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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 000-22097
SPR Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3932665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2015 Spring Road, Suite 750, Oak Brook, Illinois 60523-1874
(Address of principal executive offices)
(630) 575-6200
(Registrant's telephone number, including area code)
----------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01
----------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. Yes [x] No [ ]
As of March 22, 2000, there were 12,825,284 shares of registrant's common
stock outstanding and the aggregate market value of the registrant's common
stock held by non-affiliates of the registrant (based upon the per share
closing price of $5.938 on March 22, 2000, and for the purpose of this
calculation only, the assumption that all of the registrant's directors and
executive officers are affiliates) was approximately $52,866,822.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Registrant's Special
Meeting of Stockholders to be held on May 1, 2000 are incorporated by
reference into Part III hereof. Certain exhibits listed in Part IV of this
Annual Report on Form 10-K are incorporated by reference from prior filings
made by the Registrant under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended.
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PART I
ITEM 1. BUSINESS
Company Overview
SPR Inc. has over 26 years of experience in providing information technology
services to clients in a variety of industries, including financial services,
healthcare, insurance, manufacturing, oil and gas, transportation and
utilities. SPR focuses its marketing efforts on Fortune 1000 companies and
other large organizations which have complex IT operations and significant IT
budgets. SPR is refocusing its IT consulting and project based services into
the consulting, development, and integration markets. SPR's core competencies
are in large systems, project management, quality assurance, professional
development and strategic partnerships. SPR believes that this breadth of
service and support fosters long-term client relationships, promotes cross-
selling opportunities and minimizes SPR's dependence upon any particular
service.
SPR's business was founded in 1973 by Eugene Figliulo as Systems &
Programming Resources, Inc. During 1994, Systems and Programming Resources,
Inc. transferred certain assets and liabilities to SPR Chicago, SPR Tulsa, and
SPR Wisconsin, respectively. These entities were organized as S corporations
and owned by the executives primarily responsible for the operations in each
of these locations. SPR Chicago, SPR Tulsa, SPR Wisconsin, Systems and
Programming Resources, Inc. and DataFlex (an affiliated IT services company in
a complementary business) were merged into SPR upon SPR's formation in October
1996.
SPR maintains its principal executive offices at 2015 Spring Road, Suite
750, Oak Brook, Illinois 60523-1874. Its telephone number is (630) 575-6200.
SPR's World Wide Web address is www.sprinc.com. SPR currently has four branch
offices located in Oak Brook, Illinois; Tulsa, Oklahoma; Milwaukee, Wisconsin;
and Dallas, Texas. SPR has made, and intends to continue to make, significant
investments in its systems , recruiting organization, training programs and
marketing initiatives in an effort to sustain growth.
Industry Overview
Dataquest Incorporated forecast total expenditures for the consulting,
development and integration segments of the United States professional IT
services market to be approximately $60 billion in 1999, $70 billion in 2000,
and $82 billion in 2001. Forecast data from 1999 to 2003 shows an 81% increase
for IT consulting, 69% increase for development services, and 118% increase
for integration services. This industry growth is fueled by new technology
developments, heightened customer expectations concerning service and access
to information, a surge in interest in e-business and continued mergers and
acquisitions activity.
GartnerGroup forecasts that by 2005, investments in e-business applications
and infrastructure will drive average IT spending (in North America) beyond
10% of revenue (0.8 probability), and that over the next five years e-business
initiatives will consume between 30% and 50% of enterprise IT spending. During
peak implementation years, e-business will consume 50% of the IS budget. (0.8
probability) and by 2003, external service providers should account for 19% of
the IS budget.
SPR focuses on leveraging the value of client's existing systems in
providing e-business and IT solutions. SPR believes that the demand for its
services remains strong as large institutions seek to protect and maximize the
value of their investments in mainframe systems by bringing them up to date
and making them accessible to today's newer Internet and distributed desktop
systems.
SPR believes that clients will continue to maintain and improve their
mainframe systems for the following reasons:
. mainframe systems represent an enormous investment that may prove too
risky and expensive to completely replace;
. mainframe computing is increasingly being used in new ways as
Internet/intranet technologies develop;
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. existing mainframe systems are critical to the functioning of clients'
businesses as they contain vital business information necessary to build
replacement systems; and
. clients need access to data resident in mainframe computers regardless of
the front-end computing platform being used.
Business and Growth Strategies
In the course of becoming an IT solutions provider, SPR has pursued, and
intends to continue to pursue, the following business and growth strategies:
. Transform SPR's Information Technology Consultant Training Program. SPR
believes that it's entry-level and continuing education training programs
provided SPR with a competitive advantage in attracting, developing and
retaining qualified technical consultants. SPR is now looking at ways to
apply this program in the web development space.
. Continue To Focus On Project Management. SPR will continue to focus on
increasing its mix of project management and strategic planning
engagements. SPR believes that by providing these value-added services,
it gains a competitive advantage in assessing its clients' needs and
anticipating opportunities to provide additional IT solutions.
. Leverage Existing Client Base. SPR intends to continue building long-term
client relationships. Its record of customer satisfaction and expanded
solutions offerings have contributed to its ability to increase the
revenues generated from existing clients. SPR derived more than 71% of
its revenues in 1999 from 39 clients to which it had provided IT
solutions in the prior three consecutive years. SPR intends to further
penetrate its existing client base by providing additional service
offerings.
. Focus On Leading Technologies. SPR maintains and continues to build
expertise not only in mainframe applications but also in other high-
demand technologies, such as Internet/intranet applications, object
oriented analysis and design, open computing systems, data warehousing
and relational database management systems. SPR's expertise in these
areas, together with its relationships with software product developers
and research institutions, allow SPR to remain on the leading edge of
technological development.
Service Offerings
Since its inception, SPR has provided technical personnel to augment its
clients' internal IT departments. Over the past several years, however, SPR
has focused its efforts on providing higher-end service offerings.
SPR's consulting service line provides the IT management to help clients
design and implement solutions to address their tactical and strategic IT
initiatives. Within this service line, SPR offers a wide spectrum of services
including project management (or "project office"), quality assurance, and IT
readiness.
SPR's development service line provides services spanning the entire
application development life cycle. SPR supports new system development and
provides re-development services for transitioning and leveraging existing
systems. SPR modernizes systems through SPR's conversions and migrations
services. In addition, SPR provides maintenance and support for existing
systems through SPR's application management services.
SPR's integration service line provides expertise in integrating
applications and data, whether the applications are new or existing, packaged
or custom-built, and whether they reside on the same system or span disparate
systems. Within this service line, SPR provides enterprise application
integration to enable the exchange of business-level information between
applications. SPR's data warehousing service provides users with the ability
to access the data they need, when they need it and in a form they can easily
understand.
In addition, SPR offers general consulting services, which consists of
providing technical personnel with expertise in a wide variety of skills and
disciplines to augment clients' internal IT departments. Clients' IT
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departments often require advice and programming skills without the full range
of project management support. General consulting consists of staff
augmentation principally for maintenance and development of client/server and
mainframe environments.
The amount of responsibility assumed by SPR generally depends upon a
client's internal capabilities and desire to outsource IT functions. Based
upon client needs, SPR can provide strategic planning, project management or
implementation either at its clients' facilities or off-site at SPR's Virtual
Insourcing Centers. SPR employs proven proprietary service methodologies and
software analysis tools to deliver these services. SPR bills its clients on
either a time and materials or fixed-fee basis.
Recruiting and Training
SPR employs 13 full time recruiters, including 2 recruiting managers, who
are responsible for recruiting and establishing relationships with qualified
technical personnel. Technical personnel meeting SPR's standards are added to
a computerized database. Recruiting managers maintain regular contact with
technical personnel, monitor their availability and changes in skill levels
and update the database, which has been maintained for over 26 years.
SPR believes that its information technology consultant training program
provided SPR with a competitive advantage in attracting, developing and
retaining qualified technical consultants. SPR is now looking at ways to apply
this program in the web development space.
Marketing and Sales
SPR marketing representatives are assigned to a limited number of accounts
in order to develop an in-depth understanding of each client's individual
needs and to build long-term client relationships. These representatives are
responsible for providing highly responsive service and ensuring that SPR's
service offerings achieve client objectives. In many instances, a portion of
SPR's marketing activity is carried out by senior executives.
SPR has implemented a strategic selling methodology to better understand and
serve its customers by raising its customer contact to the chief information
officer level. SPR has also significantly upgraded its web site
(www.sprinc.com) to reflect changes in service offers.
Client Base
SPR serves clients in a diverse range of industries thereby mitigating
cyclical effects of any one industry or market. SPR derives an additional
level of diversification from certain of its clients. Different operating
divisions of a given client may utilize any one or several services offered by
SPR, which helps mitigate the risk of customer concentration. During 1999,
SPR's largest client accounted for approximately 11% of SPR's revenues.
Employees
As of December 31, 1999, SPR had 355 IT consulting professionals, of whom
335 were employees and 20 were independent contractors. Of these IT consulting
professionals, 61 were project managers. As of such date, SPR had 103 IT
consulting professionals in Chicago, Illinois; 86 in Tulsa, Oklahoma; 108 in
Milwaukee, Wisconsin; and 58 in Dallas, Texas, respectively.
SPR has three categories of IT consultants: salaried employees, associate
employees and independent contractors. Salaried employees are full-time
employees of SPR and are eligible for all benefits offered by SPR. Associate
employees are eligible for the same benefits offered to salaried employees but
are paid on an hourly basis and, as such, are not entitled to paid time off in
the form of sick days, personal days or vacation. Approximately 94% of SPR's
IT consultants are employees. Independent contractors are not employees of
SPR, but are paid on an hourly basis and are not entitled to any benefits
offered to SPR employees. Approximately 6% of SPR's IT consultants are
independent contractors.
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SPR is not a party to any collective bargaining agreements and considers its
relationships with its employees to be good.
Competition
The market for IT professional services is intensely competitive on local
and national levels, and SPR competes frequently with a variety of companies
for both the same clients and qualified technical consultants. These companies
include: "Big Five" accounting firms, systems consulting and implementation
firms, application software firms, service groups of computer equipment
companies, general management consulting firms and IT staffing companies. SPR
considers large organizations with complex IT needs to be among its primary
clients. Within a given market, there are a limited number of such potential
clients, some of which have designated only certain IT professional services
companies as approved providers of IT professional services. Primary
competitive factors for obtaining and retaining clients include price, quality
of services, technical expertise and responsiveness to client needs. The
primary competitive factors in attracting and retaining qualified candidates
as consultants are competitive compensation arrangements and consistent
exposure to high quality and varied engagements.
Several of SPR's competitors are substantially larger than SPR and have
greater financial and other resources. Many of such competitors have also been
in business longer than SPR and have significantly greater name recognition
throughout the United States, including the geographic areas in which SPR
operates and into which it may expand. In addition, such competitors are able
to meet a broader range of a client's IT consulting needs and serve a broader
geographic range than SPR, which permits such competitors to better serve
national accounts. Although SPR believes that it competes, and will continue
to compete, favorably with existing and future competitors, there can be no
assurance that SPR will continue to do so.
Intellectual Property Rights
Software developed by SPR in connection with a client engagement typically
becomes the exclusive property of the client. SPR relies upon a combination of
nondisclosure and other contractual arrangements and trade secret, copyright
and trademark laws to protect its proprietary rights, the rights of third
parties from whom SPR licenses intellectual property and the proprietary
rights of its clients. SPR enters into confidentiality agreements with its
consultants in an effort to prevent the distribution of proprietary
information.
SPR holds no patents or registered copyrights, and has no present intention
of registering any copyright or filing any patent applications.
ITEM 2. PROPERTY
SPR leases its principal executive offices, which are located at 2015 Spring
Road, Oak Brook, Illinois 60523-1874, and also leases facilities in Tulsa,
Oklahoma; Dallas, Texas; and Milwaukee, Wisconsin. These leases expire in
October 2004, May 2004, March 2003, and May 2001, respectively. SPR also
leases space in Oak Brook, Illinois; Tulsa, Oklahoma; Dallas, Texas; and
Pewaukee, Wisconsin to house Virtual Insourcing Centers. The leases expire in
October 2002, May 2004, March 2003,and June 2003, respectively. SPR believes
it has adequate space to conduct its current business. SPR anticipates,
however, that additional space will be required as business expands but
believes that it will be able to obtain suitable space as needed. See Note 8
of Notes to SPR's Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
SPR is not involved in legal proceedings which SPR believes are material to
its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the period covered by this report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) SPR's common stock began trading on October 2, 1997, at a price of
$10.67 per share. SPR's common stock is quoted on The Nasdaq National Market,
under the symbol SPRI. The quarterly range of high and low sales prices, as
reported by The Nasdaq National Market, for the fourth quarter of 1997,
through March 22, 2000, was as follows:
<TABLE>
<S> <C> <C>
2000 1st Qtr. (through March 22, 2000)...................... $ 7.38 $ 4.94
1999:
1st Qtr................................................... 22.44 3.88
2nd Qtr................................................... 7.06 3.56
3rd Qtr................................................... 6.34 3.44
4th Qtr................................................... 6.25 3.50
1998:
1st Qtr................................................... 23.67 10.67
2nd Qtr................................................... 23.00 17.17
3rd Qtr................................................... 25.67 14.00
4th Qtr................................................... 21.50 12.38
1997 4th Qtr................................................ 13.33 9.17
</TABLE>
As of March 22, 2000 there were approximately 79 shareholders of record.
This number does not include stockholders for whom shares were held in a
nominee or street name.
Except for undistributed S corporation income earned prior to the initial
public offering, SPR has not paid any dividends to date and plans to reinvest
its earnings in future growth opportunities. SPR does not anticipate paying
cash dividends in the foreseeable future.
(b) SPR's Registration Statement No. 333-32735 covering an initial public
offering of 4,485,000 shares of SPR's common stock, $.01 par value per share
(the "Offering"), was declared effective on October 1, 1997. Smith Barney Inc.
and Robert W. Baird & Co. Incorporated were the Managing Underwriters of the
Offering. Of the shares so registered, SPR sold 2,400,000 shares and certain
selling stockholders sold an aggregate of 1,500,000 shares on October 3, 1997.
On November 4, 1997, certain selling stockholders sold additional 585,000
shares to the underwriters' exercise of their over-allotment option. All of
the shares in the Offering were sold at a price of $10.67 per share for an
aggregate offering price of $47,840,000.
Net proceeds to SPR from the sale of 2,400,000 shares in the Offering was
approximately $22.5 million, after deducting underwriting discounts and
commissions of $1.8 million and offering expenses of $1.3 million paid by SPR.
SPR did not receive any of the proceeds from the sale of shares by the selling
stockholders.
On May 5, 1998, SPR completed a follow-on public offering of 3,719,250
shares of SPR's Common Stock. SPR sold 1,350,000 shares in the follow-on
public offering and received $23.1 million in net proceeds from the sale of
such shares.
The remaining net proceeds of approximately $7.0 million from the Offering,
together with the $23.1 million from the follow-on public offering, and cash
from operations are being temporarily invested in investment grade securities.
SPR intends to use the remaining net proceeds for general corporate purposes,
including the expansion and transformation of its ITC Training Program,
additional virtual insourcing centers, working capital, branch expansion and
possible acquisitions of related businesses
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data is derived from SPR's financial
statements and notes thereto that have been audited by Arthur Andersen LLP,
independent public accountants. This information should be read in
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conjunction with the financial statements and notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues........................ $58,104 $85,344 $53,422 $ 32,511 $ 22,908
Cost of services................ 43,242 50,508 32,377 23,287 15,525
------- ------- ------- -------- --------
Gross profit.................. 14,862 34,836 21,045 9,224 7,383
Costs and expenses:
Selling....................... 4,966 5,275 4,855 3,046 2,141
Recruiting.................... 1,205 1,827 1,608 1,323 777
Stock-based compensation(1)... -- -- -- 12,231 27,987
General and administrative
expenses..................... 11,893 12,320 8,438 3,742 1,642
------- ------- ------- -------- --------
Total costs and expenses.... 18,064 19,422 14,901 20,342 32,547
------- ------- ------- -------- --------
Operating income (loss)(1)...... (3,202) 15,414 6,144 (11,118) (25,164)
Other income (expense).......... 2,645 2,083 47 (71) (109)
------- ------- ------- -------- --------
Income (loss) before income
taxes(1)....................... (557) 17,497 6,191 (11,189) (25,273)
Provision (benefit) for income
taxes.......................... (911) 6,999 1,553 9 21
------- ------- ------- -------- --------
Net income (loss), as
reported(1).................... $ 354 $10,498 $ 4,638 $(11,198) $(25,294)
======= ======= ======= ======== ========
Historical diluted net income
(loss) per share............... $ 0.03 $ 0.77 $ 0.43 $ (1.15) $ (2.61)
======= ======= ======= ======== ========
Pro forma diluted net income
(loss) per common share--
includes adjustment to
recognize C corporation
provision for income taxes(2).. $ -- $ -- $ 0.30 $ (1.19) $ (2.72)
======= ======= ======= ======== ========
Balance Sheet Data (at end of
period):
Cash and short-term
investments.................... $50,549 $51,113 $21,177 $ 356 $ 1,109
Working capital................. 54,915 58,650 23,072 1,194 2,370
Total assets.................... 64,160 71,438 31,943 7,131 5,584
Long-term debt, less current
portion........................ -- -- -- 206 704
Total stockholders' equity...... 58,761 62,808 25,530 2,507 2,275
Other Data (unaudited):
Book value per share............ $ 4.35 $ 4.60 $ 2.39 $ 0.25 $ 0.23
</TABLE>
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(1) In 1994, Systems and Programming Resources, Inc. transferred certain
assets and liabilities to SPR Chicago and SPR Wisconsin. Inasmuch as such
1994 transactions were among family members within a control group, such
transactions have been recorded in SPR's financial statements as if the
stockholders of SPR Chicago and SPR Wisconsin received non-cash, stock-
based compensation during 1994, 1995 and 1996 in an amount equal to the
increase in the estimated value of such companies since 1994. This expense
is non-recurring subsequent to October 31, 1996. Such compensation expense
is recorded as stock-based compensation with the corresponding credit
included in additional paid-in capital. Upon conversion of SPR to a C
corporation upon closing of the Offering, the retained deficit of SPR,
which includes the aggregate stock-based compensation expense, was
reclassified and netted against additional paid-in capital.
(2) Prior to the Offering, SPR was an S corporation and was not subject to
federal and certain state corporate income taxes. The Statement of
Operations Data reflects a pro forma provision for income taxes as if SPR
had been subject to federal and state corporate income taxes. The pro
forma provision for income taxes is computed by multiplying the effective
tax rate times the income (loss) before income taxes adjusted to eliminate
the stock-based compensation expense and subtracting income taxes
previously recorded.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Company Overview
SPR was founded in 1973 and derives its revenues from providing IT
consulting services. SPR principally bills its clients on a time and materials
basis and revenues are recognized as services are provided. SPR has
occasionally entered into fixed-price billing engagements and may enter into
more such engagements in the future. Typically, SPR bills for its services on
a biweekly basis to monitor client satisfaction and to manage its outstanding
accounts receivable balances. SPR's cost of services consists primarily of
consultant compensation and related expenses. Accordingly, SPR's financial
performance is substantially affected by billing margins (billable hourly rate
less consultant hourly cost) and consultant utilization rates (the ratio of
hours billed to total available hours).
SPR has maintained its billing margins by increasing its hourly rates to
offset increases in its consulting staff costs. SPR manages its billing
margins by establishing a target billing rate for each consultant; however,
actual billing rates may be higher or lower than the target billing rates
depending upon competitive pressures and market conditions. Hourly billing
rate increases are generally implemented by SPR based upon market conditions,
consultant skill levels and the terms of its engagements.
Fluctuations in consultant utilization rates result from variations in the
amount of unassigned time, which historically has consisted of training,
vacation, sick and holiday time and time spent on administrative support
activities while between engagements. In order to reduce unassigned time, SPR
actively manages the terms of its engagements and matches available
consultants to client requirements. Additional factors which vary and impact
consultant utilization rate are: the number of entry-level training classes
conducted through SPR's information technology consultant training program,
the amount of time it takes to assign the newly trained consultants, and
general industry conditions.
Results of Operations
The following table sets forth selected statements of operations data as a
percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
Percentage of
Total Revenues
----------------
Year Ended
December 31,
----------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statement of Operations Data:
Revenues................................... 100% 100% 100%
Cost of services........................... 74 59 61
--- --- ---
Gross profit............................. 26 41 39
Costs and expenses:
Selling.................................. 8 6 9
Recruiting............................... 2 2 3
General and administrative expenses...... 21 15 16
--- --- ---
Total costs and expenses............... 31 23 28
--- --- ---
Operating income (loss)......................(5). 18 11
Other income (expense)..................... 5 2 -
--- --- ---
Income before income taxes................. -- 20 11
Provision (benefit) for income taxes....... (1) 8 3
--- --- ---
Net income, as reported.................... 1% 12% 8%
=== === ===
</TABLE>
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1999 Compared to 1998
Revenues. Revenues decreased 32% to $58.1 million in 1999 from $85.3 million
in 1998. This decrease is primarily the result of earlier than expected
project completions, delays in beginning new client projects, and general
industry conditions related to budget lockdowns in anticipation of the Year
2000. SPR's 1999 average billing rate per hour increased by 6% over the
average rate for 1998.
Gross Profit. Gross profit consists of revenues less cost of services, which
includes consultant salaries and benefits, virtual insourcing center facility
costs, training costs for experienced consultants, and travel expenses. Gross
profit decreased 57% to $14.9 million in 1999 from $34.8 million in 1998.
Gross profit as a percentage of revenues decreased to 25.6% in 1999 from 40.8%
in 1998. The decreases in gross profit were primarily attributed to a decline
in consultant utilization rates. As a result of the decreases in consultant
utilization rates, SPR instituted reductions in force totaling approximately
225 consultants in 1999. The results for 1999 were positively impacted by the
reversal of $2.7 million of deferred income relating to management's estimate
of the services to be performed related to completing SPR's century date
compliance projects.
Selling Expenses. Selling expenses include the salaries, benefits,
commissions, bonuses, travel, entertain-ment and other direct costs associated
with SPR's direct sales force. Selling expenses decreased 6% to $5.0 million
in 1999 from $5.3 million in 1998. The decrease was primarily the result of
lower commissions paid in 1999, partially offset by increased sales executive
compensation due to the increase in the number of sales executives to 24 in
1999 from 20 in 1998.
Recruiting Expenses. Recruiting expenses consist of costs related to hiring
new personnel, which include the salaries, benefits, bonuses and other direct
costs of the in-house recruiters, consultant relocation fees, recruiters'
travel expenses, and advertising costs. Recruiting expenses decreased 34% to
$1.2 million in 1999 from $1.8 million in 1998. Hiring in 1999 consisted only
of consultants with project specific skill sets required on client
engagements.
General and Administrative Expenses. General and administrative expenses
include salaries and benefits of management and support staff, leased
facilities cost, training costs for the entry-level portion of the information
technology consultant training program, travel expenses related to general and
administrative matters, outside professional fees, depreciation and other
corporate costs. General and administrative expenses decreased 4% to $11.9
million in 1999 from $12.3 million in 1998. The decreases in 1999 resulted
from a reversal of an allowance for bad debts for a customer who exited
bankruptcy, a decrease in information technology consultant training program
expenses, and management bonuses. These decreases were partially offset by
increases in costs associated with the merger cancelled in March 1999, office
space, and telephone charges.
Other Income (Expense). Other income increased 27% to $2.6 million in 1999
from $2.1 million in 1998. This increase is primarily attributable to interest
earned on investments.
Provision (Benefit) for Income Taxes. SPR's effective tax rate benefit was
164% for 1999. The benefit for income taxes was favorably impacted by the
passing of the statute of limitations associated with SPR's S corporation
indemnification agreement.
1998 Compared to 1997
Revenues. Revenues increased 60% to $85.3 million in 1998 from $53.4 million
in 1997. This increase was primarily the result of a significant increase in
the number of consultants employed by SPR, many of whom completed the entry-
level training program in 1996, 1997, and 1998, and an increased number of
engagements for both new and existing clients. In 1998, a higher proportion of
these engagements encompassed project-focused engagements, which yield higher
billing rates.
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Gross Profit. Gross profit increased 66% to $34.8 million in 1998 from $21.0
million in 1997. Gross profit as a percentage of revenues increased to 41% in
1998 from 39% in 1997. The increase in gross profit was primarily attributable
to higher billing rates and a higher billing-to-consultant cost ratio (which
is revenues divided by consultant cost), partially offset by management's
estimate of the services to be performed related to completing SPR's projects
recorded in 1998 and Virtual Insourcing Centers facility costs. The higher
billing rates were realized as a result of the increase in project management
engagements and the higher billing ratio was attributable primarily to the
placement of consultants who have completed the information technology
consultant training program.
Selling Expenses. Selling expenses increased 9% to $5.3 million in 1998 from
$4.9 million in 1997. This increase was primarily the result of increased
commissions attributable to the 60% increase in sales over the comparable
period and to the hiring of 6 additional sales executives in 1998. SPR's
selling expenses as a percentage of revenues decreased to 6% in 1998 from 9%
in 1997 as a result of a change in the sales commission plan on January 1,
1998.
Recruiting Expenses. SPR hired 336 consultants in 1998 compared to 384 in
1997. Recruiting expenses increased to $1.8 million in 1998 from $1.6 million
in 1997. Total recruiting costs per hire increased to approximately $5,400 in
1998 from approximately $4,200 in 1997.
General and Administrative Expenses. General and administrative expenses
increased 46% to $12.3 million in 1998 from $8.4 million in 1997. This
increase was primarily attributable to twelve additional employees, general
salary and management bonus increases, expenses related to upgrading and
utilizing SPR's network and telecommunications systems, increased professional
fees for legal, accounting and investor relations, increased travel expenses,
training costs associated with the entry-level portion of the information
technology consultant training program, employee functions, and depreciation.
These increases were partially offset by charges in 1997 for bad debt expense
of approximately $0.8 million relating primarily to a client which filed for
Chapter 11 bankruptcy protection and $0.2 million in expenses relating to
SPR's March 1997, proposed initial public offering that was postponed.
Other Income (Expense). The increase in other income in 1998, as compared to
1997, is primarily attributable to interest earned on investments of available
net proceeds from SPR's initial and follow-on public offerings.
Provision for Income Taxes. SPR's effective tax rate was 40% for 1998. Prior
to the initial public offering, SPR elected to be taxed as an S corporation.
As a result, income of SPR was taxable to the shareholders. On October 1,
1997, SPR's S corporation status was terminated and SPR became a C
corporation.
1997 Compared to 1996
Revenues. Revenues increased 64% to $53.4 million in 1997 from $32.5 million
in 1996. This increase was primarily the result of revenue generated by the
consultants who completed the entry-level training program in 1996 and 1997,
and an increased number of engagements for both new and existing clients. A
higher proportion of these engagements encompassed strategic planning and
project focused engagements, which yield higher billing rates.
Gross Profit. SPR's gross profit of $9.2 million or 28% of revenues in 1996
increased 128% to $21.0 million or 39% of revenues in 1997. The increase in
gross profit was primarily attributable to higher billing rates and a higher
billing-to-consultant cost ratio (which is revenues divided by consultant
cost), which were realized as a result of the increase in project management
engagements and the placement of consultants who completed the entry-level
course of the information technology consultant training program in 1996 and
1997.
Selling Expenses. Selling expenses increased 59% to $4.9 million in 1997
from $3.0 million in 1996. This increase was primarily the result of increased
commissions attributable to the 64% increase in sales over the comparable
period. SPR's selling expenses as a percentage of revenues were 9% in both
1997 and 1996.
10
<PAGE>
Recruiting Expenses. SPR hired 384 consultants in 1997 compared to 292 in
1996. Recruiting expenses increased to $1.6 million in 1997 from $1.3 million
in 1996. Total recruiting costs per hire decreased to approximately $4,200 in
1997 from approximately $4,500 in 1996.
Stock-based Compensation Expense. Stock-based compensation expense consists
of non-cash expense resulting from the financial statement treatment of the
1994 transfers by Systems and Programming Resources, Inc. of certain of its
assets and liabilities to SPR Chicago and SPR Wisconsin. The stock-based
compensation expense was allocated to each period based upon the increase in
the estimated fair market value of SPR Chicago and SPR Wisconsin. The increase
in the estimated fair market value of SPR Chicago and SPR Wisconsin for the
periods presented was based primarily upon SPR Chicago's and SPR Wisconsin's
revenue growth over such periods. The expense is non-recurring subsequent to
October 31, 1996. There was no stock-based compensation expense allocated to
1997 compared to $12.2 million in 1996.
General and Administrative Expenses. General and administrative expenses
increased 126% to $8.4 million in 1997 from $3.7 million in 1996. This
increase was primarily attributable to thirteen additional employees, general
salary and management bonus increases, non-cash compensation expense of
approximately $0.5 million related to the grant of options on June 2, 1997,
bad debt expense of approximately $0.8 million relating primarily to a client
which filed for Chapter 11 bankruptcy in 1997 and $0.2 million in expenses
relating to SPR's March 1997 proposed initial public offering that was
postponed until October 1997. Total costs of the March 1997, postponed
offering were approximately $0.8 million, of which $0.2 million was expensed
in the second quarter of 1997 and $0.6 million was charged against the
proceeds of the Offering. Additional factors contributing to this increase
include increased rent relating to new office space in Wisconsin, increased
depreciation, increased professional fees and training costs associated
primarily with outside instructors for the information technology consultants
training program.
Liquidity and Capital Resources
On October 2, 1997, SPR completed the Offering of 4,485,000 shares of its
common stock. SPR sold 2,400,000 of such shares.
Net proceeds to SPR from the sale of 2,400,000 shares in the Offering was
approximately $22.5 million, after deducting underwriting discounts and
commissions of $1.8 million and offering expenses of $1.3 million paid by SPR.
SPR did not receive any of the proceeds from the sale of shares by the selling
stockholders.
On May 5, 1998, SPR completed a follow-on public offering of 3,719,250
shares of its common stock. SPR sold 1,350,000 shares in the follow-on public
offering and received $23.1 million in net proceeds from the sale of such
shares.
The remaining net proceeds of approximately $7.0 million from the Offering,
together with the $23.1 million from the follow-on public offering, and cash
from operations are being temporarily invested in investment grade securities.
SPR intends to use the remaining net proceeds for general corporate purposes,
including the expansion of its information technology consultant training
program, additional virtual insourcing centers, working capital, branch
expansion and possible acquisitions of related businesses
At December 31, 1999 SPR had approximately $50.5 million of cash and
marketable securities. Prior to the Offering in October 1997, SPR financed its
growth through cash flows from operations, periodically supplemented by
borrowings under its line of credit or revolving credit and term loan
facilities. Receivables have increased to 53 days of revenues at December 31,
1999 from 52 days of revenues at December 31, 1998.
Net cash flows provided from operating activities totaled $5.4 million, $7.8
million, and $5.8 million in 1999, 1998, and 1997, respectively. The decrease
from 1998 to 1999 was primarily a result of a decrease in net income,
partially offset by a decrease in accounts receivable. The increase from 1997
to 1998 was primarily a result of increases in net income which was reduced by
management's estimate of the services to be performed
11
<PAGE>
related to completing SPR's projects, partially offset by an increase in
accounts receivable and deferred taxes. Net cash used in SPR's investing
activities, primarily to fund capital expenditures and to purchase investment
grade securities totaled $3.7 million, $28.2 million, and $20.1 million for
the years ended 1999, 1998, and 1997, respectively. Net cash provided (used
in) financing activities totaled ($4.6 million), $25.4 million, and $16.0
million in 1999, 1998, and 1997, respectively. Net cash used in financing
activities consisted primarily of payments for the acquisition of treasury
stock in 1999. In 1998 and 1997 net cash was provided by the net proceeds from
the issuance of common stock offset by the payments on a note payable to
Eugene Figliulo and dividend distributions to stockholders in 1997, offset by
the net proceeds from the issuance of common stock in 1998 and 1997.
SPR, subsequent to the Offering, has no outstanding debt. SPR believes the
net proceeds from such offerings, together with existing sources of liquidity
and funds generated from operations, will provide adequate cash to fund its
anticipated cash needs, including funding SPR's growth strategy.
Year 2000
SPR established a Year 2000 project team that completed its review and
corrected any Year 2000 related issues in 1999. As an additional safeguard,
information technology staff were available over the January 1, 2000, weekend
to address any issues which may have arisen at that time. The cost of the Year
2000 remediation effort amounted to less than $200,000.
Recent Events
On January 28, 2000, SPR and Leapnet, Inc. announced a merger of Brassie
Corporation, a wholly owned subsidiary of Leapnet, with and into SPR, under a
definitive merger agreement. The board of directors of each company has
approved the merger and has recommended that their shareholders vote in favor
of the merger. The transaction will be structured as a tax-free purchase by
Leapnet. Each of SPR's common shares will be exchanged for 1.085 shares of
Leapnet's common stock
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
The statements contained in the section captioned Management's Discussion
and Analysis of Financial Condition and Results of Operations which are not
historical are "forward looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent
SPR's present expectations or beliefs concerning future events. SPR cautions
that such statements are qualified by important factors that could cause
actual results to differ materially from those in the forward looking
statements including statements pertaining to: (i) the expected continued
success of SPR's information technology consultants training program, (ii)
SPR's future ability to effectively manage its consultant utilization rates
and its hourly consultant billing rates, (iii) SPR's ability to leverage its
Century Date Compliance expertise into providing other mass change and project
management services to its clients, (iv) successful management of engagement
and contract risks, and (v) SPR's ability to expand and develop additional
branch offices and Virtual Insourcing Centers. Results actually achieved thus
may differ materially from expected results included in these statements.
Quarterly Results of Operations
The following table sets forth certain unaudited quarterly operating
information for each of the periods shown. This data has been prepared on the
same basis as the audited financial statements, and in management's opinion,
including all adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of the information for the periods
presented. Results for any previous fiscal quarter are not necessarily
indicative of results for the full year or for any future quarter.
12
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------- ----------------------------------- -----------------------------------
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue......... $ 16.5 $16.7 $ 14.3 $10.6 $19.0 $21.4 $22.4 $22.5 $10.5 $12.2 $14.2 $16.5
Gross profit.... 3.3 4.0 2.7 4.9 7.7 8.8 9.3 9.0 3.8 4.9 5.9 6.4
Operating income
(loss)......... (1.4) (0.4) (1.7) 0.3 3.1 3.7 4.2 4.4 1.0 0.9 2.1 2.1
Net income
(loss)......... (0.5) 0.1 (0.3) 1.1 2.0 2.5 3.0 3.0 0.9 0.8 2.0 0.9
Net income per
share--assuming
dilution....... $(0.04) $0.01 $(0.03) $0.08 $0.16 $0.19 $0.21 $0.21 $0.08 $0.08 $0.20 $0.07
</TABLE>
Operating results fluctuate based upon the timing of service offering
expansion activities, the hiring and training of consultants, the initiation
and completion of engagements, the timing of corporate expenditures, and the
number of billing days in the respective quarter.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
SPR maintains investments in marketable securities. As of December 31, 1999,
the aggregate fair value of SPR's marketable securities was $45.9 million. SPR
currently does not invest excess funds in derivative financial instruments.
ITEM 8. FINANCIAL STATEMENT AND SUBSEQUENT DATA
The information in response to this item is included in the financial
statements and notes thereto, and the related Report of Independent Public
Accountants, appearing on pages F-1 to F-16 of this Form 10-K, and in Item 7
of this Form 10-K under the caption "Quarterly Results of Operations."
ITEM 9. CHANGE IN ACCOUNTANTS
No change in independent public accountants during the two years ended
December 31, 1999.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
A board of six (6) directors was elected at the 1999 annual meeting of
stockholders. The following sets forth the name, age and the positions held of
each director currently holding office.
Robert M. Figliulo (age: 45) has served as Chief Executive Officer and
Chairman of SPR since June 1997 and previously served as President and
Chairman of SPR Chicago. Since joining SPR in May 1976, Mr. Figliulo has held
numerous positions, including Programmer, Analyst, Account Manager, General
Manager of both the Tulsa and Chicago offices and Vice President of Marketing.
Mr. Figliulo received a Masters in Business Administration from the University
of Chicago in 1987. Mr. Figliulo is the brother of David Figliulo.
Stephen J. Tober (age: 35) has served as SPR's Chief Operating Officer since
June1998 and as Executive Vice President--Finance and Business Development
since June 1997. Prior to joining SPR, Mr. Tober worked in the investment
banking division of Salomon Smith Barney from 1995 through 1997. From 1991
through 1995 Mr. Tober worked in corporate finance group of the law firm
Latham & Watkins. Mr. Tober received a J.D. degree from the University of
Virginia School of Law in 1991 and a B.A. degree from Amherst College in 1987.
David A. Figliulo (age: 39) has served as Executive Vice President and
Director of SPR since June 1997, and previously served as Vice President of
SPR Chicago. Since joining SPR in July 1989, Mr. Figliulo has served as an
Account Manager and as the Vice President of Sales in SPR's Chicago office.
Prior to joining SPR, Mr. Figliulo worked as an Account Manager for Baxter
Healthcare, an international pharmaceutical company, in the
13
<PAGE>
Oxygen Systems Division and was recognized as the division's top salesman in
the United States in 1987, 1988 and 1989. Mr. Figliulo is the brother of
Robert Figliulo.
Ronald L. Taylor (age: 56) has served since 1987 as a Director, President
and Chief Operating Officer of DeVry, Inc., one of the largest publicly-owned,
degree-granting, higher education companies in North America. Mr. Taylor co-
founded Keller Graduate School of Management and was, from 1973 to 1987, its
President and Chief Operating Officer. Mr. Taylor received a Masters in
Business Administration degree from Stanford University in 1971 and a B.A.
degree from Harvard University in 1966.
Sydnor W. Thrift, Jr. (age: 71) has served as Vice President of Baseball
Operations for the Baltimore Orioles professional baseball team since November
1999, having spent the earlier part of 1999 as Director of Player Personnel.
From November 1994 through 1998, Mr. Thrift was the Orioles Director of Player
Development. His baseball career prior to the Baltimore Orioles includes the
Chicago Cubs where he was Assistant General Manager from November 1991 through
October 1994. During 1991, he served as a consultant to three professional
baseball teams (San Francisco Giants, Los Angeles Dodgers and the New York
Mets). Mr. Thrift was the General Manager of the Pittsburgh Priates from
November 1985 through October 1988.
David P. Yeager (age: 47) has served as Vice Chairman of the Board of
Directors of Hub Group, Inc., the largest intermodal marketing company in the
United States, since January 1992. Mr. Yeager has also served as Chief
Executive Officer of Hub Group, Inc. since March 1995 and was President of Hub
City Terminals-Chicago from October 1985 through December 1991. Mr. Yeager
received a Masters in Business Administration degree from the University of
Chicago in 1987.
Executive Officers
Executive officers of the Company are appointed by, and serve at the
direction of, the Board of Directors. The following sets forth the executive
officers of SPR, their ages and positions as of December 31, 1999.
Robert M. Figliulo. See the description under "Directors."
Stephen J. Tober. See the description under "Directors."
David A. Figliulo. See the description under "Directors."
Stephen T. Gambill (age: 49) has served as Vice President and Chief
Financial Officer since July 1996. From 1982 through July 1996, Mr. Gambill, a
certified public accountant, held various financial management positions
within Natural Gas Pipeline Company of America, a large natural gas pipeline,
and most recently served as its Director of Accounting. Prior to 1982, Mr.
Gambill held various auditing positions with the public accounting firms of
Coopers and Lybrand and Deloitte, Haskins & Sells. Mr. Gambill received a
Masters in Business Administration degree from the University of Chicago in
1987.
ITEM 11. EXECUTIVE COMPENSATION
The information in response to this item is incorporated herein by reference
from the section of the Proxy Statement captioned "Executive Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information in response to this item is incorporated herein by reference
from the section of the Proxy Statement captioned "Security Ownership of
Management and Certain Beneficial Owners."
The following graph shows a comparison of cumulative total returns for the
Company, the Nasdaq Stock Market--U.S. & Foreign Index and the Nasdaq Computer
& Data Processing Services Index during the period commencing on October 2,
1997, the date of the Company's initial public offering, and ending
December 31,
14
<PAGE>
1999. The comparison assumes $100 was invested on October 2, 1997 in the
Company's Common Stock, the Nasdaq Stock Market--U.S. & Foreign Index and the
Nasdaq Computer & Data Processing Services Index and assumes the reinvestment
of all dividends, if any.
[GRAPH]
<TABLE>
<CAPTION>
10/2/97 12/31/97 12/31/98 12/31/99
------- -------- -------- --------
<S> <C> <C> <C> <C>
SPR Inc. $100.00 $90.70 $138.00 $ 49.00
Nasdaq Stock Market--U.S. & Foreign Index $100.00 $92.10 $127.60 $239.40
Nasdaq Computer & Data Processing Services
Index $100.00 $94.20 $168.10 $369.10
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the closing date of the Offering in October 1997, SPR entered into a
tax indemnity agreement with each of its then current stockholders which
provides, among other things, that SPR will indemnify such stockholders against
additional income taxes resulting from adjustments made (as a result of a final
determination made by a competent tax authority) to the taxable income reported
by SPR as an S corporation for periods prior to the initial public offering,
but only to the extent those adjustments result in a decrease in income taxes
otherwise payable by SPR as a C corporation for periods after the initial
public offering.
SPR paid approximately $324,000, $340,000, and $480,000 during 1999, 1998,
and 1997 respectively, in fees to a law firm having a partner whom is a
stockholder of SPR and who is a brother of certain executive officers of SPR. A
portion of the fees paid in 1998 and 1997 related to services performed by such
firm in connection with the 1996 mergers and the 1997 and 1998 offerings. In
1999, $159,000 of the $324,000 was attributed to a failed merger. In addition,
fees of $128,000 were paid to another law firm having a partner whom is a
stockholder of SPR and a brother of certain executive officers of SPR in 1999.
During 1999 and 1998, SPR paid approximately $196,000 and $314,000,
respectively, to a higher education company having a president and chief
operating officer who is a director of SPR.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements.
The following financial statements and notes thereto, and the related
Independent Auditors' Report, are filed as part of this form 10-K on pages F-1
to F-17:
Report of Independent Public Accountants
Balance Sheets at December 31, 1999 and 1998
Statements of Operations for the years ended December 31, 1999, 1998, and
1997
Statements of Stockholders' Equity for the years ended December 31, 1999,
1998, and 1997
Statements of Cash Flows for the years ended December 31, 1999, 1998, and
1997 Notes to Financial Statements
(2) Financial Statement Schedules.
All financial statement schedules have been omitted because such schedules
are not required or the information required has been presented in the
aforementioned financial statements.
(3) Exhibits
The following exhibits are filed with this report or incorporated by
reference as set forth below.
<TABLE>
<C> <S>
2.1 Agreement of Merger dated October 30, 1996 between the Registrant and
SPR Chicago Inc.*
2.2 Agreement of Merger dated October 31, 1996 among the Registrant,
Consulting Acquisition, Inc. and Systems and Programming Resources,
Inc.*
2.3 Agreement of Merger dated October 31, 1996 between the Registrant and
Systems and Programming Resources of Tulsa, Inc.*
2.4 Agreement of Merger dated October 31, 1996 between the Registrant and
SPR Wisconsin, Inc.*
3.1 Certificate of Incorporation of the Registrant.*
3.1.1 Certificate of Amendment of Certificate of Incorporation.*
3.2 By-laws of the Registrant.*
4.1 Description of specimen stock certificate representing Common Stock.*
10.1.1 Management Employment Agreement dated as of June 2, 1997 between the
Registrant and Robert M. Figliulo.*
10.1.2 Management Employment Agreement dated as of June 2, 1997 between the
Registrant and David A. Figliulo.*
10.1.3 Management Employment Agreement dated as of June 2, 1997 between the
Registrant and Stephen J. Tober.*
10.1.4 Management Employment Agreement dated as of June 2, 1997 between the
Registrant and Stephen T. Gambill.*
10.1.5 Management Employment Agreement dated as of June 2, 1997 between the
Registrant and Michael J. Fletcher.*
10.4 Amended and Restated Combined Incentive and Non-statutory Stock Option
Plan.*
10.5 Revised form of employee Stock Purchase Plan.*
10.6 Lease for 2015 Spring Road, Oak Brook, Illinois.*
10.6.1 First Amendment to Lease for 2015 Spring Road, Oak Brook, Illinois.
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
10.6.2 Third Amendment to Lease for 2015 Spring Road, Oak Brook, Illinois.
10.6.3 Fourth Amendment to Lease for 2015 Spring Road, Oak Brook, Illinois.
10.7 Lease for 400 Mid-Continent Tower, Tulsa, Oklahoma.*
10.7.1 Third Amendment to Lease for 400 Mid-Continent Tower, Tulsa, Oklahoma.*
10.7.2 Fourth Amendment to Lease for 400 Mid-Continental Tower, Tulsa, Oklahoma.#
10.7.3 Fifth Amendment to Lease for 400 Mid-Continental Tower, Tulsa, Oklahoma.
10.8 Lease for 100 East Wisconsin Avenue, Milwaukee, Wisconsin.*
10.8.1 Second Amendment to Lease for 100 East Wisconsin Avenue, Milwaukee, Wisconsin.
10.9 Sublease for 815 Commerce Drive, Oak Brook, Illinois.*
10.10 Lease for Tower Executive Office Building, N14 W24200 Tower Place, Pewaukee, Wisconsin.
10.11 Lease for 800 West Airport Freeway, Irving, Texas.
10.11.1 First Amendment to Lease for 800 West Airport Freeway, Irving, Texas.
10.12 Form of Tax Indemnity Agreement.*
27.1 Financial Data Schedule.
</TABLE>
- --------
* Incorporated by reference to SPR Inc.'s Registration Statement on Form S-1
(No. 333-32735), which was declared effective by the Securities and Exchange
Commission on October 1, 1997.
# Incorporated by reference to SPR Inc.'s Form 10-K (No. 000-22097) for the
year ending December 31, 1997.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed by SPR during the period covered by
this report.
17
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Arthur Andersen LLP, Independent Public Accountants............. F-2
Balance Sheets as of December 31, 1999 and 1998........................... F-3
Statements of Operations for the Fiscal Years Ended December 31, 1999,
1998, and 1997........................................................... F-4
Statements of Stockholders' Equity for the Years Ended December 31, 1999,
1998 and 1997............................................................ F-5
Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and
1997..................................................................... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
Report of Independent Public Accountants
To the Stockholders of SPR Inc.:
We have audited the accompanying balance sheets of SPR Inc. (a Delaware
corporation) as of December 31, 1999 and 1998 and the related statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SPR Inc. as of December
31, 1999 and 1998, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 18, 2000
F-2
<PAGE>
SPR INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
Years Ended December
31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................... $ 4,322,192 $ 7,207,273
Accounts receivable, net:
Trade............................................ 6,068,025 12,779,270
Income taxes and other........................... 2,427,111 893,752
Marketable securities.............................. 46,226,804 43,905,707
Prepaid expenses and other......................... 474,085 523,041
Deferred taxes..................................... 795,500 1,971,394
----------- -----------
Total current assets............................... 60,313,717 67,280,437
----------- -----------
Property and equipment, at cost:
Leasehold improvements............................. 686,631 403,025
Computer equipment and software.................... 3,730,819 3,086,179
Office furniture and equipment..................... 2,922,975 2,502,443
----------- -----------
7,340,425 5,991,647
Less--accumulated depreciation and amortization.. (3,598,480) (2,005,065)
----------- -----------
Property and equipment, net.................... 3,741,945 3,986,582
Deferred taxes....................................... 104,637 171,225
----------- -----------
Total assets................................. $64,160,299 $71,438,244
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable................................... $ 2,004,660 $ 1,466,669
Accrued expenses:
Payroll and payroll related...................... 2,773,086 3,700,970
Other............................................ 321,349 488,033
Deferred income.................................... 300,000 2,975,000
----------- -----------
Total current liabilities........................ 5,399,095 8,630,672
----------- -----------
Commitments and contingencies
Stockholders' equity
Common stock $.01 par, 25,000,000 shares
authorized, 13,975,976 and 13,843,442 shares
issued and outstanding at December 31, 1999 and
1998, respectively ............................... 139,760 138,434
Preferred stock, $.01 par, 3,000,000 shares
authorized, no shares issued and outstanding...... -- --
Treasury stock, 1,150,692 shares, at cost.......... (5,205,273) --
Additional paid in capital......................... 52,073,090 51,269,440
Retained earnings.................................. 11,753,627 11,399,698
----------- -----------
Total stockholders' equity....................... 58,761,204 62,807,572
----------- -----------
Total liabilities and stockholders' equity..... $64,160,299 $71,438,244
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-3
<PAGE>
SPR INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues................................ $58,104,283 $85,343,514 $53,421,924
Cost of services........................ 43,242,570 50,507,854 32,376,687
----------- ----------- -----------
Gross profit.......................... 14,861,713 34,835,660 21,045,237
Costs and expenses:
Selling............................... 4,965,754 5,275,048 4,855,567
Recruiting............................ 1,205,092 1,827,376 1,608,059
General and administrative expenses... 11,893,035 12,319,835 8,437,804
----------- ----------- -----------
Total costs and expenses............ 18,063,881 19,422,259 14,901,430
----------- ----------- -----------
Operating income (loss)................. (3,202,168) 15,413,401 6,143,807
Other income (expense):
Interest expense...................... (379) (4,203) (178,783)
Interest income....................... 2,642,197 2,080,420 266,851
Other, net............................ 3,017 6,938 (41,257)
----------- ----------- -----------
Total other income.................. 2,644,835 2,083,155 46,811
----------- ----------- -----------
Income (loss) before income taxes....... (557,333) 17,496,556 6,190,618
Provision (benefit) for income taxes.... (911,262) 6,998,623 1,552,422
----------- ----------- -----------
Net income.............................. $ 353,929 $10,497,933 $ 4,638,196
=========== =========== ===========
Historical net income per share:
Basic................................. $ 0.03 $ 0.80 $ 0.45
=========== =========== ===========
Diluted............................... $ 0.03 $ 0.77 $ 0.43
=========== =========== ===========
Pro forma income data:
Net income as reported................ $ 4,638,196
Pro forma adjustment to recognize C
corporation provision for income
taxes................................ 1,469,071
-----------
Pro forma net income.................. $ 3,169,125
===========
Pro forma net income per share:
Basic................................. $ 0.31
===========
Diluted............................... $ 0.30
===========
Weighted average number of shares
outstanding:
Basic................................. 13,375,569 13,144,412 10,306,032
Diluted............................... 13,512,759 13,641,558 10,669,072
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE>
SPR INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Treasury Stock Additional Retained Total
-------------------- ----------------------- Paid-in Earnings Stockholders'
Shares Amount Shares Amount Capital (Deficit) Equity
---------- -------- ---------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 9,701,100 $ 97,011 -- $ -- $46,702,525 $(44,292,188) $ 2,507,348
Net income............. -- -- -- -- -- 4,638,196 4,638,196
Employee stock purchase
plan.................. 35,957 360 -- -- 324,222 -- 324,582
Capitalization of
undistributed S
Corporation earnings
in conjunction with
termination of S
Corporation election
on October 1, 1997.... -- -- -- -- (45,444,263) 45,444,263 --
S Corporation
distributions......... -- -- -- -- -- (4,885,771) (4,885,771)
Employee stock option
plan and related tax
benefits.............. -- -- -- -- 458,886 -- 458,886
Sale of stock in
initial public
offering, net of
issuance costs........ 2,400,000 24,000 -- -- 22,462,431 -- 22,486,431
---------- -------- ---------- ----------- ----------- ------------ -----------
Balance at December 31,
1997................... 12,137,057 121,371 -- -- 24,503,801 904,500 25,529,672
Net income............. 10,497,933 10,497,933
Employee stock purchase
plan.................. 94,646 946 -- -- 1,141,285 1,142,231
Treasury stock
retired............... (2,250) (23) -- -- (21,243) (2,735) (24,001)
Employee stock option
plan and related tax
benefits.............. 232,499 2,325 -- -- 2,557,795 -- 2,560,120
Sale of stock in
secondary public
offering, net of
issuance costs........ 1,350,000 13,500 -- -- 23,087,750 -- 23,101,250
Other.................. 31,490 315 -- -- 52 -- 367
---------- -------- ---------- ----------- ----------- ------------ -----------
Balance at December 31,
1998................... 13,843,442 138,434 -- -- 51,269,440 11,399,698 62,807,572
Net income............. 353,929 353,929
Employee stock purchase
plan.................. 128,654 1,287 -- -- 583,978 585,265
Treasury stock
acquired.............. (1,150,692) (5,205,273) (5,205,273)
Employee stock option
plan and related tax
benefits.............. 3,880 39 -- -- 219,672 -- 219,711
---------- -------- ---------- ----------- ----------- ------------ -----------
Balance at December 31,
1999................... 13,975,976 $139,760 (1,150,692) $(5,205,273) $52,073,090 $ 11,753,627 $58,761,204
========== ======== ========== =========== =========== ============ ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
SPR INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income for the period......... $ 353,929 $ 10,497,933 $ 4,638,196
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization... 1,593,415 1,364,784 435,151
Deferred taxes.................. 1,242,482 (2,331,465) 188,846
Expense related to employee
stock option plan.............. 150,984 150,984 458,886
Loss on sale of property and
equipment...................... -- 239,977 41,257
(Increase) decrease in accounts
receivable, net................ 5,222,567 (4,378,855) (3,712,391)
(Increase) decrease in prepaid
expenses and other............. 48,956 (286,320) 466,784
Increase in accounts payable.... 537,991 174,718 332,459
Increase (decrease) in accrued
expenses....................... (1,094,568) (559,953) 2,991,658
Increase (decrease) in deferred
income......................... (2,675,000) 2,975,000 --
------------ ------------ -------------
Net cash provided by operating
activities................... 5,380,756 7,846,803 5,840,846
------------ ------------ -------------
Cash flows from investing
activities:
Purchases of property and
equipment, net of sales.......... (1,348,778) (3,317,508) (1,231,084)
Purchases of marketable
securities....................... (36,267,097) (72,880,518) (182,122,189)
Sales/maturity of marketable
securities....................... 33,946,000 48,018,000 163,079,000
Decrease in notes receivable--
other............................ -- -- 10,879
Decrease in notes receivable--
related parties.................. -- -- 181,245
------------ ------------ -------------
Net cash used in investing
activities................... (3,669,875) (28,180,026) (20,082,149)
------------ ------------ -------------
Cash flows from financing
activities:
Proceeds from the sale of common
stock, net of issuance costs of
approximately $3,114,000 in 1997
and $1,705,000 in 1998,
respectively..................... -- 23,101,250 22,486,431
Treasury stock acquired........... (5,205,273)
Payments on note payable--related
party............................ -- -- (641,266)
Proceeds from employee stock
purchase plan.................... 585,265 1,142,231 324,582
Proceeds from employee stock
option plan...................... 24,046 1,187,292 --
Distributions..................... -- -- (4,635,261)
Payments on term note payable..... -- -- (216,005)
Net borrowings on line of credit
and term note.................... -- -- (1,300,000)
Other cash flows from financing
activities....................... -- (23,634) --
------------ ------------ -------------
Net cash provided by (used in)
financing activities......... (4,595,962) 25,407,139 16,018,481
------------ ------------ -------------
Net increase (decrease) in cash..... (2,885,081) 5,073,916 1,777,178
Cash and cash equivalents, beginning
of period.......................... 7,207,273 2,133,357 356,179
------------ ------------ -------------
Cash and cash equivalents, end of
period............................. $ 4,322,192 $ 7,207,273 $ 2,133,357
============ ============ =============
Supplemental disclosure of cash
payments made for:
Interest.......................... $ 379 $ 4,203 $ 178,783
Income taxes...................... 589,852 9,526,096 40,550
============ ============ =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
Notes to Financial Statements
NOTE 1--BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(a) Business--Founded in 1973 and headquartered in the Chicago area, SPR
Inc. (the "Company") provides information technology services to Fortune 1000
companies in a variety of industry groups including transportation,
manufacturing, insurance, retail, financial services, healthcare, and energy.
These services include General Consulting as well as five outsourcing
services: software modernization, mass change, application management,
information delivery, and software quality services. The outsourcing services
help clients with comprehensive solutions for maintaining, improving and
transitioning legacy systems. SPR has offices in Oak Brook, IL, Dallas,
Milwaukee, and Tulsa.
(b) Basis of Presentation--SPR Inc. was formed on October 29, 1996. During
October 1996, Systems and Programming Resources, Inc., Systems & Programming
Resources of Tulsa, Inc., SPR Wisconsin, Inc., SPR Chicago Inc., and
Consulting Acquisition, Inc. (d.b.a. DataFlex) merged into SPR Inc. at which
time the stockholders of such companies received an aggregate of 9,700,786
shares of common stock of SPR Inc. Systems and Programming Resources, Inc.,
SPR Wisconsin, Inc., SPR Chicago Inc., Consulting Acquisition, Inc. and SPR
Inc. are under common ownership and control and were accounted for at
historical cost as a reorganization of entities under common control (similar
to the pooling of interests method of accounting). The merger of Systems &
Programming Resources of Tulsa, Inc. into SPR Inc. was accounted for using the
pooling of interests method of accounting. The accompanying financial
statements of the Company have been prepared to give retroactive effect to the
merger.
(c) Cash and Cash Equivalents--Cash equivalents are comprised of certain
highly liquid investments with maturities of three months or less.
(d) Accounts Receivable--Accounts receivable include fees and expenses for
services rendered prior to year end which were billed subsequent to year end.
Amounts relating to such fees and expenses included in accounts receivable are
$1,990,675 and $2,320,189 at December 31, 1999 and 1998, respectively. A
summary of the activity in allowance for doubtful accounts for the years ended
December 31, 1999, 1998, and 1997 is as follows:
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End of
of Year Expenses Write-Offs Year
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999 Allowance for Doubtful
Accounts.................... $843,695 $(400,000) $96,984 $346,711
1998 Allowance for Doubtful
Accounts.................... $843,695 $ -- $ -- $843,695
1997 Allowance for Doubtful
Accounts.................... $ 74,399 $ 852,747 $83,451 $843,695
</TABLE>
(e) Marketable securities--The Company invests in investment-grade
marketable securities with varying maturities. These securities include
municipal bonds and corporate bonds. The Company accounts for its investments
using Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS No. 115").
Management determines the classification of investments under SFAS No. 115 at
the time of purchase and reevaluates such classifications as of each balance
sheet date.
F-7
<PAGE>
The carrying amounts and fair values of the Company's marketable securities
are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1999 1998
----------------------- -----------------------
Amortized Aggregate Amortized Aggregate
Cost Basis Fair Value Cost Basis Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Held-to-maturity:
U.S. corporate notes maturing
within
10 years.................... $21,842,680 $21,519,123 $17,655,707 $17,640,942
----------- ----------- ----------- -----------
Available-for-sale:
U.S. corporate notes maturing
after
10 years.................... 10,084,124 10,084,124 12,700,000 12,700,000
Municipal obligations
maturing after
10 years.................... 14,300,000 14,300,000 13,550,000 13,550,000
----------- ----------- ----------- -----------
Total available-for-sale... 24,384,124 24,384,124 26,250,000 26,250,000
----------- ----------- ----------- -----------
Total short-term investments... $46,226,804 $45,903,247 $43,905,707 $43,890,942
=========== =========== =========== ===========
</TABLE>
The following schedule shows the components of investment income at December
31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
Interest Income................................. $2,453,747 $1,918,893 $244,506
Dividend Income................................. 10,967 13,696 8,997
---------- ---------- --------
Total Investment Income......................... $2,464,714 $1,932,589 $253,503
========== ========== ========
</TABLE>
(f) Revenue Recognition--Revenues are recognized as the related services are
performed. Clients are generally billed on a time and materials basis. The
Company accounts for its fixed fee engagements under the percentage-of-
completion method, using costs incurred to date in relation to estimated total
costs of the contract to measure the stage of completion. The cumulative
effects of revisions of estimated total contract costs and revenues are
recorded in the period in which the facts requiring the revision become known.
Less than 1% and approximately 4% of revenues were generated from fixed-price
engagements during 1999 and 1998, respectively.
(g) Property and Equipment--Property and equipment are stated at cost.
Expenditures for repair and maintenance are charged to expense as incurred.
Depreciation and amortization are computed using the straight-line method. The
estimated useful lives used in computing depreciation and amortization are as
follows:
<TABLE>
<CAPTION>
Asset Description Asset Life
----------------- ----------
<S> <C>
Leasehold improvements........................... Shorter of lease term or
estimated useful life of
the asset
Computer equipment and software.................. 3 years
Office furniture and equipment................... 5 years
</TABLE>
(h) Deferred Income--The determination of deferred income is based on
management's estimate of the services to be performed related to completing
the Company's century date compliance projects, and is adjusted as additional
or new information becomes available.
(i) Distributions--Distributions are recorded when declared by the board of
directors.
(j) 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.
F-8
<PAGE>
(k) Income Taxes--Prior to the consummation of the initial public offering
on October 1, 1997, the Company elected to be taxed as an S corporation. As a
result, income of the Company was taxable to the shareholders. On October 1,
1997, the Company's S corporation status was terminated and the Company became
a C corporation. At this time, the retained deficit of the Company was
reclassified and netted against additional paid-in capital.
(l) Pro forma net income and net income per share--The pro forma net income
and net income per share include a provision for federal and state income
taxes as if the Company had been a C corporation for all periods presented.
(m) Reclassifications--Certain prior year amounts have been reclassified to
conform to the current year's presentation.
NOTE 2--BUSINESS SEGMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). The Company has no
separately reportable segments in accordance with this standard. Under the
enterprise-wide disclosure requirements of SFAS No. 131, the Company reports
net revenues by service offering. Amounts for the years ended December 31,
1999, 1998, and 1997 are shown in the table below.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
1999 1998 1997
----------------- ----------------- -----------------
Revenues % Revenues % Revenues %
----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
General consulting...... $21,821,105 37.6% $30,443,400 35.7% $27,630,770 51.7%
Century date
compliance............. 13,463,779 23.2% 33,824,961 39.6% 17,215,227 32.2%
Application management.. 9,412,643 16.2% 6,033,476 7.1% 5,318,936 10.0%
Software quality........ 8,482,777 14.6% 4,221,395 4.9% -- --
All other service
offerings.............. 4,923,979 8.4% 10,820,282 12.7% 3,256,991 6.1%
----------- ----------- -----------
Total revenues........ $58,104,283 $85,343,514 $53,421,924
=========== =========== ===========
</TABLE>
NOTE 3--CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations of
credit risk consist of accounts receivable and investments. The Company places
its investments with high quality financial institutions. The Company reviews
a customer's credit history before extending credit. In addition, the Company
routinely assesses the financial strength of its customers and, as a
consequence, believes that its accounts receivable credit risk is limited.
During 1997, the Company began performing services for a client that filed
for Chapter 11 bankruptcy protection during the third quarter of 1997. The
Company has received payments for all amounts related to the bankruptcy
period, and in 1999, the customer emerged from bankruptcy. This customer
accounted for approximately 1%, 7%, and 8% of revenues for the years ended
December 31, 1999, 1998, and 1997, respectively. The Company is continuing to
perform services for this customer.
The Company's customers are predominantly in the Midwest, with the majority
of customers located in Chicago, Tulsa, Milwaukee, and Dallas. One customer in
the telecommunication and energy industries accounted for approximately 11%,
4%, and 1% of revenues for the years ended December 31, 1999, 1998, and 1997,
respectively. A customer in the insurance industry accounted for 6%, 7%, and
12% of revenues for the years ended December 31, 1999, 1998, and 1997,
respectively. A transportation industry customer accounted for 6%, 11%, and 5%
of revenues for the years ended December 31, 1999, 1998, and 1997,
respectively. The Company has no off balance sheet credit risk.
F-9
<PAGE>
NOTE 4--INCOME TAXES
Prior to the initial public offering of the Company's Common Stock completed
on October 1, 1997 (the "Offering"), the Company included its income and
expenses with those of its stockholders for Federal and certain state income
tax purposes (an S corporation election). By this election, income of the
Company is taxable to the stockholders. In connection with the Offering, the
Company terminated its S corporation election and converted to a C
corporation. The Company recorded a deferred income tax liability and
corresponding income tax expense of $712,000, arising from the change in the
Company's tax status and a change from the cash basis to the accrual basis of
accounting for tax purposes. Beginning October 1, 1997, the Company provides
for deferred income taxes under the asset and liability method of accounting
for income taxes. This method requires the recognition of deferred income
taxes based upon the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax basis of existing assets
and liabilities.
Prior to consummation of the Offering, the Company made a distribution to
its existing stockholders of part of the Company's undistributed S corporation
earnings.
The unaudited pro forma provision for income taxes presented on the
statement of operations for 1997 represents the estimated taxes that would
have been recorded had the Company been a C corporation for income tax
purposes for the entirety of this period. The pro forma provision for income
taxes is as follows:
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Federal......................................................... $2,736,725
State........................................................... 284,768
----------
Total income tax expense...................................... $3,021,493
==========
</TABLE>
During 1999, 1998, and the fourth quarter of 1997, the Company was a C
corporation for income tax purposes. The provision for income taxes for 1999,
1998, and the portion of 1997 that the Company was a C corporation includes
federal and state income taxes currently payable and those deferred because of
temporary differences between the financial statement and tax bases of assets
and liabilities. The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal............................. $(1,767,739) $7,627,347 $1,202,361
State............................... (386,005) 1,702,741 161,215
----------- ---------- ----------
Total current provision
(benefit)........................ (2,153,744) 9,330,088 1,363,576
Deferred:
Federal............................. 1,019,798 (1,905,973) (445,264)
State............................... 222,684 (425,492) (77,890)
----------- ---------- ----------
Total deferred provision
(benefit)........................ 1,242,482 (2,331,465) (523,154)
Initial recognition of deferred income
taxes resulting from change in tax
status............................... -- -- 712,000
----------- ---------- ----------
Total income tax provision
(benefit)........................ $ (911,262) $6,998,623 $1,552,422
=========== ========== ==========
</TABLE>
F-10
<PAGE>
Reconciliations of the statutory federal tax rates to the pro forma and
actual effective income tax rates are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997
------------
1999 1998 Pro
Actual Actual forma Actual
------ ------ ----- ------
<S> <C> <C> <C> <C>
Statutory rate................................ (34)% 34% 34% 34%
State taxes, net of federal benefit........... (5)% 5% 5% 1%
S Corporation income taxed to its
shareholders................................. -- % -- % -- % (24)%
Income taxes (benefited) recognized as a
result of a change in tax status............. (18)% -- % -- % 11%
Increase in valuation allowance .............. -- % -- % 6% 2%
S corporation liability associated with
indemnefication.............................. (107)%
Other......................................... -- % 1% 4% 1%
------ ---- ---- -----
Effective rate.............................. (164)% 40% 49% 25%
====== ==== ==== =====
</TABLE>
The significant components of the Company's deferred income tax assets and
liabilities as of December 31, 1999, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
Deferred income tax assets:
Payroll and related............... $ 395,459 $ 443,916 $ 311,196
Allowance for doubtful accounts... 138,685 337,478 75,501
Deferred income................... 120,000 1,190,000 --
Stock options..................... 220,733 161,458 153,360
Intangibles....................... 672,464 852,998 965,064
Depreciation...................... 25,260 9,767 --
---------- ---------- -----------
Total deferred income tax assets.. 1,572,601 2,995,617 1,505,121
Valuation allowance............... (672,464) (852,998) (1,321,567)
---------- ---------- -----------
Net deferred tax income assets...... $ 900,137 $2,142,619 $ 183,554
========== ========== ===========
Deferred income tax liabilities:
Change in tax accounting method
(cash to accrual).................. $ -- $ -- $ 356,400
Depreciation........................ -- -- 16,000
---------- ---------- -----------
Total deferred income tax
liabilities...................... $ -- $ -- $ 372,400
========== ========== ===========
</TABLE>
The Company establishes valuation allowances in accordance with the
provisions of Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" ("SFAS No. 109"). The Company continually reviews the
adequacy of the valuation allowance and is recognizing these benefits only as
reassessment indicates that it is more likely than not that the benefits will
be realized.
In connection with the Offering, the Company entered into a tax indemnity
agreement with each of its current stockholders which provides, among other
things, that the Company will indemnify such stockholders against additional
income taxes resulting from adjustments made (as a result of a final
determination made by a competent tax authority) to the taxable income
reported by the Company as an S corporation for periods prior to the Offering,
but only to the extent those adjustments result in a decrease in income taxes
otherwise payable by the Company as a C corporation for periods after the
Offering.
F-11
<PAGE>
NOTE 5--CHANGE IN DEFERRED INCOME
In the fourth quarter of 1999, the Company changed its estimate of the
services to be performed related to completing the Company's century date
compliance projects. This non-cash change in estimate decreased 1999 cost of
services by approximately $2.7 million ($1.6 million net of tax). or
approximately $0.12 per diluted common share.
NOTE 6--STOCK REPURCHASE PROGRAM
On March 17, 1999 the Company announced a plan to purchase up to 1.5 million
of its shares of common stock under a stock repurchase program. The quantity
to be purchased and the targeted price was determined daily, based upon
management's discretion. As of December 31, 1999, the Company has purchased
1,150,692 shares at an average price per share of $4.52.
NOTE 7--LINES OF CREDIT AND LONG-TERM DEBT
In June 1997, the Company entered into a loan agreement that provided for a
revolving loan facility and a term loan facility. The revolving loan facility
allowed for maximum borrowings of the lesser of (a) $2,000,000 less the
undrawn face amount of letters of credit or (b) the borrowing base, as
defined, less the undrawn face amount of letters of credit. Interest on
revolving loans was at the bank's prime rate (8.5% at December 31, 1997). The
revolving loan facility matured in March 1998. The term loan facility provided
for maximum borrowings of $2,000,000 for use for certain purposes and was
cancelled upon consummation of the initial public offering in October 1997.
Interest was payable quarterly at the prime rate plus 1% (9.5% at December 31,
1997). The Company paid off borrowings under these facilities using proceeds
from the offering. As of December 31, 1999, 1998 and 1997, there were no loans
outstanding.
Substantially all assets of the Company were collateral for borrowings under
the loan agreement. The agreement contained certain restrictions, prohibiting,
among other things, additional indebtedness without the lender's consent. The
term loan agreement contained certain covenants including, among others, a
requirement of a cash flow coverage ratio of not less than 1.1 to 1.0. The
Company was in compliance with all loan covenants at the date the borrowings
were repaid.
NOTE 8--LEASE AGREEMENTS
The Company leases its office facilities under operating lease agreements
that expire at various times through 2004. In addition, the Company leases
certain equipment under operating lease agreements.
In addition to the minimum future rental payments, the Company is obligated
to pay certain operating expenses relating to its leased properties and
equipment. Total expense under operating leases was approximately $1,591,000,
$990,000, and $684,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. The following is a schedule of minimum future rental payments
required under the operating leases:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
<S> <C>
2000............................................................. 1,318,141
2001............................................................. 1,213,913
2002............................................................. 1,080,212
2003............................................................. 818,527
2004............................................................. 493,259
----------
Total minimum payments required................................ $4,924,052
==========
</TABLE>
F-12
<PAGE>
NOTE 9--401(K) PROFIT-SHARING PLAN
The Company has a contributory 401(k) profit-sharing plan (the "Plan")
covering substantially all full-time employees. The Plan allows participants
to contribute up to 22% of their total compensation on a pretax basis, up to a
specified amount. Beginning in 1999, the Company is required to contribute
annually one-half of the first 6% of the participants' contributions, up to a
maximum of $2,000 per participant. The total Company contribution for the year
ended December 31, 1999 was approximately $640,000. Through 1998, the Company
was required to contribute annually one-fourth of the first $2,000 of the
participants' contributions, up to a maximum of $500 per participant. The
total Company contribution was approximately $224,000 and $126,000 for the
years ended December 31, 1998 and 1997, respectively.
NOTE 10--COMMITMENTS AND CONTINGENCIES
Letter of Credit--The Company had letters of credit of $55,000 and $78,700
at December 31, 1999 and 1998 as security for a lease agreement. The letter of
credit is renewable each year.
Litigation--In the ordinary course of conducting its business the Company
becomes involved in various lawsuits related to its business. The Company does
not believe that the ultimate resolution of these matters will be material to
its business, financial position or results of operations.
Employment Contracts--During 1998, the Company entered into employment
contracts with certain employees. The employment contracts provide that in the
event of a change in control the employee is entitled to a sum equal to (i)
one year of the employee's effective annual base compensation immediately
prior to the termination date, plus (ii) an amount equal to the prior year's
cash bonus, plus (iii) cash value in the health plan. If a change in control
occurred, as defined, at December 31, 1999, the Company's total commitment
under the employment contracts would be approximately $2.1 million.
NOTE 11--STOCK PLANS
Description
In June 1999, the Company's shareholders approved the 1999 Combined
Incentive and Non-statutory Stock Option Plan. The 1999 plan provides for the
granting of options to purchase a maximum of 1,250,000 shares of common stock.
In November 1996, the Company adopted a Combined Incentive and Non-statutory
Stock Option Plan and an Employee Stock Purchase Plan. 1,566,378 shares of
common stock are reserved for issuance under the 1996 Combined Incentive and
Non-statutory Stock Option Plan and 750,000 shares of common stock are
reserved for issuance under the Employee Stock Purchase Plan.
The 1999 Combined Incentive and Non-statutory Stock Option Plan provides
that awards may be granted to employees, officers, and directors of the
Company. Awards may consist of non-statutory stock options and incentive stock
options to purchase shares of common stock and restricted stock purchase
rights. Options granted under the plan generally vest over a five-year period
at the rate of 20% per year. The exercise price per share of common stock may
not be less than 85% (100% in the case of an ISO) of the fair market value of
the common stock on the date the option is granted. Options and restricted
stock purchase rights granted under the option plan must generally be
exercised within ten years from the date of grant. In the case of any eligible
employee who owns stock possessing more than 10% of the voting power of stock,
the exercise price of any options granted may not be less than 110% of the
fair market value of the common stock on the date of grant and the exercise
period may not exceed five years from the date of grant. If the Company is
acquired by another entity, outstanding awards may be assumed or substituted
by the successor corporation, if any. If a successor corporation does not
assume or substitute the awards, the vesting of the awards will be
accelerated.
The 1996 Combined Incentive and Non-statutory Stock Option Plan provides
that awards may be granted to employees, officers, and directors of the
Company. Awards may consist of non-statutory stock options and incentive stock
options to purchase shares of common stock and stock appreciation rights
("SARs"). Incentive
F-13
<PAGE>
stock options ("ISOs") generally vest over a five-year period at the rate of
20% per year. The exercise price per share of common stock may not be less
than 85% (100% in the case of an ISO) of the fair market value of the common
stock on the date the option is granted. Options and SARs granted under the
option plan must generally be exercised within ten years from the date of
grant. In the case of any eligible employee who owns stock possessing more
than 10% of the voting power of stock, the exercise price of any ISOs granted
may not be less than 110% of the fair market value of the common stock on the
date of grant and the exercise period may not exceed five years from the date
of grant. In the event of a change in control, as defined, options vest
immediately.
The Employee Stock Purchase Plan permits eligible employees, who customarily
work more than 20 hours per week and more than five months in any calendar
year, to purchase common stock through payroll deductions of up to 20% of
their total cash compensation, provided that no employee may purchase more
than $25,000 worth of stock in any calendar year. The purchase price is the
lesser of 85% of the market value of the common stock on the first or last day
of the offering period, as defined.
Activity
Stock option activity for the Company's Combined Incentive and Non-statutory
Stock Option Plan for the years ended December 31, 1997, 1998, and 1999 is as
follows:
<TABLE>
<CAPTION>
Average Average
Exercise Exercise
Shares Price Shares Price
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding @12/31/96................ 645,348 $ 8.94 46,991 $8.94
Granted.............................. 1,431,709 $ 6.26 489,479 $5.35
Exercised............................ -- -- -- --
Cancelled/Expired.................... (1,297,745) $ 8.28 (93,982) $8.28
---------- ------ -------- -----
Outstanding @12/31/97.............. 779,312 $ 5.11 442,488 $5.11
Granted.............................. 221,175 $18.55 -- --
Exercised............................ (111,663) $ 5.11 (120,836) $5.11
Cancelled/Expired.................... (68,501) $ 9.36 -- --
---------- ------ -------- -----
Outstanding @12/31/98.............. 820,323 $ 8.38 321,652 $5.11
Granted.............................. 221,000 $ 3.83 26,000 4
Exercised............................ (3,880) $ 6.20 -- --
Cancelled/Expired.................... (279,157) $ 8.37 -- --
---------- ------ -------- -----
Outstanding @12/31/99................ 758,286 $ 7.06 347,652 $5.01
========== ====== ======== =====
</TABLE>
The number of options exercisable and the number of options available for
grant at December 31, 1999, 1998, and 1997 are shown below:
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998 1997
--------- ------- -------
<S> <C> <C> <C>
Options exercisable at year-end.................... 487,607 342,655 415,088
Options available for grant at year-end............ 1,474,061 191,904 344,578
</TABLE>
F-14
<PAGE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- --------------------------
Weighted Average
Remaining Weighted Average
Number of Contractual Life Exercise Weighted Average
Exercise Price Options (in Years) Price Options Price Number of Exercise
-------------- ------------------ ---------------- ---------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
$3.75................... 186,500 9.3 $ 3.75 15,000 $ 3.75
$4.13................... 50,000 9.3 $ 4.13 -- --
$5.11................... 733,088 7.4 $ 5.11 443,897 $ 5.11
$10.75.................. 40,350 8.0 $10.75 8,310 $10.75
$21.00.................. 96,000 8.5 $21.00 20,400 $21.00
--------- -------
$3.75-$21.00............ 1,105,938 7.9 $ 6.42 487,607 $ 5.83
========= =======
</TABLE>
Accounting
The Company currently utilizes Accounting Principles Board Opinion No. 25 in
its accounting for stock plans. In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation" ("SFAS No. 123"). The accounting
method as provided in the pronouncement is not required to be adopted;
however, it is encouraged. The Company is not adopting the accounting
provisions of SFAS No. 123. Had the Company accounted for its stock plans in
accordance with SFAS No. 123, the Company's net income (loss) and earnings
(loss) per share for the years ended December 31, 1999, 1998, and 1997, would
have been shown as the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net income (a)...................... $ 353,929 $10,497,933 $ 3,169,125
SFAS No. 123 adjustment (net of
tax)............................... $ (597,420) $ (593,100) $ (721,168)
Proforma net income (loss).......... $ (243,491) $ 9,904,833 $ 2,447,957
Basic Shares........................ 13,375,569 13,144,412 10,306,032
Diluted Shares...................... 13,375,569 13,641,558 10,669,071
Pro forma basic EPS................. $ (0.02) $ 0.75 $ 0.24
Pro forma diluted EPS............... $ (0.02) $ 0.73 $ 0.23
</TABLE>
- --------
(a) The amounts shown in 1997 are pro forma net income amounts adjusted to
recognize the tax impacts of the Company's conversion to a C corporation.
The pro forma disclosure is not likely to be indicative of pro forma
results, which may be expected in future years because of the fact that
options vest over several years. Compensation expense is recognized as the
options vest and additional awards may also be granted.
For purposes of determining the pro forma effect of stock options, the fair
value of each option is estimated on the date of grant based on the Black-
Scholes option pricing model, assuming:
<TABLE>
<CAPTION>
Options
Granted
During:
-----------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Volatility................................................ 70.0% 55.0% 41.0%
Dividend Yield............................................ 0.0% 0.0% 0.0%
Risk-free interest rate................................... 4.9% 5.4% 6.5%
Expected life in years.................................... 5 5 5
</TABLE>
The weighted average fair values of options granted under the Company's
Combined Incentive and Non-Statutory Stock Option Plan for the years ended
December 31, 1999, 1998, and 1997, were $2.30, $9.87, and $3.06, respectively.
F-15
<PAGE>
For purposes of determining the pro forma effect of the Employee Stock
Purchase Plan purchase rights, the fair value of each purchase right is
estimated on the date of grant based on the Black-Scholes option pricing
model, assuming:
<TABLE>
<CAPTION>
Employee Stock Purchase
Plan
Purchase Rights Issued
During:
-------------------------
1999 1998 1997
--------- -------- ----
<S> <C> <C> <C>
Volatility........................................... 70.0% 55.0% 41.0%
Dividend yield....................................... 0.0% 0.0% 0.0%
Risk-free interest rate.............................. 4.6%-5.0% 5.2%-5.4% 5.3%
Expected life in months.............................. 6 6 3
</TABLE>
The weighted average fair values of purchase rights issued under the
Company's Employee Stock Purchase Plan for the years ended December 31, 1999,
1998, and 1997 were $3.59, $4.71, and $2.50, respectively.
NOTE 12--EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No.
128"). SFAS No. 128 changed the methodology of calculating earnings per share
and renamed the two calculations to basic earnings per share and diluted
earnings per share. The Company adopted SFAS No. 128 in December 1997, and has
retroactively restated all periods presented. Basic earnings per common share
are based on the average quarterly weighted average number of shares of common
stock outstanding. Diluted earnings per common share are adjusted for the
assumed exercise of dilutive stock options.
Under the requirements of SFAS No. 128, the Company's basic and diluted per
share amounts for the years ending December 31, 1999, 1998, and 1997 would be
as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1999 1998 1997
------------------------- ------------------------- -------------------------
Per Share Per Share Per Share
Income Shares Amount Income Shares Amount Income Shares Amount
------- ------- --------- ------- ------- --------- ------- ------- ---------
(000's) (000's) (000's) (000's) (000's) (000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS (a): $354 13,376 $0.03 $10,498 13,144 $0.80 $3,169 10,306 $0.31
Income available to
Common Stockholders
Effect of Dilutive
Securities:
Employee Compensation
Plans.................. -- 137 -- -- 497 (0.03) -- 363 (0.01)
---- ------ ----- ------- ------ ----- ------ ------ -----
Dilutive EPS:
Income available to
Common Stockholders
plus assumed
exercises............. $354 13,513 $0.03 $10,498 13,641 $0.77 $3,169 10,669 $0.30
==== ====== ===== ======= ====== ===== ====== ====== =====
</TABLE>
- --------
(a) The amounts shown in 1997 are pro forma net income amounts adjusted to
recognize the tax impacts of the Company's conversion to a "C"
Corporation.
NOTE 13--RELATED PARTY TRANSACTIONS
The Company paid approximately $324,000, $340,000, and $480,000 during 1999,
1998, and 1997, respectively, in fees to a law firm having a partner whom is a
stockholder of the Company and who is a brother of certain executive officers
of the Company. A portion of the fees paid in 1998 and 1997 related to
services performed by such firm in connection with the 1996 mergers and the
1997 and 1998 offerings. In 1999, $159,000 of the $324,000 was attributed to a
failed merger. In addition, fees of $128,000 were paid to another law firm
having a partner whom is a stockholder of the Company and a brother of certain
executive officers of the Company in 1999.
F-16
<PAGE>
During 1999 and 1998, the Company paid approximately $196,000 and $314,000,
respectively, for SPR's consulting professionals to attend training classes at
a higher education company having a president and chief operating officer who
is a director of the Company.
NOTE 14--FOLLOW-ON PUBLIC OFFERING
On May 5, 1998, the Company completed a follow-on public offering of
3,719,250 shares of the Company's common Stock. The company sold 1,350,000
shares in the follow-on public offering and received $23.1 million in net
proceeds from the sales of such shares.
NOTE 15--STOCK SPLITS
On September 26, 1997, the Company's board of directors approved a 1.044-to-
1 split of the Company's common stock in the form of a stock dividend. All
common stock and per share amounts have been adjusted retroactively to give
effect to this stock split.
On August 3, 1998, the Company's board of directors approved a three-for-two
share common stock split. Shareholders received one additional share for every
two shares held on the record date of August 14, 1998. Distribution of the
additional shares began on August 28, 1998. Cash was paid in lieu of
fractional shares. All shares and per share amounts reported in this filing
have been restated to reflect the three-for-two share common stock split.
NOTE 16--SUBSEQUENT EVENT
On January 28, 2000, SPR and Leapnet, Inc. announced a merger of Brassie
Corporation, a wholly owned subsidiary of Leapnet, with and into SPR, under a
definitive merger agreement. The board of directors of each company has
approved the merger and has recommended that their shareholders vote in favor
of the merger. The transaction will be structured as a tax-free purchase by
Leapnet. Each of SPR's common shares will be exchanged for 1.085 shares of
Leapnet's common stock.
F-17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on March 30, 1999 on its behalf by the
undersigned, thereunto duly authorized.
SPR Inc.
/s/ Robert M. Figliulo
By: _________________________________
Robert M. Figliulo
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 30, 1999 by the following persons on
behalf of the registrant and in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C>
/s/ Robert M. Figliulo Chief Executive Officer and Chairman
______________________________________ of the Board of Directors
Robert M. Figliulo (Principal Executive Officer)
/s/ Stephen J. Tober Chief Operating Officer and Director
______________________________________
Stephen J. Tober
/s/ Stephen T. Gambill Vice President and Chief Financial
______________________________________ Officer (Principal Financial
Stephen T. Gambill Officer)
/s/ David A. Figliulo Executive Vice President and
______________________________________ Director
David A. Figliulo
/s/ Ronald L. Taylor Director
______________________________________
Ronald L. Taylor
/s/ Sydnor W. Thrift, Jr. Director
______________________________________
Sydnor W. Thrift, Jr.
/s/ David P. Yeager Director
______________________________________
David P. Yeager
</TABLE>
<PAGE>
COMMERCE PLAZA - FIRST AMENDMENT TO
TEMPORARY OFFICE SPACE LICENSE
This First Amendment to Temporary Office Space License ("First Amendment") made
and entered as of the 30 day of December, 1998, by and between Metropolitan Life
Insurance Company, a New York corporation ("Licensor") and SPR, Inc., a Delaware
corporation, the successor-in-interest to SPR Chicago, Inc. ("Licensee").
WITNESSETH:
Whereas, Licensor and Licensee have heretofore entered into that certain
Temporary Office Space License dated November 13, 1998 ("License") for temporary
premises (the "Premises") described as Suite 240, containing approximately 2,892
rentable square feet on the second floor of the building at 2015 Spring Road
(the "Building") in a complex commonly known as Commerce Plaza located in Oak
Brook, Illinois, the Premises being more particularly described in said
Temporary Office Space License.
Whereas, the parties mutually desire to amend the License, all on and
subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual terms and conditions herein
contained, the parties hereby agree as follows:
1. Definitions. Unless otherwise defined herein, all capitalized terms
-----------
shall have the same meaning ascribed to them in the License.
2. Term. The term of the License shall be extended from January 31, 1999
----
to June 30, 1999, unless terminated earlier as provided for in the License.
Licensee shall have the option to terminate the License on an earlier date by
providing Licensor with written notice at least sixty (60) days prior to the
requested termination date.
3. Licensee's Representation and Acknowledgement. Licensee hereby
---------------------------------------------
acknowledges that Licensor has performed all of its obligations with respect to
the Premises. Licensee further acknowledges that as of the date hereof Licensor
is not in default under any of the terms of the License.
4. Authority. This First Amendment shall be binding upon and inure to the
---------
benefit of the parties hereto, their respective heirs, legal representatives,
successors and assigns. Each party hereto and the persons signing below warrant
that the person signing below on such party's behalf is authorized to do so and
to bind such party to the terms of this First Amendment.
5. Continuation. Except as specifically herein amended, all terms and
------------
conditions
1
<PAGE>
contained in the License with respect to the Premises shall remain in full force
and effect. In the event that any provisions of this First Amendment shall
conflict with the License, this First Amendment shall govern.
IN WITNESS WHEREOF, the parties have executed this License as of the date first
above written.
METROPOLITAN LIFE INSURANCE SPR, INC., a Delaware corporation
COMPANY, a New York corporation
By: /s/ [ILLEGIBLE]^^ By: /s/ Stephen T. Gambill
----------------------------- -----------------------------
Its: ASSISTANT VICE-PRESIDENT Its: VP & CFO
------------------------- ------------------------
2
<PAGE>
THIRD AMENDMENT
FOR COMMERCE PLAZA, OAK BROOK, ILLINOIS
---------------------------------------
This Third Amendment to Lease ("Third Amendment") is made as of December
30, 1998, between Metropolitan Life Insurance Company, a New York corporation
("Landlord") and SPR, INC., a Delaware corporation, the successor-in-interest to
SPR CHICAGO, Inc. ("Tenant").
RECITALS:
Landlord and Tenant entered into a certain Lease dated November 29, 1995
(the "Lease") which was amended by that certain First Lease Amendment dated
June 3, 1996 ("First Amendment") and that certain Second Amendment dated August
31, 1998 ("Second Amendment") (the Lease, First Amendment and Second Amendment
are hereinafter collectively called the "Amended Lease") pursuant to which
Tenant leased certain space located on the seventh floor of the building at 2015
Spring Road, commonly known as Commerce Plaza, (the "Building") located in Oak
Brook, Illinois, the Leased Premises being more particularly described in the
Lease and have agreed to expand the Leased Premises by adding certain parcels of
space on the sixth floor of the Building as enumerated in the Second Amendment;
Landlord and Tenant desire to make certain changes to the Amended Lease as
set forth herein.
NOW, THEREFORE, to reflect the agreements of the parties, the parties amend
the Amended Lease as follows:
1. Definitions. Unless otherwise defined herein, all capitalized terms
-----------
shall have the same meaning ascribed to them in the Amended Lease.
2. Expansion Commencement Dates. The "Third Expansion Commencement Date"
----------------------------
as referenced in the Second Amendment is hereby changed from September 1, 1999
to June 1, 1999.
3. Base Rent Schedule and Base Rent. Effective as of the Second Expansion
--------------------------------
Commencement Date, the Base Rent of $2,882,654.17 in the Schedule, the Lease and
Appendix C - Rent Schedule to the Lease as referenced in the Second Amendment
and the Supplemental Schedule as shown on Appendix C-1 of the Second Amendment
is hereby deleted and replaced with $2,901,438.10 and Appendix C - Base Rent
Schedule of the Lease shall be amended by adding the Base Rent on the revised
attached Supplemental Schedule as shown on Appendix C-1 to this Third Amendment
for the Second Expansion, Third Expansion and Fourth Expansion (attached hereto
and made a part hereof as Appendix C-1) to enumerate the Base Rent for the
Second Expansion Space, Third Expansion Space and Fourth Expansion Space.
4. Tenant's Representation and Acknowledgement. Tenant hereby acknowledges
-------------------------------------------
that Landlord has performed all of its obligations with respect to the Leased
Premises. Tenant further acknowledges that as of the date hereof Landlord is not
in default under any of the terms
1
<PAGE>
of the Lease.
5. Authority. This Third Amendment shall be binding upon and inure to the
---------
benefit of the parties hereto, their respective heirs, legal representatives,
successors and assigns. Each party hereto and the persons signing below warrant
that the person signing below on such party's behalf is authorized to do so and
to bind such party to the terms of this Third Amendment.
6. Continuation. Except as specifically herein amended, all terms and
------------
conditions contained in the Lease with respect to the Leased Premises shall
remain in full force and effect. In the event that any provisions of this Third
Amendment shall conflict with the Lease, this Third Amendment shall govern.
IN WITNESS WHEREOF, this Third Amendment has been executed as of the date
first above written.
LANDLORD: TENANT:
METROPOLITAN LIFE INSURANCE SPR, INC., a Delaware
COMPANY, a New York corporation corporation
By: /s/ [ILLEGIBLE]^^ By: Sophia T. Gambill
----------------------------- ----------------------
Its: ASSISTANT VICE-PRESIDENT Its: VP & CFO
------------------------- -------------------
2
<PAGE>
SUPPLEMENTAL SCHEDULE
APPENDIX C-1
The following show the period Base Rent for the Second Expansion Space, Third
Expansion Space, Fourth Expansion Space and renewal of the First Expansion Space
(741 rentable square fee) with the initial Leased Premises (7,966 rentable
square feet):
7258 sf expansion (69 months)
psf/annual Monthly Base Period Base
Period Base Rent Rent Rent
- ------------------ ---------- ----------- -----------
02/01/99 - 01/31/00 $ 17.75 $ 10,735.79 $128,829.48
02/01/00 - 01/31/01 $ 18.28 $ 11,056.35 $132,676.20
02/01/01 - 01/31/02 $ 18.83 $ 11,389.01 $136,668.12
02/01/02 - 01/31/03 $ 19.39 $ 11,727.72 $140,732.64
02/01/03 - 01/31/04 $ 19.97 $ 12,078.52 $144,942.24
02/01/04 - 10/31/04 $ 20.57 $ 12,441.42 $111,972.78
-----------
$795,821.46
4233 sf expansion (65 months)
psf/annual Monthly Base Period Base
Period Base Rent Rent Rent
------------------ ---------- ------------ -----------
06/01/99 - 01/31/00 $ 17.75 $ 6,261.31 $ 50,090.48
02/01/00 - 01/31/01 $ 18.28 $ 6,448.27 $ 77,379.24
02/01/01 - 01/31/02 $ 18.83 $ 6,642.28 $ 79,707.36
02/01/02 - 01/31/03 $ 19.39 $ 6,839.82 $ 82,077.84
02/01/03 - 01/31/04 $ 19.97 $ 7,044.42 $ 84,533.04
02/01/04 - 10/31/04 $ 20.57 $ 7,256.07 $ 65,304.63
-----------
$439,092.59
3008 sf expansion (60 months)
psf/annual Monthly Base Period Base
Period Base Rent Rent Rent
- ------------------- --------- ------------ ------------
11/01/99 - 01/31/00 $ 17.75 $ 4,449.33 $ 13,347.99
02/01/00 - 01/31/01 $ 18.28 $ 4,582.19 $ 54,986.28
02/01/01 - 01/31/02 $ 18.83 $ 4,720.05 $ 56,640.60
02/01/02 - 01/31/03 $ 19.39 $ 4,860.43 $ 58,325.16
02/01/03 - 01/31/04 $ 19.97 $ 5,005.81 $ 60,069.72
02/01/04 - 10/31/04 $ 20.57 $ 5,156.21 $ 65,304.63
-----------
$289,775.64
Appendix C - Page 1
<PAGE>
8707 sf renewal (105 months and 10 days)
psf/annual Monthly Base Period Base
Period Base Rent Rent Rent
- ------------------- ---------- ------------ --------------
01/22/02 - 01/31/02 $ 18.83 $ 13,662.73 $ 4,554.20
02/01/02 - 01/31/03 $ 19.39 $ 14,069.06 $ 168,828.72
02/01/03 - 01/31/04 $ 19.97 $ 14,489.90 $ 173,878.80
02/01/04 - 10/31/04 $ 20.57 $ 14,925.25 $ 134,327.25
--------------
$ 481,588.97
Subtotal, Expansion & Renewal Base rent: $ 2,006,278.66
1st Amendment total Base rent: $ 895,159.44
--------------
Total Base Rent: $ 2,901,438.10
Appendix C - Page 2
<PAGE>
FOURTH AMENDMENT
FOR COMMERCE PLAZA, OAK BROOK, ILLINOIS
---------------------------------------
This Fourth Amendment to Lease ("Fourth Amendment") is made as of November
11, 1999, between Metropolitan Life Insurance Company, a New York corporation
("Landlord") and SPR, INC., a Delaware corporation ("Tenant").
RECITALS:
Landlord and Tenant entered into a certain Lease dated November 29, 1995
(the "Lease") which was amended by that certain First Lease Amendment dated June
3, 1996 ("First Amendment") and that certain Second Amendment dated August 31,
1998 ("Second Amendment") and that Third Amendment dated December 30, 1998
("Third Amendment") (the Lease, First Amendment, Second Amendment, and Third
Amendment are hereinafter collectively called the "Amended Lease") pursuant to
which Tenant leased certain space located on the seventh floor of the building
at 2015 Spring Road, commonly known as Commerce Plaza, (the "Building") located
in Oak Brook, Illinois, the Leased Premises being more particularly described in
the Lease and have agreed to expand the Leased Premises by adding certain
parcels of space on the sixth floor of the Building as enumerated in the Second
Amendment;
Landlord and Tenant desire to make certain changes to the Amended Lease as
set forth herein.
NOW, THEREFORE, to reflect the agreements of the parties, the parties amend
the Amended Lease as follows:
1. Definitions. Unless otherwise defined herein, all capitalized terms
-----------
shall have the same meaning ascribed to them in the Amended Lease.
2. Expansion Commencement Dates. The "Third Expansion Commencement Date"
----------------------------
as referenced in the Third Amendment is hereby changed from June 1, 1999 to July
16, 1999.
3. Continuation. Except as specifically herein amended, all terms and
------------
conditions contained in the Lease with respect to the Leased Premises shall
remain in full force and effect. In the event that any provisions of this Fourth
Amendment shall conflict with the Lease, this Fourth Amendment shall govern.
<PAGE>
IN WITNESS WHEREOF, this Fourth Amendment has been executed as of the date
first above written.
LANDLORD: TENANT:
METROPOLITAN LIFE INSURANCE SPR, INC., a Delaware
COMPANY, a New York corporation corporation
By:/s/ [ILLEGIBLE]^^ By: Stephen T. Gambill
--------------------------------- -----------------------------
Its: Assistant Vice-President Its: VP & CFO
----------------------------- -------------------------
<PAGE>
FIFTH AMENDMENT TO LEASE AGREEMENT
----------------------------------
This Fifth Amendment to Lease Agreement ("Fifth Amendment") is entered into
between Terry Argue, as the duly appointed receiver in Case No. CJ-94-03054,
Fleet National Bank of Massachusetts v. Fourth Street Associates, et al.,
- -----------------------------------------------------------------------
District Court, Tulsa County, Oklahoma ("Receiver") and SPR Inc., formerly
known as Systems & Programming Resources of Tulsa, Inc. ("Tenant"). RMM
Corporation ("RMM") and Tenant entered into a Mid-Continent Tower Lease
Agreement ("Original Lease") dated August 29, 1994, whereby Tenant leased
certain office space ("Original Premises") in the Mid-Continent Tower Building,
401 South Boston, Tulsa, Oklahoma ("Building").
The Original Lease has been amended by the following amendments, each
amendment amending the Original Lease as amended by the previous amendments:
(a) Amendment to Lease Agreement ("First Amendment") pursuant to which the
Lease Term (as defined in the Original Lease) was extended and Tenant
leased additional office space ("First Additional Space") in the Building.
(b) Second Amendment to Lease Agreement ("Second Amendment") pursuant to
which Tenant leased additional office space ("Second Additional Space") in
the Building.
(c) Third Amendment to Lease Agreement ("Third Amendment") pursuant to
which the Lease Term was extended and Tenant leased additional office space
("Third Additional Space") in the Building.
(d) Fourth Amendment to Lease Agreement ("Fourth Amendment") pursuant to
which Tenant leased additional office space ("Fourth Additional Space") in
the Building and Tenant's sublease of a part of the Fourth Additional Space
was approved by Receiver.
The First Amendment and the Second Amendment were between RMM and Tenant. The
Third Amendment and the Fourth Amendment were between Receiver and Tenant.
The Original Lease as amended by the First Amendment, the Second Amendment,
the Third Amendment, and the Fourth Amendment is referred to herein as the
"Lease". The Lease as amended hereby is referred to herein as the "Amended
Lease". Receiver and Tenant wish to agree for the amendment of the Lease on the
terms and conditions set forth herein. At the date of the execution of this
Fifth Amendment Tenant leases 11,955 square feet of Net Rentable Area of office
space in the Building which
<PAGE>
January, 1998, through
February, 1998 (two equal
monthly installments) 10,331.11
March, 1998, through
May, 1999 (fifteen equal
monthly installments) 16,636.07
June, 1999, through
May, 2002 (thirty-six equal
monthly installments) 17,646.75
June, 2002, through
May, 2004 (twenty-four equal
monthly installments) 19,251.00
TOTAL BASE RENTAL BEFORE ADJUSTMENT $1,547,597.79
Therefore, as of March 1, 1998, Tenant will lease office space in the Building
totalling 19,251 square feet of Net Rentable Area. Tenant's lease of the
Premises shall be under the terms and conditions of the Lease except as provided
for herein.
2. The Receiver shall make in the Fifth Additional Space the tenant
improvements ("Fifth Additional Space Tenant Improvements") shown on Exhibit "B"
hereto at the Receiver's sole cost. The Fourth Amendment provided that Receiver
would pay up to $8,910 ("Allowance") for tenant improvements in the Fourth
Additional Space. Tenant improvements have been made in the Fourth Additional
Space pursuant to the provisions of the Fourth Amendment but such improvements
in the Fourth Additional Space have not required the Receiver pay all of the
Allowance for those tenant improvements in the Fourth Additional Space. Receiver
shall not be required to make any further payments with regard to any tenant
improvements in the Fourth Additional Space and the Tenant releases Receiver
from any obligation to pay any part of the Allowance not yet paid by Receiver.
3. Tenant shall have the option ("Fifth Additional Space Termination
Option") to terminate its lease of the Fifth Additional Space as December 31st
of any of 1998, 1999, 2000, 2001, 2002, or 2003. The last day of the lease by
Tenant of the Fifth Additional Space if the Fifth Additional Space Termination
Option is exercised as provided in this Paragraph 3 is hereinafter referred to
as the "Fifth Additional Space Termination Date". The Fifth Additional Space
Termination Option shall be exercised by Tenant by delivering to Receiver at
least
-3-
<PAGE>
11,955 square feet of Net Rentable Area of office space comprise the Premises as
that term is used in the Lease.
Therefore, in consideration of the mutual promises and covenants contained
herein, the parties agree that the Lease is amended as follows:
1. Tenant effective March 1, 1998, will lease certain additional office
space ("Fifth Additional Space") in the Building consisting of 7,296 square feet
of Net Rentable Area and as described on Exhibit "A" hereto and made a part
hereof. From and after March 1, 1998, for the remainder of the Lease Term and
all extensions and renewals thereof, the Premises shall be comprised of the
Original Premises, the First Additional Space, the Second Additional Space, the
Third Additional Space, the Fourth Additional Space, and the Fifth Additional
Space. The Base Rental for the Premises shall be subject to adjustment as
provided in paragraph 6 of the Original Lease and as adjustment is otherwise
provided in the Amended Lease, including in the Third Amendment. The Base Rental
Schedule attached to the Original Lease as amended by the First Amendment, the
Second Amendment, the Third Amendment, and the Fourth Amendment is further
amended to provide as follows:
BASE RENTAL SCHEDULE
--------------------
Month Monthly Base Rental before adjustment
----- -------------------------------------
October, 1994, through
August, 1995 (eleven equal
monthly installments) $ 2,480.50
September, 1995, through
May, 1996 (nine equal
monthly installments) 3,757.40
June, 1996, through
May, 1997 (twelve equal
monthly installments) 4,338.12
June, 1997, through
December, 1997 (seven equal
monthly installments) 9,561.14
-2-
<PAGE>
ninety (90) days but not more than one hundred eighty (180) days prior to the
Fifth Additional Space Termination Date both of (a) written notice of Tenant's
exercise of the Fifth Additional Space Termination Option ("Fifth Additional
Space Termination Notice"), including the Fifth Additional Space Termination
Date, and (b) payment of a sum ("Fifth Additional Space Termination Fee") equal
to two times the amount of the installment of Base Rental attributable to the
Fifth Additional Space which is to be paid in the month in which the Fifth
Additional Space Termination Date falls, in which event the lease by Tenant
of the Fifth Additional Space shall terminate on the Fifth Additional Space
Termination Date. The Fifth Additional Space Termination Notice and the Fifth
Additional Space Termination Fee must be delivered together to Receiver. Tenant
shall vacate the Fifth Additional Space on or before the Fifth Additional Space
Termination Date, such space upon such vacation to be in the same condition as
the condition required by the terms of the Amended Lease for the Premises upon
vacation at the expiration of the Lease Term. After the Fifth Additional Space
Termination Date the Fifth Additional Space shall no longer be a part of the
Premises. The Fifth Additional Space Termination Notice may not be delivered by
Tenant at any time when Tenant is in default under the Amended Lease. If the
Fifth Additional Space Termination Option is not exercised, the lease by Tenant
of the Fifth Additional Space shall continue hereunder for the complete Lease
Term. Tenant shall be liable for all Base Rental due and payable prior to the
Fifth Additional Space Termination Date, including any accelerated Base Rental,
but not for Base Rental attributable to the Fifth Additional Space and payable
after the Fifth Additional Space Termination Date. For the purposes of this
Paragraph 3, the amount of Base Rental before Basic Cost increase adjustment
attributable to the Fifth Additional Space shall be deemed to be (a) $6,304.96
for December, 1998; (b) $6,688.00 for December of each of 1999, 2000, and 2001;
and (c) $7,296.00 for December of each of 2002 and 2003. Once the Fifth
Additional Space Termination Option has been exercised, such exercise may not be
withdrawn or revoked. The parties agree that the Fifth Additional Space
Termination Fee is for the sole purpose of compensating Receiver for the loss he
will sustain from the early termination of the lease by Tenant of the Fifth
Additional Space, that it is a reasonable estimate of such loss, that it is not
a penalty, and that it is not paid in place of, but, rather, is in addition to,
the Base Rental installment to be paid in the month in which the Fifth
Additional Space Termination Date falls. The termination of the lease by Tenant
of the Fifth Additional Space under the provisions of this Paragraph 3 shall not
affect the liability of Tenant for its obligations under the Amended Lease with
regard to the Original Premises, the First Additional Space, the Second
Additional Space, the Third Additional Space, and the
-4-
<PAGE>
Fourth Additional Space, all of which shall, upon such termination, comprise the
Premises.
4. Paragraph 29 of the Original Lease is amended in its entirety to
state:
In the event of holding over by Tenant after expiration or other
termination of the term of this Lease, or in the event Tenant
continues to occupy the Premises after the termination of Tenant's
right of possession pursuant to Paragraph 26 (d)(ii) hereof, Tenant
shall, throughout the entire holdover period, pay rent equal on a per
diem basis to twice the amount of (a) the Base Rental and additional
Base Rental payable during the last full calendar month during the
Lease Term for which an installment of Base Rental was payable divided
by (b) the number of days in such calendar month. No holding over by
Tenant after the expiration of the Lease Term shall be construed to
extend the term of the Lease. The provision of this paragraph shall
not be in place of or in lieu of, but shall be in addition to, the
provisions of subparagraphs 26(a), 26(d), and 26(e).
5. Landlord acknowledges that Tenant's name has changed as set forth in
the first paragraph of this Amendment. Paragraph 36 of the Original Lease is
hereby amended to provide Tenant's current name.
6. All of the terms and provisions of the Lease, except as modified and
amended herein, shall remain in full force and effect and are hereby ratified
and confirmed by the parties hereto and Tenant acknowledges its liability as the
Tenant under the Amended Lease. The execution of this Fifth Amendment shall in
no event be deemed to constitute a waiver of any right or claim of Receiver
under or by virtue of the Lease except as specifically set forth herein.
7. In the event of conflict between the terms and provisions of this
Fifth Amendment and the terms and provisions of the Lease, the terms and
provisions of this Fifth Amendment shall control.
8. Receiver's rights, obligations, and liabilities hereunder and with
regard to this Fifth Amendment are solely in his capacity as receiver. Terry
Argue, individually, shall not have rights, obligations, or liabilities
hereunder. Notwithstanding anything herein to the contrary, the Receiver conveys
herein only such rights as he has and makes such agreements, warranties,
representations, and provisions as he is
-5-
<PAGE>
actually authorized to make. A copy of the order appointing the Receiver as
receiver is attached hereto as Exhibit "C".
9. Neither the Amended Lease nor any of its components will be recorded
by Tenant or Receiver in the land records of Tulsa County, Oklahoma.
Dated 2-18-98, 1998.
--------
/s/ Terry Argue
------------------------
Terry Argue, Receiver
"Receiver"
SPR Inc.
By /s/ [ILLEGIBLE]^^
----------------------
_____ President
"Tenant"
TENANT
------
STATE OF Oklahoma)
---------
COUNTY OF Tulsa ) SS:
--------
This instrument was acknowledged before me on this 18/th/ day of February,
------ --------
1998, by Michael J. Fletcher, as ______ President of SPR Inc., a Public
------------------- -----------
corporation.
/s/ Shelli K. Austin
--------------------
Notary Public
(seal)
My Commission expires:
[SEAL]
December 15, 2000
- -----------------
-6-
<PAGE>
SECOND AMENDMENT TO OFFICE LEASE
BY AND BETWEEN
100 EAST WISCONSIN AVENUE JOINT VENTURE
AND
SPR INC.
THIS SECOND AMENDMENT TO LEASE is made this 30 day of April, 1999, by and
between 100 EAST WISCONSIN AVENUE JOINT VENTURE, a Wisconsin joint venture
("Landlord") and SPR INC., a Delaware corporation, f/k/a Systems & Programming
Resources, Inc., a Wisconsin corporation ("Tenant").
WITNESSETH:
WHEREAS, under date of April 19, 1996, Landlord and Tenant entered into an
Office Lease (the "Original Lease") for 5,220 rentable square feet on the 27th
floor of the Building located at 100 East Wisconsin Avenue, Milwaukee,
Wisconsin; and
WHEREAS, under date of April 2, 1997, the Original Lease was amended
wherein certain area was added to the Premises (the "First Amendment"); and
WHEREAS, the Original Lease, the First Amendment and this Second Amendment
are sometimes referred to herein collectively as the "Lease," and the premises
demised to the Tenant in the Original Lease and the First Amendment are
referred to herein as the "Original Premises;" and
WHEREAS, Landlord and Tenant now desire to amend the Lease as hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual terms and conditions herein
contained, and other good and valuable consideration, Landlord and Tenant agree
as follows:
1. TERMS. All capitalized terms used but not otherwise defined herein
shall have the meanings given to them in the Lease.
2. AREA ADDED TO THE PREMISES. On August 1, 1999 (the "Second Amendment
Commencement Date"), two thousand nineteen (2,019) rentable square feet on the
27th Floor of the Building, as depicted on Exhibit A attached hereto, shall be
---------
added to the Original Premises (hereafter the portion of rentable square feet
added to the Original Premises shall be sometimes referred to herein as the
"Second Amendment Premises"). On and after the Second Amendment Commencement
Date the entire Premises shall consist of eight thousand nine hundred twenty-
three (8,923) rentable square feet.
3. RENT. Prior to and after the Second Amendment Commencement Date, the
Monthly Base Rent for the Original Premises shall remain as provided in the
Lease. From and after August 1, 1999, Monthly Base Rent for the Second Amendment
Premises shall be as provided on Schedule 1 attached hereto.
4. LEASEHOLD IMPROVEMENTS. Landlord and Tenant hereby acknowledge and agree
that Tenant shall take the Second Amendment Premises in an "AS IS" condition,
except for the leasehold improvements set forth on Exhibit B attached hereto.
---------
5. CURRENT TENANT. Landlord and Tenant acknowledge that there is currently
a tenant leasing the Second Amendment Premises (the "Existing Tenant"), whose
lease expires on June 30, 1999 (the "Existing Tenant's Termination Date").
Landlord agrees that it will exercise commercially reasonable efforts to ensure
that the Existing Tenant vacates the Second Amendment Premises by the Existing
Tenant's Termination Date, and that the Second Amendment Premises will be
available for Tenant's occupancy by the Second Amendment Commencement Date. In
the event, however, that the Second Amendment Premises are not available by the
Second Amendment Commencement Date, Tenant agrees that Landlord shall in no
event have any liability to Tenant whatsoever, and Tenant shall not be
responsible for Rent, or any charges due under the Lease for the
<PAGE>
Second Amendment Premises until such time as the Second Amendment Premises are
available for Tenant's occupancy.
6. NO OPTION. The execution of this Second Amendment and delivery of same
to Landlord by Tenant does not constitute a reservation of the Second Amendment
Premises or an agreement to enter into this Second Amendment by Landlord, and
this Second Amendment shall become effective only if and when Landlord executes
and delivers same to Tenant. Tenant shall, if requested by Landlord, deliver to
Landlord certified resolutions of Tenant's directors authorizing execution and
delivery of this Second Amendment and the performance by Tenant of its
obligations hereunder.
7. MODIFICATION OF LEASE. Except as set forth herein, the Lease remains
unmodified and in full force and effect.
IN WITNESS WHEREOF, this Second Amendment has been executed as of the date
set forth on the first page hereof.
LANDLORD:
100 EAST WISCONSIN AVENUE JOINT
VENTURE, a Wisconsin Joint Venture
By: TC MILWAUKEE, INC., as agent for the
Landlord
By: /s/ Joseph T. Weirick
-----------------------------------
Joseph T. Weirick, Vice President
TENANT:
SPR INC., a Delaware corporation
By: Stephen T. Gambill
------------------------------------------
Title: VP & CFO
----------------------------------
-2-
<PAGE>
SCHEDULE I
Rent Schedule
-------------
Monthly Base Rent for the Second Amendment Premises shall be payable in the
following amounts:
Date Annual Base Rent/s.f. Monthly Base Rent
- ---- --------------------- -----------------
08/01/99- $16.25 $2,734.06
05/31/01
Tenant shall further be responsible for its share of Operating Costs for
the Second Amendment Premises pursuant to Section 22.02 of the Lease (as
adjusted for any increase as provided under Article 22).
A "Lease Year" is a twelve (12) consecutive month period beginning on
the Commencement Date (or in the event the Commencement Date does not fall on
the first day of a calendar month, then the first day of the first full calendar
month following the Commencement Date) or any anniversary thereof. Rents for any
partial month of a Lease Year shall be prorated on a daily basis and paid in
advance.
S-1
<PAGE>
Exhibit A
[FLOOR PLAN APPEARS HERE]
<PAGE>
EXHIBIT B
---------
LEASEHOLD IMPROVEMENTS
Landlord, at Landlord's sole cost and expense, agrees to provide the
following improvements to the Second Amendment Premises:
1. Furnish and install new Building Standard carpet.
2. Repaint all walls throughout the Second Amendment Premises.
3. Furnish and install a wall covering for one (1) wall in each of the
private offices.
4. Create an opening from the Original Premises to the Second Amendment
Premises.
5. Demolish the existing interior rooms.
6. Furnish and install a door to the storage room.
7. Install all electrical and HVAC work that is required by the City of
Milwaukee Code and Building Standards.
B-1
<PAGE>
=====================================
Towne Realty Inc.
=====================================
- --------------------------
Thomas Bernacchi, CPM
Vice President
Commercial Division
April 22, 1998
Steve Sheppe
SPR Inc.
100 E Wisconsin Avenue
Milwaukee, WI 53202
RE: Lease between SPR Inc., and Towne Realty, Inc.
at the Tower Executive Office Building in Pewaukee
Dear Steve
The execution of the above-referenced lease by Towne Realty, Inc.
is subject to and conditioned on Towne Realty Inc.'s receiving
from Camp Manito-Wish a signed amendment agreeing to relocate
from their current space to a new space within the Tower
Executive Office building. We expect to receive the signed
amendment agreeing to the relocation on or before Tuesday, April
28/th/ 1998. Should we not receive the signed amendment from Camp
Manito-Wish by that date, the above-referenced lease will be
null and void.
Sincerely
/s/ Thomas G. Bernacchi,
Thomas G. Bernacchi, CPM
Vice President - Commercial Division
Acknowledged and Accepted:
/s/ [ILLEGIBLE]^^ 4-22-98
------------------------------------
By: Date:
/kjs
<PAGE>
OFFICE LEASE
THIS LEASE made this 16TH day of APRIL, 1998, by and between TOWNE
REALTY, INC. (hereinafter called the "Landlord"), and SPR, INC. (hereinafter
called "Tenant").
W I T N E S S E T H
1. DEMISE AND PREMISES: Subject to the terms and conditions hereof,
-------------------
Landlord leases to Tenant, and Tenant leases from Landlord, at TOWER EXECUTIVE
OFFICE BUILDING, N14 W24200 Tower Place, Pewaukee, Wisconsin (herein called the
"Building"), approximately 10,218net Rentable square feet located on the 2nd
floor of the Building in the location as depicted in the floor plan attached
hereto as Exhibit A (hereinafter the "Premises").
2. TERM: This Lease shall be for a term of five (5) years commencing
----
on July 1, 1998 and ending on JUNE 30,2003. If the commencement date is other
than on the first day of a calendar month, rent for the first month of this
Lease shall be prorated so that the Tenant shall pay rent only for that portion
of the month Tenant physically occupies the Premises for the Permitted Use (as
described in Paragraph 4).
3. (a) BASIC RENT: Tenant agrees to pay to Landlord, or Landlord's
----------
agent, without demand, basic rent at the total annual rent of ONE HUNDRED
SEVENTY THREE SEVEN HUNDRED SIX AND 00/100 ($173,706.00) Dollars, in equal
monthly installments of FOURTEEN THOUSAND FOUR HUNDRED SEVENTY FIVE AND
FIFTY/100 ($14,475.50) Dollars, commencing on the rental commencement date (as
defined above). All basic rent shall be payable in monthly installments, in
advance, on the first day of each month during every year of the demised term,
in lawful money of the United States, without deduction or offset, to Landlord
at the address set forth below for notices or to such other places as Landlord
may from time to time designate in writing. For any portion of a calendar month
during the term hereof, basic rent shall be prorated for each day of such period
and shall be due and payable on the first day of such period.
(b) OPERATING EXPENSES: Commencing January 1, 1999, Tenant agrees
------------------
to pay to Landlord, Tenant's pro rata share of the Operating Expenses (as
hereafter defined) in excess of the Operating Expenses for calendar year 1998
for each calendar year during the remaining term of this Lease based on the
Rentable Area of the Premises, as compared to the total Rentable Area of the
Building, which pro rata share is equal to 19.1%. During the term of this Lease,
such increase in Operating Expense shall be limited to 4% per year cumulative,
excluding Real Estate Tax and Insurance increases which will have no maximum
limit.
"Operating Expenses" shall mean all costs and expenses of Landlord
with respect to the operation and maintenance of the Building and the land on,
under or over which it is erected, all determined on an accrual basis in
accordance with sound and accepted accounting principles consistently applied
(including pro rata charges for all items of Operating Expense not recurring
annually that are customarily incurred in connection with prudent building
management and operation), including but not limited to the following: real
estate taxes and special assessments (or taxes and charges imposed in lieu
thereof), payroll taxes, federal and state unemployment taxes and social
security taxes for management employees located in the Building; taxes imposed
upon, allocable to, or measured by or on the rentals, including, without
limitation, any sales or use tax on such rental, or any gross income tax or
excise tax levied by the State, any political subdivision thereof, or Federal
Government with respect to the receipt of such rental; taxes imposed upon or
with respect to the possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy of the Building or any portion thereof;
taxes imposed upon any transaction or document creating or transferring any
leasehold interest or an estate in the Building or any portion thereof;
insurance, including but not limited to, fire (including endorsements for
extended coverage, vandalism and malicious mischief and theft and mysterious
disappearance), public liability, business and rental interruption, boiler,
water damage, workmen's compensation, health, accident and group insurance;
water and sewer charges; license, permit and inspection fees; union dues and
subscriptions; costs of wages and salaries of personnel involved in the
operation and management of the Building (i.e., the Property Manager and all
---
personnel under the Property Manager's supervision or control), including
welfare, retirement, vacations and other compensation and fringe benefits;
management fees; auditor's fees; reasonable materials and supplies,
including charges for office rent, telephone, telegraph, postage, stationery
supplies and other materials and expenses required for operation of the
Building's operations
-1-
<PAGE>
offices; repairs to and maintenance of the Building, including cost of
materials, supplies tools and equipment used in connection therewith; costs
incurred in connection with the operation, inspection and servicing (including
outside maintenance contracts) of elevator, electrical, plumbing, heating, air-
conditioning and mechanical equipment and the cost of materials, supplies, tools
and equipment used in connection therewith; interior and exterior landscaping
and cost of other services (including but not limited to electricity, steam,
gas, water and other utilities) for the operation and maintenance of the
Building and all such other expenses and costs reasonably necessary or desirable
to be incurred for the purpose of operating and maintaining the Building in good
and workmanlike condition as a first class office building. Notwithstanding the
foregoing sentence, as used in the definition of Operating Expenses, taxes shall
not include any federal, state or municipal income, profit, franchise,
privilege, capital, levy, excise, inheritance, estate, succession, gift or
transfer tax or any real property deed, conveyance or transfer taxes. Any taxes
or assessment which may be paid over more than a one-year period shall be
apportioned evenly over the maximum period of time permitted by law and only the
portion thereof attributable to a given year shall be included in taxes for that
year. "Operating Expense" shall not include: Landlord's cost of items sold to
other tenants; Landlord's income taxes or any other taxes imposed upon or
measured by Landlord's income or profit; personal property taxes of other
tenants; leasing commissions and fees to real estate agents; and franchise,
estate, inheritance, succession and real estate transfer taxes.
"Rentable Area" shall be defined as all space within Tenant's demising
walls plus the Tenant's proportionate share of all common areas. The Rentable
Area of the Premises shall be determined by Landlord in Landlord's sole
discretion and Tenant agrees to pay its pro rata share as stated above in this
Subparagraph 3(b) notwithstanding any discrepancy in the calculation of Rentable
Area. "Common Areas" are those areas of the building that Tenant shares in
common with other tenants (such as elevator lobby, public corridors, toilets,
service closets and service elevator lobby). Excluded from "Rentable Area" in
the Building shall be all elevator pipe and mechanical shaft space and all
stairwells. Changes in Rentable Area for purposes of this Subparagraph 3(b)
shall be effective on the day of the change.
Within sixty (60) days after the expiration of each calendar year or
as soon thereafter as possible, Landlord or Landlord's agent shall submit to
Tenant a statement setting forth the Operating Expenses, which statement shall
also include in sufficient detail the calculation of the Operating Expenses and
Tenant's share of same. Within 30 days after delivery of such statement, Tenant
shall pay to Landlord a sum equal to the amount of the resulting adjustment for
such calendar year, regardless of whether Tenant shall dispute any of the items
included by Landlord. If Tenant shall not dispute any item or items of any such
statement within sixty (60) days after such statement has been rendered, Tenant
shall be deemed to have approved such statement. If Tenant shall dispute any
item or items included by Landlord in determining Operating Expenses and such
dispute is not amicably settled between Landlord and Tenant within sixty (60)
days after the statement therefor has been rendered, either party may, during
the fifteen (15) days next following the expiration of such sixty (60) days,
refer such disputed item or items to a reputable firm of independent certified
public accountants selected by mutual agreement of Landlord or Landlord's agent
and Tenant for decision, which decision shall be conclusive and binding upon
Landlord and Tenant. Landlord shall credit the amount, if any, of Tenant's prior
payment found to be excessive against Tenant's next subsequent monthly rental
payment or payments. The expenses involved in such determination shall be borne
by the party against whom a decision is rendered by such accountants, provided
that, if more than one item in dispute, and that neither party prevails on every
item in dispute, then the expenses shall be apportioned according to the
monetary value of the items decided against each party. The parties shall pay
their apportioned shares of the expenses involved in such decision making,
within fifteen (15) days of the date of decision.
In addition, for a given calendar year during the term of the Lease,
Landlord or Landlord's agent shall have the right to reasonably estimate the
Operating Expenses for such calendar year, and Tenant shall pay to Landlord,
together with and in addition to basic rent and other charges for such calendar
year an amount equal to Tenant's share of such estimated Operating Expenses
after accounting for Base Year Stops and agreed caps, which amount shall be paid
in equal monthly installments over the portion of the calendar year subsequent
to Landlord's making of such estimate. Thereafter, when Landlord has determined
the actual amount of the Operating Expenses for such calendar year, the
difference between the amount of Tenant's share of the estimated Operating
Expenses paid by Tenant and Tenant's share of the Operating Expenses shall be
refunded to or paid by the Tenant within thirty (30) days after the date of
Landlord's bill. It is understood and agreed that
-2-
<PAGE>
Landlord or Landlord's agent shall retain books and records at Landlord's or
its agents offices which set forth the Operating Expenses for the Building and
shall make available upon Tenant's prior written request such books and records
for Tenant's review during the normal business hours of Landlord for a period
of two (2) years from and after the incurring of such Operating Expenses.
All amounts payable by Tenant to Landlord pursuant to this
Subparagraph 3(b) or any other provision of this Lease shall be deemed
additional rent, and, in the event of nonpayment thereof, Landlord shall have
all the rights and remedies herein provided for in case of nonpayment of rent.
4. PERMITTED USE AND RESTRICTIONS ON USE: The Premises shall be used
-------------------------------------
only as GENERAL OFFICE use or for any other lawful purposes with Landlord's
prior written consent. Tenant shall use and occupy the Premises for such
purposes throughout the term hereof. Tenant shall not do or permit anything to
be done in or about the Premises which in any way will obstruct or interfere
with the rights of any other tenants or occupants of the Building, or injure or
unreasonably annoy them, or use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, injure or tend to injure
the reputation of the Building or any part thereof, or cause any lines to form
in the common areas of the Building. Tenant shall not cause, commit, maintain,
or permit any nuisance or cause, commit, maintain, or permit the commission of
any waste in, on or about the Premises.
5. COMMON AREAS AND FACILITIES: Subject to the Rules and Regulations
---------------------------
(as such term is defined in Paragraph 6 below), Tenant and its employees,
customers and invitees shall have the reasonable nonexclusive right to use (in
common with Landlord and the other tenants and occupants of the Building and
their respective employees, customers and invitees, and all other to whom
Landlord has or may hereafter grant rights to use the same) such elevator,
stairways, corridors, parking lot, sidewalks, and other common areas and
facilities, if any, as may from time to time exist and be generally available to
all occupants of the Building. Landlord shall have the right to close any or all
portions of the common areas and facilities to such extent as may, in Landlord's
opinion, be necessary to prevent a dedication thereof or the accrual of any
rights to any person or the public therein. Landlord shall at all times have
full control, management and direction of the common areas and facilities and
shall maintain and repair the same. Landlord reserves the right at any time to
reduce, increase, enclose or otherwise change the size, number, location, layout
and nature of the common areas and facilities and the other tenancies and
premises included in the Building, to construct additional buildings and
stories, and to create additional Rentable Areas through use and/or enclosure of
common areas, to place signs on the Building and to change the name, number or
designation by which the Building or Premises is commonly known. Tenant shall
not at any time interfere with the rights of Landlord, other tenants, and their
respective employees, agents, officers and invitees, to use any part of the
Building and common areas. If Tenant's operation of its business within the
Premises be materially interfered with or if free access to the Premises is
barred in excess of three (3) consecutive business days for any reason
whatsoever, Tenant shall be entitled to an abatement of rent. If such
interference continues for fifteen (15) consecutive business days, Tenant may
cancel this Lease on notice to the Landlord. In exercising its rights under this
paragraph, Landlord
-3-
<PAGE>
shall use reasonable efforts to limit interference with Tenant's use of the
Premises.
6. COMPLIANCE WITH LAWS AND RULES: Tenant shall not use the Premises
------------------------------
or permit anything to be done in or about the Premises which will in any way
conflict with any law, statute, ordinance or governmental rule or regulation now
in force or hereafter enacted or promulgated. Tenant shall not do or permit
anything to be done on or about the Premises or bring or keep anything which
will in any way increase the cost of any insurance no or hereafter carried on
the Building or any of its contents, or that will invalidate any such insurance
or grant the insurer a defense thereon. Except as otherwise provided herein,
Tenant shall at its sole cost and expense promptly comply with all laws, orders,
statutes, ordinances and governmental rules, regulation or requirements now or
hereafter in force, and with the requirements of any duly constituted public
authority having jurisdiction over the Premises, except that Tenant shall not be
required to make structural changes (including but not limited to structural
changes to the roof, parapet, walls, gutters, downspouts, foundation and load-
bearing walls) not related to or affected by Tenant's alterations or
improvements or by a change in Tenant's use of the Premises. Landlord warrants
and represents that upon the commencement date of this Lease the condition of
the Premises will comply with all laws, orders, statutes, ordinances and
governmental rules, regulations or requirements, including compliance with ADA,
now in force and with the requirements of any duly constituted public authority
having jurisdiction over the Premises and the local Board of Fire Underwriters
or any similar body now in force. Tenant shall also comply with the Rules and
Regulations in effect on the date hereof (as set forth in Exhibit B attached
hereto, which is hereby incorporated herein) and with such reasonable additional
rules and regulations, and such reasonable amendments to the existing rules and
regulations, as may from time to time be made or established by Landlord to
govern the use, occupancy and operation of the Building (herein, including any
such additions and amendments, called the "Rules and Regulations"). Landlord
shall use due diligence to enforce the performance of the Rules and Regulations
by the other tenants and occupants of the Building. Tenant's obligation under
this Article or any other similar provision of the Lease (including the Rules
and Regulations, if any) shall be limited to those situations in which a
violation, order or duty is imposed resulting from the particular use made of
the demised Premises or any portion thereof by Tenant, it being understood that
Tenant shall not be responsible for complying with any violations, orders, codes
or duties which are imposed on the building generally and which would have to be
complied with whether Tenant or any other tenants were then in possession of the
demised Premises.
7. UTILITIES AND SERVICES: Landlord shall (a) furnish heat and
----------------------
air-conditioning to the Premises, as provided in the Rules and Regulations; (b)
furnish water for the intended use of occupants of the Building; (c) provide
janitor service for the Premises and elevator service for the Building to the
extent provided in the Rules and Regulations; and (d) provide cleaning service
for the interior and exterior of Tenant's windows of a scope and frequency
determined by Landlord. Replacement of lamps, bulbs, tubes, starters and
ballasts in the Premises shall be provided by Landlord and the cost thereof
included in Operating Expenses. Landlord shall have the exclusive right to
attend to such replacement, and its charges therefor shall be reasonable.
Landlord may adopt a system of relamping and reballasting periodically on a
group basis. If Landlord elects to make available to tenants in the Building
other services or supplies including but not limited to those services set forth
in Paragraph 26 of the Rules and Regulations, which shall benefit all tenants or
which Landlord could not provide efficiently if certain tenants refused to
obtain it (such as piped-in music), or arranges a master contract therefor,
Tenant shall pay its proportionate share of the expense. It Tenant wishes to
obtain any of such services outside the normal business days and hours for such
services, the, if the service desired is available, special arrangements must be
made with Landlord, and Tenant shall pay Landlord's then standard charge for any
such additional services so furnished. Landlord shall not be liable for, and
Tenant shall not be entitled to, any abatement or reduction of rental by reason
of interruption of Landlord's failure to furnish any of the foregoing when such
failure is caused by accident, breakage, repairs, strikes, lockouts or other
labor disputes of any character, or by any other similar or dissimilar cause
beyond the reasonable control of Landlord. Landlord shall not be liable under
any circumstances for loss of, or injury to, property or person, however
occurring through or in connection with or incidental to the furnishing of,
interruption of or a failure to furnish any of the foregoing, including
documents, files or other property damaged, destroyed or lost through acts or
omissions of the personnel performing janitorial or cleaning services. Any
services, other than those agreed herein to be provided by Landlord, which are
consumed on the Premises, shall be paid for by Tenant. Tenant shall have access
to the Premises Seven (7) days per week, Twenty-Four (24) hours per day.
Anything in this Lease to the contrary notwithstanding, if the
stoppage
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<PAGE>
of services which Landlord is obligated to provide for Tenant causes any portion
of the Premises to become unusable by Tenant for more than Five (5)
consecutive business days, then and in that event Tenant shall be entitled to a
pro rata abatement of rent as to such unusable portion of the Premises
commencing with the sixth (6/th/) day that the same are unusable, provided,
however, that Tenant shall not be entitled to any abatement of rent due to
unusability (a) caused by any act or omission of Tenant or any of Tenant's
servants, employees, agents, visitors, or licensees or (b) where Tenant requests
Landlord to make a decoration, alteration, improvement, or addition or (c) where
the repair in question or the services in question are those which Tenant is
obligated to make or furnish under any of the provisions of this Lease.
Tenant agrees at all times to cooperate fully with Landlord and to
abide by all the regulations and requirements which Landlord may prescribe for
the proper functioning and protection of all such heating, ventilating and air-
conditioning systems. Wherever heat-generating machines or equipment are used in
the Premises which shall affect the temperature otherwise maintained by the air-
conditioning system in the Premises and Tenant gives Landlord notice of such
increased temperature, or in any other portion of the Building, Landlord
reserves the right to install supplementary air-conditioning units in the
Premises and the cost of installation, operation and maintenance thereof shall
be paid by Tenant to Landlord, upon demand. Tenant will not, without the prior
written consent of Landlord, use any apparatus or device in the Premises which
will in any way increase the amount of heat, air-conditioning or water usually
furnished or supplied for use of the Premises. If Tenant shall require heat,
air-conditioning or water in excess of that usually furnished or supplied for
use of the Premises, then (i) Tenant shall first procure the written consent of
Landlord to the use thereof, which consent Landlord may refuse; and (ii) the
annual rental payable for the Premises shall be equitably adjusted upward, so
that such rental includes an appropriate amount for the additional services
expected to be consumed by Tenant in the Premises. Notwithstanding the
foregoing, in no event shall personal computers or related printers be deemed
"heat generating" for purposes of this paragraph.
8. ELECTRICAL SERVICE AND CHARGE: Landlord agrees to provide Tenant
-----------------------------
with standard electrical service for lighting and office equipment requirements
of Tenant on the Premises (hereinafter called "Electrical Service"). The cost of
such Electrical Service shall be considered an Operating Expense under Paragraph
3 above.
9. REPAIRS: Landlord shall maintain the exterior of the Building and
-------
make all structural and major exterior repairs to the Building and Premises
including the building systems, roof, parapet walls, and foundation and load-
bearing walls unless such repairs are required by reasons of negligence or
misconduct of Tenant, its agents, employees, customers or invitees, or the
particular nature of Tenant's use of the Premises, in which case such repairs
shall be made by Tenant. Except as set forth above, if such repairs are of a
capital nature, they shall be made at Landlord's expense, otherwise they shall
be considered an Operating Expense under Paragraph 3 above. Tenant shall give
Landlord written notice of the need for any such repairs to be made by Landlord,
and Landlord shall be under no liability for damage or injury however caused in
the event of its failure to make such repairs, unless it shall have received
such notice from Tenant and failed to make such repairs within a reasonable time
after receipt of such notice. However, if such repairs cannot be completed
within thirty (30) days, it shall be considered sufficient performance if
Landlord promptly commences such repairs and continues to use due diligence to
complete such repairs as soon as reasonably possible. Except as above provided
in this Paragraph 9, Tenant shall, at its expense, keep the Premises and every
part thereof in good condition and repair, ordinary wear and tear and casualty
excepted.
If the Building, including the elevator, boilers, engines, pipes,
or other apparatus (or any of them) used for the purpose of heating, ventilating
or air-conditioning the Building or operating the elevator, or if the water
pipes, drainage pipes, electric lighting or other equipment of the Building or
the roof or outside walls of the Building get out of repair or become damaged or
destroyed through the negligence or misconduct of the Tenant or its agents,
employees, customers, or invitees, in any way stopping up or injuring the
heating, ventilating, or air-conditioning apparatus, elevator, water pipes,
drainage pipes or other equipment or part of the Building, the expense of the
necessary repairs, replacements or alterations shall be borne by the Tenant,
which shall pay the same to the Landlord within thirty (30) days of demand.
Replacement of and addition to the plumbing or electrical equipment and
facilities located in, or serving only the Premises, and unclogging of the
plumbing systems of the Premises caused by the negligence or misconduct of
Tenant, its agents, employees, customers, or invitees shall be at Tenant's
expense. Tenant shall, at it expense, repair or
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<PAGE>
replace with glass of equal quality any broken or cracked plate or other glass
in doors, windows and elsewhere in the interior and on the exterior of the
Premises (except the exterior curtain wall glass and lobby wall glass) unless
the breakage shall be covered by any fire or other casualty insurance which
Landlord may carry on the Building. Repairs and replacements of exterior curtain
wall glass required by reason of negligence or misconduct of Tenant, its
agents, employees, customers, or invitees shall be done at Tenant's expense.
10. ALTERATIONS: Tenant shall not make or suffer to be made, any
-----------
alterations, additions or improvements ("Alterations") in, on or to the Premises
or any part thereof, without the prior written consent of Landlord; and any such
alteration, addition, or improvement in, on or to the Premises, except movable
furniture and trade fixtures, shall at once become a part of the Building and
appurtenant realty and belong to Landlord. Any such alteration, addition or
improvement by Tenant, shall be made at Tenant's sole cost and expense, and any
contractor or person selected by Tenant to make the same must first be approved
in writing by Landlord. All of the foregoing, together with all repairs required
to be made by Tenant, shall be made in good and workmanlike manner and in
compliance with all governmental requirements and rating bureau recommendations,
and shall be performed by competent workmen whose labor union affiliates are not
incompatible with those of any workmen who may be employed in the Building by
Landlord its contractors or subcontractors. Tenant shall obtain all necessary
permits from governmental authorities. Tenant agrees not to create, incur,
impose, or permit, or suffer to exist any lien or other obligation against the
Premises or Landlord (or shall provide adequate security or bond, in a manner
satisfactory to Landlord, and use due diligence to contest any such lien or
other obligation in good faith) by reason of any alteration or improvement or
any repair or decoration permitted or required to be made by Tenant pursuant to
this Lease, and Tenant agrees to hold Landlord harmless from and against any and
all claims and demands by contractors or other third persons against the
Premises or Landlord relating to or arising out of any such alteration,
improvement, repair or decoration. This Paragraph 10 shall apply to any work
performed by Tenant in making the Premises initially ready for use and
occupancy. Notwithstanding the foregoing to the contrary, if the Alterations (i)
are of a cosmetic nature such as painting, wallpapering, hanging pictures,
millwork and carpeting, (ii) are not visible from the exterior of the Premises
or the Building and (iii) do not affect the systems or the structural elements
of the Building, then such no consent shall be required; provided that even if
Landlord's consent to an Alteration is not required, Tenant shall still comply
with this Section.
11. ASSIGNMENT; SUBLEASE: Tenant shall not assign, pledge, mortgage or
--------------------
otherwise encumber this lease or sublease any part or all of the Premises
without Landlord's prior written consent, which shall not be unreasonably
withheld or delayed, nor shall any transfer of Tenant's interest in the Premises
by operation of law occur or be allowed to occur. Notwithstanding Landlord's
consent to any of the foregoing, Tenant shall remain liable to Landlord for
payment of rental then due and thereafter to become due and the performance of
all other obligations of Tenant hereunder for the balance of the term hereof.
Tenant agrees that, upon making any permitted assignment or subletting under
this Lease, Tenant shall promptly furnish Landlord with an executed counterpart
of the instrument of assignment or subletting. As a condition of any assignment
or subletting, the assignee and/or subtenant must assume and agree in writing to
perform all of the terms, conditions and provisions as contained in this Lease
on the Tenant's part to be performed. Landlord's consent to any of the foregoing
shall not release or waive the prohibition against it thereafter or constitute a
consent to any other assignment, pledge, mortgage, encumbrance, transfer, or
sublease. If this Lease be assigned, or if the Premises or any part thereof be
subleased or occupied by anybody other than Tenant, whether with or without
Landlord's consent, Landlord may collect from the assignee, sublessee, or
occupant, any rental or other charges payable by Tenant under this Lease and not
timely paid by Tenant, and apply the amount collected to the rental and other
charges herein reserved, but such collection by Landlord shall not be deemed an
acceptance of the assignee, sublessee, or occupant as a tenant, nor a consent to
such assignment or sublease or occupancy, nor a release of Tenant from the
performance by Tenant of this Lease.
Notwithstanding the forgoing paragraph, Tenant may assign all or part
of this Lease, or sublease all or part of the Premises, to (a) any corporation
which has the power to direct Tenant's management and operation, or any
corporation whose management and operation is controlled by Tenant, or (b) any
corporation a majority of whose voting stock is owned by Tenant, or (c) any
corporation in which or with which Tenant, its corporate successors or assigns,
is merged or consolidated, in accordance with applicable statutory provisions
for merger or consolidation of corporations, so long as the liabilities of the
corporations participating in such merge or consolidation are assumed by the
corporation
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surviving such merger or created by such consolidation, or (d) any corporation
acquiring this Lease and a substantial portion of Tenant's assets.
12. DIRECTORY AND SIGNS: Landlord shall place Tenant's name upon the
-------------------
directory board of the Building in the same manner as other tenants in the
Building, but the design and style of such identification, and the location of
such directory board and allocation of the space thereon among the tenants and
occupants of the Building shall be determined by Landlord, in its sole
discretion. Landlord shall provide Tenant front door signage in accordance with
the Building standard signage package. Tenant shall not, without Landlord's
prior written consent in each case first had and obtained, install, affix or
use: (a) any signs, lettering or advertising media of any kind whatsoever,
blinds, shades, curtains, draperies or similar items on the exterior of the
Premises, in any window of the Premises, or in the interior of the Premises in
such a manner as shall be visible from outside the Premises; or (b) any
awnings, radio or television antennae or any other object or equipment of any
nature whatsoever on the exterior of the Premises. No name, symbol, mark,
design, or insignia adopted by Landlord for use in connection with the Building
shall be used by Tenant in the conduct of the business in the Premises or
elsewhere, without prior written consent of Landlord. Tenant shall not refer to
the Building by any name other than that designated by Landlord from time to
time, and Tenant shall use such designated name for the business address of the
Tenant but for no other purpose. All rights to and use of the exterior of the
Premises and the roof of the Building are reserved to Landlord, except as
permitted above. Tenant, at Tenant's sole cost and expense shall be allowed to
use the unused monument sign located at the front of the Building during the
term of this Lease.
13. INSURANCE AND WAIVER OF SUBROGATION: Tenant shall, at its expense,
-----------------------------------
obtain and carry at all times during the term of this Lease (a) public liability
insurance covering the Premises with limits of at least One Million Dollars
($1,000,000.00) for one person and Three Million Dollars ($3,000,000.00) for any
number of persons injured or killed in one occurrence and Five Hundred Thousand
Dollars ($500,000.00) property damage (or such higher amounts as Landlord or its
lender may from time to time reasonably determine); and (b) fire insurance, with
extended coverage, vandalism and malicious mischief, theft and mysterious
disappearance endorsements and without co-insurance, covering the contents of
the Premises and all alterations, additions, and leasehold improvements made by
or for Tenant, in the amount of their full replacement value. Anything herein
to the contrary notwithstanding, Tenant shall be permitted to self-assume the
risk of physical damage to its personal property in lieu of maintaining
insurance. In the event of loss or damage to Tenant's personal property, Tenant
agrees to be responsible for repairing or replacing such damaged property. All
of such policies shall cover both Landlord and Tenant, as their interests may
appear, and all insurers thereon shall agree not to cancel or change the same
without at least twenty (20) days prior written notice to Landlord.
Anything in this Lease to the contrary notwithstanding, Landlord and
Tenant each hereby waives any and all rights of recovery, claim, action, or
causes of action, against the other, its agents, servants, partners,
shareholders, officers, or employees, for any loss or damage that may occur to
the leased Premises or the Building, or any improvements thereto, or any
personal property of such party therein, 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 the other party hereto, its agents, officers, partners,
shareholders, servants, or employees, and covenants that no insurer shall hold
any right of subrogation against such other party. Landlord and Tenant will
cause their respective insurers to issue appropriate waiver of subrogation
rights endorsements to all policies of insurance carried in connection with the
Building and the demised Premises.
14. NONLIABILITY OF LANDLORD: Except for the gross negligence and
------------------------
willful misconduct of the Landlord, Landlord shall not be liable to Tenant, and
Tenant hereby waives all claims against Landlord, for any injury or damage to
any person or property in or about the Premises by or from any cause whatsoever,
including, without limitation the generality of the foregoing, those caused by
snow, ice or water leakage of any character from the roof, walls, basement, or
other portion of the Premises or the Building, or caused by gas, fire, oil,
electricity, or any cause whatsoever in, on, or about the Premises or Building
or caused by the acts of negligence of other tenants or occupants of premises in
the Building.
15. INDEMNITY: Tenant shall hold Landlord harmless and indemnified
----------
from and against any and all claims or liability for any injury or damage to any
person or property whatsoever, excepting any injury or damage to any person or
property caused by Landlord's
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<PAGE>
active negligence or willful misconduct; (a) occurring in, on, or about the
Premises or any part thereof, however caused; (b) occurring in, on, or about any
facilities (including, without prejudice to the generality of the term
"facilities", elevator, stairways, passageways, or hallways) the use of which
Tenant may have in conjunction with other tenants and occupants of the Building,
when such injury or damage shall be the act, neglect, fault of, or omission of
any duty with respect to the same, by Tenant, its employees, customers, or
invitees; or (c) arising out of or resulting from Tenant's use and occupancy of
the Premises or any equipment therein or appurtenances thereto.
Landlord agrees to indemnify and save harmless Tenant, its officers,
employees, contractors, or licensees against and from all claims arising from
any active negligence or willful misconduct negligent act of Landlord, or of
Landlord's agents, employees, contractors, or licensees. Tenant agrees to
indemnify and save harmless Landlord its officers, employees, contractors, or
licensees against and from all claims arising from any negligent act of Tenant,
or of Tenant's agents, employees, contractors, or licensees.
16. TAXES PAYABLE BY TENANT: Tenant agrees to pay, before delinquency,
-----------------------
any and all taxes which are or should be levied or assessed and which become
payable during the term hereof upon Tenant's equipment, furniture, fixtures, and
other personal property located in the Premises.
17. HOLDING OVER: Tenant shall pay Landlord for each day Tenant
------------
retains possession of the Premises or any part thereof after termination hereof,
by lapse of time or otherwise, at a rate equal to 150% of the annual rent, as
adjusted for Operating Expense Increases, divided by 365 and also pay all
additional rent and all damages sustained by Landlord by reason of such
retention. If Landlord gives written notice to Tenant of Landlord's election
thereof, such holding over shall constitute an extension of this Lease for a
period from month to month, on the terms and conditions of this Lease. This
provision shall not be deemed to waive Landlord's right of re-entry or any other
right hereunder or at law.
18. SUBORDINATION TO GROUND LEASES AND MORTGAGES: This Lease is and
--------------------------------------------
shall be subject and subordinate at all times to all ground or underlying leases
which may hereafter by executed affecting the Premises, the Building and/or all
or any part of the land upon which the Building is situated, and to the lien of
any mortgages in any amount or amounts whatsoever now, herebefore or hereafter
placed on or against the land and buildings or either thereof, of which the
Premises are a part, or on or against Landlord's interest or estate therein, or
any part of or interest (and in all cases including all extensions, renewals,
amendments and supplements to any ground or underlying lease or mortgage),
without the necessity of the execution and delivery of any further instruments
on the part of Tenant to effectuate such subordination. Tenant covenants and
agrees to execute and deliver upon demand such further instruments evidencing
such subordination of this Lease to such ground or underlying leases and to the
lien of any such mortgages as may be required by Landlord and Tenant further
agrees to attorn to and recognize the holder of any mortgage or the Landlord
under any ground lease. Notwithstanding anything hereinabove contained in this
Paragraph 18, in the event the holder of any mortgage or the Landlord under any
ground or underlying lease shall at any time elect to have this Lease constitute
a prior and superior lien to its mortgage or lease, then, and in such event,
upon any such holder or Landlord notifying Tenant to that effect in writing,
this lease shall be deemed prior and superior in lien to such mortgage or lease,
as the case may be, whether this Lease is dated prior to or subsequent to the
date of such mortgage or lease. If the Premises are subject to any Mortgage or
Deed of Trust as of the date hereof or if a Mortgage or Deed of Trust is placed
after such date, and Tenant is not in default of this Lease, Landlord shall
cause the holder of such Mortgage or Deed of Trust to execute and deliver to
Tenant a non-disturbance Subordination and Attornment Agreement in a form
reasonably acceptable to Landlord and Tenant.
19. LANDLORD'S RIGHT OF ACCESS: Landlord and its agents and employees
--------------------------
shall at all times have the right to enter the Premises on reasonable notice to
Tenant, at any reasonable time (except in emergencies, in which case the time
for entry shall not be so limited) to inspect the same, to supply any service to
be provided by Landlord to Tenant hereunder, to show the Premises to prospective
purchasers, mortgagees or tenants (provided showings to prospective tenants of
the Premises shall be limited to the last 6 months of the lease term) and to
alter, improve or repair the Premises and any potion of the Building without
abatement of rent and may for that purpose erect, use and maintain scaffolding,
pipes, conduits and other necessary structures in and through the Premises where
required by the character of the work to be performed. For each of the aforesaid
purposes, Landlord shall at all times have and retain a key with which to unlock
all of the doors in, upon or about the
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<PAGE>
Premises, excluding Tenant's vaults and safes (which placement must be
designated in advance by Tenant, and approved in writing by Landlord), and
Landlord shall have the right to use any and all means which Landlord may deem
necessary or proper to open such doors in an emergency in order to obtain entry
to any portion of the Premises. Any entry to the Premises or portions thereof by
Landlord by any of such means, or otherwise, shall not under any circumstances
be construed or deemed to be a forcible or unlawful entry into, or a retainer
of, the Premises, or an eviction, actual or constructive, of Tenant from the
Premises or any portions thereof. Landlord shall conduct its activities at a
time and in a manner so as to minimize any disruption of or interference with
Tenant's business or access to the Premises.
20. EASEMENT FOR PIPES: Tenant shall permit Landlord (or its
------------------
designee) to erect, use, maintain, replace and repair, pipes, cables, conduits,
plumbing, vents, telephone, electric and other wires or other items, in, to and
through the Premises, as and to the extent that Landlord may now or hereafter
deem to be necessary or appropriate for the proper operation and maintenance of
the Building provided the same are installed at such times and by such methods
as will not materially interfere with Tenant's use of the demises Premises or
damage the appearance thereof or reduce the area of the demises Premises and are
concealed behind the walls, floors and/or ceilings of the demises Premises as
then constructed. In the event Landlord needs access to any under-floor duct,
Landlord's liability for carpet replacement shall be limited to replacement of
the piece removed to gain such access provided, however, the carpet shall be
restored to reasonably the same appearance as prior to such Landlord access. All
such work shall be done, so far as practicable, in such manner as to minimize
interference with Tenant's use and occupancy of the Premises.
21. INSOLVENCY OR BANKRUPTCY OF TENANT: The appointment of a receiver
----------------------------------
to take possession of all or substantially all of the assets of Tenant, or an
assignment by Tenant for the benefit of creditors, or any action taken or
suffered by Tenant under any insolvency, bankruptcy or reorganization act, shall
at Landlord's option, constitute a breach of this Lease by Tenant. Upon the
happening of any such event or at any time thereafter, this Lease shall
terminate five (5) days after written notice of termination from Landlord to
Tenant. In no event shall this lease be assigned or assignable by operation of
law or by voluntary or involuntary bankruptcy proceedings or otherwise, and in
no event shall this Lease or any rights or privileges hereunder be an asset of
Tenant under any bankruptcy, insolvency or reorganization proceedings.
22. DEFAULT: If: (a) default be made in the payment of the rental or
-------
any additional charge payable hereunder by Tenant, and such default shall
continue for ten (10) days after written notice by Landlord to Tenant; or (b)
default be made in any of the other covenants or conditions herein contained on
the part of Tenant, and such default shall continue for thirty (30) days after
written notice thereof shall have been given to Tenant (if such default is a
curable default, but not of a type which can be corrected within thirty (30)
days, then if Tenant fails to promptly commence, diligently pursue and to
continue to do so in order to correct such default); or (c) if this Lease shall,
by act of Tenant or by operation of law or otherwise, devolve or pass to any
party other then Tenant, except with the prior written consent of Landlord, then
and in any of the above-described events, Tenant shall be in breach of this
Lease, and Landlord shall have the rights and remedies herein referred to and/or
provided. In the event of any breach by Tenant, beyond applicable periods of
notice and grace, Landlord, besides any other rights or remedies it may have by
law or otherwise, shall have the immediate right of re-entry and the right to
remove all persons and property from the Premises. Such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant. Should Landlord elect to re-enter as herein provided, or should
Landlord take possession pursuant to legal proceedings or pursuant to any notice
provided by law, Landlord may either terminate this Lease or may from time to
time, without terminating this Lease, relet the Premises or any part thereof for
such term or terms (which may for a term extending beyond the term of this
Lease) and at such rental or rentals and upon such other terms and conditions as
Landlord, in the exercise of Landlord's sole discretion, may deem advisable,
including but not by way of limitation, the right to make alterations and
repairs to the Premises. Upon each such reletting (i) Tenant shall be
immediately liable to pay to Landlord, in addition to any rent and any other
sums due hereunder, the reasonable cost and expense of such reletting and of
such alterations and repairs incurred by Landlord, and the amount, if any, by
which the rent reserved in this Lease for the period of such reletting (up to
but not beyond the term of this Lease), exceeds the amount agreed to be paid
as rent for the Premises for such period of such reletting; or (ii) at the
option of Landlord, rents received by Landlord from such reletting shall be
applied first, to the payment of any sums due hereunder from Tenant to Landlord,
other than rent; second, to the payment of any costs and expenses of such
reletting and of such alterations and repairs;
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third, to the payment of rent due and unpaid hereunder; and the residue, if any,
shall be held by Landlord and applied in payment of future rents as the same
may become due and payable hereunder. If Tenant has been credited with any rent
to be received by such reletting under option (i), and such rent shall not be
promptly paid to Landlord by the new tenant, or if such rentals received from
such reletting under option (ii) during any months be less than that to be paid
during that month by Tenant hereunder, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly, within ten (10)
days of notification of such deficiency. No such re-entry or taking possession
of the Premises by Landlord shall be construed as an election on Landlord's part
to terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any such reletting without termination, Landlord
may at any time thereafter elect to terminate this Lease for any such previous
breach. Should Landlord at any time terminate this Lease for any breach, in
addition to any other remedy Landlord may have, Landlord may recover from Tenant
all damages Landlord may incur by reason of such breach, including the cost of
recovering the Premises, and including the worth at the time of such termination
of the excess, if any, of the amount of rent and charges equivalent to rent
reserved in this Lease for the remainder of the stated term over the then
reasonable rental value of the Premises for the remainder of the stated term,
all of which amounts shall be immediately due and payable by Tenant to Landlord.
All covenants and agreements to be performed by the Landlord or Tenant
under any of the terms and conditions of this lease shall be performed by the
party obligated to do so at the party's sole cost and expense (and without any
abatement of rent by Tenant). If the Tenant shall fail to pay any sum of money,
other than rent, required to be paid by it hereunder or shall fail to perform
any other act on its part to be to be performed hereunder, and such failure
shall continue beyond applicable periods of notice and grace, the Landlord may,
on reasonable notice to Tenant, but shall not be obligated so to do, and without
waiving or releasing the Tenant from any obligations of the Tenant, make any
such payment or perform any such other act. All sums so paid by Landlord and all
necessary incidental costs, and all costs and expenses (including reasonable
attorneys' fees) incurred by Landlord in enforcing any of the terms, covenants
or conditions of this lease, or in suing for or obtaining relief by reason of a
breach thereof, together with interest on all of the forgoing at the rate of
twelve percent (12%) per annum from the date of payment or incurring by the
Landlord (or the highest rate allowed by law, whichever is less), shall be
payable as additional rent to the Landlord on demand, and Tenant covenants to
pay any such sums, costs and expenses Landlord shall have, in addition to any
other right or remedy of the Landlord, which rights and remedies shall be the
same as in the case of default by Tenant in the payment of the rent.
Failure of Landlord or Tenant to exercise its rights in connection
with any breach or violation of any term, covenant, or condition herein
contained shall not be deemed to be a waiver of such term, covenant or condition
for any subsequent breach of the same or any other term, covenant or condition
herein contained. The subsequent acceptance of rent hereunder by Landlord shall
not be deemed to be a waiver of any preceding breach by Tenant of any term,
covenant or condition of this lease, other than the failure of Tenant to pay the
particular rental so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such rent.
A material default by Tenant or any affiliate of Tenant in the prompt
and full-payment of any sums due Landlord (or any affiliate of Landlord) or in
the complete and timely performance of any of the terms, covenants and
conditions on its part contained in this lease or any other collateral
agreements or documents to which Landlord (or affiliate of Landlord) and Tenant
(or any affiliate of Tenant) are parties shall constitute a material default by
Tenant under this Lease, and a default by Tenant under this Lease shall
constitute a material default under such other collateral agreement or document
by Tenant (or its affiliate).
23. SALE BY LANDLORD: In the event of a sale or conveyance by Landlord
----------------
of the Building or any part of the Building including the Premises, the same
shall operate to release Landlord from any future liability upon any of the
covenants and conditions herein contained, and in such event, Tenant agrees to
look solely to the responsibility of the successor in interest of Landlord in
and to this Lease. The Lease shall not be affected by any such sale or
conveyance, and Tenant agrees to attorn to the purchaser or grantee, which shall
be personally obligated on this Lease only so long as it is the owner of
Landlord's interest in and to this Lease. If Landlord shall fail to perform any
term, covenant or condition of this Lease upon Landlord's part to be performed
and, as a consequence of such default, Tenant shall recover a money judgment
against Landlord, such judgment shall be satisfied only out of the proceeds of
sale received upon execution of such judgment and levy thereon against the
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right, title and interest of Landlord in the Building and out of rents or other
income from such property receivable by Landlord and Landlord shall not be
liable for any deficiency.
24. NOTICES: All notices and demands which may or are required to be
-------
given by either party to the other hereunder shall be in writing, and given by
personal delivery or sent by United States certified or registered mail, postage
prepaid. Notices and demands to Tenant shall be addressed to Tenant at 100 EAST
WISCONSIN AVENUE, SUITE 2700, MILWAUKEE, WI 53202. Notices and demands to the
Landlord shall be addressed to it at 710 North Plankinton Avenue, Suite 1400,
Milwaukee, Wisconsin 53203, or to such other firm or to such other place as
Landlord may from time to time designate in a written notice to the Tenant. All
such notices and demands shall be deemed to be given on the date such notice is
personally delivered or on the date three (3) business days after the date such
notices or demands are deposited in the United States certified or registered
mail.
25. SURRENDER OF PREMISES: Upon the termination of this Lease, by
---------------------
expiration or otherwise, Tenant shall surrender the Premises to Landlord in as
good condition and repair as when delivered by Landlord, wear and tear,
obsolescence and damage from the elements, fire and other casualty excepted
unless caused by the negligence or misconduct of Tenant or its agents or
employees. All alterations, additions, improvements and decorations made to the
Premises by Tenant shall remain and become the property of the Landlord. All
trade fixtures and other equipment and personal property owned by Tenant may be
removed from the Premises by Tenant no later than the expiration date of this
Lease, and provided that Tenant shall repair any and all damage caused by such
removal.
26. FIRE DAMAGE: If the Premises shall be destroyed or damaged by
-----------
fire or other casualty, covered by standard extended coverage endorsement,
Landlord shall (unless this Lease shall be terminated as hereinafter provided)
diligently proceed, after adjustment of such loss, to repair or restore the
basic building structure and facilities of the Premises, together with all items
which Landlord furnished to Tenant upon the commencement of the term hereof, to
the condition in which they existed immediately prior to such destruction or
damage. Of the Premises or any part thereof shall be rendered untenantable by
any destruction or damage, whether covered by standard extended coverage
endorsement or not, a just proportion of the rental based upon the number of
square feet of area in the Premises which are untenantable, shall be abated
until the Premises or such part thereof shall have been put in tenantable
condition by Landlord. In the event, however, that any destruction or damage to
the Premises, or to the Building (regardless of whether or not the Premises be
affected), is so extensive that Landlord, in its sole discretion, shall elect
not to repair or restore the Premises or Building, as the case may be, Landlord
may terminate this Lease (effective as of the date of the destruction or damage)
by written notice to Tenant given within ninety (90) days after the occurrence
of the event giving rise to the damage or destruction. In the event that this
Lease is terminated, Tenant shall not have any claim against Landlord,
including for the value of the unexpired term of the Lease or for the expenses
of moving to another location.
Anything herein to the contrary notwithstanding, if the Premises or
the Building is destroyed, or so damaged that in normal course it cannot be
repaired and made tenantable within ninety (90) days, or so damaged that
Landlord shall decide not to repair or rebuild, either Landlord or Tenant may
terminate this lease by giving notice to the other, and the rent shall be paid
to or adjusted as of the date of the damage, and Tenant shall thereupon vacate
the Premises and surrender them to Landlord.
27. COMPENSATION: If all or a substantial portion of the Premises
------------
shall be taken by any public authority under its power of condemnation, this
Lease shall terminate with respect to the portion or entirety of the Premises so
acquired as of the date title shall be taken by the acquiring authority, and the
rental payable hereunder shall be apportioned accordingly. If any part of the
Building shall be taken, then Landlord (whether or not the Premises be affected)
shall have the right to terminate this Lease upon giving written notice thereof
to Tenant within six (6) months after such taking. In such event this Lease
shall terminate on the date stated in the notice, and the rental payable
hereunder shall be apportioned accordingly. Upon any such taking and the
continuing force of the Lease as to a part of the Premises, the rental payable
thereafter shall be reduced in proportion to the amount of total floor area of
the Premises taken. In the event of any such taking, Landlord, at it expense,
shall, unless this lease has been terminated, diligently rebuild or restore the
remainder of the Premises (including the items furnished by Landlord to Tenant
at the commencement of the term of this Lease) to the condition in which it
existed at the time of such taking. Landlord's obligations shall be limited to
the rebuilding or restoration of such basic building structure and facilities as
Landlord furnished upon the commencement of the term hereof. In any event, all
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damages awarded by the acquiring authority for any such taking, whether for the
whole or a part of the Premises or Building, shall belong to and be the property
of Landlord whether such damages shall be awarded as compensation for loss of,
or diminution in value to, the leasehold or the fee thereof; provided, however,
that Landlord shall not be entitled to any award made for the loss of any of
Tenant's trade fixtures or movable personal property or the cost of relocating
or removing its personal property. In the event that this lease if terminated as
hereinabove provided, Tenant shall not have any claim against Landlord, for the
value of the unexpired term hereof or for the expenses of moving to another
location.
28. COVENANT OF QUIET ENJOYMENT: Landlord covenants that it has full
---------------------------
right, title and authority to enter into this Lease. So long as Tenant shall
duly and punctually perform and observe all of its obligations under this
Lease, Tenant shall peaceably and quietly have, hold and enjoy the Premises
free from let or hindrance by Landlord or any party claiming by, through or
under Landlord, subject and subordinate to any: zoning, use and building laws,
ordinances, and regulation; recorded building and use restrictions and
covenants; easements for public utilities;
29. APPLICABLE LAW AND CONSTRUCTION: The laws of the State of
-------------------------------
Wisconsin shall govern the validity, performance and enforcement of this Lease.
The invalidity or unenforceability of any provision of this Lease shall not
affect or impair any other provision. The headings of the several articles and
sections contained herein are for convenience only and do not define, limit or
construe the contents thereof. Whenever herein the singular number is used, the
same shall include the plural, and the masculine gender shall include the
feminine and neuter genders. In the event that either party hereto shall be
delayed or hindered in or prevented from the performance of any act required
hereunder by reason of strikes, lockouts, labor troubles, inability to procure
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war or other reason of a like nature not the fault of the
party delayed in performing work or doing acts required under the terms of this
lease, then performance of such act shall be excused for the period of the delay
and the period for the performance of any such act shall be extended for a
period equivalent to the period of such delay. The provision of this section
shall not operate to excuse Tenant from prompt payment of rent, additional rent
or any other payments required by the terms of this Lease except as otherwise
provided herein.
30. EXECUTION OF LEASE BY LANDLORD: Employees or agents of Landlord
------------------------------
have no authority to make or agree to make a lease or any other agreement or
undertaking in connection herewith. The submission of this document for
examination does not constitute an offer to lease, or a reservation of, or
option for, the Premises, and this document becomes effective and binding only
upon the execution and delivery hereof by Landlord and Tenant. Tenant confirms
that Landlord and its agents have made no representations or promises with
respect to the Premises or the making or entry into of this Lease except as in
this lease expressly set forth, and agrees that no claim or liability shall be
asserted by Tenant against Landlord for, and Landlord shall not be liable by
reason of, breach of any representations or promises not expressly stated in
this Lease. This Lease can be modified or altered only by an instrument in
writing executed by each of the parties hereto.
31. BINDING EFFECT OF LEASES: The covenants, agreements and
------------------------
obligations herein contained, except as herein otherwise specifically provided,
shall extend to, bind and inure to the benefit of the parties hereto and their
respective personal representatives, heirs, successors and assigns (but in the
case of assigns of Tenant only to the extent that assignment is permitted
hereunder). No third party, (other than such successors and assigns), shall be
entitled to enforce any or all of the terms of this lease or shall have rights
hereunder whatsoever.
32. LANDLORD APPROVAL: Wherever it is indicated in this Lease that
-----------------
consent or approval must first be obtained from the Landlord by the Tenant, the
Landlord agrees in such instance that it will not unreasonably withhold or delay
its consent, however, such approval by Landlord may be subject to mortgagee
approval and in such event Landlord shall use its best efforts to obtain the
consent of mortgagee within a reasonable time.
33. ESTOPPEL CERTIFICATES: Tenant, at the request of the Landlord, at
---------------------
any time and from time to time, shall, upon not less that fifteen (15) days
prior notice, execute, acknowledge and deliver to Landlord, in accordance with
the notice provisions contained Paragraph 24, a statement in writing certifying
that this Lease is unmodified and in
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<PAGE>
full force and effect as modified, and setting forth the modifications), the
dates to which the fixed net annual rental has been paid, and stating whether or
not, to the best knowledge of the Tenant, any party is in default in keeping,
observing or performing any term, covenant, agreement, provision, condition of
limitation contained in this Lease, and if in default, specifying each such
default, it being intended that any such statement delivered pursuant to this
Paragraph may be relied upon by Landlord, or any prospective purchaser or
assignee or mortgagee.
34. COMMISSION: THE LOZOFF COMPANY represented the Tenant in
----------
connection with the procurement of this Lease and Landlord agrees to pay THE
LOZOFF COMPANY a commission in the amount of 7% of the annual rent due hereunder
for the first 12 months of the term and 2% of the annual rent due for each
subsequent 12-month period of the term hereof.
35. TENANT IMPROVEMENTS: See the attached Exhibit "C" Approved
-------------------
Construction Drawings and Specifications.
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed by their duly authorized representatives as of the day and year first
above written.
LANDLORD:
TOWNE REALTY, INC.
BY: /s/ [ILLEGIBLE]^^
----------------------------
Its Vice Pres
---------------------------
TENANT:
SPR, INC.
BY: /s/ [ILLEGIBLE]^^
----------------------------
Its Executive Vice President
---------------------------
Attest:
_______________________________
Its ___________________________
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<PAGE>
Exhibit A
[FLOOR PlAN APPEARS HERE]
Leased by & between: TOWNE REALTY, INC. as Landlord and SPR, INC.
as Tenant.
Lease Date: April 16, 1998
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<PAGE>
EXHIBIT B
Rules and Regulations
---------------------
(1) The Building shall be open to the public from at least 7:30 a.m.
to 6:00 p.m., Monday through Friday, and 7:30 a.m. to 1:00 p.m., Saturday,
excluding holidays. Subject to the provisions hereof, the Building will be
generally continuously accessible to Tenant and Tenant's subtenants. Landlord
may at all times control entry to and departures from the Building (through a
security officer or employee in charge, should Landlord so choose), and (a)
persons may enter the Building only with permission; (b) persons entering or
departing from the Building may be questioned as to their business in the
Building and the right is reserved to require the use of an identification card
and the registering of such persons as to the hour of entry and departure,
nature of visit, and other information deemed necessary for the protection of
the Building and its tenants; (c) all entries into and departures from the
Building will take place through such one or more entrances as Landlord shall
from time to time designate; and (d) Landlord reserves the right at any time and
from time to time to require that any tenant, or employee or agent of any
tenant, desiring to take office furniture, equipment or other similar items from
the Building first obtain a pass therefor from landlord or such employee of
landlord as Landlord shall from time to time designate for such purpose. Any
tenant desiring to move furniture or other equipment into or out of the Building
shall in all instances first obtain the prior written approval of Landlord, both
as to the time of day and entrance to the Building to be utilized by the Tenant
in connection with such move.
Landlord will normally not strictly enforce Rules (1)(a), (1)(b) and (1)(c)
from 7:30 a.m. to 6:00 p.m., Monday through Friday, and from 7:30 a.m. to 1:00
p.m. on Saturdays, but it reserves the right to do so or not to do so at any
time, when required, in Landlord's sole opinion, for the safety of the tenants,
the Building, property therein, or for any other reasonably necessary reason. In
case of invasion, mob, riot, public excitement, or other commotion, the Landlord
reserved the right to prevent access to the Building by persons other than
tenants during the continuance of the same by closing the doors or otherwise,
for the safety of the tenants and the protection of the Building and the
property therein or for any other desirable reason.
Landlord shall in no case be liable for damages for any error with regard
to the admission to or exclusion from the Building of any person.
(2) The elevator in the Building will be in operation from at least
7:30 a.m. to 6:00 p.m. on Monday through Friday each week, excluding holidays.
On Saturdays, Sundays and holidays and after 6:00 p.m. on other days, the
elevator will be in operation during the hours the Building is open. Elevator
service may be interrupted because of maintenance, repairs, or improvements or
for any cause beyond Landlord's control. The stairway between the floor will be
generally continuously accessible, unless restricted by fire code or other
ordinance.
(3) All janitor service in and about the individual Tenant's leased
premises ("Suite") shall be performed by employees of, or service companies
retained by, Landlord unless written approval is given by landlord. The janitor
service to be furnished by landlord shall consist of routine dusting, vacuum
cleaning or dustmopping floors, removing normal waste, cleaning exterior windows
and maintaining the Suite and the entrance doors of the Suite after use
ordinarily incident to the purpose for which the Suite is leased, and shall be
furnished, only on Monday through Friday of each week, excluding holidays. Any
additional janitor service requested by Tenant and elected to be furnished by
Landlord shall be paid for at such reasonable rates as Landlord shall specify.
(4) Heat and air-conditioning, to provide conditions required
for comfortable occupancy of the Suite under normal business operations in a
manner commensurate with first-class office buildings in the Mayfair Road,
Wauwatosa, Wisconsin area, will be furnished during the usual seasons therefor.
Heating and air-conditioning will be available Monday through Friday from 7:30
a.m. to 6:00 p.m. and Saturday from 9:00 a.m. to 1:00 p.m. during usual season
therefor. Sunday and holidays shall be excepted. Wherever machines or equipment
are used in the Suite which affect the temperature otherwise maintained by the
air-conditioning or heating system, Landlord shall have the right to require
Tenant to discontinue the use thereof unless Tenant shall agree to reimburse
Landlord for its cost of furnishing and installing supplementary air-
conditioning or heating equipment for the Suite and to pay for the cost of the
operation and maintenance of such equipment. Tenant shall give Landlord or its
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representatives prompt written (and, in the case of an emergency, oral) notice
of any accidents to, or defects in, any heating, air-conditioning, electrical,
plumbing or water system, pipe, apparatus or equipment in the Building. Tenant
shall not use any method of heat or air-conditioning other than that approved by
Landlord. In the event Tenant shall, after obtaining the prior written approval
of Landlord, install special heating or air-conditioning equipment in the Suite,
governing regulatory codes and standards. Any and all damage and costs of repair
to the Suite, to other Suites in the Building and/or the Building itself arising
directly or indirectly from Tenant's negligent use of a special heating or air-
conditioning system shall be the sole responsibility and expense of Tenant
unless such damages or expense is due to insured casualty pursuant to Paragraph
(13) of the Lease. In addition, any and all costs and expenses of every kind
arising from the unclogging of Tenant's plumbing system in the Suite shall be
the sole responsibility and expense of Tenant, if caused by the acts or
negligence of Tenant, its agents, employees, customers or invitees unless such
damages or expense is due to insured casualty pursuant to Paragraph (13) of the
Lease.
(5) All entrance doors to the Suite shall be locked when the Suite is
not in use. All corridors, elevators or stairways in or adjacent to the Building
shall be obstructed or used for any purpose other than the ingress and egress to
and from the Suite, and no doormats, overshoes, umbrellas or other items of any
nature whatsoever shall be placed or permitted to remain therein. No floor,
partition, transom or opening that reflects or admits light into any place in
the Building, and no means of access to any Building fire escape, shall be
covered or obstructed by Tenant.
(7) Landlord and its representatives shall have the right to enter
the Suite to examine the same, to perform janitorial services, and for all other
reasonable purposes. Landlord's Building manager and Building personnel shall
keep a pass key and be allowed admittance to the Suite to cover any emergency or
required inspection that may arise.
(8) The Tenant and its employees, contractors, customers and invitees
shall at all times refrain from making any loud, unseemly or improper noises or
sounds or vibrations (through the playing of radios, television sets or musical
instruments, the improper or excessively loud use of Tenant's intercom or
similar system, or any other manner) in the Suite or elsewhere in the Building,
from smoking in the elevator, and from in any manner unreasonably disturbing or
interfering with other tenants or their employees and invitees, and shall use
such lobby or hallway receptacles for tobacco products and waste as Landlord may
furnish. No foul or noxious gas, odor or substance, or combustible fluid or
material, shall be used, kept or permitted to be used in the Suite.
(9) No animals, birds or other pets and no bicycles or other vehicles
shall be brought or kept in or about the Building, except at such areas Landlord
may designate, temporarily or otherwise. The Suite shall not be used for cooking
or lodging purposes or for the storage of merchandise or other materials.
(10) If Tenant desires telegraphic or telephonic connections or other
wire services, the Landlord reserves the right to direct where and how the wires
are to be introduced and instruments placed, and without such direction, no
boring or cutting for wires or instruments will be permitted. No spikes, hooks,
screws or nails or other devices shall be driven in the walls or woodwork of the
Suite without the prior consent of the Landlord, and no holes shall be drilled
in the floor, except for these matters approved by Landlord in Tenant's initial
decoration of the Suite or subsequently approved by Landlord in writing.
(11) No sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the outside or inside of the Building or Suite except on
corridor doors and then only at the expense of Tenant and of such color, size,
style and material as shall be approved by the Landlord. One or more directory
boards showing the names and Suite numbers of tenants (and Tenant's subtenants)
will be provided by the Landlord in the lobby of the Building.
(12) Except for standard computers, adding machines, calculators and
typewriters used on desks and similar office equipment, Landlord's prior written
consent shall be obtained for the installation, use or operation in the Building
of office or business machines, equipment of any type, any engine, motor or
machinery, any coffee-making or other electrical device of any nature, or use of
any source of power other than electricity for lighting or other
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<PAGE>
purposes.
(13) Safes and other objects of unusual size or weight will not be
allowed to be brought into or removed from the Building without the prior
written consent of Landlord and, where such consent is obtained, shall be
brought into or removed from Building at the time and place and in the manner
and shall be placed and maintained in such location and position in the Suite,
as Landlord may reasonably designate. All damage done to the Building or the
Suite by the delivery, installation, use or removal thereof shall be paid for by
Tenant.
(14) Freight, business equipment, furniture and other large or bulky
articles shall be delivered to and removed from the Building through such
entrance, in such manner and at such times as may be reasonably designated by
the Landlord. Packages of reasonable weight and size, which can be carried by
one person without interference with other passengers therein, may be moved up
and down on such elevator and at such times as may be specified by Landlord. All
damage to elevator or other portions of the Building caused by the moving or
carrying of articles therein or thereon shall be paid for by Tenant unless such
damage is due to insured casualty pursuant to Paragraph (13) of the Lease.
Landlord shall not be responsible for damage except for damage caused by
landlord's negligence, to any property of Tenant delivered to or left in any
receiving area or elsewhere in the Building or to any property moved or handled
anywhere in the Building by any representative of Landlord as an accommodation
to Tenant, Landlord being under no obligation to accept delivery of, or to move
or handle, any property of Tenant.
(15) Landlord shall furnish hot and cold running water. Water shall
not be left running except when in actual use. Lavatory and other plumbing
equipment shall not be used for any purpose other than that for which they are
intended, and no rubbish, papers or other foreign substances shall be thrown
therein. Any damage resulting to them from misuse of any nature or character
whatever shall be paid for by Tenant if the cause of the damage.
(16) Landlord shall have the right to control and operate the public
and common use portions and facilities of the Building in such manner as it
deems. No tenant shall invite to the Suite, or permit the visit of, persons in
such numbers or under such conditions as to interfere with the use and enjoyment
of the entrances, corridors, elevator and facilities of the Building, by other
tenants.
(17) No tenant shall obtain or accept for use in the Suite, ice,
coffee service, drinking water, barbering, boot-blacking or any other service
from any person not authorized by landlord in writing to furnish such services,
proved always that the charges for such services by persons authorized by
landlord are not excessive. A Tenant may contract for catering services serving
its Premises only. No vending machine or machines of any description shall be
installed, maintained or operated upon the Suite or anywhere in the Building by
Tenant without the written consent of the Landlord. Notwithstanding the
foregoing, Tenant shall have the right to install and operate coffee machines
and microwave ovens for the use of its subtenants, provided that the number and
location thereof are set forth in the plans and specifications for the
construction of the Premises and are approved in writing.
(18) No blinds, shades, curtains, draperies or similar items visible
from the exterior of the Building, and no awnings, aerials or other projections
shall be installed by any tenant on, over or around the exterior windows or
entrances of the Suite without the Landlord's prior written consent. No tenant
shall place any furniture or other items against or in close proximity to any
exterior glass so that the same are visible from the exterior of the Building.
Building standard blinds have been selected by Landlord.
(19) Landlord reserves the right to exclude or eject from the Building
all solicitors, canvassers and peddlers, or any person who, in the reasonable
judgment of Landlord's security officer or employee in charge, is under the
influence of liquor or drugs, or any person who shall in any manner do any
illegal act or any act in violation of any of the Rules and Regulations of the
Building.
(20) Tenant shall not use the name of the Building for any purpose
other than that of the business address of the Tenant and shall not use any
picture, cut or representation of the Building, or any part thereof, without the
Landlord's prior written consent, which consent shall not be unreasonably
withheld or delayed.
(21) Tenant shall not (a) attach or permit to be attached additional
locks or similar devices to any interior or exterior door or transom of the
Suite; (b) change existing
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interior or exterior locks or the mechanism thereof; or (c) make or permit to be
made any keys for any door thereof other than those provided by Landlord. If
more than two keys for one lock are desired, Landlord will provide them upon
payment therefor by Tenant. Each Tenant, upon the termination of its tenancy,
shall deliver to the Landlord all keys of offices, rooms and toilet rooms which
shall have been furnished the Tenant or which the Tenant shall have had made
and, in the event of loss of any keys so furnished, shall pay the Landlord
therefor.
(22) Requests for any special janitorial or other special requirements
of Tenant must be directed to the Building Office. Employees of the Landlord
shall not perform any work or do anything outside of Landlord's regular duties,
unless directed to do so by the Landlord, and no employee will admit any person
(Tenant or otherwise) without specific instructions from landlord.
(23) The fire stairs shall be used only for emergency exit purposes.
(24) Landlord shall have the right, exercisable with reasonable
written notice and without liability to Tenant, to change the name and the
street address of the Building of which the Suite is a part. Such written notice
shall be given prior to such change so as to minimize costs of the tenants of
the Building.
(25) Landlord reserves the right from time to time to make such
further reasonable Rules and Regulations and such reasonable amendments to these
initial and any subsequent Rules and Regulations as, in the judgment of the
Landlord, may be necessary or desirable for the safety, care and cleanliness of
the Building or the preservation of good order therein, or the maintenance and
promotion of the high class character and reputation of the Building or for any
other reasonable or desirable purpose. Such further Rules and Regulations and
such amendments shall be binding upon Tenant, effective upon its receipt of a
written copy thereof, provided the same are not inconsistent with Paragraph (28)
of this Lease.
(26) Landlord may provide and make available to Tenant the following
services (which services Tenant is not obligated to purchase):
a. Hanging pictures.
b. Special cleaning of carpets and other articles.
c. Special security services.
d. Special office layout changes.
e. Special decorating services.
Landlord's charges to tenant for such services shall be the actual cost to
landlord, plus 15% for administration and overhead. The list of available
services may be expanded or reduced by Landlord from time to time.
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<PAGE>
EXHIBIT C
To be attached.
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<PAGE>
EXHIBIT D
[DIAGRAM APPEARS HERE]
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<PAGE>
EXHIBIT E
To be attached.
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<PAGE>
SUPPLEMENT TO LEASE DATED APRIL 16, 1998
- --------------------------------------------------------------------------------
THIS SUPPLEMENT is annexed to and made a part of that certain Office Lease
dated April 16, 1998, by and between TOWNE REALTY, INC. as Landlord and SPR,
INC. as Tenant for the Premises located at N14 W24200 TOWER PLACE, 2/nd/ Floor,
Pewaukee, Wisconsin.
WITNESSETH:
WHEREAS, Landlord and Tenant mutually desire to add the following
provisions to such Office Lease under the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the covenants contained herein and other
good and valuable consideration, the parties agree as follows:
1 . It is understood and agreed that Landlord will not lease the vacant space
adjacent to The Premises, as outlined in blue on Exhibit "D" to any other
person without first offering same to Tenant hereunder. Tenant shall have
ten (10) days after being notified by Landlord of the availability of such
space within which to exercise its rights hereunder, by notifying Landlord
in writing of its intent to lease such space. Upon Tenant's exercise of its
right as provided herein, said additional space shall be deemed to
constitute part of the Premises referenced in this Lease, and the Lease of
such additional space shall be for the remainder of Tenant's Term and in
accordance with the terms and conditions herein; however, subject to
inclusion of a rental rate, term and Improvement Allowance which Landlord
is offering to the general public or a specific third party.
2. Provided and on condition that this Lease is not previously cancelled or
terminated by either party, by operation of law or otherwise, and that the
Tenant has, during the whole of the Term, complied with the conditions and
terms of the Lease, then the Tenant herein is given the right to renew this
Lease for an additional period of Five (5) years, subject to the following
terms and conditions:
(a) The right to renew the Lease shall be exercised, if at all, only by
written notice to Landlord not later than Twelve (12) months prior to
the expiration date of the initial Lease Term.
(b) The rents for the renewal period shall be mutually agreed upon by
both parties.
3. Landlord guarantees to Tenant Sixty (60) unreserved parking stalls for the
use by Tenant's employees and visitors. Furthermore, Landlord will work
with Tenant to acquire an additional twenty (20) parking spaces at Tenant's
sole cost and expense in the adjacent parking lots of either The Machine
Shed Restaurant or The Comfort Suites hotel for a frequency of three (3)
to four (4) times per year for a duration of six (6) weeks each time.
4. Landlord agrees that during the term of this Lease or any extension
thereof, no other portion of the Building will be Leased to any competitor
listed on the attached Exhibit "E", whose leased space is greater than
3,000 square feet without Tenant's permission.
5. It is understood and agreed that Tenant has the right to cancel this Lease
on July 1, 2001 by giving Landlord prior written notice no later than July
1, 2000. Along with said cancellation notice to Landlord, Tenant shall pay
to Landlord a cancellation fee in the amount of One Hundred Seventy Four
Thousand Nine Hundred Fifty Six and 00/100 ($174,956.00) Dollars.
6. All other terms and conditions of the original Lease, and any supplements,
amendments and addendum shall remain in effect and shall apply to said
Premises if not in conflict with the terms herein.
IN WITNESS WHEREOF, the parties have caused this Supplement to be executed
this 22/nd/ day of April, 1998, at Milwaukee, Wisconsin.
Landlord: TOWNE REALTY, INC. Tenant: SPR, INC.
By: /s/ [ILLEGIBLE]^^ By: /s/ [ILLEGIBLE]^^
---------------------------- ------------------------------
Vice President Executive Vice President
By:____________________________ By:______________________________
-22-
<PAGE>
DECLARATION OF COMMENCEMENT
OF LEASE
WHEREAS, SHERIDAN IRVING, L.P., hereinafter known as Landlord, and SPR Inc.
Hereinafter known as Tenant, did enter into that certain Lease dated January 26,
1998 and as amended on March 16, 1998 covering leased premises of 7,526
rentable square feet located in Suite 600 at 800 West Airport Freeway, Irving,
Texas 75062, and
NOW THEREFORE, Landlord and Tenant do agree and declare that the Commencement
Date of said Lease is hereby set as April 1, 1998: the stated sixty (60) month
-------------
term of said Lease expires on March 31, 2003. Rental shall commence to be due
--------------
and payable on April 1, 1998.
--------------
AS, Tenant is obligated to obtain certain insurance under the Lease, a
Certificate of Insurance is hereby provided by Tenant attached to this
Declaration:
Agreed and accepted this 14th day of April 1998.
LESSEE: SHERIDAN IRVING, L.P.
By: Sheridan Mgmt. Corp., G.P.
BY: [ILLEGIBLE]^^ BY: /s/ Laurie M. Adams
------------------------- --------------------
BY:_________________________ BY: Laurie M. Adams, Vice President
-------------------------------
<PAGE>
The Sheridan Group
User: SHERRI Occupant Ledger Page: 3
Unit Reference Number: 301-600 Occupant Type: Current
<TABLE>
<CAPTION>
Charge Schedule
- ---------- ------------------- --------------- ------------- ------------- -------------
Charge Charge Charge Start Stop Charge
Code Description Frequency Date Date Amount
- ---------- ------------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
RNT Monthly Rent M 4/01/98 3/31/01 6,738.61
RNT Monthly Rent M 3/01/01 6,942.19
This tenant has no lease options.
</TABLE>
Chronological History
<TABLE>
<CAPTION>
----- ----- ----------------------------------- -------------- --------------
Date Code Description Amount Balance
----- ----- ----------------------------------- -------------- --------------
<S> <C> <C> <C> <C>
2/05/98 SDA Pymt. Batch 435 Check 17769 (6,738.61) (6,738.61)
2/05/98 SDA Security Deposit Adjustment 6,738.61 0.00
3/01/98 RNT Monthly Rent 6,738.61 6,738.61
3/20/98 RNT Billing Adjustment 6,7381.61) 0.00
3/30/98 OCR Rea. Batch 435 Check 17769 (6,738.61) (6,738.61)
3/30/98 SDA Rea. Batch 435 Check 17769 6,738.61 0.00
3/30/98 SDA Pymt. Batch 736 Check 18377 6,942.19 (6,942.19)
3/30/98 SDA Security Deposit Adjustment 6,942.19 0.00
4/01/98 RNT Monthly Rent 6,738.61 6,738.61
4/07/98 KEY Locks and Keys 125.78 6,864.39
4/08/98 SEC Access Card 10.00 6,874.39
4/13/98 SDA Pymt. Batch 857 Check 18562 (6,738.61) 135.78
4/14/98 OCR Deposit Decrease Pmt. SDA (6,738.61) (6,602.83)
4/16/98 KEY Locks and Keys 85.52 (6,517.31)
5/01/98 RNT Monthly Rent 6,738.61 221.30
5/01/98 TI Change Order N. Chavez Lewis 1,256.78 1,478.08
6/01/98 RNT Monthly Rent 6,738.61 8,216.69
6/05/98 SIG Access Cards 6 & $10 each 60.00 8,276.69
6/08/98 KEY Pymt. Batch 117 Check 19295 (6,959.91) 1,316.78
7/01/98 RNT Monthly Rent 6,738.61 8,055.39
7/06/98 RNT Pymt. Batch 233 Check 19685 (8,055.39) 0.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SPR INC. 017769
- ---------------------------------------------------------------------------------------------------------------
YOUR INVOICE NO. INVOICE DATE AMOUNT DISCOUNT NET AMOUNT CHECK TOTAL
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHERIDAN IRVING, L.P.
1800 GLEARM PL.
$6,738.61
DEPOSIT
</TABLE>
[LOGO] SPR INC. CHECK NO. 017769
DATE 2-1-98
-------------------
AMOUNT OF CHECK
$6,738.61****
-------------------
PAY TO THE ORDER OF
SHERIDAN IRVING, L.P.
1800 GLENARM PLACE #700
DENVER CO 80202 /s/ Stephen T. Gambill
---------------------------
AMERICAN NATIONAL BANK 2-77/710
& TRUST CO. OF CHICAGO /s/ [ILLEGIBLE]^^
---------------------------
<PAGE>
<TABLE>
<CAPTION>
SPR INC. 018377
- -----------------------------------------------------------------------------------------------
YOUR INVOICE NO. INVOICE DATE AMOUNT DISCOUNT NET AMOUNT CHECK TOTAL
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DEPOSIT 3/25/98 6,942.19 .00 6,942.19
APR98 RENT 3/25/98 3,410.00 .00 3,410.00
TOTALS 10,352.19 .00 10,352.19
</TABLE>
[LOGO] SPR INC.
Suite 407 CHECK NO. 018377
7616 LBJ Freeway
Dallas TX 75251
DATE 3/26/98
-------------------
AMOUNT OF CHECK
$10,352.19**
-------------------
PAY TO THE ORDER OF
SHERIDAN IRVING, L.P.
1800 GLENARM PLACE ____________________
SUITE 700
DENVER CO 80202
AMERICAN NATIONAL BANK 2-77/710
& TRUST CO. OF CHICAGO /s/ [ILLEGIBLE]^^
-------------------
<PAGE>
7/28/98 The Sheridan Group 1:28 pm
User: SHERRI Occupant Ledger Page: 1
Unit Reference Number: 301-600 Occupant Type: Current
Property Name : Sheridan Irving, LP ID: 1057102000584
- ---------------------------------------------------------------------------
Company Name : SPR, Inc. Phone Number :
Address 1 : 800 W. Airport Freeway Unit Number : 600
Address 2 : Suite 600
City, State Zip : Irving, TX 75062
D/B/A Name :
Open Items : 0.00
Open Credits : - 0.00
=================
Current Balance : = 0.00
Contact : Percentage Lease : No
Security Deposit : 6,942.19 Percentage 0.00
Other Deposit : 0.00 Base Sales Amount 0.00
Square Feet (GLA) : 0 Billing Month : 0
Usable Sq. Ft. : 0 Annual Sales 0.00
Gross Sq. Ft. : 0
Prorata Sq. Ft. : 0
Parking Information :
Number of Reserved Parking Spaces : 0
Storage Space : n
- ------------------------------------------------------------------------------
--------------[ Bill To ]----------------
Effective Date : 3/01/98
Expiration Date : 2/28/03
Move-In Date : 3/01/98
Move-Out Date :
Option Date : 2/28/03 -----------------------------------------
--------- Commission Info ---------
Lease Term :
Lease Type : Standard : y
Base Year : 98 Amount : 0.00
Base Year Rent : 0.00 Agent :
- ----------------------- Concession Information -------------------------------
Term Amount
Free Rent : n 0 0.00
Lease Buyout : n 0 0.00
Moving Expenses : n 0.00
Other : n 0.00
- --- Tenant Improvement Allowances ---
Standard Allowance Per S.F. : 0
Excess Allowance Per S.F. : 0
Comments:
<PAGE>
SALLIS COMMERCIAL
R e a l E s t a t e, I n c .
February 5, 1998
Mr. Stephen Gambill
SPR Inc.
2015 Spring Road, 7/th/ floor
Oak Brook, IL 60523
Dear Stephen:
As stated in Exhibit "C" in the lease document between Sheridan Irving, L.P.
("Landlord") and SPR Inc. ("Tenant"), Tenant has a Right of First Refusal on the
adjacent 2,640 rentable square feet on the 6/th/ floor. Please be advised that a
letter of intent for that remaining space has been received and reviewed by
Landlord and such terms have been deemed acceptable.
Tenant shall have until Tuesday, February 10, 1998 to accept or reject the
space. No response from Tenant by February 10, 1998 will be deemed a rejection
of the space and Landlord will be free to lease the space to the interested
party.
The terms applicable to Lessee's acceptance of the space are as follows:
Effective Date: 4/1/98
Expiration Date: 2/28/2003
Rental: Months Rental Rate Monthly
------ ----------- -------
1-36 $15.50 $3,410.00
37-60 $16.00 $3,520.00
Tenant Improvements: $12.00 per rentable square foot ($31,680.00).
General: All other terms and conditions of the original
lease shall apply
Please indicate below if Tenant intends to execute its right.
Best regards,
Lawson Williams
/s/ Lawson Williams
Agreed and accepted
/s/ Stephen T Gambill
- ----------------------------
cc: Laurie Adams
Hal Stahnke
2501 State Street Dallas, Texas 75201
Telephone 214/855-5004 Facsimile 214/855-9177
<PAGE>
Sheridan Management Corp.
1800 Glenarm Place, Suite 1200
Denver, CO 80202
303-297-1800
Fax: 303-296-7353
The Sheridan Group
- --------------------------------------------------------------------------------
March 16, 1998
Mr. Stephen T. Gambill
Chief Financial Officer
SPR
2015 Spring Road, 7/th/ Floor
Oak Brook, IL 60523
Dear Stephen:
Enclosed is a copy of the executed First Amendment for your lease at 800
W. Airport Freeway in Irving, TX. Only one original was sent to me, I kept
that and a photocopy is returned for your file.
Thank you for your great business.
Sincerely,
SHERIDAN IRVING, L.P.
By: Sheridan Management Corp., G.P.
/s/ Laurie M. Adams
Laurie M. Adams
Vice President
Enc.
<PAGE>
First Amendment To Lease
This First Amendment is entered into between Sheridan Irving, L.P. ("Lessor")
and SPR Inc. ("Lessee") for and in consideration of ten dollars ($10.00) and
other good and valuable considerate receipt of which is hereby acknowledged:
Witnesseth
1. Lessor and Lessee hereby confirm and ratify, except as modified below, all
of the terms, conditions and covenants in that certain written Lease
Agreement, dated January 26, 1998.
2. Lessor and Lessee agree that Lessee wishes to lease the adjacent 2,645
rentable square feet located in Suite 605, the ("Expansion Space") for a
term of five (5) years commencing on April 1, 1998 and expiring on March
31, 2003.
3. The rental rate for the Expansion Space will be as follows:
Years Rate Monthly
----- ---- -------
1-3 $15.50 $3,416.46
4-5 $16.00 $3,526.67
4. Lessor will provide Lessee with an improvement allowance of $31,740.00 to
improve the Premises. Any costs incurred above the allowance will be paid
directly to Lessor by Lessee or amortized into Tenant's rental rate at ten
percent (10%) per annum.
5. Lessor will provide Lessee with an additional eight (8) parking spaces.
6. Lessee's pro rata share will become 5.33%
7. All other terms and conditions of the original Lease Agreement shall remain
in full force and effect, except as modified herein
8. This Amendment to Lease is only binding upon execution by both Lessor and
Lessee.
Agreed to this 10 day of March, 1998.
LESSOR LESSEE
SHERIDAN IRVING, L.P., a Texas SPR Inc.
Limited Partnership
By Sheridan Management Corp., G.P.
By: /s/ Laurie M. Adams By: Stephen T. Gambill
--------------------------------- --------------------------
Laurie M Adams, Vice President Stephen T. Gambill
3-16-98 VP & Chief Financial
---------------------------------- --------------------------
Officer
------------
(Type Name and Title)
<PAGE>
COMMERCIAL
LEASE AGREEMENT
ARTICLE 1.00 BASIC LEASE TERMS
1.01 Parties. This Lease Agreement ("Lease") is entered into this 26 day of
January, 1998 by and between the following Lessor and Lessee.
Sheridan Irving, L.P. ("Lessor")
SPR Inc., a Delaware Corporation (" Lessee")
1.02 Leased Premises. In consideration of the rents, terms, provisions and
covenants of this Lease, Lessor hereby leases, lets and demises to Lessee the
following described premises ("leased premises"): 4,886 square feet of rentable
area on the 6/th/ floor known as Suite 600. The term "rentable area" is defined
on Exhibit "A" attached hereto and made a part hereof. The leased premises are
situated within the building located at 800 West Airport Freeway, Irving, Texas,
75065, and a plan of the floor or floors on which the leased premises are
located is made a part of Exhibit "A".
1.03 Term. Subject to and upon the conditions set forth herein, the
term of this Lease shall be for five (5) years and zero (0) months and shall
commence on March 1, 1998 the ("commencement date") and shall terminate
February 28, 2003 (60) months thereafter. Lessor shall permit Lessee or Lessee's
employees, agents, suppliers, contractors and workmen to enter the leased
premises prior to the commencement of the Term so long as Lessee has provided
Lessor a certificate of insurance as provided for in paragraph 7.08 prior
to entering the leased premises so as to enable Lessee to perform such other
acts as may be required by Lessee to make the leased premises ready for
Lessee's occupancy. Lessee agrees that Lessee and its employees, agents,
suppliers, contractors and workmen and their activities in the leased
premises and Building will not interfere with or delay the completion of
the Lessor Work to be performed by Lessor and will not interfere with other
activities of either Lessor or other occupants of the Building. Lessor shall
have the right to discontinue such entry upon a written notice of not less
than twenty-four (24) hours to Lessee if Lessor determines that any such
interference or delay has been or may be caused. Notwithstanding anything
contained herein, Lessee agrees that any such entry into the leased premises
shall be at Lessee's own risk and Lessor shall not be liable in any way for
injury, loss or damage which may occur to any person, or to the Lessee's
property or installations made in the leased premises and Lessee agrees to
protect, defend, indemnify and save Lessor harmless from all liabilities,
costs, damages, fees and expenses arising out of or connected with the
activities of Lessee or its employees, agents, contractors, suppliers or workmen
in or about the leased premises or Building. All such work by Lessee shall be
performed at its sole cost and expense and in accordance with the terms hereof.
1.4 Base Rent.
Months Rental Rate Monthly
1-36 16.55 (full service) $6,738.61
37-60 17.05 (full service) $6,942.19
1.05 Operating Expense Payment. Per Section 2.02 hereof.
1.06 Addresses.
LESSOR LESSEE
Sheridan Irving, L.P. SPR Inc.
- ------------------------------- -------------------------------------
1800 Glenarm Place, #700 800 West Airport Fwy, Suite 600, LB #
- ------------------------------- -------------------------------------
Denver, CO 80202 Irving, Texas 75062
- ------------------------------- -------------------------------------
1.7 Permitted Use. General Office
--------------
1
INITIALS Stg Lma
--- ---
<PAGE>
First Amendment To Lease
This First Amendment is entered into between Sheridan Irving, L.P. ("Lessor")
and SPR Inc. ("Lessee") for and in consideration of ten dollars ($10.00) and
other good and valuable considerate receipt of which is hereby acknowledged:
Witnesseth
1. Lessor and Lessee hereby confirm and ratify, except as modified below, all of
the terms, conditions and covenants in that certain written Lease Agreement,
dated January 26, 1998.
2. Lessor and Lessee agree that Lessee wishes to lease the adjacent 2,645
rentable square feet located in Suite 605, the ("Expansion Space") for a term
of five (5) years commencing on April 1, 1998 and expiring on March 31, 2003.
3. The rental rate for the Expansion Space will be as follows:
Years Rate Monthly
----- ---- -------
1-3 $15.50 $3,416.46
4-5 $16.00 $3,526.67
4. Lessor will provide Lessee with an improvement allowance of $31,740.00 to
improve the Premises. Any costs incurred above the allowance will be paid
directly to Lessor by Lessee or amortized into Tenant's rental rate at ten
percent (10%) per annum.
5. Lessor will provide Lessee with an additional eight (8) parking spaces.
6. Lessee's pro rata share will become 5.33%
7. All other terms and conditions of the original Lease Agreement shall remain
in full force and effect, except as modified herein
8. This Amendment to Lease is only binding upon execution by both Lessor and
Lessee.
Agreed to this 10 day of March, 1998.
LESSOR LESSEE
SHERIDAN IRVING, L.P., a Texas SPR Inc.
Limited Partnership
By Sheridan Management Corp., G.P.
By: /s/ Laurie M Adams By: /s/ Stephen T Gambill
--------------------------------- -----------------------------
Laurie M Adams, Vice President Stephen T Gambill
3-16-98 VP + Chief Financial Officer
--------------------------------- -----------------------------
(Type Name and Title)
<PAGE>
COMMERCIAL
LEASE AGREEMENT
ARTICLE 1.00 BASIC LEASE TERMS
1.01 Parties. This Lease Agreement ("Lease") is entered into this 3/rd/
day of February, 1998 by and between the following Lessor and Lessee:
Sheridan Irving, L.P. ("Lessor")
-------------------------------------------
SPR Inc., a Delaware Corporation ("Lessee")
-------------------------------------------
1.02 Leased Premises. In consideration of the rents, terms, provisions
and covenants of this Lease, Lessor hereby leases, lets and demises to Lessee
the following described premises ("leased premises"): 4,886 square feet of
rentable area on the 6/th/ floor known as Suite 600. The term "rentable area" is
defined on Exhibit "A" attached hereto and made a part hereof. The leased
premises are situated within the building located at 800 West Airport Freeway,
Irving, Texas, 75065, and a plan of the floor or floors on which the leased
premises are located is made a part of Exhibit "A".
1.03 Term. Subject to and upon the conditions set forth herein, the term
of this Lease shall be for five (5) years and zero (0) months and shall commence
on March 1, 1998 the ("commencement date") and shall terminate February 28, 2003
(60) months thereafter. Lessor shall permit Lessee or Lessee's employees,
agents, suppliers, contractors and workmen to enter the leased premises prior to
the commencement of the Term so long as Lessee has provided Lessor a certificate
of insurance as provided for in paragraph 7.08 prior to entering the leased
premises so as to enable Lessee to perform such other acts as may be required by
Lessee to make the leased premises ready for Lessee's occupancy. Lessee agrees
that Lessee and its employees, agents, suppliers, contractors and workmen and
their activities in the leased premises and Building will not interfere with or
delay the completion of the Lessor Work to be performed by Lessor and will not
interfere with other activities of either Lessor or other occupants of the
Building. Lessor shall have the right to discontinue such entry upon a written
notice of not less than twenty-four (24) hours to Lessee if Lessor determines
that any such interference or delay has been or may be caused. Notwithstanding
anything contained herein, Lessee agrees that any such entry into the leased
premises shall be at Lessee's own risk and Lessor shall not be liable in any way
for injury, loss or damage which may occur to any person, or to the Lessee's
property or installations made in the leased premises and Lessee agrees to
protect, defend, indemnify and save Lessor harmless from all liabilities, costs,
damages, fees and expenses arising out of or connected with the activities of
Lessee or its employees, agents, contractors, suppliers or workmen in or about
the leased premises or Building. All such work by Lessee shall be performed at
its sole cost and expense and in accordance with the terms hereof.
1.4 Base Rent.
Months Rental Rate Monthly
1-36 16.55 (full service) $6,738.61
37-60 17.05 (full service) $6,942.19
1.05 Operating Expense Payment. Per Section 2.02 hereof.
1.06 Addresses.
LESSOR LESSEE
Sheridan Irving, L.P. SPR Inc.
- ------------------------------------- -------------------------------------
1800 Glenarm Place, #700 800 West Airport Fwy, Suite 600, LB#
- ------------------------------------- -------------------------------------
Denver, CO 80202 Irving, Texas 75062
- ------------------------------------- -------------------------------------
1.7 Permitted Use. General Office
--------------
1
INITIALS STG LMA
--- ---
<PAGE>
1.08 Security Deposit $ 6,942.19; payable by Lessee upon execution of
this lease.
ARTICLE 2.00 RENT
2.01 Base Rent. Lessee agrees to pay monthly as base rent during the term
of this Lease, without deduction, set-off or counterclaim the sum of money set
forth in section 1.04 of this Lease, which amount shall be payable to Lessor at
the address shown above. One monthly installment of rent shall be due and
payable on the date of execution of this Lease by Lessee for the first month's
rent and a like monthly installment shall be due and payable on or before the
first day of each calendar month succeeding the commencement date or completion
date during the term of this Lease, provided, that if the commencement date or
the completion date should be a date other than the first day of a calendar
month, the monthly rental set forth above shall be prorated to the end of that
calendar month, and all succeeding installments of rent shall be payable on or
before the first day of each succeeding calendar month during the term of this
Lease. Lessee shall pay, as additional rental, all other sums due under this
Lease. A rent concession or waiver of the base rent shall not relieve Lessee of
any obligation to pay any other charge due and payable under this Lease,
including without limitation, any sum due under section 1.05.
2.02 Operating Expense Payment. Lessee shall also pay as additional
rental Lessee's pro rata share of the amount, if any, by which (i) the operating
expenses (defined in Section 2.03 hereof) exceed the actual per square foot
building operating expenses for 1998 as a base year based on the rentable area
of the building (the "Operating Expense Obligation"). Lessor shall invoice
Lessee monthly for monthly installments of Lessee's Operating Expenses
Obligation during the first calendar year of this Lease (which amount shall be
adjusted at the beginning of each subsequent calendar year based upon
anticipated operating costs for such year). Lessor shall, within six months
following the close of a calendar year for which additional rental is due under
this section, invoice Lessee for the additional rent. If this Lease shall
terminate on a day other than the last day of a calendar year, the amount of any
additional rental payable by Lessee applicable to the year in which such
termination shall occur shall be prorated on the ratio that the number of days
from the commencement of such calendar year and to including such termination
date bears to 365. If the invoice delivered within six months following the
close of a calendar year in accordance with this section shows an amount
owing by Lessee that is less than the sum of the monthly payments made by Lessee
in the previous calendar year, the invoice shall be accompanied by a refund of
the excess from Lessor to Lessee. During the year in which this Lease
terminates, Lessor shall have the option to invoice Lessee for Lessee's
Operating Expenses Obligation based upon Lessee's previous year's Operating
Expenses Obligation; Lessor shall invoice Lessee under this option within thirty
days prior to the termination of this Lease or at any time thereafter. Lessee
shall have the right, at its own expense and within reasonable time, to audit
Lessor's books relevant to the additional rent, and Lessee agrees to pay the
additional rent within ten days following the receipt of the invoice. The term
"Lessee's pro rata share" is defined on Exhibit "A" attached hereto. If after
audit, Lessee determines the obligation was overstated, Lessee shall be entitled
to a refund of the overstatement. If overstatement exceeds three percent (3%) of
amount due, Lessor shall pay cost of audit.
2.03 Operating Expenses. The term "operating expenses" includes all
expenses incurred by Lessor with respect to the maintenance and operation of the
building and project of which the leased premises are a part, including, but not
limited to, the following: (1) maintenance and repair costs; (2) electricity,
fuel, water, sewer, gas and other utility charges; (3) security, window washing,
janitorial services, trash and snow removal; (4) landscaping and pest control;
(5) reasonable (consistent with like building in the market) management fees,
wages and fringe benefits payable to on-site building manager; (6) all services,
supplies, repairs, replacements or other expenses for maintaining and operating
the building or project including parking or common areas; (7) the cost,
including interest, amortized over its useful life, of installation of any
device or other equipment which improves the operating efficiency of any system
within the building of which the leased premises forms a part; (8) all real
property taxes and installments of special assessments, including dues and
assessments by means of deed restrictions and/or owners' associations which
accrue against the building and project of which the leased premises are a part
during the term of this Lease; (9) all insurance premiums Lessor is required to
pay or deems necessary to pay, including public liability insurance, with
respect to the building; (10) workmen's
2
INITIALS STG LMA
--- ---
<PAGE>
compensation insurance, employment taxes, uniforms and equipment for employees
and agents referenced in item (5) above; (11) fire protection; and (12)
maintenance, repair and replacement of water, electrical, sanitary sewer, storm
sewer and other utility lines, pipes and conduits serving the building and
project. The term "operating expenses" does not include the following; (1)
repairs, restoration or other work occasioned by fire, wind, the elements or
other casualty; (2) income and franchise taxes of Lessor; (3) expenses incurred
in leasing to or procuring of tenants, leasing commissions, advertising expenses
and expenses for the renovating of space for new tenants; (4) interest or
principal payments on any mortgage or other indebtedness of Lessor; (5) any
depreciation allowance or expense; (6) capital improvements to the Building
other than as described in (7) above, including those required by law, (7)
abatement of environmental hazards or materials.
2.04 Late Payment Charge. Other remedies for nonpayment of rent
notwithstanding, if the monthly payment due per sections 2.01 and 2.02 above are
not received by Lessor on or before the fifth day of the month for which the
rent is due, or if any other payment due Lessor by Lessee is not received by
Lessor on or before the fifth day of the month next following the month in which
Lessee was invoiced, to the maximum extent permitted by applicable law, a
service charge of up to three percent (3%) per month until paid of such past due
amount shall, at Lessor's option, be assessed and shall be immediately due and
payable by Lessee in addition to such other amount owed under this Lease.
2.05 Increase in Insurance Premiums. If any increase in the fire
insurance premiums paid by Lessor for the building is caused by Lessee's use of
the leased premises in a manner other than as set forth in section 1.07, then
Lessee shall pay as additional rent the amount of such increase to Lessor.
2.06 Security Deposit. On the date of execution of this Lease by Lessee,
there shall be due and payable by Lessee a security deposit in an amount
specified in section 1.08 above, 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 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 after notice and
opportunity to cure as provided herein, 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, and 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 an amount sufficient to restore the security deposit to its
original amount.
2.07 Holding Over. In the event of holding over by Lessee after the
expiration or termination of this Lease, the hold over shall be as a tenant at
will and all of the other 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 hold over a monthly amount equal to 1.5 times the monthly rent which
would have been payable by Lessee had the hold over period been a part of the
original term of this Lease. Lessee agrees to vacate and deliver the lease
premises to Lessor upon Lessee's receipt of notice from Lessor to vacate. The
rental payable during the hold over period shall be payable to Lessor on demand.
No holding over by Lessee, whether with or without the consent of Lessor, shall
operate to extend the term of this Lease.
ARTICLE 3.00 OCCUPANCY AND USE
3.01 Use. Lessee warrants and represents to Lessor that the leased
premises shall be used and occupied only for the purpose as set forth in section
1.07. Lessee shall occupy the Leased premises, conduct its business and control
its agents, employees, invitees and visitors in such a manner as is lawful,
reputable and will not create any nuisance. Lessee shall not permit any
operation which emits any odor or matter which intrudes into other portions of
the building, use any apparatus or machine which makes undue noise or causes
vibration in any portion of the building or otherwise interfere with, annoy or
disturb any other lessee in its normal business operations or Lessor in its
management of the building. Lessee shall not commit or permit any
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waste on the leased premises, permit the leased premises to be used in any way
which would, in the reasonable opinion of Lessor, be extra hazardous on
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account of fire or which would in any way increase or render void the fire
insurance on the building.
3.02 Signs. No sign of any type or description visible from the exterior
of the leased premises shall be erected, place or painted in or about the
leased premises or project except those signs and sign locations submitted to
Lessor in writing and approved by Lessor in writing, not to be unreasonably
withheld, and which signs and sign locations are in conformance with Lessor's
sign criteria established for the project.
3.03 Compliance with Laws, Rules and Regulations. Lessee, at Lessee's
sole cost and expense, shall comply with all laws, ordinances, orders, rules and
regulations of state, federal, municipal or other agencies or bodies having
jurisdiction relating to the use, condition and occupancy of the leased premises
arising directly from Lessee's use thereof, occurring after the commencement
date, and unrelated to environmental abatement or sprinklers, including, without
limitation, the Americans with Disabilities Act and all regulations promulgated
thereunder or pursuant thereto. Lessee will comply with the rules of the
building adopted by Lessor which are set forth on Exhibit B attached to this
Lease. Lessor shall have the right at all times to change and amend the rules
and regulations in any reasonable manner as may be deemed advisable for the
safety, care, cleanliness, preservation of good order and operation or use of
the building or the leased premises. All changes and amendments to the rules and
regulations of the building will be sent by Lessor to Lessee in writing and
shall thereafter be carried out and observed by Lessee. Rules and regulations
shall be enforced in a non-discriminatory manner.
3.04 Warranty of Possession. Lessor warrants that it has the right and
authority to execute this Lease, and Lessee, upon payment of the required
rents and subject to the terms, conditions, covenants and agreements contained
in this Lease, shall have possession of the leased premises during the full
term of this Lease as well as any extension or renewal thereof.
3.05 Third Party Interference. Lessor shall not be responsible for the
acts or omissions of any other lessee or third party that may interfere with
Lessee's use and enjoyment of the leased premises, provided Lessor shall use
reasonable efforts to respond to Lessee complaints regarding violations by third
parties of established rules and regulations.
3.06 Lessor's Right of Access. Lessor or its authorized agents shall at
any and all reasonable times following reasonable notice to Lessee have the
right to enter the leased premises to inspect the same, to supply janitorial
service or any other service to be provided by Lessor, to show during the last
six months of the term the leased premises to prospective purchasers or lessees,
and to alter, improve or repair the leased premises or any other portion of the
building. Lessee hereby waives any claim for damages for injury or inconvenience
to or interference with Lessee's business, any loss of occupancy or use of the
leased premises, and any other loss occasioned thereby except to the extent
resulting from the negligent or willful misconduct of Lessor, its employees and
agents. Lessor shall at all times have and retain a key with which to unlock all
of the doors in, upon and about the leased premises. Lessee shall not change
Lessor's lock system or in any other manner prohibit Lessor from entering the
leased premises. Lessor shall have the right to use any and all means which
Lessor may deem proper to open any door in an emergency without liability
therefor. In exercising the foregoing rights, Lessor shall use reasonable
efforts to minimize interference with Lessee's use and enjoyment of the leased
premises.
ARTICLE 4.00 UTILITIES AND SERVICE
4.01 Building Services. Lessor shall furnish water and electricity for
Lessee during the term of this Lease. Lessee shall pay all telephone charges.
Lessor shall furnish Lessee hot and cold water at those points of supply
provided for general use of other lessees in the building, central heating and
air conditioning in season (at times Lessor normally furnishes these services to
other lessees in the building, and at temperatures and in amounts as are
considered by Lessor to be standard, such serve on Saturday afternoons, Sundays,
evenings and holidays to be furnished only upon the request of Lessee, who shall
bear the entire cost reasonably set for the leased premises). Lessor shall also
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furnish routine maintenance, painting and electric lighting service for
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all public areas and special service areas of the building in the manner and to
the extent deemed by Lessor to be standard. Lessor shall provide automatic
elevators available for use on a 7/24 basis. Lessor may, in its sole discretion,
provide additional services not enumerated herein. Failure by Lessor to any
extent to furnish these defined services or any other services not enumerated,
or any cessation thereof, shall not render Lessor liable in any respect for
damages to either person or property, be construed as an eviction of Lessee,
work an abatement of rent or relieve Lessee from fulfillment of any covenant in
this Lease except as allowed by law. Should any of the building equipment or
machinery break down, or for any cause cease to function properly, Lessor shall
use reasonable diligence to repair the same promptly, but Lessee shall have no
claim for rebate of rent on account of any interruption in service occasioned
from the repairs. Notwithstanding the foregoing to the contrary, in the event
any interruption in utility service due to the negligence of the Landlord causes
the leased premises to be rendered untenantable (meaning that Lessee is unable
to use such space in the formal course of its business) for more than five (5)
consecutive days after notice from Lessee to Lessor that such utility service
has been interrupted ("Interruption Notice"), rent shall abate on a per diem
basis for each day after such five (5) day period during which the leased
premises remain untenantable. If an interruption in utility service causes the
leased premises to be rendered untenantable for more than one hundred eighty
(180) consecutive days after Lessee gives Lessor an Interruption Notice, Lessee
may, at its option, terminate this Lease by giving notice to Lessor within five
(5) days after such one hundred eighty (180) day period. Lessor reserves the
right from time to time to make reasonable changes in the delivery of utilities
and services to the building not depriving Lessee of benefit.
4.02 Theft or Burglary. Lessor shall not be liable to Lessee for losses due
to theft or burglary, or for damages done by unauthorized persons to the
leased premises or the building. Lessor shall provide reasonable security
measures consistent with like buildings in the market.
4.03 Janitorial Service. Lessor shall furnish janitorial services to the
leased premises and public areas of the building in amounts and quality
consistent with services provided to like buildings in the area five times per
week during the term of this Lease, excluding holidays. Lessor shall not provide
janitorial service to kitchen, bathrooms or storage areas included in the leased
premises.
4.04 Excessive Utility Consumption. Lessee shall pay all utility costs
occasioned by electrodata processing machines, telephone equipment, computers
and other equipment of high electrical consumption, including without
limitation, the cost of installing, servicing and maintaining any special or
additional inside or outside wiring or lines, meters or submeters, transformers,
poles, air conditioning costs, or the cost of any other equipment necessary to
increase the amount or type of electricity or power available to the leased
premises. Lessee shall not install any such equipment without the prior written
consent of Lessor, which consent shall not be unreasonable withheld.
Lessor may, among other conditions, require as a condition to its consent
for the installation of such equipment or machinery, payment by Lessee as
additional rent for excess consumption of electricity that may be occasioned by
the operation of said equipment or machinery. Lessor may make periodic
inspections of the leased premises at reasonable times to determine that
Lessee's electrically operated equipment and machinery complies with the
provisions of this section.
The total average consumption of electricity, including lighting, in excess
of five (5) watts per square foot for the leased premises shall be deemed
excessive. Additionally, any individual piece of electrically operated machinery
or equipment having a name plate rating in excess of two (2) kilowatts shall
also be deemed as requiring excess electric current. At Lessee's option and
expense, Lessee may install an electrical meter to track such costs.
Lessor may require that one or more separate meters be installed to record
the consumption or use of electricity, or shall have the right to cause a
reputable independent electrical engineer to survey and determine the quantity
of electricity consumed by such excessive use. The cost of any such survey or
meters and of installation, maintenance and repair thereof shall be paid for by
Lessee. Lessee agrees to pay Lessor (or the utility company, if direct service
is provided by the utility company), promptly upon demand therefor, for all such
electric consumption and demand as shown by said meters, or a flat monthly
charge determined by the
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survey, as applicable, at the rates charged for such service by the local public
utility company. If Lessee's cost of electricity based on meter readings is to
be paid to Lessor, Lessee shall pay a service charge related thereto.
Lessor shall not be liable for its failure to maintain comfortable
atmospheric conditions in all or any portion of the leased premises due to heat
generated by any equipment, machinery or additional lighting installed by
Lessee (with or without Lessor's consent) that exceeds design capabilities for
the building of which the leased premises are a part. If Lessee desires
additional cooling to offset excessive heat generated by such equipment or
machinery, Lessee shall pay for auxiliary cooling equipment, and its operating
costs including without limitation electricity, gas, oil and water, or for
excess electrical consumption by the existing cooling system, as appropriate.
4.05 Window Coverings. Lessor shall furnish and install window coverings on
all exterior windows to maintain a uniform exterior appearance. Lessee shall not
remove or replace these window coverings or install any other window covering
which would affect the exterior appearance of the building. Lessee may install
lined or unlined over draperies on the interior sides of the Lessor furnished
window coverings, for interior appearance or to reduce light transmissions,
provided such over draperies do not affect the exterior appearance of the
building, or affect the operation of the building's heating, ventilating and air
conditioning systems.
4.06 Charge for Service. All costs of Lessor for providing the services set
forth in Article 4.00 (except those charges paid by Lessee pursuant to section
4.04) shall be subject to the additional rent provisions in section 2.02.
ARTICLE 5.00 REPAIRS AND MAINTENANCE
5.01 Lessor Repairs. Unless otherwise expressly provided herein, Lessor
shall not be required to make any improvements, replacements or repairs of any
kind or character to the leased premises or to the building and project of which
the leased premises are a part during the term of this Lease, except such
repairs as are set forth in this section. Lessor shall maintain only the roof,
foundation, parking and common areas, the structural soundness of the exterior
walls, doors, corridors, windows and other structures or equipment serving the
leased premises. Lessor's cost of maintaining and repairing the items set forth
in this section are subject to the additional rent provisions in section 2.02.
Lessor shall not be liable to Lessee, except as expressly provided in this
Lease, for any damage or inconvenience, 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, provided Lessor shall use reasonable
efforts to minimize interference with Lessee's use and enjoyment of the
Premises.
5.02 Lessee Repairs. Lessee shall, at its own cost and expense, repair or
replace any damage or injury to all or any part of the leased premises caused by
Lessee or Lessee's agents, employees, invitees, licensees or visitors, after
having obtained Lessor's approval per section 6.02 hereof; provided, however,
if Lessee fails to make the repairs or replacements promptly after notice and
opportunity to cure, Lessor may, at its option, make the repairs or replacements
and the costs of such repairs or replacements shall be charged to Lessee as
additional rent and shall become payable by Lessee with the payment of the rent
next due hereunder.
5.03 Request for Repairs. All requests for repairs or maintenance that are
the responsibility of Lessor pursuant to any provisions of this Lease must be
made in writing to Lessor at the address set forth herein.
5.04 Lessee Damages. Lessee shall not allow any damage to be committed on
any portion of the leased premises or building, 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 existed at the commencement date of this
Lease, 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.
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ARTICLE 6.00 ALTERATIONS AND IMPROVEMENTS
6.01 Lessor Improvements. If construction to the leased premises is to be
performed by Lessor prior to or during Lessee's occupancy, Lessor will complete
the construction of the improvements to the leased premises, in accordance
with plans and specifications agreed to by Lessor and Lessee, which plans and
specifications are made a part of this Lease by reference, Lessee shall execute
a copy of the plans and specifications and a change order setting forth the
amount of any such costs to be borne by Lessor within seven days of receipt of
the plans and specifications. In the event Lessee fails to execute the plans
and specifications and change order within the seven-day period, Lessor may, at
its sole option, declare this Lease canceled or notify Lessee that the base rent
shall commence on the completion date even though the improvements to be
constructed by Lessor may not be complete. Any changes or modifications to the
approved plans and specifications shall be made and accepted by written change
order or agreement signed by Lessor and Lessee and shall constitute an amendment
to this Lease.
6.02 Lessee Improvements. Lessee shall not make or allow to be made any
alterations or physical additions in or to the leased premises without first
obtaining the written consent of Lessor, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing to the contrary, if the Alterations (1)
are or cosmetic nature such as painting, wallpapering, hanging pictures,
millwork and carpeting; (2) are not visible from the exterior of the leased
premises or the Building and (3) do not affect the Systems or the structural
elements of the Building, then such no consent shall be required; provided that
even if Lessor's consent to an Alteration is not required, Lessee shall still
comply with this Section. Any alterations, physical additions or improvements to
the leased premises made by Lessee shall become the property of Lessor and shall
be surrendered to Lessor and become the property of Lessor upon the termination
of this Lease. Provided, however, Lessor, at its option, may require at the time
of approval only, Lessee to remove any physical additions and/or repair any
alterations in order to restore the leased 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 at the end of the term of this
Lease if Lessee is not then in default and if such equipment and furniture is
not then subject to any other rights, liens and interests of Lessor.
ARTICLE 7.00 CASUALTY AND INSURANCE, LIABILITY
7.01 Substantial Destruction. If the leased premises should be totally
destroyed by fire or other casualty, or if the leased premises should be so
damaged so that Lessor determines in its sole discretion that rebuilding cannot
reasonably be completed within 120 working days after the date of written
notification by Lessee to Lessor of the destruction, this Lease shall terminate
and the rent shall be abated for the unexpired portion of the Lease, effective
as of the date of the written notification.
7.02 Partial Destruction. If the leased premises should be partially
damaged by fire or other casualty, and Lessor determines in its sole discretion
that rebuilding or repairs can reasonably be completed within 120 working days
from the date of written notification by Lessee to Lessor of the destruction,
this Lease shall not terminate, and Lessor shall at its sole risk and expense
proceed with reasonable diligence to rebuild or repair the building or other
improvements to substantially the same condition in which they existed prior to
the damage. If the leased 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, invitees or those for whom Lessee is responsible, the rent
payable under this Lease during the period for which the leased premises are
untenantable may be adjusted to such an extent as Lessor in its sole discretion
determines is fair and reasonable under the circumstances. In the event that
Lessor fails to complete the necessary repairs or rebuilding within 120 working
days from the date of written notification by Lessee to Lessor of the
destruction, Lessee may at its option terminate this Lease by delivering written
notice of termination to Lessor, whereupon all rights and obligations under this
Lease shall cease to exist.
7.03 Property Insurance. Lessor shall at all times during the term of this
Lease maintain a policy or policies of insurance with the premiums paid in
advance, issued by and
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binding upon some solvent insurance company, insuring the building against all
risk of direct physical loss in an amount equal to ninety percent of the full
replacement cost of the building structure and its improvements as of the date
of the loss; provided, that Lessor shall not be obligated in any way or manner
to insure any personal property (including, but not limited to, any furniture,
machinery, goods or supplies) of Lessee upon or within the leased premises, any
fixtures installed by or paid for by Lessee upon or within the leased premises,
or any improvements which Lessee may construct on the leased premises, Lessee
shall have no right in or claim to the proceeds of any policy of insurance
maintained by Lessor even if the costs of such insurance is borne by Lessee as
set forth in Article 2.00.
7.04 Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding, subject to the approval or acceptance of the parties'
respective insurance carriers, as herein provided, 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,
improvements to the building of which the leased premises are a part, or
personal property 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 section 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 which has issued to it policies of
insurance covering all risk of direct physical loss, written notice of terms of
the mutual waivers contained in this section and to have the insurance policies
properly endorsed, if necessary, to prevent the invalidation of the insurance
coverages by reason of the mutual waivers contained in this section.
7.05 Hold Harmless. Lessor shall not be liable to Lessee's employees,
agents, invitees, licensees or visitors, or to any other person, for any
injury to person or damage to property on or about the leased premises
caused by the negligence or misconduct of Lessee, its agents, servants or
employees, or of any other person entering upon the leased premises under
express or implied invitation by Lessee, or caused by the improvements
located on the leased premises becoming out of repair, the failure or
cessation of any service provided by Lessor (including security service and
devices), or caused by leakage of gas, oil, water or steam or by electricity
emanating from the leased premises. Lessee agrees to indemnify and hold
harmless Lessor from any loss, attorney's fees, expenses and claims arising
out of any such damage or injury, except to the limited extent arising solely
out of any fault or negligence on the part of Lessor. Without limitation of any
other provisions hereof, Lessor agrees to defend, protect, indemnify and save
harmless Lessee and Lessee's beneficiaries and their respective partners,
affiliates, officers, agents, servants and employees from and against all
liability to third parties arising solely out of the acts of Lessor or its
agents, or employees.
7.06 Criminal Acts of Third Parties. Lessor shall not be liable in any
manner to Lessee, its agents, employees, invitees or visitors for any injury or
damage to Lessee, Lessee's agents, employees, invitees or visitors, or their
property, caused by the criminal or intentional misconduct of third parties or
of Lessee, Lessee's agents, employees, invitees or visitors. All claims against
Lessor for any such damage or injury are hereby expressly waived by Lessee, and
Lessee hereby agrees to hold harmless and indemnify Lessor from all such damages
and the attorney's fees and other expenses of defending all claims made by
Lessee's agents, employees, invitees or visitors arising out of such acts,
except to the limited extent caused solely by any fault or negligence on the
part of Lessor.
7.07 Public Liability. Lessor assumes no liability or responsibility
whatsoever with respect to the conduct and operation of the business to be
conducted upon the leased premises. Lessor shall not be liable for any accident
to or injury to any person or persons or property in or about the leased
premises which are caused by the conduct and operation of said business or by
virtue of equipment or property of Lessee in said premises. Lessee agrees to
indemnify and hold harmless Lessor from and against any loss, attorney's fees,
expenses and claims arising out of such accident or injury, except to the
limited extent caused solely by any fault or negligence on the part of Lessor.
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7.08 Lessee Insurance.
(a) Lessee at its cost shall maintain as named insured, during the term of
this Lease, public liability and property damage insurance with at least a
single combined liability and property damage limit of $1,000,000.00, insuring
against all liability of Lessee and its authorized representatives arising out
of an in connection with Lessee's use of occupancy of the leased premises. All
public liability insurance and property damage insurance shall insure
performance by Lessee of the indemnity provisions of this Article 7.00. Lessor
and Lessor's agent, Sheridan Management Corp., shall be named as additional
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insureds. The policy shall contain a contractual liability endorsement that
refers expressly to this Lease.
(b) Lessee at its cost shall maintain as named insured, during the term of
this Lease, fire and extended coverage insurance on the leased premises and its
contents, including any leasehold improvements made by Lessee, in an amount
sufficient so that no co-insurance will be payable in case of loss.
(c) Lessee shall increase its insurance coverage as required not more
frequently than each three (3) years, if in the opinion of the mortgagee of the
building or Lessor's insurance agent the amount of public liability and property
damage insurance coverage at that time is not adequate.
(d) All insurance required under this Lease shall be issued by insurance
companies authorized to do business in the State of Texas. Each policy shall
contain an endorsement requiring 30 days' written notice from the insurance
company to Lessor before cancellation or any change in the coverage, scope or
amount of any policy. Each policy, or a certificate showing it is in effect,
together with evidence of payment of premiums, shall be deposited with Lessor at
the commencement of the term, and renewal certificates or copies of renewal
policies shall be delivered to Lessor at least thirty (30) days prior to the
expiration date of any policy.
(e) Notwithstanding the fact that any liability of Lessee to Lessor may
be covered by Lessee's insurance, Lessee's liability shall in no way be limited
by the amount of its insurance recovery.
ARTICLE 8.00 CONDEMNATION
8.01 Substantial Taking. If during the term (or any extension or renewal)
of this Lease, all or a substantial part of the leased premises are 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 leased
premises for the purpose for which they are then being used, this Lease shall
terminate and the rent shall be abated during the unexpired portion of this
Lease effective on the date physical possession is taken by the condemning
authority. Lessee shall have no claim to the condemnation award provided,
however, that Lessee may proceed independently in such proceeding for the
unamoritized value of the leasehold improvements for which Lessee has paid for
in their entirety and its moving costs only in any such award is in addition to
and not in diminution of Lessor's award.
8.02 Partial Taking. In the event a portion of the leased 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 purchase in lieu thereof, and
this Lease is not terminated as provided in section 8.01 above, Lessor may, at
Lessor's sole risk and expense, restore and reconstruct the building and other
improvements on the leased 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 adjusted to such an extent as Lessor determines in
its sole discretion is fair and reasonable under the circumstances. Lessee shall
have no claim to the condemnation award provided, however, that Lessee may
proceed independently in such proceeding for the unamoritized value of the
leasehold improvements for which Lessee has paid for in their entirety and its
moving costs only in any such award is in addition to and not in diminution of
Lessor's award.
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ARTICLE 9.00 ASSIGNMENT OR SUBLEASE
9.01 Lessor Assignment. Lessor shall have the right to sell, transfer or
assign, in whole or in part, its rights and obligations in this Lease and in the
building. Any such sale, transfer or assignment shall operate to release Lessor
from any and all liabilities under this Lease arising after the date of such
sale, assignment or transfer.
9.02 Lessee Assignment. Lessee shall not assign, in whole or in part, this
Lease, or allow it to be assigned, in whole or in part, by operation of law or
otherwise or mortgage or pledge the same, or sublet the leased premises, in
whole or in part, without the prior written consent of Lessor which shall not
be unreasonably withheld, and in no event shall any such assignment or sublease
ever release Lessee or any guarantor from any obligation or liability hereunder.
No assignee or sublessee of the leased premises or any portion thereof may
assign or sublet the leased premises or any portion thereof.
9.03 Conditions of Assignment. If Lessee desires to assign or sublet all or
any part of the leased premises, it shall so notify Lessor at least thirty days
in advance of the date on which Lessee desires to make such assignment or
sublease. Lessee shall provide Lessor with a copy of the proposed assignment or
sublease and such information as Lessor might request concerning the proposed
sublessee or assignee to allow Lessor to make informed judgments as to the
financial condition, reputation, operations and general desirability of the
proposed subtenant or assignee. Within fifteen days after Lessor's receipt of
Lessee's proposed assignment or sublease and all required information concerning
the proposed subtenant or assignee, Lessor shall have the following options: (1)
cancel this Lease as to the leased premises or portion thereof proposed to be
assigned or sublet; (2) consent to the proposed assignment or sublease, and, if
the rent due and payable by any assignee or sublessee under any such permitted
assignment or sublease (or a combination of the rent payable under such
assignment or sublease plus any bonus or any other consideration therefore or
any payment incident thereto) exceeds the rent payable under this Lease for such
space, Lessee shall pay to Lessor fifty percent (50%) such excess rent and other
excess consideration within ten days following receipt thereof by Lessee; or (3)
refuse, in its reasonable discretion and judgment, to consent to the proposed
assignment or sublease, which refusal shall be deemed to have been exercised
unless Lessor gives Lessee written notice providing otherwise. Upon the
occurrence of an event of default, if all or any part of the leased 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. Any collection directly by Lessor from the assignee or
subtenant shall not be construed to constitute a novation or a release of Lessee
or any guarantor from the further performance of its obligations under this
Lease.
9.04 Rights of Lessor's Mortgagees. Lessee accepts this Lease subject and
subordinate to any recorded mortgage or deed of trust lien presently existing or
hereafter created upon the leased premises by or through Lessor, Lessor is
hereby irrevocably vested with full power and authority to subordinate Lessee's
interest under this Lease to any mortgage or deed of trust lien hereafter placed
by Lessor on the leased premises, and Lessee agrees upon demand to execute the
additional instruments subordinating this Lease as Lessor may require. If the
interests of Lessor under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any mortgage or deed of
trust on the leased premises, Lessee shall be bound to the transferee (sometimes
called the "Purchaser"), at the option of the Purchaser, under the 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, and, if requested by the Purchaser,
provided Lessee shall not be disturbed from its use and enjoyment of the leased
premises for so long as it is not in default after expiration of all notice and
cure periods. Lessee agrees to attorn to the Purchaser, including the mortgagee
under any such mortgage if it be the Purchaser, as its Lessor.
9.05 Estoppel Certificates. Lessee agrees to furnish, from time to time,
within ten days after receipt of a request from Lessor or Lessor's mortgagee, a
statement certifying, if applicable, that Lessee is in possession of the leased
premises; the leased premises are acceptable; the Lease is in full force and
effect; the Lease is unmodified; Lessee claims no present charge, lien,
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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.
9.06 Permitted Subleasing and Assignments. Notwithstanding any other
provision of this Section upon written notice to Lessor and without Lessor's
consent, Lessee shall have the right to sublease the leased premises in whole
or in part or to assign this Lease to: (1) any corporation or entity which owns
or controls, or is owned or controlled by, Lessee, (2) any corporation or entity
which is owned or controlled by Lessee's parent corporation, or (3) any
corporation or entity that succeeds to substantially all of the assets and
business of Lessee as a result of a sale, merger, consolidation or other
business reorganization, provided that such successor or assignee formed by
virtue of either subsection(1), (2), or (3) above has a net worth which is at
least equal to that of Lessee as of the date of this Lease. In such event, upon
Lessor request, Lessee shall furnish Lessor any information connected to such
transaction as may be reasonably requested by Lessor including, by way of
example, but not limitation, financial statements of the new entity. In no event
shall any such assignment or sublease ever release Lessee or any guarantor from
any obligation or liability hereunder. No assignee or sublessee of the leased
premises or any portion thereof may assign or sublet the leased premises or any
portion thereof.
ARTICLE 11.00 DEFAULT AND REMEDIES
11.01 Default by Lessee. The following shall be deemed to be events of
default by Lessee under this Lease: (1) Lessee shall fail to pay when due any
installment of rent or any other payment required pursuant to this Lease within
five (5) days of written notice of such failure; (2) Lessee shall fail 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 days after written notice to
Lessee; (3) Lessee shall file a petition or be adjudged bankrupt or insolvent
under any applicable federal or state bankruptcy or insolvency law or admit that
it cannot meet its financial obligations as they become due; or a receiver or
trustee shall be appointed for all or substantially all of the assets of
Lessee; or Lessee shall make a transfer in fraud of creditors or shall make an
assignment for the benefit of creditors; or (4) Lessee shall do or permit to be
done any act which results in a lien or claim of lien being filed against the
leased premises or the building and or project of which the leased premises are
a part, and such lien is not removed or endorsed over within ten days.
11.02 Option to Re-enter. In each and every such event set forth in section
11.01 above, from thenceforth and at all times thereafter, at the option of
Lessor, Lessee's right of possession shall thereupon cease and terminate, and
Lessor shall be entitled to the possession of the leased premises and to re-
enter the same without demand of rent or demand of possession of said premises
and may forthwith proceed to recover possession of the leased premises by
process of law, any notice to quit being hereby expressly waived by Lessee. In
the event of such re-entry by process of law or otherwise, Lessee nevertheless
agrees to remain answerable for any and all damage, deficiency or loss of rent
which Lessor may sustain by such re-entry, including reasonable attorney's fees
and court costs. No waiver of any breach of any covenant, condition or
agreement, herein contained, on one or more occasions shall operate as a waiver
of the covenant, condition or agreement itself, or of any subsequent breach
thereof. No provision of this Lease shall be deemed to have been waived by
Lessor unless such waiver shall be in writing signed by Lessor.
11.03 Lessor's Right to Relet. Should this Lease be terminated before the
expiration of the term of this Lease by reason of Lessee's default as provided
in Section 11.01, the leased premises may be relet by Lessor for such rent and
upon such terms as are reasonable under the circumstances. If the full rent
reserved under this Lease (and any of the costs, expenses or damages indicated
below) shall not be realized by Lessor, Lessee shall be liable for all damages
sustained by Lessor, including, without limitation, deficiency in rent,
reasonable attorney's fees, other collection costs, brokerage fees, and expenses
of placing the leased premises in first-class rentable condition. Lessor, in
putting the leased premises in good order or preparing the same for rerental
may, at Lessor's option, make such alterations, repairs, or replacements in the
leased premises as Lessor, in Lessor's sole judgment, considers advisable and
necessary for the purpose
11
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of reletting the leased premises, and the making of such alterations, repairs,
or replacements shall not operate or be construed to release Lessee from
liability hereunder as aforesaid. Lessor shall in no event be liable in any way
whatsoever for failure to relet the leased premises, or in the event that the
leased premises are relet, for failure to collect the rent thereof under such
reletting. In no event shall Lessee be entitled to receive any excess, if any,
of such net rent collected over the sums payable by Lessee to Lessor hereunder.
11.04 Recovery of Damages. Any damage or loss of rent sustained by Lessor
may be recovered by Lessor, at Lessor's option, at the time of the reletting, or
in separate actions, from time to time, as said damage shall have been
ascertained by successive relettings, or, at Lessor's option, may be deferred
until the expiration of the term of this Lease (in which event Lessee hereby
agrees that the cause of action shall not be deemed to have accrued until the
date of expiration of said term). The provisions contained in this paragraph
shall be in addition to and shall not prevent the enforcement of any claim
Lessor may have against Lessee for anticipatory breach of the unexpired term of
this Lease. All rights and remedies of Lessor under this Lease shall be
cumulative and shall not be exclusive of any other rights and remedies provided
to Lessor under applicable law. In the event Lessee becomes the subject debtor
in a case under the Bankruptcy Code, the provisions of this section 11.04 may be
limited by the limitations of damage provisions of the Bankruptcy Code.
11.05 Waiver. If under the provisions hereof Lessor shall institute
proceedings and a compromise or settlement thereof shall be made, the same shall
not constitute a waiver of any covenant, rule or regulation herein contained nor
of any of Lessor's rights hereunder. No waiver by Lessor of any breach of any
covenant, condition, agreement, rule or regulation herein contained shall
operate as a waiver of such covenant, condition, agreement, rule or regulation
itself, or of any subsequent breach thereof.
ARTICLE 13.00 DEFINITIONS
13.01 Abandon. "Abandon" means the vacating of all or a substantial
portion of the leased premises by Lessee, whether or not Lessee is in default of
the rental payments due under this Lease.
13.02 Act of God or Force Majeure. An "act of God" or "force majeure" is
defined for purposes of this Lease as strikes, lockouts, sit-downs, material or
labor restrictions by any governmental authority, 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 and which by the exercise of due diligence Lessor
is unable, wholly or in part, to prevent or overcome.
13.03 Building or Project. "Building" or "project" as used in this Lease
means the building and project described in section 1.02, including the leased
premises and the land upon which the leased premises are situated.
13.04 Commencement Date. The term "commencement date" shall be the date set
forth in section 1.3. The commencement date shall constitute the commencement of
the term of this Lease for all purposes, whether or not Lessee has actually
taken possession.
13.05 Rentable Area. See Exhibit "A" attached hereto.
ARTICLE 14.00 MISCELLANEOUS
14.01 Waiver. 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. Pursuit of any one or more of the remedies set
forth in Article 11.00 above shall not preclude pursuit of any one or more of
the other remedies provided elsewhere in this Lease or provided by law, nor
shall pursuit of any
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remedy constitute forfeiture or waiver of any rent or damages accruing to Lessor
by reason of the violation of any of the terms, provisions or covenants of 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.
14.02 Act of God. Lessor shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Lessee, so long as the
performance or non-performance of the covenant or obligation is delayed, caused
or prevented by an act of God or force majeure.
14.03 Attorney's Fees. In the event a party hereto defaults in the
performance of any of the terms, covenants, agreements or conditions contained
in this Lease and places the other party files suit or otherwise initiates an
appropriate legal proceeding for the enforcement of such other party's rights
under this Agreement, the non-prevailing party in any such suit or proceeding
shall pay to the prevailing party all of the reasonable attorneys' fees and
expenses incurred by the prevailing party in connection with such suit or
proceeding.
14.04 Successors. This Lease shall be binding upon and inure to the benefit
of Lessor and Lessee and their respective successors and assigns.
14.05 Rent Tax. If applicable in the jurisdiction where the leased premises
are situated, 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.
14.06 Captions. The captions appearing in this Lease are inserted only as
a matter of convenience and in no way define, limit, construe or describe the
scope of intent of any section.
14.07 Notice. All rent and other payments required to be made by Lessee
shall be payable to Lessor at the address set forth in section 1.06. All
payments required to be made by Lessor to Lessee shall be payable to Lessee at
the address set forth in section 1.06, or at any other address within the United
States as Lessee may specify from time to time by written notice. Any notice or
document required or permitted to be delivered by the terms of 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 forth in
section 1.06.
14.08 Submission of Lease. Submission of this Lease to Lessee for signature
does not constitute a reservation of space or an option to lease. This Lease is
not effective until execution by and delivery to both Lessor and Lessee.
14.09 Corporate Authority. 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
leased 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.
14.10 Severability. If any provision of this Lease or the application
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
14.11 Lessor's Liability. If Lessor shall be in default under this Lease
and, if as a consequence of such default, Lessee shall recover a money judgment
against Lessor, such judgment shall be satisfied only out of the right, title
and interest of Lessor in the leased premises as the same may then be encumbered
and neither Lessor nor any person or entity comprising Lessor shall be liable
for any deficiency. In no event shall Lessee have the right to levy against
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any property of Lessor nor any person or entity comprising Lessor other than its
interest in the leased premises as herein expressly provided. Without limiting
the generality of the foregoing and notwithstanding anything to the contrary
contained in this lease, Lessor's liability hereunder shall be limited in all
cases to Lessee's actual and direct, but not consequential, special or punitive,
damages.
14.12 Brokers. Lessor warrants that it has had no dealings with any real
estate broker or agent in connection with the negotiation of this Lease except
the broker named below, if any, and that it knows of no other real estate
broker or agent who is or might be entitled to a commission in connection with
this Lease. Lessor agrees to pay all real estate commissions due in connection
with this Lease to Sallis Commercial Real Estate, Inc. and International
Equities Management and Lessor agrees to indemnify and hold harmless Lessee
from and against any liability or claim, whether meritorious or not, arising
with respect to any broker not so named below, which claim arises by, through or
on behalf of Lessor. Lessee warrants and represents that it has had no dealings
with any real estate broker or agent in connection with the negotiations of this
Lease except the broker named below, if any, and that it knows of no other real
estate broker or agent who is or might be entitled to a commission in connection
with this Lease, and Lessee agrees to indemnify and hold harmless Lessor from
and against any liability or claim, whether meritorious or not, arising with
respect to any broker not so named below, which claim arose by, through or on
behalf of Lessee.
14.13 Applicable Law. This Lease shall be governed by and construed and
enforced in accordance with the laws or the State of Texas. Lessee hereby agrees
that any legal action or proceeding with respect to this Lease may be maintained
in the courts of Dallas County, Texas, or in the U.S. District Court for the
Northern District of Texas, and Lessee hereby consents to the jurisdiction and
venue of such courts.
ARTICLE 15.00 AMENDMENT AND LIMITATION OF WARRANTIES
15.01 Entire Agreement. 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 VERBAL REPRESENTATIONS, WARRANTIES,
UNDERSTANDINGS, STIPULATIONS, AGREEMENTS, OR PROMISES PERTAINING TO THIS LEASE.
15.02 Amendment. THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR EXTENDED
EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LESSOR AND LESSEE.
15.03 Limitation of Warranties. LESSOR AND LESSEE EXPRESSLY ACKNOWLEDGE AND
AGREE THAT THERE ARE NO IMPLIED WARRANTIES OF MERCHANTABILITY, HABITABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR USE OR WARRANTIES OF ANY OTHER KIND, WHETHER
EXPRESS OR IMPLIED, ARISING OUT OF THIS LEASE AND THERE ARE NO WARRANTIES WHICH
EXTEND BEYOND THOSE EXPRESSLY SET FORTH IN THIS LEASE. FURTHER, NEITHER LESSOR
NOR ANY AGENT OR REPRESENTATIVE OF LESSOR HAS MADE ANY REPRESENTATIONS OR
WARRANTIES OF ANY KIND OF OR WITH RESPECT TO THE LEASED PREMISES OR OTHERWISE,
EXCEPT AS EXPRESSLY PROVIDED HEREIN.
15.04 No Memorandum of Lease. Neither this Lease nor a memorandum of this
Lease shall be recorded in the public records of the county in which the leased
premises are located without the prior written consent of Lessor, which consent
may be given or withheld in Lessor's sole and absolute discretion.
ARTICLE 16.00 OTHER PROVISIONS
16.01 Parking. Lessor grants to Lessee and its employees in the leased
premises, for the term of this Lease, a non-exclusive license, to be used in
common with others, to use 25 spaces in
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that surface parking area adjacent to the building in which the leased premises
are located, as same may be added to, subtracted from, or rearranged during the
term of this Lease by Lessor.
16.02 Exhibits. Exhibit A (Occupation of Leased Premises and Definitions),
Exhibit B (Rules and Regulations), and Exhibit C (Form of Guaranty) are
incorporated by reference herein.
SIGNED at ______________ this 26 day of January 1998.
LESSEE LESSOR
SPR, Inc. SHERIDAN IRVING, L.P., a Texas
- ---------------------------- Limited Partnership
By Sheridan Management Corp., G.P.
By: /s/ Stephen T. Gambill By: /s/ Laurie M. Adams
------------------------- -------------------------------
Stephen T. Gambill Laurie M. Adams, Vice President
Chief Financial Officer
------------------------- -------------------------------
(Type Name and Title)
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<PAGE>
EXHIBIT "A"
DESCRIPTION OF LEASED PREMISES AND DEFINITIONS
1. Definition of Rentable Area. The term "rentable area" as used herein and
applied to Lessee, shall refer to (A) all floor areas within the inside surface
of the outer glass or exterior wall enclosing the portion of the leased premises
on the Building floor and measured to the mid-point of the walls separating the
following areas: those leased by or held for lease to other tenants or devoted
to corridors, elevator foyers, rest rooms, mechanical rooms, janitor closets,
vending areas and other similar facilities for the use of all tenants on the
particular floor (hereinafter sometimes called "Floor Common Areas"), together
with (b) 12,222 square feet consisting of: (i) a proportionate part of the Floor
Common Areas located on such floor based upon the ratio which the Lessee's space
on such floor (computed using the measurement criteria set forth in subparagraph
(A) above) bears to the aggregate leasable space on such floor (computed using
the measurement criteria set forth in subparagraph (A) above) and (ii) an
allocation of the square footage of the Building's elevator and main mechanical
rooms, and ground level lobby and service areas, based upon the ratio which the
Lessee's space within the Building (computed using the measurement criteria set
forth in subparagraph (A) above) bears to the aggregate leasable space within
the Building (computed using the measurement criteria set forth in subparagraph
(A) above). No deductions from rentable area are made for columns or projections
necessary to the Building. The rentable area of the leased premises has been
calculated on the basis of the foregoing definition and is hereby stipulated for
all purposes hereof to be 4,886 square feet. The rentable area of the Building
includes 100% of Floor Common Areas, Building elevator and main mechanical
rooms, and ground level lobby and service areas, and is stipulated for all
purposes hereof to be 141,137 square feet.
2. Floor Plan. A floor plan of the 6th floor of the Building, showing
Lessee's suite, is attached as a part of this Exhibit "A".
3. Definition of Lessee's Pro Rata Share. The term "Lessee's pro rata
share" shall mean, as to any calendar year during the term hereof, a fraction
having as its numerator the rentable area of the leased premises and having as
its denominator the rentable area of the Building.
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<PAGE>
EXHIBIT "A"
(Continued)
FLOOR PLAN OF PREMISES
WHERE LEASED PREMISES ARE LOCATED
[FLOOR PLAN APPEARS HERE]
NOTE: - ALL DIMENSIONS ARE APPROXIMATE
North
The Sheridan Group
-----------------------------------
800 W. AIRPORT FREEWAY
IRVING, TEXAS 75062
17
<PAGE>
EXHIBIT "A-1"
DESCRIPTION OF LANDLORD'S WORK
LEWIS COMMERICAL GENERAL CONTRACTORS
2117 Villawood Garland Texas 75040
(972)496-4970 Phone * (972)496-9129 Fax
October 27, 1997
Mr. Lawson Williams Ms. Donna Crenshaw
Sallis Commercial Tenant Relations
Phone: 214-855-5004 THE SHERIDAN GROUP
Fax:###-##-####
Subject. Specification for Suite 605 at 800 W. Airport Freeway, Irving, Texas
A. Supervision and permits to complete lease space. All work to have full
compliance with all applicable governing authorities, codes and safety
regulations at local, state and federal levels; including compliance with
whatever accessibility standard is more stringent A.D.A or TAS.
B. Install approximately 380 ^??^ of new wall using metal studs and 5/8" fire
rated sheet rock.
C. Supply and install Two (2) each corridor door frames and hardware, fire rated
per city code solid core doors with locks and closers.
D. Supply and install fourteen (14) each interior stained doors, frames and
hardware.
E. Tape, bed and paint all walls using Sherwin Williams Paint, applying one (1)
primer coat and one (1) coat of "Eggshell" Paint.
F. Install new ceiling tile to match existing building standard - Armstrong
USG562.
G. Supply and install 30% cut pile carpet with carpet base to match - Dupont
Market Place 30 Broadloom. Color to be selected.
H. Speakers and strobes per city code.
I. Sprinklers per city code.
J. New glass side light at waiting and reception entrance door. 2' wide 8'6"
height with tempered glass per city code.
K. Millwork in reception and break rooms to be paint grade with plastic laminate
tops. Color to be selected (ADA).
L. 4'x 4' phone board in mechanical room. Paint to match walls. Dedicated plug
for phone equipment.
M. ADA stainless steel sink with goose neck faucet and paddle hardware in break
room.
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EXHIBIT "A-1"
continued
N. Contractor shall air balance the existing HVAC system and provide sufficient
HVAC engineering to assure correct distribution throughout.
O. Electrician shall place one light switch, two duplex outlets, one telephone
data box with pull string and ring in each office. As needed, lights will be
relocated. Exit signs are per city code.
P. There will be a final clean and make ready before move in of new client.
Q. Other items that will be complete if client accepts proposal dated November
20,1997.
(1) Electric at open office area.
(2) Electrical at classroom.
(3) Two ton HVAC at classroom.
(4) New Hurculite door.
(5) Upper cabinet at breakroom.
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EXHIBIT "A-2"
Contractor's Bid
LEWIS COMMERICAL GENERAL CONTRACTORS
Bid Form
Building Name: The Sheridan Group Project Name: Suite 605
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Description Amount Subcontractor
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Supervision $ 1,000.00
- ------------------------------------------------------------------------------------------------
Permits 500.00
- ------------------------------------------------------------------------------------------------
Demolition 200.00
- ------------------------------------------------------------------------------------------------
Framing and Drywall 7,565.00
- ------------------------------------------------------------------------------------------------
Ceilings 2,850.00
- ------------------------------------------------------------------------------------------------
Doors, Frames & Hardware 5,100.00
- ------------------------------------------------------------------------------------------------
ADA Hardware
- ------------------------------------------------------------------------------------------------
Prep and Paint 4,840.00
- ------------------------------------------------------------------------------------------------
Wallcoverings
- ------------------------------------------------------------------------------------------------
Millwork ^??^
- ------------------------------------------------------------------------------------------------
Glazing 250.00
- ------------------------------------------------------------------------------------------------
Electrical and Lighting 6,065.00
- ------------------------------------------------------------------------------------------------
Plumbing 2,150.00
- ------------------------------------------------------------------------------------------------
HVAC Test and Balance 3,250.00
- ------------------------------------------------------------------------------------------------
Fire Protection, ADA Strobes, ^??^
- ------------------------------------------------------------------------------------------------
Sprinklers 3,650.00
- ------------------------------------------------------------------------------------------------
Appliances
- ------------------------------------------------------------------------------------------------
Floorcoverings and Base 8,220.00
- ------------------------------------------------------------------------------------------------
Final Clean Make Ready 500.00
- ------------------------------------------------------------------------------------------------
Other (list)
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Subtotal $51,640.00
- ------------------------------------------------------------------------------------------------
Overhead, Profit and General Conditions 2,523.51
- ------------------------------------------------------------------------------------------------
Remodel Tax 4,468.49
- ------------------------------------------------------------------------------------------------
Total Bid $58,632.00
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Alternates:
- ------------------------------------------------------------------------------------------------
</TABLE>
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EXHIBIT "A-2"
Contractor's Bid
continued
LEWIS COMMERCIAL GENERAL CONTRACTORS
2117 Villawood * Garland, Texas 75040
(972)496-4970 Phone (972)496-9129 Fax
PROPOSAL
Date: November 20, 1997
To: Lawson Williams
Sallis Commercial
From: Leonard L. Lewis, Jr.
Re: Proposal - 6th Floor- SPR Requirements
800 W Airport Freeway
Scope
(1) Open Office Area - Electrical $ 2,180.00
(2) Class Room - Electrical $ 5,418.00
(3) Two Ton HVAC at Class Room $ 7,854.00
(4) Price for a One of Herculite Doors $ 2,850.00
(5) Upper Cabinets at Break Room $ 1,848.00
NOTE: Pricing includes profit, overhead and taxes
Thank you for considering Lewis Commercial General Contractors.
Leonard L. Lewis, Jr.
President
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EXHIBIT "B"
RULES AND REGULATIONS
The Lessee shall observe such rules and regulations as may be adopted and
made available to Lessee by Lessor from time to time (hereinafter referred
to as the "Rules and Regulations"); provided, that it is understood and agreed
that said Rules and Regulations are supplemental to the terms and conditions of
this Lease and shall not be construed or interpreted in any way as to amend,
modify or waive, in whole or in part, any of the terms and conditions of this
Lease. It is further understood and agreed that in the event of any conflict
between the terms and conditions of this Lease and the provisions of the Rules
and Regulations in force from time to time, then and in such event, the terms
and conditions of this Lease shall apply.
1. Lessee shall not prepare any food or do any cooking or install any
vending machines except with respect to a microwave oven and such vending
machines intended for the exclusive use of Lessee's employees.
2. No signs, advertisements, or notices shall be attached to, or placed on,
the exterior or interior of the Building, or the parking areas or
sidewalks.
3. No animal or bird of any kind shall be brought into, kept in or about,
the leased premises or the Building.
4. Lessee shall lower window coverings and turn off all lights within the
leased premises prior to leaving for the day.
5. Lessee, or Lessee's agents, shall not bring or store in the Building or
leased premises any kerosene, gasoline, combustible, inflammable or
explosive substance.
6. No additional locks, bolts or mail slots shall be placed on the doors,
windows, or walls without the Lessor's prior written approval.
7. All carrying or removal of equipment, furniture, or bulky matter must
take place during the hours which the Lessor, or its management agent
may reasonably determine. Lessor shall provide Lessee with a designated
----------
freight elevator which must be used for all movements of above said
items.
8. Lessor shall have the right to prohibit Lessee's use of the Building name
or photo in any advertisements which in the opinion of the Lessor tend to
impair the reputation of the Building.
9. Lessor reserves the right to exclude from the Building, between the hours
of 7:00 p.m. and 6:30 a.m. on all weekdays, all the hours of Saturday
other than 8:30 a.m. to 1:00 p.m., and all the hours of Sunday and legal
holidays, all persons who do not present a Building key issued by Lessee
and identification.
10. Lessee's contractor, while in the Building or leased premises, shall be
subject to the Rules and Regulations of the Building, and will also be
subject to direction from the Lessor or its agents, but will not be an
agent or contractor of the Lessor or its agents.
11. If the leased premises or any part of the Building becomes infested with
vermin as a result of the use or neglect on the part of the Lessee, the
Lessee shall reimburse Lessor for the extermination expense.
12. If, as a result of any governmental rule or regulation or law, Lessor
imposes a curtailment of services or a reduction of energy usage, the
Lessee shall comply and shall be liable for any surcharges imposed upon
Lessor for noncompliance.
13. Lessee shall install and maintain, at Lessee's expense, fire
extinguishers (to the extent required by local government regulations or
law) next to any duplicating machine or similar heat producing equipment.
INITIALS [ILLEGIBLE]^^ [ILLEGIBLE]^^
--------------- -------------
22
<PAGE>
14. Lessee shall install and maintain, at Lessee's expense, any life safety
equipment (to the extent required by governmental rules, regulations or
laws) to be kept in the leased premises.
15. Lessee and Lessee's agents and employees shall park only in those parking
areas designated by Lessor or Lessor's agents, Lessee shall pay a fine to
Lessor of $10.00 per violation for each parking violation of Lessee,
Lessee's employees, agents, invitees or licensees.
16. No canvassing or soliciting shall be allowed in the Building.
17. Lessee will not use the Building for lodging, sleeping or cooking, or
conduct mechanical or manufacturing operations.
18. Lessee shall not conduct, in or about the Building, any auction, public
or private, without the prior written approval of Lessor.
19. Lessee shall not use any machines in the Building, other than office
machines such as typewriters, calculators, copying machines, personal
computers, and similar machines, without the prior written approval of
Lessor. All office equipment and any other devices of any electrical or
mechanical nature shall be placed by Lessee in the leased premises or
settings approved by Lessor or otherwise placed so as to prevent any
vibrations or odors from circulating within the Building.
20. Lessee shall use the common area of the Building only as a means of
ingress and egress and Lessee shall permit no loitering by any persons
upon the common area or elsewhere within the Building.
21. Lessor will furnish Lessee, free of charge, two (2) keys to the Building
exterior door and one (1) additional key for every full-time employee
employed within the leased premises who requests an individual key.
Lessor shall charge $10.00 per key for any additional or replacement key.
Lessee shall not have any such keys copied. Lessee, upon the termination
of its Lease, or the earlier substitution by Lessor at its sole
discretion of a replacement security system for the Building, shall
deliver to Lessor all keys to doors in the Building.
22. Lessor reserves the right to restrict the amount of directory space
utilized by Lessee on the ground floor lobby directory sign for the
Building.
23. Lessor shall provide Lessee electricity and HVAC for normal operations
Monday through Friday 7:00 a.m. to 7:00 p.m. and Saturday 8:30 a.m. to
1:00 p.m. Any additional usage required by Lessee must be arranged with
Lessor, or its agent, and shall be subject to additional charges.
24. Lessee shall not contract for or construct any improvements within the
leased premises, other than the original Leasehold improvements approved
by Lessor, without written consent of Lessor (this includes concrete and
core drilling).
25. If Lessee desires to install a music sound system, it must obtain prior
written approval of the system and Lessee will be wholly responsible for
the cost and charges for such system.
26. Violation of these Rules and Regulations, or any amendments hereof or
additions hereto, shall constitute a default under the Lease.
27. The common areas and roof of the Building are not for the use of the
general public, and Lessor shall in all cases retain the right to control
or prevent access thereto by all persons whose presence, in the judgment
of Lessor, shall be prejudicial to the safety, character, reputation or
interests of the Building and its tenants. Lessee shall not enter or
install equipment in the mechanical rooms, air conditioning rooms,
electrical closets, janitorial closets, or similar areas, or go upon the
roof of the Building without the prior written consent of Lessor. No
tenant shall install any radio or television antenna, loudspeaker, or
other device on the roof or exterior walls of the Building.
23
<PAGE>
EXHIBIT "C"
RIGHT OF FIRST REFUSAL
Provided that Tenant is not in default under any of the terms of this
Lease, Tenant shall have a one time First Right of Refusal on Suite 605 at 800
W. Airport Freeway, Irving, TX 75062, consisting of approximately 2,640 rentable
square feet. Should another arms length party present a bona fide offer to
Landlord that Landlord would be willing to accept, Tenant shall have three (3)
business days after notice to accept or reject the space under the same terms
and conditions as were presented after receiving written notice from Landlord or
Landlord's agent. No response from Tenant within the three (3) business days
---------
will be deemed a rejection of the space by Tenant and Landlord will be free to
lease the space to the party making the offer under the terms of that offer.
This First Right of Refusal will be offered on a one time basis only, provided,
however, if such offering party does not in fact execute a lease for the space,
such right shall be reinstated.
24
<PAGE>
EXHIBIT "D"
OPTION TO RENEW
Provided that Tenant is not then in default under any of the terms of this
Lease, Tenant shall have the option to renew the term of this Lease ("Option to
Renew") for one five (5) year period (the "Extended Term"). Basic annual rent to
be paid by the Tenant to the Landlord for the extended Term for the Premises
shall be at the then current market rate for the Building. The terms and
conditions of the Lease, as it may be amended from time to time, shall govern
Tenant's tenancy during the Extended Term. The establishment of market rent
shall include the rental rate, escalation provisions, expense recapture,
concession, allowances, and security deposit requirements as necessary to
reflect the then prevailing market condition. In addition, for each year of
Extended Term, tenant shall pay an Additional Rental in an amount equal to
Tenant's Proportionate Share of any and all increases incurred for "Operating
Expenses" as said term is defined in the Lease, paid or payable by Landlord with
respect to the Building.
Landlord shall no later than fifteen (15) days after written request
therefore from Tenant (which request cannot be delivered more than ninety (90)
days prior to the expiration of the Initial Term) give written notice of the
Extended Basic Annual Rent to Tenant for the five (5) years of the Extended Term
which rent shall be binding upon Landlord and Tenant as to matters stated
therein if Tenant thereafter elects to exercise its Option to Renew. If Tenant
gives notice of its election to exercise its Option to Renew prior to receipt of
said notice by Landlord, then Tenant shall have fifteen (15) days after receipt
of written notice of the Extended Basic Annual Rent for the Extended Term from
landlord to withdraw in writing, its election to exercise its Option to Renew.
To exercise this Option to Renew, Tenant must give notice in writing to
Landlord, a minimum of one hundred twenty (120) days and a maximum of one
hundred fifty (150) days prior to expiration of the Initial Term.
If Tenant has sublet any portion of the Premises, Tenant's option to renew
shall be applicable only to that part of the Premises of which Tenant is an
actual possession. Tenant may also renew the Lease for the portion sublet
provided the portion sublet does not exceed one-third (1/3) of the entire
Premises.
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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<SECURITIES> 46,227
<RECEIVABLES> 8,842
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<PP&E> 7,340
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0
0
<COMMON> 140
<OTHER-SE> 58,621
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,645)
<INCOME-PRETAX> (557)
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