Such signage will be coordinated throughout the park for uniformity
and attractiveness. No sign, tag, label, picture, advertisement, or notice
shall be displayed, distributed, inscribed, painted, or affixed by Lessee on any
part of the outside or inside of the Building or of the Premises without the
prior written consent of Lessor.
2. DRIVES AND PARKING AREAS. All parking shall be within the property
------------------------
boundaries and within marked parking spaces. There should be no on-street
parking and at no time shall any lessee obstruct drives and loading areas
intended for the use of all lessees. The drives and parking areas are for the
joint and nonexclusive use of Lessor's lessees, and their agents, customers, and
invitees, unless specifically marked. In the event Lessee, its agents,
customers and/or invitees use a disproportionate portion of the parking, Lessor
shall have the right to restrict Lessee, its agents, customers and/or invitees
to certain parking areas. Lessee shall not permit any fleet trucks to park
overnight in the Building's parking areas.
3. STORAGE AND LOADING AREAS. Unless specifically approved by Lessor in
-------------------------
writing, no materials, supplies, or equipment shall be stored anywhere except
inside the Premises. Trash receptacles may not be placed in the service areas
except by Lessor. If Lessor does not supply trash receptacles, Lessee shall
furnish its own receptacles, and shall place such receptacles in a location
designated by Lessor.
4. LOCKS. No additional locks, other than Landlord approved entry
-----
systems, shall be placed on the doors of the Premises by Lessee nor shall any
existing locks be changed unless Lessor is immediately furnished with two keys
thereto. Lessor will, without charge, furnish Lessee with two keys for each
lock on the entrance doors when Lessee assumes possession, with the
understanding that at the termination or expiration of the term of the Lease
the keys shall be returned.
5. CONTRACTORS AND SERVICE MAINTENANCE. Lessee will refer all
-----------------------------------
contractors, contractor's representatives, and installation technicians
rendering any service on or to the Premises for Lessee to Lessor for its
approval and supervision before performance of any service. This provision
shall apply to all work performed in the Building, including, but not limited
to, installation of electrical devices and attachments and installations of any
nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment, or
any other physical portion of the Building.
6. LODGING. No Lessee shall at any time occupy any part of the Building
-------
as sleeping or lodging quarters.
<PAGE>
7. REGULATION OF OPERATION AND USE. Lessee shall not place, install, or
-------------------------------
operate on the Premises or in any part of Building, any engine, stove or
machinery, or conduct mechanical operations or cook thereon or therein, or
place or use in or about the Premises any explosives, gasoline, kerosene, oil,
acids, caustics, or any other flammable, explosive or hazardous material without
the prior written consent of Lessor. The foregoing shall not prohibit the use
of microwave ovens.
8. WINDOW COVERINGS. Windows facing the Building exterior shall at all
----------------
times be wholly clear and uncovered (except for such blinds or curtains or other
window coverings Lessor may provide or approve) so that a full unobstructed view
of the interior of the Premises may be had from outside the Building.
9. MODIFICATIONS. Lessor shall have the right from time to time to
-------------
modify, add to or delete any of these Rules and Regulations at Lessor's
reasonable discretion, provided that any changes are uniformly applied to all
lessees, and do not materially interfere with the conduct of Lessee's business
at the Premises.
2
<PAGE>
Avalon Ridge Building Standard Finishes
for Wire and Cable Specialties
Carpet Cambridge 26 02 Level Loop
Base Roppe 4" cove
VCT Tarkett 1/8" Exelon
Paint Duron Flat Latex
Ceiling Tile Armstrong 707 2x4
Doors 3 degrees x 7 degrees Birch veneer
Hardware PDQ Lever passage sets
Toilet American Olean Tank Style
Lighting 2x4 Acrylic Lens office 1 per 80/sf
Lighting 8' Strip lights at 40 foot candles 3' AFF
EXHIBIT "E"
27
<PAGE>
AVALON RIDGE SITE 12
--------------------
93,333 square foot Office/Distribution building with the following features:
* Tilt up construction
* Glass store front
* Minimum bay sizes of 6,600 square feet;
* Office: build to suit
* 40' x 40' column spacing
* One dock door per bay with a knock out for one additional door
* Optional drive in ramps
* Minimum clear height of 24' (average)
* Fully sprinklered
* Underground utilities
* The attached rendering substantially reflects the building
(SEE EXHIBIT G).
EXHIBIT "F"
28
<PAGE>
EXHIBIT G
[Photograph]
29
<PAGE>
EXHIBIT 10.13
MULTI-TENANT INDUSTRIAL GROSS LEASE (BASE YEAR)
-----------------------------------------------
Effective Date: October 24, 1995
(The date set forth below Landlord's signature.)
<TABLE>
<CAPTION>
BASIC LEASE INFORMATION
-----------------------
<S> <C>
Landlord: CATELLUS DEVELOPMENT CORPORATION,
a Delaware corporation
Landlord's Address 201 Mission Street
For Notice: San Francisco, CA 94105
Attn: Asset Management
Telephone: (415) 974-4500
Fax: (415) 974-4502
Landlord's Address Dept. #1918
For Payment of Rent: P.O. Box 61000
San Francisco, CA 94161-1918
Tenant: WIRE AND CABLE SPECIALTIES, INC.
a Georgia corporation
Tenant's Address 5855 Peachtree Corners East
For Notice: Norcross, GA 30092
Attn: Paul Monahan, III
Telephone: (404) 449-0207
Fax: (404) 449-5755
Project: Livermore Valley Business Park
Building: Building B
Premises: Approximately 13,824 rentable square feet as shown
in Exhibit A.
Premises Address:
Street: 6757 Las Positas Road, Unit B
City and State: Livermore, CA 94550
Company Parcel No.: CA0010526
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
Term: Sixty (60) months
Estimated
Commencement March 1, 1996
Date:
Base Rent Per Month: Five Thousand Eight Hundred Six and 08/100 Dollars
($5,806.08)
Tenant's Share: Eighteen percent (18%)
Base Year: The calendar year 1996
Security Deposit: Six Thousand Eighty-Two and 56/100 Dollars
($6,082.56)
Broker: Michael Lloyd - Colliers Parrish International
Lease Year: Shall refer to each three hundred sixty-five (365)
day period during the Term commencing on the
Commencement Date and on each anniversary thereof.
Parking Spaces: No exclusive parking spaces
Permitted Uses: Warehousing and distribution of wire and cable
products and all legal related office uses and no
other uses shall be permitted without the prior
written consent of Landlord
</TABLE>
EXHIBITS
A - Premises
B - Work Letter
C - Commencement Date Memorandum
D - Prohibited Uses
E - Rules and Regulations
F - Tenant Estoppel
The Basic Lease Information set forth above and the Exhibits attached
hereto are incorporated into and made a part of the following Lease. Each
reference in this Lease to any of the Basic Lease Information shall mean the
respective information above and shall be construed to incorporate all of the
terms provided under the particular Lease paragraph pertaining to such
information. In the event of any conflict between the Basic Lease Information
and the provisions of the Lease, the latter shall control.
(ii)
<PAGE>
LANDLORD (____________) AND TENANT (____________) AGREE.
initial initial
(iii)
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. PREMISES................................................................ 6
--------
1.1 Premises.......................................................... 6
--------
1.2 Common Area....................................................... 6
-----------
1.3 Reserved Rights................................................... 6
---------------
2. TERM.................................................................... 6
----
2.1 Commencement Date................................................. 6
-----------------
2.2 Possession........................................................ 7
----------
2.3 Early Entry....................................................... 7
-----------
3. RENT.................................................................... 7
----
3.1 Rent.............................................................. 7
----
3.2 Late Charge and Interest.......................................... 7
------------------------
3.3 Security Deposit.................................................. 8
----------------
3.4 Scheduled Base Rent Increases..................................... 8
-----------------------------
4. UTILITIES............................................................... 8
---------
5. TAXES................................................................... 8
-----
5.1 Increase in Real Propertv Taxes................................... 8
-------------------------------
5.2 Definition of Real Property Taxes................................. 9
---------------------------------
5.3 Personal Property Taxes........................................... 9
-----------------------
6. OPERATING EXPENSES...................................................... 9
------------------
6.1 Increase in Operating Expenses.................................... 9
------------------------------
6.2 Definition of Operating Expenses.................................. 9
--------------------------------
7. ESTIMATED EXPENSES......................................................10
------------------
7.1 Payment...........................................................10
-------
7.2 Adjustment........................................................10
----------
8. INSURANCE...............................................................11
---------
8.1 Landlord..........................................................11
--------
8.2 Tenant............................................................11
------
8.2.1 Commercial General Liability Insurance (Occurrence
--------------------------------------------------
Form)....................................................11
-----
8.2.2 Automobile Liability Insurance............................11
------------------------------
8.2.3 Workers' Compensation and Employer's Liability
----------------------------------------------
Insurance................................................11
---------
8.2.4 Property Insurance........................................12
-------------------
8.3 General............................................................12
-------
8.3.1 Insurance Companies.......................................12
-------------------
</TABLE>
(iv)
<PAGE>
<TABLE>
<S> <C> <C>
8.3.2 Certificates of Insurance.................................12
-------------------------
8.3.3 Additional Insureds.......................................12
-------------------
8.3.4 Primary Coverage..........................................12
----------------
8.3.5 Umbrella/Excess Insurance.................................12
-------------------------
8.3.6 Waiver of Subrogation.....................................12
---------------------
8.3.7 Notification of Incidents.................................13
-------------------------
8.4 Indemnity.........................................................13
---------
8.5 Exemption of Landlord from Liability..............................13
-----------
9. REPAIRS AND MAINTENANCE.................................................14
-----------------------
9.1 Tenant............................................................14
------
9.2 Landlord..........................................................14
--------
10. ALTERATIONS.............................................................14
-----------
10.1 Trade Fixtures; Alterations.......................................14
---------------------------
10.2 Damage; Removal...................................................15
---------------
10.3 Liens.............................................................15
-----
11. USE.....................................................................15
---
12. ENVIRONMENTAL MATTERS...................................................16
---------------------
12.1 Definitions.......................................................16
-----------
12.1.1 Environmental Condition...................................16
-----------------------
12.1.2 Environmental Laws........................................16
------------------
12.1.3 Hazardous Materials.......................................16
-------------------
12.2 Environmental Compliance..........................................17
------------------------
12.3 Indemnification...................................................17
---------------
13. DAMAGE AND DESTRUCTION..................................................18
----------------------
13.1 Casualty..........................................................18
--------
13.1.1 Less Than 90 Days.........................................18
-----------------
13.1.2 Greater Than 90 Days......................................18
--------------------
13.1.3 Greater Than 120 Days.....................................19
---------------------
13.2 Tenant's Fault....................................................19
--------------
13.3 Uninsured Casualty................................................19
------------------
13.4 Waiver............................................................20
------
14. EMINENT DOMAIN..........................................................20
--------------
14.1 Total Condemnation................................................20
------------------
14.2 Partial Condemnation..............................................20
--------------------
14.3 Award.............................................................21
-----
14.4 Temporary Condemnation............................................21
----------------------
</TABLE>
(v)
<PAGE>
<TABLE>
<S> <C> <C>
15. DEFAULT.................................................................21
-------
15.1 Events of Defaults................................................21
------------------
15.2 Remedies..........................................................22
--------
15.2.1 Termination...............................................22
-----------
15.2.2 Continuation..............................................23
------------
15.2.3 Defaults..................................................24
--------
15.3 Cumulative........................................................24
----------
16. ASSIGNMENT AND SUBLETTING...............................................24
-------------------------
17. ESTOPPEL. SUBORDINATION AND ATTORNMENT..................................25
--------------------------------------
17.1 Estoppel..........................................................25
--------
17.2 Subordination.....................................................25
-------------
17.3 Attornment........................................................25
----------
18. MISCELLANEOUS...........................................................26
-------------
18.1 General...........................................................26
-------
18.1.1 Entire Agreement..........................................26
----------------
18.1.2 Time of Essence...........................................26
---------------
18.1.3 Attorneys' Fees...........................................26
---------------
18.1.4 Severability..............................................26
------------
18.1.5 Law.......................................................26
---
18.1.6 No Option.................................................26
---------
18.1.7 Successors and Assigns....................................26
----------------------
18.1.8 Third Party Beneficiaries.................................26
-------------------------
18.1.9 Memorandum of Lease.......................................26
-------------------
18.1.10 Agency, Partnership or Joint Venture......................26
------------------------------------
18.1.11 Merger....................................................27
------
18.1.12 Headings..................................................27
--------
18.2 Signs.............................................................27
-----
18.3 Waiver............................................................27
------
18.4 Financial Statements..............................................27
--------------------
18.5 Limitation of Liability...........................................27
-----------------------
18.6 Notices...........................................................28
-------
18.7 Brokerage Commission..............................................28
--------------------
18.8 Authorization.....................................................28
-------------
18.9 Holding Over; Surrender...........................................28
-----------------------
18.9.1 Holding Over..............................................28
------------
18.9.2 Surrender.................................................28
---------
18.10 Joint and Several.................................................29
-----------------
18.11 Covenants and Conditions..........................................29
------------------------
18.12 Addenda...........................................................29
-------
</TABLE>
(vi)
<PAGE>
1. PREMISES.
--------
1.1 Premises. Landlord hereby leases to Tenant the Premises as shown on
--------
Exhibit A attached hereto, but excluding, the Common Area and any other portion
-
of the Project.
1.2 Common Area. Tenant may, subject to rules made by Landlord, use the
-----------
following areas ("Common Area") in common with Landlord and other tenants of the
Project: refuse facilities, landscaped areas, driveways necessary for access to
the Premises, parking areas and other common facilities designated by Landlord
from time to time for the common use of all tenants of the Project.
1.3 Reserved Rights. Landlord reserves the right to enter the Premises
---------------
upon reasonable notice to Tenant (except in case of an emergency) and/or to
undertake the following: inspect the Premises and/or the performance by Tenant
of the terms and conditions hereof; change boundary lines of the Common Areas;
install, use, maintain, repair, alter, relocate or replace any Common Area and
any pipes, ducts, conduits, wires, equipment and other facilities in the
Building; grant easements on the Project, dedicate for public use portions
thereof and record covenants, conditions and restrictions ("CC&R's") affecting
the Project and/or amendments to existing CC&R's which do not unreasonably
interfere with Tenant's use of the Premises; change the name of the Building or
Project; affix reasonable signs and displays; and, during the last nine (9)
months of the Term, show the Premises to prospective tenants.
2. TERM.
----
2.1 Commencement Date. The Term of the Lease shall commence
-----------------
("Commencement Date") on the first day of the first full month following the
date on which the Premises are Substantially Complete (as hereinafter defined)
except that if Substantial Completion occurs on the first day of a month, that
date shall be the Commencement Date, and the Lease shall continue in full force
and effect for the period of time specified as the Term or until this Lease is
terminated as otherwise provided herein. The Premises shall be deemed to be
"Substantially Complete" on the earliest of the date on which: (1) Landlord
files or causes to be filed with the City in which the Premises are located (if
required) and delivers to Tenant an architect's notice of substantial
completion, or similar written notice that the Premises are substantially
complete, (2) Tenant commences business operations in the Premises, or (3) a
certificate of occupancy is issued for the Premises. Landlord shall arrange for
the construction of certain Tenant Improvements (as defined in the Work Letter),
if any, in accordance with and subject to the terms of the Work Letter attached
hereto as Exhibit B. Tenant shall, upon demand after delivery of the Premises
---------
to Tenant, execute and deliver to Landlord a Commencement Date Memorandum in the
form attached hereto as Exhibit C acknowledging (i) the Commencement Date, (ii)
---------
the final square footage of the Premises, and (iii) Tenant's acceptance of the
Premises. If the Premises are not Substantially Complete on the Estimated
Commencement Date, this Lease shall remain in effect, Landlord shall not be
subject to any liability, and the Commencement Date shall be delayed until the
date the Premises are Substantially Complete. Tenant acknowledges that it has
1.
<PAGE>
had an adequate opportunity to inspect and investigate all matters relevant to
the Premises, using experts and other qualified professionals, and that Tenant
has determined that the Premises are acceptable for Tenant's use. Tenant further
acknowledges that neither Landlord nor any broker or agent has made any
representations or warranties in connection with the physical condition of the
Premises or their fitness for Tenant's use upon which Tenant has relied directly
or indirectly for any purpose.
2.2 Possession. Tenant's possession of the Premises during the period of
----------
time, if any, from the date on which Landlord tenders possession of the Premises
to Tenant in a Substantially Completed condition (the "Possession Date") to the
Commencement Date, shall be subject to all the provisions of this Lease and
shall not advance the expiration date. Rent shall be paid for such period at the
rate stated in the Basic Lease Information, prorated on the basis of a thirty
(30) day month, and shall be due and payable to Landlord on or before the
Commencement Date. Tenant shall acknowledge in writing the Possession Date in
the form attached hereto as Exhibit C.
---------
2.3 Early Entry. Tenant may, at Tenant's sole risk, enter the Premises
-----------
prior to the date of Substantial Completion of the Premises solely to install
trade fixtures and equipment; provided, however, that (a) Tenant's early entry
shall not interfere with the construction of any of Landlord's improvements or
cause labor difficulties; and (b) Tenant shall comply with all provisions of the
Lease other than the obligation to pay Base Rent.
3. RENT.
----
3.1 Rent. Tenant shall pay to Landlord, at Landlord's Address for
-----
Payment of Rent designated in the Basic Lease Information, or at such other
address as Landlord may from time to time designate in writing to Tenant for the
payment of Rent, the Base Rent, without notice, demand, offset or deduction, on
the first day of each calendar month. Upon the execution of this Lease, Tenant
shall pay to Landlord the first month's Base Rent. If the Term ends on a date
other than the last day of a month, Base Rent shall be prorated on a per diem
basis with respect to the portion of the last month within the Term. All sums
other than Base Rent which Tenant is obligated to pay under this Lease shall be
deemed to be additional rent due hereunder, whether or not such sums are
designated "additional rent." The term "Rent" means the Base Rent and all
additional rent payable hereunder.
3.2 Late Charge and Interest. The late payment of any Rent will cause
-------------------------
Landlord to incur additional costs, including administration and collection
costs and processing and accounting expenses and increased debt service
("Delinquency Costs"). If Landlord has not received any installment of Rent
within five (5) business days after such amount is due, Tenant shall pay a late
charge of ten percent (10%) of the delinquent amount, which is agreed to
represent a reasonable estimate of the Delinquency Costs incurred by Landlord.
In addition, all such delinquent amounts shall bear interest from the date such
amount was due until paid in full at a rate per annum ("Applicable Interest
Rate") equal to the lesser of (a) the maximum interest rate permitted by law or
(b) five percent (5%) above the rate publicly announced by Bank of America, N.A.
(or if Bank of
2.
<PAGE>
America, N.A. ceases to exist, the largest bank then headquartered in the
State of California) ("Bank") as its "Reference Rate." If the use of the
announced Reference Rate is discontinued by the Bank, then the term Reference
Rate shall mean the announced rate charged by the Bank which is, from time to
time, substituted for the Reference Rate. Landlord and Tenant recognize that the
damage which Landlord shall suffer as a result of Tenant's failure to pay such
amounts is difficult to ascertain and said late charge and interest are the best
estimate of the damage which Landlord shall suffer in the event of late payment.
If a late charge becomes payable for any three (3) installments of Rent within
any twelve (12) month period, then the Rent shall automatically become due and
payable quarterly in advance.
3.3 Security Deposit. Upon occupancy of the Premises, Tenant shall pay
----------------
to Landlord the Security Deposit. The Security Deposit shall secure the full and
faithful performance of each provision of this Lease to be performed by Tenant.
Landlord shall not be required to pay interest on the Security Deposit or to
keep the Security Deposit separate from Landlord's own funds. If Tenant fails to
perform fully and timely all or any of Tenant's covenants and obligations
hereunder, Landlord may, but without obligation, apply all or any portion of the
Security Deposit toward fulfillment of Tenant's unperformed covenants and/or
obligations. If Landlord does so apply any portion of the Security Deposit,
Tenant shall immediately pay Landlord sufficient cash to restore the Security
Deposit to the amount of the then current Base Rent per month. Upon any increase
in Base Rent, Landlord may require the Security Deposit to be increased by the
amount of the increase in Base Rent per month. After Tenant vacates the
Premises, upon the expiration or sooner termination of this Lease, if Tenant is
not then in default, Landlord shall return to Tenant any unapplied balance of
the Security Deposit.
3.4 Scheduled Base Rent Increases. Base Rent shall automatically and
-----------------------------
without notice be increased in accordance with the following, schedule:
<TABLE>
<CAPTION>
Lease Month Increased Base Rent
----------- -------------------
<S> <C>
31 - 60 Six Thousand Eighty-Two and 56/100 Dollars
($6,082.56)
</TABLE>
4. UTILITIES. Tenant shall pay all charges for heat, water, gas, electricity,
---------
telephone and any other utilities used on or provided to the Premises. Landlord
shall not be liable to Tenant for interruption in or curtailment of any utility
service, nor shall any such interruption or curtailment constitute constructive
eviction or grounds for rental abatement. In the event the Premises is not
separately metered, Tenant shall have the option, subject to Landlord's prior
written consent and the terms of this Lease, to cause the Premises to be
separately metered at Tenant's cost and expense. If Tenant does not elect to
cause the Premises to be separately metered, Tenant shall pay a reasonable
proration of utilities, as determined by Landlord.
5. TAXES.
-----
3.
<PAGE>
5.1 Increase in Real Propertv Taxes. Tenant shall pay to Landlord
-------------------------------
Tenant's Share of the Increase in Real Property Taxes. The "Increase in Real
Property Taxes" is the increase in Real Property Taxes in any calendar year over
the Real Property Taxes in the Base Year.
5.2 Definition of Real Property Taxes. "Real Property Taxes" shall be
---------------------------------
the sum of the following: all real property taxes, possessory-interest taxes,
business or license taxes or fees, service payments in lieu of such taxes or
fees, annual or periodic license or use fees, excises, transit and traffic
charges, housing fund assessments, open space charges, childcare fees, school,
sewer and parking fees, public infrastructure improvement assessments or any
other assessments, levies, fees, exactions or charges, general and special,
ordinary and extraordinary, unforeseen as well as foreseen (including fees
"in-lieu" of any such tax or assessment) which are assessed, levied, charged,
conferred or imposed by any public authority upon the Project (or any real
property comprising any portion thereof) or its operations, together with all
taxes, assessments or other fees imposed by any public authority upon or
measured by any Rent or other charges payable hereunder, including any gross
receipts tax or excise tax levied by any governmental authority with respect to
receipt of rental income, or upon, with respect to or by reason of the
development, possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises or any portion
thereof, or documentary transfer taxes upon this transaction or any document to
which Tenant is a party creating or transferring an interest in the Premises,
together with any tax imposed in substitution, partially or totally, of any tax
previously included within the aforesaid definition or any additional tax the
nature of which was previously included within the aforesaid definition,
together with the costs and expenses (including attorneys and expert witness
fees and costs) of challenging any of the foregoing or seeking the reduction in
or abatement, redemption or return of any of the foregoing, but only to the
extent of any such reduction, abatement, redemption or return. Nothing contained
in this Lease shall require Tenant to pay any franchise, corporate, estate or
inheritance tax of Landlord, or any income, profits or revenue tax or charge
upon the net income of Landlord.
5.3 Personal Property Taxes. Prior to delinquency, Tenant shall pay all
-----------------------
taxes and assessments levied upon trade fixtures, alterations, additions,
improvements, inventories and other personal property located and/or installed
on the Premises by Tenant; and Tenant shall provide Landlord copies of receipts
for payment of all such taxes and assessments. To the extent any such taxes are
not separately assessed or billed to Tenant, Tenant shall pay the amount thereof
as invoiced by Landlord.
6. OPERATING EXPENSES.
------------------
6.1 Increase in Operating Expenses. Tenant shall pay to Landlord
------------------------------
Tenant's Share of the Increase in Operating Expenses. The "Increase in Operating
Expenses" is the increase in Operating Expenses in any calendar year over the
Operating Expenses in the Base Year.
6.2 Definition of Operating Expenses. "Operating Expenses" shall include
--------------------------------
all reasonable and necessary expenses incurred by Landlord in the operation,
maintenance, repair
4.
<PAGE>
and management of the Common Area and the Building, including, but not limited
to, (a) non-structural repairs to and maintenance of the roof, skylights and
exterior walls of the Building; (b) repair, maintenance, utility costs and
landscaping of the Common Area, including any and all costs of maintenance of
common driveways, walkways, landscaping, and other costs which are allocable to
the real property of which the Premises are a part under the terms of any CC&R's
affecting the real property; (c) insurance deductibles and premiums relating to
the insurance maintained by Landlord with respect to the Building and Common
Area (if Landlord elects to self insure, for the purposes of this provision
insurance deductibles shall not exceed reasonable and customary deductibles or
deemed deductibles for such self-insurance programs); (d) maintenance contracts
for heating, ventilation and air-conditioning (HVAC) systems and elevators, if
any; and (e) capital improvements made to or capital assets acquired for the
Building or Common Area after the Commencement Date that reduce Operating
Expenses or are reasonably necessary for the health and safety of the occupants
of the Building or are required under any governmental law or regulation, which
capital costs, or an allocable portion thereof, shall be amortized over the
period determined by Landlord, together with interest on the unamortized balance
at the Applicable Interest Rate. Operating Expenses shall also include an
administrative fee to Landlord for accounting and project management services
relating to the Building and Common Area in an amount equal to ten percent (10%)
of the sum of Operating Expenses (other than the administrative fee) and Real
Property Taxes. Operating Expenses shall not include (i) replacement of or
structural repairs to the roof or the exterior walls; (ii) repairs to the extent
covered by insurance proceeds, or paid by Tenant or other third parties; or
(iii) alterations solely attributable to tenants of the Building other than
Tenant.
7. ESTIMATED EXPENSES.
-------------------
7.1 Payment. "Estimated Expenses" for any particular year shall mean
-------
Landlord's estimate of Increases in Operating Expenses and Real Property Taxes
(collectively referred to as "Increases") for a calendar year. On or about the
last month of each calendar year, or as soon thereafter as practicable, Landlord
shall give Tenant notice of the Estimated Expenses for the ensuing calendar
year. Tenant shall pay Tenant's Share of the Estimated Expenses with
installments of Base Rent in monthly installments of one-twelfth (1/12th)
thereof on the first day of each calendar month during such year. If at any time
Landlord determines that Operating Expenses and Real Property Taxes are
projected to vary from the then Estimated Expenses by more than ten percent
(10%), Landlord may, by notice to Tenant, revise such Estimated Expenses, and
Tenant's monthly installments for the remainder of such year shall be adjusted
so that by the end of such calendar year Tenant has paid to Landlord Tenant's
Share of the revised Estimated Expenses for such year.
7.2 Adjustment. "Operating Expenses and Real Property Taxes Adjustment"
-----------
(or "Adjustment") shall mean the difference between Tenant's Share of Estimated
Expenses and Tenant's Share of Increases for any calendar year. After the end of
each calendar year, Landlord shall deliver to Tenant a statement of Tenant's
Share of Increases for such calendar year, accompanied by a computation of the
Adjustment. If Tenant's payments are less than Tenant's
5.
<PAGE>
Share of Increases, then Tenant shall pay the difference within twenty (20) days
after receipt of such statement. Tenant's obligation to pay such amount shall
survive the termination of this Lease. If Tenant's payments exceed Tenant's
Share of Increases, then (provided that Tenant is not in default), Landlord
shall credit such excess amount to future installments of Tenant's Share of
Increases for the next calendar year. If Tenant is in default, Landlord may, but
shall not be required to, credit such amount to Rent arrearages.
8. INSURANCE.
---------
8.1 Landlord. Landlord shall maintain insurance insuring the Building
--------
against fire and extended coverage (including, if Landlord elects, "all risk"
coverage, earthquake/volcanic action, flood and/or surface water insurance) for
the full replacement cost of the Building, with deductibles and the form and
endorsements of such coverage as selected by Landlord; provided, Landlord
reserves the right to self-insure with respect to any such coverage. Landlord
may also carry such other insurance as Landlord may deem prudent or advisable
including, without limitation, liability insurance in such amounts and on such
terms as Landlord shall determine. Such insurance is to protect, and to be for
the benefit of, Landlord.
8.2 Tenant. Tenant shall, at Tenant's expense, obtain and keep in force
-------
at all times the following insurance:
8.2.1 Commercial General Liability Insurance (Occurrence Form). A
---------------------------------------------------------
policy of commercial liability insurance (occurrence form) having a combined
single limit of not less than One Million Dollars ($1,000,000) per occurrence
and Two Million Dollars ($2,000,000) aggregate per location if Tenant has
multiple locations, providing coverage for, among other things, blanket
contractual liability, premises, products/completed operations and personal and
advertising injury coverage, with deletion of (a) the exclusion for operations
within fifty (50) feet of a railroad track (railroad protective liability), if
applicable, and (b) the exclusion for explosion, collapse or underground hazard,
if applicable, and, if necessary, Tenant shall provide for restoration of the
aggregate limit;
8.2.2 Automobile Liability Insurance. Comprehensive automobile
-------------------------------
liability insurance having a combined single limit of not less than One Million
Dollars ($1,000,000) per occurrence and insuring Tenant against liability for
claims arising out of ownership, maintenance, or use of any owned, hired or non-
owned automobiles;
8.2.3 Workers' Compensation and Employer's Liability Insurance.
---------------------------------------------------------
Workers' compensation insurance having limits not less than those required by
state statute and federal statute, if applicable, and covering all persons
employed by Tenant in the conduct of its operations on the Premises (including
the all states endorsement and, if applicable, the volunteers endorsement),
together with employer's liability insurance coverage in the amount of at least
Five Hundred Thousand ($500,000); and
6.
<PAGE>
8.2.4 Property Insurance. "All risk" property insurance including
------------------
boiler and machinery comprehensive form, if applicable, covering damage to or
loss of any of Tenant's personal property, fixtures and equipment, including
electronic data processing equipment, of Tenant (collectively "Tenant's
Property") (and coverage for the full replacement cost thereof including,
business interruption of Tenant), together with, if the property of Tenant's
invitees is to be kept in the Premises, warehouser's legal liability or bailee
customers insurance for the full replacement cost of the property belonging to
invitees and located in the Premises.
8.3 General.
-------
8.3.1 Insurance Companies. Insurance required to be maintained by
-------------------
Tenant shall be written by companies licensed to do business in the state in
which the Premises are located and having a "General Policyholders Rating" of at
least A VIII (or such higher rating as may be required by a lender having a lien
on the Premises) as set forth in the most current issue of "Best's Insurance
Guide."
8.3.2 Certificates of Insurance. Tenant shall deliver to Landlord
-------------------------
certificates of insurance for all insurance required to be maintained by Tenant,
in the form of the ACORD standard certificate of insurance, no later than seven
(7) days prior to the date of possession of the Premises. Tenant shall, at least
ten (10) days prior to expiration of the policy, furnish Landlord with
certificates of renewal or "binders" thereof. Each certificate shall expressly
provide that such policies shall not be cancelable or otherwise subject to
modification except after sixty (60) days prior written notice to the parties
named as additional insureds in this Lease (except in the case of cancellation
for nonpayment of premium in which case cancellation shall not take effect until
at least (10) days' notice has been given to the parties named as additional
insureds). If Tenant fails to maintain any insurance required in this Lease,
Tenant shall be liable for all losses and cost resulting from said failure.
8.3.3 Additional Insureds. Landlord and any property management
-------------------
company of Landlord for the Premises shall be named as additional insureds on
the policy required by Section 8.2. 1. The policies required under Section 8.2.1
shall provide for severability of interest. An additional insureds endorsement,
naming Landlord and any property management company of Landlord, if applicable,
as additional insured(s), shall be attached to the certificate of insurance.
8.3.4 Primary Coverage. All insurance to be maintained by Tenant
----------------
shall, except for workers' compensation and employer's liability insurance, be
primary, without right of contribution from insurance of Landlord.
8.3.5 Umbrella/Excess Insurance. Any umbrella liability policy or
--------------------------
excess liability policy (which shall be in "following form") shall provide that
if the underlying aggregate is exhausted, the excess coverage will drop down as
primary insurance. The limits of insurance maintained by Tenant shall not limit
Tenant's liability under this Lease.
7.
<PAGE>
8.3.6 Waiver of Subrogation. Tenant waives any right to recover
----------------------
against Landlord for claims for damages to Tenant's Property whether or not
covered by insurance. This provision is intended to waive fully, and for the
benefit of Landlord, any rights and/or claims which might give rise to a right
of subrogation in favor of any insurance carrier. The coverage obtained by
Tenant pursuant to this Lease shall include, without limitation, a waiver of
subrogation endorsement attached to the certificate of insurance.
8.3.7 Notification of Incidents. Tenant shall notify Landlord
-------------------------
within twenty-four (24) hours after the occurrence of any accidents or incidents
in the Premises, the Building or Common Areas which could give rise to a claim
under any of the insurance policies required under this Section 8.
8.4 Indemnity. Tenant shall indemnify, protect, defend (by counsel
----------
acceptable to Landlord) and hold harmless Landlord and its partners, directors,
officers, employees, shareholders, lenders, agents, contractors and each of
their successors and assigns from and against any and all claims, judgments,
causes of action, damages, penalties, costs, liabilities, and expenses,
including all costs, attorneys' fees, expenses and liabilities incurred in the
defense of any such claim or any action or proceeding brought thereon, arising
at any time during or after the Term as a result (directly or indirectly) of or
in connection with (i) any default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, or (ii) Tenant's
use of the Premises, the conduct of Tenant's business or any activity, work or
things done, permitted or suffered by Tenant in or about the Premises, the
Building, the Common Area or other portions of the Project, except for claims
caused solely by Landlord's or Landlord's agent's negligent acts or omissions or
wilful misconduct. The obligations of Tenant under this Section 8.4 shall
survive the termination of this Lease with respect to any claims or liability
arising prior to such termination.
8.5 Exemption of Landlord from Liability. Tenant, as a material part of
the consideration to Landlord, hereby assumes all risk of damage to property
including, but not limited to, Tenant's fixtures, equipment, furniture and
alterations or injury to persons in, upon or about the Premises, the Building,
the Common Area or other portions of the Project arising from any cause, and
Tenant hereby waives all claims in respect thereof against Landlord, except such
claims as are caused solely by Landlord's gross negligence or wilful misconduct.
Tenant hereby agrees that Landlord shall not be liable for injury to Tenant's
business or any loss of income therefrom or for damage to the property of
Tenant, or injury to or death of Tenant, Tenant's employees, invitees,
customers, agents or contractors or any other person in or about the Premises,
the Building, the Common Area or the Project, whether such damage or injury is
caused by fire, steam, electricity, gas, water or rain, or from the breakage,
leakage or other defects of sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause, whether said damage
or injury results from conditions arising upon the Premises, upon other portions
of the Building, or from other sources or places, and regardless of whether the
cause of such damage or injury or the means of repairing the same is
inaccessible to Tenant, except damage or injury caused solely by Landlord's
gross negligence or wilful
8.
<PAGE>
misconduct. Landlord shall not be liable for any damages arising from any act or
neglect of any other tenant, if any, of the Building, or the Project or
Landlord's failure to enforce the terms of any agreements with parties other
than Tenant.
9. REPAIRS AND MAINTENANCE.
-----------------------
9.1 Tenant. Tenant shall keep and maintain the Premises, including
------
floors and floor coverings, interior plumbing, electrical wiring, fixtures and
equipment in good repair and in a clean and safe condition, and repair and/or
replace any and all of the foregoing in a good and workmanlike manner. Without
limiting the foregoing, Tenant shall, at Tenant's sole expense, (a) immediately
replace all broken glass in the Premises with glass equal to or in excess of the
specification and quality of the original glass; and (b) repair any area damaged
by Tenant, Tenant's agents, employees, invitees and visitors, including any
damage caused by any roof penetration, whether or not such roof penetration was
approved by Landlord.
9.2 Landlord. Landlord shall repair damage to structural portions of the
--------
Building; provided, if such damage is caused by an act or omission of Tenant,
then such repairs shall be at Tenant's sole expense. There shall be no abatement
of Rent during the performance of such work. As Landlord is required to maintain
certain insurance as provided in Section 8.1 above, Landlord shall not be liable
to Tenant for injury or damage that may result from any defect in the
construction or condition of the Premises, nor for any damage that may result
from interruption of Tenant's use of the Premises during any repairs by
Landlord. Tenant waives any right to repair the Premises, the Building and/or
the Common Area at the expense of Landlord under any applicable governmental
laws, ordinances, statutes, orders or regulations now or hereafter in effect
which might otherwise apply.
10. ALTERATIONS.
------------
10.1 Trade Fixtures; Alterations. Tenant may install necessary trade
----------------------------
fixtures, equipment and furniture in the Premises, provided that such items are
installed and are removable without structural or material damage to the
Premises, the Building, the Common Area or the Project. Tenant shall not
construct, nor allow to be constructed, any alterations or physical additions
in, about or to the Premises without obtaining the prior written consent of
Landlord, which consent shall be conditioned upon Tenant's compliance with all
laws, ordinances, regulations, codes and other governmental requirements and
with Landlord's reasonable requirements regarding construction of improvements
and alterations but such consent otherwise shall not be unreasonably withheld.
Tenant shall submit plans and specifications to Landlord with Tenant's request
for approval and shall reimburse Landlord for all costs which Landlord may incur
in connection with granting approval to Tenant for any such alterations and
additions, including any costs or expenses which Landlord may incur in electing
to have outside architects and engineers review said matters. Landlord's
approval of the plans, specifications and working drawings for Tenant's
alterations and additions shall create no responsibility or liability on the
part of Landlord for their completeness, design sufficiency or
9.
<PAGE>
compliance with all laws, rules and regulations of 00governmental agencies or
authorities. Tenant shall file a notice of completion after completion of such
work and provide Landlord with a copy thereof. Tenant shall provide Landlord
with a set of "as-built" drawings for any such work.
10.2 Damage; Removal. Tenant shall repair all damage to the Premises
---------------
and/or the Building caused by the installation or removal of Tenant's fixtures,
equipment, furniture and alterations. Upon the termination of this Lease, Tenant
shall remove any or all alterations, additions, improvements and partitions made
or installed by Tenant and restore the Premises to its condition existing prior
to the construction of any such items and perform any closure work,
investigation and environmental remedial work required by any Environmental Laws
(as defined in Article 12) or by any other applicable laws, ordinances,
regulations or permits by any governmental authority having jurisdiction;
provided, however, Landlord may permit, upon written notice to Tenant, any such
items designated by Landlord to remain on the Premises, in which event they
shall be and become the property of Landlord upon the termination of this Lease.
All such removals and restoration shall be accomplished in a good and
workmanlike manner so as not to cause any damage to the Premises, the Building,
the Common Area or the Project whatsoever and in strict accordance with all
applicable laws, regulations and government orders.
10.3 Liens. Tenant shall promptly pay and discharge all claims for labor
------
performed, supplies furnished and services rendered at the request of Tenant and
shall keep the Premises free of all mechanics' and materialmen's liens in
connection therewith. Tenant shall provide at least ten (10) days prior written
notice to Landlord before any labor is performed, supplies furnished or services
rendered on or at the Premises and Landlord shall have the right to post on the
Premises notices of non-responsibility. If any lien is filed, Tenant shall cause
such lien to be released and removed within ten (10) days after the date of
filing, and if Tenant fails to do so, Landlord may take such action as may be
necessary to remove such lien and Tenant shall pay Landlord such amounts
expended by Landlord together with interest thereon at the Applicable Interest
Rate from the date of expenditure.
11. USE.
---
The Premises shall be used only for the Permitted Uses set forth in the
Basic Lease Information and for no other uses. Tenant, at Tenant's expense,
shall comply with any CC&RS or supplements thereto recorded in any official or
public records with respect to the Project or any portion thereof and with all
laws, rules, orders, ordinances, directions, regulations and requirements of
federal, state, county and municipal authorities now in force or which may
hereafter be in force, which shall impose any duty upon Landlord or Tenant with
respect to the use, occupation or alteration of the Premises. Tenant shall be
responsible for obtaining any permit, business license, certificate of
occupancy, or other permits or licenses required by any Governmental agency
permitting Tenant's use or occupancy of the Premises. In no event shall the
Premises be used for any of the Prohibited Uses set forth on Exhibit D attached
---------
hereto.
10.
<PAGE>
Tenant shall comply with the rules and regulations attached hereto as Exhibit E,
---------
together with such additional rules and regulations as Landlord may from time to
time prescribe. Tenant shall not commit waste, overload the floors or structure
of the Building, subject the Premises, the Building, the Common Area or the
Project to any use which would damage the same or increase the risk of loss or
violate any insurance coverage, permit any unreasonable odors, smoke, dust, gas,
substances, noise or vibrations to emanate from the Premises, take any action
which would constitute a nuisance or would disturb, obstruct or endanger any
other tenants, take any action which would abrogate any warranties, or use or
allow the Premises to be used for any unlawful purpose. Tenant shall have the
right to use for its employees and invitees, on an unreserved basis, the number
of Parking Spaces indicated in the Basic Lease Information. Tenant shall not use
more than the number of spaces allocated to Tenant. Landlord shall not be
responsible for non-compliance by any other tenant or occupant with, or
Landlord's failure to enforce, any of the rules or regulations or any other
terms or provisions of such tenant's or occupant's lease. Tenant shall promptly
comply with the reasonable requirements of any board of fire insurance
underwriters or other similar body now or hereafter constituted. Tenant shall
not do any act which shall in any way encumber the title of Landlord in and to
the Premises, the Building or the Project.
12. ENVIRONMENTAL MATTERS.
---------------------
12.1 Definitions.
------------
12.1.1 Environmental Condition. "Environmental Condition" means
------------------------
any adverse condition relating to any Hazardous Materials or the environment,
including surface water, groundwater, drinking water supply, land, soil, surface
or subsurface strata or the ambient air and includes air, land and water
pollutants, noise, vibration, light and odors.
12.1.2 Environmental Laws. "Environmental Laws" means any and all
-------------------
federal, state or local environmental, health and/or safety-related laws,
regulations, standards, decisions of courts, ordinances, rules, codes, orders,
decrees, directives, guidelines, permits or permit conditions, currently
existing and as amended, enacted, issued or adopted in the future relating to
the environment or to any Hazardous Material (including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. (S)9601 et seq.)), which are or become applicable to Tenant, the
-------
Premises, the Building, the Common Area or the Project.
12.1.3 Hazardous Materials. "Hazardous Materials" means any
--------------------
chemical, substance, material, controlled substance, object, condition, waste,
living organism or combination thereof which is or may be hazardous to human
health or safety or to the environment (whether potentially injurious to persons
and property and whether potentially injurious by themselves or in combination
with other materials) due to its radioactivity, ignitability, corrosivity,
reactivity, explosivity, toxicity, carcinogenicity, mutagenicity, phytotoxicity,
infectiousness or other harmful or potentially harmful properties or effects,
11.
<PAGE>
including, without limitation, petroleum and petroleum products, asbestos,
radon, polychlorinated biphenyls (PCBs) and all of those chemicals, substances,
materials, controlled substances, objects, conditions, wastes, living organisms
or combinations thereof which are now or become in the future listed in the
United States Department of Transportation Hazardous Materials Table [49 C.F.R.
(S) 172.101 ], as amended from time to time, or listed, defined or regulated in
any manner by any Environmental Law.
12.2 Environmental Compliance. Tenant shall not cause nor permit, nor
------------------------
allow any of Tenant's employees, agents, customers, visitors, invitees,
licensees, contractors, assignees or subtenants (collectively, "Tenant's
Parties") to cause or permit any Hazardous Materials to be brought upon, stored,
manufactured, generated, blended, handled, recycled, treated, disposed or used
on, under or about the Premises, the Building, the Common Area or the Project,
except for routine office and janitorial supplies in usual and customary
quantities stored, used and disposed of in accordance with all applicable
Environmental Laws. Tenant and Tenant's Parties shall comply with all
Environmental Laws and promptly notify Landlord in writing of (a) the presence
of any Hazardous Materials, other than office and janitorial supplies as
permitted above, on the Premises; (b) any notices of violation or potential or
alleged violation of any Environmental Law which are received by Tenant from any
governmental agency; (c) any and all inquiry, investigation, enforcement, clean-
up, removal or other governmental or regulatory actions instituted or threatened
relating to Tenant or the Premises or the Project; and (d) all claims made or
threatened by any third-party against Tenant or the Premises or Project relating
to any Hazardous Materials. Landlord shall have the right, upon not less than
forty-eight (48) hours notice to Tenant, to enter upon and inspect the Premises
and to conduct tests, monitoring, and investigations. Such right of entry shall
include the right to test for soil and groundwater contamination. If such tests
indicate the presence of any Environmental Condition which occurred during the
Term of this Lease, or if Landlord has reasonable grounds to believe that Tenant
has disposed of or caused a release of Hazardous Materials at, on or about the
Premises or the Project, Tenant shall reimburse Landlord for the cost of
conducting such tests. In the event of any such Environmental Condition, Tenant
shall promptly take any and all steps necessary to rectify the same to
Landlord's reasonable satisfaction or shall, at Landlord's election, reimburse
Landlord, upon demand, for the cost to Landlord of performing rectifying work.
The reimbursement shall be paid to Landlord in advance of Landlord's performing
such work, based upon Landlord's reasonable estimate of the cost thereof, and
upon completion of such work by Landlord, Tenant shall pay to Landlord any
shortfall within thirty (30) days after Landlord bills Tenant therefor or
Landlord shall within thirty (30) days refund to Tenant any excess deposit, as
the case may be. In addition, Tenant shall comply, at its sole cost and expense,
with such recommendations contained in any environmental assessment as Landlord
may reasonably require including without limitation, any recommendations with
respect to precautions which should be taken with respect to activities on the
Premises, and additional testing and studies to detect the presence of Hazardous
Materials.
12.3 Indemnification. Tenant shall indemnify, protect, defend by counsel
----------------
acceptable to Landlord and hold harmless Landlord and its partners, directors,
officers, employees,
12.
<PAGE>
shareholders, lenders, agents, contractors and each of their respective
successors and assigns (individually and collectively, "Indemnitees") from and
against any and all claims, judgments, causes of action, damages, penalties,
fines, taxes, costs, liabilities, losses and expenses (including, without
limitation, reasonable attorneys' fees and court costs) or death or injury to
any person or damage to any property) whatsoever, arising from or in connection
with, or caused in whole or in part, directly or indirectly, by (a) Tenant
and/or any of Tenant's Parties' breach of any prohibition or provision of this
Section 12; (b) Tenant and/or any of Tenant's Parties' breach of any
Environmental Law, or (c) the presence of Hazardous Materials on, under or about
the Premises or other properties as a result (directly or indirectly) of
Tenant's and/or any of Tenant's Parties' activities, or failure to act, in
connection with the Premises. This indemnity shall include the cost of any
required or necessary repair, response, removal, cleanup or detoxification, and
the preparation and implementation of any closure, monitoring or other required
plans, whether such action is required or necessary prior to or following the
termination of this Lease. This indemnification is intended to constitute an
indemnity agreement within the meaning of Section 9607(e)(i) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. (S) 9607(e)(I)). Neither the written consent by Landlord to the presence
of Hazardous Materials on, under or about the Premises, nor the strict
compliance by Tenant with all Environmental Laws, shall excuse Tenant from
Tenant's obligation of indemnification pursuant hereto. Tenant's obligations
pursuant to the foregoing indemnity shall survive the termination of this Lease.
13. DAMAGE AND DESTRUCTION.
----------------------
13.1 Casualty. If the Premises or Building should be damaged or destroyed
--------
by fire or other casualty, Tenant shall give immediate written notice to
Landlord. Within thirty (30) days after receipt thereof, Landlord shall notify
Tenant whether the necessary repairs can reasonably be made: (a) within ninety
(90) days; (b) in more than ninety (90) days but in less than one hundred eighty
(180) days; or (c) in more than one hundred eighty (180) days from the date of
such notice.
13.1.1 Less Than 90 Days. If the Premises or Building should be
-----------------
damaged only to such extent that rebuilding or repairs can reasonably be
completed within ninety (90) days, this Lease shall not terminate and, provided
that insurance proceeds are available to fully repair the damage, Landlord shall
repair the Premises, except that Landlord shall not be required to rebuild,
repair or replace any alterations, partitions, fixtures, additions and other
improvements (collectively, "Improvements") which may have been placed in, on or
about the Premises by or for the benefit of Tenant. If Tenant is required to
vacate all or a portion of the Premises during Landlord's repair thereof, the
Base Rent payable hereunder shall be abated proportionately from the date Tenant
vacates all or a portion of the Premises only during the period the Premises are
unfit for occupancy.
13.1.2 Greater Than 90 Days. If the Premises or Building should be
---------------------
damaged only to such extent that rebuilding or repairs can reasonably be
completed in more than ninety
13.
<PAGE>
(90) days but in less than one hundred twenty (120) days, then Landlord shall
have the option of: (a) terminating the Lease effective upon the occurrence of
such damage, in which event the Rent shall be abated from the date Tenant
vacates the Premises; or (b) electing to repair the Premises, provided insurance
proceeds are available to fully repair the damage (except that Landlord shall
not be required to rebuild, repair or replace any part of the Improvements which
may have been placed in, on or about the Premises by or for the benefit of
Tenant). If Tenant is required to vacate all or a portion of the Premises during
Landlord's repair thereof, the Base Rent payable hereunder shall be abated
proportionately from the date Tenant vacates all or a portion of the Premises
only during the period the Premises are unfit for occupancy. In the event that
Landlord should fail to substantially complete such repairs within one hundred
twenty days (120) days after the date upon which Landlord is notified by Tenant
of the casualty (such period to be extended for delays caused by Tenant or
because of any items of Force Majeure, as defined below) and Tenant has not re-
occupied the Premises, Tenant shall have the right, as Tenant's exclusive
remedy, within ten (10) days after the expiration of such one hundred twenty
(120) day period, to terminate this Lease by delivering written notice to
Landlord as Tenant's exclusive remedy, whereupon all rights hereunder shall
cease and terminate thirty (30) days after Landlord's receipt of such notice.
13.1.3 Greater Than 120 Days. If the Premises or Building, should
----------------------
be so damaged that rebuilding or repairs cannot be completed within one hundred
twenty (120) days, either Landlord or Tenant may terminate this Lease by giving
written notice within ten (10) days after notice from Landlord specifying such
time period of repair; and this Lease shall terminate and the Rent shall be
abated from the date Tenant vacates the Premises. In the event that neither
party elects to terminate this Lease, Landlord shall promptly commence and
diligently prosecute to completion the repairs to the Premises, provided
insurance proceeds are available to repair the damage (except that Landlord
shall not be required to rebuild, repair or replace any Improvements which may
have been placed in, on or about the Premises by or for the benefit of Tenant).
If Tenant is required to vacate all or a portion of the Premises during
Landlord's repair thereof, the Base Rent payable hereunder shall be abated
proportionately from the date Tenant vacates all or a portion of the Premises
only during the period that the Premises are unfit for occupancy.
13.2 Tenant's Fault. If the Premises or any portion of the Building is
---------------
damaged resulting from the negligence or breach of this Lease by Tenant or any
of Tenant's Parties, Rent shall not be reduced during the repair of such damage
and Tenant shall be liable to Landlord for the cost of the repair caused thereby
to the extent such cost is not covered by insurance proceeds.
13.3 Uninsured Casualty. In the event that the Premises or any portion of
-------------------
the Building is damaged to the extent Tenant is unable to use the Premises and
such damage is not covered by insurance proceeds received by Landlord or in the
event that the holder of any indebtedness secured by the Premises requires that
the insurance proceeds be applied to such indebtedness, then Landlord shall have
the right at Landlord's option either (i) to repair such damage as soon as
14.
<PAGE>
reasonably possible at Landlord's expense, or (ii) to give written notice to
Tenant within thirty (30) days after the date of the occurrence of such damage
of Landlord's intention to terminate this Lease as of the date of the occurrence
of such damage. In the event that Landlord elects to repair such damage and
fails to substantially complete such repairs within one hundred eighty days
(180) days after the date upon which Landlord is notified by Tenant of the
casualty (such period to be extended for delays caused by Tenant or because of
any items of Force Majeure) and Tenant has not re-occupied the Premises, Tenant
shall have the right, as Tenant's exclusive remedy, within ten (10) days after
the expiration of such one hundred eighty (180) day period, to terminate this
Lease by delivering written notice to Landlord as Tenant's exclusive remedy,
whereupon all rights hereunder shall cease and terminate thirty (30) days after
Landlord's receipt of such notice if Landlord shall fail to substantially
complete such repairs within such thirty (30) day period.
In the event Landlord elects to terminate this Lease, Tenant shall have the
right within ten (10) days after receipt of such notice to give written notice
to Landlord of Tenant's intention to pay the cost of repair of such damage, in
which event this Lease shall continue in full force and effect, Landlord shall
make such repairs as soon as reasonably possible and Tenant shall reimburse
Landlord for such repairs within fifteen (15) days after receipt of an invoice
from Landlord. If Tenant does not give such notice within the ten (10) day
period, this Lease shall terminate automatically as of the date of the
occurrence of the damage.
As used herein, the term "Force Majeure" shall mean any delay in the obtaining
of any permits for and in the construction of improvements caused by any action,
inaction, order, ruling, moratorium, regulation, statute, condition or other
decision of any governmental agency having jurisdiction over any portion of the
Project, over the construction anticipated to occur thereon or over any uses
thereof or by fire, flood, inclement weather, strikes, lockouts or other labor
or industrial disturbance (whether or not on the part of agents or employees of
either party hereto engaged in the construction of the Premises), civil
disturbance, order of any government, court or regulatory body claiming
jurisdiction or otherwise, act of public enemy, war, riot, sabotage, blockade,
embargo, failure or inability to secure materials, supplies or labor through
ordinary sources by reason of shortages or priority or similar regulation, order
of any government or regulatory body, lightning, earthquake, storm, hurricane,
tornado, washout, explosion or any cause whatsoever beyond the reasonable
control of the party where performance is required, or any of its contractors or
other representatives, whether or not similar to any of the causes hereinabove
stated.
13.4 Waiver. With respect to any damage or destruction which Landlord is
-------
obligated to repair or may elect to repair, Tenant waives all rights to
terminate this Lease pursuant to rights otherwise presently or hereafter
accorded by law.
14. EMINENT DOMAIN.
--------------
15.
<PAGE>
14.1 Total Condemnation. If all of the Premises is condemned by eminent
-------------------
domain, inversely condemned or sold under threat of condemnation for any public
or quasi-public use or purpose ("Condemned"), this Lease shall terminate as of
the earlier of the date the condemning authority takes title to or possession of
the Premises, and Rent shall be adjusted to the date of termination.
14.2 Partial Condemnation. If any portion of the Premises or the Building
---------------------
is Condemned and such partial condemnation materially impairs Tenant's ability
to use the Premises for Tenant's business as reasonably determined by Landlord,
Landlord shall have the option of either (I) relocating Tenant to comparable
space within the Project or (ii) terminating this Lease as of the earlier of the
date title vests in the condemning authority or as of the date an order of
immediate possession is issued and Rent shall be adjusted to the date of
termination. If such partial condemnation does not materially impair Tenant's
ability to use the Premises for the business of Tenant, Landlord shall promptly
restore the Premises to the extent of any condemnation proceeds recovered by
Landlord, excluding the portion thereof lost in such condemnation, and this
Lease shall continue in full force and effect except that after the date of such
title vesting Rent shall be adjusted as reasonably determined by Landlord.
14.3 Award. If the Premises are wholly or partially Condemned, Landlord
------
shall be entitled to the entire award paid for such condemnation, and Tenant
waives any claim to any part of the award from Landlord or the condemning
authority; provided, however, Tenant shall have the right to recover from the
condemning authority such compensation as may be separately awarded to Tenant in
connection with costs in removing Tenant's merchandise, furniture, fixtures,
leasehold improvements and equipment to a new location. No condemnation of any
kind shall be construed to constitute an actual or constructive eviction of
Tenant or a breach of any express or implied covenant of quiet enjoyment.
14.4 Temporary Condemnation. In the event of a temporary condemnation
----------------------
not extending beyond the Term, this Lease shall remain in effect, Tenant shall
continue to pay Rent and Tenant shall receive any award made for such
condemnation except damages to any of Landlord's property. If a temporary
condemnation is for a period which extends beyond the Term, this Lease shall
terminate as of the date of initial occupancy by the condemning authority and
any such award shall be distributed in accordance with the preceding section. If
a temporary condemnation remains in effect at the expiration or earlier
termination of this Lease, Tenant shall pay Landlord the reasonable cost of
performing any obligations required of Tenant with respect to the surrender of
the Premises.
15. DEFAULT.
--------
15.1 Events of Defaults. The occurrence of any of the following events
-------------------
shall, at Landlord's option, constitute an "Event of Default":
16.
<PAGE>
15.1.1 Vacation or abandonment of the Premises for a period of
thirty (30) consecutive days;
15.1.2 Failure to pay Rent on the date when due and the failure
continuing for a period of five (5) days after such payment is due
15.1.3 Failure to perform Tenant's covenants and obligations
hereunder (except default in the payment of Rent) where such failure continues
for a period of thirty (30) days after written notice from Landlord; provided,
however, if the nature of the default is such that more than thirty (30) days
are reasonably required for its cure, Tenant shall not be deemed to be in
default if Tenant commences the cure within the thirty (30) day period and
diligently prosecutes such cure to completion;
15.1.4 The making of a general assignment by Tenant for the benefit
of creditors; the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant's creditors seeking the rehabilitation,
liquidation or reorganization of Tenant under any law relating to bankruptcy,
insolvency or other relief of debtors and, in the case of an involuntary action,
the failure to remove or discharge the same within sixty (60) days of such
filing; the appointment of a receiver or other custodian to take possession of
substantially all of Tenant's assets or this leasehold; Tenant's insolvency or
inability to pay Tenant's debts or failure generally to pay Tenant's debts when
due; any court entering a decree or order directing the winding up or
liquidation of Tenant or of substantially all of Tenant's assets; Tenant taking
any action toward the dissolution or winding up of Tenant's affairs; the
cessation or suspension of Tenant's use of the Premises; or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets or
this leasehold;
15.1.5 The making of any material misrepresentation or omission by
Tenant or any successor in interest of Tenant in any materials delivered by or
on behalf of Tenant to Landlord or Landlord's lender pursuant to this Lease;
15.1.6 The occurrence of an Event of Default set forth in Section
15.1.4 or 15.1.5 with respect to any guarantor of this Lease, if applicable; or
15.1.7 The release or discharge of Hazardous Materials into the soil
or groundwater.
15.2 Remedies.
---------
15.2.1 Termination. In the event of the occurrence of any Event of
------------
Default, Landlord shall have the right to give a written termination notice to
Tenant and, on the date specified in such notice, this Lease shall terminate
unless on or before such date all arrears of Rent and all other sums payable by
Tenant under this Lease and all costs and expenses incurred
17.
<PAGE>
by or on behalf of Landlord hereunder shall have been paid by Tenant and all
other Events of Default at the time existing shall have been fully remedied to
the satisfaction of Landlord.
15.2.1.1 Repossession. Following termination, without
-------------
prejudice to other remedies Landlord may have, Landlord may (i) peaceably
re-enter the Premises upon voluntary surrender by Tenant or remove Tenant
therefrom and any other persons occupying the Premises, using such legal
proceedings as may be available; (ii) repossess the Premises or relet the
Premises or any part thereof for such term (which may be for a term extending
beyond the Term), at such rental and upon such other terms and conditions as
Landlord in Landlord's sole discretion shall determine, with the right to make
reasonable alterations and repairs to the Premises; and (iii) remove all
personal property therefrom.
15.2.1.2 Unpaid Rent. Landlord shall have all the rights
------------
and remedies of a landlord provided by applicable law, including the right to
recover from Tenant: (a) the worth, at the time of award, of the unpaid Rent
that had been earned at the time of termination, (b) the worth, at the time of
award, of the amount by which the unpaid Rent that would have been earned after
the date of termination until the time of award exceeds the amount of loss of
rent that Tenant proves could have been reasonably avoided, (c) the worth, at
the time of award, of the amount by which the unpaid Rent for the balance of the
Term after the time of award exceeds the amount of the loss of rent that Tenant
proves could have been reasonably avoided, and (d) any other amount, and court
costs, necessary to compensate Landlord for all detriment proximately caused by
Tenant's default. The phrase "worth, at the time of award," as used in (a) and
(b) above, shall be computed at the Applicable Interest Rate, and as used in (c)
above, shall be computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent,
(1%).
15.2.2 Continuation. Even though an Event of Default may have
-------------
occurred, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession; and Landlord may enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
Rent as it becomes due. Landlord, without terminating this Lease, may, during
the period Tenant is in default, enter the Premises and relet the same, or any
portion thereof, to third parties for Tenant's account and Tenant shall be
liable to Landlord for all costs Landlord incurs in reletting the Premises,
including, without limitation, brokers' commissions, expenses of remodeling the
Premises and like costs. Reletting may be for a period shorter or longer than
the remaining Term. Tenant shall continue to pay the Rent on the date the same
is due. No act by Landlord hereunder, including acts of maintenance,
preservation or efforts to lease the Premises or the appointment of a receiver
upon application of Landlord to protect Landlord's interest under this Lease,
shall terminate this Lease unless Landlord notifies Tenant that Landlord elects
to terminate this Lease. In the event that Landlord elects to relet the
Premises, the rent that Landlord receives from reletting shall be applied to the
payment of, first, any indebtedness from Tenant to Landlord other than Base Rent
and Tenant's Share of Increases; second, all costs, including maintenance,
incurred by Landlord in reletting; and, third, Base Rent and Tenant's Share of
Increases under this Lease. After deducting the payments referred to
18.
<PAGE>
above, any sum remaining from the rental Landlord receives from reletting shall
be held by Landlord and applied in payment of future Rent as Rent becomes due
under this Lease. In no event, and notwithstanding anything in Section 16 to the
contrary, shall Tenant be entitled to any excess rent received by Landlord. If,
on the date Rent is due under this Lease, the rent received from the reletting
is less than the Rent due on that date, Tenant shall pay to Landlord, in
addition to the remaining Rent due, all costs, including, maintenance, which
Landlord incurred in reletting the Premises that remain after applying the rent
received from relenting as provided hereinabove. So long as this Lease is not
terminated, Landlord shall have the right to remedy any default of Tenant, to
maintain or improve the Premises, to cause a receiver to be appointed to
administer the Premises and new or existing subleases and to add to the Rent
payable hereunder all of Landlord's reasonable costs in so doing, with interest
at the Applicable Interest Rate from the date of such expenditure.
15.2.3 Defaults. In the event of the occurrence of an Event of
---------
Default under Section 15.1.7, Landlord shall have the right to (a) terminate
this Lease and collect damages, including the cost of remediation of any
Hazardous Materials released into the soil or groundwater, or (b) require
remediation of contamination while enforcing the remaining terms of this Lease.
15.3 Cumulative. Each right and remedy of Landlord provided for herein or
-----------
now or hereafter existing at law, in equity, by statute or otherwise shall be
cumulative and shall not preclude Landlord from exercising any other rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity, by statute or otherwise. No payment by Tenant of a lesser amount than
the Rent nor any endorsement on any check or letter accompanying any check or
payment as Rent shall be deemed an accord and satisfaction of full payment of
Rent; and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies.
16. ASSIGNMENT AND SUBLETTING. Tenant shall not assign, sublet or otherwise
--------------------------
transfer, whether voluntarily or involuntarily or by operation of law, the
Premises or any part thereof without Landlord's prior written approval, which
shall not be unreasonably withheld. Landlord's consent to one assignment or
subletting shall not be deemed a consent to subsequent assignments and/or
sublettings. The merger of Tenant with any other entity or the transfer of any
controlling or managing ownership or beneficial interest in Tenant, or the
assignment of a substantial portion of the assets of Tenant, whether or not
located at the Premises, shall constitute an assignment hereunder. If Tenant
desires to assign this Lease or sublet any or all of the Premises, Tenant shall
give Landlord written notice thereof with copies of all related documents and
agreements associated with the assignment or sublease, including without
limitation, the financial statements of any proposed assignee or subtenant,
forty-five (45) days prior to the anticipated effective date of the assignment
or sublease. Tenant shall pay Landlord's reasonable attorneys' fees incurred in
the review of such documentation plus an administrative fee of Three Hundred
Fifty Dollars ($350.00) for each proposed transfer. Landlord shall have a period
of thirty (30) days following receipt of such notice and all related documents
and agreements to
19.
<PAGE>
notify Tenant in writing of Landlord's approval or disapproval of the proposed
assignment or sublease. If Landlord fails to notify Tenant in writing of such
election, Landlord shall be deemed to have disapproved such assignment or
subletting. The parties agree that it shall be reasonable for Landlord to
withhold its consent to a proposed assignment or subletting if the proposed
assignee or sublessee or its business is subject to compliance with additional
requirements of the law (including related regulations) commonly known as the
"Americans with Disabilities Act (ADA)" beyond those requirements which are
applicable to the tenant desiring to assign or sublease or if the proposed
assignee's or subtenant's activities in, on or about the Premises or Project
involve the use, analysis, handling, storage, transport, discharge, release,
generation or disposal of any Hazardous Materials. This Lease may not be
assigned by operation of law. Any purported assignment or subletting contrary to
the provisions hereof shall be void and shall constitute an Event of Default
hereunder. If Tenant receives rent or other consideration for any such transfer
in excess of the Rent, or in case of the sublease of a portion of the Premises,
in excess of such Rent that is fairly allocable to such portion, after
appropriate adjustments to assure that all other payments required hereunder are
appropriately taken into account, Tenant shall pay Landlord fifty percent (50%)
of the difference between each such payment of rent or other consideration and
the Rent required hereunder. Landlord may, without waiving any rights or
remedies, collect rent from the assignee, subtenant or occupant and apply the
net amount collected to the Rent herein reserved and apportion any excess rent
so collected in accordance with the terms of the preceding sentence. Tenant
shall continue to be liable as a principal and not as a guarantor or surety to
the same extent as though no assignment or subletting had been made. In
addition, Tenant shall make all legally required disclosures to the proposed
assignee or subtenant. Landlord may consent to subsequent assignments or
subletting of this Lease or amendments or modifications to the Lease by
assignees of Tenant without notifying Tenant or any successor of Tenant and
without obtaining their consent. No permitted transfer shall be effective until
there has been delivered to Landlord a counterpart of the transfer instrument in
which the transferee agrees to be and remain jointly and severally liable with
Tenant for the payment of Rent pertaining to the Premises and for the
performance of all the terms and provisions of this Lease relating thereto
arising on or after the date of the transfer.
17. ESTOPPEL. SUBORDINATION AND ATTORNMENT.
---------------------------------------
17.1 Estoppel. Within ten (10) days after request by Landlord, Tenant
---------
shall deliver an estoppel certificate duly executed (and acknowledged if
required by any lender or purchaser), in the form attached hereto as Exhibit F
---------
to any proposed mortgagee, purchaser or Landlord. Tenant's failure to deliver
said statement in such time period shall be an Event of Default hereunder and
shall be conclusive upon Tenant that (a) this Lease is in full force and effect,
without modification except as may be represented by Landlord; (b) there are no
uncured defaults in Landlord's performance and Tenant has no right of offset,
counterclaim or deduction against Rent hereunder; and (c) no more than one
month's Base Rent has been paid in advance. Landlord reserves the right to
substitute a different form of estoppel certificate upon the request of any
proposed mortgagee or purchaser. If any financier should require that this
Lease be amended (other than in the description of the Premises, the Term, the
Permitted Use, the Rent or
20.
<PAGE>
as will substantially, materially and adversely affect the rights of Tenant),
Landlord shall give written notice thereof to Tenant, which notice shall be
accompanied by a Lease supplement embodying such amendments. Tenant shall,
within ten (10) days after the receipt of Landlord's notice, execute and deliver
to Landlord the tendered Lease supplement.
17.2 Subordination. This Lease shall be subject and subordinate to all
--------------
ground leases and the lien of all mortgages and deeds of trust which now or
hereafter affect the Premises or the Project or Landlord's interest therein, and
all amendments thereto, all without the necessity of Tenant's executing further
instruments to effect such subordination. If requested, Tenant shall execute and
deliver to Landlord within ten (10) days after Landlord's request whatever
documentation that may reasonably be required to further effect the provisions
of this paragraph.
17.3 Attornment. In the event of a foreclosure proceeding, the exercise
-----------
of the power of sale under any mortgage or deed of trust or the termination of a
ground lease, Tenant shall, if requested, attorn to the purchaser thereupon and
recognize such purchaser as Landlord under this Lease; provided, however,
Tenant's obligation to attorn to such purchaser shall be conditioned upon
Tenant's receipt of a non-disturbance agreement.
18. MISCELLANEOUS.
-------------
18.1 General.
--------
18.1.1 Entire Agreement. This Lease sets forth all the agreements
-----------------
between Landlord and Tenant concerning the Premises; and there are no agreements
either oral or written other than as set forth herein.
18.1.2 Time of Essence. Time is of the essence of this Lease.
----------------
18.1.3 Attorneys' Fees. In any action or proceeding which either
---------------
party brings against the other to enforce its rights hereunder, the unsuccessful
party shall pay all costs incurred by the prevailing party including reasonable
attorneys' fees, which amounts shall be a part of the judgment in said action or
proceeding.
18.1.4 Severability. If any provision of this Lease or the
-------------
application of any such provision shall be held by a court of competent
jurisdiction to be invalid, void or unenforceable to any extent, the remaining
provisions of this Lease and the application thereof shall remain in full force
and effect and shall not be affected, impaired or invalidated.
18.1.5 Law. This Lease shall be construed and enforced in
---
accordance with the laws of the state in which the Premises are located.
18.1.6 No Option. Submission of this Lease to Tenant for
----------
examination or negotiation does not constitute an option to lease, offer to
lease or a reservation of, or option for,
21.
<PAGE>
the Premises; and this document shall become effective and binding only upon the
execution and delivery hereof by Landlord and Tenant.
18.1.7 Successors and Assigns. This Lease shall be binding upon and
----------------------
inure to the benefit of the successors and assigns of Landlord and, subject to
compliance with the terms of Section 16, Tenant.
18.1.8 Third Party Beneficiaries. Nothing herein is intended to
-------------------------
create any third party benefit.
18.1.9 Memorandum of Lease. Tenant shall not record this Lease or a
--------------------
short form memorandum hereof without Landlord's prior written consent.
18.1.10 Agency, Partnership or Joint Venture. Nothing contained
-------------------------------------
herein nor any acts of the parties hereto shall be deemed or construed by the
parties hereto, nor by any third party, as creating the relationship of
principal and agent or of partnership or of joint venture by the parties hereto
or any relationship other than the relationship of landlord and tenant.
18.1.11 Merger. The voluntary or other surrender of this Lease by
-------
Tenant or a mutual cancellation thereof or a termination by Landlord shall not
work a merger and shall, at the option of Landlord, terminate all or any
existing subtenancies or may, at the option of Landlord, operate as an
assignment to Landlord of any or all of such subtenancies.
18.1.12 Headings. Section headings have been inserted solely as a
---------
matter of convenience and are not intended to define or limit the scope of any
of the provisions contained therein.
18.2 Signs. All signs and graphics of every kind visible in or from
------
public view or corridors, the Common Areas or the exterior of the Premises shall
be subject to Landlord's prior written approval and shall be subject to any
applicable governmental laws, ordinances, and regulations and in compliance with
Landlord's signage program. Tenant shall remove all such signs and graphics
prior to the termination of this Lease. Such installations and removals shall be
made in such manner as to avoid injury or defacement of the Premises; and Tenant
shall repair any injury or defacement, including without limitation,
discoloration caused by such installation or removal.
18.3 Waiver. No waiver of any default or breach hereunder shall be
-------
implied from any omission to take action on account thereof, notwithstanding any
custom and practice or course of dealing. No waiver by either party of any
provision under this Lease shall be effective unless in writing and signed by
such party. No waiver shall affect any default other than the default specified
in the waiver and then such waiver shall be operative only for the time and to
the extent therein stated. Waivers of any covenant shall not be construed as a
waiver of any subsequent breach of the same.
22.
<PAGE>
18.4 Financial Statements. As a material part of this Lease, Tenant
---------------------
agrees to provide to any lender, purchaser or Landlord for their review only,
within ten (10) days after request, a current, accurate, audited financial
statement for Tenant and Tenant's business prepared under generally accepted
accounting principles consistently applied and such other certified financial
information or tax returns as may be reasonably required by Landlord, purchaser
or any lender of either.
18.5 Limitation of Liability. The obligations of Landlord under this
-----------------------
Lease are not personal obligations of the individual partners, directors,
officers, shareholders, agents or employees of Landlord; and Tenant shall look
solely to the Building for satisfaction of any liability of Landlord and shall
not look to other assets of Landlord nor seek recourse against the assets of the
individual partners, directors, officers, shareholders, agents or employees of
Landlord. Whenever Landlord transfers its interest, Landlord shall be
automatically released from further performance under this Lease and from all
further liabilities and expenses hereunder and the transferee of Landlord's
interest shall assume all liabilities and obligations of Landlord hereunder from
the date of such transfer.
18.6 Notices. All notices to be given hereunder shall be in writing and
--------
mailed postage prepaid by certified or registered mail, return receipt
requested, or delivered by personal or courier delivery, or sent by facsimile
(immediately followed by one of the preceding methods), to Landlord's Address
and Tenant's Address, or to such other place as Landlord or Tenant may designate
in a written notice given to the other party. Notices shall be deemed served
upon the earlier of receipt or three (3) days after the date of mailing.
18.7 Brokerage Commission. Landlord shall pay a brokerage commission to
--------------------
Broker in accordance with a separate agreement between Landlord and Broker.
Tenant warrants to Landlord that Tenant's sole contact with Landlord or with the
Premises in connection with this transaction has been directly with Landlord and
Broker, and that no other broker or finder can properly claim a right to a
commission or a finder's fee based upon contacts between the claimant and
Tenant. Tenant agrees to indemnify and hold Landlord harmless from any claims or
liability, including, reasonable attorneys' fees, in connection with a claim by
any person for a real estate broker's commission, finder's fee or other
compensation based upon any statement, representation or agreement of Tenant,
and Landlord agrees to indemnify and hold Tenant harmless from any such claims
or liability, including reasonable attorneys' fees, based upon any statement,
representation or agreement of Landlord.
18.8 Authorization. Each individual executing this Lease on behalf of
-------------
Tenant represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of Tenant and that such execution is binding upon
Tenant.
18.9 Holding Over; Surrender.
-----------------------
23.
<PAGE>
18.9.1 Holding Over. If Tenant holds over the Premises or any
-------------
part thereof after expiration or earlier termination of the Term, such holding
over shall constitute a month-to-month tenancy, at a rent equal to two hundred
percent (200%) of the Base Rent in effect immediately prior to such holding over
and shall otherwise be on all the other terms and conditions of this Lease.
This paragraph shall not be construed as Landlord's permission for Tenant to
hold over. Acceptance of Rent by Landlord following expiration or termination
shall not constitute a renewal of this Lease or extension of the Term except as
specifically set forth above. If Tenant fails to surrender the Premises upon
expiration or earlier termination of this Lease, Tenant shall indemnify and hold
Landlord harmless from and against all loss or liability resulting from or
arising out of Tenant's failure to surrender the Premises, including, but not
limited to, any amounts required to be paid to any tenant or prospective tenant
who was to have occupied the Premises after the expiration or earlier
termination of this Lease and any related attorneys' fees and brokerage
commissions.
18.9.2 Surrender. Upon the termination of this Lease or Tenant's
---------
right to possession of the Premises, Tenant will surrender the Premises,
together with all keys, in good condition and repair, reasonable wear and tear
excepted. Conditions existing because of Tenant's failure to perform
maintenance, repairs or replacements shall not be deemed "reasonable wear and
tear."
18.10 Joint and Several. If Tenant consists of more than one person, the
-----------------
obligation of all such persons shall be joint and several.
18.11 Covenants and Conditions. Each provision to be performed by Tenant
------------------------
hereunder shall be deemed to be both a covenant and a condition.
18.12 Addenda. The Addenda attached hereto, if any, and identified with
--------
this Lease are incorporated herein by this reference as if fully set forth
herein.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
set forth above.
"Landlord" "Tenant"
CATELLUS DEVELOPMENT CORPORATION, a WIRE AND CABLE SPECILATIES,
a Delaware corporation INC., a Georgia Corporation
By: /s/ [signature illegible] By: /s/ Paul Monahan
----------------------------- ------------------------------
Its: Vice President Its:Vice President and C.O.O.
---------------------------- -------------------------
24.
<PAGE>
EXHIBIT A
---------
PREMISES
--------
[Floor Plan]
<PAGE>
EXHIBIT B
---------
WORK LETTER
-----------
Notwithstanding anything to the contrary contained in the Lease, Tenant shall
lease the Premises from Landlord on an "as-is" basis, without chance or
modification thereto of any kind other than the following modifications
(collectively, "Tenant Improvements") which Landlord shall make to the Premises
in accordance with Landlord's building standards and at Landlord's cost not to
exceed $14,474.00 (the "TI Allowance"):
1. Construct approximately 250 square feet of additional office space.
2. Upgrade existing restrooms to comply with current ADA ordinances.
3. Recarpet, base and repaint existing, interior offices.
4. Demolition of existing wall and tie in T-Bar/relocate ladder.
If the final cost of the Tenant Improvements, including all changes thereto,
exceeds the TI Allowance, such excess costs shall be paid by Tenant to Landlord
within ten (10) days after Landlord's delivery to Tenant of a bill setting forth
such costs.
<PAGE>
EXHIBIT C
---------
COMMENCEMENT DATE MEMORANDUM
----------------------------
With respect to that certain lease ("Lease") dated ________________, 19__,
between ________________, a__________________("Tenant"), and
_________________________, a __________________corporation, ("Landlord"),
whereby Landlord leased to Tenant and Tenant leased from Landlord approximately
________ rentable square feet of the building located at______________________
("Premises"), Tenant hereby acknowledges and certifies to Landlord as follows:
(1) Landlord delivered possession of the Premises to Tenant in a
Substantially Completed condition on __________________________("Possession
Date");
(2) The Lease commenced on __________, 19__ ("Commencement Date");
(3) The Premises contain_______________rentable square feet of space; and
(4) Tenant has accepted and is currently in possession of the Premises and
the Premises are acceptable for Tenant's use.
IN WITNESS WHEREOF, this Commencement Date Memorandum is executed this ____
day of ____________, 199__.
"Tenant"
__________________________.
a_________________________
By: _____________________
Its: _____________________
By: _____________________.
Its: _____________________
<PAGE>
EXHIBIT D
---------
PROHIBITED USES
---------------
The following types of operations and activities are expressly prohibited on
the Premises:
1. automobile/truck maintenance, repair or fueling;
2. battery manufacturing or reclamation;
3. ceramics and jewelry manufacturing or finishing;
4. chemical (organic or inorganic) storage, use or manufacturing;
5. drum recycling;
6. dry cleaning;
7. electronic components manufacturing;
8. electroplating and metal finishing;
9. explosives manufacturing, use or storage;
10. hazardous waste treatment, storage, or disposal;
11. leather production, tanning or finishing;
12. machinery and tool manufacturing;
13. medical equipment manufacturing and hospitals;
14. metal shredding, recycling or reclamation;
15. metal smelting and refining;
16. mining;
17. paint, pigment and coating operations;
18. petroleum refining;
19. plastic and synthetic materials manufacturing;
<PAGE>
20. solvent reclamation;
21. tire and rubber manufacturing;
22. above- and/or underground storage tanks; and
23. residential use or occupancy.
<PAGE>
EXHIBIT E
---------
RULES AND REGULATIONS
---------------------
1. No automobile, recreational vehicle or any other type of vehicle or
equipment shall remain upon the Common Area longer than 24 hours and no
vehicle or equipment of any kind shall be dismantled or repaired or
serviced on the Common Area. All vehicle parking shall be restricted to
areas designated and marked for vehicle parking. The foregoing restrictions
shall not be deemed to prevent temporary parking for loading or unloading
of vehicles in designated areas.
2. Signs will conform to sign standards and criteria established from time to
time by Landlord. No other signs, placards, pictures, advertisements, names
or notices shall be inscribed, displayed or printed or affixed on or to any
part of the outside or inside of the building without the written consent
of Landlord and Landlord shall have the right to remove any such non-
conforming, signs, placards, pictures, advertisements, names or notices
without notice to and at the expense of Tenant.
3. No antenna, aerial, discs, dishes or other such device shall be erected on
the roof or exterior walls of the Premises, or on the grounds, without the
written consent of the Landlord in each instance. Any device so installed
without such written consent shall be subject to removal without notice at
any time.
4. No loud speakers, televisions, phonographs, radios or other devices shall
be used in a manner so as to be heard or seen outside of the Premises
without the prior written consent of the Landlord.
5. The outside areas immediately adjoining the Premises shall be kept clean
and free from dirt and rubbish by the Tenant to the satisfaction of
Landlord and Tenant shall not place or permit any obstruction or materials
in such areas or permit any work to be performed outside the Premises.
6. No open storage shall be permitted in the Project.
7. All garbage and refuse shall be placed in containers placed at the location
designated for refuse collection, in the manner specified by Landlord.
8. No vending machine or machines of any description shall be installed,
maintained or operated upon the Common Area.
9. Tenant shall not disturb, solicit, or canvass any occupant of the building
and shall cooperate to prevent same.
<PAGE>
10. No noxious or offensive trade or activity shall be carried on upon any
units or any part of the Common Area nor shall anything be done thereon
which would in any way interfere with the quiet enjoyment of each of the
other tenants of the Project or which would increase the rate of insurance
or overburden utility facilities from time to time existing in the Project.
11. Landlord reserves the right to make such amendments to these rules and
regulations from time to time as are nondiscriminatory and not inconsistent
with the Lease.
<PAGE>
EXHIBIT F
---------
TENANT ESTOPPEL
---------------
This Agreement ("Agreement"), dated as of _________________, 199__,
executed by _____________________________("Tenant"), in favor of
___________________________, a ______________________("Lender"), is entered into
with reference to the following, facts:
A. Tenant is presently leasing certain premises (the "Premises")
comprising a portion of the real property (the "Property") described in Exhibit
-------
1 attached hereto and incorporated herein by this reference, pursuant to that
- -
certain lease (as modified from time to time, the "Lease") dated as of
__________________, 199__, between Tenant and__________________,a
_________________________ corporation ("Landlord").
B. Lender has made or agreed to make a loan or loans to Landlord (the
"Loan") and, in connection therewith, Landlord has executed or will execute a
deed of trust (as modified from time to time, the "Deed of Trust") assigning to
Lender Landlord's interest in the Property, including Landlord's interests as
landlord under the Lease.
In consideration of the foregoing, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Tenant hereby
agrees as follows:
1. Certification by Tenant. Tenant hereby certifies to Lender as
follows:
1.1 The Lease is in full force and effect, and Tenant has not
transferred its interests in the Lease or agreed to do so.
1.2 A true and complete copy of the Lease, together with all
amendments, supplements and other modifications thereto (oral or written), is
attached hereto as Exhibit 2.
---------
1.3 No rent or other amount has been prepaid under the Lease, except
as follows (if none, state "None"): ____________________________________________
1.4 No deposit of any nature has been made in connection with the
Lease (other than deposits the nature and amount of which are expressly
described in the Lease), except as follows (if none, state "None"):
1.5 Tenant shall pay base rent under the Lease, upon the execution of
the Lease, in the amount of $______________per month.
1.6 The Lease is the only agreement between Landlord and Tenant with
respect to the Premises, and Tenant claims no rights with respect to the
Premises or the Property other than those set forth in the Lease, except as
follows (if none, state "None"): _____________
1
<PAGE>
1.7 To the best of Tenant's knowledge, there are no existing defenses
or offsets against amounts due or to become due to Landlord under the Lease, and
there are no existing uncured defaults by Landlord under the Lease, nor has any
event occurred which, with the passage of time or the giving of notice or both,
would constitute such a default, except as follows (if none, state "None"):
________________________________________________
1.8 Landlord has offered no free rent period, building allowance or
similar concession(s) to induce Tenant to enter into the Lease, except as set
forth in the Lease, and Landlord has no other obligations to Tenant in
connection with the Lease, matured or not yet matured, except as set forth in
the Lease.
1.9 To the best of Tenant's knowledge, no circumstance presently
exists, and no event has occurred, that would prevent the Lease from becoming
effective or would entitle Tenant to terminate the Lease.
2. Consent to Assignment. Tenant understands that Landlord has assigned
---------------------
or will assign the Lease to Lender in connection with the Loan, and Tenant
hereby consents to such assignment. Tenant is not aware of any prior assignment
of the Lease by Landlord, except as follows (if none, state
None"):_________________________________________________
3. No Modification of Lease; Lender Consents. Tenant shall not, without
------------------------------------------
Lender's prior written consent, (a) amend, supplement, terminate or otherwise
modify the Lease; or (b) accept (and/or act in reliance on) the release,
relinquishment or waiver by Landlord of any right with respect to the Lease.
Any such termination, modification, acceptance or other action taken without
such prior consent shall, at Lender's option, be void. Without limiting the
generality of the foregoing, (i) any assignment or subletting by Tenant (or by
any assignee or subtenant) which requires Landlord's consent shall also require
Lender's consent, which consent shall not be unreasonably withheld, and shall,
at Lender's option, be void if such consent is not obtained, and (ii) any
alteration to the Premises which requires Landlord's consent shall also require
Lender's consent which consent shall not be unreasonably withheld. Tenant shall
not pay any rent or other amount due to Landlord under the Lease more than 10
days in advance of the due date.
4. Lender Cure Rights. Tenant shall not exercise any termination remedy
-------------------
upon a default by Landlord with respect to the Lease unless Tenant has first
given Lender written notice of such default (at the address shown below or any
other address hereafter supplied to Tenant by Lender) and such default is not
cured within 30 days thereafter; provided that, if such default is nonmonetary,
is curable by Lender, and (a) is of such a nature that it cannot reasonably be
cured within 30 days or (b) the cure thereof by Lender requires Lender to have
possession of the Property, then in either such event Tenant shall not exercise
any termination remedy so long as Lender is diligently taking all steps required
for Lender to cure the default (including, pursuit of possession of the
Property, to the extent required).
2
<PAGE>
ADDRESS FOR NOTICES TO LENDER:
_______________________________________
_______________________________________
_______________________________________
Attention:_____________________________
5. Transferee of Landlord's Interests. Notwithstanding any provision to
-----------------------------------
the contrary in the Lease, a transferee of the Landlord's interest under the
Lease shall not be (i) liable for any act or omission of any prior landlord
under the Lease (including, without limitation the breach of any representation
or warranty made by any prior landlord unless such breach is caused by such
transferee), (ii) obligated to cure any default of any prior landlord under the
Lease (other than non-monetary defaults that remain uncured at the time of
foreclosure), (iii) subject to any offsets or defenses which Tenant is entitled
to assert against any prior landlord under the Lease, (iv) bound by any payment
of any amount owing under the Lease to any prior landlord which was made more
than 10 days prior to the date due, (v) bound by any amendment or other
modification to the Lease which has made subsequent to the date of this
Agreement without the prior written consent of Lender (which shall not be
unreasonably withheld) and which could adversely affect the landlord's
interests, or (vi) liable for the return to Tenant of any security or other
deposit paid by Tenant to any prior landlord under the Lease except to the
extent that such transferee actually receives such deposit.
6. Further Assurances. Tenant shall execute, acknowledge and deliver to
-------------------
Landlord or Lender all documents, and shall take all actions, reasonably
required by Landlord or Lender from time to time to confirm or effect the
matters set forth herein, or otherwise to carry out the purposes of this
Agreement.
7. Payments to Lender. Tenant shall make all payments under the Lease to
------------------
Lender upon receiving a direction to pay from Lender, and shall comply with any
such direction to pay without determining whether any default exists with
respect to the Loan.
8. Agreements by Landlord. Landlord hereby agrees as follows:
-----------------------
8.1 Tenant shall have no liability to Landlord for any amount
otherwise owing to Landlord under the Lease in the event that (a) Tenant
receives a written demand from Lender to pay such amount to Lender, and (b)
Tenant thereafter pays such amount to Lender.
8.2 Tenant shall be entitled to assume that any such demand by Lender
is valid and shall be under no obligation and shall have no right, to inquire as
to its validity, nor shall any claim by Landlord that such demand is invalid
affect Tenant's right and obligation to pay all amounts demanded to Lender and
thereupon be discharged of Tenant's obligation to pay such amounts to Landlord.
3
<PAGE>
9. Attorney Fees. In the event that any litigation shall be commenced
--------------
concerning this Agreement, the party prevailing in such litigation shall be
entitled to recover, in addition to such other relief as may be granted, its
reasonable costs and expenses, including, without limitation reasonable
attorneys' fees and court costs, whether or not taxable, as awarded by a court
of competent jurisdiction.
10. Reliance by Lender. Tenant understands that Lender will rely upon
-------------------
this Agreement in making the Loan and/or in entering into certain agreements
and/or granting certain consents in connection therewith. Notice of acceptance
of this Agreement by Lender is waived.
11. Miscellaneous. This Agreement shall bind, and shall inure to the
-------------
benefit of, the successors and assigns of the parties. This Agreement shall be
governed by the laws of the State of California.
IN WITNESS WHEREOF, Tenant has caused this Agreement to be duly executed as
of the date first written above.
"Tenant"
____________________________________
By: /s/ Paul Monahan
---------------------------------
Title: Vice President and
------------------------------
Chief Operating Officer
------------------------------
Landlord consents to and agrees with the
terms of Paragraphs 7 and 8 herein:
____________________________________
a __________________________________
By: _______________________________
Title:______________________________
4
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EXHIBIT 1
---------
[Legal Description]
TO BE SUPPLIED.
5
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EXHIBIT 2
---------
[Lease]
6
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EXHIBIT 10.14
LEASE
THIS INDENTURE OF LEASE dated as of the 2nd day of December 1994, is made
by and between GHK COMPANY, L.L.C., a New Hampshire Limited Liability Company
with offices c/o Ram Asset Management, Inc., 121 Middle Street, Portland, Maine
(hereinafter called the "Lessor") and Wire & Cable Specialties, Inc., with a
place of business at 7 Raymond Avenue, Salem, New Hampshire (hereinafter called
the "Lessee").
WITNESSETH that for and in consideration of the rents herein reserved and
the covenants and agreements herein contained and expressed and to be kept,
performed and fulfilled, the parties agree as follows:
Section 1 - Premises. Lessor hereby demises and lets unto Lessee, and
--------------------
Lessee hereby leases from Lessor units six and seven in Building A at 7 Raymond
Avenue, Salem, New Hampshire, the leased premises consisting of approximately
5,000 square feet of space, and being shown as the portion highlighted on
Exhibit A annexed hereto the ("Premises"). All of the land, buildings and
improvements owned by Lessor in the vicinity of the Premises, including any
additional buildings which may be hereafter constructed and all rights of way
and easements appurto are herein referred to as the ("Property").
Section 2 - Term. The initial term of this Lease shall be for a period of
----------------
approximately three (3) years commencing when the Premises is certified for
occupancy by Lessor. The estimated commencement date is December 19, 1994.
Section 3 - Rent. Lessee shall pay to Lessor rent for the Premises
----------------
monthly, in advance, on the first day of each month as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Year PSF Monthly Annual
<S> <C> <C> <C>
Commencement date - 12/31/94 $5.00 Pro-rated Pro-rated
01/01/95-12/31/95 $5.00 $2,083.33 $25,000.00
01/01/96-12/31/96 $5.25 $2,187.50 $26,250.00
01/01/97-12/31/97 $5.50 $2,291.67 $27,500.00
- -----------------------------------------------------------------
</TABLE>
Section 4 - Additional Rent. Lessee shall pay to Lessor, as additional
---------------------------
rent, Lessee's Proportionate Share (as hereinafter defined) of all of the costs
of the Property, which costs shall include but shall not be limited to i)
cleaning and maintenance of the common areas, ii) clearing and snow removal from
parking area and access drives, iii) trash removal, iv) insurance carried by
Lessor with respect to the Property, v) real estate taxes, vi) landscaping, vii)
management fees, viii) repairs and maintenance of the buildings and improvements
on the Property, ix) maintenance and other costs related to water, sewer, storm
drainage and other utility service provided to the Property to the extent such
utilities are not separately metered to the Premises and other Lessee premises
in the Property and x) other expenses as deemed necessary by Lessor. This lease
is a triple net lease. The term "real
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estate taxes" as used in the paragraph shall be deemed to include all
assessments, impositions and other governmental charges, ordinary and
reasonable, which may be levied, assessed or otherwise become a lien upon or
charge against the Property. Additional rent will be in monthly installments,
due with the monthly payments of the base rent, based on the budget provided by
Lessor to Lessee. Lessor shall reconcile actual costs and expenses with the
budget figures at least annually and make appropriate adjustments with Lessee.
For the purposes of this Lease, Lessee's Proportionate Share is the product of
the area of the Premises divided by the leasable area of all buildings on the
Property. At the time of signing of this Lease, such Proportionate Share is
seven and 16/100 percent (7.16%).
For the period from January 1, 1995 through December 31, 1995, Lessee's
Additional Rent shall not exceed Eighty-five Hundred Dollars ($8,500).
Section 5 - Payment of Rent and Late Charges. Payments due under Sections
--------------------------------------------
3 and 4 above shall be made at Lessor's office at the address set forth in
Section 29, or such other place as Lessor may designate in writing, on or before
the first of each month. If the payment is not received by Lessor on the first
day of each month, Lessor shall be entitled to, and Lessee shall pay to Lessor a
late fee equal to five percent (5%) of the late payments and if payment is not
received after the 10th of the month, it shall bear interest from the first of
the month at the prime commercial rate of The First National Bank of Boston, as
it may be adjusted from time to time, plus 4% per annum, but in no event more
than the highest rate of interest allowed by applicable law. All payments under
this Lease shall be paid to Lessor without notice or demand, and without
abatement, deduction, counterclaim or set-off.
Section 6 - Security Deposit. Simultaneously with the execution of this
----------------------------
Lease, Lessee has deposited the sum of two thousand seven hundred ninety one and
67/100ths Dollars ($2,791.67) (the "Deposit") with Lessor as security for the
full and faithful performance by Lessee of all of the terms and conditions of
this Lease required to be paid or performed by Lessee. Lessor may apply any
portion of the Deposit for the payment of any payments of rent, additional rent
or sums due to Lessor hereunder for which Lessee is in default and for any
damages to the Premises (excluding reasonable wear and tear) caused by any
affirmative or negligent act by Lessee, its employees, servants or invitees.
Promptly following any application of the Deposit, Lessee shall pay to Lessor an
amount needed to restore the Deposit to its original amount. Upon the expiration
of this Lease and Lessee's vacating of the Premises, Lessor shall return the
Deposit to Lessee less any amounts applied by Lessor to said rent or damages
within 60 days.
Section 7 - Taxes and Assessments. Lessor shall pay and discharge all real
---------------------------------
estate taxes and levies, and charges and governmental impositions, duties and
charges of like kind and nature, which shall or may during the term of this
Lease be charged, laid, levied or imposed upon or become a lien or liens upon
the building containing the Premises, subject to Lessee making the payments of
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Additional Rent as required in Section 4 above. Lessee shall pay all personal
property taxes and other governmental impositions on its personal property and
fixtures located at the Premises.
Section 8 - Quiet Enjoyment. Lessor shall put Lessee in possession of the
---------------------------
Premises at the beginning of the term hereof, and Lessee, upon paying the rent
and observing the other covenants and conditions herein upon its part to be
observed, shall peaceably and quietly hold and enjoy the Premises without
hindrance by, from or through Lessor, subject to the terms of this Lease.
Section 9 - Signs. Lessee shall not install or alter any exterior signs on
-----------------
the Premises without the prior written approval of Lessor. Any signs shall be in
compliance with all federal, state and local laws and ordinances and shall
conform with a uniform sign policy which Lessor may establish with respect to
the Property. Lesser shall maintain a sign identifying the name of its business
in a location designated by Lessor at the Premises.
Section 10 - Repairs by Lessee. Lessee shall, at its own expense, be
------------------------------
responsible for all maintenance and repairs to the Premises, including, without
limitation, light bulbs, ballasts, the heating, ventilating and air conditioning
systems serving the Premises, and for all interior painting desired by Lessee
and for the replacement of broken glass within the Premises. Lessee shall also
promptly make any repairs lawfully required by any public authority as a result
of changes in statutes or regulations which become effective subsequent to the
beginning of the term of this Lease and which repairs are required because of
the nature of the occupancy of the Premises by Lessee or the manner in which it
conducts its business therein. At the expiration of this Lease or earlier
termination hereof for any cause herein provided for, Lessee shall deliver up
the Premises to Lessor broom clean and in the same sanitary and attractive
condition and state of repairs as at the beginning of the term hereof,
reasonable wear and tear, taking by eminent domain and damage due to fire or
other casualty insured against excepted.
In the event Lessee fails to make promptly any repairs required of Lessee
hereunder, or fails to perform any of its other obligations Lessor may, at its
option, make such repairs or perform such obligations to Lessee's account and
the cost thereof will become an obligation of Lessee under this Lease, payable
within thirty (30) days of demand and any such amount shall bear interest at the
prime rate published in the Wall Street Journal plus 10% per annum, as may from
time to time be determined, from the date of demand.
Section 11 - Lessor's Maintenance. Lessor shall be responsible for
---------------------------------
structural maintenance of the building. The parties acknowledge that it is their
intention that this Lease shall otherwise be an absolute net lease, so-called,
and that Lessee has responsibility for all non-structural maintenance and repair
to the Premises, together with payment of all reasonable costs and expense
associated with the Premises excepting only any responsibility specifically
accepted by Lessor hereunder.
Section 12 - Alterations and Additions. Lessee shall not make structural
--------------------------------------
alterations or
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additions to the Premises, but may make non-structural alterations provided
Lessor consents thereto in writing, which consent shall not be unreasonably
withheld or delayed. Lessee shall not make any penetrations of the roof or
exterior wall except for roof penetrations at a location approved by Lessor and
performed by a contractor approved by Lessor. Lessee may require satisfactory
evidence of available financing for any such alterations or additions. All such
allowed alterations shall be at Lessee's expense and shall be in quality at
least equal to the present construction. Lessee shall not permit any mechanics'
liens, or similar liens, to remain upon the Premises for labor and material
furnished to Lessee or claimed to have been furnished to Lessee in connection
with work of any character performed or claimed to have been performed at the
direction of Lessee and shall cause any such lien to be released of record
forthwith without cost to Lessor. Any alterations or improvements made by Lessee
shall become the property of Lessor at the termination of occupancy as provided
herein.
Section 13 - Machinery, Equipment and Trade Fixtures. Lessee agrees that
----------------------------------------------------
it shall not install any machinery, equipment and trade fixtures, and
appurtenances thereto, in the Premises which cannot be removed from the Premises
without damage to the Premises. Lessee agrees that (a) all machinery and
equipment, and appurtenances thereto, installed in the Premises by Lessee, or by
any employee, agent or subcontractor of Lessee, or by any subLessee of Lessee,
which may be removed from the Premises without damage to the Premises and (b)
all furniture, furnishings and movable trade fixtures installed in the Premises
shall be deemed to remain personal property and that all such machinery,
equipment, appurtenances, furniture and movable trade fixtures of Lessee or of
any employee, agent or subcontractor or subLessee of Lessee, must be removed,
prior to the expiration of this Lease or its earlier termination for any cause
herein provided for. Lessee shall repair any damage occasioned by such removal
and shall restore the Premises to their condition as at the beginning of the
term hereof, reasonable wear and tear, taking by eminent domain and damage due
to fire or other casualty insured against excepted. Any such property which is
required to be removed pursuant to the provisions hereof and which is not so
removed prior to the expiration or earlier termination of this Lease may be
removed from the Premises by Lessor and stored for the account of Lessee; and if
Lessee shall fail to reclaim such property within sixty (60) days following such
expiration or earlier termination of this Lease, such property shall be deemed
to have been abandoned by Lessee and may be appropriated, sold, destroyed, or
otherwise disposed of by Lessor without notice to Lessee and without obligation
to account therefor. Lessee shall pay to Lessor all reasonable costs incurred by
Lessor in removing, storing, selling, destroying or otherwise disposing of any
such property
Section 14 - Utilities. Lessee shall make arrangements for, and shall pay
----------------------
when due all charges for, all utilities, including but not limited to gas,
electricity, heat, power, telephone and any other services supplied to it at the
Premises, and shall hold and save Lessor harmless from any expense or liability
connected therewith. Lessor shall be under no responsibility to supply either
heat or hot water to the Premises at any time whatsoever. Lessor will provide
utility connections up to the premises. In no event shall Lessor be responsible
or liable to Lessee or any one claiming under Lessee for failure or cessation of
supply of any utilities.
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Section 15 - Use of the Premises.
--------------------------------
(a) In its use of the Premises, Lessee shall comply with all statutes,
ordinances and regulations applicable to the use thereof, including, without
limiting the generality of the foregoing, the Zoning Ordinance of the Town of
Salem, New Hampshire, as now in effect or as hereafter amended. No business
shall be operated or conducted on the Premises which involves heavy
manufacturing or which is noxious or offensive.
(b) Lessee shall not injure or deface, or commit waste with respect to the
Premises, nor occupy or use the Premises in such manner as to constitute a
nuisance of any kind, nor for any purpose nor in any manner in violation of any
present or future laws, rules, requirements, orders, directions, ordinances or
regulations of any governmental or lawful authority including Boards of Fire
Underwriters. Lessee shall, immediately upon the discovery of any unlawful,
illegal, disreputable or extra hazardous use, take all necessary steps to
discontinue such use.
(c) Lessee shall procure any licenses or permits required by any use of
the Premises by Lessee.
(d) Lessee's use of the access roads, parking areas and loading areas on
the Property shall be subject to any reasonable rules or regulations which may
be established from time to time by Lessor. Lessee shall not park storage
trailers or store any items of its property on said exterior common areas.
(e) Lessee shall not permit any employee, servant, invitee or visitor of
Lessee to violate the covenants or obligations of Lessee hereunder.
Section 16 - Subleasing - Assignment.
------------------------------------
(a) Lessee shall not, without the prior written consent of Lessor, assign
this Lease in whole or in part, or sublet the Premises or any portion thereof.
In the event of such assignment or sublease, Lessee shall remain liable to
Lessor for all the rentals called for under the terms of this Lease and for the
performance of all covenants herein to be performed by Lessee.
(b) It is agreed that if Lessor shall consent to such assignment or
subletting, and Lessee shall thereupon assign this Lease or sublet all or any
portion of the Demised Premises, then and in that event Lessee shall pay to
Lessor, as additional rent, (i) in the event of an assignment, the amount of all
monies, if any, which the assignee has agreed to and does pay to Lessee in
consideration of the making of such assignment less however all out of pocket
costs actually incurred by Lessee in connection with the making of such
assignment, including but not limited to any brokerage fees, advertising and
alteration costs; and (ii) in the event of a subletting, the amount, if any, by
which the fixed basic rent additional rent payable by the subLessee to Lessee
shall exceed the fixed basic rent plus additional rent allocable to that part of
the demised premises affected by such sublease, pursuant
5
<PAGE>
to the provisions of this Lease plus the amounts, if any, payable by such
subLessee to Lessee pursuant to any side agreement as consideration (partial or
otherwise) for Lessee making such subletting.
Lessor shall have the right to assign this Lease or any of the rights and
benefits accruing to it thereunder.
Section 17 - Mechanic's Lien. In the event of the filing in the Rockingham
----------------------------
County Registry of Deeds of any notice of a builder's, supplier's or mechanic's
lien on the Premises arising out of any work performed by or on behalf of
Lessee, Lessee shall cause said lien to be released and discharged without
delay.
Section 18 - Liability. Except for injury or damage caused by the willful
----------------------
or grossly negligent act of Lessor, its servants or agents, Lessor shall not be
liable for any injury or damage to any person happening on or about the Premises
or for any injury or damage to the Premises or to any property of Lessee or to
any property of any third person, firm, association or corporation on or about
the Premises. Lessee shall, except for injury or damage caused as aforesaid,
indemnify and save Lessor harmless from and against any and all liability and
damages, costs and expenses, including reasonable counsel fees, and from and
against any and all suits, claims and demands of any kind or nature, by and on
behalf of any person, firm, association or corporation, arising out of or based
upon any incident, occurrence, injury or damage which shall or may happen on or
about the Premises and from and against any matter or thing growing out of the
condition, maintenance, repair, alteration, use, occupation or operation of the
Premises or the installation of any property therein or the removal of any
property therefrom. Lessee agrees to look solely to Lessor's interest in the
Property for recovering of any judgment or claim against Lessor.
Section 19 - Liability Insurance. Lessee shall throughout the term hereof
--------------------------------
procure and carry, at its expense, comprehensive liability insurance on the
Premises with an insurance company authorized to do business in New Hampshire
and acceptable to Lessor. Lessor shall throughout the term procure and carry,
comprehensive liability insurance on the common areas of the Property a portion
of the cost shall be included in the additional rent due under Section 4. Such
insurance shall be carried in the name of and for the benefit of Lessee and
Lessor; shall be written on an "occurrence" basis; and shall provide coverage of
at least $1,000,000.00 in case of death of or injury to one person at least
$1,000,000.00 in case of death of or injury to more than one person in the same
occurrence; and at least $1,000,000.00 in case of loss, destruction or damage to
property. Lessee shall comply with the requirements of the Boilers and Unfired
Pressure Vessels Law (RSA 157-A), if applicable, and in such event the policy or
policies referred to above shall contain an endorsement providing pressure
vessels insurance coverage and naming Lessor as an additional insured. Lessee
shall furnish to Lessor a certificate of such insurance which shall provide that
the insurance indicated therein shall not be canceled without at least twenty
(20) days' written notice to Lessor.
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Section 20 - Fire and Extended Coverage Insurance. Lessor shall procure
-------------------------------------------------
and continue in force during the term hereof fire and extended coverage
insurance on the building containing the Premises. Lessee shall procure and
continue in force during the term hereof, fire and extended coverage insurance
on any and all personal property and fixtures of Lessee which are situated in
the Premises.
Without prejudice to any rights of Lessee under the applicable
insurance policies, Lessor shall be held free and harmless from liability for
loss or damage to personal property of Lessee in the Premises by fire, the
extended coverage perils, sprinkler leakage, vandalism and malicious mischief if
and to the extent actually insured against, whether or not such loss or damage
be the result of the negligence of Lessor, its employees or agents. This
subsection does not impose any added obligation or expense upon Lessee and is to
be construed only as a limitation upon the rights of the insurance carriers to
subrogation.
Section 21 - Condemnation, Destruction or Damage.
------------------------------------------------
(a) If the Premises, or any significant portion thereof, are taken by
eminent domain, or condemned for public use, this Lease may be terminated by
either party, and any and all awards for such taking shall be the exclusive
property of Lessor. Nothing contained herein shall be construed to preclude
Lessee from prosecuting any claim directly against the condemning authority in
such condemnation proceedings for loss of business or depreciation to, damage
to, or cost of removal of, or the value of stock and other personal property
belonging to Lessee, provided, however, that no such claim shall diminish or
otherwise adversely affect Lessor's award or the award to any mortgagee.
(b) In the event that the building of which the Premises are a part,
shall be totally destroyed by fire or other casualty insured against, or shall
be so damaged that repairs and restoration cannot be accomplished within a
period of sixty (60) days from the date of such destruction or damage, this
Lease shall terminate at the election of Lessor and each party shall be relieved
of any further obligation to the other, except that Lessee shall be liable for
and shall promptly pay Lessor any rent then in arrears or Lessor shall promptly
rebate to Lessee a pro rata portion of any rent paid in advance. In the event
the premises shall be so damaged that repairs and restoration can be
accomplished within a period of sixty (60) days from the date of such
destruction or damage or if Lessor does not elect to terminate this Lease, this
Lease shall continue in effect in accordance with its terms; such repairs and
restoration shall, unless otherwise agreed by Lessor and Lessee, be performed
promptly by Lessor as closely as practicable to the condition which existed as
of the date of the damage (utilizing therefor the proceeds of the insurance
applicable thereto), and until such repairs and restoration have been
accomplished, a portion of the rent shall abate equal to the proportion of the
Premises rendered unusable by the damage. It is understood that Lessor's
obligation to restore, replace or rebuild shall not exceed in amount the sum of
the insurance proceeds paid to it and/or released to it by any mortgagee with
which settlement was made. Lessee agrees to execute and deliver to Lessor all
instruments and documents necessary to evidence the fact that the right to such
insurance proceeds is vested in Lessor by the damage.
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Section 22 - Repossession by Lessor. At the expiration of this Lease or
-----------------------------------
upon the earlier termination of this Lease for any cause herein provided for,
Lessee shall peaceably and quietly quit the Premises and deliver possession of
the same to Lessor.
Section 23 - Mortgage Lien. Lessee agrees that this Lease and all rights
--------------------------
of Lessee hereunder are and shall be subject and subordinate to the lien of (1)
any mortgage constituting a first lien of the Property, or any part thereof, at
the date hereof, (2) the lien of any mortgage hereafter executed to a bank,
trust company or other recognized lending institution to provide permanent
financing or refinancing of the land and improvements containing the Premises,
and (3) any renewal, modification, consolidation or extension of any mortgage
referred to in clause (1) and (2). Lessee shall, upon demand at any time or
times, execute, acknowledge and deliver to Lessor without any expense to Lessee,
any and all instruments that may be necessary or proper to subordinate this
Lease and all rights of Lessee hereunder to the lien of a mortgage referred to
in (2) or (3) of the preceding sentence.
Section 24 - Environmental Matters.
----------------------------------
(a) Lessee represents and warrants that it shall not use the Premises
for the Storage, Treatment or Disposal of Hazardous Wastes, and hereby certifies
that its operations or other uses of the Premises will not involve the same. For
the purposes of this Lease, the terms Hazardous Waste, Storage, Treatment and
Disposal are defined by cumulative reference to the following sources, as
amended from time to time: (1) The Resource Conservation and Recovery Act of
1976, 42 USC (S)6901 et seq (RCRA); (2) EPA Federal Regulations promulgated
thereunder and codified in 40 C.F.R. Parts 260-265 and Parts 122-124; (3) New
Hampshire R.S.A. Ch. 147 and 147-A, and New Hampshire Regulations promulgated
thereunder by any agency or department of the State of New Hampshire.
(b) As used in this Section, the term "Hazardous Material" shall mean
any substance, water or material which has been determined by any state, federal
or local government authority to be capable of posing a risk of injury to
health, safety and property, including, but not limited to, all of those
materials, wastes and substances designated as hazardous or toxic by the U. S.
Environmental Protection Agency, the U. S. Department of Labor, the U. S.
Department of Transportation, and/or any other governmental agency, federal,
state, or local, now or hereafter authorized to regulate materials and
substances in the environment (collectively "Governmental Authority(ies)").
(c) Lessee agrees to take responsibility for any remedial action
required by Government Authorities having jurisdiction regarding any Hazardous
Material or Hazardous Waste owned, controlled, used or manufactured by Lessee,
or for which Lessee is otherwise legally responsible. Lessee shall pay all costs
in connection with any such investigation or remedial activity including,
without limitation, all installation, operation, maintenance, testing, and
monitoring costs, all power and utility costs and any and all pumping taxes or
fees that may be applicable to Lessee's
8
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activities. Lessee shall perform all such work in a good, safe and workmanlike
manner, in compliance with all laws and regulations thereto, and shall
diligently pursue any required investigation and remedial activity until Lessee
is allowed to terminate these activities by those Government Authorities having
jurisdiction.
(d) Lessee shall conduct any testing, monitoring, reporting and
remedial activities in connection with the Premises in a good, safe and
workmanlike manner, and in compliance with all laws and regulations applicable
thereto. Lessee shall promptly provide Lessor with copies of any testing results
and reports that are generated in connection with Lessee's activities and that
are submitted to any Government Authority.
(e) Lessee shall indemnify, hold harmless, and defend Lessor, its
officers, members, employees and agents (collectively "Indemnities") against all
claims, demands, losses, liabilities, costs and expenses, including attorneys'
fees, (collectively "Liabilities") imposed upon or accruing against Indemnities
as actual and direct costs of investigatory or remedial action required by any
Government Authority having jurisdiction or as damages to third persons for
personal injury or property damage arising from the existence of Hazardous
Material or Hazardous Waste referred to in subparagraph (c). Such Liabilities
shall include, without limitation: (i) injury or death to any person, (ii)
damage to or loss of use of any other property, (iii) the cost of any demolition
and rebuilding of the improvements containing the Premises, repair, or
remediation and the preparation of any closure or other activity required by any
Governmental Authority, (iv) any lawsuit brought or threatened, good faith
settlement reached, or governmental order relating to the presence, disposal,
release or threatened release of any Hazardous Material or Hazardous Waste
referred to in subparagraph (c), on, from or under the land and building
containing the Premises and (v) the imposition of any liens on the land and
building containing the Premises arising from Lessee's activities on or about
the Premises or from the existence of Hazardous Material or Hazardous Waste
referred to in subparagraph (c).
(f) Lessee shall have no responsibility for Hazardous Waste or
Hazardous Materials existing on the Premises at the date hereof, except that
Lessee shall be responsible for any costs and expenses incurred by or assessed
against Lessor which result from Lessee's activities or from aggravation of such
preexisting conditions during the tenancy of Lessee.
(g) Lessee shall use its best efforts (including payment of money)
not to cause or suffer any lien to be recorded against the land and building
containing the Premises as a consequence of, or in any way related to, the
presence, remediation or disposal of Hazardous Material or Hazardous Waste in or
about the Premises, including any mechanics' liens and any so-called state,
federal or local "superfund" lien relating to such matters.
Section 25 - Americans With Disabilities Act. Lessee shall comply with the
--------------------------------------------
Americans with Disabilities Act of 1990 ("ADA") and the regulations promulgated
thereunder. Lessee hereby expressly assumes all responsibility for compliance
with the ADA relating to the Premises and the
9
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activities conducted by Lessee within the Premises. Any alterations made to the
Premises made by Lessee for the purpose of complying with the ADA or which
otherwise require compliance with the ADA shall be done in accordance with this
Lease; provided, that Lessor's consent to such alterations shall not constitute
either Lessor 's assumption, in whole or in part, of Lessee's responsibility for
compliance with the ADA, or representation or confirmation by Lessor that such
alterations comply with the provisions of the ADA.
Section 26 - Default. In the event (i) any installment of rent or
--------------------
additional rent shall not be paid within ten (10) days after the same is due and
payable; or (ii) Lessee defaults in the performance or observance of any other
covenant or condition in this Lease and such default remains unremedied for ten
(10) days after written notice thereof has been given to Lessee by Lessor; or
(iii) Lessee makes an assignment for the benefit of creditors, files a voluntary
petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions or
applies to any tribunal for any receiver or any trustee of or for Lessee of any
substantial part of its property, commences any proceeding relating to Lessee or
any substantial part of its property under any reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or there is commenced against
Lessee any such proceeding which remains undismissed for a period of sixty (60)
days, or any order approving the petition in any such proceeding is entered, or
Lessee by any act indicates its consent to, or acquiescence in any such
proceeding or the appointment of any receiver of or trustee for Lessee of any
substantial part of its property, or suffers any such receivership or
trusteeship to continue undischarged for a period of sixty (60) days, then in
any of such events, Lessor may, subject to the rights of any trustee in
bankruptcy to assume this Lease, immediately or at any time thereafter and
without demand or notice enter upon the Premises or any part thereof in the name
of the whole and repossess the same as of Lessor's former estate and expel
Lessee and those claiming through or under Lessee and remove their effects
forcibly, if necessary, without being deemed guilty of any manner of trespass
and without prejudice to any remedies which might otherwise be used for arrears
of rent or preceding breach of covenant. Upon such entry this Lease shall
terminate, and Lessee covenants that, in case of such termination by reason of
the default of Lessee, Lessee shall remain and continue liable to Lessor in an
amount equal to the total rent reserved for the balance of the term hereof plus
all additional rent reserved for the balance of the term hereof less the net
amounts (after deducting the expenses of repair, renovation or demolition and
attorneys fees and leasing commissions) which Lessor realize, or with due
diligence should have realized, from the reletting of the Premises. As used in
this Section, the term "additional rent" means the obligations of Lessee under
Section 4 and the value of all considerations other than rent agreed to be paid
or performed by Lessee hereunder, including, without limiting the generality of
the foregoing, taxes, assessments and insurance premiums. Lessor shall have the
right from time to time to relet the Premises upon such terms as it may deem
fit, and if a sufficient sum shall not be thus realized to yield the net rent
required under this Lease, Lessee agrees to satisfy and pay all deficiencies as
they may become due during each month of the remaining term of this Lease.
Nothing herein contained shall be deemed to require Lessor to await the date
whereon this Lease, or the term hereof, would have expired had there been no
default by Lessee, or no such termination or cancellation. Lessee expressly
waives service of any notice of intention to reenter and waives any and all
right to recover or regain
10
<PAGE>
possession of the Premises, or to reinstate or redeem this Lease as may be
permitted or provided for by or under any statute or law now or hereafter in
force and effect. The rights and remedies given to Lessor in this Lease are
distinct, separate and cumulative remedies, and no one of them, whether or not
exercised by Lessor, shall be deemed to be in exclusion of any of the others
herein or by law or equity provided. Nothing contained in this Section shall
limit or prejudice the right of Lessor to prove and obtain, in proceedings
involving the bankruptcy or insolvency of, or a composition with creditors by,
Lessee the maximum allowed by any statute or rule of law at the time in effect.
Section 27 - Expense Reimbursement. In addition to any other remedies
----------------------------------
Lessor may have at law or equity and/or under the Lease, Lessee shall pay upon
demand all of Lessor's costs, charges and expenses, including attorney fees and
court costs, incurred in connection with the successful recovery of sums due
under this Lease, or the successful enforcement of any provisions of this Lease.
Section 28 - Access to Premises. Lessor or its representatives shall have
-------------------------------
free access to the Premises at reasonable intervals during normal business hours
for the purpose of inspection, or for the purpose of showing the Premises to
prospective purchasers or Lessees, or for the purpose of making repairs which
Lessee is obligated to take hereunder but has failed or refused to make. The
preceding sentence does not impose upon Lessor any obligation to make repairs.
Lessor also reserves the right to alter, change, close or limit access to any
portion of the common areas on the Property or to designate portions of such
common areas for use by a single Lessee of the Property.
Section 29 - Holding Over. Except for mutual consent by Lessor and Lessee,
-------------------------
any holding over by Lessee after the expiration of the term of this Lease shall
be treated as a daily tenancy at sufferance at a rate equal to two hundred and
00/100 percent (200%) the rent and herein provided (prorated on a daily basis)
and shall otherwise be in the terms and conditions set forth in this Lease as
far as applicable.
Section 30 - Notices. Any written notice, request or demand required or
--------------------
permitted by this Lease shall, until either party shall notify the other in
writing of a different address, be properly given if sent by certified first
class mail, postage prepaid, return receipt requested, or by prepaid telex, TWX,
telecopy, overnight delivery service, or telegram (with messenger delivery
specified) and shall be deemed given on the day that such writing is received by
the party to whom it is sent, and addressed (if notice is given by mail) as
follows:
If to Lessor:
GHK Company, L.L.C.
c/o Ram Asset Management, Inc.
121 Middle Street, Suite 200
Portland, Maine 04101
Attn.: Ms. Ann C. Goggin
If to Lessee:
11
<PAGE>
Wire & Cable Specialties, Inc.
7 Raymond Avenue, Building A
Salem, New Hampshire, 03079
Attn.: Mr. Paul Monahan
Section 31 - Succession. This Lease shall be binding upon and inure to the
-----------------------
benefit of the heirs, executors, administrators, successors and assigns of the
parties hereto. This section shall not be construed to give Lessor the right to
assign this Lease which shall be governed by section 16.
Section 32 - Waiver. Any consent, expressed or implied, by either party to
-------------------
any breach by the other party of any covenant or condition of this Lease shall
not constitute a waiver of any prior or succeeding breach of the same or any
other covenant or condition of this Lease. Acceptance by Lessor of rent or other
payment with knowledge of a breach of or default under any term hereof by Lessee
shall not constitute a waiver by Lessor of such breach or default. This Lease
shall not be modified or canceled except by writing executed by Lessor and
Lessee.
Section 33 - Acceptance of the Premises. Lessee is thoroughly familiar
---------------------------------------
with the Premises, their condition, state of repair and everything connected
therewith, based on Lessee's own investigation thereof, and no representations
of any kind or nature concerning the Premises or any part thereof not contained
herein have been made to Lessee either before or at the time of the execution of
this Lease. After completion of the tenant improvements required by Section 37
possession of the Premises shall be turned over to Lessee and Lessee shall
except the same.
Section 34 - Brokerage. The parties represent and warrant to each other
----------------------
that they had no contact with any real estate broker, salesman or finder in
connection with the transaction resulting in this Lease, other than The Dalton
Co. Each party agrees to indemnify the other party against, and hold said party
harmless from, any cost, claim, loss, liability, damage or expense arising from
any breach of the foregoing warranty and representation.
Section 35 - Arbitration.
------------------------
(a) In the event of any dispute as to the meaning or interpretation
of any provision of this Lease, either party may, upon ten (10) days' written
notice to the other party, require that the dispute be determined by arbitration
under the rules, then obtaining, of the Commercial Panel of the American
Arbitration Association.
(b) A decision of an arbitrator made in accordance with the
provisions of this Section shall be final and binding upon the parties hereto
and enforceable in a court of law.
Section 36 - Governing Law. This Lease shall be construed and interpreted
--------------------------
in accordance with the laws of the State of New Hampshire.
12
<PAGE>
Section 37 - Lessee Improvements. Lessor shall make certain improvements
--------------------------------
to the Premises to ready the Premises for Lessee's occupancy. Such improvements
are described on Exhibit B.
Section 38 - Option to Terminate. Lessee shall have the option to
--------------------------------
terminate this lease on December 31, 1996 if Lessee provides Lessor with 120
days written notice prior to December 31, 1996 AND either a) Lessee desires to
close this office and leave the Greater Boston/Southern New Hampshire market, or
b) Lessee desires to expand its leased area, Lessor is unable to accomodate such
expansion, and Lessee subsequently does in fact expand its operation in the
market area.
Section 39 - Option to Relocate. Lessee understands that Lessor may
-------------------------------
construct one or more additional buildings at 7 Raymond Avenue. In the event
that Lessor does construct such a
Section 39 - Option to Relocate. Lessee understands that Lessor may
-------------------------------
construct one or more additional buildings at 7 Raymond Avenue. In the event
that Lessor does construct such a building, and Lessee and Lessor reach
agreement on the terms of Lessee relocating into an additional building, Lessor
agrees to release Lessee from this Lease.
Section 40 - Option to Renew. Lessee has the option to extend this lease
----------------------------
at the expiration of the term of this Lease for one additional three year term.
Lessee shall exercise this option to renew by giving Lessor written notice at
least ninety (90) days in advance of the expiration of this Lease. The rental
rate during such renewal option shall be equal to the rental rate then in effect
plus a 5% increase, and the rent shall increase by 5% each year.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed and
delivered as of the day and year first above written.
WITNESS: GHK Company, L.L.C.
/s/ Edward J. Dalton By:/s/ Ann C. Goggin
- ----------------------------- --------------------------
Its Manager
Wire & Cable Specialties, Inc.
/s/ Antoinette M. Shields By:/s/ Paul Monahan
- ----------------------------- --------------------------
Its Vice President
STATE OF N.H.
COUNTY OF ROCKINGHAM
13
<PAGE>
On this 6th day of December, 1994, before me, the undersigned officer,
personally appeared ANN C. GOGGIN, the Manager of GHK Company, L.L. C., a New
Hampshire limited liability company, and acknowledged that she executed the same
for the purpose therein contained, on behalf of the corporation.
/s/ Edward J. Dalton
-----------------------------
Notary Public
My commission expires: May 13, 1997
STATE OF N.H.
COUNTY OF ROCKINGHAM
On this 6th day of December, 1994, before me, the undersigned officer,
personally appeared PAUL MONAHAN, the Vice President of Wire & Cable
Specialties, Inc. and acknowledged that he executed the same for the purpose
therein contained, on behalf of the corporation.
/s/ Edward J. Dalton
-----------------------------
EXHIBIT A
[DRAWING]
14
<PAGE>
EXHIBIT B
Scope of Lessor Improvements:
DEMOLITION, CUT & PATCH, DUMPSTER: Includes demo and removal in warehouse area
- ---------------------------------
of the following: existing suspended ceiling and associated lighting and air
conditioning ducts, all suspended fixtures and supporting systems to within 18
FT AFF. Remove existing metal stud/GWB separating warehouse area. Patch damaged
wall intersection with GWB. Remove all existing debris in warehouse area.
Provide new 6' wide x 6'8" opening (match existing door heights) in existing
walls between offices one and two, and between offices two and three New wall
case shall be GWB. (Office one is adjacent to Unit 8). Cut and patch cement
floor for a distance sufficient to connect the new bathroom sewer plumbing to
existing sewer plumbing in office adjacent to Unit 5. Removal of existing carpet
and disposal.
CARPENTRY/DRYWALL: Walls: 3 5/8" GA metal studs spread at 16" OC. One layer
- -----------------
1/2" GWB applied to each face of stud. Partition to extend to 8'0" AFF. All GWB
to be taped, with 3 layers of joint compound, sanded and one coat primer.
Ceiling: Provide new suspended ceiling in handicap toilet room at 7'8". Suspend
ceiling 6" from 20 GA metal stud frame anchored to top of enclosure. Provide new
suspended ceiling in office adjacent to unit 5 to match existing.
Doors: Install three wooden doors and metal frames. Doors are available on site.
Use existing passage set hardware where applicable. Provide privacy set on
toilet room door to match existing finish. Doors to be installed in handicap
toilet room, hallway opening to warehouse area and office adjacent to Unit 5.
There are no doors to be installed in new 6' openings between offices one and
two, and two and three.
Interior Windows: Re-install sliding window units in presently installed frame,
Sliding units available on site.
OVERHEAD DOOR: Provide and install new 8' x 10' manually operated insulated
- -------------
metal faced overhead door; cut exterior skin of building to accommodate required
opening. Door shall match those in existing building. Door shall include
appropriate structural frame installation dock, bumper and related hardware.
Door opening shall be trimmed out at exterior opening to match existing,
ELECTRICAL: Repair existing fluorescent deck mounted fixtures in rear of
- ----------
warehouse. Install (4) four new metal halide fixtures to accommodate typical
general lighting for warehouse space. Use existing light switch circuitry. Re-
use and install two functional existing light fixtures from warehouse area in
office adjacent to Unit 5. Install transformer to meet building code and
sufficiently power a/c outlets. Install new ceiling fan/light combination in
handicap toilet room, Nutone or equal. Provide one
15
<PAGE>
22OV/3 Phase power drop near rear center column and two 110 Volt duplex
receptacles at warehouse office near partition wall.
SPRINKLER: Remove and cap sprinkler drops in warehouse area, except for two
- ---------
mounted on partition wall by new bathroom
HVAC: Re-use and install one HVAC diffuser in office adjacent to Unit 5 and
- ----
necessary duct work to diffuser. Attach existing roof top unit to office duct
work. Cap off end of office duct work adjacent to Unit 5. Attach existing roof
top unit to new duct work with three diffusers in warehouse area. Ductwork for
fan unit in handicap bathroom shall extend through the roof
PLUMBING: Install one handicap toilet/crane "Hymont" #3-154 elongated rim; one
- --------
handicapped lavatory w/chrome faucet levers; one chrome toilet paper holder; and
one 42" stainless steel grab bar. Attach water and sewer lines to existing.
FLOORING/CARPET: Provide and install new VCT Armstrong "Excelon" or equal in
- ---------------
bathroom. Provide and install new 26 oz. nylon loop Peerless "Liason" or equal
commercial grade carpeting, glue down installation, in offices and adjacent
hallway. All floor covering to be trimmed in vinyl cove base.
PAINT: Paint all walls in office area and adjacent hallway with one coat flat
- -----
latex. Warehouse walls not to be painted.
PERMITS: Lessor shall obtain necessary building and occupancy permits.
- -------
FINAL CLEANING: All office and warehouse areas to be left broom clean.
- --------------
16
<PAGE>
ADDENDUM TO LEASE
DATED DECEMBER 2, 1994
BETWEEN WIRE & CABLE SPECIALTIES, INC., LESSEE, AND
GHK COMPANY, L. L. C., LESSOR
This schedule (Exhibit C) has been discussed and agreed upon by Lessor, Lessee,
and Lessor's contractor. All dates are estimates. Lessor shall make best efforts
to hold its contractor to this schedule.
<TABLE>
<CAPTION>
<S> <C> <C>
Demolition: Commence: 12/07/94
Complete: 12/12/94
Overhead door: Installed 12/12/94
Plumbing: Roughed in 12/12/94
Complete: 12/13/94
Sprinkler Commence 12/12/94
Complete: 12/13/94
Carpentry/Drywall To take place throughout construction period, for project
completion on 12/18
Permits: Building 12/07/94
Occupancy: 12/16/94
HVAC: Commence 12/13/94
Complete: 12/15/94
Painting: Commence 12/17/94
Complete: 12/18/94
Floor Covering/Carpet: Complete: 2/18/94
</TABLE>
Seen and Agreed To:
Wire & Cable Specialties, Inc., Lessee
By:/s/ Andy Rainey
-------------------------------------
Andy Rainey, Regional Manager, Northeast
GHK Company, L. L. C., Lessor
By:/s/ Ann C. Goggin
-------------------------------------
Ann C. Goggin, Manager
17
<PAGE>
EXHIBIT 10.15
INDUSTRIAL LEASE
ELGIN TECH CENTER
ELGIN, ILLINOIS
Lessor: Principal Mutual Life Insurance Company
Lessee: Wire & Cable Specialties Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. DEMISE...............................................................1
2. TERM.................................................................1
3. RENT.................................................................2
4. PURPOSE..............................................................3
5. OPERATING EXPENSES...................................................3
6. ADDITIONAL RENT......................................................5
7. SORTING AND SEPARATION OF REFUSE AND TRASH...........................5
8. HAZARDOUS WASTE......................................................6
9. INSURANCE............................................................7
10. DAMAGE OR RESTORATION...............................................10
11. INDEMNIFICATION.....................................................10
12. ASSIGNMENT AND SUBLETTING...........................................11
13. CARE OF PREMISES....................................................11
14. ALTERATION BY TENANT................................................12
15. CONDEMNATION........................................................12
16. SUBORDINATION.......................................................13
17. ACCESS TO PREMISES..................................................13
18. RULES AND REGULATIONS...............................................13
19. COVENANTS OF RIGHT TO LEASE.........................................14
20. MECHANIC'S LIENS....................................................14
21. EXPIRATION OF LEASE AND SURRENDER OF POSSESSION.....................14
22. DEFAULT-REMEDIES....................................................15
23. RE-ENTRY BY LANDLORD................................................16
24. ADDITIONAL RIGHTS TO LANDLORD.......................................17
25. SUCCESSORS, ASSIGNS AND LIABILITY...................................17
26. NOTICES.............................................................17
27. MORTGAGEE'S APPROVAL................................................18
28. ESTOPPEL CERTIFICATES...............................................18
29. MISCELLANEOUS.......................................................18
30. DEFAULT RATE OF INTEREST............................................19
31. EXCULPATORY PROVISIONS..............................................19
32. MORTGAGE PROTECTION.................................................20
</TABLE>
i
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT by and between Principal Mutual Life Insurance Company,
whose address for the purpose of this lease shall be 711 High Street, Des
Moines, Iowa 50309, collectively hereinafter referred to as "Landlord", and Wire
& Cable Specialties Corp., whose address for the purpose of this lease (Lease)
shall be 1150 Davis Road, Unit E, Elgin, Illinois 60123, hereinafter referred to
as "Tenant".
IT IS AGREED AS FOLLOWS:
1. DEMISE.
Landlord does hereby lease to Tenant and Tenant hereby rents the premises
(Premises) described as: l2,800 square feet of net rentable area consisting
of approximately 1,395 square feet of office space and 11,405 square feet
of warehouse space located at 1150 Davis Road, Unit E, Elgin, Illinois
which, more particularly, includes the space and premises shown on the site
plan attached hereto and marked Exhibit "A".
-----------
Improvements. Landlord shall, prepare and furnish the drawings and
------------
specifications for all improvements set forth in Exhibit "B", which is
-----------
attached hereto and made a part hereof. Landlord shall, without cost to
Tenant, perform the construction or other items of work in the premises and
furnish those quantities and dualities of materials specified on Exhibit
-------
"B".
---
2. TERM.
The term of this lease shall be for a period of Three (3) years, commencing
on the first day of October, 1993 and ending at midnight on the thirtieth
day of September, 1996 (Lease Term). Notwithstanding said commencement
date, if for any reason Landlord cannot deliver possession of the leased
premises to the Tenant on said date, Landlord shall not be subject to any
liability therefore, nor shall such failure affect the validity of this
lease or the obligations of the Tenant hereunder or extend the term hereof,
but in such case Tenant shall not be obligated to pay rent until possession
of the Premises is tendered to Tenant. In the event that delivery of
possession results from Tenant's failure to perform work for which Tenant
is responsible, or fails to furnish the plans and specifications as
provided above, or fails to make timely selections of materials, color
choices or other matters for which Tenant is responsible, the rent shall,
nonetheless, commence on the commencement date stated above. If Tenant
occupies the leased premises prior to said commencement date, such
occupancy shall be subject to all provisions hereof and shall not advance
the termination date, and Tenant shall pay rent for such period at the
initial monthly rate set forth below.
1
<PAGE>
3. RENT.
(A) Rent. Tenant shall pay for the use and occupancy of the premises base
----
rental sums as set forth in the Rent Schedule marked as Exhibit "C" ,
-----------
payable in monthly installments in the amount of $5,013.33 on the
first day of each month in advance without demand during the term of
this lease. Rent of any period during the term hereof which is less
than one month shall be a pro rata portion of the monthly installment.
Rent shall be payable in lawful money of the United States to Landlord
at the address stated herein or to such other persons or at such other
places as Landlord may designate in writing.
(B) Place of Payment. All such rentals shall be paid to Landlord at
----------------
Bennett & Kahnweiler Management Company, Lockbox #94984, Chicago, IL
60690 or at such place as Landlord may designate from time to time, in
writing addressed to Tenant.
(C) Late Charge. Tenant hereby acknowledges that late payment by Tenant of
-----------
Rent or other sums due thereunder will cause Landlord to incur costs
not contemplated by this Lease. Therefore, if any installment of rent
or any other sum of due from Tenant shall not be received by Landlord
within ten (10) days after such amount is due, Tenant shall pay to
Landlord a late charge of six percent (6%) of such overdue amount.
Acceptance of such late charge by itself by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such any
remaining overdue amount or prevent Landlord from exercising any other
right or remedy available to Landlord.
(D) Receipt. Receipt is hereby acknowledged of the sum of $5,013.33 in
-------
payment of the base monthly rental for the first month of the term of
this Lease.
(E) Security Deposit. Tenant shall deposit with Landlord upon execution
----------------
hereof $5,013.33 as security for Tenant's faithful performance of
Tenant's obligation hereunder. If Tenant fails to pay rent or other
charges due hereunder or otherwise defaults with respect to any
provision of the Lease, Landlord may use, apply or retain all or any
portion of said deposit for the payment of any rent or other charge in
default or for the payment of any other sum to which Landlord may
become obligated by reason of Tenant`s default, or to compensate
Landlord for any loss or damage which Lessor may suffer thereby. If
Landlord so uses or applies all or any portion of said deposit, Tenant
shall within ten (10) days after written demand therefor deposit cash
with Landlord in an amount sufficient to restore said deposit to the
full amount herein above stated and Tenant's failure to do so shall be
a material breach of this Lease. If the monthly rent shall, from time
to time increase during the term of this Lease, Tenant shall thereupon
deposit with Landlord additional security deposit so that the amount
of security deposit held by Landlord
2
<PAGE>
shall at all times bear the same proportion to current rate as the
original security deposit bears to the original monthly rent set forth
in Paragraph 3A hereof. Landlord shall not be required to keep said
deposit separate from its general accounts. If Tenant performs all of
Tenant's obligations hereunder, said deposit, or so much thereof as
has not theretofore been applied by Landlord shall be returned,
without payment of interest or other increment for its use to Tenant
(or at Landlord's option, to the last assignee, if any, of Tenant's
interest hereunder) at the expiration of the term hereof, and after
Tenant has vacated the Premises. No trust relationship is created
herein between Landlord and Tenant with respect to said Security
Deposit.
Tenant hereby agrees not to look to any mortgagee as mortgagee,
mortgagee-in-possession or successor in title to the Premises for
accountability for any security deposit required by Landlord
hereunder, unless said sums have actually been received by said
mortgagee as security for Tenant's performance of this Lease. Landlord
may deliver the funds deposited hereunder by Tenant to the purchaser
of Landlord's interest in the Premises, in the event that such
interest is sold, and thereupon Landlord shall be discharged from any
further liability with respect to said security deposit.
(F) Pro Rata Share. Tenant's proportionate share shall be the percentage
--------------
which the square footage of the premises bears to the total square
footage of the following-described building(s) 12.5%.
4. PURPOSE.
Tenant covenants that the demised premises will be used as general office
and warehouse for distribution of electrical wire and cable together with
the incidental activities of Tenant, its affiliated companies or other
subsidiary companies and for no other use or purpose. Tenant further
covenants that the premises will not be used or occupied for any unlawful
purposes.
5. OPERATING EXPENSES.
TAXES, UTILITIES, REPAIRS, MAINTENANCE AND REPLACEMENT
(1) Taxes
(a) The Landlord shall pay all taxes payable during the term
of this Lease before the same are delinquent.
(b) If in the future a tax or other charge on rents shall be
imposed by any governing body having the authority to
impose such tax or
3
<PAGE>
charge, then such tax or charge shall likewise be the
obligation of the Landlord.
(c) As used herein, the term "taxes" shall mean real estate
taxes, assessments (whether they be general or special) ,
sewer rents, rates and charges, transit and transit
district taxes, taxes based upon the receipt of rent, and
any other federal, state or local governmental charge,
general, special, ordinary or extraordinary (but not
including income or franchise taxes or any other taxes
imposed upon or measured by Landlord's income or profits,
except as provided herein), which may now or hereafter be
levied, assessed or imposed against the Premises.
(2) Tenant shall pay all utility bills incurred including but not
limited to water, gas, electricity, fuel, light, heat and power
bills.
(3) Landlord shall be responsible for the following: (a) trash
removal subject to Paragraph 7; (b) landscaping; (c) all labor
costs and supply costs involved in the operation of the
building; (d) all other services of any kind and nature which
may be used in or upon the premises (except as provided for
elsewhere in this Lease); (e) management fees paid for the
management of the premises; (f) and the repair, maintenance and
replacement of the building and improvements as follows: (i)
the roof; (ii) all interior and exterior components of the
building and improvements both structural or otherwise; (iii)
parking lot, (iv) sidewalks, alleys and any and all access
drives, including the removal of snow and ice therefrom; (v)
heating equipment, lines and fixtures; (vi) air conditioning
equipment, lines and fixtures; (vii) plumbing equipment, lines
and fixtures; (viii) electrical equipment, lines and fixtures;
(ix) all ingress-egress doors; (x) plate glass; (xi) all
utility lines and services.
(4) Landlord shall be responsible for providing Property and
Liability Insurance for the premises.
(5) Notwithstanding anything to the contrary contained herein, the
Tenant will keep, maintain and preserve the premises in a first
class condition. The Tenant at its sole cost and expense will
provide janitorial and window washing for the interior of the
premises. When and if needed, at the Tenant's sole cost and
expense, the Tenant will make all interior repairs and
replacements including but not limited to interior walls, doors
and windows, floors and floor coverings. The Tenant will also
repair and replace at its sole cost and expense any broken
windows and/or damage to the building or premises caused by the
negligence of the Tenant or its
4
<PAGE>
employees, agents, guests or invitees during the Term hereof.
Tenant will comply with all ordinances of the City of Elgin,
rules and regulations of the Board of Health and the laws of
the State of Illinois, relative to the repair, maintenance and
replacement in the leased premises.
(6) Tenant, at Tenant's sole expense, shall comply with all laws,
rules, orders, ordinances, directions, regulations and
requirements of federal, state, county, and municipal
authorities now in force or which may hereafter be in force,
which shall impose any duty upon the Landlord or Tenant with
respect to the use, occupation or alteration of the premises.
6. ADDITIONAL RENT.
It is understood that the Rent set forth in paragraph 3 of the Lease was
negotiated in anticipation that the Landlord's portion of Operating
Expenses, defined in paragraph 5(1), 5(3), and 5(4) of the Lease, would not
exceed $.99 per square foot. Therefore, in order that Rent payable
throughout the term of this Lease shall reflect any increase in such costs,
Tenant shall pay its pro rata share of the increase in Operating Expenses
defined in paragraph 5(l), 5(3), and 5(4).
Landlord will use it's reasonable efforts to ensure that any increase in
expenses reflects market conditions. Within 60 days after the first day of
each calendar year, Landlord shall furnish to Tenant an estimate of
Tenant's pro rata share of reimbursable Operating Expenses defined in
Paragraph 5 for the ensuing calendar year. Tenant shall pay to Landlord
1/12th of said estimate at the same time and place as the base rent is to
be paid pursuant to Paragraph 3, above. Landlord will furnish a statement
of the actual cost with respect to the reimbursable expenses no later than
60 days following the calendar year-end including the year following the
year in which the Lease terminates. In the event that Landlord is, for any
reason, unable to furnish the accounting for the prior year within the time
specified above, the Landlord will furnish such accounting as soon
thereafter as practicable with the same force and effect as the statement
would have had if delivered within the time specified above. Tenant will
pay any deficiency to Landlord as shown by such statement within 30 days
after receipt of statement. If the total amount paid by Tenant during any
calendar year exceeds the actual amount of its share of the reimbursable
expenses due for such calendar year, the excess will be refunded by
Landlord within 30 days of the date of the statement. Landlord will keep
books and records showing the reimbursable expenses in accordance with
generally accepted accounting principles. Upon five (5) business days
notice, Tenant shall have the right to inspect the books and records at the
office of the Landlord or its Manager.
7. SORTING AND SEPARATION OF REFUSE AND TRASH.
(A) The Tenant covenants and agrees, as its sole cost and expense,
to comply with all
5
<PAGE>
present and future laws, orders and regulations of all state, federal,
municipal and local governments, departments, commissions and boards
regarding the collection, sorting, separation and recycling of waste
products, garbage, refuse and trash. The Tenant shall sort and
separate waste products, garbage, refuse and trash into such
categories as provided by law. Each separately sorted category of
waste products, garbage, refuse and trash shall be placed in separate
receptacles reasonably approved by the Landlord. Such separate
receptacles may, at the Landlord's option, be removed from the demised
premises in accordance with a collection schedule prescribed by law.
(B) The Landlord reserves the right to refuse to collect or accept from
the Tenant any waste products, garbage, refuse or trash that is not
separated and sorted as required by law, and to require the Tenant
arrange for such collection at the Tenant's sole cost and expense,
utilizing a contractor satisfactory to the Landlord. The Tenant shall
pay all costs, expenses, fines, penalties or damages that may be
imposed on the Landlord or the Tenant by reason of the Tenant's
failure to comply with the provisions of this paragraph 6, and, at the
Tenant's sole cost and expense, shall indemnify, defend and hold the
Landlord harmless (including legal fees and expenses) from and against
any actions, claims and suits arising from such noncompliance,
utilizing counsel reasonably satisfactory to the Landlord.
8. HAZARDOUS WASTE.
The term "Hazardous Substances", as used in this lease shall mean
pollutants, contaminants, toxic or hazardous wastes, or any other
substances, the use and/or the removal of which is required or the use of
which is restricted, prohibited or penalized by any "Environmental Law",
which term shall mean any federal, state or local law, ordinance or other
statute of a governmental or quasi-governmental authority relating to
pollution or protection of the environment. Tenant hereby agrees that (A)
no activity will be conducted on the premises that will produce any
Hazardous Substance, except for such activities that are part of the
ordinary course of Tenant's business activities (the "Permitted
Activities") provided said Permitted Activities are conducted in accordance
with all Environmental Laws and have been approved in advance in writing by
Landlord; Tenant shall be responsible for obtaining any required permits
and paying any fees and providing any testing required by any governmental
agency; (B) the premises will not be used in any manner for the storage of
any Hazardous Substances except for the temporary storage of such materials
that are used in the ordinary course of Tenant's business (the "Permitted
Materials") provided such Permitted Materials are properly stored in a
manner and location meeting all Environmental Laws and approved in advance
in writing by Landlord; Tenant shall be responsible for obtaining any
required permits and paying any fees and providing any testing required by
any governmental agency; (C) no portion of the premises will be used as a
landfill or a dump; (D) Tenant will not install any underground tanks of
any type; (E) Tenant will not allow any surface or subsurface
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conditions to exist or come into existence that constitute, or with the
passage of time may constitute a public or private nuisance; (F) Tenant
will not permit any Hazardous Substances to be brought onto the premises,
except for the Permitted Materials described above, and if so brought or
found located thereon, the same shall be immediately removed, with proper
disposal, and all required cleanup procedures shall be diligently
undertaken pursuant to all Environmental Laws. Landlord or Landlord's
representative shall have the right but not the obligation to enter the
premises for the purpose of inspecting the storage, use and disposal of
Permitted Materials to ensure compliance with all Environmental Laws.
Should it be determined, in Landlord's sole opinion, that said Permitted
Materials are being improperly stored, used, or disposed of, then Tenant
shall immediately take such corrective action as requested by Landlord.
Should Tenant fail to take such corrective action within 24 hours, Landlord
shall have the right to perform such work and Tenant shall promptly
reimburse Landlord for any and all costs associated with said work. If at
any time during or after the term of the lease, the premises are found to
be so contaminated or subject to said conditions, Tenant shall diligently
institute proper and thorough cleanup procedures at Tenant's sole cost, and
Tenant agrees to indemnify, defend and hold harmless Landlord, its lenders,
any managing agents and leasing agents of the Premises, and their
respective agents, partners, officers, directors and employees, from all
claims, demands, actions, liabilities, costs, expenses, damages (actual or
punitive) and obligations of any nature arising from or as a result of the
use of the Premises by Tenant. The foregoing indemnification and the
responsibilities of Tenant shall survive the termination or expiration of
this Lease.
During the term of this lease, Tenant shall promptly provide Landlord with
copies of all summons, citations, directives, information inquiries or
requests, notices of potential responsibility, notices of violation or
deficiency, orders or decrees, claims, complaints, investigations,
judgments, letters, notice of environmental liens, and other
communications, written or oral, actual or threatened, from the United
States Environmental Protection Agency, Occupational Safety and Health
Administration, Illinois Environmental Protection Agency or other federal,
state or local agency or authority, or any other entity or individual,
concerning (i) any Hazardous Substance and the Premises; (ii) the
imposition of any lien on the Premises; or (iii) any alleged violation of
or responsibility under any Environmental Law.
9. INSURANCE.
(A) INSURANCE BY LANDLORD.
Landlord shall, during the Lease Term, procure and keep in force the
following insurance, the cost of which shall be deemed as Additional
Rent payable, by Tenant pursuant to Paragraph 5(4):
(1) PROPERTY INSURANCE. "All Risk" property insurance, including,
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without limitation, coverage for earthquake and flood; and
machinery (if applicable); sprinkler damage; vandalism;
malicious mischief. Such Insurance shall not cover Tenant's
equipment, trade fixtures, inventory, fixtures or personal
property located on or in the Premises;
(2) LIABILITY INSURANCE. Commercial general liability (lessor's
risk) insurance against any and all claims for bodily injury,
death or property damage occurring in or about the Building or
the Land. Such insurance shall have a combined single limit of
not less than One Million Dollars ($1,000,000) per occurrence
per location with a Two Million Dollar ($2,000,000) aggregate
limit; and
(3) OTHER. Such other insurance as required by law.
(B) INSURANCE BY TENANT.
Tenant shall, during the Lease Term, procure and keep in force the
following insurance:
(1) Personal Property Insurance. "All Risk" property insurance,
---------------------------
including, without limitation, coverage for earthquake and
flood; broiler and machinery (if applicable); sprinkler damage;
vandalism; malicious mischief on all equipment, trade fixtures,
inventory, fixtures and personal property located on or in the
Premises, including fixtures hereinafter constructed or
installed on the Premises. Such insurance shall be in an amount
equal to the full replacement cost of the aggregate of the
foregoing and shall provide coverage comparable to the coverage
in the standard ISO all risk form, when such form is
supplemented with the coverages required above.
(2) Liability Insurance. Commercial general liability insurance for
-------------------
the mutual benefit of Landlord and Tenant, against any and all
claims for personal injury, death or property damage occurring
in, or about the Premises (and Tenant's operations on the
Premises), or arising out of Tenant's or Tenant's agents' use
or occupancy of the Premises. Such insurance shall have a
combined single limit of not less than One Million Dollars
($1,000,000) per occurrence per location with Two Million
Dollars ($2,000,000) aggregate limit. Such insurance shall
contain a cross-liability (severability of interests) clause
and an extended ("broad form") liability endorsement, including
contractual coverage. The minimum limited specified above are
the minimum amounts required by Landlord, and may be revised by
Landlord from time to time to meet changed circumstances,
including without limitation to reflect (i) changes in the
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<PAGE>
purchasing power of the dollar, (ii) changes indicated by the
amount of plaintiff's verdicts in personal injury actions in
the State of Illinois or (iii) changes consistent with the
standards required by other landlords in the county in which
the Premises are located. Such liability insurance shall be
primary and not contributing to any insurance available to
Landlord, and Landlord's insurance (if any) shall be in excess
thereto.
(3) Other Such other insurance as required by law, including,
-----
without limitation, workers' compensation insurance.
(4) Form of the Policies. The policies required to be maintained by
--------------------
Tenant pursuant to Paragraphs 9(B)(1), (2), and (3) above shall
be with companies rated A10 or better in Best Insurance Guide,
licensed to do business in Illinois and domiciled in USA, on
forms, with deductible amounts (if any), and loss payable
clauses satisfactory to Landlord, shall include Landlord and
the beneficiary or mortgagee of any deed of trust or mortgage
encumbering the Premises as additional insureds, and shall
provide that such parties may, although additional insureds,
recover for any reasonable loss suffered by Tenant's
negligence. Certified copies of policies of certificates of
insurance shall be delivered to Landlord prior to the
Commencement Date; a new policy or certificate shall be
delivered to landlord at least thirty (30) days prior to the
expiration date of the old policy. Tenant shall have the right
to provide insurance coverage which it is obligated to carry
pursuant to the terms hereof in a blanket policy, provided such
blanket policy expressly affords coverage to the Premises and
to Tenant as required by this Lease. Tenant shall obtain a
written obligation on the part of Tenant's insurer(s) to notify
Landlord and any beneficiary or mortgagee of a deed of trust or
mortgage encumbering the Premises in writing of any delinquency
in premium payments and at least thirty (30) days prior to any
cancellation or modification of any policy.
(C) FAILURE BY TENANT TO OBTAIN INSURANCE.
If Tenant does not take out the insurance required pursuant to
Paragraph 9(B) or keep the same in full force and effect, Landlord
may, but shall not be obligated to take out the necessary insurance
and pay the premium therefor, and Tenant shall repay to Landlord, as
Additional Rent, the amount so paid promptly upon demand. In
addition, Landlord may recover from Tenant and Tenant agrees to pay,
as Additional Rent, any and all reasonable expenses (including
attorneys' fees) and damages which Landlord may sustain by reason of
the failure by Tenant to obtain and maintain such insurance, it being
expressly declared that the expenses and damages of Landlord shall not
be limited to the amount of the premiums thereon.
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<PAGE>
(D) SUBROGATION.
In the event of loss or damage to the Premises, each party will look
first to any insurance in its favor before making any claim against
the other party. The Tenant will obtain for each policy in effect a
provision permitting waiver of any claim against the Landlord for loss
or damage within the scope of the insurance. In addition, each party,
its agents, employees or guests to the extent permitted, for itself
and its insurers waives all such insured claims against the other
party.
10. DAMAGE OR RESTORATION.
If, prior to or during the term of this Lease, or any extension thereof,
the leased premises or the building of which the premises may be a part,
shall be so damaged or destroyed by fire or other casualty so as to render
them untenantable, then Landlord, at its sole option, shall have the right
to cancel and terminate this Lease. If not terminated, then Landlord shall
repair and restore the leased premises with all reasonable speed to
substantially the same condition as immediately prior to such damage or
destruction, and the rental or a just and proportionate part thereof,
according to Tenant's ability to utilize the premises in its damaged
condition, shall be abated until the premises shall have been repaired and
restored by Landlord. But if the leased premises shall be so lightly
damaged by fire or other casualty as not to be rendered untenantable, then
Landlord agrees to repair the premises with reasonable promptness and the
rent accrued and accruing, shall not cease. "Untenantable" premises shall
be such as to not allow Tenant to transact and effectuate its operations in
the ordinary course of business. Tenant shall have the right to cancel and
terminate this Lease in the event the premises is damaged or destroyed by
fire or other casualty and is untenantable for a period exceeding six (6)
months.
11. INDEMNIFICATION.
Tenant shall indemnify, hold harmless, and defend Landlord (except for
Landlord's active negligence or willful misconduct) against all claims,
losses or liabilities for injury or death to any person or for damage to or
loss of use of any property arising out of any occurrence in, on or about
the Building or land, if cause or contributed to by Tenant to Tenant's
agents, or arising out of any occurrence in, upon or at the Premises or on
account of the use, condition, occupational safety or occupancy of the
Premises. It is the intent of the parties hereto that the indemnity
contained in this Paragraph 11 shall not be limited or barred by reason of
any passive negligence on the part of Landlord or Landlord's agents, except
as expressly provided herein. Such indemnification shall include and apply
to attorneys' fees, investigation costs, and other necessary and reasonable
costs actually incurred by Landlord. Tenant shall further indemnify,
defend and hold harmless Landlord from and against any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease. The
provisions of this Paragraph 11 shall survive Lease Termination with
respect
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<PAGE>
to any damage, injury, death, breach or default occurring prior to such
termination. This Lease is made on the express conditions that Landlord
shall not be liable for, or suffer loss by reason of, injury to person or
property, from whatever cause, in any way connected with the condition,
use, occupational safety or occupancy of the Premises specifically
including, without limitation, any liability for injury to the person or
property of Tenant or Tenant's agents.
12. ASSIGNMENT AND SUBLETTING.
Tenant may assign, sublet or transfer this Lease to any person, firm or
corporation with the written consent of Landlord which consent shall not be
unreasonably withheld, provided, however, that no such assignment, sublease
or transfer shall act as a release of Tenant from any of the obligations
and agreements on its part to be kept and performed hereunder. Any
assignment, sublease or transfer without the prior written consent of
Landlord shall be null and void at Landlord's option.
Request for consent to assign Tenant's interest or to sublease the premises
shall be accompanied by a statement setting forth the name of the
prospective assignee or sublessee, the financial details of the assignment
or sublease (i.e. the rental and security deposit), the term, other
relevant information concerning the proposed assignee or sublessee.
Landlord shall have the right within ten (10) days after receipt of such
written request from Tenant to (A) withhold consent to the assignment or
sublease if the withholding of such consent is reasonable, or (B) consent
to such sublease or Assignment, in which case any rent payable by the
assignee or sublessee (including any lump sum of additional payment or
other consideration for the assignment or sublease) which exceeds the rent
payable by Tenant hereunder shall be shared fifty percent (50%) by Tenant
and fifty percent (50%) by Landlord, or (C) terminate this Lease, effective
as of the commencement date of the term of such sublease or the effective
date of such assignment in which case Landlord shall have the right to
enter into a direct Lease with such proposed assignee or sublessee. If
Landlord elects to so terminate the Lease, then this Lease shall be
canceled and terminated as of the effective date of the proposed assignment
or the commencement date of the proposed sublease, as set forth in Tenant's
notice.
Landlord's approval of any subtenant or assignee is conditioned upon there
being no additional compliance required with all laws, rules and
regulations of any governmental authority required of either the Landlord
or the Tenant and such approval shall create no responsibility or liability
on the part of the Landlord for any non-compliance with laws, rules and
regulations of any governmental authority.
13. CARE OF PREMISES.
Tenant further covenants and agrees that during said term it will keep said
demised
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premises and every part thereof and all buildings at any time situated
thereon in a clean and wholesome condition and generally that it will in
all respects and at all times duly comply with all lawful health and police
regulations and also that it will keep the improvements at any time
situated upon the demised premises safe, secure and comfortable to the
lawful and valid requirements applicable thereto.
14. ALTERATION BY TENANT.
(A) Tenant is hereby given the right, at its sole cost and expense, at any
time during the term hereof, to make any alterations or improvements
to the interior of the demised premises which the Tenant may deem
necessary or desirable for its purposes; provided, however, that no
alterations or improvements shall be made without the written approval
of the Landlord, which written approval shall not be unreasonably
withheld.
(B) All work herein permitted shall be done and completed by the Tenant in
a good and workmanlike manner and in compliance with all requirements
of law and of governmental rules and regulations. Tenant agrees to
indemnify the Landlord against all mechanics' or other liens arising
out of any of such work, and also against any and all claims for
damages or injury which may occur during the course of any such work.
The Landlord agrees to apply for or join with the Tenant in applying
for all permits necessary to be secured from governmental authorities
and to promptly execute such consents as such authorities may require
in connection with any of the foregoing work.
(C) Landlord may require that Tenant remove any or all said alterations,
improvements or additions at the expiration of the term, and restore
the premises to their prior condition. Unless Landlord requires their
removal, all alterations, additions and improvements which may be made
on the premises, shall become the property of Landlord and remain upon
and be surrendered with the premises at the expiration of the term.
Tenant shall repair any damage to the premises caused by the
installation or removal of Tenant's trade fixtures, furnishings and
equipment.
15. CONDEMNATION.
(A) If the leased premises shall be wholly taken by exercise of right of
eminent domain, then this Lease shall terminate from the day the
possession of the whole of the leased premises shall be required under
the exercise of such power of eminent domain. Any award for the taking
of all or part of the premises under the power of eminent domain or
any payment made under threat of the exercise of such power shall be
the property of the Landlord. Tenant reserves such separate rights as
it may have against the condemning authority to claim damages for loss
12
<PAGE>
of its trade fixtures and the cost of removal and relocation expenses
and any other loss or damage.
(B) If such part of the building or buildings in which Tenant's business
is operated shall be condemned so as to the substantially and
materially hamper the operation of Tenant's business, then the rent
payable hereunder shall be reduced in the proportion that the
remaining area of the demised premises bears to the original area of
the entire demised premises leased hereunder. If the parties are
unable to agree upon the amount of the reduction in rent within seven
(7) days from the date the Tenant's business is substantially and
materially hampered, then it shall be arrived at by arbitration, each
party to select an arbitrator and if the two arbitrators are unable to
agree they shall select a third arbitrator and the three arbitrators
so selected shall determine the amount of such reasonable reduction.
It is agreed that the findings of the arbitrators shall be binding
upon the parties.
16. SUBORDINATION.
Tenant shall, upon the request of Landlord in writing, agree to the
subordination of this Lease and the lien hereof to the lien of any present
or future mortgage upon the premises irrespective of the time of execution
or the time of recording of any such mortgage. In the event of
subordination of this Lease, Landlord will attempt to obtain from the
holder of any such mortgage, a written agreement with Tenant to the effect
that (A) in the event of a foreclosure or other action taken under the
mortgage by the holder thereof, this Lease and the rights of Tenant
hereunder shall not be disturbed but shall continue in full force and
effect so long as Tenant shall not be in default hereunder; and (B) such
holder will agree that in the event it or any successor assign shall be in
possession of the premises, that so long as Tenant shall observe and
perform all of the obligations of Tenant to be performed pursuant to this
Lease, such Mortgagee will perform all obligations of Landlord required to
be performed under this Lease. The word "Mortgage" as used herein includes
mortgages, deeds of trust and any sale-leaseback transactions, or other
similar instruments, and modifications, extensions, renewals, and
replacements thereof, and any and all advances thereunder.
17. ACCESS TO PREMISES
Landlord and its authorized agents shall have free access to said premises
at any and all reasonable times to inspect the same and for the purposes
pertaining to the rights of the Landlord.
18. RULES AND REGULATIONS.
Tenant agrees to comply with all reasonable rules and regulations
promulgated by Landlord concerning the use and enjoyment of the demised
premises. Among other
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things, the rules and regulations specifically prohibit outdoor storage.
19. COVENANTS OF RIGHT TO LEASE.
Landlord covenants that it has good and sufficient right to enter into this
Lease and that they it alone have has full right to lease the premises for
the term aforesaid. Landlord further covenants that upon performing the
terms and obligations of Tenant under this Lease, Tenant will have quite
enjoyment throughout the term of this Lease and any renewal or extension
thereof.
20. MECHANIC'S LIENS.
Neither the Tenant nor anyone claiming by, through, or under the lease,
shall have the right to file or place any mechanic's lien or other lien of
any kind or character whatsoever upon said premises or upon any building or
improvement thereon, or upon the leasehold interest of the Tenant therein,
and notice is hereby given that no contractor, subcontractor, or anyone
else who may furnish any material, service or labor for any building,
improvements, alteration repairs or any part thereof, shall at any time be
or become entitled to any lien thereon, and for the further security of the
Landlord, the Tenant covenants and agrees to give actual notice thereof in
advance, to any and all contractors and subcontractors who may furnish or
agree to furnish any such material, service or labor.
21. EXPIRATION OF LEASE AND SURRENDER OF POSSESSION.
(A) Upon the expiration of this Lease, by lapse of time or otherwise, any
and all buildings, improvements or additions erected on said premises
by Tenant shall be and become the property of the Landlord without any
payment therefor and Tenant shall surrender said premises, together
with all buildings and improvements thereon, whether erected by Tenant
or Landlord, ordinary wear and tear and damage by fire or other
casualty excepted.
(B) If Tenant fails to yield up immediate possession of said premises at
the termination of this Lease and return the keys to said premises to
Landlord at the place stipulated herein for the payment of rent he
shall pay as liquidated damages for the whole time such possession is
withheld a sum equal to twice the amount of the rent for the last year
of the term prorated and averaged per day of such withholding. But the
provisions of this clause and the acceptance or any such liquidated
damages by Landlord shall not constitute a waiver by Landlord of its
rights of re-entering as hereinafter set forth, nor shall any other
act in apparent affirmance of the tenant operate as a waiver by
Landlord its rights of re-entering as hereinbefore set forth, nor of
its rights to terminate this Lease or operate as an extension thereof.
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(C) Tenant may install adequate equipment, fixtures and machinery for the
carrying on of its business and upon the termination of this Lease by
lapse of time or otherwise, provided all rents and other amounts that
may be due and owing to Landlord have been paid and the provisions of
this Lease complied with, the Tenant may remove such equipment,
fixtures and machinery installed by it at Tenant's cost. However, upon
removal of such equipment, fixtures and machinery, the Tenant shall
also repair any damage caused by such removal or installation.
22. DEFAULT-REMEDIES.
The occurrence of one or more of the following events shall constitute a
material default and breach of this lease by Tenant:
(A) Failure by Tenant to make payment of any rent herein agreed to be paid
or any other payment required to be made by Tenant hereunder, as and
when due, and such a failure shall continue for a period of ten (10)
days;
(B) The making by Tenant of any assignment or arrangement for the benefit
of creditors;
(C) The filing by Tenant of a petition in bankruptcy or for any other
relief under the Federal Bankruptcy Law or any other applicable
statute;
(D) The levying of an attachment, execution of other judicial seizure upon
the Tenant's property in or interest under this lease, which is not
satisfied or released or the enforcement thereof stayed or superseded
by an appropriate proceeding within thirty (30) days thereafter;
(E) The filing of an involuntary petition in bankruptcy or for
reorganization or arrangement under the Federal Bankruptcy Law against
Tenant and such involuntary petition is not withdrawn, dismissed,
stayed or discharged within sixty (60) days from the filing thereof;
(F) The appointment of a Receiver or Trustee to take possession of the
property of Tenant or of Tenant's business or assets and the order or
decree appointing such Receiver or Trustee shall have remained in
force undischarged or unstayed for thirty (30) days after the entry of
such order or decree;
(G) The vacating or abandonment of the leased premises.
(H) The failure by Tenant to perform or observe any other term, covenant,
agreement or condition to be performed or kept by the Tenant under the
terms, conditions, or
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provisions of this lease, and such a failure shall continue
uncorrected for thirty (30) days after written notice thereof has been
given by Landlord to the Tenant.
Then and in any such event Landlord shall have the right, at the option of
the Landlord, then or at any time thereafter while such default or defaults
shall continue, to elect either (1) to cure such default or defaults at its
own expense and without prejudice to any other remedies which it might
otherwise have, any payment made or expenses incurred by Landlord in curing
such default with interest thereon at eighteen percent (18%) per annum to
be and become additional rent to be paid by Tenant with the next
installment of rent falling due thereafter; or (2) to re-enter the leased
Premises, without notice, and dispossess Tenant and anyone claiming under
Tenant by summary proceedings or otherwise, and remove their effects, and
take complete possession of the leased Premises and either (a) declare this
lease forfeited and the terms ended, or (b) elect to continue this lease in
full force and effect, but with the right at any time thereafter to declare
this lease forfeited and the term ended. In such re-entry the Landlord
may, with or without process of law, remove all persons from the Premises,
and Tenant hereby covenants in such event, for itself and all others
occupying the leased Premises under Tenant, to peacefully yield up and
surrender the leased Premises to the Landlord. Should Landlord declare
this lease forfeited and the term ended, the Landlord shall be entitled to
recover from Tenant the rental and all other sums due and owing by Tenant
to the date of termination, plus the costs of curing all of Tenant's
defaults existing at or prior to the date of termination, plus the cost of
recovering possession of the Premises, plus the deficiency, if any, between
Tenant's rental for the balance of the term provided hereunder and the
rental obtained by Landlord under another lease for the Premises for the
balance of the term remaining under this lease. Landlord shall use its
best efforts to rent the Premises with or without advertising, and on the
best terms available for the remainder of the term hereof, or for such
longer or shorter period as Landlord shall deem advisable. Tenant shall
remain liable for payments of all renewals and other charges and costs
imposed on Tenant herein, in the amounts, at the times and upon the
conditions as herein provided, but Landlord shall credit against such
liability of the Tenant all amounts received by Landlord from such
reletting after first reimbursing itself for all costs incurred in curing
Tenant's defaults and re-entering, preparing and refinishing the Premises
for reletting, and reletting the Premises, and for the payment of any
procurement fee or commission paid to obtain another tenant, and for the
attorney fees and legal costs incurred by Landlord.
23. RE-ENTRY BY LANDLORD.
No re-entry by Landlord or any action brought by Landlord to oust Tenant
from the premises shall operate to terminate this lease unless Landlord
shall have given written notice of termination to Tenant, in which event
Tenant's liability shall be as above provided. No right or remedy granted
to Landlord herein is intended to be exclusive of any other right or
remedy, and each and every right and remedy herein provided shall be
cumulative and in addition to any other right or remedy hereunder or now or
hereafter
16
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existing in law or equity or by statute. In the event of termination of
this lease, Tenant waives any and all rights to redeem the premises either
given by any statute now in effect or hereafter enacted.
24. ADDITIONAL RIGHTS TO LANDLORD.
(A) In addition to any and all other remedies, Landlord may restrain any
threatened breach of any covenant, condition or agreement herein
contained but the mention herein of any particular remedy or right
shall not preclude the Landlord from any other remedy or right it may
have either at law or equity, or by virtue of some other provision of
this Lease; nor shall the consent to one act, which would otherwise be
a violation or waiver of or redress for one violation either of
covenant, promise agreement undertaking or condition, prevent a
subsequent act which would originally have constituted a violation
from having all the force and effect of any original violation.
(B) Receipt by Landlord of rent or other payments from the Tenant shall
not be deemed to operate as a waiver of any rights of the Landlord to
enforce payment of any rent, additional rent, or other payments
previously due or which may thereafter become due, or of any rights of
the Landlord to terminate this Lease or to exercise any remedy or
right which otherwise might be available to the Landlord, the right of
Landlord to declare a forfeiture for each and every unremedied breach
of this Lease is a continuing one for the life of this Lease. A
default remedied in accordance with the terms of this lease shall no
longer constitute a default.
25. SUCCESSORS, ASSIGNS AND LIABILITY.
The terms, covenants, conditions and agreements herein contained and as the
same may from time to time hereafter be supplemented, modified or amended,
shall apply to, bind, and inure to the benefit of the parties hereto and
their legal representatives, successors and assigns, respectively. In the
event either party now or hereafter shall consist of more than one person,
firm or corporation, then and in such event all such person, firms and/or
corporations shall be jointly and severally liable as parties hereunder.
26. NOTICES.
All notices required under this Lease shall be in writing and shall be
deemed to be properly served when posted by certified United States mail,
postage prepaid, return receipt requested, addressed to the party to whom
directed at the address herein set forth or at such other address as may be
from time to time designated in writing by the party changing such address.
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<TABLE>
<CAPTION>
Landlord Tenant
-------- ------
<S> <C>
Principal Mutual Life Insurance Wire & Cable Specialties Corp.
Company 5855 Peachtree Corners East
711 High Street Norcross, GA 30092
Des Moines, Iowa 50309
Copy to:
--------
David S. DeLugas
2550 Cobb Parkway, Ste. 200
Smyrna, GA 30080
</TABLE>
27. MORTGAGEE'S APPROVAL.
If Landlord's mortgagee shall require reasonable modifications of the terms
and provisions of this Lease, Tenant agrees to execute and deliver to
Landlord the agreements required to affect such reasonable Lease
modification within thirty (30) days after Landlord's request therefor. In
no event, however, shall Tenant be required to agree to any modification of
the provision of this Lease relating to: the amount of rent or other
charges reserved herein; the size and/or general location of the demised
premises; the duration and/or commencement date of the term; or reducing
the improvements to be made by Landlord to the demised premises prior to
the delivery of possession.
28. ESTOPPEL CERTIFICATES.
Tenant and Landlord mutually agrees that at any time within ten (10) days
following written notice from the other party Landlord, it will execute,
acknowledge and deliver to said party Landlord or any proposed mortgage or
purchaser a statement in writing certifying whether this lease is in full
force and effect and, if it is in full force and effect, what modifications
have been made to the date of the certificates and whether or not any
defaults or offsets exist with respect to this lease and, if there are,
what they are claimed to be and setting forth dates to which rent or other
charges have been paid in advance, if any, and stating whether or not
Landlord is in default, if so, specifying what the default may be. The
failure of either Tenant or Landlord to execute, acknowledge, and deliver
to the other party Landlord a statement as above shall constitute an
acknowledgment by Tenant or Landlord that this lease is unmodified and in
full force and effect and that the rent and other charges have been duly
and fully paid to and including the respective due dates immediately
preceding the date of Landlord's the notice was given to Tenant or Landlord
and shall constitute as to any person, a waiver of any defaults which may
exist prior to such notice.
18
<PAGE>
29. MISCELLANEOUS.
(A) In the event that Tenant desires to store or maintain the type or
character of goods or materials in the leased premises which cause an
increase in insurance premiums on the premises, Tenant shall first
obtain the written consent of Landlord and Tenant shall reimburse
Landlord for any increase in premiums caused thereby.
(B) If any term or provision of this Lease is declared invalid or
unenforceable, the remainder of this Lease shall not be affected by
such determination and shall continue to be valid and enforceable.
(C) This agreement contains the entire Lease contract between the parties
hereto. A short form of this Lease, for the purpose of recording, may
be executed by the parties simultaneously herewith and if either party
desires to record this Lease, the short form shall be used for that
purpose.
(D) The parties executing this Lease warrant that this agreement is being
executed with full corporate authority and that the officers whose
signatures appear hereon are duly authorized and empowered to make and
execute this Lease in the name of the corporation by appropriate and
legal resolution of its Board of Directors.
(E) Unless the context clearly denotes the contrary, the word "rent" or
"rental" as used in this Lease not only includes cash rental, but also
all other payments and obligations to pay assumed by the Tenant,
whether such obligations to pay run to the Landlord or to other
parties.
(F) It is mutually agreed by and between Landlord and Tenant that the
respective parties hereto shall, and they hereby do, waive trial by
jury in any action, proceeding or counterclaim brought by either of
the parties hereto against the other on any matter whatsoever arising
out of or in any way connected with this Lease, the relationship of
Landlord and Tenant, Tenant's use of or occupancy of the Premises or
any claim of injury or damage and any emergency statutory or any other
statutory remedy. If Landlord commences any summary proceeding for
nonpayment of rent, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding.
30. DEFAULT RATE OF INTEREST.
All amounts owed by Tenant to Landlord pursuant to any provision of this
Lease shall bear interest from the date due until paid at eighteen percent
(18%) per annum, unless a lesser rate shall then be the maximum rate
permissible by law with respect thereto, in which event said lesser rate
shall be charged.
19
<PAGE>
31. EXCULPATORY PROVISIONS.
It is expressly understood and agreed by and between the parties hereto,
anything herein to the contrary notwithstanding, that each and all of the
representations, warranties, covenants, undertakings and agreements herein
made on the part of Landlord while in form purporting to be the
representations, warranties, covenants, undertakings and agreements of
Landlord are nevertheless each and every one of them made and intended, not
as personal representations, warranties, covenants, undertakings and
agreements by Landlord or for the purpose or with the intention of binding
Landlord personally, but are made and intended for the purpose only of
subjecting Landlord's interest in the Premises to the terms of this Lease
and for no other purpose whatsoever, and in case of default hereunder by
Landlord, Tenant shall look solely to the interests of Landlord in the
Premises; and that Landlord shall not have any personal liability to pay
any indebtedness accruing hereunder or to perform any covenant, either
express or implied, herein contained, all such personal liability, if any,
being expressly waived and released by Tenant and by all persons claiming
by, through or under Tenant.
32. MORTGAGE PROTECTION.
Tenant agrees to give any holder of any first mortgage or first trust deed
in the nature of a mortgage (both hereinafter referred to as a "First
Mortgage") against the Premises, or any interest therein, by registered or
certified mail, a copy of any notice or claim of default served upon
Landlord by Tenant, provided that prior to such notice Tenant has been
notified in writing (by way of service on Tenant of a copy of an assignment
of Landlord's interest in leases, or otherwise) of the address of such
First Mortgage holder. Tenant further agrees that if Landlord shall have
failed to cure any such default within twenty (20) days after such notice
to Landlord (or if such default cannot be cured or corrected within that
time, then such additional time as may be necessary if Landlord has
commenced within such twenty (20) days and is diligently pursuing the
remedies or steps necessary to cure or correct such default) , then the
holder of the First Mortgage shall have an additional thirty (30) days
within which to cure or correct such Default (or if such default cannot be
cured or corrected within that time, then such additional time as may be
necessary if such holder of the First Mortgage has commenced with such
thirty (30) days and is diligently pursuing the remedies or steps necessary
to cure or correct such default, including the time necessary to obtain
possession if possession is necessary to cure or correct such default.
IN WITNESS WHEREOF, the parties hereto have executed this Lease in two
counterpart
20
<PAGE>
copies, each of which shall be deemed originals.
Signed at Illinois, on this_____day of____________________________________,1993.
LANDLORD:
Principal Mutual Life Insurance Company
By /s/ [signature illegible]
-------------------------------------
___________________________________Title
By _____________________________________
___________________________________Title
TENANT:
Wire & Cable Sepecialties Corp.
By /s/ Paul R. Monaham III
-------------------------------------
V.P.& C.O.O. Title
-----------------------------------
By /s/ Theodore J.Bruno
-------------------------------------
C.E.O. Title
-----------------------------------
21
<PAGE>
State of GA. )
)ss.
County of ______ )
On this 26th day of July, 1993, before me, the undersigned, Notary Public in and
for the State of GA personally appeared Paul R. Monahan III and Theodore J.
Bruno, to me personally known, who being by me duly sworn, did say that they are
the V.P. & Chief Operating Officer and CEO, respectively of said corporation
executing the within and foregoing instrument, that the seal affixed thereto is
the seal of the said corporation; that the instrument was signed and sealed on
behalf of the corporation by authority its Board of Directors; and that the said
Paul R. Monahan III and Theodore J. Bruno, as such officers acknowledged the
execution of said instrument to be the voluntary act and deed of the corporation
by it and by them voluntarily executed.
/s/ Henrilyn C. Cleland
- --------------------------------------------------------
Notary Public in and for the State of GA
Comm. expires 6/30/96
[SEAL]
22
<PAGE>
EXHIBIT A
ELGIN TECH CENTER
1150 DAVIS ROAD
ELGIN, ILLINOIS
_________________
[Site Plan]
23
<PAGE>
EXHIBIT B
[Site Drawings and Specifications]
24
<PAGE>
Construction Details:
Lunchroom and Conference Room Cabinetry to be KDA Avia - all white
laminated
Single basin stainless steel sink with Chicago Faucet, or equivilent, in
Lunchroom
30 oz. cut pile glue down carpet installed in office areas as per plan
Armstrong Exelon Vinyl Composite Tile to be installed in Lunchroom, Storage
Room, and by warehouse entry door
Armstrong 2 x 4 lay in acoustical ceiling tile
Office partitions to be painted one coat flat latex wall paint - one color
throughout
6 gallon hot water tank to be installed for Lunchroom sink
In addition to the existing telephone and electrical outlets:
4 duplex outlets
1 GFI outlet in Lunchroom
4 telephone outlets stubbed in
2 additional circuits
25
<PAGE>
Mr. Ted Bruno Page Two
Modifications to existing office:
1. Remove walls as indicated.
2. Create lunch room with sink and upper and lower cabinets.
3. Create conference room with lower cabinets.
4. Lunch room and storage area to be tiled.
5. All other areas to be carpeted except the small area in front of the
warehouse entryway from the north office area.
6. Replace and/or repair ceiling tiles as needed.
7. New overhead door for rear dock door.
8. Hot water heater to be in working order.
9. Replace 2 light lenses.
10. Replace burnt out light bulbs/ballasts in office and warehouse.
11. Paint office walls.
12. Replace 2 sink faucets.
13. Replace toilet seats.
14. New light globes for washrooms.
15. Replace broken exit signs.
16. Replace missing plate covers for electrical outlets.
26
<PAGE>
EXHIBIT C
---------
RENT SCHEDULE
-------------
<TABLE>
<CAPTION>
Rental Period Annual Fixed Rent Monthly Annual Fixed Rent
- ------------- ----------------- Fixed Rent Per Square Foot
---------- -----------------
<S> <C> <C> <C>
10/1/93 9/30/96 $5,013.33 $4.70
</TABLE>
27
<PAGE>
Exhibit 10.16
Form A140 COMMERCIAL LEASE
This lease is made between Mr. Joe Schmitt , of 4521 Tule Lake Dr.,
Littleton, CO 80123 , herein called Lessor, and Wire & Cable Specialties , of
5855 Peachtree Corners East, Norcross, GA 30092 , herein called Lessee. Lessee
hereby offers to lease from Lessor the premises situated in the City of Denver ,
County of Denver , State of Colorado , described as 3825 Paris St, 80239, a
5,000 sq. ft. stand alone building with 1200 sq. ft. of office , upon the
following TERMS and CONDITIONS:
1. TERM AND RENT. Lessor demises the above premises for a term of three(3)
years, commencing Aug. 1 ,1995 , and terminating on July 31, , 1998 , or sooner
as pro-vided herein at the annual rental of Possession July 14, 1995 Dollars ($
29,400.00 ), payable in equal installment in advance on the first day of each
month for that month's rental, during the term of this lease. All rental made to
Lessor, at the address specified above. Rent $2,200, Tax $200, Insurance $50
monthly $2,450,00 per month
2. USE. Lessee shall use and occupy the premises for distribution of
electrical wire and cable. The premises shall be used for no other purpose.
Lessor represents that the premises may law-fully be used for such purposes.
3. CARE AND MAINTENANCE OF PREMISES. Lessee acknowledges that the premises
are in good order and repair, unless otherwise indicated herein. Lessee shall,
at his own expense and at all times, maintain the premises in good and safe
condition, including plate glass, electrical wiring, plumbing and heating
installations and any other system or equip-
ment upon the premises and shall surrender the same, at termination hereof, in
as good condition as received, normal wear and tear excepted. Lessee shall be
responsible for all repairs required, excepting the roof, exterior walls, struc-
tural foundations, and:
, which
shall be maintained by Lessor. Lessee shall also maintain in good condition such
portions adjacent to the premises, such as sidewalks, driveways, lawns and
shrubbery, which would otherwise be required to be maintained by Lessor.
<PAGE>
4. ALTERATIONS. Lessee shall not, without first obtaining the written consent
of Lessor, make any alterations, addi-tions, or improvements, in, to or about
the premises. Lessee and Lessor have agreed to office modifications, per
attached, the cost borne by Lessee.
5. ORDINANCES AND STATUTES. Lessee shall comply with all statutes, ordinances
and requirements of all municipal, state and federal authorities now in force,
or which may hereafter be in force, pertaining to the premises, occasioned by or
affecting the use thereof by Lessee.
6. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this lease or sublet
any portion of the premises without prior written consent of the Lessor, which
shall not be unreasonably withheld. Any such assignment or subletting without
consent shall be void and, at the option of the Lessor, may terminate this
lease.
7. UTILITIES. All applications and connections for necessary utility services
on the demised premises shall be made in the name of Lessee only, and Lessee
shall be solely liable for utility charges as they become due, including those
for sewer, water, gas, electricity, and telephone services.
8. ENTRY AND INSPECTION. Lessee shall permit Lessor or Lessor's agents to
enter upon the premises at reasonable times and upon reasonable notice, for the
purpose of inspecting the same, and will permit Lessor at any time within sixty
(60) days prior to the expiration of this lease, to place upon the premises any
usual "To Let" or "For Lease" signs, and permit persons desiring to lease the
same to inspect the premises thereafter.
9. POSSESSION. If Lessor is unable to deliver possession of the premises at
the commencement hereof, Lessor shall not be liable for any damage caused
thereby, nor shall this lease be void or voidable, but Lessee shall not be
liable for any rent until possession is delivered. Lessee may terminate this
lease if possession is not delivered within (7) days of the commencement
of the term hereof.
10. INDEMNIFICATION OF LESSOR. Lessor shall not be liable for any damage or
injury to Lessee, or any other person, or to any property, occurring on the
demised premises or any part thereof, and Lessee agrees to hold Lessor harm-
less from any claims for damages, no matter how caused.
11. INSURANCE. Lessee, at his expense, shall maintain plate glass and public
liability insurance including bodily injury and property damage insuring Lessee
and Lessor with minimum coverage as follows:
Lessee shall provide Lessor with a Certificate of Insurance showing
Lessor as additional insured. The Certificate shall provide for a ten-day
written notice to Lessor in the event of cancellation or material change of cov-
erage. To the maximum extent permitted by insurance policies which may be owned
by Lessor or Lessee, Lessee and Lessor, for the benefit or each other, waive any
and all rights of subrogation which might otherwise exist.
<PAGE>
STANDARD OFFICE/WAREHOUSE LEASE
THIS LEASE, made on the date of the later execution and acceptance hereof
by Lessor or Lessee, as the case may be, by and between Lessor and Lessee:
W I T N E S S E T H:
1. Premises. Lessor does hereby rent and lease to Lessee, and Lessee does
hereby rent and hire from Lessor, that certain space containing approximately
5,000 rentable square feet, as shown on the floor plan attached hereto as
- -----
Exhibit A (said space being herein referred to as the "Premises"). The Premises
are located in Lessor's building (herein referred to as the "Building") known as
3825 Paris Street , Colorado. No easement for light or air is included
- --------------------------
in the Premises.
2. Lease Term.
(a) The term of this Lease shall be for a period of ---- THREE (3)
-----------------
years, commencing on August 1 , 199 5 (herein referred to as the "Commence
__
Date"), and ending on July 31 1998 at midnight (herein
----------------------,------
referred to as the "Termination Date"). All references to the "term of this
Lease" refer to the term of the Lease as it is renewed, extended or sooner
terminated.
(b) If Lessor is unable to give possession of the Premises to Lessee
on the Commencement Date because (i) the Premises are not sufficiently
completed to render the Premises ready for occupancy, or (ii) a tenant or
occupant remains in possession of the Premises, or (iii) for any other
reason, then Lessor shall not be liable for such failure, and no such
failure shall affect the validity of this Lease; provided, however, Lessee
shall not be required to pay rent for any period during which Lessor is
prevented from giving possession of the Premises to Lessee. Occupancy will
be July 15, 1995 for setup.
(c) Upon delivery of possession of the Premises to Lessee, Lessee
agrees to execute and deliver to Lessor a Tenant's Acceptance of Premises.
3. Base Rent.
(a) Lessee shall pay to Lessor at Lessor's office, or such other
place as Lessor shall from time to time designate in writing, an annual
Base Rent of $ 26,400.00 in equal monthly installments of $ 2,200.00 to be
---------- ---------
paid without notice, demand, deduction, or set-off, on the first (1st) day
of each month in advance.
(b) Effective the first (1st) day of each Lease Year following the
first (1st) Lease Year, the annual Base Rent payable for that Lease Year
will be determined as follows:
<PAGE>
<TABLE>
<CAPTION>
Lease Year Annual Base Rent Monthly Installments
- ---------- ---------------- --------------------
<S> <C> <C>
2 $26,400.00 $2,200.00
3 $26,400.00 $2,200.00
</TABLE>
(c) As used herein, the term "Lease Year" shall mean each term of
twelve (12) consecutive calendar months commencing on the Commencement Date
or on the first (1st) day of the first (1st) calendar month following the
Commencement Date, if the Commencement Date does not fall on the first(1st)
day of a calendar month; provided, however, that the first (1st) Lease Year
shall include the partial month, if any, caused by the Commencement Date's
falling on other than the first (1st) day of a calendar month.
(d) Rental payments not received by Lessor within five (5) calendar
days of the due date thereof shall be subject to a late charge due and
payable by Lessee to Lessor on the sixth (6th) calendar day after the due
date thereof in an amount equal to five (5%) percent of such past due
rental.
(e) As used in this Lease, the term "rent" or "rental" shall include
all Base Rent payable pursuant to this Paragraph 3 and all additional rent
and other additional charges or sums payable to Lessor hereunder.
(f) Lessee shall pay the first (1st) month's Base Rent on the date of
Lessee's occupancy of the building (July 15, 1995).
4. In addition to the Base Rent, Lessee shall pay to Lessor, as
additional rent, the amounts described in subparagraphs 4(a), 4(b), and 4(c)
below:
(a) Real Estate Taxes: Lessee agrees to pay, in addition to base
rent, $200.00 per month to offset Landlords cost of real Estate taxes.
(b) Insurance: Lessee agrees to pay, in addition to base rent,
$50.00 per month to offset the landlords cost of insurance.
(c) Maintenance: Lessee agrees to be responsible for all upkeep,
snowremoval and service on all mechanical systems. The mechanical systems,
including, HVAC, Electrical, and plumbing will be delivered in working
order and Lessee will obtain a service contract. Lessee will keep all
grounds clean and free of debris.
5. Security Deposit. Simultaneously with the execution of this Lease,
Lessee has paid to Lessor a security deposit in the amount of $ 2,200.00
---------------.
The security deposit shall be held by Lessor for the performance of Lessee's
covenants and obligations under this Lease, it being expressly understood that
the deposit shall not be considered an advance payment of rental or a measure of
Lessor's damage in case of default by Lessor. Upon
2
<PAGE>
the occurrence of an Event of Default by Lessee or breach by Lessee of Lessee's
covenants under this Lease, Lessor may, from time to time, without prejudice to
any other remedy, use the security deposit to the extent necessary to make good
any arrears of rent, or to repair any damage or injury, or pay any expense or
liability incurred by Lessor as a result of the Event of Default or breach of
covenant, and any remaining balance of the security deposit shall be returned by
Lessor to Lessee upon termination of this Lease. If any portion of the security
deposit is so used or applied, Lessee shall upon ten days' written notice from
Lessor, deposit with Lessor by cash or cashier's check an amount sufficient to
restore the security deposit to its original amount.
6. Utilities. Lessee shall promptly pay all charges for utilities and
other services furnished to the Premises by Lessor or the applicable utility
company, including, but not limited to, gas, water, electricity, fuel, light and
heat, and Lessee shall promptly pay all charges for garbage collection services
and for all other sanitary services rendered to the Premises or used by Lessee
in connection herewith. In the event any utilities furnished to the Premises are
not separately metered, Lessee shall pay to Lessor, as additional rental,
Lessee's pro rata share of the utilities used by Lessee, within ten (10)
calendar days following receipt of a statement showing the amount due. Lessee's
prorated amount shall be determined on the basis of the size of the Premises,
unless Lessor determines that Lessee's use of the Premises justifies a
disproportionate allocation of utility costs to Lessee.
7. Use. The Premises shall be used for Sale and Distribution of Wire &
-------------------------------
Cable and for no other purpose. The Premises shall not be used for any
- ----------
illegal purposes; nor in violation of any regulation of any governmental body;
nor in any manner to create any nuisance or trespass; nor in any manner to
vitiate the insurance or increase the rate of insurance on the Premises or on
the Building. Lessee agrees to use the Premises only for the purposes herein
leased until the expiration of the term of this Lease.
8. Repairs by Lessor.
(a) Lessee accepts the Premises in their present condition and as
suited for the uses intended by Lessee, subject only to Lessor's agreement
to complete the Lessor's Work described in Exhibit A. Except as otherwise
expressly provided in this Lease, Lessor shall not be required to make any
repairs or improvements to the Premises except repairs to the foundation,
exterior walls or roof of the Building as necessary for safety and
tenantability; Lessor's duties shall also include repairs to underground
utility and sewer pipes outside the exterior walls of the Building, or
under or within the floor of the Premises, unless made necessary by the
negligence or misuse of Lessee, its employees, or agents.
(b) Lessee shall be responsible for the maintenance of those areas
around the Building, including parking areas, planted areas, and
landscaping areas.
3
<PAGE>
9. Repairs by Lessee. Lessee shall repair, maintain, replace as necessary
and keep in good, clean and safe repair all portions of the Premises and all
equipment, fixtures and systems therein which are not specifically set forth as
the responsibility of Lessor in Paragraph 8 of this Lease. Lessee's repairs and
replacements shall include without limitation all electrical,plumbing, heating
and air conditioning systems, parts, components and fixtures within or relating
to the Premises. In connection therewith, Lessee shall maintain in force at all
times a maintenance contract for the heating, ventilation, and air conditioning
equipment acceptable in form and content to Lessor and with a service
organization acceptable to Lessor. Lessee shall also promptly repair or replace
all partitions and all glass and plate glass within the Premises immediately
when cracked or broken. Lessor gives to Lessee exclusive control of the Premises
and shall be under no obligation to inspect the Premises. Lessee shall at once
report in writing to Lessor any defective conditions known to Lessee which
Lessor is required to repair, and failure to promptly report such defects shall
make Lessee liable to Lessor for any liability incurred by Lessor by reason of
such defects, and Lessee indemnifies and holds harmless Lessor from and against
all loss, cost and damage (including reasonable attorney's fees) arising from or
related to Lessee's failure to so report such defective conditions.
10. Lessor's Finish Work. Lessor agrees that it will finish out the
Premises as depicted and described on Exhibit A attached hereto (the "Plans and
Specifications"), which were submitted, reviewed and approved by Lessor and
Lessee prior to the execution hereof. In the event that Lessee shall desire, or
Lessor shall find it necessary to make, any modificat ions or changes to the
Plans and Specifications, the party desiring or requiring said changes shall
give the other party written notice thereof. No change to the Plans and
Specifications shall be effective unless and until it has been approved in
writing by Lessor and Lessee.
11. Right of Entry. Lessor shall have the right, but not the obligation,
and upon reasonable notice, to enter the Premises at reasonable hours to exhibit
same to prospective purchasers, lenders or tenants; to inspect the Premises to
see that Lessee is complying with all Lessee's obligations hereunder; and to
make repairs required of Lessor under the terms of this Lease or repairs or
modifications to any adjoining space.
12. Lessor's Right to Act for Lessee. If Lessee fails to pay any
additional rent or make any other payment (except Base Rent) or take any other
action when and as required under this Lease, Lessor may, without demand upon
Lessee and without waiving or releasing Lessee from any duty, obligation, or
liability under this Lease, pay any such additional rent, make any such other
payment or take any such action required of Lessee. The actions which Lessor
may take shall include, but are not limited to, the performance of maintenance
or repairs and the making of replacements to the Premises, the payment of
insurance premiums which Lessee is required to pay under this Lease and the
payment of taxes and
4
<PAGE>
assessments which Lessee is required to pay under this Lease. Lessor may pay all
incidental costs and expenses incurred in exercising its rights hereunder,
including, without limitation, reasonable attorneys' fees and expenses,
penalties, re-instatement fees, late charges and interest. All amounts paid by
Lessor pursuant to this Paragraph, and all costs and expenses incurred by Lessor
in exercising Lessor's rights under this Paragraph, shall bear interest at the
lesser of (i) eighteen percent (18%) per annum or (ii) the highest rate
permitted under applicable law (the "Default Rate of Interest") , from the date
of payment by Lessor and shall be payable by Lessee to Lessor upon demand.
13. Default.
(a) Each of the following events shall constitute an "Event of
Default" by Lessee under this Lease:
(i) if Lessee shall fail to pay when due any rent or other
payment to be made by Lessee hereunder and shall not cure such failure
within ten (10) days after the due date (as to the scheduled monthly rental
payments) or within five (5) business days after written notice thereof
from Lessor (as to nonscheduled payments), as the case may be; or
(ii) if Lessee shall violate or breach, or shall fail fully and
completely to observe, keep, satisfy, perform, and comply with, any
agreement term, covenant, condition, requirement, restriction, or provision
of this Lease (other than the payment of rent or any other payment to be
made by Lessee), and shall not cure such failure within thirty (30) days
after Lessor gives Lessee written notice thereof; or
(iii) if the Premises are deserted or abandoned; or
(iv) if Lessee's Interest in the Premises is levied upon; or
(v) if any petition is filed by or against Lessee under any
Section or Chapter of the Federal Bankruptcy Code, and in the case of a
petition filed against Lessee, such petition is not dismissed within sixty
(60) days of such filing; or if Lessee becomes insolvent or transfers
property in fraud of creditors; or if Lessee makes an assignment for
the benefit of creditors; or if a receiver is appointed for any of Lessee's
assets.
For the purposes of the Events of Default specified in clause (v)
above, the word "Lessee" shall include, without limitation; (i) any party
comprising Lessee, should more than one person or entity execute this Lease as
Lessee, or any general partner or joint venturer of Lessee or any such party;
and (ii) any person or entity now or hereafter liable, whether primarily,
secondarily, or contingently, for the performance of the duties and obligations
of Lessee under this Lease, including without limitation any principal, maker,
endorser, guarantor or surety.
5
<PAGE>
(b) Upon the occurrence of any Event of Default, Lessor may pursue any one
or more of the following remedies, in addition to any other remedies provided
under this Lease, at law or in equity, separately or concurrently or in any
combination, without any notice (except as specifically provided herein) or
demand whatsoever and without prejudice to any other remedy which it may have
for possession of the Premises for arrearages in rent or other amounts payable
to Lessor:
(i) Lessor may terminate this Lease by giving Lessee written notice
of termination, in which event Lessee shall Immediately quit and vacate the
Premises and deliver and surrender possession of the Premises to Lessor,
and this Lease shall be terminated at the time designated by Lessor in its
notice of termination to Lessee; provided, however, that no termination of
this Lease prior to the normal expiration hereof shall affect Lessor's
right to collect rent for the period prior to termination; or
(ii) With or without terminating this Lease, Lessor may enter upon
and take possession of the Premises and expel or remove Lessee and any
other person who may be occupying the Premises by force if necessary,
without being liable for prosecution or any claim for damages; or
(iii) Lessor may re-let the Premises or any part thereof, on such
terms and conditions as Lessor may deem satisfactory, and receive the rent
for any such re-letting, in which event Lessee shall pay to Lessor on
demand any deficiency that may arise by reason of such re-letting;
provided, further, that Lessee shall pay over to Lessor on demand any and
all costs and expenses incurred in renovating or altering the Premises to
make it suitable for re-letting; or
(iv) Lessor may declare immediately due and payable the present
value (using a discount rate of eight percent (8%) per annum) of all rent
and other sums due or to become due under this Lease immediately due and
payable; provided, however, that such payment shall not constitute a
penalty or forfeiture or liquidated damages, but shall merely constitute
payment in advance of the rent for the remainder of the term of this Lease.
Upon making such payment, Lessee shall be entitled to receive from Lessor
all rents actually received by Lessor from other assignees, tenants, and
subtenants on account of the Premises during the term of this Lease,
provided that the monies to which Lessee shall so become entitled shall in
no event exceed the entire amount actually paid by Lessee to Lessor
pursuant to this subparagraph (iv), less all costs, expenses and attorneys'
fees of Lessor incurred in connection with the reletting of the Premises.
(c) Lessor's pursuit of any one or more of the remedies provided in
this Lease shall not constitute an election of remedies excluding the
election of another remedy or other remedies, or a forfeiture or waiver of
any rent or other
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amounts payable under this Lease by Lessee or of any damages or other sums
accruing to Lessor by reason of Lessee's violation of any provision of this
Lease. No action taken by or on behalf of Lessor shall be construed to mean
acceptance of a surrender of this Lease. No failure of Lessor to pursue or
exercise any of Lessor's powers, rights, or remedies or to insist upon
strict and exact compliance by Lessee with any provision of this Lease, and
no custom or practice at variance with the terms of this Lease, shall
constitute a waiver by Lessor of the right to demand strict and exact
compliance with the terms and conditions of this Lease.
14. Rights Cumulative. All rights, remedies, powers, and privileges
conferred under this Lease on Lessor shall be cumulative of and in addition to,
but not restrictive of or in lieu of, those conferred by law.
15. Liens. Lessee hereby indemnifies Lessor against, and shall keep the
Premises, the Building, and the Land free from liens for any work performed,
material furnished or obligations incurred by Lessee. Should any liens or
claims be filed against the Premises, the Building, or the Land by reason of
Lessee's acts or omissions, Lessee shall cause same to be discharged by bond or
otherwise within ten (10) days after filing. If Lessee fails to cause any such
lien or claim to be discharged within the required time, Lessor may cause same
to be discharged and may make any payment that Lessor, in its sole judgment,
considers necessary, desirable, or proper in order to do so. All amounts paid
by Lessor shall bear interest at the Default Rate of Interest from the date of
payment by Lessor and shall be payable by Lessee to Lessor upon demand.
16. Lessee's Property; Improvements to the Premises.
(a) Lessee shall not remove any personal property, fixtures, or
equipment from the Premises at any time during which Lessee is in default
under this Lease. Upon any termination of this Lease at a time at which
Lessee shall be liable in any amount to Lessor under this Lease, Lessor
shall have a lien upon the personal property and effects of Lessee within
the Premises, and Lessor shall have the right, at Lessor's election,
without notice to Lessee, to sell at a private, commercially reasonable
sale all or part of said property and effects for such price as against any
amounts due under this Lease from Lessee to Lessor, including the expenses
of such sale. If Lessee shall not remove all Lessee's effects from the
Premises at any expiration or other termination of this Lease, Lessor shall
have the right, at Lessor's election, to remove all or part of said effects
in any manner that Lessor shall choose and store the same without liability
to Lessee for loss thereof, and Lessee shall be liable to Lessor for all
expenses incurred in such removal and also for the cost of storage of said
effects.
(b) Lessee shall not make any alterations, additions, or improvements
to the Premises, exterior or interior, without
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the prior written consent of Lessor, except for unattached movable fixtures
which may be installed without drilling, cutting, or otherwise defacing the
Premises. If any such alterations, additions, or improvements are made,
then, at the expiration of the term of this Lease, Lessee agrees to restore
the Premises to the condition prior to making same, at Lessee's sole cost
and expense, reasonable wear and tear excepted, provided that if Lessor
does not require removal, then all such alterations, additions, or
improvements shall become the sole property of Lessor. Lessee may not use
or penetrate the roof of the Premises for any purpose whatsoever without
Lessor's prior written consent. All construction work done by Lessee in the
Premises shall be performed in a good and workmanlike manner, in compliance
with all governmental requirements, and at such times and in such manner as
will cause a minimum of interference with other construction in progress
and with the transaction of business in the Building. Lessee covenants and
agrees that all contractors, subcontractors, and other persons or entities
performing work for Lessee at the Premises will carry liability insurance
in amounts acceptable to Lessor.
17. Subletting and Assignment.
(a) Lessee shall not, directly or indirectly, without the prior
written consent of Lessor, endorsed hereon, sell, assign, hypothecate, or
---------------
otherwise transfer this Lease or any interest hereunder, or sublet the
Premises or any part thereof, or permit the use of the Premises by any
party other than Lessee. Such consent will not unreasonably witheld.
Consent to any assignment or sublease shall not be deemed a waiver of the
right of Lessor to approve any further assignment or subletting.
Notwithstanding any permitted assignment or subletting, Lessee shall remain
liable for the full and complete performance, satisfaction, and compliance
with each and every agreement, term, covenant, condition, requirement,
provision, and restriction of this Lease, as principal and not as surety or
guarantor, and as if no such assignment or subletting had been made.
(b) In the event that during the term of this Lease Lessee desires to
sublease the Premises or assign this Lease, Lessee shall give written
notice thereof to Lessor, which notice shall contain (i) the name of the
proposed subtenant or assignee; (ii) the terms of any sublease; and (iii)
such other information as Lessor shall reasonably request; whereupon Lessor
shall consider such proposed subtenant or assignee and notify Lessee with
reasonable promptness as to Lessor's choice, at Lessor's sole discretion,
of the following: (x) that Lessor consents to a subleasing of the Premises
or assignment of this Lease to such proposed subtenant or assignee, or (y)
that upon such proposed subtenant's or assignee's entering into a mutually
satisfactory new lease of the Premises with Lessor, then Lessee shall be
released from all further obligations and liabilities under this Lease
(excepting only any unpaid rentals or any unperformed
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covenants then past due or unperformed under this Lease); or (z) that
Lessor declines to consent to such sublease or assignment due to
insufficient or unsatisfactory documentation furnished to Lessor to
establish the proposed subtenant's or assignee's financial strength and
proposed use of and operations upon the Premises.
(c) In the event that Lessee sublets the Premises or any part
thereof, or sells, assigns, or transfers this Lease and at any time
receives rent and/or other consideration which exceeds that which Lessee
would at that time be obligated to pay to Lessor, Lessee shall pay to
Lessor 100% of the gross excess in such rent as such rent is received by
Lessee and 100% of any other consideration received by Lessee from such
subtenant in connection with such sublease or, in the case of an assignment
of this Lease by Lessee, Lessor shall receive 100% of any consideration
paid to Lessee by such assignee in connection with such assignment. In
addition, should Lessor agree to an assignment or sublease agreement,
Lessee will pay to Lessor on demand a sum equal to all of Lessor's costs,
including reasonable attorneys' fees, incurred in connection with such
assignment or transfer.
18. Damage or Destruction. If the Premises or any portion thereof are
destroyed by storm, fire, lightning, earthquake, or other casualty, Lessee shall
immediately notify Lessor. In the event the Premises cannot, in Lessor's
judgment, be restored within one hundred eighty (180) days of the date of such
damage or destruction, this Lease shall terminate as of the date of such
destruction, and all rent and other sums payable by Lessee hereunder shall be
accounted for as between Lessor and Lessee as of that date. Lessor shall notify
Lessee within thirty (30) days of the date of the damage or destruction whether
the Premises can be restored within one hundred eighty (180) days. If this Lease
is not terminated as provided in this Paragraph, Lessor shall, to the extent
insurance proceeds payable on account of such damage or destruction are
available to Lessor (with the excess proceeds belonging to Lessor), within a
reasonable time, repair, restore, rebuild, reconstruct, or replace the damaged
or destroyed portion of the Premises to a condition substantially similar to the
condition which existed prior to the damage or destruction. Provided, however,
Lessor shall only be required to repair, restore, rebuild, reconstruct, and
replace the Lessor's Work shown on Exhibit A, and Lessee shall, at its sole cost
and expense, upon completion of the Lessor's Work, repair, restore, rebuild,
reconstruct, and replace, as required, any and all improvements installed in the
Premises by Lessee and all trade fixtures, personal property, inventory, signs,
and other contents in the Premises, and all other repairs not specifically
required of Lessor hereunder, in a manner and to at least the condition existing
prior to the damage. Lessee's obligations to pay Base Rent shall abate until
Lessor has repaired, restored, rebuilt, reconstructed, or replaced the Premises,
as required herein, in proportion to the part of the Premises which are unusable
by Lessee. If the damage or destruction is due to the act, neglect, fault, or
omission of Lessee, there shall be no rent abatement. Notwithstanding the
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foregoing, if any such damage or destruction occurs within the final two (2)
years of the term hereof, then Lessor, in its sole discretion, may, without
regard to the aforesaid 100-day period, terminate this Lease by written notice
to Lessee.
19. Condemnation.
(a) In the event of a taking of all or substantially all of the
Premises (so that the uptake portion is unsuitable for the continued
feasible and economic operation of the Premises by Lessee for substantially
the same purposes as immediately prior to such taking), then this Lease
shall automatically terminate and all rent and other sums payable by Lessee
hereunder shall be apportioned and paid through and including the date of
such taking.
(b) In the event of a taking of less than substantially all of the
premises, Lessor may, at Lessor's option, terminate this Lease by giving
written notice of such termination to Lessee, in which event this Lease
shall terminate, and all rent and other sums payable by Lessee hereunder
shall be apportioned and paid through the date of such taking.
(c) In the event of a taking of a type described in subparagraph
19(b) hereof and if Lessor does not terminate this Lease, then this Lease
and all of the duties and obligations of Lessee hereunder shall remain
unmodified and in full force and effect; provided, however, that the rent
payable after the taking shall be reduced to an amount which bears the same
ratio to the rent payable immediately prior to the taking as the rental
value of the Premises after taking bears to the rental value of the
Premises immediately prior to the taking.
(d) Lessor shall be entitled to all awards, damages, compensation, or
proceeds payable by reason of any taking, and Lessee shall not be entitled
to any portion thereof, shall have no claim for, and hereby transfers,
assigns, conveys, and sets over unto Lessor all of its right, title, and
interest, if any, in or to any award, damages, compensation, or proceeds
payable by reason of any taking; and, without limiting the generality of
the foregoing, Lessee shall have no claim against Lessor or the condemning
authority, or otherwise, for any award, damages, compensation, or proceeds
for (i) the value of any unexpired term of this Lease, or (ii) the value of
any fixtures or improvements installed by Lessee in the Premises. Nothing
herein shall be construed, however, to preclude Lessee from prosecuting any
claim directly against the condemning authority for loss of business,
moving expenses, damage to, and cost of removal of, trade fixtures,
furniture, and other personal property belonging to Lessee; provided,
however, that Lessee shall make no claim which shall diminish or adversely
affect any award claimed or received by Lessor.
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<PAGE>
20. Indemnity. Lessee shall, at all times, except to the extent of the
negligence of Lessor, its agents and employees, indemnify and hold harmless
Lessor and Lessor's officers, employees, and agents from, against, and in
respect of, all liabilities, damages, losses, costs, expenses (including all
reasonable attorneys' fees), causes of action, suits, claims, demands, and
judgments of any nature whatsoever arising, in whole or in part, out of, by
reason of, or in connection with: (a) injury to or the death of persons or
damage to property (i) on the Premises, or (ii) in any manner arising out of, by
reason of, or in connection with, the use, nonuse or occupancy of the Premises,
or (iii) resulting from the condition of the Premises; (b) the violation or
breach of, or the failure of Lessee to fully and completely keep, observe,
satisfy, perform, and comply with, any agreement, term, covenant, condition,
requirement, provision, or restriction of this Lease; or (c) the violation of
any law affecting the Premises or the use or occupancy thereof. Lessee, on
behalf of itself and all persons and entities claiming through Lessee, waives
all claims against Lessor for damage to any property or injury to, or death of,
any person in, upon, or about the Premises, the Building, or the Land arising at
any time and from any cause (including without limitation fire, explosion,
water, rain, flood, or leaks from any part of the Premises or from the pipes,
appliances, plumbing works, roof, or subsurface of any floor or ceiling, or from
the street, or any other place), except to the extent caused by the negligence
or willful misconduct of Lessor, its agents, employees, representatives, or
contractors.
21. Insurance.
(a) Lessee shall maintain in force at all times comprehensive general
public liability insurance in an amount of not less than $ ,000,000.00
combined single limit coverage for bodily injury, death, and property
damage. Such insurance shall include contractually assumed liability; and
such insurance shall be primary and not in excess of or contributory with
other insurance carried by other persons. Said policy shall name both
Lessor and Lessee as insureds and shall contain a provision requiring the
insurer to give Lessor at least fifteen (15) calendar days' prior written
notice before any termination or expiration of said policy or any reason.
Prior to the commencement of this Lease and prior to the expiration of each
term of such policy, Lessee shall deliver to Lessor the original of such
policy or a proper certificate from the insurer.
(b) Lessee hereby agrees to insure any improvements installed by
Lessee in the Premises and its merchandise, trade fixtures, personal
property, furnishings, supplies, inventory, signs, and other contents of
the Premises against fire, with all risk coverage, for the full replacement
value thereof. Lessor shall have no responsibility whatsoever for any
damage, theft, or other casualty to or involving the same.
(c) Each policy of insurance obtained by Lessee hereunder or
otherwise with respect to the Premises shall
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<PAGE>
contain a waiver of subrogation clause reasonably acceptable to Lessor.
(d) Lessor shall insure the Buliding against damage with casualty
insurance not less than the replacement value of the Building and with such
deductibles as Lessor reasonably deems appropriate and with comprehensive
general public liability insurance in such amounts and with such
deductibles as Lessor reasonably deems appropriate.
22. Signage. Lessee shall not install any signs visible from outside the
Premises except with the prior written consent of Lessor. Any permitted signs
shall be in compliance with applicable governmental rules and regulations
governing such signs
23. Attorneys' Fees. In the event that either party is required to
enforce the provisions of this Lease, such party, if it prevails, shall be
entitled to receive from the other party all costs and expenses incurred at
trial and on appeal in connection with such enforcement, including but not
limited to reasonable attorneys' fees.
24. Parties. "Lessor" as used in this Lease shall include Lessor's assigns
and successors in title to the Premises. "Lessee" shall include Lessee and, if
this Lease shall be validly assigned or the Premises validly sublet, shall
include such assignee or subtenant, its successors and permitted assigns.
"Lessor" and "Lessee" shall include male and female, singular and plural,
corporation, partnership, or individual, as may fit the particular parties.
25. Landlord and Tenant Relationship. This Lease shall create the
relationship of landlord and tenant between Lessor and Lessee; no estate shall
pass out of Lessor; Lessee has only an usufruct not subject to levy and sale.
26. Holding Over. If Lessee remains in possession of the Premises after
expiration of the term of this Lease, with Lessor's acquiescence and without any
distinct agreement of parties, Lessee shall be a tenant at will at a rental rate
equal to 150% of the rate in effect at the end of this Lease; there shall be no
renewal of this Lease by operation of law.
27. Sale by Lessor. In the event of any sale, conveyance, transfer, or
assignment by Lessor of its interest in and to the Premises, all obligations
under this Lease of the party selling, conveying, transferring, assigning, or
otherwise disposing shall cease and terminate and Lessee releases said party
from same and Lessee shall thereafter look only and solely to the party to whom
or which the Premises were sold, conveyed, transferred, assigned, or otherwise
disposed of for performance of all of Lessor's duties and obligations under this
Lease.
28. Surrender of the Premises. At the termination of this Lease, Lessee
shall surrender the Premises and keys thereof to Lessor in at least as good a
condition as at commencement of the
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term of this Lease, natural wear and tear and casualty only excepted.
29. Notices. Lessee hereby appoints as Lessee's agent to receive the
service of all dispossessory or distraint proceedings and notices thereunder,
and all notices required or permitted under this Lease, the person in charge of
or occupying the Premises at that time; and if no person is in charge of or
occupying same, then such service or notice may be made by attaching the same on
the main entrance to the Premises. All notices to Lessor shall be delivered by
hand or sent by certified mail, return receipt requested, postage prepaid, to
Lessor's principal office set forth at the beginning of this Lease.
30. Covenant of Quiet Enjoyment. So long as Lessee observes and performs
the covenants and agreements contained herein to be observed and performed by
Lessee, Lessor covenants and agrees that Lessee shall at all times during the
term of this Lease peacefully and quietly have and enjoy possession of the
Premises, but always subject to the terms hereof.
31. Subordination and Attornment.
(a) This Lease shall be subordinate to the right, title, and interest
of any lender or other party holding a security interest in or a lien upon
the Premises under any and all mortgage instruments or deeds to secure debt
presently encumbering the Premises or the Building and to any and all other
deeds to secure debt or mortgage instruments hereafter encumbering the
Premises or the Building. Lessee shall at any time hereafter, on demand of
Lessor or the holder of any such deed to secure debt or mortgage
instrument, execute any instruments which may reasonably be required by
such party for the purpose of evidencing the subordination of this Lease to
the lien or security of such party.
(b) The following provisions shall be applicable to the
subordinations provided under subparagraph (a) above: (i) Lessor agrees to
use its reasonable efforts following full execution and delivery of this
Lease to obtain from its present lender a nondisturbance agreement
providing that, in the event the deed to secure debt or mortgage instrument
is foreclosed, Lessee's possession of the Premises shall not be disturbed
so long as no Event of Default shall have occurred and is continuing and so
long as Lessee continues to comply with the terms of this Lease (a
"Nondisturbance Agreement"); and (ii) as to any deed to secure debt or
mortgage instrument that is placed against the Premises or the Building
after the date of this Lease, the foregoing subordination shall not be
effective unless the holder of such deed to secure debt or mortgage
instrument shall execute and deliver to Lessee a Nondisturbance Agreement.
(c) Lessee shall, upon demand, at any time or times, execute,
acknowledge, and deliver to Lessor or the holder of any such instruments or
deeds to secure debt, without expense,
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any and all documents that may be necessary to make this Lease superior to the
lien of any of the same.
(d) If the holder of any of said instruments or deeds to secure debt
shall hereafter succeed to the rights of Lessor under this Lease, Lessee
shall, at the option of such holder or a purchaser at any foreclosure or
sale under power, attorn to and recognize such successor as Lessee's
landlord under this Lease. Lessee shall promptly execute, acknowledge, and
deliver any instrument that may be necessary to evidence such attornment.
Upon such attornment, this Lease shall continue in full force and effect as
a direct lease between each successor Lessor and Lessee, subject to all of
the terms, covenants, and conditions of this Lease.
(e) If Lessee fails at any time to execute, acknowledge, and deliver
any of the documents provided for by this Paragraph within ten (10) days
after Lessor's notice so to do, in addition to the remedies allowed by
Paragraph 13 hereof, or otherwise, Lessor may execute, acknowledge, and
deliver any and all such documents as the attorney-in-fact of Lessee in its
name, place, and stead and Lessee hereby appoints Lessor, its successors
and assigns as such attorney-in-fact, such power of attorney being coupled
with an interest and being irrevocable by death, dissolution or merger of
Lessee.
32. Estoppel Certificate. At any time and from time to time, Lessee, on or
before the date specified in a request therefor made by Lessor, which date shall
not be earlier than ten (10) days from the making of such request, shall
execute, acknowledge, and deliver to Lessor a certificate evidencing whether or
not (a) this Lease is in full force and effect; (b) this Lease has been amended
in any way; (c) there are any existing defaults on the part of Lessor hereunder,
to the knowledge of Lessee, and specifying the nature of such defaults, if any;
(d) the date to which rent and other amounts due hereunder, if any, have been
paid; and (e) such other matters requested by Lessor. Each certificate
delivered pursuant to this Paragraph may be relied on by any prospective
purchaser of the Building or transferee of Lessor's interest hereunder or by any
holder or prospective holder of any mortgage instrument or deed to secure debt
now or hereafter encumbering the Building.
33. Governmental Regulations. Lessee agrees, at is sole expense, promptly
to comply with all requirements of any legally constituted public authority made
necessary by reason of Lessee's use or occupancy of the Premises. Lessor agrees
promptly to comply with any such requirements if not made necessary by reason of
Lessee's use or occupancy of the Premises. It is mutually agreed, however,
between Lessor and Lessee, that if in order to comply with such requirements the
cost to Lessor or Lessee, as the case may be, shall exceed a sum equal to one
(1) year's Base Rent under this Lease at the time compliance is required, then
the party who is obligated to comply with such requirement is entitled to
terminate this Lease by giving written notice of termination to the other party,
which termination shall become effective sixty (60) days after receipt of such
notice, and which notice shall eliminate
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necessity of compliance with such requirement by the party giving such notice,
unless the party receiving such notice of termination shall, before the
termination becomes effective, pay to the party giving notice all costs of
compliance in excess of one (1) year's Base Rent, or secure payment of said sum
in a manner satisfactory to the party giving notice.
34. Relocation. In the event Lessor determines to utilize the Premises
for other purposes during the term of this Lease, Lessee agrees to relocate to
other space in the Building and/or Project designated by Lessor, provided such
other space is of equal or larger size than the Premises. Lessor shall pay all
out-of pocket expenses of any such relocation, including the expenses of moving
and reconstruction of all Lessee furnished and Lessor furnished improvements.
In the event of such relocation, this Lease shall continue in full force and
effect without any change in the terms or conditions hereof, but with the new
location substituted for the old location set forth in Paragraph 1 of this
Lease.
35. Successors and Assigns. The provisions of this Lease shall inure to
the benefit of and be binding upon Lessor and Lessee and their respective
successors, heirs, legal representatives, and assigns, subject, however, in the
case of Lessee, to the restrictions on assignment and subletting contained in
this Lease.
36. Limitation of Liability. Lessor's obligations and liability to Lessee
with respect to this Lease shall be limited solely to Lessor's interest in the
Building, and neither Lessor, nor any joint venturer, partner, officer,
director, or shareholder of Lessor or any of the joint venturers of Lessor shall
have any personal liability whatsoever with respect to this Lease.
37. Agent's Commission.
-None -
38. Rules and Regulations. Lessee accepts the Premises subject to and
hereby agrees with Lessor to abide by the Rules and Regulations attached to this
Lease and incorporated herein by reference.
39. Hazardous Substances. Lessee covenants and agrees that it shall not
cause or permit any Hazardous Substances (as hereinafter defined) to be
generated, used, treated, stored, released or disposed of in, on, at, or under
the Premises, the Building, or the Land without Lessor's prior written consent.
Lessee further covenants and agrees to indemnify Lessor for any loss, cost,
damage, liability, or expense (including without limitation, attorneys fees), as
well as environmental impairment damages, that Lessor might ever incur because
of Lessee's failure to comply with the provisions of the immediately preceding
sentence, this indemnification to survive the expiration or other termination of
this Lease. For the purposes of this Paragraph 39, Hazardous Substances shall
mean and refer to (a) all those substances, elements, materials, compounds, or
wastes defined or
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classified as hazardous or restrictedunder (i) the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended from time to time,
the regulations promulgated thereunder and analogous state statutes and
regulations, (ii) the Resource Conservation and Recovery Act of 1976, as amended
from time to time, the regulations promulgated thereunder and analogous state
statutes and regulations, (iii) the Toxic Substances Control Act, as amended
from time to time, the regulations promulgated thereunder and analogous state
statutes and regulations; and (b) petroleum products, including, without
limitation, waste oils; and (c) "asbestos", as defined In 29 C.F.R. Sec.
1910.1001 et seq. (or analogous regulations promulgated under the Occupational
Safety and Health Act of 1970, as amended from time to time, and the regulations
promulgated thereunder); and (d) "PCBs", as defined in 40 C.F.R. Sec. 761 et
seq., and "TCDD", as defined in 40 C.F.R. Sec. 775 et seq. (or in either case
analogous regulations promulgated under the Toxic Substances Control Act, as
amended from time to time); and (e) any other substance, element, material, or
compound defined or restricted as a hazardous, toxic, radioactive, or dangerous
substance, material, or waste by the Environmental Protection Agency or by any
other ordinance, statute, law, code, or regulation of any federal, state, or
local governmental entity or any agency, department or other subdivision
thereof, whether now or later enacted, issued, or promulgated.
40. Miscellaneous. Time is of the essence of this Lease. This Lease
contains the entire agreement of Lessor and Lessee and no representations or
agreements, oral or otherwise, between the parties not embodied herein shall be
of any force or effect. No failure of Lessor to exercise any power given Lessor
hereunder, or to insist upon strict compliance by Lessee of any obligations
hereunder, and no custom or practice of the parties at variance with the terms
hereof shall constitute a waiver of Lessor's right to demand exact compliance
with the terms hereof. If any clause or provision of this Lease is illegal,
invalid, or unenforceable under applicable present or future laws or regulations
effective during the term of this Lease, the remainder of this Lease shall not
be affected. In lieu of each clause or provision of this Lease which is illegal,
invalid, or unenforceable, there shall be added as part of this Lease a clause
or provision as nearly identical as may be possible and as may be legal, valid,
and enforceable. This Lease shall be governed by, construed under, and
interpreted and enforced in accordance with the laws of the State of Georgia.
Neither this Lease, nor any memorandum of this Lease or reference hereto, shall
be recorded by Lessee without Lessor's consent endorsed hereon. Lessor shall be
excused from the performance of any of its obligations under this Lease for the
period of any delay resulting from any cause beyond its control, including,
without limitation, all labor disputes, governmental regulations or controls,
fires or other casualties, inability to obtain any material, or services or acts
of God. If Lessee executes this Lease as a corporation, each of the persons
executing this Lease on behalf of Lessee does hereby personally represent and
warrant that Lessee is a duly authorized and existing corporation, that Lessee
is qualified to do business in the state in which the Premises are located, that
the corporation has full right and authority to enter into this Lease,
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and that each person signing on behalf of the corporation is authorized to do
so. In the event any representation or warranty is false, all persons who
execute this Lease shall be liable, individually, as Lessee. The owner of record
of the Premises is the Lessor. The person authorized to manage the Premises is
the Manager.
41. Special Stipulations. In the event any Special Stipulations are
attached to this Lease, the terms thereof shall control in the event of a
conflict between the provisions of this Lease and the provisions thereof.
42. Incorporation of Exhibits. All exhibits referred to in this Lease are
hereby incorporated herein by this reference.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed, under seal, in their respective names and on their behalf by their
duly authorized officials, the day and year indicated below. This Lease shall
govern in case of dispute.
Lessor:
By: /s/[signature illegible]
------------------------
President
Attest: ________________________
Secretary
(CORPORATE SEAL)
Date of Execution by Lessor:
June 9, 1995
- ---------------------------
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Wire & Cable Specialties
Lessee: 5855 Peachtree Corners East
Norcross, GA. 30092
By: /s/ Paul Monahan
-----------------------
Vice President
Attest: _______________________
Secretary
(CORPORATE SEAL)
Date of Execution by Lessor:
June 9, 1995
- ---------------------------
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EXHIBIT "A"
Floor Plan and Modifications
Landlord to install new carpet to office facility.
Landlord to paint (where not already done) office area.
Landlord to certify that all mechanical systems are in working order and can be
incorporated into a service agreement if not already. This includes HVAC,
electrical, and plumbing systems.
Office area is built out and modifications below are requested prior to
installation of carpet and occupancy if possible. If not cost effective, lessee
will take space without following office modifications.
[FLOOR PLAN]
<PAGE>
EXHIBIT B
Legal Description
To be attached
-- TO BE PROVIDED BY LANDLORD -
All of the South 127.73 feet of Lot 3, Block 2,
UPLAND WEST FILING NO. TWO a/k/a 3825 Paris Street,
Denver, Colorado 80239
<PAGE>
Exhibit 10.18
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made as of the ____ day of ___________ 1996 between
Futronix Systems Corp., a Delaware corporation (the "Company"), and Terrence M.
Hunt (the "Employee").
RECITALS
--------
The Employee has been an executive level employee of a company that has
become or has merged into a wholly-owned subsidiary of the Company on the date
hereof (the "Subsidiary"). The Company desires to retain the Employee to
provide services to the Company and the Subsidiary, and the Employee desires to
provide services to the Company and the Subsidiary, upon the terms and
conditions hereinafter set forth.
WITNESSETH:
----------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment.
----------
(a) The Company hereby employs the Employee as an executive level
employee, and the Employee hereby accepts such continued employment. During the
term of the Employee's employment under this Agreement (the "Employment Term"),
the Employee shall perform such services as shall be specified from time to time
by the Board of Directors of the Company (the "Board") and by any senior
executive officer of the Company in a senior position relative to the Employee,
which services shall be rendered on behalf of the Company, the Subsidiary and
any other affiliated company, as designated from time to time by the Board or
any such senior executive officer.
(b) The Company has elected the Employee as of the date hereof to the
position of President and Chief Operating Officer. The Employee shall continue
to hold such office or offices and to have such responsibilities as are set
forth on Exhibit "A" hereto until any change in such office or in such
responsibilities as may be approved in writing by a majority vote of the Board
and by a majority vote of the "Senior Management"; provided, however, that
notwithstanding any such change, the Employee shall at all times during the
Employment Term remain an executive level employee and shall have
responsibilities commensurate with such status; and provided further that the
Employee shall not be required by the Company to relocate to a metropolitan area
different from that in which the Employee resides on the date hereof. For the
purposes of this Agreement, "Senior Management" means the President, the Vice
Chairman of the Board and the Chief Financial Officer of the Company so long as
the persons holding such positions on the date hereof continue to hold such
positions, and thereafter such term shall mean the three most senior executive
officers of the Company from time to time.
<PAGE>
2. Performance.
-----------
The Employee shall devote his entire business efforts to the performance of
his duties hereunder; provided, however, that the Employee may engage in
personal investment and charitable activities so long as they do not interfere
with the performance of his duties hereunder.
3. Term.
----
The Employment Term shall consist of an initial term beginning on the date
hereof and continuing until December 31, 1999 and one or more one-year renewal
terms that shall begin automatically upon the end of the initial term or any
renewal term then in effect unless one of the parties hereto gives the other
party a notice of non-renewal under Section 5(a) or the Employment Term is
otherwise terminated under Sections 5 or 6.
4. Compensation for Employment.
---------------------------
(a) The basic annual rate of compensation of the Employee for his
employment services to the Company during the Employment Term shall be $150,000
(such amount, as adjusted in accordance with this Section 4, is referred to
herein as the "Salary"), which the Company shall pay (or cause the Subsidiary to
pay) to the Employee in equal installments in accordance with the normal payroll
policies of the Company. The Salary may be adjusted upward on an annual basis
as the Board may approve, in its sole discretion, but the Salary shall not be
decreased.
(b) The Employee shall be eligible to receive a bonus (the "Bonus") upon
such terms and conditions as may be determined from time to time by the Board;
provided, however, that (i) for the period from the date hereof through the end
of 1996, the Company shall pay the Employee a bonus in an amount equal to the
Salary multiplied by a fraction, the numerator of which is the number of days
included in the period from the date hereof through the end of 1996 and the
denominator of which is 365, and (ii) for the remainder of the initial term (the
"Income-Based Bonus Period"), the Company shall pay the Employee a bonus in an
amount equal to 2.34% of the Company's consolidated pre-tax annual income
without taking into account any bonuses paid to the Employee or other
management-level employees of the Company or the Subsidiary ("Adjusted Pre-Tax
Income"). With respect to 1997, however, the Bonus shall be at least equal to
$150,000. With respect to 1998 and 1999, the Company shall not pay any part of
the Bonus to the Employee unless the Company shall have achieved at least 80% of
the Company's budget that shall have been submitted by Senior Management and
approved by the Board for the applicable year. Except as provided herein with
respect to a termination, the Company shall pay the Bonus with respect to a
particular year in the next year promptly after receipt of the Company's
consolidated audited financial statements from its independent accountants.
(c) During the Employment Term, the Company shall provide (or cause the
Subsidiary to provide) the Employee with fringe benefits that are substantially
equivalent to the fringe benefits specified on Exhibit "B" hereto (the "Fringe
Benefits").
-2-
<PAGE>
5. Termination Without Compensation.
--------------------------------
(a) Non-Renewal of Term. Either the Company or the Employee may terminate
-------------------
the Employment Term by notice to the other party of such termination at least 90
days prior to the end of the initial term or any renewal term then in effect.
As of the termination date, the Company shall have no further liability or
obligation to the Employee hereunder except that the Company shall provide the
Employee with any unpaid Salary and Fringe Benefits that have accrued through
the date of termination.
(b) Total Disability. If the Employee becomes totally disabled (as defined
----------------
below), the Company may terminate the Employment Term by notice to the Employee,
and as of the termination date, the Company shall have no further liability or
obligation to the Employee hereunder except as follows: the Company shall
provide the Employee with (i) any unpaid Salary and Fringe Benefits that have
accrued through the date of termination; (ii) whatever benefits that he may be
entitled to receive under any then existing disability benefit plans of the
Company, including any such plans included in the Fringe Benefits, and (iii) in
the year immediately following the year of termination, the Bonus to which the
Employee would have been entitled if he had been employed for the full period to
which the Bonus relates but reduced proportionately to correspond to the portion
of the period for which the Employee was actually employed (a "Proportionate
Bonus"). For the purposes hereof, the Employee shall be deemed to be "totally
disabled" if the Employee is considered totally disabled under any group
disability plan maintained by the Company and in effect at that time, or in the
absence of any such plan, if the Employee is unable to perform his services
hereunder as a result of illness, injury or incapacity for a continuous period
of six months. In the event of any dispute under this Section 5(a), the Employee
shall submit to a physical examination by a licensed physician mutually
satisfactory to the Company and the Employee, the cost of such examination to be
paid by the Company, and the determination of such physician shall be
determinative.
(c) Death. If the Employee dies, this Employment Agreement shall
-----
terminate on the date of death, and thereafter the Company shall not have any
further liability or obligation to the Employee, his executors, administrators,
heirs, assigns or any other person claiming under or through him except that the
Company shall provide the Employee's estate with any unpaid Salary and Fringe
Benefits that have accrued through the date of termination and a Proportionate
Bonus.
(d) Cause. The Company may terminate the Employment Term for "cause" by
-----
giving the Employee 30 days' notice of the termination date, and as of the
termination date, the Company shall not have any further liability or obligation
to the Employee, except that the Company shall provide the Employee with any
unpaid Salary and Fringe Benefits that have accrued through the date of
termination, net of any liabilities that the Employee may have to the Company.
For purposes of this Agreement, "cause" shall mean (i) conviction of a felony,
(ii) conduct amounting to a material act of fraud or dishonesty involving the
Company, (iii) a material act of fraud or dishonesty not involving the Company
that has a material adverse effect upon the business or reputation of the
Company, (iv) the failure or refusal of the Employee in any material respect to
observe or perform (other than by reason of illness, injury or incapacity) any
of the material terms or provisions of this Agreement if
-3-
<PAGE>
such nonperformance continues uncured for a period of 30 days after notice
thereof, which notice specifies the nature of such failure or refusal and
requests that it be cured or (v) chronic alcoholism, drug addiction or any other
form of addiction that materially impairs the Employee's ability to perform the
terms and provisions of this Agreement, as determined by a physician retained by
the Company.
(e) Resignation. The Employee shall have the right to terminate the
-----------
Employment Term at any time by giving the Company at least 30 days' notice of
the termination date. Under such circumstances, the Company shall continue to
pay the Salary and provide the Fringe Benefits to the Employee through the
termination date. As of such termination date, the Company shall not have any
further liability or obligation to the Employee, except that the Company shall
provide the Employee with any unpaid Salary and Fringe Benefits that have
accrued through the date of termination.
6. Termination With Compensation.
-----------------------------
(a) Without Cause. The Company shall have the right to terminate the
-------------
Employment Term without cause at any time by giving the Employee 30 days' notice
of the termination date. Under such circumstances, the Company shall pay to the
Employee in a single payment within 45 days after the termination date, an
amount (the "Lump Sum Payment") equal to (i) the Salary for the remainder of the
Employment Term (i.e. the remainder of the initial term or of any renewal term
then in effect) plus (ii) an amount equal to (x) the quotient resulting from
dividing the Bonus paid to the Employee for the annual period immediately
preceding the year of termination (or the minimum Bonus for 1997 in the case of
termination during 1997) by 12, multiplied by the number of months remaining in
the Employment Term. In addition, the Company shall continue to provide to the
Employee the health benefits in effect for the Employee at the time of
termination until the earlier of the expiration of 18 months after the
termination date and the date on which the Employee obtains health benefits from
another source. As of such termination date, the Company shall not have any
further liability or obligation to the Employee other than to continue paying
the amounts and provide the health benefits specified in this Section 6(a).
Notwithstanding the foregoing, the Company shall not be obligated to pay the
Lump Sum Payment unless the Employee delivers the release specified under
Section 6(b).
(b) Consideration for Termination Compensation. The Lump Sum Payment is
------------------------------------------
referred to herein as the "Termination Compensation." The Employee shall not be
entitled to any Termination Compensation unless the Employee executes and
delivers to the Company after a notice of termination a release in a form
satisfactory to the Company in its sole discretion by which the Employee
releases the Company from any obligations and liabilities of any type
whatsoever, except for the Company's obligations with respect to the Termination
Compensation. The parties hereto acknowledge that the Termination Compensation
to be provided under this Section 6 is to be provided in consideration for the
above-specified release.
-4-
<PAGE>
7. Inventions, Designs and Product Developments.
--------------------------------------------
All inventions, innovations, designs, ideas and product developments,
developed or conceived by the Employee, solely or jointly with others, whether
or not patentable or copyrightable, at any time during the Employment Term or
during his employment by the Company prior to the commencement of the Employment
Term and that relate to the actual or planned business activities of the Company
(collectively, the "Developments") and all of the Employee's right, title and
interest therein, shall be the exclusive property of the Company. The Employee
hereby assigns, transfers and conveys to the Company all of his right, title and
interest in and to any and all such Developments. The Employee shall disclose
fully, as soon as practicable and in writing, all Developments to the Board. At
any time and from time to time, upon the request of the Company, the Employee
shall execute and deliver to the Company any and all instruments, documents and
papers, give evidence and do any and all other acts that, in the opinion of
counsel for the Company, are or may be necessary or desirable to document such
transfer or to enable the Company to file and prosecute applications for and to
acquire, maintain and enforce any and all patents, trademark registrations or
copyrights under United States or foreign law with respect to any such
Developments or to obtain any extension, validation, re-issue, continuance or
renewal of any such patent, trademark or copyright. The Company will be
responsible for the preparation of any such instruments, documents and papers
and for the prosecution of any such proceedings and will reimburse the Employee
for all reasonable expenses incurred by him in compliance with the provisions of
this Section 8.
8. Confidential Information.
------------------------
(a) The Employee has had and will have possession of or access to
confidential information relating to the business of the Company, including
writings, equipment, processes, drawings, reports, manuals, invention records,
financial information, business plans, customer lists, the identity of or other
facts relating to prospective customers, inventory lists, arrangements with
suppliers and customers, computer programs, or other material embodying trade
secrets, customer or product information or technical or business information of
the Company. All such information, other than any information that is in the
public domain through no act or omission of the Employee or which he is
authorized to disclose, is referred to collectively as the "Company
Information." During the Employment Term and thereafter for a period of three
years, the Employee shall not (i) use or exploit in any manner the Company
Information for himself or any person, partnership, association, corporation or
other entity other than the Company, (ii) remove any Company Information, or any
reproduction thereof, from the possession or control of the Company or (iii)
treat Company Information otherwise than in a confidential manner.
(b) All Company Information developed, created or maintained by the
Employee, alone or with others while employed by the Company, and all Company
Information maintained by the Employee thereafter, shall remain at all times the
exclusive property of the Company. The Employee shall return to the Company all
Company Information, and reproductions thereof, whether prepared by him or
others, that are in his possession immediately upon request and in any event
upon the completion of his employment by the Company.
-5-
<PAGE>
9. Remedies.
--------
The Employee expressly acknowledges that the remedy at law for any breach
of Sections 7 and 8 will be inadequate and that upon any such breach or
threatened breach, the Company shall be entitled as a matter of right to
injunctive relief in any court of competent jurisdiction, in equity or
otherwise, and to enforce the specific performance of the Employee's obligations
under these provisions without the necessity of proving the actual damage to the
Company or the inadequacy of a legal remedy. The rights conferred upon the
Company by the preceding sentence shall not be exclusive of, but shall be in
addition to, any other rights or remedies which the Company may have at law, in
equity or otherwise.
10. General.
-------
(a) Governing Law. The terms of this Agreement shall be governed by the
-------------
laws of the State of Texas.
(b) Company. For purposes of Sections 7, 8 and 9, the term "Company"
-------
shall be deemed to include the Subsidiary and any incorporated or unincorporated
entities that are controlled, directly or indirectly, by the Company through
ownership, agreement or otherwise.
(c) Binding Effect. All of the terms and provisions of this Agreement
--------------
shall be binding upon and inure to the benefit and be enforceable by the
respective heirs, representatives, successors (including any successor as a
result of a merger or similar reorganization) and assigns of the parties hereto,
except that the duties and responsibilities of the Employee hereunder are of a
personal nature and shall not be assignable in whole or in part by the Employee.
(d) Notices. All notices required to be given under this Agreement shall
-------
be in writing and shall be deemed to have been given when personally delivered
or when mailed by registered or certified mail, postage prepaid, return receipt
requested, or when sent by Federal Express or other overnight delivery service,
addressed (i) in the case of the Company, to the Company at its principal
executive offices, to the attention of the President, and (ii) in the case of
the Employee, to the Employee at the Employee's residential address on the
records of the Company at that time.
(e) Entire Agreement; Modification. This Agreement constitutes the entire
------------------------------
agreement of the parties hereto with respect to the subject matter hereof and
may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the termination of the Employment Term and
--------
of the Employee's employment by the Company, this Agreement shall continue to
bind the parties for so long as any obligations remain under the terms of this
Agreement.
(g) Waiver. No waiver of any breach of this Agreement shall be construed
------
to be a waiver as to succeeding breaches.
-6-
<PAGE>
(h) Severability. If any provision of this Agreement or application
------------
thereof to anyone under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto duly executed this Agreement as of the day and year first written
above.
FUTRONIX SYSTEMS CORP.
By:__________________________
_____________________________
Terrence M. Hunt
-7-
<PAGE>
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made as of the ____ day of ___________ 1996 between
Futronix Systems Corp., a Delaware corporation (the "Company"), and Theodore J.
Bruno (the "Employee").
RECITALS
--------
The Employee has been an executive level employee of a company that has
become or has merged into a wholly-owned subsidiary of the Company on the date
hereof (the "Subsidiary"). The Company desires to retain the Employee to
provide services to the Company and the Subsidiary, and the Employee desires to
provide services to the Company and the Subsidiary, upon the terms and
conditions hereinafter set forth.
WITNESSETH:
----------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment.
----------
(a) The Company hereby employs the Employee as an executive level
employee, and the Employee hereby accepts such continued employment. During the
term of the Employee's employment under this Agreement (the "Employment Term"),
the Employee shall perform such services as shall be specified from time to time
by the Board of Directors of the Company (the "Board") and by any senior
executive officer of the Company in a senior position relative to the Employee,
which services shall be rendered on behalf of the Company, the Subsidiary and
any other affiliated company, as designated from time to time by the Board or
any such senior executive officer.
(b) The Company has elected the Employee as of the date hereof to the
position of Vice Chairman and Treasurer. The Employee shall continue to hold
such office or offices and to have such responsibilities as are set forth on
Exhibit "A" hereto until any change in such office or in such responsibilities
as may be approved in writing by a majority vote of the Board and by a majority
vote of the "Senior Management"; provided, however, that notwithstanding any
such change, the Employee shall at all times during the Employment Term remain
an executive level employee and shall have responsibilities commensurate with
such status; and provided further that the Employee shall not be required by the
Company to relocate to a metropolitan area different from that in which the
Employee resides on the date hereof. For the purposes of this Agreement,
"Senior Management" means the President, the Vice Chairman of the Board and the
Chief Financial Officer of the Company so long as the persons holding such
positions on the date hereof continue to hold such positions, and thereafter
such term shall mean the three most senior executive officers of the Company
from time to time.
<PAGE>
2. Performance.
-----------
The Employee shall devote his entire business efforts to the performance of
his duties hereunder; provided, however, that the Employee may engage in
personal investment and charitable activities so long as they do not interfere
with the performance of his duties hereunder.
3. Term.
----
The Employment Term shall consist of an initial term beginning on the date
hereof and continuing until December 31, 1999 and one or more one-year renewal
terms that shall begin automatically upon the end of the initial term or any
renewal term then in effect unless one of the parties hereto gives the other
party a notice of non-renewal under Section 5(a) or the Employment Term is
otherwise terminated under Sections 5 or 6.
4. Compensation for Employment.
---------------------------
(a) The basic annual rate of compensation of the Employee for his
employment services to the Company during the Employment Term shall be $150,000
(such amount, as adjusted in accordance with this Section 4, is referred to
herein as the "Salary"), which the Company shall pay (or cause the Subsidiary to
pay) to the Employee in equal installments in accordance with the normal payroll
policies of the Company. The Salary may be adjusted upward on an annual basis
as the Board may approve, in its sole discretion, but the Salary shall not be
decreased.
(b) The Employee shall be eligible to receive a bonus (the "Bonus") upon
such terms and conditions as may be determined from time to time by the Board;
provided, however, that (i) for the period from the date hereof through the end
of 1996, the Company shall pay the Employee a bonus in an amount equal to the
Salary multiplied by a fraction, the numerator of which is the number of days
included in the period from the date hereof through the end of 1996 and the
denominator of which is 365, and (ii) for the remainder of the initial term (the
"Income-Based Bonus Period"), the Company shall pay the Employee a bonus in an
amount equal to 2.34% of the Company's consolidated pre-tax annual income
without taking into account any bonuses paid to the Employee or other
management-level employees of the Company or the Subsidiary ("Adjusted Pre-Tax
Income"). With respect to 1997, however, the Bonus shall be at least equal to
$150,000. With respect to 1998 and 1999, the Company shall not pay any part of
the Bonus to the Employee unless the Company shall have achieved at least 80% of
the Company's budget that shall have been submitted by Senior Management and
approved by the Board for the applicable year. Except as provided herein with
respect to a termination, the Company shall pay the Bonus with respect to a
particular year in the next year promptly after receipt of the Company's
consolidated audited financial statements from its independent accountants.
-2-
<PAGE>
(c) During the Employment Term, the Company shall provide (or cause the
Subsidiary to provide) the Employee with fringe benefits that are substantially
equivalent to the fringe benefits specified on Exhibit "B" hereto (the "Fringe
Benefits").
5. Termination Without Compensation.
--------------------------------
(a) Non-Renewal of Term. Either the Company or the Employee may terminate
-------------------
the Employment Term by notice to the other party of such termination at least 90
days prior to the end of the initial term or any renewal term then in effect.
As of the termination date, the Company shall have no further liability or
obligation to the Employee hereunder except that the Company shall provide the
Employee with any unpaid Salary and Fringe Benefits that have accrued through
the date of termination.
(b) Total Disability. If the Employee becomes totally disabled (as defined
----------------
below), the Company may terminate the Employment Term by notice to the Employee,
and as of the termination date, the Company shall have no further liability or
obligation to the Employee hereunder except as follows: the Company shall
provide the Employee with (i) any unpaid Salary and Fringe Benefits that have
accrued through the date of termination; (ii) whatever benefits that he may be
entitled to receive under any then existing disability benefit plans of the
Company, including any such plans included in the Fringe Benefits, and (iii) in
the year immediately following the year of termination, the Bonus to which the
Employee would have been entitled if he had been employed for the full period to
which the Bonus relates but reduced proportionately to correspond to the portion
of the period for which the Employee was actually employed (a "Proportionate
Bonus"). For the purposes hereof, the Employee shall be deemed to be "totally
disabled" if the Employee is considered totally disabled under any group
disability plan maintained by the Company and in effect at that time, or in the
absence of any such plan, if the Employee is unable to perform his services
hereunder as a result of illness, injury or incapacity for a continuous period
of six months. In the event of any dispute under this Section 5(a), the Employee
shall submit to a physical examination by a licensed physician mutually
satisfactory to the Company and the Employee, the cost of such examination to be
paid by the Company, and the determination of such physician shall be
determinative.
(c) Death. If the Employee dies, this Employment Agreement shall
-----
terminate on the date of death, and thereafter the Company shall not have any
further liability or obligation to the Employee, his executors, administrators,
heirs, assigns or any other person claiming under or through him except that the
Company shall provide the Employee's estate with any unpaid Salary and Fringe
Benefits that have accrued through the date of termination and a Proportionate
Bonus.
(d) Cause. The Company may terminate the Employment Term for "cause" by
-----
giving the Employee 30 days' notice of the termination date, and as of the
termination date, the Company shall not have any further liability or obligation
to the Employee, except that the Company shall provide the Employee with any
unpaid Salary and Fringe Benefits that have accrued through the date of
termination, net of any liabilities that the Employee may have to the Company.
For purposes of
-3-
<PAGE>
this Agreement, "cause" shall mean (i) conviction of a felony, (ii) conduct
amounting to a material act of fraud or dishonesty involving the Company, (iii)
a material act of fraud or dishonesty not involving the Company that has a
material adverse effect upon the business or reputation of the Company, (iv) the
failure or refusal of the Employee in any material respect to observe or perform
(other than by reason of illness, injury or incapacity) any of the material
terms or provisions of this Agreement if such nonperformance continues uncured
for a period of 30 days after notice thereof, which notice specifies the nature
of such failure or refusal and requests that it be cured or (v) chronic
alcoholism, drug addiction or any other form of addiction that materially
impairs the Employee's ability to perform the terms and provisions of this
Agreement, as determined by a physician retained by the Company.
(e) Resignation. The Employee shall have the right to terminate the
-----------
Employment Term at any time by giving the Company at least 30 days' notice of
the termination date. Under such circumstances, the Company shall continue to
pay the Salary and provide the Fringe Benefits to the Employee through the
termination date. As of such termination date, the Company shall not have any
further liability or obligation to the Employee, except that the Company shall
provide the Employee with any unpaid Salary and Fringe Benefits that have
accrued through the date of termination.
6. Termination With Compensation.
-----------------------------
(a) Without Cause. The Company shall have the right to terminate the
-------------
Employment Term without cause at any time by giving the Employee 30 days' notice
of the termination date. Under such circumstances, the Company shall pay to the
Employee in a single payment within 45 days after the termination date, an
amount (the "Lump Sum Payment") equal to (i) the Salary for the remainder of the
Employment Term (i.e. the remainder of the initial term or of any renewal term
then in effect) plus (ii) an amount equal to (x) the quotient resulting from
dividing the Bonus paid to the Employee for the annual period immediately
preceding the year of termination (or the minimum Bonus for 1997 in the case of
termination during 1997) by 12, multiplied by the number of months remaining in
the Employment Term. In addition, the Company shall continue to provide to the
Employee the health benefits in effect for the Employee at the time of
termination until the earlier of the expiration of 18 months after the
termination date and the date on which the Employee obtains health benefits from
another source. As of such termination date, the Company shall not have any
further liability or obligation to the Employee other than to continue paying
the amounts and provide the health benefits specified in this Section 6(a).
Notwithstanding the foregoing, the Company shall not be obligated to pay the
Lump Sum Payment unless the Employee delivers the release specified under
Section 6(b).
(b) Consideration for Termination Compensation. The Lump Sum Payment is
------------------------------------------
referred to herein as the "Termination Compensation." The Employee shall not be
entitled to any Termination Compensation unless the Employee executes and
delivers to the Company after a notice of termination a release in a form
satisfactory to the Company in its sole discretion by which the
-4-
<PAGE>
Employee releases the Company from any obligations and liabilities of any type
whatsoever, except for the Company's obligations with respect to the Termination
Compensation. The parties hereto acknowledge that the Termination Compensation
to be provided under this Section 6 is to be provided in consideration for the
above-specified release.
7. Inventions, Designs and Product Developments.
--------------------------------------------
All inventions, innovations, designs, ideas and product developments,
developed or conceived by the Employee, solely or jointly with others, whether
or not patentable or copyrightable, at any time during the Employment Term or
during his employment by the Company prior to the commencement of the Employment
Term and that relate to the actual or planned business activities of the Company
(collectively, the "Developments") and all of the Employee's right, title and
interest therein, shall be the exclusive property of the Company. The Employee
hereby assigns, transfers and conveys to the Company all of his right, title and
interest in and to any and all such Developments. The Employee shall disclose
fully, as soon as practicable and in writing, all Developments to the Board. At
any time and from time to time, upon the request of the Company, the Employee
shall execute and deliver to the Company any and all instruments, documents and
papers, give evidence and do any and all other acts that, in the opinion of
counsel for the Company, are or may be necessary or desirable to document such
transfer or to enable the Company to file and prosecute applications for and to
acquire, maintain and enforce any and all patents, trademark registrations or
copyrights under United States or foreign law with respect to any such
Developments or to obtain any extension, validation, re-issue, continuance or
renewal of any such patent, trademark or copyright. The Company will be
responsible for the preparation of any such instruments, documents and papers
and for the prosecution of any such proceedings and will reimburse the Employee
for all reasonable expenses incurred by him in compliance with the provisions of
this Section 8.
8. Confidential Information.
------------------------
(a) The Employee has had and will have possession of or access to
confidential information relating to the business of the Company, including
writings, equipment, processes, drawings, reports, manuals, invention records,
financial information, business plans, customer lists, the identity of or other
facts relating to prospective customers, inventory lists, arrangements with
suppliers and customers, computer programs, or other material embodying trade
secrets, customer or product information or technical or business information of
the Company. All such information, other than any information that is in the
public domain through no act or omission of the Employee or which he is
authorized to disclose, is referred to collectively as the "Company
Information." During the Employment Term and thereafter for a period of three
years, the Employee shall not (i) use or exploit in any manner the Company
Information for himself or any person, partnership, association, corporation or
other entity other than the Company, (ii) remove any Company Information, or any
reproduction thereof, from the possession or control of the Company or (iii)
treat Company Information otherwise than in a confidential manner.
-5-
<PAGE>
(b) All Company Information developed, created or maintained by the
Employee, alone or with others while employed by the Company, and all Company
Information maintained by the Employee thereafter, shall remain at all times the
exclusive property of the Company. The Employee shall return to the Company all
Company Information, and reproductions thereof, whether prepared by him or
others, that are in his possession immediately upon request and in any event
upon the completion of his employment by the Company.
9. Remedies.
--------
The Employee expressly acknowledges that the remedy at law for any breach
of Sections 7 and 8 will be inadequate and that upon any such breach or
threatened breach, the Company shall be entitled as a matter of right to
injunctive relief in any court of competent jurisdiction, in equity or
otherwise, and to enforce the specific performance of the Employee's obligations
under these provisions without the necessity of proving the actual damage to the
Company or the inadequacy of a legal remedy. The rights conferred upon the
Company by the preceding sentence shall not be exclusive of, but shall be in
addition to, any other rights or remedies which the Company may have at law, in
equity or otherwise.
10. General.
-------
(a) Governing Law. The terms of this Agreement shall be governed by the
-------------
laws of the State of Georgia.
(b) Company. For purposes of Sections 7, 8 and 9, the term "Company"
-------
shall be deemed to include the Subsidiary and any incorporated or unincorporated
entities that are controlled, directly or indirectly, by the Company through
ownership, agreement or otherwise.
(c) Binding Effect. All of the terms and provisions of this Agreement
--------------
shall be binding upon and inure to the benefit and be enforceable by the
respective heirs, representatives, successors (including any successor as a
result of a merger or similar reorganization) and assigns of the parties hereto,
except that the duties and responsibilities of the Employee hereunder are of a
personal nature and shall not be assignable in whole or in part by the Employee.
(d) Notices. All notices required to be given under this Agreement shall
-------
be in writing and shall be deemed to have been given when personally delivered
or when mailed by registered or certified mail, postage prepaid, return receipt
requested, or when sent by Federal Express or other overnight delivery service,
addressed (i) in the case of the Company, to the Company at its principal
executive offices, to the attention of the President, and (ii) in the case of
the Employee, to the Employee at the Employee's residential address on the
records of the Company at that time.
-6-
<PAGE>
(e) Entire Agreement; Modification. This Agreement constitutes the entire
------------------------------
agreement of the parties hereto with respect to the subject matter hereof and
may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the termination of the Employment Term and
--------
of the Employee's employment by the Company, this Agreement shall continue to
bind the parties for so long as any obligations remain under the terms of this
Agreement.
(g) Waiver. No waiver of any breach of this Agreement shall be construed
------
to be a waiver as to succeeding breaches.
(h) Severability. If any provision of this Agreement or application
------------
thereof to anyone under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto duly executed this Agreement as of the day and year first written
above.
FUTRONIX SYSTEMS CORP.
By:________________________
___________________________
Theodore J. Bruno
-7-
<PAGE>
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made as of the ____ day of ___________ 1996 between
Futronix Systems Corp., a Delaware corporation (the "Company"), and Paul Monahan
(the "Employee").
RECITALS
--------
The Employee has been an executive level employee of a company that has
become or has merged into a wholly-owned subsidiary of the Company on the date
hereof (the "Subsidiary"). The Company desires to retain the Employee to
provide services to the Company and the Subsidiary, and the Employee desires to
provide services to the Company and the Subsidiary, upon the terms and
conditions hereinafter set forth.
WITNESSETH:
----------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment.
----------
(a) The Company hereby employs the Employee as an executive level
employee, and the Employee hereby accepts such continued employment. During the
term of the Employee's employment under this Agreement (the "Employment Term"),
the Employee shall perform such services as shall be specified from time to time
by the Board of Directors of the Company (the "Board") and by any senior
executive officer of the Company in a senior position relative to the Employee,
which services shall be rendered on behalf of the Company, the Subsidiary and
any other affiliated company, as designated from time to time by the Board or
any such senior executive officer.
(b) The Company has elected the Employee as of the date hereof to the
position of Chief Financial Officer and Secretary. The Employee shall continue
to hold such office or offices and to have such responsibilities as are set
forth on Exhibit "A" hereto until any change in such office or in such
responsibilities as may be approved in writing by a majority vote of the Board
and by a majority vote of the "Senior Management"; provided, however, that
notwithstanding any such change, the Employee shall at all times during the
Employment Term remain an executive level employee and shall have
responsibilities commensurate with such status; and provided further that the
Employee shall not be required by the Company to relocate to a metropolitan area
different from that in which the Employee resides on the date hereof. For the
purposes of this Agreement, "Senior Management" means the President, the Vice
Chairman of the Board and the Chief Financial Officer of the Company so long as
the persons holding such positions on the date hereof continue to hold such
positions, and thereafter such term shall mean the three most senior executive
officers of the Company from time to time.
<PAGE>
2. Performance.
-----------
The Employee shall devote his entire business efforts to the performance of
his duties hereunder; provided, however, that the Employee may engage in
personal investment and charitable activities so long as they do not interfere
with the performance of his duties hereunder.
3. Term.
----
The Employment Term shall consist of an initial term beginning on the date
hereof and continuing until December 31, 1999 and one or more one-year renewal
terms that shall begin automatically upon the end of the initial term or any
renewal term then in effect unless one of the parties hereto gives the other
party a notice of non-renewal under Section 5(a) or the Employment Term is
otherwise terminated under Sections 5 or 6.
4. Compensation for Employment.
---------------------------
(a) The basic annual rate of compensation of the Employee for his
employment services to the Company during the Employment Term shall be $150,000
(such amount, as adjusted in accordance with this Section 4, is referred to
herein as the "Salary"), which the Company shall pay (or cause the Subsidiary to
pay) to the Employee in equal installments in accordance with the normal payroll
policies of the Company. The Salary may be adjusted upward on an annual basis
as the Board may approve, in its sole discretion, but the Salary shall not be
decreased.
(b) The Employee shall be eligible to receive a bonus (the "Bonus") upon
such terms and conditions as may be determined from time to time by the Board;
provided, however, that (i) for the period from the date hereof through the end
of 1996, the Company shall pay the Employee a bonus in an amount equal to the
Salary multiplied by a fraction, the numerator of which is the number of days
included in the period from the date hereof through the end of 1996 and the
denominator of which is 365, and (ii) for the remainder of the initial term (the
"Income-Based Bonus Period"), the Company shall pay the Employee a bonus in an
amount equal to .79% of the Company's consolidated pre-tax annual income without
taking into account any bonuses paid to the Employee or other management-level
employees of the Company or the Subsidiary ("Adjusted Pre-Tax Income"). With
respect to 1997, however, the Bonus shall be at least equal to $50,000. With
respect to 1998 and 1999, the Company shall not pay any part of the Bonus to the
Employee unless the Company shall have achieved at least 80% of the Company's
budget that shall have been submitted by Senior Management and approved by the
Board for the applicable year. Except as provided herein with respect to a
termination, the Company shall pay the Bonus with respect to a particular year
in the next year promptly after receipt of the Company's consolidated audited
financial statements from its independent accountants.
-2-
<PAGE>
(c) During the Employment Term, the Company shall provide (or cause the
Subsidiary to provide) the Employee with fringe benefits that are substantially
equivalent to the fringe benefits specified on Exhibit "B" hereto (the "Fringe
Benefits").
5. Termination Without Compensation.
--------------------------------
(a) Non-Renewal of Term. Either the Company or the Employee may terminate
-------------------
the Employment Term by notice to the other party of such termination at least 90
days prior to the end of the initial term or any renewal term then in effect.
As of the termination date, the Company shall have no further liability or
obligation to the Employee hereunder except that the Company shall provide the
Employee with any unpaid Salary and Fringe Benefits that have accrued through
the date of termination.
(b) Total Disability. If the Employee becomes totally disabled (as
----------------
defined below), the Company may terminate the Employment Term by notice to the
Employee, and as of the termination date, the Company shall have no further
liability or obligation to the Employee hereunder except as follows: the Company
shall provide the Employee with (i) any unpaid Salary and Fringe Benefits that
have accrued through the date of termination; (ii) whatever benefits that he may
be entitled to receive under any then existing disability benefit plans of the
Company, including any such plans included in the Fringe Benefits, and (iii) in
the year immediately following the year of termination, the Bonus to which the
Employee would have been entitled if he had been employed for the full period to
which the Bonus relates but reduced proportionately to correspond to the portion
of the period for which the Employee was actually employed (a "Proportionate
Bonus"). For the purposes hereof, the Employee shall be deemed to be "totally
disabled" if the Employee is considered totally disabled under any group
disability plan maintained by the Company and in effect at that time, or in the
absence of any such plan, if the Employee is unable to perform his services
hereunder as a result of illness, injury or incapacity for a continuous period
of six months. In the event of any dispute under this Section 5(a), the
Employee shall submit to a physical examination by a licensed physician mutually
satisfactory to the Company and the Employee, the cost of such examination to be
paid by the Company, and the determination of such physician shall be
determinative.
(c) Death. If the Employee dies, this Employment Agreement shall
-----
terminate on the date of death, and thereafter the Company shall not have any
further liability or obligation to the Employee, his executors, administrators,
heirs, assigns or any other person claiming under or through him except that the
Company shall provide the Employee's estate with any unpaid Salary and Fringe
Benefits that have accrued through the date of termination and a Proportionate
Bonus.
(d) Cause. The Company may terminate the Employment Term for "cause" by
-----
giving the Employee 30 days' notice of the termination date, and as of the
termination date, the Company shall not have any further liability or obligation
to the Employee, except that the Company shall provide the Employee with any
unpaid Salary and Fringe Benefits that have accrued through the date of
termination, net of any liabilities that the Employee may have to the Company.
For purposes of
-3-
<PAGE>
this Agreement, "cause" shall mean (i) conviction of a felony, (ii) conduct
amounting to a material act of fraud or dishonesty involving the Company, (iii)
a material act of fraud or dishonesty not involving the Company that has a
material adverse effect upon the business or reputation of the Company, (iv) the
failure or refusal of the Employee in any material respect to observe or perform
(other than by reason of illness, injury or incapacity) any of the material
terms or provisions of this Agreement if such nonperformance continues uncured
for a period of 30 days after notice thereof, which notice specifies the nature
of such failure or refusal and requests that it be cured or (v) chronic
alcoholism, drug addiction or any other form of addiction that materially
impairs the Employee's ability to perform the terms and provisions of this
Agreement, as determined by a physician retained by the Company.
(e) Resignation. The Employee shall have the right to terminate the
-----------
Employment Term at any time by giving the Company at least 30 days' notice of
the termination date. Under such circumstances, the Company shall continue to
pay the Salary and provide the Fringe Benefits to the Employee through the
termination date. As of such termination date, the Company shall not have any
further liability or obligation to the Employee, except that the Company shall
provide the Employee with any unpaid Salary and Fringe Benefits that have
accrued through the date of termination.
6. Termination With Compensation.
-----------------------------
(a) Without Cause. The Company shall have the right to terminate the
-------------
Employment Term without cause at any time by giving the Employee 30 days' notice
of the termination date. Under such circumstances, the Company shall pay to the
Employee in a single payment within 45 days after the termination date, an
amount (the "Lump Sum Payment") equal to (i) the Salary for the remainder of the
Employment Term (i.e. the remainder of the initial term or of any renewal term
then in effect) plus (ii) an amount equal to (x) the quotient resulting from
dividing the Bonus paid to the Employee for the annual period immediately
preceding the year of termination (or the minimum Bonus for 1997 in the case of
termination during 1997) by 12, multiplied by the number of months remaining in
the Employment Term. In addition, the Company shall continue to provide to the
Employee the health benefits in effect for the Employee at the time of
termination until the earlier of the expiration of 18 months after the
termination date and the date on which the Employee obtains health benefits from
another source. As of such termination date, the Company shall not have any
further liability or obligation to the Employee other than to continue paying
the amounts and provide the health benefits specified in this Section 6(a).
Notwithstanding the foregoing, the Company shall not be obligated to pay the
Lump Sum Payment unless the Employee delivers the release specified under
Section 6(b).
(b) Consideration for Termination Compensation. The Lump Sum Payment is
------------------------------------------
referred to herein as the "Termination Compensation." The Employee shall not be
entitled to any Termination Compensation unless the Employee executes and
delivers to the Company after a notice of termination a release in a form
satisfactory to the Company in its sole discretion by which the
-4-
<PAGE>
Employee releases the Company from any obligations and liabilities of any type
whatsoever, except for the Company's obligations with respect to the Termination
Compensation. The parties hereto acknowledge that the Termination Compensation
to be provided under this Section 6 is to be provided in consideration for the
above-specified release.
7. Inventions, Designs and Product Developments.
--------------------------------------------
All inventions, innovations, designs, ideas and product developments,
developed or conceived by the Employee, solely or jointly with others, whether
or not patentable or copyrightable, at any time during the Employment Term or
during his employment by the Company prior to the commencement of the Employment
Term and that relate to the actual or planned business activities of the Company
(collectively, the "Developments") and all of the Employee's right, title and
interest therein, shall be the exclusive property of the Company. The Employee
hereby assigns, transfers and conveys to the Company all of his right, title and
interest in and to any and all such Developments. The Employee shall disclose
fully, as soon as practicable and in writing, all Developments to the Board. At
any time and from time to time, upon the request of the Company, the Employee
shall execute and deliver to the Company any and all instruments, documents and
papers, give evidence and do any and all other acts that, in the opinion of
counsel for the Company, are or may be necessary or desirable to document such
transfer or to enable the Company to file and prosecute applications for and to
acquire, maintain and enforce any and all patents, trademark registrations or
copyrights under United States or foreign law with respect to any such
Developments or to obtain any extension, validation, re-issue, continuance or
renewal of any such patent, trademark or copyright. The Company will be
responsible for the preparation of any such instruments, documents and papers
and for the prosecution of any such proceedings and will reimburse the Employee
for all reasonable expenses incurred by him in compliance with the provisions of
this Section 8.
8. Confidential Information.
------------------------
(a) The Employee has had and will have possession of or access to
confidential information relating to the business of the Company, including
writings, equipment, processes, drawings, reports, manuals, invention records,
financial information, business plans, customer lists, the identity of or other
facts relating to prospective customers, inventory lists, arrangements with
suppliers and customers, computer programs, or other material embodying trade
secrets, customer or product information or technical or business information of
the Company. All such information, other than any information that is in the
public domain through no act or omission of the Employee or which he is
authorized to disclose, is referred to collectively as the "Company
Information." During the Employment Term and thereafter for a period of three
years, the Employee shall not (i) use or exploit in any manner the Company
Information for himself or any person, partnership, association, corporation or
other entity other than the Company, (ii) remove any Company Information, or any
reproduction thereof, from the possession or control of the Company or (iii)
treat Company Information otherwise than in a confidential manner.
-5-
<PAGE>
(b) All Company Information developed, created or maintained by the
Employee, alone or with others while employed by the Company, and all Company
Information maintained by the Employee thereafter, shall remain at all times the
exclusive property of the Company. The Employee shall return to the Company all
Company Information, and reproductions thereof, whether prepared by him or
others, that are in his possession immediately upon request and in any event
upon the completion of his employment by the Company.
9. Remedies.
--------
The Employee expressly acknowledges that the remedy at law for any breach
of Sections 7 and 8 will be inadequate and that upon any such breach or
threatened breach, the Company shall be entitled as a matter of right to
injunctive relief in any court of competent jurisdiction, in equity or
otherwise, and to enforce the specific performance of the Employee's obligations
under these provisions without the necessity of proving the actual damage to the
Company or the inadequacy of a legal remedy. The rights conferred upon the
Company by the preceding sentence shall not be exclusive of, but shall be in
addition to, any other rights or remedies which the Company may have at law, in
equity or otherwise.
10. General.
-------
(a) Governing Law. The terms of this Agreement shall be governed by the
-------------
laws of the State of Georgia.
(b) Company. For purposes of Sections 7, 8 and 9, the term "Company"
-------
shall be deemed to include the Subsidiary and any incorporated or unincorporated
entities that are controlled, directly or indirectly, by the Company through
ownership, agreement or otherwise.
(c) Binding Effect. All of the terms and provisions of this Agreement
--------------
shall be binding upon and inure to the benefit and be enforceable by the
respective heirs, representatives, successors (including any successor as a
result of a merger or similar reorganization) and assigns of the parties hereto,
except that the duties and responsibilities of the Employee hereunder are of a
personal nature and shall not be assignable in whole or in part by the Employee.
(d) Notices. All notices required to be given under this Agreement shall
-------
be in writing and shall be deemed to have been given when personally delivered
or when mailed by registered or certified mail, postage prepaid, return receipt
requested, or when sent by Federal Express or other overnight delivery service,
addressed (i) in the case of the Company, to the Company at its principal
executive offices, to the attention of the President, and (ii) in the case of
the Employee, to the Employee at the Employee's residential address on the
records of the Company at that time.
-6-
<PAGE>
(e) Entire Agreement; Modification. This Agreement constitutes the entire
------------------------------
agreement of the parties hereto with respect to the subject matter hereof and
may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the termination of the Employment Term and
--------
of the Employee's employment by the Company, this Agreement shall continue to
bind the parties for so long as any obligations remain under the terms of this
Agreement.
(g) Waiver. No waiver of any breach of this Agreement shall be construed
------
to be a waiver as to succeeding breaches.
(h) Severability. If any provision of this Agreement or application
------------
thereof to anyone under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto duly executed this Agreement as of the day and year first written
above.
FUTRONIX SYSTEMS CORP.
By:_____________________
________________________
Paul Monahan
-7-
<PAGE>
EXHIBIT 10.21
MONAHAN AGREEMENT
-----------------
THIS AGREEMENT is made as of the 7th day of August, 1996 by and among
Futronix Systems Corp., a Delaware corporation (the "Company"), Futronix
Acquisition Company, a Texas corporation (the "Acquisition Company"), Futronix
Corporation, a Texas corporation ("Futronix"), Wire & Cable Specialties
Corporation, a Georgia corporation ("W&C"), Theodore J. Bruno, a Georgia
resident ("Bruno"), and Paul Monahan, a Georgia resident ("Monahan").
Background
----------
This Agreement is being entered into in connection with a Reorganization
Agreement, dated the date hereof, among the Company, the Acquisition Company,
Futronix, W&C, Terrence M. Hunt, Bruno and the Futronix Stockholder Parties (the
"Reorganization Agreement"). Terms are used as defined in the Reorganization
Agreement unless otherwise defined herein.
The Reorganization Agreement contemplates that the Company and Monahan will
take certain actions in connection with the Transactions, and this Agreement
sets forth the terms and conditions of such actions.
WITNESSETH:
----------
NOW, THEREFORE, in consideration of the respective covenants contained
herein and in the Reorganization Agreement and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment Agreement. At the Closing, Monahan shall execute and
--------------------
deliver to the Company the Employment Agreement attached to the Reorganization
Agreement as Exhibit "D" (the "New Employment Agreement"). Upon the Company's
execution and delivery to Monahan of the New Employment Agreement, the
Employment Agreement between Monahan and W&C, dated February 26, 1993, as
amended (the "Old Employment Agreement"), shall thereupon terminate, and neither
Monahan nor W&C shall have any rights or obligations thereunder.
2. Appointment to Offices of the Company. At the Closing, the Company
-------------------------------------
shall appoint Monahan to the offices of Chief Financial Officer and Secretary,
and Monahan shall accept such appointments, as contemplated by Section 8.7 of
the Reorganization Agreement.
3. Value Appreciation Bonus. Upon Monahan's completion of seven days of
------------------------
employment with the Company as Chief Financial Officer and Secretary (or on the
next business day if such seventh day is not a business day), the Company shall
pay to Monahan the Value Appreciation Bonus (defined in Section 4 hereof). This
payment will not be forfeited in the event that, subsequent to the Closing,
Monahan is unable to fulfill this condition as the result of his death,
disability or termination without "cause" (as defined in Section 5(d) of the New
Employment Agreement).
4. Settlement of Value Appreciation Bonus Obligations. The payment to
--------------------------------------------------
Monahan of a bonus in an amount equal to 123,857 shares of Company Common Stock
plus cash equal to the
<PAGE>
product of 82% of such number of shares multiplied by the
value of a share of Company Common Stock as determined for reporting such bonus
for federal income tax purposes (the "Value Appreciation Bonus") shall satisfy
in full any and all rights of Monahan to receive a bonus under Section 6 of the
Old Employment Agreement.
5. Registration Rights Agreement. At the Closing, Monahan shall execute
-----------------------------
and deliver to the Company the Registration Rights Agreement attached to the
Reorganization Agreement as Exhibit "E."
6. Option from Bruno. At the Closing, Bruno and Monahan shall enter into
-----------------
the Option Agreement specified in Section 9.7 of the Reorganization Agreement
and the Option Agreement between them, dated February 26, 1993, shall thereupon
terminate, and neither Bruno or Monahan shall have any rights or obligations
thereunder.
7. Futronix Companies Covenants. To the extent that they relate to
----------------------------
Monahan, Monahan shall be entitled to rely upon and enforce the covenants on the
part of any of the Futronix Companies that are contained in the following
Sections of the Reorganization Agreement, to the same extent as if he were a
party to the Reorganization Agreement: Section 7.6 Secondary Registration
----------------------
Statement, Section 8.7 Appointment of Directors and Officers, Section 8.8 Value
- --------- ------------------------------------- -----
Appreciation Bonus, Section 8.9 Employment Agreements, Section 8.10 Registration
- ------------------ --------------------- ------------
Rights and Section 8.12 Release of Indebtedness Guarantee.
- ------ ---------------------------------
8. Indemnification. Monahan shall indemnify each W&C Indemnified Party as
---------------
provided in Section 14 of the Reorganization Agreement and shall be bound by the
provisions thereof.
9. Secondary Registration. Monahan shall be bound by the provisions of
----------------------
Section 7.6 of the Reorganization Agreement with respect to the Secondary
Registration Statement.
10. Applicable Lockup Period. Monahan shall execute and deliver such
------------------------
documentation as the Company may reasonably request to evidence his agreement to
an Applicable Lockup Period of not more than 180 days.
11. Termination. This Agreement shall terminate and none of the parties
-----------
shall have any rights or obligations hereunder upon a termination of the
Reorganization Agreement.
12. Contents of Agreement. This Agreement, together with the other
---------------------
Transaction Documents, sets forth the entire understanding of the parties hereto
with respect to the Transactions and supersedes all prior agreements or
understandings among the parties regarding those matters.
13. Amendment, Parties in Interest, Assignment, Etc. This Agreement may
-----------------------------------------------
be amended, modified or supplemented only by a written instrument duly executed
by each of the parties hereto. If any provision of this Agreement shall for any
reason be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the respective
heirs, legal representatives, successors and permitted assigns of the
-2-
<PAGE>
parties hereto. No party hereto shall assign this Agreement or any right,
benefit or obligation hereunder. Any term or provision of this Agreement may be
waived at any time by the Party entitled to the benefit thereof by a written
instrument duly executed by such party. The parties hereto shall execute and
deliver any and all documents and take any and all other actions that may be
deemed reasonably necessary by their respective counsel to complete the
Transactions.
14. Interpretation. Unless the context of this Agreement clearly requires
--------------
otherwise, (a) references to the plural include the singular, the singular the
plural, the part the whole, (b) references to any gender include all genders,
(c) "or" has the inclusive meaning frequently identified with the phrase
"and/or," (d) "including" has the inclusive meaning frequently identified with
the phrase "but not limited to" and (e) references to "hereunder" or "herein"
relate to this Agreement. The section and other headings contained in this
Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
Section, subsection, Disclosure Schedule and Exhibit references are to this
Agreement unless otherwise specified. Each accounting term used herein that is
not specifically defined herein shall have the meaning given to it under GAAP.
15. Governing Law. This Agreement shall be construed and interpreted in
-------------
accordance with the laws of the State of Delaware without regard to its
provisions concerning conflict of laws.
16. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and
-3-
<PAGE>
the same instrument. Each such copy shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first written above.
FUTRONIX SYSTEMS CORP.
By: /s/ Terrence M. Hunt
------------------------
Title: President
FUTRONIX ACQUISITION COMPANY
By: /s/ Terrence M. Hunt
------------------------
Title: President
FUTRONIX CORPORATION
By: /s/ Terrence M. Hunt
------------------------
Title: President
WIRE & CABLE SPECIALTIES CORPORATION
By: /s/ Theodore J. Bruno
------------------------
Title: President
/s/ Theodore J. Bruno
----------------------------
THEODORE J. BRUNO
/s/ Paul Monahan
----------------------------
PAUL MONAHAN
-4-
<PAGE>
EXHIBIT 10.22
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS AGREEMENT is made as of _________ __, 1996 by and among Futronix
Systems Corp., a Delaware corporation (the "Company"), and the undersigned
securityholders of the Company (the "Stockholders").
BACKGROUND
----------
The Stockholders are persons and entities that are acquiring
contemporaneously with the date hereof shares of Common Stock, par value $0.01
per share, of the Company (the "Common Stock") or other securities that are
exercisable for or convertible into Common Stock. The Company has agreed to
provide the registration rights provided for in this Agreement as an inducement
for the Stockholders to enter into other agreements contemporaneously with this
Agreement, including with respect to certain of the Stockholders a
Reorganization Agreement, dated August 7, 1996 (the "Reorganization Agreement").
WITNESSETH:
----------
The parties hereto, each intending to be legally bound and in exchange for
the mutual covenants herein, agree as follows:
1. Demand Registrations.
--------------------
(a) Requests for Registration. At any time, each Significant Stockholder
-------------------------
(defined below) may demand registration (a "Demand Registration") under the
Securities Act of 1933, as amended (the "1933 Act"), of all or any portion of
the Registrable Securities (defined below) owned by such Significant
Stockholder. In order to accomplish such demand, a Significant Stockholder shall
send written notice of the demand to the Company, and such notice shall specify
the number of Registrable Securities sought to be registered. The Significant
Stockholders each have the right to one Demand Registration; provided, however,
that the Company shall only be required to proceed with a Demand Registration
requested by a Significant Stockholder if the number of Registrable Securities
that the Stockholders (including the Significant Stockholder requesting the
Demand Registration) and the Company shall have elected to include in such
Demand Registration pursuant to this Section 1 has an aggregate fair market
value, in the reasonable opinion of the Company, in excess of $5 million.
(b) Procedure. Within 10 days after receipt of such a demand, the Company
---------
shall give written notice of such requested registration to all other holders of
Registrable Securities and shall include in such registration, subject to the
allocation provisions below, all other Registrable Securities with respect to
which the Company has received written requests for inclusion within 20 days
after the Company's mailing of such notice, plus any securities of the Company
that the Company chooses to include on its own behalf.
(c) Expenses. In a Demand Registration, the Company shall pay the
--------
Registration Expenses (defined below), but the Underwriting Commissions (defined
below) shall be shared
<PAGE>
by the Company and those holders of Registrable Securities whose Registrable
Securities are included in the Demand Registration in proportion to any
securities included on their behalf.
(d) Priority on Demand Registrations. If a Demand Registration is
--------------------------------
underwritten and the managing underwriters advise the Company in writing that in
their opinion the number of Registrable Securities requested to be included
exceeds the number that can be sold in such offering, at a price reasonably
related to fair market value, the Company shall include in such Demand
Registration (i) first, the Registrable Securities requested to be included in
such Demand Registration by all Stockholders, including the Significant
Stockholder making the demand, pro rata on the basis of the number of
Registrable Securities owned, and (ii) second, any securities that the Company
desires to include on its own behalf. A Demand Registration shall not be
considered to be a Significant Stockholder's one Demand Registration under
Section 1(a), and the Company shall pay the Registration Expenses of such
Demand Registration, if (i) as a result of the foregoing allocation, the
Significant Stockholder that initiated the Demand Registration is not able to
register and sell in the Demand Registration at least 75% of the Registrable
Securities sought to be included in the Demand Registration by such Significant
Stockholder, as specified in such Stockholder's notice by which the demand was
made, (ii) the gross proceeds of the securities included in the Demand
Registration on behalf of the Company constitute at least 20% of the total gross
proceeds of the Demand Registration, or (iii) the registration statement
requested by such Stockholder does not become effective for any reason.
(e) Selection of Underwriters. If any Demand Registration is underwritten,
-------------------------
the selection of the investment banker(s) and manager(s) and the other decisions
regarding the underwriting arrangements for the offering shall be made by the
Significant Stockholder initiating such registration.
(f) Restrictions on Demand Registrations. The Company shall not be
------------------------------------
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration or any registration in which
the holders of Registrable Securities were given piggyback rights pursuant to
Section 2 below.
(g) Contemporaneous Demand. If any holder of the Company's securities that
----------------------
is not a holder of Registrable Securities under this Agreement exercises demand
registration rights to have the Company register its securities under the 1933
Act (a "Non-Stockholder Registration") within a period of 30 days before or
after the time any Significant Stockholder shall have requested a Demand
Registration, then (i) the holders of Registrable Securities that desire to be
included in the Non-Stockholder Registration and the holders of securities other
than Registrable Securities that have registration rights with respect to such a
registration shall be entitled to participate in the Non-Stockholder
Registration on a pro rata basis, according to the number of shares owned by the
holders seeking to have securities included in such registration, (ii) the
Company shall pay all of the Registration Expenses of the Non-Stockholder
Registration, and (iii) the Non-Stockholder Registration shall not count as a
Demand Registration with respect to any Significant Stockholder that shall have
requested a Demand Registration within such time period unless the Significant
Stockholder is able to register and sell at least 75% of the Registrable
Securities sought to be registered by that Stockholder in its Demand
Registration.
-2-
<PAGE>
(h) Registrations under Reorganization Agreement. The "Initial
--------------------------------------------
Registration Statements" and "Secondary Registration Statement" that are
referred to in the Reorganization Agreement shall not be deemed a Demand
Registration or a Piggyback Registration (defined below), nor shall any of the
other terms of this Agreement apply to such Initial Registration Statements and
Secondary Registration Statement notwithstanding any other contrary provisions
of this Agreement.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register any of
------------------
its securities under the 1933 Act (other than a Demand Registration), and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company shall give prompt written
notice to all holders of Registrable Securities and shall include in such
Piggyback Registration, subject to the allocation provisions below, all
Registrable Securities with respect to which the Company has received written
requests for inclusion within 20 days after the Company's mailing of such
notice. The Company shall not select a form of registration statement which
imposes, for its use, limitations on the maximum value or number of securities
to be registered if these limitations would preclude registration of the
Registrable Securities that the Company has been requested to include in such
registration.
(b) Piggyback Expenses. In all Piggyback Registrations, the Company shall
------------------
pay the Registration Expenses related to the Registrable Securities of the
Selling Stockholders (defined below), but the Selling Stockholders shall pay the
Underwriting Commissions related to their Registrable Securities.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
---------------------------------
underwritten primary registration on behalf of the Company, and the managing
underwriter(s) advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number that
can be sold in such offering, at a price reasonably related to fair market
value, the Company shall allocate the securities to be included as follows: (i)
first, the securities the Company proposes to sell on its own behalf; and (ii)
second, Registrable Securities requested to be included in such registration,
pro rata on the basis of the number of Registrable Securities owned among the
Selling Stockholders.
(d) Priority on Secondary Registrations. If a Piggyback Registration is
-----------------------------------
initiated as an underwritten secondary registration on behalf of holders of the
Company's securities (other than a Demand Registration pursuant to Section 1,
and the managing underwriter(s) advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number that can be sold in such offering, at a price reasonably
related to fair market value, the Company shall allocate the securities to be
included as follows: (i) first, the securities requested to be included by the
holders initiating such registration; and (ii) second, Registrable Securities
requested to be included in such registration, pro rata on the basis of the
number of Registrable Securities owned among the Selling Stockholders.
(e) Selection of Underwriters. If any Piggyback Registration is
-------------------------
underwritten, the selection of investment banker(s) and manager(s) and the other
decisions regarding the underwriting arrangements for the offering shall be made
by the Company, if the registration is
-3-
<PAGE>
under Section 2(c), or by the holders initiating such registration, if the
registration is under Section 2(d).
3. Registration on Form S-3.
------------------------
The Company shall use its best efforts to qualify for registration on Form
S-3 or any comparable or successor form or forms; and to that end, the Company
shall register (whether or not required by law to do so) its Common Stock under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), in accordance
with the provisions of the 1934 Act contemporaneously with or as soon as
possible following the effective date of the first registration of any of the
Company's securities under the 1933 Act. After the Company has so qualified, in
addition to the rights contained in the foregoing provisions of this
Registration Rights Agreement, each Significant Stockholder shall have the right
to require registration of its Registrable Securities on Form S-3 at the
Company's expense, provided that (a) the number of Registrable Securities that
the Stockholders (including the Significant Stockholder requesting the
registration) and the Company shall have elected to include in such Demand
Registration pursuant to this Section 3 has an aggregate fair market value, in
the reasonable opinion of the Company, of at least $500,000 and (b) each
Significant Stockholder shall be entitled to only two such registrations during
any 12-month period. When the Company receives notice of any Significant
Stockholder's request for a registration on Form S-3, it shall send notice of
such proposed registration to all other holders of Registrable Securities and
include the Registrable Securities of such holders in the registration in
accordance with the procedures set forth in Section 1.
4. Holdback Agreements.
-------------------
Neither the Stockholders participating in any such registration nor the
Company shall effect any public sale or distribution of equity securities of the
Company or any securities convertible into or exchangeable or exercisable for
such securities during the seven days prior to and the 90 days after any
underwritten Demand Registration or underwritten Piggyback Registration has
become effective (except as part of such underwritten registration).
5. Registration Procedures.
-----------------------
Whenever the holders of Registrable Securities have requested that any
Registrable Securities be registered pursuant to Section 1 or 2 of this
Agreement, the Company shall, as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use
commercially reasonable efforts to cause such registration statement to
become effective (provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall
furnish each Selling Stockholder with copies of all such documents proposed
to be filed);
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus
-4-
<PAGE>
used in connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days;
(c) furnish to each Selling Stockholder such number of copies of
such registration statement, each amendment and supplement thereto and the
prospectus included in such registration statement (including each
preliminary prospectus), and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use commercially reasonable efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as the managing underwriter(s) may reasonably request;
(e) notify each Selling Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within the
period that the Company is required to keep the registration statement
effective of the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
will not contain an untrue statement of a material fact or omit to state
any fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed or included
on securities exchanges on which similar securities issued by the Company
are then listed or included;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including an underwriting
agreement in customary form) and take such other customary actions as may
be reasonably necessary to expedite or facilitate the disposition of such
Registrable Securities;
(i) obtain a "comfort" letter addressed to the Company from its
independent public accountants in customary form and covering such matters
of the type customarily covered by "comfort" letters; and
(j) make available for inspection by any Selling Stockholder, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by
any such seller,
-5-
<PAGE>
underwriter, attorney, accountant or agent in connection with such
registration statement.
6. Indemnification.
---------------
(a) The Company hereby indemnifies, to the extent permitted by law, each
Stockholder, its officers and directors, and each person who controls such
holder (within the meaning of the 1933 Act or the 1934 Act), against all losses,
claims, damages, liabilities and expenses arising out of or resulting from any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in any information furnished in writing to the
Company by such holder expressly for use therein or by any such holder's failure
to deliver a copy of the registration statement or prospectus or any amendments
or supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company shall indemnify the underwriters, their officers and
directors, and each person who controls such underwriters (within the meaning of
the 1933 Act or the 1934 Act) to the same extent as provided above with respect
to the indemnification of the Stockholders.
(b) In connection with any registration statement in which a Selling
Stockholder is participating, each such holder shall furnish to the Company in
writing such information as is reasonably requested by the Company for use in
any such registration statement or prospectus and shall indemnify, to the extent
permitted by law, the Company, its directors and officers and each person who
controls the Company (within the meaning of the 1933 Act or the 1934 Act)
against any losses, claims, damages, liabilities and expenses resulting from any
untrue or alleged untrue statement of material fact or any omission or alleged
omission of a material fact required to be stated in the registration statement
or prospectus or any amendment thereof or supplement thereto or necessary to
make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in information so furnished in writing
by such holder specifically for use in preparing the registration statement.
Notwithstanding the foregoing, the liability of a Selling Stockholder under this
Section 6(b) shall be limited to an amount equal to the net proceeds actually
received by the Selling Stockholder from the sale of Registrable Securities
covered by the registration statement.
(c) Any person entitled to indemnification hereunder shall (i) give prompt
notice to the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party. If such defense is assumed, the indemnifying party shall not be subject
to any liability for any settlement made without its consent (but such consent
will not be unreasonably withheld). An indemnifying party who is not entitled,
or elects not, to assume the defense of a claim shall not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
-6-
<PAGE>
7. Participation in Underwritten Registrations.
-------------------------------------------
No Selling Stockholder may participate in any underwritten registration
hereunder unless such holder (a) agrees to sell such holder's securities on the
basis provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements under Sections 1(e) or 2(e), and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
8. Definitions.
-----------
(a) The term "Registrable Securities" means (i) the Common Stock
registered in the names of the Stockholders from time to time, (ii) the Common
Stock issuable upon conversion of the Convertible Preferred Stock, par value
$0.01 per share, of the Company registered in the names of the Stockholders from
time to time, (iii) the Common Stock issuable upon exercise of the warrants to
purchase Common Stock which warrants are registered in the names of the
Stockholders from time to time, (iv) the Common Stock issuable upon the exercise
of certain options to purchase Common Stock granted by a Stockholder to certain
other Stockholders pursuant to the terms of the Reorganization Agreement and (v)
any securities issued or to be issued with respect to the securities referred to
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Registrable Securities, such securities
will cease to be Registrable Securities when they have been (A) effectively
registered under the 1933 Act and disposed of in accordance with the
registration state ment covering them, or (B) transferred pursuant to Rule 144
(or any similar provision then in force).
(b) The term "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, expenses and
fees for listing the securities to be registered on exchanges on which similar
securities issued by the Company are then listed, and fees and disbursements of
counsel for the Company and of all independent certified public accountants,
underwriters (other than Underwriting Commissions) and other persons retained by
the Company.
(c) The term "Selling Stockholders" means registered holders of
Registrable Securities who request inclusion of all or a portion of their shares
of Registrable Securities in a Demand Registration pursuant to the Section 1(b)
or a Piggyback Registration pursuant to Section 2(a). Such term also includes
those Stockholders who demand a Demand Registration for the purposes of Sections
5, 6, and 7.
(d) The term "Significant Stockholder" means each of Bradford Venture
Partners, L.P., Overseas Private Investor Partners, Terrence M. Hunt and
Theodore J. Bruno.
(e) The term "Underwriting Commissions" means all underwriting discounts
or commissions relating to the sale of securities of the Company, but excludes
any expenses reimbursed to underwriters.
-7-
<PAGE>
9. Subsequent Registration Rights.
------------------------------
From and after the date of this Agreement, the Company may enter into an
agreement with any holder or prospective holder of any securities of the Company
that would allow such holder or prospective holder to include such securities in
any registration filed under Sections 1 or 2 hereof or to otherwise become a
party hereto as a "Stockholder" for all purposes hereunder. However, the Company
shall not enter into any such agreement without the prior written consent of the
beneficial holders of a majority of the outstanding Registrable Securities
unless under the terms of any such agreement such holder or prospective holder
may include such securities in any such registration only to the extent that the
inclusion of its securities would not reduce the amount of the Registrable
Securities that the Stockholders (excluding a holder becoming a "Stockholder"
hereunder by reason of any such agreement) would be entitled to include in such
registration.
10. Miscellaneous.
--------------
(a) Termination of Futronix Registration Rights Agreement. The
-----------------------------------------------------
Stockholders who are parties to the Futronix Registration Rights Agreement,
dated as of January 1, 1994, hereby terminate such agreement as of the date
hereof.
(b) Notices. Any notices required hereunder shall be deemed to be given
-------
upon the earlier of the date when received at, or the seventh day after the date
when sent by certified or registered mail to, the address of the Company's
corporate headquarters in the case of any notice to the Company, and until
changed by notice to the Company, the respective addresses of the Stockholders
on file with the Company in the case of any notice to the Stockholders.
(c) Amendments and Waivers. The provisions of this Agreement may be
----------------------
amended or terminated and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, if approved in
writing by the Stockholders that own beneficially two-thirds of the Registrable
Securities and or by any agreement permitted by Section 9.
(d) Binding Effect. This Agreement will bind and inure to the benefit of
--------------
the respective successors (including any successor resulting from a merger or
similar reorganization), assigns, heirs, and personal representatives of the
parties hereto. In particular, this Agreement shall bind and inure to the
benefit of any assignee of Theodore J. Bruno upon the exercise of an option
referred to in Section 9.7 of the Reorganization Agreement to the extent of any
such assignee's acquisition of Common Stock in connection with such exercise. In
addition, without limiting the generality of the foregoing, if a Stockholder
liquidates or reorganizes such that its assets are transferred to its own
stockholders, members or partners or to another entity, such stockholders,
members, partners or entity shall succeed to all of the rights of the
Stockholder hereunder.
(e) Governing Law. All questions concerning the construction, validity and
-------------
interpretation of this Agreement will be governed by the internal law, not the
law of conflicts, of Delaware.
-8-
<PAGE>
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be considered to be an original instrument and
to be effective as of the date first written above. Each such copy shall be
deemed an original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart.
(g) Interpretation. Unless the context of this Agreement clearly
--------------
requires otherwise, (a) references to the plural include the singular, the
singular the plural, the part the whole, (b) references to one gender include
all genders, (c) "or" has the inclusive meaning frequently identified with the
phrase "and/or" and (d) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to." The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect.
-9-
<PAGE>
[SIGNATURE PAGE FOR REGISTRATION RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
FUTRONIX SYSTEMS CORP.
______________________________ By:_____________________________
TERRENCE M. HUNT
OVERSEAS EQUITY INVESTOR PARTNERS BRADFORD VENTURE PARTNERS, L.P.
By: Overseas Equity Investors Ltd. By: Bradford Associates, General Partner
General Partner
By:__________________________ By:_____________________________
Barbara M. Henagan
General Partner
______________________________
BRADFORD MILLS REVOCABLE TRUST BVP SPECIAL SITUATIONS, L.P.
NO. 1 U/D/T 12/3/91
By: Bradford Associates, General Partner
______________________________ By:____________________________
BRADFORD MILLS REVOCABLE TRUST NO. Barbara M. Henagan
2 U/D/T 12/3/91 GeneralPartner
______________________________ ________________________________
ROBERT J. SIMON BARBARA M. HENAGAN
______________________________ ________________________________
ELIZABETH M. HARDIE BRADFORD ALAN MILLS
______________________________ ________________________________
THOMAS J. SHARBAUGH AS SUCCESSOR CHERYL A. MILLS, TRUSTEE U/A/D 3/28/89
TRUSTEE TO JOHN R. PETTY, TRUSTEE F/B/O BRADFORD TAYBROOK MILLS
U/A/D 3/17/69
______________________________ ________________________________
BARBARA L. MILLS, TRUSTEE U/A/D BARBARA L. MILLS, TRUSTEE U/A/D
12/26/84 F/B/O FRANCES LEE HARDIE 2/26/88 F/B/O KENNETH IAN HARDIE
__________________________________ ________________________________
BRADFORD ALAN MILLS, TRUSTEE U/A/D ERWIN HOSONO
11/4/78 F/B/O ROSS D. MILLS
<PAGE>
[SIGNATURE PAGE FOR REGISTRATION RIGHTS AGREEMENT]
___________________________________ ___________________________________
THOMAS L. FERGUSON THOMAS F. RUHM
___________________________________ ___________________________________
WARD W. WOODS CHRISTOPHER F. O. GABRIELI
___________________________________ ___________________________________
NEILL H. BROWNSTEIN RODNEY A. COHEN
___________________________________ ___________________________________
ADAM GODFREY ROBERT D. LINDSAY
___________________________________ ___________________________________
RICHARD R. DAVIS JOAN SCOTT
___________________________________ ___________________________________
THEODORE J. BRUNO PAUL MONAHAN
<PAGE>
Exhibit 10.23
OPTION AGREEMENT
----------------
This Option Agreement (the "Agreement") is made as of , 1996, by
-----------
and between Paul R. Monahan ("Optionee") and Theodore J. Bruno ("Bruno").
W I T N E S S E T H:
- - - - - - - --- -
WHEREAS, Optionee and Bruno are subject to that certain First Right of
Refusal and Option Agreement (the "Option Agreement") dated February 26, 1993
relating to common stock of Wire & Cable Specialties Corporation, a Georgia
corporation ("W&C");
WHEREAS, W&C and Bruno are parties to that certain Reorganization Agreement
dated , 1996 by and among W&C, Bruno, Futronix Systems Corp. (the
-------------
"Company"), Futronix Acquisition Company, Futronix Corporation, Terrence M. Hunt
and the Futronix Stockholder Parties (the "Reorganization Agreement") pursuant
to which, contemporaneously with the execution hereof, W&C and Futronix
Corporation will merge with and into Futronix Acquisition Company, a wholly
owned subsidiary of the Company; and
WHEREAS, Section 9.7 of the Reorganization Agreement provides for the
cancellation of the Option Agreement and its replacement with a substantially
similar option agreement relating to the common stock of the company, as set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agrees as follows:
1. GRANT
-----
Bruno hereby grants to Optionee, subject to the terms and conditions
hereinafter set forth, an option (the "Option") to acquire in the aggregate
337,790 shares (the "Shares") of the common stock, $0.01 par value per share, of
the Company held by him.
2. TERM AND EXERCISE
-----------------
The Option may be exercised by Optionee in whole or in part at any time
on or before February 26, 2013. Optionee shall effect any such exercise by
delivering to Bruno (i) a written notice which specifies the number of Shares
that Optionee desires to purchase pursuant to the Option and (ii) a certified
check made payable to Bruno in the amount of the purchase price of such Shares.
3. EXERCISE PRICE
--------------
The price at which the Shares may be purchased by Optionee upon the
exercise of this Option shall be $0.04 per Share.
4. ISSUANCE OF STOCK
-----------------
Within 30 business days following the exercise of this Option by
Optionee, Bruno shall cause to be issued and delivered to Optionee a certificate
or certificates representing the Shares so purchased,
<PAGE>
which Shares shall be fully paid and nonassessable. Optionee acknowledges that
the Shares which may be acquired by him have been registered for resale by him
under the Securities Act of 1933, as amended, in accordance with the provisions
of Section 7.6 of the Reorganization Agreement and hereby acknowledges that any
resale of such resale of such Shares shall be effected in accordance with the
provisions of such Section 7.6 and any additional conditions that shall be
placed upon the resale of such stock by the Company in order to comply with the
Securities Act of 1933, as amended, and any applicable state securities laws.
5. TRANSFERABILITY
---------------
This Agreement and the Option granted hereunder may not be assigned,
pledged, hypothecated, sold or otherwise transferred or encumbered by Optionee
without the consent of Bruno.
6. ADJUSTMENT
----------
If the Company shall in any manner subdivide (by stock split, stock
dividend or otherwise) or combine (by reverse stock split or otherwise) the
outstanding shares of its common stock, the number of Shares purchasable
pursuant to this Agreement shall be proportionately subdivided or combined and
the price payable upon exercise hereof shall be appropriately adjusted for any
increase or decrease in the number of outstanding shares of the Company's common
stock resulting from such action of the Company.
7. TERMINATION OF OPTION AGREEMENT
-------------------------------
Upon execution of this Agreement, the Option Agreement shall be
terminated and the Optionee and Bruno shall have no further rights or
responsibilities with respect to such agreement.
8. NOTICES
-------
Any notice, payment or communication required or permitted to be given
by any provision of this Agreement shall be in writing and shall be delivered
personally or sent by certified mail, return receipt requested, addressed as
follows: if to Bruno at 2416 Woodward Way, Atlanta, Georgia 30305; if to
Optionee, at 10665 Nellie Brook Court, Duluth, Georgia 30155. Each party may,
from time to time, by notice to the other party hereto, specify a new address
for delivery of notices to such party hereunder. Any such notice shall be deemed
to be delivered, given, and received for all purposes as of the date such notice
is received or property mailed.
9. BINDING EFFECT
--------------
Except as otherwise provided in this Agreement, every covenant, term,
and provision of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, legatees, legal
representatives, successors, transferees, and assigns.
10. HEADINGS
--------
Section and other headings contained in this Agreement are for
reference purposes only and are not intended to described, interpret, define or
limit the scope or intent of this Agreement or any provision hereof.
<PAGE>
11. SEVERABILITY
------------
Every provision of this Agreement is intended to be severable. If any
term or provision hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity or legality of the
remainder of this Agreement.
12. GOVERNING LAW
-------------
The laws of the State Georgia shall govern the validity of this
Agreement, the construction of its terms, and the interpretation of the rights
and duties of the parties hereto.
IN WITNESS WHEREOF, this Agreement is executed as of the day and year first
above written.
----------------------------------
Theodore J. Bruno
----------------------------------
Paul R. Monahan
<PAGE>
Exhibit 10.24
OPTION AGREEMENT
----------------
This Option Agreement (the "Agreement") is made as of ___________, 1996, by
and between Joan Scott ("Optionee") and Theodore J. Bruno ("Bruno").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Optionee and Bruno are subject to that certain Option Agreement
(the "Option Agreement") dated May 1, 1994 relating to common stock of Wire &
Cable Specialties Corporation, a Georgia corporation ("W&C");
WHEREAS, W&C and Bruno are parties to that certain Reorganization Agreement
dated _____________, 1996 by and among W&C, Bruno, Futronix Systems Corp. (the
"Company"), Futronix Acquisition Company, Futronix Corporation, Terrence M. Hunt
and the Futronix Stockholder Parties (the "Reorganization Agreement") pursuant
to which, contemporaneously with the execution hereof, W&C and Futronix
Corporation will merge with and into Futronix Acquisition Company, a wholly
owned subsidiary of the Company; and
WHEREAS, Section 9.7 of the Reorganization Agreement provides for the
cancellation of the Option Agreement and its replacement with a substantially
similar option agreement relating to the common stock of the company, as set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agrees as follows:
1. GRANT
-----
Bruno hereby grants to Optionee, subject to the terms and conditions
hereinafter set forth, an option (the "Option") to acquire in the aggregate
56,299 shares (the "Shares") of the common stock, $0.01 par value per share, of
the Company held by him.
2. TERM AND EXERCISE
-----------------
The Option may be exercised by Optionee in whole or in part at any time on
or before May 1, 2014. Optionee shall effect any such exercise by delivering to
Bruno (i) a written notice which specifies the number of Shares that Optionee
desires to purchase pursuant to the Option and (ii) a certified check made
payable to Bruno in the amount of the purchase price of such Shares.
3. EXERCISE PRICE
--------------
<PAGE>
The price at which the Shares may be purchased by Optionee upon the
exercise of this Option shall be $0.19 per Share.
4. ISSUANCE OF STOCK
-----------------
Within 30 business days following the exercise of this Option by Optionee,
Bruno shall cause to be issued and delivered to Optionee a certificate or
certificates representing the Shares so purchased, which Shares shall be fully
paid and nonassessable. Optionee acknowledges that the Shares which may be
acquired by him have been registered for resale by him under the Securities Act
of 1933, as amended, in accordance with the provisions of Section 7.6 of the
Reorganization Agreement and hereby acknowledges that any resale of such resale
of such Shares shall be effected in accordance with the provisions of such
Section 7.6 and any additional conditions that shall be placed upon the resale
of such stock by the Company in order to comply with the Securities Act of 1933,
as amended, and any applicable state securities laws.
5. TRANSFERABILITY
---------------
This Agreement and the Option granted hereunder may not be assigned,
pledged, hypothecated, sold or otherwise transferred or encumbered by Optionee
without the consent of Bruno.
6. ADJUSTMENT
----------
If the Company shall in any manner subdivide (by stock split, stock
dividend or otherwise) or combine (by reverse stock split or otherwise) the
outstanding shares of its common stock, the number of Shares purchasable
pursuant to this Agreement shall be proportionately subdivided or combined and
the price payable upon exercise hereof shall be appropriately adjusted for any
increase or decrease in the number of outstanding shares of the Company's common
stock resulting from such action of the Company.
7. TERMINATION OF OPTION AGREEMENT
-------------------------------
Upon execution of this Agreement, the Option Agreement shall be terminated
and the Optionee and Bruno shall have no further rights or responsibilities with
respect to such agreement.
8. NOTICES
-------
Any notice, payment or communication required or permitted to be given by
any provision of this Agreement shall be in writing and shall be delivered
personally or sent by certified mail, return receipt requested, addressed as
follows: if to Bruno at 2416 Woodward Way, Atlanta, Georgia 30305; if to
Optionee, at 1219 Wildcliff Parkway, Atlanta, Georgia 30329. Each party may,
from time to time, by notice to the other party hereto, specify a new address
for delivery of notices to such party hereunder. Any such notice shall be
deemed to be delivered, given, and received for all purposes as of the date such
notice is received or property mailed.
<PAGE>
9. BINDING EFFECT
--------------
Except as otherwise provided in this Agreement, every covenant, term, and
provision of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, legatees, legal representatives,
successors, transferees, and assigns.
10. HEADINGS
--------
Section and other headings contained in this Agreement are for reference
purposes only and are not intended to described, interpret, define or limit the
scope or intent of this Agreement or any provision hereof.
11. SEVERABILITY
------------
Every provision of this Agreement is intended to be severable. If any term
or provision hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity or legality of the
remainder of this Agreement.
12. GOVERNING LAW
-------------
The laws of the State Georgia shall govern the validity of this Agreement,
the construction of its terms, and the interpretation of the rights and duties
of the parties hereto.
IN WITNESS WHEREOF, this Agreement is executed as of the day and year first
above written.
__________________________________
Theodore J. Bruno
__________________________________
Joan Scott
<PAGE>
EXHIBIT 11
Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
Years Ended December 31, Six Months Ended June 30,
--------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1995 1996
Net Income - Historical $ (99,000) $ 70,000 $ 170,671 $ 301,171 $ 614,245 $ 187,923 $ 194,768
========== ========== ========== ========== ========== ========== ==========
Net Income - Pro forma $ (61,380) $ 43,400 $ 105,816 $ 335,171 $ 614,245 $ 187,923 $ 194,768
(Adjusted only for income ========== ========== ========== ========== ========== ========== ==========
taxes of S Corporation)
Shares:
Weighted average number
of common shares
outstanding 588,235 588,235 588,235 829,331 1,588,235 1,588,235 1,588,235
Common stock equivalents
(treasury stock method):
Stock options 23,077
Warrants 164,091 680,605 680,605 680,605
Additional shares
considered outstanding
in accordance with SAB
83 (Note A):
Stock options 46,154 46,154 46,154 46,154 46,154 46,154 23,077
Convertible preferred
stock 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average number
of common shares and
common stock equivalents 1,634,389 1,634,389 1,634,389 2,039,576 3,314,994 3,314,994 3,314,994
========== ========== ========== ========== ========== ========== ==========
Earnings per common
share - Historical $ (.06) $ .04 $ .10 $ .15 $ .19 $ .06 $ .06
========== ========== ========== ========== ========== ========== ==========
Pro forma earnings per
common share $ (.04) $ .03 $ .06 $ .16 $ .19 $ .06 $ .06
========== ========== ========== ========== ========== ========== ==========
</TABLE>
Note A: Staff Accounting Bulletin 83 requires that common stock and common stock
equivalents issued within a one year period prior to the initial filing of a
registration statement relating to an initial public offering should be treated
as outstanding for all reported periods.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name Jurisdiction
---- ------------
Futronix Systems Corp. Delaware
Subsidiaries of Futronix Systems Corp.:
Futronix Acquisition Company Texas
<PAGE>
EXHIBIT 23.1
Futronix Corporation
We consent to the use in this Registration Statement of Futronix Systems Corp.
on Form S-1 of our reports dated April 26, 1996 and August 29, 1996, appearing
in the Prospectus, which is a part of this Registration Statement, and to the
references to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Houston, Texas
September 4, 1996
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement of our report dated
April 14, 1995, relating to the financial statements of Futronix Corporation
(dba Futronix Cable Depot) and to the reference to our Firm under the caption
"Experts" in the Prospectus.
Weinstein Spira & Company, P.C.
Houston, Texas
September 3, 1996
<PAGE>
Exhibit 23.3
CONSENT OF GROSS, COLLINS + CRESS, P.C.,
INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated July 22, 1996, in the Registration Statement on
Form S-1 and related prospectus of Futronix Systems Corporation.
Gross, Collins + Cress, P.C.
September 4, 1996
Atlanta, Georgia
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Aug-29-1996
<PERIOD-END> Aug-29-1996
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,000
<CURRENT-LIABILITIES> 1,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
