U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 0-10701.
PHYMED, INC.
(Name of small business issuer in its charter)
Tatonka Energy, Inc.
(former name), if changed since last report
Oklahoma, USA 73-1457920
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9603 White Rock Trail, Suite 100
Dallas, Texas 75238
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (214) 340-9912
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which
registered None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value of $.001 per Share
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 No X
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $ 3,330,411.
-----------
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common equity
as of a specified date within the past 60 days: $4,391,8450 based on the average
of the bid and asked price on February 22, 2000.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 8,783,697 shares of Common
Stock, $.01 par value, as of December 31, 1999.
Transitional Small Business Disclosure Format (check one): Yes No X
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<PAGE>
TABLE OF CONTENTS
PART I
Item 1. Description of Business 4
Item 2. Description of Property 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis or Plan of Operation 10
Item 7. Financial Statements 13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; 14
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation 16
Item 11. Security Ownership of Certain Beneficial Owners and Management 20
Item 12. Certain Relationships and Related Transactions 22
Item 13. Exhibits and Reports on Form 8-K
Signature Page
Index to Financial Statements
<PAGE>
PART I
Item 1. Description of Business
Business Development
The Registrant was organized under the laws of British Columbia,
Canada, on March 12, 1980, under the name of Sooner Energy Corp.
("Sooner-British Columbia"). On June 1, 1994, at an extraordinary general
meeting of members of Sooner-British Columbia, a special resolution was passed
for the continuance of the Registrant as a Wyoming corporation in the United
States. On such date, Sooner-British Columbia was then "continued" as a Wyoming
corporation with the same name ("Sooner-Wyoming") and was immediately merged
into a wholly owned subsidiary of Sooner-Wyoming, which had been incorporated in
Oklahoma under the name of Tatonka Energy, Inc. ("Tatonka"). Tatonka was the
surviving corporation in the merger and is referred to in this report as
"Tatonka" or the "Registrant."
On April 3, 1998, the Registrant acquired 80% of the outstanding common
shares of Phy.Med. Inc., a Texas corporation ("PHYMED - Dallas"), in a reverse
triangular merger. In connection with the merger the Registrant issued and
George C. Barker, individually, and as Trustee of the Phy.Med., Inc. Employee
Stock Ownership Plan (the "ESOP"), acquired from the Registrant, in the
aggregate, immediate ownership of and the right to receive an aggregate of
68,915,409 authorized but unissued shares of Common Stock, $.001 par value, of
the Registrant, as then constituted, which, if all such shares were outstanding,
would constitute 87.9% of the Registrant's then outstanding 78,430,965 shares of
Common Stock.
The Registrant completed a 1-for-10 reverse stock split that became
effective shortly after the annual meeting of shareholders held February 19,
1999. Upon the effectiveness of such reverse split, Mr. Barker and the ESOP own
6,941,540 shares of the 7,843,097 shares, $.01 par value, outstanding (7,933,190
shares on a fully diluted basis). The Registrant will continue to have
50,000,000 shares of Common Stock authorized. At the date of the merger Tatonka
had only nominal assets. Therefore, the merger has been accounted for as a
recapitalization of PHYMED - Dallas. Accordingly, the financial statements of
the Registrant included herein are those of PHYMED - Dallas.
The Registrant's registered office for service in Oklahoma is 1601 N.W.
Expressway, Suite 1910, Oklahoma City, Oklahoma 73118. The executive offices of
the Registrant are located in Dallas, Texas at 9603 White Rock Trail, Suite 100,
Dallas, Texas 75238. The main business telephone number of the Registrant at
such address is (214) 340-9912.
<PAGE>
Business of the Registrant
The Registrant formerly engaged in the exploration and development of
oil and gas products. As of December 31, 1996 the Registrant was no longer
actively engaged in the oil and gas industry.
In August 1996, Richard A. Green, Sr. acquired control of the
Registrant through Verde, Inc., a corporation he controlled. On September 11,
1996 the Registrant invested unsuccessfully in a new restaurant concept. On
November 6, 1996, the Registrant invested unsuccessfully in the establishment of
a wholly-owned subsidiary for the purpose of developing new lines of business in
the commercial construction industry. On or about July 21, 1997, Richard A.
Green, Sr., ceased to control the Registrant and sold controlling interest in
the Registrant to Richard Bowes and Joe R. Love.
In April 1998, the Registrant acquired 80% of the outstanding common
shares of PHYMED DIAGNOSTIC IMAGING CENTER - Dallas, Inc. (formerly Phy.Med.
Inc.), a Texas corporation ("PHYMED - Dallas") in a reverse triangular merger.
PHYMED - Dallas is an eight-year-old privately held company in the operation of
medical diagnostic imaging centers, which provide a full scope of medical
diagnostic imaging services including magnetic resonance imaging (MRI), computer
tomography (CT) scans, x-rays and other radiological services to patients of
referring physicians. At the time of the merger PHYMED - Dallas owned and
operated a diagnostic imaging center (White Rock) in Dallas, Texas, which
provides diagnostic services to referring physicians in the Dallas area.
Additionally, PHYMED - Dallas at the time of the merger provided
management services to Medical Imaging of Plano, Inc. ("MIPI"), a newly
constructed diagnostic imaging center in Plano, Texas (a suburb of Dallas) under
a licensing and management agreement. The Plano center (located 10 miles from
the White Rock center) offers identical services to the White Rock center to
referring physicians in the Plano area. This licensing and management agreement
was terminated by mutual consent as of September 30, 1999 in anticipation of the
sale of the imaging center to a third party.
PHYMED - Dallas at that time had also established a wholly owned
capitated services subsidiary, PhyMed Contracted Services, Inc. ("PHYMED -
Contracted Services") to provide radiological services under an exclusive
risk-based system of reimbursement to independent physician associations (IPA)
and health maintenance organizations. In August 1998 Contracted Services entered
into such an arrangement with an IPA. In addition to capitated services, PHYMED
- - Dallas purchased the x-ray equipment located in two of the IPA's clinics,
which are operated for capitated and non-capitated patients of the clinics.
On December 12, 1997 PhyMed organized PhyMed Diagnostic Center-McAllen,
L.L.C., a Texas limited liability corporation, for the purpose of establishing a
diagnostic imaging center in McAllen, Texas. In 1998, 43% of the ownership of
the L.L.C. was acquired by outside parties with the remaining 57% owned by
PHYMED - Dallas. In March 1999, the center began operation in temporary
facilities with a portable MRI. The Registrant was unable to obtain financing
for the permanent structure and add additional services required for the
successful operation of the new center. Based upon the aforementioned management
decided to close the facility and the McAllen imaging center ceased operations
December 31, 1999 and the L.L.C. will be dissolved in 2000.
<PAGE>
In September 1999 the Registrant formed PHYMED Diagnostic Imaging
Center-Hillcrest, Inc., (PHYMED-Hillcrest) a wholly owned subsidiary for the
purpose of leasing an existing diagnostic imaging center located approximately 6
miles from the White Rock center. The Center provides MRI, CAT scan, radiology
and ultrasound services to referring physicians.
Also in September 1999 the Registrant formed PHYMED Diagnostic Imaging
Center-Duncanville, Inc., (PHYMED-Duncanville) a wholly owned subsidiary for the
purpose of acquiring an existing diagnostic center located in the Dallas suburb
of Duncanville located approximately 20 miles from the White Rock Center. The
imaging center ceased operations n December 1999. The seller was unable to
provide an acceptable real estate lease acceptable and the Registrant terminated
the purchase agreement.
Employees
As of December 31, 1998, the Registrant had 35 full-time employees.
Item 2. Description of Property
At December 31, 1998, the Registrant occupied leased offices
(approximately 13,000 square feet) at 9603 White Rock Trail, in Dallas, Texas
with an annual lease obligation of $158,000. The Registrant's corporate offices
and its wholly owned subsidiary, PHYMED Diagnostic Imaging Center - Dallas,
Inc., occupies the same leased space in which it provides a full range of
diagnostic imaging services.
Additionally, the Registrant's wholly owned subsidiary, PHYMED
Contracted Services, Inc. leased office space at the medical clinics of INOVA in
Richardson and Mesquite, Texas with an annual lease obligation of $6,600. Each
is equipped with x-ray and developing equipment.
In September 1999 PHYMED-Hillcrest entered into a five year lease for
approximately 8,000 square feet of space with an annual lease obligation of
$165,000 that had previously been operated as imaging center at 12840 Hillcrest
Road, in Dallas, Texas.
Item 3. Legal Proceedings
At December 31, 1998, PHYMED Diagnostic Imaging Center - Dallas, Inc.
(a subsidiary of the Registrant) was a party to the following pending legal
proceeding.
On December 7, 1998 Siemens Credit Corporation through its attorney
demanded full payment on a delinquent equipment lease and a related promissory
note on which the majority shareholders of the Registrant are guarantors. On
January 20, 1999 both the lease and promissory notes were accelerated and
Siemens filed suit in the Federal Court in Northern District of Texas for
collection of both the lease and promissory note.
On July 30, 1999 Siemens gave notice to remove the MRI related to the
lease, which was accomplished in August 1999. In December 1999 a joint venture
between the Registrant and an equipment leasing company purchased the MRI from
Siemens Credit Corporation for $600,000.
Management is continuing to negotiate a settlement with Siemens that
would be satisfactory to both parties. The consolidated balance sheet reflects
as a current liability the amount due from the subsidiary under the lease
agreement.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Registrant's Common Stock is quoted on the NASD's Electronic
Bulletin Board traded in the over-the-counter market under the symbol "TTKA"
prior to March 1999 when the symbol was changed to "PYMD". Trading is only
sporadic and there is no established trading market. The tables below list the
high and low bid prices in U.S. dollars for each quarter of the last two fiscal
years, as provided by NASDAQ.
Bid Quotations*
--------------------------
Low High
1998 (U.S. Dollars):
First Quarter .20 2.20
Second Quarter .40 2.1875
Third Quarter .3125 1.30
Fourth Quarter .30 .625
1997 (U.S.Dollars):
First Quarter .10 .10
Second Quarter .10 .10
Third Quarter .1875 .10
Fourth Quarter .140625 .10
- --------------------------------------------------------------------------------
*These quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and thus may not represent actual
transactions.
The Registrant has not paid any dividends on its Common Stock and
anticipates that future earnings, if any, will be retained to finance future
growth. In addition, the 135,139 shares of Series "A" Preferred Stock have an
annual noncumulative dividend preference of $6,757. Accordingly, the Registrant
does not anticipate paying any dividends on Common Stock for the foreseeable
future.
Within the past fiscal year, the Registrant has sold the following
securities without registering under the Securities Act:
(a) On April 3, 1998, the Registrant issued by operation of
law in a reverse triangular statutory merger certain shares of
Common Stock in a business combination. The Registrant acquired
ownership of 80% of Phy.Med. Inc. in the merger. In connection
with the merger, George C. Barker, individually, and the Phy.Med.
Inc. Employee Stock Ownership Plan (the "ESOP"), acquired from
the Registrant, in the aggregate, immediate ownership of and the
right to receive an aggregate of 6,815,409 (shares of Common
Stock, $.01 par value, of the Registrant which would constitute
87.9% of the 7,843967 shares of Common Stock the Registrant would
then have outstanding. See "Item 11. Security Ownership of
Certain Beneficial Owners and Management."
The issuance of these shares is exempt under Section 4(2) of
the Securities Act. The Registrant is issuing these shares to a
sophisticated investor. In addition, Mr. Barker has access to
information concerning the Registrant and the ability to fend for
himself. He and the ESOP, of which he is the sole trustee, are
taking the shares for investment.
(b) Effective December 31, 1997, the Board of Directors
authorized the Registrant to issue to Joe P. Foor 100,000 shares
of Common Stock as a finder's fee for his services in introducing
the Registrant and Phy.Med., Inc., and assisting in the
consummation of an acquisition of PHYMED - Dallas, such shares to
be issuable only in the event of the consummation of a business
combination transaction whereby the Registrant acquires Phy.Med.,
Inc. On such date, the Common Stock was trading at about $.60 per
share. The 100,000 shares were valued at $.20 per share (or
$20,000), on the basis of the market value of the stock,
discounted for being "restricted securities" and lack of
liquidity. The Registrant became obligated to issue such 100,000
shares of Common Stock to Joe Foor for his services when the
merger transaction which became effective on April 3, 1998, and
the shares are deemed to have been issued on such date.
The issuance of these shares will be exempt under Section
4(2) of the Securities Act. These shares are being issued to a
Director of the Registrant. Such person has access to information
concerning the Registrant and the ability to fend for himself. In
addition, he will take the shares for investment. See "Item 11.
Security Ownership of Certain Beneficial Owners and Management."
<PAGE>
(c ) Effective May 4, 1998, the Board of Directors granted
stock options to Messrs. Barker, Love and Foor, subject to the
approval of the shareholders. Each of the options is subject to a
separate stock option agreement and is not part of a plan. The
three options are exercisable to purchase a total of
100,000 shares of the Registrant's Common Stock at $1.30 per
share.
Mr. Barker's option is exercisable to purchase 500,000
shares of Common Stock. The option is not immediately
exercisable. It vests and becomes exercisable in full at the end
of any quarter during any fiscal year when the cumulative
"Operating Profit Before Corporate Overhead" for such fiscal year
to date equals or exceeds $1,065,483.
Mr. Barker's option has a term of 10 years and expires on
May 4, 2008.
The options granted to Mr. Love and Mr. Foor are each
immediately exercisable to purchase 250,000 shares. Each option
has a term of 10 years and expires on May 4, 2008. The purpose of
the options granted to Mr. Love and Mr. Foor is to compensate
them for serving as Directors of the Registrant.
The grant of the options was exempt under Section 4(2) of
the Securities Act. These options were granted to the three
Directors of the Registrant, one of who is also the Chief
Executive Officer of the Registrant. The optionees have access to
information concerning the Registrant and the ability to fend for
themselves. In addition, the optionees took the options for
investment. The issuance of the underlying shares of Common Stock
upon exercise of the options will likewise be exempt for the same
reason. However, the Registrant plans to register the shares of
Common Stock underlying the options on Form S-8 whenever anyone
of the three optionees advises the Registrant that he would like
to exercise part or all of his option. See "Item 10. Executive
Compensation."
Item 6. Management's Discussion and Analysis or Plan of Operation.
Overview
Effective April 3, 1998, pursuant to an agreement and plan or
reorganization and merger, between the Registrant and Phy.Med., Inc. (PHYMED -
Dallas), the Registrant acquired 80% of the outstanding capital stock of PHYMED
- - Dallas in exchange for 6,891,541 shares of common stock. The merger, which
results in the former PHYMED - Dallas shareholders owning approximately 87.9% of
the outstanding Common Stock of the Registrant, will be accounted for as a
recapitalization of PHYMED - Dallas.
<PAGE>
In December 1998 the Registrant negotiated a professional services
contract for radiological services following the retirement of the prior
radiologist. This new agreement provides for reimbursement based on a percentage
of "global" charges collected as opposed to the previous arrangement which
provided for separate billing of technical and professional services. This along
with the opening of the additional imaging center (Hillcrest) in September 1999
resulted in a 40% increase of net revenues for the fiscal year 1999 as compared
to the prior year.
The Registrant, on a consolidated basis, has taken additional steps in
1999 and 2000 to increase profitability and cash flow, and is developing a plan
to raise additional capital including:
o Provided $198,000 through a limited liability corporation
o Provided $335,000 through interim financing of trade account
receivable
o Joined with a leasing organization to purchase and operate the
Siemen's MRI in a joint venture
o Entering into a accounts receivable financing arrangement that
will provide, by formula, up to $1,150,000 in funding (commitment
letter executed on February 18, 2000 with closing in March 2000)
Management believes that these actions will provide sufficient
liquidity to enable the Registrant to meet its obligations and continue in
business. However there is no assurance such actions will be successful.
Fiscal 1998 as compared to 1997
The following table sets forth operating data of the Registrant as a
percentage of total revenues for the periods indicated:
Year Ended
December 31
1998 1997
-----------------
Net revenue 100.0% 100.0%
Operating expenses (115.5) (102.9)
----------------
Operating profit (15.5) (2.9)
Other expenses (7.6) (14.5)
----------------
Net earnings (loss) before tax (23.1) (17.4)
Income tax 2.6 6.5
----------------
Net earnings (loss) (20.5) (10.9)
Net revenues increased by $31,917 or 0.1% to $3,330,411 for
the year ended December 31, 1998 from $3,298,494 for the year ended December 31,
1997. This limited increase in net patient revenue was the result of: sales lost
to a "Registrant managed" imaging center opened in January 1998 in Plano, Texas
(a suburb of Dallas, Texas), increased contractual allowance on managed care
contracts, increased contracted services revenue related to a capitated contract
that commenced in August 1998.
Operating expenses increased by $452,231, or 13.3% to $3,845,813 for
the year ended December 31, 1998 from $3,393,582 for the year ended December 31,
1997. This increase was due primarily to the expenses resulting from the
reorganization between Tatonka Energy, Inc. and PHYMED - Dallas, Inc.
($157,000); the costs associated with the implementation of a new computer
system for clinical and image management; increased salary expense ($100,000).
Operating losses increased by $420,314, or 442% to ($515,402) for the
year ended December 31, 1998 from ($95,088) for the year ended December 31,
1997. The increased operating loss was primarily the result of little increase
in net patient revenue while operating expenses were increased by the cost of
the merger and installation of the computer system.
Other expenses decreased by $225,990, or 47.2% to $252,581 for the year
ended December 31, 1998 from $478,571 for the year ended December 31, 1997. This
decrease is primarily related to reduced interest expense ($150,686)
attributable to reduction of notes payable related to the purchase of treasury
stock and to the ESOP stock acquisition.
The net loss before income tax benefit increased $194,324 or 34% to
($767,983) for the year ended December 31,1998 from($573,659) for the year ended
December 31, 1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In February 1998 the bank factoring the patient accounts receivable
decided to leave the asset lending business. In April it called the line of
credit PHYMED- Dallas had been using for its operating credit line. The balance
owed in the amount of $738,755 was repaid through a monthly payment plan that
reduced the funds available for operations by approximately $60,000 per month.
The balance outstanding at December 31, 1998 was $281,919. In September 1999 the
entire balance was retired. The Registrant is currently negotiating with another
financial institution to arrange new financing of accounts receivable on terms
more favorable to the Registrant. There is no assurance that any refinancing
will take place or that it will be on terms favorable to the Registrant.
The unscheduled repayment of $476,836 to the factoring organization
during the fiscal year ended December 31, 1998 resulted in less cash available
for operations. This coupled with the unpaid reorganization expenses resulted in
an increase of $616,902, or 167% to $985,728 in trade accounts payable and
accrued expenses at December 31, 1998 from $368,826 at December 31, 1997.
In July 1998 DVI Finance Company (DVI) filed suit seeking payment on
its financing and in August 1998 obtained an injunction against PHYMED - Dallas
disbursing funds without consent of DVI. This suit was settled in December 1998
for $245,530 in principal and interest plus $21,130 in related expenses and the
injunction was dissolved. The repayment was funded by refinancing the related
equipment on thirty-six month installment loan.
At December 31, 1998 PHYMED Dallas, a subsidiary of the Registrant, was
in default on certain equipment financings Siemens Credit Corporation. These
financings constitute $1,664,247 of the $1,989,104 current maturities of
long-term debt at December 31, 1998. Subsequently Siemens has accelerated the
financings and removed the equipment (an MRI) in July 1999. Litigation is
pending in the Unites District Court of the Northern District of Texas.
In December 1999 a joint venture formed by the Registrant and an
equipment leasing company repurchased the Siemens MRI from Siemens Credit
Corporation for $600,000. The MRI is to be operated for the joint venture by
PHYMED Contracted Services Corporation in the White Rock imaging center. The
purchase price is a direct offset to the balance due Siemens Credit Corporation
as described in the paragraph above.
In July 1999 the Registrant formed PHYMED PRIVATE PARTNERS L.L.C. (A
Nevada limited liability corporation) for the purpose of raising $220,000 in the
form of eleven $20,000 units consisting a five-year note and a 5,000 warrant to
purchase PHYMED, INC. common stock for $0.50 per share. The placement was fully
subscribed. The net proceeds were used to purchase certificates of deposit which
then was used to collateralize $198,000 in loans to the Registrant.
<PAGE>
In September 1999 the Registrant borrowed $335,000 from an individual
for one year with the accounts receivable of its subsidiaries pledged as
collateral. The proceeds were used to open the PHYMED - Hillcrest imaging center
and retire some accounts payable.
The real estate lease related to the premises occupied by the Registrant and its
subsidiary PHYMED - Dallas on White Rock Trail is in default and in arrears
approximately $63,000 at December 31, 1998. In February 2000 the Registrant and
the landlord agreed to a new lease that made the Registrant current on its rent
payments for the White Rock offices effective April 1, 2000.
Item 7. Financial Statements
The following financial statements are attached to this report:
Balance Sheet - December 31, 1998
Statements of Operations -
Year ended December 31, 1998 and 1997
Statement of Stockholders' Equity -
Year ended December 31, 1998 and 1997
Statements of Cash Flows - Year ended December 31, 1998 and
1997 Notes to Financial Statements
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
Directors
The shareholders elected five Directors at the last Annual Meeting of
Shareholders on February 19, 1999. George C. Barker was elected as a director on
April 3, 1998, in connection with the Merger, to fill the existing vacancy. The
term of the present directors will expire concurrently with the election of
directors at the 1999 Annual Meeting of Shareholders.
Messrs. Barker, Love and Foor were re-elected as Directors for the year
at the 1999 Annual Meeting of Shareholders and that two additional Directors
were elected; namely, Marilyn Moss (resigned October 1999) and Judith F. Barker.
George C. Barker and Judith F. Barker are married.
<PAGE>
The Company's Certificate of Incorporation provides that the number of
Directors shall be as specified in the Bylaws, and the Bylaws provide that the
number of Directors shall be not less than one nor more than seven. The Bylaws
further provide that the shareholders may at any annual meeting determine the
number of Directors, and the number so determined shall remain fixed until
changed at a subsequent annual meeting.
Each Director elected at the 2000 Annual Meeting of Shareholders will
serve until the next Annual Meeting of Shareholders and until his or her
successor has been duly elected and qualified.
Information Concerning Directors
The Directors are listed below with brief statements setting forth
their principal occupations and other biographical information. Certain
information concerning the four members of the Board of Directors is set forth
in "Item 11. Security Ownership of Certain Beneficial Owners and Management."
George C. Barker
Joe R. Love
Joe P. Foor
Judith F. Barker
George C. Barker has a background in management and healthcare of more
than twenty-five years. He was appointed to the Board of Directors of the
Registrant in April 1998 after the acquisition of Phy.Med., Inc. At the same
time, he was also elected Chairman of the Board, President and Chief Executive
Officer. He co-founded Phy.Med., Inc. in 1990 and has been the President, Chief
Executive Officer and the Chairman of the Board of Directors of that company
since 1993. Mr. Barker's background includes financial and administrative
positions with large hospitals, division level management with national hospital
management companies and radiology center operations. His management duties have
included responsibilities for annual budgets exceeding $45 million and 1,100
employees. He earned his MBA at Suffolk University and his undergraduate degree
at New Hampshire College and is 56 years old.
Joe R. Love has been a Director since the Registrant's inception in the
early 1980's. In addition to being co-founder and Chairman of CCDC, Inc., he is
on the Board of Directors of First Cash, Inc., a public company which operates a
chain of pawn shops, for which Mr. Love has served as a Board member since 1991.
He is also a director of Western Country Clubs, Inc., a public company which
operates country and western night clubs. He has been instrumental in arranging
public offerings totaling approximately $52 million for a number of his
portfolio companies. Over the last ten years, Mr. Love has been involved in
several other public companies as well as being active in real estate and
restaurant ventures. His real estate activities include acting as general
partner of a $94 million joint venture with Metropolitan Life Insurance Company.
He has also been involved as a partner in several Hilton Hotels. Mr. Love is a
graduate of the University of Oklahoma with a BBA and is 61 years old.
Joe P. Foor has been a Director of the Registrant since 1996. He is the
Chief Executive Officer of Featherstone Financial Services, representing such
clients as Greenbriar Corporation (a publicly-held company based in Dallas,
Texas), Qual-Med, Inc., Catalyst Energy Systems, and other businesses. Mr. Foor
holds a BA from The University of Oklahoma and a Masters Degree from Southern
Methodist University and is 61 years old.
<PAGE>
Judith F. Barker is a nominee for Director and has been Secretary and
Treasurer of the Registrant since April 1998. She has been the Secretary of
PHYMED - Dallas and the Business Office Manager for more than the last five
years. She has been involved in office management, health facility billing and
collections for over twenty years. Her experience has been gained at individual
physician and large group practice offices, hospitals and credit companies.
Since 1992, she has played a key role in the management of PhyMed's accounts
receivable. Mrs. Barker is 59 years old.
Board of Directors-Meetings and Committees
The Board of Directors held two meetings during calendar year 1998. The
Board of Directors had no Audit Committee, Compensation or Nomination Committees
during 1998 and does not currently have an Audit, Compensation, or Nomination
Committee.
Executive Officers
After the 1999 Annual Meeting of Shareholders, the newly elected
Directors re-elected the following officers for the coming year:
George C. Barker Chairman of the Board, President
and Chief Executive Officer
Marilyn Moss Executive Vice President - Operations
Judith F. Barker Secretary and Treasurer
Marilyn Moss resigned from the Board of Directors and as an officer of the
Registrant in October 1999
Item 10. Executive Compensation
Executive Officers
Mr. Joe R. Foor served as president of the Registrant from January 1,
1998 to April 3, 1998 with no compensation related to his service.
In 1993, PhyMed and Mr. Barker entered into a ten-year employment
agreement pursuant to which PHYMED - Dallas pays Mr. Barker $240,000 per annum.
In connection with the Merger, on April 3, 1998 Mr. Barker became an employee of
the Registrant and the Registrant assumed the obligations of PHYMED - Dallas
under the employment Merger.
During the fiscal year ended December 31, 1998, George C. Barker was
the Chief Executive Officer of the Registrant and the only executive officer of
the Registrant whose total compensation exceeded $100,000. theRegistrant paid or
accrued $240,000 of salary to Mr. Barker during such period.
On May 4, 1998, the Board of Directors of the Registrant granted Mr.
Barker an option to purchase 500,000 shares of Common Stock, with vesting to be
contingent upon the attainment by the Registrant of certain financial
objectives. For additional information, see "Stock Option Grants" below.
<PAGE>
Compensation of Directors
On May 4, 1998, the Board of Directors granted to each Mr. Love and
Mr. Foor an option to purchase 250,000 shares of Common Stock. The purpose of
the options granted to Mr. Love and Mr. Foor is to compensate them for serving
as Directors of the Registrant. For additional information, see "Stock Option
Grants" below.
1998 Stock Option Grants
Effective May 4, 1998, the Board of Directors granted stock options to
Messrs. Barker, Love and Foor, subject to the approval of the shareholders. Each
of the options is subject to a separate stock option agreement and is not part
of a plan. The three options are exercisable to purchase a total of 1,000,000
shares of the Registrant's Common Stock at $1.30 per share.
Mr. Barker's option is exercisable to purchase 500,000 shares of Common
Stock. The option is not immediately exercisable. It vests and becomes
exercisable in full at the end of any quarter during any fiscal year when the
cumulative "Operating Profit Before Corporate Overhead" for such fiscal year to
date equals or exceeds $1,065,483.
Mr. Barker's option has a term of 10 years and expires on May 4,
2008. The purpose of Mr. Barker's stock option is to retain and incentivise him
as Chairman of the Board, President and Chief Executive Officer of the
Registrant.
The options granted to Mr. Love and Mr. Foor is each exercisable to
purchase 250,000 shares. Each option is presently exercisable and has a term of
10 years that expires on May 4, 2008. The purpose of the options granted to Mr.
Love and Mr. Foor is to compensate them for serving as Directors of the
Registrant.
The number of shares subject to an option is subject to proportional
adjustment for any increase or decrease in the number of shares issued by the
Registrant without receipt of consideration by the Registrant, such as a stock
dividend or a stock split.
The options are non-qualified stock options under the Internal Revenue
Code of 1986. As a general rule, no tax is imposed on the optionee upon the
grant of an option, nor will the Registrant be entitled to a tax deduction by
reason of such grant. Generally, upon the exercise of an option, an optionee
will be treated as receiving compensation taxable as ordinary income in the year
of exercise in an amount equal to the excess of the fair market value of the
shares on the date of exercise over the exercise price. Thereafter, if the
holder holds the stock for a period of one year or less the sale will be treated
as subject to ordinary income tax rates. Stock held for a period exceeding one
year receives capital gain tax rate treatment. The Registrant will be entitled
to a tax deduction in an amount equal to the compensation recognized by the
optionee.
<PAGE>
Set forth below is certain information with respect to the options
granted as of May 4, 1998, subject to approval of the options by the
shareholders.
New Plan Benefits
-----------------
1998 Stock Option Agreements
----------------------------
Name and Position Dollar Value Number of Shares
- ---------------------------------
George C. Barker 0- (3) 500,000 (1)
Chairman of the Board, President
And Chief Executive Officer
Joe R. Love -0- (3) 250,000 (2)
Director
Joe P. Foor -0- (3) 250,000 (2)
Director
Executive Group -0- (3) 500,000 (1)
Non-Executive Director Group -0- (3) 500,000 (2)
Non-Executive Officer -0- -0-
Employee Group
- --------------------
(1) Mr. Barker's option vests and becomes exercisable in full at the end of
any quarter during any fiscal year when the cumulative "Operating
Profit Before Corporate Overhead" for such fiscal year to date equals
or exceeds $1,065.483.
(2) Vested immediately upon the date of grant, May 4, 1998, subject to
approval of the stock options by the shareholders of the Registrant at
the Annual Meeting.
(3) The option price is $1.30 per share, as the Common Stock is presently
constituted. The dollar value of the option is equal to (a) the value
of one share of Common Stock in excess of $1.30 per share, multiplied
by (b) the number of shares covered by the option. On December 31, 1999
the bid and asked prices on the common stock were approximately $0.50
to $0.75. Accordingly, the dollar value of the option is zero.
PhyMed Employee Stock Ownership Plan
In 1993, PhyMed established an employee stock ownership plan ("ESOP")
for its employees. Such plan is qualified under the provisions of the Internal
Revenue Code of 1986 as a defined contribution retirement plan designed to
invest primarily in qualifying employer securities. This provides a means for
employees to have an ownership interest in their employer. Upon establishment,
the ESOP purchased certain shares of PhyMed from a shareholder for a cash down
payment and a promissory note payable in installments. PhyMed makes
contributions to the ESOP which enable it to make timely payments of principal
and interest on its note to the former shareholder. Mr. and Mrs. Barker own in
the aggregate approximately 70% of the vested interests of participants in the
ESOP. See "Item 11. Security Ownership of Certain Beneficial Owners and
Management-Possible Change of Control."
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and the rules
promulgated thereunder require that directors and executive officers of the
Registrant and beneficial owners of greater than 10% of the Registrant's Common
Stock file various reports with the Securities and Exchange Commission (the
"SEC"). The Registrant has reviewed its files and made inquiries by and on
behalf of the Registrant. Management believes that for the fiscal year ended
December 31, 1998, reports were not timely filed by Joe R. Love or Joe P. Foor
with respect to 250,000 stock option each were granted on May 4, 1998 (See Part
III. "1998 Stock Option Grants").
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of December 1,
1998, concerning the beneficial ownership of Common Stock by all Directors and
nominees, certain executive officers, all Directors and executive officers of
the Registrant, as a group, and each person who beneficially owns more than 5%
of the 7,843,001 outstanding shares of Common Stock, $.01 par value. Unless
otherwise indicated, each person named has sole voting and investment power over
the shares indicated.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership (1) of Class (1)
- ------------------- ------------------------ ------------
George C. Barker 6,891,541 (2)(3)(4) 87.9%
9603 White Rock Trail, Suite 100
Dallas, Texas 75238
Joe R. Love 511,714 (5) 6.3%
1601 N.W. Expressway, Suite 2101
Oklahoma City, Oklahoma
Joe P. Foor 455,408 (6) 5.6%
3535 Northwest Parkway
Dallas, Texas 75225
Judith F. Barker 6,891,541 (2)(3)(4) 87.9%
9603 White Rock Trail, Suite 100
Dallas, Texas 75238
All directors and officers 7,858,663 94. 2%
as a group (4 persons)
(1) In February 1999, the shareholders approved, a 1-for-10 reverse stock
split, which includes increasing the par value of the Common Stock from
$.001 to $.01. The change in the par value of common stock became effective
in March 1999.
(2) Includes 5,384,016 outstanding shares owned directly by Mr. Barker and
1,507,524 outstanding shares owned by Phy.Med., Inc. Employee Stock Option
Plan, as to which Mr. Barker is the sole trustee and has voting power. Mr.
and Mrs. Barker own in the aggregate approximately 70% of the vested
interests of participants in the ESOP.
(3) Does not include shares, which can be purchased upon the exercise of stock
option. On May 4, 1998, the Board of Directors granted Mr. Barker an option
to purchase 500,000 shares of Common Stock with vesting to be contingent
upon the attainment by the Registrant of certain financial objectives.
Therefore, it is not presently exercisable and will not be exercisable
within the next 60 days. For additional information, see "Item 10.
Executive Compensation-1998 Stock Option Grants."
<PAGE>
(4) George C. Barker and Judith F. Barker are married. Mr. Barker is the owner
of record or has the power to vote all the outstanding shares beneficially
owned by him. Mrs. Barker is also deemed to be the beneficial owner of the
same shares. Mrs. Barker disclaims any beneficial ownership of shares held
by Mr. Barker as sole trustee of the ESOP but allocated to the accounts of
ESOP participants other than Mr. or Mrs. Barker.
(5) Includes (a) holdings of family members of Mr. Love, (b) 6,828 shares
issuable upon conversion of Series A Preferred Stock held by a corporation
controlled by Mr. Love, and (c) 250,000 shares which can be purchased upon
the exercise of a recently granted stock option. See "Item 10. Executive
Compensation-1998 Stock Option Grants."
(6) Includes (a) 26,667 shares issuable upon conversion of Series A Preferred
Stock held by Mr. Foor's wife, Anne Foor, and (b) 250,000 shares which can
be purchased upon the exercise of a recently granted stock option. See
"Item 10. Executive Compensation-1998 Stock Option Grants."
By virtue of his beneficial ownership of Common Stock, Mr. Barker may be deemed
to be a "parent" of the Registrant as such term is defined in the rules and
regulations of the Securities and Exchange Commission.
Possible Change of Control
Prior to the Merger on April 3, 1998, there were 800 common shares of
PHYMED - Dallas outstanding, of which 500 were owned by Mr.Barker, individually,
and 300 were owned by the ESOP.
In the Merger, the 500 PHYMED - Dallas common shares owned by Barker
were converted into immediate ownership of and the right to receive 5,423,079
shares of Common Stock of the Registrant, and 140 of the 300 PHYMED - Dallas
common shares owned by the ESOP were converted in like manner into
1,518,462 shares of Common Stock of the Registrant. The remaining 160 PHYMED -
Dallas common shares held by the ESOP now constitute the 20% of PHYMED - Dallas
common shares not owned by the Registrant.
The 800 shares of PHYMED - Dallas owned by Barker and the ESOP at the
time of the Merger were pledged to Patrick Alan Luckett ("Luckett") to secure
the payment of (a) two promissory notes payable to the order of Luckett, which
were issued to him as partial payment for shares of PhyMed purchased from him,
and (b) a guaranty of such notes.
On September 21, 1993, Barker and Luckett owned all the then
outstanding common shares of PhyMed, Inc., each of them owning of 500 common
shares. On such date Luckett sold 200 of his shares to PhyMed and 300 shares to
the ESOP. The sales were for cash and promissory notes. One note was issued by
PhyMed in the original principal amount of $800,000 pursuant to the terms of a
Loan and Security Merger dated September 21, 1993, and the second promissory
note was issued by the ESOP in the original principal amount of $800,000. Both
notes were guaranteed by Barker. The PhyMed note was secured by the 200 shares
repurchased from Luckett by PhyMed; the ESOP note was secured by the 300 shares
the ESOP purchased from Luckett; and the 500 shares already owned by Barker were
pledged to secure his guaranty of the two notes.
The aggregate of 6,891,541 shares of Common Stock of the Registrant
received by Barker and the ESOP as a result of the Merger have been substituted
in the pledge for the 640 PHYMED - Dallas shares which were released from the
pledge and converted into such shares of Common Stock of the Registrant. The 20%
of PHYMED - Dallas still owned by the ESOP remains pledged for such purpose.
As of February 24, 2000, the unpaid principal balance on the PhyMed
note was retired, and the ESOP note was $125,564.
Mr. and Mrs. Barker are guarantors on the Siemens Credit Corporation
lease that is currently in litigation. An adverse outcome in that litigation
could result in a possible change in control of the Registrant.
<PAGE>
Item 12. Certain Relationships and Related Transactions
On or about July 21, 1997, Richard A. Green, Sr., controlled the
Registrant through Verde, Inc. It owned 205,114 shares of Common Stock, and Mr.
Green was a Director and President of the Registrant. On or about July 21, 1997,
Verde, Inc. sold its holdings to Richard Bowes and Joe R. Love for $50,000 cash,
and Mr. Green resigned all positions with the Registrant.
During 1997, Messrs. Joe R. Love, Joe P. Foor and an outside
consultant, Richard Bowes, rendered services to the Registrant, partly for
services rendered in connection with Board meetings and partly for consulting
services consisting of due diligence efforts regarding merger candidates. In
consideration of such services, on October 16, 1997, the Board of Directors
authorized the issuance of an aggregate of 300,000 shares, as presently
constituted, to such persons (100,000 shares to each of such persons). The
Registrant treated the shares as having been earned in full and issued at the
end of the year, December 31, 1997. The Registrant valued such services at
$60,000 and recorded that amount as an expense for 1997. The Common Stock was
trading at approximately $0.60 per share on December 31, 1997. The shares were
valued at $0.20 per share, on the basis of the market value of the stock,
discounted for being "restricted securities" and lack of liquidity, as well as
the Registrant's lack of earnings and book value.
On March 31, 1998, the Registrant entered into a letter agreement with
Joe P. Foor and CCDC, Inc., a company controlled by Joe R. Love. Mr. Foor and
CCDC, Inc. (the "consultants") agreed to provide certain specified consulting
and advisory services of a corporate development nature, as the Registrant may
need. The Registrant will pay the consultants a $36,000 annual retainer, plus
out-of-pocket expenses. The consultants will also earn a transaction fee for
each acquisition or capital placement completed the Registrant. The letter
agreement was terminated by mutual agreement in February 1999.
George C. Barker owns a 50% interest in and is President of American
Medical Imaging Corporation ("AMIC"), which rents a mobile magnetic resonance
imaging ("MRI") machine to PHYMED Diagnostic Imaging - McAllen, LLC in McAllen,
Texas. PHYMED - Dallas and AMIC have a business relationship which is embodied
in a Radiology Services Provider Agreement - Contracted Services dated February
1, 1996. This agreement has a one-year term, which renews automatically each
year for one additional year unless terminated by one of the parties. AMIC
refers patients to PHYMED - Dallas for MRI procedures AMIC is unable to perform
on its own MRI machine. PHYMED - Dallas invoices AMIC directly for such
procedures at a discounted fee of $300.00 per procedure, and AMIC pays the
invoices directly to PHYMED - Dallas upon receipt. PHYMED - Dallas received
revenues of $149,000 in 1998 and $176,000 in 1997 from AMIC.
PHYMED - Dallas entered into a 10-year Management/Licensing Agreement
with Medical Imaging of Plano, Inc. ("MIPI") effective January 14, 1998 with
respect to the operation of a new full service radiology center in Plano, Texas,
a suburb of Dallas, under the name of "PhyMed Diagnostic Imaging Center Plano."
PHYMED - Dallas managed the new center until September 30, 1999 when the
agreement was terminated by mutual consent. Mr. Barker owned 12.5% and was
President of MIPI. As a part of the termination of the agreement Mr. Barker
transferred his 12.5% ownership in MIPI to MIPI as payment for indebtedness of
$102,153, owed MIPI by PHYMED Contracted Services for services rendered in
conjunction with its capitated contract between August 1998 and September 1999
(resulting in PHYMED - Contracted Services owing Mr. Barker the indebtedness).
Additionally, Mr. Barker resigned as both President and Director of MIPI. Mr.
Barker has personally guaranteed for three years $200,000 of MIPI's obligations
under equipment leases for equipment used at the new center.
George C. Barker d/b/a "A/G Partners" manages for a monthly fee a
physician practice of The PRS Group, P.A., and Philip R. Shalen, M.D. is the
sole radiologist employed by it. PHYMED - Dallas does not have a direct
relationship with A/G Partners. This arrangement was cancelled by mutual consent
as of December 31, 1999.
<PAGE>
On January 1, 1996, PhyMed and The PRS Group, P.A. entered into a
10-year Radiology Services Agreement which provided that The PRS Group, P.A.
would provide the professional service component and PhyMed would provide the
technical component of the diagnostic radiological services rendered by PhyMed
at its Center. PhyMed and The PRS Group, P.A. each bill patients separately for
their components of the diagnostic services. On September 1, 1997, the parties
entered into a new 10-year Radiology Services Agreement which contains
substantially the same provisions as the 1996 agreement. This Agreement was
canceled by mutual consent as of November 30, 1998.
On July 18, 1998 Registrant borrowed $100,000 from Anne C. Foor, the
wife of Director Joe P. Foor. The 12 % note was due January 20, 1999 and
included warrants to purchase 20,000 shares of common stock at $0.625 per share
expiring July 20, 2001. The note was renewed on January 20, 1999 for five months
and included additional warrants for 30,000 shares on the same terms. On July
20, 1999 another renewal extended the maturity to January 20, 2000 and included
additional warrants for 50,000 at $0.50 per share expiring January 20, 2002.
That note was renewed on January 20, 2000 with a June 20, 2000 maturity and
included additional warrants to purchase 20,000 shares at $0.50 per share
expiring June 20, 2002.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
1.1 Agreement and Plan of Reorganization and Merger as of March 6,
1998 by and among Tatonka Energy, Inc. Tatonka Energy Subsidiary
Phy.Med., Inc. and the Stockholders of PhyMed, Inc. (Exhibit 1)*
1.2 Amendment to Agreement and Plan of Reorganization and Merger
dated as of March 6, 1998, by and among Tatonka Energy, Inc.
Tatonka Energy Subsidiary, Inc. Phy.Med., Inc. and the
Shareholders of PhyMed, Inc. (Exhibit 1.2)****
3.1 Amended Certificate of Incorporation of PHYMED, INC. filed with
the Secretary of State of Oklahoma on February 25, 1999
3.2 Loan and Security Agreement by and between PhyMed Inc., as
Borrower, and Patrick A. Luckett, as Lender, and George C.
Barker, as Guarantor, dated September 21, 1993 (Exhibit 3.1)***
3.3 $800,000 Note Dated September 21, 1993 from PhyMed, Inc. to
Patrick A. Luckett (Exhibit 3.3)***
3.4 $800,000 Note dated September 21, 1993 from Phy.Med., Inc.
Employee Stock Ownership Plan of Phy.Med., Inc. (Exhibit 3.3)***
3.5 Note Purchase Agreement (undated but) executed September 21,
1993, by and between Patrick A. Luckett, Phy.Med., Inc. and the
Employee Stock Ownership Plan of Phy.Med., Inc. (Exhibit 3.4)***
3.6 Guaranty Agreement dated September 21, 1993, signed by George C.
Barker in favor of Patrick Alan Luckett (Exhibit 3.5)***
<PAGE>
3.7 Limited waiver of Certain Rights and Remedies executed by Patrick
Alan Luckett on October 24, 1998 (Exhibit 3.6)***
10.1 Employment Agreement dated October 1, 1993, between Phy.Med.,
Inc. and George C. Barker (assumed by Registrant on April 3,
1998) (Exhibit 10.5)**
10.2 Stock Option Agreement dated May 4, 1998, between the Company and
George C. Barker (Exhibit 10.6)**
10.3 Stock Option Agreement dated May 4, 1998, between the Company and
Joe R. Love (Exhibit 10.7)**
10.4 Stock Option Agreement dated May 4, 1998, between the Company and
Joe P. Foor (Exhibit 10.8)**
10.5 Letter Agreement dated March 31, 1998 by and among the Registrant
and CCDC, Inc. and Joe For (Exhibit 10.9)**
10.6 Loan and Security Agreement (undated) between Medical Equipment
Finance Company and Phy.Med., Inc. [This is the "DVI" financing
document. Medical Equipment Finance Company is a subsidiary of
DVI.] (Exhibit 10.6)***
10.7 Equipment Lease Agreement, effective July 11, 1995, between
Siemens Credit Corporation and Phy.Med., Inc. (Exhibit 10.7)***
10.8 Promissory Note of Phy.Med., Inc. (undated) to Siemens Credit
Corporation in the principal amount of $175,000 (Exhibit 10.8)***
10.9 (Real Estate) Lease Agreement made and entered in as of March 15,
1996, between Cocanougher Feed Co., Inc. d/b/a Cocanougher Asset
Management, ("Lessor"), and PhyMed, Inc., d/b/a PhyMed Diagnostic
Imaging Center ("Lessee") (Exhibit 10.9)***
10.10 Management/Licensing Agreement dated January 4, 1998 between
Phy.Med., Inc. and Medical Imaging of Plano, Inc. (Exhibit
10.10)**
10.11 Radiology Service Provider Agreement - Contracted Services dated
February 1, 1996 between Phy.Med., Inc. and American Medical
Imaging Incorporated (Exhibit 10.11)**
10.12 Radiology Services Agreement dated September 1, 1997, between
Phy.Med., Inc. and the PRS Group, P.A. (Exhibit 10.13)**
10.13 Amendment dated February 23, 2000 to Stock Option Agreement
dated May 4, 1998 between Registrant and George C. Barker
10.14 Amendment dated February 23, 2000 to Stock Option Agreement
dated May 4, 1998 between Registrant and Joe. R. Love
10.15 Amendment dated February 23, 2000 to Stock Option Agreement
dated May 4, 1998 between Registrant and Joe. P. Foor
10.16 Master Lease Agreement Number 11053 effective October 11, 1999
between Prime Leasing Company and PHYMED Diagnostic Imaging
Center - Hillcrest., Inc. (a wholly owned subsidiary of the
Registrant)
10.17 Lease Schedule Number 1 to master Lease Agreement Number 11053
<PAGE>
10.18 Amendment to Lease Schedule Number 1 to Master Leasse Agreement
Number 11053
10.19 Master Lease Agreement Number 11500 effective February 11, 2000
between Prime Leasing Company and PHYMED Diagnostic Imaging
Center - White Rock, Inc. (a wholly owned subsidiary of the
Registrant)
10.20 Lease Schedule Number 1 to master Lease Agreement Number 11500
10.21 Agreement of Limited Partnership ( White Rock JV, Ltd.) between
LDE Ventures, Inc. and Registrant dated December 18, 1999
regarding the operation and use of the Siemens 1.5 MRI
10.22 Master Lease Agreement Number 11113 effective Feburary 11, 2000
between Prime Leasing Company and White Rock JV, Ltd.
10.23 Lease Schedule Number 1 to master Lease Agreement Number 11113
10.24 Management and Agreement dated December 11, 1999 between White
Rock JV, Ltd. and PHYMED Contracted Services Corporation (a
wholly owned subsidiary of the Registrant)
10.25 Office Lease Agreement made and entered in as of September 8,
1999, between AETNA Life Insurance Company (Lessor) and
Registrant
27 Financial Data Schedule
* Incorporated by reference to the exhibit number set forth in
parentheses, which exhibit was filed with the Company's Form 8-K filed April 8,
1998
** Incorporated by reference to the exhibit number set forth in
parentheses, which exhibit was filed by the Registrant's Form 10-KSB for the
year ended December 31, 1997. The Form 10-KSB was filed June 16, 1998.
*** Incorporated by reference to the exhibit number set forth in
parentheses, which exhibit was filed by the Registrant's Form 10-QSB for the
quarter ended June 30, 1998. The Form 10-QSB was filed December 3, 1998
**** Incorporated by reference to the exhibit number set forth in
parentheses which exhibit was filed by the Registrant's Form 8-K/A filed
December 8, 1998
(b) Reports on form 8-K
No report on Form 8-K was filed during the fourth (last) quarter of the
fiscal year ended December 31, 1998.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TATONKA ENERGY, INC.
Registrant
Date: March 1, 2000 BY: /s/ George C. Barker
-----------------------
George C. Barker
President and Chief Executive Officer
By: /s/ David L Moore
-----------------------
DAVID L. Moore
Chief Financial Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Date: March 1, 2000 BY: /s/Judith F. Barker
--------------------------------
Judith F. Barker, Director
Date: March 1, 2000 BY: /s/ Joe P. Foor
--------------------------------
Joe P. Foor, Director
BY:
--------------------------------
Joe R. Love
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Pages
-----
Report of Independent Certified Public Accountants F-2
Financial Statements
Consolidated Balance Sheet at December 31, 1998 F-3
Consolidated Statements of Operations for the years ended
December 31, 1998 and 1997 F-5
Consolidated Statements of Changes in Shareholders' Deficit
for the years ended December 31, 1998 and 1997 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997 F-7
Notes to Consolidated Financial Statements F-8
F-1
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
PHYMED, INC.
We have audited the accompanying consolidated balance sheet of PHYMED, INC. and
Subsidiaries as of December 31, 1998, and the related consolidated statements of
operations, changes in shareholders' deficit, and cash flows for each of the two
years in the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of PHYMED, INC. and
Subsidiaries as of December 31, 1998, and the consolidated results of their
operations and their consolidated cash flows for each of the two years in the
period then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the accompanying financial
statements, the Company incurred net losses of $679,983 and $360,659 for the
years ended December 31, 1998 and 1997, respectively, and as of December 31,
1998 the Company's current liabilities exceeded its current assets by
$2,440,110. These factors, among others as discussed in Note C to the financial
statements, raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note C. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
GRANT THORNTON LLP
Dallas, Texas
October 29, 1999
F-2
<PAGE>
PHYMED, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31, 1998
ASSETS
CURRENT ASSETS
Accounts receivable - trade, less allowance for
doubtful accounts and contractual allowances
of $970,000 $ 895,810
Receivable - related party 26,027
-----------
Total current assets 921,837
PROPERTY AND EQUIPMENT
Clinic and medical equipment 3,566,690
Furniture and equipment 95,042
Computer hardware and software 403,450
Leasehold improvements 381,420
-----------
4,446,602
Less accumulated depreciation and amortization (3,433,016)
-----------
1,013,586
OTHER ASSETS
Noncurrent accounts receivable - trade, less
allowance for doubtful accounts and
contractual allowances of $442,000 252,082
Other 17,322
-----------
269,404
$ 2,204,827
===========
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
PHYMED, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEET - CONTINUED
December 31, 1998
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,989,104
Accounts payable - trade 632,819
Accounts payable - related parties 105,196
Payable to factor 281,919
Accrued expenses 352,909
-----------
Total current liabilities 3,361,947
LONG-TERM LIABILITIES
Long-term debt, less current maturities 580,076
Deferred rent 34,387
-----------
Total liabilities 3,976,410
COMMITMENTS AND CONTINGENCIES --
SHAREHOLDERS' DEFICIT
Common stock - $.01 par value per share; authorized,
50,000,000 shares; issued and outstanding,
7,843,097 shares 78,431
Series "A" nonvoting convertible preferred stock, $1 par
value per share; issued and outstanding, 135,139 shares 135,139
Additional paid-in capital 999
Unearned ESOP compensation (220,449)
Accumulated deficit (1,765,703)
-----------
Total shareholders' deficit (1,771,583)
-----------
$ 2,204,827
===========
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
PHYMED, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31,
---------------------------
1998 1997
----------- -----------
(restated)
Net patient revenue $ 3,330,411 $ 3,298,494
Operating expenses (3,845,813) (3,393,582)
----------- -----------
Operating loss (515,402) (95,088)
Other income (expenses)
Interest expense (228,884) (379,570)
Factoring fees (66,869) (100,041)
Miscellaneous income 43,172 1,040
----------- -----------
(252,581) (478,571)
----------- -----------
Net loss before income tax benefit (767,983) (573,659)
Deferred income tax benefit 88,000 213,000
----------- -----------
NET LOSS $ (679,983) $ (360,659)
=========== ===========
Loss per share - basic and diluted $(.09) $(.05)
===== =====
Weighted average shares 7,843,097 7,605,208
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
PHYMED Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
Retained
Common stock Additional Unearned earnings
------------------------- Preferred paid-in ESOP (accumulated
Shares Amount stock capital compensation deficit)
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997, as restated 1,000 $ 1,000 $ -- $ -- $ (446,615) $ 352,594
Amortization of unearned ESOP
compensation, net of taxes of
$13,000 -- -- -- 22,254 113,083 --
Net loss -- -- -- -- -- (360,659)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 1,000 1,000 -- 22,254 (333,532) (8,065)
Merger of Tatonka Energy, Inc.
and PHYMED, INC. and
recapitalization 7,842,097 77,431 135,139 (21,255) -- (1,038,781)
Amortization of unearned ESOP
compensation -- -- -- -- 113,083 (38,874)
Net loss -- -- -- -- -- (679,983)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 7,843,097 $ 78,431 $ 135,139 $ 999 $ (220,449) $(1,765,703)
=========== =========== =========== =========== =========== ===========
Treasury stock
--------------------------
Shares Amount Total
----------- ----------- -----------
Balance at January 1, 1997, as restated 226 $ (847,582) $ (940,603)
Amortization of unearned ESOP
compensation, net of taxes of
$13,000 -- -- 135,337
Net loss -- -- (360,659)
----------- ----------- -----------
Balance at December 31, 1997 226 (847,582) (1,165,925)
Merger of Tatonka Energy, Inc.
and PHYMED, INC. and
recapitalization (226) 847,582 116
Amortization of unearned ESOP
compensation -- -- 74,209
Net loss -- -- (679,983)
----------- ----------- -----------
Balance at December 31, 1998 -- $ -- $(1,771,583)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
PHYMED, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
--------------------------
1998 1997
----------- -----------
(restated)
<S> <C> <C>
Cash flows from operating activities
Net loss $ (679,983) $ (360,659)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 543,827 623,055
Amortization of unearned ESOP compensation 74,209 148,337
Deferred income taxes (88,000) 132,000
Changes in operating assets and liabilities
Receivables 448,655 190,344
Prepaid expenses and other current assets (3,789) --
Other assets 32,243 (4,996)
Accounts payable and other current liabilities 722,098 (118,708)
Other noncurrent liabilities 485 33,902
----------- -----------
Net cash provided by operating activities 1,049,745 643,275
Cash flows from investing activities
Purchase of property assets (32,417) --
Proceeds from sale of assets -- 21,057
Merger 116 --
----------- -----------
Net cash provided by (used in) investing activities (32,301) 21,057
Cash flows from financing activities
Proceeds from (payments to) factoring company - net (476,836) 153,060
Repayments of debt (947,330) (783,139)
Proceeds from debt 369,489 --
----------- -----------
Net cash used in financing activities (1,054,677) (630,079)
----------- -----------
Net increase (decrease) in cash (37,233) 34,253
Cash at beginning of period 37,233 2,980
----------- -----------
Cash at end of period $ -- $ 37,233
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 171,204 $ 393,771
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
PHYMED, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
Effective April 3, 1998, Tatonka Energy, Inc. ( "Tatonka") acquired 80% of
the outstanding capital stock of Phy Med Diagnostic Imaging Center Dallas,
Inc. ("PMDIC"), pursuant to an agreement and plan of reorganization and
merger (the Agreement). The Agreement provided that consideration given by
Tatonka was the issuance of 6,891,541 Tatonka common shares.
At the date of the merger, Tatonka had nominal assets, consisting only of
$116 in cash, and no liabilities. The terms of the merger result in the
former PMDIC shareholders owning approximately 87% of the outstanding Tatonka
common stock. Therefore, the merger has been accounted for as a
recapitalization of PMDIC. The accompanying financial statements are those of
PMDIC for all periods presented.
At the annual meeting of shareholders held in February 1999, the shareholders
approved (1) the change of Tatonka's name to PHYMED, INC., and (2) a 1-for-10
reverse split of the common stock. All share amounts herein have been
restated to give effect to the stock split.
NOTE B - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
------------------
The Company is engaged in the business of operating diagnostic imaging
centers, located in Dallas and McAllen, Texas.
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of PHYMED, INC.,
its wholly-owned subsidiaries, PMDIC, PhyMed Contracted Services, Inc.
(PMCS), and 53%-owned PhyMed Diagnostic Center-McAllen, LLC. (McAllen)
(collectively "the Company"). Significant intercompany accounts and
transactions have been eliminated in consolidation.
Revenue Recognition and Receivables
-----------------------------------
Net patient revenue is recorded as services are rendered, at the estimated
realizable amounts from patients, third-party payers and others based upon
contractual arrangements. Provisions are made for estimated uncollectible
accounts and are reflected in the financial statements as bad debts, included
in operating expenses.
F-8
<PAGE>
PHYMED, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued
Property and Equipment
----------------------
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives, which range from three to five years, by the
straight-line method. Leasehold improvements are amortized by the
straight-line method over the lives of the respective leases or the service
lives of the improvements, whichever is shorter.
Deferred Rent
-------------
The cost of the Company's lease for office space is accounted for by the
straight-line method. The difference between the net cash requirements of the
lease and straight-line method is reflected on the balance sheet as deferred
rent.
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that effect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
-------------------------
Cash equivalents consist of high liquid investments, which are readily
convertible into cash and have a maturity of three months or less.
Earnings (Loss) Per Share
-------------------------
Basic earnings (loss) per share is computed by dividing net loss by the
weighted average number of common shares outstanding. Diluted earnings per
share gives effect to the assumed conversion of preferred stock, when
dilutive.
Stock-based Compensation
------------------------
The Company accounts for stock-based compensation to employees using the
intrinsic value method. Accordingly, compensation cost for stock options to
employees is measured as the excess, if any, of the quoted market price of
the Company's common stock at the date of the grant over the amount an
employee must pay to acquire the stock.
F-9
<PAGE>
PHYMED, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts for cash, accounts receivable and accounts payable
approximate fair value because of the short-term nature of these financial
instruments. The carrying amount reported for long-term debt approximates
fair value, as interest rates are tied to market.
NOTE C - GOING CONCERN MATTERS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. The Company had net losses of $679,953 in
1998 and $360,659 in 1997, and at December 31, 1998, current liabilities
exceeded current assets by $2,440,110. Included in current maturities of
long-term debt is $1,664,246 relating to a subsidiary's financings which
were in default at December 31, 1998. The lender has filed a lawsuit to
collect the unpaid balances. See Note E and G.
The Company has taken steps in 1999 to increase profitability and cash flow,
and is developing a refinancing plan to raise additional capital. Management
believes that these actions will provide sufficient liquidity to enable the
Company to meet its obligations and continue in business. However, there is
no assurance such actions will be successful.
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment accounts include $863,824 of assets which have been
financed under leases classified as capital leases. The amounts capitalized
are the lesser of the fair market values or the present values of the
minimum lease payments of the leased property. As discussed in Note E,
equipment collateralizing certain financing obligations was repossessed in
August of 1999. The net carrying value of the equipment was $549,000 at
December 31, 1998.
F-10
<PAGE>
<TABLE>
<CAPTION>
PHYMED, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - LONG-TERM DEBT
<S> <C> <C>
December 31,
1998
------------
Promissory notes, payable in monthly installments through 2000, at interest
rates ranging from 9.9% to 10.0% $ 85,860
Note payable by the Company's Employee Stock Ownership Plan for the
purchase of common shares, payable in monthly installments through
2000, at an interest rate of 10.0%, collateralized by the common
shares acquired 272,566
Note payable to bank payable in monthly installments through 2001 at
prime plus 2% (9.75%) per annum, collateralized by accounts receivable
and equipment 269,489
Note payable to shareholder with monthly interest payments at 12% per
annum, due January 2000, collateralized by accounts receivable 100,000
Capitalized lease obligations, payable in monthly installments through
2001, collateralized by the related equipment 1,828,030
Capitalized lease obligation, payable in monthly installments through
2001, collateralized by the related equipment 293,552
---------
2,849,497
Less amount representing interest on capital lease obligations imputed
at rates ranging from 7.5% to 9.5% (280,317)
---------
2,569,180
Less current maturities (1,989,104)
---------
$ 580,076
========
All debt is guaranteed by the Company's principal shareholder.
Aggregate maturities of long-term debt at December 31, 1998, are as follows:
Year ending
December 31,
------------
1999 $1,989,104
2000 440,019
2001 140,057
---------
$2,569,180
=========
</TABLE>
F-11
<PAGE>
PHYMED, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - LONG-TERM DEBT - Continued
At December 31, 1998, a subsidiary was in default on certain equipment
financings, accounted for as capital leases, with Siemens Credit Corporation
(Siemens). Accordingly, these financings have been included in current
maturies of long-term debt, and constitute $1,664,246 of the $1,989,104
current maturities as of December 31, 1998. On December 7, 1998, Siemens
accelerated maturity and in August of 1999, repossessed the equipment. See
Note G regarding related litigation.
NOTE F - PREFERRED STOCK
The Series A preferred stock is nonvoting, and each share is convertible
into .6667 shares of common stock. Holders are entitled to a 5% dividend
when and if declared by the Board of Directors.
NOTE G - COMMITMENTS AND CONTINGENCIES
Future minimum rental commitments under the noncancellable operating leases,
which relate primarily to office and medical center premises, are as
follows:
Year ended December 31,
1999 $169,046
2000 173,591
2001 171,035
2002 168,800
2003 and thereafter 27,727
--------
Total minimum payments required $710,199
========
Rental expense totaled approximately $157,000 and $134,000 for the years
ended December 31, 1998 and 1997, respectively.
A subsidiary of PHYMED, INC. is defendant in a lawsuit brought by Siemens
Credit Corporation for payments of approximately $1,965,000 allegedly due
under a defaulted equipment lease and a promissory note with an unpaid
principal balance at December 31, 1998 of approximately $85,000. The outcome
of this lawsuit is not determinable.
Several other legal actions arising in the ordinary course of business are
pending or in process against the Company. In the opinion of management, the
eventual disposition of these actions will not have a materially adverse
effect on the financial position, results of operations or liquidity of the
Company.
F-12
<PAGE>
<TABLE>
<CAPTION>
PHYMED, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - INCOME TAXES
Following is a reconciliation of the Company's income tax benefit with the
amount of tax computed at the federal statutory rate:
Years ended December 31,
---------------------------
1998 1997
------ ------
<S> <C> <C>
Tax benefit at statutory rate $ 261,000 $195,000
State taxes, net of Federal effect 22,000 18,000
Nondeductible expenses (63,000) --
Change in valuation allowance (116,000) --
Other (16,000) --
-------- -------
$ 88,000 $213,000
======== =======
The components of the deferred tax asset and liability are as follows:
December 31,
1998
------------
Deferred tax assets
Property and equipment $ 190,000
Accounts payable and accrued expenses 112,000
Net operating loss carryforward 323,000
--------
625,000
Less valuation allowance
Net operating loss carryover of Tatonka
at April 3, 1998 (115,000)
Other (116,000)
--------
394,000
Deferred tax liabilities
Accounts receivable (394,000)
---------
Net deferred tax asset $ --
========
</TABLE>
A valuation allowance has been provided against deferred tax assets at
December 31, 1998, because of uncertainties regarding their ultimate
realization.
The Company has net operating loss carryovers at December 31, 1998 of
approximately $900,000, of which approximately $300,000 relates to Tatonka.
The carryovers expire, if not utilized, from 2009 through 2018. Use of the
carryovers is limited by the change in ownership rules of the Internal
Revenue Code.
F-13
<PAGE>
PHYMED, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE I - LOSS PER SHARE
Loss per share has been calculated based upon the number of shares
(6,891,541) issued by PHYMED, INC. on April 3, 1998, for the acquisition of
PMDIC, with retroactive application to all periods presented. For the period
subsequent to April 3, 1998, weighted average shares outstanding include
also the outstanding shares of PHYMED, INC. (951,556) held by the pre-merger
PHYMED, INC. shareholders.
No effect has been given in the calculation of loss per share to the effect
of the Series A convertible preferred stock, because the result of assumed
conversion is antidilutive.
NOTE J - STOCK OPTIONS
In 1998, the Company granted stock options to its Chief Executive Officer,
George Barker, and two Directors to purchase shares of the Company's common
stock at $1.30 per share. The options have a 10-year term. Mr. Barker was
granted 500,000 options that vest based on the Company attaining certain
operating profit goals. The Directors were granted 250,000 options each that
are exercisable immediately. At December 31, 1998, options to purchase
500,000 shares were exercisable.
The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS
123). It applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations for accounting stock options.
Had compensation costs for stock based compensation plans been determined
consistent with the fair value method of FAS 123, the Company's net loss and
net loss per common share for 1998 would have been $1,329,983 and $.17. The
fair value of these options were estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used; expected volatility 693%, risk free rate of 5.9% no
dividend yield and expected life of 10 years. The weighted average fair
value of options granted during 1998 was $1.30 per share.
F-14
<PAGE>
PHYMED, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors a leveraged employee stock ownership plan (ESOP) that
covers all employees who have completed one year of service and who are at
least 18 years of age. The Company accounts for its ESOP in accordance with
Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans". Accordingly, the Company reports in its balance sheet the
debt of the ESOP and Unearned ESOP Compensation. The Company allocates the
shares purchased by the ESOP to qualifying employees as payments are made on
the debt of the ESOP. As shares are allocated to employees the Company
records compensation expense equal to the fair value of the shares, as
determined by an annual independent valuation. The difference in the fair
value of shares allocated to employees and the cost of the shares is charged
or credited to equity, net of related income taxes. All ESOP shares are
pledged as collateral for the ESOP debt.
<TABLE>
<CAPTION>
The status of ESOP shares was as follows:
December 31, 1998
----------------------
PHYMED, INC. PMDIC
<S> <C> <C> <C>
Allocated shares 1,507,525 79
Unallocated shares -- 55
--------- ------
Total ESOP shares 1,507,525 134
========= ======
Fair value of unallocated shares $144,375
=======
The Company recognized expense under the plan of $74,210 in 1998 and $148,337
in 1997.
</TABLE>
NOTE L - RELATED PARTY TRANSACTIONS
Mr. George C. Barker, the Company's Chief Executive Officer and majority
shareholder, owns a 50% interest in and is President of American Medical
Imaging Corporation ("AMIC"), which rents a mobile magnetic resonance
imaging ("MRI") machine to McAllen. The Company and AMIC have a business
relationship which is embodied in a Radiology Services Provider Agreement -
Contracted Services dated February 1, 1996. This agreement has a one year
term which renews automatically each year for one additional year unless
terminated by one of the parties. AMIC refers patients to the Company for
MRI procedures AMIC is unable to perform on its own MRI machine. The Company
invoices AMIC directly for such procedures at a discounted fee of $300 per
procedure, and AMIC pays the invoices directly to the Company upon receipt.
PhyMed received revenues of $149,000 in 1998 and $176,000 in 1997 from AMIC.
F-15
<PAGE>
PHYMED, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE L - RELATED PARTY TRANSACTIONS - Continued
The Company entered into a 10-year Management/Licensing Agreement with
Medical Imaging of Plano, Inc. ("MIPI") effective January 14, 1998 with
respect to the operation of a new full service radiology center in Plano,
Texas. The Company managed the new center until September 30, 1999, when the
agreement was terminated by mutual consent. Mr. Barker owns 12.5% of the
common stock of MIPI and is its President. Mr. Barker has personally
guaranteed for three years, $200,000 of MIPI's obligations under equipment
leases for equipment used at the new center. The Management/Licensing with
MIPI was terminated by mutual consent of the parties on September 30, 1999.
Mr. George C. Barker d/b/a "A/G Partners" manages for a monthly fee the
physician practice of The PRS Group, P.A. The Company does not have a direct
relationship with A/G Partners. On January 1, 1996, PhyMed and The PRS
Group, P.A. entered into a 10-year Radiology Services Agreement which
provided that The PRS Group, P.A. would provide the professional service
component and the Company would provide the technical component of the
diagnostic radiological services rendered at its Center. Under this
arrangement the Company and The PRS Group, P.A. each bill patients
separately for their components of the diagnostic services. On September 1,
1997, the parties entered into a new 10-year Radiology Services Agreement,
which contains substantially the same provisions as the 1996 agreement. This
Agreement was canceled by mutual consent as of November 30, 1998.
NOTE M - FOURTH QUARTER ADJUSTMENTS
During the fourth quarter of 1998, the Company recorded approximately
$700,000 in charges related to contractual allowances and bad debts.
NOTE N - RESTATEMENT
The Company has determined that the allowance for doubtful accounts and
contractual allowances was understated by $684,000 at December 31, 1997 and,
accordingly, has restated its financial statements for 1997. The effect of
this restatement is as follows:
Increase (decrease)
Net patient revenues $(345,000)
Deferred income tax benefit 128,000
Net loss 217,000
Accounts receivable at December 31, 1997 (684,000)
Retained earnings
January 1, 1997 (214,000)
December 31, 1997 (431,000)
F-16
<PAGE>
EXHIBITS
1.1 Agreement and Plan of Reorganization and Merger as of March 6, 1998 by
and among Tatonka Energy, Inc. Tatonka Energy Subsidiary Phy.Med.,
Inc. and the Stockholders of PhyMed, Inc. (Exhibit 1)*
1.2 Amendment to Agreement and Plan of Reorganization and Merger dated as
of March 6, 1998, by and among Tatonka Energy, Inc. Tatonka Energy
Subsidiary, Inc. Phy.Med., Inc. and the Shareholders of PhyMed, Inc.
(Exhibit 1.2)****
3.1 Amended Certificate of Incorporation of PHYMED, INC. filed with the
Secretary of State of Oklahoma on February 25, 1999
3.2 Loan and Security Agreement by and between PhyMed Inc., as Borrower,
and Patrick A. Luckett, as Lender, and George C. Barker, as Guarantor,
dated September 21, 1993 (Exhibit 3.1)***
3.3 $800,000 Note Dated September 21, 1993 from PhyMed, Inc. to Patrick A.
Luckett (Exhibit 3.3)***
3.4 $800,000 Note dated September 21, 1993 from Phy.Med., Inc. Employee
Stock Ownership Plan of Phy.Med., Inc. (Exhibit 3.3)***
3.5 Note Purchase Agreement (undated but) executed September 21, 1993, by
and between Patrick A. Luckett, Phy.Med., Inc. and the Employee Stock
Ownership Plan of Phy.Med., Inc. (Exhibit 3.4)***
3.6 Guaranty Agreement dated September 21, 1993, signed by George C.
Barker in favor of Patrick Alan Luckett (Exhibit 3.5)***
3.7 Limited waiver of Certain Rights and Remedies executed by Patrick Alan
Luckett on October 24, 1998 (Exhibit 3.6)***
10.1 Employment Agreement dated October 1, 1993, between Phy.Med., Inc. and
George C. Barker (assumed by Registrant on April 3, 1998) (Exhibit
10.5)**
10.2 Stock Option Agreement dated May 4, 1998, between the Company and
George C. Barker (Exhibit 10.6)**
10.3 Stock Option Agreement dated May 4, 1998, between the Company and Joe
R. Love (Exhibit 10.7)**
10.4 Stock Option Agreement dated May 4, 1998, between the Company and Joe
P. Foor (Exhibit 10.8)**
10.5 Letter Agreement dated March 31, 1998 by and among the Registrant and
CCDC, Inc. and Joe For (Exhibit 10.9)**
10.6 Loan and Security Agreement (undated) between Medical Equipment
Finance Company and Phy.Med., Inc. [This is the "DVI" financing
document. Medical Equipment Finance Company is a subsidiary of DVI.]
(Exhibit 10.6)***
10.7 Equipment Lease Agreement, effective July 11, 1995, between Siemens
Credit Corporation and Phy.Med., Inc. (Exhibit 10.7)***
10.8 Promissory Note of Phy.Med., Inc. (undated) to Siemens Credit
Corporation in the principal amount of $175,000 (Exhibit 10.8)***
10.9 (Real Estate) Lease Agreement made and entered in as of March 15,
1996, between Cocanougher Feed Co., Inc. d/b/a Cocanougher Asset
Management, ("Lessor"), and PhyMed, Inc., d/b/a PhyMed Diagnostic
Imaging Center ("Lessee") (Exhibit 10.9)***
10.10 Management/Licensing Agreement dated January 4, 1998 between
Phy.Med., Inc. and Medical Imaging of Plano, Inc. (Exhibit 10.10)**
10.11 Radiology Service Provider Agreement - Contracted Services dated
February 1, 1996 between Phy.Med., Inc. and American Medical Imaging
Incorporated (Exhibit 10.11)**
<PAGE>
10.12 Radiology Services Agreement dated September 1, 1997, between
Phy.Med., Inc. and the PRS Group, P.A. (Exhibit 10.13)**
10.13 Amendment dated February 23, 2000 to Stock Option Agreement dated May
4, 1998 between Registrant and George C. Barker
10.14 Amendment dated February 23, 2000 to Stock Option Agreement dated May
4, 1998 between Registrant and Joe. R. Love
10.15 Amendment dated February 23, 2000 to Stock Option Agreement dated May
4, 1998 between Registrant and Joe. P. Foor
10.16 Master Lease Agreement Number 11053 effective October 11, 1999
between Prime Leasing Company and PHYMED Diagnostic Imaging Center -
Hillcrest., Inc. (a wholly owned subsidiary of the Registrant)
10.17 Lease Schedule Number 1 to master Lease Agreement Number 11053
10.18 Amendment to Lease Schedule Number 1 to Master Leasse Agreement
Number 11053
10.19 Master Lease Agreement Number 11500effective February 11, 2000
between Prime Leasing Company and PHYMED Diagnostic Imaging Center -
White Rock, Inc. (a wholly owned subsidiary of the Registrant)
10.20 Lease Schedule Number 1 to master Lease Agreement Number 11500
10.21 Agreement of Limited Partnership ( White Rock JV, Ltd.) between LDE
Ventures, Inc. and Registrant dated December 18, 1999 regarding the
operation and use of the Siemens 1.5 MRI
10.22 Master Lease Agreement Number 11113 effective February 11, 2000
between Prime Leasing Company and White Rock JV, Ltd.
10-23 Lease Schedule Number 1 to master Lease Agreement Number 11113
10.24 Management and Agreement dated December 11, 1999 between White Rock
JV, Ltd. and PHYMED Contracted Services Corporation (a wholly owned
subsidiary of the Registrant)
10.25 Office Lease Agreement made and entered in as of September 8, 1999,
between AETNA Life Insurance Company (Lessor) and Registrant
27 Financial Data Schedule
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
[symbol omitted]
AMENDED
CERTIFICATE OF INCORPORATION
WHEREAS, the Amended Certificate of Incorporation of
PHYMED, INC.
has been filed in the office of the Secretary of State as provided by the laws
of the State of Oklahoma.
NOW THEREFORE, I, the undersigned, Secretary of State of the State of Oklahoma,
by virtue of the powers vested in me by law, do hereby issue this certificate
evidencing such filing.
IN TESTIMONY WHEREOF, I have hereunto set my hand and caused to be affixed the
Great Seal of the State of Oklahoma.
Filed in the City of Oklahoma City this 25th
------
day of February, 1999
-------- ----
/s/ illegible
---------------------
By: /s/ illegible
---------------------------------
[state seal
symbol omitted]
<PAGE>
FILED
FEB 25 1999
OKLAHOMA SECRETARY
OF STATE
AMENDED
CERTIFICATE OF INCORPORATION
(AFTER RECEIPT OF PAYMENT OF STOCK)
TO: OKLAHOMA SECRETARY OF STATE
2300 N. Lincoln Blvd., Room 101, State Capitol Building
Oklahoma City, Oklahoma 73105-4897
(405)-522-4560
PLEASE NOTE: This form MUST be filed with a letter from the Oklahoma Tax
Commission, Franchise Tax Department, stating that the franchise tax, due
yearly, has been paid for the current fiscal year.
The undersigned Oklahoma corporation, for the purpose of amending its
certificate of incorporation as provided by Section 1077 of the Oklahoma General
Corporation Act, hereby certifies:
1. A. The name of the corporation is:
Tatonka Energy, Inc
- --------------------------------------------------------------------------------
B. As amended: The name of the corporation has been changed to:
Phymed, Inc.
- --------------------------------------------------------------------------------
(Please Note: The new name of the corporation MUST contain one of the following
words: association, company, corporation, club, foundation, fund, incorporated,
institute, society, union, syndicate or limited or one of the abbreviations
co.,corp.,inc. or ltd.)
2. The name of the registered agent and the street address of the registered
office in the State of Oklahoma is:
Joe R. Love 1601 N.W. Expressway, Suite 1910 Oklahoma City, OK 73118
- --------------------------------------------------------------------------------
Name of Agent Street Address City County Zip Code
(P.O. BOXES ARE NOT ACCEPTABLE)
3. The duration of the corporation is: Perpetual
----------------------------------------
<PAGE>
4. The aggregate number of the authorized shares, itemized by class, par value
of shares, shares without par value, and series,if any, within a class is:
NUMBER OF SHARES SERIES PAR VALUE PER SHARE
(If any) (Or, if without par value, so state)
COMMON 50,000,000 $0.01
Series "A" Preferred Stock
------------- ---------
PREFERRED 1,000,000 $1.00
----------- ---------
5. Set forth clearly any and all amendments to the certificate of
incorporation which are desired to be made:
See exhibit "A" attached hereto and incorporated herein for all purposes.
That at a meeting of the Board of Directors, a resolution was duly adopted
setting forth the foregoing proposed amendment(s) to the Certificate of
Incorporation of said corporation, declaring said amendment(s) to be advisable
and calling a meeting of the shareholders of said corporation for consideration
thereof.
That thereafter, pursuant to said resolution of its Board of Directors, a
meeting of the shareholders of said corporation was duly called and held, at
which meeting the necessary number of shares as required by a statute were voted
in favor of the amendment(s).
IN WITNESS WHEROF, said corporation has caused this certificate to be
signed by its President or Vice President and attested by its Secretary or
Assistant Secretary, this 19th day of February, 1999.
/s/ George C. Barker
----------------------------------
George C. Barker
-----------------------------------
(PLEASE PRINT NAME)
ATTEST:
/s/ Judith F. Barker
- ----------------------
Secretary
Judith F. Barker
- ----------------------
(PLEASE PRINT NAME)
<PAGE>
TATONKA ENERGY, INC.
AMENDED ARTICLES 1 AND 5 OF THE CERTIFICATE OF INCORPORATION
The present Article 1 of the Certificate of Incorporation of Tatonka
Energy, Inc. is deleted in its entirety and replaced with the following Article
1:
"1. The name of this Corporation is:
PHYMED, Inc."
The present Article 5 of the Certificate of Incorporation of Tatonka
Energy, Inc. is deleted in its entirety and replaced with the following Article
5:
"5. The shares to be issued by the Corporation shall be of two classes,
namely, Voting Common Stock, of a par value of One Cent ($0.01) per
share, and Preferred Stock, of a par value of One Dollar ($1.00) per
share. The Corporation shall have the authority to allot an aggregate
number of fifty million (50,000,000) shares of the Voting Common Stock
and an aggregate number of one million (1,000,000) shares of Preferred
Stock.
A. Authority of the Board of Directors. Regarding Preferred Stock,
135,139 shares are designated as Series "A" Preferred Stock
(Non-Voting) and 500,000 shares are designated as Series B 12%
Cumulative Convertible Preferred Stock. The Board of Directors shall be
vested with and shall have the authority to issue any or all shares of
Preferred Stock in one or more series and by resolution or resolutions,
to establish the designation, number, full or limited voting powers, or
the denial of voting powers, preferences and relative, participating,
optional, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics of each series
to be issued; provided, however, that the Board of Directors may not
change the rights and preferences of shares of Series "A" Preferred
Stock (Non-Voting) or Series B 12% Cumulative Convertible Preferred
Stock, which are outstanding at the time any authorized change is to
take effect.
B. Series B 12% Cumulative Convertible Preferred Stock. The "Series B
12% Cumulative Convertible Preferred Stock" (the "Series B Preferred
Stock") shall have the powers, preferences and relative, participating,
optional, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics set forth below.
(a) Voting Rights. The Series B Preferred Stock shall
be nonvoting stock, and the holders (hereinafter
called "Holders") of Series B Preferred Stock shall
have no voting rights except where required by law.
(b) Dividend Rights. Subject to the restrictions an
limitations of subparagraphs (ii) and (iii) below,
the Holders of Series B Preferred Stock shall be
entitled to receive dividends as provided in
subparagraph (i) below:
(i) The Holders of Series B Preferred Stock
shall be entitled to receive dividends out of any
funds legally available for that purpose at the
annual rate of 12% of the amount of the liquidation
preference and no more, payable annually, or at such
shorter intervals as the Board of Directors may from
time to time determine. Dividends shall accrue on all
1
<PAGE>
shares of Series B Preferred Stock from the date they
are issued and shall accrue from day to day, whether
or not earned or declared. Such dividends shall be
payable when, as and if declared by the Board of
Directors. Nothing contained herein shall obligate
the Board of Directors to declare any dividends to
the Holders of Series B Preferred Stock, and such
Holders shall have no right to receive any dividends
unless and until declared by the Board of directors
in its sole and absolute discretion. Dividends shall
be paid once a year within forty-five (45) days after
completion of the audit of the Corporation's
financial statements for each fiscal year. Accrued
but unpaid dividends on the Series B Preferred Stock
will be payable before any dividends are paid,
declared, or set apart for holders of any other
series of Preferred Stock junior to the Series B
Preferred Stock or for holders of Common Stock. In
addition, dividends are cumulative so that if, for
any dividend period, the preferential dividends on
Series B Preferred Stock are not paid, or declared,
or set apart, the deficiency must be fully paid or
declared and set apart, without interest, before any
distribution (by dividend or otherwise) is paid on,
declared, or set apart for any other series of
Preferred Stock junior to the Series B Preferred
Stock or for Common Stock
(ii) Prior to the end of the first full
fiscal year ending on or after December 31, 1998,
during which the Corporation shall have reported net
income after taxes of at least $1,200,000, as
reflected on the Corporation's audited financial
statements for such year, the Board of Directors
shall have the right and option, in its sole and
absolute discretion, at any time or times, or
intermittently from time to time, to determine or
declare that dividends shall not accrue from day to
day and, accordingly, shall not be paid, on the
Series B Preferred Stock. In the event of such
determination or determinations by the Board of
directors, the Holders of Series B Preferred Stock
shall not be entitled to receive dividends during
such period of time or times as the Board of
Directors may determine.
(iii) Notwithstanding any other term or
provision contained herein, and as a completely
separate and independent matter from the provisions
of subparagraph (ii) above, the Board of Directors
shall, in its sole and absolute discretion, have the
right and option, but not the obligation, to pay
dividends on the Series B Preferred Stock either in
shares of Common Stock or in cash for any period or
periods of time, whether consecutive or not, such as,
for example, for an entire year, for a portion or
portions of a year, for multiple years, or for
portions of multiple years. If the Board of Directors
determines to pay dividends for any period in shares
of Common Stock, the value of a share shall be
determined by averaging the daily closing prices
(i.e., last sale price, regular way) for a share of
Common Stock for the 10 consecutive trading days on
which such shares are actually traded on the NASDAQ
National Market System preceding the end of the
period, if the Common Stock is so traded at the time.
If not, the average of the high bid and low asked
prices as reported in the Wall Street Journal, or if
not so reported, as furnished by a professional
market maker making a market in the Common Stock and
selected by the Board of Directors of, shall be used.
(c) Liquidation Preference. On any voluntary or
involuntary liquidation of the Corporation, the
Holders of Series B Preferred Stock shall receive a
liquidation preference equal to $10.00 per share,
plus any declared and unpaid dividends on Series B
Preferred Stock, and no more, before any amount is
paid to the holders of the Common Stock. or any other
series of Preferred Stock junior to the Series B
Preferred Stock. Each certificate representing shares
of Series B Preferred Stock shall show on its face
the amount of the liquidation preference per share.
2
<PAGE>
If the assets of the Corporation should be
insufficient to permit payment to the Holders of
Series B Preferred Stock of their full liquidation
preference amounts as herein provided, then such
assets will be distributed ratably among the holders
of outstanding shares of Series B Preferred Stock. If
the assets of the Corporation are sufficient to
permit payment to the Holders of Series B Preferred
Stock of their liquidation preference in full, the
holders of any other series of Preferred Stock junior
to the Series B Preferred Stock and/or the holders of
Common Stock shall receive ratably all the remaining
assets of the Corporation. A merger or consolidation
of the Corporation with or into any other
corporation, or a sale of all or substantially all of
the assets of the Corporation will be deemed a
liquidation of the Corporation within the meaning of
this paragraph, thereby entitling Holders to the
liquidation preference.
(d) Conversion Rights of Holders. The Holder of any shares of
Series B Preferred Stock shall have the right and option to
convert any of such shares of Series B Preferred Stock into
shares of Common Stock on the following terms:
(i) Conversion Rate. Commencing August 31, 1999, each
outstanding share of Series B Preferred Stock shall be
convertible at any time and from time to time, at the option
of the Holder, into ten (10) shares of Common Stock (as
constituted after the effectiveness of a 1-for-10 reverse
stock split).
(ii) Procedure. Any Holder may convert by delivering to the
office of the Corporation or its transfer agent a written
notice electing to convert and surrendering the Holder's
certificate(s) being converted, duly endorsed for transfer.
(e) General Conversion Provisions. The following provisions apply
to conversion:
(i) Anti-dilution Rights. While the Series B Preferred Stock
is outstanding, if the Corporation:
(w) divides its outstanding shares of Common Stock into
a greater number of shares;
(x) combines its outstanding shares of Common Stock
into a small number of shares;
(y) pays a dividend or makes a distribution on its
Common Stock in shares of its capital stock or other
property; or
(z) issues by reclassification of its Common Stock any
shares of its capital stock or other property;
then the conversion privilege in effect immediately before
such action will be adjusted so that the each Holder of the
Series B Preferred Stock thereafter converted may receive the
number of shares of Common Stock, capital stock or other
property that he would have owned immediately following such
action if he had converted the shares of Series B Preferred
Stock immediately before the record date (or, if no record
date, the effective date) for such action.
The adjustment will become effective immediately after the
record date in the case of a dividend or distribution and
immediately after the effective date in the case of a
subdivision, combination or reclassification.
3
<PAGE>
(ii) No Fractional Shares. Neither fractional shares, nor
scrip or other certificates evidencing such fractional shares,
will be issued by the Corporation on conversion of Series B
Preferred Stock, but the Corporation will pay in lieu thereof
the Determined Value (defined below) in cash to the holders
who would be entitled to receive such fractional shares. The
"Determined Value" means the otherwise-issuable fraction of a
share of Common Stock multiplied by the average of the daily
closing prices (i.e., last sale price, regular way) for a
share of Common Stock for the 10 consecutive trading days on
which such shares are actually traded on the NASDAQ National
Market System (if the Common Stock is so traded at the time)
preceding the date the Holder delivered to the office of the
Corporation or its transfer agent a written notice electing to
convert and surrendering the Holder's certificate(s)
evidencing the shares of Series B Preferred Stock being
converted, duly endorsed for transfer. If the Common Stock is
not so traded at the time, the average of the high bid and low
asked prices as reported in the Wall Street Journal, or if not
so reported, as furnished by a professional market maker
making a market in the Common Stock and selected by the Board
of Directors of, shall be used.
(iii) Status of Converted Shares. Shares of Series B Preferred
Stock that are converted will be restored to the status of
authorized but unissued shares of Preferred Stock, and will no
longer be authorized but unissued shares of Series B Preferred
Stock.
(iv)Reservation of Shares. The Corporation will at all times
reserve and keep available out of its authorized but unissued
shares of Common Stock such number of shares of Common Stock
as may be necessary for the purpose of converting all
outstanding shares of Series B Preferred Stock into the full
number of shares of Common Stock issuable upon conversion of
all such Series B Preferred Stock.
(f) Redemption. The Corporation may redeem Series B Preferred
Stock under the following terms and conditions:
(i) Terms of Redemption. On or after 5:00 p.m. Dallas, Texas
time, July 31, 2000, the Corporation, may, at the option of
the Board of Directors, redeem the whole, or from time to time
any part, of the outstanding Series B Preferred Stock by
paying in cash $10.00 per share, plus all dividends accrued,
unpaid, and accumulated thereon, as provided in this paragraph
through and including the redemption date (the "Redemption
Price") and by giving to each record Holder of Series B
Preferred Stock at his or her last known address as shown on
the Corporation's records, at least thirty (30) but not more
than sixty (60)days' notice. This "Redemption Notice" may be
either in person or in writing, by mail, postage prepaid and
must state the class or series or part of any class or series
of shares to be redeemed, along with the date and plan of
redemption, the Redemption Price, and the place where the
shareholders may obtain payment of the Redemption Price on
surrendering their share certificates. If only a part of the
outstanding Series B Preferred Stock is redeemed, redemption
will be by lot or pro rata, as the Board of Directors
prescribes. But no Series B Preferred Stock may be redeemed
unless all accrued and accumulated dividends on all
outstanding Series B Preferred Stock have been paid for all
past dividend periods and full dividends for the current
period through and including the redemption date have been
paid or declared and set apart for payment. On or after the
date fixed for redemption, each Holder of shares called for
redemption may, unless the Holder has previously exercised the
option to convert the Holder's Series B Preferred Stock as
provided elsewhere herein, surrender to the Corporation the
certificate for the shares at the place designated in the
Redemption Notice and will then be entitled to receive payment
of the Redemption Price. If fewer than all the shares
represented by any surrendered certificate are redeemed, a new
certificate for the unredeemed shares will be issued. If the
Redemption Notice is duly given and sufficient funds are
4
<PAGE>
available on the date fixed for redemption, then, whether or
not the certificates representing the shares to be redeemed
are surrendered, all the Holders' rights with respect to the
shares called for redemption will terminate on the date fixed
for redemption, except for the Holders' right to receive the
Redemption Price, without interest, on surrendering their
certificates.
(ii) Deposit of Funds. Shares are considered redeemed, and
dividends on them cease to accrue after the date fixed for
redemption, if, on or before any date fixed for redeeming the
Series B Preferred Stock as provided in this paragraph, the
Corporation deposits as a trust fund with any bank or trust
company in Oklahoma or Texas (or any bank or trust company in
the United States duly appointed and acting as the
Corporation's transfer agent) a sum sufficient to redeem, on
the date fixed for redemption, the shares called for
redemption, with irrevocable instructions and authority to the
bank or trust company (a) to publish the Redemption Notice (or
to complete publication already begun), and (b) to pay, on and
after the date fixed for redemption or before that date, the
Redemption Price of the shares to their holders when they
surrender their certificates. The deposit is considered to
constitute full payment of the shares to their holders, and
from the date of the deposit the shares will no longer be
considered outstanding. Moreover, the Holders of the shares
will cease to be shareholders with respect to the shares,
except to receive from the bank or trust company payment of
the Redemption Price of the shares (without interest) on
surrendering of the certificates and to convert the shares to
Common Stock as provided elsewhere herein. Any money so
deposited on account of the Redemption Price of Series B
Preferred Stock shares converted after the deposit is made
must be repaid immediately to the corporation on conversion of
those shares of Series B Preferred Stock.
(iii) Status of Redeemed Shares. Shares of Series B Preferred
Stock redeemed by the Corporation shall be restored to the
status of authorized but unissued shares.
(i) No Preemptive Rights. Holders of Series B Preferred Stock
will not have any preemptive rights to subscribe for or
purchase any additional shares of Preferred Stock of any
series or any shares of the Corporation's Common Stock.
(j) Restriction of Surplus. The liquidation preference of the
Series B Preferred Stock exceeds the par value thereof by
$9.99 per share. As long as any shares of Series B Preferred
Stock are outstanding, surplus shall be restricted on any
specific date by an amount equal to the product of (i) $9.99
multiplied by (ii) the number of shares of Series B
Preferred Stock then outstanding. In furtherance of this
restriction of surplus, the Corporation covenants and agrees
that, so long as any shares of Series B Preferred Stock are
issued and outstanding, the Corporation shall not pay any
dividend, make any other distribution, or enter into or
consummate any transaction which would have the effect of
reducing the combined (i) par value of all shares of Series
B Preferred Stock then outstanding and (ii) surplus of the
Corporation to an amount less than the aggregate liquidation
preference of all the then-outstanding shares of Series B
Preferred Stock."
5
Exhibit 10.13
AMENDMENT TO STOCK OPTION AGREEMENT
George C. Barker
This Amendment to Stock Option Agreement is made as of the 4th day of
May, 1998, between Tatonka Energy, Inc., an Oklahoma corporation ("Company") and
George C. Barker, ("Optionee").
WHEREAS, on May 4, 1988, the Company granted Optionee an option to
purchase an aggregate of 5,000,000 shares of Company's Common Stock, par value
of $0.001 (as presently constituted), on the terms and conditions hereinafter
set forth, at the purchase price of $0.075 per share as presently constituted
(500,000 shares at $0.75 per share, after the effectiveness of the proposed
1-for-10 reverse stock split); and
WHEREAS, the option was contained in that certain Stock Option
Agreement dated as of May 4, 1988; and
WHEREAS, the Company and the Optionee intended that the option be
granted at a price equal to 100% of the fair market value of the Company's
Common Stock on the date of grant; and
WHEREAS, the parties believed at the time that $0.075 per share (as
presently constituted) was the fair market value of the Common Stock on such
date, but the parties have subsequently learned that the fair market value of
the Common Stock on such date was $0.13; and
WHEREAS, the parties desire to amend the Stock Option Agreement, as of
May 4, 1998, to correct this error;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and Optionee agree as follows:
1. The purchase price shall be $0.13 per share as presently constituted
($1.30 per share, after the effectiveness of the proposed 1-for-10 reverse stock
split).
2. Except as amended by this Amendment, the terms and provisions of the
Stock Option Agreement shall be unchanged and shall remain in full force and
effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to Stock
Option Agreement to be executed in its name by its President and attested by its
Secretary on the day and year first above written, and the Optionee has hereunto
set his hand and seal on the day and year specified below.
TATONKA ENERGY, INC.
By /s/ George C. Barker
---------------------------
George C. Barker, President
ATTEST:
/s/ Judith F. Barker
- ---------------------------
Judith F. Barker, Secretary
By /s/ George C. Barker
---------------------------
George C. Barker, Optionee
AMENDMENT TO STOCK OPTION AGREEMENT
Joe R. Love
This Amendment to Stock Option Agreement is made as of the 4th day of
May, 1998, between Tatonka Energy, Inc., an Oklahoma corporation ("Company") and
Joe R. Love ("Optionee").
WHEREAS, on May 4, 1988, the Company granted Optionee an option to
purchase an aggregate of 2,500,000 shares of Company's Common Stock, par value
of $0.001 (as presently constituted), on the terms and conditions hereinafter
set forth, at the purchase price of $0.075 per share as presently constituted
(250,000 shares at $0.75 per share, after the effectiveness of the proposed
1-for-10 reverse stock split); and
WHEREAS, the option was contained in that certain Stock Option
Agreement dated as of May 4, 1988; and
WHEREAS, the Company and the Optionee intended that the option be
granted at a price equal to 100% of the fair market value of the Company's
Common Stock on the date of grant; and
WHEREAS, the parties believed at the time that $0.075 per share (as
presently constituted) was the fair market value of the Common Stock on such
date, but the parties have subsequently learned that the fair market value of
the Common Stock on such date was $0.13; and
WHEREAS, the parties desire to amend the Stock Option Agreement, as of
May 4, 1998, to correct this error;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and Optionee agree as follows:
1. The purchase price shall be $0.13 per share as presently constituted
($1.30 per share, after the effectiveness of the proposed 1-for-10 reverse stock
split).
2. Except as amended by this Amendment, the terms and provisions of the
Stock Option Agreement shall be unchanged and shall remain in full force and
effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to Stock
Option Agreement to be executed in its name by its President and attested by its
Secretary on the day and year first above written, and the Optionee has hereunto
set his hand and seal on the day and year specified below.
TATONKA ENERGY, INC.
By /s/ George C. Barker
---------------------------
George C. Barker, President
ATTEST:
/s/ Judith F. Barker
- ---------------------------
Judith F. Barker, Secretary
By /s/ George C. Barker
---------------------------
George C. Barker, Optionee
AMENDMENT TO STOCK OPTION AGREEMENT
Joe P. Foor
This Amendment to Stock Option Agreement is made as of the 4th day of
May, 1998, between Tatonka Energy, Inc., an Oklahoma corporation ("Company") and
Joe P. Foor ("Optionee").
WHEREAS, on May 4, 1988, the Company granted Optionee an option to
purchase an aggregate of 2,500,000 shares of Company's Common Stock, par value
of $0.001 (as presently constituted), on the terms and conditions hereinafter
set forth, at the purchase price of $0.075 per share as presently constituted
(250,000 shares at $0.75 per share, after the effectiveness of the proposed
1-for-10 reverse stock split); and
WHEREAS, the option was contained in that certain Stock Option
Agreement dated as of May 4, 1988; and
WHEREAS, the Company and the Optionee intended that the option be
granted at a price equal to 100% of the fair market value of the Company's
Common Stock on the date of grant; and
WHEREAS, the parties believed at the time that $0.075 per share (as
presently constituted) was the fair market value of the Common Stock on such
date, but the parties have subsequently learned that the fair market value of
the Common Stock on such date was $0.13; and
WHEREAS, the parties desire to amend the Stock Option Agreement, as of
May 4, 1998, to correct this error;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and Optionee agree as follows:
1. The purchase price shall be $0.13 per share as presently constituted
($1.30 per share, after the effectiveness of the proposed 1-for-10 reverse stock
split).
2. Except as amended by this Amendment, the terms and provisions of the
Stock Option Agreement shall be unchanged and shall remain in full force and
effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to Stock
Option Agreement to be executed in its name by its President and attested by its
Secretary on the day and year first above written, and the Optionee has hereunto
set his hand and seal on the day and year specified below.
TATONKA ENERGY, INC.
By /s/ George C. Barker
---------------------------
George C. Barker, President
ATTEST:
/s/ Judith F. Barker
- ---------------------------
Judith F. Barker, Secretary
By /s/ George C. Barker
---------------------------
George C. Barker, Optionee
- --------------------------------------------------------------------------------
MASTER LEASE AGREEMENT
- --------------------------------------------------------------------------------
Master Lease Agreement No. 11053 ("MASTER LEASE")
LESSOR: PRIME LEASING, INC., LESSEE: PHYMED Diagnostic Imaging
an Illinois corporation ("LESSOR") Center Hillcrest, Inc.,
10275 W. Higgins Road a Texas corporation ("LESSEE")
Rosemont, IL 60018 12840 Hillcrest Road, Suite 100
847/294-6000 Dallas, Texas 75230
Phone:
WHEREAS, LESSOR, as the foreclosing secured party under a Loan and Security
Agreement dated September 15, 1998, between Lessor, as secured party, and The
Ranch Imaging Center, L.C. and Millennium Diagnostic Imaging, L.L.C., as
debtors, conducted a public foreclosure sale of certain equipment. which is more
particularly described in the Lease Schedule attached hereto (the "Foreclosed
Equipment"); WHEREAS, LESSOR and LESEE previously have entered into a Secured
Party's Temporary Master Lease Agreement (the "Temporary Master Lease"), dated
October __, 1999, whereby LESSOR leased to LESSEE such Foreclosed Equipment in a
limited disposition of the Foreclosed Equipment, which was conducted as a
private sale/disposition of the Foreclosed Equipment pending the consummation of
a public sale of the Foreclosed Equipment; WHEREAS, LESSOR acquired title to the
Foreclosed Equipment at the public foreclosure sale; WHEREAS, LESSOR desires to
lease the Foreclosed Equipment to LESSEE and may lease additional equipment
(referred to as "Additional Equipment") to Lessee in the future (the Foreclosed
Equipment and the Additional Equipment being referred to collectively as the
"Equipment"); WHEREAS, LESSEE desires to lease the Foreclosed Equipment from
LESSOR and may lease Additional Equipment from Lessor in the future; and
WHEREAS, to facilitate the lease of the Foreclosed Equipment, the parties agree
to enter into this MASTER LEASE and to incorporate by reference from time to
time in lease schedules (hereinafter referred to as "Lease Schedules", and
individually as a "Lease Schedule") which will be attached hereto and made a
part hereof, various units of Equipment; NOW, THEREFORE, in consideration of the
mutual promises contained herein and other good and valuable consideration, the
parties hereto agree as follows:
TERMS, CONDITIONS AND COVENANTS OF LEASE
1. LEASE: This MASTER LEASE sets forth the terms and conditions by which LESSOR
agrees to lease to LESSEE and LESSEE agrees to lease from LESSOR the Equipment
as listed and described in each Lease Schedule executed pursuant to this MASTER
LEASE. Each Lease Schedule shall be separate and distinct for all purposes and
shall incorporate therein all the terms and conditions of this MASTER LEASE. If
there is a conflict between the Lease Schedule and this MASTER LEASE, the terms
and conditions of this MASTER LEASE shall govern and control.
2. TERM:
----
a. The term of this MASTER LEASE shall begin on the date of execution by LESSOR
and shall continue in effect thereafter until all of LESSEE'S obligations and
liabilities under this MASTER LEASE and every Lease Schedule have been fully
performed or otherwise discharged.
b. The lease term for each Lease Schedule shall commence on the earlier of the
Equipment installation, first clinical use, or the cutover date (hereinafter
referred to as "Commencement Date"). If any Equipment under the Lease Schedule
is not newly installed, then the Commencement Date shall be the date upon which
title to the Equipment passes to LESSOR. The lease term shall continue for the
number of months set forth in the Lease Schedule (hereinafter referred to as
"Initial Term") and continue for any extended or renewal term. The first payment
date of the Initial Term shall be the first day of the month immediately
following the Commencement Date (or beginning on the Commencement Date if that
date is on the first day of the month).
c. LESSEE shall deliver to LESSOR a Certificate of Acceptance within five (5)
days of the Commencement Date. If Lessee fails to deliver the Certificate of
Acceptance, LESSEE shall be deemed to have accepted the Equipment as installed
and operational as of the Commencement Date unless LESSEE gives LESSOR written
notice of each defect within five (5) days of the Commencement Date.
<PAGE>
3. RENT AND PAYMENTS: LESSEE'S obligation to pay rent under each Lease Schedule
shall begin on the Commencement Date and continue for the term. The monthly rent
(hereinafter referred to as "Monthly Rent") set forth in the Lease Schedule
shall be due and payable in advance on the first day of each calendar month
during the Initial Term without notice or demand notwithstanding the fact that
LESSOR may, as a convenience only, invoice LESSEE. If the Commencement Date of a
Lease Schedule shall be other than the first day of the month, LESSEE shall make
a rental payment (hereinafter referred to as "Interim Rent") equal to 1/30th of
the Monthly Rent set forth in the Lease Schedule for each day beginning with the
Commencement Date to and including the last day of the month prior to the
beginning of the Initial Term. Any amounts payable by LESSEE under this MASTER
LEASE other than the Monthly Rent and Interim Rent shall be deemed to be
additional rent (hereinafter referred to as "Additional Rent") and shall be paid
within twenty (20) days of invoicing by LESSOR. Rent shall be paid to LESSOR at
the address designated herein or at such other place as LESSOR designates in
writing, or if to an assignee of LESSOR, at such place as such assignee shall
designate in writing, by check or wire transfer so that all funds are
immediately available. As used herein, the term "rent" shall mean all Monthly
Rent, Interim Rent and Additional Rent. THIS IS A NON-CANCELABLE LEASE. LESSEE
shall pay the total rents for the entire term to LESSOR, or LESSOR'S assignee
(as defined herein), and such payment of rents shall be absolute and
unconditional without right to setoff, reduction, abatement, counterclaim,
recoupment, or defense of any kind whatsoever.
a. SERVICE CHARGE: In the event that any rent is not received by LESSOR or
LESSOR'S assignee within five (5) days of the due date thereof, LESSEE shall pay
a service charge of five percent (5%) of the past due payment and shall pay
interest at the rate of 1.5 percent (1.5%) per month or the maximum legal rate,
whichever is less, until all past due rents are received.
b. LEASE BASIS COST: The term "Lease Basis Cost" as used herein means the cost
of acquiring, delivering and installing the Equipment including but not limited
to all parts, materials, labor, services, transportation, taxes, and all other
charges of every kind and nature associated therewith.
c. NON-PERFORMANCE: If LESSEE fails to perform any of its covenants, warranties,
terms or conditions herein, LESSOR may, at its option, perform on LESSEE'S
behalf and all monies advanced by LESSOR shall be repayable by LESSEE as
Additional Rent. However, in no event shall LESSOR'S performance on behalf of
LESSEE be deemed to relieve LESSEE of its obligations hereunder.
4. LEGAL TITLE, LIENS, TAXES AND QUIET ENJOYMENT: During the term of this MASTER
LEASE, legal title to all Equipment shall at all times vest in LESSOR. LESSEE'S
interest in the Equipment shall be limited to its possession and use and LESSEE
shall not have or assert any right, title or interest therein, except as
expressly set forth herein, and shall protect, indemnify and defend, at its
expense, LESSOR'S legal title. LESSEE shall, at its expense, keep the Equipment
free and clear of any lien or encumbrance of any kind whatsoever except that of
LESSOR arising hereunder. LESSEE warrants that the Equipment will at all times
remain personal property, regardless of how it may be affixed to any real
property. Prior to LESSOR'S acceptance of this MASTER LEASE, LESSEE shall
provide LESSOR with a waiver, in form satisfactory to LESSOR, by the landlord or
mortgagee of the premises in which the Equipment is located, of such landlord's
or mortgagee's rights in and to the Equipment and/or the rent due under this
MASTER LEASE. In lieu of such waiver, LESSEE hereby agrees to hold LESSOR
harmless and indemnify LESSOR with regard to any and all claims, actions,
damages, costs and attorneys fees asserted by any landlord or mortgagee against
LESSOR or the Equipment herein. LESSEE shall pay all taxes, assessments or fees
assessed against the Equipment or payable by LESSOR or LESSEE with respect to
the Equipment, including any interest or penalties therein, excepting only
federal or state taxes based on the net income of LESSOR and without regard to
LESSOR'S agreement to invoice LESSEE for such amounts. LESSEE agrees, to the
extent permissible by law, to prepare and file all required tax returns and
other reports (other than reports regarding LESSOR'S income tax) with any
federal, state or other regulatory authority. LESSEE further agrees, to the
extent permitted by law, to take such actions and to file such documents as may
be required to ensure that the valuation of the Equipment, as reflected on the
records and tax rolls of applicable taxing authorities, does not exceed the fair
market value of the Equipment. To the extent LESSEE is not permitted to file
such returns, reports, or documents, LESSEE shall prepare them and provide them
to LESSOR for filing prior to the date such return or report is due. LESSOR
shall have the right to affix a stencil, plate, label or other indicia of its
ownership to the Equipment and LESSEE shall not remove or conceal such
identification. LESSEE shall have the right to quiet enjoyment of the Equipment
during the term of the Lease Schedule, so long as no event of default (as herein
defined) occurs.
<PAGE>
5. LOCATION, USE, MODIFICATIONS AND ALTERATIONS: LESSEE shall not move, or
permit the movement of, the Equipment from the location (hereinafter referred to
as "Equipment Location") specified in the Lease Schedule without LESSOR'S prior
written consent. LESSEE shall not use, or permit the use of, the Equipment
unless such use is consistent with LESSEE'S business, by qualified operators
under LESSEE'S control and in compliance with (A) applicable laws and
regulations; (B) the specifications of, and use contemplated by, the
manufacturer of the Equipment (hereinafter referred to as "Manufacturer"); (C)
the terms of LESSEE'S insurance coverage; and (D) the requirements of LESSEE'S
maintenance agreement regarding the Equipment. LESSEE shall not make any
modifications, alterations or additions to the Equipment without LESSOR'S prior
written consent (other than Manufacturer's Changes, as such term is hereinafter
defined) unless said additions (A) are readily removable without causing any
damage to the Equipment and (B) do not impair the quality, safety, function or
marketability of the Equipment (hereinafter referred to as a "Permitted
Modification"). Any Permitted Modification shall not become the property of
LESSOR and shall not be subject to the Lease Schedule, provided that upon
termination or expiration of the term, LESSEE shall remove all Permitted
Modifications and restore the Equipment to its original condition (ordinary wear
and tear excepted), all at no expense to LESSOR. LESSEE shall permit the
Manufacturer, its agents or its contractors, access to the Equipment for the
purpose of performing such upgrades, recall orders or engineering changes as the
Manufacturer shall require to enhance or maintain the Equipment's standard of
performance (herein defined as "Manufacturer's Changes"), all of which shall
immediately become the property of LESSOR and be subject to the Lease Schedule.
6. MAINTENANCE AND INSPECTION: THIS IS A NET LEASE. LESSEE shall, at its own
expense, maintain the Equipment in good condition and repair and furnish all
necessary repairs, parts, materials and supplies. At all times herein, LESSEE
shall keep in full force and effect a maintenance agreement with the
Manufacturer or, with LESSOR'S consent, with an equivalent service organization
that routinely maintains such Equipment (hereinafter referred to as "Equivalent
Service Organization"). During reasonable business hours and subject to LESSEE'S
reasonable security precautions, LESSEE shall permit LESSOR access to all of the
Equipment for the purpose of inspecting the Equipment to determine LESSEE'S
compliance with this MASTER LEASE. If LESSEE is not in compliance with this
MASTER LEASE, LESSOR shall notify LESSEE in writing of the acts of noncompliance
and LESSEE shall immediately cease using the Equipment until full compliance is
achieved.
7. DISCLAIMER OF WARRANTIES: LESSEE has selected at its own risk the
Manufacturer, size and design of the Equipment. LESSEE acknowledges that LESSOR
is not the Manufacturer, or its agent or distributor, and that LESSOR MAKES NO
REPRESENTATIONS OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE
MERCHANTABILITY, VALUE, CONDITION, QUALITY, DESIGN, CAPACITY, MATERIAL,
WORKMANSHIP OR FITNESS OR SUITABILITY FOR ANY PURPOSE OR USE BY LESSEE, OR
PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT. LESSOR SHALL NOT BE LIABLE FOR
LOSSES OR DAMAGES THEREFROM, INCLUDING BUT NOT LIMITED TO LOSS OF BUSINESS, OR
ACTUAL OR ANTICIPATED PROFITS, OR OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF ANY KIND WHATSOEVER ARISING FROM THIS MASTER LEASE OR THE EQUIPMENT.
So long as no Event of Default (as herein defined) has occurred and continues
uncured, LESSOR assigns LESSEE all of Manufacturer's warranties and
indemnifications, to the extent said warranties and indemnifications are
assignable.
8. RISK OF LOSS: LESSEE hereby assumes and shall bear the entire risk of changes
to, loss, theft, damage, destruction or seizure (hereinafter referred to as
"Event of Loss") of the Equipment from every cause whatsoever. No Event of Loss
shall relieve LESSEE of its obligations to pay rent or to perform any other
obligation under this MASTER LEASE. If any of the Equipment is damaged and
repairable, LESSEE shall promptly notify LESSOR of the occurrence of the Event
of Loss and shall, at LESSEE'S expense within thirty (30) days of such Event of
Loss, cause repairs to be made to the Equipment to restore it to the condition
required pursuant to Section 6 herein. If the Equipment is damaged beyond
repair, LESSEE shall promptly notify LESSOR of the occurrence of the Event of
Loss and shall, at LESSEE'S expense within thirty (30) days of the Event of
Loss: (A) replace the Equipment with like equipment in good repair and working
order or (B) pay to LESSOR in cash the following: (1) the greater of (a) ten
percent (10%) of the Lease Basis Cost or (b) the actual fair market value of the
Equipment calculated as of the date of the Event of Loss; and (2) all amounts
which have accrued and have not been paid by LESSEE to LESSOR under this MASTER
LEASE through the date of the Event of Loss; and (3) the present value of the
unpaid rent discounted at a rate of five percent (5%) for the remainder of the
Initial Term for each Lease Schedule covering the Equipment (the total amount
described in (1), (2), and (3) above is hereinafter collectively referred to as
"Casualty Value").
<PAGE>
9. INSURANCE: LESSEE shall provide and maintain, at its sole cost and expense:
(1) all risk property insurance on the Equipment for its full replacement value
in an amount no less than the Casualty Value, and (2) comprehensive public
liability and property damage insurance on the Equipment in amounts not less
than $1,000,000.00 per occurrence and $3,000,000.00 in the aggregate, with an
insurer reasonably acceptable to LESSOR considering the risks to be insured.
LESSEE shall provide LESSOR or its assigns (in a form acceptable to LESSOR) with
certificates of insurance and a loss payable endorsement in favor of LESSOR and
its assigns, as loss payee for property damage coverage and as additional
insured for public liability coverage. If specifically requested in writing by
LESSOR, LESSEE shall provide a copy of the insurance policy under which the
certificates are issued. The insurance endorsement shall provide that the
coverage shall not be materially altered or cancelled unless thirty (30) days
prior written notice has been given to LESSOR and its assigns, and that the
coverage afforded to LESSOR and its assigns, shall not be rescinded, impaired or
invalidated by any act or omission of LESSEE. LESSOR may apply proceeds of any
such insurance to any of LESSEE'S obligations hereunder, but shall pay excess
proceeds, if any, to LESSEE upon LESSEE'S full satisfaction of its obligations
hereunder.
10. GENERAL INDEMNIFICATION: Except for liability arising from the gross
negligence or willful misconduct of LESSOR, its employees or agents, LESSEE
hereby agrees to indemnify, defend, protect and hold LESSOR, its agents,
employees, directors and assigns harmless from and against any and all claims,
losses, damages. injuries, suits, demands or expenses, including but not limited
to attorney's fees and costs of whatever kind and nature, arising in connection
with the Equipment, including without limitation its selection, purchase,
installation, use, deinstallation, delivery, return or manufacture (including
without limitation patent, trademark or other infringement). LESSEE shall
promptly notify LESSOR or its assigns of any matter hereby indemnified against.
11. RETURN OF EQUIPMENT: Upon the expiration of any Lease Schedule or
termination for any other cause, LESSEE at is sole cost and expense, shall
assemble, crate, insure and deliver all of the Equipment, and all of the service
records relating thereto, subject to the Lease Schedule, to LESSOR in the same
good condition and repair as when received, ordinary wear and teat excepted, to
such reasonable destination within the continental United States as LESSOR shall
designate. LESSEE shall immediately prior to the return of each unit of
Equipment, provide LESSOR a letter from the Manufacturer certifying that each
unit of Equipment is in good working order, ordinary wear and tear excepted, and
is eligible for a maintenance agreement by the Manufacturer or Equivalent
Service Organization. LESSEE shall provide LESSOR with at least one hundred
twenty (120) days written notice of the return of the Equipment. Notwithstanding
any other rights and remedies of LESSOR, if LESSEE fails to return the Equipment
to LESSOR or its designee within ten (10) days of the time required, then until
such time as the Equipment is returned, LESSEE shall pay on demand as liquidated
damages, not as a penalty, and at LESSOR'S election, an amount equal to (A)
twelve (12) months rent; or (B) one hundred twenty percent (120%) of the Monthly
Rent for each month or portion thereof until the Equipment is returned to LESSOR
as detailed herein.
12. LESSEE'S REPRESENTATIONS AND WARRANTIES: LESSEE represents and warrants to
LESSOR with regard to this MASTER LEASE and each Lease Schedule to be appended
hereto that:
a. The execution, delivery and performance of this MASTER LEASE and any Lease
Schedule have been duly authorized by all necessary action on the part of
LESSEE, and this MASTER LEASE constitutes a valid and binding obligation of
LESSEE enforceable against LESSEE in accordance with its terms;
b. The individual executing this MASTER LEASE on behalf of LESSEE is duly
authorized;
c. Neither the execution or delivery by LESSEE of this MASTER LEASE, nor the
performance thereof by LESSEE, conflicts with, results in a breach of or
constitutes a default or violation of LESSEE'S Certificate of Incorporation,
By-Laws, applicable law, court order or any agreement or other instrument to
which LESSEE is a party or by which it is bound;
d. LESSEE is duly organized and in good standing in its state of incorporation,
is duly qualified to do business in each jurisdiction where the Equipment is
located and where such qualification is required;
<PAGE>
e. Upon request by LESSOR, LESSEE shall furnish its most recent audited annual
financial statements prepared in accordance with generally accepted accounting
principles; and LESSEE shall furnish its quarterly financial statements within
___ days after the end of each quarter, prepared in accordance with generally
accepted accounting principles, and being certified as true and correct by an
authorized officer of LESSEE;
f. LESSEE shall provide to LESSOR any other documents reasonably requested to
consummate this transaction or any Lease Schedule or as reasonably required
under this MASTER LEASE;
g. No approval, consent or authorization is required from any governmental
authority with respect to the execution, delivery or performance of this MASTER
LEASE, or if any such approval, consent or authorization is required, it has
been obtained.
13. EVENT OF DEFAULT: The occurrence of any of the following events shall
constitute an event of default by LESSEE or its guarantor (hereinafter referred
to as an "Event of Default"):
a. Failure to pay when due any installment of rent or other sum due hereunder,
and such failure shall continue for more than five (5) days; or
b. Failure to perform any other term or condition, covenant, representation or
warranty of this MASTER LEASE or any Lease Schedule, and such failure continues
for a period of twenty (20) days after notice thereof; or
c. If LESSEE or its guarantor ceases doing business as a going concern, becomes
insolvent, admits in writing its inability to pay its debts as they become due,
makes an assignment for the benefit of its creditors, files a voluntary petition
or answer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal
or state statute, law or regulation, admits, consents to or acquiesces in the
appointment of a receiver or trustee of any of its property, the commission of
any act of dissolution, liquidation or the bankruptcy or death of the LESSEE'S
guarantor in the event that the Guarantor is a natural person; or
d. Failure within sixty (60) days after the commencement of any proceeding
against LESSEE or its guarantor seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, bankruptcy or similar
relief under any current or future federal or state statute, law or regulation
to obtain the dismissal of such proceeding; or
e. If any warranty, covenant or representation made by LESSEE to LESSOR is
false, incorrect or untrue in any material respect; or if any Equipment subject
to a Lease Schedule is attached, levied upon, encumbered, pledged or seized; or
LESSEE defaults under any other agreement with LESSOR; or defaults under any
other material lease, loan or agreement for the borrowing of money; or
f. There is a material adverse change in the financial condition of LESSEE or
its guarantor.
14. REMEDIES: At any time after an Event of Default, LESSOR shall have the right
to exercise any one or more of the following cumulative remedies:
a. Accelerate without notice to LESSEE all of LESSEE'S obligations hereunder and
to sue for and recover all rents and other amounts which have accrued or shall
accrue under this MASTER LEASE, all of which shall become immediately due and
payable upon demand by LESSOR;
b. Require that LESSEE assemble the Equipment and deliver it to LESSOR as
provided under Section 11 or enter the premises where any Equipment is located
without notice or process of law and take possession of the Equipment without
incurring any liability to LESSEE or any other party for any damages arising
from such taking of possession;
c. Sell any or all of the Equipment at public or private sale or relet same;
d. Terminate this MASTER LEASE or any Lease Schedule as to any or all of the
Equipment; and
e. At law or in equity, enforce any of LESSOR'S rights or pursue any other
remedy now or hereafter arising.
<PAGE>
LESSOR'S remedies hereunder are cumulative in nature, not exclusive, and the
exercise of any particular remedy shall not be construed to be an election of
remedies by LESSOR nor shall any waiver or delay by LESSOR of any of its rights
or remedies under this MASTER LEASE be construed as a waiver of LESSOR'S rights
to enforce that, or any other, right or remedy in the future. Notwithstanding
LESSOR'S election of remedies, LESSEE shall remain liable for the present value
of all rents discounted at a rate of five percent (5%) and other amounts which
have accrued or would have accrued during the Initial Term, in addition to (A)
all of LESSOR'S costs and expenses incurred in enforcing its rights hereunder,
or in taking of possession, storing, repairing, selling or reletting the
Equipment, (B) court costs and reasonable attorney's fees, and (C) an amount
equal to the greater of (1) ten percent (10%) of the Lease Basis Cost or (2) the
fair market value calculated as of the date of such Event of Default, less (D)
the net proceeds of a public or private sale or reletting, if any, of the
Equipment, at the present value, if necessary, discounted at a rate of five
percent (5%) and (E) any insurance proceeds recovered by LESSOR from insurance
coverage provided by LESSEE. However, in no event shall LESSOR'S exercise of
more than one of its remedies entitle LESSOR to recover from LESSEE an amount in
excess of that referred to in this section.
15. ASSIGNMENT AND SUBLEASE:
a. LESSOR'S ASSIGNMENT: LESSEE understands and acknowledges that LESSOR has
entered into this MASTER LEASE and shall enter into each Lease Schedule in
anticipation of assigning, mortgaging, or otherwise transferring its rights and
interests thereunder and/or in the Equipment (but not its obligations) to others
(hereinafter referred to as "Assignees") without notice to or the consent of
LESSEE. Accordingly, LESSOR and LESSEE agree that:
(1) LESSEE will, after due notice, acknowledge in writing such notice of
assignment as reasonably requested by LESSOR or its Assignee, and pay directly
to the designated Assignee the amounts which become due under each assigned
Lease Schedule and such payment shall be absolute and unconditional, without
reduction, abatement, offset or counterclaim of any kind. Notwithstanding the
foregoing, LESSEE reserves its rights to have recourse directly against LESSOR
on account of any claim it may have against LESSOR.
(2) Any Assignee may reassign its rights and interests hereunder with the same
effect as the original assignment.
(3) LESSEE agrees to execute all filings pursuant to the Uniform Commercial Code
as well as any other documents reasonably requested by LESSOR or its Assignee.
Any Assignee shall not be liable to LESSEE for any obligations of LESSOR
hereunder.
b. LESSEE'S ASSIGNMENT AND SUBLEASE: Without LESSOR'S prior written consent,
LESSEE shall not: (A) assign any of its obligations hereunder, (B) attempt to
sublease the Equipment or (C) attempt to sell, transfer, hypothecate, dispose
of, lend or abandon the Equipment or any of LESSEE'S rights in it.
16. CHOICE OF LAW AND FORUM: This MASTER LEASE and the provisions contained
herein shall be deemed to have been executed at LESSOR'S principal place of
business in Rosemont, Illinois and shall be governed in all respects by the laws
of the State of Illinois. LESSOR and LESSEE on behalf of themselves and their
assignees further agree that courts located in the State of Illinois shall have
jurisdiction over any matters arising out of this MASTER LEASE and hereby submit
themselves to the personal jurisdiction of the Illinois courts.
17. NOTICES: All notices or demands provided for herein shall be in writing and
shall be deemed given when delivered or deposited in the United States mail,
first class, postage prepaid, addressed to the parties at their respective
addresses set forth above, or at such other address as may be provided from time
to time.
18. SURVIVAL OF OBLIGATIONS: All the terms and conditions, representations,
covenants, warranties and agreements contained in this MASTER LEASE and in any
Lease Schedule or in any document in connection herewith shall specifically
survive the expiration or termination of this MASTER LEASE.
19. SEVERABILITY: To the extent any provision of this MASTER LEASE or any Lease
Schedule is deemed partially or wholly invalid or unenforceable under applicable
law, such provision shall be effective to the extent valid and enforceable, and
all other provisions shall remain in full force and effect.
20. LESSOR'S CONSENT: When LESSOR'S consent is required by the terms of this
MASTER LEASE, such consent shall not be unreasonably withheld.
<PAGE>
21. LEASE SCHEDULE REAFFIRMATION: The execution by LESSOR and LESSEE of each
Lease Schedule shall constitute a reaffirmation by LESSEE of its covenants,
representations and warranties herein and that the same are true, correct and
complete with respect to the Lease Schedule as of the date of execution of each
Lease Schedule.
22. HEADINGS: All section headings of this MASTER LEASE are for convenience
only, and shall not in any way limit or affect the meaning or scope of this
MASTER LEASE or its provisions.
23. NO WAIVER: No delay, omission or failure to act by LESSOR at any time to
exercise or enforce any right or remedy herein provided shall be a waiver of any
such right or remedy to which LESSOR is entitled, nor shall it in any way affect
the right of LESSOR to enforce such provisions thereafter.
24. ENTIRE AGREEMENT: This MASTER LEASE constitutes the entire agreement of the
parties hereto and no other written or oral representations or warranties shall
be binding upon the parties hereto. NO AGENT OR EMPLOYEE OF THE MANUFACTURER OR
SELLER OF THE EQUIPMENT IS AUTHORIZED TO BIND LESSOR TO THIS MASTER LEASE OR ANY
OTHER AGREEMENT OR TO WAIVE OR MODIFY ANY OF THE PROVISIONS HEREOF. Any
modification or waiver of any of the provisions herein shall be effective only
if in writing and executed by all of the parties hereto, provided however that
LESSOR may add applicable Equipment serial or identification numbers to Lease
Schedules and financing statements.
25. SUCCESSOR: This MASTER LEASE and each Lease Schedule shall be binding upon
and shall inure to the benefit of LESSOR, LESSEE and their respective
successors, legal representatives and assigns.
26. ADDITIONAL FILINGS: In the event that LESSEE fails or refuses to execute
and/or file Uniform Commercial Code financing statements or other instruments or
recordings which LESSOR or its Assignee reasonably deems necessary to perfect,
or maintain perfection of, LESSOR'S or its Assignee's interests hereunder,
LESSEE hereby appoints LESSOR or its Assignee as LESSEE'S limited
attorney-in-fact to execute and record all documents reasonably necessary to
perfect or maintain the perfection of LESSOR'S interest hereunder. LESSEE shall
pay LESSOR or its Assignee for any costs and fees relating to the filings
including, but not limited to, costs, fees, searches, document preparation,
documentary stamps, privilege taxes and reasonable attorneys' fees.
27. MULTIPLE LESSEES: If more than one LESSEE is named within this MASTER LEASE,
the liability of each shall be joint and several.
28. LEASE ACCEPTANCE: At no time shall this MASTER LEASE or the Lease Schedule
be deemed to constitute an offer binding upon LESSOR until it is accepted by
execution of LESSOR at its corporate office in Rosemont, Illinois.
PRIME LEASING, INC., PHYMED Diagnostic Imaging Center
LESSOR Hillcrest, Inc.,
LESSEE
By: By:
----------------------------------- ----------------------------
Name (Printed): Name (Printed):
----------------------- ----------------
Title: Title:
-------------------------------- -------------------------
Date: October ____, 1999 Date: October ____, 1999
LEASE SCHEDULE
LEASE SCHEDULE NUMBER 1 TO MASTER LEASE AGREEMENT NUMBER 11053
-----
This Lease Schedule incorporates the terms and conditions of a certain Master
Lease Agreement, dated as of the ____ day of October, 1999 (the "Master Lease")
by and between PRIME LEASING, INC., O'Hare International Center, 10275 W.
Higgins Road, Rosemont, Illinois 60018 (the "Lessor"), and PHYMED Diagnostic
Imaging Center Hillcrest, Inc., 12840 Hillcrest Road, Suite 100, Dallas, Texas
75230 (the "Lessee").
THIS IS A NON-CANCELABLE LEASE SCHEDULE.
1. Initial Term: 48 months commencing with the first day of the month
immediately following the Commencement Date (or beginning with the
Commencement Date if that date is the first day of the month.)
2. Rental Payments: $33,333 per month, plus any and all applicable taxes.
Advance Payments receivable by Lessor as of the Commencement Date: $33,333.
This Advance Payment is made by transfer and credit of the Advance Payments
in the amount of $66,666 made by Lessee under the Temporary Master Lease
Agreement dated September ___, 1999, $33,333 of which was applied to the
first month's rent payable under the Temporary Master Lease Agreement, and
the remaining $33,333 of which is credited and transferred as the Deposit
under the Master Lease.
3. Deposit. LESSEE previously delivered to LESSOR on the Commencement Date of
the Temporary Master Lease the sum of Sixty-Six Thousand Six Hundred
Sixty-Six and No/100 Dollars ($66,666) in immediately available funds (the
"Deposit"). The Deposit shall continue to be held by LESSOR, without
liability for interest, as the Deposit under this Master Lease.
Thirty-Three Thousand Three Hundred Thirty-Three and No/100 Dollars
($33,333) of the Deposit was applied by LESSOR towards the payment of the
first full month of rent due under the Temporary Master Lease; the
remainder may be applied by LESSOR, at LESSOR'S sole option, for any past
due amount due under this Master Lease. If LESSEE is not in default under
the terms of this Master Lease, any portion of the Deposit not applied by
LESSOR as payment of rent or any past due amount under this Master Lease,
shall be distributed by LESSOR as follows; first, towards the payment of
the rent due on the last month of this Master Lease; and second after
termination of this Master Lease and contingent on LESSEE complying with
all of the terms of this Master Lease, any remaining amount to LESSEE.
4. Conditions Precedent. LESSOR'S obligations under this Lease Schedule are
subject to the following conditions precedent:
a. LESSEE shall have leased that certain real property and improvements
("Premises") located at 12840 Hillcrest Road, Suite 100, Dallas,
Dallas County, Texas;
b. LESSOR shall have received approval for this Master Lease from
LESSOR'S Executive Committee;
c. LESSOR shall have received the Guaranty (as defined in Section 8,
below);
d. Lessor shall have received a landlord's waiver from the landlord of
the Premises, in form satisfactory to LESSOR, waiving landlord's
rights in and to the Equipment; and
2
<PAGE>
e. LESSOR shall have received any other document reasonably requested
from LESSEE by LESSOR.
5. Equipment: See Equipment Schedule attached hereto and made a part hereof.
6. Commencement Date: October ___, 1999, as evidenced by the Certificate of
Acceptance, issued in respect to this Lease Schedule.
7. End of Lease Options: At the end of the Initial Term, Lessee has the option
to: (A) purchase all, but not less than all, of the Equipment at Fair
Market Value, as described in the Master Lease; (B) renew the lease of all,
but not less than all, of the Equipment at a Monthly Rent based on the then
Fair Market Value of the Equipment; or (C) return all, but not less than
all, of the Equipment, subject to the terms and conditions as stipulated in
the Master Lease.
8. Guaranty. By its signature below, PHYMED, INC., a Texas corporation
("PARENT"), agrees that it will execute a Guaranty, dated as of the date
hereof, that is acceptable to LESSOR, at LESSOR'S sole discretion, whereby
PARENT will guarantee to LESSOR, the due, regular and punctual payment of
all of LESSEE'S obligations herein, including all rents due herein.
9. Entire Agreement: LESSEE REPRESENTS THAT IT HAS READ, RECEIVED, RETAINED A
COPY OF AND UNDERSTANDS THIS LEASE SCHEDULE AND AGREES TO BE BOUND BY ITS
TERMS AND CONDITIONS. LESSOR AND LESSEE AGREE THAT THIS LEASE SCHEDULE, THE
MASTER LEASE AND ALL RIDERS THERETO SHALL CONSTITUTE THE ENTIRE AGREEMENT
AND SUPERSEDE ALL PROPOSALS, ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND
ALL OTHER COMMUNICATIONS BETWEEN LESSOR AND LESSEE WITH RESPECT TO ANY UNIT
OF EQUIPMENT.
THIS LEASE SCHEDULE IS EFFECTIVE ONLY UPON ACCEPTANCE BY LESSOR AT ITS CORPORATE
OFFICE IN ROSEMONT, ILLINOIS.
Accepted on October ___, 1999, at Rosemont, Illinois.
PRIME LEASING, INC. PHYMED Diagnostic Imaging Center
(Lessor) Hillcrest, Inc. (Lessee)
By:________________________________ By:__________________________________
Name (Printed):____________________ Name (Printed):______________________
Title:_____________________________ Title:_______________________________
Date: October ___, 1999
PHYMED, INC.,
(Parent)
By:________________________________
Name (Printed):____________________
Title:_____________________________
Date: October ___, 1999
3
<PAGE>
EQUIPMENT SCHEDULE
TO
LEASE SCHEDULE NUMBER 1
TO
MASTER LEASE AGREEMENT NUMBER _______
Quantity Description of Equipment Serial Number
- -------- ------------------------ -------------
1 MRI Phillips Gyro Scan NT 1.5 126285-1
1 G.E. R&F MS 1850 13562WK4
1 Mammography-Bennett Contour BMC29289
1 Ultrasound-ATL Ultramark HDI 001JQ5
1 C/Arm OEC DXR5 05X6015
1 Dryview 8700 Laser Imager 8702003
1 CT-Picker 171950 PQ2000 Spiral CT Scanner 4038
EQUIPMENT LOCATION: 12840 Hillcrest Road, Suite 100, Dallas, Texas 75230
AMENDMENT NUMBER 01
TO LEASE SCHEDULE NO. 01
TO MASTER LEASE AGREEMENT NO. 11053
That certain Lease Schedule No. 01 dated October 15, 1999 to Master Lease
Agreement No. 11053 between PHYMED Diagnostic Imaging Center Hillcrest, Inc. as
Lessee and Prime Leasing, Inc. as Lessor, and all supplemental documents
thereto, notwithstanding anything to the contrary set forth therein is hereby
amended and it is expressly agreed to as follows:
Section 1, Initial Term is hereby amended to read as follows:
1. Initial Term: 49 months, commencing with the first day of the month
immediately following the Commencement Date of the Secured Party's Temporary
Master Lease Agreement (the "Temporary Master Lease") between Lessee and Lessor,
dated October 15, 1999.
Section 2, Rental Payments is hereby amended to read as follows:
2. Rental Payments: $33,333 for the first and second month, $0.00 for the third
month and $34,656.00 for month four through forty-nine, plus any and all
applicable taxes.
Except as expressly set forth herein, the Lease Schedule shall not otherwise
have been modified or amended hereby.
Accepted and Agreed to: Accepted and Agreed to:
Prime Leasing, Inc. PHYMED Diagnostic Imaging Center
(Lessor) Hillcrest, Inc.
(Lessee)
BY: BY:
------------------------------------ --------------------------------
NAME:(Printed) NAME:(Printed)
------------------------ --------------------
TITLE: TITLE:
--------------------------------- -----------------------------
DATE: DATE:
--------------------------------- -----------------------------
- --------------------------------------------------------------------------------
MASTER LEASE AGREEMENT
- --------------------------------------------------------------------------------
Master Lease Agreement No. 11150 ("MASTER LEASE")
LESSOR: PRIME LEASING, INC., LESSEE: Phymed Diagnostic Imaging
Center-White Rock, Inc.
an Illinois corporation ("LESSOR") an Texas Limited Partnership ("LESSEE")
10275 W. Higgins Road 9603 White Rock Trail
Rosemont, IL 60018 Dallas, TX 75238
847/294-6000 Phone:
WHEREAS, LESSOR desires to lease certain equipment ("Equipment") to LESSEE and
may lease additional equipment (referred to as "Additional Equipment") to Lessee
in the future (the Equipment and the Additional Equipment being referred to
collectively as the "Equipment"); WHEREAS, LESSEE desires to lease certain
Equipment from LESSOR and may lease Additional Equipment from Lessor in the
future; and WHEREAS, to facilitate the lease of the Equipment, the parties agree
to enter into this MASTER LEASE and to incorporate by reference from time to
time in lease schedules (hereinafter referred to as "Lease Schedules", and
individually as a "Lease Schedule") which will be attached hereto and made a
part hereof, various units of Equipment; NOW, THEREFORE, in consideration of the
mutual promises contained herein and other good and valuable consideration, the
parties hereto agree as follows:
TERMS, CONDITIONS AND COVENANTS OF LEASE
1. LEASE: This MASTER LEASE sets forth the terms and conditions by which LESSOR
agrees to lease to LESSEE and LESSEE agrees to lease from LESSOR the Equipment
as listed and described in each Lease Schedule executed pursuant to this MASTER
LEASE. Each Lease Schedule shall be separate and distinct for all purposes and
shall incorporate therein all the terms and conditions of this MASTER LEASE. If
there is a conflict between the Lease Schedule and this MASTER LEASE, the terms
and conditions of this MASTER LEASE shall govern and control.
2. TERM:
a. The term of this MASTER LEASE shall begin on the date of execution by LESSOR
and shall continue in effect thereafter until all of LESSEE'S obligations and
liabilities under this MASTER LEASE and every Lease Schedule have been fully
performed or otherwise discharged.
b. The lease term for each Lease Schedule shall commence on the earlier of the
Equipment installation, first clinical use, or the cutover date (hereinafter
referred to as "Commencement Date"). If any Equipment under the Lease Schedule
is not newly installed, then the Commencement Date shall be the date upon which
title to the Equipment passes to LESSOR. The lease term shall continue for the
number of months set forth in the Lease Schedule (hereinafter referred to as
"Initial Term") and continue for any extended or renewal term. The first payment
date of the Initial Term shall be the first day of the month immediately
following the Commencement Date (or beginning on the Commencement Date if that
date is on the first day of the month).
d. LESSEE shall deliver to LESSOR a Certificate of Acceptance within five (5)
days of the Commencement Date. If Lessee fails to deliver the Certificate of
Acceptance, LESSEE shall be deemed to have accepted the Equipment as installed
and operational as of the Commencement Date unless LESSEE gives LESSOR written
notice of each defect within five (5) days of the Commencement Date.
3. RENT AND PAYMENTS: LESSEE'S obligation to pay rent under each Lease Schedule
shall begin on the Commencement Date and continue for the term. The monthly rent
(hereinafter referred to as "Monthly Rent") set forth in the Lease Schedule
shall be due and payable in advance on the first day of each calendar month
during the Initial Term without notice or demand notwithstanding the fact that
LESSOR may, as a convenience only, invoice LESSEE. If the Commencement Date of a
Lease Schedule shall be other than the first day of the month, LESSEE shall make
a rental payment (hereinafter referred to as "Interim Rent") equal to 1/30th of
the Monthly Rent set forth in the Lease Schedule for each day beginning with the
Commencement Date to and including the last day of the month prior to the
beginning of the Initial Term. Any amounts payable by LESSEE under this MASTER
<PAGE>
LEASE other than the Monthly Rent and Interim Rent shall be deemed to be
additional rent (hereinafter referred to as "Additional Rent") and shall be paid
within twenty (20) days of invoicing by LESSOR. Rent shall be paid to LESSOR at
the address designated herein or at such other place as LESSOR designates in
writing, or if to an assignee of LESSOR, at such place as such assignee shall
designate in writing, by check or wire transfer so that all funds are
immediately available. As used herein, the term "rent" shall mean all Monthly
Rent, Interim Rent and Additional Rent. THIS IS A NON-CANCELABLE LEASE. LESSEE
shall pay the total rents for the entire term to LESSOR, or LESSOR'S assignee
(as defined herein), and such payment of rents shall be absolute and
unconditional without right to setoff, reduction, abatement, counterclaim,
recoupment, or defense of any kind whatsoever.
a. SERVICE CHARGE: In the event that any rent is not received by LESSOR or
LESSOR'S assignee within five (5) days of the due date thereof, LESSEE shall pay
a service charge of five percent (5%) of the past due payment and shall pay
interest at the rate of 1.5 percent (1.5%) per month or the maximum legal rate,
whichever is less, until all past due rents are received.
b. LEASE BASIS COST: The term "Lease Basis Cost" as used herein means the cost
of acquiring, delivering and installing the Equipment including but not limited
to all parts, materials, labor, services, transportation, taxes, and all other
charges of every kind and nature associated therewith.
c. NON-PERFORMANCE: If LESSEE fails to perform any of its covenants, warranties,
terms or conditions herein, LESSOR may, at its option, perform on LESSEE'S
behalf and all monies advanced by LESSOR shall be repayable by LESSEE as
Additional Rent. However, in no event shall LESSOR'S performance on behalf of
LESSEE be deemed to relieve LESSEE of its obligations hereunder.
4. LEGAL TITLE, LIENS, TAXES AND QUIET ENJOYMENT: During the term of this MASTER
LEASE, legal title to all Equipment shall at all times vest in LESSOR. LESSEE'S
interest in the Equipment shall be limited to its possession and use and LESSEE
shall not have or assert any right, title or interest therein, except as
expressly set forth herein, and shall protect, indemnify and defend, at its
expense, LESSOR'S legal title. LESSEE shall, at its expense, keep the Equipment
free and clear of any lien or encumbrance of any kind whatsoever except that of
LESSOR arising hereunder. LESSEE warrants that the Equipment will at all times
remain personal property, regardless of how it may be affixed to any real
property. Prior to LESSOR'S acceptance of this MASTER LEASE, LESSEE shall
provide LESSOR with a waiver, in form satisfactory to LESSOR, by the landlord or
mortgagee of the premises in which the Equipment is located, of such landlord's
or mortgagee's rights in and to the Equipment and/or the rent due under this
MASTER LEASE. In lieu of such waiver, LESSEE hereby agrees to hold LESSOR
harmless and indemnify LESSOR with regard to any and all claims, actions,
damages, costs and attorneys fees asserted by any landlord or mortgagee against
LESSOR or the Equipment herein. LESSEE shall pay all taxes, assessments or fees
assessed against the Equipment or payable by LESSOR or LESSEE with respect to
the Equipment, including any interest or penalties therein, excepting only
federal or state taxes based on the net income of LESSOR and without regard to
LESSOR'S agreement to invoice LESSEE for such amounts. LESSEE agrees, to the
extent permissible by law, to prepare and file all required tax returns and
other reports (other than reports regarding LESSOR'S income tax) with any
federal, state or other regulatory authority. LESSEE further agrees, to the
extent permitted by law, to take such actions and to file such documents as may
be required to ensure that the valuation of the Equipment, as reflected on the
records and tax rolls of applicable taxing authorities, does not exceed the fair
market value of the Equipment. To the extent LESSEE is not permitted to file
such returns, reports, or documents, LESSEE shall prepare them and provide them
to LESSOR for filing prior to the date such return or report is due. LESSOR
shall have the right to affix a stencil, plate, label or other indicia of its
ownership to the Equipment and LESSEE shall not remove or conceal such
identification. LESSEE shall have the right to quiet enjoyment of the Equipment
during the term of the Lease Schedule, so long as no event of default (as herein
defined) occurs.
<PAGE>
5. LOCATION, USE, MODIFICATIONS AND ALTERATIONS: LESSEE shall not move, or
permit the movement of, the Equipment from the location (hereinafter referred to
as "Equipment Location") specified in the Lease Schedule without LESSOR'S prior
written consent. LESSEE shall not use, or permit the use of, the Equipment
unless such use is consistent with LESSEE'S business, by qualified operators
under LESSEE'S control and in compliance with (A) applicable laws and
regulations; (B) the specifications of, and use contemplated by, the
manufacturer of the Equipment (hereinafter referred to as "Manufacturer"); (C)
the terms of LESSEE'S insurance coverage; and (D) the requirements of LESSEE'S
maintenance agreement regarding the Equipment. LESSEE shall not make any
modifications, alterations or additions to the Equipment without LESSOR'S prior
written consent (other than Manufacturer's Changes, as such term is hereinafter
defined) unless said additions (A) are readily removable without causing any
damage to the Equipment and (B) do not impair the quality, safety, function or
marketability of the Equipment (hereinafter referred to as a "Permitted
Modification"). Any Permitted Modification shall not become the property of
LESSOR and shall not be subject to the Lease Schedule, provided that upon
termination or expiration of the term, LESSEE shall remove all Permitted
Modifications and restore the Equipment to its original condition (ordinary wear
and tear excepted), all at no expense to LESSOR. LESSEE shall permit the
Manufacturer, its agents or its contractors, access to the Equipment for the
purpose of performing such upgrades, recall orders or engineering changes as the
Manufacturer shall require to enhance or maintain the Equipment's standard of
performance (herein defined as "Manufacturer's Changes"), all of which shall
immediately become the property of LESSOR and be subject to the Lease Schedule.
6. MAINTENANCE AND INSPECTION: THIS IS A NET LEASE. LESSEE shall, at its own
expense, maintain the Equipment in good condition and repair and furnish all
necessary repairs, parts, materials and supplies. At all times herein, LESSEE
shall keep in full force and effect a maintenance agreement with the
Manufacturer or, with LESSOR'S consent, with an equivalent service organization
that routinely maintains such Equipment (hereinafter referred to as "Equivalent
Service Organization"). During reasonable business hours and subject to LESSEE'S
reasonable security precautions, LESSEE shall permit LESSOR access to all of the
Equipment for the purpose of inspecting the Equipment to determine LESSEE'S
compliance with this MASTER LEASE. If LESSEE is not in compliance with this
MASTER LEASE, LESSOR shall notify LESSEE in writing of the acts of noncompliance
and LESSEE shall immediately cease using the Equipment until full compliance is
achieved.
7. DISCLAIMER OF WARRANTIES: LESSEE has selected at its own risk the
Manufacturer, size and design of the Equipment. LESSEE acknowledges that LESSOR
is not the Manufacturer, or its agent or distributor, and that LESSOR MAKES NO
REPRESENTATIONS OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE
MERCHANTABILITY, VALUE, CONDITION, QUALITY, DESIGN, CAPACITY, MATERIAL,
WORKMANSHIP OR FITNESS OR SUITABILITY FOR ANY PURPOSE OR USE BY LESSEE, OR
PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT. LESSOR SHALL NOT BE LIABLE FOR
LOSSES OR DAMAGES THEREFROM, INCLUDING BUT NOT LIMITED TO LOSS OF BUSINESS, OR
ACTUAL OR ANTICIPATED PROFITS, OR OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF ANY KIND WHATSOEVER ARISING FROM THIS MASTER LEASE OR THE EQUIPMENT.
So long as no Event of Default (as herein defined) has occurred and continues
uncured, LESSOR assigns LESSEE all of Manufacturer's warranties and
indemnifications, to the extent said warranties and indemnifications are
assignable.
8. RISK OF LOSS: LESSEE hereby assumes and shall bear the entire risk of changes
to, loss, theft, damage, destruction or seizure (hereinafter referred to as
"Event of Loss") of the Equipment from every cause whatsoever. No Event of Loss
shall relieve LESSEE of its obligations to pay rent or to perform any other
obligation under this MASTER LEASE. If any of the Equipment is damaged and
repairable, LESSEE shall promptly notify LESSOR of the occurrence of the Event
of Loss and shall, at LESSEE'S expense within thirty (30) days of such Event of
Loss, cause repairs to be made to the Equipment to restore it to the condition
required pursuant to Section 6 herein. If the Equipment is damaged beyond
repair, LESSEE shall promptly notify LESSOR of the occurrence of the Event of
Loss and shall, at LESSEE'S expense within thirty (30) days of the Event of
Loss: (A) replace the Equipment with like equipment in good repair and working
order or (B) pay to LESSOR in cash the following: (1) the greater of (a) ten
percent (10%) of the Lease Basis Cost or (b) the actual fair market value of the
Equipment calculated as of the date of the Event of Loss; and (2) all amounts
which have accrued and have not been paid by LESSEE to LESSOR under this MASTER
LEASE through the date of the Event of Loss; and (3) the present value of the
unpaid rent discounted at a rate of five percent (5%) for the remainder of the
Initial Term for each Lease Schedule covering the Equipment (the total amount
described in (1), (2), and (3) above is hereinafter collectively referred to as
"Casualty Value").
<PAGE>
9. INSURANCE: LESSEE shall provide and maintain, at its sole cost and expense:
(1) all risk property insurance on the Equipment for its full replacement value
in an amount no less than the Casualty Value, and (2) comprehensive public
liability and property damage insurance on the Equipment in amounts not less
than $1,000,000.00 per occurrence and $3,000,000.00 in the aggregate, with an
insurer reasonably acceptable to LESSOR considering the risks to be insured.
LESSEE shall provide LESSOR or its assigns (in a form acceptable to LESSOR) with
certificates of insurance and a loss payable endorsement in favor of LESSOR and
its assigns, as loss payee for property damage coverage and as additional
insured for public liability coverage. If specifically requested in writing by
LESSOR, LESSEE shall provide a copy of the insurance policy under which the
certificates are issued. The insurance endorsement shall provide that the
coverage shall not be materially altered or cancelled unless thirty (30) days
prior written notice has been given to LESSOR and its assigns, and that the
coverage afforded to LESSOR and its assigns, shall not be rescinded, impaired or
invalidated by any act or omission of LESSEE. LESSOR may apply proceeds of any
such insurance to any of LESSEE'S obligations hereunder, but shall pay excess
proceeds, if any, to LESSEE upon LESSEE'S full satisfaction of its obligations
hereunder.
10. GENERAL INDEMNIFICATION: Except for liability arising from the gross
negligence or willful misconduct of LESSOR, its employees or agents, LESSEE
hereby agrees to indemnify, defend, protect and hold LESSOR, its agents,
employees, directors and assigns harmless from and against any and all claims,
losses, damages. injuries, suits, demands or expenses, including but not limited
to attorney's fees and costs of whatever kind and nature, arising in connection
with the Equipment, including without limitation its selection, purchase,
installation, use, deinstallation, delivery, return or manufacture (including
without limitation patent, trademark or other infringement). LESSEE shall
promptly notify LESSOR or its assigns of any matter hereby indemnified against.
11. RETURN OF EQUIPMENT: Upon the expiration of any Lease Schedule or
termination for any other cause, LESSEE at is sole cost and expense, shall
assemble, crate, insure and deliver all of the Equipment, and all of the service
records relating thereto, subject to the Lease Schedule, to LESSOR in the same
good condition and repair as when received, ordinary wear and teat excepted, to
such reasonable destination within the continental United States as LESSOR shall
designate. LESSEE shall immediately prior to the return of each unit of
Equipment, provide LESSOR a letter from the Manufacturer certifying that each
unit of Equipment is in good working order, ordinary wear and tear excepted, and
is eligible for a maintenance agreement by the Manufacturer or Equivalent
Service Organization. LESSEE shall provide LESSOR with at least one hundred
twenty (120) days written notice of the return of the Equipment. Notwithstanding
any other rights and remedies of LESSOR, if LESSEE fails to return the Equipment
to LESSOR or its designee within ten (10) days of the time required, then until
such time as the Equipment is returned, LESSEE shall pay on demand as liquidated
damages, not as a penalty, and at LESSOR'S election, an amount equal to (A)
twelve (12) months rent; or (B) one hundred twenty percent (120%) of the Monthly
Rent for each month or portion thereof until the Equipment is returned to LESSOR
as detailed herein.
12. LESSEE'S REPRESENTATIONS AND WARRANTIES: LESSEE represents and warrants to
LESSOR with regard to this MASTER LEASE and each Lease Schedule to be appended
hereto that:
a. The execution, delivery and performance of this MASTER LEASE and any Lease
Schedule have been duly authorized by all necessary action on the part of
LESSEE, and this MASTER LEASE constitutes a valid and binding obligation of
LESSEE enforceable against LESSEE in accordance with its terms;
b. The individual executing this MASTER LEASE on behalf of LESSEE is duly
authorized;
c. Neither the execution or delivery by LESSEE of this MASTER LEASE, nor the
performance thereof by LESSEE, conflicts with, results in a breach of or
constitutes a default or violation of LESSEE'S Certificate of Incorporation,
By-Laws, applicable law, court order or any agreement or other instrument to
which LESSEE is a party or by which it is bound;
<PAGE>
d. LESSEE is duly organized and in good standing in its state of incorporation,
is duly qualified to do business in each jurisdiction where the Equipment is
located and where such qualification is required;
e. Upon request by LESSOR, LESSEE shall furnish its most recent audited annual
financial statements prepared in accordance with generally accepted accounting
principles; and LESSEE shall furnish its quarterly financial statements within
___ days after the end of each quarter, prepared in accordance with generally
accepted accounting principles, and being certified as true and correct by an
authorized officer of LESSEE;
f. LESSEE shall provide to LESSOR any other documents reasonably requested to
consummate this transaction or any Lease Schedule or as reasonably required
under this MASTER LEASE;
g. No approval, consent or authorization is required from any governmental
authority with respect to the execution, delivery or performance of this MASTER
LEASE, or if any such approval, consent or authorization is required, it has
been obtained.
13. EVENT OF DEFAULT: The occurrence of any of the following events shall
constitute an event of default by LESSEE or its guarantor (hereinafter referred
to as an "Event of Default"):
a. Failure to pay when due any installment of rent or other sum due hereunder,
and such failure shall continue for more than five (5) days; or
b. Failure to perform any other term or condition, covenant, representation or
warranty of this MASTER LEASE or any Lease Schedule, and such failure continues
for a period of twenty (20) days after notice thereof; or
c. If LESSEE or its guarantor ceases doing business as a going concern, becomes
insolvent, admits in writing its inability to pay its debts as they become due,
makes an assignment for the benefit of its creditors, files a voluntary petition
or answer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal
or state statute, law or regulation, admits, consents to or acquiesces in the
appointment of a receiver or trustee of any of its property, the commission of
any act of dissolution, liquidation or the bankruptcy or death of the LESSEE'S
guarantor in the event that the Guarantor is a natural person; or
d. Failure within sixty (60) days after the commencement of any proceeding
against LESSEE or its guarantor seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, bankruptcy or similar
relief under any current or future federal or state statute, law or regulation
to obtain the dismissal of such proceeding; or
e. If any warranty, covenant or representation made by LESSEE to LESSOR is
false, incorrect or untrue in any material respect; or if any Equipment subject
to a Lease Schedule is attached, levied upon, encumbered, pledged or seized; or
LESSEE defaults under any other agreement with LESSOR; or defaults under any
other material lease, loan or agreement for the borrowing of money; or
f. There is a material adverse change in the financial condition of LESSEE or
its guarantor.
14. REMEDIES: At any time after an Event of Default, LESSOR shall have the right
to exercise any one or more of the following cumulative remedies:
a. Accelerate without notice to LESSEE all of LESSEE'S obligations hereunder and
to sue for and recover all rents and other amounts which have accrued or shall
accrue under this MASTER LEASE, all of which shall become immediately due and
payable upon demand by LESSOR;
b. Require that LESSEE assemble the Equipment and deliver it to LESSOR as
provided under Section 11 or enter the premises where any Equipment is located
without notice or process of law and take possession of the Equipment without
incurring any liability to LESSEE or any other party for any damages arising
from such taking of possession;
c. Sell any or all of the Equipment at public or private sale or relet same;
d. Terminate this MASTER LEASE or any Lease Schedule as to any or all of the
Equipment; and
<PAGE>
e. At law or in equity, enforce any of LESSOR'S rights or pursue any other
remedy now or hereafter arising.
LESSOR'S remedies hereunder are cumulative in nature, not exclusive, and the
exercise of any particular remedy shall not be construed to be an election of
remedies by LESSOR nor shall any waiver or delay by LESSOR of any of its rights
or remedies under this MASTER LEASE be construed as a waiver of LESSOR'S rights
to enforce that, or any other, right or remedy in the future. Notwithstanding
LESSOR'S election of remedies, LESSEE shall remain liable for the present value
of all rents discounted at a rate of five percent (5%) and other amounts which
have accrued or would have accrued during the Initial Term, in addition to (A)
all of LESSOR'S costs and expenses incurred in enforcing its rights hereunder,
or in taking of possession, storing, repairing, selling or reletting the
Equipment, (B) court costs and reasonable attorney's fees, and (C) an amount
equal to the greater of (1) ten percent (10%) of the Lease Basis Cost or (2) the
fair market value calculated as of the date of such Event of Default, less (D)
the net proceeds of a public or private sale or reletting, if any, of the
Equipment, at the present value, if necessary, discounted at a rate of five
percent (5%) and (E) any insurance proceeds recovered by LESSOR from insurance
coverage provided by LESSEE. However, in no event shall LESSOR'S exercise of
more than one of its remedies entitle LESSOR to recover from LESSEE an amount in
excess of that referred to in this section.
15. ASSIGNMENT AND SUBLEASE:
a. LESSOR'S ASSIGNMENT: LESSEE understands and acknowledges that LESSOR has
entered into this MASTER LEASE and shall enter into each Lease Schedule in
anticipation of assigning, mortgaging, or otherwise transferring its rights and
interests thereunder and/or in the Equipment (but not its obligations) to others
(hereinafter referred to as "Assignees") without notice to or the consent of
LESSEE. Accordingly, LESSOR and LESSEE agree that:
(1) LESSEE will, after due notice, acknowledge in writing such notice of
assignment as reasonably requested by LESSOR or its Assignee, and pay directly
to the designated Assignee the amounts which become due under each assigned
Lease Schedule and such payment shall be absolute and unconditional, without
reduction, abatement, offset or counterclaim of any kind. Notwithstanding the
foregoing, LESSEE reserves its rights to have recourse directly against LESSOR
on account of any claim it may have against LESSOR.
(2) Any Assignee may reassign its rights and interests hereunder with the same
effect as the original assignment.
(3) LESSEE agrees to execute all filings pursuant to the Uniform Commercial Code
as well as any other documents reasonably requested by LESSOR or its Assignee.
Any Assignee shall not be liable to LESSEE for any obligations of LESSOR
hereunder.
b. LESSEE'S ASSIGNMENT AND SUBLEASE: Without LESSOR'S prior written consent,
LESSEE shall not: (A) assign any of its obligations hereunder, (B) attempt to
sublease the Equipment or (C) attempt to sell, transfer, hypothecate, dispose
of, lend or abandon the Equipment or any of LESSEE'S rights in it.
16. CHOICE OF LAW AND FORUM: This MASTER LEASE and the provisions contained
herein shall be deemed to have been executed at LESSOR'S principal place of
business in Rosemont, Illinois and shall be governed in all respects by the laws
of the State of Illinois. LESSOR and LESSEE on behalf of themselves and their
assignees further agree that courts located in the State of Illinois shall have
jurisdiction over any matters arising out of this MASTER LEASE and hereby submit
themselves to the personal jurisdiction of the Illinois courts.
17. NOTICES: All notices or demands provided for herein shall be in writing and
shall be deemed given when delivered or deposited in the United States mail,
first class, postage prepaid, addressed to the parties at their respective
addresses set forth above, or at such other address as may be provided from time
to time.
18. SURVIVAL OF OBLIGATIONS: All the terms and conditions, representations,
covenants, warranties and agreements contained in this MASTER LEASE and in any
Lease Schedule or in any document in connection herewith shall specifically
survive the expiration or termination of this MASTER LEASE.
19. SEVERABILITY: To the extent any provision of this MASTER LEASE or any Lease
Schedule is deemed partially or wholly invalid or unenforceable under applicable
law, such provision shall be effective to the extent valid and enforceable, and
all other provisions shall remain in full force and effect.
20. LESSOR'S CONSENT: When LESSOR'S consent is required by the terms of this
MASTER LEASE, such consent shall not be unreasonably withheld.
<PAGE>
21. LEASE SCHEDULE REAFFIRMATION: The execution by LESSOR and LESSEE of each
Lease Schedule shall constitute a reaffirmation by LESSEE of its covenants,
representations and warranties herein and that the same are true, correct and
complete with respect to the Lease Schedule as of the date of execution of each
Lease Schedule.
22. HEADINGS: All section headings of this MASTER LEASE are for convenience
only, and shall not in any way limit or affect the meaning or scope of this
MASTER LEASE or its provisions.
23. NO WAIVER: No delay, omission or failure to act by LESSOR at any time to
exercise or enforce any right or remedy herein provided shall be a waiver of any
such right or remedy to which LESSOR is entitled, nor shall it in any way affect
the right of LESSOR to enforce such provisions thereafter.
24. ENTIRE AGREEMENT: This MASTER LEASE constitutes the entire agreement of the
parties hereto and no other written or oral representations or warranties shall
be binding upon the parties hereto. NO AGENT OR EMPLOYEE OF THE MANUFACTURER OR
SELLER OF THE EQUIPMENT IS AUTHORIZED TO BIND LESSOR TO THIS MASTER LEASE OR ANY
OTHER AGREEMENT OR TO WAIVE OR MODIFY ANY OF THE PROVISIONS HEREOF. Any
modification or waiver of any of the provisions herein shall be effective only
if in writing and executed by all of the parties hereto, provided however that
LESSOR may add applicable Equipment serial or identification numbers to Lease
Schedules and financing statements.
25. SUCCESSOR: This MASTER LEASE and each Lease Schedule shall be binding upon
and shall inure to the benefit of LESSOR, LESSEE and their respective
successors, legal representatives and assigns.
26. ADDITIONAL FILINGS: In the event that LESSEE fails or refuses to execute
and/or file Uniform Commercial Code financing statements or other instruments or
recordings which LESSOR or its Assignee reasonably deems necessary to perfect,
or maintain perfection of, LESSOR'S or its Assignee's interests hereunder,
LESSEE hereby appoints LESSOR or its Assignee as LESSEE'S limited
attorney-in-fact to execute and record all documents reasonably necessary to
perfect or maintain the perfection of LESSOR'S interest hereunder. LESSEE shall
pay LESSOR or its Assignee for any costs and fees relating to the filings
including, but not limited to, costs, fees, searches, document preparation,
documentary stamps, privilege taxes and reasonable attorneys' fees.
27. MULTIPLE LESSEES: If more than one LESSEE is named within this MASTER LEASE,
the liability of each shall be joint and several.
28. LEASE ACCEPTANCE: At no time shall this MASTER LEASE or the Lease Schedule
be deemed to constitute an offer binding upon LESSOR until it is accepted by
execution of LESSOR at its corporate office in Rosemont, Illinois.
PRIME LEASING, INC., PHYMED DIAGNOSTIC IMAGING
CENTER-WHITE ROCK, INC.
LESSOR LESSEE
By: By:
----------------------------------
Name (Printed): Name (Printed):
----------------------
Title: Title:
-------------------------------
Date: , 2000 Date: February 11, 2000
------ -----------
LEASE SCHEDULE
LEASE SCHEDULE NUMBER 1 TO MASTER LEASE AGREEMENT NUMBER 11150
-----
This Lease Schedule incorporates the terms and conditions of a certain Master
Lease Agreement, dated as of the 11th day of February, 2000 (the "Master Lease")
by and between PRIME LEASING, INC., O'Hare International Center, 10275 W.
Higgins Road, Rosemont, Illinois 60018 (the "Lessor"), and PHYMED DIAGNOSTIC
IMAGING CENTER-WHITE ROCK , INC., 9603 White Rock Trail, Dallas, TX 75238 (the
"Lessee").
THIS IS A NON-CANCELABLE LEASE SCHEDULE.
1. Initial Term: 48 months commencing with the first day of the month
immediately following the Commencement Date (or beginning with the
Commencement Date if that date is the first day of the month.)
2. Rental Payments: $13,365.00 per month, plus any and all applicable taxes.
Advance Payments receivable by Lessor as of the Commencement Date:
$26,730.00. $13,365.00 of which will be applied to the first month's rent
payable under this Lease Schedule, and the remaining $13,365.00 of which is
credited and transferred as the Deposit under the Master Lease.
3. Deposit. LESSEE delivered to LESSOR on the Commencement Date of the Lease
the sum of Twenty-Six Thousand Seven Hundred Thirty and No/100 Dollars
($26,760.00) in immediately available funds (the "Deposit"). The Deposit
shall continue to be held by LESSOR, without liability for interest, as the
Deposit under this Master Lease. Thirteen Thousand Three Hundred Sixty Five
and No/100 Dollars ($13,365.00) of the Deposit is applied by LESSOR towards
the payment of the first full month of rent due under this Lease; the
remainder may be applied by LESSOR, at LESSOR'S sole option, for any past
due amount due under this Master Lease. If LESSEE is not in default under
the terms of this Master Lease, any portion of the Deposit not applied by
LESSOR as payment of rent or any past due amount under this Master Lease,
shall be distributed by LESSOR as follows; first, towards the payment of
the rent due on the last month of this Master Lease; and second after
termination of this Master Lease and contingent on LESSEE complying with
all of the terms of this Master Lease, any remaining amount to LESSEE.
4. Conditions Precedent. LESSOR'S obligations under this Lease Schedule are
subject to the following conditions precedent:
a. LESSEE shall have leased that certain real property and improvements
("Premises") located at 12840 Hillcrest Road, Suite 100, Dallas, Texas
75230;
<PAGE>
b. LESSOR shall have received approval for this Master Lease from
LESSOR'S Executive Committee;
c. LESSOR shall have received the Guaranty (as defined in Section 8,
below);
d. Lessor shall have received a landlord's waiver from the landlord of
the Premises, in form satisfactory to LESSOR, waiving landlord's
rights in and to the Equipment; and
e. LESSOR shall have received any other document reasonably requested
from LESSEE by LESSOR.
5. Equipment: See Equipment Schedule attached hereto and made a part hereof.
6. Commencement Date: February 11 , 2000, as evidenced by the Certificate of
Acceptance, issued in respect to this Lease Schedule.
7. End of Lease Options: At the end of the Initial Term, Lessee has the option
to: (A) purchase all, but not less than all, of the Equipment at Fair
Market Value, as described in the Master Lease; (B) renew the lease of all,
but not less than all, of the Equipment at a Monthly Rent based on the then
Fair Market Value of the Equipment; or (C) return all, but not less than
all, of the Equipment, subject to the terms and conditions as stipulated in
the Master Lease.
8. Guaranty. By its signature below, PHYMED, INC., a Texas corporation
("PARENT"), agrees that it will execute a Guaranty, dated as of the date
hereof, that is acceptable to LESSOR, at LESSOR'S sole discretion, whereby
PARENT will guarantee to LESSOR, the due, regular and punctual payment of
all of LESSEE'S obligations herein, including all rents due herein.
9. Entire Agreement: LESSEE REPRESENTS THAT IT HAS READ, RECEIVED, RETAINED A
COPY OF AND UNDERSTANDS THIS LEASE SCHEDULE AND AGREES TO BE BOUND BY ITS
TERMS AND CONDITIONS. LESSOR AND LESSEE AGREE THAT THIS LEASE SCHEDULE, THE
MASTER LEASE AND ALL RIDERS THERETO SHALL CONSTITUTE THE ENTIRE AGREEMENT
AND SUPERSEDE ALL PROPOSALS, ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND
ALL OTHER COMMUNICATIONS BETWEEN LESSOR AND LESSEE WITH RESPECT TO ANY UNIT
OF EQUIPMENT.
THIS LEASE SCHEDULE IS EFFECTIVE ONLY UPON ACCEPTANCE BY LESSOR AT ITS CORPORATE
OFFICE IN ROSEMONT, ILLINOIS. Accepted on , 2000, at Rosemont, Illinois.
PRIME LEASING, INC. PHYMED DIAGNOSTIC IMAGING
CENTER -WHITE ROCK, INC.
(Lessor) (Lessee)
By:__________________________________ By:_______________________________
Name (Printed):______________________ Name (Printed):___________________
Title:_______________________________ Title:____________________________
Date: ______________________, 2000
PHYMED, INC.,
(Parent)
By:__________________________________
Name (Printed):______________________
Title:_______________________________
Date: February ___, 2000
<PAGE>
EQUIPMENT SCHEDULE
TO
LEASE SCHEDULE NUMBER 1
TO
MASTER LEASE AGREEMENT NUMBER 11150
-----
Quantity Description of Equipment Serial Number
- -------- ------------------------ -------------
One(1) Picker Ultra Z High Performance CT System
Including all additions, accessories and
EQUIPMENT LOCATION: 12840 Hillcrest Road, Suite 100, Dallas, TX 75230
<TABLE>
<CAPTION>
AGREEMENT OF LIMITED PARTNERSHIP
OF
WHITE ROCK JV, LTD.
TABLE OF CONTENTS
Page
----
ARTICLE I ORGANIZATIONAL MATTERS
<S> <C> <C>
1.1 Formation............................................................................... 1
1.2 Name.................................................................................... 1
1.3 Term.................................................................................... 1
1.4 Registered Office and Principal Office of Partnership;
Addresses of Partners................................................................... 2
1.5 Ownership............................................................................... 2
1.6 Title to Partnership Property........................................................... 2
1.7 Limits of Partnership................................................................... 2
ARTICLE II DEFINITIONS......................................................................... 2
ARTICLE III PURPOSE
3.1 Purposes and Scope...................................................................... 8
ARTICLE IV CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
4.1 Initial Capital Contributions........................................................... 8
4.2 Additional Capital Contributions........................................................ 8
4.3 Other Capital Contributions............................................................. 8
4.4 Defaults in Making Required Capital Contributions....................................... 8
4.5 Capital Accounts........................................................................ 9
4.6 Negative Capital Accounts............................................................... 12
4.7 Interest................................................................................ 12
4.8 No Withdrawal........................................................................... 12
4.9 Loans From Partners..................................................................... 12
ARTICLE V ALLOCATIONS
5.1 Allocations of Profits and Losses....................................................... 13
5.2 Special Allocations of Profits and Losses............................................... 14
5.3 Curative Allocations.................................................................... 15
5.4 Tax Allocations: Code Section 704(c)................................................... 16
5.5 Other Allocation Rules.................................................................. 16
ARTICLE VI DISTRIBUTIONS
6.1 Distributions........................................................................... 17
6.2 Make-Up Payments........................................................................ 17
6.3 Payments Not Deemed Distributions....................................................... 18
6.4 Withheld Amounts........................................................................ 18
<PAGE>
ARTICLE VII MANAGEMENT OF THE PARTNERSHIP
7.1 Designation and Authority of General Partner............................................ 18
7.2 Major Decisions......................................................................... 19
7.3 Certificate of Limited Partnership...................................................... 20
7.4 Compensation and Reimbursement of General Partner....................................... 20
7.5 Partnership Funds....................................................................... 20
7.6 Duties.................................................................................. 20
7.7 Transactions with Affiliates............................................................ 20
7.8 Outside Activities; Conflicts of Interest............................................... 21
7.9 Resolution of Conflicts of Interest..................................................... 21
7.10 Indemnification......................................................................... 21
7.11 Liability of General Partner............................................................ 21
7.12 Reliance by General Partner............................................................. 22
7.13 Insurance............................................................................... 22
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 Limitation of Liability................................................................. 22
8.2 Management of Business.................................................................. 22
8.3 Outside Activities...................................................................... 22
8.4 Return of Capital....................................................................... 23
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 Records and Accounting.................................................................. 23
9.2 Fiscal Year............................................................................. 23
9.3 Reports................................................................................. 23
ARTICLE X TAX MATTERS
10.1 Preparation of Tax Returns.............................................................. 24
10.2 Tax Elections........................................................................... 24
10.3 Tax Controversies....................................................................... 24
10.4 Organizational Expenses................................................................. 24
10.5 Taxation as a Partnership............................................................... 24
ARTICLE XI TRANSFERS OF PARTNERSHIP INTERESTS
11.1 Transfer Restrictions................................................................... 24
11.2 Transfers by General Partner............................................................ 25
11.3 Transfers by Limited Partners........................................................... 25
11.4 Additional Limitations on Transfers of Limited Partnership Interests.................... 25
11.5 Distributions and Allocations in Respect of Transferred Partnership
Interests............................................................................... 25
11.6 Admission of Initial and Substitute Limited Partners and Successor
General Partner......................................................................... 26
11.7 Prohibited Transfers.................................................................... 26
11.8 Specific Performance and Other Remedies................................................. 27
11.9 PHYMED Purchase Option.................................................................. 27
<PAGE>
ARTICLE XII WITHDRAWAL AND REMOVAL OF GENERAL PARTNER
12.1 Events of Withdrawal.................................................................... 28
12.2 Removal................................................................................. 28
ARTICLE XIII DISSOLUTION AND WINDING UP
13.1 Dissolution............................................................................. 29
13.2 Continuation of the Partnership......................................................... 29
13.3 Liquidation............................................................................. 30
13.4 Distribution in Kind.................................................................... 31
13.5 Cancellation of Certificate of Limited Partnership...................................... 31
13.6 Return of Capital....................................................................... 31
ARTICLE XIV AMENDMENT OF AGREEMENT; CONSENTS
14.1 Amendment Procedures.................................................................... 32
14.4 Action Without a Meeting................................................................ 32
ARTICLE XV GENERAL PROVISIONS
15.1 Addresses and Notices................................................................... 32
15.2 Titles and Captions..................................................................... 32
15.3 Pronouns and Plurals.................................................................... 32
15.4 Further Action.......................................................................... 33
15.5 Binding Effect.......................................................................... 33
15.6 Integration............................................................................. 33
15.7 Creditors............................................................................... 33
15.8 Waiver.................................................................................. 33
15.9 Counterparts............................................................................ 33
15.10 Applicable Law.......................................................................... 33
15.11 Invalidity of Provisions................................................................ 33
</TABLE>
EXHIBITS
Exhibit A - Percentage Interests
Exhibit B - Initial Capital Contributions
Exhibit C - MRI Lease
<PAGE>
THE PARTNERSHIP INTERESTS REPRESENTED BY THIS LIMITED PARTNERSHIP AGREEMENT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE
SECURITIES ACTS IN RELIANCE UPON EXEMPTIONS UNDER THOSE ACTS. THE SALE OR OTHER
DISPOSITION OF THE PARTNERSHIP INTERESTS IS PROHIBITED UNLESS SUCH SALE OR
DISPOSITION IS MADE IN COMPLIANCE WITH ALL SUCH APPLICABLE ACTS. ADDITIONAL
RESTRICTIONS ON TRANSFER OF THE PARTNERSHIP INTERESTS ARE SET FORTH IN THIS
AGREEMENT.
AGREEMENT OF LIMITED PARTNERSHIP
OF
WHITE ROCK JV, LTD.
THIS AGREEMENT OF LIMITED PARTNERSHIP OF WHITE ROCK JV, LTD. is entered
into as of December ____, 1999 (the "Commencement Date"), by and among PHYMED,
INC., an Oklahoma ("PHYMED"), as General Partner, and LDE Ventures, Inc., an
Illinois corporation ("LDE"), as Limited Partner.
Certain terms used in this agreement are defined in Article II hereof.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 Formation. Subject to the provisions of this Agreement, the
Partners hereby form the Partnership as a limited partnership pursuant to the
Texas Act. Except as expressly provided herein, the rights and obligations of
the Partners and the administration and termination of the Partnership shall be
governed by the Texas Act.
1.2 Name. The name of the Partnership shall be, and the business of the
Partnership shall be conducted under the name of, White Rock JV, Ltd. The
General Partner may change the name of the Partnership at any time and from time
to time and shall provide the Limited Partners with written notice of such name
change within twenty (20) days after such name change.
1.3 Term. The Partnership shall continue in existence until the close
of Partnership business on December 31, 2049, or until the earlier termination
of the Partnership in accordance with the provisions of Section 13.1(b). The
General Partner shall not commence or engage in any business on behalf of the
Partnership until after the Effective Date, other than matters necessary or
incidental to the organization of the Partnership.
<PAGE>
1.4 Registered Office and Principal Office of Partnership;
Addresses of Partners.
(a) Partnership Offices. The registered office of the
Partnership in the State of Texas shall be 9603 White Rock Trail,
Dallas, Texas 75238, and the registered agent for service of process on
the Partnership at such registered office shall be George C. Barker or
such other registered office or registered agent as the General Partner
may from time to time designate. The principal office of the
Partnership shall be 9603 White Rock Trail, Dallas, Texas 75238, or
such other place as the General Partner may from time to time
designate. The General Partner shall notify each Limited Partner within
ten (10) days following the change of the location of the principal
office of the Partnership. The Partnership may maintain offices at such
other place or places as the General Partner deems advisable.
(b) Addresses of Partners. The address of each Partner shall
be the address of such Partner appearing on the signature pages to this
Agreement. A Partner may change its address at any time by giving all
of the other Partners ten (10) days prior written notice of such change
in address.
1.5 Ownership. The interest of each Partner in the Partnership shall be
personal property for all purposes. All property and interests in property, real
or personal, owned by the Partnership shall be deemed owned by the Partnership
as an entity, and no Partner, individually, shall have any ownership interests
in such property or interest except by having an ownership interest in the
Partnership as a Partner. Each of the Partners irrevocably waives, during the
term of the Partnership and during any period of its liquidation following any
dissolution, any right that it may have to maintain any action for partition
with respect to any of the property of the Partnership.
1.6 Title to Partnership Property. Legal title to all property of
the Partnership shall be held and conveyed in the name of the Partnership.
1.7 Limits of Partnership. The relationship between the parties hereto
shall be limited to the carrying on of the business of the Partnership in
accordance with the terms of this Agreement. Such relationship shall be
construed and deemed to be a limited partnership for the sole and limited
purpose of carrying on such business. Except as otherwise provided for or
contemplated in this Agreement, nothing herein shall be construed to create a
partnership between the Partners or to authorize any Partner to act as general
agent for any other Partner.
<PAGE>
ARTICLE II
DEFINITIONS
The following definitions shall apply to the terms used in this
Agreement, unless otherwise clearly indicated to the contrary in this Agreement:
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments: (a)
any amounts that such Partner is, or is deemed to be, obligated to restore
pursuant to section 1.704-1(b)(2)(ii)(c) of the Regulations, the penultimate
sentence of section 1.704-2(g)(1) of the Regulations, or the penultimate
sentence of section 1.704-2(i)(5) of the Regulations, shall be credited to such
Capital Account; and (b) the items described in sections
1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the Regulations shall be debited to
such Capital Account. The foregoing definition of Adjusted Capital Account
Deficit is intended to comply with the provisions of section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.
"Affiliate" means any Person that directly or indirectly controls, is
controlled by, or is under common control with, the Person in question. As used
in this definition, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Agreement" means this Agreement of Limited Partnership of White Rock
JV, Ltd., as it may be amended, supplemented, or restated from time to time.
"Available Cash" of the Partnership as of any date means all cash funds
of the Partnership on hand from time to time after: (a) payment of all
Partnership Costs and Expenses that are due and payable as of such time; (b)
provision for payment of all Partnership Costs and Expenses that are reasonably
anticipated to become due and payable within 30 days following the date on which
Available Cash is being determined; and (c) provision for adequate reserves
(working capital and/or capital), the amount of such reserves to be established
by the General Partner and approved by a Super-Majority Interest.
"Average Daily Scans" means, with respect to a particular calendar
month, the quotient of (a) the aggregate number of scans performed by the MRI,
all Business Days for such calendar month, divided by (b) the number of Business
Days during such calendar month.
"Book Depreciation" has the meaning set forth in Section 4.5(b)(v).
"Book Value" has the meaning set forth in Section 4.5(c).
"Business Day" means any day during which the Center is open for
patient treating for at least 5 hours.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 4.5(a).
"Capital Contribution" means any cash or other property contributed by
a Partner to the Partnership pursuant to the provisions of this Agreement.
"Center" means the location in Dallas, Texas where the MRI is operated.
<PAGE>
"Certificate" means the Certificate of Limited Partnership filed with
the Secretary of State of the State of Texas pursuant to Section 7.3, as such
Certificate may be amended or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time.
"Commencement Date" means December _____, 1999.
"Composite Sharing Ratio" of each Partner means, at any particular
time, the quotient (expressed as a percentage) of (a) the aggregate amount of
distributions since the Commencement Date to such Partner under Section 6.1(c)
hereof, divided by (b) the aggregate amount of distributions since the
Commencement Date to all Partners under Section 6.1(c) hereof.
"Event of Bankruptcy" means, with respect to any Partner or the
Partnership, any of the following acts or events:
(a) making an assignment for the benefit of creditors;
(b) filing a voluntary petition in bankruptcy;
(c) becoming the subject of an order for relief or being declared
insolvent or bankrupt in any federal or state bankruptcy or insolvency
proceeding;
(d) filing a petition or answer seeking a reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any statute, law or regulation;
(e) filing an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against it in a proceeding of
the type described in parts (a) through (d) of this definition;
(f) making an admission in writing of an inability to pay debts as
they mature;
(g) giving notice to any governmental body that insolvency has
occurred, that insolvency is pending, or that operations have been
suspended;
(h) seeking, consenting to, or acquiescing in the appointment of a
trustee, receiver, or liquidator of all or any substantial part of its
properties; or
(i) the expiration of 90 days after the date of the commencement of a
proceeding against such Person seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any statute, law, or regulation if the proceeding has not been
previously dismissed, or the expiration of 60 days after the date of the
appointment, without such Person's consent or acquiescence, of a trustee,
receiver, or liquidator of such Person or of all or any substantial part of
such Person's properties, if the appointment has not previously been
vacated or stayed, or the expiration of 60 days after the date of
expiration of a stay, if the appointment has not been previously vacated.
<PAGE>
"Excess Amount" has the meaning set forth in Section 5.1(a)(iii).
"General Partner" means PHYMED, Inc., in its capacity as the general
partner of the Partnership, or its successors or assigns.
"Limited Partners" means LDE Ventures, Inc., and any other Person who
has been admitted or is deemed to have been admitted as a limited partner in the
Partnership and whose admission has been reflected on the books and records of
the Partnership.
"Liquidator" has the meaning set forth in Section 13.3.
"Losses" has the meaning set forth in Section 4.5(b).
"MRI" means the magnetic resonance imaging machine operated by the
Partnership pursuant to the MRI Lease.
"MRI Lease" means that certain Lease, by and between the Partnership
and Prime Leasing, Inc., attached hereto as Exhibit C.
"Nonrecourse Deductions" has the meaning set forth in section
1.704-2(b)(1) of the Regulations.
"Option Notice" has the meaning set forth in Section 11.9(b).
"Partner" means a General Partner or a Limited Partner.
"Partner Minimum Gain" means partner nonrecourse debt minimum gain as
determined under the rules of section 1.704-2(i) of the Regulations.
"Partner Nonrecourse Deduction" has the meaning set forth in section
1.704-2(i)(1) and (2) of the Regulations.
"Partnership" means the limited partnership established pursuant to
this Agreement by the filing of the Certificate with the Secretary of State of
the State of Texas.
"Partnership Estimated Net Taxable Income" has the meaning set forth in
Section 6.4(a).
"Partnership Interest" means the interest acquired by a Partner in the
Partnership including, without limitation, such Partner's right: (a) to an
allocable share of the Profits, Losses, and other income, gains, losses,
deductions, and credits of the Partnership; (b) to a distributive share of the
assets of the Partnership; (c) if a Limited Partner, to vote on those matters
described in this Agreement; and (d) if the General Partner, to manage and
operate the Partnership.
<PAGE>
"Partnership Minimum Gain" has the meaning set forth in section
1.704-2(d) of the Regulations.
"Percentage Interest" means the percentage interest of a Partner in
certain rights and obligations described in this Agreement. The Percentage
Interest of each Partner as of any date is set forth in Exhibit A attached
hereto, as such Exhibit may be revised from time to time to reflect adjustments
pursuant to Section 4.4, Section 4.5 and Article XI hereof.
"Person" means an individual or a corporation, partnership, trust,
estate, unincorporated organization, association, or other entity.
"Prime Rate" means the rate of interest announced from time to time by
Bank One, as its prime, reference or other similar rate.
"Profits" has the meaning set forth in Section 4.5(b).
"Purchase Price" has the meaning set forth in Section 11.9(c).
"Regulations" means the Department of Treasury Regulations promulgated
under the Code, as amended and in effect (including corresponding provisions of
succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 5.3.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor to such statute.
"Sharing Ratios" means, with respect to a particular calendar month,
the following percentages based on the Average Daily Scans performed by the MRI
for such month:
<PAGE>
----------------------------------------------------------------------------
Average Daily Scans for Sharing Ratio for Sharing Ratio for LDE
Such Calendar Month PHYMED for Such for SuchCalendar Month
Calendar Month
----------------------------------------------------------------------------
5 or fewer 35.00% 65.00%
6 36.67% 63.33%
7 37.86% 62.14%
8 38.75% 61.25%
9 39.44% 60.56%
10 40.00% 60.00%
11 40.46% 59.54%
12 40.83% 59.17%
13 41.15% 58.85%
14 41.43% 58.57%
15 41.67% 58.33%
16 41.88% 58.12%
17 42.05% 57.95%
18 42.22% 57.78%
19 42.37% 57.63%
20 or more 42.50% 57.50%
The Partners hereby agree that the Sharing Ratios of the Partners shall
be automatically adjusted pursuant to Sections 4.4(c) and 6.2 hereof.
"Shortfall" has the meaning set forth in Section 4.2.
"Super-Majority Interest" means the owners of more than 85% of the
Percentage Interests of the Partners.
"Texas Act" means the Texas Revised Limited Partnership Act, Article
6132a-1 of Title 105 of the Texas Revised Civil Statutes, as it may be amended
from time to time, and any successor to such Texas Act.
"Transfer" has the meaning set forth in Section 11.1.
"Undistributed Priority Return" means, with respect to LDE on any
particular date, the amount in a special recordkeeping account maintained by the
Partnership for LDE equal to: (a) the product of (i) $18,750 multiplied by (ii)
the number of calendar months (and partial calendar months) from the
Commencement Date to such particular date; reduced (but not below zero) by: (b)
the sum of (i) aggregate amount of cash distributed to LDE pursuant to Section
6.1(a), plus (ii) the aggregate amount of UPR Elimination Payments to LDE which
have actually been made since the Commencement Date.
"UPR Elimination Payment" has the meaning set forth in Section 6.2.
<PAGE>
ARTICLE III
PURPOSE
3.1 Purposes and Scope. Subject to the provisions of this Agreement,
the purpose of the Partnership are to:
(a) operate, lease, manage, improve, sell, transfer and otherwise
use the MRI to be located in Dallas, Texas;
(b) enter into contracts with respect to the use and operation of
the MRI, advertise and promote the use of the MRI; and
(c) do any and all other acts or things which may be incidental
or necessary to carry on the business of the Partnership as herein
contemplated.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
4.1 Initial Capital Contributions. On the Commencement Date, each
Partner shall be credited with making the Capital Contribution shown opposite of
its or his name on Exhibit B hereto, and in that regard, each Partner's Capital
Account as of the Commencement Date shall be the amount shown opposite of its or
his name on Exhibit B hereto.
4.2 Additional Capital Contributions. After the Capital Contributions
described in Section 4.1 have been made, if at any time, the Partnership does
not have sufficient cash funds on hand to pay its operating expenses (a
"Shortfall"), PHYMED shall make a Capital Contribution to the Partnership equal
to such Shortfall. LDE shall not be obligated to make any Capital Contribution
to the Partnership other than the Capital Contribution described in Section 4.1.
4.3 Other Capital Contributions. Except as provided in Sections 4.1 and
4.2 hereof, no Partner shall be required to make any Capital Contributions to
the Partnership without the unanimous consent of the Partners. If, however, the
Partners unanimously consent to making Capital Contributions in addition to
those set forth in Sections 4.1 and 4.2 hereof, the Capital Contributions
approved unanimously by the Partners shall become required Capital Contributions
pursuant to the terms of the mandate approved by the Partners.
4.4 Defaults in Making Required Capital Contributions.
(a) If a Partner reasonably determines that another Partner
has failed to make a Capital Contribution required under Section 4.1 or
Section 4.2, then the General Partner (or if the General Partner or its
Affiliate is the defaulting Partner, then a Partner that is not an
Affiliate of the General Partner) shall send a notice (the "Default
Notice") to the Partner failing to make such Capital Contribution and
to all other Partners, notifying the defaulting Partner of its failure
to make such Capital Contribution, the amount to be contributed, and
requesting that such Capital Contribution be made immediately. If a
Partner fails to make a Capital Contribution as required under Section
4.2 within five (5) Business Days after receiving such a Default
Notice, then the Partner failing to make such required Capital
Contribution and each of its Affiliates shall be in default (such
Partner is referred to as the "Defaulting Partner" and the amount that
such Partner failed to contribute is referred to as the "Default
Amount").
<PAGE>
(b) If a Partner is a Defaulting Partner, then the Partners
that are not Defaulting Partners (the "Non-Defaulting Partners") may
advance an amount to the Partnership equal to the Default Amount. The
Partners acknowledge and agree that any such advance shall be deemed to
be a loan from the Non-Defaulting Partner to the Defaulting Partner (a
"Partner Default Loan"). Any such Partner Default Loan will be a
nonrecourse obligation of the Defaulting Partner, will bear interest at
the greater of (i) the Prime Rate plus 800 basis points per annum, or
(ii) fifteen percent per annum, will be secured by a first lien
priority security interest in the Defaulting Partner's Partnership
Interest, and will be repaid out of any and all distributions to which
the Defaulting Partner would otherwise be entitled from the Partnership
until all accrued interest and outstanding principal on such Partner
Default Loan has been paid in full. A Defaulting Partner may repay any
Partner Default Loan at any time before conversion of such loan into a
Capital Contribution.
(c) At any time after sixty (60) days following the date after
a Partner Default Loan has been made, a Non-Defaulting Partner making
such loan may elect, by providing notice to each Partner, to convert
the Partner Default Loan into a Capital Contribution in an amount equal
to the outstanding principal balance of such Partner Default Loan. The
accrued but unpaid interest on such Partner Default Loan shall remain
an obligation of the Defaulting Partner. Upon making such election, the
Sharing Ratio of the Defaulting Partner for each calendar month
following the date of such election shall be equal to 50 percent of
what it otherwise would be, and the Sharing Ratio of the Non-Defaulting
Partner shall be equal to the sum of (i) the Sharing Ratio that it
would have absent such election, plus (ii) the amount of Sharing Ratio
lost by the Defaulting Partner as a result of such election.
4.5 Capital Accounts.
(a) Maintenance Rules. The Partnership shall maintain for each
Partner a separate Capital Account in accordance with this Section 4.5,
which shall control the division of assets upon liquidation of the
Partnership as provided in Section 13.3. Each Capital Account shall be
maintained in accordance with the following provisions:
(i) Such Capital Account shall be increased by the
cash amount or Book Value of any property contributed by such
Partner to the Partnership pursuant to this Agreement, such
Partner's allocable share of Profits and any items in the
nature of income or gains which are specially allocated to
such Partner pursuant to Section 5.2 and Section 5.3, and the
amount of any Partnership liabilities assumed by such Partner
or which are secured by any property distributed to such
Partner.
(ii) Such Capital Account shall be decreased by the
cash amount or Book Value of any property distributed to such
Partner pursuant to this Agreement, such Partner's allocable
share of Losses and any items in the nature of deductions or
losses which are specially allocated to such Partner pursuant
to Section 5.2 and Section 5.3, and the amount of any
liabilities of the Partner assumed by the Partnership or which
are secured by any property contributed by such Partner to the
Partnership.
<PAGE>
(iii) If all or a portion of an interest in the
Partnership is transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the
transferred interest; provided, however, that if the transfer
causes a termination of the Partnership under section
708(b)(1)(B) of the Code, then the Partnership shall be deemed
to have contributed its assets to a new partnership in
exchange for all of the interests in the new partnership,
followed by a distribution of the interests in the new
partnership to the transferee Partner and the remaining
Partners of the Partnership in liquidation of the Partnership.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
section 1.704-1(b) of the Regulations and shall be interpreted and applied in a
manner consistent with such Regulations. If a Super-Majority Interest determines
that it is prudent to modify the manner in which the Capital Accounts, or any
increases or decreases to the Capital Accounts, are computed in order to comply
with such Regulations, the General Partner may authorize such modifications,
provided that it is not likely to have a material effect on the amounts
distributable to any Person pursuant to Section 13.3 upon the dissolution and
liquidation of the Partnership.
(b) Definition of Profits and Losses. "Profits" and "Losses"
mean, for each fiscal year or other period, an amount equal to the
Partnership's taxable income or loss for such year or period,
determined in accordance with Code section 703(a) (for this purpose,
all items of income, gain, loss or deduction required to be stated
separately pursuant to Code section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in
computing Profits and Losses pursuant to this Section 4.5(b)
shall be added to such taxable income or loss.
(ii) Any expenditures of the Partnership described in
Code section 705(a)(2)(B), or treated as Code section
705(a)(2)(B) expenditures pursuant to section
1.704-1(b)(2)(iv)(i) of the Regulations, and not otherwise
taken into account in computing Profits and Losses pursuant to
this Section 4.5(b), shall be subtracted from such taxable
income or loss.
(iii) If the Book Value of any partnership asset is
adjusted pursuant to Section 4.5(c)(ii) or Section
4.5(c)(iii), the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for
purposes of computing Profits and Losses.
(iv) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to
the Book Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its
Book Value.
<PAGE>
(v) In lieu of the deduction for depreciation, cost
recovery or amortization taken into account in computing such
taxable income or loss, there shall be taken into account Book
Depreciation as defined in this Section 4.5(b)(v). "Book
Depreciation" for any asset means for any fiscal year or other
period an amount that bears the same ratio to the Book Value
of that asset at the beginning of such fiscal year or other
period as the federal income tax depreciation, amortization or
other cost recovery deduction allowable for that asset for
such year or other period bears to the adjusted tax basis of
that asset at the beginning of such year or other period. If
the federal income tax depreciation, amortization or other
cost recovery deduction allowable for any asset for such year
or other period is zero, then Book Depreciation for that asset
shall be determined with reference to such beginning Book
Value using any reasonable method selected by the General
Partner and approved by a Super-Majority Interest.
(vi) Notwithstanding any other provision of this
Section 4.5(b), any items that are specially allocated
pursuant to Section 5.2 or Section 5.3 shall not be taken into
account in computing Profits and Losses.
(c) Definition of Book Value. "Book Value" means for any asset
the asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Book Value of any asset contributed
by a Partner to the Partnership shall be the gross fair market
value of such asset, as determined by the General Partner and
approved by a Super-Majority Interest.
(ii) The Book Values of all Partnership assets shall
be adjusted to equal their respective gross fair market
values, as determined by the General Partner and approved by a
Super-Majority Interest, as of the following times: (A) on the
acquisition of an additional interest in the Partnership by
any new or existing Partner in exchange for more than a de
minimis capital contribution if the General Partner reasonably
determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the
Partnership; (B) on the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership
property as consideration for an interest in the Partnership
if the General Partner reasonably determines that such
adjustment is necessary or appropriate to reflect the relative
economic interests of the Partners in the Partnership; and (C)
on the liquidation of the Partnership within the meaning of
section 1.704-1(b)(2)(ii)(g) of the Regulations.
<PAGE>
(iii) The Book Value of any Partnership asset
distributed to any Partner shall be the gross fair market
value of such asset on the date of distribution.
(iv) The Book Values of Partnership assets shall be
increased (or decreased) to reflect any adjustment to the
adjusted basis of such assets pursuant to Code section 734(b)
or Code section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital
Accounts pursuant to section 1.704-1(b)(2)(iv)(m) of the
Regulations and Section 5.2(d); provided, however, that Book
Values shall not be adjusted pursuant to this Section
4.5(c)(iv) to the extent the General Partner determines that
an adjustment pursuant to Section 4.5(c)(ii) is necessary or
appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this Section
4.6(c)(iv).
(v) If the Book Value of an asset has been determined
or adjusted pursuant to Section 4.5(c)(i), 4.5(c)(ii), or
4.5(c)(iv), such Book Value shall thereafter be adjusted by
the Book Depreciation taken into account with respect to such
asset for purposes of computing Profits and Losses.
4.6 Negative Capital Accounts. If any Partner has a deficit balance in
its Capital Account, such Partner shall have no obligation to restore such
negative balance or to make any Capital Contribution to the Partnership by
reason thereof, and such negative balance shall not be considered an asset of
the Partnership or of any Partner.
4.7 Interest. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Capital Accounts.
4.8 No Withdrawal. No Partner shall be entitled to withdraw any part
of its Capital Contribution or its Capital Account or to receive any
distribution from the Partnership, except as provided in Section 6.1 and Article
XIII.
4.9 Loans From Partners. Except as provided in Section 4.3(c), loans
by a Partner to the Partnership shall not be considered Capital Contributions.
ARTICLE V
ALLOCATIONS
5.1 Allocations of Profits and Losses.
(a) Allocation of Profit Generally. After giving effect to the
allocations set forth in Section 5.2 and Section 5.3, Profits for any
Fiscal Year shall be allocated to the Partners in the following
manner:
(i) First, to each Partner with a negative balance in
its Adjusted Capital Account, pro rata in accordance with such
negative Adjusted Capital Account balances, until such
negative Adjusted Capital Account balances have been
eliminated;
(ii) Next, to LDE in the minimum amount necessary to
cause LDE positive Adjusted Capital Account balance to equal
its accrued but unpaid Undistributed Priority Return;
(iii) Next, to the Partners in the minimum amount
necessary to cause the ratios among their "Excess Amounts" to
equal the ratios among their Composite Sharing Ratios. For
purposes of this Agreement, LDE's "Excess Amount" equals the
positive balance in LDE's Capital Account (computed after the
allocation of Profits under subparagraphs (i) and (ii) of this
Section 5.1(a) for the Fiscal Year of the allocation), reduced
by the sum of LDE's Undistributed Priority Return (with LDE's
Undistributed Priority Return being computed after giving
effect to all Capital Contributions and all distributions that
took place during and before the Fiscal Year with respect to
which the allocation is being made), and PHYMED's "Excess
Amount" equals the positive balance in PHYMED's Capital
Account; and
<PAGE>
(iv) Next, to the Partners in proportion to their
Composite Sharing Ratios.
(b) Allocation of Losses.
(i) After giving effect to the allocations set forth
in Section 5.2 and Section 5.3, and subject to the limitation
set forth in Section 5.1(b)(ii), Losses for any Fiscal Year
shall be allocated to the Partners in the following manner:
(A) First, in circumstances in which all
Partners have positive Excess Amounts, to the
Partners in the minimum amounts necessary to cause
their positive Excess Amounts to be in the same
ratios as their Percentage Interests, and in
circumstances in which one or more Partners, but not
all Partners, have positive Excess Amounts, to the
Partners with positive Excess Amounts in the minimum
amounts necessary to cause such Partners' positive
Excess Amounts to be in the same ratios as their
Percentage Interests;
(B) Next, to the Partners with positive
Excess Amounts pro rata in accordance with their
positive Excess Amounts, until such positive Excess
Amounts have been eliminated;
(C) Next, to LDE in the minimum amount
necessary to cause each such Partner's positive
Adjusted Capital Account balance to equal the sum of
such Partner's Undistributed Priority Return; and
(D) Next, to the Partners in proportion to
their Composite Sharing Ratios.
(ii) Notwithstanding anything to the contrary in
Section 5.1(b)(i):
(A) Except as set forth below, the Losses
allocated pursuant to Section 5.1(b)(i) hereof to any
Partner for any Fiscal Year shall not exceed the
maximum amount of Losses that may be allocated to
such Partner without causing such Partner to have an
Adjusted Capital Account Deficit at the end of such
Fiscal Year.
(B) If some but not all of the Partners
would have an Adjusted Capital Account Deficit as a
consequence of an allocation of Losses pursuant to
Section 5.1(b)(i) hereof, the limitations set forth
in this Section 5.1(b)(ii) shall be applied by
allocating Losses pursuant to this Section 5.1(b)(ii)
only to those Partners who would not have an Adjusted
Capital Account Deficit as a consequence of receiving
such an allocation of Losses (with the allocation of
such Losses among such Partners to be determined by
the General Partner, based on the allocation that is
most likely to effectuate the distribution priorities
set forth in Section 6.1 hereof).
<PAGE>
(C) If no Partner may receive an additional
allocation of Losses pursuant to Section
5.1(b)(ii)(B) above, such additional Losses not
allocated pursuant to Section 5.1(b)(ii)(B) shall be
allocated among the Partners in a manner that is most
likely to effectuate the distribution priorities set
forth in Section 6.1 hereof, as determined by the
General Partner.
5.2 Special Allocations of Profits and Losses.
(a) Minimum Gain Chargeback--Partnership Nonrecourse
Liabilities. If there is a net decrease in Partnership Minimum Gain
during any Partnership taxable year, certain items of income and gain
shall be allocated (on a gross basis) to the Partners in the amounts
and manner described in section 1.704-2(f) and (j)(2)(i) and (iii) of
the Regulations, subject to the exemptions set forth in section
1.704-2(f)(2), (3), (4), and (5) of the Regulations. This Section
5.2(a) is intended to comply with the minimum gain chargeback
requirement (set forth in section 1.704-2(f) of the Regulations)
relating to Partnership nonrecourse liabilities (as defined in section
1.704-2(b)(3) of the Regulations) and shall be so interpreted.
(b) Minimum Gain Chargeback--Partner Nonrecourse Debt. If
there is a net decrease in Partner Minimum Gain during any Partnership
taxable year, certain items of income and gain shall be allocated (on a
gross basis) as quickly as possible to those Partners who had a share
of the Partner Minimum Gain (determined pursuant to section
1.704-2(i)(5) of the Regulations) in the amounts and manner described
in section 1.704-2(i)(4), (j)(2)(ii) and (iii) of the Regulations. This
Section 5.2(b) is intended to comply with the minimum gain chargeback
requirement (set forth in section 1.704-2(i)(4) of the Regulations)
relating to partner nonrecourse debt (as defined in section
1.704-2(b)(4) of the Regulations) and shall be so interpreted.
(c) Qualified Income Offset. If, after applying Section 5.2(a)
and Section 5.2(b), any Partner has an Adjusted Capital Account
Deficit, items of Partnership income and gain shall be specially
allocated (on a gross basis) to each such Partner in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit of
such Partner as quickly as possible. This Section 5.2(c) is intended to
comply with the "qualified income offset" requirement set forth in
section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be so
interpreted.
(d) Basis Adjustments. To the extent an adjustment to the tax
basis of any Partnership asset pursuant to section 734(b) or 743(b) of
the Code is required, pursuant to section 1.704-1(b)(2)(iv)(m) of the
Regulations, to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated
as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis), and such gain or loss
shall be specially allocated to the Partners in a manner consistent
with the manner in which their Capital Accounts are required to be
adjusted pursuant to such section of the Regulations.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
fiscal year shall be specially allocated among the Partners in
proportion to their Percentage Interests.
(f) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions shall be allocated pursuant to section 1.704-2(b)(4) and
(i)(1) of the Regulations to the Partner who bears the economic risk
of loss with respect to such deductions.
<PAGE>
5.3 Curative Allocations. The allocations set forth in Section 5.1(b)
and Section 5.2(a) through Section 5.2(f) (the "Regulatory Allocations") are
intended to comply with certain requirements of the Regulations. It is the
intent of the Partners that, to the extent possible, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with special
allocations of other items of Partnership income, gain, loss, or deduction
pursuant to this Section 5.3. Therefore, notwithstanding any other provisions of
this Article V (other than the Regulatory Allocations), the General Partner
shall make such offsetting special allocations of Partnership income, gain,
loss, or deduction in whatever manner it determines appropriate so that, after
such offsetting allocations are made, each Partner's Capital Account balance is,
to the extent possible, equal to the Capital Account balance such Partner would
have had if the Regulatory Allocations were not part of the Agreement and all
Partnership items were allocated pursuant to Section 5.1(a). In exercising its
discretion under this Section 5.3, the General Partner shall take into account
future Regulatory Allocations under Sections 5.2(a) and 5.2(b) that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 5.2(e) and 5.2(f).
5.4 Tax Allocations: Code Section 704(c).
(a) In accordance with Code section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership shall, solely
for tax purposes, be allocated among the Partners so as to take account
of any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its initial Book Value
(computed in accordance with Section 4.4(c)(i)).
(b) If the Book Value of any Partnership asset is adjusted
pursuant to Section 4.4(c)(ii), subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income
tax purposes and its Book Value in the same manner as under Code
section 704(c) and the Regulations thereunder.
(c) Any elections or other decisions relating to allocations
made pursuant to this Section 5.4 shall be made by the General Partner
in any manner that reasonably reflects the purpose and intention of the
Agreement. Allocations pursuant to this Section 5.4 are solely for
purposes of federal, state, and local taxes and shall not affect or in
any way be taken into account in computing any Partner's Capital
Account or share of Profits, Losses, and other items or distributions
pursuant to any provision of this Agreement.
5.5 Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any
other item allocable to any period, Profits, Losses, and any such other
item shall be determined on a daily, monthly, or other basis, as
determined by the General Partner using any permissible method under
section 706 of the Code and the Regulations thereunder.
(b) For federal income tax purposes, every item of income,
gain, loss, and deduction shall be allocated among the Partners in
accordance with the allocations under Sections 5.1, 5.2, 5.3, and 5.4
of this Agreement.
(c) The Partners are aware of the income tax consequences of
the allocations made by this Article V and hereby agree to be bound by
the provisions of this Article V in reporting their shares of
Partnership income and loss for income tax purposes.
(d) It is intended that the allocations in Sections 5.1, 5.2,
5.3, and 5.4 effect an allocation for federal income tax purposes
consistent with section 704 of the Code and comply with any limitations
or restrictions therein.
(e) The Partners agree that their Percentage Interests
represent their respective interests in Partnership profits for
purposes of allocating excess nonrecourse liabilities (as defined in
section 1.752-3(a)(3) of the Regulations) pursuant to section
1.752-3(a)(3) of the Regulations.
<PAGE>
ARTICLE VI
DISTRIBUTIONS
6.1 Distributions. The General Partner shall review the Partnership's
accounts promptly after the end of each calendar month to determine whether
there exists any Available Cash at such time. If there exists Available Cash at
such time, the General Partner shall promptly distribute all such Available
Cash. Except to the extent Section 13.3 or Section 13.4 are applicable, all
distributions pursuant to this Section 6.1 shall be made to the Partners in the
manner set forth below:
(a) First, to LDE to the extent LDE has accrued but unpaid
Undistributed Priority Return, in an amount up to LDE's accrued but
unpaid Undistributed Priority Return;
(b) Next, 100% to PHYMED until the total distributions to PHYMED
under this Section 6.1(b) equal the total UPR Elimination Payments
since the Commencement Date; and
(c) Next, to the Partners in proportion to their Sharing Ratios
for the immediately preceding calendar month.
6.2 Make-Up Payments. If, with respect to any calendar month, LDE has
accrued but unpaid Undistributed Priority Return on the fifteenth day following
said calendar month, then PHYMED shall make a cash payment directly to LDE no
later than the twentieth day following said calendar month in an amount
necessary to eliminate LDE's Undistributed Priority Return (a "UPR Elimination
Payment"). If PHYMED does not make the UPR Elimination Payment (if due) in full
by the twentieth day following each relevant calendar month, then LDE shall
notify PHYMED in writing of such failure. If PHYMED does not make the relevant
UPR Elimination Payment in full within five Business Days following the written
notice from LDE referred to in the immediately preceding sentence, then (a)
PHYMED shall continue to have an unconditional obligation to make the UPR
Elimination Payment (with interest at the greater of (i) 15 percent per annum,
or (ii) the LDE Rate on the date of such default plus 800 basis points, and (b)
PHYMED's Sharing Ratios for each calendar month after the date of failure to pay
the UPR Elimination Payment shall be equal to 50 percent of what it otherwise
would be, and the Sharing Ratio of LDE shall be equal to the sum of (i) the
Sharing Ratio that it would have absent such default by PHYMED, plus (ii) the
amount of Sharing Ratio lost by PHYMED as a result of such default.
6.3 Payments Not Deemed Distributions. Any amounts paid pursuant to
Section 7.4 shall not be considered distributions for purposes of this
Agreement.
6.4 Withheld Amounts.
(a) Notwithstanding any other provision of this Article VI to the
contrary, each Partner hereby authorizes the Partnership to withhold
and to pay over, or otherwise pay, any withholding or other taxes
payable by the Partnership with respect to such Partner as a result of
such Partner's participation in the Partnership. If and to the extent
that the Partnership shall be required to withhold or pay any such
taxes, such Partner shall be deemed for all purposes of this Agreement
to have received a payment from the Partnership as of the time such
withholding or tax is paid, which payment shall be deemed to be a
distribution with respect to such Partner's Partnership Interest to
the extent that the Partner (or any successor to such Partner's
Partnership Interest) is then entitled to receive a distribution.
<PAGE>
(b) To the extent that the aggregate of such payments to a
Partner for any period exceeds the distributions to which such Partner
is entitled for such period, the amount of such excess shall be
considered a loan from the Partnership to such Partner. Such loan
shall bear interest (which interest shall be treated as an item of
income to the Partnership) at the lesser of the maximum rate permitted
by law or the LDE Rate, as determined hereunder from time to time,
until discharged by such Partner by repayment, which may be made in
the sole discretion of the General Partner out of distributions to
which such Partner would otherwise be subsequently entitled.
c) Any withholdings authorized by this Section 6.4 shall be made
at the applicable statutory rate under the applicable tax law unless
the General Partner shall have received an opinion of counsel or other
evidence satisfactory to the General Partner to the effect that a
lower rate is applicable, or that no withholding is applicable.
ARTICLE VII
MANAGEMENT OF THE PARTNERSHIP
7.1 Designation and Authority of General Partner.
(a) The Partners hereby designate PHYMED as the general partner
of the Partnership. PHYMED shall continue to serve as the General
Partner of the Partnership until such time as provided in the
Agreement.
(b) Subject to Section 7.2, the General Partner shall conduct,
direct, and exercise full control over all activities of the
Partnership and all management powers over the business and affairs of
the Partnership shall be vested in the General Partner.
7.2 Major Decisions. The General Partner shall not have the authority
to cause the Partnership to act on any matter constituting a Major Decision (or
which otherwise requires the approval of a Super-Majority Interest) until the
General Partner obtains the written approval of a Super-Majority Interest. The
term "Major Decision," as used in this Agreement means any decision with respect
to the following matters:
(a) approval of any contract between any Partner (or any
Affiliate of any Partner) and the Partnership;
(b) doing any act in contravention of the Agreement or failing to
do any act required by the Agreement;
(c) doing any act which would make it impossible to carry on the
ordinary business of the Partnership;
(d) executing or delivering any assignment for the benefit of
creditors of the Company;
(e) moving the MRI to any location other than the Center;
(f) engaging in any material activity not related to operation of
the MRI;
(g) selling, exchanging, leasing or otherwise transferring any
single asset of the Partnership with a fair market value in excess of
$1,000;
<PAGE>
(h) acquiring any single asset of the Partnership with a fair
market value in excess of $1,000;
(i) placing any voluntary liens or encumbrances on Partnership
assets;
(j) entering into any contract, including any employment
contract;
(k) borrowing any money by the Partnership in excess of $1,000
(other than trade payables and liabilities incurred in the ordinary
course of business);
(l) confessing any judgment against the Partnership in connection
with any threatened or pending legal action;
(m) settling any claim in excess of $1,000 against the
Partnership;
(n) making any material decision concerning Partnership
accounting for book and federal income tax purposes or making any
significant election for federal income tax purposes;
(o) making the decision to institute any lawsuit and selecting
the attorneys to prosecute such a lawsuit;
(p) filing any voluntary petition in bankruptcy or receivership
with respect to the Partnership;
(q) lending any funds of the Partnership other than the deposit
of Partnership funds in a federally insured institution;
(r) making any other decision under this Agreement that
specifically requires the approval of a Super-Majority Interest; and
(s) obtaining any insurance coverage.
7.3 Certificate of Limited Partnership. The General Partner shall
file the Certificate with the Secretary of State of the State of Texas, and
shall cause to be filed such other certificates or documents (including, without
limitation, copies, amendments, or restatements of the Certificate) as may be
determined by the General Partner to be reasonable and necessary or appropriate
for the formation, qualification, or registration and operation of a limited
partnership (or a partnership in which the Limited Partners have limited
liability) in the State of Texas and in any other state where the Partnership
may elect to do business.
7.4 Compensation and Reimbursement of General Partner. The General
Partner shall not be compensated for services rendered to the Partnership as a
General Partner. However, the Partnership shall reimburse the General Partner
for all reasonable expenses incurred by the General Partner on behalf of the
Partnership and/or for the benefit of the Partnership.
7.5 Partnership Funds. The funds of the Partnership shall be deposited
in such interest-bearing Partnership account or Partnership accounts as are
designated by the General Partner. All withdrawals from or charges against such
accounts shall be made by the General Partner or by its representative. Funds of
the Partnership may be invested as determined by the General Partner in
accordance with the terms and provisions of this Agreement.
<PAGE>
7.6 Duties. The General Partner shall manage the Partnership and its
business and affairs in accordance with the terms of this Agreement to the best
of its ability, and shall use its good faith efforts to carry out the business
of the Partnership. The General Partner shall act honestly, in good faith and in
the best interest of the Partnership. The General Partner shall devote itself to
the business of the Partnership to the extent that it determines is necessary
for the efficient carrying on thereof.
7.7 Transactions with Affiliates. The General Partner may not, on
behalf of the Partnership, enter into any transaction, agreement or contract
with a Partner or with any Person that is an Affiliate of any Partner and/or the
Partnership unless the terms to the Partnership of any such transaction,
agreement, or contract involving the Partnership with a Partner or with any
Affiliate of a Partner and/or the Partnership shall be competitive with the
terms of similar transactions, agreements, or contracts obtained by persons in
the same business as the Partnership in arms-length agreements with unrelated
parties.
7.8 Outside Activities; Conflicts of Interest. The General Partner or
any Affiliate thereof and any director, officer, employee, agent, or
representative of the General Partner or any Affiliate thereof shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities in the same business as the Partnership, except that neither the
General Partner nor any Affiliate shall be entitled to open an MRI imaging
center or have any interest in an MRI imaging center at any location within a
10-mile radius of the Center. Neither the Partnership nor any of the Partners
shall have any rights by virtue of this Agreement or the partnership
relationship created hereby in any business ventures of the General Partner, any
Affiliate thereof, or any director, officer, employee, agent, or representative
of either the General Partner or any Affiliate thereof.
7.9 Resolution of Conflicts of Interest. Unless otherwise expressly
provided in this Agreement or any other agreement contemplated herein, whenever
a conflict of interest exists or arises between the General Partner or any of
its Affiliates, on the one hand, and the Partnership or any Limited Partner, on
the other hand, any action taken by the General Partner, in the absence of bad
faith by the General Partner, shall not constitute a breach of this Agreement or
any other agreement contemplated herein or a breach of any standard of care or
duty imposed herein or therein or under the Texas Act or any other applicable
law, rule, or regulation.
7.10 Indemnification. The Partnership shall indemnify and hold
harmless the General Partner and any director, officer, employee, agent, or
representative of the General Partner, against all liabilities, losses, and
damages incurred by any of them by reason of any act performed or omitted to be
performed in the name of or on behalf of the Partnership, or in connection with
the Partnership's business, including attorneys' fees and any amounts expended
in the settlement of any claims or liabilities, losses, or damages, to the
fullest extent permitted by the Texas Act (excluding, however, any losses or
damages resulting from the General Partner's negligence, gross negligence,
fraud, willful misconduct, or breach of this Agreement). The Partnership shall
indemnify and hold harmless any Limited Partner, employee, agent, or
representative of the Partnership, any Person who is or was serving at the
request of the Partnership acting through the General Partner as a director,
officer, partner, trustee, employee, agent, or representative of another
corporation, partnership, joint venture, trust, or other enterprise, but in no
event shall such indemnification exceed the indemnification permitted by the
Texas Act. Notwithstanding anything to the contrary in this Section 7.10, in no
event shall Limited Partners be subject to personal liability by reason of the
indemnification provisions of this Agreement.
<PAGE>
7.11 Liability of General Partner.
(a) Neither the General Partner nor its directors, officers,
employees, agents, or representatives shall be liable to the
Partnership or any Limited Partner for errors in judgment or for any
acts or omissions that do not constitute negligence, gross negligence,
fraud, willful or wanton misconduct or breach of this Agreement.
(b) The General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its directors, officers,
employees, agents, or representatives.
7.12 Reliance by General Partner.
(a) The General Partner may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
and other consultants and advisers selected by it, and any opinion of
any such Person as to matters which the General Partner believes to be
within such Person's professional or expert competence shall be full
and complete authorization and protection in respect of any action
taken or suffered or omitted by the General Partner hereunder in good
faith and in accordance with such opinion.
7.13 Insurance. The General Partner, on behalf of the Partnership
and at the Partnership's cost and expense, shall, during the entire term hereof,
obtain, maintain and keep in full force and effect, such insurance coverage as
the General Partner reasonably deems advisable, subject to Section 7.2.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 Limitation of Liability. A Limited Partner shall have no liability
under this Agreement except as provided herein or under the Texas Act.
8.2 Management of Business. No Limited Partner shall take part in the
control (within the meaning of the Texas Act) of the Partnership's business,
transact any business in the Partnership's name, or have the power to sign
documents for or otherwise bind the Partnership other than as specifically set
forth in this Agreement.
8.3 Outside Activities. A Limited Partner or any Affiliate thereof,
and any director, officer, employee, agent, or representative of such Limited
Partner or any Affiliate thereof, shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities in direct competition
with the Partnership. Neither the Partnership nor any of the other Partners
shall have any rights by virtue of this Agreement in any business ventures of
any Limited Partner, any Affiliate thereof, or any director, officer, employee,
agent, or representative of any Limited Partner or any Affiliate thereof.
8.4 Return of Capital. No Limited Partner shall be entitled to the
withdrawal or return of its Capital Contribution except to the extent, if any,
that distributions made pursuant to this Agreement or upon termination of the
Partnership may be considered as such by law and then only to the extent
provided for in this Agreement.
<PAGE>
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 Records and Accounting. The General Partner shall keep or cause
to be kept appropriate books and records with respect to the Partnership's
business, which shall at all times be kept at the principal office of the
Partnership or such other office as the General Partner may designate for such
purposes. Any books and records maintained by the Partnership in the regular
course of its business, including books of account and records of Partnership
proceedings, may be kept on any information storage device, provided that the
books and records so kept are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained for financial reporting purposes on the accrual method of accounting.
9.2 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year for tax and accounting purposes.
9.3 Reports.
(a) The General Partner shall deliver to each Partner, at the
Partnership's expense, not later than 90 days following the end of each
fiscal year, a balance sheet, an income statement, and an annual
statement of source and application of funds of the Partnership for
such fiscal year. Upon the request of any Partner, such financial
statements shall be audited by an independent accounting firm selected
by the requesting Partner, with the Partner requesting such audit
paying the entire cost of the audit.
(b) The General Partner shall deliver to each Partner, at the
Partnership's expense, not later than 45 days after the last day of
each calendar quarter during the term of this Agreement, other than the
last calendar quarter of the fiscal year in question, a balance sheet
together with a profit and loss statement for such calendar quarter
together with a cumulative profit and loss statement to date and with
comparative statements for the like periods immediately preceding.
(c) Within twenty days following each calendar month, the
General Partner shall deliver to each Partner a written report setting
forth: (i) the Sharing Ratio applicable to each Partner for the
immediately preceding month, (ii) the Composite Sharing Ratio for each
Partner as of the end of the immediately preceding month, (iii)
distributions for the immediately preceding month, setting forth the
amount distributed to each Partner under each of Sections 6.1(a), (b)
and (c), (iv) LDE's Undistributed Priority Return as of the end of the
immediately preceding month, (v) UPR Elimination Payments for the
immediately preceding month, and (vi) the maximum amount that could be
distributed in the upcoming month under Section 6.1(b).
ARTICLE X
TAX MATTERS
10.1 Preparation of Tax Returns. The General Partner shall arrange for
the preparation and timely filing of all returns of Partnership income, gains,
deductions, losses and other items necessary for federal, state and local income
tax purposes. The classification, realization and recognition of income, gains,
losses and deductions and other items shall be on the cash or accrual method of
accounting for federal income tax purposes, as the General Partner shall
determine in accordance with applicable law. The General Partner in its sole
discretion may pay state and local income taxes attributable to operations of
the Partnership and treat such taxes as an expense of the Partnership.
<PAGE>
10.2 Tax Elections. Except as otherwise provided herein, the General
Partner shall determine whether to make any election available to the
Partnership under the Code.
10.3 Tax Controversies. Subject to the provisions hereof, PHYMED is
designated the "tax matters partner" (as defined in section 6231 of the Code),
and is authorized and required to represent the Partnership, at the
Partnership's expense, in connection with all examinations of the Partnership's
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional services and costs
associated therewith. Each Partner agrees to cooperate with PHYMED in connection
with such proceedings.
10.4 Organizational Expenses. The Partnership shall elect to deduct
expenses incurred in organizing the Partnership ratably over a 60-month period
as provided in section 709 of the Code.
10.5 Taxation as a Partnership. No election shall be made by the
Partnership or any Partner for the Partnership to be excluded from the
application of any of the provisions of Subchapter K, Chapter 1 of Subtitle A of
the Code or from any similar provisions of any state tax laws.
ARTICLE XI
TRANSFERS OF PARTNERSHIP INTERESTS
11.1 Transfer Restrictions. No Partnership Interest shall be
transferred, in whole or in part, except in accordance with the terms and
conditions set forth in this Article XI. Any transfer or purported transfer of
any Partnership Interest not made in accordance with this Article XI shall be
null and void. An alleged transferee shall have no right to require any
information or account of the Partnership's transactions or to inspect the
Partnership's books. The Partnership shall be entitled to treat the alleged
transferor of a Partnership Interest as the absolute owner thereof in all
respects, and shall incur no liability to any alleged transferee for
distributions to the Partner owning such Partnership Interest of record or for
allocations of income, gain, losses, deductions or credits or for transmittal of
reports and notices required to be given to holders of Partnership Interests.
The term "transfer" when used in this Article XI with respect to a Partnership
Interest, includes a sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange, or any other disposition.
11.2 Transfers by General Partner. The General Partner may transfer
all, but not less than all, of its Partnership Interest to any Person only after
first obtaining the approval of a Super-Majority Interest, which approval may be
unreasonably withheld. Any permitted transfer by the General Partner of its
Partnership Interest under this Section 11.2 shall not constitute a withdrawal
of the General Partner under Article XII, Section 13.1(b), or any other
provision of this Agreement. If any such transfer is deemed to constitute a
withdrawal under such provisions or otherwise and results in the dissolution of
the Partnership under this Agreement or the laws of any jurisdiction to which
the Partnership or this Agreement is subject, the Partners hereby unanimously
consent to the reconstitution and continuation of the Partnership immediately
following such dissolution, pursuant to Section 13.2.
11.3 ransfers by Limited Partners. Except as provided in Section 11.4,
a Partnership Interest of a Limited Partner may be transferred at any time.
<PAGE>
11.4 Additional Limitations on Transfers of Partnership Interests.
The General Partner (or the Limited Partners if the General Partner is the
transferor) may require, as a condition to any transfer of a Partnership
Interest of a Limited Partner, that, in the General Partner's (or Limited
Partners, if applicable) reasonable determination: (a) the transfer will not
jeopardize the treatment of the Partnership as a partnership for federal income
tax purposes; (b) the transfer will not result in or cause a termination of the
Partnership for federal income tax purposes; and (c) the transfer will not
violate the registration requirements of applicable securities laws or cause any
prior offer and sale of Partnership Interests to violate such requirements. The
General Partner (or Limited Partners, if applicable) may also require the
proposed transferee to deliver to the Partnership acceptable representations and
warranties respecting its status under applicable securities laws and its
investment intent with respect to the Partnership Interest, and may require the
transferor and transferee to supply such other documentation as the General
Partner (or Limited Partners, if applicable) may deem advisable in its sole
discretion.
11.5 Distributions and Allocations in Respect of Transferred
Partnership Interests. If any Partnership Interest is transferred during any
fiscal year in compliance with the provisions of this Article XI, Profits,
Losses, and all other items attributable to the transferred interest for such
period shall be divided and allocated between the transferor and the transferee
by taking into account their varying interests during the period in accordance
with Code Section 706(d), using any conventions permitted by law that are
reasonably selected by the General Partner.
11.6 Admission of Initial and Substitute Limited Partners and Successor
General Partner.
(a) Admission of Initial Limited Partners. On the Effective
Date, the General Partner shall admit LDE as the Limited Partner in the
Partnership. Each Limited Partner shall execute this Agreement (or a
counterpart thereof) and thereby agree to be bound by the terms hereof
as Limited Partner.
(b) Admission of Substitute Limited Partners. A transferee
(which may be the heir or legatee of a Limited Partner) or assignee of
a Limited Partner's Partnership Interest, or Person acquiring a
Partnership Interest pursuant to any foreclosure made upon any
permitted pledge or hypothecation of such Partnership Interest, shall
be entitled to receive the distributive share of the Partnership's
Profits, Losses, income, gains, losses, deductions, and credits
attributable to such Partnership Interest. To become a substitute
Limited Partner, the transferor and the transferee must notify the
General Partner in writing of such transfer. If acceptable to the
General Partner, such transferee, assignee, heir, or legatee shall
execute a counterpart of this Agreement, thereby agreeing to be bound
by the terms hereof as a Limited Partner with respect to the
Partnership Interest so transferred. Upon admission of a substitute
Limited Partner, such Limited Partner shall be subject to all of the
restrictions applicable to, shall assume all of the obligations of, and
shall attain the status of a Limited Partner under and pursuant to this
Agreement with respect to the Partnership Interest held by such Limited
Partner.
(c) Admission of Successor General Partner. A permitted
transferee of or successor to all of the Partnership Interest of the
General Partner pursuant to Section 11.2 shall be admitted to the
Partnership as the General Partner, effective as of the date of the
withdrawal or removal of the predecessor General Partner or the date of
transfer of such predecessor's Partnership Interest.
<PAGE>
(d) Action by General Partner. In connection with the
admission of any substitute Limited Partner or successor General
Partner, the General Partner shall have the authority to take all such
actions as it deems necessary or advisable in connection therewith, and
the execution and filing with appropriate authorities of any necessary
documentation.
11.7 Prohibited Transfers. Any transfer or purported transfer,
whether by operation of law or otherwise, of a Partnership Interest shall be
null and void and of no legal effect unless it is permitted by this Article XI
or by other provisions of this Agreement.
11.8 Specific Performance and Other Remedies. It is expressly agreed
that the remedy at law for breach of any of the obligations to transfer a
Partnership Interest pursuant to this Article XI is inadequate in view of: (i)
the complexities and uncertainties in measuring the actual damages that would be
sustained by reason of the failure of a Partner to comply fully with each of
said obligations, and (ii) the uniqueness of the Partnership business and the
Partnership relationship. Accordingly, each of the aforesaid obligations to
transfer a Partnership Interest shall be, and is hereby expressly made,
enforceable by specific performance.
11.9 PHYMED Purchase Option.
(a) Purchase Option. At any time after thirty-six months from
the Commencement Date, PHYMED or its Affiliate shall have the right,
but not the obligation, to purchase all, but not less than all, of the
Partnership Interests held by LDE and its Affiliates for the Purchase
Price on the date the relevant Option Notice is sent.
(b) Option Notice. If PHYMED or its Affiliate desires to
exercise its option under Section 11.9(a), it shall give written notice
(the "Option Notice") to LDE stating its intention to exercise its
option under Section 11.9(a) and a proposed calculation of the Purchase
Price. The date of the Option Notice shall be the date such notice is
deemed given or made pursuant to Section 15.1.
(c) Calculation of Purchase Price.
(i) The "Purchase Price" as of the date of an Option
Notice equals the greater of (A) $1,000, or (B) the excess (if
any) of (I) the future value of $2,500,000 as of the date of
the Option Notice (using a 15% per annum interest factor,
compounded monthly, running from the Commencement Date to the
date of the Option Notice), over (II) the future value of each
distribution to LDE under Section 6.1 hereof and each UPR
Elimination Payment as of the date of the Option Notice (using
a 15% per annum interest factor (compounded monthly), running
from the date of distribution or payment to the date of the
Option Notice).
(ii)The Purchase Price shall be paid entirely in cash
at closing.
(d) Disagreement With Purchase Price. If LDE or its Affiliates
disagree with the proposed calculation of Purchase Price set forth in
the Option Notice, it shall give written notice to PHYMED (the
"Purchase Price Notice") to that effect within fifteen (15) days from
the date of the Option Notice. Such Purchase Price Notice shall state
the specific grounds for disagreement and a new calculation of Purchase
Price. If the parties cannot agree upon the Purchase Price within
fifteen (15) days after the date of the Purchase Price Notice, then the
parties shall submit the calculation of Purchase Price to a mutually
acceptable national independent accounting firm. The fees and expenses
of the national independent accounting firm shall be shared by the
parties equally.
<PAGE>
(c) Closing. A Transfer described in this Section 11.9 shall
be consummated within thirty (30) days after the date on which the
Purchase Price is finally determined pursuant to Section 11.9(d), or if
there is no disagreement regarding the proposed calculation of Purchase
Price set forth in the Option Notice, then within thirty (30) days
after the date of the Option Notice.
ARTICLE XII
WITHDRAWAL AND REMOVAL OF GENERAL PARTNER
12.1 Events of Withdrawal. The General Partner may not voluntarily
withdraw from the Partnership at any time. The General Partner, however, will be
deemed to have withdrawn from the Partnership on the occurrence of any one of
the following events (each event herein referred to as an "Event of
Withdrawal"):
(a) The General Partner is removed as a general partner
pursuant to Section 12.2; or
(b) The General Partner transfers all of its right, title
and interest as General Partner pursuant to Section
12.2 Removal.
(a) A General Partner may be removed as General Partner at any
time: (i) after such Person commits an act of fraud or gross negligence
in its capacity as General Partner; (ii) after such Person commits a
material breach of this Agreement; (iii) after such Person engages in
intentional and willful misconduct against the interests of the
Partnership; (iv) after such Person suffers or is subject to an Event
of Bankruptcy; or (v) upon the unanimous vote of the Limited Partners
to remove the General Partner (which removal may be for any reason).
(b) Any such removal of that Person as the General Partner
shall be effective after the following two conditions have been
satisfied: (i) delivery of a removal notice to the General Partner from
all of the Limited Partners; and (ii) approval by LDE of a new General
Partner and the admission of such Person as a General Partner in the
Partnership.
(c) If a Person is removed as a General Partner but continues
to own a Partnership Interest, then the Partnership Interest shall be
converted into a Partnership Interest as a Limited Partner.
(d) If a Person is removed as General Partner, such Person
shall perform, execute and deliver or cause to be performed, executed
and delivered any and all acts, documents and assurances as the new
General Partner may reasonably require to evidence: (i) the removal of
the former General Partner; (ii) if applicable, a conversion of the
Partnership Interest of the former General Partner to a Partnership
Interest as a Limited Partner; and (iii) the admission of a new General
Partner.
<PAGE>
(e) Notwithstanding anything to the contrary in Article XI, in
connection with the admission of a new General Partner, the Limited
Partners may assign Partnership Interests to such new General Partner
so that such new General Partner has at least a 1% Percentage Interest
in all items of Profit, Loss, income, gain, loss and deduction,
Partnership capital, and distributions. The Partnership Interest of a
Limited Partner that is assigned to such new General Partner shall be
converted into a Partnership Interest as a General Partner upon its
receipt by the new General Partner.
ARTICLE XIII
DISSOLUTION AND WINDING UP
13.1 Dissolution.
(a) Except as otherwise provided in this Agreement, no Partner
shall have the right to terminate this Agreement or dissolve the
Partnership by its express will or by withdrawal without the prior
written consent of the other Partners.
(b) The Partnership shall be dissolved upon the first to occur
of any of the following:
(i) the expiration of its term as provided in Section
1.3;
(ii) an election to dissolve the Partnership by a
Super-Majority Interest; or
(iii) any other event that, under the Texas Act, would
cause the Partnership's dissolution.
13.2 Continuation of the Partnership. Except as otherwise provided in
this Agreement, upon the occurrence of an event described in Section
13.1(b)(iii), if there remains at least one General Partner, the business of the
Partnership shall be carried on by such General Partner without dissolution if
approved by LDE. In all other cases, upon the occurrence of an event described
in Section 13.1(b), the Partnership shall be deemed to be dissolved and
reconstituted only if the remaining Partners unanimously elect to continue the
Partnership within 90 days of such event. If no election to continue the
Partnership is made within 90 days of such event, the Partnership shall conduct
only those activities necessary to wind up its affairs. If an election to
continue the Partnership is made upon the occurrence of an event described in
Section 13.1(b), then:
(a) if there is no remaining General Partner, then within such
90 day period a successor General Partner shall be selected by LDE;
(b) the Partnership shall be deemed to be reconstituted and
shall continue until the end of the term for which it is formed unless
earlier dissolved in accordance with this Article XIII;
(c) the departing General Partner shall be automatically
admitted to the Partnership as a Limited Partner and its former
Partnership Interest as a General Partner shall be automatically
converted to a Limited Partner's Partnership Interest; and
(d) all necessary steps shall be taken to amend or restate
this Agreement and the Certificate.
13.3 Liquidation.
(a) Upon dissolution of the Partnership, unless the
Partnership is continued under Section 13.2, the General Partner shall
be the liquidator (the "Liquidator"). The Liquidator shall be entitled
to receive such compensation for its services as may be approved by a
Super-Majority Interest.
<PAGE>
(b) The Liquidator shall agree not to resign at any time
without 15 days prior written notice and may be removed at any time,
with or without cause, by notice of removal approved by a
Super-Majority Interest. Upon dissolution, removal, or resignation of
the Liquidator, a successor and substitute Liquidator (who shall have
and succeed to all rights, powers, and duties of the original
Liquidator) shall within 30 days thereafter be selected by a
Super-Majority Interest. The right to appoint a successor or substitute
Liquidator in the manner provided herein shall be recurring and
continuing for so long as the functions and services of the Liquidator
are authorized to continue under the provisions hereof, and every
reference herein to the Liquidator will be deemed to refer also to any
such successor or substitute Liquidator appointed in the manner herein
provided.
(c) Except as expressly provided in this Article XIII, the
Liquidator appointed in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the
parties hereto, all of the powers conferred upon the General Partner
under the terms of this Agreement (but subject to all of the applicable
limitations, contractual and otherwise, upon the exercise of such
powers) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be
reasonably required in the good faith judgment of the Liquidator to
complete the winding up and liquidation of the Partnership.
(d) Subject to Section 13.4, the Liquidator shall liquidate
the assets of the Partnership and apply and distribute the proceeds of
such liquidation in the following order of priority, unless otherwise
required by mandatory provisions of applicable law:
(i) to the payment of the expenses of terminating
transactions, including, without limitation, brokerage
commissions, legal fees, accounting fees and closing costs;
(ii) to the payment to creditors of the Partnership,
including Partners, in order of priority provided by law;
and
(iii) to the Partners and any assignees in accordance
with the positive balances in their respective Capital
Accounts as provided in section 1.704-1(b)(2)(ii)(b)(2) of
the Regulations; provided, however, that the Liquidator may
place in escrow a reserve of cash or other assets of the
Partnership for contingent liabilities in an amount
determined by the Liquidator to be appropriate for such
purposes.
<PAGE>
13.4 Distribution in Kind. Notwithstanding the provisions of Section
13.3 which require the liquidation of the assets of the Partnership, but subject
to the order of priorities set forth therein, if on dissolution of the
Partnership the Liquidator and a Super-Majority Interest determine that an
immediate sale of part or all of the Partnership's assets would be impractical
or would cause undue loss to the Partners and any assignees, the Liquidator may
defer for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Partnership (other than those to Partners) and/or,
after obtaining the approval of a Super-Majority Interest, may distribute to the
Partners and assignees, in lieu of cash, as tenants in common and in accordance
with the provisions of Section 13.3, undivided interests in such Partnership
assets as the Liquidator deems not suitable for liquidation. Any such
distributions in kind shall be subject to such conditions relating to the
disposition and management of such properties as the Liquidator deems reasonable
and equitable and to any joint operating agreements or other agreements
governing the operation of such properties at such time. The Liquidator and a
Super-Majority Interest shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
13.5 Cancellation of Certificate of Limited Partnership. Upon the
completion of the distribution of Partnership property as provided in Section
13.3 and Section 13.4, the Partnership shall be terminated, and the Liquidator
(or the General Partner and Limited Partners if necessary) shall cause the
cancellation of the Certificate in the State of Texas and of all qualifications
and registrations of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Texas and shall take such other actions as
may be necessary to terminate the Partnership.
13.6 Return of Capital. The General Partner shall not be personally
liable for the return of the Capital Contributions of Limited Partners, or any
portion thereof, it being expressly understood that any such return shall be
made solely from Partnership assets.
ARTICLE XIV
AMENDMENT OF AGREEMENT; CONSENTS
14.1 Amendment Procedures. All amendments to this Agreement shall
be in accordance with the following requirements: (a) amendments to this
Agreement may be proposed only by the General Partner or a Super-Majority
Interest; (b) a proposed amendment shall be effective upon its approval by all
of the Partners; and (c) the General Partner shall notify all Partners upon
final adoption of any such proposed amendment.
14.4 Action Without a Meeting. Any action that may be taken by
Limited Partners may be taken without a meeting if a consent in writing setting
forth the action so taken is signed by Limited Partners owning not less than the
minimum Percentage Interests that would be necessary to authorize or take such
action pursuant to the terms of this Agreement. To the extent that the laws of
any jurisdiction to which the Partnership or the Partnership Agreement is
subject require that any action of Limited Partners under this Agreement be
unanimous, any action taken by Limited Partners pursuant to and in accordance
with the preceding sentence shall be deemed to constitute the act of all Limited
Partners and, in such event, each Limited Partner that does not execute such
written consent hereby agrees to be bound by the decision of those Limited
Partners executing such consent and hereby approves such action to the extent
such approval is required for such matter to be effective under the laws of such
jurisdiction. Prompt notice of the taking of such action shall be given to
Limited Partners who have not consented in writing to such action.
<PAGE>
ARTICLE XV
GENERAL PROVISIONS
15.1 Addresses and Notices. Any notice, demand, request, or report
required or permitted to be given or made to a Partner under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by United States registered or certified mail to the Partner at the
address herein specified (i.e., the address shown on its signature page or as
changed pursuant to Section 1.4(b) hereof), regardless of any claim or any
Person who may have an interest in any Partnership Interest by reason of an
assignment or otherwise.
15.2 Titles and Captions. All article and section titles and captions
in this Agreement are for convenience only, shall not be deemed part of this
Agreement, and in no way shall define, limit, extend, or describe the scope or
intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
15.3 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine, or neuter forms, and the singular form of nouns, pronouns, and verbs
shall include the plural and vice versa.
15.4 Further Action. The parties shall execute all documents,
provide all information, and take or refrain from taking all actions as may be
necessary or appropriate to achieve the purposes of this Agreement.
15.5 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives, and permitted assigns.
15.6Integration. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements and understandings pertaining thereto.
15.7 Creditors. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of
the Partnership.
15.8 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement, or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement,
or condition.
15.9 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart.
15.10 Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Texas, without regard to the
principles of conflicts of law.
15.11 Invalidity of Provisions. If any provision of this Agreement is
declared or found to be illegal, unenforceable, or void, in whole or in part,
then the parties shall be relieved of all obligations arising under such
provision, but only to the extent that it is illegal, unenforceable, or void, it
being the intent and agreement of the parties that this Agreement shall be
deemed amended by modifying such provision to the extent necessary to make it
legal and enforceable while preserving its intent or, if that is not possible,
by substituting therefor another provision that is legal and enforceable and
achieves the same objectives.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the Effective Date.
GENERAL PARTNER: PHYMED, INC.,
an Oklahoma corporation
Address:
_________________________________ By:_________________________________
_________________________________ Name:_______________________________
Title:______________________________
LIMITED PARTNER: LDE VENTURES, INC.,
an Illinois corporation
Address:
_______________________ By: _______________________________
_______________________ Name: ______________________________
_______________________ Title: _____________________________
<PAGE>
EXHIBIT A
---------
Initial Percentage Interests
----------------------------
PHYMED 65%
LDE 35%
- --------------------------------------------------------------------------------
MASTER LEASE AGREEMENT
- --------------------------------------------------------------------------------
Master Lease Agreement No. 11113 ("MASTER LEASE")
LESSOR: PRIME LEASING, INC., LESSEE: White Rock JV, Ltd.
an Illinois corporation ("LESSOR") an Texas Limited Partnership ("LESSEE")
10275 W. Higgins Road 9603 White Rock Trail
Rosemont, IL 60018 Dallas, TX 75238
847/294-6000 Phone:
WHEREAS, LESSOR desires to lease certain equipment ("Equipment") to LESSEE and
may lease additional equipment (referred to as "Additional Equipment") to Lessee
in the future (the Equipment and the Additional Equipment being referred to
collectively as the "Equipment"); WHEREAS, LESSEE desires to lease certain
Equipment from LESSOR and may lease Additional Equipment from Lessor in the
future; and WHEREAS, to facilitate the lease of the Equipment, the parties agree
to enter into this MASTER LEASE and to incorporate by reference from time to
time in lease schedules (hereinafter referred to as "Lease Schedules", and
individually as a "Lease Schedule") which will be attached hereto and made a
part hereof, various units of Equipment; NOW, THEREFORE, in consideration of the
mutual promises contained herein and other good and valuable consideration, the
parties hereto agree as follows:
TERMS, CONDITIONS AND COVENANTS OF LEASE
<PAGE>
1. LEASE: This MASTER LEASE sets forth the terms and conditions by which LESSOR
agrees to lease to LESSEE and LESSEE agrees to lease from LESSOR the Equipment
as listed and described in each Lease Schedule executed pursuant to this MASTER
LEASE. Each Lease Schedule shall be separate and distinct for all purposes and
shall incorporate therein all the terms and conditions of this MASTER LEASE. If
there is a conflict between the Lease Schedule and this MASTER LEASE, the terms
and conditions of this MASTER LEASE shall govern and control.
2. TERM:
a. The term of this MASTER LEASE shall begin on the date of execution by LESSOR
and shall continue in effect thereafter until all of LESSEE'S obligations and
liabilities under this MASTER LEASE and every Lease Schedule have been fully
performed or otherwise discharged.
b. The lease term for each Lease Schedule shall commence on the earlier of the
Equipment installation, first clinical use, or the cutover date (hereinafter
referred to as "Commencement Date"). If any Equipment under the Lease Schedule
is not newly installed, then the Commencement Date shall be the date upon which
title to the Equipment passes to LESSOR. The lease term shall continue for the
number of months set forth in the Lease Schedule (hereinafter referred to as
"Initial Term") and continue for any extended or renewal term. The first payment
date of the Initial Term shall be the first day of the month immediately
following the Commencement Date (or beginning on the Commencement Date if that
date is on the first day of the month).
e. LESSEE shall deliver to LESSOR a Certificate of Acceptance within five (5)
days of the Commencement Date. If Lessee fails to deliver the Certificate of
Acceptance, LESSEE shall be deemed to have accepted the Equipment as installed
and operational as of the Commencement Date unless LESSEE gives LESSOR written
notice of each defect within five (5) days of the Commencement Date.
3. RENT AND PAYMENTS: LESSEE'S obligation to pay rent under each Lease Schedule
shall begin on the Commencement Date and continue for the term. The monthly rent
(hereinafter referred to as "Monthly Rent") set forth in the Lease Schedule
shall be due and payable in advance on the first day of each calendar month
during the Initial Term without notice or demand notwithstanding the fact that
LESSOR may, as a convenience only, invoice LESSEE. If the Commencement Date of a
Lease Schedule shall be other than the first day of the month, LESSEE shall make
a rental payment (hereinafter referred to as "Interim Rent") equal to 1/30th of
the Monthly Rent set forth in the Lease Schedule for each day beginning with the
Commencement Date to and including the last day of the month prior to the
beginning of the Initial Term. Any amounts payable by LESSEE under this MASTER
LEASE other than the Monthly Rent and Interim Rent shall be deemed to be
additional rent (hereinafter referred to as "Additional Rent") and shall be paid
within twenty (20) days of invoicing by LESSOR. Rent shall be paid to LESSOR at
the address designated herein or at such other place as LESSOR designates in
writing, or if to an assignee of LESSOR, at such place as such assignee shall
designate in writing, by check or wire transfer so that all funds are
immediately available. As used herein, the term "rent" shall mean all Monthly
Rent, Interim Rent and Additional Rent. THIS IS A NON-CANCELABLE LEASE. LESSEE
shall pay the total rents for the entire term to LESSOR, or LESSOR'S assignee
(as defined herein), and such payment of rents shall be absolute and
unconditional without right to setoff, reduction, abatement, counterclaim,
recoupment, or defense of any kind whatsoever.
<PAGE>
a. SERVICE CHARGE: In the event that any rent is not received by LESSOR or
LESSOR'S assignee within five (5) days of the due date thereof, LESSEE shall pay
a service charge of five percent (5%) of the past due payment and shall pay
interest at the rate of 1.5 percent (1.5%) per month or the maximum legal rate,
whichever is less, until all past due rents are received.
b. LEASE BASIS COST: The term "Lease Basis Cost" as used herein means the cost
of acquiring, delivering and installing the Equipment including but not limited
to all parts, materials, labor, services, transportation, taxes, and all other
charges of every kind and nature associated therewith.
c. NON-PERFORMANCE: If LESSEE fails to perform any of its covenants, warranties,
terms or conditions herein, LESSOR may, at its option, perform on LESSEE'S
behalf and all monies advanced by LESSOR shall be repayable by LESSEE as
Additional Rent. However, in no event shall LESSOR'S performance on behalf of
LESSEE be deemed to relieve LESSEE of its obligations hereunder.
4. LEGAL TITLE, LIENS, TAXES AND QUIET ENJOYMENT: During the term of this MASTER
LEASE, legal title to all Equipment shall at all times vest in LESSOR. LESSEE'S
interest in the Equipment shall be limited to its possession and use and LESSEE
shall not have or assert any right, title or interest therein, except as
expressly set forth herein, and shall protect, indemnify and defend, at its
expense, LESSOR'S legal title. LESSEE shall, at its expense, keep the Equipment
free and clear of any lien or encumbrance of any kind whatsoever except that of
LESSOR arising hereunder. LESSEE warrants that the Equipment will at all times
remain personal property, regardless of how it may be affixed to any real
property. Prior to LESSOR'S acceptance of this MASTER LEASE, LESSEE shall
provide LESSOR with a waiver, in form satisfactory to LESSOR, by the landlord or
mortgagee of the premises in which the Equipment is located, of such landlord's
or mortgagee's rights in and to the Equipment and/or the rent due under this
MASTER LEASE. In lieu of such waiver, LESSEE hereby agrees to hold LESSOR
harmless and indemnify LESSOR with regard to any and all claims, actions,
damages, costs and attorneys fees asserted by any landlord or mortgagee against
LESSOR or the Equipment herein. LESSEE shall pay all taxes, assessments or fees
assessed against the Equipment or payable by LESSOR or LESSEE with respect to
the Equipment, including any interest or penalties therein, excepting only
federal or state taxes based on the net income of LESSOR and without regard to
LESSOR'S agreement to invoice LESSEE for such amounts. LESSEE agrees, to the
extent permissible by law, to prepare and file all required tax returns and
other reports (other than reports regarding LESSOR'S income tax) with any
federal, state or other regulatory authority. LESSEE further agrees, to the
extent permitted by law, to take such actions and to file such documents as may
be required to ensure that the valuation of the Equipment, as reflected on the
records and tax rolls of applicable taxing authorities, does not exceed the fair
market value of the Equipment. To the extent LESSEE is not permitted to file
such returns, reports, or documents, LESSEE shall prepare them and provide them
to LESSOR for filing prior to the date such return or report is due. LESSOR
shall have the right to affix a stencil, plate, label or other indicia of its
ownership to the Equipment and LESSEE shall not remove or conceal such
identification. LESSEE shall have the right to quiet enjoyment of the Equipment
during the term of the Lease Schedule, so long as no event of default (as herein
defined) occurs.
<PAGE>
5. LOCATION, USE, MODIFICATIONS AND ALTERATIONS: LESSEE shall not move, or
permit the movement of, the Equipment from the location (hereinafter referred to
as "Equipment Location") specified in the Lease Schedule without LESSOR'S prior
written consent. LESSEE shall not use, or permit the use of, the Equipment
unless such use is consistent with LESSEE'S business, by qualified operators
under LESSEE'S control and in compliance with (A) applicable laws and
regulations; (B) the specifications of, and use contemplated by, the
manufacturer of the Equipment (hereinafter referred to as "Manufacturer"); (C)
the terms of LESSEE'S insurance coverage; and (D) the requirements of LESSEE'S
maintenance agreement regarding the Equipment. LESSEE shall not make any
modifications, alterations or additions to the Equipment without LESSOR'S prior
written consent (other than Manufacturer's Changes, as such term is hereinafter
defined) unless said additions (A) are readily removable without causing any
damage to the Equipment and (B) do not impair the quality, safety, function or
marketability of the Equipment (hereinafter referred to as a "Permitted
Modification"). Any Permitted Modification shall not become the property of
LESSOR and shall not be subject to the Lease Schedule, provided that upon
termination or expiration of the term, LESSEE shall remove all Permitted
Modifications and restore the Equipment to its original condition (ordinary wear
and tear excepted), all at no expense to LESSOR. LESSEE shall permit the
Manufacturer, its agents or its contractors, access to the Equipment for the
purpose of performing such upgrades, recall orders or engineering changes as the
Manufacturer shall require to enhance or maintain the Equipment's standard of
performance (herein defined as "Manufacturer's Changes"), all of which shall
immediately become the property of LESSOR and be subject to the Lease Schedule.
6. MAINTENANCE AND INSPECTION: THIS IS A NET LEASE. LESSEE shall, at its own
expense, maintain the Equipment in good condition and repair and furnish all
necessary repairs, parts, materials and supplies. At all times herein, LESSEE
shall keep in full force and effect a maintenance agreement with the
Manufacturer or, with LESSOR'S consent, with an equivalent service organization
that routinely maintains such Equipment (hereinafter referred to as "Equivalent
Service Organization"). During reasonable business hours and subject to LESSEE'S
reasonable security precautions, LESSEE shall permit LESSOR access to all of the
Equipment for the purpose of inspecting the Equipment to determine LESSEE'S
compliance with this MASTER LEASE. If LESSEE is not in compliance with this
MASTER LEASE, LESSOR shall notify LESSEE in writing of the acts of noncompliance
and LESSEE shall immediately cease using the Equipment until full compliance is
achieved.
7. DISCLAIMER OF WARRANTIES: LESSEE has selected at its own risk the
Manufacturer, size and design of the Equipment. LESSEE acknowledges that LESSOR
is not the Manufacturer, or its agent or distributor, and that LESSOR MAKES NO
REPRESENTATIONS OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE
MERCHANTABILITY, VALUE, CONDITION, QUALITY, DESIGN, CAPACITY, MATERIAL,
WORKMANSHIP OR FITNESS OR SUITABILITY FOR ANY PURPOSE OR USE BY LESSEE, OR
PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT. LESSOR SHALL NOT BE LIABLE FOR
LOSSES OR DAMAGES THEREFROM, INCLUDING BUT NOT LIMITED TO LOSS OF BUSINESS, OR
ACTUAL OR ANTICIPATED PROFITS, OR OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF ANY KIND WHATSOEVER ARISING FROM THIS MASTER LEASE OR THE EQUIPMENT.
So long as no Event of Default (as herein defined) has occurred and continues
uncured, LESSOR assigns LESSEE all of Manufacturer's warranties and
indemnifications, to the extent said warranties and indemnifications are
assignable.
8. RISK OF LOSS: LESSEE hereby assumes and shall bear the entire risk of changes
to, loss, theft, damage, destruction or seizure (hereinafter referred to as
"Event of Loss") of the Equipment from every cause whatsoever. No Event of Loss
shall relieve LESSEE of its obligations to pay rent or to perform any other
obligation under this MASTER LEASE. If any of the Equipment is damaged and
repairable, LESSEE shall promptly notify LESSOR of the occurrence of the Event
of Loss and shall, at LESSEE'S expense within thirty (30) days of such Event of
Loss, cause repairs to be made to the Equipment to restore it to the condition
required pursuant to Section 6 herein. If the Equipment is damaged beyond
repair, LESSEE shall promptly notify LESSOR of the occurrence of the Event of
Loss and shall, at LESSEE'S expense within thirty (30) days of the Event of
Loss: (A) replace the Equipment with like equipment in good repair and working
order or (B) pay to LESSOR in cash the following: (1) the greater of (a) ten
percent (10%) of the Lease Basis Cost or (b) the actual fair market value of the
Equipment calculated as of the date of the Event of Loss; and (2) all amounts
which have accrued and have not been paid by LESSEE to LESSOR under this MASTER
LEASE through the date of the Event of Loss; and (3) the present value of the
unpaid rent discounted at a rate of five percent (5%) for the remainder of the
Initial Term for each Lease Schedule covering the Equipment (the total amount
described in (1), (2), and (3) above is hereinafter collectively referred to as
"Casualty Value").
<PAGE>
9. INSURANCE: LESSEE shall provide and maintain, at its sole cost and expense:
(1) all risk property insurance on the Equipment for its full replacement value
in an amount no less than the Casualty Value, and (2) comprehensive public
liability and property damage insurance on the Equipment in amounts not less
than $1,000,000.00 per occurrence and $3,000,000.00 in the aggregate, with an
insurer reasonably acceptable to LESSOR considering the risks to be insured.
LESSEE shall provide LESSOR or its assigns (in a form acceptable to LESSOR) with
certificates of insurance and a loss payable endorsement in favor of LESSOR and
its assigns, as loss payee for property damage coverage and as additional
insured for public liability coverage. If specifically requested in writing by
LESSOR, LESSEE shall provide a copy of the insurance policy under which the
certificates are issued. The insurance endorsement shall provide that the
coverage shall not be materially altered or cancelled unless thirty (30) days
prior written notice has been given to LESSOR and its assigns, and that the
coverage afforded to LESSOR and its assigns, shall not be rescinded, impaired or
invalidated by any act or omission of LESSEE. LESSOR may apply proceeds of any
such insurance to any of LESSEE'S obligations hereunder, but shall pay excess
proceeds, if any, to LESSEE upon LESSEE'S full satisfaction of its obligations
hereunder.
10. GENERAL INDEMNIFICATION: Except for liability arising from the gross
negligence or willful misconduct of LESSOR, its employees or agents, LESSEE
hereby agrees to indemnify, defend, protect and hold LESSOR, its agents,
employees, directors and assigns harmless from and against any and all claims,
losses, damages. injuries, suits, demands or expenses, including but not limited
to attorney's fees and costs of whatever kind and nature, arising in connection
with the Equipment, including without limitation its selection, purchase,
installation, use, deinstallation, delivery, return or manufacture (including
without limitation patent, trademark or other infringement). LESSEE shall
promptly notify LESSOR or its assigns of any matter hereby indemnified against.
11. RETURN OF EQUIPMENT: Upon the expiration of any Lease Schedule or
termination for any other cause, LESSEE at is sole cost and expense, shall
assemble, crate, insure and deliver all of the Equipment, and all of the service
records relating thereto, subject to the Lease Schedule, to LESSOR in the same
good condition and repair as when received, ordinary wear and teat excepted, to
such reasonable destination within the continental United States as LESSOR shall
designate. LESSEE shall immediately prior to the return of each unit of
Equipment, provide LESSOR a letter from the Manufacturer certifying that each
unit of Equipment is in good working order, ordinary wear and tear excepted, and
is eligible for a maintenance agreement by the Manufacturer or Equivalent
Service Organization. LESSEE shall provide LESSOR with at least one hundred
twenty (120) days written notice of the return of the Equipment. Notwithstanding
any other rights and remedies of LESSOR, if LESSEE fails to return the Equipment
to LESSOR or its designee within ten (10) days of the time required, then until
such time as the Equipment is returned, LESSEE shall pay on demand as liquidated
damages, not as a penalty, and at LESSOR'S election, an amount equal to (A)
twelve (12) months rent; or (B) one hundred twenty percent (120%) of the Monthly
Rent for each month or portion thereof until the Equipment is returned to LESSOR
as detailed herein.
<PAGE>
12. LESSEE'S REPRESENTATIONS AND WARRANTIES: LESSEE represents and warrants
to LESSOR with regard to this MASTER LEASE and each
Lease Schedule to be appended hereto that:
a. The execution, delivery and performance of this MASTER LEASE and any Lease
Schedule have been duly authorized by all necessary action on the part of
LESSEE, and this MASTER LEASE constitutes a valid and binding obligation of
LESSEE enforceable against LESSEE in accordance with its terms;
b. The individual executing this MASTER LEASE on behalf of LESSEE is duly
authorized;
c. Neither the execution or delivery by LESSEE of this MASTER LEASE, nor the
performance thereof by LESSEE, conflicts with, results in a breach of or
constitutes a default or violation of LESSEE'S Certificate of Incorporation,
By-Laws, applicable law, court order or any agreement or other instrument to
which LESSEE is a party or by which it is bound;
d. LESSEE is duly organized and in good standing in its state of incorporation,
is duly qualified to do business in each jurisdiction where the Equipment is
located and where such qualification is required;
e. Upon request by LESSOR, LESSEE shall furnish its most recent audited annual
financial statements prepared in accordance with generally accepted accounting
principles; and LESSEE shall furnish its quarterly financial statements within
___ days after the end of each quarter, prepared in accordance with generally
accepted accounting principles, and being certified as true and correct by an
authorized officer of LESSEE;
f. LESSEE shall provide to LESSOR any other documents reasonably requested to
consummate this transaction or any Lease Schedule or as reasonably required
under this MASTER LEASE;
g. No approval, consent or authorization is required from any governmental
authority with respect to the execution, delivery or performance of this MASTER
LEASE, or if any such approval, consent or authorization is required, it has
been obtained.
13. EVENT OF DEFAULT: The occurrence of any of the following events shall
constitute an event of default by LESSEE or its guarantor (hereinafter referred
to as an "Event of Default"):
a. Failure to pay when due any installment of rent or other sum due hereunder,
and such failure shall continue for more than five (5) days; or
b. Failure to perform any other term or condition, covenant, representation or
warranty of this MASTER LEASE or any Lease Schedule, and such failure continues
for a period of twenty (20) days after notice thereof; or
c. If LESSEE or its guarantor ceases doing business as a going concern, becomes
insolvent, admits in writing its inability to pay its debts as they become due,
makes an assignment for the benefit of its creditors, files a voluntary petition
or answer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal
or state statute, law or regulation, admits, consents to or acquiesces in the
appointment of a receiver or trustee of any of its property, the commission of
any act of dissolution, liquidation or the bankruptcy or death of the LESSEE'S
guarantor in the event that the Guarantor is a natural person; or
<PAGE>
d. Failure within sixty (60) days after the commencement of any proceeding
against LESSEE or its guarantor seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, bankruptcy or similar
relief under any current or future federal or state statute, law or regulation
to obtain the dismissal of such proceeding; or
e. If any warranty, covenant or representation made by LESSEE to LESSOR is
false, incorrect or untrue in any material respect; or if any Equipment subject
to a Lease Schedule is attached, levied upon, encumbered, pledged or seized; or
LESSEE defaults under any other agreement with LESSOR; or defaults under any
other material lease, loan or agreement for the borrowing of money; or
f. There is a material adverse change in the financial condition of LESSEE or
its guarantor.
14. REMEDIES: At any time after an Event of Default, LESSOR shall have the right
to exercise any one or more of the following cumulative remedies:
a. Accelerate without notice to LESSEE all of LESSEE'S obligations hereunder and
to sue for and recover all rents and other amounts which have accrued or shall
accrue under this MASTER LEASE, all of which shall become immediately due and
payable upon demand by LESSOR;
b. Require that LESSEE assemble the Equipment and deliver it to LESSOR as
provided under Section 11 or enter the premises where any Equipment is located
without notice or process of law and take possession of the Equipment without
incurring any liability to LESSEE or any other party for any damages arising
from such taking of possession;
c. Sell any or all of the Equipment at public or private sale or relet same;
d. Terminate this MASTER LEASE or any Lease Schedule as to any or all of the
Equipment; and
e. At law or in equity, enforce any of LESSOR'S rights or pursue any other
remedy now or hereafter arising.
LESSOR'S remedies hereunder are cumulative in nature, not exclusive, and the
exercise of any particular remedy shall not be construed to be an election of
remedies by LESSOR nor shall any waiver or delay by LESSOR of any of its rights
or remedies under this MASTER LEASE be construed as a waiver of LESSOR'S rights
to enforce that, or any other, right or remedy in the future. Notwithstanding
LESSOR'S election of remedies, LESSEE shall remain liable for the present value
of all rents discounted at a rate of five percent (5%) and other amounts which
have accrued or would have accrued during the Initial Term, in addition to (A)
all of LESSOR'S costs and expenses incurred in enforcing its rights hereunder,
or in taking of possession, storing, repairing, selling or reletting the
Equipment, (B) court costs and reasonable attorney's fees, and (C) an amount
equal to the greater of (1) ten percent (10%) of the Lease Basis Cost or (2) the
fair market value calculated as of the date of such Event of Default, less (D)
the net proceeds of a public or private sale or reletting, if any, of the
Equipment, at the present value, if necessary, discounted at a rate of five
percent (5%) and (E) any insurance proceeds recovered by LESSOR from insurance
coverage provided by LESSEE. However, in no event shall LESSOR'S exercise of
more than one of its remedies entitle LESSOR to recover from LESSEE an amount in
excess of that referred to in this section.
<PAGE>
15. ASSIGNMENT AND SUBLEASE
a. LESSOR'S ASSIGNMENT: LESSEE understands and acknowledges that LESSOR has
entered into this MASTER LEASE and shall enter into each Lease Schedule in
anticipation of assigning, mortgaging, or otherwise transferring its rights and
interests thereunder and/or in the Equipment (but not its obligations) to others
(hereinafter referred to as "Assignees") without notice to or the consent of
LESSEE. Accordingly, LESSOR and LESSEE agree that:
(1) LESSEE will, after due notice, acknowledge in writing such notice of
assignment as reasonably requested by LESSOR or its Assignee, and pay directly
to the designated Assignee the amounts which become due under each assigned
Lease Schedule and such payment shall be absolute and unconditional, without
reduction, abatement, offset or counterclaim of any kind. Notwithstanding the
foregoing, LESSEE reserves its rights to have recourse directly against LESSOR
on account of any claim it may have against LESSOR.
(2) Any Assignee may reassign its rights and interests hereunder with the same
effect as the original assignment.
(3) LESSEE agrees to execute all filings pursuant to the Uniform Commercial Code
as well as any other documents reasonably requested by LESSOR or its Assignee.
Any Assignee shall not be liable to LESSEE for any obligations of LESSOR
hereunder.
b. LESSEE'S ASSIGNMENT AND SUBLEASE: Without LESSOR'S prior written consent,
LESSEE shall not: (A) assign any of its obligations hereunder, (B) attempt to
sublease the Equipment or (C) attempt to sell, transfer, hypothecate, dispose
of, lend or abandon the Equipment or any of LESSEE'S rights in it.
16. CHOICE OF LAW AND FORUM: This MASTER LEASE and the provisions contained
herein shall be deemed to have been executed at LESSOR'S principal place of
business in Rosemont, Illinois and shall be governed in all respects by the laws
of the State of Illinois. LESSOR and LESSEE on behalf of themselves and their
assignees further agree that courts located in the State of Illinois shall have
jurisdiction over any matters arising out of this MASTER LEASE and hereby submit
themselves to the personal jurisdiction of the Illinois courts.
17. NOTICES: All notices or demands provided for herein shall be in writing and
shall be deemed given when delivered or deposited in the United States mail,
first class, postage prepaid, addressed to the parties at their respective
addresses set forth above, or at such other address as may be provided from time
to time.
18. SURVIVAL OF OBLIGATIONS: All the terms and conditions, representations,
covenants, warranties and agreements contained in this MASTER LEASE and in any
Lease Schedule or in any document in connection herewith shall specifically
survive the expiration or termination of this MASTER LEASE.
19. SEVERABILITY: To the extent any provision of this MASTER LEASE or any Lease
Schedule is deemed partially or wholly invalid or unenforceable under applicable
law, such provision shall be effective to the extent valid and enforceable, and
all other provisions shall remain in full force and effect.
<PAGE>
20. LESSOR'S CONSENT: When LESSOR'S consent is required by the terms of this
MASTER LEASE, such consent shall not be unreasonably withheld.
21. LEASE SCHEDULE REAFFIRMATION: The execution by LESSOR and LESSEE of each
Lease Schedule shall constitute a reaffirmation by LESSEE of its covenants,
representations and warranties herein and that the same are true, correct and
complete with respect to the Lease Schedule as of the date of execution of each
Lease Schedule.
22. HEADINGS: All section headings of this MASTER LEASE are for convenience
only, and shall not in any way limit or affect the meaning or scope of this
MASTER LEASE or its provisions.
23. NO WAIVER: No delay, omission or failure to act by LESSOR at any time to
exercise or enforce any right or remedy herein provided shall be a waiver of any
such right or remedy to which LESSOR is entitled, nor shall it in any way affect
the right of LESSOR to enforce such provisions thereafter.
24. ENTIRE AGREEMENT: This MASTER LEASE constitutes the entire agreement of the
parties hereto and no other written or oral representations or warranties shall
be binding upon the parties hereto. NO AGENT OR EMPLOYEE OF THE MANUFACTURER OR
SELLER OF THE EQUIPMENT IS AUTHORIZED TO BIND LESSOR TO THIS MASTER LEASE OR ANY
OTHER AGREEMENT OR TO WAIVE OR MODIFY ANY OF THE PROVISIONS HEREOF. Any
modification or waiver of any of the provisions herein shall be effective only
if in writing and executed by all of the parties hereto, provided however that
LESSOR may add applicable Equipment serial or identification numbers to Lease
Schedules and financing statements.
25. SUCCESSOR: This MASTER LEASE and each Lease Schedule shall be binding upon
and shall inure to the benefit of LESSOR, LESSEE and their respective
successors, legal representatives and assigns.
26. ADDITIONAL FILINGS: In the event that LESSEE fails or refuses to execute
and/or file Uniform Commercial Code financing statements or other instruments or
recordings which LESSOR or its Assignee reasonably deems necessary to perfect,
or maintain perfection of, LESSOR'S or its Assignee's interests hereunder,
LESSEE hereby appoints LESSOR or its Assignee as LESSEE'S limited
attorney-in-fact to execute and record all documents reasonably necessary to
perfect or maintain the perfection of LESSOR'S interest hereunder. LESSEE shall
pay LESSOR or its Assignee for any costs and fees relating to the filings
including, but not limited to, costs, fees, searches, document preparation,
documentary stamps, privilege taxes and reasonable attorneys' fees.
27. MULTIPLE LESSEES: If more than one LESSEE is named within this MASTER LEASE,
the liability of each shall be joint and several.
28. LEASE ACCEPTANCE: At no time shall this MASTER LEASE or the Lease Schedule
be deemed to constitute an offer binding upon LESSOR until it is accepted by
execution of LESSOR at its corporate office in Rosemont, Illinois.
<PAGE>
PRIME LEASING, INC., WHITE ROCK JV, LTD.
LESSOR LESSEE
By: PHYMED, INC. as General Partner
By: By:
--------------------------------- ------------------------------
Name (Printed): Name (Printed):
---------------------- ----------------------------------
Title: Title:
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Date: , 1999 Date: , 1999
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LEASE SCHEDULE
LEASE SCHEDULE NUMBER 1 TO MASTER LEASE AGREEMENT NUMBER 11113
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This Lease Schedule incorporates the terms and conditions of a certain Master
Lease Agreement, dated as of the ____ day of , 1999 (the "Master Lease") by and
between PRIME LEASING, INC., O'Hare International Center, 10275 W. Higgins Road,
Rosemont, Illinois 60018 (the "Lessor"), and WHITE ROCK JV, LTD., 9603 White
Rock Trail, Dallas, TX 75238 (the "Lessee").
THIS IS A NON-CANCELABLE LEASE SCHEDULE.
1. Initial Term: 48 months commencing with the first day of the month
immediately following the Commencement Date (or beginning with the
Commencement Date if that date is the first day of the month.)
2. Rental Payments: $16,698.00 per month, plus any and all applicable taxes.
Advance Payments receivable by Lessor as of the Commencement Date:
$16,698.00 which will be applied to the first month's rent payable under
this Lease Schedule.
3. Deposit. LESSEE will deliver to LESSOR on February 1, 2000 the sum of
Sixteen Thousand Six Hundred Ninety-Eight and No/100 Dollars ($16,698.00)
in immediately available funds (the "Deposit"). The Deposit shall continue
to be held by LESSOR, without liability for interest, as the Deposit under
this Master Lease. The Deposit may be applied by LESSOR, at LESSOR'S sole
option, for any past due amount due under this Master Lease. If LESSEE is
not in default under the terms of this Master Lease, any portion of the
Deposit not applied by LESSOR as payment of rent or any past due amount
under this Master Lease, shall be distributed by LESSOR as follows; first,
towards the payment of the rent due on the last month of this Master Lease;
and second after termination of this Master Lease and contingent on LESSEE
complying with all of the terms of this Master Lease, any remaining amount
to LESSEE.
4. Conditions Precedent. LESSOR'S obligations under this Lease Schedule are
subject to the following conditions precedent:
a. LESSEE shall have leased that certain real property and improvements
("Premises") located at 9603 White Rock Trail, Dallas County, Dallas,
TX 75238;
b. LESSOR shall have received approval for this Master Lease from
LESSOR'S Executive Committee;
LEASE SCHEDULE - Page 1
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<PAGE>
c. LESSOR shall have received the Guaranty (as defined in Section 8,
below);
d. Lessor shall have received a landlord's waiver from the landlord of
the Premises, in form satisfactory to LESSOR, waiving landlord's
rights in and to the Equipment; and
e. LESSOR shall have received any other document reasonably requested
from LESSEE by LESSOR.
5. Equipment: See Equipment Schedule attached hereto and made a part hereof.
6. Commencement Date:_______________, 1999, as evidenced by the Certificate of
Acceptance, issued in respect to this Lease Schedule.
7. End of Lease Options: At the end of the Initial Term, Lessee has the option
to: (A) purchase all, but not less than all, of the Equipment at Fair
Market Value, as described in the Master Lease; (B) renew the lease of all,
but not less than all, of the Equipment at a Monthly Rent based on the then
Fair Market Value of the Equipment; or (C) return all, but not less than
all, of the Equipment, subject to the terms and conditions as stipulated in
the Master Lease.
8. Guaranty. By its signature below, PHYMED, INC., a Texas corporation
("PARENT"), agrees that it will execute a Guaranty, dated as of the date
hereof, that is acceptable to LESSOR, at LESSOR'S sole discretion, whereby
PARENT will guarantee to LESSOR, the due, regular and punctual payment of
all of LESSEE'S obligations herein, including all rents due herein.
9. Entire Agreement: LESSEE REPRESENTS THAT IT HAS READ, RECEIVED, RETAINED A
COPY OF AND UNDERSTANDS THIS LEASE SCHEDULE AND AGREES TO BE BOUND BY ITS
TERMS AND CONDITIONS. LESSOR AND LESSEE AGREE THAT THIS LEASE SCHEDULE, THE
MASTER LEASE AND ALL RIDERS THERETO SHALL CONSTITUTE THE ENTIRE AGREEMENT
AND SUPERSEDE ALL PROPOSALS, ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND
ALL OTHER COMMUNICATIONS BETWEEN LESSOR AND LESSEE WITH RESPECT TO ANY UNIT
OF EQUIPMENT.
THIS LEASE SCHEDULE IS EFFECTIVE ONLY UPON ACCEPTANCE BY LESSOR AT ITS CORPORATE
OFFICE IN ROSEMONT, ILLINOIS.
LEASE SCHEDULE - Page 2
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<PAGE>
Accepted on _____________________, 1999, at Rosemont, Illinois.
PRIME LEASING, INC. White Rock JV, Ltd.
(Lessor) (Lessee)
By: PHYMED, INC. as General Partner
By:___________________________________ By:__________________________________
Name (Printed):_______________________ Name (Printed):______________________
Title:________________________________ Title:_______________________________
Date: _________________________, 1999
PHYMED, INC.,
(Parent)
By:___________________________________
Name (Printed):_______________________
Title:________________________________
Date: October ___, 1999
LEASE SCHEDULE - Page 3
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<PAGE>
EQUIPMENT SCHEDULE
TO
LEASE SCHEDULE NUMBER 1
TO
MASTER LEASE AGREEMENT NUMBER 11113
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Quantity Description of Equipment Serial Number
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1 1996 Siemens Magnatom 1.5 T Vision MRI 7170
All Accounts Receivable as generated from
the use of the Siemens MRI as listed above
EQUIPMENT LOCATION: 9603 White Rock Trail,
Dallas, TX 75238
LEASE SCHEDULE - Page 4
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MANAGEMENT/LICENSING AGREEMENT
This MANAGEMENT/LICENSING AGREEMENT (this "AGREEMENT") is made and entered into
by and between PhyMed Contracted Services, Inc., a Texas corporation ("Manager")
("Licensor") and White Rock JV, Ltd., (the "Center") ("Licensee");
WHEREAS, Manager is in the business of operating medical diagnostic imaging
Centers and providing management services to medical and other health care
practitioners in the conduct of their professional and technical operations; and
WHEREAS, Center is engaged in the operation of an outpatient medical diagnostic
imaging center doing business in the State of Texas; and Center desires to
retain the experience and abilities of Manager in the furtherance of the
business of Center and has offered to engage Manager to render consulting,
management, advisory and other tangible benefits;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. TERM. This AGREEMENT shall be for a term of four (4) years commencing on the
effective date set forth below, unless sooner terminated as provided elsewhere
in this AGREEMENT (the "Initial Term"). At the end of the Initial Term, the term
of this AGREEMENT shall be extended for consecutive twelve (12) month periods
(each such period is referred to as a "renewal term"), upon the same terms and
conditions, unless either party gives the other party written notice to the
contrary at least thirty (30) days prior to the end of the Initial Term or any
renewal term. The Initial Term and each renewal term are, collectively, the
Term.
2. MANAGEMENT SERVICES. The Center hereby grants to Manager the right to
supervise and direct the day-to-day management and operation of the Center, and
Manager agrees to provide such services, upon the terms and conditions of this
AGREEMENT and subject at all times to policies and control of the Center or
owner of the Center. Without limiting the generality of the foregoing, the
Center grants to Manager the right, and Manager agrees, to perform the following
services on behalf of the Center;
(a) to manage the administrative and business operations of the Center as
Manager determines to be customary and usual in the operation of comparable
medical diagnostic imaging center rendering comparable services;
<PAGE>
(b) to hire, promote, discharge, and supervise the work of such medical,
technical, business, administrative, and maintenance personnel as Manager shall
deem necessary or advisable in the management of the Center pursuant to this
AGREEMENT;
(c) to hire, promote and discharge as shall be appropriate and reasonably
required by the nature of the Center such physician and non-physician medical
and technical personnel as Manager shall deem necessary or advisable in the
operation of the Center; provided, however, that the Center shall maintain
complete responsibility for supervising the actions of nursing personnel and
medical technicians. Center agrees to save and hold Manager harmless for all
acts or omissions of nursing personnel and medical technicians under the
direction or supervision of a physician. Manager shall exercise reasonable care
in the initial selection of such personnel and technicians; however, Center will
not be obligated to accept the services of individuals deemed by the Center to
be unqualified to perform technical or patient care services.
(d) to adopt such reasonable rules, policies and procedures as may be
appropriate for the orderly operation of the Center and the delivery of
administrative, clerical and other management services. Center hereby agrees to
abide by such rules, policies and procedures and to cooperate with Manager in
causing all personnel to abide by same;
(e) to procure medical and non-medical supplies and equipment which Manager and
Center deem necessary for the operation of the Center from such suppliers and on
such terms as Manager may determine; Center shall promptly notify Manager if any
supplies or equipment are defective or otherwise unsatisfactory for their
intended use. Manager expressly disclaims any warranties of merchantability or
fitness for a particular use with respect to supplies and equipment provided.
(f) to install and maintain systems for accounting, auditing, and medical
records maintenance;
(g) as agent for the Center, to promptly deposit in banking institutions
selected by Center, in a separate account, in the Center's name and for the
Center's benefit, all moneys received by Manager as revenues from the Center or
otherwise for or on behalf of the Center;
(h) to fulfill the obligations of Center under any existing lease affecting
medical or business equipment located in the Center, including payment of rental
when due, and to secure insurance as required by any such lease agreement, but
only to the extent of the funds in the bank accounts of the Center. Any such
lease shall be reviewed and acknowledged in writing by Manager prior to the
execution of this AGREEMENT;
(j) to make or install, or cause to be made or installed, at the expense of
Center, and in the name of the Center, all mutually agreed alterations,
replacements, additions and improvements in and to the office facilities
excluding, however, extraordinary capital replacements, additions or repairs;
(j) to assist in the application for all licenses and permits required of the
Center or Manager in connection with the management and operation of the Center;
(k) to cause, at the request and expense of Center, such other acts and things
to be done as shall be reasonable and necessary for the efficient and
cost-effective operation of the Center.
(l) to contract, on behalf of the Center, with a qualified radiologist for the
performance of procedures, for the supervision of physician and non-physician
technical staff and to perform the duties and responsibilities of a medical
director.
(m) to act as an agent for the Center in the conduct of all financial and legal
affairs, to include the engagement of legal, accounting and other professionals,
execution of binding contracts and agreements, loan documents, pledging of
center assets for purposes of loan and other financial arrangements as the
Manager deems appropriate in the operation of the Center.
<PAGE>
3. Employees. Manager shall not be liable to employees employed by Center for
their wages, fringe benefits or other compensation. Center shall be responsible
for payment of the total aggregate compensation, including fringe benefits,
payable with respect to such employees. The term "fringe benefits" as used
herein shall mean and include Center's contribution of FICA, FUTA, unemployment
compensation and other employment taxes, worker's compensation, group life and
accident and health insurance premiums, incentive bonuses and other similar
benefits agreed to by Manager on behalf of the Center.
4. Fee. As compensation for all services rendered by Manager under this
AGREEMENT, the Center shall pay to Manager at its principal office (or at such
other place, if any, as Manager from time to time may designate in a written
notice to the Center) a monthly management fee (the "Management Fee") of
$5,000.00 per month, said amount to be paid in advance on or before the first
day of the month, every month during the term of this AGREEMENT. The formula for
determining the Management Fee is not intended and shall not be interpreted or
applied as permitting the Manager to share in the Center's fees. It is
acknowledged as the parties' negotiated agreement as to the reasonable fair
market value of the services furnished by Manager pursuant to this AGREEMENT,
considering the nature and volume of the services required and the risks assumed
by the Manager.
The payment of the Fee to Manager will be subordinate to any loan or lease
payments due under any loan or lease between Center and Prime Leasing, Inc.
("Prime") or its successors or assigns. In addition, payment of the Fee to
Manager will be suspended so long as Center is in default under any such loan or
lease agreement with Prime. Manager agrees to continue to perform under this
AGREEMENT during any period during which payment of the Fee has been suspended.
5. Payment of Expenses. Center shall be responsible for making payment of all
operating expenses attributable to the operation of Center unless Manager
specifically assumes payment as an obligation pursuant to this AGREEMENT.
6. Performance of Duties of Manager. (a) Manager is an independent contractor,
and not an employee or partner of the Center. As an independent contractor,
Manager shall not act or attempt to act, or in any manner assume or create any
obligation on behalf of or in the name of the Center or any of its affiliates,
or otherwise bind the Center or any of its affiliates in any manner, other than
as specifically authorized in this AGREEMENT or otherwise authorized in writing
by the Center.
(b) Manager shall devote its best efforts to the operation of the Center in a
reasonable manner and shall perform its services and obligations hereunder
diligently and according to the local standards. It is expressly acknowledged
that Manager is engaged in operating a similar medical diagnostic imaging center
in Dallas and is providing management services to the medical profession and is
in no way restricted or restrained from pursuing such other business activities.
7. Books and Records (a) Business Records. Manager shall prepare and furnish to
the Center an unaudited statement of revenue and expenses of the Center, and any
other reports on the operations of the Center as may be reasonably requested by
Center, for each calendar month during the term of this AGREEMENT on or before
the 25th day of the calendar month immediately following the month for which the
statement is being prepared. Copies of all statements and reports shall be sent
to LDE Ventures, Inc., 10275 W. Higgins Rd., Suite 200, Rosemont, IL 60018.
Manager shall accord to the Center, and its accountants, attorneys and agents,
the right to examine or inspect any and all books or records relating to the
Center at all reasonable times during the term of this AGREEMENT, and for a
period of one year following the termination of this AGREEMENT. Books and
records of the Center may be kept at the Center or at such other location within
the Dallas metropolitan area as Manager may determine.
<PAGE>
(b) Medical Records. Manager and Center shall cooperate with the Center to
assure preparation of appropriate medical records concerning medical services
provided by the Center. Manager shall maintain such medical records at the
Center in accordance with prudent record keeping procedures and as required by
law.
(c) Confidentiality of Records. Manager and Center agree to take all reasonable
precautions to prevent the unauthorized disclosure of any and all books and
records kept and/or maintained by Manager under the terms of this AGREEMENT and
to keep such books and records confidential except as otherwise provided by law
or in subparagraph (d) of this Paragraph.
(d) Disclosure of Records to Governmental Agencies. To the extent required by
section l86l (v) (1) (I) of the Social Security Act, the parties hereto, upon
proper request, shall allow the United States Department of Health and Human
Services, the Comptroller General of the United States, or their duly authorized
representatives access to this AGREEMENT, and to all books, documents and
records necessary to verify the nature and extent of the cost of services
provided by either party under this AGREEMENT at any time during the term of
this AGREEMENT and for an additional period of four (4) years following the last
date services are furnished under this AGREEMENT. In the event that either party
carries out any of its obligations under this AGREEMENT through an agreement
with an organization related to it, such party shall require that a clause
substantially to the effect of this subparagraph be included in that agreement.
8. Liability Insurance. (a) Manager shall maintain throughout the term of this
AGREEMENT, at its sole expense, and for a period not less than three (3) years
commencing on the date of the termination of this AGREEMENT, professional
liability insurance coverage on Manager and its employees in the minimum amount
$1,00,000.00 for each occurrence and Three Million Dollars $3,000,000.00 in the
aggregate. Such insurance shall be obtained from an insurance carrier whose A.H.
Best rating is A or better and contain an endorsement to the effect that the
policy shall not be canceled or materially changed without at least 30 days
prior written notice to Manager. The Center shall provide to Manager upon
request a certificate of insurance such coverage.
(b) The Center shall maintain, at its sole expense, throughout the term of this
AGREEMENT and for a period not less than three (3) years commencing on the date
of the termination of this AGREEMENT, professional liability insurance covering
(i) the Center in the minimum amount of $1,000,000 dollars for each occurrence
and $3,000,000 dollars in the aggregate, and (ii) covering each physician
rendering medical services at the Center, whether they are members of the Center
or employees of the Center, or independent contractors, in the minimum amount of
$1,000,000 dollars for each occurrence and $3,000,000 dollars in the aggregate.
Such insurance shall be obtained from an insurance carrier whose A.H. Best
rating is A or better and contain an endorsement to the effect that the policy
shall not be canceled or materially changed without at least 30 days prior
written notice to Manager. The Center shall provide to Manager upon request a
certificate of insurance such coverage.
9. Events of Default. (a) The Center shall be in default under this AGREEMENT
upon the occurrence of any of the following events:
(i) failure of the Center to comply with any term or condition of this
AGREEMENT within fifteen days after written notice of such noncompliance by
Manager;
(ii) dissolution of the Center;
(iii)bankruptcy of the Center.
<PAGE>
(b) Manager shall be in default under this AGREEMENT upon the occurrence of any
of the following events:
(i) failure of Manager to comply with any term or condition of this
AGREEMENT within fifteen days after written notice of such noncompliance to
Manager by the Center; and
(ii) bankruptcy of Manager;
(c) For purposes of this paragraph the bankruptcy of an entity shall be deemed
to have occurred when that entity (i) makes a general assignment for the benefit
of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes the
subject of an order for relief or is declared insolvent in any federal or state
bankruptcy or insolvency proceeding; (iv) files a written petition or answer
seeking a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law; (v) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against that entity in a proceeding of the type described in parts (i)
through (iv) of this subparagraph; (vi) seeks, consents to, or acquiesces in the
appointment of a trustee, receiver, or liquidator (vii) or l20 days expire after
the date of the commencement of a proceeding against that entity seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any law if the proceeding has not been
previously dismissed, or 90 days expire after the date of the appointment,
without the entity's consent or acquiescence, of a trustee, receiver, or
liquidator of that entity if the appointment has not previously been vacated or
stayed, or 90 days expire after the date of expiration of a stay, if the
appointment has not previously been vacated.
(d) Upon the occurrence of an event of default of the Center as provided in
subparagraph (a) of this paragraph, Manager shall have the right to terminate
its obligations under this AGREEMENT, subject to the limitations of Paragraph 10
of this AGREEMENT, and to pursue any other remedies available at law or equity,
and Manager's termination of its obligations under this AGREEMENT shall not
constitute a waiver or forfeiture of any rights or remedies that Manager may
have including Manager's right to compensation.
(e) Upon the occurrence of an event of default of Manager as provided in
subparagraph (b) of this paragraph, the Center shall have the right to terminate
this AGREEMENT and to pursue any other remedies available at law or equity
against Manager, and Center's termination of its obligations under this
AGREEMENT shall not constitute a waiver or forfeiture of any rights or remedies
that Center may have.
10. Termination. Either party may terminate this AGREEMENT at any time, without
cause, upon 45 days' advance written notice to the other, provided however, that
Manager may not terminate this AGREEMENT so long as Center has any loan or lease
agreement in effect with Prime. Upon termination of this AGREEMENT, either at
the expiration of its term as provided in Paragraph l, or upon an event of
default as provided in Paragraph 9, or as provided in this Paragraph:
(a) Manager shall deliver to the Center as received any moneys due the Center
under this AGREEMENT but received by Manager after such termination, less any
amounts due Manager, including any due and unpaid Management Fees;
(b) Manager shall deliver to the Center all materials and supplies, copies of
books and records, keys, contracts and documents, and such other accountings,
paper and records pertaining to the Center and this AGREEMENT as the Center
shall reasonably request;
(c) The obligations of the parties hereto with respect to this AGREEMENT shall
cease and terminate, except as to obligations of either party which shall have
heretofore accrued or arisen, or except as otherwise herein provided.
<PAGE>
11. Power of Attorney. The Center hereby constitutes and appoints Manager and
its authorized representatives (and any successor thereto by assignment,
election, or otherwise and the authorized representatives thereof) with full
power of substitution as its true and lawful agent and attorney-in-fact, with
full power and authority in its name, place, and stead (i) to bill patients and
collect accounts receivable, (ii) on behalf of the Center, to receive and give
receipts for all insurance, Medicare, and Medicaid payments payable to the
Center, (iii) to take possession of, endorse in the name of the Center, and
deposit in the Center's bank account any cash, notes, checks, money orders, or
other instruments received by Manager or the Center relating to the operation of
the Center, (iv) to pledge receivables and other Center assets for purposes of
obtaining financing and obtaining equipment for the Center as the Manager solely
deems appropriate, and (v) to contract with third parties on behalf of the
Center for the purposes of procuring equipment, office space, supplies
professional consultants, attorneys and accounting professionals as the Manager
solely deems appropriate.
12. Relationship of the Parties. Nothing in this AGREEMENT shall be construed as
creating a company or joint venture between Manager and the Center and in no
event shall Manager participate in or be responsible for the profits or losses
of the Center. Except to the extent that Manager may act as billing, collecting
and disbursing agent for the Center, neither party is the agent of the other.
Center shall require any employee or independent contractor who works in
conjunction with Center under this AGREEMENT to expressly abide by each and
every term and condition of this AGREEMENT and to evidence such agreement in
writing as required by Manager.
13. Standard of Care. Although Manager's obligation to obtain office facilities,
equipment, supplies and services is limited to the quantity and quality
ordinarily required by members of the same profession as Center, according to
the generally accepted standards of care prevailing in the local community,
Center is not restricted to such standard and is at all times free to equip
Center according to higher or more specialized standards; however, Center shall
be responsible for making separate arrangements for any extraordinary
requirements for office facilities, equipment, services or supplies resulting
from such choice to Center according to such higher or more specialized
standards.
14. Limitation of Liability. Manager shall not be liable for any claim or demand
on account of damages arising out of, or in any manner connected with, any
injuries suffered by persons receiving care provided by, or authorized by
Center, unless such injury is approximately caused by proven negligence on the
part of the Manager. Center shall not be liable for any claim or demand arising
out of the acts or omissions of the Manager, except to the extent, if any, that
Center is negligent in exercising direct professional supervision and direction
of those of the Manager's employees who are assigned to assist the Center in the
care of patients. The amount of Manager's liability for any default in its
obligations hereunder shall be limited to the amount of the liability insurance
carried by Manager pursuant to Section 8(a), and no incidental or consequential
damages in excess of such amount may be recovered.
15. Grant of License. Licensor grants to Licensee a non-exclusive license, to
use the name " PHYMED DIAGNOSTIC IMAGING CENTER " and any logo's existing or
created by Licensor, in connection with its business and advertising until the
expiration or cancellation of this AGREEMENT. Upon written notice to Licensor,
Licensee shall have the right to extend the terms of this AGREEMENT to any other
entity operating under the authority and control of Licensee in accordance with
the provision hereinafter set forth.
16. Approval by Licensor. All operations, training programs, medical procedures,
advertising and promotional materials shall be submitted by Licensee to Licensor
for Licensor's approval prior to any release thereof by Licensee. If disapproval
is not received by Licensee within ten days after receipt of such material or
matters by Licensor, such right of approval shall be deemed waived and such
material shall be considered approved. Licensor's rights are hereby restricted
solely to the material and matter covered by this paragraph. Such approvals by
Licensor shall not be unreasonably withheld, and once such approvals have been
obtained further approval need not be obtained for future or repeat use. No
procedures or materials shall be used or continued without the approval of
Licensor as herein provided.
<PAGE>
17. Inspection. The Licensee will permit duly authorized representatives of the
Licensor to inspect, on the premises of the Licensee, at all reasonable times,
the operations of the licensee.
18. Indemnity. The Licensor assumes no Liability to the Licensee or to third
parties with respect to the performance of the procedures, training or treatment
conducted under the license, and the Licensee hereby indemnifies and holds
harmless the Licensor against all losses, damages and expenses, including
attorneys' fees, incurred as result of or related to claims of third persons
involving the delivery of health care to patients or training to health care
providers resulting from the acts or omissions of the Licensee.
19. Miscellaneous.
(a) Prohibited Activities. Manager shall not provide or otherwise engage in
services which constitute the unauthorized practice of medicine under applicable
Texas Law.
(b) Communications to be given under this AGREEMENT by any party to the other
shall be deemed to have been duly given if given in writing and personally
delivered, sent by facsimile followed by mail, or sent by mail, registered
or certified, postage prepaid with return receipt requested, at the
address specified beside each party's signature at the end of this
AGREEMENT. Notices delivered personally or by mail shall be deemed
communicated as of l0:00 a.m. on the third business day after mailing. Any
party may change its address for notice hereunder by giving notice of such
change in the manner provided in this paragraph.
Chairman President
PhyMed Contracted Services, Inc.. White Rock JV, Ltd.
9603 White Rock Trail 9603 White Rock Trail
Suite 100 Suite 100
Dallas, Texas 75238 Dallas, Texas 75238
Fax 214-349-7474 Fax 214-349-7474
A copy of all communications to be given under this AGREEMENT shall also
be provided in the same manner as above to:
LDE Ventures, Inc.
10275 W. Higgins Rd, Suite 200
Rosemont, IL 60018
Fax 847-294-6070
(c) Entire Agreement. This AGREEMENT supersedes any and all other agreements,
either oral or written, between the parties with respect to the subject matter
hereof and contains all of the covenants and agreements between the parties.
<PAGE>
(d) Modification and Waiver. No change or modification of this AGREEMENT shall
be valid or binding upon the parties unless such change or modification shall be
in writing and signed by all the parties. No waiver of any term or condition of
this AGREEMENT shall be enforceable unless it shall be in writing signed by the
party against which it is sought to charged. The waiver by any party of a breach
of any provision of this AGREEMENT by any other shall not operate or be
construed as a waiver of any subsequent breach by such other party.
(e) Governing Law. This AGREEMENT, and the rights and obligations of the parties
hereto, shall be governed by and construed in accordance with the laws of the
State of Texas and shall be performable in Dallas County, Texas. Venue of any
litigation arising hereunder shall be in a court of competent jurisdiction in
Dallas County, Texas.
(f) Counterparts. This AGREEMENT may be executed in counterparts, each of which
shall constitute an original, but all of which shall constitute one and the same
document. Any counterpart evidencing signature by one party that is delivered by
telecopy by such party to the other party hereto shall be binding on the sending
party when such telecopy is sent, and such sending party shall within ten days
thereafter deliver to the other party a hard copy of such executed counterpart
containing the original signature of such party or its authorized
representative.
(g) Costs. If any action at Law or in equity is necessary to enforce or
interpret the terms of this AGREEMENT, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements in addition to
any other relief to which it may be entitled.
(h) Assignment. Center may assign its rights under this AGREEMENT to any partner
or affiliate of any partner without the prior consent of Manager. No party may
otherwise assign any rights or delegate any duties under this AGREEMENT without
the prior written consent of the other party hereto, which consent may be
withheld in that party's sole discretion.
(i) Binding Effect. This AGREEMENT shall be binding upon the parties hereto,
together with their respective successors, and permitted assigns.
<PAGE>
(j) Severability. If any provision of this AGREEMENT is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
hereof, such provision shall be fully severable and this AGREEMENT shall be
construed and enforced as if such illegal, invalid or unenforceable provision
never comprised a part of this AGREEMENT; and the remaining provisions of this
AGREEMENT shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as part of this AGREEMENT, a provision as similar
in its terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
(k) Language. Whenever the context requires, references in this AGREEMENT to
the singular number shall include the plural, the plural number shall include
the singular, and words denoting gender shall include the masculine, feminine,
and neuter. Section headings in this AGREEMENT are for convenience of reference
only and shall not be considered in construing or interpreting this AGREEMENT.
(l) Further Actions. Each party to this AGREEMENT shall perform any and all
further acts and execute and deliver any and all documents and instruments that
may be reasonably necessary to carry out the provisions of this AGREEMENT.
(m) Third Party Beneficiary. Manager and Center hereby acknowledge and agree
that the Center's owner is deemed a third party beneficiary of this AGREEMENT,
and that Manager's agreement to perform duties hereunder run directly to the
benefit of Center's owner.
IN WITNESS WHEREOF, the parties have caused this AGREEMENT to be executed and
effective this _________ day of ____________________ , 2000.
FOR THE MANAGER: FOR THE CENTER:
By: By:
----------------------------------- ---------------------------
Bill Ward, VP Business Development GEORGE C. BARKER, President
PhyMed Contracted Services, INC. PHYMED DIAGNOSTIC IMAGING-WHITE
9603 White Rock Trail ROCK, INC., the General Partner
Suite 100 9603 White Rock Trail, Suite 100
Dallas, Texas 75238 Dallas, Texas 75238
OFFICE LEASE
BASIC DEFINITIONS AND LEASE PROVISIONS
COMMERCE PLAZA HILLCREST
A. The following list sets out certain defined terms and certain
financial and other information pertaining to the lease:
1. "Date of Lease": September 8, 1999
------------------------------------
2. "Landlord": AETNA LIFE INSURANCE COMPANY, C/O ALLEGIS REALTY
-----------------------------------------------------
INVESTORS, L.L.C.
- -----------------
3. Landlord's address: 12001 North Central Expressway, Suite 650,
--------------------------------------------
Dallas, TX 75243-3735
- ---------------------
Contact: Asset Management
----------------
Telephone: 972-458-3300 Facsimile: 972-490-9440
--------------- ------------
4. "Tenant": PHYMED, INC., a Texas Corporation
---------------------------------
5. Tenant's address: 12840 Hillcrest Road, Suite E100
--------------------------------
Dallas, Texas 75230
- --------------------
Contact: Mr. George Barker
-----------------
Telephone: Facsimile:
------------------ ---------------------
6. Tenant's trade name: PHYMED Diagnostic Imaging, Inc.
-------------------------------
7. "Building": Landlord's property located in the City of Dallas,
Dallas County, Texas, which property is described or shown on Exhibit "A",
attached to the Lease. -----------
8. "Premises": A unit in the Building containing approximately 8,472
square feet in rentable area (measured by calculating lengths and widths to the
exterior of outside walls and to the center of interior walls, without decuction
for any columns or projections necessary to the building, and, if applicable, a
proportionate share of any common areas located on the floor(s) on which the
Premises is located and a proportionate share of any of the Building's public
areas, management office, engineer's office, and mechanical spaces, e.g.,
service areas housing communications, HVAC, plumbing, fire protection and
elevator equipment), being known as Suite E100 and being described or shown on
Exhibit "B", attached to the Lease. With regard to Exhibit "B", the parties
agree that the exhibit is attached solely for the purpose of locating the
Building and the Premises within the Building and that no representation,
warranty, or covenant is to be implied by any other information shown on the
exhibit (i.e., any information as to buildings, tenants or prospective tenants,
<PAGE>
etc. is subject to change at any time). Should a party desire to measure the
square footage of the Premises, it must do so at the time of construction of any
leasehold improvements prior to the Commencement Date, or if no leasehold
improvements are to be constructed, then prior to the Commencement Date. If such
measurement reflects a different number, then, subject to the other party's
verification of the number, the parties agree to make adjustments based on such
measurement. In the event of a dispute regarding the method of calculation, the
parties agree that the standards for measurement set by the Building Owners and
Managers Association ("BOMA") shall govern and control. If no measurement is
made prior to the Commencement Date, then the parties to this Lease will be
deemed to have accepted the number contained herein as the square footage of
rentable area of the Premises throughout the Lease Term, subject to adjustment
only for any subsequent additions or deletions of space.
9. "Commencement Date": September 1, 1999, subject to extension for
any delay other than a Tenant Delay (as defined in Exhibit "E").
-----------
10. "Lease Term": Commencing on the Commencement Date and continuing
for Sixty (60) months after the Commencement Date; provided that if the
Commencement Date is a date other than the first day of a calendar month, then
the Lease Term shall be extended so that it expires at the end of the calendar
month following the expiration of the months noted herein.
11. "Base Rental": The total Base Rental for the Lease Term is $
826,020.00 , payable as follows:
Month(s) Amount per s.f. Amount per year Amount per month
1-60 $19.50 $165,204.00 $13,767.00
12. "Base Expense Stop": 1999 Base Year
--------------
13. "Tenant's Pro Rata Share":3.68 %, which is the percentage obtained
by dividing (a) the square footage of rentable area of the Premises by (b) the
square footage of rentable area of the Building.
14. "Prepaid Rental": $ N/A , being an estimate of the Base Rental,
for the N/A month(s) of the Lease Term, such prepaid rental being due and
payable upon execution of this Lease.
15. "Security Deposit": $ 55,068.00 , such Security Deposit being due
and payable upon execution of this Lease. If at the end of the 57th month of the
term of the Lease, Tenant is not, and has never been in default of the Lease,
then $41,301.00 of the Security Deposit shall be credited toward the 58th, 59th,
and 60th months' Base Rental as herein defined.
16. "Permitted Use": Imaging Center only and for no other use or
purpose. Tenant acknowledges that the above specification of a "Permitted Use"
means only that Landlord has no objection to the specified use and does not
include any representation or warranty by Landlord that such specified use
complies with applicable laws and/or requires special governmental permits.
17. "Rent" or "rental": All amounts due from Tenant to Landlord under
Section 4.5 of the Lease), are deemed to be "rent" or "rental".
18. "Brokers": Kennedy-Wilson Properties of Texas, Ltd.
----------------------------------------
B. The foregoing Basic Lease Information is incorporated into and made
a part of the lease. If any conflict exists between any Basic Lease Information
and the Lease, then the Lease shall control.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have entered into and executed
this Lease on the Date of the Lease written above.
LANDLORD: TENANT:
AETNA LIFE INSURANCE COMPANY PHYMED, INC., a Texas Corporation
By: Allegis Realty Investors, LLC, By:
Its Investment Advisor and Agent
Printed Name: George Barker
By: Title: President
--------------------------------
Name: James G. Hughes
Title: Vice President
<PAGE>
LEASE AGREEMENT
(Office)
This LEASE AGREEMENT (the "Lease") is entered into as of the Date of
Lease between AETNA LIFE INSURANCE COMPANY ("Landlord") and PHYMED, INC., a
Texas Corporation ("Tenant").
ARTICLE 1
BASIC DEFINITIONS AND LEASE PROVISIONS
1.1 The definitions and basic provisions set forth in the Basic
Definitions and Lease Provisions executed by Landlord and Tenant, and attached
hereto, are incorporated herein by reference for all purposes.
ARTICLE 2
LEASE GRANT
2.1 Subject to the terms and conditions of this Lease, Landlord leases
to Tenant, and Tenant leases from Landlord, the Premises for the Lease Term.
2.2 In addition, Tenant is granted the non-exclusive right to use in
common with the other tenants and occupants the parking and other common areas
of the Building, as such may be modified from time to time by Landlord. The
grant herein provided shall not include any easement for light or air.
ARTICLE 3
DELIVERY OF THE PREMISES; LEASE TERM
3.1 The Lease Term shall be for the period of time specified in the
Basic Definitions and Lease Provisions, beginning on the Commencement Date, as
such date may be adjusted herein, and expiring on the Expiration Date. If this
Lease is executed before the Premises become vacant, or otherwise available, or
if any present tenant or occupant of the Premises holds over, and Landlord
cannot acquire possession of the Premises to deliver to Tenant, or if Landlord
is obligated to construct leasehold improvements in the Premises under the
provisions of Exhibit "E", but is unable to complete the leasehold improvements
by the Commencement Date due to an unavoidable delay, as defined in Exhibit "E",
then Landlord shall not be deemed to be in default hereunder, and Tenant agrees
to accept possession on such date as Landlord is able to deliver possession and
the Commencement Date shall be postponed accordingly. Thereafter, this Lease
shall continue for the full number of months set forth in the Lease Term. Except
for a postponement of the Commencement Date, this Lease shall not be affected by
any failure to deliver possession as a result of an event noted above and Tenant
shall have no claim for damages against Landlord as a result thereof, all of
which claims are hereby waived and released by Tenant.
3.2 If Tenant takes possession of the Premises prior to the
Commencement Date for any reason, then such possession shall be subject to all
the terms and conditions of the Lease and Tenant shall pay Base Rental and other
rent to Landlord on a per diem basis for each day of occupancy prior to the
Commencement Date at the rate payable for the first month of the Lease Term.
Tenant shall not, however, be obligated to pay Base Rental and other rent to
Landlord prior to the Commencement Date if such early occupancy is only for the
purpose of constructing leasehold improvements if Tenant is required to do so
under the provisions of Exhibit "E".
3.3 By taking possession of the Premises, it shall be conclusive
evidence that Tenant has inspected the Premises (and has sufficient knowledge
and expertise to make such inspection or has caused the Premises to be inspected
on its behalf by one or more persons with such knowledge and expertise), that
Tenant has accepted the Premises and Building as being in good and satisfactory
condition, suitable for the purposes herein intended and that the same comply
fully with Landlord's covenants and obligations under the Lease with respect to
the construction of leasehold improvements, except for any punchlist items
agreed to in writing by Landlord and Tenant, if Landlord performed the
construction of leasehold improvements. Tenant acknowledges and agrees that
Landlord has made no representation or warranty, express or implied, as to the
habitability, suitability, quality, condition or fitness of the Premises or
Building, and Tenant waives, to the extent permitted by applicable law, any
defects in the Premises or Building and any claims arising therefrom, save and
except those arising from any construction or repair obligations of Landlord
expressly provided for in the Lease.
<PAGE>
3.4 Following the Commencement Date, Landlord shall prepare a
Commencement Date Letter in the form attached hereto as Exhibit "F" setting
forth the Commencement Date, Expiration Date, and confirming Tenant's acceptance
of the Premises and that Landlord has performed all of its obligations with
respect to delivery of the Premises, except as to any punchlist items previously
specified in writing and related to any construction performed by Landlord.
Tenant shall execute and deliver the Commencement Date Letter to Landlord within
ten (10) days after delivery by Landlord.
ARTICLE 4
RENT
4.1 Tenant promises and agrees to pay Landlord at Landlord's address
set forth in the Lease, or such other address as Landlord may provide to Tenant,
the Base Rental and all other rent charged under this Lease without deduction or
set off, for each month of the entire Lease Term. The first monthly installment
of Base Rental shall be payable by Tenant to Landlord contemporaneously with the
execution of the Lease, and thereafter, a monthly installment of Base Rental, as
may be adjusted in accordance with the provisions of the Lease, shall be due and
payable, in advance, without notice or demand on or before the first day of each
succeeding calendar month during the Lease Term. The Base Rental for any
fractional month at the beginning or end of the Lease Term shall be prorated.
4.2 The Base Rental is determined, in part, on Landlord's estimate of
Basic Costs incurred by Landlord each year in connection with its ownership,
operation and management of the Building. In the event that the Basic Costs
increase, or are estimated by Landlord to increase, above the levels charged to
Landlord on the Date of the Lease, Landlord shall charge to Tenant and Tenant
agrees to pay as additional rental Tenant's Pro Rata Share of any such increases
in Basic Costs in accordance with the provisions of Exhibit "C".
4.3 The Security Deposit shall be paid to Landlord contemporaneously
with the execution of the Lease. Landlord shall hold the Security Deposit
without liability for interest and as security for the performance by Tenant of
Tenant's covenants and obligations under the Lease, it being expressly
understood that such deposit shall not be considered an advance payment of
rental or a measure of Landlord's damages in case of default by Tenant. Upon the
occurrence of any Event of Default by Tenant, Landlord may, from time to time,
without prejudice to any other remedy, use the Security Deposit to the extent
necessary to make good any arrearage of rent and any other damage, injury,
expense or liability caused to Landlord by such Event of Default. Following any
such application of the Security Deposit, Tenant shall pay to Landlord on demand
the amount so applied in order to restore the Security Deposit to its original
amount. If Tenant is not then in default of this Lease, any remaining balance of
the Security Deposit shall be returned by Landlord to Tenant upon termination of
the Lease. If Landlord transfers its interest in the Premises during the Lease
Term, Landlord may assign the Security Deposit to the transferee and thereafter
shall have no further liability for the return of the Security Deposit.
4.4 Tenant hereby acknowledges that late payment to Landlord of rent
due hereunder will cause Landlord to incur costs and inconvenience not
contemplated by the Lease, the exact amount of which will be extremely difficult
to ascertain. If any rent due from Tenant is not received by Landlord or
Landlord's designated agent within ten (10) days after its due date, then Tenant
shall pay to Landlord as a late charge ten percent (10%) of such overdue amount,
plus any attorney's fees incurred by Landlord by reason of Tenant's failure to
pay rent when due hereunder. The parties hereby agree that such late charges
represent a fair and reasonable estimate of the cost that Landlord will incur by
reason of Tenant's late payment. Landlord's acceptance of such late charges
shall not constitute a waiver of Tenant's default with respect to such overdue
amount or estop Landlord from exercising any of the other rights and remedies
granted hereunder.
4.5 All payments required of Tenant under the Lease shall bear
interest, beginning on the day after the due date until paid at the lesser of
twelve percent ( 12 %) per annum or the maximum lawful rate ("Default
Interest"). In no event, however, shall the charges permitted under this
paragraph or elsewhere in the Lease, to the extent the same are considered to be
interest under applicable law, exceed the maximum lawful rate of interest.
4.6 No payment by Tenant or receipt by Landlord of a lesser amount than
the rent due under this lease shall be deemed to be other than on account of the
earliest rent due hereunder, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or to pursue any other
remedy provided in this lease or at law or in equity.
<PAGE>
ARTICLE 5
SERVICES
5.1 Provided no Event of Default exists, Landlord shall use all
reasonable efforts to furnish to Tenant the following services: (i) water (hot
and cold) at those points of supply provided for general use of tenants of the
Building; (ii) heated and refrigerated air conditioning ("HVAC") as appropriate,
during Normal Business Hours (which shall be on generally accepted business days
from 6:30am to 8:30pm , Monday through Friday and 8:00am to 4:00pm on
Saturdays), and at such temperatures and in such amounts as are reasonably
considered by Landlord to be standard; (iii) janitorial service comparable to
that provided in other office buildingson business days (if Tenant's use or
floor covering or other leasehold improvements require special services, then
Tenant shall, at Landlord's option, either retain another cleaning contractor to
perform such services [with Landlord's approval] or pay the additional cost
reasonably determined by Landlord attributable to the special services, as
additional rent) and such window washing as may from time to time in Landlord's
judgment be reasonably required; (iv) if a multi-floor building, then elevators
for ingress and egress to the floor on which the Premises are located, in common
with other tenants, provided that Landlord may reasonably limit the number of
elevators in operation at times other than during customary business hours and
on holidays; (v) replacement of Building-standard light bulbs and fluorescent
tubes; and (vi) electrical current other than for lighting or equipment
requiring more than 110 volts, or other than for lighting or equipment with
electrical energy consumption that exceeds normal office usage as reasonably
determined by Landlord. If Tenant desires any HVAC service after Normal Business
Hours, such service shall be supplied to Tenant upon the written request of
Tenant delivered to Landlord before 3 p.m. on the business day before the
service is to be provided, and Tenant shall pay to Landlord the cost of such
service with the next due installment of monthly rent after Landlord has
delivered to Tenant an invoice therefor.
5.2 Tenant shall not install any electrical equipment requiring special
wiring or voltage in excess of 110 volts or otherwise exceeding Building
capacity unless approved in advance by Landlord. If approved, Landlord shall use
reasonable efforts to furnish electrical current for such lighting or equipment
through the then-existing feeders and risers serving the Building and the
Premises, and Tenant shall pay to Landlord the cost of such service with the
next due installment(s) of monthly rent after Landlord has delivered to Tenant
an invoice therefor. Landlord may determine the amount of such additional
consumption and potential consumption by either or both: (i) a survey of
Tenant's potential usage of electricity and that of standard or average tenant
usage of electricity in the Building performed by a reputable consultant
selected by Landlord and paid for by Tenant; or (ii) a separate meter in the
Premises installed, maintained, and read by Landlord, at Tenant's expense. In no
event will the use of electricity in the Premises exceed the capacity of
existing feeders and risers to or wiring in the Premises. If additional risers
or wiring are required to meet Tenant's excess electrical requirements,
Landlord, in it sole and absolute judgment, may elect to permit same at the sole
cost and expense of Tenant, provided such additional feeders, risers or wirings
shall not cause permanent damage or injury to the Building or the Premises,
cause or create a dangerous or hazardous condition, entail excessive or
unreasonable alterations, repairs, or expenses, or interfere with or disturb
other tenants of the Building. If Tenant uses machines or equipment in the
Premises which affect the standard temperature otherwise maintained by the air
conditioning system, Landlord may install supplemental air conditioning units or
other supplemental equipment in the Premises, and the cost thereof, including
the cost of installation, operation, use, and maintenance, shall be paid by
Tenant to Landlord with the next due installment of rent after Landlord has
delivered to Tenant an invoice therefor.
5.3 Landlord's obligation to furnish services under Section 5.1 shall
be subject to the rules and regulations of the supplier of such services and
governmental rules and regulations. Landlord may, upon not less than thirty (30)
days' prior written notice to Tenant, discontinue any such service to the
Premises, provided Landlord first arranges for a direct connection thereof
through the supplier of such service. Tenant shall, however, be responsible for
contracting with the supplier of such service and for paying all deposits for,
and costs relating to, such service.
<PAGE>
5.4 Failure to any extent to furnish any service described above or
any stoppage or interruption of those services resulting from any cause shall
not render Landlord liable in any respect for damages, nor be construed as an
eviction of Tenant or work an abatement of rent, nor relieve Tenant from
fulfillment of any covenant or agreement contained in the Lease.
ARTICLE 6
USE
6.1 Tenant shall use the Premises only for the Permitted Use. Tenant
will not occupy or use the Premises, or permit any portion of the Premises to be
occupied or used, for any business or purpose other than the Permitted Use or
for any use or purpose which is unlawful or deemed to be disreputable in any
manner, or dangerous to life, limb or property, or extrahazardous on account of
fire, nor permit anything to be done which will in any way increase the premiums
for insurance coverage on the Building or contents therein, or invalidate any
insurance coverage on the Building. Tenant will conduct its business and control
its agents, employees and invitees in such a manner as not to create any
nuisance, nor interfere with, annoy or disturb other tenants or Landlord, in the
management of the Building. Tenant will not commit waste and will maintain the
Premises in a clean, healthful and safe condition and will comply with all laws,
ordinances, orders, rules and regulations (state, federal, municipal, insurance
and other agencies or bodies having any jurisdiction thereof) with reference to
the use, condition or occupancy of the Premises, including, without limitation,
all environmental, health and safety laws and the Americans with Disabilities
Act. Tenant will secure at its own expense all permits and licenses required for
the transaction of business from the Premises in accordance with the Permitted
Use. Tenant will receive or take delivery of goods or merchandise and will
remove all garbage and trash only in the manner and areas prescribed by Landlord
from time to time. Tenant will not display or sell merchandise outside the
exterior walls and doorways of the Premises and may not use such areas for
storage. Tenant will not keep any substance or carry on or permit any operation
which might emit offensive odors or conditions into other parts of the Building
or use any apparatus which might make undue noise or vibrations in the Building.
Tenant further agrees not to install any exterior lighting, amplifiers or
similar devices or use in or about the Premises an advertising medium which may
be heard or seen outside the Premises, such as flashing lights, searchlights,
loudspeakers, phonographs or radio broadcasts.
6.2 Tenant will, and will cause all its employees, agents, contractors
and invitees to, comply fully with all rules and regulations of the Building
adopted by Landlord from time to time. A copy of the rules and regulations for
the Building, existing on the Date of the Lease, are attached hereto as Exhibit
"D". Landlord shall at all times have the right to change such rules and
regulations or to promulgate other rules and regulations in such reasonable
manner as may be deemed advisable for the safety, care, or cleanliness of the
Building or Premises, and for the preservation of good order therein, all of
which rules and regulations, changes and amendments will be forwarded to Tenant
in writing and shall be carried out and observed by Tenant.
ARTICLE 7
SIGNAGE
7.1 Tenant shall not install any signs, window or door lettering or
advertising media of any type in, on or about the Premises or any part thereof,
except for such tenant identification information as Landlord permits to be
included or shown on any directory maintained in the front lobby of the Building
and adjacent to the access door or doors to the Premises or such other items as
Landlord approves. Should Landlord agree in writing to any of the foregoing
items, Tenant agrees to maintain same in good condition and repair at all times.
ARTICLE 8
COMMON AREAS
8.1 The use and occupation by Tenant of the Premises shall include the
use in common with others entitled thereto of the common areas. The term "common
areas" shall mean those portions of the Building intended for the common use of
all tenants including, among other facilities, the parking areas, service roads,
loading facilities, sidewalks, and such other facilities as may be designated by
Landlord from time to time as common areas, subject, however, to the terms and
conditions of this Lease and to the rules and regulations governing the use of
the common areas as prescribed from time to time by Landlord. Landlord shall
have the right from time to time to change the area, level, location and
arrangement of the common areas.
<PAGE>
8.2 The common areas shall at all times be subject to the exclusive
control and management of Landlord. Landlord shall police the common areas and
maintain them in good condition and repair throughout the Lease Term.
8.3 All common areas and facilities, which Tenant may be permitted to
use are to be used under a revocable license, and if such areas are diminished,
Landlord shall not be subject to any liability nor shall Tenant be entitled to
any compensation or diminution or abatement of rent, nor shall the diminution of
such areas be deemed constructive or actual eviction.
8.4 Tenant shall have the right to park in the parking areas in common
with other tenants of the Building upon such terms and conditions established by
Landlord at any time during the Lease Term, including the imposition of a
reasonable parking charge if required by governmental authority or as otherwise
provided for in the Lease. Tenant agrees not to overburden the parking areas and
agrees to cooperate with Landlord and the other tenants in use of the parking
areas. Landlord reserves the right in its absolute discretion to determine
whether the parking areas are becoming overburdened and to allocate and assign
parking spaces among Tenant and other tenants, and to reconfigure the parking
areas and modify the existing ingress to and egress from the parking areas as
Landlord shall deem appropriate.
ARTICLE 9
ALTERATIONS
9.1 Any leasehold improvements to the Premises contemplated by Landlord
and Tenant to be made prior to the commencement of the Lease Term shall be
performed in accordance with the provisions of Exhibit "E".
9.2 Other than any leasehold improvements to be made under Section 9.1,
Tenant shall not make, or allow to be made, any alterations, additions or
improvements to the Premises without the prior written approval of Landlord. All
alterations, additions or improvements installed on the Premises by either
party, including, without limitation, fixtures, but excluding readily movable
trade fixtures, shall become the property of Landlord at the expiration of the
Lease Term, unless Landlord requests their removal, in which event, Tenant shall
remove any such alterations, additions or improvements and restore the Premises
to its original condition at Tenant's expense.
9.3 Prior to commencing any construction work on the Premises, Tenant
must furnish to Landlord adequate plans and specifications for the written
approval of Landlord. Once approved, Tenant shall not modify the plans and
specifications without, again, obtaining the written approval of Landlord.
Landlord's approval of the plans and specifications shall not be deemed to be a
representation by Landlord that such plans and specifications comply with
applicable insurance requirements, building codes, ordinances, laws or
regulations.
9.4 All construction work shall be performed only by Landlord or by
contractors and subcontractors approved in writing by Landlord. If Landlord does
not perform the construction work, then Tenant shall cause all of its
contractors and subcontractors to procure and maintain insurance coverage
against such risks and in such amounts as Landlord may reasonably require and
with such companies as Landlord may reasonably approve. Landlord may also
require Tenant to furnish a payment and performance bond, reasonably
satisfactory to Landlord in an amount covering the cost of the construction
work, and/or require Tenant to obtain a waiver and release of liens from all
contractors and subcontractors prior to commencement of the construction work.
Tenant agrees to indemnify Landlord and hold Landlord harmless against any loss,
liability or damage resulting from any such construction work performed by
Tenant or on Tenant's behalf.
9.5 All construction work by, or on behalf of, Tenant must be performed
in a good and workmanlike manner in accordance with the approved plans and
specifications, lien-free, and in compliance with all governmental laws and
requirements. Tenant shall only utilize new materials of a quality that is equal
or better than the quality of those materials already on the Premises.
9.6 Tenant shall not permit any mechanic's liens to be filed against
the Premises or the Building for any work performed, materials furnished, or
obligation incurred by or at the request of Tenant, including, but not limited
to, any work performed, materials furnished, or obligations incurred by or at
the request of Tenant for construction performed under the provisions of Exhibit
"E". If such a lien is filed, then Tenant shall, within ten (10) days after
Landlord has delivered notice of the filing to Tenant, either pay the amount of
<PAGE>
the lien or diligently contest such lien, in which event, Tenant shall deliver
to Landlord a bond or other security reasonably satisfactory to Landlord. If
Tenant fails to timely take either such action, then Landlord may, at its
election, pay the lien claim without inquiry as to the validity thereof, and any
amounts so paid, plus Landlord's expenses and an administrative fee equal to
fifteen percent (15%) of the amount paid, shall be paid by Tenant to Landlord as
additional rental within ten (10) days after Landlord has delivered to Tenant an
invoice therefor. No work which Landlord permits Tenant to perform in the
Premises shall be deemed to be for the immediate use or benefit of Landlord so
that no mechanics or other lien shall be allowed against the estate of Landlord
by reason of its consent to such work.
ARTICLE 10
REPAIRS
10.1 Landlord shall not be required to make any repairs or replacements
of any kind or character on the Premises during the Lease Term except repairs to
the exterior walls, corridors, window, roof and other structural elements and
equipment of the Building, except when such repairs are caused by fire or other
casualty, in which event, the provisions of Article 13 shall govern and control.
Landlord shall not be responsible for termite, or other insect, or vermin
eradication. Subject to the provisions of any waiver contained in Section 12.2,
Landlord shall not be required to make any repairs occasioned by the acts or
negligence of Tenant, its agents, employees, contractors and invitees. Tenant
shall give immediate written notice to Landlord of the need for repairs or
corrections and Landlord shall have a reasonable time to make such repairs or
corrections. Landlord's liability hereunder shall be limited to the cost of such
repairs or corrections. Tenant waives the provisions of any law permitting
Tenant the right to make repairs and deduct the expense of such repairs from the
rent due under the lease.
10.2 Landlord may, at its option and at the cost and expense of Tenant,
repair or replace any damage or injury done to the Building or any part thereof,
caused by Tenant, its agents, employees, contractors or invitees. Tenant shall
pay such costs, plus an administrative fee equal to fifteen percent (15%) of the
costs, to Landlord on the next date an installment of Base Rental is due
following notice from Landlord of the costs. Tenant further agrees throughout
the Lease Term to maintain and keep the interior of the Premises in good repair
and condition at Tenant's expense.
ARTICLE 11
ASSIGNMENT AND SUBLETTING
11.1 Tenant shall not, without the prior written consent of Landlord
(which Landlord may grant or deny in its sole discretion), (i) advertise that
any portion of the Premises is available for lease, (ii) assign, transfer, or
encumber this Lease or any estate or interest herein, whether directly or by
operation of law, (iii) permit any other entity to become Tenant hereunder by
merger, consolidation, or other reorganization (iv) if Tenant is an entity other
than a corporation whose stock is publicly traded, permit the transfer of an
ownership interest in Tenant so as to result in a change in the current control
of Tenant, (v) sublet any portion of the Premises, (vi) grant any license,
concession, or other right of occupancy of any portion of the Premises, or (vii)
permit the use of the Premises by any parties other than Tenant (any of the
events listed in Sections 11.1(ii) through 11.1(vii) being a "Transfer"). If
Tenant requests Landlord's consent to a Transfer, then Tenant shall provide
Landlord with a written description of all terms and conditions of the proposed
Transfer, copies of the proposed documentation, and the following information
about the proposed transferee: name and address; reasonably satisfactory
information about its business and business history; its proposed use of the
Premises; banking, financial, and other credit information; and general
references sufficient to enable Landlord to determine the proposed transferee's
creditworthiness and character. Tenant shall reimburse Landlord for its
attorneys' fees and other expenses incurred in connection with considering any
request for its consent to a Transfer. If Landlord consents to a proposed
Transfer, then the proposed transferee shall deliver to Landlord a written
agreement whereby it expressly assumes the obligations of Tenant hereunder;
however, any transferee of less than all of the space in the Premises shall be
liable only for the obligations under this Lease that are properly allocable to
the space subject to the Transfer, and only to the extent of the rent it has
agreed to pay Tenant therefor. Landlord's consent to a Transfer shall not
release Tenant from performing its obligations under this Lease, but rather
Tenant and its transferee shall be jointly and severally liable therefor.
Landlord's consent to any Transfer shall not waive Landlord's rights as to any
subsequent Transfers. If an Event of Default occurs while the Premises or any
part thereof are subject to a Transfer, then Landlord, in addition to its other
remedies, may collect directly from such transferee all rents becoming due to
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Tenant and apply such rents against Base Rental and other amounts due under this
Lease. Tenant authorizes its transferees to make payments of rent directly to
Landlord upon receipt of notice from Landlord to do so.
11.2 Landlord may, within thirty (30) days after submission of Tenant's
written request for Landlord's consent to a Transfer, cancel this Lease (or, as
to a subletting or assignment, cancel as to the portion of the Premises proposed
to be sublet or assigned) as of the date the proposed Transfer was to be
effective. If Landlord cancels this Lease as to any portion of the Premises,
then this Lease shall cease for such portion of the Premises and Tenant shall
pay to Landlord all Base Rental and other amounts accrued through the
cancellation date relating to the portion of the Premises covered by the
proposed Transfer and all brokerage commissions paid or payable by Landlord in
connection with this Lease that are allocable to such portion of the Premises.
Thereafter, Landlord may lease such portion of the Premises to the prospective
transferee (or to any other person) without liability to Tenant.
11.3 Tenant shall pay to Landlord, immediately upon receipt thereof,
all compensation received by Tenant for a Transfer that exceeds the Base Rental
and other amounts due under the Lease, excluding any amount due under this
Section 11.3 and allocable to the portion of the Premises covered thereby.
11.4 Landlord may sell, transfer, assign or convey all or any part of
its interest in the Building and the Lease and, in the event Landlord assigns
its interest in this Lease, Landlord shall be released from any further
obligation and liabilities hereunder, and Tenant agrees to attorn and look
solely to Landlord's successor-in-interest for performance of such obligation.
ARTICLE 12
INSURANCE; WAIVERS; SUBROGATION; INDEMNITY
12.1 Tenant shall at its expense procure and maintain throughout the
Lease Term the following insurance policies: (i) commercial general liability
insurance in amounts of not less than $1,000,000 per occurrence, combined single
limit, or such other amounts as Landlord may from time to time reasonably
require, insuring Tenant, Landlord and Landlord's agents against all liability
for injury to or death of a person or persons or damage to property arising from
the use and occupancy of the Premises, (ii) contractual liability insurance
coverage sufficient to cover Tenant's indemnity obligations hereunder, (iii)
casualty insurance, including "all risks" and fire and extended coverage
insurance covering the full value of Tenant's leasehold improvements, personal
property and other property (including the property of others), located in or on
the Premises, (iv) workman's compensation insurance, containing a waiver of
subrogation endorsement reasonably acceptable to Landlord, (v) comprehensive
automobile liability insurance, insuring Tenant, Landlord and Landlord's agents,
(vi) business interruption insurance, and (vii) such other insurance and in such
amounts as Landlord may reasonably require from time to time. Tenant's insurance
shall provide primary coverage to Landlord when any policy issued to Landlord
provides duplicate or similar coverage, and in such circumstance, Landlord's
policy will be excess over Tenant's policy. Tenant shall furnish certificates of
insurance and such other evidence satisfactory to Landlord of the maintenance of
all insurance coverages required hereunder prior to the Commencement Date, and
Tenant shall obtain a written obligation on the part of each insurance company
to notify Landlord at least thirty (30) days before cancellation or a material
change of any such insurance. All such insurance policies shall name Landlord as
additional insured or loss payee, as applicable, and otherwise shall be in form,
and issued by companies, reasonably satisfactory to Landlord and with
deductibles reasonably satisfactory to Landlord. Tenant's failure to maintain
any insurance hereunder shall constitute an Event of Default without any written
notice required of Landlord and, in such event, Landlord shall have the right,
but not the obligation, to purchase any insurance that has lapsed. Should
Landlord elect to purchase insurance on behalf of Tenant, then Tenant shall
reimburse to Landlord the cost of such insurance and an administrative fee of
fifteen percent (15%) of the amount of the premium within ten (10) days of the
date of the notice from Landlord seeking the reimbursement. The policy limits of
any insurance required to be carried by Tenant shall not limit the liability of
Tenant under this Lease.
12.2 Landlord shall not be liable to Tenant or those claiming by,
through, or under Tenant for any injury to or death of any person or persons or
the damage to or theft, destruction, loss, or loss of use of any property or
inconvenience (a "Loss") caused by casualty, theft, fire, third parties, or any
other matter (including Losses arising through repair or alteration of any part
of the Building, or failure to make repairs, or from any other cause),
regardless of whether the negligence of any party caused such Loss in whole or
in part. Landlord and Tenant waive any claim each might have against the other
for any damage to or theft, destruction, loss, or loss of use of any property,
to the extent the same is covered under any insurance policy that covers the
<PAGE>
Building, the Premises, Landlord's or Tenant's fixtures, personal property,
leasehold improvements, or business, or, in the case of Tenant's waiver, is
required to be insured against under the terms of the Lease, regardless that the
negligence or fault of the other party caused such loss; however, the waiver
shall not apply to the portion of any damage which is not reimbursed by the
damaged party's insurance by reason of the deductible in such party's insurance
coverage, or apply to any coinsurance penalty which Landlord might sustain. Each
party shall cause its insurance carrier to endorse all applicable policies
waiving the carrier's rights of recovery under subrogation or otherwise against
the other party.
12.3 Subject to the provisions of Section 12.2, Tenant shall defend,
indemnify, and hold harmless Landlord and its employees and agents from and
against all claims, demands, liabilities, causes of action, suits, judgments,
and expenses (including attorneys' fees) for any Loss arising from an occurrence
on the Premises or caused by or resulting from the condition of the Premises, or
from the acts or omissions of Tenant or Tenant's employees, agents, contractors
or invitees, or from Tenant's failure to perform any of its obligations under
this Lease (other than a Loss arising from the gross negligence or willful
misconduct of Landlord or its employees or agents), even though caused or
alleged to be caused by the joint, comparative, or concurrent negligence or
fault of Landlord or its employees and agents, and even though any such claim,
cause of action, or suit is based upon or alleged to be based upon the strict
liability of Landlord or its employees and agents, provided that this indemnity
shall not apply to the gross negligence or willful misconduct of Landlord or its
employees or agents. This indemnity provision is intended to indemnify Landlord
and its employees and agents against the consequences of their own negligence or
fault (but not the gross negligence or willful misconduct of Landlord or its
employees or agents) as provided above when Landlord or its employees and agents
are jointly, comparatively, or concurrently negligent with Tenant.
12.4 Tenant shall not use, and shall not permit any subtenant,
licensee, concessionaire, employee, agent or invitee (hereinafter collectively
"Tenant's Representatives") to use, any portion of the Premises or Building, for
the placement, storage, manufacture, disposal or handling of any hazardous
materials (hereinafter defined) unless Tenant complies with all applicable
environmental laws (federal, state or local), including, but not limited to
those for obtaining proper permits. In the event Tenant or Tenant's
Representatives desire to use or place hazardous materials on the Premises it
shall notify Landlord in writing thirty (30) days prior to such proposed use or
placement, and provide the names of the hazardous materials, procedures to
insure compliance with the applicable environmental law and such other
information as Landlord may reasonably request.
In the event Tenant or Tenant's Representatives places, releases or
discovers any hazardous materials on the Premises or Building in violation of
applicable environmental laws, Tenant shall immediately notify Landlord of such
fact in writing within twenty-four (24) hours of the placement, release or
discovery. Tenant shall not attempt any removal, abatement or remediation of
those hazardous materials on the Premises in violation of applicable
environmental laws, without obtaining the additional written consent of
Landlord, which consent may be specifically conditioned on Landlord's right to
approve the scope, timing and techniques of any such work and the appointment of
all contractors, engineers, inspectors and consultants in connection with any
such work. Tenant shall be responsible for the cost of any removal, abatement
and remediation work of any hazardous materials placed, stored, manufactured,
disposed of or handled by Tenant or Tenant's Representatives on the Premises or
any other portion of the Building and for the cost of any removal, abatement or
remediation of any hazardous materials which might be disturbed or released as a
result of any remodeling or construction in the Premises by Tenant or Tenant's
Representatives. Such costs shall include, without limitation, the cost of any
supervision by Landlord, its employees or agents, in connection with such work.
Tenant shall comply with all environmental laws in connection with any such
removal.
Tenant shall indemnify Landlord, its shareholders, directors, officers,
employees and agents and hold them harmless, from and against any loss, damage
(including, without limitation, a loss in value of the Building or damages due
to restrictions on marketing contaminated space), cost, liability or expense
(including reasonable attorneys' fees and expenses and court costs) arising out
of the placement, storage, use, manufacture, disposal, handling, removal,
abatement or remediation of any hazardous materials by Tenant or Tenant's
Representatives on the Premises or Building, or any removal, abatement or
remediation of any hazardous materials required hereunder to be performed or
paid for by Tenant, with respect to any portion of the Premises or the Building,
or arising out of any breach by Tenant of its obligations under this paragraph.
The term "hazardous materials" as used herein shall mean (i) any
"hazardous waste" as defined by the Resource Conservation and Recovery Act of
1976 (42 U.S.C. Section 6901 et seq.), as amended from time to time, and
regulations promulgated thereunder; (ii) any "hazardous substance" as defined by
<PAGE>
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. Section 9601, et seq.), as amended from time to time, and regulations
promulgated thereunder; (iii) asbestos or polychlorinated biphenyls; (iv) any
substance the presence of which on the Building or on the Premises is prohibited
or regulated by any federal, state or local law, regulation, code or rule; and
(v) any other substance which requires special handling or notification of any
federal, state or local governmental entity in its collection, storage,
treatment, or disposal.
12.5 The indemnification provisions contained in Article 12 shall
survive the termination of this Lease.
ARTICLE 13
FIRE AND CASUALTY
13.1 If the Premises or or Building or any part thereof shall be
damaged by fire or other casualty, Tenant shall give prompt written notice
thereof to Landlord and Landlord may, at its option, terminate this Lease by
notifying Tenant in writing of such termination within sixty (60) days after the
date of such damage, in which event the rent hereunder shall be abated as of the
date of such damage. If Landlord does not elect to terminate this Lease,
Landlord shall as soon as reasonably practical after the date of such damage
commence to repair and restore the Building with reasonable diligence (except
that Landlord shall not be responsible for delays outside its control) to
substantially the same condition in which it was immediately prior to the
happening of the casualty, except that Landlord shall not be required to
rebuild, repair or replace any part of Tenant's leasehold improvements (except
to the extent originally paid by Landlord), furniture, furnishings or fixtures
and equipment removable by Tenant under the provisions of this Lease, and the
Lease Term will be extended by the period of time equal to the time to repair
and restore the damage. Tenant agrees to rebuild and restore any leasehold
improvements to the extent not required of Landlord. Tenant shall commence any
such work upon written notice from Landlord. Any insurance which may be carried
by Landlord or Tenant against loss or damage to the Building or to the Premises
shall be for the sole benefit of the party carrying such insurance and under its
sole control.
13.2 Landlord shall not be liable for any inconvenience or annoyance to
Tenant or injury to the business of Tenant resulting in any way from such damage
or the repair thereof. Subject to the provisions of the remainder of this
paragragh, Landlord shall allow Tenant a fair diminution of rent during the time
and to the extent the Premises are unfit for occupancy. The diminution of rent
shall expire on the date Landlord delivers the Premises to Tenant ready for
occupancy (if Landlord originally provided the leasehold improvements) or (ii)
on the date following an equivalent time allowed Tenant for the construction of
leasehold improvements after Landlord delivered the Premises to Tenant ready for
Tenant to rebuild its leasehold improvements, as contemplated in Exhibit "E" (if
Tenant originally provided the leasehold improvements). If the Premises or any
other portion of the Building is damaged by fire or other casualty resulting
from the fault or negligence of Tenant or any of Tenant's agents, employees or
invitees, the rent hereunder shall not be diminished during the repair of such
damage and Tenant shall be liable to Landlord for the cost and expense of the
repair and restoration of the Building caused thereby to the extent such costs
and expenses are not covered by insurance proceeds.
ARTICLE 14
CONDEMNATION
14.1 If all of the Building should be taken for any public or
quasi-public use under any governmental law, ordinance or regulation or by right
of eminent domain or by private purchase in lieu thereof, this Lease shall
terminate and the rent shall be abated during the unexpired portion of the Lease
Term, effective on the date physical possession is taken by the condemning
authority, and Tenant shall have no claim against Landlord for the value of any
unexpired Lease Term.
14.2 In the event a portion but not all of the Building shall be taken
for any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, by private sale in lieu thereof and
the partial taking or condemnation shall render the Building unsuitable for
continued operation, then Landlord shall have the option, in its sole
discretion, of terminating this Lease or, at Landlord's sole risk and expense,
restoring and reconstructing the Building to the extent necessary to make same
reasonably tenantable. Should Landlord not elect to terminate this Lease, then
Landlord shall restore the Premises and the Lease shall continue in full force
and effect with the rent payable during the unexpired portion of this Lease
being adjusted to such an extent as may be fair and reasonable under the
circumstances, and Tenant shall have no claim against Landlord for the value of
any interrupted portion of this Lease.
<PAGE>
14.3 Landlord shall be entitled to receive all of the compensation
awarded upon a condemnation (or the proceeds of a private sale in lieu thereof)
of all or any part of the Building or the Premises, including any award for the
value of any unexpired Lease Term, and Tenant hereby assigns to Landlord and
expressly waives all claim to any such compensation. However, Tenant reserves
for itself any separate award made for relocation cost or loss of any of
Tenant's trade fixtures, provided no such award shall diminish the amount that
would otherwise be awarded to Landlord.
ARTICLE 15
SUBORDINATION, ATTORNMENT, ESTOPPEL
15.1 This Lease shall be subordinate to any deed of trust, mortgage, or
other security instrument (a "Mortgage"), or any ground lease, master lease, or
primary lease (a "Primary Lease"), that now or hereafter covers all or any part
of the Premises (the mortgagee under any Mortgage or the lessor under any
Primary Lease is referred to herein as "Landlord's Mortgagee"), including any
modifications, renewals or extensions of such Mortgage or Primary Lease.
Notwithstanding the foregoing, Tenant agrees that any such Landlord's Mortgagee
shall have the right at any time to subordinate such Mortgage or Primary Lease
to this Lease on such terms and subject to such conditions as Landlord's
Mortgagee may deem appropriate in its discretion. Tenant agrees upon demand to
execute such further instruments subordinating this Lease or attorning to the
Landlord's Mortgagee as Landlord may request. In the event that Tenant should
fail to execute any subordination or other agreement required by this paragraph,
promptly as requested, Tenant hereby irrevocably constitutes Landlord as its
attorney in fact to execute such instrument in Tenant's name, place and stead,
it being agreed that such power is one coupled with an interest.
15.2 Tenant shall attorn to any party succeeding to Landlord's interest
in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure,
power of sale, termination of lease, or otherwise, upon such party's request,
and shall execute such agreements confirming such attornment as such party may
reasonably request.
15.3 Tenant shall not seek to enforce any remedy it may have for any
default on the part of the Landlord without first giving written notice by
certified mail, return receipt requested, specifying the default in reasonable
detail, to any Landlord's Mortgagee whose address has been given to Tenant, and
affording such Landlord's Mortgagee a reasonable opportunity to perform
Landlord's obligations hereunder.
15.4 Tenant agrees that, within ten (10) days of written request by
Landlord, it will execute and deliver to such persons as Landlord shall request
a statement in recordable form certifying that this Lease is unmodified and in
full force and effect (or if there have been modifications, that the same is in
full force and effect as so modified), stating the dates to which rent and other
charges payable under this Lease have been paid, stating that Landlord is not in
default hereunder (or if Tenant alleges a default stating the nature of such
alleged default) and further stating such other matters as Landlord shall
reasonably require.
ARTICLE 16
EVENTS OF DEFAULT
16.1 The following shall be deemed to be Events of Default by Tenant
under this Lease:
(a) Tenant shall fail to pay any installment of Base Rental or any
other rent or monetary sum when due under the provisions of the Lease.
(b) Tenant shall fail to comply with any term, provision or covenant of
this lease, other than the payment of a monetary sum, and such failure shall not
be cured within ten (10) days after written notice thereof to Tenant.
(c) Tenant or any guarantor of Tenant's obligations under this Lease
shall become insolvent, or shall make a transfer in fraud of creditors, or shall
make an assignment for the benefit of creditors.
<PAGE>
(d) Tenant or any guarantor of Tenant's obligations under this Lease
shall file a petition under any state or federal bankruptcy or other insolvency
statutes or Tenant or any guarantor of Tenant's obligations under this Lease
shall be adjudged bankrupt or insolvent in proceeding filed against Tenant or
guarantor thereunder and such adjudication shall not be vacated or set aside
within thirty (30) days.
(e) A receiver or trustee shall be appointed for all or substantially
all of the assets of Tenant or any guarantor of the obligations of Tenant under
this Lease and such receivership shall not be terminated or stayed within thirty
(30) days.
(f) Tenant shall do or permit to be done anything which creates a lien
upon the Premises or upon all or any part of the Building.
(g) Tenant shall desert or vacate any substantial portion of the
premises.
ARTICLE 17
REMEDIES
17.1 Upon the occurrence of an Event of Default, Landlord shall have
the option to pursue any one or more of the following remedies without any
notice or demand whatsoever, except if required by applicable law:
(a) Terminate this Lease in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
damages, enter upon and take possession and expel or remove Tenant and any other
person who may be occupying said Premises or any part thereof without being
liable for prosecution or any claim for damages therefor, and Tenant agrees to
pay to Landlord, as hereinafter set forth in Section 17.2, on demand the amount
of all loss and damage which Landlord may suffer by reason of such termination,
whether through inability to relet the Premises on satisfactory terms or
otherwise.
(b) Terminate Tenant's right to possession of the Premises, but not the
Lease, in which event Tenant shall immediately surrender the Premises to
Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any
other remedy which it may have for possession or damages, enter upon and take
possession of the Premises and expel or remove Tenant and any other person who
may be occupying the Premises or any part thereof without being liable for
prosecution or any claim for damages therefor and Tenant agrees to pay to
Landlord, as hereinafter set forth in Section 17.2, on demand the amount of all
loss and damage which Landlord may suffer by reason of such termination, whether
through inability to relet the Premises on satisfactory terms or otherwise.
(c) Enter upon the Premises, without terminating the Lease or Tenant's
right to possession and without being liable for prosecution or any claim for
damages therefor, and do whatever Tenant is obligated to do under the provisions
of this Lease, and Tenant agrees to reimburse Landlord on demand for any
expenses which Landlord may incur in thus effecting compliance with Tenant's
obligations under this Lease, plus an administrative fee equal to fifteen
percent (15%) of any expenses incurred by Landlord, and Tenant further agrees
that Landlord shall not be liable for any damages resulting to the Tenant for
such action.
(d) Not to re-enter the Premises or terminate the Lease, but to allow
Tenant to remain in possession of the Premises, and bring suit against Tenant to
collect the monthly rents and other charges provided in this Lease as they
accrue. Landlord shall have a right to allow such deficiencies of monthly rents
and other charges provided in this Lease to accumulate and to bring an action on
several or all of the accrued deficiencies at one time. Any such suit shall not
prejudice in any way the right of Landlord to bring a similar action for any
subsequent deficiency or deficiencies.
Tenant agrees that any re-entry into the Premises under the provisions
of subpart (b) of this Section shall not be deemed a termination of the Lease or
an acceptance of the surrender thereof, unless Landlord shall have notified
Tenant in writing that it has so elected to terminate the Lease. Tenant also
agrees that any notice pursuant to an action for forcible detainer or eviction
shall not be deemed to be a termination of the Lease unless Landlord shall have
also notified Tenant in writing that it has so elected to terminate the Lease.
Any election of the remedy provided in subpart (b) of this Section shall not
preclude the subsequent election by Landlord of the remedy under subpart (a) of
this Section.
<PAGE>
Should Landlord elect to re-enter the Premises under the provisions of
subparts (a) or (b), Landlord shall make reasonable efforts to relet the
Premises. Nothing herein, however, shall prohibit Landlord from leasing any
other vacant space in the Building before leasing the Premises, or from using
its business judgment in respect to the releasing of the Premises. In this
regard, Landlord shall not be required to relet the Premises in part, rather
than a whole, or for a rental rate less than the rental rate then being offered
to prospective tenants for other space in the Building.
17.2 Should Landlord at any time terminate this Lease or Tenant's right
to possession for an Event of Default, Landlord shall recover from Tenant, and
Tenant shall be liable and pay to Landlord, as damages a sum equal to the
following:
(i) the unpaid monthly rents and other charges provided in this Lease
and which accrued prior to the date of termination;
(ii) an amount equal to the following:
(A) Until Landlord is able, through reasonable efforts, to relet the
Premises under terms satisfactory to Landlord, in its sole discretion, Tenant
shall pay to Landlord on or before the first day of each calendar month, the
monthly rentals and other charges provided in this Lease. If and after the
Premises have been relet by Landlord, Tenant shall pay to Landlord on the
twentieth (20th) day of each calendar month the difference between the monthly
rentals and other charges provided in this Lease for such calendar month and
that actually collected by Landlord for such month. If it is necessary for
Landlord to bring suit in order to collect any deficiency, Landlord shall have a
right to allow such deficiencies to accumulate and to bring an action on several
or all of the accrued deficiencies at one time. Any such suit shall not
prejudice in any way the right of Landlord to bring a similar action for any
subsequent deficiency or deficiencies. Any amount collected by Landlord from
subsequent tenants for any calendar month in excess of the monthly rentals and
other charges provided in this Lease, shall be credited to Tenant, first, in
reduction of Tenant's liability for any calendar month for which the amount
collected by Landlord will be less than the monthly rentals and other charges
provided in this Lease and, then, against Tenant's liability for any other
damages of Landlord hereunder, and Tenant shall have no right to any excess
other than the above-described credits; and
(B) When Landlord desires, Landlord may demand a final settlement, in
which event, Landlord shall have a right to, and Tenant hereby agrees to pay,
the difference between (1) the total monthly rents and other charges provided in
this Lease for the remainder of the Lease Term, and (2) the fair rental value of
the Premises for such period (determined as of the time of the final settlement)
such difference discounted to present value using the prime rate published in
the Wall Street Journal for the region in which the Building is located on the
date of the final settlement; and
(iii) all other damages which Landlord may demonstrate it incurred,
including, without limitation, any and all costs of retaking the Premises,
costs of maintaining and preserving the Premises after such retaking, and
costs of reletting the Premises, such as costs to repair or remodel the
Premises and to pay leasing commissions.
If Landlord elects to exercise the remedy prescribed in Section
17.2(ii) (A) above, this election shall not prejudice Landlord's right at any
time thereafter to cancel said election in favor of the remedy prescribed in
Section 17.2 (ii) (B) above.
As used in Article 17, the phrase "the monthly rentals and other
charges provided in this Lease" shall mean the monthly amount of Base Rental
plus the monthly amount of Tenant's Pro Rata Share of Excess Basic Costs. If
Landlord demands a final settlement, then Landlord shall have the right to
estimate Tenant's Pro Rata share of Excess Basic Costs for the remainder of the
Lease Term.
Any past due monthly rents and other charges provided in this Lease
shall bear interest at the Default Interest rate, defined elsewhere in the
Lease.
17.3 Upon the occurrence of an Event of Default, Landlord may alter all
locks and security devices at the Premises and will not be obligated to return
the key to Tenant if Landlord has elected either to terminate this Lease under
Section 17.1(a) or permanently repossess the Premises under Section 17.1(b). If
Landlord alters all locks and security devices at the Premises because of an
Event of Default without electing either to terminate this Lease or permanently
<PAGE>
repossess the Premises, then Landlord shall return the key to Tenant only during
the regular business hours of Landlord's property manager and only in the event
Tenant has paid the rent or otherwise performed the obligations necessary to
cure the Event of Default and, further, Tenant provides reasonable assurances to
Landlord evidencing Tenant's ability to perform its remaining obligations under
this Lease. In the event Landlord alters the locks and the keys are not returned
to Tenant, then, upon the prior written request of Tenant accompanied by such
releases and waivers as Landlord may require, Landlord, at its option, may (i)
escort Tenant to the Premises to retrieve personal belongings and other property
not subject to Landlord's lien and security interest, or (ii) obtain from Tenant
a list of such personal belongings and personal property and advise Tenant of a
time and place where such items will be made available to Tenant. If Landlord
elects the latter option, then Tenant shall reimburse to Landlord the cost of
moving and/or storing the items prior to Landlord's making same available to
Tenant.
17.4 Should Landlord re-enter and take possession of the Premises,
Landlord may, with respect to any and all furniture, fixtures, equipment and
other personal property located on the Premises, exercise one or more of the
following rights: (i) sell the personal property pursuant to any lien retained
by Landlord; (ii) remove the personal property from the Premises (without the
necessity of obtaining a distress warrant, writ of sequestration or other legal
process) and place same in storage and, in such event, Tenant shall be liable to
Landlord for costs incurred by Landlord in connection with such removal and
storage and shall indemnify and hold Landlord harmless from all loss, damage,
cost, expense and liability in connection with such removal and storage; or
(iii) dispose of any of the personal property. Should Landlord elect to dispose
of any of the personal property, whether or not such personal property was first
placed in storage, Landlord shall give Tenant written notice at Tenant's last
known address advising Tenant that Landlord will dispose of the personal
property unless Tenant retrieves same within five (5) days from the date of the
notice and pays to Landlord any costs incurred for storage and/or removal.
Landlord shall also have the right to relinquish possession of all or any
portion of such personal property to any person claiming to be entitled to
possession thereof who presents to Landlord a copy of any instrument represented
to Landlord by such person to grant such person the right to take possession of
such personal property, without the necessity on the part of Landlord to inquire
into the authenticity of the copy of the instrument or of Tenant's or Tenant's
predecessor's signature thereon and without the necessity of Landlord's making
any nature of investigation or inquiry as to the validity of the factual or
legal basis upon which such person purports to act; and Tenant agrees to
indemnify and hold Landlord harmless from all cost, expense, loss, damage and
liability incident to Landlord's relinquishment of possession of all or any
portion of such furniture, fixtures, equipment of other personal property to the
person. The rights of Landlord herein stated shall be in addition to any and all
other rights which Landlord has or may hereafter have a law or in equity, and
Tenant stipulates and agrees that the rights herein granted Landlord are
commercially reasonable. Tenant knowingly and irrevocably waives any claims it
may have against Landlord arising from Landlord's removal and storage of
Tenant's personal property in accordance with the provisions of this paragraph.
17.5 No 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 such intention shall be given to Tenant. Notwithstanding any
such re-entry or taking possession of the Premises, Landlord may at any time
thereafter elect to terminate this Lease by reason of the Event of Default.
Pursuit of any of the remedies set forth in Article 17 shall not preclude
pursuit of any of the other remedies in Article 17 or any others provided in
this Lease or any other remedies provided by law or in equity. The specific
remedies to which Landlord may resort under this Lease are cumulative and are
not intended to be exclusive of any other remedies to which Landlord may be
lawfully entitled in case of a breach or threatened breach of the Lease. In
addition to any other remedies provided in the Lease, Landlord shall be entitled
to seek injunctive relief to restrain any violation or threatened violation of
the covenants, conditions or provisions of this lease or to compel specific
performance. The pursuit of any remedy provided in this Lease shall not
constitute a forfeiture or waiver of any rent due to Landlord under this Lease
or of any damages accruing to Landlord by reason of the violation of any of the
terms, provisions and covenants contained in this Lease. Landlord's acceptance
of rent following an Event of Default hereunder shall not be construed as
Landlord's waiver of such Event of Default unless such waiver is expressly
stated in writing signed by Landlord. No waiver by Landlord of any violation or
breach of the terms, provisions, and covenants of the Lease shall be deemed or
construed to constitute a waiver of any other violation or breach of any of the
terms, provisions, and covenants of the Lease. No consent by Landlord to any act
of Tenant under this Lease shall be deemed to waive or render unnecessary
consent to any subsequent or similar act. Forbearance by Landlord to enforce one
or more of the remedies herein provided upon an Event of Default shall not be
deemed or construed to constitute a waiver of any other violation or Event of
Default.
<PAGE>
17.6 Landlord and Tenant hereby irrevocably waive, to the extent
permitted by law, any right to trial by jury in any lawsuit, action, proceeding,
or counterclaim brought by either party hereto against the other on any matter
arising out of or connected with this Lease, the acts or omissions of Landlord
or Tenant in connection with this Lease, or Tenant's occupancy and use of the
Premises and the Building.
17.7 Tenant shall not for any reason withhold or reduce Tenant's
required payments of rent and other charges provided in this Lease, it being
agreed that the obligations of Landlord under this Lease are independent of
Tenant's obligations except as may be otherwise expressly provided. The
immediately preceding sentence shall not be deemed to deny Tenant the pursuit of
all rights granted it under this Lease or at law; however, at the direction of
Landlord, Tenant's claims in this regard shall be litigated in proceedings
different from any litigation involving rent claims or other claims by Landlord
against Tenant (i.e., each party may proceed to a separate judgment without
consideration, counterclaim or offset as to the claims asserted by the other
party).
17.8 In the event of any default described in subsection (d) of Section
16.1 of this Lease, any assumption and assignment must conform with the
requirements of the Bankruptcy Code which provides, in part, that the Landlord
must be provided with adequate assurance of the following: (i) that the proposed
assignee has sources to pay monthly rents and any other charges due under this
Lease; (ii) that the financial condition and operating performance of any
proposed assignee and its guarantors, if any, shall be similar to the financial
condition and operating performance of Tenant and its guarantors, if any, as of
the date of execution of this Lease; (iii) that any percentage rent due under
this Lease will not decline substantially; (iv) that any assumption or
assignment is subject to all of the provisions of this Lease (including, but not
limited to, restrictions as to use) and will not breach any such provision
contained in any other Lease, financing agreement or other agreement relating to
the Building; and (v) that any assumption or assignment will not disrupt any
tenant mix or balance in the Building.
(a) In order to provide Landlord with the assurance contemplated by the
Bankruptcy Code, Tenant must fulfill the following obligations, in addition to
any other reasonable obligations that Landlord may require, before any
assumption of this Lease is effective: (i) all defaults under subsection (a) of
Section 16.1 of this Lease must be cured within ten (10) days after the date of
assumption; (ii) all other defaults under Section 16.1 of this Lease other than
under subsection (d) of Section 16.1 must be cured within ten (10) days after
the date of assumption; (iii) all actual monetary losses incurred by Landlord
(including, but not limited to, reasonable attorneys' fees) must be paid to
Landlord within ten (10) days after the date of assumption; and (iv) Landlord
must receive within ten (10) days after the date of assumption a Security
Deposit in the amount of six (6) months Base Rental (using the Base Rental in
effect for the first full month immediately following the assumption) and an
advance prepayment of Base Rental in the amount of three (3) months Base Rental
(using the Base Rental in effect for the first full month immediately following
the assumption), both sums to be held by Landlord in accordance with the other
provisions of this Lease, including, without limitation, Section 4.3, and deemed
to be rent under this Lease for the purposes of the Bankruptcy Code as amended
and from time to time in effect.
(b) In the event this Lease is assumed in accordance with the
requirements of the Bankruptcy Code and this Lease, and is subsequently
assigned, then, in addition to any other reasonable obligations that Landlord
may require and in order to provide Landlord with the assurances contemplated by
the Bankruptcy Code, Landlord shall be provided with the following: (i) a
financial statement of the proposed assignee prepared in accordance with
generally accepted accounting principles consistently applied, though on a cash
basis, which reveals a net worth in an amount sufficient, in Landlord's
reasonable judgment, to assure the future performance by the proposed assignee
of Tenant's obligations under this Lease; or (ii) a written guaranty by one or
more guarantors with financial ability sufficient to assure the future
performance of Tenant's obligations under this lease, such guaranty to be in
form and content satisfactory to Landlord and to cover the performance of all of
Tenant's obligations under this Lease.
<PAGE>
ARTICLE 18
LANDLORD'S DEFAULT
18.1 Landlord shall be in default under the Lease if Landlord has not
begun and pursued with reasonable diligence the cure of any failure of Landlord
to meet its obligations under the Lease within thirty (30) days of the receipt
by Landlord of written notice from Tenant of the alleged failure to perform.
Tenant hereby waives any right to terminate or rescind this Lease as a result of
Landlord's default as to any covenant or agreement contained in this Lease or as
a result of the breach of any promise or inducement hereof, whether in this
Lease or elsewhere and Tenant hereby agrees that Tenant's sole remedies for
default hereunder and for breach of any promise or inducement shall be limited
to a suit for damages and/or injunctive relief. In addition, Tenant hereby
covenants that, prior to the exercise of any such remedies, it will give the
mortgagees holding mortgages on the project notice and a reasonable time to cure
any default by Landlord.
18.2 The liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease shall be limited to Tenant's actual direct, but
not consequential, damages therefor. Tenant agrees to look solely to the estate
and interest of Landlord in the Building for the collection of any judgment or
other judicial process requiring the payment of money by Landlord in the event
of a default or breach by Landlord with respect to this Lease, and no other
assets of Landlord shall be subject to levy of execution or other procedures for
the satisfaction of Tenant's rights. This section shall not be deemed to limit
or deny any remedies which Tenant may have in the event of default by Landlord
hereunder which do not involve the personal liability of Landlord.
ARTICLE 19
LANDLORD'S CONTRACTUAL LIEN
19.1 Landlord shall have, at all times, a valid security interest in
and upon the present and future receivables of Tenant and all goods, wares,
equipment, fixtures, furniture, improvements and other personal property of
Tenant presently or which may hereafter be situated on the Premises, and all
proceeds therefrom, and such property shall not be removed therefrom without the
consent of Landlord until all arrearage in rent as well as any and all other
sums of money then due to Landlord hereunder shall first have been paid and
discharged and all the covenants, agreements and conditions hereof have been
fully complied with and performed by Tenant. This contractual lien is in
addition to any and all liens in favor of Landlord and arising under law or
otherwise and is given to secure payment of all rent and other sums of money
becoming due under the Lease from Tenant and to secure payment of any damages or
loss which Landlord may suffer by reason of the breach by Tenant of any
covenant, agreement or condition contained herein and shall survive any
termination of this Lease by reason of a default by Tenant. Upon the occurrence
of any Event of Default by Tenant, Landlord may, in addition to any other
remedies provided herein, enter upon the Premises and take possession of any and
all goods, wares, equipment, fixtures, furniture, improvements and other
personal property of Tenant situated on the Premises, without liability for
trespass or conversion, store same (on or off the Premises or Project) and sell
the same at public or private sale, with or without having such property at the
sale, after giving Tenant reasonable notice of the time and place of any public
sale or of the time after which any private sale is to be made, at which sale
the Landlord or its assigns may purchase unless otherwise prohibited by law.
Without intending to exclude any other manner of giving Tenant reasonable
notice, the requirement of reasonable notice shall be met if such notice is
given in the manner prescribed in this Lease at least five (5) days before the
time of sale unless otherwise required by law. The proceeds from any such
disposition, less any and all expenses connected with the taking of possession,
holding and selling of the property (including reasonable attorneys' fees and
other expenses), shall be applied as a credit against the indebtedness secured
by the security interest granted in this section. Any surplus shall be paid to
Tenant or as otherwise required by law; and the Tenant shall pay any
deficiencies forthwith. Upon request by Landlord, Tenant agrees to execute and
deliver to Landlord within ten (10) days of such request a financing statement
in form sufficient to perfect the security interest of Landlord in the
aforementioned property and proceeds thereof under the provisions of the Uniform
Commercial Code in force in the State of Texas. Landlord may also file a copy of
this Lease to perfect its interest in the personal property of Tenant described
above.
<PAGE>
ARTICLE 20
SURRENDER OF PREMISES; HOLDING OVER
20.1 No act by Landlord shall be deemed an acceptance of a surrender of
the Premises, and no agreement to accept a surrender of the Premises shall be
valid unless the same is made in writing and signed by Landlord. At the
expiration or termination of this Lease, Tenant shall deliver to Landlord the
Premises "broom-clean" and with all improvements located thereon in good repair
and condition, reasonable wear and tear and condemnation and fire or other
casualty damage not caused by Tenant excepted, and shall deliver to Landlord all
keys to the Premises. Provided that Tenant has performed all of its obligations
hereunder, Tenant may remove all unattached trade fixtures, furniture, and
personal property placed in the Premises by Tenant (but Tenant shall not remove
any such item which was paid for, in whole or in part, by Landlord).
Additionally, Tenant shall remove such alterations, additions, improvements,
trade fixtures, equipment, wiring, and furniture as Landlord may request. Tenant
shall repair all damage caused by such removal. All items not so removed shall
be deemed to have been abandoned by Tenant and may be appropriated, sold,
stored, destroyed, or otherwise disposed of by Landlord at any time, thereafter,
without notice to Tenant and without any obligation to account for such items.
If Landlord incurs any cost in the storage or removal of any such items, Tenant
shall pay to Landlord on demand any and all such charges. The provisions of this
paragraph shall survive the expiration or termination of the Lease.
20.2 If Tenant, or any party under Tenant claiming rights to the Lease,
fails to vacate the Premises at the end of the Lease Term, then such possession
shall be an unlawful detainer (Landlord reserving the right to seek an eviction
or removal), no tenancy shall be created, and Tenant shall pay each day during
any holdover period a daily Base Rental equal to the greater of (a) one
thirtieth (1/30th) of one hundred fifty percent (150%) of the monthly Base
Rental payable during the last month of the Lease Term, or (b) the prevailing
rental rate for similar space in the Building, plus, Tenant shall pay any
additional rental due under the other provisions of this Lease during any such
holdover period. In addition to payment of rent, Tenant shall pay to Landlord
all other damages to which Landlord may be entitled as a result of Tenant's
holding over.
ARTICLE 21
RIGHT OF ACCESS
21.1 Landlord or Landlord's representatives shall have the right to
enter into and upon the Premises at any and all reasonable times (i) to inspect,
clean or make repairs or alterations or additions to the Premises as Landlord
may deem necessary (but without any obligation to do so, except as expressly
provided elsewhere in the Lease), or (ii) to show the Premises to prospective
tenants, purchasers or lenders; and Tenant shall not be entitled to any
abatement or reduction of rent by reason thereof, nor shall any such entry be
deemed to be an actual or constructive eviction.
ARTICLE 22
SUBSTITUTION SPACE
22.1 From time to time during the Term, Landlord may substitute for the
Premises other space that has an area at least equal to that of the Premises and
is located in the Building or in any other comparable building managed by
Landlord or an affiliate of Landlord (the "Substitution Space").
22.2 If Landlord exercises such right by giving Tenant notice thereof
("Substitution Notice") at least sixty (60) days before the effective date of
such substitution, then (i) the description of the Premises shall be replaced by
the description of the Substitution Space; and (ii) all of the terms and
conditions of this Lease shall apply to the Substitution Space except that (A)
if the then unexpired balance of the Lease Term shall be less than one (1) year,
then the Lease Term shall be extended so that it shall be one (1) year from the
Substitution Commencement Date (defined below), and (B) if the Substitution
Space contains more square footage than the Premises, then the Base Rental then
in effect shall be increased proportionately (provided that such increase shall
not exceed 105% of the Base Rental due for the Premises) and shall be subject to
adjustment as herein provided. The effective date of such substitution (the
"Substitution Commencement Date") shall be the date specified in the
Substitution Notice or, if Landlord is required to perform tenant finish work to
the Substitution Space under this Article, then the date on which Landlord
substantially completes such tenant finish work. If Landlord is delayed in
performing the tenant finish work by Tenant's actions (either by Tenant's change
in the plans and specifications for such work or otherwise), then the
Substitution Commencement Date shall not be extended and Tenant shall pay rent
for the Substitution Space beginning on the date specified in the Substitution
Notice.
<PAGE>
22.3 Tenant may either accept possession of the Substitution Space in
its "as is" condition as of the Substitution Commencement Date or require
Landlord to alter the Substitution Space in the same manner as the Premises were
altered or were to be altered. Tenant shall deliver to Landlord written notice
of its election within ten (10) days after the Substitution Notice has been
delivered to Tenant. If Tenant fails to timely deliver notice of its election or
if an Event of Default then exists, then Tenant shall be deemed to have elected
to accept possession of the Substitution Space in its "as is" condition. If
Tenant timely elects to require Landlord to alter the Substitution Space, then
(i) notwithstanding Section 22.2, if the then unexpired balance of the Term is
less than three (3) years, then the Term shall be extended so that it continues
for three (3) years from the Substitution Commencement Date, and (ii) Tenant
shall continue to occupy the Premises (upon all of the terms of this Lease)
until the Substitution Commencement Date.
22.4 Tenant shall move from the Premises into the Substitution Space
and shall surrender possession of the Premises as provided in Section 20.1 by
the Substitution Commencement Date. If Tenant occupies the Premises after the
Substitution Commencement Date, then Tenant's occupancy of the Premises shall be
a tenancy-at-will (and, without limiting all other rights and remedies available
to Landlord, including instituting a forcible detainer suit), Tenant shall pay
Base Rental for the Premises as provided in Section 20.2 and all other rent due
therefor until such occupancy ends; such amounts shall be in addition to the
rent due for the Substitution Space.
22.5 If Landlord exercises its substitution right, then Landlord shall
reimburse Tenant for Tenant's reasonable out-of-pocket expenses for moving
Tenant's furniture, equipment, supplies and telephone equipment from the
Premises to the Substitution Space and for reprinting Tenant's stationery of the
same quality and quantity of Tenant's stationery supply on hand immediately
prior to Landlord's notice to Tenant of the exercise of this relocation right.
If the Substitution Space contains more square footage than the Premises, and if
the Premises were carpeted, Landlord shall supply and install and equal amount
of carpeting of the same or equivalent quality and color.
ARTICLE 23
MISCELLANEOUS
23.1 Attorneys' Fees. In case it should be necessary or proper for one
party to bring an action under this Lease against the other , then the party
which does not prevail agrees in each and any such case to pay to the party
which prevails its reasonable attorneys' fees. Furthermore, should it be
necessary for Landlord to consult an attorney for the enforcement of any of
Landlord's rights hereunder (including seeking payment of any amounts due under
the Lease) without the necessity of bringing an action, then Tenant,
nonetheless, agrees in such event to pay to Landlord its reasonable attorneys'
fees.
23.2 Taxes. Tenant shall be liable for all taxes levied or assessed
against personal property, furniture, or fixtures placed by Tenant in the
Premises. If any taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and Landlord elects to pay the same, or if the
assessed value of Landlord's property is increased by inclusion of such personal
property, furniture or fixtures and Landlord elects to pay the taxes based on
such increase, then Tenant shall pay to Landlord, upon demand, that part of such
taxes for which Tenant is primarily liable hereunder.
23.3 Name. Tenant shall not, without the written consent of Landlord,
use the name of the Building for any purpose other than as the address of the
business to be conducted by Tenant in the Premises. In no event shall Tenant
acquire any rights in or to such name and Landlord reserves the right from time
to time and at any time to change the name of the Building.
23.4 Financial Statements. Prior to the execution of this Lease, Tenant
has delivered financial statements to Landlord, prepared by a certified public
accountant and certified to be true and correct in all material aspects. Tenant
further agrees to deliver to Landlord updated financial statements from time to
time within ten (10) days of Landlord's written request, each financial
statement certified to be true and correct in all material aspects by an
authorized person on behalf of Tenant.
23.5 Brokerage. Landlord and Tenant each warrant to the other that it
has not dealt with any broker or agent in connection with the negotiation or
execution of this Lease, other than the person(s) listed in the Basic
Definitions and Lease Provisions of this Lease (the "Broker(s)"). Except for any
Broker(s) who shall be compensated in accordance with the provisions of a
separate agreement, Landlord and Tenant each agree to indemnify the other
against all costs, expenses, attorneys' fees, and other liability for
commissions or other compensation claimed by any other broker or agent claiming
the same by, through, or under the indemnifying party.
<PAGE>
23.6 Quiet Enjoyment. Provided Tenant has performed all of the terms
and conditions of this Lease to be performed by Tenant, Tenant shall peaceably
and quietly hold and enjoy the Premises for the Term, without hindrance from
Landlord or any party claiming by, through, or under Landlord, subject to the
terms and conditions of this Lease.
23.7 Force Majeure. Whenever a period of time is herein prescribed for
action to be taken by either party hereto, such party shall not be liable or
responsible for, and there shall be excluded from the computation for any such
period of time, delays due to strikes, riots, acts of God, shortages of labor or
materials, war, governmental laws, regulations, or restrictions, or any other
causes of any kind whatsoever which are beyond the control of such party. The
foregoing shall not excuse, however, the timely payment of rent by Tenant under
the provisions of this Lease.
23.8 Notices. All notices and other communications given by one party
to the other under the provisions of this Lease shall be in writing, addressed
to the party at the address provided in the Basic Definitions and Lease
Provisions, and shall be by one of the following: (i) mailed by first class,
United States Mail, postage prepaid, certified, with return receipt requested,
(ii) hand delivered by courier to the intended address, or (iii) sent by prepaid
telegram, cable, facsimile transmission, or telex followed by a confirmatory
letter. Notice sent by certified mail shall be effective three (3) days after
being deposited in the United States Mail; all other notices shall be effective
upon delivery to the address of the addressee. The parties hereto may change
their addresses by giving notice thereof to the other in conformity with this
provision.
23.9 Joint and Several Liability. If there is more than one Tenant,
then the obligations hereunder imposed upon Tenant shall be joint and several.
If there is a guarantor of Tenant's obligations hereunder, then the obligations
hereunder imposed upon Tenant shall be the joint and several obligations of
Tenant and such guarantor, and Landlord need not first proceed against Tenant
before proceeding against such guarantor nor shall any such guarantor be
released from its guaranty for any reason whatsoever.
23.10 Severability. If any clause or provision of this Lease is
illegal, invalid, or unenforceable under present or future laws, then the
remainder of this Lease shall not be affected thereby and in lieu of such clause
or provision, there shall be added as a part of this Lease a clause of provision
as similar in terms to such illegal, invalid, or unenforceable clause or
provision as may be possible and be legal, valid, and enforceable.
23.11 Amendments; Construction and Binding Effect. This Lease may not
be amended except by instrument in writing signed by Landlord and Tenant. No
provision of this Lease shall be deemed to have been waived by Landlord unless
such waiver is in writing signed by Landlord, and no custom or practice which
may evolve between the parties in the administration of the terms thereof shall
waive or diminish the right of Landlord to insist upon the performance by Tenant
in strict accordance with the terms hereof. The terms and conditions contained
in this Lease shall inure to the benefit of and be binding upon the parties
hereto, and upon their respective successors in interest and legal
representatives, except as otherwise herein expressly provided. This Lease is
for the sole benefit of Landlord and Tenant, and, other than Landlord's
Mortgagee or a successor thereto, no third party shall be deemed a beneficiary
hereof.
23.12 Captions. The captions contained in this Lease are for
convenience of reference only, and do not limit or enlarge the terms and
conditions of this Lease.
23.13 Recording. Tenant shall not record or permit to be recorded in
the official records of the county where the Premises are located the Lease or
any memorandum of lease or other document giving notice of the existence of the
Lease.
23.14 Time of Essence. Except as otherwise expressly provided in this
Lease, time is of the essence.
23.15 Governing Law; Venue. The laws of the state in which the Building
is located shall govern the interpretation, validity, performance and
enforcement of this Lease. Venue for any action under this Lease shall be the
county in which rentals are due.
<PAGE>
23.16 Authority. If Tenant is a corporation or partnership, the person
executing the Lease on behalf of Tenant hereby represents and warrants that (i)
he is duly authorized and empowered to execute the Lease on behalf of Tenant,
(ii) Tenant has full right and authority to enter into this Lease, and (iii)
upon full execution, this Lease constitutes a valid and binding obligation of
Tenant.
23.17 Approval. Any approval of Landlord required under the provisions
of this Lease must be in writing or it shall not be deemed to be effective and,
if not in writing, then in the making of proof thereof, Landlord shall be
presumed not to have given its approval.
23.18 No Merger. There shall be no merger of the leasehold estate
hereby created with the fee estate in the Premises or any part thereof if the
same person acquires or holds, directly or indirectly, this Lease or any
interest in this Lease and the fee estate in the Premises or any interest in
such fee estate.
23.19 No Partnership. Nothing in this Lease shall be deemed or
construed by the parties hereto, nor by any third party, as creating the
relationship of principal and agent or of partnership or of joint venture
between the parties hereto, it being understood and agreed that neither the
method of computation of rent, nor any other provision contained herein, nor any
acts of the parties hereto, shall be deemed to create any relationship between
the parties hereto other than the relationship of landlord and tenant.
23.20 No Offer. The submission of this Lease by Landlord to Tenant for
examination shall not be construed as an offer to lease or a reservation of an
option to lease. Further, it is the intention of the parties that Landlord shall
not be bound and Tenant shall not have any rights under this Lease unless and
until Landlord executes a copy of this Lease and delivers it to Tenant.
23.21 Exhibits. All exhibits and attachments attached hereto are
incorporated herein by this reference.
Exhibit A - Legal Description
Exhibit B - Outline of Premises
Exhibit C - Operating Expense Reimbursement
Exhibit D - Building Rules and Regulations
Exhibit E - Work Letter
Exhibit F - Commencement Date Letter
Exhibit M - Special Conditions
23.22 Entire Agreement. This Lease, including all exhibits attached
hereto, constitutes the entire agreement between Landlord and Tenant regarding
the subject matter hereof and supersedes all oral statements and prior writings
relating thereto. Except for those set forth in this Lease, no representations,
warranties, or agreements have been made by Landlord, Landlord's agent or
Tenant, anyone of the foregoing to the other with respect to this Lease or the
obligations to Landlord or Tenant in connection therewith.
<PAGE>
EXECUTED to be effective on the day and date first written above.
LANDLORD:
AETNA LIFE INSURANCE COMPANY
By: Allegis Realty Investors LLC,
Its Investment Advisor and Agent
By:
-----------------------------
Printed Name: James G. Hughes
Title: Vice President
ATTEST: TENANT:
PHYMED, INC., a Texas Corporation
By:
- --------------------------- -----------------------------
(Title) Printed Name: George Barker
Title: President
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
COMMERCE PLAZA HILLCREST
BEING block A/7467, Hillcrest 635 Addition, an Addition to the City of Dallas,
Dallas County, Texas, as recorded in Volume 71021, Page 2073-2080, Map Records,
Dallas County, Texas, and being out of the HIRAM WILBURN SURVEY, Abstract No.
1568:
BEGINNING at a point for a corner in the East right of way line of Hillcrest
Road with its intersection with the Southerly right of way line of Interstate
Highway 635;
THENCE South 82 degrees 15' 12" East, along the said Southerly Line of
Interstate Highway 635, 1136.34 feet to a point to a corner;
THENCE South 17 degrees 29' 31" East along the encroachment limit line on the
West side of White Rock Creek, 340.62 feet to a point for a corner in the South
Line of City of Dallas Block No. 7467 and in the North Line of City of Dallas
Block 7466;
THENCE North 89 degrees 00' 00" West, along the North Line of City of Dallas
Block No. 7466,1249.71 feet to a point for a corner in the East right of way
line of Hillcrest Road, said right of way being 60.00 feet in width;
THENCE North 00 degrees 09' 18" East, along said East Line of Hillcrest Road,
378.08 feet to a point for a corner;
THENCE South 89 degrees 57' 07" East, continuing along the East Line of
Hillcrest Road, 20.00 feet to a point for a corner;
THENCE North 00 degrees 06' 33" East, continuing along the East Line of
Hillcrest Road 78.18 feet to the POINT OF BEGINNING and containing 463,313.34
square feet or 10.636 acres of land, more or less.
And now known as Block A/7467, Hillcrest 635 Addition, an Addition to the City
of Dallas, Texas, according to the map thereof recorded in Volume 71021, Page
2073, Map Records of Dallas County, Texas
<PAGE>
Exhibit "B"
<PAGE>
EXHIBIT "C"
OPERATING EXPENSE REIMBURSEMENT
This Exhibit is attached to and made a part of the Lease by and between
AETNA LIFE INSURANCE COMPANY ("Landlord") and PHYMED, INC., a Texas Corporation
("Tenant").
A. Tenant shall pay Tenant's Pro-Rata Share of the excess ("Excess")
of actual Basic Costs for a calendar year over the actual Basic Costs for the
calendar year of 1999 , (the "Expense Stop"). Landlord may make a good faith
estimate of the Excess for any calendar year or part thereof during the Lease
Term, and, Tenant shall pay to Landlord as additional rent along with each
monthly payment of Base Rental an amount equal to the estimated Excess for such
calendar year or part thereof divided by the number of months in such calendar
year during the Lease Term. From time to time during any calendar year, Landlord
may revise its estimate of the Excess and deliver a copy of the revised estimate
to Tenant. Thereafter, the monthly installments of Excess payable by Tenant
shall be appropriately adjusted. In no event will the provisions of Exhibit "C"
serve to reduce the monthly Base Rental.
B. Landlord will maintain books and records of all Basic Costs in
accordance with generally accepted accounting for similar types of properties,
applied on a consistent basis. After the end of every calendar year Landlord
will deliver to Tenant a statement ("Annual Cost Statement") setting forth the
actual Basic Costs for the prior calendar year, the actual amount of any Excess
for the prior calendar year, and Tenant's Pro Rata Share. If Tenant owes an
additional amount of Excess over the estimated payments made during the prior
calendar year, this will also be noted in the Annual Cost Statement and Tenant
will pay such amount, as additional rent, with the next due installment of Base
Rental. If the Annual Statement reflects an overpayment, then Landlord will
credit the amount of the overpayment against the next due installments of
additional rent payable under the provisions of this Exhibit "C", or if the
Lease Term has expired, Landlord will refund the difference to Tenant.
Notwithstanding any expiration or earlier termination of this Lease,
Tenant's obligation to pay Tenant's Pro Rata Share of any Excess shall survive
any expiration or termination of this Lease.
C. The term "Basic Costs" shall mean all expenses and disbursements of
every kind (subject to the limitations set forth below) which Landlord incurs,
pays or becomes obligated to pay in connection with the ownership, operation,
management, repair and maintenance (including replacement thereof) of the
Project, including, but not limited to, the following:
(a) Wages and salaries of all employees engaged in the operation,
repair, replacement, and maintenance of the Project, including taxes, insurance
and benefits relating thereto;
(b) All supplies and materials used in the operation,
maintenance, repair, replacement, and security of the Project;
(c) Annual cost of all capital improvements made to the Project
which although capital in nature can reasonably be expected to reduce the normal
operating costs of the Project, as well as all capital improvements made to
comply with any legal requirements, insurance requirements or environmental laws
which become effective after the date of this Lease, or to benefit or increase
the safety and security of the Project, as amortized over the useful economic
life of such improvements as determined by Landlord in its reasonable discretion
(without regard to the period over which such improvements may be depreciated or
amortized for federal income tax purposes), and the amortized portion, together
with interest on the unamortized portion of such improvements or expenditures at
an interest rate equal to two percent (2%) over the interest rate payable on
United States Treasury securities having a maturity comparable to the period of
the amortization at the time Landlord incurred the cost, shall be included in
operating expenses in the year in which the costs are incurred and in any
subsequent years;
(d) Cost of all utilities, other than the cost of utilities
actually reimbursed to Landlord by individual tenants ;
(e) Cost of any insurance or insurance related expense applicable
to the Project and Landlord's personal property used in connection therewith,
including without limitation, the premiums for public liability coverage, fire
and extended coverage, and rental loss coverage;
<PAGE>
(f) All taxes and assessments and governmental charges whether
federal, state, county or municipal, and whether they be by taxing districts or
authorities presently taxing or by others, subsequently created or otherwise,
and any other taxes and assessments attributable to the Project (or its
operation), and the grounds, parking areas, driveways, and alleys around the
Project, excluding, however, federal and state taxes on income (collectively,
"Taxes"); if the present method of taxation changes so that in lieu of the whole
or any part of any Taxes levied on the Landlord or Project, there is levied on
Landlord a capital tax directly on the rents received therefrom or a franchise
tax, assessment, or charge based, in whole or in part, upon such rents for the
Project, then all such taxes, assessments, or charges, or the part thereof so
based, shall be deemed to be included within the term "Taxes" for the purposes
hereof;
(g) Cost of repairs, replacements, and general maintenance of the
Project; and
(h) Cost of service or maintenance contracts with independent
contractors for the operation, maintenance, repair, replacement, or security of
the Project (including, without limitation, alarm service, window cleaning, and
elevator maintenance) (Nothing herein is intended to obligate Landlord to
provide any security for the Project.).
There are specifically excluded from the definition of the term "Basic Cost"
costs for the following:
(1) Capital improvements made to the Project, other than capital
improvements described above in this Exhibit "C" and except for items which,
though capital for accounting purposes, are properly considered maintenance and
repair items, such as painting of common areas, replacement of carpet in
elevator lobbies, and the like;
(2) Repair, replacements and general maintenance paid by proceeds
of insurance or by Tenant or other third parties, and alterations attributable
solely to tenants of the Project other than Tenant;
(3) Debt service on loans to Landlord;
(4) Depreciation of the Project;
(5) Leasing commissions;
(6) Legal expenses, other than those incurred for the general
benefit of the Building's tenants (e.g., tax disputes);
(7) Wages and salaries and benefits of employees above the level
of Project manager;
(8) renovating or otherwise installing tenant improvements for
occupants of the Project; and
(9) correcting defects in the construction of the Project.
D. With respect to any calendar year or partial calendar year in which
the Project is not occupied to the extent of 100% of the rentable area thereof,
the Basic Costs for such period shall, for the purposes hereof, be increased to
the amount which would have been incurred had the Project been occupied to the
extent of 100% of the rentable area.
<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS
This Exhibit is attached to and made a part of the Lease by and between
AETNA LIFE INSURANCE COMPANY ("Landlord") and PHYMED, INC, a Texas Corporation
("Tenant").
A. The following rules and regulations shall apply to the Building,
including, without limitation the Premises:
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be obstructed by Tenant or used by any Tenant for purposes other
than ingress and egress to and from its Premises. No rubbish, litter, trash, or
material of any nature shall be placed, emptied, or thrown in those areas. At no
time shall Tenant permit Tenant's employees to loiter in common areas or
elsewhere in or about the Building.
2. Plumbing, fixtures and appliances shall be used only for the
purposes for which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or deposited therein. Damage resulting to any such
fixtures or appliances from misuse by Tenant or its agents, employees or
invitees, shall be paid by such Tenant.
3. No signs, advertisements or notices shall be painted or affixed on
or to any windows or doors or other part of the Building without the prior
written consent of Landlord. No nails, hooks or screws shall be driven or
inserted in any part of the Building except by personnel of Landlord or retained
by Landlord. No curtains or other window treatments shall be placed on the
glass, without Landlord's prior approval. No lighting which may be visible from
the exterior of the Premises may be utilized without Landlord's prior approval.
4. Landlord may provide and maintain an alphabetical directory for all
tenants in the main lobby of the Building.
5. Landlord shall provide all door locks in Tenant's Premises, at the
cost of Tenant, and Tenant shall not place any additional door locks in its
Premises without Landlord's prior written consent. Landlord shall furnish to
Tenant a reasonable number of keys to the door lock's in Tenant's Premises free
of cost and additional keys, at Tenant's cost. Tenant shall not make a duplicate
of any key. All keys are to be returned to Landlord at the expiration or earlier
termination of this Lease.
6. Movement in or out of the Building of furniture or office equipment,
or dispatch or receipt by Tenant of any merchandise or materials which require
use of elevators or stairways, common area loading docks or movement through the
Building entrances or lobby shall be conducted under Landlord's supervision at
such times and in such a manner as Landlord may reasonably require. At the time
of seeking Landlord's approval, Tenant shall provide to Landlord, in writing, a
detailed listing of the activity. Tenant assumes all risks of and shall be
liable for all damage to articles moved and injury to persons resulting from
such activity. If any equipment, property and personnel of Landlord are damaged
or injured as a result of acts in connection with this activity, then Tenant
shall be solely liable for any and all damage or loss resulting therefrom.
7. Landlord may prescribe weight limitations and determine the
locations for safes and other heavy equipment or items, which shall in all cases
be placed in the Building so as to distribute weight in a manner which will
avoid damage to the Building, which may include the use of such supporting
devices as Landlord may require, and which may not in any case exceed the
acceptable floor loading and weight distribution for the Building. All damages
to the Building caused by the installation or removal of any property of a
tenant, or done by a tenant's property while in the Building, shall be repaired
at the expense of such tenant.
8. Corridor doors, when not in use, shall be kept closed.
9. No birds or animals (except seeing eye dogs) shall be brought into
or kept in, on or about the Premises. No portion of the Premises shall at any
time be used or occupied as sleeping or lodging quarters or for any immoral or
illegal purposes or for any purpose which would tend to injure the reputation of
the Building or impair the value of the Building.
<PAGE>
10. Tenant shall not commit waste and shall keep its Premises neat and
clean. All trash and debris must be placed in receptacles provided therefor.
11. Tenant shall not make or permit any improper, objectionable or
unpleasant noises or odors to emanate from the Premises to other parts of the
Building or otherwise interfere in any way with other tenants or persons having
business with them, shall not solicit business or distribute, or cause to be
distributed, in any portion of the Building any handbills, promotional materials
or other advertising, and shall not conduct or permit any other activities in
the Building that might constitute a nuisance. Tenant shall not do any cooking
or operate a restaurant or food service business from the Premises (other than a
microwave oven for use by its employees or a beverage service that is free or of
nominal charge for use by employees and invitees).
12. No machinery of any kind (other than normal office equipment) shall
be operated by Tenant on its Premises without Landlord's prior written
reasonable consent.
13. No flammable, explosive or dangerous fluid or substance shall be
used or kept by Tenant in the Premises.
14. Landlord will not be responsible for lost or stolen personal
property, money or jewelry from the Premises or public or common areas
regardless of whether such loss occurs when the area is locked against entry or
not.
15. No coin, vending or dispensing machines of any kind may be
maintained in any Premises, except that Tenant may from time to time maintain
soft drink machines for use by its employees and invitees on a no-charge or
nominal charge basis.
16. All mail chutes located in the Building shall be available for use
by Landlord and all tenants of the Building according to the rules of the United
States Postal Service.
17. Neither Tenant nor any agent, contractor or employee of Tenant
shall have any right of access to the roof of the Premises or the Building and
neither shall install, repair, place or replace any aerial, fan, air conditioner
or other device on the roof of the Premises or the Building without the prior
written consent of Landlord. Such consent may be expressly conditioned upon
Landlord's supervision of access to the roof and upon such other reasonable
restrictions as Landlord may advise Tenant. Any aerial, fan, air conditioner or
device installed without such written consent shall be subject to removal, at
Tenant's expense, without notice, at any time. Tenant shall be liable for all
damages resulting from the installation or removal of any aerial, fan, air
conditioner or other device.
18. Tenant will refer to Landlord for Landlord's supervision, approval
and control all contractors, contractor representatives, and installation
technicians rendering any service to Tenant, before performance of any
contractual service. Such supervisory action by Landlord shall not render
Landlord responsible for any work performed for Tenant. This provision shall
apply to all work performed in the Building, including, without limitation, the
installation of telephones, computer wiring, cabling, electrical devices,
attachments and installations of any nature. Tenant shall be solely responsible
for complying with all applicable laws, codes and ordinances pursuant to which
such work shall be performed.
19. Landlord may from time to time (without any obligation to do so or
liability for not doing so) adopt appropriate systems and procedures for the
security or safety of the Building, its occupants, entry and use, or its
contents and Tenant, its employees, contractors, agents and invitees shall
comply therewith.
20. Canvassing, soliciting, and peddling in or about the Building is
prohibited and Tenant shall cooperate and use reasonable efforts to prevent
same.
21. At no time shall Tenant permit or shall Tenant's agents, employees,
contractors, quests, or invitees smoke in any common area of the Building,
unless such common area has been declared a designated smoking area by Landlord.
22. Tenant accepts any and all liability for damages and injuries to
persons and property resulting from the serving and sales of alcoholic beverages
from the Premises. Nothing contained herein shall be construed as the consent of
Landlord to permit the serving or sale of alcoholic beverages on the Premises.
B. The Landlord reserves the right to rescind any of these rules and
make such other and further rules and regulations as in the judgment of Landlord
shall from time to time be needed for the safety, protection, care and
cleanliness of the Building, the operation thereof, the preservation of good
order therein, and the protection and comfort of its tenants, their agents,
employees and invitees, which rules when made and notice thereof given to Tenant
shall be binding upon him in like manner as if originally herein prescribed.
<PAGE>
EXHIBIT "E"
WORK LETTER
This Exhibit is attached to made a part of the Lease by and between
AETNA LIFE INSURANCE COMPANY ("Landlord") and PHYMED, INC., a Texas Corporation
("Tenant").
A. Definitions. Each term used in this Work Letter shall have the
meaning hereinafter set forth:
1. "Architect" shall mean the architect selected by Landlord and responsible for
the drafting of the Plans and Specifications and shall coordinate and supervise
with the Contractor the construction of the leasehold improvements.
2. "Construction Costs" shall mean all costs incurred in the construction of the
leasehold improvements in accordance with the Plans and Specifications, as
modified from time to time in accordance with the provisions of this Work
Letter. Such costs shall include all hard costs and soft costs to complete the
improvements. Hard costs shall include such costs as labor and materials. Soft
costs shall include such cost as architectural and engineering fees, but shall
exclude any interest incurred on funds expended during the course of the
construction. The cost of signage shall not be part of Construction Costs,
unless this blank is checked x .
3. "Contractor" shall mean the contractor selected by Landlord and responsible
for the construction of leasehold improvements.
4. "Plans and Specifications" shall mean the final plans and specifications for
the construction of leasehold improvements mutually agreed upon by Landlord and
Tenant, in accordance with the provisions of Section B. 1 of this Work Letter.
5. "Tenant Delay" shall mean any delay in the construction of the Work caused by
Tenant for any reason whatsoever. In the event of a Tenant Delay, the
Commencement Date shall be accelerated one (1) day for every day of delay caused
by Tenant.
6. "Tenant Improvement Allowance" shall mean the sum of $ N/A (or $ 0.00 per
square foot of rentable area times N/A square feet of rentable area) which
Landlord agrees to pay towards the Construction Costs.
7. "Work" shall mean the construction of leasehold improvements on the Premises
in accordance with the Plans and Specifications.
B. Construction of Premises. Landlord shall cause the Work to be
constructed substantially in accordance with the Plans and Specifications.
Tenant shall cooperate at all stages to promote the efficient and expeditious
completion of the Work. Upon approval of the Plans and Specifications and
payment of any excess, as hereinafter described, Landlord shall enter into a
construction contract with the Contractor. Landlord makes no representations or
warranties as to the Work and shall have no liability therefor; Landlord's sole
obligation shall be to enforce any warranty from the Contractor with respect to
the Work.
1. Plans and Specifications Approval. Upon execution of the Lease, Tenant shall
furnish to Landlord and the Architect preliminary space plans for the
construction of the Work which the Architect shall use to prepare and submit to
Landlord within the next N/A (___) days the proposed plans and specifications
for the Work. Landlord shall thereafter have N/A (___) days within which to
approve the proposed plans and specifications or disapprove, in which event,
Landlord shall advise Tenant and the Architect, in writing, of the reasons for
its disapproval. The Architect shall have N/A (___) days from the date of
written disapproval from Landlord to make the adjustments required by Landlord,
and resubmit the revised plans and specifications to Landlord and Tenant.
Thereafter, Landlord shall again have N/A (___) days to approve or disapprove
the revised plans and specifications. If Tenant fails to submit the preliminary
space plans on a timely basis, it shall constitute a Tenant Delay. The approval
of the Plans and Specifications by Landlord shall not be construed as any
representation or warranty by Landlord with respect to the accuracy of the Plans
and Specifications or their compliance with applicable laws, including, without
limitation, compliance with the Americans With Disabilities Act, for which it
shall be the sole responsibility of the Tenant to insure the Premises are in
compliance therewith.
<PAGE>
2. Tenant's Share of Costs. Tenant shall be liable and pay for all Construction
Costs except to the extent of the Tenant Improvement Allowance which shall be
paid by Landlord. Upon approval of the Plans and Specifications, Landlord shall
obtain estimates of the Construction Costs from the Contractor and furnish
copies to Tenant. In the event such estimates exceed the Tenant Improvement
Allowance, Tenant shall pay the excess to Landlord within N/A (___) days of the
notice from Landlord of the estimate costs and, in any event, before the
commencement of construction. If Tenant fails to tender the excess timely,
Landlord shall not proceed with construction, and such delay shall constitute a
Tenant Delay for each day until the excess is paid. Upon receipt of the excess,
Landlord shall cause the Contractor to commence construction. Upon completion of
the construction, Landlord shall provide to Tenant an accounting of the final
costs, crediting Tenant for the Tenant Improvement Allowance and any excess
previously paid to Landlord. If any additional amounts are due and owing for
payment of Construction Costs beyond those amounts previously tendered to
Landlord, Tenant shall pay same to Landlord within N/A (___) days after the date
such accounting was provided to Tenant.
3. Construction of the Work. Following approval of the Plans and Specifications
and payment of any excess by Tenant, either the Landlord or the Contractor, as
appropriate, shall apply for a building permit, and the Contractor shall
commence construction of the Work immediately upon receipt of the permit and
proceed with all due diligence until substantial completion. The Work shall be
deemed to be substantially complete upon (i) Landlord's obtaining a certificate
of occupancy or its equivalent from the appropriate governmental authority and
(ii) the Work is sufficiently complete in accordance with the Plans and
Specifications so that Tenant may occupy the Premises, subject to any punchlist
items.
4. Unavoidable Delays. Tenant and Landlord acknowledge that there may be
unavoidable delays in the construction of the Work. The term "unavoidable
delays" shall mean events beyond the control of Landlord or the Contractor,
including, without limitation, acts of God, war, civil commotion, strikes, fire,
flood, earthquake or other casualty, governmental regulation or restriction and
adverse weather conditions or continued possession by prior tenants or
occupants.
5. Changes. If Tenant requests a change, alteration or addition after the final
Plans and Specifications have been approved, Tenant shall submit same in writing
to Landlord and to the Architect. If Landlord approves such change, Landlord
shall obtain from the Contractor and provide Tenant with an estimate of the cost
of such change. Tenant shall notify Landlord within one (1) business day if
Tenant elects to proceed with the change, in which event, Landlord shall
incorporate the change into the Plans and Specifications. The cost of such
change shall also be incorporated in the calculation of the Construction Costs.
If Landlord disapproves of such change, it shall immediately notify Tenant in
writing specifying the reasons for such disapproval and the construction shall
proceed in accordance with the previously approved, final Plans and
Specifications. Any delay in construction time (determined in accordance with he
next sentence) caused by such changes shall constitute a Tenant Delay. The
Architect, in his sole discretion, shall determine whether such change
necessitates a delay in construction and the length of such delay.
6. Governmental Regulations. Tenant shall be solely responsible for causing the
design and construction of the Work to conform to any and all requirements of
applicable building, plumbing, electrical and fire codes and the requirements of
any authority having jurisdiction over the Work, as such codes and requirements
may from time to time be amended or supplemented.
7. Entry by Tenant. During the course of construction of the Work, Tenant may
enter the Premises for purposes of inspecting the Work, installing trade
fixtures, erecting signs, stocking merchandise and such other Work as may be
necessary or desirable to prepare to occupy and conduct its business from the
Premises, provided that (i) Tenant assumes the risk of injury to person and
damage to its property, (ii) any entry shall be subject to the provisions of
this Lease, except that the Lease Term shall not commence and rent shall not be
due, and (iii) Tenant shall not unreasonably interfere with the construction of
the Work on the Premises. Tenant shall also provide evidence of insurance prior
to any such entry. If such entry shall interfere with the construction of the
Work, then Tenant shall immediately leave upon the request of Landlord.
C. Delivery of the Premises. Subject to unavoidable delays, the Work is
estimated to be substantially completed for delivery of the Premises to Tenant
by the Commencement Date. If an unavoidable delay will prevent the substantial
completion of the Work prior to the scheduled Commencement Date, then Landlord
will notify Tenant in writing. Upon substantial completion of the Work, Landlord
will notify Tenant in writing and afford Tenant an opportunity to inspect the
Premises prior to delivery. At the inspection, Landlord and Tenant will prepare
and agree upon a punchlist of any items that remain to be completed.
<PAGE>
If the Work is substantially completed to permit delivery of the
Premises prior to the Commencement Date, Landlord shall notify Tenant in writing
and, should Tenant elects to take occupancy early, then Tenant may inspect the
Premises and prepare, with Landlord, a punchlist prior to delivery.
D. Limitation. This Exhibit shall not be deemed applicable to any
additional space added to the original Premises or, in the event of a renewal of
the Lease Term, to the original Premises, itself, during the renewal term,
unless expressly so provided in the Lease or any amendment thereto.
<PAGE>
EXHIBIT "F"
COMMENCEMENT DATE LETTER
This Exhibit is attached to and made a part of the Lease by and between
AETNA LIFE INSURANCE COMPANY ("Landlord") PHYMED, INC., a Texas Corporation
("Tenant").
1. The Lease Term commenced on September 1, 1999.
2. The Lease Term will expire on August 31, 2004 , unless renewed or
extended.
3. Tenant acknowledges that the Work has been completed in
accordance with the Plans and Specifications and accepts such Work, subject to
any punch list items being completed.
4. Tenant, further, acknowledges that any tenant improvement
allowance owed to Tenant or other obligations of Landlord to Tenant in
connection with the Work and all other conditions precedent to the commencement
of the Lease Term have occurred and that the Lease is in full force and effect.
5. There are no existing defenses or offsets which, as of the date
hereof, Tenant has against the enforcement of the Lease by Landlord.
EXECUTED on the ____ day of ____________, 19__.
LANDLORD:
AETNA LIFE INSURANCE COMPANY
By: Allegis Realty Investors LLC,
Its Investment Advisor and Agent
By:
----------------------------
Printed Name: James G. Hughes
Title: Vice President
ATTEST: TENANT:
PHYMED, INC., a Texas Corporation
By:
- ------------------------------------- ----------------------------
(Title)
Printed Name: George Barker
Title: President
<PAGE>
EXHIBIT "M"
SPECIAL CONDITIONS
This Exhibit is attached to and made a part of the Lease by and between
AETNA LIFE INSURANCE COMPANY ("Landlord") and PHYMED, INC., a Texas Corporation
("Tenant").
SPECIAL ALTERATIONS AND ADDITIONS BY TENANT
Tenant acknowledges that the Premises presently contain a Magnetic Resonance
Imager (MRI) and related equipment, including but not limited to lead shielding
and other Leasehold improvements. Should Tenant repair, replace or in any manner
alter the MRI or other related equipment in any manner that alters the Project,
Building or Premises (specifically including but not limited to the exterior of
the Building, the windows, parking areas and landscaping), Tenant will be
required to receive landlord's prior written consent to begin such alterations
and such consent shall be conditioned upon Landlord's approval of the following:
(i) Tenant's contractor(s); (ii) detailed plans and work specifications of
Tenant Alterations; and (iii) certificates of insurance from Tenant's
contractor(s) as listed in Paragraph 9 of the Lease. In addition, Tenant must
obtain all approvals and permits required by any and all governmental
authorities and provide same to Landlord prior to commencement of any work, and
after work commences must comply with all conditions of such approvals and
permits to perform work in a prompt and expeditious manner with good and
sufficient materials. Upon completion of each alteration or upon the demand of
Landlord, Tenant shall immediately commence to make any and all repairs to the
Project, Building and Premises and return them to their original condition prior
to the commencement of the alterations, all at Tenant's sole cost and to
Landlord's satisfaction. If Tenant does not commence to make the required
repairs or the repairs are not made to Landlord's satisfaction, Landlord may
immediately commence to do so, at Tenant's sole cost plus a construction fee of
fifteen percent (15%).
MAGNETIC RESONANCE IMAGERS
Notwithstanding anything contained within the Lease to the contrary, Landlord
hereby agrees to allow Tenant to assemble and operate Magnetic Resonance Imaging
(MRI) machines within the Leased Premises and to vent the machine's waste gases
to the exterior of the building. Tenant agrees to shield the aforementioned MRI
machine with a steel enclosure and conform to all applicable governmental
standards, guidelines and codes. Design and location of venting machines must be
approved by Landlord.
SERVICE BY LANDLORD
Separate meters are currently installed and future meters may be installed at
Landlord's option, to measure Tenant's use of electric, water and other utility
services as a result of independent janitorial services or the increased use of
such metered utility by Tenant. Tenant will be required to pay all such fees
associated with installation of submetering and actual submetering, upon demand,
with full documentation regarding the method of computation.
D.
Tenant herein agrees that in return for Landlord's permission to allow Tenant to
utilize its MRI units within the Leased Premises that Tenant will guarantee to
accommodate Landlord or any other effected Tenants in the project as a result of
the gauss line emissions or any other type of emissions as a result of its use
of its MRI units or any other equipment in the Lease Premises including, but not
limited to, the following:
1. Tenant agrees that it will provide, at its sole cost and expense, whatever
shielding or other protection is necessary to prevent interference with any
electrical or electric equipment of other Tenants within the project that may
result from Tenant's use of its MRI units or other equipment within the Leased
Premises.
2. If Tenant is not able or willing to provide the necessary shielding or other
protections to these suites, Tenant agrees to lease said suites, or, at
Landlord's sole discretion, the affected portion of said suite, provided that
the unleased portion is in a leasable configuration, (Landlord's sole option),
on the same terms and conditions of this Lease except that the rate shall be at
the then market rate unless the market rate is less than the rate then in effect
on Tenant's Premises in which case the higher rate shall prevail. Additionally,
Tenant agrees to pay all cost of relocation (including, but not limited to,
<PAGE>
Tenant improvements, relocation of phone systems, reprinting of stationary,
moving costs, etc.) of the Tenants of the effected suites and any loss income of
any nature to the Landlord (including Landlord's inability to find suitable
space for such Tenants within the project and its resulting additional lost
income therefrom) as a result of the unwillingness or inability of Tenant to
provide the necessary shielding or protection as indicated herein.
3. If Tenant fails to provide the necessary shielding or protection as indicated
herein, or in the alternative, fails to pay all costs associated with relocating
any Tenants in effected suites, such failure shall constitute an event of
default under this Lease and in addition to any other rights and remedies
Landlord may have hereunder or at law, Landlord shall have the right, at its
sole option to (1) provide whatever shielding or other protection is necessary
to prevent interference with any electrical or electric equipment of other
Tenants within the project that may result from Tenant's use of its MRI units or
other equipment within the Leased Premises, or (2) as provided in subparagraph 2
above.
E.
Tenant herein agrees that it will be responsible for any and all submetering or
other electrical alterations, additions, or deletions to the Premises or the
project in general as a result of its use of its suite or suites past, present
or future. Tenant agrees that upon termination of this Lease for any reason,
Tenant shall at its sole cost and at Landlord's option return the electrical
system to its condition prior to Tenant's use of the Premises. Additionally,
Tenant agrees that it will pay all costs of electrical usage and water usage as
a result of after hours and above normal use in its Premises.
F.
Tenant herein agrees and understands that all construction plans for the Leased
Premises or future Premises are subject to review and express written approval
and supervision of the architects and engineers of Landlord.
G.
In addition to Tenant's obligation set forth in Paragraph D of this Exhibit, at
the termination of this Lease, Tenant shall, at its sole cost, and at Landlord's
option, remove any improvements made to the Leased Premises by Tenant or
Tenant's equipment, including, without limitation, any alterations or additions
made to the Leased Premises to accommodate the MRI units or other equipment and
restore the Leased Premises to the existing condition as of September 1, 1999,
at Tenant's sole cost and expense.
END OF SPECIAL PROVISIONS
<TABLE> <S> <C>
<ARTICLE> 5
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<NAME> PHYMED, INC.
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<S> <C>
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0
135,139
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