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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
3RD QUARTER
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 000-24769
---------------------
CLARK/BARDES HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C>
DELAWARE 52-2103926
(State Incorporation) (I.R.S. Employer Identification Number)
102 SOUTH WYNSTONE PARK DR., SUITE 200
NORTH BARRINGTON, ILLINOIS 60010 (847) 304-5800
(Address of Principal Executive Offices) (Registrant's Telephone Number)
</TABLE>
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 [ ]
The number of shares outstanding of the registrant's common stock, all of
which comprise a single class with a $0.01 par value, as of September 30, 1999,
the latest practicable date, was 9,629,999.
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TABLE OF CONTENTS
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PAGE
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<S> <C>
PART I. -- FINANCIAL INFORMATION
Item 1. Financial Statements................................ 3
Condensed Consolidated Balance Sheets at September 30,
1999 and December 31, 1998............................ 3
Condensed Consolidated Statements of Income for the
three months and nine months ended September 30, 1999
and 1998.............................................. 4
Condensed Consolidated Statements of Cash Flows for the
three months and nine months ended September 30, 1999
and 1998.............................................. 5
Notes to Condensed Consolidated Financial Statements... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results
of Operations............................................. 13
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................... 29
PART II. -- OTHER INFORMATION
Item 4. Exhibits and Reports on Form 8-K.................... 30
SIGNATURES.................................................. 36
EXHIBITS
Index to Exhibits......................................... 37
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 3,405 $12,102
Accounts and notes receivable -- net...................... 10,051 8,076
Other current assets...................................... 902 59
-------- -------
14,358 20,237
Equipment and Leasehold Improvements -- net................. 6,499 1,178
Intangible Assets -- net.................................... 95,481 45,209
Deferred Tax Asset.......................................... 55 607
Other Assets................................................ 959 262
-------- -------
Total Assets...................................... $117,352 $67,493
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable.......................................... $ 2,893 $ 2,925
Commissions and fees...................................... 4,061 2,634
Income taxes.............................................. 726 528
Accrued liabilities....................................... 6,417 2,651
Current portion of long term debt......................... 7,087 4,344
-------- -------
21,184 13,082
Long Term Debt.............................................. 38,689 24,713
Stockholders' Equity
Preferred stock
Authorized -- 1,000,000 shares; $.01 par value.......
None issued..........................................
Common stock........................................... 96 82
Authorized -- 20,000,000 shares; $.01 par value......
Issued and outstanding --
8,202,535 at December 31, 1998.......................
9,629,999 at September 30, 1999......................
Paid in capital............................................. 50,098 26,274
Retained earnings........................................... 7,285 3,342
-------- -------
Total Stockholders' Equity........................ 57,479 29,698
-------- -------
Total Liabilities and Stockholders' Equity........ $117,352 $67,493
======== =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE> 4
CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total Revenue................................ $ 25,655 $ 17,641 $ 79,431 $ 46,626
Commission and fee expense................... 10,456 11,052 37,672 29,255
---------- ---------- ---------- ----------
Gross Profit....................... 15,199 6,589 41,759 17,371
---------- ---------- ---------- ----------
Operating Expenses
General and administrative................. 11,332 4,613 29,789 13,022
Amortization............................... 1,237 356 3,009 798
Put warrants (non-recurring)............... -- (500) -- 4,800
---------- ---------- ---------- ----------
12,569 4,469 32,798 18,620
---------- ---------- ---------- ----------
Operating Income (Loss)............ 2,630 2,120 8,961 (1,249)
Interest
Income..................................... 133 220 291 388
Expense.................................... (923) (764) (2,500) (2,568)
---------- ---------- ---------- ----------
Income (Loss) before Income Taxes............ 1,840 1,576 6,752 (3,429)
Income Taxes................................. 804 (806) 2,809 (801)
---------- ---------- ---------- ----------
Net Income (Loss).................. $ 1,036 $ 2,382 $ 3,943 $ (2,628)
========== ========== ========== ==========
Basic Net Income (Loss) Per Common Share
Net Income (Loss).......................... $ 0.11 $ 0.44 $ 0.44 $ (0.66)
========== ========== ========== ==========
Weighted Average Shares.................... 9,629,157 5,407,503 8,891,628 3,958,602
========== ========== ========== ==========
Diluted Net Income (Loss) Per Common Share
Net Income (Loss).......................... $ 0.11 $ 0.39 $ 0.43 $ (0.66)
========== ========== ========== ==========
Weighted Average Shares.................... 9,865,535 6,156,926 9,118,669 3,958,602
========== ========== ========== ==========
Dividends Per Share.......................... $ -- $ 0.69 $ -- $ 0.82
========== ========== ========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE> 5
CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash From Operating Activities -- Net.............. $ 2,617 $ (1,730) $ 10,609 $ 4,013
Investing Activities
Purchases of businesses.......................... (14,795) (14,835) (53,289) (16,335)
Purchases of equipment........................... (3,703) (267) (5,880) (333)
Other............................................ 329 9 (622) 98
-------- -------- -------- --------
(18,169) (15,093) (59,791) (16,570)
-------- -------- -------- --------
Financing Activities
Proceeds from borrowings......................... 15,492 2,000 68,216 2,000
Repayment of borrowings.......................... (7,962) (7,478) (51,497) (8,928)
Proceeds from issuance of common stock........... 1,125 34,897 23,766 35,198
Dividends........................................ -- (3,246) -- (3,680)
Other............................................ -- 269 -- 108
-------- -------- -------- --------
8,655 26,442 40,485 24,698
-------- -------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents... (6,897) 9,619 (8,697) 12,141
Cash and Cash Equivalents, Beginning of Period..... 10,302 6,305 12,102 3,783
-------- -------- -------- --------
Cash and Cash Equivalents, End of Period........... $ 3,405 $ 15,924 $ 3,405 $ 15,924
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE> 6
CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
UNAUDITED
1. NATURE OF OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF
PRESENTATION
The consolidated financial statements include the accounts of Clark/Bardes
Holdings, Inc. (CBH) and its wholly-owned subsidiary, Clark/Bardes, Inc. (CBI).
Though its three operating divisions; Clark/Bardes, Bank Compensation Strategies
and HealthCare Compensation Strategies (formerly MCG HealthCare), CBI designs,
markets and administers life insurance products, compensation, and benefit
programs to U. S. corporations, banks and healthcare organizations. CBI assists
its clients in using customized life insurance products to generate capital to
finance long-term benefit liabilities and to supplement and secure benefits for
key employees. In addition, CBI provides long-term administrative services for
executive benefits and insurance and provides compensation consulting services.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, including
normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1999, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant Company and Subsidiaries annual
report on Form 10-K for the year ended December 31, 1998.
2. ACQUISITION OF THE WAMBERG ORGANIZATION AND WAMBERG FINANCIAL CORPORATION
On September 1, 1999, CBI purchased certain assets and assumed certain
liabilities of The Wamberg Organization and purchased all of the outstanding
stock of Wamberg Financial Corporation for a purchase price of $18.0 million
consisting of:
(i) a cash payment to The Wamberg Organization of $12.0 million;
(ii) a cash payment to W.T. Wamberg of $50,000 for his shares of
Wamberg Financial Corporation;
(iii) a direct payment of $1.5 million for two outstanding loans;
(iv) assumption of approximately $4.3 million of liabilities including
a $3.8 million note for the purchase of a corporate aircraft;
(v) expenses of approximately $173,000.
In addition, the asset purchase agreement provides for the payment of an
additional $11.9 million upon the attainment of certain stipulated annual
financial objectives starting with the period ended December 31, 1999 through
December 31, 2002. The $13.8 million cash portion of the purchase price came
from CBI's existing cash balances.
6
<PAGE> 7
CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The sole shareholder of The Wamberg Organization and Wamberg Financial
Corporation was W.T. Wamberg, Chairman of CBI and Clark/Bardes Holdings, Inc.
The Wamberg Organization has historically been CBI's largest single producer,
accounting for 17.5% of revenue in 1998 and 23.2% for the six month period ended
June 30, 1999. Upon consummation of the acquisitions, Mr. Wamberg became
president and chief executive officer of Clark/Bardes Holdings, Inc.
The assets acquired include receivables, equipment, intangibles,
intellectual property, customer and supplier lists, insurance, and all rights
under existing contracts, leases, agreements and permits. Wamberg Financial
Corporation was principally engaged in leasing an airplane to The Wamberg
Organization. Because of the timing of this purchase, CBI has not definitively
determined the allocation of the purchase price.
Because of the relationship between The Wamberg Organization, Wamberg
Financial Corporation, W.T. Wamberg and CBI, the CBH board of directors
appointed a special committee comprised of independent, non-employee directors
to negotiate and review the terms of this transaction. The special committee
received a fairness opinion with respect to the acquisition and after analyzing
the matter and considering all relevant issues, recommended that the full board
approve the transaction.
The Wamberg Organization leases its 11,085 square feet of office space from
an entity controlled by Mr. Wamberg for an annual rental of $150,000, under a
lease expiring on February 21, 2009.
On January 4, 1999, CBI purchased the right to receive approximately 27.5%
of the commission and fee revenue, prior to deduction of servicing costs,
related to renewal revenue of certain inforce policies existing on June 30,
1998, due under the Principal Office agreement with W. T. Wamberg and The
Wamberg Organization, for a cash payment of $7.5 million. Concurrent with the
acquisition of The Wamberg Organization, CBI purchased all of the renewal
revenue not acquired on January 4, 1999. In accordance with the asset purchase
agreement, all renewal revenue acquired as of September 1, 1999, remaining
inforce on December 31, 2018, will revert to Mr. Wamberg.
The acquisition of The Wamberg Organization and Wamberg Financial
Corporation will be accounted for as a purchase. The unaudited pro forma
information below presents our results of operations and those of The Wamberg
Organization and Wamberg Financial Corporation as if the acquisition occurred on
January 1, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Pro forma:
Revenues..................................... $27,246 $19,828 $87,058 $55,910
Net income (loss)............................ 1,059 2,442 4,514 (409)
Diluted earnings (loss) per share............ .11 .38 .49 (.10)
</TABLE>
3. ACQUISITION OF NATIONAL INSTITUTE FOR COMMUNITY BANKING
On May 18, 1999, CBH acquired all of the issued and outstanding capital
stock of National Institute for Community Banking (NICB) by merging it with and
into CBH. Each share of NICB common stock was converted into CBH common stock on
a ratio of 39.7 of CBH for each share of NICB for a total of 484,303 shares of
CBH common stock. By agreement, the effective date of the NICB acquisition was
January 1, 1999. The acquisition of NICB has been accounted for as a purchase.
Of the total, 99,851 shares were issued at the closing and 384,452 shares
are issuable upon attaining stipulated revenue and income goals over the four
year period 1999 to 2002. No other consideration was given. The value of the
shares received by the selling shareholders was $1.6 million based on CBH's
closing price of
7
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CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$16 on May 18, 1999. Any shares issued will be accounted for as additional
consideration based on their value at the time of issuance.
4. ACQUISITION OF MCG/HEALTHCARE
On April 5, 1999, CBI purchased the assets and business and assumed certain
liabilities of Phynque, Inc., d/b/a Management Compensation Group/HealthCare, a
Minnesota corporation, for a purchase price of $35.9 million consisting of:
(i) a cash payment of $13.8 million;
(ii) a promissory note for $8.7 million;
(iii) 326,363 shares of common stock, having an aggregate value of
$5.3 million based on the closing price of the common stock on April 5,
1999;
(iv) the direct payment of $3.6 million thousand for certain
outstanding loans;
(v) the assumption of $4.2 million of liabilities and $310,000 of
closing costs.
The purchase price was determined by an arm's length negotiation among the
parties. The assets acquired include cash, receivables and equipment in addition
to all intangible assets, intellectual property, files pertaining to customers,
computer software and systems and related licenses. The liabilities assumed
include commissions payable, accrued employee benefits and operating expenses.
The $17.4 million cash portion of the purchase price was funded by a borrowing
under CBI's credit facility. The promissory note is payable in thirty-two equal
quarterly installments of principal and interest at 10% per annum of $430,000
commencing on April 5, 2000. The promissory note is secured by a personal
guarantee of W.T. Wamberg, Chairman of Clark/ Bardes. Closing costs and fees
connected with the transaction are estimated to be approximately $500,000.
MCG/HealthCare is a 180 employee executive benefit consulting organization
servicing the healthcare industry. MCG/HealthCare is headquartered in
Minneapolis, Minnesota. Prior to the acquisition described above, there was no
material relationship between CBI and MCG/HealthCare.
The acquisition of MCG/HealthCare has been accounted for as a purchase. The
unaudited pro forma information below presents the results of CBI and
MCG/HealthCare as if the acquisition had occurred on January 1, 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Pro forma:
Revenues..................................... $25,655 $25,098 $85,188 $67,396
Net income (loss)............................ 1,036 2,113 4,328 (3,066)
Diluted earnings (loss) per share............ .11 .33 .47 (0.72)
</TABLE>
5. ACQUISITION OF SCHOENKE
On September 1, 1998 CBI acquired substantially all of the assets and
business of Schoenke & Associates Corporation and Schoenke & Associates
Securities Corporation, based in Germantown, Maryland. The Schoenke companies
specialize in designing and administering benefit programs for companies. CBI
accounted for the acquisition as a purchase and has included the operating
results of the Schoenke Companies in the financial statements commencing from
the acquisition date.
8
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CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The purchase price was $17.0 million plus related expenses of approximately
$98,000. The purchase price was comprised of $15.0 million in cash and a
promissory note in the principal amount of $2.0 million. CBI allocated
approximately $768,000 of the purchase price to tangible assets acquired and the
remaining $16.2 million was allocated to the net present value of estimated
future profits embedded in the existing inforce book of business.
The unaudited pro forma information below presents the results of CBI and
Schoenke combined as if the acquisition had occurred January 1, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Pro forma:
Revenues..................................... $25,655 $18,992 $79,431 $51,510
Net income (loss)............................ 1,036 2,739 3,943 (2,476)
Diluted earnings (loss) per share............ .11 .42 .43 (.58)
</TABLE>
6. PRIVATE PLACEMENT
On June 7, 1999, CBH sold 1,000,000 shares of common stock to Conning
Insurance Capital Partnership V, L. P. for $17 million in a private placement
transaction. The proceeds from this sale was used for debt reduction and
acquisitions.
7. CREDIT FACILITY
In January 1999, CBI negotiated a $65 million senior credit facility and
issued $25 million of floating rate debt fixed for the first year at 7.08%, (the
one-year London InterBank Offered Rate plus 2%) under that facility. Principal
and interest are payable quarterly beginning March 31, 1999. The $25 million
proceeds was used to retire existing long term debt. The credit facility
contains certain restrictive covenants requiring mandatory prepayments under
certain conditions, financial reporting and compliance certificates, maintenance
of financial ratios, restrictions on guarantees and additional indebtedness,
limitations on mergers and acquisitions, prohibition of cash dividends,
limitation on investments, loans, and advances, and changes in control.
Coincident with the credit facility and floating rate agreement, CBI has
entered into two interest rate swap agreements with a bank affiliated with the
lending group to fix the interest rates. The first agreement went into effect on
July 6, 1999 and fixes the interest rate at 5.76% on $15 million of the debt.
The second agreement will go into effect on January 18, 2000 and fixes the rate
at 5.29% on $15 million of the debt.
CBI incurred $400,000 of costs in connection with the refinancing. These
costs have been capitalized and are reflected in Other Assets in the balance
sheet at September 30, 1999 and are being amortized over the life of the credit
facility.
8. SEGMENT INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------
BANK CLARK/ HEALTHCARE
CLARK/ COMPENSATION BARDES OF COMPENSATION
BARDES STRATEGIES WASHINGTON, DC STRATEGIES TOTAL
------- ------------ -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues from External
Clients.................. $11,090 $ 7,002 $ 1,467 $ 6,096 $ 25,655
Segment Profit........... 2,197 522 118 876 3,713
Segment Assets........... 39,150 27,849 15,610 34,688 117,297
</TABLE>
9
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CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1998
-----------------------------------------------------------------
BANK CLARK/ HEALTHCARE
CLARK/ COMPENSATION BARDES OF COMPENSATION
BARDES STRATEGIES WASHINGTON, DC STRATEGIES TOTAL
------- ------------ -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues from External
Clients.................. $ 9,860 $ 7,454 $ 327 $ -- $ 17,641
Segment Profit........... 653 851 115 -- 1,619
Segment Assets........... 16,148 26,209 18,484 -- 60,841
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------
BANK CLARK/ HEALTHCARE
CLARK/ COMPENSATION BARDES OF COMPENSATION
BARDES STRATEGIES WASHINGTON, DC STRATEGIES TOTAL
------- ------------ -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues from External
Clients.................. $42,967 $20,266 $ 4,200 $11,998 $ 79,431
Segment Profit........... 7,751 1,538 879 1,505 11,673
Segment Assets........... 39,150 27,849 15,610 34,688 117,297
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
-----------------------------------------------------------------
BANK CLARK/ HEALTHCARE
CLARK/ COMPENSATION BARDES OF COMPENSATION
BARDES STRATEGIES WASHINGTON, DC STRATEGIES TOTAL
------- ------------ -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues from External
Clients.................. $27,048 $19,251 $ 327 $ -- $ 46,626
Segment Profit........... 1,261 2,175 115 -- 3,551
Segment Assets........... 16,148 26,209 18,484 -- 60,841
</TABLE>
A reconciliation of total external revenues for reportable segments to
total consolidated revenues and total segment profits (loss) to consolidated
income (loss) before taxes is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUES
Total external revenues for reportable
segments.................................. $25,655 $17,641 $79,431 $46,626
======= ======= ======= =======
Total consolidated revenues................. $25,655 $17,641 $79,431 $46,626
PROFIT (LOSS)
Total profit (loss) for reportable
segments.................................. $ 3,713 $ 1,619 $11,673 $ 3,551
Unallocated amounts
Corporate overhead........................ (1,083) -- (2,712) --
Put warrants (non-recurring).............. -- 500 -- (4,800)
Interest -- net........................... (790) (543) (2,209) (2,180)
------- ------- ------- -------
Income (loss) before taxes................ $ 1,840 $ 1,579 $ 6,752 $(3,429)
======= ======= ======= =======
</TABLE>
10
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CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of total assets for reportable segments with total
consolidated assets at September 30, 1999, and December 31, 1998, is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Total assets............................................... $117,297 $66,886
Deferred tax asset......................................... 55 607
-------- -------
$117,352 $67,493
======== =======
</TABLE>
9. EARNINGS PER SHARE
The following table is a reconciliation of the numerators and denominators
used in computing earnings per share.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------ -------------------
1999 1998 1999 1998
------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
NUMERATOR
Net income (loss) for basic earnings per
share........................................ $1,036 $2,382 $3,943 $(2,628)
Effect of dilutive securities:
Interest on convertible debt (net of tax).... -- 40 -- --
------ ------ ------ -------
Numerator for diluted earnings per share....... $1,036 $2,422 $3,943 $(2,628)
DENOMINATOR
Denominator for basic earning per share --
weighted average shares...................... 9,629 5,408 8,892 3,959
Effect of dilutive securities:
Stock options................................ 236 221 227
Convertible debt............................. -- 528 -- --
------ ------ ------ -------
Denominator for diluted earnings per share --
weighted average shares -- diluted........... 9,865 6,157 9,119 3,959
====== ====== ====== =======
PER SHARE
Basic earnings (loss).......................... $ 0.11 $ 0.44 $ 0.44 $ (0.66)
====== ====== ====== =======
Diluted earnings (loss)........................ $ 0.11 $ 0.39 $ 0.43 $ (0.66)
====== ====== ====== =======
</TABLE>
The effects of options and convertible debt have been excluded from the
calculations of diluted earnings per share for the nine months ended September
30, 1998 as such effects would have been antidilutive.
10. SIGNIFICANT RISKS AND UNCERTAINTIES
Federal tax laws create certain advantages for the purchase of life
insurance products by individuals and corporations; therefore the life insurance
products underlying the benefit programs marketed by the Company are vulnerable
to adverse changes in tax legislation. Amendments to the federal tax laws
enacted in 1996 and 1997 have reduced the advantages of certain purchases of
business-owned life insurance. With limited exceptions, the 1996 amendment
eliminated the ability to deduct interest on loans against the cash value of
life insurance policies. In 1997, legislation imposed an interest deduction
disallowance that applied to all business-owned life insurance except for
policies placed on employees, officers, directors and 20 percent owners.
11
<PAGE> 12
CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In recent federal budget proposals, certain provisions have been offered to
expand the disallowance rule to policies covering employees, officers and
directors. If such proposals are enacted, it would significantly reduce the
attractiveness of business-owned life insurance to companies that traditionally
have high debt/equity ratios, such as banks. While CBI believes there is
inadequate support in Congress at this time to enact such a change, CBI is
unable to predict the outcome of any such legislative proposal by the current or
any future Congress. CBI believes, at the very least, any such proposal would
fully grandfather existing business.
On October 19, 1999, the United States Tax Court ruled that a domestic
corporation was not entitled to deduct fees and interest on policy loans from a
leveraged corporate-owned life insurance program. Although CBI stopped marketing
leveraged COLI programs in June 1997, management is continuing to evaluate the
impact of this decision, which remains subject to appeal. Nevertheless, this
development may cause some current holders of leveraged COLI policies to elect
to surrender their policies, which would reduce the amount of commissions that
CBH would realize from the total pool of leveraged COLI policies.
One of CBI's carriers, General American Life Insurance Company, was placed
under rehabilitation (a form of receivership) by the State of Missouri as the
result of a liquidity impairment. General American has entered into an agreement
to be acquired by Metropolitan Life Insurance Company. The acquisition by
Metlife and the reorganization plan to resolve General American's liquidity
problem await approval by Missouri regulators. During General American's
rehabilitation period, holders of General American policies may not realize the
full values of their policies and CBI may be forced to accept less favorable
renewal commission terms with another insurance carrier in order for the
insurance carrier to assume the policies. In addition, these events could cause
a slowdown in new sales of programs which are financed by policies underwritten
by other insurance companies, or CBI's persistency rate could be adversely
affected by more clients choosing to surrender their policies. Management
believes that General American's pending acquisition by Metropolitan Life is
likely to occur and that policyholders will be adequately protected throughout
the rehabilitation and acquisition. As a result, the Company believes the
General American rehabilitation and acquisition will have little, if any,
negative on the Company" current or future business.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Tables shown in Dollars in Thousands, Except Per Share Amounts)
OVERVIEW
We reported net income of $1.0 million, or $.11 per diluted share, for the
third quarter of 1999, and net income of $3.9 million, or $.43 per diluted
share, for the nine month period ended September 30, 1999. In 1998, we reported
net income of $2.4 million, or $.39 per diluted share, for the third quarter and
a loss of $2.6 million, or $.66 per diluted share for the nine month period
ended September 30, 1998.
Our results for the nine month period ended September 30, 1998, were
adversely impacted by a non-recurring operating charge of $4.8 million to
reflect a fair value adjustment for put warrants previously issued to some of
our note holders. These warrants were redeemed in the third quarter of 1998 for
$4.8 million. Had this $4.8 million, non-tax deductible, charge not occurred,
net income for the nine months ended September 30, 1998, would have been $2.2
million, or $.55 per diluted share
ACQUISITIONS
Our acquisition program remains unchanged since it began with the purchase
of Bank Compensation Strategies in September 1997. We seek to acquire
compatible, well managed and growing companies that will provide either an entry
into a new and expanding market, as did BCS and HealthCare Compensation
Strategies or add to existing business as did Schoenke and NICB.
The companies we acquire are typically privately owned and structured as S
corporations where all of the income is passed on to the shareholders with very
little retained in the company itself. Accordingly, our evaluation focus is on
the quality of the management and future earnings and growth potential with the
financial asset values embedded in a strong book of renewal business that will
be realized for many years after the acquisition takes place.
The Wamberg Organization and Wamberg Financial Corporation
On September 1, 1999, we acquired substantially all the assets and assumed
certain liabilities of The Wamberg Organization, whose sole shareholder was W.
T. Wamberg, and purchased all of the outstanding stock of Wamberg Financial
Corporation, whose sole shareholder was W. T. Wamberg. We acquired certain
operating assets, all of the remaining renewal commission not already acquired
and some liabilities, principally accounts payable and employee benefits, of The
Wamberg Organization. In addition, we acquired all of the outstanding common
stock of Wamberg Financial Corporation which owns an airplane and related debt
of approximately $3.8 million and is engaged in leasing the airplane solely to
The Wamberg Organization. The assets acquired under the purchase agreement
include receivables; equipment; intangible assets; intellectual property;
customer and supplier lists; insurance; and all rights under existing contracts,
leases, agreements and permits. Because of the timing and complexity of the
transactions, CBI has not definitively allocated the purchase price to the
acquired asset.
The Wamberg Organization has historically produced our largest volume of
revenue -- 17.5% of total revenue in 1998 and 23.2% to June 30, 1999. In light
of the relationship between The Wamberg Organization, Wamberg Financial
Corporation, W. T. Wamberg and us, our board appointed a special committee of
the board of directors comprised of independent, non-employee directors to
review the terms of this transaction. The special committee retained an
investment bank to issue a fairness opinion with respect to this acquisition.
After analyzing the matter and considering all relevant issues, the special
committee recommended that our board approve the transaction.
The total cost of the acquisition was approximately $18.0 million and
provided for:
- a cash payment to The Wamberg Organization of $12.0 million;
- a payment to The Wamberg Organization of $11.9 million through December
31, 2002, which may be reduced if revenue objectives set forth in the
purchase agreement are not achieved;
13
<PAGE> 14
- a cash payment to W. T. Wamberg of $50,000 for his shares of Wamberg
Financial Corporation; and
- the direct payment of $1.5 million for outstanding loans of The Wamberg
Organization;
- the assumption of approximately $4.3 million of liabilities including a
$3.8 million note payable for the purchase of a corporate aircraft;
- expenses of approximately $173,000.
The cash portion of $13.8 million was funded through our existing cash
balances.
The Wamberg Organization leases its 11,085 square feet of office space from
an entity controlled by Mr. Wamberg for an annual rental of $150,000 under a
lease expiring on February 21, 2009.
On January 4, 1999, we purchased the right to receive approximately 27.5%
of the commission and fee revenue, prior to deduction of servicing costs,
related to renewal revenue of certain inforce policies existing on June 30,
1998, due under the Principal Office Agreement with W. T. Wamberg and The
Wamberg Organization, for a cash payment of $7.5 million. This transaction
allows us to receive approximately $14.2 million over a ten year period.
Concurrent with the acquisition of The Wamberg Organization and Wamberg, CBI
purchased all of the renewal revenue not acquired on January 4, 1999. In
accordance with the asset purchase agreement, all renewal revenue acquired as of
September 1, 1999, remaining inforce on December 31, 2018, will revert to Mr.
Wamberg.
For the periods prior to the acquisition, The Wamberg Organization and
Wamberg Financial Corporation had revenue and net income as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED
ENDED DECEMBER 31,
JUNE 30, ----------------
1999 1998 1997
----------- ------- ------
(UNAUDITED) (AUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues............................................... $6,037 $10,169 $8,830
Net income............................................. $1,938 $ 4,005 $3,000
</TABLE>
Both The Wamberg Organization and Wamberg Financial Corporation were S
corporations and, accordingly, did not pay federal income taxes.
The unaudited pro forma information below, presents our results of
operations and those of The Wamberg Organization and Wamberg Financial
Corporation as if the acquisition occurred on January 1, 1998, reflecting the
purchase method of accounting.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Pro forma:
Revenues..................................... $27,246 $19,828 $87,058 $55,910
Net income (loss)............................ 1,059 2,442 4,514 (409)
Diluted earnings (loss) per share............ .11 .38 .49 (.10)
</TABLE>
National Institute for Community Banking
On May 18, 1999, we acquired National Institute for Community Banking
(NICB), which by agreement, was effective January 1, 1999. The acquisition was
consummated by merging NICB into us with the NICB shareholders receiving 99,851
shares of our common stock at the closing price of $16 per share for a total
value of $1.6 million. As part of the agreement, the NICB shareholders will
receive an additional 384,452 shares of our common stock as consideration if
stipulated revenue and income goals during the years 1999 through 2002 are
achieved. Acquisition expenses were approximately $77,000. NICB was acquired as
an addition to an expansion of our BCS division.
14
<PAGE> 15
Management Compensation Group/HealthCare
On April 5, 1999, we purchased the assets and business and assumed certain
liabilities of Phynque, Inc., d/b/a Management Compensation Group/HealthCare
(MCG) for a purchase price of $35.9 million consisting of the following:
- a cash payment of $13.8 million;
- a promissory note for $8.7 million;
- 326,363 shares of common stock, having an aggregate value of $5.3 million
based on the closing price of the common stock on April 5, 1999;
- the direct payment of $3.6 million for certain outstanding loans; and
- the assumption of $4.2 million of liabilities and payment of
approximately $310,000 of closing costs.
The assets acquired include cash, receivables and equipment in addition to
all intangible assets, intellectual property, and client lists. The liabilities
assumed include commissions, accrued employee benefits and operating expenses.
The $17.4 million cash portion of the purchase price was funded by a borrowing
under our credit facility. The promissory note is payable in thirty-two equal
quarterly installments of principal and interest at 10% per annum of $430,000
starting April 5, 2000. The promissory note is secured by a personal guarantee
from W. T. Wamberg, Chairman of Clark/Bardes, Inc. MCG is a 180 employee
executive benefit consulting organization servicing the healthcare industry and
is headquartered in Minneapolis, Minnesota.
The acquisition of MCG marked our entrance into the healthcare and
not-for-profit executive benefit and compensation plan business with the
creation of our newest major operating division, HealthCare Compensation
Strategies.
For the periods prior to the acquisition, MCG had revenue and net income as
follows:
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEARS ENDED
ENDED SEPTEMBER 30,
MARCH 31, -------------------
1999 1998 1997
----------- -------- --------
(UNAUDITED) (AUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues.............................................. $10,986 $26,000 $21,939
Net income (loss)..................................... $(1,696) $ 1,816 $ 379
</TABLE>
MCG was an S corporation and, accordingly, did not pay Federal income
taxes.
The unaudited pro forma information below presents our results of
operations and that of MCG combined as if the acquisition had occurred on
January 1, 1998, reflecting the purchase method of accounting.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Pro forma:
Revenues..................................... $25,655 $25,098 $85,188 $67,396
Net income (loss)............................ 1,036 2,113 4,328 (3,066)
Diluted earnings (loss) per share............ .11 .33 .47 (.72)
</TABLE>
Wiedemann & Johnson
Effective November 1, 1998, we acquired substantially all the assets and
the business of Wiedemann & Johnson, based in Dallas, Texas. The total purchase
price was $6.0 million, consisting of $4.0 million in cash and 142,857 shares of
our common stock at $14 per share. Acquisition related expenses were
approximately $54,000. We allocated approximately $40,000 of the purchase price
to tangible assets and the remainder to the net present value of Wiedemann's
expected future revenue. Wiedemann is engaged in the business of the
15
<PAGE> 16
design, implementation and administration of non-qualified executive benefits
programs financed through life insurance. Our primary objective in acquiring the
assets and business of Wiedemann was to expand our client and revenue base and
acquire the experienced Wiedemann support and administrative personnel.
Schoenke & Associates
On September 1, 1998, we purchased substantially all of the assets and
business of Schoenke & Associates Corporation and Schoenke & Associates
Securities Corporation in Germantown, Maryland. The Schoenke companies
specialize in designing and administering benefit programs for companies. The
purchase price was $17.0 million plus expenses of $98,000 and was comprised of
$15.0 million in cash and a promissory note in the principal amount of $2.0
million. CBI allocated approximately $768,000 of the purchase price to tangible
assets acquired and the remaining $16.2 million was allocated to the net present
value of estimated future profits embedded in the existing inforce book of
business.
For the periods prior to being acquired by us, Schoenke's revenues and net
income were:
<TABLE>
<CAPTION>
EIGHT MONTHS FISCAL YEARS ENDED
ENDED DECEMBER 31,
AUGUST 31, -------------------
1998 1997 1996
------------ -------- --------
(UNAUDITED) (AUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues............................................... $4,884 $6,465 $5,835
Net income............................................. $ 841 $ 492 $ 194
</TABLE>
Schoenke was an S corporation and, accordingly, did not pay Federal income
taxes.
The unaudited pro forma information below presents the results of CBI and
Schoenke combined as if the acquisition had occurred January 1, 1998, reflecting
the purchase method of accounting.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Pro forma:
Revenues..................................... $25,655 $18,992 $79,431 $51,510
Net income (loss)............................ 1,036 2,739 3,943 (2,476)
Diluted earnings (loss) per share............ .11 .42 .43 (.58)
</TABLE>
The Schoenke and Wiedemann acquisitions were valuable additions to the
Clark/Bardes divisions core business.
Bank Compensation Strategies
Effective September 1, 1997, we acquired substantially all the assets and
the business of Bank Compensation Strategies, Inc., a Minnesota based company,
for a total purchase price of $24.0 million, plus acquisition related expenses
of $383,000. This was our first major acquisition and marked our entry into the
community bank benefit and compensation market.
PRIVATE PLACEMENT WITH CONNING
On June 7, 1999, we completed a private placement of 1,000,000 shares of
our common stock at $17 per share to Conning Insurance Capital Limited
Partnership V, L. P. (Conning). Conning is a limited partnership managed by a
subsidiary of Conning Corporation. Conning Corporation is, in turn, an indirect
subsidiary of General American Life Insurance Company. As part of the private
placement, we granted Conning registration rights which they may use to have
their shares of our common stock registered along with any shares we may be
registering with the SEC, after December 31, 2002.
16
<PAGE> 17
We also agreed to appoint a representative of Conning to our board of
directors. Conning designated Steven F. Piaker, Senior Vice President of
Conning, to be that representative. We further agreed that, when Mr. Piaker's
term expires, we would use our best efforts to elect a Conning representative to
our board of directors. Proceeds of the $17 million sale of our common stock was
used to reduce outstanding debt and for acquisitions.
GENERAL AMERICAN LIFE INSURANCE COMPANY
One of the insurance carriers we use is General American Life Insurance
Company which represented approximately 8.3% of our renewal revenues for the six
month period ending June 30, 1999. Following a downgrade of General American's
financial ratings by Moody's Investors Service Inc. and a downgrade of General
American's debt to non-investment grade in August 1999, investors began
exercising their rights to withdraw a total of $6.8 billion under short-term
funding agreements, commonly referred to as guaranteed investment contracts,
issued by General American. The contracts require only seven days' notice and
General American, faced with the unexpected volume of withdrawal requests, was
unable to convert the assets within the time required. As a result, General
American has been placed under administrative supervision by the Department of
Insurance of the state of Missouri. On August 26, 1999, General American
tentatively entered into a definitive agreement with Metropolitan Life Insurance
Company whereby Metlife will acquire all of the outstanding common stock of
General American's parent company. As a condition to this agreement, a Missouri
court subsequently placed General American into rehabilitation, a form of
receivership, to protect its policyholders. While the contracts held by our
clients are not the specific investment contracts that created General
American's liquidity problems, our clients are nonetheless affected because
insurance policies underwritten by General American will be restricted from
making policy surrenders or exchanges until General American's liquidity problem
is resolved. A Missouri court must still approve and authorize General
American's reorganization plan, including the sale of General American to
Metlife. If approved, the plan is intended to allow General American and its
subsidiaries' inforce and reinsurance business to continue under the control of
Metlife. Of course, we cannot assure you that the court will approve the
acquisition, nor can we assure you that the acquisition will have its intended
effect.
We do not expect to sell programs financed by insurance policies
underwritten by General American for the foreseeable future. During General
American's rehabilitation, it is possible our clients who hold General American
policies may not realize the full values of their policies and we may be forced
to accept less favorable renewal commission terms with another insurance carrier
in order for the insurance carrier to assume the policies. In addition, these
events could cause a slowdown in new sales of programs which are financed by
policies underwritten by other insurance companies or our persistency rate could
be adversely affected by more clients choosing to surrender their policies. We
are not able to predict the effect that General American's rehabilitation or
potential acquisition will have on the persistency of policies underwritten by
other insurance carriers. General American's rehabilitation or potential
acquisition could adversely affect our renewal fees and commissions and our
persistency levels in general. No assurance can be given that similar financial
difficulties will not be experienced by other insurance companies.
ADVERSE TAX COURT DECISION REGARDING LEVERAGED CORPORATE OWNED LIFE INSURANCE
On October 19, 1999, the U.S. Tax Court issued a decision denying the
deductibility of interest on policy loans in connection with a leveraged
corporate owned life insurance (COLI) program. Following adverse federal income
tax legislation in 1995, Clark/Bardes ceased offering leverage COLI in its
package of benefit plans. Consequently, Clark/Bardes does not expect any adverse
effects of this recent Tax Court ruling on its future new business revenue
stream.
However, because of the varied facts and circumstances surrounding each
case, it is impossible to determine the effects, if any, of this case on a
client's decision to continue or surrender any given policy. Because of the
number of other variables, including adverse tax implications resulting from a
surrender, management does not believe this decision will have any material
adverse effects on the company.
17
<PAGE> 18
REVENUE
Our operating units derive their revenue primarily from:
- commissions paid by the insurance companies that underwrite the policies
underlying the various insurance programs;
- fees paid by clients in connection with program design and administrative
services; and
- executive compensation program and benefit consulting fees.
Our revenue is usually long term and recurring, is typically paid annually
and extends for a period of ten years or more after the sale. Commissions paid
by insurance companies vary by policy and by program and usually represent a
percentage of the premium or the cash surrender value of the insurance policies
underlying our program. We recognize revenue at the time the insurance premium
is paid by the client to the insurance company or the renewal premium is due to
the insurance company.
We include first year commission revenue, renewal commission revenue and
other revenue in total revenue.
- First Year Commission Revenue. First year revenue is recognized at the
time the client is contractually committed to purchase the insurance
policies and the premiums are paid by the client to the insurance
company.
- Renewal Commission Revenue. Renewal revenue is recognized on the date
that the renewal premium is due to the insurance company. Renewal revenue
in future periods, which is not recognized on our balance sheet, is
estimated to be approximately $230 million in total revenue over the next
five years. However, renewal revenue can be affected by policy surrenders
or exchanges, material contract changes, asset growth and case mortality
rates. Over the last five years, we have experienced a persistency rate
of approximately 95% of the inforce insurance underlying our programs. We
can give no assurances that our persistency rate will remain at this
level.
- Other Revenue. Other revenue consists of several miscellaneous sources of
revenue associated with our operations including consulting and
administrative fees.
QUARTERLY RESULTS
The following table presents a summary of key revenue and expense
statistics for the most recent eight calendar quarters. This information is not
necessarily indicative of results for any full year or for any subsequent
period.
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1997 1998 1998 1998 1998 1999 1999
------------ --------- -------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue............... $27,162 $13,754 $15,230 $17,641 $28,141 $24,057 $29,714
Gross profit................ 9,135 4,622 6,159 6,589 11,285 9,874 16,681
Ratio..................... 33.6% 33.6% 40.4% 37.4% 40.1% 41.0% 56.1%
G & A expense............... 4,004 3,371 5,029 4,613 6,594 6,255 12,202
Amortization................ 295 221 221 356 434 620 1,152
Income before interest,
taxes and non-recurring
expense................... 4,836 1,030 909 1,621 4,257 2,999 3,327
% of revenue.............. 17.8% 7.5% 6.0% 9.2% 15.1% 12.5% 11.2%
% of G.P. ................ 52.9% 22.3% 14.8% 24.6% 37.7% 30.4% 19.9%
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
Total revenue............... $25,654
Gross profit................ 15,198
Ratio..................... 59.2%
G & A expense............... 11,332
Amortization................ 1,237
Income before interest,
taxes and non-recurring
expense................... 2,630
% of revenue.............. 10.3%
% of G.P. ................ 17.3%
</TABLE>
Our operating results can fluctuate considerably, especially when compared
on a consecutive quarterly basis. Because many of our programs are implemented
late in the year, we see large increases in both first year
18
<PAGE> 19
and renewal revenue in the fourth quarter. Operating results are also affected
by a number of other factors, including:
- introduction of new or enhanced programs and services by us or our
competitors;
- client acceptance or rejection of new programs and services;
- program development expenses;
- timing of major sales;
- demand for administrative services;
- competitive, legislative and regulatory conditions in our industry; and
- general economic conditions.
Many of these factors are beyond our control. The sales cycles of our
Clark/Bardes Division often takes between twelve and eighteen months, with first
year revenue coming from a few large cases. Our revenue is thus difficult to
forecast, and we believe that comparing our consecutive quarterly results of
operations is not necessarily meaningful, nor does it indicate what results we
will achieve for any subsequent period. In our business, past operating results
are not a reliable indicator of future performance.
RESULTS OF OPERATIONS
The following table sets forth the relationship between revenues and
expenses on a percentage basis.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
1996 1997 1998 1998 1999
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Total Revenue.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Commission and fee expense..................... 63.3 65.6 61.6 62.7 47.4
----- ----- ----- ----- -----
Gross Profit......................... 36.7 34.4 38.4 37.3 52.6
----- ----- ----- ----- -----
General and administrative..................... 25.9 23.3 26.3 27.9 37.5
Amortization................................... -- 0.6 1.6 1.7 3.8
Non recurring (put warrants)................... -- -- 6.4 10.3 --
----- ----- ----- ----- -----
Operating income (loss)........................ 10.9 10.5 4.1 (2.7) 11.3
Interest expense -- net........................ 0.4 (1.8) (3.4) (4.7) (2.7)
----- ----- ----- ----- -----
Income (loss) before taxes..................... 11.2 8.7 0.7 (7.4) 8.5
Income taxes................................... 0.5 0.1 1.3 (1.7) 3.6
----- ----- ----- ----- -----
Net income........................... 10.7% 8.6% (0.7)% 5.6% 4.9%
===== ===== ===== ===== =====
</TABLE>
Revenue
Revenue growth, from existing business units, was mixed for the third
quarter and nine months ended September 30, 1999. Revenue for the quarter
increased $8.0 million or 45% and $32.8 million or 70% for the nine months to
date. Overall revenue for the periods can be summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
----------------- -----------------
FOR THE PERIOD ENDED SEPTEMBER 30, 1999 1998 1999 1998
- ---------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Existing business units........................ $18,092 $17,314 $63,230 $46,299
Acquisitions................................... 7,563 327 16,201 327
------- ------- ------- -------
Total................................ $25,655 $17,641 $79,431 $46,626
======= ======= ======= =======
</TABLE>
19
<PAGE> 20
For 1999, acquisitions contributed 29.5% of the third quarter and 25.6% of
the first nine months of revenue, respectively. By definition, we consider any
revenue source appearing in the first full year of operating results as being
from acquisitions. After that they become part of existing business.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
----------------- -----------------
FOR THE PERIOD ENDED SEPTEMBER 30, 1999 1998 1999 1998
- ---------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
First year revenue:
Clark/Bardes......................................... $ 3,773 $ 2,423 $20,120 $ 6,929
Bank Compensation Strategies......................... 4,653 5,960 14,118 15,323
HealthCare Compensation Strategies................... 5,626 -- 9,347 --
------- ------- ------- -------
14,052 8,383 43,585 22,252
------- ------- ------- -------
Renewal revenue:
Clark/Bardes......................................... $ 8,521 $ 7,764 $25,896 $20,446
Bank Compensation Strategies......................... 2,349 1,494 6,148 3,928
HealthCare Compensation Strategies................... 402 -- 2,497 --
------- ------- ------- -------
11,272 9,258 39,541 24,374
------- ------- ------- -------
Other.................................................. 331 -- 1,305 --
------- ------- ------- -------
Total........................................ $25,655 $17,641 $79,431 $46,626
======= ======= ======= =======
</TABLE>
The Clark/Bardes Division benefitted by $1.5 million in the quarter and
$4.2 million for the nine month period ended September 30, 1999, respectively,
from the acquisition of Schoenke in September 1998.
First Year Revenue
Including acquisitions, CBH continues to benefit from significant growth in
first year revenue.
<TABLE>
<CAPTION>
1999 -- 1998 INCREASE
- ------------ ---------------
<S> <C> <C>
Third quarter:
Existing businesses....................................... $ (201)
Acquisitions.............................................. 5,870
-------
$ 5,669 67.6%
======= =====
Nine months:
Existing businesses....................................... $10,785
Acquisitions.............................................. 10,548
-------
$21,333 95.9%
======= =====
</TABLE>
Renewal Revenue
As the acquired divisions continue to grow, renewal revenue will grow
accordingly, but will become a diminished factor in our overall revenue mix.
<TABLE>
<CAPTION>
1999 -- 1998 INCREASE
- ------------ ---------------
<S> <C> <C>
Third quarter:
Existing businesses....................................... $ 966
Acquisitions.............................................. 1,047
-------
$ 2,013 21.7%
======= =====
Nine months:
Existing businesses....................................... $ 5,256
Acquisitions.............................................. 4,911
-------
$10,167 41.7%
======= =====
</TABLE>
20
<PAGE> 21
The following table represents the gross revenue associated with our
inforce business-owned life insurance policies as of September 30, 1999. The
projected gross revenue stated below is not adjusted for mortality, lapse, or
other factors that may impair collection of revenue. We cannot assure you that
commissions under any of these policies will be received. These projected gross
revenues are based on the beliefs and assumptions of management and are not
necessarily indicative of the revenue that may actually be achieved in the
future.
PROJECTED GROSS RENEWAL REVENUE
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
BANK HEALTHCARE
CLARK COMPENSATION COMPENSATION
BARDES STRATEGIES STRATEGIES TOTAL
-------- ------------ ------------ --------
<S> <C> <C> <C> <C>
2000.......................................... $ 39,701 $ 9,407 $ 6,108 $ 55,216
2001.......................................... 37,140 5,324 6,090 48,554
2002.......................................... 35,378 3,463 6,013 44,854
2003.......................................... 32,649 3,587 5,946 42,184
2004.......................................... 28,890 3,629 5,826 38,345
2005.......................................... 28,477 3,671 5,584 37,732
2006.......................................... 28,393 3,715 5,392 37,500
2007.......................................... 26,429 3,763 5,193 35,385
2008.......................................... 24,308 3,810 4,780 32,898
2009.......................................... 24,506 3,860 4,232 32,598
-------- ------- ------- --------
Total............................... $305,872 $44,229 $55,164 $405,264
======== ======= ======= ========
</TABLE>
In our report for the quarter ended June 30, 1999, we stated that the
projected gross revenue, at that time, was $418.7 million for the ten year
period ending with the year 2009. Included in that projection was an amount
attributable to our newly acquired division, HealthCare Compensation Strategies,
of $68.1 million. HCS had never prepared such a projection before and because of
a lack of understanding overstated its projected ten year revenue by $12.9
million. During the process of updating its ten year projection in connection
with the third quarter report, HCS management detected the error and took
immediate steps to remedy the condition.
COMMISSION EXPENSE AND GROSS PROFIT
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
----------------- -----------------
FOR THE PERIOD ENDED SEPTEMBER 30, 1999 1998 1999 1998
---------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Commissions and fee expense............................ $10,456 $11,052 $37,672 $29,255
Gross profit........................................... $15,199 $ 6,589 $41,759 $17,371
Revenue retained ratio................................. 59.2% 37.3% 52.6% 37.2%
</TABLE>
While increases in commission expense and gross profit are closely
correlated with increases in gross revenue, one of our most important operating
factors is revenue retained. This is the amount of revenue we keep to pay
expenses and finance our ongoing operations.
Our revenue retained ratio increased by 58.3% in the third quarter and
41.0% during the nine months ended September 30, 1999. Three factors have
contributed to this improvement:
- the acquisition of MCG HealthCare;
- a higher volume of first year revenue coming from internal sales efforts;
and,
- the acquisition of NICB.
21
<PAGE> 22
Gross profit for each operating unit, is as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
---------------- -----------------
FOR THE PERIOD 1999 1998 1999 1998
- -------------- ------- ------ ------- -------
<S> <C> <C> <C> <C>
Clark/Bardes............................................ $ 6,177 $4,112 $21,045 $10,869
Bank Compensation Strategies............................ 3,618 2,478 10,154 6,502
HealthCare Compensation Strategies...................... 5,404 -- 10,560 --
------- ------ ------- -------
$15,199 $6,590 $41,759 $17,371
======= ====== ======= =======
Percent of revenue:
Clark/Bardes.......................................... 49.2 40.4 44.6 39.9
Bank Compensation Strategies.......................... 51.7 33.2 50.1 33.8
HealthCare Compensation Strategies.................... 88.6 -- 88.0
Total Company................................. 59.2 37.4 52.6 37.3
</TABLE>
Gross Profit
<TABLE>
<CAPTION>
1999 -- 1998 INCREASE
- ------------ --------
<S> <C> <C>
Third quarter:
Existing businesses....................................... $ 2,647
Acquisitions.............................................. 5,963
-------
$ 8,610 130.7%
======= =====
Nine months:
Existing businesses....................................... $10,855
Acquisitions.............................................. 13,633
-------
$24,388 140.4%
======= =====
</TABLE>
GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
---------------- -----------------
FOR THE PERIOD ENDED SEPTEMBER 30, 1999 1998 1999 1998
- ---------------------------------- ------- ------ ------- -------
<S> <C> <C> <C> <C>
Clark/Bardes............................................ $ 3,351 $3,287 $11,034 $ 9,431
Bank Compensation Strategies............................ 2,884 1,326 7,975 3,591
HealthCare Compensation Strategies...................... 4,014 -- 8,068
Corporate overhead -- note.............................. 1,083 -- 2,712 --
------- ------ ------- -------
$11,332 $4,613 $29,789 $13,022
======= ====== ======= =======
As a percentage of retained revenue:
Clark/Bardes.......................................... 54.2% 80.2% 52.4% 86.9%
Bank Compensation Strategies.......................... 79.7% 53.5% 78.5% 55.2%
HealthCare Compensation Strategies.................... 74.3% -- 76.4%
Total......................................... 74.6% 70.1% 71.3% 75.0%
</TABLE>
- ---------------
Note -- prior to 1999, Corporate overhead was included in the Clark/Bardes
Division.
The increase in general and administrative expenses should be reviewed in
the same context as the decrease in commission expense. Since the beginning of
the year, two significant events have impacted this relationship:
- the acquisition of NICB -- prior to our acquiring NICB, it functioned as
an independent producer for BCS. With the acquisition; commission
previously paid to NICB by BCS have been replaced, in part, by salaries
to the former owners;
22
<PAGE> 23
- the acquisition of MCG (now HCS) -- all of HCS's sales force are company
personnel -- HCS does not rely on any independent producers thus their
selling expense is also reflected in salaries.
The overall increase in general and administrative expense may be analyzed
as follows:
<TABLE>
<CAPTION>
1999 -- 1998 INCREASE
- ------------ --------
<S> <C> <C>
Third quarter:
Existing businesses....................................... $ 2,243
Acquisitions.............................................. 4,476
-------
$ 6,719 121.7%
======= ======
Nine months:
Existing businesses....................................... $ 6,943
Acquisitions.............................................. 9,824
-------
$16,767 107.9%
======= ======
</TABLE>
The most important factor to consider, however, is that the rate of
increase in general and administrative expenses remains lower than the rate of
increase in gross profit. By way of comparison for the periods:
<TABLE>
<CAPTION>
1999 -- 1998 INCREASE
- ------------ --------
<S> <C> <C>
Three months:
Gross profit.............................................. $ 8,625 131.2%
General and administrative expense........................ 6,710 121.7
Nine months:
Gross profit.............................................. 24,405 140.6
General and administrative expense........................ 16,767 107.9
</TABLE>
OTHER EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
-------------- ---------------
FOR THE PERIOD ENDED SEPTEMBER 30, 1999 1998 1999 1998
---------------------------------- ------ ----- ------ ------
<S> <C> <C> <C> <C>
Amortization of intangibles................................ $1,237 $ 356 $3,009 $ 798
Nonrecurring operating expense............................. -- 500 -- 4,800
Interest expense -- net.................................... 790 544 2,209 2,180
Income taxes............................................... 833 (806) 2,838 (801)
</TABLE>
Amortization: Amortization expense increased $881,000 for the three month
period and $2.2 million for the nine month period ended September 30, 1999,
reflecting a full quarter and six months of amortization for the Schoenke and
Wiedemann acquisitions in 1998, as well as the MCG and NICB acquisitions in the
second quarter of 1999.
Nonrecurring operating expense: In 1998, we recognized the expense related
to the increased market value of certain put warrants. These warrants were
redeemed in a later period for $4.8 million and the cost was not deductible for
federal income tax purposes. Other than our employee stock option plans, we do
not have any other convertible securities outstanding.
Interest Expense -- net: Net interest costs increased $246,000 or 45.2% in
the third quarter and $29,000 or 1.3% for the nine months ended September 30,
1999. Three factors contributed to this:
- lower average monthly borrowings for the first six months of 1999;
- lower interest costs resulting from the new Bank One credit facility
starting January 1, 1999;
- emphasizing cash flow and dedicating all excess cash to paying down
acquisition debt.
23
<PAGE> 24
With increased borrowings as a result of our acquisition program, these costs
may be expected to increase in subsequent quarters.
Federal Income Taxes: Federal income tax expense was 43.6% of income before
taxes for the quarter ended September 30, 1999, and 41.6% for the nine months.
This compares to 40% as our normal combined federal and state income tax rate.
The rate for the six months ended June 30, 1999 was 40.8%.
Like all corporations, we have a certain amount of expenses that are not
deductible for federal income tax purposes. They are closely controlled and do
not exceed the amounts management deems prudent for such outlays. The basic
reason for the excessive tax rate was the low level of taxable income for the
periods and the effect of losing a large amount of deductions on a low base of
earnings.
FINANCIAL CONDITION AND LIQUIDITY
We continue to generate strong cash flow from operations. We use the net
cash from operating activities to fund capital expenditures and small
acquisitions. We expect that large future acquisitions will be financed
primarily through externally available funds. However, we can offer no assurance
that such funds will be available and, if so, on terms acceptable to us.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 CHANGE
------------------------------- -------- -------- --------
<S> <C> <C> <C>
Cash flows from (used in):
Operations................................................ $ 10,609 $ 4,013 $ 6,596
Investing................................................. (59,791) (16,570) (43,221)
Financing................................................. 40,485 24,698 15,787
</TABLE>
Cash Flows from Operating Activities
Our cash flow from operations for the nine months ended September 30, 1999,
improved significantly over that of the comparable nine month period in 1998.
The components were:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------- INCREASE/(DECREASE)
1999 1998 IN CASH
------- ------- -------------------
<S> <C> <C> <C>
Net income (loss) plus non-cash expenses.................. $ 7,511 $(1,608) $ 9,119
Changes in operating assets and liabilities............... 3,098 5,621 (2,523)
------- ------- -------
Cash flow from operating activities....................... $10,609 $ 4,013 $ 6,596
======= ======= =======
</TABLE>
In this regard, it is noted that the working capital ratio declined to .67
to one at September 30, 1999 compared with 1.54 to one at December 31, 1999. As
an acquiring company, a great deal of our acquisitions are funded through
debt -- either bank borrowings or sellers' notes. Because of this and the strong
cash generated by operations, management has determined to dedicate all excess
cash to the reduction of bank borrowings and, as a result, only cash for
reasonably foreseeable needs and expenses is retained. As an example of this,
the entire $13.8 million cash portion of the acquisition of The Wamberg
Organization and Wamberg Financial Corporation was accomplished without any
additional borrowings.
Cash Used in Investing Activities
Acquisitions accounted for $53.3 million of the $59.8 million used in
investing activities. The balance was comprised of $6.5 million for purchase of
equipment and various assets such as deferred debt expenses and artwork acquired
with MCG.
Cash spending for acquisitions included:
<TABLE>
<S> <C>
- MCG/HealthCare............................................ $17.4 million
- The Wamberg Corporation and Wamberg Financial Corporation
including the $7.5 million purchase of renewal revenue in
January 1999.............................................. $21.3 million
</TABLE>
24
<PAGE> 25
We expect acquisitions to continue for the remainder of the year and be
financed primarily from available credit lines and possible additional equity.
However, we can offer no assurances such will be the case.
Cash Flows from Financing Activities
In January 1999, we entered into a $65.0 million credit agreement
consisting of a $35.0 million revolving credit facility and two term loans of
$25.0 million and $5.0 million. In January 1999, we used $25.0 million of the
term loans to retire existing debt. The remaining $5.0 million is available for
working capital. The loan is at a fixed rate of 7.08% for the first year and at
a floating rate based on the London Interbank Offered Rate plus 2.25%
thereafter. The loan matures on December 31, 2004 with interest and principal
payable quarterly starting March 31, 1999. The credit agreement contains
restrictive covenants which, among other things, require mandatory prepayments
under certain conditions, financial reporting and compliance certificates,
maintenance of financial ratios, restrictions on guarantees and additional
indebtedness, limitations on mergers and acquisitions, prohibition of cash
dividends, limitation on investments, loans, and advances, and certain change in
control provisions. Since restructuring our debt, we have drawn down on the new
line for $55.1 million of which $25.0 million was used to repay the old debt
$19.0 million for acquisitions, and $11.1 million for general operating
purposes. Since then, $23.8 million of the acquisition and operating debt has
been repaid.
In June, we sold 1,000,000 shares of common stock to Conning Insurance
Capital Limited Partnership V, L. P. for $17 million in a private placement.
Approximately $12 million was used to pay down the Bank One acquisition debt.
In an effort to reduce interest costs, management has directed that all
cash beyond reasonably foreseeable needs be used to pay down debt. Since the
company has a $5 million stand-by working capital line and $10 million in
accounts receivable, this program has been implemented.
We believe that our net cash flow from operations will continue to provide
sufficient funds to service our debt obligations. We estimate renewal revenue in
future periods, which is not reflected on our balance sheet, to represent
approximately $230 million over the next five years. However, renewal revenue
can be adversely affected by policy surrenders or exchanges, material contract
changes, asset growth and case mortality rates.
As our business grows, our working capital and capital expenditures
requirements will also continue to increase. We believe that net cash flows from
operations will be sufficient to finance our debt payments, working capital and
capital expenditures for the next twelve months. There can be no assurance,
however, that the net cash flows from operations will be sufficient to meet our
anticipated requirements or that we will not require additional debt or equity
financing within this time frame. We may continue to issue stock to finance
future acquisitions.
MARKET RISK
We are exposed to various types of market risk in the normal course of our
business, including the impact of interest rate changes and changes in corporate
tax rates. Specifically, a portion of our Bank One credit line bears interest at
the floating London Interbank Offered Rate (LIBOR). We may employ risk
management strategies, including the use of derivatives such as interest rate
swap agreements, to manage those exposures. We do not hold derivatives for
trading purposes.
It is our policy to enter into interest rate swap transactions only to the
extent necessary to achieve our desired objectives of limiting our exposures to
the interest rate risks discussed above. We do not hedge our market risk
exposure in a manner that would completely eliminate the impact of changes in
interest rates on our net income. We do not expect that our results of
operations or liquidity will be materially affected by these risk management
strategies.
Coincident with entering into credit facility and term loan agreements, we
have entered into two interest rate swap agreements with a bank affiliated with
the lending group to fix the interest rates. The first agreement went into
effect on July 6, 1999 and fixes the interest rate at 5.76% on $15 million of
the debt. The second agreement goes into effect on January 18, 2000 and fixes
the rate at 5.29% on $15 million of the debt.
25
<PAGE> 26
INFLATION
Inflation has not had a material effect on our results of operations.
Certain of our expenses, such as compensation, benefits and capital equipment
costs, are subject to normal inflationary pressures. However, the majority of
our service and administrative agreements with clients, which generate fee
income, have a cost of living adjustment tied to the consumer price index.
Management believes that future inflationary pressures will continue to be
offset, because as inflation increases, investment returns will also increase,
resulting in higher cash values and higher commission rates.
YEAR "2000" UPDATE
The year 2000 issue is the result of computer programs written using two
digits rather than four digits to define "date" fields. Information systems have
time sensitive operations that, as a result of this date field limitation could
disrupt activities in the normal business cycle.
State of Readiness
Based on previous and ongoing internal reviews, we believe we have
identified all potential hardware and software that may not function properly
with respect to dates in the year 2000 and thereafter. We will continue our
assessment of year 2000 issues and take steps to prevent these issues from
adversely affecting our future operating results. This process includes, but is
not limited to, the following:
- We reviewed all our software and systems to determine what was not year
2000 compatible and we are upgrading any that are not compliant.
- We contacted all of our major suppliers and vendors to determine if they
had a plan in place to become Y2K compliant, and what problems we might
expect if they would not be.
- We contacted all our suppliers and providers in areas such as employee
benefit plan carriers, office supplies and equipment providers, building
facilities managers or providers of elevators and utilities for their
plans to become Y2K compliant and to report on their progress.
- We have reviewed all internal office machines, such as fax machines,
copiers, the security system, the phone system, etc.
- We have contacted all our carriers and providers of client-related
policies and services to determine their plans to become Y2K compliant,
and to report on their progress, so we could be assured our clients would
receive seamless service.
This assessment and readiness process has been completed, however, we continue
to focus on specific issues.
In our assessment of year 2000 issues, we specifically focused on our
software applications and associated software products, hardware, facilities,
communications equipment and security systems. Our proprietary financial
modeling and administrative systems that support our insurance-financed employee
benefit programs were designed to be year 2000 ready. During 1998, we upgraded
our network software to be year 2000 compliant.
In addition;
- We have completed upgrades to most of our hardware, with the last of our
hardware upgrades scheduled completed at the end of September 1999.
- We completed upgrades to our software by the end of September 1999.
- We have completed upgrades to our telephone and security systems within
the last year to make them compliant. We believe all office equipment is
now 100% compliant.
- Major suppliers, vendors and carriers have provided us written statements
assuring us that they are or will be year 2000 compliant by the end of
1999.
26
<PAGE> 27
Third Party Issues
In addition to evaluating our own systems for year 2000 compliance, we have
communicated with and requested information from our important clients and
carriers to determine the extent to which interfaces with such entities are
vulnerable to year 2000 issues and the extent to which the internal systems of
such entities are vulnerable to year 2000 issues. Third parties that have
relationships with us, including insurance companies and clients, may experience
significant operational difficulties if their computer systems do not properly
recognize date sensitive information when the year changes to 2000. These
computer malfunction issues may have a material adverse effect on the operations
of such third parties, which may, in turn, have a material adverse effect on us.
We are not able to determine the extent to which such third parties, such as
insurance companies and clients, may experience year 2000 issues. Any year 2000
problem of either us or third parties that have relationships with us could have
a material adverse effect on our business, results of operations and financial
condition.
Costs
Our costs, as of September 30, 1999, related to the Year 2000 compliance
efforts total approximately $400,000, and we do not expect our total costs to
materially exceed this amount. We funded these costs with cash generated from
operations.
Continuing Plan
We believe our own systems and software, as well as all internal office
equipment will be 100% compliant before year end and we believe our vendors and
suppliers are actively working to achieve the same results. However, we cannot
make the same assertion with respect to our clients or carriers.
In the event a problem occurs that is out of our control, we have developed
a contingency plan along the following lines:
- MIS and Corporate Services (facilities) staff members will be working the
weekend of December 31 to January 2 to monitor systems and facilities
conditions immediately as of January 1, 2000.
- To protect our systems from data loss due to any power surges, we will
shut them down the evening of December 31, 1999. We will then power them
back up the morning of January 1, 2000.
- We will run one last back up on December 31, 1999 to ensure we have all
data from the close of the last business day backed up and saved off site
so we can recreate all systems and data if we lose our systems
altogether.
- We keep hard copies of all documents sent to clients and carriers, and
our carriers have copies of most of the paperwork. Therefore, we can
recreate our activity through that paper trail.
- We can also use that paper trail to prove when documents, checks or other
information was sent to carriers, clients or banks so we can provide
proof of when a document or check should have been received and calculate
and charge back for any impact the delay of a deposit, etc., would have
on a client's account balance or premium value.
- We have numerous staff members who have remote access to our systems so
we could get at our systems and data remotely if we have any problem
getting into our office. In addition, we store all documents that have
already been imaged, as well as all back up tapes of our data at an
offsite location which we could also access in the event we could not
gain access to our office.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." SFAS
No. 128 specifies the computation, presentation and disclosure requirements for
earnings per share for entities with publicly-held common stock. SFAS No. 128 is
effective for financial statements for both interim and annual periods ending
27
<PAGE> 28
after December 15, 1997 and has been adopted by us and is presented in the
accompanying financial statements.
As of January 1, 1998, we adopted SFAS No. 130 "Reporting Comprehensive
Income." SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components. The adoption of this statement had no
impact on our net income or shareholders' equity. We have no other comprehensive
income as defined by SFAS No. 130 as of December 31, 1997 or December 31, 1998.
In June 1997, the FASB issued SFAS No. 131 "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 requires public enterprises
to report selected information about operating segments in annual and interim
reports issued to shareholders. It is effective for financial statements for
fiscal years beginning after December 15, 1997, but it is not required to be
applied to interim financial statements in the initial year of its application.
The adoption of this statement will have no impact on our financial condition or
results of operations. This statement has been adopted by us and is presented in
the accompanying financial statements.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Form 10-Q and the documents incorporated by reference in this Form may
contain 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. When used in this Form 10-Q, words such as
"anticipate," "believe," "estimate," "expect," "intend," "predict," "project,"
and similar expressions, as they relate to us or our management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs and assumptions of our management as well as information currently
available to us. These forward-looking statements are subject to certain risks,
uncertainties and assumptions, including but not limited to the following:
- - risks associated with changes in tax legislation
- - dependence on key producers and services of key personnel
- - dependence on persistency of existing business
- - credit risk related to renewal revenue
- - acquisition risks
- - risks related to significant intangible assets
- - dependence on certain insurance companies
- - dependence on information processing systems and risk of error or omissions
- - competitive factors and pricing pressures
- - risks posed by the year 2000 date change
- - changes in legal and regulatory requirements and general economic conditions
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, expected or projected. Such forward-looking statements
reflect our current views with respect to future events and are subject to these
and other risks, uncertainties and assumptions relating to the operations,
results of operations, growth strategy and liquidity. All subsequent written and
oral forward-looking statements attributable to us or individuals acting on our
behalf are expressly qualified in their entirety by this paragraph.
28
<PAGE> 29
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In January 1999, CBI entered into a $65 million credit agreement consisting
of a $35 million revolving credit facility and two term loans of $25 million and
$5 million. In January 1999, pursuant to the credit agreement, Clark/Bardes
obtained a term loan for $25 million at a fixed rate of 7.08% for the first year
and at a floating rate based upon the one-year London InterBank Offered Rate
plus 2% thereafter. The term loans are represented by secured promissory notes
maturing December 31, 2004. Principal and interest are payable quarterly
beginning March 31, 1999. The $25.0 million proceeds were used to retire
previously issued debt.
Coincident with the credit facility and floating rate agreements, CBI has
entered into two interest rate swap agreements with a bank affiliated with the
lending group to fix the interest rates. The first agreement went into effect on
July 6, 1999 and fixes the interest rate at 5.76% on $15 million of the debt.
The second agreement goes into effect on January 18, 2000 and fixes the rate at
5.29% on $15 million of the debt.
29
<PAGE> 30
PART II. OTHER INFORMATION
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 -- Reorganization Agreement, by and among Clark/Bardes,
Inc., Clark/Bardes, Inc. and the Predecessor Company
(Incorporated herein by reference to Exhibit 2.1 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
2.2 -- Letter of Intent, dated May 29, 1998, from Clark/Bardes,
Inc. and the Schoenke Companies (Incorporated herein by
reference to Exhibit 2.2 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
2.3 -- Asset Purchase Agreement, dated September 5, 1997, among
Clark/Bardes, Inc., Bank Compensation Strategies, Inc.,
et al. (Incorporated herein by reference to Exhibit 2.3
of Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
2.4 -- Letter of Understanding, dated October 1, 1998, by and
between Clark/Bardes Holdings, Inc. and the Wiedemann &
Johnson Company (Incorporated herein by reference to
Exhibit 10 of Clark/Bardes' Quarterly Report on Form
10-Q, File No. 000-24769, filed with the SEC on November
16, 1998).
2.5 -- Asset Purchase Agreement, dated September 18, 1998, with
Schoenke & Associates Corporation, Schoenke & Associates
Securities Corporation and Raymond F. Schoenke, Jr.
(Incorporated herein by reference to Exhibit 2.2 of
Clark/Bardes' Current Report on Form 8-K, File No.
000-24769, filed with the SEC on October 2, 1998).
2.6 -- Asset Purchase Agreement, dated November 16, 1998, by and
among Clark/Bardes, Inc., Clark/Bardes, Inc., Wiedemann &
Johnson Company, Bruce Hlavacek and Jennie Hlavacek
(Incorporated herein by reference to Exhibit 2.6 of
Clark/Bardes' Annual Report on Form 10-K, File No.
000-24769, filed with the SEC on March 31, 1999).
2.7 -- Asset Purchase Agreement, dated April 15, 1999, by and
among Clark/Bardes, Inc., Clark/Bardes Holdings, Inc.,
Phynque, Inc., and certain shareholders of Phynque, Inc.
(Incorporated herein by reference to Exhibit 2.1 of
Clark/Bardes' Current Report on Form 8-K, File No.
000-24769, filed with the SEC on April 20, 1999).
2.8 -- Agreement and Plan of Reorganization, dated May 18, 1999,
by and among Clark/Bardes Holdings, Inc., NICB Agency,
Inc., and David Shuster, Lynn High, Kathy Smith, and
Kelly Earls (Incorporated herein by reference to Exhibit
2.8 of Clark/Bardes' Quarterly Report on Form 10-Q, File
No. 000-24769, filed with the SEC on August 16, 1999).
2.9 -- Asset and Stock Purchase Agreement, dated September 1,
1999, by and among Clark/Bardes, Inc. and The Wamberg
Organization Inc. and W.T. Wamberg (Incorporated herein
by reference to Exhibit 2.1 of Clark/Bardes' Current
Report on Form 8-K, File No. 000-24769, filed with the
SEC on September 16, 1999).
3.1 -- Certificate of Incorporation of Clark/Bardes, Inc.
(Incorporated herein by reference to Exhibit 3.1 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799, filed with the SEC on July 12, 1998).
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.2 -- Bylaws of Clark/Bardes, Inc. (Incorporated by reference
to Exhibit 3.2 to Clark/ Bardes' Registration Statement
on Form S-1, File No. 333-56799, filed with the SEC on
July 12, 1998).
3.3 -- Certificate of Amendment (Incorporated herein by
reference to Exhibit 3.3 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
3.4 -- Certificate of Designation (Incorporated herein by
reference to Exhibit 3.4 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
3.5 -- Certificate of Merger of NICB Agency, Inc. and
Clark/Bardes Holdings, Inc. (Incorporated herein by
reference to Exhibit 3.5 of Clark/Bardes' Quarterly
Report on Form 10-Q, File No. 000-24769, filed with the
SEC on August 16, 1999).
4.1 -- Specimen Certificate for shares of Common Stock, par
value $.01 per share, of Clark/Bardes Holdings, Inc.
(Incorporated herein by reference to Exhibit 4.1 of
Clark/Bardes' Amendment No. 1 to the Registration
Statement on Form S-1, File No. 333-56799 filed with the
SEC on July 27, 1998).
4.2 -- Rights Agreement, dated as of July 10, 1998, by and
between Clark/Bardes, Inc. and The Bank of New York
(Incorporated herein by reference to Exhibit 4.4 of
Clark/Bardes' Quarterly Report on Form 10-Q, File No.
000-24769, filed with the SEC on November 16, 1998).
10.1 -- Clark/Bardes, Inc. 1998 Stock Option Plan (Incorporated
herein by reference to Exhibit 10.1 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.2 -- Administration and Services Agreement, by and between
Clark/Bardes, Inc. and Clark/Bardes Agency of Ohio, Inc.
(Incorporated herein by reference to Exhibit 10.2 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.3 -- Administration and Services Agreement, by and between
Clark/Bardes, Inc. and Clark/Bardes Securities, Inc.
(Incorporated herein by reference to Exhibit 10.3 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.4 -- Administration and Services Agreement, by and between
Clark/Bardes, Inc. and Clark/Bardes, Inc. of Pennsylvania
(Incorporated herein by reference to Exhibit 10.4 of
Clark/Bardes Registration Statement on Form S-1, File No.
333-56799).
10.5 -- Principal Office Agreement, dated July 29, 1993, by and
between W.T. Wamberg and Clark/Bardes, Inc. (Incorporated
herein by reference to Exhibit 10.5 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.6 -- Buy-Sell Agreement for Clark/Bardes Agency of Ohio, Inc.,
dated April 1996, by and between Clark/Bardes Securities,
Inc., Clark/Bardes Agency of Ohio, Inc. and Robert
Kelleher (Incorporated herein by reference to Exhibit
10.6 of Clark/Bardes' Registration Statement on Form S-1,
File No. 333-56799).
10.7 -- Note and Warrant Purchase Agreement, dated September 8,
1997, by and between Clark/Bardes, Inc. and Great-West,
Life Investors and Nationwide (Incorporated herein by
reference to Exhibit 10.7 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
10.8 -- Note Agreement, dated September 8, 1997, by and between
Clark/Bardes, Inc., Great-West, Life Investors and
Nationwide (Incorporated herein by reference to Exhibit
10.8 of Clark/Bardes' Registration Statement on Form S-1,
File No. 333-56799).
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.9 -- Form of Common Stock Purchase Warrant, dated September 8,
1997 (Incorporated herein by reference to Exhibit 10.9 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-6799).
10.10 -- Form of 11.00% Secured Priority Senior Secured Note Due
August 2004 (Incorporated herein by reference to Exhibit
10.10 of Clark/Bardes' Registration Statement on Form
S-1, File No. 333-56799).
10.11 -- Form of 10.50% Senior Secured Note Due August 2004
(Incorporated herein by reference to Exhibit 10.11 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.12 -- Convertible Subordinated Note, dated September 1997
(Incorporated herein by reference to Exhibit 10.12 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.13 -- Medium Term Note, dated September 1997 (Incorporated
herein by reference to Exhibit 10.13 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.14 -- Stock Purchase Agreement, dated August 22, 1997, by and
among Clark/Bardes, Inc., Malcolm N. Briggs, Steven J.
Cochlan, G.F. Pendleton, and Don R. Teasley (Incorporated
herein by reference to Exhibit 10.14 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.15 -- Stock Purchase Agreement, dated August 1997, by and among
Clark/Bardes, Inc. and Henry J. Smith (Incorporated
herein by reference to Exhibit 10.15 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.16 -- Lease Agreement, dated April 24, 1998, by and between
Northland Center Limited Partnership and Clark/Bardes,
Inc. (Incorporated herein by reference to Exhibit 10.16
of Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.17 -- Lease Agreement, dated December 30, 1994, by and between
C-W#5, Ltd., and Clark/Bardes, Inc. (Incorporated herein
by reference to Exhibit 10.17 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.18 -- Letter of Agreement to Purchase Warrants, dated June 11,
1998, to Nationwide (Incorporated herein by reference to
Exhibit 10.18 of Clark/Bardes' Registration Statement on
Form S-1, File No. 333-56799).
10.19 -- Letter of Agreement to Purchase Warrants, dated June 11,
1998 to Life Investors (Incorporated herein by reference
to Exhibit 10.19 of Clark/Bardes' Registration Statement
on Form S-1, File No. 333-56799).
10.20 -- Letter of Agreement to Purchase Warrants, dated June 11,
1998, to Great-West (Incorporated herein by reference to
Exhibit 10.20 of Clark/Bardes' Registration Statement on
Form S-1, File No. 333-56799).
10.21 -- Phantom Stock Agreement, dated September 5, 1997, by and
between Clark/ Bardes, Inc. and Steven J. Cochlan
(Incorporated herein by reference to Exhibit 10.21 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.22 -- Employment Agreement, dated November 21, 1996, by and
between Clark/Bardes, Inc. and Kurt J. Laning
(Incorporated herein by reference to Exhibit 10.22 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.23 -- Employment Agreement, dated March 28, 1995, by and
between Clark/Bardes, Inc. and Keith L. Staudt
(Incorporated herein by reference to Exhibit 10.23 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.24 -- Employment Agreement, dated August 23, 1993, by and
between Clark/Bardes, Inc. and Larry Sluder (Incorporated
herein by reference to Exhibit 10.24 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.25 -- Employment Agreement, dated March 7, 1993, by and between
Clark/Bardes, Inc. and Ronald A. Roth (Incorporated
herein by reference to Exhibit 10.25 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.26 -- Employment Agreement, dated April 15, 1991, by and
between Clark/Bardes, Inc. and Sue A. Leslie
(Incorporated herein by reference to Exhibit 10.26 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.27 -- Employment Agreement, dated June 9, 1993, by and between
Clark/Bardes, Inc. and William J. Gallegos (Incorporated
herein by reference to Exhibit 10.27 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.28 -- Tax Indemnity Agreement by and between Clark/Bardes
Holdings, Inc., Clark/Bardes, Inc. and certain former
Shareholders of the Predecessor Company (Incorporated
herein by reference to Exhibit 10.28 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.29 -- Form of Employee Stock Purchase Plan (Incorporated herein
by reference to Exhibit 10.29 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.30 -- Form of Employment Agreement, effective as of September
1, 1998, by and between Clark/Bardes, Inc. and Robert E.
Miller (Incorporated herein by reference to Exhibit 10.30
of Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.31 -- Form of Employment Agreement, effective as of July 1,
1998, by and between Clark/Bardes, Inc. and Thomas M.
Pyra (Incorporated herein by reference to Exhibit 10.31
of Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.32 -- Form of Employment Agreement, effective as of July 1,
1998, by and between Clark/Bardes Holdings, Inc. and
Melvin G. Todd (Incorporated herein by reference to
Exhibit 10.32 of Clark/Bardes' Registration Statement on
Form S-1, File No. 333-36799).
10.33 -- Form of Commission Transfer Agreement by and between W.T.
Wamberg, The Wamberg Organization, Inc. and Clark/Bardes,
Inc. (Incorporated herein by reference to Exhibit 10.33
of Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.34 -- Letter of Agreement, dated July 24, 1998, to Great-West,
Life Investors and Nationwide (Incorporated herein by
reference to Exhibit 10.34 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
10.35 -- Employment Agreement, dated September 1, 1997, by and
between Clark/Bardes, Inc. and Richard C. Chapman
(Incorporated herein by reference to Exhibit 10.35 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.36 -- Put Rights Agreement, dated as of September 9, 1997, by
and among Clark/Bardes, Inc., Great-West, Life Investors
and Nationwide (Incorporated herein by reference to
Exhibit 10.38 of Clark/Bardes' Registration Statement on
Form S-1, File No. 333-56799).
10.37 -- Participation Rights Agreement, dated as of September 9,
1997, by and among Clark/Bardes, Inc., Great-West, Life
Investors and Nationwide (Incorporated herein by
reference to Exhibit 10.39 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
10.38 -- Registration Rights Agreement, dated as of September 9,
1997, by and among Clark/Bardes, Inc., Great-West, Life
Investors and Nationwide (Incorporated herein by
reference to Exhibit 10.40 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
10.39 -- Form of Letter Agreement between Phoenix Home Life and
Clark/Bardes Holdings (Incorporated herein by reference
to Exhibit 10.41 of Clark/Bardes' Registration Statement
on Form S-1, File No. 333-56799).
10.40 -- Letter Agreement, dated August 14, 1998, between
Nationwide and Clark/Bardes Holdings (Incorporated herein
by reference to Exhibit 10.42 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.41 -- Letter Agreement, dated August 14, 1998, between
Great-West and Clark/Bardes Holdings (Incorporated herein
by reference to Exhibit 10.43 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.42 -- Letter Agreement, dated August 17, 1998, between General
American and Clark/ Bardes Holdings (Incorporated herein
by reference to Exhibit 10.44 of Clark/ Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.43 -- 1998 Non-Employee Director Stock Option Plan
(Incorporated herein by reference to Exhibit 4.7 of
Clark/Bardes' Registration Statement on Form S-8, File
No. 333-68163, filed with the SEC on December 1, 1998).
10.44 -- Credit Agreement, dated January 15, 1999, among
Clark/Bardes, Inc., Bank One Texas, N.A., U.S. Bank
National Association, certain financial institutions, and
Banc One Capital Markets, Inc. (Incorporated herein by
reference to Exhibit 10.46 of Clark/Bardes' Annual Report
on Form 10-K, File No. 000-24769, filed with the SEC on
March 31, 1999).
10.45 -- Lease Agreement, dated December 30, 1996, by and between
Bellemead Development Corporation and Schoenke &
Associates Corporation (Incorporated herein by reference
to Exhibit 10.47 of Clark/Bardes' Annual Report on Form
10-K, File No. 000-24769, filed with the SEC on March 31,
1999).
10.46 -- Lease of Office Space, dated February 20, 1990, by and
between T.N.C. Northstar Associates Limited Partnership
and Phynque, Inc., as amended (Incorporated herein by
reference to Exhibit 10.46 of Clark/Bardes' Quarterly
Report on Form 10-Q, File No. 000-24769, filed with the
SEC on August 16, 1999).
10.47 -- Form of Employment Agreement, dated April 5, 1999, by and
between Clark/ Bardes, Inc. and Donald Wegmiller
(Incorporated herein by reference to Exhibit 10.47 of
Clark/Bardes' Quarterly Report on Form 10-Q, File No.
000-24769, filed with the SEC on August 16, 1999).
*10.48 -- Employment Agreement, dated as of September 1, 1999, by
and between Clark/ Bardes Holdings, Inc. and W.T.
Wamberg.
*10.49 -- [NORTH BARRINGTON LEASE]
</TABLE>
34
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
22.1 -- Definitive Proxy Statement dated March 31, 1999
(Incorporated herein by reference to File No. 000-24769,
filed with the SEC on March 31, 1999).
*27.1 -- Financial Data Schedule for 3 months (included with SEC
filed copy only).
*27.2 -- Financial Data Schedule for 9 months (included with SEC
filed copy only).
</TABLE>
- ---------------
* Filed herewith.
(b) Reports on Form 8-K
Form 8-K, File No. 000-24769, filed on September 6, 1999, as amended by
Amendment No. 1, filed on October 4, 1999.
35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLARK/BARDES HOLDINGS, INC.
Date 11/02/99
/s/ W.T. WAMBERG
------------------------------------
W.T. Wamberg
President and Chief Executive
Officer
Date 11/02/99
/s/ THOMAS M. PYRA
------------------------------------
Thomas M. Pyra
Vice President and Chief Financial
Officer
(Principal Financial Officer)
Date 11/02/99
36
<PAGE> 37
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 -- Reorganization Agreement, by and among Clark/Bardes,
Inc., Clark/Bardes, Inc. and the Predecessor Company
(Incorporated herein by reference to Exhibit 2.1 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
2.2 -- Letter of Intent, dated May 29, 1998, from Clark/Bardes,
Inc. and the Schoenke Companies (Incorporated herein by
reference to Exhibit 2.2 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
2.3 -- Asset Purchase Agreement, dated September 5, 1997, among
Clark/Bardes, Inc., Bank Compensation Strategies, Inc.,
et al. (Incorporated herein by reference to Exhibit 2.3
of Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
2.4 -- Letter of Understanding, dated October 1, 1998, by and
between Clark/Bardes Holdings, Inc. and the Wiedemann &
Johnson Company (Incorporated herein by reference to
Exhibit 10 of Clark/Bardes' Quarterly Report on Form
10-Q, File No. 000-24769, filed with the SEC on November
16, 1998).
2.5 -- Asset Purchase Agreement, dated September 18, 1998, with
Schoenke & Associates Corporation, Schoenke & Associates
Securities Corporation and Raymond F. Schoenke, Jr.
(Incorporated herein by reference to Exhibit 2.2 of
Clark/Bardes' Current Report on Form 8-K, File No.
000-24769, filed with the SEC on October 2, 1998).
2.6 -- Asset Purchase Agreement, dated November 16, 1998, by and
among Clark/Bardes, Inc., Clark/Bardes, Inc., Wiedemann &
Johnson Company, Bruce Hlavacek and Jennie Hlavacek
(Incorporated herein by reference to Exhibit 2.6 of
Clark/Bardes' Annual Report on Form 10-K, File No.
000-24769, filed with the SEC on March 31, 1999).
2.7 -- Asset Purchase Agreement, dated April 15, 1999, by and
among Clark/Bardes, Inc., Clark/Bardes Holdings, Inc.,
Phynque, Inc., and certain shareholders of Phynque, Inc.
(Incorporated herein by reference to Exhibit 2.1 of
Clark/Bardes' Current Report on Form 8-K, File No.
000-24769, filed with the SEC on April 20, 1999).
2.8 -- Agreement and Plan of Reorganization, dated May 18, 1999,
by and among Clark/Bardes Holdings, Inc., NICB Agency,
Inc., and David Shuster, Lynn High, Kathy Smith, and
Kelly Earls (Incorporated herein by reference to Exhibit
2.8 of Clark/Bardes' Quarterly Report on Form 10-Q, File
No. 000-24769, filed with the SEC on August 16, 1999).
2.9 -- Asset and Stock Purchase Agreement, dated September 1,
1999, by and among Clark/Bardes, Inc. and The Wamberg
Organization Inc. and W.T. Wamberg (Incorporated herein
by reference to Exhibit 2.1 of Clark/Bardes' Current
Report on Form 8-K, File No. 000-24769, filed with the
SEC on September 16, 1999).
3.1 -- Certificate of Incorporation of Clark/Bardes, Inc.
(Incorporated herein by reference to Exhibit 3.1 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799, filed with the SEC on July 12, 1998).
3.2 -- Bylaws of Clark/Bardes, Inc. (Incorporated by reference
to Exhibit 3.2 to Clark/ Bardes' Registration Statement
on Form S-1, File No. 333-56799, filed with the SEC on
July 12, 1998).
3.3 -- Certificate of Amendment (Incorporated herein by
reference to Exhibit 3.3 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
3.4 -- Certificate of Designation (Incorporated herein by
reference to Exhibit 3.4 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.5 -- Certificate of Merger of NICB Agency, Inc. and
Clark/Bardes Holdings, Inc. (Incorporated herein by
reference to Exhibit 3.5 of Clark/Bardes' Quarterly
Report on Form 10-Q, File No. 000-24769, filed with the
SEC on August 16, 1999).
4.1 -- Specimen Certificate for shares of Common Stock, par
value $.01 per share, of Clark/Bardes Holdings, Inc.
(Incorporated herein by reference to Exhibit 4.1 of
Clark/Bardes' Amendment No. 1 to the Registration
Statement on Form S-1, File No. 333-56799 filed with the
SEC on July 27, 1998).
4.2 -- Rights Agreement, dated as of July 10, 1998, by and
between Clark/Bardes, Inc. and The Bank of New York
(Incorporated herein by reference to Exhibit 4.4 of
Clark/Bardes' Quarterly Report on Form 10-Q, File No.
000-24769, filed with the SEC on November 16, 1998).
10.1 -- Clark/Bardes, Inc. 1998 Stock Option Plan (Incorporated
herein by reference to Exhibit 10.1 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.2 -- Administration and Services Agreement, by and between
Clark/Bardes, Inc. and Clark/Bardes Agency of Ohio, Inc.
(Incorporated herein by reference to Exhibit 10.2 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.3 -- Administration and Services Agreement, by and between
Clark/Bardes, Inc. and Clark/Bardes Securities, Inc.
(Incorporated herein by reference to Exhibit 10.3 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.4 -- Administration and Services Agreement, by and between
Clark/Bardes, Inc. and Clark/Bardes, Inc. of Pennsylvania
(Incorporated herein by reference to Exhibit 10.4 of
Clark/Bardes Registration Statement on Form S-1, File No.
333-56799).
10.5 -- Principal Office Agreement, dated July 29, 1993, by and
between W.T. Wamberg and Clark/Bardes, Inc. (Incorporated
herein by reference to Exhibit 10.5 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.6 -- Buy-Sell Agreement for Clark/Bardes Agency of Ohio, Inc.,
dated April 1996, by and between Clark/Bardes Securities,
Inc., Clark/Bardes Agency of Ohio, Inc. and Robert
Kelleher (Incorporated herein by reference to Exhibit
10.6 of Clark/Bardes' Registration Statement on Form S-1,
File No. 333-56799).
10.7 -- Note and Warrant Purchase Agreement, dated September 8,
1997, by and between Clark/Bardes, Inc. and Great-West,
Life Investors and Nationwide (Incorporated herein by
reference to Exhibit 10.7 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
10.8 -- Note Agreement, dated September 8, 1997, by and between
Clark/Bardes, Inc., Great-West, Life Investors and
Nationwide (Incorporated herein by reference to Exhibit
10.8 of Clark/Bardes' Registration Statement on Form S-1,
File No. 333-56799).
10.9 -- Form of Common Stock Purchase Warrant, dated September 8,
1997 (Incorporated herein by reference to Exhibit 10.9 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-6799).
10.10 -- Form of 11.00% Secured Priority Senior Secured Note Due
August 2004 (Incorporated herein by reference to Exhibit
10.10 of Clark/Bardes' Registration Statement on Form
S-1, File No. 333-56799).
10.11 -- Form of 10.50% Senior Secured Note Due August 2004
(Incorporated herein by reference to Exhibit 10.11 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.12 -- Convertible Subordinated Note, dated September 1997
(Incorporated herein by reference to Exhibit 10.12 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.13 -- Medium Term Note, dated September 1997 (Incorporated
herein by reference to Exhibit 10.13 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.14 -- Stock Purchase Agreement, dated August 22, 1997, by and
among Clark/Bardes, Inc., Malcolm N. Briggs, Steven J.
Cochlan, G.F. Pendleton, and Don R. Teasley (Incorporated
herein by reference to Exhibit 10.14 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.15 -- Stock Purchase Agreement, dated August 1997, by and among
Clark/Bardes, Inc. and Henry J. Smith (Incorporated
herein by reference to Exhibit 10.15 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.16 -- Lease Agreement, dated April 24, 1998, by and between
Northland Center Limited Partnership and Clark/Bardes,
Inc. (Incorporated herein by reference to Exhibit 10.16
of Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.17 -- Lease Agreement, dated December 30, 1994, by and between
C-W#5, Ltd., and Clark/Bardes, Inc. (Incorporated herein
by reference to Exhibit 10.17 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.18 -- Letter of Agreement to Purchase Warrants, dated June 11,
1998, to Nationwide (Incorporated herein by reference to
Exhibit 10.18 of Clark/Bardes' Registration Statement on
Form S-1, File No. 333-56799).
10.19 -- Letter of Agreement to Purchase Warrants, dated June 11,
1998 to Life Investors (Incorporated herein by reference
to Exhibit 10.19 of Clark/Bardes' Registration Statement
on Form S-1, File No. 333-56799).
10.20 -- Letter of Agreement to Purchase Warrants, dated June 11,
1998, to Great-West (Incorporated herein by reference to
Exhibit 10.20 of Clark/Bardes' Registration Statement on
Form S-1, File No. 333-56799).
10.21 -- Phantom Stock Agreement, dated September 5, 1997, by and
between Clark/ Bardes, Inc. and Steven J. Cochlan
(Incorporated herein by reference to Exhibit 10.21 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.22 -- Employment Agreement, dated November 21, 1996, by and
between Clark/Bardes, Inc. and Kurt J. Laning
(Incorporated herein by reference to Exhibit 10.22 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.23 -- Employment Agreement, dated March 28, 1995, by and
between Clark/Bardes, Inc. and Keith L. Staudt
(Incorporated herein by reference to Exhibit 10.23 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.24 -- Employment Agreement, dated August 23, 1993, by and
between Clark/Bardes, Inc. and Larry Sluder (Incorporated
herein by reference to Exhibit 10.24 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.25 -- Employment Agreement, dated March 7, 1993, by and between
Clark/Bardes, Inc. and Ronald A. Roth (Incorporated
herein by reference to Exhibit 10.25 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.26 -- Employment Agreement, dated April 15, 1991, by and
between Clark/Bardes, Inc. and Sue A. Leslie
(Incorporated herein by reference to Exhibit 10.26 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.27 -- Employment Agreement, dated June 9, 1993, by and between
Clark/Bardes, Inc. and William J. Gallegos (Incorporated
herein by reference to Exhibit 10.27 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.28 -- Tax Indemnity Agreement by and between Clark/Bardes
Holdings, Inc., Clark/Bardes, Inc. and certain former
Shareholders of the Predecessor Company (Incorporated
herein by reference to Exhibit 10.28 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.29 -- Form of Employee Stock Purchase Plan (Incorporated herein
by reference to Exhibit 10.29 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.30 -- Form of Employment Agreement, effective as of September
1, 1998, by and between Clark/Bardes, Inc. and Robert E.
Miller (Incorporated herein by reference to Exhibit 10.30
of Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.31 -- Form of Employment Agreement, effective as of July 1,
1998, by and between Clark/Bardes, Inc. and Thomas M.
Pyra (Incorporated herein by reference to Exhibit 10.31
of Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.32 -- Form of Employment Agreement, effective as of July 1,
1998, by and between Clark/Bardes Holdings, Inc. and
Melvin G. Todd (Incorporated herein by reference to
Exhibit 10.32 of Clark/Bardes' Registration Statement on
Form S-1, File No. 333-36799).
10.33 -- Form of Commission Transfer Agreement by and between W.T.
Wamberg, The Wamberg Organization, Inc. and Clark/Bardes,
Inc. (Incorporated herein by reference to Exhibit 10.33
of Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.34 -- Letter of Agreement, dated July 24, 1998, to Great-West,
Life Investors and Nationwide (Incorporated herein by
reference to Exhibit 10.34 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
10.35 -- Employment Agreement, dated September 1, 1997, by and
between Clark/Bardes, Inc. and Richard C. Chapman
(Incorporated herein by reference to Exhibit 10.35 of
Clark/Bardes' Registration Statement on Form S-1, File
No. 333-56799).
10.36 -- Put Rights Agreement, dated as of September 9, 1997, by
and among Clark/Bardes, Inc., Great-West, Life Investors
and Nationwide (Incorporated herein by reference to
Exhibit 10.38 of Clark/Bardes' Registration Statement on
Form S-1, File No. 333-56799).
10.37 -- Participation Rights Agreement, dated as of September 9,
1997, by and among Clark/Bardes, Inc., Great-West, Life
Investors and Nationwide (Incorporated herein by
reference to Exhibit 10.39 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
10.38 -- Registration Rights Agreement, dated as of September 9,
1997, by and among Clark/Bardes, Inc., Great-West, Life
Investors and Nationwide (Incorporated herein by
reference to Exhibit 10.40 of Clark/Bardes' Registration
Statement on Form S-1, File No. 333-56799).
10.39 -- Form of Letter Agreement between Phoenix Home Life and
Clark/Bardes Holdings (Incorporated herein by reference
to Exhibit 10.41 of Clark/Bardes' Registration Statement
on Form S-1, File No. 333-56799).
10.40 -- Letter Agreement, dated August 14, 1998, between
Nationwide and Clark/Bardes Holdings (Incorporated herein
by reference to Exhibit 10.42 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.41 -- Letter Agreement, dated August 14, 1998, between
Great-West and Clark/Bardes Holdings (Incorporated herein
by reference to Exhibit 10.43 of Clark/Bardes'
Registration Statement on Form S-1, File No. 333-56799).
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.42 -- Letter Agreement, dated August 17, 1998, between General
American and Clark/ Bardes Holdings (Incorporated herein
by reference to Exhibit 10.44 of Clark/ Bardes'
Registration Statement on Form S-1, File No. 333-56799).
10.43 -- 1998 Non-Employee Director Stock Option Plan
(Incorporated herein by reference to Exhibit 4.7 of
Clark/Bardes' Registration Statement on Form S-8, File
No. 333-68163, filed with the SEC on December 1, 1998).
10.44 -- Credit Agreement, dated January 15, 1999, among
Clark/Bardes, Inc., Bank One Texas, N.A., U.S. Bank
National Association, certain financial institutions, and
Banc One Capital Markets, Inc. (Incorporated herein by
reference to Exhibit 10.46 of Clark/Bardes' Annual Report
on Form 10-K, File No. 000-24769, filed with the SEC on
March 31, 1999).
10.45 -- Lease Agreement, dated December 30, 1996, by and between
Bellemead Development Corporation and Schoenke &
Associates Corporation (Incorporated herein by reference
to Exhibit 10.47 of Clark/Bardes' Annual Report on Form
10-K, File No. 000-24769, filed with the SEC on March 31,
1999).
10.46 -- Lease of Office Space, dated February 20, 1990, by and
between T.N.C. Northstar Associates Limited Partnership
and Phynque, Inc., as amended (Incorporated herein by
reference to Exhibit 10.46 of Clark/Bardes' Quarterly
Report on Form 10-Q, File No. 000-24769, filed with the
SEC on August 16, 1999).
10.47 -- Form of Employment Agreement, dated April 5, 1999, by and
between Clark/ Bardes, Inc. and Donald Wegmiller
(Incorporated herein by reference to Exhibit 10.47 of
Clark/Bardes' Quarterly Report on Form 10-Q, File No.
000-24769, filed with the SEC on August 16, 1999).
*10.48 -- Employment Agreement, dated as of September 1, 1999, by
and between Clark/ Bardes Holdings, Inc. and W.T.
Wamberg.
*10.49 -- [NORTH BARRINGTON LEASE]
22.1 -- Definitive Proxy Statement dated March 31, 1999
(Incorporated herein by reference to File No. 000-24769,
filed with the SEC on March 31, 1999).
*27.1 -- Financial Data Schedule for 3 months (included with SEC
filed copy only).
*27.2 -- Financial Data Schedule for 9 months (included with SEC
filed copy only).
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 10.48
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), by and between Clark/Bardes Holdings,
Inc., a Delaware corporation ("Company"), and W.T. Wamberg, a resident of
Illinois (the "Executive"), shall become effective on September 1, 1999 (the
"Effective Date").
WITNESSETH THAT:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive, and
the Executive agrees to serve the Company, in the capacities described herein
during the Period of Employment (as defined in Section 2 of this Agreement), in
accordance with the terms and conditions of this Agreement.
2. PERIOD OF EMPLOYMENT. The term "Period of Employment" shall mean the
period of 5 years, commencing on the Effective Date and, unless earlier
terminated pursuant to Section 7, ending on the fifth anniversary of the
Effective Date; provided, however, that the Period of Employment shall
automatically be extended on a day by day basis effective on and after the
fourth anniversary of the Effective Date (so that it is always one (1) year)
until such date as either the Company or the Executive shall have terminated
such automatic extension provision by giving written notice to the other.
3. DUTIES DURING THE PERIOD OF EMPLOYMENT.
(a) DUTIES. During the Period of Employment, the Executive shall be
employed as the Chief Executive Officer of the Company with overall charge and
responsibility for the business and affairs of the Company. Executive shall also
be the Chairman of the Company's Board of Directors. Executive shall report
directly to the Company's Board of Directors.
(b) SCOPE. During the Period of Employment, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
shall devote substantially all of his business time and attention to the
business and affairs of the Company. It shall not be a violation of this
Agreement for the Executive to (i) serve on corporate, civic or charitable
boards or committees; (ii) deliver lectures, fulfill speaking engagements or
teach occasional courses or seminars at educational institutions; or (iii)
manage personal investments, so long as such activities under clauses (i), (ii)
and (iii) do not interfere, in any substantive respect, with the Executive's
responsibilities hereunder.
<PAGE> 2
4. COMPENSATION AND OTHER PAYMENTS.
(a) SALARY. During the Period of Employment, the Company shall pay the
Executive an annualized base salary of not less than Two Hundred Sixty Thousand
($260,000) per year (the "Base Salary"). The Executive's Base Salary shall be
paid in accordance with the Company's executive payroll policy. The Base Salary
shall be reviewed annually as of the end of each fiscal year during the Period
of Employment by the Compensation Committee of the Company's Board of Directors
(the "Committee"). Each annual review shall be completed within 60 days after
the last day of the fiscal year. Based upon such reviews, the Committee may
increase, but shall not decrease, the Base Salary. Any increase in Base Salary
shall not serve to limit or reduce any other obligation to the Executive under
this Agreement.
(b) ANNUAL BONUS. In addition to the Base Salary, the Executive shall
be eligible to receive an annual bonus of up to 140% of his Base Salary, as
determined in the sole discretion of the Compensation Committee of the Company's
Board of Directors.
5. OTHER EXECUTIVE BENEFITS.
(a) REGULAR REIMBURSED BUSINESS EXPENSES. The Company shall promptly
reimburse the Executive for all expenses and disbursements reasonably incurred
by the Executive in the performance of his duties hereunder during the Period of
Employment.
(b) BENEFIT PLANS. The Executive and his eligible family members shall
be entitled to participate immediately, on terms no less favorable to the
Executive and his eligible family members than the terms offered to senior
executives of the Company, in any group and/or executive life, hospitalization
or disability insurance plan, health program, vacation policy, pension, profit
sharing, 401(k) and similar benefit plans (qualified, non-qualified and
supplemental) or other fringe benefits (it being understood that items such as
stock options are not fringe benefits) of the Company (collectively referred to
as the "Benefits"). In the event that any health programs or insurance policies
applicable to the Benefits provided hereunder contain a preexisting conditions
clause, the Company shall either obtain a waiver from such clause with respect
to the Executive and/or his eligible family members or self-insure the Executive
and/or his eligible family members with respect to such conditions. Anything
contained herein to the contrary notwithstanding, the benefits described herein
shall not duplicate benefits made available to the Executive pursuant to any
other provision of this Agreement.
(c) PERQUISITES. The Company shall provide the Executive such
perquisites of employment as are commonly provided to other senior executives of
the Company. In addition to the foregoing, the Company shall: (1) pay the annual
membership dues for organizations which are business related, including (i) the
Glenview Country Club, (ii) the Barrington Hills Country Club, (iii) the
Wynstone Country Club, (iv) the Chicago Club, (v) the Economic Club of Chicago,
and (vi) the Max McGraw Wildlife Center; (2) pay the annual membership dues for
industry organizations, including the Association for Advanced Underwriting; (3)
provide the Executive with the use of an automobile that the Company leases in
its own name and for which the Company pays all insurance premiums, and that is
acceptable to the Company and to the Executive, and the Company shall also pay
all expenses for the upkeep and operation of such
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<PAGE> 3
automobile as documented by the Executive; (4) reimburse the Executive for the
costs incurred by him for estate planning services provided by Ayco; and (5)
reimburse the Executive for the cost of maintaining during the Period of
Employment an individual disability insurance policy(ies) that will, together
with any group disability policy maintained by the Company, provide the
Executive with a disability benefit equal to 60% of his annual Base Salary and
maximum Annual Bonus.
(d) USE OF COMPANY AIRCRAFT. To the extent practicable, all of
Executive's business related air travel will be via the Company's corporate
aircraft (or the corporate aircraft of any of the Company's subsidiaries). In
addition, the Executive shall have personal use of the Company's corporate
aircraft (or the corporate aircraft of any of the Company's subsidiaries),
subject to availability, reimbursement by the Executive to the Company of direct
costs associated with such use, and usual and customary income tax treatment of
such use.
6. NON-COMPETITION; NON-SOLICITATION.
(a) During the Period of Employment, and for two (2) years thereafter
(the "non- Competition Period), the Executive shall not in the United States,
and in any other areas in which the Company has done business within five (5)
years preceding the Effective Date (collectively, the "Territory"), directly or
indirectly, either alone or in partnership or jointly or in conjunction with any
person or persons, firm, association, syndicate, company or corporation as
principal, agent, employee, director, shareholder or in any other manner
whatsoever (i) carry on or be engaged in the business of marketing executive
benefit and insurance plans to large corporations and other organizations (the
"Business") or any other business which is in competition with the Business as
existing on the date hereof, or (ii) solicit business from, or sell to, any of
the Company's customers in the Territory or any other person, firm or
corporation in the Territory to whom the Company has sold products within five
(5) years preceding the date of this Agreement where such solicitation or sale
would involve the sale of products competitive with the Business. Nothing herein
shall prohibit Executive from being an owner of not more than 5% of the
outstanding stock of any class of a corporation which is publicly traded, so
long as he has no active participation in the business of such corporation.
(b) Executive agrees that during the Period of Employment and for a
period of two (2) year thereafter, he will not directly or indirectly offer
employment to any person who is currently or was within the last year employed
by the Company, or, is or will be employed by the Company, except with the prior
written consent of the Company.
(c) Nothing contained herein shall in any way limit the ability of the
Company to enforce the terms of the Non-Compete Agreement between the Company
and the Executive dated as of September 1, 1999.
7. TERMINATION.
(a) DEATH OR DISABILITY. This Agreement and the Period of Employment
shall terminate automatically upon the Executive's death. If the Disability of
the Executive has occurred (pursuant to the definition of "Disability" set forth
below), it may give to the Executive
3
<PAGE> 4
written notice of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the thirtieth day after receipt by the Executive of such notice given at any
time after a period of one hundred eighty (180) consecutive days (or 60
consecutive days three or more times in any single period of 365 consecutive
days) of Disability; provided that, within the thirty (30) days after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" means the
Executive's inability to perform his duties hereunder as determined by a
physician mutually acceptable to the Company and the Executive (or his
representative).
(b) BY THE COMPANY FOR CAUSE. During the Period of Employment after the
Effective Date, the Company may terminate the Executive's employment for
"Cause". For purposes of this Agreement, "Cause" shall mean (i) except in the
event of the Executive's Disability, a substantial, repeated and continued act
of misconduct or failure by the Executive to perform his material duties or
obligations to the Company pursuant to this Agreement, as determined by a
majority of the members of the Company's Board of Directors, which the Executive
fails to remedy within thirty (30) days after written notice is received by the
Executive specifying the alleged act of misconduct or failure in reasonable
detail; (ii) conviction by the Executive of a felony; or (iii) the Company's
Board of Directors determines that the Executive has engaged in a fraudulent act
resulting in personal gain or enrichment at the expense of the Company or other
detriment to the Company.
(c) BY EXECUTIVE FOR GOOD REASON. During the Period of Employment, the
Executive's employment hereunder may be terminated by the Executive for Good
Reason. For purposes of this Agreement, "Good Reason" shall mean, without the
executive's consent:
(i) the assignment to the Executive of any duties inconsistent
in any material respect with the Executive's position (including
status, offices, titles and reporting relationships), authority, duties
or responsibilities as contemplated by Section 3 of this Agreement, or
any other action by the Company which results in a significant
diminution in such position, authority, duties or responsibilities,
excluding for this Section 7(c) any isolated and inadvertent action not
taken in bad faith and which is remedied by the Company within ten (10)
days after receipt of a notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4 or 5 of this Agreement other than an isolated
and inadvertent failure not taken in bad faith and which is remedied by
the Company within ten (10) days after receipt of notice thereof given
by the Executive; and
(iii) the Executive being required, without his consent, to
relocate to a principal place of employment outside of the Chicago
metropolitan area.
(d) OTHER THAN FOR CAUSE OR GOOD REASON. The Executive or the Company
may terminate this Agreement for any reason other than for Good Reason or Cause,
respectively, upon thirty (30) days written notice to the Company or Executive,
as the case may be. If the Executive terminates the Agreement for any reason, he
shall have no liability to the Company or
4
<PAGE> 5
its subsidiaries or affiliates. If the Company terminates the Agreement, or if
the Agreement terminates because of the death of the Executive, the obligations
of the Company shall be as set forth in Section 8 hereof.
(e) NOTICE OF TERMINATION. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 19(b) of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon; (ii)
sets forth in reasonable detail, if necessary, the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated; and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall not be less than thirty (30) days after the
giving of such notice). The failure by the Executive or Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of the basis for termination shall not waive any right of such party
hereunder or preclude such party from asserting such fact or circumstance in
enforcing his or its rights hereunder.
(f) DATE OF TERMINATION. "Date of Termination" means the date specified
in the Notice of Termination; provided, however, that if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
8. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) DEATH. If the Executive's employment is terminated by reason of the
Executive's death, this Agreement shall terminate without further obligations to
the Executive's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Executive as of
the Date of Termination, including, but not necessarily limited to: (i) the
Executive's full Base Salary through the Date of Termination at the rate in
effect on the Date of Termination, disregarding any reduction in Base Salary in
violation of this Agreement; (ii) any options (which shall become vested and
immediately exercisable); and (iii) any other rights and benefits (including,
without limitation, payments due pursuant to Section 5(a) of this Agreement)
available to the Executive under employee compensation and benefit arrangements
of the Company (without duplication) in which the Executive was a participant on
the Date of Termination, determined in accordance with the applicable terms and
provisions of such arrangements (such amounts specified in clauses (i) through
(iii) are hereinafter referred to as "Accrued Obligations").
(b) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability, this Agreement shall terminate, and the Company
shall pay to Executive (or in the event of Executive's death after finding of
Disability, his surviving spouse, or if he leaves no spouse, his personal
representative, as successor in interest) his Accrued Obligations.
(c) CAUSE; OTHER THAN GOOD REASON. If the Executive's employment shall
be terminated by the Company for Cause or by the Executive for Other than Good
Reason, this Agreement shall terminate, and the Executive shall be entitled to
(i) the Base Salary earned by
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<PAGE> 6
him before the Date of Termination, as provided in Section 4, prorated on the
basis of the number of full days of service rendered by the Executive during the
year to the Date of Termination; (ii) any accrued, but unpaid, vacation or sick
leave benefits; (iii) any authorized but unreimbursed business expenses; and
(iv) any accrued, but unpaid Annual Bonus which will be paid in the year
following the Executive's termination in accordance with the Company's customary
practices.
(d) GOOD REASON; CHANGE IN CONTROL; OTHER THAN FOR CAUSE, DEATH OR
DISABILITY.
(i) If (A) the Company shall terminate the Executive's
employment (other than for Cause or Disability and except if the
Executive's employment is terminated as a result of his death); or (B)
during the Period of Employment, the Executive shall terminate his
employment for Good Reason; or (C) during the Period of Employment, the
Executive shall terminate his for any reason within 12 months after a
Change in Control, then the Executive shall receive the severance
benefits provided for in this Section 8(d).
(ii) The Executive shall elect either (A) to receive a full 12
months of Base Salary ("Severance Compensation"), and be bound by the
noncompetition and non-solicitation covenants under Section 6 (the
"Restrictive Covenants") for 24 months following termination of
employment; or (B) to receive no such compensation and not be bound by
the Restrictive Covenants. The Executive shall communicate the selected
option to the Company in writing within five (5) business days
following the date of the Executive's termination of employment. If the
Executive fails to give timely notice during the five day period, the
Executive shall be deemed to have elected no Severance Compensation and
no Restrictive Covenants. Whether the Executive elects Severance
Compensation or not, the Company shall pay the Executive his pro rated
Annual Bonus to the date of termination.
(iii) In addition, the Executive shall also receive those
other obligations and Benefits accrued or earned and vested (if
applicable) by the Executive as of the Date of Termination, including,
but not necessarily limited to, all other Accrued Obligations.
(iv) For the remainder of the Period of Employment (determined
without regard to the termination thereof pursuant to Section 7), or
such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been
provided to them in accordance with Section 5(b) of this Agreement as
if the Executive's employment had not been terminated, including (but
not by way of limitation) health insurance and life insurance.
(v) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if (A) the Company becomes a
subsidiary of another corporation or entity or is merged or
consolidated into another corporation or entity or substantially all of
the assets of the Company are sold to another corporation or entity; or
(B) any person, corporation, partnership or other entity, either alone
or in conjunction with its "affiliates," as that term is defined in
Rule 405 of the General Rules and Regulations under
6
<PAGE> 7
the Securities Act of 1933, as amended, or other group of persons,
corporations, partnerships or other entities who are not "affiliates"
but who are acting in concert, other than the Executive or his family
members or any person, organization or entity that is controlled by the
Executive or his family members, becomes the owner of record or
beneficially of securities of the Company that represent thirty-three
and one-third percent (33 1/3%) or more of the combined voting power of
the Company's then outstanding securities entitled to elect Board of
Directors of the Company; or (C) the Board of Directors of the Company
or a committee thereof makes a determination in its reasonable judgment
that a "Change of Control" of the Company has taken place.
It is understood that the Executive's rights under this Section 8 are in lieu of
all other rights which the Executive may otherwise have had upon termination of
this Agreement; provided, however, that no provision of this Agreement is
intended to adversely affect the Executive's rights under the Consolidated
Omnibus Budget Reconciliation Act of 1985.
9. MITIGATION. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement.
10. INDEMNIFICATION. The Company shall maintain, for the benefit of the
Executive, director and officer liability insurance in form at least as
comprehensive as, and in an amount that is at least equal to, that maintained by
the Company on the Effective Date. In addition, the Executive shall be
indemnified by the Company against liability as an officer and director of the
Company and any subsidiary or affiliate of the Company to the maximum extent
permitted by applicable law. The Executive's rights under this Section 10 shall
continue so long as he may be subject to such liability, whether or not this
Agreement may have terminated prior thereto.
11. CONFIDENTIAL INFORMATION. The Executive shall abide by the terms of
Clark/Bardes, Inc.'s standard Intellectual Property and Confidentiality
Agreement. In addition, during the Period of Employment and for a period of two
(2) years immediately thereafter, Executive shall not, directly or indirectly,
use any Confidential Information other than pursuant to his employment by and
for the benefit of the Company. The term "Confidential Information" used in this
Agreement means all data or information not generally known outside of the
business of the Company relating to its products, customer lists, financial
arrangements or contracts, internal policies, or any non-public financial data
or business plan, data, or survey, any product specification, and any
description or plan for any new or revised product.
12. REMEDY FOR VIOLATION OF SECTION 6 OR 11. The Executive acknowledges
that the Company has no adequate remedy at law and will be irreparably harmed if
the Executive breaches or threatens to breach the provisions of Sections 6 or 11
of this Agreement, and, therefore, agrees that the Company shall be entitled to
injunctive relief to prevent any breach or threatened breach of either such
Section and that the Company shall be entitled to specific performance of the
terms of each of such Sections in addition to any other legal or equitable
remedy it may have. Nothing in this Agreement shall be construed as prohibiting
the Company from pursuing any other remedies at law or in equity that it may
have or any other rights that it may have under any other agreement.
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<PAGE> 8
13. WITHHOLDING. Anything in this Agreement to the contrary
notwithstanding, all payments required to be made by the Company hereunder to
the Executive shall be subject to withholding of such amounts, at the time
payments are actually made to the Executive and received by him, relating to
taxes as the Company may reasonably determine it should withhold pursuant to any
applicable law or regulation.
14. ARBITRATION. Any dispute or controversy between the Company and the
Executive, whether arising out of or relating to this Agreement, the breach of
this Agreement, or otherwise, shall be settled by arbitration administered by
the American Arbitration Association ("AAA") in accordance with its Commercial
Arbitration Rules then in effect and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. Any
arbitration shall be held before a single arbitrator who shall be selected by
the mutual agreement of the Company and the Executive, unless the parties are
unable to agree to an arbitrator, in which case, the arbitrator will be selected
under the procedures of the AAA. The arbitrator shall have the authority to
award any remedy or relief that a court of competent jurisdiction could order or
grant, including, without limitation, the issuance of an injunction. However,
either party may, without inconsistency with this arbitration provision, apply
to any court having jurisdiction over such dispute or controversy and seek
interim provisional, injunctive or other equitable relief until the arbitration
award is rendered or the controversy is otherwise resolved. Except as necessary
in court proceedings to enforce this arbitration provision or an award rendered
hereunder, or to obtain interim relief, neither a party nor an arbitrator may
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of the Company and the Executive. The Company and the
Executive acknowledge that this Agreement evidences a transaction involving
interstate commerce. Notwithstanding any choice of law provision included in
this Agreement, the United States Federal Arbitration Act shall govern the
interpretation and enforcement of this arbitration provision. The arbitration
proceeding shall be conducted in Chicago, Illinois or such other location to
which the parties may agree. The Company shall pay the costs of any arbitrator
appointed hereunder.
15. REIMBURSEMENT OF LEGAL EXPENSES. In the event that the Executive is
successful in pursuing any claim or dispute involving the Executive's employment
with the Company, including any claim or dispute relating to (a) this Agreement,
(b) termination of the Executive's employment with the Company or (c) the
failure or refusal of the Company to perform fully in accordance with the terms
hereof, whether in mediation, arbitration or litigation, the Company shall
promptly reimburse the Executive for all costs and expenses (including, without
limitation, attorneys' fees) relating solely, or allocable, to such successful
claim. In any other case, the Executive and the Company shall each bear all
their own costs and attorneys fees.
16. TAXES. In the event that the aggregate of all payments or benefits
made or provided to, or that may be made or provided to, the Executive under
this Agreement and under all other plans, programs and arrangements of the
Company (the "Aggregate Payment") is determined to constitute a Parachute
Payment, as such term is defined in Section 280G(b)(2) of the Internal Revenue
Code, the Company shall pay to the Executive prior to the time any excise tax
imposed by Section 4999 of the Internal Revenue Code ("Excise Tax") is payable
with
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<PAGE> 9
respect to such Aggregate Payment, an additional amount which, after the
imposition of all income and excise taxes thereon, is equal to the Excise Tax on
the Aggregate Payment. The determination of whether the Aggregate Payment
constitutes a Parachute Payment and, if so, the amount to be paid to the
Executive and the time of payment pursuant to this Section 16 shall be made by
an independent auditor (the "Auditor") jointly selected by the Company and the
Executive and paid by the Company. The Auditor shall be a nationally recognized
United States public accounting firm which has not, during the two (2) years
preceding the date of its selection, acted in any way on behalf of the Company
or any affiliate thereof. If the Executive and the Company cannot agree on the
firm to serve as the Auditor, then the Executive and the Company shall each
select one accounting firm and those two firms shall jointly select the
accounting firm to serve as the Auditor. Notwithstanding the foregoing, in the
event that the amount of the Executive's Excise Tax liability is subsequently
determined to be greater than the Excise Tax liability with respect to which an
initial payment to the Executive under this Section 16 has been made, the
Company shall pay to the Executive an additional amount with respect to such
additional Excise Tax (and any interest and penalties thereon) at the time and
in the amount determined by the Auditor. The Executive and the Company shall
cooperate with each other in connection with any proceeding or claim relating to
the existence or amount of liability for Excise Tax, and all expenses incurred
by the Executive in connection therewith shall be paid by the Company promptly
upon notice of demand from the Executive.
17. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's heirs and
legal representatives. The Company may assign its rights, duties or obligations
under this Agreement to only an entity with which it has merged or consolidated,
or to which it has transferred all, or substantially all, of its assets.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, reorganization, consolidation, acquisition or
property or stock, liquidation, or otherwise) to all or a substantial portion of
its assets, by agreement in form and substance reasonably satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform this
Agreement if no such succession had taken place. Regardless of whether such an
agreement is executed, this Agreement shall be binding upon any successor of the
Company in accordance with the operation of law, and such successor shall be
deemed the "Company" for purposes of this Agreement.
(d) As used in this Agreement, the term "Company" shall include any
successor to the Company's business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
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<PAGE> 10
18. REPRESENTATIONS.
(a) The Company represents and warrants that (i) the execution of this
Agreement has been duly authorized by the Company, including action of the
applicable Board of Directors and Compensation Committee; (ii) the execution,
delivery and performance of this Agreement by the Company does not and will not
violate any law, regulation, order, judgment or decree or any agreement, plan or
corporate governance document of the Company; and (iii) upon the execution and
delivery of this Agreement by the Executive, this Agreement shall be the valid
and binding obligation of the Company, enforceable in accordance with its terms,
except to the extent enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the effect of general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
(b) The Executive represents and warrants to the Company that (i) the
execution, delivery and performance of this Agreement by the Executive does not
and will not violate any law, regulation, order, judgment or decree or any
agreement to which the Executive is a party or by which he is bound; (ii) the
Executive is not a party to or bound by any employment agreement, noncompetition
agreement or confidentiality agreement with any other person or entity that
would interfere with this Agreement or his performance of services hereunder;
and (iii) upon the execution and delivery of this Agreement by the Company, this
Agreement shall be the valid and binding obligation of the Executive,
enforceable in accordance with its terms, except to the extent enforceability
may be limited by applicable bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally and by the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
19. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois, without reference to principles of
conflicts of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
the respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party, by overnight courier, or
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
W. T. Wamberg
102 South Wynstone Park Drive
North Barrington, Illinois 60010
With copy to Freeborn & Peters
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<PAGE> 11
If to the Company:
Clark/Bardes Holdings, Inc.
2121 San Jacinto Street, Suite 2200
Dallas, Texas 75201
Attn: General Counsel
or to such other address as any of the parties shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) None of the provisions of this Agreement shall be deemed to be a
penalty.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) Any party's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision hereof.
(f) This Agreement (which includes the agreements referenced herein)
supersedes any prior employment agreement or understandings, written or verbal
between the Company or the Company and the Executive and contains the entire
understanding of the Company, the Company and the Executive with respect to the
subject matter hereof.
(g) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS HEREOF, the parties have executed this Agreement all as of
the day and year first above written.
CLARK/BARDES HOLDINGS, INC.
By: /s/ [Illegible]
----------------------------------
Its:
----------------------------------
W.T. WAMBERG
/s/ W.T. Wamberg
--------------------------------------
11
<PAGE> 1
EXHIBIT 10.49
SUBLEASE
THIS SUBLEASE (the "SUBLEASE") is made as of the 1st day of September,
1999, between CLARK/BARDES, INC., a Delaware corporation ("SUBLESSEE"), and THE
WAMBERG ORGANIZATION, INC., an Illinois corporation ("SUBLESSOR").
WITNESSETH
WHEREAS, pursuant to a Lease dated on or about June 30, 1992, as
amended by a certain Amendment to Lease dated December 30, 1993, as further
amended by a certain Second Amendment to Lease dated August 26, 1994, as further
amended by an Amendment to Lease dated December 5, 1996, as further amended by a
certain Third Amendment to Office Lease dated February 21, 1998, by and among
SUNNINGDALE PARTNERS, INC., an Illinois corporation, ("Landlord"), and
Sublessor, as Tenant, (the "MASTER LEASE"), Landlord has leased to Sublessor
certain premises located in the building known as 102 South Wynstone Park Drive,
North Barrington, Illinois (the "BUILDING"), which premises consist of
approximately 11,085 square feet of office space located on the ground floor and
first floor of said Building (the "MASTER LEASE PREMISES");
WHEREAS, a true and correct copy of the Master Lease is attached hereto
as Exhibit A, and all capitalized terms not otherwise defined in this Sublease
shall have the same meanings in this Sublease as given such terms in the Master
Lease;
WHEREAS, the term of the Master Lease expires on February 21, 2009;
WHEREAS, Sublessee desires to lease from Sublessor, and Sublessor
desires to lease to Sublessee, a portion of the Premises demised by the Master
Lease, consisting of approximately 9,391 square feet of space located on the
first floor of the Building (the "SUBLEASED PREMISES"), upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Sublease of Subleased Premises. Sublessor hereby agrees to lease the
Subleased Premises to Sublessee, and Sublessee hereby agrees to lease the
Subleased Premises from Sublessor, on the terms and conditions set forth herein.
Sublessor further assigns to Sublessee the membership(s) in the Wynstone Country
Club set forth in the Master Lease.
2. Term. The term of this Sublease (the "TERM") shall commence as of
the date hereof and shall continue in effect until the expiration of the Master
Lease on February 21, 2009.
<PAGE> 2
3. Performance under the Master Lease. In order to effectuate the
understandings and intent of Sublessor and Sublessee as set forth in this
Sublease, Sublessor and Sublessee agree as follows:
(a) Master Lease Obligations. This Sublease is subject to and
subordinate in all respects to the Master Lease. The terms and conditions of the
Master Lease, as it pertains to the Subleased Premises, are incorporated herein
by reference as if fully set forth herein. From and after the commencement of
the Term, and except as otherwise set forth herein, Sublessor and Sublessee
agree to assume and be bound by all of the covenants and agreements under the
Master Lease made by Landlord (as defined in the Master Lease) and Tenant (as
defined in the Master Lease) and to perform all of the duties, responsibilities
and obligations of Landlord and Tenant under the Master Lease, in each case: (i)
substituting Sublessor for Landlord; (ii) substituting Sublessee for Tenant in
regard to all terms and conditions of the Master Lease as they apply and pertain
to the Subleased Premises; and (iii) with Sublessor remaining as Tenant in
regard to all terms and conditions of the Master Lease as they apply and pertain
to the remainder of the Master Lease Premises.
(b) Sublessee's Rights Under the Master Lease. Subject to the terms
and provisions of this Sublease, whenever Sublessor, as the Tenant under the
Master Lease, has reserved a right under the Master Lease, such right shall
inure to the benefit of and shall be exercised solely by Sublessee as such right
pertains to the Subleased Premises. Notwithstanding the foregoing, this Sublease
shall not include the limited right of first offer set forth in Section 38 of
the Lease, and said limited right of first offer shall not inure to the benefit
of Sublessee.
(c) Sublessor's Performance Under the Master Lease. Sublessor
covenants and agrees that from and after the date hereof and during the Term of
the Sublease, Sublessor shall comply in all respects with the requirements of
the Master Lease, both in respect of Sublessor's obligations as Tenant
thereunder as such obligations pertain to the Master Lease Premises, and in
respect of Sublessor's obligations as Sublessor hereunder as such obligations
pertain to the Subleased Premises, and not take any action or enter into any
agreements which shall be in conflict with Sublessor's obligations or
Sublessee's rights under this Sublease. In the event of default by Sublessor,
except as otherwise provided in subparagraph (f) below, the notice and cure
provisions set forth in the Master Lease shall apply. In any instance where the
consent of Landlord is required to any act or omission, Sublessor shall not be
required to give such consent unless and until Landlord has also given its
consent in writing. Sublessor shall not modify or amend the Master Lease, or
waive any right or benefit thereunder, without Sublessee's written consent.
(d) Sublessee's Performance Under the Master Lease. Sublessee
covenants and agrees that from and after the date hereof and during the Term of
the Sublease, Sublessee shall comply in all respects with the requirements of
the Master Lease, as such obligations pertain to the Sublease Premises, and not
take any action or enter into any agreements which shall be in conflict with
Sublessee's obligations or Sublessor's rights under this Sublease. In the event
of default by Sublessee, the notice and cure provisions set forth in the Master
Lease shall apply.
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<PAGE> 3
(e) Sublessee's Quiet Enjoyment. Sublessor covenants that so long as
Sublessee keeps, observes and performs all of the terms, conditions, provisions
and agreements herein contained on the part of Sublessee to be kept, observed
and performed including, without limitation, payment of Rent (as hereinafter
defined), Sublessee shall during the Term peaceably and quietly hold the
Subleased Premises, subject to the Master Lease and subject to the terms,
covenants, conditions, provisions and agreements hereof, free from hindrance by
Sublessor or Landlord.
(f) Right of Sublessee to Perform Sublessor's Obligations. If
Sublessor shall fail to make any payment or perform any act required to be made
or performed by Sublessor under the Master Lease pursuant to this Sublease, and
such default is not cured by Sublessor by the first to occur of (i) one-half of
the period specified in the Master Lease for curing such default, or (ii) five
(5) days prior to the expiration of such Master Lease cure period, Sublessee,
without waiving or releasing any obligation or default hereunder, may (but shall
be under no obligation to) make such payment or perform such act for the account
and at the expense of Sublessor, and may take any and all such actions as
Sublessee in its sole discretion deems necessary or appropriate to accomplish
such cure. If Sublessee shall reasonably incur any expense in remedying such
default, Sublessee shall be entitled to set off such sums against Rent as future
Rent becomes due under this Sublease.
4. Rent. Sublessee shall pay to Sublessor at the address set forth
herein: (a) base rent in the amount of Twelve Thousand Five Hundred Twenty-One
and 33/100ths Dollars ($12,521.33) per month for the entire Term of the Sublease
("MONTHLY RENT") at such times as specified in the Master Lease (if the Term
commences other than on the first day of a month, Monthly Rent for such month
shall be prorated); and (b) Sublessee's proportionate share ("PROPORTIONATE
SHARE") of the other costs and charges due and payable under the Master Lease,
at the same time and place as the payment of Monthly Rent or at such other times
as are specified in the Master Lease; and (c) Sublessee's Proportionate Share
shall be a fraction, the numerator of which shall be the square footage of the
Subleased Premises and the denominator of which shall be the leasable square
footage of the Building, as defined in the Master Lease. Sublessor authorizes
and directs Sublessee to make payments of Monthly Rent and Sublessee's
Proportionate Share of other costs and charges directly to Landlord, and any
payments so made shall be deemed to be in satisfaction and acquittance for the
monetary obligations payable under this Sublease to the extent of any payment so
made to Landlord.
5. Assignment and Subletting. Sublessee may not assign this Sublease in
whole or in part or sublet the Subleased Premises in whole or in part without
the prior written consent of Sublessor and Landlord, which consent shall be
granted or withheld in accordance with the terms and conditions, and subject to
the same qualifications and exclusions, as set forth in the Master Lease. If
Sublessor and Landlord consent to any such assignment or subletting, Sublessee
shall remain fully and primarily liable to Sublessor, in all respects, under
this Sublease. Notwithstanding the foregoing, Sublessee shall have the right
option, without the consent of Sublessor or Landlord, to assign this Sublease or
sublease the Subleased Premises to any other corporation that is an affiliate,
subsidiary or parent of Sublessee, or to any entity which merges or consolidates
with, or acquires substantially all the assets or stock of, Sublessee.
3
<PAGE> 4
6. Notices from Landlord. In the event that either Sublessor or
Sublessee shall receive any notice from Landlord regarding a default pursuant to
any of the provisions of the Master Lease, the party receiving such notice shall
promptly give a copy thereof to the other party.
7. Insurance and Indemnity.
(a) From and after the commencement date of the Term, Sublessee and
Sublessor shall each obtain, pay for and provide or cause to be provided any and
all insurance policies with the coverages and types of insurance carriers all as
may be required to be obtained and carried by Tenant under the Master Lease.
(b) Sublessor and Sublessee shall each cause their respective
liability insurance policies to be endorsed to add the other party as an
additional insured thereunder and such policies shall be endorsed as necessary
to provide contractual liability coverage with respect to the indemnities set
forth in the Master Lease, which the parties hereby ratify and adopt.
8. Condition Precedent. The effectiveness of this Sublease is expressly
subject to and conditional upon obtaining Landlord's written consent to this
Sublease pursuant to Article 11 of the Master Lease.
9. Captions. The captions in this Sublease are inserted only as a
matter of convenience and for reference and in no way define, limit, enlarge or
describe the scope or intent of this Sublease nor in any way affect this
Sublease or the construction of any provisions hereof.
10. Severability. If any clause or provision of this Sublease or the
application thereof to any person or circumstance becomes illegal, invalid or
unenforceable to any extent because of present or future laws or any rules or
regulation of any governmental body or entity, effective during the Term, the
intention of the parties hereto is that the remainder of this Sublease 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.
11. Real Estate Broker. Each of Sublessee and Sublessor represents to
the other that it dealt with no broker in connection with this Sublease, and no
broker negotiated this Sublease or is entitled to any commission in connection
therewith. Each of Sublessee and Sublessor agrees to indemnify, defend and hold
the other and its partners, employees, agents, and officers harmless from and
against all claims made by any broker or finder for any commissions or fee in
connection with Sublease.
12. Representations, Warranties, Covenants and Agreements.
(a) Sublessor hereby warrants, represents and covenants that the
Master Lease is presently in full force and effect and without default on the
part of the Sublessor upon execution
4
<PAGE> 5
hereof and will so be at the commencement of the Term, and that no condition is
now existing which would constitute a default under the Master Lease with the
giving of notice or lapse of time or both.
(b) Sublessor warrants, represents and covenants that Sublessor will
continue to observe and perform all of Sublessor's obligations under the Master
Lease not assumed by Sublessee hereunder in order to prevent any default
thereunder or breach thereof during the term of this Sublease.
(c) Sublessor warrants and represents that Exhibit "A" attached
hereto is a true, correct and complete copy of the Master Lease and all
amendments thereto.
(d) Sublessor warrants and represents that, to its knowledge,
Landlord is not in default under the Master Lease as of the execution and
delivery hereof, and that no condition exists which would constitute a default
under the Master Lease with the giving of notice or lapse of time or both.
13. Notices. All notices or demands upon Sublessor or Sublessee desired
or required to be given under any provisions hereof shall be in writing and
shall be hand delivered; certified or registered mail, return receipt requested;
telex, telecopier, or next day air courier to the parties set forth below. Such
notices shall be deemed given at the time personally delivered, if delivered by
hand; three (3) days after deposit in the United States mail, if sent certified
or registered mail; when answered back, if telexed; upon delivery, with receipt
acknowledged if telecopied; and the next business day after timely delivery to
courier, if sent by air courier. Any notices or demands given under this
Sublease shall be deemed to have been given if a copy thereof has been delivered
as herein provided addressed as follows:
If to Sublessor: 102 South Wynstone Park Drive
North Barrington, IL 60010
Attention: W.T. Wamberg
Phone: 847-304-5800
Fax: 847-304-5898
If to Sublessee: Clark/Bardes, Inc.
2121 San Jacinto Street, Suite 2200
Dallas, Texas 75201
Attention: Mel Todd, President
Phone: 214-871-8717
Fax:214-871-7690
Any party hereto may change its notice address by proper notice to the other
parties. Any parties' failure to accept delivery shall be deemed to constitute
receipt for the purposes of this Section. In addition, any notices with respect
to the Subleased Premises provided to Sublessor by Landlord pursuant to the
Master Lease, shall be immediately delivered by Sublessor directly to Sublessee
at
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<PAGE> 6
the address set forth herein.
14. Miscellaneous.
(a) No Waiver. The failure of either party to insist on strict
performance of any covenant or condition hereof, or to exercise any option
contained herein, shall not be construed as a waiver of such covenant, condition
or option in any other instance.
(b) Governing Law. The parties agree that the rights and obligations
of the parties under this Sublease shall be governed and construed in accordance
with the laws of the State of Illinois.
(c) Successors and Assigns. Each provision of this Sublease shall
extend to and shall bind and inure to the benefit not only of Sublessor and
Sublessee, but also their respective successors and assigns, but this provision
shall not operate to permit any transfer, assignment, mortgage, encumbrance,
lien, charge or subletting contrary to the provisions of the Master Lease or of
this Sublease.
(d) Amendments. No modification, waiver or amendment of this
Sublease or of any of its conditions shall be binding upon Sublessor or
Sublessee unless in writing signed by both parties. No modification, waiver or
amendment of the Master Lease shall be binding upon Sublessee without
Sublessee's written consent thereto.
(e) Time of Essence. Time is of the essence of this Sublease and
each and all of the provisions thereof.
(f) Severability. The invalidity of any of the provisions of this
Sublease will not impair or affect in any manner the validity, enforceability or
effect of the rest of this Sublease.
(g) Entire Agreement. All understandings and agreements, oral or
written, heretofore made between the parties hereto are merged in this Sublease,
which alone fully and completely expresses the agreement between Sublessor and
Sublessee.
(h) Remedies Cumulative. Except as specifically provided herein, all
rights and remedies of Sublessor and Sublessee under this Sublease shall be
cumulative and none shall exclude any other rights and remedies allowed by law.
(i) Conflict. In the event that any of the terms and provisions of
this Sublease are inconsistent with the Master Lease, the terms and provisions
of this Sublease shall control.
SIGNATURES FOLLOW
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<PAGE> 7
SIGNATURE PAGE TO SUBLEASE
IN WITNESS WHEREOF, the parties hereto have executed this Sublease
as of the day and year first above written.
SUBLESSOR: SUBLESSEE:
THE WAMBERG ORGANIZATION, INC. CLARK/BARDES, INC.
By: /s/ W. T. WAMBERG By: /s/ THOMAS M. PYRA
--------------------------------- -------------------------------
Name: W. T. WAMBERG Name: /s/ THOMAS M. PYRA
------------------------------- -----------------------------
Title: President Title: Chief Financial Officer
------------------------------ ----------------------------
7
<PAGE> 8
CONSENT
The undersigned Landlord under the Lease referred to in this Sublease
hereby consents to the foregoing Sublease and further agrees as follows:
1. In the event of default under the Master Lease, Landlord agrees that
Sublessee shall have the right, but not the obligation, to cure or cause to be
cured any default, whether the same consists of the failure to pay rent or any
other monetary liability or obligation under the Master Lease or consists of the
failure to perform any other term, covenant or condition under the Master Lease.
If a default occurs under the Master Lease, Landlord shall give Sublessee
written notice thereof and Landlord shall take no action to terminate the Master
Lease or to interfere with Sublessee's use, occupancy or enjoyment of the
Subleased Premises unless Sublessee fails to cure or cause to be cured such
default as such default pertains to the Subleased Premises only, which cure
shall be effected within the grace or cure periods provided for under the Master
Lease. Landlord agrees that only such defaults as pertain to the Subleased
Premises must be cured by Sublessee in order for Sublessee's use, occupancy and
enjoyment of the Subleased Premises not to be distributed, and Sublessee shall
not be required to cure any default as it pertains to the remainder of the
Premises. The foregoing shall not be construed to waive or release any fights
Landlord shall have against Sublessor with respect to the remainder of the
Premises or that otherwise have accrued in favor of Landlord.
2. Landlord further agrees to accept payment of the Monthly Rent
provided for under this Sublease directly from Sublessee and agrees that said
Monthly Rent shall be accepted in full satisfaction and acquittance for Base
Rent under the Master Lease applicable to the Subleased Premises. Accordingly,
Landlord agrees to look solely to Sublessor for payment of any and all Base Rent
payable under the Master Lease that is in excess of the Monthly Rent payable
under this Sublease.
3. Landlord further agrees to accept directly from Sublessee payment of
Sublessee's Proportionate Share of Operating Expenses attributable to the
Subleased Premises and its Proportionate Share of any other monetary obligations
or liabilities payable under the Master Lease. Accordingly, Landlord shall look
solely to Sublessor for any and all Operating Expenses or other monetary
obligations or liabilities payable under the Master Lease pertaining to the
remainder of the Premises.
4. If the Master Lease shall terminate for any reason other than
casualty or condemnation or for Sublessee's failure to cure a default as such
pertains to the Subleased Premises, Sublessee shall have the right, exercisable
within thirty (30) days after such termination (and provided that all defaults
in respect of the Subleased Premises have been cured), to enter into a direct
lease with Landlord for the Subleased Premises, which new lease shall commence
as of the date of termination of the Master Lease and continue for the remainder
of the Term thereof and which lease shall contain the same terms, covenants and
conditions as the Master Lease, except for requirements that are no longer
applicable or have previously been performed, and except that such new lease
shall only pertain to
8
<PAGE> 9
the Subleased Premises and shall provide for base rent to be paid in the amounts
set forth in the Sublease.
5. Landlord hereby waives its right to terminate the Master Lease
pursuant to Section 35(k) of the Master Lease in connection with the foregoing
Sublease and acknowledges that Section 35(k) shall not apply to transfers of
stock in Sublessee, in that the stock of Sublessee is listed on a recognized
security exchange.
In Witness Whereof, Landlord has executed this Consent as of the 1st
day of September, 1999.
LANDLORD:
SUNNINGDALE PARTNERS, INC.
By: /s/ W. T. WAMBERG
------------------------------------
Name: W. T. WAMBERG
-------------------------------
Title: PRESIDENT
------------------------------
9
<PAGE> 10
EXHIBIT A
[True and correct copy of Master Lease]
<PAGE> 11
THIRD AMENDMENT TO OFFICE LEASE
This THIRD AMENDMENT TO OFFICE LEASE (the "Third Amendment") is made
and entered into this 21st day of February, 1998 by and between SUNNINGDALE
PARTNERS, INC., an Illinois corporation ("Landlord") and THE WAMBERG
ORGANIZATION INC., an Illinois corporation ("Tenant").
WITNESSETH:
WHEREAS, on or about June 30th, 1992 Landlord and Tenant entered into a
certain Office Lease, as amended on December 30th, 1993 (the "Lease"), and
further amended as of December 5th, 1996, which is incorporated herein by this
reference.
WHEREAS, The parties wish to modify certain terms of the Lease as more
particularly described below.
NOW, THEREFORE, in consideration of the premises, rent, mutual
covenants and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant hereby agree as follows:
1. The Premises shall be deemed amended to change from 6,698 square feet
currently occupied on the Ground Floor of the "Advo" building, 102 S.
Wynstone Park Drive, Barrington, Illinois, to 9,391 square feet of the
First Floor of the same building and 1,694 square feet of the ground floor,
for a total of 11,085 square feet.
2. The Commencement Date with respect to the occupancy of the new space shall
be February 21, 1998 and the termination date with respect to said new
space shall be February 20, 2009 (eleven years).
<PAGE> 12
AMENDED LEASE
THE WAMBERG ORG. INC.
February 21, 1998
Page 2
3. The Annual Base Rent attributable to the new space shall be One Hundred
Seventy Seven Thousand Three Hundred Sixty Dollars and no/100 ($177,360.00)
payable in equal monthly installments of Fourteen Thousand Seven Hundred
Eighty Dollars and no/100 ($14,780.00) (the monthly base rent). This rent
will be increased by 3% per year, for each year the space is occupied.
4. Tenant's Proportionate Share with respect to Operating Expenses shall be
58.76%.
5. So long as Tenant is occupying the Premises as described in the Lease and
is not in default thereunder, its use of it membership at Wynstone Country
Club shall be continued.
6. The Lease, except as hereby explicitly and expressly modified, shall remain
unmodified and in full force and effect.
<PAGE> 13
AMENDED LEASE
THE WAMBERG ORG. INC.
February 21, 1998
Page 3
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
upon the date first written.
LANDLORD:
SUNNINGDALE PARTNERSHIP, INC., an Illinois Corporation,
BY: /s/ WARREN T. WAMBERG
------------------------------
Warren T. Wamberg
TENANT:
THE WAMBERG ORGANIZATION, INC., an Illinois Corporation,
BY: /s/ WARREN T. WAMBERG
------------------------------
Warren T. Wamberg
<PAGE> 14
Appendix "A"
[ORIGINAL LEASE LAYOUT]
<PAGE> 15
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE made and entered into this 5th day of December,
1996 by and between THE WAMBERG ORGANIZATION, INC., an Illinois Corporation,
("Tenant") and SUNNINGDALE PARTNERS, INC., an Illinois Corporation,
("Landlord").
WITNESSETH:
WHEREAS, the parties hereto did heretofore enter in a certain Lease on June 30,
1992 for a portion of the first floor of the Premises commonly known as 102
South Wynstone Park Drive, North Barrington, Illinois ("the Lease"); and
WHEREAS, the parties hereto do hereby intend to amend the Lease to provide for
the leasing of an additional non-contiguous 1,694 square feet of rentable area
on the first floor of the Property as same is described in the lease on the
terms and conditions as are more fully hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the parties hereto do hereby agree that the Lease be and is hereby amended to
provide as follows:
1. The Premises shall be deemed amended to include the following Additional
Premises: 1,694 rentable square feet as depicted on Appendix "A" attached
hereto and specifically incorporated by reference herein. The Rentable Area
as
<PAGE> 16
defined in the Lease shall be deemed amended to include said additional
1,694 rentable square feet.
2. The Commencement Date with respect to the occupancy of the Additional
Premises shall be January 1, 1997 and the termination date with respect to
said Additional Premises shall be January 1, 2000.
3. The Annual Base Rent attributable to the Additional Premises shall be
TWENTY-SEVEN THOUSAND ONE HUNDRED FOUR DOLLARS AND 00/100 (27,104.00)
payable in equal monthly installments of TWO THOUSAND TWO HUNDRED FIFTY
EIGHT DOLLARS AND 66/100 ($2,258.66) (the Monthly Base Rent).
4. Tenant's Proportionate Share with respect to the Additional Premises shall
be 9.37%.
5. Tenant has chosen to extend its lease of the original Premises as described
in the Lease to January 1, 2000 in order that the tenancy of the Premises
and the Additional premises will be co-terminus. Tenant's Base Rent
attributable to the Premises described in the Lease shall be based upon
Sixteen Dollars and 00/100 ($16.00) per square foot of Rentable Area.
6. So long as Tenant is occupying the Premises as described in the Lease and
is not in default thereunder, its use of membership at Wynstone Country
Club shall be continued.
7. The Lease, except as hereby explicitly and expressly modified, shall remain
unmodified and in full force and effect.
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
upon the date first written.
LANDLORD:
SUNNINGDALE PARTNERSHIP, INC., an
Illinois Corporation,
BY: /s/ W. T. WAMBERG
-------------------------------------
ATTEST:
---------------------------
TENANT:
THE WAMBERG ORGANIZATION, INC., an
Illinois Corporation,
BY: /s/ W. T. WAMBERG
--------------------------------------
ATTEST: /s/ VIRGINIA GARRISON
---------------------------
<PAGE> 18
[LAYOUT]
<PAGE> 19
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE made and entered into this 26th day of
August, 1994 by and between THE WAMBERG ORGANIZATION, INC., a Corporation,
("Tenant") and SUNNINGDALE PARTNERS, INC., an Illinois Corporation,
("Landlord").
W I T N E S S E T H:
WHEREAS, the parties hereto did heretofore enter in a certain Lease on June
30, 1992 for a portion of the first floor of the Premises commonly known as 102
South Wynstone Park Drive, North Barrington, Illinois ("the Lease"); and
WHEREAS, the parties did hereto amend the Lease on December 30, 1993; and
WHEREAS, the parties hereto do hereby intend to further amend the Lease to
reflect the exercise by Tenant of the Option set forth in paragraph 5 of the
Amendment to Lease entered into December 30, 1993.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto do hereby agree that the Lease be and is hereby
amended to provide as follows:
1. The term of the Lease for the original Premises as described therein
is hereby extended to and including January 14, 1997.
2. Effective August 1, 1994, the Base Rent attributable to the Premises
as described in the Lease shall be increased to
<PAGE> 20
Fifteen Dollars and 50/100 ($15.50) per square foot of Rentable Area. Landlord
agrees, at its sole cost and expense, to install locks on private offices as
designated by Tenant, provided however the amount of said locks to be installed
shall not exceed four (4).
3. Landlord agrees to contribute up to a maximum of Six Hundred Fifteen
($615.00) Dollars towards the installation of Tenant's security system to be
provided by ADT at Tenant's expense.
4. Except as otherwise specifically provided for herein, the Lease, as
amended December 30, 1993, and particularly as provided in paragraph 5 of said
Amendment, shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals upon the date first written.
LANDLORD:
SUNNINGDALE PARTNERSHIP, INC., an
Illinois Corporation,
BY: /s/ [ILLEGIBLE]
-------------------------------------
ATTEST:
/s/ LISA J. BLACKMORE
- -----------------------------------
TENANT:
THE WAMBERG ORGANIZATION, INC., a
Corporation,
BY: /s/ [ILLEGIBLE]
-------------------------------------
ATTEST:
/s/ [ILLEGIBLE]
- -----------------------------------
-2-
<PAGE> 21
1ST AMENDMENT
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE made and entered into this 30th day of December,
1993 by and between THE WAMBERG ORGANIZATION, INC., a Corporation, ("Tenant")
and SUNNINGDALE PARTNERS, INC., an Illinois Corporation, ("Landlord").
W I T N E S S E T H:
WHEREAS, the parties hereto did heretofore enter in a certain Lease on June
30, 1992 for a portion of the first floor of the Premises commonly known as 102
South Wynstone Park Drive, North Barrington, Illinois ("the Lease"); and
WHEREAS, the parties hereto do hereby intend to amend the Lease to provide
for the leasing of an additional non-contiguous 1,517 square feet of rentable
area on the first floor of the Property as same is described in the Lease on the
terms and conditions as are more fully hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto do hereby agree that the Lease be and is
hereby amended to provide as follows:
1. The Premises shall be deemed amended to include the following
Additional Premises: 1,517 rentable square feet as depicted on Appendix "A"
attached hereto and specifically incorporated by reference herein. The Rentable
Area as defined in the Lease shall be deemed amended to include said additional
1,517 rentable square feet.
<PAGE> 22
2. The Commencement Date with respect to the occupancy of the
Additional Premises shall be January 15, 1994 and the termination date with
respect to said Additional Premises shall be January 14, 1997.
3. The Annual Base Rent attributable to the Additional Premises shall
be TWENTY-THREE THOUSAND FIVE HUNDRED THIRTEEN DOLLARS and 50/100 ($23,513.50)
payable in equal monthly installments of ONE THOUSAND NINE HUNDRED FIFTY-NINE
DOLLARS and 46/100 ($1,959.46) (the Monthly Base Rent).
4. Tenant's Proportionate Share with respect to the Additional Premises
shall be 8.39%.
5. So long as Tenant is not in default, Tenant shall have the right and
option exercisable in writing, certified mail or personal delivery on or before
August 1, 1994, to extend its lease of the original Premises as described in the
Lease to January 14, 1997 in order that the tenancy of the Premises and the
Additional Premises will be co-terminus. In the event of such exercise, Tenant's
Base Rent attributable to the Premises described in the Lease shall be based
upon Fifteen Dollars and 50/100 ($15.50) per square foot of Rentable Area.
Notwithstanding anything to the contrary herein contained, it is understood that
such option shall be contingent upon and subject to the right of Advo, Inc. to
lease the Premises or any portion thereof for the period commencing August 1,
1995.
6. So long as Tenant is occupying the Premises as described in the
Lease and is not in default thereunder, its use of membership at Wynstone
Country Club shall be continued.
-2-
<PAGE> 23
7. The Lease, except as hereby explicitly and expressly modified, shall
remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals upon the date first written.
LANDLORD:
SUNNINGDALE PARTNERSHIP INC., an
Illinois Corporation,
BY: /s/ [ILLEGIBLE]
-------------------------------------
ATTEST:
/s/ LISA J. BLACKMORE
- -----------------------------------
TENANT:
THE WAMBERG ORGANIZATION, INC., a
Corporation,
BY: /s/ [ILLEGIBLE]
-------------------------------------
ATTEST:
/s/ [ILLEGIBLE]
- -----------------------------------
-3-
<PAGE> 24
THE OFFICE PARK AT WYNSTONE
North Barrington, Illinois
-----------------
Reference Page
-----------------
LANDLORD: SUNNINGDALE PARTNERS, INC.,
an Illinois corporation
LANDLORD'S ADDRESS: 102 South Wynstone Park Drive
North Barrington, Illinois 60011
TENANT: THE WAMBERG ORGANIZATION, INC.
TENANT'S CURRENT
ADDRESS: 205 North Michigan Avenue
Chicago, Illinois 60601
PREMISES: Portion of first floor
102 South Wynstone Park Drive
North Barrington, Illinois 60010
(See Appendix "A" attached hereto for plan of Premises)
RENTABLE AREA: Landlord represents and warrants that the Premises
comprise 5,181 rentable square feet.
COMMENCEMENT DATE: August 1, 1992
TERMINATION DATE: July 31, 1995
ANNUAL BASE RENT: $75,124.50
MONTHLY BASE RENT: $6,260.38
TENANT'S PROPORTIONATE
SHARE: 28.7490%
REAL ESTATE BROKERS: Frain Camins & Swartchild and CB Commercial
LEASE EXECUTION DATE: June 30, 1992
<PAGE> 25
The reference page information and definitions are incorporated into and made a
part of the Lease.
LANDLORD: TENANT:
SUNNINGDALE PARTNERS, INC., THE WAMBERG ORGANIZATION, INC.,
an Illinois corporation,
BY: BY: /s/ [ILLEGIBLE]
------------------------------- --------------------------------
The Wamberg Organization, Inc.
------------------------------- --------------------------------
Its: Its: President
------------------------------ -------------------------------
ATTEST:
BY:
-------------------------------
Its:
------------------------------
-2-
<PAGE> 26
L E A S E
THIS LEASE MADE and entered into this _____ day of June, 1992, by and
between THE WAMBERG ORGANIZATION, INC., a corporation, 205 North Michigan
Avenue, Chicago, Illinois 60601 (TENANT) and SUNNINGDALE PARTNERS, INC., an
Illinois corporation, P. 0. Box 3756, Barrington, Illinois 60011 (LANDLORD).
W I T N E S S E T H:
Demise
LANDLORD does hereby lease to TENANT and TENANT hereby lets from LANDLORD
those certain premises (the "PREMISES"), designated on the plan attached hereto
as Appendix "A" and made a part hereof, which PREMISES are situated in that
certain building (the "BUILDING") located on a portion of the first floor, 102
South Wynstone Park Drive, North Barrington, Illinois 60010. The BUILDING and
the real estate on which it is located are hereinafter referred to as the
"Property". The Property does not include any other buildable areas and no
additional buildings or improvements benefitting other parcels will be situated
thereon during the term of the lease.
Such letting and hiring is upon and subject to the terms, covenants and
conditions herein set forth and TENANT and LANDLORD covenant as a material part
of the consideration for this Lease to keep and perform each and all of said
terms, covenants and conditions by them to be kept and performed and that this
Lease is made upon the condition of such performance.
1.
Purpose
The PREMISES are to be used for general office purposes and for no other
purpose without the prior written consent of the LANDLORD.
2.
Term
The term of this Lease shall be for a period of three (3) years beginning
August 1, 1992 and ending July 31, 1995 except as otherwise expressly provided
in this Lease.
<PAGE> 27
3.
Possession
If LANDLORD, for any reason whatsoever, cannot deliver possession of the
PREMISES to the TENANT on the date of the commencement of the Term, this Lease
shall not be void or voidable, nor shall the LANDLORD be liable to TENANT for
any loss or damage resulting therefrom. Under such circumstances, the rent
provided for herein shall not commence until possession of the PREMISES is made
available to TENANT and no such failure to give possession on the date of
commencement of the Term shall affect the validity of this Lease or the
obligations of the TENANT hereunder, nor shall the same be construed to extend
the Term.
Notwithstanding the provisions contained in the immediately preceding
paragraph, however, in the event possession of the PREMISES is not tendered by
LANDLORD on or before September 1, 1992, then in such event, from and after
September 1, 1992 until such time as possession of the PREMISES is so tendered
to TENANT, TENANT shall be entitled to a credit against rent due LANDLORD in
amount equal to the penalty rent paid by TENANT to its landlord for the premises
presently leased by TENANT at 205 North Michigan Avenue, Chicago, Illinois,
provided however, in the event said LANDLORD imposes such penalty rent, in no
event shall said credit exceed one hundred (100%) percent of the base rent
normally due by TENANT to its landlord under the aforesaid lease without
application of the holdover penalty thereunder, and further provided that no
such credit shall be due and payable from and after the tender of possession of
the PREMISES to TENANT by LANDLORD. It is further provided that in the event
said LANDLORD elects as a result of TENANT's holdover after September 1, 1992 to
extend said lease for an additional year, in such event, LANDLORD agrees to
credit against rent due LANDLORD an amount equal to the rent due said LANDLORD
for that portion of said additional year after TENANT has been tendered
possession of the PREMISES by LANDLORD.
The PREMISES shall be deemed to be ready for TENANT'S occupancy if only
minor or insubstantial details of construction, decoration or mechanical
adjustments remain to be done in the PREMISES or any part thereof, or if the
delay in the availability of the PREMISES or any part thereof for occupancy
shall be due to special work, changes, alterations, or additions required or
made by TENANT in the layout or finishing of the PREMISES. Whether or not the
PREMISES are ready for occupancy shall be determined by the issuance of a
temporary or permanent certificate of occupancy from the Village of North
Barrington. It is further understood that within 48 hours prior to initial
occupancy, the parties shall jointly
-2-
<PAGE> 28
inspect the PREMISES and prepare a "punch list" of incomplete items to be
completed by LANDLORD within a reasonable time after occupancy. TENANT agrees to
provide a supplemental "punch list" within thirty (30) days after occupancy
encompassing all items not then completed. Notwithstanding anything to the
contrary herein contained, it is understood that if the PREMISES are not deemed
ready for TENANT'S occupancy on or before October 1, 1992, then in such event,
TENANT may elect to terminate this Lease.
4.
Definitions As Used In This Lease
A. The term "BASE YEAR" means the calendar year in which the term of this
Lease commences.
B. The term "COMMENCEMENT DATE" is the date of the beginning of the Lease
as defined in Section Two (2) of this Lease.
C. The term "COMPARISON YEAR" means each calendar year during the Term
subsequent to the Base Year.
D. The term "TENANT'S PROPORTIONATE SHARE" shall mean 28.43% being the
ratio which the rentable office area of the PREMISES bears to the entire
rentable office area in the Building.
E. The Term "TAXES" means any and all taxes of every kind and nature
whatsoever which LANDLORD shall pay or become obligated to pay during a calendar
year for a year encompassed by the term of the Lease (regardless of whether such
taxes were assessed or became a lien during, prior or subsequent to the calendar
year of payment) because of or in connection with the ownership, leasing and
operation of the Property including without limitation, real estate taxes,
personal property taxes on property owned by TENANT or located on the PREMISES,
sewer rents, water rents, special assessments, transit taxes, legal fees and
court costs charged for the protest or reduction of property taxes and/or
assessments in connection with the PREMISES including the Building, any tax or
excise on rent or any other tax (however described) on account of rental
received for use and occupancy of any or all of the Building and/or the
PREMISES, whether any such taxes are imposed by the United States, the State of
Illinois, the County of Lake, or any local governmental municipality, authority
or agency or any political subdivision of any thereof. TAXES shall not include
any net income, capital stock, estate or inheritance taxes; provided, however,
if at any time during the term hereof a tax or excise on rents or income or
other tax however described (herein called "Rent Tax") is levied or assessed by
the United States or the State of Illinois or any political subdivision thereof
on account of the rents hereunder or the interest of LANDLORD under this Lease,
and if such Rent Tax is in lieu of or as a substitute for, in whole or in part,
real estate taxes or other ad valorem taxes such Rent Tax shall constitute
TAXES.
-3-
<PAGE> 29
F. The term "OPERATING COSTS" means any and all expenses, costs and
disbursements (other than taxes as defined in Section 4(E) of every kind and
nature whatsoever incurred by LANDLORD in connection with the management,
maintenance, operation and repair of the Property (including, without
limitation, Energy Costs, easement maintenance expenses, including assessments
applicable to the Property established by any Declaration as hereinafter
defined, any and all common area expenses in the development in which the
Property is located, including but not limited to landscaping and other
maintenance of properties which benefit the Property, property management fees,
insurance costs and routine repairs, maintenance and decorating, wage and
salaries, legal and accounting, which LANDLORD shall be or become obligated to
pay in respect of a calendar year regardless of when such OPERATING COSTS were
incurred), except the following: (i) costs of capital improvements and cost of
curing construction defects, if any; (ii) depreciation (except on any capital
improvements made or installed after the Base Year for the purpose of saving
labor or otherwise reducing applicable OPERATING COSTS); (iii) interest and
principal payments on mortgages, if any; (iv) real estate brokers, leasing
commissions or compensation; (vi) any cost or expenditure (or portion thereof)
for which LANDLORD is reimbursed, whether by insurance proceeds or otherwise;
(vii) services provided for a single tenant; and (viii) tenant improvement cost
for TENANT or other tenants. In the event during all or any portion of any
calendar year the Building is not fully rented and occupied, LANDLORD may elect
to make an appropriate adjustment of TENANT'S PROPORTIONATE SHARE of OPERATING
COSTS for such year, employing sound accounting and management principles, to
determine the OPERATING COSTS that would have been paid or incurred by LANDLORD
on items which vary with occupancy of the Building had the Building been fully
rented and occupied and the amount so determined, provided that in no event
shall LANDLORD adjust the cost of maintenance and services to common areas of
the Building and TENANT'S PROPORTIONATE SHARE if any adjusted OPERATING COSTS
shall not exceed the cost which LANDLORD would have incurred had said OPERATING
COSTS been furnished only to the PREMISES and billed directly to TENANT. For
purposes of this subparagraph "the development in which the Property is located"
shall be deemed to refer to any subdivision or group of subdivisions containing
common areas and/or utilities and/or services benefiting the Property, including
any and all Property encompassed by any declaration of easements, and/or
protective covenants ("Declaration") affecting the Property, provided however
that notwithstanding anything to the contrary herein contained, it is understood
that TENANT shall not be responsible for any expenses relating to "the
development in which the Property is located" except to the extent that of
TENANT'S PROPORTIONATE SHARE of usage and except to the extent that said
improvements benefit TENANT.
-4-
<PAGE> 30
5.
Base Rent
Except as otherwise provided herein, TENANT shall pay as initial Base Rent
to LANDLORD the sum of SEVENTY FOUR THOUSAND EIGHT DOLLARS ($74,008.00) per
annum in equal monthly payments of SIX THOUSAND ONE HUNDRED SIXTY SEVEN DOLLARS
AND THIRTY-THREE ($6,167.33) in advance on the first day of the first full
calendar month and on the first day of each calendar month thereafter during the
Term and at the same rate for fractions of a month if the Term shall begin on
any day except the first day or shall end on any day except the last day of a
calendar month.
Any rent (whether Base Rent or additional rent) or other amount due from
TENANT to LANDLORD under this Lease not paid when due shall bear interest from
the date due until the date paid at the annual rate of TWO (2%) PERCENT above
the prime rate charged by the FIRST NATIONAL BANK OF CHICAGO (also called the
Corporate Base Rate by said Bank) on ninety (90) day commercial loans to its
largest customers from time to time during such period but the payment of such
interest shall not excuse or cure any default by TENANT under this Lease. The
covenants herein to pay rent (both Base Rent and additional rent) shall be
independent of any other covenant set forth in this Lease.
It is understood that in addition to the Base Rent provided for aforesaid
that TENANT shall be responsible for the payment of all TAXES, OPERATING COSTS,
and other improvements herein provided as additional rent. It is the intention
of the parties that this Lease be deemed and construed as a "net lease", and all
Base Rent, additional rent, and all other charges, costs and sums to be paid by
TENANT hereby shall be paid to LANDLORD absolutely net and without any charges,
assessments, impositions, expenses or deductions of any kind or nature
whatsoever.
6.
Base Rent Adjustment Formula
Base Rent shall be subject to adjustment as hereinafter set forth in this
Section 6 and in Section 7.
Taxes
A. It is further agreed between the parties hereto that in addition to the
rental provided for herein that TENANT will also pay during the term of this
Lease, as additional rent, TENANT's PROPORTIONATE SHARE of the TAXES. TENANT's
PROPORTIONATE SHARE of
-5-
<PAGE> 31
which are estimated for the first year of the Term to not exceed TWELVE THOUSAND
NINE HUNDRED FIFTY-TWO DOLLARS AND 50/100 ($12,952.50). To insure the payment
of such additional rent, TENANT shall pay to LANDLORD on the first day of each
and every month at the time of payment of the rental provided for herein
one-twelfth (1/12th) of the annual taxes levied and assessed against the
PREMISES for the prior year. The monies paid by TENANT as aforesaid shall be
used by LANDLORD to pay the TAXES when the tax bills become available. In the
event the monies paid as aforesaid are insufficient to pay the amount of the
TAXES then TENANT will then on demand pay to LANDLORD the amount of such
deficiency. In the event the monies so paid as aforesaid exceed the TAXES at the
time of the issuance of final bills therefor, then to such extent LANDLORD shall
credit such excess against future amounts due to LANDLORD from TENANT or in the
event no such future amounts will be due, said excess shall be refunded to
TENANT. To the extent that said TAXES are assessed against more than the
PREMISES, TENANT shall be required to pay a prorata share of the larger area
being assessed.
Operating Costs
B. TENANT shall also pay to LANDLORD as additional rent an amount equal to
TENANT'S PROPORTIONATE SHARE of the OPERATING COSTS for each year of the term,
which are estimated for the first year of the Term not to exceed EIGHTEEN
THOUSAND ONE HUNDRED THIRTY-THREE DOLLARS AND 50/100 ($18,133.50). To insure the
payment of such additional rent TENANT shall pay to LANDLORD on the first day of
each and every month at the time of the payment of the rental one-twelfth of the
OPERATING COSTS as reasonably estimated by LANDLORD for such year. In the event
the monies so paid as aforesaid are insufficient to pay the amount of the
OPERATING COSTS when final bills therefor are received by LANDLORD, then TENANT
will on demand pay to LANDLORD the amount of said deficiency. In the event the
monies so paid as aforesaid exceed the OPERATING COSTS at the time of the
issuance of final bills therefor, then to such extent LANDLORD shall credit such
excess against future amounts due to LANDLORD from TENANT or in the event no
such future amounts will be due, said excess shall be refunded to TENANT.
7.
Rent Adjustment Payment
On or before the first day of April of each calendar year after the Base
Year, LANDLORD shall endeavor to furnish to TENANT a written statement showing
in reasonable detail OPERATING COSTS and TAXES for the Base Year and for the
Comparison Year preceding the year in which such statement is furnished and
showing the amount, if any, of rental adjustment due from TENANT for such
Comparison year.
-6-
<PAGE> 32
On the monthly rental payment date (the "adjustment date") next following
TENANT'S receipt of each such annual statement, TENANT shall pay to LANDLORD as
additional rent an amount equal to the Sum of (a) the "net rental adjustment"
for the entire preceding calendar year (being the aggregate rental adjustment
shown on each such annual statement less the amount, if any, by which (i) the
total rent paid by TENANT during the preceding calendar year (including all
adjustment to monthly rental as herein provided), exceeded (ii) the Base Rent
and (b) one-twelfth (1/12th) of such "net rental adjustment" for the present
calendar year multiplied by the number of monthly rental payment dates
(including the adjustment date) having elapsed for such present calendar year.
Subsequent monthly rental payments shall thereafter be increased by one-twelfth
(1/12th) of such "net rental adjustment".
In the event that any such settlement required above indicates that the
total additional rent paid by TENANT during the preceding calendar year exceeds
the aggregate rental payable by TENANT for such calendar year pursuant to
Section 6 and Section 7, LANDLORD shall apply such excess on any amounts of
additional rent next falling due under this Lease as long as TENANT is not then
in default of any of the terms and provisions of this Lease.
The annual determination and statement of TAXES and OPERATING COSTS shall
be prepared in accordance with generally acceptable accounting principles. In
the event of any dispute as to any additional rental due hereunder, TENANT shall
have the right to inspect LANDLORD'S accounting records relative to TAXES and
OPERATING COSTS at LANDLORD's accounting office during normal business hours at
any time within sixty (60) days following the furnishing by LANDLORD to TENANT
of such statement. However, any such audit may not be limited to the preceding
year. If such audit discloses an error in LANDLORD's computations to the
detriment of TENANT by more than five (5%) percent of the amount billed for a
single year, then LANDLORD shall reimburse TENANT the reasonable costs of such
audit.
In no event shall any rent adjustment result in a decrease of the Base Rent
as set forth in Section 5 hereof.
In the event of the termination of this Lease by expiration of the stated
term or for any other cause or reason whatsoever prior to the determination of
rental adjustment as hereinabove set forth, TENANT'S agreement to pay additional
rental up to the time of termination and LANDLORD's obligation to repay any
overpayment shall survive the expiration or termination of the Lease.
If the lease year of the term of this Lease ends on any day other than the
last day of December, any payment due to TENANT by reason of decrease in
OPERATING COSTS or any payment due to LANDLORD by reason of any increase in
OPERATING COSTS shall be prorated on the basis of which the number of days in
such partial year bears to three hundred sixty-five (365).
-7-
<PAGE> 33
8.
Holding Over
Should TENANT hold over after the termination of this Lease, by lapse of
time or otherwise, TENANT shall become a tenant from month to month only upon
each and all of the terms herein provided as may be applicable to such month to
month tenancy and any such holding over shall not constitute an extension of
this Lease; provided, however, during such holding over, TENANT shall pay Base
Rent (as adjusted pursuant to Sections 6 and 7, all as estimated by LANDLORD) at
one hundred fifty (150%) percent of the rate payable for the month immediately
preceding said holding over. The provisions of this paragraph do not exclude the
LANDLORD'S rights of re-entry or any other right hereunder.
9.
Building Service
(a) LANDLORD shall furnish janitorial and cleaning services in and about
the PREMISES, Saturdays, Sundays excepted, comparable to the standard janitor
services furnished by other first class office buildings in the suburban Chicago
area, the costs of which shall be included in OPERATING COSTS.
LANDLORD shall also maintain and keep lighted the common stairs,
entries and toilet rooms in the Building and maintain the roof, structural
components, h.v.a.c., and common areas of the Building to the standard set forth
in Section 9.(a) hereof. LANDLORD shall not be liable for, and TENANT shall not
be entitled to, any abatement or reduction of rental by reason of LANDLORD'S
failure to furnish any of the foregoing, nor shall such failure constitute an
eviction, if such failure is caused by accident, breakage, repairs, energy
shortages or restriction, strikes, lockouts, or other labor disturbances or
labor disputes of any character, riots, civil disturbance or by any other
cause, similar or dissimilar, beyond the reasonable control of LANDLORD. Except
as otherwise herein provided, LANDLORD shall not be liable under any
circumstances for loss of or injury to property, however occurring, through or
in connection with or incidental to failure to furnish any of the foregoing.
Notwithstanding the foregoing, in the event as a result of any of the
foregoing, the PREMISES become unfit for use for TENANT's business for a period
of 72 consecutive hours, then in such event, rent shall abate until such fitness
is restored.
Wherever heat generating machines or equipment, including telephone
equipment, are used in the PREMISES which affect the temperature otherwise
maintained by the air conditioning system, LANDLORD reserves the right to
install supplementary air conditioning units or heating units in the PREMISES
and the cost thereof,
-8-
<PAGE> 34
including the cost of installation, and the cost of operation and maintenance
thereof shall be paid by TENANT to LANDLORD upon demand by LANDLORD.
(b) Neither LANDLORD nor LANDLORD'S beneficiaries, nor any company,
firm or individual, operating, maintaining, managing or supervising the plant or
facilities furnishing the services included in LANDLORD'S energy costs nor any
of their respective agents, or employees, shall be liable to TENANT, or any of
TENANT'S employees, agents, customers or invitees or anyone claiming through or
under TENANT, for any damages, injuries, losses, expenses, claims or causes of
action, because of any interruption or discontinuance at any time for any reason
in the furnishing of any of such services, or any other service to be furnished
by LANDLORD as set forth herein; nor shall any such interruption or
discontinuance relieve TENANT from full performance of TENANT'S obligations
under this lease except as provided in paragraph 9.(a) hereof.
(c) Electricity shall not be furnished by LANDLORD, but shall be
furnished by the approved electric utility company serving the area. LANDLORD
shall permit the TENANT to receive such service direct from such public utility
company at TENANT'S cost, and shall permit TENANT's wire and conduits, to the
extent available, suitable and safely capable, to be used for such purposes.
TENANT shall make all necessary arrangements with the local utility company for
metering and paying for electric current furnished by it to TENANT and TENANT
shall pay for all charges for electric current consumed on the PREMISES during
TENANT'S occupancy thereof. The electricity used during the performance of
janitor service, the making of alterations or repairs in the PREMISES, (other
than Tenant Improvements); or the operation of any special air conditioning
systems which may be required for data processing equipment or for other special
equipment or machinery installed by TENANT, shall be paid for by TENANT. TENANT
shall make no alterations or additions to the electric equipment and/or
appliances without the prior written consent of the LANDLORD in each instance,
which consent shall not be unreasonably withheld. TENANT also agrees to purchase
from the LANDLORD or its agent all lamps, bulbs after the initial installation
thereof, ballasts and starters used in the PREMISES provided however that the
availability quality and cost of any such items shall be comparable to that
available to TENANT from other suppliers. TENANT covenants and agrees that at
all times its use of electric current shall never exceed the capacity of the
feeders to the Building or the risers or wiring installed thereon. TENANT will
not, without the written consent of LANDLORD, use any apparatus or device in the
PREMISES to connect to electric current (except through existing electrical
outlets in the PREMISES) or water pipes, any apparatus or device for the purpose
of using electric current or water. If TENANT shall require water or electric
current in excess of that which is respectively obtainable from existing water
pipes or electrical outlets and normal for use of the PREMISES as general office
space, TENANT shall first procure the consent of LANDLORD, which LANDLORD
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may not unreasonably refuse. If LANDLORD consents to such excess water or
electric requirements, TENANT shall pay all costs including but not limited to
meter service and installation of facilities necessary to furnishing such excess
capacity.
10.
Condition of the Premises
Subject to "punch lists" referred to in section 3 hereof, by taking
possession of the PREMISES, TENANT shall be deemed to have agreed that the
PREMISES were as of the date of taking possession, in good order, repair and
condition. No promises of the LANDLORD to alter, remodel, decorate, clean or
improve the PREMISES or the Building and no representation or warranty
expressed or implied, respecting the condition of the PREMISES or the Building
has been made by the LANDLORD to TENANT, unless the same is contained herein or
made a part hereof.
TENANT shall, at its own expense, keep the PREMISES in good repair and
tenantable condition and shall promptly and adequately repair all damages to
the PREMISES caused by TENANT or any of its employees, agents or invitees under
the supervision and with the approval of LANDLORD and within a reasonable period
of time as specified by LANDLORD, loss by ordinary wear and tear, fire and other
casualty excepted. Subject to the provisions of paragraph 27 hereof, if TENANT
does not do so promptly and adequately, LANDLORD may, but need not, make such
repairs and TENANT shall pay LANDLORD immediately upon request by LANDLORD.
11.
Uses Prohibited
TENANT shall not use, or permit the PREMISES or any part thereof to be
used, for any purpose or purposes other than as specified in Section 1 of this
Lease. No use shall be made or permitted to be made of the PREMISES, nor acts
done, which will increase the existing rate of insurance upon the Building, or
cause a cancellation of any insurance policy covering the Building, or any part
thereof, nor shall TENANT sell, or permit to be kept, used or sold, in or about
the PREMISES, any article which may be prohibited by LANDLORD'S insurance
policies. TENANT shall not commit or suffer to be committed, any waste upon the
PREMISES, or any public or private nuisance or other act or thing which may
disturb the quiet enjoyment of any other tenant in the Building, nor, without
limiting the generality of the foregoing, shall TENANT allow the PREMISES to be
used for any improper, immoral, unlawful or objectionable purpose. TENANT agrees
at all times to cause the PREMISES to be operated in compliance with all
federal, state, local or municipal environmental protection agency health and
safety laws, statutes, ordinances, and
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rules and regulations, so that no clean-up claim or other obligation or
responsibility arises from a violation of any of the foregoing, by acts or
omissions of TENANT, and TENANT further agrees to promptly cure any such
violation committed by TENANT at its own expense, and shall furthermore defend
and indemnify LANDLORD, beneficiaries, mortgagees, and officers, agents, and
employees thereof respectively, for any and all liability, loss, costs
(including attorneys' fees and expenses), damages, responsibilities or
obligations incurred as a result of any violation of any of the foregoing.
TENANT shall upon request of LANDLORD certify in writing that it is in
compliance with applicable local, state and federal environmental rules,
regulations, statutes and laws for the preceding year. At the request of the
LANDLORD, TENANT shall submit to the LANDLORD, or shall make available for
inspection and copying upon reasonable notice and at reasonable times, any or
all of the documents and materials prepared by or for TENANT pursuant to any
environmental law or regulation or submitted to any governmental regulatory
agency in conjunction therewith. LANDLORD shall have reasonable access to the
PREMISES to inspect the same to confirm that the TENANT is using the PREMISES in
accordance with local, state and federal environmental rules, regulations,
statutes and laws. TENANT shall, at the request of the LANDLORD and at the
TENANT'S expense, conduct such testing and analysis as is necessary to ascertain
whether the TENANT is using the PREMISES in compliance with all local, state and
federal environmental rules, regulations, statutes and laws, provided however,
LANDLORD shall not request that TENANT conduct such tests unless LANDLORD has a
reasonable suspicion that TENANT may be in violation of the foregoing rules,
regulations, statutes, or laws. Said tests shall be conducted by qualified
independent experts chosen by the TENANT and subject to LANDLORD'S reasonable
approval. Copies of reports of any such tests shall be provided to the LANDLORD.
The provisions within this paragraph shall survive termination of this Lease and
shall be binding upon and shall inure to the benefit of the parties hereto,
their respective successors and assigns, and mortgagees thereof.
12.
Compliance With Law
TENANT shall not use the PREMISES or permit anything to be done in or
about the PREMISES which in any way conflict with any law, statute, ordinance or
governmental rule or regulation now in force or which may hereafter be enacted
or promulgated. TENANT shall, at its sole cost and expense, promptly comply with
all laws, statutes, ordinances and governmental rules, regulations or
requirements now in force or which may hereafter be in force and with the
requirements of any board of fire under-writers or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the PREMISES, excluding structural changes not related to or affected by
TENANT'S improvements or acts. The judgment of any court
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of competent jurisdiction or the admission of TENANT in an action against TENANT
whether LANDLORD be a party thereto or not, that TENANT has violated any law,
statute, ordinance or governmental rule, regulation or requirement shall be
conclusive of that fact as between LANDLORD and TENANT.
13.
Alterations and Repairs
TENANT shall keep the PREMISES in good condition and repair ordinary
wear and tear and loss by fire and other casualty excepted, and shall erect any
partitions, make any alterations in or additions, changes or repairs to the
PREMISES without the LANDLORD'S prior written approval in each and every
instance, such consent not to be unreasonably withheld. Unless otherwise agreed
by LANDLORD and TENANT in writing, all such work shall be performed either by or
under the direction of LANDLORD, but at the cost of TENANT. During the term of
this Lease, no work shall be performed by or under the direction of TENANT
without the express written consent of LANDLORD. Unless otherwise provided by
written agreement, all alterations, improvements, and changes shall remain upon
and be surrendered with the PREMISES, excepting however that at LANDLORD'S
option, TENANT shall, at its expense, when surrendering the PREMISES, remove
from the PREMISES and the Building all such alterations, improvements, and
changes, provided LANDLORD has designated them for removal at the time of
approval, and further provided that TENANT may remove any trade fixtures
provided the PREMISES are restored to a condition reasonably satisfactory to
LANDLORD. If TENANT does not remove said additions, decorations, fixtures,
hardware, non-trade fixtures and improvements, which TENANT may be required to
remove after request to do so by LANDLORD, LANDLORD may remove the same and
TENANT shall pay the cost of such removal to LANDLORD upon demand. TENANT
hereby agrees to hold LANDLORD and LANDLORD'S beneficiaries, their agents and
employees harmless from any and all liabilities of every kind and description
which may arise out of or be connected in any way with said alterations or
additions. Any mechanic's lien filed against PREMISES, or the Building or the
Property, for work claimed to have been furnished to TENANT shall be discharged
of record by TENANT within ten (10) days thereafter, at TENANT'S expense,
provided however TENANT shall have the right to contest any such lien on the
posting of reasonably sufficient security or insuring over same with LANDLORD's
title insurer.
TENANT shall, at the termination of this Lease, surrender the PREMISES
to LANDLORD in as good condition and repair as reasonable and proper use thereof
will permit, loss by ordinary wear and tear, fire or other casualty excepted.
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14.
Assignment and Subletting
TENANT shall not assign this Lease, or any interest therein and shall
not sublet the PREMISES or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person to occupy or use the PREMISES,
or any portion thereof, without the written consent of LANDLORD first had and
obtained, which shall not be unreasonably withheld.
TENANT shall, by notice in writing, advise LANDLORD of its intention
from on and after a stated date (which shall not be less than sixty (60) days
after the date of TENANT'S notice) to assign or to sublet any such part of all
of the PREMISES for the balance or any part of the Term, and, in such event
LANDLORD shall have the right, to be exercised by giving written notice to
TENANT thirty (30) days after receipt of TENANT'S notice, to recapture the space
described in TENANT'S notice and such recapture notice shall, if given, cancel
and terminate this Lease with respect to the space therein described as of the
date stated in TENANT'S notice. TENANT'S said notice shall state the name and
address of the proposed subtenant and a true and complete copy of the proposed
sublease shall be delivered to LANDLORD with said notice. If TENANT'S notice
shall cover all of the space hereby demised and if LANDLORD shall give the
aforesaid recapture notice with respect thereto, the Term of this Lease shall
expire and end on the date stated in TENANT'S notice as fully and completely as
if that date had been herein definitely fixed for the expiration of the Term.
If, however, this Lease be canceled pursuant to the foregoing with respect to
less than the entire PREMISES, the rental and the escalation percentages herein
reserved shall be adjusted on the basis of the number of square feet retained by
TENANT, and this Lease as so amended shall continue thereafter in full force
and effect. If LANDLORD, upon receiving TENANT'S said notice with respect to
any such space, shall not exercise its right to cancel as aforesaid, LANDLORD
will not unreasonably withhold its consent to TENANT'S assigning or subletting
the space covered by its notice, provided; (i) at the time thereof TENANT is not
in default under this Lease, (ii) LANDLORD, in its sole discretion reasonably
exercised, determines that the reputation, business, proposed use of the
premises and financial responsibility of the proposed sublessee or occupant, as
the case may be, of the PREMISES are satisfactory to LANDLORD, (iii) any
assignee shall expressly assume all the obligations of this Lease on TENANT'S
part to be performed; (iv) such consent if given shall not release TENANT of any
of its obligations (including, without limitation, its obligation to pay rent)
under this Lease, (v) TENANT agrees specifically to pay over to LANDLORD, as
additional rent, fifty (50%) percent of all net sums (ie: after deduction of
brokerage fees, build-out costs, or other costs incurred by TENANT in
subletting) received by TENANT under the terms and conditions to such assignment
or sublease, which are in excess of the
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amounts otherwise required to be paid pursuant to the Lease; and (vi) a consent
to one assignment, subletting occupation or use shall be limited to such
particular assignment, sublease or occupation and shall not be deemed to
constitute LANDLORD'S consent to an assignment or sublease to or occupation by
another person. Any such assignment or subletting without such consent shall be
void and shall, at the option of LANDLORD, constitute a default under this
Lease. TENANT will pay all of LANDLORD'S costs associated with any such
assignment or subletting including but not limited to reasonable legal fees.
15.
Signs
TENANT shall not place or affix any exterior or interior signs visible
from the outside of the PREMISES.
16.
Damage to Property - Injury to Persons
TENANT, as a material part of the consideration to be rendered to
LANDLORD under this Lease, to the extent permitted by law, hereby waives all
claims except claims caused by or resulting from the non-performance of the
LANDLORD, which TENANT or TENANT'S successor or assigns may have against
LANDLORD, its agents, servants, or employees for loss, theft or damage to the
property and for injuries to persons in, upon or about the PREMISES or the
Building from any cause whatsoever.
TENANT will hold LANDLORD, its agents, servants, and employees exempt
and harmless from and on account of any damage or, injury to any person, or to
the goods, wares, and merchandise of any person, arising from the uses of the
PREMISES by TENANT or arising from the failure of TENANT to keep the PREMISES in
good condition as herein provided if non-performance by the LANDLORD or
negligence of the LANDLORD, its agents, servants or employees does not
contribute hereto. Neither LANDLORD nor its agents, servants, employees shall be
liable to TENANT for any damage by or from any act or negligence of any
co-tenant or other occupant of the same Building, or by any owner or occupant of
adjoining or contiguous property, provided however, that the provisions of this
paragraph shall not apply to negligence or willful and wanton misconduct of any
such individuals or entities. TENANT agrees to pay for all damage to the
Building or the PREMISES, as well as all damage to tenants or occupants thereof
caused by TENANT'S misuse or neglect of the PREMISES, its apparatus or
appurtenances or caused by any licensee, contractor, agent or employees of
TENANT. Notwithstanding the foregoing provisions, neither LANDLORD nor TENANT
shall be liable to one another for any loss, damage or injury caused by its act
or neglect to the extent
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that the other party has recovered the amount of such loss, damage or injury
from insurance and the insurance company is bound by this waiver of liability.
LANDLORD will hold TENANT, its agents, servants, and employees exempt
and harmless from and on account of any damage or injury to any person, or to
the goods, wares, and merchandise of any person, arising of the failure of
LANDLORD to keep the Building and its common areas under LANDLORD's control in
good condition as herein provided as a result of any act or omission of
LANDLORD, its agents, servants, or employees, and waives all claims against
TENANT for loss, damage, or theft of LANDLORD's property and for injuries to
persons in and about those portions of the Building and its common areas under
LANDLORD's control. Notwithstanding the foregoing provisions, LANDLORD shall not
be liable to TENANT for any loss, damage or injury caused by its act or neglect
to the extent that TENANT has recovered the amount of such loss, damage or
injury from insurance and the insurance company is bound by this waiver of
liability.
Particularly, but not in limitation of the foregoing paragraph, all
property belonging to TENANT or any occupant of the PREMISES that is in the
Building or the PREMISES shall be there at the risk of TENANT or other person
only, and LANDLORD or its agent, servants, or employees (except in case of
non-performance by the LANDLORD or negligence or willful and wanton conduct of
LANDLORD or its agents, servants, employees) shall not be liable for: damage to
or theft of or misappropriation of such property; nor for any damage to property
entrusted to LANDLORD, its agents, servants, or employees, if any; nor for the
loss of or damage to any property by theft or other-wise, by any means
whatsoever, nor for any injury or damage to persons or property resulting from
fire, explosion, falling plaster, steam, gas, electricity, snow, water or rain
which may leak from any part of the Building or from the pipes, appliances or
plumbing works therein or from the roof, street or subsurface or from any other
place or resulting from dampness or any other cause whatsoever; nor for
interference with the light or other incorporeal hereditaments, nor for any
latent defect in the PREMISES or in the Building. TENANT shall give prompt
notice to LANDLORD in case of fire or accidents in the PREMISES or in the
Building or of defects therein or in the fixtures or equipment.
In case any action or proceeding be brought against LANDLORD by reason
of any obligation on TENANT'S part to be performed under the term of this Lease,
or arising from any act or negligence of the TENANT, or of its agents or
employees, TENANT, upon notice from LANDLORD shall defend the same at TENANT'S
expense by counsel reasonably satisfactory to LANDLORD.
TENANT shall maintain in full force and effect during the term of this
Lease (including any period prior to the beginning of the term during which
TENANT has taken possession and including also
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any period of extension of the Term in which TENANT obtains possession), in
responsible companies approved by LANDLORD (i) fire and extended coverage
insurance including an endorsement for vandalism and malicious mischief)
covering all TENANT'S property in, on or about the PREMISES, with full waiver or
subrogation rights against LANDLORD in an amount equal to the full replacement
cost of such property, and (ii) public liability insurance insuring TENANT
against all claims, demands or action for injury to or death of any one person
in an amount of not less than FIVE HUNDRED THOUSAND ($500,000.00) DOLLARS and
for injury to or death of more than one person in any one accident in an amount
not less than ONE MILLION ($1,000,000.00) DOLLARS and for damage to property in
an amount of not less than ONE HUNDRED THOUSAND ($100,000.00) DOLLARS or such
other amounts as LANDLORD may reasonably require and (iii) rental insurance
equal to one year's rent insurance. All liability policies shall cover the
entire PREMISES.
LANDLORD agrees to maintain fire and extended coverage insurance for
the full replacement value of the Building during the term of the Lease.
All such policies, shall name LANDLORD, any mortgagees of LANDLORD, and
all other parties designated by LANDLORD as additional parties insured. All
insurance policies shall indicate that at least thirty (30) days prior written
notice shall be delivered to all additional parties insured by the insurer prior
to termination of cancellation of such insurance and TENANT shall provide
Certificates of Insurance, not less than ten (10) days prior to the COMMENCEMENT
DATE, evidencing the aforesaid coverage to all insured parties. TENANT shall not
violate or permit a violation of any of the conditions or terms of any such
insurance policies and shall perform and satisfy all reasonable requirements of
the insurance company issuing such policies.
17.
Damage or Destruction
In the event the PREMISES or the Building are damaged by fire or other
casualty and the insurance proceeds have been made available therefor by the
holder or holders of any mortgages or deeds of trust covering the Building, the
damage shall be repaired by and at the expense of LANDLORD to the extent of such
insurance proceeds available therefor, provided such repairs can, in LANDLORD'S
sole opinion, be made within one hundred twenty (120) days after the occurrence
of such damage without the payment of overtime or other premiums. Until such
repairs are completed, the rent shall be abated in proportion to the part of the
PREMISES which is unusable by TENANT in the conduct of its business. All rent
shall be abated if partial untenantability renders the entire Premises unfit for
TENANT's business. If repairs cannot, in LANDLORD'S sole opinion be made
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within one hundred twenty (120) days, LANDLORD may at its option make these
within a reasonable time and this Lease shall continue in effect. In the case of
repairs, which in LANDLORD'S opinion cannot be made within one-hundred twenty
(120) days, LANDLORD shall notify TENANT within thirty (30) days of the date of
occurrence of such damage as to whether or not LANDLORD elects to make such
repairs and if no such notice is given, LANDLORD shall be deemed not to have
elected to make such repairs. If LANDLORD elects not to make such repairs which
cannot be made within one hundred twenty (120) days of notice, then either party
may, by written notice to the other, cancel this Lease as of the date of the
occurrence of such damage. Notwithstanding anything to the contrary herein
contained, in the event that such repairs are not completed within one hundred
eighty (180) days of the date of such casualty, then in such event, either party
may cancel this Lease. Except as provided in this Section, there shall be no
abatement of rent and no liability of LANDLORD by reason of any injury to or
interference with TENANT'S business or property arising from any such fire or
other casualty or from the making or not making of any repairs, alterations or
improvements in or to any portion of the Building or the PREMISES or in or to
fixtures, appurtenances and equipment therein. TENANT understands that LANDLORD
will not carry insurance of any kind on TENANT'S furniture or furnishings or on
any fixtures or equipment removable by TENANT under the provisions of this Lease
and that LANDLORD shall not be obliged to repair any damage thereto or replace
the same. LANDLORD shall not be required to repair any injury or damage caused
by fire or other cause, or to make any repairs or replacements to or of
improvements installed in the PREMISES by or for TENANT, except to the extent
such improvements were permanently installed as part of the initial tenant
improvements.
18.
Entry by Landlord
LANDLORD and its agents shall have the right to enter the PREMISES at
all reasonable times and upon reasonable notice except in cases of emergency for
the purpose of examining or inspecting the same, to supply janitorial services
and any other service to be provided by LANDLORD to TENANT hereunder, to show
the same to prospective purchasers or tenants of the Building, and make such
alterations, repairs, improvements, or additions, whether structural or
otherwise, to the PREMISES or to the Building as LANDLORD may deem reasonably
necessary or desirable. LANDLORD may enter by means of a master key without
liability to TENANT except for any failure to exercise due care for TENANT'S
property and without affecting this Lease. LANDLORD shall use reasonable efforts
on any such entry not to unreasonably interrupt or interfere with TENANT'S use
and occupancy of the PREMISES. To the extent that such insurance results in an
inability of TENANT to carry on its business for 72 consecutive hours, then in
such event, rent shall abate until such ability is restored.
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19.
Insolvency or Bankruptcy
If at any time during the term demised or prior thereto there shall be
filed by or against TENANT in any court pursuant to any statute, either of the
United States or of any state, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of TENANT'S property, and within thirty (30) days thereof TENANT fails
to secure a discharge thereof, or if TENANT makes an assignment for the benefit
of creditors, this Lease, at the option of LANDLORD, exercised within a
reasonable time after notice of the happening of any one or more of such events,
may be canceled and terminated and in which event neither TENANT nor any person
claiming through or under TENANT by virtue of any statute or of an order of any
court shall be entitled to possession or to remain in possession of the PREMISES
demised but shall forthwith quit and surrender the PREMISES, and LANDLORD, in
addition to the other rights and remedies LANDLORD has by virtue of any other
provision herein or elsewhere in this Lease contained or by virtue of any
statute or rule of law, may retain as liquidated damages any rent, security
deposit or monies received by it from TENANT or others in behalf of TENANT.
Notwithstanding anything to the contrary herein contained, the event of
cancellation of this Lease as provided in this paragraph, LANDLORD shall upon
such termination be entitled to recover damages in an amount equal to the
present value of the rent specified under Section Five (5) and other sections
covering the base rent adjustments of this Lease for the remainder of the stated
term herein less the fair market rental value of the PREMISES for the stated
term.
20.
Default
If any of the following events of default shall occur, to wit:
(a) TENANT defaults for more than five (5) days after notice of default
after the due date therefor in the payment of rent (whether Base
Rent or additional rent) or any other sum required to be paid
hereunder, or any part thereof, or
(b) TENANT defaults in the prompt and full performance of any other
(i.e. other than payment of rent or any other sum) covenant,
agreement or condition of this Lease and such other default shall
continue for a
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period of twenty (20) days after written notice thereof from
LANDLORD to TENANT (unless such other default involves a hazardous
condition, in which event it shall be cured forthwith).
Notwithstanding the foregoing, to the extent that such default
cannot be cured within twenty (20) days and TENANT is diligently
continuing to attempt to cure said default, and to the extent that
such default does not involve a hazardous condition, said period
shall be reasonably extended, or
(c) The leasehold interest of TENANT be levied upon under execution or
be attached by process of law, or if TENANT abandons the PREMISES,
or
(d) Bankruptcy or insolvency of TENANT, then in any such event,
LANDLORD, besides other rights or remedies, it may have, shall have
the immediate right of re-entry and may remove all persons and
property from the PREMISES; such Property may be removed and stored
in any other place in the Building in which the PREMISES are
situated, or in any other place, for the account of and at the
expense and at the risk of TENANT.
TENANT hereby waives all claims for damages which may be caused by the
re-entry with process of law of LANDLORD and taking possession of the PREMISES
or removing or storing the furniture and property as herein provided, and will
save LANDLORD harmless from any loss, costs, or damages occasioned LANDLORD
thereby, and no such re-entry shall be considered or construed to be a forcible
entry.
Should LANDLORD elect to re-enter, as herein provided, or should it
take possession pursuant to legal proceedings or pursuant to any notice provided
for by law; it may either terminate this Lease or it may from time to time,
without terminating this Lease, re-let the PREMISES or any part thereof for such
terms and at such rental or rentals and upon such other terms and conditions as
LANDLORD in its sole discretion may deem advisable, with the right to make
alterations and repairs to the PREMISES.
LANDLORD may elect to apply rentals received by it (i) to the payment
of any indebtedness, other than rent, due hereunder from TENANT to LANDLORD;
(ii) to the payment of any cost of such re-letting including but not limited to
any broker's commissions or fees in connection therewith; (iii) to the payment
of the cost of any alterations and repairs to the PREMISES; (iv) to the payment
of rent due and unpaid hereunder; and the residue, if any, shall be held by
LANDLORD and applied in payment of future rent as the same may become due and
payable hereunder. Should such rentals received from such re-letting after
application by LANDLORD to the payments described in foregoing clauses (i)
through (iv) during any month be less than that agreed to be paid during that
month by TENANT hereunder, then TENANT
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shall pay such deficiency to LANDLORD. Such deficiency shall be calculated and
paid monthly on demand by LANDLORD.
In lieu of electing to receive and apply rentals as provided in the
immediately preceding paragraph, LANDLORD may elect to receive from TENANT as
and for LANDLORD'S liquidated damages for TENANT'S default, an amount equal to
the entire amount of Base Rent less the fair market rental value of the PREMISES
for the balance of the Term provided for in this Lease for the remainder of the
Term discounted for present value based upon the rate of interest paid for one
(1) year treasury bills, which amount shall be forthwith due and payable by
TENANT upon its being advised of such election by LANDLORD.
No such re-entry or taking possession of the PREMISES by LANDLORD shall
be construed as an election on its part to terminate this Lease unless a written
notice of same is given to TENANT or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any such re-letting
without termination, LANDLORD may at any time thereafter elect to terminate this
Lease for such previous breach.
Notwithstanding anything to the contrary herein contained or any other
rights exercised by LANDLORD hereunder, upon the occurrence of an event of a
monetary or material default by TENANT under the terms of this Lease, rent which
otherwise would be due or would have been due except for any abatement provided
for in this Lease shall be immediately due and payable.
21.
Rules and Regulations
The rules and regulations attached hereto and marked Appendix "B", as
well as such rules and regulations as may be hereafter adopted by LANDLORD for
the safety, care and cleanliness of the PREMISES and the preservation of good
order thereon, are hereby expressly made a part hereof, and TENANT agrees to
obey all such rules and regulations. The violation of any such rules and
regulations by TENANT shall, after notice and expiration of any cure periods
provided for hereunder, be deemed a default under this Lease by TENANT,
affording LANDLORD all those remedies set out in Section 20 hereof. LANDLORD
shall not be responsible to TENANT for the non-performance by any other tenant
or occupant of the Building or any of said rules and regulations. LANDLORD
agrees to uniformly enforce all such rules and regulations.
22.
Non Real Estate Taxes
During the term hereof, TENANT shall pay prior to
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delinquency all taxes assessed against and levied upon fixtures, furnishings,
equipment and all other personal property of TENANT contained in the PREMISES,
and TENANT shall cause said fixtures, furnishing, equipment and other personal
property to be assessed and billed separately from the real property of
LANDLORD. In the event any or all of the TENANT'S fixtures, furnishings,
equipment and other personal property shall be assessed and taxed with the
LANDLORD'S real property, the TENANT shall pay to LANDLORD its share of such
taxes within ten (10) days after delivery to TENANT by LANDLORD of a statement
in writing setting forth the amount of such taxes applicable to the TENANT'S
property.
23.
Eminent Domain
If the Building, or a substantial part thereof or a substantial part of
the PREMISES, shall be lawfully taken or condemned or conveyed in lieu thereof,
(or conveyed under threat of such taking or condemnation), for any public or
quasi-public use or purpose, the term of this Lease shall end upon and not
before the date of the taking of possession by the condemning authority and
without apportionment of the award. TENANT hereby assigns to LANDLORD TENANT'S
interest, if any, in such award and specifically agrees that any such award
shall be the entire property of LANDLORD in which TENANT shall not be entitled
to share. TENANT further waives any right to challenge the right of condemning
authority to proceed with such taking. Current rent shall be apportioned as of
the date of such termination. If any part of the Building other than the
PREMISES or not constituting a substantial part of the PREMISES, shall be so
taken or condemned (or conveyed under threat of such taking or condemnation), or
if the grade of any street adjacent to the Building is changed by any competent
authority and such taking or change of grade makes it necessary or desirable to
substantially remodel or restore the Building, LANDLORD shall have the right
to cancel this Lease upon not less than ninety (90) days notice prior to the
date of cancellation designated in the notice. No money or other consideration
shall be payable by LANDLORD to TENANT for the right of cancellation, and TENANT
shall have no right to share in any condemnation award or in any judgment for
damages or in any proceeds of any sale made under any threat of condemnation or
taking. TENANT shall have the right to separately pursue its own award for
relocation expenses and loss of trade fixtures in the event of such condemnation
proceedings.
24.
Subordination
LANDLORD has heretofore and may hereafter from time to time execute and
deliver mortgages or trust deeds in the nature of a
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mortgage, both referred to herein as "Mortgages" against the Land and Building,
or any interest therein. If requested by the Mortgagee or trustee under any
Mortgage, TENANT will either (a) subordinate its interest in this Lease to said
Mortgages, and to any and all advances made thereunder and to the interest
thereon, and to all renewals, replacements, modifications and extensions
thereof, or (b) make TENANT'S interest in this Lease inferior thereto; and
TENANT will promptly execute and deliver such agreement or agreements as may be
reasonably required by such mortgage or trustee under any Mortgage, provided
however that any such subordination shall provide that so long as TENANT is not
in default hereunder, its tenancy shall not be disturbed.
It is further agreed that (a) if any Mortgage shall be foreclosed (i)
the liability of the mortgagee or trustee thereunder or purchaser at such
foreclosure sale or the liability of a subsequent owner designated as LANDLORD
under this Lease shall exist only so long as such trustee, mortgagee, purchaser
or owner is the owner of the Building and such liability shall not continue or
survive after further transfer of ownership; and (ii) upon request of the
mortgagee or trustee, TENANT will attorn, as TENANT under this Lease, to the
purchaser at any foreclosure sale under any mortgage, and TENANT will execute
such instruments as may be necessary or appropriate to evidence such attornment;
and (b) this Lease may not be modified or amended so as to reduce the rent or
shorten the term provided hereunder, or so as to adversely affect in any other
respect to any material extent the rights of the LANDLORD or TENANT, nor shall
this Lease be canceled or surrendered without the prior written consent, in each
instance of the mortgagee or trustee under any Mortgage. It is understood that
TENANT'S tenancy shall not be disturbed so long as TENANT is not in default
under this Lease. LANDLORD agrees to request a non-disturbance letter from its
existing mortgagee.
TENANT agrees to give any mortgages and/or trust deed holders, by
registered mail, a copy of any notice of default served upon the LANDLORD by
TENANT provided that prior to such notice TENANT has received notice (by way of
service on TENANT of a copy of an assignment of rents and leases, or otherwise)
of the address of such mortgagees and/or trust deed holders. TENANT further
agrees that if LANDLORD shall have failed to cure such default within the time
provided for in this lease, then the mortgagees and/or trust deed holders shall
have an additional thirty (30) days after receipt of notice thereof within which
to cure such default or if such default cannot be cured within that time, then
such additional time as may be necessary, if, within such thirty (30) days, any
mortgagee and/or trust deed holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings, if necessary to effect such cure).
Such period of time shall be extended by any period within which such mortgagee
and/or trust deed holder is prevented from commencing or pursuing such
foreclosure proceedings by reason of
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LANDLORD'S bankruptcy. Until the time allowed as aforesaid for mortgagee and/or
trust deed holder to cure such defaults has expired without cure, TENANT shall
have no right to and shall not terminate this Lease on account of default.
No mortgagee and no person acquiring title to the demised premises by
reason of foreclosure of any mortgage or by conveyance in lieu of foreclosure
shall have any obligation or liability to TENANT on account of any security
deposit unless such mortgagee or title holder shall receive such security
deposit in cash.
25.
Waiver
The waiver of LANDLORD of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition or any subsequent breach of the same or any other term, covenant, or
condition herein contained. The acceptance of rent hereunder shall not be
construed to be a waiver of any breach by TENANT of any term, covenant or
condition of this Lease. It is understood and agreed that the remedies herein
given to LANDLORD shall be cumulative, and the exercise of any one remedy by
LANDLORD shall not be to the exclusion of any other remedy. It is also agreed
that after the service of notice or the commencement of a suit or judgment for
possession of the PREMISES, LANDLORD may collect and receive any monies due, and
the payment of said monies shall not waive or affect said notice, suit or
judgment.
26.
Inability To Perform
This Lease and the obligation of TENANT to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of TENANT
to be performed shall not be affected, impaired or excused, nor shall LANDLORD
at any time be deemed to be in default hereunder because LANDLORD is unable to
fulfill any of its obligations under this Lease or to supply or is delayed in
supplying any service expressly or by implication to be supplied or is unable to
make, or is delayed in making any TENANT improvement, repair, additions,
alterations, or decorations or is unable to supply or is delayed in supplying
any equipment or fixtures if LANDLORD is prevented or delayed from so doing by
reason of strike or labor troubles or any outside cause whatsoever beyond the
reasonable control of LANDLORD, including but not limited to riots and civil
disturbances or energy shortages or governmental preemption in connection with a
national emergency or by reason of any rule, order, or regulation of any
department or subdivision thereof of any government agency or by reason of the
conditions of supply and demand which have been or are affected by war or other
emergency.
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27.
Subrogation
The parties hereto agree to have any and all fire, extended coverage
or any and all material damage insurance which shall be carried pursuant to this
Lease endorsed with a subrogation clause substantially as follows: "This
insurance shall not be invalidated should the insured waive in writing prior to
a loss any or all right of recovery against any party for loss occurring to the
property described herein"; and each party hereto waives all claims for recovery
from the other party for any loss or damage (whether or not such loss or damage
is caused by negligence of the other party and notwithstanding any provision or
provisions contained in this Lease to the contrary) to any of its property
insured under valid and collectible insurance.
28.
Sale By Landlord
In the event of a sale or conveyance by LANDLORD of the Building
containing the PREMISES, the same shall operate to release LANDLORD from any
future liability upon any of the covenants or conditions, expressed or implied,
herein contained in favor of TENANT, and in such event TENANT agrees to look
solely to the responsibility of the successor in interest of LANDLORD in and to
this Lease. If any security deposit has been made by TENANT hereunder, LANDLORD
shall transfer such security deposit to such successor in interest of LANDLORD
and thereupon LANDLORD shall be released from any further obligations hereunder.
This Lease shall not be affected by any such sale, and the TENANT agrees to
attorn to the Purchaser or assignee.
29.
Rights of Landlord To Perform
All covenants and agreements to be performed by tenant under any of the
terms of this Lease shall be performed by TENANT at TENANT'S sole cost and
expense and without any abatement of rent. If TENANT shall fail to pay any sum
of money, other than rent, required to be paid it hereunder, or shall fail to
perform any other act on its part to be performed hereunder, and such failure
shall continue for ten (10) days after notice thereof by LANDLORD, LANDLORD may,
but shall not be obligated so to do, and without waiving or release TENANT from
any obligations of TENANT, make any such payment or perform any such other act
on TENANT'S part to be made or performed as in this Lease provided. All sums so
paid by LANDLORD and all necessary incidental costs together with interest
thereon at the rate set forth in Section 5 of this Lease computed from the date
of such payment by LANDLORD shall be payable to LANDLORD and the LANDLORD
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shall have (in addition to any other right or remedy of LANDLORD) the same
rights and remedies in the event of the non-payment thereof by TENANT as in the
case of default by TENANT in the payment of rent.
30.
Estoppel Certificate
TENANT shall at any time and from time to time upon not less than ten
(10) days' prior written notice from LANDLORD execute, acknowledge and deliver
to LANDLORD a statement in writing certifying that this Lease is unmodified and
in full force and effect (or if modified, stating the nature of the modification
and certifying that this Lease, as so modified, is in full force and effect) and
the dates to which the rental and other charges are paid and acknowledging that
there are not, to TENANT'S knowledge, any uncured defaults on the part of
LANDLORD hereunder or specifying such defaults if any are claimed. It is
expressly understood and agreed that any such statement may be relied upon by
any prospective purchaser or encumbrancer of all or any portion of the real
property of which the PREMISES are a part. TENANT'S failure to deliver such
statement within such time shall be conclusive upon TENANT that this Lease is in
full force and effect, without modification except as may be represented by
LANDLORD, that there are no uncured defaults in LANDLORD'S performance and that
not more than two (2) months' rental has been paid in advance.
31.
Preparation
LANDLORD agrees to cause the PREMISES to be completed in accordance
with the plans, specification and agreements approved by both parties on the
terms, conditions, and provisions as provided in the plans attached hereto in
Appendix "C" which is attached hereto and made a part of this Lease.
32.
Notice
Any notice from LANDLORD to TENANT or from TENANT to LANDLORD may be
served personally, by mail, or by overnight courier. If served by mail, notice
shall be deemed served on the second day after mailing by registered or
certified mail, addressed to TENANT at the PREMISES or to LANDLORD at the place
from time to time established for the payment of rent and a copy thereof shall
until further notice, be served personally or by registered or certified mail to
LANDLORD at the address shown on the first page of the Lease.
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33.
Rights Reserved
LANDLORD reserves the following rights, exercisable without notice and
without liability to TENANT for damage or injury to property, person or business
and without effecting an eviction, constructive or actual or disturbance of
TENANT'S use of possession or giving rise to any claim for set-off or abatement
of rent:
(a) To change the Building's name or street address upon sixty (60)
days prior written notice;
(b) To install, affix and maintain any and all signs on the exterior
and interior of the Building;
(c) To designate and approve, prior to installation, all types of
window shades, blinds, drapes, awnings, window ventilators and
other similar equipment and to control all lighting interior or
exterior of the Building;
(d) To retain at all times, and to use in appropriate instances, keys
to all doors within and into the PREMISES. No locks or bolts shall
be altered, changed or added without the prior written consent of
LANDLORD;
(e) Subject to the provisions of paragraph 9.(a), to decorate or to
make repairs, alterations, additions or improvements, whether
structural or otherwise, in and about the Building, or any part
thereof, and for such purpose to enter upon the PREMISES, and
during the continuance of said work to temporarily close doors,
entryways, public spaces, and corridors in the Building and to
interrupt or temporarily suspend Building services and facilities;
(f) To prescribe the location and style of the suite number and
identification sign or lettering for the PREMISES occupied by
TENANT;
(g) To have access for LANDLORD and other tenants of the Building to
mail chutes according to the rules of the United States Post
Office;
(h) To enter the PREMISES at reasonable hours for reasonable purposes,
including inspection and supplying janitorial service or other
service to be provided to TENANT hereunder;
(i) To require all persons entering or leaving the
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Building during such hours as LANDLORD may from time to time
reasonably determine to identify themselves to watchmen by
designation or otherwise, and to establish their right to enter or
leave in accordance with the provisions of Paragraph 19 hereof.
LANDLORD shall not be liable in damages for any error with respect
to admission to or eviction or exclusion from the Building of any
person. In case of fire, invasion, insurrection, mob, riot, civil
disorder, public excitement or other commotion, or threat thereof,
LANDLORD reserves the right to limit or prevent access to the
Building during the continuance of the same, shut down elevator
service, activate elevator emergency controls, or otherwise take
such action or preventive measures deemed necessary by LANDLORD for
the safety of the tenants or other occupants of the Building or the
protection of the Building and the property in the Building. TENANT
agrees to cooperate in any reasonable safety program developed by
LANDLORD;
(j) To control and prevent access to common areas and other non-general
public areas pursuant to Appendix "B" attached to this Lease;
(k) From time to time to make and adopt such reasonable rules and
regulations, in addition to or other than or by way of amendment or
modification of the rules and regulations contained in Appendix "B"
attached to this Lease or other sections of this Lease, for the
protection and welfare of the Building and its tenants and
occupants, as the LANDLORD may determine, and the TENANT agrees to
abide by all such rules and regulations;
(l) To have and retain a paramount title to the PREMISES free and clear
of any act of TENANT;
(m) To grant to anyone that exclusive right to conduct any business or
render any services in the Building;
(n) To approve the weight, size and location of safes and other heavy
equipment and articles in and about the PREMISES and the Building,
and to require all such items and furniture to be moved into and
out of the Building and the PREMISES only at such times and in
such manner as LANDLORD shall direct in writing. Movements of
TENANT'S property into or out of the Building and within the
Building are entirely at the risk and responsibility of TENANT and
LANDLORD reserves the right to require permits before allowing any
such property to be moved into or out of the building.
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34.
Real Estate Broker
TENANT represents that TENANT has dealt directly with and only with
FRAIN, CAMINS & SWARTCHILD and CB COMMERCIAL as brokers in connection with this
Lease and agrees to indemnify and hold LANDLORD harmless from all claims or
demands of any other broker or brokers for any commission alleged to be due such
broker or brokers in connection with its participating in the negotiation with
TENANT of this Lease.
35.
Miscellaneous Provisions
(a) The term "OFFICE" or "OFFICES" wherever used in this Lease, shall
not be construed to mean or permit the PREMISES to be used as a
store or stores, for the sale or display, at any time, of goods,
wares, or merchandise of any kind, or as a restaurant, shop, booth,
bootblack, or other stand, barbershop, or for other similar
purposes or for manufacturing. The words "RE-ENTER" or "RE-ENTRY"
as used in this Lease, are not restricted to their technical legal
meaning. The term "LANDLORD" as used in this Lease means only the
LANDLORD from time to time and upon conveying its interest, such
conveying LANDLORD shall be relieved from any further obligation or
liability.
(b) Time is of the essence of this Lease and each and all of its
provisions.
(c) Submission of this instrument for examination or signature by
TENANT does not constitute a reservation or offer or option for
lease, and it is not effective as a lease or otherwise so as to
incur the least inconvenience to TENANT.
(d) The invalidity or unenforceability of any provision hereof shall
not affect or impair any other provisions.
(e) This Lease shall be governed by and construed pursuant to the laws
of the State of Illinois.
(f) Should any mortgage require a modification of this Lease, which
modifications will not bring about any increased cost or expense to
TENANT or in any other way materially change the rights and
obligations of
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TENANT hereunder, then and in such event, TENANT agrees that this
Lease may be so modified.
(g) TENANT agrees to provide to LANDLORD, upon request, (but not more
than once annually) a current financial statement of TENANT
certified by an authorized representative of TENANT to be true and
correct, and further agrees to provide any other financial
information reasonably requested by LANDLORD.
(h) All rights and remedies of LANDLORD under this Lease, or that may
be provided by law, may be exercised by LANDLORD in its own name
individually, or in its name by its agent, and all legal
proceedings for the enforcement of any such rights or remedies,
including distress for rent, forcible detainer, and any other legal
or equitable proceedings, may be commenced and prosecuted to final
judgment and execution by LANDLORD in its own name individually or
in its name or by its agent. TENANT conclusively agrees that
LANDLORD has full power and authority to execute this Lease and to
make and perform the agreements herein contained and TENANT
expressly stipulates that any rights or remedies available to
LANDLORD either by the provision of this Lease or otherwise may be
enforced by LANDLORD in its own name individually or in its name by
agent or principal.
(i) Any of the covenants and conditions of this Lease shall survive
termination of the Lease.
(j) The marginal headings and titles to the paragraphs of this Lease
are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.
(k) If TENANT is a corporation and if at any time during the Lease Term
the person or persons who owns a majority of its voting shares at
the time of the execution of this Lease cease to own a majority of
such shares (except as a result of transfers by gift, bequest or
inheritance) TENANT shall so notify LANDLORD and LANDLORD may
terminate this Lease by notice to TENANT given within ninety (90)
days thereafter. This Section shall not apply whenever TENANT is a
corporation, the outstanding voting stock of which is listed on a
recognized security exchange or if at least ninety (90%) percent of
its voting stock is owned by another corporation, the voting stock
of which is so listed. For the purposes of this Section, stock
ownership shall be determined in accordance with the principles set
forth in Section
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544 of the Internal Revenue Code of 1954 as the same existed on
August 16, 1954, and the term "voting stock" shall refer to shares
of stock regularly entitled to vote for the election of directors
of the corporation. Notwithstanding the foregoing in the event of
transfer of control of TENANT, then in lieu hereof the provisions
of Section 14, as in the case of subleases, shall apply.
(1) This Lease includes appendices A, B, C and D which are expressly
made a part of this Lease.
(m) LANDLORD further agrees to purchase at its own cost and expense a
limited golf membership at Wynstone Country Club for the benefit of
TENANT during the term of the Lease which membership shall include
all privileges of a regular golf membership except for weekend or
holiday play. TENANT agrees to be responsible for membership dues
and membership fees associated with such membership during the term
of the Lease.
36.
Tenant-Corporation or Partnership
In case TENANT is a corporation, TENANT represents and warrants that
this Lease has been duly authorized, executed and delivered by and on behalf of
the TENANT and constitutes the valid and binding agreement of the TENANT in
accordance with the terms hereof. In case TENANT is a partnership, TENANT
represents and warrants that all of the persons who are general or managing
partners in said partnership have executed this Lease on behalf of TENANT, or
that this Lease has been executed and delivered pursuant to and in conformity
with a valid and effective authorization therefor by all of the general or
managing partners of such partnership, and is and constitutes the valid and
binding agreement of the partnership and each and every partner therein in
accordance with its terms. Also, it is agreed that each and every present and
future partner in TENANT shall be and remain at all times jointly and
severally liable hereunder and that the death, resignation or withdrawal of any
partner shall not release the liability of such partner under the terms of this
Lease unless and until the LANDLORD shall have consented in writing to such
release.
37.
Successors and Assigns
The covenants and conditions herein contained shall apply to and bind
the respective heirs, successors, Executors,
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administrators, and assigns of the parties hereto. The terms "LANDLORD" and
"TENANT" shall include the successors and assigns of either such party, whether
immediate or remote.
38.
Limited Right of First Offer
So long as TENANT is not in default hereunder, in further consideration
of the within Lease, LANDLORD hereby grants to TENANT a limited right of first
offer to purchase the property commonly as proposed Lot 7 in
Wynstone/Sunningdale Commercial Area II Office Park as depicted on Appendix D
attached hereto and specifically incorporated by reference herein. The parties
acknowledge that LANDLORD is presently in negotiation with the Village of North
Barrington with respect to the subdivision and construction requirements to
develop said property which forms a portion of Phase II of the Office Park at
Wynstone. Upon the recording of the Plat of Wynstone/Sunningdale Commercial Area
II, LANDLORD and TENANT shall have a period of sixty (60) days (the "Negotiation
Period") to enter into good faith negotiations for the sale of Lot 7 to TENANT
on the construction by LANDLORD for a build-to-suit building thereon for
occupancy by TENANT. If LANDLORD and TENANT have not reached agreement on the
sale of Lot 7 prior to the end of the Negotiation Period, LANDLORD shall be
free to sell Lot 7 to a third party. However, LANDLORD may not sell Lot 7 to a
third party on terms materially more favorable to the third party purchaser than
the terms offered to TENANT during the Negotiation Period, unless prior to said
sale, LANDLORD gives TENANT notice of the proposed terms of the sale to the
third party purchaser. TENANT shall then have fifteen (15) days to accept such
terms and conditions and thereafter proceed to purchase Lot 7 pursuant to the
terms of such notice and if TENANT fails to elect to do so in writing within
said fifteen (15) days, LANDLORD shall be free to sell Lot 7 to a third party on
such terms.
IN WITNESS WHEREOF, the LANDLORD and TENANT have executed this Lease
the day and year first above written.
LANDLORD:
SUNNINGDALE PARTNERS, INC.,
an Illinois corporation,
BY:
-----------------------------------------
ATTEST:
-------------------------------------
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<PAGE> 57
TENANT:
THE WAMBERG ORGANIZATION, INC., a
corporation,
BY: /s/ W. T. WAMBERG
-----------------------------------------
ATTEST: [ILLEGIBLE]
-------------------------------------
<PAGE> 58
APPENDIX "B"
RULES AND REGULATIONS
ATTACHED TO AND MADE PART OF THIS LEASE
1. TENANT shall not place anything or allow anything to be placed near
the glass of any window, door, partition or wall which may in LANDLORD'S
judgment appear unsightly from outside the premises of the Building. LANDLORD
shall furnish and install building standard window blinds at all exterior
windows.
2. The building directory located in the Building Lobby as provided by
LANDLORD shall be available to TENANT solely to display its name and location in
the Building which display shall be as directed by LANDLORD.
3. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by TENANT or used by TENANT for any purpose
other than for ingress to and egress from the Premises. The halls, passages,
exits, entrances, elevators, stairways, balconies and roof are not for the use
of the general public and the LANDLORD shall in all cases retain the right to
control and prevent access thereto by all persons whose presence in the judgment
of LANDLORD, reasonably exercised, shall be prejudicial to the safety,
character, reputation and interests of the Building. Neither TENANT nor any
employees or invitees of any TENANT shall go upon the roof of the building.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein and to the
extent caused by TENANT or its employees or invitees, the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by TENANT.
5. TENANT shall not cause any unnecessary janitorial labor or services
by reason of TENANT'S carelessness or indifference in the preservation of good
order and cleanliness.
6. The Premises shall not be used for lodging.
7. TENANT shall not bring upon, use or keep in the Premises or the
Building any kerosene gasoline or inflammable or combustible fluid or material,
or use any method of heating or air conditioning other than that supplied by
LANDLORD.
8. LANDLORD shall have sole power to direct electricians as to where
and how telephone and other wires are to be introduced. No
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boring or cutting for wires will be allowed without the consent of LANDLORD. The
location of telephone, call boxes and other office equipment affixed to the
Premises shall be subject to the approval of LANDLORD.
9. Upon the termination of the tenancy, TENANT shall deliver to the
LANDLORD all keys and passes for offices, rooms, parking lot and toilet rooms
which shall have been furnished TENANT. In the event of loss of any keys so
furnished, TENANT shall pay the LANDLORD therefor. TENANT shall not make or
cause to be made any such keys and shall order all such keys solely from
LANDLORD and shall pay LANDLORD for any additional such keys over and above the
two sets of keys furnished by LANDLORD.
10. TENANT shall not install linoleum, tile, carpet or other floor
coverings so that the same shall be affixed to the floor of the Premises in
any manner except as approved by the LANDLORD.
11. No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the elevators, except between
such hours and in such elevators as shall be designated by the LANDLORD.
12. TENANT shall cause all doors to the Premises to be closed and
securely locked before leaving the Building at the end of the day.
13. Without the prior written consent of LANDLORD, TENANT shall not use
the name of the Building or any picture of the Building in connection with or in
promoting or advertising the business of TENANT except TENANT may use the
address of the Building as the address of its business.
14. TENANT shall not waste heat or air-conditioning, and shall
cooperate fully with LANDLORD to assure the most effective operation of the
Building's heating and air-conditioning, and shall refrain from attempting to
adjust any controls other than room thermostats installed for TENANT'S use.
TENANT shall keep corridor doors closed.
15. TENANT assumes full responsibility for protecting the Premises from
theft, robbery and pilferage, which includes keeping doors locked except if
unlocked by LANDLORD and other means of entry to premises closed and secured.
16. Peddlers, solicitors and beggars shall be reported to the office of
the Building or as LANDLORD otherwise requests.
17. TENANT shall not advertise the business, profession or activities
of TENANT conducted in the Building in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities.
- 34 -
<PAGE> 60
18. TENANT shall allow no animals or pets to be brought or to remain in
the Building or any part thereof.
19. TENANT acknowledges that Building security problems may occur which
may require the employment of extreme security measures in the day-to-day
operation of the Building. Accordingly:
(a) LANDLORD may at any time, or from time to time, or for
regularly scheduled time periods, as deemed advisable by
LANDLORD and/or its agents, in their sole discretion,
require that persons entering or leaving the Building
identify themselves to watchmen or other employees
designated by LANDLORD by registration, identification or
otherwise.
(b) LANDLORD may at any time, or from time to time or for
regularly scheduled time periods, as deemed advisable by
LANDLORD and/or its agents, in their sole discretion, employ
such other security measures as but not limited to the
search of all persons, parcels, packages, etc., entering and
leaving the Building, the evacuation of the Building and the
denial of access of any person to the Building.
(c) TENANT hereby assents to the exercise of the above
discretion of LANDLORD and its agents, whether done acting
under reasonable belief of cause or for drills, regardless
of whether or not such action shall in fact be warranted and
regardless of whether any such action is applied uniformly
or as aimed at specific persons whose conduct is deemed
suspicious.
(d) The exercise of such security measures and the resulting
interruption of service and cessation or loss of TENANT'S
business, if any, shall never be deemed an eviction or
disturbance of TENANT'S use and possession of the Premises,
or any part thereof, or render LANDLORD liable to TENANT for
damages or relieve TENANT from TENANT'S obligations under
this Lease.
(e) TENANT agrees that it and its employees will cooperate fully
with Building employees in the implementation of any and all
security procedures.
20. In the event carpeting is furnished by LANDLORD, TENANT will be
fully responsible for and upon LANDLORD'S request will pay for any damage to
carpeting caused by lack of protective mats under desk chairs or equipment or
any other abnormal puncture and wearing of carpet.
21. To the extent it does not require capital improvements,
- 35 -
<PAGE> 61
TENANT shall comply with all applicable laws, ordinances, governmental orders
or regulations and applicable orders or directions from any public Office or
body having jurisdiction, with respect to the Premises and the use or occupancy
thereof. TENANT shall not make or permit any use of the Premises which directly
or indirectly is forbidden by law, ordinances, governmental regulations or order
or direction of applicable public authority, or which may be dangerous to person
or property.
22. TENANT shall not use or permit to be brought into the Premises or
the Building any flammable oils or fluids, or any explosive or other articles
deemed hazardous to persons or property, or do or permit to be done any act or
thing which will invalidate or which if brought in would be in conflict with any
insurance policy covering the Building or its operation, or the Premises, or any
part of either, and will not do or permit to be done anything in or upon the
Premises, or bring or keep anything therein, which shall not comply with all
rules, orders, regulations or requirements of any organization, bureau,
department or body having jurisdiction with respect thereto (and TENANT shall at
all times comply with all such rules, orders, regulations or requirements), or
which shall increase the rate of insurance on the Building, its appurtenances,
contents or operation.
23. If TENANT desires signal, communication, alarm or other utility or
similar service connections installed or changed, TENANT shall not install or
change the same without the approval of LANDLORD and then only under direction
of LANDLORD and at TENANT'S expense. TENANT shall not install in the Premises
any equipment which requires a substantial amount of electrical current without
the advance written consent of the LANDLORD and TENANT shall ascertain from the
LANDLORD the maximum amount of load or demand for or use of electrical
current which can safely be permitted in the Premises, taking into account the
capacity of the electric wiring in the Building and the Premises and the needs
of other tenants of the Building, and shall not in any event connect a greater
load than such safe capacity.
24. Service requirements of TENANT will be attended to only upon
application to management of the Building. Employees of LANDLORD shall not
perform any work or do anything outside of their regular duties unless under
special instruction from LANDLORD.
25. No TENANT shall obtain for use upon the premises ice, drinking
water, towel and other similar services on the Premises, except from persons
authorized by the LANDLORD and at the hours and under regulations fixed by the
LANDLORD.
26. LANDLORD reserves the right to exclude or expel from the Building
any person who, in the judgment of LANDLORD is intoxicated or under the
influence of liquor or drugs or who shall in any manner do any act in violation
of any of the rules and regulations of the building.
- 36 -
<PAGE> 62
27. No vending machines of any description shall be installed,
maintained or operated in the Premises without the written consent of LANDLORD.
28. TENANT shall not (i) install or operate any internal combustion
engine, boiler, machinery, refrigerating, heating or air-conditioning apparatus
in or about the Premises, (ii) carry on any mechanical business in or about the
Premises without the written permission of LANDLORD, (iii) exhibit, sell or
offer for sale, use, rent or exchange in the Premises or Building any article,
thing or service except those ordinarily embraced within the permitted use of
the Premises specified in this Lease, (iv) use the Premises for housing, lodging
or sleeping purposes, (v) permit preparation or warming of food in the Premises
or permit food to be brought into the Premises for consumption therein (warming
of coffee and individual lunches of employees excepted) except by express
permission of LANDLORD, (vi) place any radio or television antennae on the roof
or on or in any part of the inside or outside of the Building other than the
inside of the Premises, (vii) operate or permit to be operated any musical or
sound producing instrument or device inside or outside the Premises which may be
heard outside the Premises, (viii) use any illumination or power for the
operation of any equipment or device other than electricity, (ix) operate any
electrical device from which may emanate electrical waves which may interfere
with or impair radio or television broadcasting or reception from or in the
Building or elsewhere, (x) bring or permit to be in the Building any bicycle or
other vehicle, or dog (except in the company of a blind person) or other animal
or bird, (xi) make or permit any objectionable noise or odor to emanate from the
Premises, (xii) disturb, solicit or canvas any occupant of the Building, (xiii)
do anything in or about the Premises tending to create or maintain a nuisance or
do any act tending to injure the reputation of the Building, or (xiv) throw or
permit to be thrown or dropped any article from any window or other opening in
the Building.
29. From time to time LANDLORD reserves the right to amend and modify
these rules and regulations.
- 37 -
<PAGE> 63
APPENDIX "C"
This Work Agreement is executed simultaneously with the foregoing
Lease (the "Lease") wherein TENANT is leasing certain space in 102 So. Wynstone
Park Drive, North Barrington, Illinois.
LANDLORD and TENANT named in said Lease agree as follows:
1. TENANT agrees to devote such time in consultation with LANDLORD and
LANDLORD'S architect (the "Architect") and whomever else LANDLORD shall
designate and to furnish such information relative to the Premises, all as
LANDLORD may deem necessary to enable LANDLORD to complete prior to the
Commencement Date the Premises in accordance with TENANT'S requirements as shown
in the plans attached to the within Appendix "C" and made a part hereof ("The
Work").
2. All work to be done in the Premises, including without limitation,
The Work, shall be subject to approval of LANDLORD and no work shall be
undertaken in the Premises until such approval is given in writing.
3. Except as hereinafter set forth, LANDLORD has no obligation to
perform or pay for any work to the Premises other than The Work. If TENANT
wishes other work ("Additional Work") to the Premises in addition to The Work,
TENANT shall deliver to LANDLORD for its approval final plans and specifications
for the Additional Work. Such plans (including any required changes to
LANDLORD'S Plan) for the Additional Work. Such plans (including any required
changes to LANDLORD'S Plan) for the Additional Work shall be prepared at
TENANT'S cost and expense. Provided TENANT approved the cost thereof, LANDLORD
agrees to cause the Additional Work to be constructed by LANDLORD'S contractors
which construction shall be at TENANT'S cost and expense. LANDLORD shall furnish
TENANT with written estimates of the cost of the Additional Work within fifteen
(15) days after receipt by LANDLORD of the plans for the Additional Work. If
TENANT shall fail to approve in writing such estimates within seven (7) days
from receipt thereof, TENANT shall be deemed to have abandoned its request for
Additional Work, and LANDLORD shall not be authorized to proceed with such
Additional Work. If TENANT approves in writing such estimates in the form
supplied by LANDLORD, TENANT shall pay LANDLORD the cost of such Additional Work
together with ten (10%) percent of such cost for LANDLORD'S overhead and
supervision all as and when billed therefor (whether in one or more installments
are required by LANDLORD). The sums due hereunder shall be deemed to be rent and
treated as such in accordance with the terms and provisions of this Lease and
shall be due and payable on invoice. If TENANT does not authorize LANDLORD to do
the Additional Work, the improvement to the Premises shall be limited to The
Work.
4. Notwithstanding the date provided in the Lease for commencement of
the term thereof, TENANT'S obligation to pay rent
- 38 -
<PAGE> 64
thereunder shall not commence until LANDLORD shall have substantially completed
all The Work and, if agreed to be performed by LANDLORD, the Additional Work;
provided, however, if LANDLORD shall be delayed in substantially completing the
Premises as a result of
(a) TENANT'S failure to furnish the Plans or the plans for the
Additional Work as required hereby, or
(b) TENANT'S failure to approve cost estimates for Additional Work
within the time specified in paragraph 3 hereof, or
(c) TENANT'S request for materials, finishes or installations
other than required by The Work, or
(d) TENANT'S changes in The Work or the Plans or the plans for
Additional Work (notwithstanding LANDLORD'S approval of any such changes), or
(e) Any other act or omission by TENANT or its agents, the
commencement of the term of the Lease and the payment of rent thereunder shall
not be affected or deferred on account of such delay.
5. LANDLORD, at LANDLORD'S discretion, may permit TENANT and TENANT'S
agents to enter the Premises prior to the date specified as the commencement of
the term of the Lease in order that TENANT may make the Premises ready for
TENANT'S use and occupancy. If LANDLORD permits such entry prior to the
commencement of the term, such permission shall constitute a license only and
not a lease and such license shall be conditioned upon TENANT working in harmony
and not interfering with LANDLORD and LANDLORD'S agents, contractors, workmen,
mechanics and suppliers in doing The Work or Additional Work, if any, or
LANDLORD'S work in the Building or with other tenants and occupants of the
Building. LANDLORD shall have the right to withdraw such license for any reason
upon twenty-four (24) hours' written notice to TENANT. TENANT agrees that
LANDLORD shall not be liable in any way for any injury, loss or damage which may
occur to any TENANT'S preparations of the Premises or to properties placed
therein prior to the commencement of the term of the Lease, the same being at
TENANT'S sole risk.
6. LANDLORD agrees to provide at its sole cost and expense, all
Building Standard work as described in the attached schedule thereof. It is
further agreed that LANDLORD, at its expense, shall provide five fixed glass
(full light) panels and wood frames with full light doors and the same level of
finish, including a reception desk in the reception area as similar to that
presently used by ADVO. LANDLORD further agrees that at its sole cost and
expense to provide a full light door with two full light side panels in the main
entrance and an exercise room of approximately 10' x 13' with powder room and 3'
x 4' shower room inside as well as a kitchen including cabinetry and appliances
of the same or similar quality to that provided to ADVO.
- 39 -
<PAGE> 65
7. LANDLORD shall further provide a warranty for the period of one (1)
year from completion that all such improvements have been installed in a good
and workmanlike manner.
LANDLORD:
SUNNINGDALE PARTNERS, INC., an
Illinois corporation,
BY:
---------------------------------------
ATTEST:
-----------------------------------
TENANT:
THE WAMBERG ORGANIZATION, INC., a
corporation,
BY: /s/ [ILLEGIBLE]
---------------------------------------
ATTEST: /s/ [ILLEGIBLE]
-----------------------------------
- 40 -
<PAGE> 66
APPENDIX "A"
THE WAMBERG ORGANIZATION, INC,
[FLOOR PLAN]
<PAGE> 67
APPENDIX D
JANITORIAL CLEANING SPECIFICATIONS
102 S. WYNSTONE PARK DRIVE
NORTH BARRINGTON, IL
GENERAL CLEANING
1. Dust and sweep flooring.
2. Vacuum carpeted aisles 4 nights per week. Heavy vacuum once each week
moving light furniture.
3. Sweep stairways.
4. Empty and clean, as needed, wastepaper baskets, ash trays,
receptacles, etc.
5. Remove wastepaper, waste materials, and ash trays and remove to
dumpster.
6. Dust furniture, fixtures, desk equipment, telephones and window sills.
7. Dust baseboards, chair rails, louvers, pictures, charts, doors, etc.
within reach.
8. Remove all finger marks.
9. Wash drinking fountains and coolers.
10. Keep locker and service closet rooms clean and orderly.
11. Scrub flooring in entrance areas and public areas.
12. Clean floor mats as needed.
13. Dust and rub down mail chutes and mail depositories.
14. Spot clean entrance doors.
NIGHTLY CLEANING OF LAVATORIES
1. Sweep and wash flooring.
2. Wash and polish mirrors, shelves, lighting fixtures, etc., including
flushmeters, piping and toilet seat hinges.
3. Wash both sides of toilet seats, wash basins, bowls and urinals.
4. Dust partitions, tile walls, dispensers, doors and receptacles.
5. Empty and clean towel and sanitary disposal receptacles.
6. Remove wastepaper and refuse to a designated area.
7. Fill toilet tissue, soap and towel dispensers.
PERIODIC CLEANING OF LAVATORIES
1. Scrub floors.
2. Wash partitions, tile walls, and enamel surfaces.
<PAGE> 68
PERIODIC CLEANING
1. Clean lights, globes and fixtures once a month.
2. Dust walls once a month.
3. On multiple tenancy floors, stone, ceramic tile, marble and terrazzo
flooring in elevator foyers and corridors will be washed once each
week. Resilient flooring will be spray buffed once each week.
4. Spot clean carpets in public corridors once a week and shampoo two
times a year.
5. On multiple tenancy floors, elevator, stairway, office and utility
doors will be washed with clean water or cleaner once a month.
6. On multiple tenancy floors, dust and clean electric fixtures and any
other fittings in public corridors once a month.
7. Wash all interior and exterior glass two times a year at an additional
cost.
8. Wash or vacuum stairways periodically.
9. All unoccupied areas not under construction shall be vacuumed or swept
periodically as directed by building manager.
SEMI-ANNUAL CLEANING
1. Dust pictures, frames, charts, graphs and similar wall hangings not
reached in nightly cleaning.
2. Dust exterior of lighting fixtures.
3. Dust overhead pipes, sprinklers, etc.
4. Dust venetian blinds.
5. Dust window frames.
FLOOR MAINTENANCE
1. Wash and apply 1 coat of approved floor finish to composition flooring
once every six months.
2. Wash and wipe baseboards during the floor maintenance operation.
<PAGE> 69
ATTACHMENT A
BUILDING STANDARDS
THE OFFICE PARK AT WYNSTONE
NORTH BARRINGTON, IL
Except as otherwise provided in this Lease and the Tenant Work Agreement,
Landlord shall supply and install, pursuant to Tenant's final space plans and
Tenant's Building Standard Improvement allowance, the following interior
construction improvements:
1. Partitions:
a. Corridor and Demising -- 3-5/8" studs at 2'-0" o.c.
with 2 layers of 5/8" gypsum wallboard for 1 hour U.L.
rating with sound attenuation blanket insulation between
studs to ceiling above for multi-tenant floors.
b. Interior -- 3-5/8" studs at 2'-0" with 5/8" gypsum
wallboard each face. Allowance of one linear foot for each
15 rentable square feet.
2. Doors:
a. Entrance -- Six (6) panel wood doors 6'8" in height and
frame with 3-1/2" casings painted to match walls. Polished
brass lever handle hardware and lockset. Allowance of one
assembly per tenant.
b. Interior -- Six (6) panel wood doors 6'8" in height and
frames with 3-1/2" casings painted to match walls.
Polished brass lever handle hardware and lockset. Allowance
of one assembly per 400 rentable square feet; standard
interior partitioning.
3. Electrical:
a. Lighting -- 2'x4' lay-in fluorescent light fixtures with
parabolic louvers. Allowance of one fixture per 120 rentable
square feet.
b. Light Switches -- Upon mutual agreement by June 30, 1992.
C. Duplex Wall Receptacles -- Upon mutual agreement by June 30,
1992.
d. Telephone Wall Outlet -- Upon mutual agreement by June 30,
1992.
1
<PAGE> 70
4. Ceilings
2' x 2' exposed tee grid with layin tile.
5. Window Covering - Blinds:
1" wide tapeless narrow slat horizontal venetian blinds in
building standard color at each exterior window.
6. Floors:
a. Carpet - Wall-to-wall carpet with direct gluedown
installation in building standard material and colors,
throughout demised area. Tenant may substitute to building
standard vinyl tile and base. Allowance of $1.50 per
rentable square foot.
b. Base - 4-1/2" wood baseboard in building standard color on
all partition walls.
7. Finishes:
a. Paint - All building standard partitioning and door frames
to receive two coats of paint in building standard colors
and material. Application of one color per area.
8. HVAC - Air Cleaner and Humidification:
Install a complete multiple zone commercial grade heating and
air conditioning system per the latest ASHRAE standards. Design
parameters to be 95 degree dry bulb to 70 degree dry bulb
for cooling and -10 degree dry bulb to 75 degree dry bulb for
heating.
Heating equipment will be a minimum of 90% efficient and cooling
equipment to have a minimum of 9 S.E.E.R.
High efficiency air cleaners will be provided for maximum air
purification.
Main systems control will be through the use of programmable set
back thermostats.
Systems shall be designed to provide individual tenant control as
well as individual tenant utility metering to the maximum extent
feasible.
Exhaust systems will be provided in toilet rooms, lunch room,
main office area and conference room. Exhaust systems will
include variable speed control.
2
<PAGE> 71
All ductwork will be fabricated per the latest SMACNA standards
and completely balanced for maximum comfort.
9. Life Safety:
a. Fire Alarm and Detection System - fire horns in public
areas and stairs. Area smoke detectors in tenant areas,
lobbies, stairs and mechanical spaces. Manual pull stations
at all means of egress.
b. Emergency Lighting:
Building standard light fixtures on emergency circuits as
required by code.
c. Exit Signs:
Building standard exit signs installed as required by code.
d. Fire Extinguishers:
As required by local code.
10. Signage:
a. Entrance - one building standard sign provided adjacent to
main entrance door.
b. Exterior - one building standard office park sign provided
adjacent to main entrance door on first floor West of
sidewalk.
3
<PAGE> 72
APPENDIX "A"
THE WAMBERG ORGANIZATION, INC.
(LOSS FACTOR 1.115)
[FLOOR PLAN]
<PAGE> 73
ESTOPPEL CERTIFICATE
The undersigned Sunningdale Partners, Inc., an Illinois corporation
("Landlord") and The Wamberg Organization, Inc., an Illinois corporation
("Sublessor") hereby certify to Clark/Bardes, Inc. ("Sublessee") as follows:
1. Landlord and Sublessor are parties to the following documents:
a. Third Amendment to Office Lease dated February 21, 1998;
b. Amendment to Lease dated December 5, 1996;
c. Second Amendment to Lease dated August 26, 1994;
d. Amendment to Lease dated December 30, 1993;
e. Lease dated June 30, 1992;
(items a. through e. being hereafter referred to as the "Lease").
2. The Lease pertains to office space located in the office building know
as the "Advo" Building, 102 South Wynstone Park Drive, North
Barrington, IL 60010 (the "Building"). The foregoing documents are
complete and embody all agreements and understandings between Landlord
and Sublessor pertaining to the Building. Said Lease is in full force
and effect and has not been further modified or amended.
3. The Premises that are currently subject to the terms and condition of
the Lease consist of approximately 11,085 square feet of space in the
Building, of which 9,391 square feet (the "Subleased Premises") are
located on the first floor and 1,694 square feet are located on the
ground floor.
4. The term of the Lease with respect to the entire Premises extends
until February 20, 2009.
5. Base Rent payable under the Lease for the entire Premises is currently
$177,360.00 annually and $14,780.00 monthly.
6. Base Rent payable under the Lease for the Subleased Premises is
$150,256.00 annually and $12,521.33 monthly.
7. Tenant's Proportionate Share of "Operating Expenses" as defined in the
Lease is 58.76% for the entire Premises and 49.78% for the Subleased
Premises.
8. All monthly rent has been paid in full through August 31, 1999.
<PAGE> 74
9. The estimated payments for Operating Expenses have been paid in full
through August 31, 1999.
10. The annual reconciliation of actual Operating Expenses for 1998 has
been completed and all payments associated therewith have been
settled. Actual Operating Expenses for 1998, including real estate
taxes, were $6.77 per square foot.
11. The annual reconciliation of Real Estate Taxes for taxes payable in
1998 has been completed and all payments associated therewith have
been settled.
12. There is no Security Deposit held by Landlord under the Lease.
13. To the best knowledge of each of the undersigned, no event has
occurred or circumstance currently exists which, with the giving of
notice or passage of time, would constitute a default or event of
default by either Landlord or Tenant under the Lease.
14. The undersigned acknowledge and agree that Sublessee may rely on the
certifications made in this Estoppel in consummating a sublease of the
Lease.
IN WITNESS WHEREOF this Estoppel is executed and delivered as of the ____
day of September, 1999.
LANDLORD: TENANT/SUBLESSOR:
SUNNINGDALE PARTNERS, INC., an THE WAMBERG ORGANIZATION, INC.
Illinois corporation
By: /s/ W. T. WAMBERG By: /s/ W. T. WAMBERG
---------------------------- --------------------------------
Name: W. T. WAMBERG Name: W. T. WAMBERG
----------------------- ---------------------------
Title: President Title: President
---------------------- --------------------------
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED STATEMENT OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER
30, 1999 AND CONDENSED BALANCE SHEET (UNAUDITED) AS OF SEPTEMBER 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,405
<SECURITIES> 0
<RECEIVABLES> 10,045
<ALLOWANCES> (394)
<INVENTORY> 0
<CURRENT-ASSETS> 14,358
<PP&E> 8,813
<DEPRECIATION> (2,314)
<TOTAL-ASSETS> 117,352
<CURRENT-LIABILITIES> 21,186
<BONDS> 0
0
0
<COMMON> 96
<OTHER-SE> 55,283
<TOTAL-LIABILITY-AND-EQUITY> 117,352
<SALES> 25,654
<TOTAL-REVENUES> 25,654
<CGS> 0
<TOTAL-COSTS> 23,024
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 923
<INCOME-PRETAX> 1,840
<INCOME-TAX> 804
<INCOME-CONTINUING> 1,036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,036
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED STATEMENT OF INCOME (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1999 AND CONDENSED BALANCE SHEET (UNAUDITED) AS OF SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,405
<SECURITIES> 0
<RECEIVABLES> 10,045
<ALLOWANCES> (394)
<INVENTORY> 0
<CURRENT-ASSETS> 14,358
<PP&E> 8,813
<DEPRECIATION> (2,314)
<TOTAL-ASSETS> 117,352
<CURRENT-LIABILITIES> 21,186
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0
0
<COMMON> 96
<OTHER-SE> 55,283
<TOTAL-LIABILITY-AND-EQUITY> 117,352
<SALES> 79,430
<TOTAL-REVENUES> 79,430
<CGS> 0
<TOTAL-COSTS> 70,469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,500
<INCOME-PRETAX> 6,752
<INCOME-TAX> 2,809
<INCOME-CONTINUING> 3,943
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<EPS-BASIC> 0.44
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</TABLE>
