FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from .........to........
Commission File No. 001-08772
HUGHES SUPPLY, INC.
Incorporated in the State I.R.S. Employer I.D.
of Florida Number 59-0559446
Post Office Box 2273
20 North Orange Avenue, Suite 200
Orlando, Florida 32802
Registrant's Telephone Number, including area code: 407/841-4755
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock Outstanding as of December 1, 1996
$1 Par Value 10,494,815
Page 1
HUGHES SUPPLY, INC.
FORM 10-Q
Index
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
October 31, 1996 and January 26, 1996 3 - 4
Consolidated Statements of Income for
the Three Months Ended October 31, 1996
and 1995 5
Consolidated Statements of Income for the
Nine Months Ended October 31, 1996 and 1995 6
Consolidated Statements of Cash Flows for the
Nine Months Ended October 31, 1996 and 1995 7
Notes to Consolidated Financial Statements 8 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 11 - 14
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 15 - 19
Signatures 20
Index of Exhibits Filed with This Report 21
Page 2
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
(in thousands, except share data)
October 31, January 26,
1996 1996
---------- ----------
(Note 2)
ASSETS
Current Assets:
Cash and cash equivalents $ 3,088 $ 3,432
Accounts receivable, less allowance for
losses of $8,376 and $4,671 197,933 138,682
Inventories 192,048 138,903
Deferred income taxes 12,152 10,397
Other current assets 10,014 15,785
--------- ---------
Total current assets 415,235 307,199
Property and Equipment, net 65,740 59,165
Excess of Cost over Net Assets Acquired 80,239 16,637
Deferred Income Taxes 3,023 2,430
Other Assets 5,810 4,924
--------- ---------
$ 570,047 $ 390,355
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3
HUGHES SUPPLY, INC.
Consolidated Balance Sheets (unaudited) - continued
(in thousands, except share data)
October 31, January 26,
1996 1996
----------- -----------
(Note 2)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,024 $ 2,632
Accounts payable 107,345 88,280
Accrued compensation and benefits 16,431 12,642
Other current liabilities 22,974 17,037
--------- ---------
Total current liabilities 147,774 120,591
Long-Term Debt 167,774 109,524
Other Noncurrent Liabilities 2,121 1,771
--------- ---------
Total liabilities 317,669 231,886
--------- ---------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock - -
Common stock-10,123,658 and
7,288,623 shares issued and outstanding 10,124 7,289
Capital in excess of par value 104,953 40,464
Retained earnings 137,301 110,716
--------- ---------
Total shareholders' equity 252,378 158,469
--------- ---------
$ 570,047 $ 390,355
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 4
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
Three months ended October 31,
1996 1995
---------- ----------
Net Sales $ 371,671 $ 296,680
Cost of Sales 292,842 237,072
---------- ----------
Gross Profit 78,829 59,608
---------- ----------
Operating Expenses:
Selling, general and administrative 56,520 47,279
Depreciation and amortization 3,930 2,638
Provision for doubtful accounts 988 1,188
---------- ----------
Total operating expenses 61,438 51,105
---------- ----------
Operating Income 17,391 8,503
---------- ----------
Non-Operating Income and (Expenses):
Interest and other income 971 1,460
Interest expense (3,085) (1,915)
---------- ----------
(2,114) (455)
---------- ----------
Income Before Income Taxes 15,277 8,048
Income Taxes 6,095 3,030
---------- ----------
Net Income $ 9,182 $ 5,018
========== ==========
Earnings Per Share:
Primary $ .91 $ .68
========== ==========
Fully diluted $ .91 $ .67
========== ==========
Average Shares Outstanding:
Primary 10,136 7,425
========== ==========
Fully diluted 10,142 7,440
========== ==========
Dividends Per Share $ .10 $ .07
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 5
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
Nine months ended October 31,
1996 1995
---------- ----------
Net Sales $1,050,187 $ 854,555
Cost of Sales 832,274 683,023
---------- ----------
Gross Profit 217,913 171,532
---------- ----------
Operating Expenses:
Selling, general and administrative 164,968 136,891
Depreciation and amortization 10,178 7,381
Provision for doubtful accounts 2,650 2,434
---------- ----------
Total operating expenses 177,796 146,706
---------- ----------
Operating Income 40,117 24,826
---------- ----------
Non-Operating Income and (Expenses):
Interest and other income 4,375 3,676
Interest expense (7,939) (5,926)
---------- ----------
(3,564) (2,250)
---------- ----------
Income Before Income Taxes 36,553 22,576
Income Taxes 14,542 8,476
---------- ----------
Net Income $ 22,011 $ 14,100
========== ==========
Earnings Per Share:
Primary $ 2.44 $ 1.93
========== ==========
Fully diluted $ 2.43 $ 1.91
========== ==========
Average Shares Outstanding:
Primary 9,031 7,322
========== ==========
Fully diluted 9,065 7,378
========== ==========
Dividends Per Share $ .28 $ .21
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 6
HUGHES SUPPLY, INC.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Nine months ended October 31,
1996 1995
---------- ----------
Increase (Decrease) in Cash and Cash
Equivalents:
Cash flows from operating activities:
Cash received from customers $1,012,254 $ 832,901
Cash paid to suppliers and employees (985,877) (804,066)
Interest received 2,862 2,497
Interest paid (4,900) (5,659)
Income taxes paid (14,917) (10,714)
---------- ----------
Net cash provided by
operating activities 9,422 14,959
---------- ----------
Cash flows from investing activities:
Capital expenditures (10,953) (8,848)
Proceeds from sale of
property and equipment 1,721 1,156
Business acquisitions, net of cash (89,952) (6,945)
---------- ----------
Net cash used in
investing activities (99,184) (14,637)
---------- ----------
Cash flows from financing activities:
Net borrowing (repayment) under
short-term debt arrangements (39,991) 5,781
Principal payments on:
Long-term notes (14,266) (5,417)
Capital lease obligations (843) (598)
Proceeds from issuance of long-term debt 98,000 -
Net proceeds from sale of common stock 48,197 -
Proceeds from stock options exercised 869 874
Purchase of common shares (395) (409)
Dividends paid (2,153) (2,564)
---------- ----------
Net cash provided by (used in)
financing activities 89,418 (2,333)
---------- ----------
Net Decrease in Cash and
Cash Equivalents (344) (2,011)
Cash and Cash Equivalents:
Beginning of period 3,432 3,692
---------- ----------
End of period $ 3,088 $ 1,681
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 7
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) (dollars in thousands, except per share data)
1. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary to
present fairly the financial position as of October 31, 1996, the
results of operations for the three months and nine months ended
October 31, 1996 and 1995, and cash flows for the nine months then
ended. Prior period financial statements have been restated to
include the accounts of ELASCO (defined in Note 2 below) acquired
and accounted for as a pooling of interests (see Note 2).
The fiscal year of the Company is a 52- or 53-week period ending on
the last Friday in January. Fiscal year 1997 will be a 53-week
period while fiscal year 1996 was a 52-week period. The nine
months ended October 31, 1996 and 1995 contained 40 and 39 weeks,
respectively, while the three months ended October 31, 1996 and
1995 each contained 13 weeks.
The January 26, 1996 balance sheet contains certain
reclassifications which were made to conform to the October 31,
1996 financial statement format. None of these reclassifications
affected net income or shareholders' equity.
2. On April 26, 1996 the Company acquired all the common stock of
Electric Laboratories and Sales Corporation and ELASCO Agency
Sales, Inc. (collectively, "ELASCO") in exchange for 490,161 shares
of the Company's common stock. ELASCO is a wholesale distributor
of electric utility supplies and equipment with three branches in
Illinois and Ohio. The transaction has been accounted for as a
pooling of interests and, accordingly, historical financial data
has been restated to include ELASCO. ELASCO's fiscal year end has
been changed to the last Friday in January to conform to the
Company's fiscal year end.
3. On May 13, 1996, the Company acquired substantially all of the
assets, properties and business of PVF Holdings, Inc. and its
subsidiaries ("PVF"). The aggregate consideration paid was
$108,832, consisting of cash in the amount of $81,917, the issuance
of 737,645 shares of common stock having an agreed-upon value of
$27.763 per share and the assumption of $6,436 of bank debt. PVF
distributes stainless steel pipe, valves and fittings from 16
locations nationwide, and had sales of approximately $110,000 for
calendar year 1995. The transaction has been accounted for as a
purchase and the results of operations of PVF from the date of
acquisition are included in the consolidated financial statements.
The excess of cost over net assets acquired is being amortized over
15 years by the straight-line method.
Page 8
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited) (dollars in thousands, except per share data)
The following table reflects the pro forma combined results of
operations, assuming the PVF acquisition had occurred at the
beginning of each period presented:
Nine Months Ended October 31,
1996 1995
---------- ----------
Net sales $1,083,262 $939,031
Net income 24,326 23,055
Earnings per share:
Primary 2.60 2.86
Fully diluted 2.59 2.84
The past and future financial performance of PVF will be directly
influenced by the cost of stainless steel and nickel alloy which as
a commodity item can and does fluctuate. Significant fluctuations
in the prices of stainless steel and nickel alloy which have
occurred in the first nine months of each period presented have
resulted in gross margins for PVF of 38.2% for the first nine
months of fiscal 1996 compared to 29.6% for the first nine months
of fiscal 1997 included in the pro forma information above. As a
result of the commodity price fluctuations and the fact that these
significant price fluctuations could continue to create cyclicality
in PVF's future operating performance, management believes that the
pro forma information is not necessarily indicative of future
performance.
4. On May 29, 1996 the Company issued $98,000 of senior notes in a
private placement in connection with the acquisition of PVF. The
notes mature in 2011, bear interest at 7.96% and will be payable in
20 equal semi-annual payments beginning in 2001. In May, 1996 the
Company sold in a public offering 1,486,989 shares of its common
stock which generated net proceeds of approximately $48,197.
Proceeds received by the Company in the private placement of the
senior notes and the sale of the Company's common stock were used
to partially fund the PVF acquisition (including satisfaction of
the interim note payable to the sellers) and to reduce indebtedness
outstanding under the Company's revolving credit facility and line
of credit agreement.
5. In addition to the acquisitions discussed in Notes 2 and 3 above,
during the nine months ended October 31, 1996 the Company acquired
several wholesale distributors of materials to the construction
industry for cash and stock. These acquisitions have been
accounted for as purchases or immaterial poolings and did not have
a material effect on the consolidated financial statements of the
Page 9
Company. Results of operations of these companies from their
respective dates of acquisition have been included in the
consolidated financial statements.
6. On August 22, 1996 the Company's Board of Directors increased the
regular quarterly cash dividend from $.09 to $.10 per share
effective for the third quarter dividend which was payable on
November 15, 1996 to shareholders of record on November 1, 1996.
7. The following is a reconciliation of net income to net cash
provided by (used in) operating activities:
Nine months ended October 31,
1996 1995
---------- ----------
Net income $ 22,011 $ 14,100
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 6,508 5,928
Amortization 3,670 1,453
Provision for doubtful accounts 2,650 2,434
Gain on sale of property
and equipment (684) (634)
Undistributed (earnings) losses
of affiliate (42) 73
Changes in assets and liabilities,
net of effects of acquisitions:
(Increase) decrease in:
Accounts receivable (38,720) (22,272)
Inventories (2,414) 10,066
Other current assets 5,910 6,794
Other assets (230) (2,589)
Increase (decrease) in:
Accounts payable and accrued
expenses 7,749 1,270
Accrued interest and income
taxes 5,012 (361)
Other noncurrent liabilities 350 307
Increase in deferred income taxes (2,348) (1,610)
---------- ----------
Net cash provided by
operating activities $ 9,422 $ 14,959
========== ==========
Page 10
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION - continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the financial condition of the
Company as of October 31, 1996, and the results of operations for the
nine months then ended.
As described in Note 2 of the Notes to Consolidated Financial
Statements, on April 26, 1996 the Company and Electric Laboratories and
Sales Corporation and ELASCO Agency Sales, Inc. (collectively, "ELASCO")
entered into a business combination accounted for as a pooling of
interests. Accordingly, all financial data in this discussion and
analysis is reported as though the companies have always been combined.
Material Changes in Results of Operations
Net Sales:
Net sales increased to $371.7 million for the quarter ended October 31,
1996, 25% over the prior year's third quarter. Net sales for the nine
months were $1.1 billion which was 23% ahead of last year. Newly-
acquired and opened wholesale outlets provided 18 and 14 percentage
points of the 25% and 23% increases for the three and nine month
periods, respectively.
Management expects commercial construction activity to continue at
current levels. These favorable conditions coupled with the Company's
acquisition program should result in continued sales growth.
Gross Profit:
Gross profit and gross margin for the three and nine months ended
October 31, 1996 and 1995 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
Gross Gross Gross Gross Variance
Profit Margin Profit Margin Amount %
<S> <C> <C> <C> <C> <C> <C>
Three months ended $ 78,829 21.2% $ 59,608 20.1% $ 19,221 32.2%
Nine months ended $ 217,913 20.7% $ 171,532 20.1% $ 46,381 27.0%
</TABLE>
More than half of the third quarter improvement in gross margins is
attributable to the inclusion of branches acquired from PVF Holdings,
Inc. and its subsidiaries ("PVF") in May, 1996. Expansion of product
offerings to lines with better margins, efficiencies created with
central distribution centers, and volume purchasing power have also
contributed to the improvement in gross margins.
Page 11
Operating Expenses:
Operating expenses for the three and nine month periods ended October
31, 1996 and 1995 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
% of % of Variance
Amount Net Sales Amount Net Sales Amount %
<S> <C> <C> <C> <C> <C> <C>
Three months ended $ 61,438 16.5% $ 51,105 17.2% $ 10,333 20.2%
Nine months ended $ 177,796 16.9% $ 146,706 17.2% $ 31,090 21.2%
</TABLE>
Approximately 18 and 14 percentage points of the 20.2% and 21.2%
increases in operating expenses for the three and nine months ended
October 31, 1996, respectively, is attributable to recent acquisitions
and newly-opened wholesale outlets. Lower insurance costs resulting
from a reduction in insurance premiums and better than expected claims
experience in prior year policies as well as synergies associated with
consolidated operations are primarily responsible for the decrease in
operating expenses as a percentage of net sales for the three and nine
month periods.
Non-Operating Income and Expenses:
Interest and other income decreased $.5 million and increased $.7
million for the three and nine months ended October 31, 1996,
respectively, over the prior year periods. These fluctuations are
primarily attributable to gain or loss on the sale of property and
equipment, and increased collection of service charges due on delinquent
accounts receivable.
Interest expense was $3.1 million and $7.9 million for the three and
nine months ended October 31, 1996 compared to $1.9 million and $5.9
million for the three and nine months ended October 31, 1995,
respectively. The increases are primarily the result of higher
borrowing levels as interest rates have been essentially unchanged.
Expansion through business acquisitions has been partially funded by
debt financing.
Income Taxes:
The effective tax rates for the three and nine months ended October 31,
1996 and 1995 were as follows:
1996 1995
Three months ended 39.9% 37.6%
Nine months ended 39.8% 37.5%
Prior to its merger with the Company on April 26, 1996, ELASCO was a
Subchapter S corporation and, therefore, not subject to corporate income
tax. ELASCO's Subchapter S corporation status terminated upon the
merger with the Company. As a result, the Company's effective tax rate
will be lower for the year ended January 26, 1996 than for the year
Page 12
ended January 31, 1997. The effective income tax rate for the combined
companies is expected to be approximately 40% in the fourth quarter.
Net Income:
Net income for the third quarter increased 83% to $9.2 million. Fully-
diluted earnings per share for the third quarter were $.91 compared to
$.67 in the prior year, a 36% increase with 36% more shares outstanding.
For the nine months ended October 31, 1996, net income reached $22.0
million, a 56% increase over the nine months ended October 31, 1995.
Fully-diluted earnings per share for the nine months ended October 31,
1996 and 1995 were $2.43 and $1.91, respectively. This increase of 27%
was on 23% more shares outstanding.
Liquidity and Capital Resources
Working capital at October 31, 1996 amounted to $267 million compared to
$187 million at January 26, 1996. The working capital ratio increased
slightly - 2.8 to 1 at October 31, 1996 compared to 2.5 to 1 at January
26, 1996. These increases are primarily due to higher levels of
inventories and receivables which are required to support the Company's
growth.
Cash payments for business acquisitions, accounted for as purchases,
totaled $90 million for the nine months ended October 31, 1996. In
addition, the Company issued approximately 1,304,000 of its common
shares valued at $37 million for such purchases and for acquisitions
accounted for as immaterial poolings of interests.
As discussed in Note 4 of the Notes to Consolidated Financial
Statements, in May, 1996 the Company issued 1,486,989 shares of its
common stock in a public offering (generating net proceeds of
approximately $48 million, after all expenses) and issued $98 million of
senior notes in a private placement in connection with the purchase of
substantially all of the assets, properties and business of PVF. In
addition to funding the PVF acquisition, the net proceeds of these
offerings were used to reduce indebtedness outstanding under the
Company's bank debt.
Management believes the PVF acquisition provides the Company with
several strategic benefits, including: (i) a well-established position
in the stainless steel and specialty alloy sector of the pipe, valve and
fitting products market; (ii) a higher gross margin product group than
the Company's other product groups; (iii) greater focus on targeted
industrial and replacement markets; (iv) a strong management team; and
(v) new opportunities for additional acquisitions. Additional growth
opportunities for the Company related to the PVF acquisition include
incremental sales of complementary valve products (which represented
only 2% of PVF's fiscal 1995 net sales) and new branch openings.
Expenditures for property and equipment were $11.0 million for the nine
Page 13
months ended October 31, 1996 compared to $8.8 million for the nine
months ended October 31, 1995. These expenditures are expected to be
approximately $14 million for fiscal year 1997.
Principal reductions on long-term debt were $14.3 million for the nine
months ended October 31, 1996 compared to $5.4 million for the prior
year nine months. The increase resulted primarily from paying off debt
of recent business acquisitions. Dividend payments were $2.2 million
and $2.6 million during the nine months ended October 31, 1996 and 1995,
respectively. Prior year dividend payments included $1.3 million in
cash dividends of pooled companies.
Management believes that the Company has sufficient borrowing capacity,
with $90 million available under its existing credit facilities (subject
to certain covenants related to the senior notes and in the revolving
credit facility and line of credit agreement), to take advantage of
growth and business acquisition opportunities and has the resources
necessary to fund ongoing operating requirements and anticipated capital
expenditures. Future expansion will continue to be financed on a
project-by-project basis through additional borrowing, or, as
circumstances allow, through the issuance of common stock or equity-
linked securities.
Page 14
HUGHES SUPPLY, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed.
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession - not applicable.
(3) Articles of incorporation and by-laws.
3.1 Articles of Incorporation, as amended, filed as
Exhibit 3.1 to Form 10-Q for the quarter ended July
31, 1994 (Commission File No. 001-08772).
3.2 Composite By-Laws, as amended, filed as Exhibit 3.2
to Form 10-Q for the quarter ended July 31, 1994
(Commission File No. 001-08772).
(4) Instruments defining the rights of security holders,
including indentures.
4.1 Specimen Stock Certificate representing shares of
the Registrant's common stock, $1.00 par value,
filed as Exhibit 4.2 to Form 10-Q for the quarter
ended October 31, 1984 (Commission File No. 0-
5235).
4.2 Resolution Approving and Implementing Shareholder
Rights Plan filed as Exhibit 4.4 to Form 8-K dated
May 17, 1988 (Commission File No. 0-5235).
(10) Material contracts.
10.1 Lease Agreements with Hughes, Inc.
(a) Orlando Trucking, Garage and Maintenance
Operations dated December 1, 1971, filed as
Exhibit 13(n) to Registration No. 2-43900
(Commission File No. 0-5235). Letter dated
April 15, 1992 extending lease from month to
month, filed as exhibit 10.1(a) to Form 10-K
for the fiscal year ended January 31, 1992
(Commission File No. 0-5235).
Page 15
(b) Leases effective March 31, 1988, filed as
Exhibit 10.1(c) to Form 10-K for the fiscal
year ended January 27, 1989 (Commission File
No. 0-5235).
Sub-Item Property
(1) Clearwater
(2) Daytona Beach
(3) Fort Pierce
(4) Lakeland
(6) Leesburg
(7) Orlando Electrical Operation
(8) Orlando Plumbing Operation
(9) Orlando Utility Warehouse
(11) Sarasota
(12) Venice
(13) Winter Haven
(c) Lease amendment letter between Hughes, Inc.
and the Registrant, dated December 1, 1986,
amending Orlando Truck Operations Center and
Maintenance Garage lease, filed as Exhibit
10.1(i) to Form 10-K for the fiscal year ended
January 30, 1987 (Commission File No. 0-5235).
(d) Lease agreement dated June 1, 1987, between
Hughes, Inc. and the Registrant, for
additional Sarasota property, filed as Exhibit
10.1(j) to Form 10-K for the fiscal year ended
January 29, 1988 (Commission File No. 0-5235).
(e) Leases dated March 11, 1992, filed as Exhibit
10.1(e) to Form 10-K for the fiscal year ended
January 31, 1992 (Commission File No. 0-5235).
Sub-Item Property
(2) Gainesville Electrical Operation
10.2 Hughes Supply, Inc. 1988 Stock Option Plan as
amended March 12, 1996 filed as Exhibit 10.2
to Form 10-K for the fiscal year ended January
26, 1996 (Commission File No. 001-08772).
10.3 Form of Supplemental Executive Retirement Plan
Agreement entered into between the Registrant
and eight of its executive officers, filed as
Exhibit 10.6 to Form 10-K for the fiscal year
ended January 30, 1987 (Commission File No. 0-
5235).
Page 16
10.4 Directors' Stock Option Plan, as amended,
filed as Exhibit 10.4 to Form 10-Q for the
quarter ended July 31, 1994 (Commission File
No. 001-08772).
10.5 Asset Purchase Agreement with Accord
Industries Company, dated October 9, 1990, for
sale of Registrant's manufacturing operations,
filed as Exhibit 10.7 to Form 10-K for the
fiscal year ended January 25, 1991 (Commission
File No. 0-5235).
10.6 Lease Agreement dated June 30, 1993 between
Donald C. Martin and Electrical Distributors,
Inc., filed as Exhibit 10.6 to Form 10-K for
the fiscal year ended January 28, 1994
(Commission File No. 001-08772).
10.7 Consulting Agreement dated June 30, 1993
between Hughes Supply, Inc. and Donald C.
Martin, filed as Exhibit 10.7 to Form 10-K for
the fiscal year ended January 28, 1994
(Commission File No. 001-08772).
10.8 Written description of senior executives'
long-term incentive bonus plan for fiscal year
1996 incorporated by reference to the
description of the bonus plan set forth under
the caption "Approval of the Stock Award
Provisions of the Senior Executives' Long-Term
Incentive Bonus Plan for Fiscal Year 1996" on
pages 26 and 27 of the Registrant's Proxy
Statement Annual Meeting of Shareholders To Be
Held May 24, 1994 (Commission File No. 001-
08772).
10.9 Hughes Supply, Inc. Amended Senior Executives'
Long-Term Incentive Bonus Plan, adopted
January 25, 1996, filed as Exhibit 10.9 to
Form 10-K for the fiscal year ended January
26, 1996 (Commission File No. 001-08772).
10.10 Lease Agreement dated June 24, 1996 between
Donald C. Martin and Hughes Supply, Inc.
10.11 Lease Agreements between Union Warehouse &
Trucking Company (d/b/a Union Warehouse &
Realty Company) or Monoco Realty and USCO
Incorporated.
(a) Leases dated March 1, 1985 and amended
December 23, 1986, filed as Exhibit
Page 17
10.11(a) to Form 10-K for the fiscal year
ended January 26, 1996 (Commission File No.
001-08772).
Sub-Item Property
(1) 610 East Windsor St., Monroe, NC
(2) 113-115 Henderson St., Monroe, NC
(3) Statesville, NC
(4) Charlotte, NC
(5) Durham, NC
(6) Pinehurst, NC
(7) West Columbia, SC
(b) Lease dated July 1, 1986 and amended December
23, 1986 for Aiken, South Carolina property,
filed as Exhibit 10.11(b) to Form 10-K for the
fiscal year ended January 26, 1996 (Commission
File No. 001-08772).
(c) Lease dated March 1, 1990 for Greenville,
South Carolina property, filed as Exhibit
10.11(c) to Form 10-K for the fiscal year
ended January 26, 1996 (Commission File No.
001-08772).
(d) Lease dated November 1, 1993 for Cheraw, South
Carolina property, filed as Exhibit 10.11(d)
to Form 10-K for the fiscal year ended January
26, 1996 (Commission File No. 001-08772).
(e) Lease dated March 1, 1985 and amended October
1, 1992 for 1515 Morgan Mill Road, Monroe,
North Carolina property, filed as Exhibit
10.11(e) to Form 10-K for the fiscal year
ended January 26, 1996 (Commission File No.
001-08772).
(f) Lease amendment letter between Union Warehouse
& Realty Company, Monoco Realty Company and
Hughes Supply, Inc., dated October 18, 1994,
amending the leases for the eleven properties
listed in Exhibit 10.11(a) through (e), filed
as Exhibit 10.11(f) to Form 10-K for the
fiscal year ended January 26, 1996 (Commission
File No. 001-08772).
(g) Lease effective February 1, 1996 for
Pineville, North Carolina property, filed as
Exhibit 10.11(g) to Form 10-K for the fiscal
year ended January 26, 1996 (Commission File
No. 001-08772).
Page 18
10.12 Lease Agreement effective February 1, 1993 between
Union Warehouse & Realty Company and Moore Electric
Supply, Inc., filed as Exhibit 10.12 to Form 10-K
for the fiscal year ended January 26, 1996
(Commission File No. 001-08772).
(11) Statement re computation of per share earnings.
11.1 Summary schedule of earnings per share calculations.
(15) Letter re unaudited interim financial information - not
applicable.
(18) Letter re change in accounting principles - not applicable.
(19) Report furnished to security holders - not applicable.
(22) Published report regarding matters submitted to vote of
security holders - not applicable.
(23) Consents of experts and counsel - not applicable.
(24) Power of attorney - not applicable.
(27) Financial data schedule.
27.1 Financial data schedule (filed electronically
only).
27.2 Restated financial data schedule (filed
electronically only).
27.3 Restated financial data schedule (filed
electronically only).
(99) Additional exhibits - not applicable.
(b) Reports on Form 8-K.
During the quarter ended October 31, 1996, the Registrant filed a
Current Report on Form 8-K dated October 10, 1996, which reported
under Item 5 (Other Events) that the Registrant entered into an
Amended and Restated Revolving Credit and Line of Credit Agreement.
Page 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUGHES SUPPLY, INC.
Date: December 12, 1996 By: /s/ David H. Hughes
David H. Hughes, Chairman of
the Board and Chief Executive
Officer
Date: December 12, 1996 By: /s/ J. Stephen Zepf
J. Stephen Zepf, Treasurer, Chief
Financial Officer and Chief
Accounting Officer
Page 20
INDEX OF EXHIBITS FILED WITH THIS REPORT
10.10 Lease Agreement dated June 24, 1996 between Donald C. Martin and
Hughes Supply, Inc.
11.1 Summary schedule of earnings per share calculations.
27.1 Financial data schedule (filed electronically only).
27.2 Restated financial data schedule (filed electronically only).
27.3 Restated financial data schedule (filed electronically only).
Page 21
Exhibit 11.1
HUGHES SUPPLY, INC.
SUMMARY SCHEDULE OF EARNINGS PER SHARE CALCULATIONS
(in thousands, except per share amounts)
Potentially dilutive securities:
Options for common stock, issued under stock option plan.
Three Months
Ended October 31,
1996 1995
Line
- ----
SHARES
------
1 Average shares outstanding 9,908 7,259
2 Incremental shares (options) -
Assuming options outstanding at end of period
were exercised at beginning of period (or time
of issuance, if later) and proceeds were used
to purchase shares at average market price
during the period 228 166
---------- ----------
3 Shares used in calculating Earnings Per
Common and Common Equivalent Share 10,136 7,425
4 Incremental shares (options) -
Assuming options outstanding at end of period
were exercised at beginning of period (or time
of issuance, if later) and proceeds were used
to purchase shares at the higher of the
average market price during the period or the
market price at the end of the period; and
that options exercised during the period were
exercised at the beginning of the period (or
time of issuance, if later) and the proceeds
were used to purchase shares at the market
price at the date of exercise 6 15
---------- ----------
5 Shares used in calculating Earnings Per
Common Share - Assuming Full Dilution 10,142 7,440
========== ==========
EARNINGS
--------
6 Net income per financial statements $ 9,182 $ 5,018
========== ==========
RESULTING PER SHARE DATA
------------------------
7 Earnings per common share (Line 6/Line 1) $ .93 $ .69
=========== ===========
8 Earnings per common share and common
equivalent share (Line 6/Line 3) $ .91 $ .68
=========== ===========
9 Dilution 2.2% 1.4%
=========== ===========
10 Earnings per common share - assuming full
dilution (Line 6/Line 5) $ .91 $ .67
=========== ===========
11 Dilution 2.2% 2.9%
=========== ===========
12 Used in statements of income:
[ ] Line 7, if dilution less than 3%, or antidilution, exists for all
periods.
[ X ] Lines 8 and 10, if dilution >= 3% for any period.
Nine Months
Ended October 31,
1996 1995
Line
- ----
SHARES
------
1 Average shares outstanding 8,826 7,194
2 Incremental shares (options) -
Assuming options outstanding at end of period
were exercised at beginning of period (or time
of issuance, if later) and proceeds were used
to purchase shares at average market price
during the period 205 128
---------- ----------
3 Shares used in calculating Earnings Per
Common and Common Equivalent Share 9,031 7,322
4 Incremental shares (options) -
Assuming options outstanding at end of period
were exercised at beginning of period (or time
of issuance, if later) and proceeds were used
to purchase shares at the higher of the
average market price during the period or the
market price at the end of the period; and
that options exercised during the period were
exercised at the beginning of the period (or
time of issuance, if later) and the proceeds
were used to purchase shares at the market
price at the date of exercise 34 56
---------- ----------
5 Shares used in calculating Earnings Per
Common Share - Assuming Full Dilution 9,065 7,378
========== ==========
EARNINGS
--------
6 Net income per financial statements $ 22,011 $ 14,100
========== ==========
RESULTING PER SHARE DATA
------------------------
7 Earnings per common share (Line 6/Line 1) $ 2.49 $ 1.96
=========== ===========
8 Earnings per common share and common
equivalent share (Line 6/Line 3) $ 2.44 $ 1.93
=========== ===========
9 Dilution 2.0% 1.5%
=========== ===========
10 Earnings per common share - assuming full
dilution (Line 6/Line 5) $ 2.43 $ 1.91
=========== ===========
11 Dilution 2.4% 2.6%
=========== ===========
12 Used in statements of income:
[ ] Line 7, if dilution less than 3%, or antidilution, exists for all
periods.
[ X ] Lines 8 and 10, if dilution >= 3% for any period.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF HUGHES SUPPLY, INC. AS OF OCTOBER 31, 1996,
AND THE RELATED STATEMENT OF INCOME FOR THE NINE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049029
<NAME> HUGHES SUPPLY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 3,088
<SECURITIES> 0
<RECEIVABLES> 206,309
<ALLOWANCES> 8,376
<INVENTORY> 192,048
<CURRENT-ASSETS> 412,235
<PP&E> 134,424
<DEPRECIATION> 68,684
<TOTAL-ASSETS> 570,047
<CURRENT-LIABILITIES> 147,774
<BONDS> 167,774
0
0
<COMMON> 10,124
<OTHER-SE> 242,254
<TOTAL-LIABILITY-AND-EQUITY> 570,047
<SALES> 1,050,187
<TOTAL-REVENUES> 1,050,187
<CGS> 832,274
<TOTAL-COSTS> 832,274
<OTHER-EXPENSES> 175,146
<LOSS-PROVISION> 2,650
<INTEREST-EXPENSE> 7,939
<INCOME-PRETAX> 36,553
<INCOME-TAX> 14,542
<INCOME-CONTINUING> 22,011
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,011
<EPS-PRIMARY> 2.44
<EPS-DILUTED> 2.43
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF HUGHES SUPPLY, INC. AND RELATED STATEMENTS OF
INCOME AS OF AND FOR THE PERIODS ENDED JULY 31, 1996, APRIL 30, 1996,
JANUARY 26, 1996, OCTOBER 31, 1995, AND JULY 31, 1995. THIS SCHEDULE IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000049029
<NAME> HUGHES SUPPLY, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS YEAR 9-MOS 6-MOS
<FISCAL-YEAR-END> JAN-31-1997 JAN-31-1997 JAN-26-1996 JAN-26-1996 JAN-26-1996
<PERIOD-END> JUL-31-1996 APR-30-1996 JAN-26-1996 OCT-31-1995 JUL-31-1995
<CASH> 543 3,081 3,432 1,681 3,010
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 194,907 168,854 143,353 160,272 154,369
<ALLOWANCES> 7,193 5,833 4,671 7,739 6,334
<INVENTORY> 172,609 142,450 138,903 126,226 132,584
<CURRENT-ASSETS> 382,326 328,540 307,199 296,646 300,107
<PP&E> 129,031 123,471 117,730 115,823 114,829
<DEPRECIATION> 65,454 62,119 58,565 57,187 56,392
<TOTAL-ASSETS> 536,475 418,593 390,355 381,423 381,893
<CURRENT-LIABILITIES> 137,564 137,276 120,591 115,624 109,368
<BONDS> 158,176 116,927 109,524 108,294 119,519
0 0 0 0 0
0 0 0 0 0
<COMMON> 9,730 7,384 7,289 7,264 7,302
<OTHER-SE> 228,986 155,107 151,180 148,388 143,956
<TOTAL-LIABILITY-AND-EQUITY> 536,475 418,593 390,355 381,423 381,893
<SALES> 678,516 315,637 1,126,795 854,555 557,875
<TOTAL-REVENUES> 678,516 315,637 1,126,795 854,555 557,875
<CGS> 539,432 252,443 896,076 683,023 445,951
<TOTAL-COSTS> 539,432 252,443 896,076 683,023 445,951
<OTHER-EXPENSES> 114,696 54,792 196,685 144,272 94,355
<LOSS-PROVISION> 1,662 822 1,849 2,434 1,246
<INTEREST-EXPENSE> 4,854 1,970 7,714 5,926 4,011
<INCOME-PRETAX> 21,276 7,095 29,213 22,576 14,528
<INCOME-TAX> 8,447 2,774 10,982 8,476 5,446
<INCOME-CONTINUING> 12,829 4,321 18,231 14,100 9,082
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 12,829 4,321 18,231 14,100 9,082
<EPS-PRIMARY> 1.51 .57 2.48 1.93 1.25
<EPS-DILUTED> 1.51 .57 2.46 1.91 1.24
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF HUGHES SUPPLY, INC. AND RELATED STATEMENTS OF
INCOME AS OF AND FOR THE PERIODS ENDED APRIL 30, 1995, JANUARY 27, 1995,
OCTOBER 31, 1994 AND JULY 31, 1994. THIS SCHEDULE IS QUIALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000049029
<NAME> HUGHES SUPPLY, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR 9-MOS 6-MOS
<FISCAL-YEAR-END> JAN-26-1996 JAN-27-1995 JAN-27-1995 JAN-27-1995
<PERIOD-END> APR-30-1995 JAN-27-1995 OCT-31-1994 JUL-31-1994
<CASH> 1,843 3,692 2,300 2,362
<SECURITIES> 0 0 0 0
<RECEIVABLES> 156,032 133,966 127,636 124,513
<ALLOWANCES> 5,476 5,042 7,238 6,232
<INVENTORY> 134,384 129,894 112,189 117,810
<CURRENT-ASSETS> 303,020 283,857 245,549 250,101
<PP&E> 113,050 110,234 108,415 105,149
<DEPRECIATION> 55,598 54,248 52,710 50,460
<TOTAL-ASSETS> 384,200 355,362 311,861 314,742
<CURRENT-LIABILITIES> 123,193 106,634 90,046 89,221
<BONDS> 113,120 107,334 87,993 94,935
0 0 0 0
0 0 0 0
<COMMON> 7,304 7,104 7,104 7,104
<OTHER-SE> 138,937 132,744 125,363 122,190
<TOTAL-LIABILITY-AND-EQUITY> 384,200 355,362 311,861 314,742
<SALES> 264,162 911,362 677,728 439,001
<TOTAL-REVENUES> 264,162 911,362 677,728 439,001
<CGS> 210,896 728,887 543,869 351,848
<TOTAL-COSTS> 210,896 728,887 543,869 351,848
<OTHER-EXPENSES> 46,293 157,311 114,434 74,829
<LOSS-PROVISION> 587 1,381 2,081 1,509
<INTEREST-EXPENSE> 1,900 5,429 3,836 2,512
<INCOME-PRETAX> 5,458 21,359 15,878 9,878
<INCOME-TAX> 2,050 7,735 5,722 3,601
<INCOME-CONTINUING> 3,408 13,624 10,156 6,277
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 3,408 13,624 10,156 6,277
<EPS-PRIMARY> .47 2.02 1.52 .95
<EPS-DILUTED> .47 1.99 1.49 .93
</TABLE>
Exhibit 10.10
LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into as of the 24th
day of June, 1996, by and between DONALD C. MARTIN (hereinafter
referred to as the "Lessor"), and HUGHES SUPPLY, INC.
(hereinafter referred to as the "Lessee").
W I T N E S S E T H
WHEREAS, Lessor desires to lease certain property to Lessee;
and
WHEREAS, Lessee desires to lease such property;
NOW, THEREFORE, in consideration of the premises and the
mutual promises and agreements hereinafter contained, the parties
do hereby agree as follows:
ARTICLE I
PROPERTY. Lessor agrees to lease and demise unto Lessee
certain property, known as 5200 Peachtree Road, Atlanta, Georgia
30341, as described on Exhibit "A" hereto (hereinafter referred
to as the "Property").
ARTICLE II
LEASE TERM. The term of this Lease Agreement shall be for a
period of two (2) years commencing on July 1, 1996, and ending on
June 30, 1998, both dates inclusive, unless sooner terminated as
herein provided. In no event shall there be any renewal of this
Lease by operation of law, and if Lessee remains in possession of
the Property after the termination of this Lease and without a
new lease executed by Lessor and Lessee, but with the
acquiescence of Lessor, Lessee shall be deemed to be occupying
the Property under a month-to-month periodic tenancy at an amount
to be agreed upon by the parties hereto, and in no event less
than the then-current Rent as hereinafter provided, and otherwise
subject to all the covenants and provisions of this Lease insofar
as the same are applicable to a month-to-month periodic tenancy.
Lessor and Lessee agree that any such periodic tenancy may be
terminated by thirty (30) days prior written notice by either
party to this Lease to the other party. If Lessee remains in
possession after termination of this Lease without Lessor's
acquiescence or consent, Lessee thereupon shall be deemed a
tenant-at-sufferance and may be evicted at once without notice.
ARTICLE III
3.1 RENT. From July 1, 1996 through and including June 30,
1998, Lessee agrees to pay Lessor without demand, deduction or
set-off as rental SIX THOUSAND FIVE HUNDRED ($6,500.00) DOLLARS
per month in advance, on the first (1st) day of each calendar
month during the Lease Term. Lessee shall pay to Lessor all rent
and all other charges due and owing by Lessee under this Lease
without deduction or set-off, in legal tender, and at Lessor's
address specified in Section 14.7 or as otherwise directed from
time to time by Lessor's notice.
3.2 ADDITIONAL RENT. Lessee shall pay to Lessor in addition
to all rent as herein provided, on or before the dates the same
shall become due and payable, and as additional rent, all taxes,
insurance and general maintenance of the Property, which Lessee
assumes or agrees to pay hereunder, together with all interest
and penalties that may accrue thereon. In the event of non-
payment, Lessor shall have the rights and remedies herein
provided for in the case of non-payment of rent or a breach of
condition.
3.3 TAXES AND OTHER CHARGES. Lessee shall, without notice
or demand, as additional rent, pay and discharge, on or before
the last day on which the same may be paid without penalty, all
taxes, rates and charges, sanitary assessments, and other
governmental impositions and charges of every kind and nature
whatsoever, and each and every installment thereof together with
all interest and penalties thereon, which shall or may during the
Lease Term be levied, assessed or imposed on or become a lien
upon or become due or payable out of or for or by reason of the
Property or any part thereof, the Lessee's or the Lessor's
interest in the Property and the improvements located thereon, or
any buildings, appurtenances, or equipment now or hereafter
erected or placed thereon or therein or any part thereof, or the
sidewalks or streets in front of or adjoining the Property
including further any rent tax which may now or hereafter be
imposed in addition to or in lieu of real property ad valorem
taxes. All taxes levied, assessed or imposed in addition to the
foregoing shall be paid by Lessee together with all interest and
penalties thereon, under or by virtue of all present or future
laws, ordinances, requirements, orders, directives, rules or
regulations of the federal, state, county and city or local
governments and of all other governmental authorities whatsoever.
Lessee shall pay all taxes and assessments which shall prior to
or during the Lease Term be levied, assessed or imposed on or
become a lien upon the personal property of Lessee located upon
the Property. Lessee shall be deemed to have complied with the
covenants of this Lease if payment of such rents, taxes, sanitary
assessments, and other governmental impositions and charges,
shall have been made within any grace period allowed by law or by
the governmental authority imposing the same during which payment
is permitted without penalty or interest, and either before the
same shall become a lien upon the Property or shall become
delinquent. Lessee shall within ten (10) days after receipt of
written request therefor by Lessor produce and deliver to Lessor
reasonably satisfactory evidence of such payment.
Lessor shall be responsible for the payment of all special
assessments imposed upon the Property.
All such rents, taxes, rates and charges, sanitary
assessments, and Other governmental impositions and charges which
become due and are payable in the calendar year in which the
Lease Term expires, shall be apportioned pro rata between Lessor
and Lessee in accordance with the respective portions of such
period during which the Lease Term shall be in effect.
Lessee shall have the right to contest or review by legal
proceedings, or in such other manner as it may deem suitable
(which, if instituted, Lessee shall conduct promptly at its own
expense, and free of any expense to Lessor, and, if necessary, in
the name of Lessor), any tax, assessment, rate or charge,
sanitary assessment, or other governmental imposition or charge
aforementioned.
Nothing herein contained shall be construed to require
Lessee to pay any inheritance, estate, succession, transfer,
gift, franchise, income, income profit or excess profit, capital
stock, capital levy, corporate or unincorporated business tax or
other similar tax, that is or may be imposed upon Lessor, its
successors or assigns, or upon the rent payable by Lessee. In the
event any sales tax shall be due on rent for the Property, then
Lessee shall be responsible for paying and shall pay, when due r
any such sales tax.
ARTICLE IV
COSTS AND EXPENSES OF LESSEE. All costs, expenses and
obligations of every kind, including but not limited to
utilities, repairs and maintenance relating to the Property which
may arise or become due during the term of this Lease, shall be
paid by Lessee, except as designated herein. Lessor shall be
responsible for the payment of major repairs to the roof, the
foundation and the structural walls.
ARTICLE V
COVENANTS OF LESSOR. Lessor covenants and agrees as
follows:
A. That Lessor owns the Property in fee simple and has full
right, power and authority to enter into this Lease for the terms
herein granted and that the Property may be used by Lessee during
the entire term of this Lease for the purposes for which it is
currently being used by Lessee.
B. That Lessee, upon the payment of the Rent herein
provided and upon the performance of all the terms of this Lease,
shall at all times during the Lease Term and during any extension
or renewal term, peaceably and quietly enjoy the property without
any disturbance from Lessor or from any other person claiming
through Lessor.
C. That the Property currently conforms and complies with
any and all applicable laws or private restrictions.
D. That Lessor has no knowledge or notice of any pending or
threatened law suits or insolvencies with respect to either
Lessor or the Property.
ARTICLE VI
COVENANTS OF LESSEE. Lessee covenants and agrees as
follows:
A. To pay Lessor the Rent herein stipulated at the time and
in the manner herein provided.
B. To take good care of the Property and suffer no waste or
damage and at the end or other expiration of the term of this
Lease, to return the Property in its current condition, normal
wear and tear excepted.
C. To observe and comply with all presently existing State,
City and County ordinances and regulations applicable to the
Property, and all orders and requirements presently imposed by
any other duly constituted governmental authority having
jurisdiction over the Property.
ARTICLE VII
USE.
7.1 LAWFUL PURPOSE. Lessee may use the Property for any
lawful purpose. Lessee shall not use or permit any of the
Property to be used for any unlawful purpose. Lessee shall
comply, at its own expense, with all statutes, regulations,
rules, ordinances, and orders of any governmental body,
department, or agency thereof which apply to or result from
Lessee's use or occupancy of the Property.
7.2 LESSOR'S RIGHT TO ENTER PROPERTY. Lessor and its
agents, employees, and contractors shall have the right to enter
the Property during normal business hours, without undue
interference with the conduct of Lessee's business therein, to
inspect and examine the Property and to exhibit the Property to
prospective purchasers, tenants and lenders. In the event of
emergency, or if otherwise necessary to prevent injury to persons
or damage to property, such entry to the Property may be made by
force without any liability whatsoever on the part of Lessor for
damage resulting from such forcible entry.
ARTICLE VIII
ASSIGNMENT AND SUBLETTING.
8.1 Lessee shall not, without Lessor's prior written
consent, which shall not be unreasonably withheld or delayed: (i)
assign, convey, mortgage, pledge, encumber, or otherwise transfer
(whether voluntarily, by operation of law, or otherwise) this
Lease or any interest under it; (ii) allow any transfer thereof
or any lien upon Lessee's interest by operation of law; (iii)
sublet the Property or any part thereof; or (iv) permit the use
or occupancy of the Property or any part thereof by any one other
than Lessee; and any attempt to consummate any of he foregoing
without Lessor's consent shall be void.
8.2 Notwithstanding anything herein to the contrary, if at
any time or from time to time during the Lease Term, Lessee
desires to sublet all or a part of the Property or assign,
convey, mortgage, pledge, encumber, or otherwise transfer the
Lease or any interest under it, Lessee shall notify Lessor in
writing (hereinafter referred to in this Article VIII as the
"Notice") of the terms of the proposed subletting or assignment,
the identity of the proposed assignee or subleases, the area
proposed to be sublet (if a sublease is proposed), and such other
information as Lessor may request to evaluate Lessee's request to
assign or sublet. Notwithstanding the provisions of this Article
VIII, Lessee may sublet or assign, convey, mortgage, pledge,
encumber, or otherwise transfer the Lease or any interest under
it, to its parent corporation or to an affiliate or subsidiary
corporation of which such parent corporation owns the majority of
the shares of common and preferred stock without Lessor's prior
written consent or approval. In such event, Lessee shall notify
Lessor, in writing, of such an assignment or sublease,
conveyance, mortgage, pledge, encumbrance, or other transfer
prior to the commencement of the term of such assignment or
sublease.
8.3 Within twenty (20) days of Lessor's receipt of the
proposed assignment or sublease, conveyance, mortgage, pledge,
encumbrance, or other transfer, and such requested additional
information, Lessor shall approve or disapprove in writing the
terms of the proposed assignment or sublease, conveyance,
mortgage, pledge, encumbrance, or other transfer, and the
proposed assignee or subleases or other party thereto. Failure to
so approve or disapprove shall be deemed approval by Lessor. If a
fully executed counterpart of such assignment or sublease,
conveyance, mortgage, pledge, encumbrance, or other transfer is
not delivered to Lessor within forty-five (45) days after the
date of Lessor's written approval, then Lessor's approval of same
shall be deemed null and void and Lessee shall again comply with
all the conditions of this Section 8.3 as if the Notice and
options hereinabove referred to had not been given and received.
8.4 Lessee agrees to pay, as additional rental, to Lessor,
on demand, reasonable costs incurred by Lessor in connection with
any request by Lessee for Lessor to consent to any of the
transactions contemplated by this Article VIII by Lessee.
8.5 If, with the consent of Lessor, this Lease is assigned
or the Property or any part thereof is sublet or occupied by
anybody other than Lessee, Lessor may, after default by Lessee,
collect rent from the assignee, subtenant or occupant, and apply
the net amount collected to the Rent, but no such assignment,
subletting, occupancy, or collection shall be deemed (i) a waiver
of any of Lessee's covenants contained in this Lease, (ii) the
acceptance by Lessor of the assignee, subtenant, or occupant as
Lessee, or (iii) the release of Lessee from further performance
by Lessee of its covenants under this Lease.
ARTICLE IX
EMINENT DOMAIN.
9.1 If all or any substantial part of the Property,
including but not limited to ten (10) percent of the parking,
access, building or signage, should be taken for any public or
quasi-public use under governmental law, ordinance, or
regulation, or by right of eminent domain, or by private purchase
in lieu thereof, and the taking would prevent or materially
interfere with the use of the Property for the purpose for which
it is then being used, this Lease shall terminate effective when
the physical taking shall occur in the same manner as if the date
of such taking were the date originally fixed in this Lease for
the expiration of the Lease Term.
9.2 If part of the Property is taken for any public or
quasi-public use under any governmental law, ordinance, or
regulation, or by right of eminent domain f or by private
purchase in lieu thereof, and this Lease is not terminated as
provided in subsection (a) above, this Lease shall not terminate
but the Rent payable hereunder during the unexpired portion of
this Lease shall be reduced to such extent, if any, as may be
fair and reasonable under all of the circumstances and Lessor
shall undertake to restore the Property to a condition suitable
for Lessee's use, as near to the condition thereof immediately prior
to such taking as is reasonably feasible under all circumstances.
9.3 Lessee shall not share in any condemnation award or
payment in lieu thereof or in any award for damages resulting
from any grade change of adjacent streets, the same being hereby
assigned to Lessor by Lessee; provided, however, that Lessee may
separately claim and receive from the condemning authority, if
legally payable, compensation for Lessee's removal and relocation
costs and for Lessee's loss of business and/or business
interruption.
9.4 Notwithstanding anything to the contrary contained in
this Article 9, if during the Lease Term the use or occupancy of
any part of the Property shall be taken or appropriated
temporarily for any public or quasi-public use under any
governmental law, ordinance, or regulation, or by right of
eminent domain, this Lease shall be and remain unaffected by such
taking or appropriation and Lessee shall continue to pay in full
all rental payable hereunder by Lessee during the Lease Term. In
the event of any such temporary appropriation or taking, Lessee
shall be entitled to receive that portion of any award which
represents compensation for the loss of use or occupancy of the
Property during the Lease Term, and Lessor shall be entitled to
receive that portion of any award which represents the cost of
restoration and compensation for the loss of use or occupancy of
the Property after the end of the term of this Term Lease.
ARTICLE X
INSURANCE.
10.1 Lessee shall carry fire and extended coverage
insurance insuring Lessee's interest in its improvements and
betterments to the Property and any and all furniture, equipment,
supplies, and other property owned, leased, held, or possessed by
it and contained therein, such insurance coverage to be in an
amount equal to the full insurable value of such improvements and
property. Lessee may, in the alternative, elect to self-insure
the Property in whole or in part, provided such self-insurance,
along with any and all additional third-party insurance shall
equal the full insurable value of the Property.
10.2 Lessee also agrees to carry a policy or policies of
comprehensive general liability insurance, including personal
injury and property damage, with contractual liability
endorsement, in the amount of One Million Dollars ($1,000,000.00)
for property damage and One Million Dollars ($1,000,000.00) per
occurrence for personal injuries or deaths of persons occurring
in or about the Property. Said policies shall: (i) name Lessor as
an additional insured and insure Lessor's contingent liability
under this Lease, (ii) be issued by an insurance company which is
acceptable to Lessor and licensed to do business in the State of
Georgia' and (iii) provide that said insurance shall not be
canceled unless thirty (30) days prior written notice shall have
been given to Lessor. Certificates of insurance shall be
delivered to Lessor by Lessee upon commencement of the term of
the Lease and upon each renewal of said insurance. Lessee may, in
the alternative, elect to self-insure the Property, in whole or
in part, provided such self-insurance, along with any and all
additional third-party insurance shall equal One Million Dollars
($1,000,000.00).
10.3 Lessee shall obtain from its insurers under all
policies of fire, theft, public liability, worker's compensation,
and other insurance maintained by it at any time during the Lease
Term insuring or covering the Property or any portion thereof or
operations therein, and shall in good faith endeavor to obtain a
waiver of all rights of subrogation which the insurer might have
against Lessor, if obtainable.
ARTICLE XI
INDEMNITY. Lessee agrees to indemnify and hold Lessor
harmless from and defend Lessor against any and all claims or
liability for any injury or death to any person or damage to any
property whatsoever:
A. occurring in, on or about the Property, to the extent
such injury, death or damage shall be caused in part or in whole
by the act, neglect or fault of, or omission of any duty with
respect to the same, by Lessee, its agents, employees,
contractors, invitees, licensees or tenants;
B. arising from any work or thing whatsoever done by or
benefiting the Lessee in or about the Property or from
transactions of the Lessee concerning the Property;
C. arising from any breach or event of default on the part
of the Lessee in the performance of any covenant or agreement on
the part of the Lessee to be performed pursuant to the terms of
this Lease; or
D. otherwise arising from any act or neglect of the Lessee,
or any of its agents, employees, contractors, invitees, licensees
or tenants.
ARTICLE XII
12.1 LIABILITY OF LESSOR. Lessor shall not be liable to
Lessee or to any person, firm, corporation, or other business
association claiming fly, through or under Lessee, for any
defects known to Lessee in the Property; nor for the theft,
mysterious disappearance, or loss of any property of Lessee from
the Property. Lessor shall not be liable for any interference,
disturbance, or act caused by any person other than Lessor, nor
shall Lessee be relieved from any obligation herein because of
such interference, disturbance, or act of any person other than
Lessor.
12.2 LIMITATION OF LIABILITY. Lessor's obligations and
liability with respect to this Lease shall be limited solely to
Lessor's interest in the Property, as such interest is
constituted from time to time, and Lessor shall not have any
personal liability whatsoever with respect to this Lease. In any
action or proceeding brought to enforce the obligation of Lessor
to Lessee under this Lease, Lessor and Lessee agree that any
final judgment or decree shall be enforceable against Lessor only
to the extent of Lessor's interest in the Property, as aforesaid,
and any such judgment or decree shall not be capable of execution
against, nor be a lien on, any assets of Lessor other than its
interest in the Property, as aforesaid. Lessor shall maintain a
minimum of one million dollars ($1,000,000.00) equity in the
Property.
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES.
13.1 The occurrence of any of the following shall
constitute an event of default:
(a) The Rent or any other sum of money payable under
this Lease is not paid when due;
(b) Lessee's interest in the Lease or the Property
shall be subjected to any attachment, levy, or sale
pursuant to any order or decree entered against Lessee
in any legal proceeding and such order or decree shall
not be vacated within ninety (90) days of entry
thereof; or
(c) Lessee breaches or fails to comply with any term,
provision, condition, or covenant of this Lease, other
than the payment of Rent and any other sum due and
payable hereunder.
13.2 Upon the occurrence of an event of default and, in the
case of an event of default under subsection (a) above, if such
event of default is not cured within five (5) days of receipt of
written demand, and, in the case of an event of default under
subsections (b) or (c) above, if such event of default is not
cured within thirty (30) days after written notice of such event
of default is given by Lessor to Lessee, or such longer period of
time as is reasonably necessary under the circumstances. Lessor
shall have the option to do and perform any one or more of the
following in addition to, and not in limitation of, any other
remedy or right permitted it by law or in equity or by this
Lease:
(a) Lessor, with or without terminating this Lease,
may reenter the Property and perform, correct or repair
any condition which shall constitute a failure on
Lessees part to keep, observe, perform, satisfy, or
abide by any term, condition, covenant, agreement, or
obligation of this Lease, and Lessee shall fully
reimburse and compensate Lessor on demand for all costs
and expenses reasonably incurred by Lessor in such
performance, correction or repairing, including accrued
interest as provided in the next sentence. All sums so
expended to cure Lessee's default shall accrue interest
from the date of demand until date of payment at a rate
of interest per annum equal to the lesser of (i)
sixteen percent (16%) per annum; or (ii) the highest
rate permitted by law.
(b) Lessor, with or without terminating this Lease,
may immediately, or at any time thereafter, demand in
writing that Lessee vacate the Property and thereupon
Lessee shall vacate the Property and remove therefrom
all property thereon belonging to or placed on the
Property by, at the direction of, or with consent of
Lessor within ten (10) days of receipt by Lessee of
such notice from Lessor, whereupon Lessor shall have
the right to reenter and take possession of the
Property. Any such demand, reentry and taking
possession of the Property by Lessor shall not of
itself constitute an acceptance by Lessor of a
surrender of this Lease or of the Property by Lessee
and shall not of itself constitute a termination of
this Lease by Lessor.
(c) Lessor, with or without terminating this Lease, may
immediately or at any time thereafter relet the
Property or any part thereof for such time or times, at
such rental or rentals and upon such other terms and
conditions as Lessor in its commercially reasonable
discretion may deem advisable, and Lessor may make any
alterations or repairs to the Property which it may
deem necessary or proper to facilitate such reletting;
and Lessee shall pay all costs of such reletting
including but not limited to the cost of any such
alterations and repairs to the Property, attorneys'
fees, and brokerage commissions; and if this Lease
shall not have been terminated, Lessee shall continue
to pay all rent and all other charges due under this
Lease up to and including the date of beginning of
payment of rent by any subsequent tenant of part or all
of the Property, and thereafter Lessee shall pay
monthly during the remainder of the term of this Lease
the difference, if any, between the rent and other
charges collected from any such subsequent tenant or
tenants and the rent and other charges reserved in this
Lease, but Lessee shall not be entitled to receive any
excess of any such rents collected over the rents
reserved herein.
(d) Lessor may immediately or at any time thereafter
terminate this Lease, and this Lease shall be deemed to
have-been terminated upon receipt by Lessee of written
notice of such termination; upon such termination
Lessor shall recover from Lessee all damages Lessor may
suffer by reason of such termination including, without
limitation, all arrearages in rentals, costs, charges,
additional rentals' and reimbursements, the cost
(including court costs and attorneys' fees) of
recovering possession of the Property, the cost of any
alteration of or repair to the Property which is
necessary or proper to prepare the same for re-letting
and, in addition thereto, Lessor shall have and recover
from Lessee an amount equal to the excess if any, of
the total amount of all rents and other charges to be
paid by Lessee for the remainder of the term of this
Lease over the then reasonable rental value of the
Property for the remainder of the term of this Lease,
such excess discounted to present value using a
discount rate equal to six percent (6%).
(e) Lessor shall have a good faith duty to mitigate his
losses hereunder.
13.3 If Lessor re-enters the Property or terminates this
Lease pursuant to any of the provisions of this Lease, Lessee
hereby waives all claims for damages which may be caused by such
re-entry or termination by Lessor. Lessee shall and does hereby
agree to indemnify and hold Lessor harmless from any loss, cost
(including court costs and attorneys' fees), or damages suffered
by Lessor by reason of such re-entry or termination. No such re
entry or termination shall be considered or construed to be a
forcible entry.
13.4 No course of dealing between Lessor and Lessee or any
failure or delay on the part of Lessor in exercising any rights
of Lessor under this Section 13 or under any other provisions of
this Lease shall operate as a waiver of any rights of Lessor
hereunder or under any other provisions of this Lease, nor shall
any waiver of any event of default on one occasion operate as a
waiver of any subsequent event of default or of any other event
of default. No express waiver shall affect any condition,
covenant, rule, or regulation other than the one specified in
such waiver and that one only for the time and in the manner
specifically stated.
13.5 The exercise by Lessor of any one or more of the
rights and remedies provided in this Lease shall not prevent the
subsequent exercise by Lessor of any one or more of the other
rights and remedies herein provided. All remedies provided for in
this Lease are cumulative and may, at the election of Lessor, be
exercised alternatively, successively, or in any other manner and
are in addition to any other rights provided for or allowed by
law or in equity.
ARTICLE XIV
MISCELLANEOUS
14.1 PRONOUNS. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the entity, person or
persons may require.
14.2 INSOLVENCY OR BANKRUPTCY. The appointment of a
receiver to take possession of all or substantially all of the
assets of Lessee, or an assignment of Lessee for the benefit of
creditors, or any action taken or suffered by Lessee under any
insolvency, bankruptcy, or reorganization act, unless terminated
or dismissed within eighty-five (85) days, shall at Lessor's sole
option constitute a breach of this Lease by Lessee. Upon the
happening of any such event or at any time thereafter, this Lease
shall terminate. In no event shall this Lease be assigned or
assignable by operation of law or by voluntary or involuntary
bankruptcy proceedings or otherwise and in no event shall this
Lease or any rights or privileges hereunder be an asset of Lessee
under any bankruptcy, insolvency, or reorganization proceedings.
14.3 LATE PAYMENTS. Lessee shall pay, in the event Rent or
other charge to be paid by Lessee hereunder is not paid when due,
(A) a late fee of five percent (5.0%) of the amount past due,
which late fee Lessee acknowledges is an agreed upon
reimbursement to Lessor for the administrative expense incurred
by Lessor as a result of Lessee's late payment and not a penalty
and is reasonable in light of the difficulty to estimate costs;
and (B) interest on the amount past due (excluding late fees) at
a rate per annum equal to the lesser of (ii) twelve percent (12%)
per annum; or (iii) the highest rate permitted by law, from due
date until paid. Should Lessee make a partial payment of past due
amounts, the amount of such partial payment shall be applied
first, to late fees, second' to accrued but unpaid interest, and
third, to past due amounts, in inverse order of their due date.
14.4 ATTORNEYS' FEES. In the event of any litigation
arising out of this Lease or the relationships evidenced hereby,
the prevailing party shall be entitled to receive from the other
party, an amount equal to the prevailing party's actual
attorneys' fees, reasonably incurred.
14.5 INTENTIONALLY LEFT BLANK
14.6 NO WAIVER OF RIGHTS. No failure or delay of Lessor to
exercise any right or power given it herein or to insist upon
strict compliance by Lessee of any obligation imposed on it
herein and no custom or practice of either party hereto at
variance with any term hereof shall constitute a waiver or a
modification of the terms hereof by Lessor or any right it has
herein to demand strict compliance with the terms hereof by
Lessee. No person has or shall have any authority to waive any
provision of this Lease unless such waiver is expressly made in
writing and signed by Lessor.
14.7 ADDRESSES AND NOTICES.
(a) Except for legal process which may also be served as by
law provided or as provided in subsection (b) below, all notices
required or desired to be given with respect to this Lease in
order to be effective shall be in writing and shall be deemed to
be given to and received by the party intended to receive such
notice when hand delivered or three (3) days after such notice
shall have been deposited, postage prepaid, to the United States
mail, certified, return receipt requested, properly addressed to
the addresses specified in item (c) of this Section In the event
of a change of address by either party, such party shall give
written notice thereof in accordance with The foregoing.
(b) To the extent permitted by law, Lessee hereby: (i)
appoints and designates the Property as a proper place for
service of process upon Lessee (provided, however, Lessor does
not hereby waive the right to serve Lessee with process by any
other lawful means); and (ii) expressly waives the service of any
notice under any existing or future law of the State of Florida
applicable to Lessors and tenants.
(c) Lessor: Donald C. Martin
1303 Henderson Mill Road
Mansfield, Georgia 30255
Lessee: Hughes Supply, Inc.
5180 Peachtree Road
Atlanta, Georgia 30341
14.8 ENTIRE AGREEMENT AND EXHIBITS. This Lease constitutes
and contains the sole and entire agreement of Lessor and Lessee
and no prior or contemporaneous oral or written representation or
agreement between the parties and affecting the Property shall
have legal effect. No modification or amendment of this Lease
shall be binding upon the parties unless such modification or
amendment is in writing and signed by Lessor and Lessee. The
content of each and every exhibit which is referenced in thin
Lease as being attached hereto is incorporated into this Lease as
fully as if set forth in the body of this Lease.
14.9 SUBORDINATION NON-DISTURBANCE AND ATTORNMENT.
(a) Except as provided in subsections (d) and (e) below,
this Lease and all rights of Lessee hereunder are and shall be
subject and subordinate to the lien of any mortgage, deed to
secure debt, deed of trust, or other instrument in the nature
thereof which may now or hereafter affect Lessor's estate or
interest in and to the Property and to any other instrument
encumbering the fee title of the Property and to any
modifications, renewals, consolidations, extensions, or
replacements thereof.
(b) Subsection (a) above shall be self-operative, and no
further instrument of subordination shall be required by the
holder of any such instrument affecting or encumbering the
Property. In confirmation of such subordination, Lessee shall,
upon demand, at any time or times, execute, acknowledge, and
deliver to Lessor or the holder of any such mortgage, deed to
secure debt, deed of trust, or other instrument, without expense
r any and all instruments that may be requested by Lessor or such
holder to evidence the subordination of this Lease and all rights
hereunder to the lien of any such mortgage, deed to secure debt,
deed of trust, or other instrument, and each such renewal,
modification, consolidation, replacement, and extension thereof
and if Lessee shall fail at any time, within ten (10) days
following the giving of a written request therefor, to execute,
acknowledge, and deliver any such instrument, Lessor or such
holder or such lessor, in addition to any other remedies
available to it in consequence thereof, may execute, acknowledge,
and deliver the same as the attorney-in-fact of Lessee and in
Lessees name, place, and stead and Lessee hereby irrevocably
makes, constitutes, and appoints Lessor or such holder or such
lessor, in their respective successors and assigns, such attorney-
in-fact for that purpose.
(c) Lessee shall, upon demand, at any time or times,
execute, acknowledge, and deliver to Lessor or to the holder of
any mortgage, deed to secure debt, deed of trust, or other
instrument affecting or encumbering the Property, without
expense, any and all instruments that may be necessary to make
this Lease superior to the lien of any such mortgage, deed to
secure debt, deed of trust or other instrument or the grant of
any such ground lease, and each renewal, modification,
consolidation, replacement, and extension thereof, and, if Lessee
shall fail at any time' within ten (10) days following the giving
of a written request therefor, to execute, acknowledge, and
deliver any such instrument, Lessor or such holder or such
lessor, in addition to any other remedies available to it in
consequence thereof, may execute, acknowledge, and deliver the
same as the attorney-in-fact of Lessee and in Lessee's name,
place, and stead, and Lessee hereby irrevocably makes,
constitutes, and appoints Lessor or such holder or such lessor,
and their respective successors and assigns, such attorney-in-
fact for that purpose.
(d) If the holder of any mortgage, deed to secure debt,
deed of trust or other instrument affecting or encumbering the
Property shall hereafter succeed to the rights of Lessor under
this Lease, whether through possession or foreclosure action or
exercise of private power of sale or delivery of a new lease,
Lessee shall, at the option of such holder or lessor, attorn to
and recognize such successor as Lessee's Lessor under this Lease
as of the date of such succession to Lessors interest and shall
promptly execute and deliver any instrument that may be necessary
to evidence such attornment, and Lessee hereby irrevocably
appoints Lessor or such holder or such lessor the attorney-in-
fact of Lessee to execute and deliver such instrument on behalf
of Lessee should Lessee refuse and fail to do so within ten (10)
days after Lessor or such holder or such lessor shall have given
notice to Lessee requesting the execution and delivery of such
instrument. Upon such attornment, this Lease shall continue in
full force and effect as a direct lease between such successor
Lessor and Lessee, subject to all of the terms, covenants, and
conditions of this Lease.
(e) Lessor shall obtain from any future holder of any deed
to secure debt encumbering the Property, or from the current
holder in the event of any refinancing or future advance, a non
disturbance agreement which shall provide that as long as Lessee
remains not in default under this Lease, such holder shall not
disturb Lessee's tenancy.
14.10 ESTOPPEL_CERTIFICATE. At any time and from time to
time, Lessee, on or before the date specified in a request
therefor made by Lessor, which date shall not be earlier than ten
(10) days from the making of such request, shall execute,
acknowledge, and deliver to Lessor a certificate evidencing
whether or not (i) this Lease is in full force and effect, (ii)
this Lease has been amended in any way, (iii) there are any
existing events of default on the part of Lessor hereunder to the
knowledge of Lessee and specifying the nature such events of
default, if any, and (iv) the date to which rent, and other
amounts due hereunder, if any have been paid. Each certificate
delivered pursuant to this Section may be relied on by any
prospective purchaser or transferee of Lessor's interest
hereunder or of any part of Lessor's property or by any mortgagee
of Lessor's interest hereunder or of any part of Lessors property
or by an assignee of any such mortgagee.
14.11 SEVERABILITY. If any clause or provision of this
Lease is or becomes illegal' invalid, or unenforceable because of
present or future laws or any rule or regulation of any
governmental body or entity, effective during its term the
intention of the parties hereto is that the remaining parts of
this Lease shall not be affected thereby, unless such invalidity
is essential to the rights of either party hereto in which event
this Lease shall terminate.
14.12 CAPTIONS. The captions used in this Lease are for
convenience only and do not in any way limit or amplify the terms
and provisions hereof.
14.13 SUCCESSORS AND ASSIGNS. The words "Lessor" and
"Lessee" as used herein shall include the respective contracting
party, whether singular or plural, and whether an individual,
masculine or feminine, or a partnership, joint venture, business
trust, or corporation. The provisions of this Lease shall inure
to the benefit of and be binding upon Lessor and Lessee, and
their respective successors, heirs, legal representatives, and
assigns, subject, however, in the case of Lessee, to the
provisions of Article VIII hereof.
14.14 FORCE MAJEURE. A party to this Lease shall be excused
from the performance of its duties and obligations under this
Lease, except obligations for the payment of money such as Rent,
for the period of delay, but in no event longer than go days,
caused by labor disputes, governmental regulations, riots, war,
insurrection, acts of God or other causes beyond the control of
the party whose performance is being excused (but such causes
shall not include insufficiency of funds).
14.15 LESSOR'S REPRESENTATIONS. Lessor hereby represents
and warrants that: Lessor is the owner of the Property; Lessor is
in undisputed and peaceful possession of the Property and has a
perfect right to convey good, fee simple, merchantable title to
the Property; there currently exists adequate access, parking and
utility service to the Property for the purposes anticipated by
the parties hereto; there is no outstanding indebtedness, unpaid
bill or lien against the Property for equipment, appliances,
other fixtures attached to the Property, sewerage, water main,
sidewalk or other street improvements; there are no retention
title contracts, bills of sale or other encumbrances, of record
or otherwise, affecting the title to any personal property
installed on the Property; the lines and corners of the Property
are clearly marked, and that there are no disputes concerning the
location of the lines and corners; there are no pending suits,
proceedings, judgments' bankruptcies, liens or executions against
the Lessor, either in the county where the Property is located or
in any other county in the State of Georgia; no improvements or
repairs have been made on the Property during the ninety-five
(95) days immediately preceding this date; and there are no
outstanding bills incurred for labor or materials used in making
improvements or repairs on the Property, for services of
architects, surveyors, engineers, or registered foresters
incurred in connection therewith.
14.16 HAZARDOUS SUBSTANCES.
(a) Lessee hereby covenants that Lessee shall not cause or
permit any "Hazardous Substances" (as hereinafter defined) to be
placed, held, located or disposed of in, on or at the Property or
any part thereof except in full compliance with all applicable
laws, rules, ordinances and similar provisions, and neither the
Property nor any part thereof shall ever be used as a dump site
or storage site (whether permanent or temporary) for any
Hazardous Substances during the Lease Term.
(b) Lessee hereby agrees to indemnify Lessor and hold Lessor
harmless from and against any and all losses, liabilities,
including strict liability, damages' injuries, expenses,
including reasonable attorneys' fees, costs of any settlement or
judgment and claims of any and every kind whatsoever paid,
incurred or suffered by, or asserted against, Lessor by any
person or entity or governmental agency for, with respect to, or
as a direct or indirect result of, the presence on or under, or
the escape, seepage, leakage, spillage, discharge, emission,
discharging or release from, the Property of any Hazardous
Substance (including, without limitation, any losses,
liabilities, including strict liability, damages' injuries,
expenses, including reasonable attorneys' fees, costs of any
settlement or judgment or claims asserted or arising under the
Comprehensive Environmental Response) Compensation and Liability
Act, any so-called federal, state or local "Superfund" or
"Superlien" laws, statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing
liability, including strict liability, substances or standards of
conduct concerning any Hazardous Substance), provided, however,
that the foregoing indemnity is limited to matters arising solely
from Lessee r is violation of the covenant contained in
subsection (a) above.
(c) For purposes of this Lease, "Hazardous Substances" shall
mean and include those elements or compounds which are contained
in the list of hazardous substances adopted by the United States
Environmental Protection Agency (the "EPA") or the list of toxic
pollutants designated by Congress or the EPA or which are defined
as hazardous, toxic, pollutant, infectious or radioactive by any
other Federal, state or local statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, as
now or at any time hereafter in effect.
(d) Lessor shall have the right but not the obligation, and
without limitation of Lessor's rights under this Lease, to enter
onto the Property or to take such other actions as it deems
necessary or advisable to cleanup, remove, resolve or minimize
the impact of, or otherwise deal with, any Hazardous Substance
following receipt of any notice from any person or entity
(including without limitation the EPA) asserting the existence of
any Hazardous Substance in, on or at the Property or any part
thereof which, if true, could result in an order, suit or other
action against Lessee and/or Lessor. All reasonable costs and
expenses incurred by Lessor in the exercise of any such rights,
which costs and expenses result from Lessee's violation of the
covenant contained in subsection (a) above, shall be deemed
additional rental under this Lease and shall be payable by Lessee
upon demand.
(e) Notwithstanding the foregoing, Lessor hereby warrants
that there is no Hazardous Substance affecting the Property and
indemnifies Lessee and holds Lessee harmless from and against any
and all losses, liabilities, including strict liability, damages,
injuries, expenses, including reasonable attorneys' fees, costs
of any settlement or judgment and claims of any and every kind
whatsoever paid, incurred or suffered by, or asserted against,
Lessee by any person or entity or governmental agency for, with
respect to, or as a direct or indirect result of, the presence on
or under, or the escape, seepage, leakage, spillage, discharge,
emission, discharging or release from, the Property of any
Hazardous Substance (including, without limitation, any losses,
liabilities, including strict liability, damages, injuries,
expenses, including reasonable attorneys' fees, costs of any
settlement or judgment or claims asserted or arising under the
Comprehensive Environmental Response, Compensation and Liability
Act, any so-called federal, state or local "Superfund" or
"Superlien" laws, statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing
liability, including strict liability, substances or standards of
conduct concerning any Hazardous Substance) prior to the date
hereof.
(f) This Section 14.16 shall survive cancellation,
termination or expiration of this Lease.
14.17 APPLICABLE LAW. This Lease shall be construed in
accordance with the laws of the State of Georgia.
ARTICLE XV
RIGHT OF FIRST REFUSAL.
(a) If Lessor makes a bona fide written offer to sell or
lease the Property or any part thereof to any prospective
purchaser or tenant during the term of this Lease or for an
additional period of ninety (90) days thereafter' or should
Lessor receive an acceptable offer to do so, Lessor shall notify
Lessee in writing (such notice being hereinafter called the
"Offer Notice") of Lessor's intention to sell or lease the
Property. The Offer Notice shall specifically describe the terms
and the prospective purchaser or tenant with whom such purchase
and sale or lease would be entered into (unless confidentiality
of such prospective purchaser or tenant is required by such
prospective purchaser or tenant). The Offer Notice shall also
constitute an offer by Lessor to sell or lease the Property to
Lessee in accordance with the terms of this Article XV. Lessee
shall have twenty (20) days after its receipt of such Offer
Notice to accept such offer pursuant to this First Refusal Right
and to purchase or lease the Property from Lessor in accordance
with the terms of this Article XV.
(b) Acceptance by Lessee of the offer set forth in the
Offer Notice shall be deemed effective only if such acceptance is
given to Lessor in a written notice of acceptance (the
"Acceptance Notice") specifically referring to the Offer Notice
to which it relates, received by Lessor within the twenty (20)
day period prescribed above for such acceptance. If Lessee duly
and timely delivers to Lessor its Acceptance Notice in accordance
with this Article XV, then Lessor and Lessee shall, within thirty
(30) days of Lessor's receipt of such Acceptance Notice, execute
a contract to purchase and sell or an amendment to this Lease
which conforms to the terms set forth in the Offer Notice.
(c) If Lessee elects not to exercise this First Refusal
Right, Lessor shall be entitled to sell or lease the Property to
the prospective purchaser or tenant that prompted the Offer
Notice, or an affiliate thereof.
(d) Notwithstanding anything in this Article XV the
contrary, Lessee shall have no right to exercise any right or
option under this Article XV, nor shall Lessor have any
obligation to submit an Offer Notice to Lessee with respect to
the Property before entering into a third party contract or lease
with respect thereto, or to enter into any sale or lease of the
Property with Lessee, at any time during which either (i) Lessee
is in default, or an event of default exists with respect to
Lessee, under this Lease, or (ii) this Lease is not in full force
and effect.
(e) Nothing in this Article XV shall be deemed to cause an early
termination of this Lease.
ARTICLE XVI
USUFRUCT. This Lease gives Lessee a usufruct only and does
not create an estate in the Lessee subject to lien or to levy and
sale.
IN WITNESS WHEREOF, the undersigned parties have caused this
Lease to be signed and sealed on the day and year first above
written.
LESSOR:
/s/ Donald C. Martin
Donald C. Martin
LESSEE:
HUGHES SUPPLY, INC.
By: /s/ Clyde E. Hughes
Title: Regional VP
[CORPORATE SEAL]
