UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required] For the fiscal year ended December 31, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
Commission File No.: 1-8801
GRAHAM-FIELD HEALTH PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2578230
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Rabro Drive East, Hauppauge, New York 11788
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 582-5900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, par value $.025 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Not Applicable
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(Title of Class)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [X].
Based on the closing price on March 20, 1997, the aggregate market value of
common stock held by non-affiliates of the registrant was approximately
$170,069,266.
As of the close of business on March 20, 1997, the registrant had
18,926,460 shares of common stock outstanding, of $.025 par value each.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive proxy statement to be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934, incorporated by reference into Part III hereof.
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GRAHAM-FIELD HEALTH PRODUCTS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
PART I
Item 1. Business:
The Company
Graham-Field Health Products, Inc. and its wholly owned subsidiaries
(collectively, the "Company") manufacture, market and distribute medical,
surgical and a broad range of other healthcare products into the home healthcare
and medical/surgical markets through a vast dealer network consisting of
approximately 18,500 customers in North America. The Company also markets and
distributes its products throughout Europe, Central and South America, and Asia.
The acquisition of Everest & Jennings International Ltd. ("Everest & Jennings")
on November 27, 1996 has positioned the Company as one of the leading
manufacturers of durable medical equipment in North America.
The Company's long-term strategic objective is to become the leading
provider of medical products to the rapidly growing home healthcare and
medical/surgical markets by offering the broadest product line in the industry,
single-source purchasing and technologically advanced, cost-effective delivery
systems. The cornerstone of the Company's sales and marketing strategy is the
Company's Consolidation Advantage Program ("C.A.P."). Through C.A.P., the
Company strives to become the most efficient, reliable low-cost provider of
medical products by offering its customers the ability to significantly reduce
their operating costs by consolidating the purchase of multiple product lines
through a single source. C.A.P. significantly improves the level of service to
the Company's customers by streamlining the purchasing process, decreasing order
turnaround time, reducing delivery expenses, and providing on-demand inventory.
The Company markets and distributes approximately 23,000 products under its
own brand names and under suppliers' names throughout the United States, Canada,
Mexico, Europe, Central and South America, and Asia. The Company believes that
no single competitor serving the Company's markets offers as broad a product
range as the Company. The Company maintains distribution and manufacturing
facilities throughout the United States, Canada, Mexico and Puerto Rico. The
Company's products are marketed to approximately 18,500 customers, principally
hospital, nursing home, physician and home healthcare dealers, healthcare
product wholesalers and retailers, including drug stores, catalog companies,
pharmacies and home-shopping related businesses. During the five years ended
December 31, 1996, the number of products offered by the Company expanded from
approximately 19,000 to approximately 23,000. The expansion of the number of
products offered is primarily the result of an increase in the number of
distributorship agreements with suppliers and acquisitions of other companies
and product lines.
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The Company's principal products and product lines include durable medical
equipment (such as wheelchairs, homecare beds, ambulatory aids, bathroom and
safety equipment), sphygmomanometers (blood pressure measuring devices),
stethoscopes, ECG instruments, electronic thermometers, infrared heat treatment
devices, adult incontinence products, nutritional supplements, specialty
cushions and mattresses for the treatment and prevention of pressure sores,
medicated and rubber elastic bandages, respiratory equipment and supplies,
urologicals, ostomy products, wound care products, infection control products,
first aid supplies, laboratory supplies, antiseptics, topical anesthetics and
sterile disposable medical products. By offering a wide range of products from a
single source, the Company enables its customers to reduce their costs
associated with the purchasing process, including transaction, freight and
inventory expenses. During the year ended December 31, 1996, approximately 28%
of the Company's revenues were derived from products manufactured by the
Company, approximately 18% of the Company's revenues were derived from imported
products, and approximately 54% from products purchased from domestic sources,
which includes products purchased from Everest & Jennings prior to the
acquisition. As used herein, the term "product" means a Company stockkeeping
unit.
The Company was organized under the laws of the State of Delaware on April
6, 1981 under the name, Patient Technology, Inc. On May 27, 1988, the Company
changed its name to Graham-Field Health Products, Inc. Except where the context
otherwise requires, the word "Company" as used herein includes all of its
subsidiaries. The Company's executive offices are located at 400 Rabro Drive
East, Hauppauge, New York 11788 and its telephone number is (516) 582-5900.
Everest & Jennings International Ltd.
Acquisition of Everest & Jennings
On November 27, 1996, the Company acquired Everest & Jennings in a merger
transaction. Through its subsidiaries, Everest & Jennings manufactures one of
the broadest wheelchair product lines in the world, and distributes homecare
beds. Everest & Jennings is one of the largest manufacturers of wheelchairs in
North America and, with its Canadian and Mexican subsidiaries, holds a material
share of the North American wheelchair market. Everest & Jennings' principal
subsidiaries include Everest & Jennings, Inc. ("E&J") located in Earth City,
Missouri; Everest & Jennings Canadian Limited ("Everest & Jennings Canada")
located in Toronto, Canada; and Everest & Jennings de Mexico, S.A. de C.V.
("Everest & Jennings Mexico") located in Guadalajara, Mexico. Each of Everest &
Jennings' subsidiaries manufactures wheelchairs and wheelchair parts.
The Company believes that the combination of Everest & Jennings'
manufacturing operations with the Company's cost-effective delivery systems and
advanced technology systems will increase the Company's presence in the home
healthcare market with a greater level of service and efficiency, and a broader
portfolio of products. The coordination of the manufacturing and distribution of
the wheelchair and homecare bed product lines, which represent the leading
product lines in the home healthcare market, will enhance the Company's position
as
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the leading "one-stop-shop" distributor in the medical products industry. The
Everest & Jennings name, a symbol of quality for more than 50 years, has enabled
the Company to introduce its Temco home healthcare product line and other
proprietary product lines into the rehabilitation marketplace, a virtually
untapped marketplace for the Company in the past.
Dependence on Key Supply Contracts
Everest & Jennings' business is heavily dependent on its maintenance of two
key supply contracts. Everest & Jennings obtains the majority of its homecare
wheelchairs and wheelchair components pursuant to an exclusive supply agreement
(the "Exclusive Wheelchair Supply Agreement") with P.T. Dharma Polimetal ("P.T.
Dharma"), an Indonesian manufacturer certified under the standard quality
systems of ISO 9001. The term of this agreement extends until December 31, 1999,
and on each January 1 thereafter shall be automatically extended for one
additional year unless Everest & Jennings elects not to extend or Everest &
Jennings has failed to order at least 50% of the contractually specified
minimums and the manufacturer elects to terminate. If the Exclusive Wheelchair
Supply Agreement with P.T. Dharma is terminated, there can be no assurance that
Everest & Jennings will be able to enter into a suitable supply agreement with
another manufacturer. In addition, Everest & Jennings obtains homecare beds for
distribution pursuant to a supply agreement (the "Bed Supply Agreement") with
Healthtech Products, Inc. ("Healthtech"), a wholly-owned subsidiary of Invacare
Corporation (which is a major competitor of Everest & Jennings), which is
scheduled to expire on October 15, 1997. Although the Company is in the process
of securing alternative sources of supply with other manufacturers, there can be
no assurance that arrangements as favorable as the current supply contract will
be obtainable.
Wheelchairs
Everest & Jennings develops, designs, manufactures and markets wheelchairs
into two primary categories -- rehabilitation and homecare.
The rehabilitation market is characterized by individual needs, ongoing
product innovation and government reimbursement levels. Rehabilitation products
are more sophisticated, command higher prices and support a higher price margin
structure. Most rehabilitation chairs are sold through rehabilitation dealers
working in conjunction with therapists who prescribe the products for end users.
The homecare market is characterized by lower priced, commodity products
and includes significant institutional sales. Typically, end users are
geriatrics, those temporarily disabled or individuals with long-term
disabilities who are living at home. Funding for the homecare market is through
private insurance or state and federal programs. Everest & Jennings' homecare
chairs are sold directly through homecare dealers, as well as selected
distributors selling to hospitals and nursing homes.
Everest & Jennings develops, designs, manufactures and markets
state-of-the-art
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wheelchairs including ultra-lightweight wheelchairs in Everest & Jennings'
Vision product line. Everest & Jennings continues to invest in the development
of its rehabilitation wheelchair lines, both power and manual, with primary
focus on products that are well matched to user needs and reimbursement levels
and are easier to manufacture and support. During 1996, Everest & Jennings
continued to launch new products, primarily in the rehabilitation market, as
well as in new wheelchair market segments. Three new power wheelchairs were
introduced in 1996. The new Lancer 2000 was launched mid-year as Everest &
Jennings' new flagship, power wheelchair. In addition, the Metropower was
launched earlier in the year as a lower cost alternative to the more
sophisticated traditional, power wheelchair line of Everest & Jennings. The
Sabre product line of wheelchairs, which was initially launched in 1995, was
further expanded with the addition of a lower cost model, the Sabre LTD. In the
manual rehabilitation product category, the Metro model was improved and formed
the basis for several new products using the same design architecture. The Metro
LX and Metro GT were added in 1996 to offer additional product features at
slightly higher price and reimbursement points.
The Company estimates that the aggregate domestic wheelchair market
approximates $350 million with the total North American market slightly larger
at approximately $425 million. The Company believes it has a material share of
these combined markets.
Homecare Beds
Homecare beds generally are sold to the same homecare dealer network that
purchases durable medical equipment. A patient who is discharged from a hospital
or other institution may rent a homecare bed to aid in their recovery.
Accordingly, dealers primarily retain homecare beds in a rental fleet. In
addition, Everest & Jennings offers heavy-duty, rehabilitation beds to
complement its other homecare products.
The Company estimates that the aggregate domestic market for homecare beds
is approximately $60 million. The Company believes it has a material share of
the domestic homecare bed market.
International Operations
The Canadian market is served through Everest & Jennings Canada, while the
Central and South American markets are served through Everest & Jennings Mexico.
Although Everest & Jennings in the past has not placed great emphasis on
expanding its markets beyond North America, the Company believes that there are
significant opportunities for increased growth of the Everest & Jennings'
product line in foreign markets.
Product Research and Development
Everest & Jennings continuously seeks to improve the quality, performance
and reliability of its products to meet the needs of its customer base. Everest
& Jennings has a design staff and research and development organization located
in northern California. The Everest &
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Jennings Design Center is responsible for new product design for Everest &
Jennings, and conducts sponsored research and development activities.
Products
The Company manufactures, markets and distributes approximately 23,000
healthcare products under its own brand names and under suppliers' names. The
Company's products are marketed to approximately 18,500 customers, principally
hospital, nursing home, physician and home healthcare dealers, healthcare
product wholesalers and retailers, including drug stores, catalog companies,
pharmacies and home-shopping related businesses. For each of the three years
during the period ended December 31, 1996, substantially all of the Company's
revenues were derived from sales of products.
Product lines marketed by the Company include durable medical equipment
(such as wheelchairs, homecare beds, ambulatory aids, bathroom and safety
equipment) sphygmomanometers (blood pressure measuring devices), stethoscopes,
ECG instruments, electronic thermometers, infrared heat treatment devices, adult
incontinence products, nutritional supplements, specialty cushions and
mattresses for the treatment and prevention of pressure sores, medicated and
rubber elastic bandages, respiratory equipment and supplies, urologicals, ostomy
products, wound care products, infection control products, first aid supplies,
laboratory supplies, antiseptics, topical anesthetics and sterile disposable
medical products.
Sales of the Company's line of sphygmomanometers accounted for 7%, 11% and
14% of the Company's annual revenues during the years ended December 31, 1996,
1995 and 1994, respectively. The Company's lines of incontinence products; wound
care and ostomy products; bathroom safety equipment; wheelchairs and ambulatory
aids accounted for approximately 8%, 7%, 6%, 6% and 5%, respectively, of the
Company's annual revenues in 1996. No other product line or product accounted
for more than 5% of annual revenues. Approximately 4% of all products offered by
the Company during each of the years ended December 31, 1996, 1995 and 1994,
respectively, accounted for approximately 80% of annual revenues in each such
year. The number of products marketed by the Company increased from
approximately 19,000 in 1991 to approximately 23,000 in 1996.
Sales and Marketing
The Company markets its products to approximately 18,500 customers,
principally medical/surgical supply dealers and home healthcare retailers and
wholesalers, which include drug store chains and home-shopping related
businesses. The Company's products are marketed and distributed throughout the
United States, Canada, Mexico, Europe, Central and South America and Asia. The
Company's North American distribution network includes primary points of
distribution located in Hauppauge, New York; St. Louis, Missouri; Jacksonville,
Florida; Santa Fe Springs, California; Toronto, Canada; and Guadalajara, Mexico.
Secondary points of distribution include Graham-Field Express satellite
facilities located in Mount Vernon, New York, Dallas, Texas, and San Juan,
Puerto Rico.
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The Company's automated "paperless" warehouse and distribution center
located in St. Louis, Missouri (the "St. Louis Facility") is a
"state-of-the-art" facility designed by IBM. The St. Louis Facility incorporates
sophisticated software and hardware technologies, and provides for the highest
quality levels of customer service, delivery cycles, inventory turnover and
distribution efficiency within the medical products industry. The St. Louis
Facility ranks as one of the most technologically advanced distribution centers
in the industry.
Graham-Field Express
The Company provides "same-day" and "next-day" service to home healthcare
dealers of strategic home healthcare products, including Temco patient aids,
adult incontinence products, Everest & Jennings wheelchairs, Smith & Davis
homecare beds, nutritional supplements, and other freight intensive and time
sensitive products through its satellite Graham-Field Express facilities. On
March 7, 1996, the Company introduced its innovative Graham-Field Express
program in the metropolitan New York area, which provides one of the most
personalized service alternatives in the healthcare industry. Graham-Field
Express enables customers to reduce inventory costs and eliminate warehousing
and other costs associated with the purchasing process. On September 5, 1996,
the Company opened its second Graham-Field Express facility through its
acquisition of V.C. Medical Distributors Inc. ("V.C. Medical"), a wholesale
distributor of medical products located in Puerto Rico, which currently operates
as Graham-Field Express (Puerto Rico). On January 29, 1997, the Company opened
its third Graham-Field Express facility in Dallas, Texas, which currently
operates as Graham-Field Express (Dallas). Graham-Field Express supplements the
Company's vast distribution network, enabling the Company to compete more
aggressively in the home healthcare market. The Company plans to open an
additional three (3) to four (4) Graham-Field Express sites in 1997 and eight
(8) in 1998. A new Graham-Field Express location is scheduled to open in
Baltimore, Maryland in April 1997. By late 1999, the Company plans to have a
total of approximately twenty-five (25) Graham-Field Express locations serving
all of the major U.S. markets.
Drop-Ship Programs
The Company has developed a seamless distribution program to enable orders
to be shipped from Graham-Field's distribution facilities to end users on behalf
of its customers. The Company's customers realize significant benefits from the
Company's drop-ship program by significantly reducing their operating costs by
eliminating the receiving and shipping process and inventory carrying costs,
while reducing the product delivery time to end-users. Initially, the program
will operate from the Company's distribution center located in St. Louis
Facility. The Company plans to expand the drop-ship program to cover all major
U.S. markets.
Sales and Marketing
The Company's sales force presents its C.A.P. program to customers as a
means of reducing their operating costs associated with the purchasing process
by consolidating purchases of multiple products through a single supplier - the
Company. Other benefits realized
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under C.A.P. include decreased order turnaround time, reduced delivery expenses
associated with the consolidation of purchase orders, on-demand inventory for
customers, which reduce customer warehousing costs, and reduced administrative
costs and expenses through the streamlining of the purchasing process. The
Company's sales representatives meet with customers to analyze individual
customer's needs and to demonstrate cost reducing opportunities made possible by
the C.A.P. program.
The Company's domestic sales and marketing strategies are developed on a
market-by-market basis through two primary business units: Medical/Surgical and
Home Healthcare. While the Company's sales and marketing strategies are
developed and conducted on a business unit basis, the sale of the Company's
products overlap all business units.
The Medical/Surgical business unit customer base consists of
medical/surgical supply dealers who service hospitals, nursing homes, acute care
facilities, out-patient surgicenters, physicians and other healthcare
facilities. The Home Healthcare business unit customer base includes durable
medical equipment suppliers, home healthcare equipment suppliers, respiratory
supply dealers, specialty retailers, independent pharmacies, and catalog
companies. The Home Healthcare business unit markets the Company's consumer
products to retailers who distribute products to the consumer market, including
drug store chains, mass merchandisers, department stores and home-shopping
related businesses. In general, the dealers, wholesalers and retailers to whom
the Company markets its products also sell other medical products, some of which
compete with the Company's products.
The Company's sales and marketing sales force is directed by a sales
management team consisting of an Executive Vice President of Sales and
Marketing, a Vice President of the Medical/Surgical business unit, a Vice
President of the Home Healthcare business unit, a Vice President of Sales of
Everest & Jennings, a Vice President of International Sales, and a President of
Graham-Field (Canada), a newly-formed division of Everest & Jennings Canada. The
Vice Presidents of the Home Healthcare and Medical/Surgical business units
direct the sales and marketing strategy of the business units and oversee the
Company's five (5) regional sales Vice Presidents.
The international group consists of several in-house sales employees, as
well as one representative in Taiwan. The Company's Canadian sales and marketing
activities are directed by the President of Graham-Field (Canada), who oversees
three (3) regional sales managers, fourteen (14) direct, full-time sales
employees and two (2) independent manufacturers representatives.
The Company's five (5) regional sales Vice Presidents oversee the
day-to-day operations of the domestic sales force. The domestic sales force
consists of approximately fifteen (15) direct, full-time sales employees and
fifty (50) independent manufacturers representatives. The Company's specialty
rehabilitation sales force, consisting of approximately forty (40) sales
persons, is directed by the Vice President of Sales of Everest & Jennings.
Everest & Jennings' specialty rehabilitation sales force conducts training
activities for the benefit of dealers and their personnel,
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physical and occupational therapists, and other healthcare professionals and
reimbursement agencies. This training is primarily concerned with the features
and benefits of Everest & Jennings' rehabilitation products, and the training
also covers the proper fitting and use of wheelchairs and related equipment. The
full-time sales employees receive both salary and commission, while the
independent manufacturers representatives work solely on commission.
During 1995, the Company introduced a new corporate campaign to clarify and
strengthen the Company's identity, and increase the market presence of its
proprietary product lines. As part of the campaign, the Company developed a new
packaging theme and catalog, which the Company believes offers its customers the
largest selection of healthcare products available from a single catalog. The
"Sundry Times", the Company's monthly direct brochure, regarded by customers as
one of the most useful purchasing tools in the industry, was redesigned and
improved. The Company has also introduced an aggressive print advertising
campaign with both product and image ads designed to support the new corporate
image. In addition, the Company has introduced new product brochures, an
extensive library of product line video tapes, cooperative advertising programs,
and sales promotions to reinforce the Company's on-going commitment to satisfy
the needs of its customers. A CD-ROM version of the Company's catalog and an
Internet interactive website are in the process of being developed.
Customers
The Company's products are marketed to principally hospital, nursing home,
physician and home healthcare dealers, healthcare product wholesalers and
retailers, including drug stores, catalog companies, pharmacies and home
shopping related businesses. No single customer or buying group accounted for
more than 10% of the Company's revenues in 1996.
The Company's Medical/Surgical business unit markets and sells its products
to approximately 4,000 medical and surgical supply dealers. The Company believes
that it sells to all significant medical and surgical supply dealers. The
dealers in turn sell the Company's products principally to physicians,
hospitals, nursing homes and other healthcare facilities.
The Home Healthcare business unit markets and sells its products to
approximately 14,500 customers which consist of durable medical equipment
suppliers, home healthcare equipment suppliers, respiratory supply dealers,
specialty retailers and independent pharmacies. The Company believes that it
transacts business with substantially all of the significant home healthcare
dealers in the United States. The Home Healthcare business unit also markets and
sells its products to the consumer market consisting of drug store chains, mass
merchandisers, department stores, and home shopping related businesses.
Consumers who purchase from such customers of the Company usually do so upon the
advice of physicians, hospital discharge planners, nurses or other
professionals.
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Product Sources
During the year ended December 31, 1996, approximately 28% of the Company's
revenues were derived from products manufactured by the Company, approximately
18% of the Company's revenues were derived from imported products, and
approximately 54% from products purchased from domestic sources, which includes
products purchased from Everest & Jennings prior to the acquisition.
The Company is heavily dependent on its maintenance of two key supply
contracts. Everest & Jennings obtains the majority of its homecare wheelchairs
and wheelchair components under the Exclusive Wheelchair Supply Agreement with
P.T. Dharma Polimetal. If the Exclusive Wheelchair Supply Agreement with P.T.
Dharma is terminated, there can be no assurance that Everest & Jennings will be
able to enter into a suitable supply agreement with another manufacturer. In
addition, Everest & Jennings obtains homecare beds for distribution pursuant to
the Bed Supply Agreement with Healthtech, which is scheduled to expire on
October 15, 1997. Although the Company is in the process of securing alternative
sources of supply with other manufacturers, there can be no assurance that
arrangements as favorable as the current supply agreement will be obtainable.
The Company purchases products from approximately 1,200 domestic and
foreign suppliers. The Company has entered into exclusive and non-exclusive
distribution agreements with a number of its domestic and foreign suppliers.
Under such agreements, suppliers may designate the markets into which the
Company can sell the products and may stipulate minimum annual sales volumes
which are to be achieved by the Company. Most of the distribution agreements are
cancelable by either party upon one to six months' notice. The Company does not
believe that cancellation of any such agreements would have a material adverse
effect on the Company, because comparable products are obtainable from
alternative sources upon acceptable terms.
The Company currently purchases a substantial portion of its
sphygmomanometers and stethoscopes from a limited number of suppliers in the Far
East. In addition, the Company sources component parts for sphygmomanometers and
stethoscopes and assembles such products in its facility located in Hauppauge,
New York.
Principal products produced by the Company are EVEREST & JENNINGS(R)
wheelchairs, SMITH & DAVIS(R) homecare beds, LABTRON(R) stethoscopes and blood
pressure instruments, JOHN BUNN(R) respiratory aid products, MEDICOPASTE(R)
medicated bandages, rubber elastic bandages, SURVALENT(R) electronic thermometry
systems, silver nitrate applicators, examination lamps and sterile packages
under the MSP(R) label, GRAFCO(R) medical supplies, including silver nitrate
applicators and examination lamps, the TEMCO(R) product line of patient aids,
bathroom safety equipment and patient room equipment, and Aquatherm specialty
cushions and mattresses for the treatment and prevention of pressure sores.
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Patents and Trademarks
The Company believes that its business is dependent in part on its ability
to establish and maintain patent protection for its proprietary technologies,
products and processes, and the preservation of its trade secrets. The Company
currently holds a number of United States patents relating to the EVEREST &
JENNINGS(R) and TEMCO(R) product lines. In addition, the Company holds certain
international patents relating to the components of its SURVALENT(R) electronic
thermometry system. Other companies may provide similar products which may not
be covered by the Company's issued patents. The Company must operate without
infringing upon the proprietary rights of other parties. There can be no
assurance that any United States or international patents issued or licensed to
the Company will not be successfully challenged, invalidated or circumvented, or
that patents will be issued in respect of patent applications to which the
Company currently holds rights. In addition, the Company distributes certain
patented products pursuant to licensing arrangements. In the event a licensing
arrangement is terminated, the Company may not be able to continue to distribute
the patented product. The Company believes that any such termination will not
have a material adverse effect on the business of the Company, because products
comparable to those currently distributed under such licensing arrangements are
obtainable from other sources upon acceptable terms.
The Company has registered a significant number of trademarks in the United
States, including, but not limited to, "GRAHAM-FIELD," "EVEREST & JENNINGS,"
"SMITH & DAVIS," "JOHN BUNN," "BRISTOLINE," "SURVALENT," "MEDICOPASTE BANDAGE,"
"HEALTHTEAM," "LABTRON," "GRAFCO," "TEMCO" and "TENDERCLOUD."
Product Liability
Although the Company maintains product liability insurance, there can be no
assurance that such coverage will be adequate to protect the Company from
liabilities it may incur. Product liability insurance is expensive and there can
be no assurance that the Company will be able to continue to obtain and maintain
insurance at acceptable rates. Potential losses from any possible future
liability claims and the effect which product liability litigation may have on
the reputation and marketability of the Company's products could have a material
adverse effect on the Company's business and financial condition.
Government Regulation
The healthcare industry is affected by extensive government regulation and
funding at the federal and state levels. Changes in regulations and healthcare
policy occur frequently and may impact the size and growth potential of the
Company and profitability of products sold by the Company in each market.
Although the Company is not a direct provider under Medicare and Medicaid, the
Company's products are sold to its customers, many of which are providers under
these programs and which depend upon Medicare and/or Medicaid reimbursement for
a portion of their revenue. Changes in Medicare and Medicaid regulations may
adversely impact the Company's revenues and collections indirectly by reducing
the reimbursement rate received by the Company's
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customers. The reduction in reimbursement rates will place downward pressure on
prices charged for the Company's products sold to customers subject to Medicare
and Medicaid reimbursement programs. The Company believes that its C.A.P.
program will enable customers to respond to the reduction in reimbursement rates
by consolidating the purchase of multiple product lines through a single
supplier - the Company.
The Federal Food, Drug and Cosmetic Act, the Safe Medical Devices Act and
regulations issued or proposed thereunder, provide for regulation by the Federal
Food and Drug Administration ("FDA") of the marketing, manufacturing, labeling,
packaging and distribution of medical devices and drugs, including the Company's
products. Among these regulations are requirements that medical device
manufacturers register with the FDA, list devices manufactured by them and file
various kinds of reports. The FDA's "Good Manufacturing Practice for Medical
Devices" regulation sets forth requirements for, among other things, the
Company's manufacturing process and associated record creation and maintenance,
including tests and sterility.
The Company uses the services of an unaffiliated outside firm to sterilize
its GRAFCO(R) tampons and MSP(R) product line and tests of sterility are
conducted by an unaffiliated laboratory. Records of sterilization and related
tests are kept by the Company. The Company has also engaged the services of an
outside consulting firm to monitor the quality control program in force to
ensure that all manufactured products and supplier products comply with FDA
requirements. The Company's outside consultants are in the process of
implementing ISO 9001 certification on a company-wide basis, which will enhance
the Company's overall standard quality systems, and enable the Company to comply
with European regulatory requirements.
Unscheduled FDA inspections of the Company's facilities may occur from time
to time to determine compliance with FDA regulations. Certain requirements must
be met prior to the initial marketing of medical devices. These range from a
minimum obligation of waiting to receive a determination of substantial
equivalence from the FDA before the introduction of a medical device which the
Company has determined is substantially similar to devices already on the
market, to a maximum obligation of complying with the potentially expensive and
time-consuming testing process necessary to obtain FDA approval prior to the
commercial marketing of new medical devices. In addition, the FDA has the
authority to issue performance standards for devices manufactured by the
Company. Should such standards be issued, the Company's products would be
required to conform to them.
To date, the Company has not experienced any significant difficulty or
expense in complying with the requirements imposed on it by the FDA or other
government agencies. The Company believes that the manufacturing and quality
control procedures it employs conform to requirements of the "Good Manufacturing
Practice for Medical Devices" regulation and does not anticipate having to make
any material expenditures as a result of these requirements.
-11-
<PAGE>
Competition
The Company competes with many other manufacturers and distributors who
offer one or more products competitive with the Company's products; however, the
Company believes that no single competitor serving the Company's markets offers
as broad a product range as the Company. The Company's principal means of
competition are the breadth of its product range, quality, price and speed of
delivery. The C.A.P. program enables the Company to compete by offering
customers reduced operating costs associated with purchasing by consolidating
purchases of multiple products. With respect to the Company's Everest & Jennings
wheelchairs and Smith & Davis homecare beds, the Company's primary competitors
include Invacare Corporation, Sunrise Medical Corporation and Fuqua Enterprises.
Competition for the sale of wheelchairs and homecare beds is intense and is
based on a number of factors, including quality, reliability, price, financing
programs, delivery and service. The Company believes that the quality,
reputation and recent technological advances relating to its Everest & Jennings
wheelchairs and Smith & Davis homecare beds are favorable factors in competing
with other manufacturers. Many of the Company's competitors have substantially
greater financial and other resources than the Company.
Employees
As of March 8, 1997, the Company had 1,421 employees of which seven were
executive officers, 268 were administrative and clerical personnel (of which 12
were part-time employees), 204 were sales, marketing and customer service
personnel (of which four were part-time employees) and 942 were manufacturing
and warehousing personnel (of which 43 were part-time employees).
The Company is a party to five (5) collective bargaining agreements
covering the Company's facilities located in Hauppauge, New York; Passaic, New
Jersey; Earth City, Missouri; Ontario, Canada; and Guadalajara, Mexico. The
collective bargaining agreements cover approximately 620 employees. The
collective bargaining agreements for Hauppauge, New York; Passaic, New Jersey;
Earth City, Missouri; Ontario, Canada; and Guadalajara, Mexico are scheduled to
expire on September 30, 1997, July 27, 1999, September 13, 1999, July 24, 1998
and December 31, 1997, respectively.
The Company has never experienced an interruption or curtailment of
operations due to labor controversy, except for a three-day period during the
summer of 1993 in which the Company experienced a strike at its Passaic, New
Jersey facility, which did not have a material adverse effect on the Company's
operations. The Company considers its employee relations to be satisfactory.
-12-
<PAGE>
Business Combinations
The Company has had an active acquisition program from its inception, and
has completed 14 acquisitions since 1981. The Company focuses on acquisitions
which enable the Company to increase its market share, expand its existing
product lines, consolidate manufacturing and distribution facilities, and enable
the Company to enter into new markets and complement the Company's existing
business. Among other acquisitions, in 1983 the Company acquired Labtron, Inc.
and in 1985 it acquired Graham-Field, Inc., both of which form the core of the
Company's current business.
On May 31, 1991, the Company acquired 90% of the outstanding stock of
Horizon International Health Care, Inc., formerly known as AquaTherm Products
Corporation ("Aquatherm"), a manufacturer and distributor of deodorizers and
pressure control products for the treatment or prevention of decubitus ulcers
(pressure sores). On June 11, 1991, the Company acquired the remaining 10% of
the outstanding stock of Aquatherm. The total cash purchase price for the
outstanding stock of Aquatherm was $2,356,000.
On October 1, 1991, the Company acquired from TEMCO National Corp.
("TEMCO") substantially all of the operating assets (excluding the real estate)
of the TEMCO Healthcare Division for a purchase price consisting of $5,849,000
in cash which is net of certain purchase price adjustments. In connection with
the acquisition, the Company assumed certain liabilities and entered into a
fifteen year lease for TEMCO's manufacturing and warehouse facility located in
Passaic, New Jersey. See "Properties". The operating assets acquired by the
Company included substantially all of the assets (excluding the real estate)
used by TEMCO in the business of manufacturing and marketing medical supply
products, including ambulatory aids, bath and shower accessories, geriatric
seating units and patient room assistance and convenience accessories.
On April 27, 1992, the Company acquired certain assets of ConvaTec, a
division of E.R. Squibb & Sons, Inc. ("Bandage"), for a purchase price of
$369,000 in cash. In connection with the acquisition, the Company assumed
certain liabilities of Bandage, and entered into a long-term lease for Bandage's
manufacturing facility located in Central Falls, Rhode Island. See "Properties."
The assets acquired by the Company included substantially all of the assets used
by Bandage in the business of manufacturing elastic bandages.
On May 28, 1992, the Company acquired substantially all of the operating
assets of Diamond Medical Equipment Corp. ("DEC") and National Health Care
Equipment Inc. ("NHC") for a purchase price of $9,306,000 in cash, and the
issuance and delivery to the principal stockholders of DEC and NHC of 210,176
shares of common stock of the Company. In addition, the Company repaid certain
bank indebtedness of DEC and NHC in the amount of $3,200,000 and assumed certain
liabilities of DEC and NHC. DEC and NHC, formerly privately-owned companies, are
manufacturers of patient aids and distributors of adult incontinence products,
nutritional supplements and other home healthcare products.
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<PAGE>
Effective July 1, 1995, the Company acquired substantially all of the
assets and liabilities of National Medical Excess Corp., a distributor of used
and refurbished medical products, including respiratory and durable medical
equipment. The purchase price, including acquisition expenses, was approximately
$723,000 in cash, plus the assumption of certain liabilities.
On March 4, 1996, the Company sold its Gentle Expressions breast pump
product line to The Lumiscope Company, Inc. for a purchase price of $1,000,000,
of which $500,000 was paid in cash with the balance in a secured subordinated
promissory note in the aggregate principal amount of $500,000, payable over 48
months with interest at the prime rate of interest plus 1%.
On September 4, 1996, the Company acquired substantially all of the assets
of V.C. Medical for a purchase price consisting of $1,703,829 in cash, and the
issuance of 32,787 shares of common stock of the Company, valued at $7.625 per
share representing the closing market price of the common stock of the Company
on the last trading day immediately prior to the closing. In addition, the
Company assumed certain liabilities of V.C. Medical in the amount of $296,721.
Under the terms of the transaction, in the event the pre-tax income of the
acquired business equals or exceeds $1,000,000 during the twelve (12) months
following the closing date, an additional $500,000 in cash will be paid to V.C.
Medical. The shares were delivered into escrow, and will be held in escrow until
February 4, 1998, subject to any claims for indemnification or purchase price
adjustments in favor of the Company.
On November 27, 1996, the Company acquired Everest & Jennings in a merger
transaction. In the merger, each share of the common stock of Everest &
Jennings, other than shares of the common stock of Everest & Jennings cancelled
pursuant to the merger, was converted into the right to receive .35 shares of
the common stock of the Company. In connection with the merger, 2,522,691 shares
of common stock of the Company were issued in exchange for the common stock of
Everest & Jennings. The Company's common stock was valued at $7.64 per share,
which represented the average closing market price of the Company's common stock
for the period three business days immediately prior to and three business days
immediately after the announcement of the execution of the merger agreement.
In addition, in connection with, and at the effective time of the merger:
(i) BIL (Far East Holdings) Limited, a Hong Kong corporation and the
majority stockholder of Everest & Jennings ("BIL"), purchased
1,922,242 shares of common stock of the Company (valued at $7.64 per
share) for $24,989,151, representing an amount equal to the
outstanding principal and interest on Everest & Jennings' indebtedness
to Hong Kong and Shanghai Banking Corporation Limited, which
indebtedness (the "HSBC Indebtedness") was guaranteed by BIL. The
proceeds of such stock purchase were contributed by the Company to
Everest & Jennings
-14-
<PAGE>
immediately following the merger and used to discharge the HSBC
Indebtedness.
(ii) The Company issued $61 million stated value of a new Series B
Cumulative Convertible Preferred Stock (the "Series B Preferred
Stock") to BIL in exchange for certain indebtedness of Everest &
Jennings owing to BIL and shares of E&J preferred stock owned by BIL.
The Series B Preferred Stock is entitled to a dividend of 1.5% per
annum payable quarterly, votes on an as-converted basis as a single
class with the common stock of the Company and the Series C Preferred
Stock (as defined below), is not subject to redemption and is
convertible into shares of the common stock of the Company (x) at the
option of the holder thereof, at a conversion price of $20 per share
(or, in the case of certain dividend payment defaults, at a conversion
price of $15.50 per share), (y) at the option of the Company, at a
conversion price equal to current trading prices (subject to a minimum
conversion price of $15.50 and a maximum conversion price of $20 per
share) and (z) automatically on the fifth anniversary of the date of
issuance at a conversion price of $15.50 per share. Such conversion
prices are subject to customary antidilution adjustments. Based on an
independent valuation, the fair value ascribed to the Series B
Preferred Stock was $28,200,000.
(iii) BIL purchased for cash $10 million stated value of a new Series C
Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock"), the proceeds of which are available to the Company for
general corporate purposes. The Series C Preferred Stock is entitled
to a dividend of 1.5% per annum payable quarterly, votes on an
as-converted basis as a single class with the common stock of Company
and the Series B Preferred Stock, is subject to redemption as a whole
at the option of the Company on the fifth anniversary of the date of
issuance at stated value and, if not so redeemed, will be convertible
into shares of the common stock of the Company automatically on the
fifth anniversary of the date of issuance at a conversion price of $20
per share, subject to customary antidilution adjustments. Based on an
independent valuation, the fair value ascribed to the Series C
Preferred Stock was $3,400,000.
(iv) Certain indebtedness in the amount of $4 million owing by the Company
to BIL was exchanged for an equal amount of unsecured subordinated
indebtedness of the Company maturing on April 1, 2001 and bearing
interest at the effective rate of 7.7% per annum.
On February 28, 1997, Everest & Jennings Canada acquired substantially all
of the assets and certain liabilities of Motion 2000 Inc. ("Motion 2000") and
its wholly-owned subsidiary, Motion 2000 Quebec Inc. ("Motion Quebec"), for a
purchase price equal to Cdn. $2.9 million (Canadian dollars), or approximately
$2.15 million in U.S. dollars. The purchase price was paid by the issuance of
187,733 shares of the common stock of the Company valued at $11.437 per share,
of which 28,095 shares were delivered into escrow. The purchase price is subject
to adjustment if the final determination of the closing date net book value of
the assets acquired by Everest & Jennings Canada is equal to or less than Cdn.
$450,000 (Canadian dollars), or approximately $333,000 in U.S. dollars. All of
the escrowed shares will be held in escrow until the earlier to occur (the
"Initial
-15-
<PAGE>
Release Date") of June 28, 1997, or the final resolution of the purchase price.
On the Initial Release Date, a portion of the escrowed shares will be released
in an amount equal to the difference between (i) 28,095 shares and (ii) the sum
of the number of (x) any escrowed shares subject to any indemnification claims,
(y) any escrowed shares used to satisfy any adjustment to the purchase price,
and (z) 18,729 shares. The balance of the escrowed shares will be released on
December 31, 1997, subject to any claims for indemnification.
On March 7, 1997, E&J acquired Kuschall of America, Inc. ("Kuschall"), a
manufacturer of pediatric wheelchairs, high-performance adult wheelchairs and
other rehabilitation products, for a purchase price of $1,510,000, representing
the net book value of Kuschall. The purchase price was paid by the issuance of
116,154 shares of the common stock of the Company valued at $13.00 per share, of
which 23,230 shares were delivered into escrow. The escrow shares will be
released on March 7, 1999, subject to any purchase price adjustments in favor of
the Company and claims for indemnification.
There can be no assurance that any additional acquisitions will be
effected.
-16-
<PAGE>
Item 2. Properties:
The Company's principal executive offices are located in Hauppauge, New
York.
The Company's primary domestic distribution centers are located in
Hauppauge, New York; St. Louis, Missouri; Santa Fe Springs, California; and
Jacksonville, Florida. Additional points of distribution include Graham-Field
satellite locations in Mount Vernon, New York; Dallas, Texas; and San Juan,
Puerto Rico. The Company's primary manufacturing facilities are located in
Passaic, New Jersey; Earth City, Missouri; Clay Falls, Rhode Island;
Guadalajara, Mexico; and Toronto, Canada. The manufacturing facilities located
in Toronto, Canada and Guadalajara, Mexico are owned by the Company. The Company
plans to open a new leased facility in Baltimore, Maryland in April 1997, which
will operate as a Graham-Field Express satellite location.
The Company believes that its facilities are in good repair and provide
adequate capacity for the near term growth of the Company's business.
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<PAGE>
Existing leases for the Company's principal facilities are summarized in the
following table.
A. Manufacturing Facilities:
<TABLE>
<CAPTION>
Lease
Approx. Expiration
Location Sq. Ft. Date Principal Use Annual Rent
-------- ------- ---------- ------------- -----------
<C> <C> <C> <C> <C>
400 Rabro Drive East 105,000 12/31/06 Corporate Office, $ 934,000 1/01/96 - 12/31/01
Hauppauge, NY Manufacturing, 1,023,000 1/01/02 - 12/31/06
Distribution
3601 Rider Trail 147,000 7/31/02 Manufacturing, $ 279,300 1/01/96 - 7/31/97
Earth City, MO Distribution 323,400 8/01/97 - 7/31/02
125 South Street 120,000 12/31/04 Manufacturing, $ 336,000 1/01/96 - 12/31/99
Passaic, NJ Distribution 360,000 1/01/00 - 12/31/04
131 Clay Street 21,467 12/31/97 Manufacturing, $ 67,555 1/01/96 - 12/31/97
Central Falls, RI Distribution
</TABLE>
B. Distribution Facilities:
<TABLE>
<CAPTION>
Lease
Approx. Expiration
Location Sq. Ft. Date Principal Use Annual Rent
-------- ------- ---------- ------------- -----------
<C> <C> <C> <C> <C>
12055 Missouri 144,000 3/31/07 Warehouse, $ 504,300 1/01/96 - 3/31/97
Bottom Road(1) Distribution 561,950 4/01/97 - 3/31/02
St. Louis County, MO 648,400 4/01/02 - 3/31/07
11954 East Washington Blvd 52,810 2/01/02 Warehouse, $ 228,144 2/01/97 - 8/01/99
Santa Fe Springs, CA Distribution 250,956 9/01/99 - 2/01/02
8291 Forshee Drive 28,255 8/31/99 Warehouse, $ 112,185 7/01/96 - 8/31/99
Jacksonville, FL Distribution
144 East Kingsbridge 48,000 2/28/99 Warehouse, $ 162,000 3/01/96 - 2/28/97
Mount Vernon, NY Distribution 180,000 3/01/97 - 2/28/99
Puerto Rico Highway #1 21,600 10/08/99 Warehouse, $ 114,000 10/08/96 - 10/08/99
Rio Canas Ward Distribution
Caguas, PR
135 Fell Court 30,000 12/31/06 Warehouse $ 202,500 1/01/96 - 12/31/96
Hauppauge, NY 222,750 1/01/97 - 12/31/01
240,000 1/01/02 - 12/31/06
7447 New Ridge Road 20,147 4/30/02 Warehouse, $ 90,660 4/15/97 - 4/30/99
Hanover, MD Distribution 95,700 5/01/99 - 4/30/02
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C>
1707 Falcon Drive 10,151 7/31/01 Warehouse, $ 35,520 8/01/96 - 7/31/99
DeSoto, TX Distribution 38,040 8/01/99 - 7/31/00
40,080 8/01/00 - 7/31/01
</TABLE>
- ----------
(1) The lease payments for the St. Louis Facility for the period April 1, 1997
through March 31, 2007 are subject to fluctuations in the consumer price
index. In no event shall the base rent exceed the amounts reflected in the
table.
-19-
<PAGE>
Item 3. Legal Proceedings:
On June 19, 1996, a class action lawsuit was filed on behalf of all
stockholders of Everest & Jennings (other than the named defendants) in the
Delaware Court of Chancery, following announcement on June 17, 1996 of the
original agreement in principle between Everest & Jennings and the Company. The
class action names as defendants the Company, Everest & Jennings, Everest &
Jennings' directors, and BIL. The class action challenges the transactions
contemplated by the original agreement in principle, alleging, among other
things, that (i) such transactions were an attempt to eliminate the public
stockholders of Everest & Jennings at an unfair price, (ii) BIL will receive
more value for its holdings in Everest & Jennings than its minority
stockholders, (iii) the public stockholders will not be adequately compensated
for the potential earnings of Everest & Jennings, (iv) BIL and the directors of
Everest & Jennings breached or aided and abetted the breach of fiduciary duties
owed to the stockholders (other than the defendants) by not exercising
independent business judgment and having conflicts of interest, and (v) the
Company aided and abetted and induced breaches of fiduciary duties by other
defendants by offering incentives to members of management, either in the form
of continued employment or monetary compensation and perquisites, in exchange
for their approval of the merger. The class action seeks to rescind the merger
or an award of rescissionary damages if it cannot be set aside, and also prays
for an award of compensatory damages. The Company believes that it has valid
defenses to the complaint's allegations of wrongdoing, and intends to vigorously
defend the lawsuit.
On May 21, 1996, the Company was sued by Minnesota Mining & Manufacturing
Company ("3M") in a claim purportedly arising under federal, state and common
law trademark, false advertising, and unfair competition laws, as well as for
breach of, and interference with, contracts. 3M alleges that the Company is
selling 3M products in violation of federal and state law, and seeks monetary
damages in an unspecified amount, as well as injunctive relief against the
Company's continued sale of 3M products. The claim was filed in the Southern
District of New York. The Company vigorously denies the allegations of 3M's
complaint, and has filed an answer denying the allegations of wrongdoing and
asserting affirmative defenses. In addition, the Company has asserted
counterclaims against 3M under federal antitrust laws, as well as an unfair
competition claim. On October 16, 1996, 3M moved to dismiss the Company's
antitrust counterclaims. Briefing of the motion has been completed and the
parties are awaiting a decision. 3M has proposed a settlement of all claims
pursuant to which the Company would, among other things, agree to restrict its
purchases of 3M products to certain authorized 3M dealers, and make a payment of
no more than $400,000. Although settlement discussions are ongoing, it is not
possible to predict the outcome of such discussions.
Everest & Jennings and its subsidiaries are parties to certain lawsuits and
proceedings as described below (the "Everest & Jennings Proceedings"). Under the
terms of the Amended and Restated Stockholder Agreement dated as of September 3,
1996, as amended on September 19, 1996, by and among BIL, the Company and Irwin
Selinger (the "Stockholder
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<PAGE>
Agreement"), BIL has agreed to indemnify the Company and its subsidiaries
against the Everest & Jennings Proceedings in the event the amount of losses,
claims, demands, liabilities, damages and all related costs and expenses
(including attorneys' fees and disbursements) in respect of the Everest &
Jennings Proceedings exceeds in the aggregate the applicable amounts reserved
for such proceedings on the books and records of Everest & Jennings as of
September 3, 1996. In view of BIL's obligation to indemnify the Company and its
subsidiaries with respect to such proceedings, management does not expect that
the ultimate liabilities, if any, with respect to such proceedings, will have a
material adverse effect on the consolidated financial position or results of
operations of the Company.
On July 17, 1990, a class action suit was filed in the United States
District Court for the Central District of California by a stockholder of
Everest & Jennings against Everest & Jennings and certain of its present and
former directors and officers. The suit seeks unspecified damages for alleged
non-disclosure and misrepresentation concerning Everest & Jennings in violation
of federal securities laws. The district court dismissed the complaint on March
26, 1991, and plaintiff filed his first amended complaint on May 8, 1991. The
district court again granted a motion to dismiss the entire action on November
26, 1991. Plaintiff then took an appeal to the Ninth Circuit, which reversed the
district court's dismissal of the first amended complaint and remanded the case
to the district court for further proceedings. On March 25, 1996, the district
court granted Plaintiff's motion to certify a class composed of purchasers of
the Everest & Jennings' common stock during the period from March 31, 1989 to
June 12, 1990. Plaintiff's counsel has not as yet submitted to the court any
proposed notice of class certification and, consequently, the members of the
class have not been notified that the court has certified the case to proceed as
a class action. Everest & Jennings has received and filed responses and
objections to a document request, but further action has been deferred to allow
the parties to discuss possible settlement. Everest & Jennings has ordered the
parties to file and plaintiff's counsel has filed monthly reports on the status
of settlement discussions since September 1996. There are numerous defenses
which Everest & Jennings intends to assert to the allegations in the first
amended complaint if settlement cannot be reached on acceptable terms. Under
Everest & Jennings' directors and officers insurance policy, Everest & Jennings
has coverage against liabilities incurred by its directors and officers, subject
to a self-insured retention of $150,000 (which has been exceeded by defense
costs incurred to date). The carrier has contended that fifty percent of the
liability and expenses in the case must be allocated to Everest & Jennings,
which is not an insured defendant, and fifty percent to the insured former
director and officer defendants. This proceeding constitutes an Everest &
Jennings Proceeding, which is covered under BIL's indemnification obligations
pursuant to the terms and provisions of the Stockholder Agreement.
Die Cast Products, Inc., a former subsidiary of Everest & Jennings, was
named as a defendant in a lawsuit filed by the State of California pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act 42
U.S.C.ss.ss.9601 et seq. Everest & Jennings was originally notified of this
action on December 10, 1992. A settlement was reached at an October 5, 1995
Mandatory Settlement Conference before Judge Rea in the Federal District
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<PAGE>
Court of the Central District of California. The state of California has agreed
to accept the sum of $2.6 million as settlement for all past costs and future
remedial work. Everest & Jennings' share of the settlement with the state of
California has amounted to $41,292.30, which sum was paid on January 3, 1997. No
further claims or assessments with respect to this matter are anticipated at
this time. This proceeding constitutes an Everest & Jennings Proceeding, which
is covered under BIL's indemnification obligations pursuant to the terms and
provisions of the Stockholder Agreement.
In March, 1993, E&J received a notice from the U.S. Environmental
Protection Agency ("EPA") regarding an organizational meeting of generators with
respect to the Casmalia Resources Hazardous Waste Management Facility ("Casmalia
Site") in Santa Barbara County, CA. The EPA alleges that the Casmalia Site is an
inactive hazardous waste treatment, storage and disposal facility which accepted
large volumes of commercial and industrial wastes from 1973 until 1989. In late
1991, the Casmalia Site owner/operator abandoned efforts to actively pursue site
permitting and closure and is currently conducting only minimal maintenance
activities. An agreement in principle now has been reached between the Casmalia
Steering Committee ("CSC") and the EPA for a settlement of the majority of the
Casmalia site liability. The Steering Committee represents approximately 50 of
the largest volume generators at the Casmalia site. It is anticipated that the
agreement will be formalized and embodied in a Consent Decree in the summer and
fall of 1997. Pursuant to the settlement, the CSC members are committing to
perform and fund Phase I work at the site. It is estimated that the Phase I work
being committed to will cost approximately $30 to $35 million dollars and will
take three to five years to complete. This cost will be allocated to Steering
Committee members based upon their volume of waste sent to the site. Everest &
Jennings accounts for 0.8% of the waste. Thus, by participating in the Phase I
settlement, Everest & Jennings has committed to payments of approximately
$280,000 to be spread over a three to five year period. Pursuant to the
settlement, Everest & Jennings will be released from further obligation for
thirty (30) years. In addition, the Steering Committee companies are seeking to
recover from the owner and operator of the site. Any such recovery will diminish
E&J's' payout pursuant to the settlement. This proceeding constitutes an Everest
& Jennings Proceeding, which is covered under BIL's indemnification obligations
pursuant to the terms and provisions of the Stockholder Agreement.
In 1989, a patent infringement case was initiated against E&J and other
defendants in the U.S. District Court, Central District of California. E&J
prevailed at trial with a directed verdict of patent invalidity and
non-infringement. The plaintiff filed an appeal with the U.S. Court of Appeals
for the Federal Circuit. On March 31, 1993, the Court of Appeals vacated the
District Court's decision and remanded the case for trial. Impacting the retrial
of this litigation was a re-examination proceeding before the Board of Patent
Appeals with respect to the subject patent. A ruling was rendered November 23,
1993 sustaining the claim of the patent which E&J Inc. has been charged with
infringing. Upon the issuance of a patent re-examination certificate by the U.S.
Patent Office, the plaintiff presented a motion to the District Court requesting
a retrial of the case. E&J presented a Motion for Summary Judgment of
Noninfringement based in part
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<PAGE>
upon the November 23, 1993 decision of the Board of Patent Appeals. The Motion
was granted in follow-up conferences and an official Judgment was entered
November 17, 1994. Following the appeal by the plaintiffs, the case has been
remanded to the U.S. District Court, Central District of California, for further
consideration. E&J believes that this case is without merit and intends to
contest it vigorously. The ultimate liability of E&J, if any, cannot be
determined at this time. This proceeding constitutes an Everest & Jennings
Proceeding, which is covered under BIL's indemnification obligations pursuant to
the terms and provisions of the Stockholder Agreement.
Following a jury trial on July 15, 1996, a verdict was rendered in the
District Court of the First Judicial District of the State of New Mexico in a
civil product liability law suit (Chris Trew et al. vs. Smith and Davis
Manufacturing Company, Inc., No. SF95-354) against Smith & Davis Manufacturing
Company, a wholly-owned subsidiary of Everest & Jennings ("Smith & Davis"), in
the amount of $635,698.12 actual damages, prejudgment interest and costs, plus
$4 million punitive damages. The suit was instituted on February 25, 1995 by the
children and surviving heirs and personal representatives of a nursing home
patient in Carlsbad, New Mexico who died on September 28, 1993 after her head
became pinned between a bed rail allegedly manufactured by Smith & Davis and her
bed. The suit alleged that the bed rail in question was defective and unsafe for
its intended purpose, that Smith & Davis was negligent in designing,
manufacturing, testing and marketing such bed rails, and that the negligence of
the nursing home in question was the proximate cause of decedent's injuries and
death. The nursing home reached a settlement with Plaintiffs prior to trial.
Judgment was entered on the jury verdict, which bears interest at the rate of
15% from August 30, 1996 until paid. On October 15, 1996, Plaintiffs filed a
related case in the Circuit Court of the County of St. Louis, Missouri (Chris
Trew, et. al. v. Everest & Jennings, et al., Cause No. 96CC-000456, Division
39), which seeks a declaratory judgment against Everest & Jennings and BIL to
pierce their respective corporate veils and holding them jointly and severally
liable for the full amount of the New Mexico judgment. On February 26, 1997, the
parties agreed in principle to a proposed settlement in which the Plaintiffs
would receive $3 million, of which Everest & Jennings estimates that
approximately $1.5 million will be paid by Everest & Jennings' insurance
carriers, however, Everest & Jennings may seek additional recovery from the
insurance carriers. The amounts required to be paid in the proposed settlement
in excess of any insurance recoveries will be borne, in whole or in part, by BIL
under the indemnification terms and provisions contained in the Stockholder
Agreement and/or through the Company's right of offset under the Company's
subordinated promissory note to BIL dated as of December 10, 1996 (the "BIL
Note"), in the principal amount of $4 million.
The Company and its subsidiaries are parties to other lawsuits and other
proceedings arising out of the conduct of its ordinary course of business,
including those relating to product liability and the sale and distribution of
its products. While the results of such lawsuits and other proceedings cannot be
predicted with certainty, management does not expect that the ultimate
liabilities, if any, will have a material adverse effect on the consolidated
financial position or results of operations of the Company.
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<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders:
A special meeting (the "Special Meeting") of the Company's stockholders was
held on November 27, 1996 to approve the following matters:
1. The issuance of shares of capital stock of the Company pursuant to an
Amended and Restated Agreement and Plan of Merger dated as of September 3, 1996
and amended as of October 1, 1996, by and among the Company, E&J Acquisition
Corp. ("Acquisition Corp."), a wholly-owned subsidiary of the Company, Everest &
Jennings, and BIL, providing for the merger of Acquisition Corp. with and into
Everest & Jennings.
2. To adopt an amendment to Article FOURTH of the Certificate of
Incorporation of the Company (the "Certificate of Incorporation") to increase
the number of authorized shares of the common stock of the Company from
40,000,000 shares to 60,000,000 shares.
3. To adopt an amendment to Article NINTH of the Certificate of
Incorporation to require that stockholder action be taken at an annual meeting
of stockholders or at a special meeting of stockholders and prohibit stockholder
action by written consent.
4. To adopt an amendment to Article ELEVENTH of the Certificate of
Incorporation to, among other things, provide that directors be removed only for
cause and only with the approval of the holders of at least 50% of the voting
power of the Company entitled to vote generally in the election of directors.
5. To adopt an amendment to Article TWELFTH of the Certificate of
Incorporation to provide that the stockholder vote required to alter, amend, or
repeal certain provisions of the Company Bylaws, or to adopt any provision
inconsistent therewith, shall be 80% of the voting power of the Company entitled
to vote generally in the election of directors.
6. To approve an amendment to the Company's Incentive Program to increase
the maximum number of shares of the common stock of the Company available under
the Incentive Program by 900,000 shares.
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<PAGE>
As of the record date of October 11, 1996, 14,209,895 shares of common stock of
the Company were issued and outstanding. Tabulations for the proposals voted at
the Special Meeting are set forth below:
For Against/Withheld Abstain
--- ---------------- -------
Proposal No. 1 8,974,876 130,669 107,024
Proposal No. 2 9,225,439 307,202 38,124
Proposal No. 3 7,848,233 1,192,439 171,906
Proposal No. 4 7,164,461 1,866,451 181,657
Proposal No. 5 7,108,604 1,930,334 173,631
Proposal No. 6 8,155,494 962,591 93,584
All of such proposals were approved at the Special Meeting.
-25-
<PAGE>
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters:
(a) The Common Stock of the Company is traded on the New York Stock
Exchange (Symbol: GFI). The following provides the high and low sales prices for
the period from January 1, 1995 through March 20, 1997 as reported on the New
York Stock Exchange.
High Sales Price Low Sales Price
---------------- ---------------
1995
First Quarter 4 1/2 3 1/4
Second Quarter 4 1/4 3
Third Quarter 4 5/8 3
Fourth Quarter 4 5/8 3 1/4
1996
First Quarter 5 3 1/8
Second Quarter 9 7/8 4 1/4
Third Quarter 9 1/8 6 1/2
Fourth Quarter 9 1/2 6 5/8
1997
First Quarter, through
March 20, 1997 13 3/4 8 1/2
(b) As of the close of business on March 20, 1997, the number of holders of
record of Common Stock of the Company was 595.
(c) On December 10, 1996, the Company entered into a syndicated three-year
senior secured revolving credit facility (the "Credit Facility") for up to $55
million of borrowings, including letters of credit and banker's acceptances,
arranged by IBJ Schroder Bank & Trust Company ("IBJ Schroder"), as agent. The
proceeds from the Credit Facility were used to (i) refinance certain existing
indebtedness of the Company, including the indebtedness (a) under the terms of
the Note and Warrant Agreement dated as of March 12, 1992, as amended (the "John
Hancock Note and Warrant Agreement"), with John Hancock Mutual Life Insurance
Company ("John Hancock"), and (b) to Chase Manhattan Bank, and (ii) provide for
the nationwide roll-out of the Graham-Field Express program and for the ongoing
working capital needs of the Company. The credit facility is secured by the
Company's receivables, inventory and proceeds thereof.
-26-
<PAGE>
Under the terms of the Credit Facility, the Company is prohibited from
declaring, paying or making any dividend or distribution on any shares of the
common stock or preferred stock of the Company (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of the Company.
Notwithstanding the foregoing restrictions, the Company is permitted to pay cash
dividends in any fiscal year in an amount not to exceed the greater of (i) the
amount of dividends due BIL under the terms of the Series B and Series C
Preferred Stock in any fiscal year, or (ii) 12.5% of net income of the Company
on a consolidated basis, provided, that no event of default shall have occurred
--------
and be continuing or would exist after giving effect to the payment of the
dividends.
The Company anticipates that for the foreseeable future any earnings will
be retained for use in its business and accordingly, does not anticipate the
payment of cash dividends, other than to BIL in accordance with the terms and
provisions of the Series B and Series C Preferred Stock.
-27-
<PAGE>
Item 6. Selected Financial Data:
Selected Financial Data
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994 1993 1992
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net Revenues $ 127,245,000 $100,403,000 $ 94,501,000 $ 92,552,000 $84,103,000
============= ============ ============ ============ ===========
(Loss) Income
before extraordinary item
and cumulative effect
of change in accounting
principle $ (12,215,000) $ 738,000 $ (2,356,000) $ (3,398,000) $ 1,244,000
Extraordinary item (736,000) -- -- -- --
Cumulative effect of change
in accounting principle -- -- -- 530,000 --
------------- ------------ ------------ ------------ -----------
Net (loss) income $ (12,951,000) $ 738,000 $ (2,356,000) $ (2,868,000) $ 1,244,000
============= ============ ============ ============ ===========
Net (loss) income per common share:
Before extraordinary item
and cumulative effect of
change in accounting
principle $ (.84) $ .06 $ (.18) $ (.26) $ .10
Extraordinary item (.05) -- -- -- --
Cumulative effect of change
in accounting principle -- -- -- .04 --
------------- ------------ ------------ ------------ -----------
Net (loss) income per
common share $ (.89) $ .06 $ (.18) $ (.22) $ .10
============= ============ ============ ============ ===========
Weighted average number of
common and equivalent
shares outstanding 14,574,000 13,332,000 12,879,000 12,796,000 12,719,000
============= ============ ============ ============ ===========
</TABLE>
-28-
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
Balance Sheet Data: 1996 1995 1994 1993 1992
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current Assets $ 94,270,000 $53,979,000 $51,078,000 $47,866,000 $50,887,000
------------ ----------- ----------- ----------- -----------
Current Liabilities $ 81,865,000 $20,216,000 $22,796,000 $18,601,000 $17,309,000
------------ ----------- ----------- ----------- -----------
Total Assets $202,476,000 $99,799,000 $99,494,000 $97,995,000 $97,994,000
------------ ----------- ----------- ----------- -----------
Long-term debt (including
capital leases due after one
year) $ 6,057,000 $ 972,000 $ 1,596,000 $ 2,170,000 $ 1,272,000
------------ ----------- ----------- ----------- -----------
Guaranteed Senior Notes (net
of current maturities) $ - $19,000,000 $20,000,000 $20,000,000 $20,000,000
------------ ----------- ----------- ----------- -----------
Stockholders' equity $112,802,000 $59,611,000 $55,102,000 $57,224,000 $59,324,000
------------ ----------- ----------- ----------- -----------
</TABLE>
-29-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements as
defined by the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include plans and objectives of management for future operations,
including plans and objectives relating to the future economic performance and
financial results of the Company. The forward-looking statements relate to (i)
the expansion of the Company's market share, (ii) the Company's growth into new
markets, (iii) the development of new products and product lines to appeal to
the needs of the Company's customers, (iv) the opening of new distribution and
warehouse facilities, including the expansion of the Graham-Field Express
program, (v) obtaining regulatory and governmental approvals, (vi) the upgrading
of the Company's technological resources and systems and (vii) the retention of
the Company's earnings for use in the operation and expansion of the Company's
business.
Important factors and risks that could cause actual results to differ
materially from those referred to in the forward-looking statements include, but
are not limited to, the effect of economic and market conditions, the impact of
the consolidation of healthcare practitioners, the impact of healthcare reform,
opportunities for acquisitions and the Company's ability to effectively
integrate acquired companies, the Company's ability to obtain an alternative
source of supply for homecare beds, the termination of the Company's Exclusive
Wheelchair Supply Agreement with P.T. Dharma, the ability of the Company to
maintain its gross profit margins, the ability to obtain additional financing to
expand the Company's business, the failure of the Company to successfully
compete with the Company's competitors that have greater financial resources,
the loss of key management personnel or the inability of the Company to attract
and retain qualified personnel, adverse litigation results, the acceptance and
quality of new software and hardware products which will enable the Company to
expand its business, the acceptance and ability to manage the Company's
operations in foreign markets, possible disruptions in the Company's computer
systems or distribution technology systems, possible increases in shipping rates
or interruptions in shipping service, the level and volatility of interest rates
and currency values, the impact of current or pending legislation and
regulation, as well as the risks described from time to time in the Company's
filings with the Securities and Exchange Commission, which include this Annual
Report on Form 10-K, and the section entitled "Risk Factors" in the Company's
Registration Statement on Form S-4 dated as of October 18, 1996.
The forward-looking statements are based on current expectations and
involve a number of known and unknown risks and uncertainties that could cause
the actual results, performance and/or achievements of the Company to differ
materially from any future results, performance or achievements, express or
implied, by the forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, and that in light
-30-
<PAGE>
of the significant uncertainties inherent in forward-looking statements, the
inclusion of such statements should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.
RESULTS OF OPERATIONS
Operating Revenues
- ------------------
1996 compared to 1995. Operating revenues were $126,715,000 for the year
---------------------
ended December 31, 1996, or 27% higher than the year ended December 31, 1995.
The increase in operating revenues was primarily attributable to the Company's
expansion of its C.A.P. program, the introduction of the Graham-Field Express
program, the addition of new product lines and the acquisition of Everest &
Jennings on November 27, 1996.
In March 1996, Graham-Field Express was introduced to offer "same-day" and
"next-day" service to home healthcare dealers of certain strategic home
healthcare products, including Temco patient aids, adult incontinence products,
Everest & Jennings wheelchairs, Smith & Davis homecare beds, nutritional
supplements and other freight and time sensitive products. Revenues attributable
to Graham-Field Express were approximately $14,431,000 for the year ended
December 31, 1996. The Company plans to open an additional three (3) to four (4)
Graham-Field Express sites in 1997 and eight (8) in 1998. A new Graham-Field
Express location is scheduled to open in Baltimore, Maryland in April 1997. By
late 1999, the Company plans to have a total of approximately twenty-five (25)
Graham-Field Express locations serving all of the major U.S. markets.
On September 4, 1996, the Company acquired V.C. Medical, a regional home
healthcare wholesaler located in Puerto Rico. V.C. Medical currently operates as
Graham-Field Express (Puerto Rico). Revenues attributable to Graham-Field
Express (Puerto Rico) were approximately $1,766,000 for the year ended December
31, 1996.
On November 27, 1996, the Company completed its acquisition of Everest &
Jennings. The Company believes that the combination of Everest & Jennings'
manufacturing operations with the Company's cost-effective delivery systems and
advanced technology systems will increase the Company's presence in the home
healthcare market with a greater level of service and efficiency, and a broader
portfolio of products. The coordination of the manufacturing and distribution of
the wheelchair and homecare bed product lines, which represent the leading
product lines in the home healthcare market, will enhance the Company's position
as the leading "one-stop-shop" distributor in the medical products industry. The
Everest & Jennings name, a symbol of quality for more than fifty years, has
enabled the Company to introduce its Temco home healthcare product line and
other proprietary product lines into the rehabilitation marketplace, a virtually
untapped marketplace for the Company in the past. Revenues attributable
-31-
<PAGE>
to Everest & Jennings for the period from the date of acquisition to December
31, 1996 were approximately $3,634,000.
The increase in operating revenues was achieved despite the decline in
sales of approximately $5,905,000 to Apria Healthcare Group, Inc. ("Apria") for
the year ended December 31, 1996 as compared to the prior year. The Company's
supply agreement with Apria expired on December 31, 1995.
1995 compared to 1994. Operating revenues were $100,113,000 for the year
----------------------
ended December 31, 1995, or 6% higher than the year ended December 31, 1994. The
increase in operating revenues was primarily attributable to improved service
levels, improvements in the Company's distribution network, the development of
new sales and marketing programs and the expansion of the Company's product
lines. During 1995, the Company introduced over 100 new products including the
Temco deluxe four-wheel walkabout, the John Bunn Nebulite II medication
compressor and the Labtron automatic wrist blood pressure monitor. In addition,
1995 revenues also included approximately $935,000, net of elimination of
intercompany sales, attributable to the acquisition of National Medical Excess
Corp., effective as of July 1, 1995.
The revenue increase was achieved despite the decline in sales to Apria of
21% for the year ended December 31, 1995 as compared to the prior year. The
Company's supply agreement with Apria terminated on December 31, 1995. During
1995 and 1994, the Company's product sales to Apria were approximately $8.1
million and $10.3 million, respectively, which represented approximately 8% and
11%, respectively, of the Company's product sales. The Company's sales to Apria
generated gross profit margins of approximately 20%, which is significantly
lower than the Company's sales to its other customers which generate gross
profit margins of approximately 33%.
Interest and Other Income
- -------------------------
1996 compared to 1995. Interest and other income increased from $290,000 in
----------------------
1995 to $530,000 in 1996. The increase is primarily due to the gain recognized
by the Company and royalties received by the Company in connection with the sale
of the Gentle Expressions(R) breast pump product line, and interest income on
certain notes receivable.
1995 compared to 1994. Interest and other income increased from $72,000 in
----------------------
1994 to $290,000 in 1995. The increase is primarily due to the receipt of
approximately $200,000 relating to an insurance recovery and a favorable
settlement of a contractual dispute.
Cost of Revenues
- ----------------
1996 compared to 1995. Cost of revenues as a percentage of operating
----------------------
revenue for 1996 decreased to 68% from 69% in 1995. The decrease is primarily
related to the
-32-
<PAGE>
Company's ability to maintain selling prices while benefiting from improved
purchasing and manufacturing efficiencies.
1995 compared to 1994. Cost of revenues as a percentage of operating
----------------------
revenue remained relatively unchanged from the prior year, at 69%. Due to
manufacturing efficiencies and improved purchasing activities, the Company
maintained its gross profit margin despite increased competition.
Selling, General and Administrative Expenses
- --------------------------------------------
1996 compared to 1995. Selling, general and administrative expenses as a
----------------------
percentage of operating revenues decreased to 25% in 1996 from 28% in 1995. The
decrease is attributable to a number of factors, including the expansion of the
Graham-Field Express program in 1996, which contributes revenue with a lower
percentage of selling, general and administrative expenses, as well as continued
efficiencies generated by the Company's distribution network.
1995 compared to 1994. Selling, general and administrative expenses
----------------------
decreased $2,576,000 or 9% in 1995. As a percentage of operating revenues,
selling, general and administrative expenses decreased to 28% from 32%. The
decrease was primarily due to cost reduction programs, the continued
efficiencies generated by the Company's distribution network and investments in
new business systems, and the non-recurring cost of approximately $1,321,000
recorded in the fourth quarter of 1994.
Interest Expense
- ----------------
1996 compared to 1995. Interest expense for 1996 decreased by $164,000 or
----------------------
6% as compared to 1995. The decrease is primarily due to lower interest rates on
reduced average borrowings.
1995 compared to 1994. Interest expense increased $26,000 or 1%,
----------------------
principally due to an increase in interest rates from the prior year. Interest
expense for the last six months of 1995 decreased compared to the same period in
the prior year due to a decrease in borrowings during the period. The Company
reduced its borrowings as a result of increased earnings, and the net proceeds
of $3,471,000 realized from an offshore private placement of 1,071,655 shares of
common stock completed in September 1995.
Merger and Other Related Charges
- --------------------------------
1996 compared to 1995. During the fourth quarter of 1996, the Company
----------------------
recorded non-recurring charges of $15.8 million related to the acquisition of
Everest & Jennings. The charges included $12.8 million associated with the
write-off of
-33-
<PAGE>
purchased in-process research and development costs and $3.0 million of
non-recurring merger expenses related to severance payments, the write-off of
certain unamortized catalog and software costs with no future value, the
accrual of costs to vacate certain of the Company's facilities, and the cost of
certain insurance policies.
Net (Loss) Income
- -----------------
1996 compared to 1995. Loss before income taxes and extraordinary item was
$9,542,000, as compared to income before income taxes of $1,298,000 for the
prior year. The loss before income taxes and extraordinary item for 1996
includes certain charges of $15.8 million relating to the acquisition of Everest
& Jennings. The charges include $12,800,000 associated with the write-off of
purchased in-process research and development costs and $3,000,000 related to
the merger expenses.
Net loss after the charge for the extraordinary item related to the early
retirement of the indebtedness underlying the John Hancock Note and Warrant
Agreement (the "John Hancock Indebtedness") was $12,951,000 in 1996, as compared
to net income of $738,000 for 1995. The extraordinary item of $736,000 (net of
tax benefit of $383,000) relates to the "make-whole" payment and write-off of
unamortized deferred financing costs associated with the early retirement of the
John Hancock Indebtedness.
Net income, without giving effect to the charges and extraordinary item,
was $3,585,000 as compared to $738,000 in 1995. The increase in net income is
due to increased revenues, an increase in the gross profit margin and the
decrease as a percentage of revenues in selling, general and administrative
expenses.
The Company recorded income tax expense of $2,673,000 for the year ended
December 31, 1996, as compared to $560,000 for the prior year. As of December
31, 1996, the Company had a deferred tax asset of $911,000, primarily comprised
of net operating loss carryforwards (including those acquired in connection with
an acquisition) and investment, research and development, jobs tax and
alternative minimum tax credits. The Company has provided a valuation allowance
of approximately $400,000 in the fourth quarter of 1996 because certain tax
credits are available only through their expiration dates, and only after the
utilization of available net operating loss carryforwards. A full valuation
allowance has been recognized to offset the deferred assets related to the
acquired tax attributes. If realized, the tax benefit for those items will be
recorded as a reduction of goodwill. In addition, the Company has provided an
additional valuation allowance of $600,000 in the fourth quarter of 1996 as a
charge to income tax expense against a portion of the remaining net deferred tax
asset at December 31, 1996 due to the recent acquisition of Everest & Jennings.
The balance of the deferred tax asset will continue to be evaluated by
management as to its realizability on a quarterly basis. The amount of the
deferred tax asset considered realizable could be reduced in the near future if
estimates of future taxable income during the carryforward period are reduced.
Uncertainties which may impact the future realizability but are not expected to
occur, include a decline in sales and margins resulting from a possible loss of
market share and increased competition.
1995 compared to 1994. Income before income taxes was $1,298,000 as
----------------------
compared to a loss before income taxes of $3,303,000 for the prior year. The
increase in income before
-34-
<PAGE>
income taxes is primarily due to the increase in revenues and the decrease in
selling, general and administrative expenses.
Net income was $738,000 as compared to a net loss of $2,356,000 for the
prior year. The Company recorded income tax expense of $560,000 for the year
ended December 31, 1995, as compared to an income tax benefit of $947,000 for
the prior year. As of December 31, 1995, the Company had recorded a deferred tax
asset of $3,012,000, primarily comprised of net operating loss carryforwards and
investment, research and development, jobs tax and alternative minimum tax
credits. At December 31, 1995, based upon the Company's expectation that future
taxable income will be sufficient to utilize the carryforwards prior to December
31, 2009, the Company did not record a valuation allowance on the deferred tax
assets, except for an allowance of $55,000 related to tax assets recorded for
acquired carryforwards.
The Company's business has not been materially affected by inflation.
Liquidity and Capital Resources
- -------------------------------
The Company had working capital of $12,405,000, $33,763,000 and $28,282,000
at December 31, 1996, 1995 and 1994, respectively. The decrease in working
capital for the period ended December 31, 1996 is primarily attributable to the
early retirement of the John Hancock Indebtedness and certain accrued expenses
related to the Everest & Jennings acquisition. The Company retired the John
Hancock Indebtedness with a portion of the proceeds from the Company's Credit
Facility with IBJ Schroder, which borrowings are classified as current
liabilities.
The increase in working capital for the period ended December 31, 1995 is
primarily attributable to the cash provided by the Company's net income of
$738,000, which reflects $3,260,000 of depreciation and amortization expense. In
addition, the Company raised $3,471,000 of additional capital, net of expenses,
through an offshore private placement of 1,071,655 shares of its common stock
completed in September 1995.
Cash provided by operations for the year ended December 31, 1996 was
$3,981,000. The principal reason for the cash provided by operations was the
Company's operating income after adjustments for non-cash charges, partially
offset by the aggregate increase in accounts receivable and inventory in excess
of payables.
Financing
- ---------
On December 10, 1996, the Company entered into a Credit Facility for up to
$55 million of borrowings, including letters of credit and banker's acceptances,
arranged by IBJ Schroder, as agent. The proceeds from the Credit Facility were
used to (i) refinance certain existing indebtedness of the Company, including
the indebtedness (a) under the John Hancock Note and Warrant Agreement and (b)
to The Chase Manhattan Bank and (ii) to provide for
-35-
<PAGE>
working capital needs of the Company. Under the terms of the Credit Facility,
borrowings bear interest, at the option of the Company at the bank's prime rate
(8.25% at December 31, 1996) or 2.25% above LIBOR, or 1.5% above the bank's
bankers' acceptance rate. The Credit Facility is secured by the Company's
receivables, inventory and proceeds thereof.
The Credit Facility contains certain customary terms and provisions,
including limitations with respect to the incurrence of additional debt, liens,
transactions with affiliates, consolidations, mergers and acquisitions, sales of
assets, dividends and other distributions (other than the payment of dividends
to BIL in accordance with the terms of the Company's Series B and Series C
Cumulative Convertible Preferred Stock). In addition, the Credit Agreement
contains certain financial covenants, which become effective as of the end of
the fiscal quarter ending June 30, 1997, including a cash flow coverage and
leverage ratio, and an earnings before interest and taxes covenant.
Under the terms of the Credit Facility, the Company is prohibited from
declaring, paying or making any dividend or distribution on any shares of the
common stock or preferred stock of the Company (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of the Company.
Notwithstanding the foregoing restrictions, the Company is permitted to pay cash
dividends in any fiscal year in an amount not to exceed the greater of (i) the
amount of dividends due BIL under the terms of the Series B and Series C
Preferred Stock in any fiscal year, or (ii) 12.5% of the net income of the
Company on a consolidated basis, provided that no event of default shall have
occurred and be continuing or would exist after giving effect to the payment of
the dividends.
On July 18, 1996, an affiliate of BIL provided the Company with a loan in
the amount of $4,000,000, at an effective interest rate of 8.8%. The loan was
used to fund the acquisition of V.C. Medical and for general corporate purposes.
On December 10, 1996, the loan was converted into the BIL Note, which matures on
April 1, 2001, with interest payable quarterly at an effective rate of 7.7% per
year. Under the terms of the BIL Note, the Company has the right to reduce the
principal amount of the BIL Note in the event punitive damages are awarded
against the Company or any of its subsidiaries which relate to any existing
product liability claims of Everest & Jennings and/or its subsidiaries involving
a death prior to September 3, 1996.
On November 27, 1996, the Company acquired Everest & Jennings in a merger
transaction. In the merger, each share of the common stock of Everest &
Jennings, other than shares of the common stock of Everest & Jennings cancelled
pursuant to the merger, was converted into the right to receive .35 shares of
the common stock of the Company. In connection with the merger, 2,522,691 shares
of common stock of the Company were issued in exchange for the common stock of
Everest & Jennings. The Company's common stock was valued at $7.64 per share,
which represented the average closing market price of the Company's common stock
for the period three business days immediately prior to and three business days
immediately after the announcement of the execution of the merger agreement.
-36-
<PAGE>
In addition, in connection with, and at the effective time of the merger:
(i) BIL purchased for cash 1,922,242 shares of common stock of the Company
(valued at $7.64 per share) for $24,989,151, representing an amount
equal to the outstanding principal and interest on the HSBC
Indebtedness, which was guaranteed by BIL. The proceeds of such stock
purchase were contributed by the Company to Everest & Jennings
immediately following the merger and used to discharge the HSBC
Indebtedness.
(ii) The Company issued $61 million stated value of the Series B Preferred
Stock to BIL in exchange for certain indebtedness of Everest &
Jennings owing to BIL and shares of E&J preferred stock owned by BIL.
The Series B Preferred Stock is entitled to a dividend of 1.5% per
annum payable quarterly, votes on an as-converted basis as a single
class with the common stock of the Company and the Series C Preferred
Stock (as defined below), is not subject to redemption and is
convertible into shares of the common stock of the Company (x) at the
option of the holder thereof, at a conversion price of $20 per share
(or, in the case of certain dividend payment defaults, at a conversion
price of $15.50 per share), (y) at the option of the Company, at a
conversion price equal to current trading prices (subject to a minimum
conversion price of $15.50 and a maximum conversion price of $20 per
share) and (z) automatically on the fifth anniversary of the date of
issuance at a conversion price of $15.50 per share. Such conversion
prices are subject to customary antidilution adjustments. Based on an
independent valuation, the fair value ascribed to the Series B
Preferred Stock was $28,200,000.
(iii) BIL purchased for cash $10 million stated value of the Series C
Preferred Stock, the proceeds of which are available to the Company
for general corporate purposes. The Series C Preferred Stock is
entitled to a dividend of 1.5% per annum payable quarterly, votes on
an as-converted basis as a single class with the common stock of
Company and the Series B Preferred Stock, is subject to redemption as
a whole at the option of the Company on the fifth anniversary of the
date of issuance at stated value and, if not so redeemed, will be
convertible into shares of the common stock of the Company
automatically on the fifth anniversary of the date of issuance at a
conversion price of $20 per share, subject to customary antidilution
adjustments. Based on an independent valuation, the fair value
ascribed to the Series C Preferred Stock was $3,400,000.
(iv) Certain indebtedness in the amount of $4 million owing by the Company
to BIL was exchanged for an equal amount of unsecured subordinated
indebtedness of the Company maturing on April 1, 2001 and bearing
interest at the effective rate of 7.7% per annum, which was evidenced
by the BIL Note.
-37-
<PAGE>
On March 4, 1996, the Company sold its Gentle Expressions breast pump
product line to The Lumiscope Company, Inc. for a purchase price of $1,000,000,
of which $500,000 was paid in cash with the balance in a secured subordinated
promissory note in the aggregate principal amount of $500,000, payable over 48
months plus interest at the prime rate of interest plus 1%.
On September 4, 1996, the Company acquired substantially all of the assets
of V.C. Medical for a purchase price consisting of $1,703,829 in cash and the
issuance of 32,787 shares of common stock valued at $7.625 per share.
On February 28, 1997, Everest & Jennings Canada acquired substantially all
of the assets of Motion 2000 and Motion 2000 Quebec, in consideration of the
issuance of 187,733 shares of common stock valued at $11.437 per share.
On March 7, 1997, E&J acquired all of the capital stock of Kuschall, in
consideration of the issuance of 116,154 shares of common stock valued at $13.00
per share.
The Company anticipates that the cash flow from operations, together with
the current cash balance, and the proceeds from the Credit Facility will be
sufficient to meet its working capital requirements.
-38-
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULE
FINANCIAL STATEMENTS
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1996
GRAHAM-FIELD HEALTH PRODUCTS, INC.
HAUPPAUGE, NEW YORK
<PAGE>
FORM 10-K--ITEM 8, ITEM 14(a)(1) and (2) and (d)
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements of Graham-Field Health Products,
Inc. and subsidiaries are included in Item 8:
Report of Independent Auditors...............................................F-2
Consolidated balance sheets--
December 31, 1996 and 1995..................................................F-3
Consolidated statements of operations--
Years ended December 31, 1996, 1995 and 1994................................F-5
Consolidated statements of stockholders' equity--
Years ended December 31, 1996, 1995 and 1994................................F-6
Consolidated statements of cash flows--
Years ended December 31, 1996, 1995 and 1994................................F-7
Notes to consolidated financial statements--
December 31, 1996...........................................................F-9
The following consolidated financial statement schedule of Graham-Field
Health Products, Inc. and subsidiaries is included in Item 14(d):
Schedule II--Valuation and qualifying accounts..............................F-36
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Graham-Field Health Products, Inc.
We have audited the accompanying consolidated balance sheets of Graham-Field
Health Products, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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 that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Graham-Field Health Products, Inc. and subsidiaries at December 31, 1996 and
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Melville, New York
March 10, 1997
F-2
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1996 1995
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 1,552,000 $ 214,000
Accounts receivable, less allowance for
doubtful accounts of $7,207,000 and
$1,740,000, respectively 43,651,000 21,936,000
Inventories 45,810,000 29,819,000
Other current assets 3,001,000 1,789,000
Recoverable and prepaid income taxes 256,000 221,000
------------ -----------
TOTAL CURRENT ASSETS 94,270,000 53,979,000
Property, plant and equipment, net 10,771,000 8,120,000
Excess of cost over net assets acquired, net of
accumulated amortization of $8,185,000 and
$7,212,000, respectively 91,412,000 29,291,000
Investment in leveraged lease -- 487,000
Deferred tax assets 911,000 3,012,000
Other assets 5,112,000 4,910,000
------------ -----------
TOTAL ASSETS $202,476,000 $99,799,000
============ ===========
See notes to consolidated financial statements.
F-3
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (Continued)
<TABLE>
<CAPTION>
December 31
1996 1995
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank $ 13,985,000 $ 2,100,000
Current maturities of long-term debt
and Guaranteed Senior Notes 2,016,000 1,578,000
Accounts payable 20,781,000 8,750,000
Acceptances payable 19,800,000 5,000,000
Accrued expenses 25,283,000 2,788,000
------------- ------------
TOTAL CURRENT LIABILITIES 81,865,000 20,216,000
Long-term debt 6,057,000 972,000
Other long-term liabilities 1,752,000 --
Guaranteed Senior Notes -- 19,000,000
------------- ------------
TOTAL LIABILITIES 89,674,000 40,188,000
STOCKHOLDERS' EQUITY
Series A preferred stock, par value $.01 per share:
authorized shares 1,000,000, none issued
Series B preferred stock, par value $.01 per share:
authorized shares 6,100, issued and outstanding 6,100 28,200,000 --
Series C preferred stock, par value $.01 per share:
authorized shares 1,000, issued and outstanding 1,000 3,400,000 --
Common stock, par value $.025 per share:
authorized shares 60,000,000, issued and outstanding
18,667,588 and 14,082,130, respectively 467,000 352,000
Additional paid-in capital 101,569,000 66,887,000
(Deficit) (20,667,000) (7,628,000)
Cumulative translation adjustment (12,000) --
------------- ------------
Subtotal 112,957,000 59,611,000
Notes receivable from sale of shares (155,000) --
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 112,802,000 59,611,000
Commitments and contingencies
------------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 202,476,000 $ 99,799,000
============= ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Net revenues:
Medical equipment and supplies $ 126,715,000 $100,113,000 $ 94,429,000
Interest and other income 530,000 290,000 72,000
------------- ------------ ------------
127,245,000 100,403,000 94,501,000
Costs and expenses:
Cost of revenues 86,315,000 68,883,000 65,032,000
Selling, general and administrative 32,180,000 27,566,000 30,142,000
Interest expense 2,492,000 2,656,000 2,630,000
Purchased in-process research &
development costs 12,800,000 -- --
Merger related charges 3,000,000 -- --
------------- ------------ ------------
136,787,000 99,105,000 97,804,000
------------- ------------ ------------
(Loss) income before income taxes (benefit)
and extraordinary item (9,542,000) 1,298,000 (3,303,000)
Income taxes (benefit) 2,673,000 560,000 (947,000)
------------- ------------ ------------
(Loss) income before extraordinary item (12,215,000) 738,000 (2,356,000)
Extraordinary loss on early retirement of
debt (net of tax benefit of $383,000) (736,000) -- --
------------- ------------ ------------
NET (LOSS) INCOME $ (12,951,000) $ 738,000 $ (2,356,000)
============= ============ ============
Net (loss) income per common share:
(Loss) income before extraordinary item $ (.84) $ .06 $ (.18)
Extraordinary loss on early retirement of debt (.05) -- --
------------- ------------ ------------
Net (loss) income per common share $ (.89) $ .06 $ (.18)
============= ============ ============
Weighted average number of common and
common equivalent shares 14,574,000 13,332,000 12,879,000
============= ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series B Series C Common Stock Additional
Preferred Preferred -------------------- Paid-in
Total Stock Stock Shares Amount Capital
----- ----- ----- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $ 57,224,000 12,818,186 $ 320,000 $62,914,000
Issuance of common stock on
exercise of stock options 192,000 149,250 4,000 314,000
Tax benefit from exercise of
stock options 42,000 - - 42,000
Retirement of Treasury Stock - (28,943) (1,000) (125,000)
Net loss (2,356,000) - - -
------------ ----------- ----------- ---------- ---------- ------------
BALANCE, DECEMBER 31, 1994 55,102,000 12,938,493 323,000 63,145,000
Issuance of common stock
on exercise of stock options 172,000 86,500 2,000 220,000
Regulation S offering, net 3,471,000 1,071,655 27,000 3,444,000
Tax benefit from exercise of
stock options 38,000 - - 38,000
Retirement of Treasury Stock - (14,518) - (50,000)
Warrants issued in connection with debt 90,000 - - 90,000
Net income 738,000 - - -
------------ ----------- ----------- ---------- ---------- ------------
BALANCE, DECEMBER 31, 1995 59,611,000 14,082,130 352,000 66,887,000
Issuance of common stock
on exercise of stock options 550,000 153,255 4,000 711,000
Issuance of stock in connection
with acquisitions 65,809,000 $28,200,000 $ 3,400,000 4,477,720 112,000 34,097,000
Tax benefit from exercise of
stock options 38,000 - - - - 38,000
Retirement of Treasury Stock - - - (45,517) (1,000) (164,000)
Dividend accrued on Preferred Stock (88,000) - - - - -
Translation adjustment (12,000) - - - - -
Notes receivable from officers
for sale of shares (155,000) - - - - -
Net loss (12,951,000) - - - - -
------------ ----------- ----------- ---------- ---------- ------------
BALANCE, DECEMBER 31, 1996 $112,802,000 $28,200,000 $ 3,400,000 18,667,588 $ 467,000 $101,569,000
============ =========== =========== ========== ========== ============
<CAPTION>
Treasury Stock Cumulative
---------------------- Translation Notes Recievable
(Deficit) Shares Amount Adjustment From Sale of Shares
--------- ------ ------ ---------- -------------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $ (6,010,000) 0 $ 0
Issuance of common stock on
exercise of stock options - (28,943) (126,000)
Tax benefit from exercise of
stock options - - -
Retirement of Treasury Stock - 28,943 126,000
Net loss (2,356,000) - -
------------- ----------- ------------- ----------- -----------
BALANCE, DECEMBER 31, 1994 (8,366,000) 0 0
Issuance of common stock
on exercise of stock options - (14,518) (50,000)
Regulation S offering, net - - -
Tax benefit from exercise of
stock options - - -
Retirement of Treasury Stock - 14,518 50,000
Warrants issued in connection with debt - - -
Net income 738,000 - -
------------- ----------- ------------- ----------- -----------
BALANCE, DECEMBER 31, 1995 (7,628,000) 0 0
Issuance of common stock
on exercise of stock options - (45,517) (165,000)
Issuance of stock in connection
with acquisitions - - -
Tax benefit from exercise of
stock options - - -
Retirement of Treasury Stock - 45,517 165,000
Dividend accrued on Preferred Stock (88,000) - -
Translation adjustment - - - $ (12,000)
Notes receivable from officers
for sale of shares - - - - $ (155,000)
Net loss (12,951,000) - -
------------- ----------- ------------- ----------- -----------
BALANCE, DECEMBER 31, 1996 $(20,667,000) 0 $ 0 $ (12,000) $ (155,000)
============= =========== ============= =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $(12,951,000) $ 738,000 $(2,356,000)
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Depreciation and amortization 3,443,000 3,260,000 3,448,000
Leveraged lease valuation adjustment -- -- 500,000
Deferred income taxes 2,139,000 519,000 (947,000)
Provisions for losses on accounts receivable 621,000 448,000 586,000
Gain on sale of product line (360,000) -- --
Loss on disposal of property, plant and equipment -- 3,000 --
Purchased in-process research and
development cost 12,800,000 -- --
Non-cash amounts included in merger related charges 1,191,000 -- --
Non-cash amounts included in extraordinary loss 476,000 -- --
Other -- -- 7,000
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable (10,467,000) (3,034,000) (3,639,000)
Inventories, other current assets and
recoverable and prepaid income taxes (4,793,000) 44,000 (2,601,000)
Accounts and acceptances payable
and accrued expenses 11,882,000 (5,228,000) 3,485,000
------------ ----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 3,981,000 (3,250,000) (1,517,000)
INVESTING ACTIVITIES
Purchase of short-term investments -- -- 1,998,000
Purchase of property, plant and equipment (1,017,000) (610,000) (1,094,000)
Acquisitions, net of cash acquired (4,558,000) (668,000) --
Proceeds from the sale
of property, plant, and equipment -- 19,000 --
Proceeds from sale of product line 500,000 -- --
Proceeds from sale of assets under leveraged lease 487,000 -- --
Start up cost related to the St. Louis
Distribution Center -- -- (171,000)
Notes receivable from officers (155,000) -- --
Net (increase) decrease in other assets (228,000) 116,000 (30,000)
------------ ----------- -----------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES $ (4,971,000) $(1,143,000) $ 703,000
</TABLE>
F-7
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (Continued)
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from notes payable to bank
and long-term debt $ 27,310,000 $ 2,100,000 $ 1,673,000
Principal payments on long-term debt
and notes payable (35,532,000) (1,257,000) (1,495,000)
Proceeds on exercise of stock options 550,000 172,000 192,000
Proceeds from issuance of
common stock, net -- 3,471,000 --
Proceeds from issuance of preferred stock
in connection with an acquisition 10,000,000 -- --
------------ ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,328,000 4,486,000 370,000
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,338,000 93,000 (444,000)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 214,000 121,000 565,000
------------ ----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 1,552,000 $ 214,000 $ 121,000
============ =========== ===========
SUPPLEMENTARY CASH FLOW INFORMATION:
Interest paid $ 2,889,000 $ 2,458,000 $ 2,701,000
============ =========== ===========
Income taxes paid $ 87,000 $ 74,000 $ 23,000
============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: Graham-Field Health Products, Inc. and its wholly-owned
subsidiaries (the "Company") manufacture, market and distribute medical,
surgical and a broad range of other healthcare products into the home healthcare
and medical/surgical markets through a vast dealer network, consisting of
approximately 18,500 customers, principally hospital, nursing home, physician
and home health care dealers, health care product wholesalers and retailers,
including drug stores, catalog companies, pharmacies, and home-shopping related
businesses in North America. In addition, the Company has increased its presence
in Central and South America, Canada, Mexico, Europe and Asia. The Company
markets and distributes approximately 23,000 products under its own brand names
and under suppliers' names. For the year ended December 31, 1996, approximately
28% of the Company's revenues were derived from products manufactured by the
Company, approximately 18% of the Company's revenues were derived from imported
products and approximately 54% were derived from products purchased from
domestic sources, which includes products purchased from Everest & Jennings
prior to the acquisition.
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its subsidiaries, each of which is wholly-owned. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Inventories: Inventories are valued at the lower of cost or market value. Cost
is determined principally on the standard cost method for manufactured goods and
on the average cost method for other inventories, each of which approximates
actual cost on the first-in, first-out method.
Property, Plant and Equipment: Property, plant and equipment is recorded at
cost, less accumulated depreciation and amortization. Depreciation and
amortization is computed on the straight-line method over the lesser of the
estimated useful lives of the related assets or the lease term, where
appropriate.
Excess of Cost Over Net Assets Acquired: Excess of cost over net assets acquired
is generally amortized on a straight-line basis over 30 to 40 years. The
carrying value of such costs are reviewed by management as to whether the facts
and circumstances indicate that an impairment may have occurred. If this review
indicates that such costs or a portion thereof will not be recoverable, as
determined based on the undiscounted cash flows of the entities acquired over
the remaining amortization period, the carrying value of these costs will be
reduced by the estimated shortfall of cash flows.
F-9
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of Long-Lived Assets: Effective January 1, 1996, the Company adopted
- --------------------------------
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This standard establishes the accounting for the impairment of long-lived
assets, certain identifiable intangibles and the excess of cost over net assets
acquired, related to those assets to be held and used in operations, whereby
impairment losses are required to be recorded when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets and certain identifiable intangibles that
are expected to be disposed of. The adoption of SFAS No. 121 did not have a
material effect on the results of operations or financial condition of the
Company.
Revenue Recognition Policy: The Company recognizes revenue when products are
- ---------------------------
shipped, with appropriate provisions for uncollectible accounts and credits for
returns.
Buy-Back Program: During the first quarter of 1996, the Company's inventory
- -----------------
buy-back program was introduced to provide an outlet for its customers to
eliminate their excess inventory. Under the program, the Company purchases
certain excess inventory from its customers, who in turn place additional
purchase orders with the Company exceeding the value of the excess inventory
purchased. The Company is able to utilize its vast customer base and
distribution network to market and distribute the excess inventory through its
division, National Medical Excess Corp. Substantially all of the medical
products purchased by the Company as part of the inventory buy-back program are
items not generally offered for sale by the Company. Items repurchased by the
Company which are identified as items previously sold by the Company to a
customer have been deminimus based on the Company's experience, and have been
recorded in accordance with the Company's normal revenue recognition policy.
Income Taxes: The Company and its subsidiaries file a consolidated Federal
- -------------
income tax return. The Company uses the liability method in accounting for
income taxes in accordance with SFAS No. 109. Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities, and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
Net Loss/Income Per Common Share Information: Net loss per common share for 1996
- ---------------------------------------------
was computed using the weighted average number of common shares outstanding and
by assuming the accrual of a dividend of 1.5% on both the Series B Cumulative
Convertible Preferred Stock (the "Series B Preferred Stock") and Series C
Cumulative Convertible Preferred Stock (the "Series C Preferred Stock") in the
aggregate amount of $88,000. Conversion of the preferred stock and common
equivalent shares was not assumed since the result would have been antidilutive.
Net income per common share for 1995 was computed using the weighted average
number of common shares and dilutive common equivalent shares outstanding during
the period. Net loss per common share for 1994 was computed using the weighted
average number of common shares outstanding during the period.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share." This standard changes the method of calculating earnings
per share and will be effective for periods ending after December 15, 1997.
Earlier application is not permitted; however, when adopted, all prior period
earnings per share data presented will be required to be restated to conform
with the new standard when completed.
F-10
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Employee Stock Options: The Company has a stock option program which is more
- -----------------------
fully described in Note 9. The Company accounts for stock option grants in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Under the Company's stock option program, options are granted with an exercise
price equal to the market price of the underlying common stock of the Company on
the date of grant. Accordingly, no compensation expense is recognized in
connection with the grant of stock options.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The new standard defines a fair value
method of accounting for the issuance of stock options and other equity
instruments. Under the fair value method, compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service period, which is usually the vesting period. Pursuant to SFAS No. 123,
companies are encouraged, but are not required, to adopt the fair value method
of accounting for employee stock-based transactions. Companies are also
permitted to continue to account for such transactions under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," but
are required to disclose in the financial statement footnotes, proforma net
income and per share amounts as if the Company had applied the new method of
accounting for all grants made during 1995 and 1996. SFAS No. 123 also requires
increased disclosures for stock-based compensation arrangements. Effective
January 1, 1996, the Company adopted the disclosure requirements of SFAS No.
123.
Concentration of Credit Risk: The Company manufactures, markets and distributes
- -----------------------------
medical, surgical and a broad range of other healthcare products into the home
healthcare and medical/surgical markets through a vast dealer network consisting
of approximately 18,500 customers, principally hospital, nursing home, physician
and home healthcare dealers, healthcare product wholesaler and retailers,
including drug stores, catalog companies, pharmacies and home-shopping related
business in North America. As a result of the acquisition of Everest & Jennings
International Ltd. ("Everest & Jennings") (see Note 2), third party
reimbursement through private or governmental insurance programs and managed
care programs impacts the Company's customers, which affects a portion of the
Company's business. Such impact is not material for 1996. The Company performs
periodic credit evaluations of its customers' financial condition and generally
does not require collateral. Receivables generally are due within 30 to 120
days. Credit losses relating to customers have been consistently within
management's expectations.
Concentration of Sources of Supply: Everest & Jennings' business is heavily
- -----------------------------------
dependent on its maintenance of two key supply contracts. Everest & Jennings
obtains the majority of its homecare wheelchairs and wheelchair components
pursuant to an exclusive supply agreement (the "Exclusive Wheelchair Supply
Agreement") with P.T. Dharma Polimetal ("P.T. Dharma"). The term of this
agreement extends until December 31, 1999, and on each January 1 thereafter
shall be automatically extended for one additional year unless Everest &
Jennings elects not to extend or Everest & Jennings has failed to order at least
50% of the contractually specified minimums and the manufacturer elects to
terminate. If the Exclusive Wheelchair Supply Agreement with P.T. Dharma is
terminated, there can be no assurance that Everest & Jennings will be able to
enter into a suitable supply agreement with another manufacturer. In addition,
Everest & Jennings obtains homecare beds for distribution pursuant to a supply
agreement with Healthtech Products, Inc., a wholly-owned subsidiary of Invacare
Corporation (which is a major competitor of Everest & Jennings), which is
scheduled to expire on October 15, 1997. Although the Company is in the process
of securing alternative sources of supply with other manufacturers, there can be
no assurance that arrangements as favorable as the current supply contract will
be obtainable.
F-11
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Translation: The financial statements of the Company's foreign
- -----------------------------
subsidiaries are translated into U.S. dollars in accordance with the provisions
of SFAS No. 52, "Foreign Currency Translation." Assets and liabilities are
translated at year-end exchange rates. Revenues and expenses are translated at
the average exchange rate for each year. The resulting translation adjustments
for each year are recorded as a separate component of stockholders' equity. All
foreign currency transaction gains and losses are included in the determination
of income and are not significant.
2. ACQUISITIONS OF BUSINESSES AND DISPOSAL OF PRODUCT LINE
On November 27, 1996, the Company acquired Everest & Jennings, pursuant to the
terms and provisions of the Amended and Restated Agreement and Plan of Merger
dated as of September 3, 1996 and amended as of October 1, 1996 (the "Merger
Agreement"), by and among the Company, Everest & Jennings, Everest & Jennings
Acquisition Corp., a wholly-owned subsidiary of the Company ("Sub"), and BIL
(Far East Holdings) Limited, a Hong Kong corporation and the majority
stockholder of Everest & Jennings ("BIL"). Under the terms of the Merger
Agreement, Sub was merged with and into Everest & Jennings with Everest &
Jennings continuing as the surviving corporation wholly-owned by the Company
(the "Merger").
In the Merger, each share of Everest & Jennings' common stock, par value $.10
per share (the "Everest & Jennings Common Stock"), other than shares of Everest
& Jennings Common Stock cancelled pursuant to the Merger Agreement, was
converted into the right to receive .35 shares of common stock, par value $.025
per share, of the Company. The Company's common stock was valued at $7.64 per
share, which represents the average closing market price of the Company's common
stock for the period three business days immediately prior to and three business
days immediately after the announcement of the execution of the Merger
Agreement. There were 7,207,689 shares of Everest & Jennings common stock
outstanding on November 26, 1996, which converted into 2,522,691 shares of the
Company's common stock.
In addition, in connection with, and at the effective time of the Merger:
(i) BIL purchased 1,922,242 shares of common stock of the Company for
$24,989,151, representing an amount equal to the outstanding principal
and interest on Everest & Jennings' indebtedness to Hong Kong and
Shanghai Banking Corporation Limited, which indebtedness (the "HSBC
Indebtedness") was guaranteed by BIL. The proceeds of such stock
purchase were contributed by the Company to Everest & Jennings
immediately following the Merger and used to discharge the HSBC
Indebtedness. The Company's common stock was valued at $7.64 per
share, which represents the average closing market price of the
Company's common stock for the period three business days immediately
prior to and three business days immediately after the announcement of
the execution of the Merger Agreement.
F-12
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS OF BUSINESSES AND DISPOSAL OF PRODUCT LINE (continued)
(ii) The Company issued $61 million stated value of the Series B Preferred
Stock to BIL in exchange for certain indebtedness of Everest &
Jennings owing to BIL and shares of Everest & Jennings preferred stock
owned by BIL. The Series B Preferred Stock is entitled to a dividend
of 1.5% per annum payable quarterly, votes on an as-converted basis as
a single class with the Company's common stock and the Series C
Preferred Stock (as defined below), is not subject to redemption and
is convertible into shares of the common stock of the Company (x) at
the option of the holder thereof, at a conversion price of $20 per
share (or, in the case of certain dividend payment defaults, at a
conversion price of $15.50 per share), (y) at the option of the
Company, at a conversion price equal to current trading prices
(subject to a minimum conversion price of $15.50 and a maximum
conversion price of $20 per share) and (z) automatically on the fifth
anniversary of the date of issuance at a conversion price of $15.50
per share. Such conversion prices are subject to customary
antidilution adjustments. Based on an independent valuation, the fair
value ascribed to the Series B Preferred Stock is $28,200,000.
(iii) BIL purchased for cash $10 million stated value the Series C
Preferred Stock, the proceeds of which are available to the Company
for general corporate purposes. The Series C Preferred Stock is
entitled to a dividend of 1.5% per annum payable quarterly, votes on
an as-converted basis as a single class with the Company Common Stock
and the Series B Preferred Stock, is subject to redemption as a whole
at the option of the Company on the fifth anniversary of the date of
issuance at stated value and, if not so redeemed, will be convertible
into shares of the common stock of the Company automatically on the
fifth anniversary of the date of issuance at a conversion price of $20
per share, subject to customary antidilution adjustments. Based on an
independent valuation, the fair value ascribed to the Series C
Preferred Stock is $3,400,000.
(iv) Certain indebtedness in the amount of $4 million owing by the Company
to BIL was exchanged for an equal amount of unsecured subordinated
indebtedness of the Company maturing on April 1, 2001 and bearing
interest at the effective rate of 7.7% per annum (the "BIL Note").
The acquisition of Everest & Jennings has been accounted for under the purchase
method of accounting and, accordingly, the operating results of Everest &
Jennings have been included in the Company's consolidated financial statements
since the date of acquisition. Based on an independent valuation, $12,800,000 of
the purchase price was allocated to purchased in-process research and
development projects which have not reached technological feasibility and have
no probable alternative future uses. The Company expensed the purchased
in-process and research development projects at the date of acquisition. As a
result of the acquisition, the Company incurred $3.0 million of merger related
expenses, principally for severance payments, the write-off of certain
unamortized catalog and software costs with no future value, the accrual of
costs to vacate certain of the Company's facilities, and certain insurance
policies. The excess of the aggregate purchase price over the estimated fair
market value of the net assets acquired was approximately $62.2 million, which
is being amortized on a straight line basis over 30 years. The purchase price
allocations have been completed on a preliminary basis, subject to adjustment
should new or additional facts about the business become known. From the date of
acquisition, Everest & Jennings contributed approximately $3,634,000 of revenue
for the quarter and year ended December 31, 1996.
F-13
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS OF BUSINESSES AND DISPOSAL OF PRODUCT LINE (continued)
On September 4, 1996, the Company acquired substantially all of the assets of
V.C. Medical Distributors Inc. ("V.C. Medical"), a wholesale distributor of
medical products in Puerto Rico, for a purchase price consisting of $1,703,829
in cash, and the issuance of 32,787 shares of common stock of the Company,
valued at $7.625 per share representing the closing market price of the common
stock of the Company on the last trading day immediately prior to the closing.
In addition, the Company assumed certain liabilities of V.C. Medical in the
amount of $296,721. Under the terms of the transaction, in the event the pre-tax
income of the acquired business equals of exceeds $1,000,000 during the twelve
(12) months following the closing date, an additional $500,000 will be paid to
V.C. Medical. The shares were delivered into escrow, and will be held in escrow
until February 4, 1998, subject to any claims for indemnification for purchase
price adjustments in favor of the Company. The acquisition was accounted for as
a purchase and accordingly, assets and liabilities were recorded at fair value
at the date of acquisition and the results of operations are included subsequent
to that date. The excess of cost over the net assets acquired amounted to
approximately $988,000.
The following summary presents unaudited proforma consolidated results of
operations for the years ended December 31, 1996 and 1995 as if the acquisitions
described above occurred at the beginning of each of 1996 and 1995. This
information gives effect to the adjustment of interest expense, income tax
provisions, and to the assumed amortization of fair value adjustments, including
the excess of cost over net assets acquired. Both the 1996 and 1995 pro forma
information includes the write-off of certain purchased in-process research and
development costs of $12,800,000, merger related expenses of $3,000,000, and
the extraordinary item relating to the early retirement of indebtedness
applicable to the Guaranteed Senior Notes.
The pro forma net loss per common share has been calculated by assuming the
payment of a dividend of 1.5% on both the Series B Preferred Stock and Series C
Preferred Stock in the aggregate amount of $1,065,000 for each of the years
ended December 31, 1996 and 1995. Conversion of the preferred stock was not
assumed since the result would have been antidilutive.
Pro-forma
---------
1996 1995
Net Revenues $187,522,000 $172,353,000
============ ============
Loss Before Extraordinary Item $(17,565,000) $(19,001,000
============ ============
Net loss $(18,301,000) $(19,737,000)
============ ============
Common Per Share Data:
Loss Before Extraordinary Item $ (1.00) $ (1.13)
============ ============
Net Loss $ (1.04) $ (1.17)
============ ============
Weighted Average Number of Common Shares
Outstanding 18,649,000 17,772,000
============ ============
On March 4, 1996, the Company sold its Gentle Expressions(R) breast pump product
line for $1,000,000 of which $500,000 was paid in cash with the balance in a
secured subordinated promissory note in the aggregate principal amount of
$500,000, payable over 48 months with interest at the prime rate plus one
percent. The Company recorded a gain of $360,000, which is included in other
revenue in the accompanying condensed consolidated statements of operations.
F-14
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS OF BUSINESSES AND DISPOSAL OF PRODUCT LINE (continued)
Effective July 1, 1995, the Company acquired substantially all of the assets and
liabilities of National Medical Excess Corp. ("NME"), a distributor of used and
refurbished medical products, including respiratory and durable medical
equipment. The NME acquisition was accounted for under the purchase method of
accounting and accordingly, assets and liabilities were recorded at fair values
at the date of acquisition. Results of operations of NME are included in the
consolidated financial statements of the Company subsequent to that date. The
purchase price, including acquisition expenses, was approximately $723,000 in
cash, plus the assumption of certain liabilities. The excess of cost over the
net assets acquired amounted to approximately $677,000.
3. INVENTORIES
Inventories consist of the following:
December 31
1996 1995
----------- -----------
Raw materials $ 8,423,000 $ 2,871,000
Work-in-process 4,430,000 1,620,000
Finished goods 32,957,000 25,328,000
----------- -----------
$45,810,000 $29,819,000
=========== ===========
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
December 31
1996 1995
------------ ------------
Land and buildings $ 1,129,000 $ --
Equipment 17,030,000 14,399,000
Furniture and fixtures 1,629,000 1,600,000
Leasehold improvements 2,222,000 1,958,000
------------ ------------
22,010,000 17,957,000
Accumulated depreciation and amortization (11,239,000) (9,837,000)
------------ ------------
$ 10,771,000 $ 8,120,000
============ ============
The Company recorded depreciation and amortization expense on the assets
included in property, plant and equipment of $1,682,000, $1,617,000 and
$1,679,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
F-15
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INVESTMENT IN LEVERAGED LEASE
The Company was the lessor in a leveraged lease agreement entered into in
December 1983, under which helicopters, having an estimated economic life of at
least 22 years, were leased for a term of 16 years. The Company's equity
investment represented 9% of the purchase price; the remaining 91% was furnished
by third-party financing in the form of long-term debt that provided for no
recourse against the Company and was secured by a first lien on the property. At
the end of the lease term, the equipment was to be returned to the Company. The
residual value was estimated to be 57% of the cost. As a result of certain
market conditions and technological advancements, the Company recorded a charge
in the fourth quarter of 1994 of approximately $500,000, which was included in
selling, general and administrative expenses, to reflect the estimated
impairment of the residual value of the helicopters.
In May 1996, the Company liquidated its investment in the leveraged lease
agreement. The cash proceeds of $487,000 approximated the recorded net
investment in the lease at December 31, 1995.
6. NOTES AND ACCEPTANCES PAYABLE
On December 10, 1996, the Company entered into a syndicated three-year senior
secured revolving credit facility (the "Credit Facility") for up to $55 million
of borrowings, including letters of credit and banker's acceptances, arranged by
IBJ Schroder Bank & Trust Company ("IBJ Schroder"), as agent. The proceeds from
the Credit Facility were used to (i) refinance certain existing indebtedness of
the Company, including the indebtedness (a) under the terms of the Note and
Warrant Agreement dated March as of 12, 1992, as amended (the "John Hancock Note
and Warrant Agreement"), with John Hancock Mutual Life Insurance Company ("John
Hancock") (see Note 8), and (b) to The Chase Manhattan Bank, under the line of
credit, (see below); and (ii) to provide for working capital needs of the
Company. Under the terms of the Credit Facility, borrowings bear interest, at
the option of the Company, at IBJ Schroder's prime rate (8.25% at December 31,
1996) or 2.25% above LIBOR, or 1.5% above the IBJ Schroder's bankers' acceptance
rate. The Credit Facility is secured by the Company's inventory and proceeds
thereof.
The Credit Agreement contains certain customary terms and provisions, including
limitations with respect to the incurrence of additional debt, liens,
transactions with affiliates, consolidations, mergers and acquisitions, sales of
assets, dividends and other distributions (other than the payment of dividends
to BIL in accordance with the terms of the Series B and Series C Preferred
Stock). In addition, the Credit Facility contains certain financial covenants,
which become effective as of the end of the fiscal quarter ending June 30, 1997,
and include a cash flow coverage and leverage ratio, and require specified
levels of earnings before interest and taxes.
Pursuant to the terms of the Credit Facility, the Company is prohibited from
declaring, paying or making any dividend or distribution on any shares of the
common stock or preferred stock of the Company (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of the Company.
Notwithstanding the foregoing restrictions, the Company is permitted to pay cash
dividends in any fiscal year in an amount not to exceed the greater of (i) the
amount of dividends due BIL under the terms of the Series B and Series C
Preferred Stock in any fiscal year, or (ii) 12.5% of net income of the Company
on a consolidated basis, provided, that no event of default or default shall
have occurred and be continuing or would exist after giving effect to the
payment of the dividends.
F-16
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTES AND ACCEPTANCES PAYABLE (continued)
At December 31, 1995, the Company had an unsecured line of credit with The Chase
Manhattan Bank available for letters of credit, acceptances and direct
borrowings. The total amount available under the line of credit was $15,000,000.
The line was available for direct borrowings in the amount of up to $5,000,000
and provided for commercial letter of credit and bankers acceptances. This line
of credit expired on December 31, 1996; however, amounts outstanding at that
date for bankers acceptances and letters of credit mature through March 31,
1997.
At December 31, 1996, the Company had aggregate direct borrowings under both
banks' facilities of $13,985,000 and acceptances payable of $19,800,000. The
weighted average interest rate on the amounts outstanding as of December 31,
1996 was 7.65%. Open letters of credit at December 31, 1996 were $1,568,000
relating to trade credit and $6.0 million for other requirements.
At December 31, 1995, the Company had direct borrowings of $2,100,000 and
$5,000,000 utilized under acceptances payable. The weighted average interest
rate on the amounts outstanding as of December 31, 1995 was 8.6%.
7. LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
1996 1995
---------- ----------
Note payable to BIL (a) $4,000,000 --
Notes payable to International Business
Machines Corp. ("IBM") (b) 1,019,000 $1,550,000
Capital lease obligations (c) 1,344,000 --
Other (d) 1,710,000 --
---------- ----------
8,073,000 1,550,000
Less current maturities 2,016,000 578,000
---------- ----------
$6,057,000 $ 972,000
========== ==========
(a) On July 18, 1996, an affiliate of BIL provided the Company with a loan in
the amount of $4,000,000, at an effective interest rate of 8.8%. The loan
was used to fund the acquisition of V.C. Medical and for general corporate
purposes. In connection with the acquisition of Everest & Jennings, the
indebtedness owing by the Company to BIL was exchanged for the BIL Note.
Under the terms of the BIL Note, the Company has the right to reduce the
principal amount of the BIL Note in the event punitive damages are awarded
against the Company or any of its subsidiaries which relate to any existing
product liability claims of Everest & Jennings and/or its subsidiaries
involving a death prior to September 3, 1996.
F-17
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT (continued)
(b) In connection with the development of the Company's St. Louis Distribution
Center, the Company entered into an agreement with IBM to provide the
computer hardware and software, and all necessary warehousing machinery and
equipment including installation thereof. This project was primarily
financed through IBM by the issuance of the Company's unsecured notes which
corresponded to various components of the project. The unsecured notes
mature through October 2000, with interest rates ranging from 7.68% to
11.53%.
(c) At December 31, 1996, the Company is obligated under certain lease
agreements for equipment which have been accounted for as capital leases.
The capital leases were acquired in connection with the acquisition of
Everest & Jennings. Future minimum payments by year, and in the aggregate
are as follows:
Year Ended December 31 Amount
---------------------- ------
1997 $ 954,000
1998 476,000
1999 13,000
----------
Total 1,443,000
Less amounts representing interest 99,000
----------
Present value of future minimum
lease payments $1,344,000
==========
The net book value of assets held under capital lease obligations amounted
to $424,000 at December 31, 1996.
(d) Other long-term debt consists primarily of a mortgage payable in the
amount of $1,100,000 due in monthly installments of $22,906 through
November 1998, with a final payment of approximately $570,000 due on
November 30, 1998, and bearing interest at prime plus one-half
percent. In addition, the Company has a credit facility for its
Mexican subsidiary, of which $500,000 was outstanding as of December
31, 1996. Borrowings under the credit facility bear interest at
approximately 13%. The Mexican borrowings are secured by the assets of
the Mexican subsidiary. The borrowings are payable in semi-annual
installments of $100,000 through 1999.
The scheduled maturities of the long-term debt obligations, excluding the
present value of minimum payments on capital lease obligations, are as follows:
Year Ended December 31 Amount
---------------------- ------
1997 $1,148,000
1998 1,427,000
1999 132,000
2000 22,000
Thereafter 4,000,000
----------
$6,729,000
==========
F-18
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. GUARANTEED SENIOR NOTES
On March 12, 1992, under the John Hancock Note and Warrant Agreement, the
Company privately sold at par to John Hancock its 8.28% Guaranteed Senior Notes
due February 29, 2000 (the "Guaranteed Senior Notes"), in the aggregate
principal amount of $20,000,000 (the "John Hancock Indebtedness"), and five-year
warrants to purchase 125,000 shares of the common stock of the Company at an
exercise price of $12 per share. During 1993, the John Hancock Note and Warrant
Agreement was amended to modify the terms of certain financial covenants and the
terms of the warrants issued to John Hancock. The amendment to the John Hancock
Note and Warrant Agreement provided for, among other things, an increase in the
number of shares available for issuance under the warrants from 125,000 shares
to 250,000 shares of the common stock of the Company (the "Initial Warrants"), a
reduction in the exercise price of the warrants from $12.00 to $5.50 per share,
and an extension of the expiration date of the warrants to February 29, 2000.
The Initial Warrants, which were revalued as of the date of amendment, have been
valued at $365,000, and are being amortized as additional interest over the
remaining term of the debt. At December 30, 1994, the John Hancock Note and
Warrant Agreement was amended to modify the terms of certain financial
covenants. In connection with the amendment, the Company issued to John Hancock
additional warrants to purchase 90,000 shares of the common stock of the Company
(the "Additional Warrants") at an exercise price of $5.25 per share, with an
expiration date of February 29, 2000. The Additional Warrants were valued at
$90,000 and were amortized as additional interest over the remaining term of the
debt. As a result of the Company's offshore private placement of 1,071,655
shares of common stock completed in September 1995, additional warrants to
purchase 5,336 shares of the common stock of the Company were issued to John
Hancock. In connection with the Company's offshore private placement, the
exercise prices of the warrants were adjusted from $5.50 per share to $5.42 per
share with respect to the Initial Warrants and from $5.25 per share to $5.17 per
share with respect to the Additional Warrants.
In connection with the issuance and amendments to the Guaranteed Senior Notes,
issuance costs of approximately $506,000, net of accumulated amortization of
$331,000, were included in other assets at December 31, 1995. Such costs were
amortized over the term of the Guaranteed Senior Notes.
During December 1996, the Company retired the John Hancock Indebtedness with
proceeds from the Company's Credit Facility with IBJ Schroder. In connection
with the early retirement of the John Hancock Indebtedness, the Company incurred
charges relating to the "make-whole" payment and the write-off of all
unamortized financing costs associated with the John Hancock Note and Warrant
Agreement. The charges amounted to $736,000 (net of a tax benefit of $383,000),
and are reported as an extraordinary item in the accompanying consolidated
statements of operations.
9. STOCKHOLDERS' EQUITY
On March 23, 1989, the Company declared, and on July 21, 1989 the stockholders
approved, a dividend distribution to stockholders of record on July 21, 1989 of
one right for each outstanding share of the Company's common stock pursuant to a
Rights Agreement dated as of July 21, 1989, between the Company and American
Stock Transfer & Trust Company, as Rights Agent (the "1989 Rights Agreement").
F-19
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY (continued)
On September 3, 1996, immediately prior to the execution of the Merger
Agreement, the Company entered into an amendment to the 1989 Rights Agreement,
with the effect of exempting the events and transactions contemplated by the
Merger Agreement and the Amended and Restated Stockholder Agreement dated as of
September 3, 1996, as amended on September 19, 1996, by and among the Company
and Irwin Selinger (the "Stockholder Agreement"), from the 1989 Rights
Agreement. In addition, on that date the rights previously issued under the 1989
Rights Agreement were called for redemption on September 17, 1996.
On September 3, 1996, the Company also entered into a new Rights Agreement with
American Stock Transfer & Trust Company, as Rights Agent (the "1996 Rights
Agreement"). As contemplated by the 1996 Rights Agreement, the Company's Board
of Directors declared a dividend of one new preferred share purchase right (a
"Right") for each outstanding share of the common stock of the Company
outstanding on September 17, 1996. Each Right entitles the holder thereof to
purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Shares") at a price of $35.00 per one one-hundredth of a Preferred
Share, subject to adjustment as provided in the 1996 Rights Agreement.
Until the earlier to occur of (i) 10 days following a public announcement that a
person or group of affiliated or associated persons have acquired (an "Acquiring
Person") beneficial ownership of 15% or more of the outstanding shares of
capital stock of the Company entitled generally to vote in the election of
directors ("Voting Shares") or (ii) 10 business days (or such later date as may
be determined by action of the Board of Directors prior to such time as any
person or group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in a person or group
becoming an Acquiring Person (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
common stock certificates outstanding as of the record date, by such common
stock certificate. Notwithstanding the foregoing, BIL will not be an Acquiring
Person by virtue of its ownership of any Voting Shares acquired in accordance
with the Merger Agreement or the Stockholder Agreement (the "BIL Voting
Shares"), but BIL will become an Acquiring Person if it acquires any Voting
Shares other than BIL Voting Shares or shares distributed generally to the
holders of any series or class of capital stock of the Company. In addition, the
1996 Rights Agreement contains provisions exempting the Merger and the other
events and transactions contemplated by the Merger Agreement and the Stockholder
Agreement from the 1996 Rights Agreement.
The 1996 Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the common stock of the Company. The Rights are not exercisable until
the Distribution Date. The Rights will expire on September 3, 2006.
F-20
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY (continued)
Preferred Shares purchasable upon exercise of the Rights will not be redeemable.
Each Preferred Share will be entitled to a minimum preferential quarterly
dividend payment of $1 per share but will be entitled to an aggregate dividend
of 100 times the dividend declared per share of common stock of the Company. In
the event of liquidation, the holders of the Preferred Shares will be entitled
to a minimum preferential liquidation payment of $100 per share but will be
entitled to an aggregate payment of 100 times the payment made per share of
common stock. Each Preferred Share will have 100 votes, voting together with the
shares of common stock of the Company. In the event of any merger, consolidation
or other transaction in which the common stock of the Company is exchanged, each
Preferred Share will be entitled to receive 100 times the amount received per
share of common stock of the Company. The Rights are protected by customary
antidilution provisions. Because of the nature of the Preferred Shares'
dividend, liquidation and voting rights, the value of the one one-hundredth
interest in a Preferred Share purchasable upon exercise of each Right should
approximate the value of one share of common stock of the Company.
In the event the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold
after a person or group has become an Acquiring Person, proper provision will be
made so that each holder of a Right will thereafter have the right to receive,
upon the exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction will have a market value of two times the exercise price of the
Right.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, the 1996 Rights Agreement provides that proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive (subject to adjustment) upon exercise that
number of shares of common stock of the Company having a market value of two
times the exercise price of the Right. At any time after any person or group
becomes an Acquiring Person and prior to the acquisition by such person or group
of 50% or more of the outstanding Voting Shares, the Board of Directors of the
Company may exchange the Rights (other than Rights owned by such person or
group, which will have become void), in whole or in part, at an exchange ratio
of one share of common stock, or one one-hundredth of a Preferred Share (or of a
share of a class or series of the Company's preferred stock having equivalent
rights, preferences and privileges), per Right (subject to adjustment).
At any time prior to a person or group of affiliated or associated persons
becoming an Acquiring Person, the Board of Directors of the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"). The redemption of the Rights may be made effective at such
time on such basis with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the Rights in
accordance with this paragraph, the right to exercise the Rights will terminate
and the only right of the holder of the Rights will be to receive the Redemption
Price.
F-21
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY (continued)
The terms of the Rights may be amended by the Board of Directors of the Company
without the consent of the holders of the Rights, including an amendment to (a)
lower certain thresholds described above to not less than the greater of (i) any
percentage greater than the largest percentage of the outstanding Voting Shares
then known to the Company to be beneficially owned by any person or group of
affiliated or associated persons and (ii) 10%, (b) fix a Final Expiration Date
later than September 3, 2006, or (c) reduce the Redemption Price, (d) increase
the Purchase Price, except that from and after such time as any person or group
of affiliated or associated persons becomes an Acquiring Person no such
amendment may adversely affect the interests of the holders of the Rights (other
than the Acquiring Person and its affiliates and associates).
As long as the Rights are attached to the common stock of the Company, the
Company will issue one Right with each new share of common stock so that all
such shares will have Rights attached. The Company's Board of Directors has
reserved for issuance 300,000 Preferred Shares upon exercise of the Rights.
On November 27, 1996, in connection with the acquisition of Everest & Jennings
(see Note 2), the Company issued $61 million stated value of Series B Preferred
Stock and $10 million stated value of Series C Preferred Stock to BIL, and
issued an aggregate of 4,444,933 shares of the Company's common stock. The
Series B Preferred Stock is entitled to a dividend of 1.5% per annum payable
quarterly, votes on an as-converted basis as a single class with the common
stock of the Company and the Series C Preferred Stock, is not subject to
redemption and is convertible into shares of the common stock of the Company (x)
at the option of the holder thereof, at a conversion price of $20 per share (or,
in the case of certain dividend payment defaults, at a conversion price of
$15.50 per share), (y) at the option of the Company, at a conversion price equal
to current trading prices (subject to a minimum conversion price of $15.50 and a
maximum conversion price of $20 per share) and (z) automatically on the fifth
anniversary of the date of issuance at a conversion price of $15.50 per share.
Such conversion prices are subject to customary antidilution adjustments.
The Series C Preferred Stock is entitled to a dividend of 1.5% per annum payable
quarterly, votes on an as-converted basis as a single class with the common
stock of Company and the Series B Preferred Stock, is subject to redemption as a
whole at the option of the Company on the fifth anniversary of the date of
issuance at stated value and, if not so redeemed, will be convertible into
shares of the common stock of the Company automatically on the fifth anniversary
of the date of issuance at a conversion price of $20 per share, subject to
customary antidilution adjustments.
In September 1995, the Company completed an offshore private placement of
1,071,655 shares of the common stock of the Company with various European
institutional investors. The net proceeds of $3,471,000 realized from the
offering were used for general corporate purposes.
On November 27, 1996, the Company amended its certificate of incorporation to
provide for, among other things, an increase in the number of authorized shares
of common stock from 40,000,000 to 60,000,000 shares.
On September 4, 1996, the Company acquired substantially all of the assets of
V.C. Medical , in consideration of the issuance of 32,787 shares of the common
stock.
F-22
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY (continued)
Under the Company's stock option program, the Company is authorized to grant
incentive stock options, non-qualified stock options, stock appreciation rights,
restricted stock grants and restored options. Incentive stock options may be
granted at not less than 100% (110% for owners of more than 10% of the Company's
outstanding common stock) of the fair market value of the Company's common stock
at the date of grant. Stock options outstanding under the program generally vest
and are exercisable at a rate of 50% per annum. Effective as of December 21,
1995, directors' options to purchase 10,000 shares of the common stock of the
Company are granted to eligible directors each January 2, at an exercise price
equal to the fair market value of the common stock at the date of grant.
Directors' options are exercisable one-third each year for three years, and have
a term of ten years. Incentive and non-qualified options expire five years from
the date of grant.
In 1992, the Company amended its stock option program to increase the maximum
number of shares available under the program from 900,000 to 1,500,000. In 1995,
the Company amended its stock option program to increase the maximum number of
shares available under the program from 1,500,000 to 2,100,000. In 1996, the
plan was further amended to increase the maximum number of shares available from
2,100,000 to 3,000,000.
During 1996, 1995 and 1994, officers of the Company surrendered 45,517, 14,518
and 28,943 shares, respectively, of the Company's common stock with a fair
market value of $165,000, $50,000 and $126,000, respectively, in satisfaction of
the exercise price of stock options to purchase 50,000, 25,000 and 58,187
shares, respectively, of common stock of the Company. The shares received in
satisfaction of the exercise price of stock options were recorded as treasury
stock and were retired on a quarterly basis as authorized by the Board of
Directors. Accordingly all such shares have been restored as authorized and
unissued shares of common stock.
The Company has elected to comply with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because the
alternate fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models which were not developed for use in valuing employee stock options. Under
APB 25, no compensation expense is recognized in connection with the grant of
stock options under the Company's stock option program.
In accordance with FASB Statement No. 123, pro-forma information regarding net
loss and loss per common share has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted average
assumptions for 1996 and 1995, respectively: risk-free interest rate of 6.5%;
dividend yields on the preferred stock of 1.5%, volatility factors of the
expected market price of the Company's common stock of .41 and .42; and a
weighted-average expected life of the option of 3.2 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. In
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options due to changes in
subjective input assumptions which may materially affect the fair value
estimate, and because the Company's employee stock options have characteristics
significantly different from those of traded options.
F-23
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY (continued)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's
pro-forma information is as follows:
1996 1995
---- ----
Pro forma net (loss) income $ (13,440,000) $ 644,000
Pro forma net (loss) income per share: $ (.93) $ .05
FASB Statement No. 123 is applicable only to options granted subsequent to
December 31, 1994. Accordingly, the pro forma effect will not be fully reflected
until 1997.
Information with respect to options during the years ended December 31, 1996 and
1995 under FASB statement No. 123 and for the year ended December 31, 1994 under
APB 25 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Weighted Weighted
Average Average Option
Options Exercise Price Options Exercise Price Options Exercise Price
------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Options outstanding -
beginning of year 912,645 $ 5.49 818,379 $ 6.10 824,886 $2.00 - $11.75
Options granted:
Incentive options 699,121 6.45 257,432 3.47 144,278 $4.125 - $5.913
Directors' options 90,000 3.25 91,852 3.65 50,000 $4.75 - $5.375
Non-qualified options 91,764 6.02 - 29,165 $4.125 - $5.913
Options exercised (103,255) (3.83) (86,500) (2.58) (149,250) $2.00 - $3.00
Options cancelled
and expired (47,100) (4.87) (168,518) (5.79) (80,700) $2.00 - $11.75
Options outstanding -
end of year 1,643,175 $ 5.77 912,645 $ 5.49 818,379 $2.00 - $11.75
========= ====== ======= ====== =======
Options exercisable at
end of year 582,244 $ 5.45 483,929 $ 4.95 507,686
========= ====== ======= ====== =======
Weighted average fair
value of options granted
during the year $ 2.10 $ 1.20
=========== ==========
</TABLE>
F-24
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY (continued)
Exercise prices for options outstanding as of December 31, 1996 were as follows:
Number of Range of Exercise Prices
--------- ------------------------
Options
-------
20,000 $2.00 - $2.99
409,535 3.00 - 3.99
198,922 4.00 - 4.99
194,400 5.00 - 5.99
44,000 6.00 - 6.99
725,050 7.00 - 7.99
51,268 Over 8.00
---------
1,643,175
=========
The weighted average remaining contractual life of those options is 5 years.
Shares of common stock reserved for future issuance as of December 31, 1996 are
as follows:
Number of Shares
----------------
Stock options 2,240,163
Warrants issued to John Hancock 345,336
Series B Preferred Stock 3,935,483
Series C Preferred Stock 500,000
---------
7,020,982
=========
The exercise of non-qualified stock options and disqualifying dispositions of
incentive stock options resulted in Federal and state income tax benefits to the
Company equal to the difference between the market price at the date of exercise
or sale of stock and the exercise price of the option. Accordingly, during 1996,
1995 and 1994, approximately $38,000, $38,000 and $42,000, respectively, was
credited to additional paid in capital.
10. INCOME TAXES
At December 31, 1996, the Company had aggregate net operating loss carryforwards
of approximately $22,745,000 for income tax purposes which expire at various
dates from 2008 to 2010, of which approximately $20,480,000 were acquired in
connection with the Everest & Jennings acquisition and expire primarily in 2010
and are limited as to use in any particular year. In addition, at December 31,
1996, the Company had approximately $890,000 (net of a 35% reduction of
investment tax credits as a result of the Tax Reform Act of 1986) of investment,
research and development, jobs tax and AMT credits, for income tax purposes
which expire primarily in 1999, and which includes alternative minimum tax
credits of $500,000 which have no expiration date. The Company has provided a
valuation allowance in the fourth quarter of 1996 amounting to approximately
$400,000, since the credits are available only through the expiration dates, and
only after the utilization of available net operating loss carryforwards. In
1995, the Company recorded deferred State tax benefits previously not recognized
as a component of the net operating loss carryforwards.
For financial reporting purposes, due to prior years losses of Everest &
Jennings, and SRLY limitations, a full valuation allowance of approximately
$14,494,000 has been recognized in the purchase of Everest & Jennings to offset
the net deferred tax assets related to the acquired tax attributes. If realized,
the tax benefit for those items will be recorded as a reduction to the excess
cost over net assets acquired. In addition, the Company has provided an
additional valuation allowance of $600,000 against a portion of its remaining
net deferred tax asset at December 31, 1996 due to the recent acquisition of
Everest & Jennings. The amount of the remaining deferred tax asset considered
realizable could be reduced in the near term if estimates of future taxable
income during the carryforward period are reduced.
F-25
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31, 1996 and
1995 are as follows:
1996 1995
------------ -----------
Deferred Tax Assets:
Net operating loss carryforwards $ 7,893,000 $ 3,043,000
Tax credits 890,000 744,000
Accounts receivable allowances 2,600,000 723,000
Inventory related 2,575,000 1,226,000
Deferred rent 382,000 403,000
Other reserves and accrued items 4,738,000 5,000
------------ -----------
19,078,000 6,144,000
Valuation allowance for deferred assets (15,549,000) (55,000)
------------ -----------
Total deferred tax assets 3,529,000 6,089,000
------------ -----------
Deferred Tax Liabilities:
Tax in excess of book depreciation 1,696,000 1,713,000
Leveraged lease - 506,000
Prepaid expenses 254,000 250,000
Amortization of intangibles 668,000 477,000
Other - 131,000
------------ -----------
Total deferred tax liabilities 2,618,000 3,077,000
------------ -----------
Net deferred tax assets $ 911,000 $ 3,012,000
============ ===========
Significant components of the provision (benefit) for income taxes are as
follows:
1996 1995 1994
---------- --------- ---------
Current:
Federal $ 166,000 $ 36,000 $ --
State and local 48,000 5,000 --
Foreign 9,000 -- --
---------- --------- ---------
223,000 41,000 --
Deferred Federal and state 2,450,000 519,000 (947,000)
---------- --------- ---------
$2,673,000 $ 560,000 $(947,000)
========== ========= =========
F-26
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES (continued)
The following is a reconciliation of income tax computed at the Federal
statutory rate to the provision for taxes:
1996 1995 1994
---- ---- ----
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Tax expense (benefit)
computed at
statutory rate $(3,244,000) (34%) $ 441,000 34% $(1,123,000) (34%)
Expenses not
deductible for
income tax purposes:
Amortization of
excess of cost over
net assets acquired 276,000 3% 286,000 22% 239,000 7%
In-process R&D
costs 4,352,000 46% -- -- -- --
Other 11,000 -- 54,000 4% 46,000 1%
State tax expense
(benefit), net of
Federal benefit 278,000 3% 91,000 7% (109,000) (3%)
Previously
unrecognized
State tax benefits -- -- (312,000) (24%) -- --
Valuation allowance
on net deferred tax
assets 1,000,000 10% -- -- -- --
----------- -- --------- -- ----------- ---
$ 2,673,000 28% $ 560,000 43% $ (947,000) (29%)
=========== == ========= == =========== ===
F-27
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11 EMPLOYEE BENEFIT PLANS
The Company has a non-contributory defined benefit pension plan covering
employees of its subsidiary, Everest & Jennings Inc. and two non-contributory
defined benefit pension plans for the non-bargaining unit salaried employees
("Salaried Plan") and employees subject to collective bargaining agreements
("Hourly Plan") at its Smith & Davis subsidiary. Effective May 1, 1991, benefits
accruing under the Everest & Jennings, Inc. Pension Plan were frozen. During
1991, Everest & Jennings froze the Hourly Plan and purchased participating
annuity contracts to provide for accumulated and projected benefit obligations.
Everest & Jennings also froze the Salaried Plan effective as of January 1, 1993.
Accordingly, no pension cost has been reflected in the accompanying statement of
operations.
The following table sets forth the status of these plans and the amounts
recognized in the Company's consolidated financial statements.
1996
-----------
Actuarial present value of benefit obligations:
Vested benefit obligation $17,567,000
-----------
Accumulated benefit obligation $17,567,000
-----------
Projected benefit obligation for services rendered to date $17,567,000
Plan assets at fair value, primarily listed stocks, bonds,
investment funds and annuity contracts 14,746,000
-----------
Projected benefit obligation in excess of plan assets 2,821,000
Unrecognized transition amount --
Unrecognized loss from change in discount rate --
-----------
Pension liability (current portion of $1,069,000) $ 2,821,000
===========
The following assumptions were used to determine the projected benefit
obligations and plan assets:
Everest & Jennings, Inc. Smith & Davis
Plan Plans
------------------------ -------------
1996 1996
------------------------ -------------
Weighted-average discount rate 7.5% 7.5%
Expected long-term rate of return on assets 9.0% 9.0%
No long-term rate for compensation increases were assumed as all participants
are inactive and the plans are frozen.
The Company also sponsors two 401(k) Savings and Investment Plans. One plan
covers all full-time employees of the Company's wholly-owned subsidiary, Everest
& Jennings, and the other plan covers the remaining employees of the Company.
The Company does not contribute to the plans.
F-28
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments as of December 31, 1996 and 1995, for which
it is practicable to estimate that value:
Cash and cash equivalents: The carrying amounts reported in the accompanying
balance sheets approximate fair value.
Notes and acceptances payable: The carrying amounts of the Company's borrowings
under its credit facility approximate their fair value.
Long-term debt: The fair values of the Company's long-term debt are estimated
using discounted cash flow analyses, based on the Company's incremental
borrowing rates for similar types of borrowing arrangements. At December 31,
1996 and 1995, the carrying amount reported approximates fair value.
Investment in leveraged lease: The carrying amounts reported in the accompanying
balance sheet for 1995 approximate fair value. Fair value is determined based on
the current value of the underlying assets.
Guaranteed Senior Notes: The fair value of the Company's Guaranteed Senior Notes
is estimated using a discounted cash flow analysis based on current rates
offered to the Company for debt of the same remaining maturity. At December 31,
1995, the fair value of such debt was approximately $19,200,000.
13. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company is a party to a number of noncancellable lease agreements for
warehouse space, office space and machinery and equipment rental. As of December
31, 1996 the agreements extend for various periods ranging from 1 to 11 years
and certain leases contain renewal options. Certain leases provide for payment
of real estate taxes and include escalation clauses.
For those leases which have escalation clauses, the Company has recorded rent
expense on a straight-line basis. At December 31, 1996 and 1995, $933,000 and
$984,000, respectively, of rent expense was accrued in excess of rental payments
made by the Company.
As of December 31, 1996, minimal annual rental payments under all noncancellable
operating leases are as follows:
Year Ended December 31:
-----------------------
1997 $ 3,174,000
1998 3,132,000
1999 3,007,000
2000 2,806,000
2001 2,788,000
Thereafter 11,230,000
-----------
$26,137,000
===========
Rent expense for the years ended December 31, 1996, 1995 and 1994 approximated
$2,769,000, $2,363,000, and $2,527,000, respectively.
F-29
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES (continued)
Legal Proceedings
On June 19, 1996, a class action lawsuit was filed on behalf of all stockholders
of Everest & Jennings (other than the named defendants) in the Delaware Court of
Chancery, following announcement on June 17, 1996 of the original agreement in
principle between Everest & Jennings and the Company. The class action names as
defendants the Company, Everest & Jennings, Everest & Jennings' directors, and
BIL. The class action challenges the transactions contemplated by the original
agreement in principle, alleging, among other things, that (i) such transactions
were an attempt to eliminate the public stockholders of Everest & Jennings at an
unfair price, (ii) BIL will receive more value for its holdings in Everest &
Jennings than its minority stockholders, (iii) the public stockholders will not
be adequately compensated for the potential earnings of Everest & Jennings, (iv)
BIL and the directors of Everest & Jennings breached or aided and abetted the
breach of fiduciary duties owed to the stockholders (other than the defendants)
by not exercising independent business judgment and having conflicts of
interest, and (v) the Company aided and abetted and induced breaches of
fiduciary duties by other defendants by offering incentives to members of
management, either in the form of continued employment or monetary compensation
and perquisites, in exchange for their approval of the merger. The class action
seeks to rescind the merger or an award of rescissionary damages if it cannot be
set aside, and also prays for an award of compensatory damages. The Company
believes that it has valid defenses to the complaint's allegations of
wrongdoing, and intends to vigorously defend the lawsuit.
On May 21, 1996, the Company was sued by Minnesota Mining & Manufacturing
Company ("3M") in a claim purportedly arising under federal, state and common
law trademark, false advertising, and unfair competition laws, as well as for
breach of, and interference with, contracts. 3M alleges that the Company is
selling 3M products in violation of federal and state law, and seeks monetary
damages in an unspecified amount, as well as injunctive relief against the
Company's continued sale of 3M products. The claim was filed in the Southern
District of New York. The Company vigorously denies the allegations of 3M's
complaint, and has filed an answer denying the allegations of wrongdoing and
asserting affirmative defenses. In addition, the Company has asserted
counterclaims against 3M under federal antitrust laws, as well as an unfair
competition claim. On October 16, 1996, 3M moved to dismiss the Company's
antitrust counterclaims. Briefing of the motion has been completed and the
parties are awaiting a decision. 3M has proposed a settlement of all claims
pursuant to which the Company would, among other things, agree to restrict its
purchases of 3M products to certain authorized 3M dealers, and make a payment of
no more than $400,000. Although settlement discussions are ongoing, it is not
possible to predict the outcome of such discussions.
Everest & Jennings and its subsidiaries are parties to certain lawsuits and
proceedings as described below (the "Everest & Jennings Proceedings"). Under the
terms of the Stockholder Agreement, BIL has agreed to indemnify the Company and
its subsidiaries against the Everest & Jennings Proceedings in the event the
amount of losses, claims, demands, liabilities, damages and all related costs
and expenses (including attorneys' fees and disbursements) in respect of the
Everest & Jennings Proceedings exceeds in the aggregate the applicable amounts
reserved for such proceedings on the books and records of Everest & Jennings as
of September 3, 1996. In view of BIL's obligation to indemnify the Company and
its subsidiaries with respect to such proceedings, management does not expect
that the ultimate liabilities, if any, with respect to such proceedings, will
have a material adverse effect on the consolidated financial position or results
of operations of the Company.
F-30
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES (continued)
On July 17, 1990, a class action suit was filed in the United States District
Court for the Central District of California by a stockholder of Everest &
Jennings against Everest & Jennings and certain of its present and former
directors and officers. The suit seeks unspecified damages for alleged
non-disclosure and misrepresentation concerning Everest & Jennings in violation
of federal securities laws. The district court dismissed the complaint on March
26, 1991, and plaintiff filed his first amended complaint on May 8, 1991. The
district court again granted a motion to dismiss the entire action on November
26, 1991. Plaintiff then took an appeal to the Ninth Circuit, which reversed the
district court's dismissal of the first amended complaint and remanded the case
to the district court for further proceedings. On March 25, 1996, the district
court granted Plaintiff's motion to certify a class composed of purchasers of
the Everest & Jennings' common stock during the period from March 31, 1989 to
June 12, 1990. Plaintiff's counsel has not as yet submitted to the court any
proposed notice of class certification and, consequently, the members of the
class have not been notified that the court has certified the case to proceed as
a class action. Everest & Jennings has received and filed responses and
objections to a document request, but further action has been deferred to allow
the parties to discuss possible settlement. Everest & Jennings has ordered the
parties to file and plaintiff's counsel has filed monthly reports on the status
of settlement discussions since September 1996. There are numerous defenses
which Everest & Jennings intends to assert to the allegations in the first
amended complaint if settlement cannot be reached on acceptable terms. Under
Everest & Jennings' directors and officers insurance policy, Everest & Jennings
has coverage against liabilities incurred by its directors and officers, subject
to a self-insured retention of $150,000 (which has been exceeded by defense
costs incurred to date). The carrier has contended that fifty percent of the
liability and expenses in the case must be allocated to Everest & Jennings,
which is not an insured defendant, and fifty percent to the insured former
director and officer defendants. This proceeding constitutes an Everest &
Jennings Proceeding, which is covered under BIL's indemnification obligations
pursuant to the terms and provisions of the Stockholder Agreement.
Die Cast Products, Inc., a former subsidiary of Everest & Jennings, was named as
a defendant in a lawsuit filed by the State of California pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act 42
U.S.C.ss.ss.9601 et seq. Everest & Jennings was originally notified of this
action on December 10, 1992. A settlement was reached at an October 5, 1995
Mandatory Settlement Conference before Judge Rea in the Federal District Court
of the Central District of California. The state of California has agreed to
accept the sum of $2.6 million as settlement for all past costs and future
remedial work. Everest & Jennings' share of the settlement with the state of
California has amounted to $41,292.30, which sum was paid on January 3, 1997. No
further claims or assessments with respect to this matter are anticipated at
this time. This proceeding constitutes an Everest & Jennings Proceeding, which
is covered under BIL's indemnification obligations pursuant to the terms and
provisions of the Stockholder Agreement.
F-31
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES (continued)
In March, 1993, E&J received a notice from the U.S. Environmental Protection
Agency ("EPA") regarding an organizational meeting of generators with respect to
the Casmalia Resources Hazardous Waste Management Facility ("Casmalia Site") in
Santa Barbara County, CA. The EPA alleges that the Casmalia Site is an inactive
hazardous waste treatment, storage and disposal facility which accepted large
volumes of commercial and industrial wastes from 1973 until 1989. In late 1991,
the Casmalia Site owner/operator abandoned efforts to actively pursue site
permitting and closure and is currently conducting only minimal maintenance
activities. An agreement in principle now has been reached between the Casmalia
Steering Committee ("CSC") and the EPA for a settlement of the majority of the
Casmalia site liability. The Steering Committee represents approximately 50 of
the largest volume generators at the Casmalia site. It is anticipated that the
agreement will be formalized and embodied in a Consent Decree in the summer and
fall of 1997. Pursuant to the settlement, the CSC members are committing to
perform and fund Phase I work at the site. It is estimated that the Phase I work
being committed to will cost approximately $30 to $35 million dollars and will
take three to five years to complete. This cost will be allocated to Steering
Committee members based upon their volume of waste sent to the site. Everest &
Jennings accounts for 0.8% of the waste. Thus, by participating in the Phase I
settlement, Everest & Jennings has committed to payments of approximately
$280,000 to be spread over a three to five year period. Pursuant to the
settlement, Everest & Jennings will be released from further obligation for
thirty (30) years. In addition, the Steering Committee companies are seeking to
recover from the owner and operator of the site. Any such recovery will diminish
E&J's payout pursuant to the settlement. This proceeding constitutes an Everest
& Jennings Proceeding, which is covered under BIL's indemnification obligations
pursuant to the terms and provisions of the Stockholder Agreement.
In 1989, a patent infringement case was initiated against E&J and other
defendants in the U.S. District Court, Central District of California. E&J
prevailed at trial with a directed verdict of patent invalidity and
non-infringement. The plaintiff filed an appeal with the U.S. Court of Appeals
for the Federal Circuit. On March 31, 1993, the Court of Appeals vacated the
District Court's decision and remanded the case for trial. Impacting the retrial
of this litigation was a re-examination proceeding before the Board of Patent
Appeals with respect to the subject patent. A ruling was rendered November 23,
1993 sustaining the claim of the patent which E&J Inc. has been charged with
infringing. Upon the issuance of a patent re-examination certificate by the U.S.
Patent Office, the plaintiff presented a motion to the District Court requesting
a retrial of the case. E&J presented a Motion for Summary Judgment of
Noninfringement based in part upon the November 23, 1993 decision of the Board
of Patent Appeals. The Motion was granted in follow-up conferences and an
official Judgment was entered November 17, 1994. Following the appeal by the
plaintiffs, the case has been remanded to the U.S. District Court, Central
District of California, for further consideration. E&J believes that this case
is without merit and intends to contest it vigorously. The ultimate liability of
E&J, if any, cannot be determined at this time. This proceeding constitutes an
Everest & Jennings Proceeding, which is covered under BIL's indemnification
obligations pursuant to the terms and provisions of the Stockholder Agreement.
F-32
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES (continued)
Following a jury trial on July 15, 1996, a verdict was rendered in the District
Court of the First Judicial District of the State of New Mexico in a civil
product liability law suit (Chris Trew et al. vs. Smith and Davis Manufacturing
Company, Inc., No. SF95-354) against Smith & Davis Manufacturing Company, a
wholly-owned subsidiary of Everest & Jennings ("Smith & Davis"), in the amount
of $635,698.12 actual damages, prejudgment interest and costs, plus $4 million
punitive damages. The suit was instituted on February 25, 1995 by the children
and surviving heirs and personal representatives of a nursing home patient in
Carlsbad, New Mexico who died on September 28, 1993 after her head became pinned
between a bed rail allegedly manufactured by Smith & Davis and her bed. The suit
alleged that the bed rail in question was defective and unsafe for its intended
purpose, that Smith & Davis was negligent in designing, manufacturing, testing
and marketing such bed rails, and that the negligence of the nursing home in
question was the proximate cause of decedent's injuries and death. The nursing
home reached a settlement with Plaintiffs prior to trial. Judgment was entered
on the jury verdict, which bears interest at the rate of 15% from August 30,
1996 until paid. On October 15, 1996, Plaintiffs filed a related case in the
Circuit Court of the County of St. Louis, Missouri (Chris Trew, et. al. v.
Everest & Jennings, et al., Cause No. 96CC-000456, Division 39), which seeks a
declaratory judgment against Everest & Jennings and BIL to pierce their
respective corporate veils and holding them jointly and severally liable for the
full amount of the New Mexico judgment. On February 26, 1997, the parties agreed
in principle to a proposed settlement in which the Plaintiffs would receive $3
million, of which Everest & Jennings estimates that approximately $1.5 million
will be paid by Everest & Jennings' insurance carriers, however, Everest &
Jennings may seek additional recovery from the insurance carriers. The amounts
required to be paid in the proposed settlement in excess of any insurance
recoveries will be borne, in whole or in part, by BIL under the indemnification
terms and provisions contained in the Stockholder Agreement and/or through the
Company's right of offset under the BIL Note.
The Company and its subsidiaries are parties to other lawsuits and other
proceedings arising out of the conduct of its ordinary course of business,
including those relating to product liability and the sale and distribution of
its products. While the results of such lawsuits and other proceedings cannot be
predicted with certainty, management does not expect that the ultimate
liabilities, if any, will have a material adverse effect on the consolidated
financial position or results of operations of the Company.
Collective Bargaining Agreements
The Company is a party to five (5) collective bargaining agreements covering the
Company's facilities located in Hauppauge, New York; Passaic, New Jersey; Earth
City, Missouri; Ontario, Canada; and Guadalajara, Mexico. The collective
bargaining agreements cover approximately 620 employees. The collective
bargaining agreements for Hauppauge, New York; Passaic, New Jersey; Earth City,
Missouri; Ontario, Canada; and Guadalajara, Mexico are scheduled to expire on
September 30, 1997, July 27, 1999, September 13, 1999, July 24, 1998 and
December 31, 1997, respectively.
The Company has never experienced an interruption or curtailment of operations
due to labor controversy, except for a three-day period during the summer of
1993 in which the Company experienced a strike at its Passaic, New Jersey
facility, which did not have a material adverse effect on the Company's
operations. The Company considers its employee relations to be satisfactory.
F-33
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. OTHER MATTERS
During the fourth quarter of 1996, the Company recorded charges of $15,800,000
related to the acquisition of Everest & Jennings. The charges included
$12,800,000 related to the write-off of purchased in-process research and
development costs (see Note 2) and $3,000,000 for other merger related charges
(see Note 2).
In addition, the Company recorded an extraordinary item of $736,000 (net of tax
benefit of $383,000) related to the early extinguishment of the John Hancock
Indebtedness in the fourth quarter of 1996 (see Note 8).
During the fourth quarter of 1994, the Company recorded non-recurring expenses
of approximately $1,321,000 which were included in selling, general and
administrative expenses at December 31, 1994, of which approximately $612,000
was included in accrued expenses. These non-recurring expenses were related to
the estimated impairment of the residual value related to the Company's
investment in leveraged lease (see Note 5), an accrual for severance and other
employee costs related to employees terminated during the fourth quarter of 1994
and first quarter of 1995, an accrual for sales and franchise taxes related to
in process audits being conducted by multiple states for the periods of 1988
through 1992, and costs related to a terminated acquisition attempt and a lease
arbitration proceeding with respect to the Company's principal manufacturing
facility.
15. MAJOR CUSTOMERS
In 1994, the Company derived 11% of its revenues from Apria Healthcare Group,
Inc. (formerly Abbey Home Healthcare, which merged with Homedco in June 1995).
On September 1, 1995, the Company announced that its current supply agreement
with Apria would not be renewed in 1996, and will expire by its terms on
December 31, 1995. During fiscal year 1995 and 1994, the Company's product sales
to Apria were approximately $8.1 million and $10.3 million, respectively, which
represented approximately 8% and 11%, respectively, of the Company's product
sales. The Company's sales to Apria generate gross profit margins of
approximately 20%, which is significantly lower than the Company's sales to its
other customers which generate gross profit margins of approximately 33%. During
1996, no single customer or buying group accounted for more than 10% of the
Company's revenues.
16. SUBSEQUENT EVENTS
On February 28, 1997, Everest & Jennings Canada acquired substantially all of
the assets and certain liabilities of Motion 2000 Inc. and its wholly-owned
subsidiary, Motion 2000 Quebec Inc., for a purchase price equal to Cdn. $2.9
million (Canadian Dollars) (approximately $2.15 million). The purchase price was
paid by the issuance of 187,733 shares of the common stock of the Company valued
at $11.437 per share, of which 28,095 shares were delivered into escrow. The
purchase price is subject to adjustment if the final determination of the
closing date net book value of the assets acquired by Everest & Jennings Canada
is equal to or less than Cdn. $450,000 (Canadian Dollars) (approximately
$333,000). All of the escrowed shares will be held in escrow until the earlier
to occur (the "Initial Release Date") of June 28, 1997, or the final resolution
of the purchase price. On the Initial Release Date, a portion of the escrowed
shares will be released in an amount equal to the difference between (i) 28,095
shares and (ii) the sum of the number of (x) any escrowed shares subject to any
indemnification claims, (y) any escrowed shares used to satisfy any adjustment
to the purchase price, and (z) 18,729 shares. The balance of the escrowed shares
will be released on December 31, 1997, subject to any claims for
indemnification.
F-34
<PAGE>
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. SUBSEQUENT EVENTS (continued)
On March 7, 1997, E&J acquired Kuschall of America, Inc., a manufacturer of
pediatric wheelchairs, high-performance adult wheelchairs and other
rehabilitation products, for a purchase price of $1,510,000, representing the
net book value of Kuschall. The purchase price was paid by the issuance of
116,154 shares of the common stock of the Company valued at $13.00 per share, of
which 23,230 shares were delivered into escrow. The escrow shares will be
released on March 7, 1999, subject to any purchase price adjustments in favor of
the Company and claims for indemnification.
F-35
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
==========================================================================================================================
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
- --------------------------------------------------------------------------------------------------------------------------
1 2
Balance at Additions Other Changes -- Balance at
Beginning Charged to Costs Charged to Other Add (Deduct) -- End of
DESCRIPTION of Period and Expenses Accounts-Describe Describe Period
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year Ended December 31, 1996 $ 1,740,000 $ 621,000 $5,077,000(2) $ (231,000)(1) $ 7,207,000
Year ended December 31, 1995 1,907,000 448,000 10,000(2) (625,000)(1) 1,740,000
Year ended December 31, 1994 2,451,000 586,000 (1,130,000)(1) 1,907,000
Valuation allowance for net
deferred tax assets:
Year ended December 31, 1996 $ 55,000 $1,000,000 $14,494,000(2) - $15,549,000
Year Ended December 31, 1995 55,000 - - - 55,000
Year Ended December 31, 1994 55,000 - - - 55,000
</TABLE>
(1) Net write-offs of accounts receivable.
(2) Represents an allocation of the purchase price of the Everest & Jennings and
V.C. Medical acquisitions.
F-36
<PAGE>
Item 8. Financial Statements and Supplementary Data:
The response to this Item is submitted as a separate section of this
Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures:
None.
PART III
Item 10. Directors and Executive Officers of the Registrant:
Executive Officers of the Registrant
The Company's executive officers are elected by, and serve at the
discretion of the Board of Directors. The following table sets forth certain
information concerning the present executive officers of the Company:
Position(s) with Year Became
Name Age Company Executive Officer
- ---------------- ----- ---------------------------- -----------------
Irwin Selinger 56 Chairman of the 1981
Board and Chief
Executive Officer
Gary M. Jacobs 39 Vice President - Finance 1992
and Chief Financial Officer
Richard S. Kolodny 38 Vice President, General 1993
Counsel, and Secretary
Peter Winocur 41 Executive Vice President 1996
of Sales and Marketing
Ralph Liguori 51 Executive Vice President 1995
of Operations
Beatrice Scherer 58 Vice President - Administration 1981
Donald J. Cantwell 47 Vice President of Information 1997
Systems
-49-
<PAGE>
Mr. Selinger, a founder and principal stockholder of the Company, has been
the Chairman of the Board and Chief Executive Officer of the Company since April
1981. Mr. Selinger was a founder and the Chief Executive Officer of Surgicot,
Inc., a manufacturer of sterilization indicators, and its predecessor from 1968
to April 1980. In 1979, Surgicot, Inc. was acquired by E. R. Squibb & Sons,
Inc., a subsidiary of Squibb Corporation. From April 1980 to June 1984, Mr.
Selinger was a consultant to E. R. Squibb & Sons, Inc.
Mr. Jacobs has been Vice President-Finance and the Chief Financial Officer
of the Company since August 1992. Since 1979, Mr. Jacobs was employed by the
accounting firm of Ernst & Young LLP, and most recently, held the position of
senior manager.
Mr. Kolodny has been Vice President, General Counsel and Secretary of the
Company since August 1993. From 1990 to 1993, Mr. Kolodny was associated with
the law firm of Carro, Spanbock, Kaster & Cuiffo. Prior to such time, Mr.
Kolodny was associated with the law firm of Shea & Gould.
Mr. Winocur has held various positions with the Company since May 1992, and
has been the Executive Vice President of Sales and Marketing of the Company
since January 1996. Prior to 1992, Mr. Winocur was the founder and President of
National Health Care Equipment, Inc., which was acquired by the Company in May
1992.
Mr. Liguori has been the Executive Vice President of Operations of the
Company since July 1995. From 1990 to 1995, Mr. Liguori was the Group Vice
President of Operations of Del Laboratories, Inc. Prior to such time, Mr.
Liguori was the Senior Vice President of U.S. Operations of Coleco Industries,
Inc.
Ms. Scherer has been Vice President-Administration of the Company since
1985. From 1981 to 1985, Ms. Scherer was Vice-President-Finance for the Company.
Mr. Cantwell has been the Vice President of Information Systems of the
Company since May 1996, and became an executive officer of the Company as of
January 1, 1997. From 1995 to 1996, Mr. Cantwell was the Chief Information
Officer of Dial-A-Mattress, Inc. Prior to such time, Mr. Cantwell held various
management positions with Grumman Corporation for over ten years.
-50-
<PAGE>
The information to be furnished with respect to the directors of the
Company is incorporated by reference to the Company's definitive proxy statement
to be filed pursuant to Regulation 14A.
Item 11. Executive Compensation:
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management:
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions:
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A.
-51-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
14(a). Documents filed as part of this Form 10-K:
1. Financial Statements. The following financial statements are included in
Part II, Item 8:
Page
----
Report of Independent Auditors F-2
Consolidated Balance Sheets -- December 31, 1996 and 1995 F-3
Consolidated Statements of Operations -- Years ended December 31,
1996, 1995 and 1994 F-5
Consolidated Statements of Stockholders' Equity -- Years ended December
31, 1996, 1995 and 1994 F-6
Consolidated Statements of Cash Flows -- Years ended December 31,
1996, 1995 and 1994 F-7
Notes to Consolidated Financial Statements -- December 31, 1996 F-9
2. Financial Statement Schedules. The following consolidated financial
statement schedule for the company is included in Part II, Item 14(d):
Schedule VIII--Valuation and Qualifying Accounts F-26
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
3. Exhibits filed under Item 601 of Regulation S-K. (Numbers assigned
to the following correlate to those used in such Item 601; asterixes
indicate that an Exhibit is incorporated by reference).
3. (a) The Company's Certificate of Incorporation, as amended, is *
incorporated by reference to Exhibit 3(1) to the Company's
Registration Statement on Form S-1 (File No. 33-40442) (the "1991
Registration Statement").
- --------
* Incorporated by reference.
-52-
<PAGE>
(b) Certificate of Amendment of Certificate of Incorporation of
the Company dated as of November 27, 1996.
(c) Certificate of Merger dated as of November 27, 1996, by and
between E&J Acquisition Corp. and Everest & Jennings
International Ltd.
(d) The Company's By-Laws, as amended, are incorporated by *
reference as an Exhibit to the Company's Current Report on Form
8-K dated as of July 14, 1995.
4. (a) Certificate of Designations of the Company's Series B *
Cumulative Convertible Preferred Stock is incorporated by
reference to Annex D to the Company's S-4 Registration Statement
filed on October 18, 1996 (Registration No.: 333-14423) (the
"1996 S-4 Registration Statement").
(b) Certificate of Designations of the Company's Series C *
Cumulative Convertible Preferred Stock is incorporated by
reference to Annex E to the 1996 S-4 Registration Statement.
(c) Certificate of Designations of Series A Junior Participating *
Preferred Stock, is incorporated by reference to Exhibit 4(c) to
the Company's Report on Form 8-K dated as of September 3, 1996
(the "1996 Form 8- K").
(d) Rights Agreement dated as of September 3, 1996 between the *
Company and American Stock Transfer & Trust Company, as Rights
Agent (the "1996 Rights Agreement") is incorporated by reference
to Exhibit 4(b) to the 1996 Form 8-K.
10. (a) Supply Agreement dated as of October 15, 1996, between
Healthtech Products, Inc., Invacare Corporation and Everest &
Jennings, Inc.
(b) Supply Agreement, by and between Everest & Jennings, Inc. and
P.T. Dharma Polimetal.
(c) Employment Agreement dated as of July 8, 1981 (the "Selinger *
Agreement"), between the Company and Irwin Selinger is
incorporated by reference to Exhibit 10(a) to the Company's
Registration Statement on Form S-18 (Registration No.
2-80107-NY).
(d) Amendment to the Selinger Agreement dated as of July 8, 1991, *
is incorporated by reference to Exhibit 10.1 to the 1991
Registration Statement.
(e) Amendment to the Selinger Agreement dated as of May 3, 1996.
(f) Agreement dated June 6, 1986 between the Company and Gould *
Investors, LP with respect to the sale and leaseback of 400 Rabro
Drive, Hauppauge, NY is incorporated by reference to Exhibit
10(rr) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1986 (the "1986 10-K").
- --------
* Incorporated by reference.
-53-
<PAGE>
(g) Second Amendment to Lease, dated January 1, 1990, between the *
Company and Gould Investors, L.P. in incorporated by reference
to Exhibit 10(ii) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1990 (the "1990 10-K").
(h) Lease dated January 1, 1987, between the Company and R-Three *
Investors with respect to the renting of 30,000 square feet at
135 Fell Court, Hauppauge, is incorporated by reference to
Exhibit 10(tt) to the 1986 10-K.
(i) Lease Extension Agreement, dated March 8, 1990 between the *
Company and R-Three Investors with respect to the renting of
30,000 square feet at 135 Fell Court, Hauppauge is incorporated
by reference to Exhibit 10(hh) to the 1990 10-K.
(j) Lease Agreement dated as of March 19, 1992, by and between
NET 2, L.P. and Everest & Jennings, Inc.
(k) Lease Agreement dated as of October 1, 1991 (the "Temco Lease *
Agreement"), by and between TEMCO National Corp. and
Graham-Field, Inc. is incorporated by reference to Exhibit 10(ee)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1991 (the "1991 10-K").
(l) Modification of Temco Lease Agreement dated as of May 18, *
1992, by and between TEMCO National Corp. and Graham-Field
Temco, Inc. is incorporated by reference to Exhibit 10(dd) to the
Company's Annual Report on Form 10-K for the Year ended December
31, 1992 (the "1992 10-K").
(m) Amendment No. 2 to Temco Lease Agreement dated as of April *
13, 1994, by and between The Wendt-Bristol Health Services
Corporation and Graham-Field Temco, Inc. is incorporated by
reference to Exhibit 10(x) to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 (the "1995 10-K").
(n) Amendment No. 3 to Temco Lease Agreement dated as of May 1, *
1995, by and between The Wendt-Bristol Health Services
Corporation and Graham-Field Temco, Inc. is incorporated by
reference to Exhibit 10(y) to the 1995 10-K.
(o) Lease Agreement dated as of March 23, 1992, by and between *
The Equitable Life Assurance Society of the United States and
Graham-Field, Inc. is incorporated by reference to Exhibit 10(ff)
to the 1991 10-K.
(p) Lease Agreement dated as of March 21, 1996, by and between *
Graham-Field, Inc. and HIP Realty, Inc. is incorporated by
reference to Exhibit 10(jj) to the 1995 10-K.
(q) Lease Agreement dated as of April 10, 1996, by and between
the Company and Stone Mountain Industrial Park, Inc.
- --------
* Incorporated by reference.
-54-
<PAGE>
(r) Lease Agreement dated as of August 1, 1996, by and between
Owen Bros. Enterprises and Bobeck Medical Distribution.
(s) Assignment, Assumption and Consent Agreement dated as of
January 27, 1997 by and among Bobeck Medical Distribution, Owen
Bros. Enterprises and the Company.
(t) Lease Agreement dated as of September 19, 1996, by and
between J & M, S.E. and Graham-Field Express (Puerto Rico), Inc.
(u) Lease Agreement dated as of December 27, 1996, by and between
Adaya Asset Washington, L.P. and Graham-Field, Inc.
(v) Lease Agreement dated as of February 27, 1997, by and between
Security Capital Industrial Trust and the Company.
(w) Union contract dated April 16, 1996, between Graham-Field and
Local 966 of International Brotherhood of Teamsters with respect
to the collective bargaining agreement at the Hauppauge, New York
facility.
(x) Union contract dated September 10, 1996, between Graham-Field
and Local 945 of International Brotherhood of Teamsters with
respect to the collective bargaining agreement at the Temco, New
Jersey facility.
(y) Union contract dated July 24, 1996, between Everest &
Jennings Canadian Limited and the United Steelworkers' of America
on behalf of its Local 5338.
(z) Union contract dated September 13, 1996, between Everest &
Jennings Inc. and District No. 9, International Association of
Machinists and Aerospace Workers.
(aa) The Incentive Program is incorporated by reference to the *
Company's Registration Statements on Form S-8 (File Nos.
33-37179, 33-38656, 33-48860, 033-60679 and 333-16993).
(bb) Amendment No. 1 to the Incentive Program is incorporated by *
reference to Exhibit A to the Company's Proxy Statement dated as
of May 10, 1991.
(cc) Amendment No. 2 to the Incentive Program is incorporated by *
reference to Exhibit A to the Company's Proxy Statement dated as
of May 14, 1992.
(dd) Amendment No. 3 to the Incentive Program dated as of January *
28, 1993 is incorporated by reference to Exhibit 10(y) to the
1992 10-K.
(ee) Amendment No. 4 to the Incentive Program dated as of June *
20, 1995 is incorporated by reference to Exhibit 4 to the
Company's Registration Statement on Form S-8 (File No.
033-60679).
(ff) Amendment No. 5 to the Incentive Program dated as of *
December 21, 1995 is incorporated by reference to Exhibit 10(s)
to the 1995 10-K.
- --------
* Incorporated by reference.
-55-
<PAGE>
(gg) Amendment No. 6 to the Incentive Program dated as of *
November 27, 1996 is incorporated by reference to Exhibit 4 to
the Company's Registration Statement on Form S-8 (File No.
333-16993).
(hh) Agreement and Plan of Merger dated as of May 9, 1991, by and *
among Horizon International Healthcare, Inc., Aquatherm
Acquisition Corp., Graham-Field, Inc., the Company, Tyler
Schueler and John Shepherd is incorporated by reference to
Exhibit 10 (cc) to the Company's 1991 10-K.
(ii) Asset Purchase Agreement dated as of August 30, 1991, by and *
between TEMCO National Corp. and Graham-Field, Inc. is
incorporated by reference to Exhibit (c)(1) to the Company's
Current Report on Form 8-K dated as of October 12, 1991.
(jj) John Hancock Mutual Life Insurance Note and Warrant *
Agreement dated as of March 12, 1992 is incorporated by
reference to Exhibit 10(ee) to the 1992 10-K.
(kk) Amendment dated as of December 31, 1992, to the John Hancock *
Mutual Life Insurance Note and Warrant Agreement is
incorporated by reference to Exhibit 10(ff) to the 1992 10-K.
(ll) Amendment dated as of June 30, 1993, to the John Hancock *
Mutual Life Insurance Note and Warrant Agreement is
incorporated by reference as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993.
(mm) Amendment dated as of December 31, 1993, to the John Hancock *
Mutual Life Insurance Note and Warrant Agreement is
incorporated by reference to Exhibit 10(dd) to the Company's
Annual Report on Form 10- K for the year ended December 31, 1993.
(nn) Amendment dated as of December 30, 1994, to the John Hancock *
Mutual Life Insurance Note and Warrant Agreement is
incorporated by reference to Exhibit 10(ee) to the Company's
Annual Report on Form 10- K for the year ended December 31, 1994.
(oo) Asset Purchase Agreement dated as of May 28, 1993, by and *
among Graham-Field, Inc., Diamond Medical Equipment Corp.,
National Health Care Equipment, Inc., Harvey Diamond and Peter
Winocur is incorporated by reference to Exhibit (c)(1) to the
Company's Current Report on Form 8-K dated as of June 5, 1992.
(pp) Asset Purchase Agreement dated as of September 22, 1995, by *
and among Graham-Field Health Products, Inc., National Medical
Excess Corp. and John Wittenberg is incorporated by reference to
Exhibit 10(gg) to the 1995 10-K.
- --------
* Incorporated by reference.
-56-
<PAGE>
(qq) Asset Purchase Agreement dated as of March 4, 1996, by and *
between Graham-Field, Inc. and the Lumiscope Company, Inc. is
incorporated by reference to Exhibit 10(hh) to the 1995 10-K.
(rr) Rights Agreement dated as of September 3, 1996 between the *
Company and American Stock Transfer & Trust Company, as Rights
Agent (the "1996 Rights Agreement") is incorporated by reference
to Exhibit 4(b) to the Company's Report on Form 8-K dated as of
September 3, 1996.
(ss) Registration Rights Agreement, dated as of September 3, *
1996, between the Company and BIL is incorporated by reference
to Exhibit 4(g) to the Company's Report on Form 8-K dated as of
September 3, 1996.
(tt) Amended and Restated Agreement and Plan of Merger dated as *
of September 3, 1996, and amended as of October 1, 1996, by and
among the Company, E&J Acquisition Corp., Everest & Jennings
International Ltd. and BIL is incorporated by reference to
Exhibit 2(a) to the Company's Report on Form 8-K dated as of
December 12, 1996.
(uu) Stockholder Agreement, dated as of September 3, 1996, and *
amended and restated as of October 1, 1996, among the Company,
BIL and Irwin Selinger is incorporated by reference to Exhibit
4(b) to the Company's Report on Form 8-K dated as of December 12,
1996.
(vv) Promissory Note dated as of December 10, 1996, in the
principal amount of $4 million made by the Company and payable to
BIL Securities (Offshore) Limited.
(ww) Asset Purchase Agreement dated as of September 4, 1996, by *
and among the Company, Graham-Field Express (Puerto Rico), Inc.
("GFPR"), and V.C. Medical Distributors, Inc. is incorporated by
reference to Exhibit 2(a) to the Company's Report on Form 8-K
dated as of September 17, 1996.
(xx) Revolving Credit and Security Agreement dated as of December *
10, 1996 (the "Revolving Credit Agreement"), by and among IBJ
Schroder Bank & Trust Company (as lender and as agent), the
Company, Graham- Field, Inc., Graham-Field Express, Inc.,
Graham-Field Temco, Inc., Graham-Field Distribution, Inc.,
Graham-Field Bandage, Inc., Graham- Field Express (Puerto Rico),
Inc., and Everest & Jennings, Inc. is incorporated by reference
to Exhibit 10 to the Company's Report on Form 8-K dated as of
December 23, 1996.
(yy) Asset Purchase Agreement dated as of February 10, 1997, by *
and among the Company, Everest & Jennings Canadian Limited
("E&J Canada"), Motion 2000 Inc. ("Motion 2000"), and Motion 2000
Quebec Inc. ("Motion Quebec") is incorporated by reference to
Exhibit 2(a) to the Company's Report on Form 8-K dated as of
March 12, 1997.
- --------
* Incorporated by reference.
-57-
<PAGE>
(zz) Stock Purchase Agreement dated as of March 7, 1997, by and *
among the Company, Everest & Jennings, Inc., Michael H. Dempsey,
and Naomi C. Dempsey is incorporated by reference to Exhibit 2(a)
to the Company's Report on Form 8-K dated as of March 20, 1997.
- --------
* Incorporated by reference.
-58-
<PAGE>
22. Subsidiaries of the Company:
Labtron Scientific Corporation
(a New York corporation)
Patient Technology, Inc.
(a New York corporation)
Graham-Field Express, Inc.
(a Delaware corporation)
Bristoline, Inc.
(a New York corporation)
Ventilator Corp.
(a New York corporation)
Graham-Field, Inc.
(a New York corporation)
Medisco, Inc.
(a Delaware corporation)
ExNewt, Inc.
(a New York corporation)
M.E. Team, Inc.
(a New Jersey corporation)
Graham-Field Temco, Inc.
(a New Jersey corporation)
AquaTherm Corp.
(a New Jersey corporation)
Health and Medical Techniques, Inc.
(a Connecticut corporation)
Graham-Field Distribution, Inc.
(a Missouri corporation)
Graham-Field Bandage, Inc.
(a Rhode Island corporation)
G.F.E. Healthcare Products Corp.
(a Delaware corporation)
Graham-Field European Distribution
Corporation Limited
(an Ireland corporation)
HealthTeam, Inc.
(a Delaware corporation)
Graham-Field Express (Puerto Rico), Inc.
(a Delaware corporation)
Graham-Field Express (Dallas), Inc.
(a Delaware corporation)
Everest & Jennings International Ltd.
(a Delaware corporation)
Everest & Jennings, Inc.
(a California corporation)
Smith & Davis Manufacturing Company
-59-
<PAGE>
(a Missouri corporation)
Everest & Jennings de Mexico S.A. de C.V.
(a Mexico corporation)
The Jennings Investment Company
(a California corporation)
Everest & Jennings Canadian Ltd.
(a Canadian corporation)
MCT Acquisition Corp.
(a Missouri corporation)
Thompson Blair, Inc.
(a Missouri corporation)
Freeway Investment Corp.
(a California corporation)
Metal Products Corp.
(a California corporation)
Professional Securities Corp.
(a Missouri corporation)
International Medical Equipment Corp.
(a California corporation)
Everest & Jennings Lifestyles
(a California corporation)
Rabson Medical Sales, Ltd.
(a New York corporation)
Kuschall of America, Inc.
(a California corporation)
24. Consent of Independent Auditors.
14(b). Reports on Form 8-K.
The Company's Report on Form 8-K dated as of December 12, 1996 (Date of
Event: November 27, 1996).
The Company's Report on Form 8-K dated as of December 23, 1996 (Date of
Event: December 10, 1996).
-60-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Irwin Selinger
---------------------------------------
Irwin Selinger, Chairman of the
Board and Chief Executive Officer
Date: March 28, 1997
Pursuant to the requirements of the Securities 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:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Irwin Selinger Chairman of the Board and Chief Execu- March 28, 1997
- ----------------------------- tive Officer (Principal Executive Officer
Irwin Selinger and Director)
/s/ Gary M. Jacobs Vice President/Finance and Chief Finan- March 28, 1997
- ----------------------------- cial Officer (Principal Financial Officer)
Gary M. Jacobs
/s/ David P. Delaney, Jr. Director March 28, 1997
- -----------------------------
David P. Delaney
/s/ Rodney F. Price Director March 28, 1997
- -----------------------------
Rodney F. Price
/s/ Bevil J. Hogg Director March 28, 1997
- -----------------------------
Bevil J. Hogg
/s/ Dr. Harold Lazarus Director March 28, 1997
- -----------------------------
Dr. Harold Lazarus
/s/ Louis A. Lubrano Director March 28, 1997
- -----------------------------
Louis A. Lubrano
/s/ Andrew A. Giordano Director March 28, 1997
- -----------------------------
Andrew A. Giordano
/s/ Robert Spiegel Director March 28, 1997
- -----------------------------
Robert Spiegel
/s/ Steven D. Levkoff Director March 28, 1997
- -----------------------------
Steven D. Levkoff
/s/Donald Press Director March 28, 1997
- -----------------------------
Donald Press
s
/s/ Peter Handal Director March 28, 1997
- -----------------------------
Peter Handal
</TABLE>
EXHIBIT 3(b)
Certificate of Amendment of Certificate of Incorporation of the Company dated as
of November 27, 1996.
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
GRAHAM-FIELD HEALTH PRODUCTS, INC.
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
GRAHAM-FIELD HEALTH PRODUCTS, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: At a meeting held on August 12, 1996, the Board of Directors
of the Corporation duly adopted resolutions setting forth the proposed amendment
(the "Amendment") to the Certificate of Incorporation of the Corporation,
declaring the Amendment to be advisable and calling for the submission of the
Amendment to the stockholders of the Corporation pursuant to Section 242 of the
General Corporation Law of the State of Delaware (the "DGCL"). The resolutions
setting forth the Amendment are as follows:
RESOLVED, that the number of shares of Corporation Common Stock
which this Corporation shall have the authority to issue be increased from
40,000,000 to 60,000,000, and, accordingly, the first paragraph of Article
FOURTH of the Certificate of Incorporation be amended and restated in its
entirety to read as follows:
"FOURTH: the total number of shares of all classes of stock which
the Company is authorized to issue is 61,000,000 shares. All such
shares are to have a par value and are classified as 1,000,000
shares of Preferred Stock, each share of such class having a par
value of $.01, and 60,000,000 shares of Common Stock, each share of
such class having a par value of $.025.;"
-2-
<PAGE>
SECOND: Thereafter, pursuant to a resolution of the Board of
Directors of the Corporation, the Amendment was submitted to the holders of all
of the outstanding shares of Common Stock of the Corporation at a Special
Meeting of Stockholders, duly called and held on November 27, 1996, upon notice
in accordance with the DGCL, at which meeting the requisite number of shares as
required by statute were voted in favor of such Amendment.
THIRD: The Amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
-3-
<PAGE>
IN WITNESS WHEREOF, said Corporation has caused this certificate to
be signed by Richard S. Kolodny, its Vice President, General Counsel and
Secretary, as of the 27 day of November, 1996.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Richard S. Kolodny
------------------------------
Richard S. Kolodny
Vice President,
General Counsel and Secretary
-4-
EXHIBIT 3(c)
Certificate of Merger dated as of November 27, 1996, by and between E&J
Acquisition Corp. and Everest & Jennings International Ltd.
<PAGE>
- 2 -
CERTIFICATE OF MERGER
MERGING
E&J ACQUISITION CORP.
(a Delaware corporation)
INTO
EVEREST & JENNINGS INTERNATIONAL LTD.
(a Delaware corporation)
(Pursuant to Section 251 of
the General Corporation Law of the State of Delaware)
The undersigned corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: The name and state of incorporation of each of the
constituent corporations (the "Constituent Corporations") to the merger (the
"Merger") are as follows:
Name State of Incorporation
---- ----------------------
Everest & Jennings Delaware
International Ltd.
E&J Acquisition Corp. Delaware
SECOND: An Amended and Restated Agreement and Plan of Merger, dated
as of September 3, 1996 and amended as of October 1, 1996, among the Constituent
Corporations and other parties thereto (the "Merger Agreement") has been
approved, adopted, certified, executed and acknowledged by each of the
Constituent Corporations in accordance with the requirements of Section 251(c)
of the General Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation of the Merger is
Everest & Jennings International Ltd. (the "Surviving Corporation").
FOURTH: The Certificate of Incorporation of Everest & Jennings
International Ltd., a Delaware corporation which will survive the Merger, shall
be the Certificate of Incorporation of the Surviving Corporation.
FIFTH: The executed Merger Agreement is on file at the principal
place of business of the Surviving Corporation. The address of the principal
place of business of the Surviving Corporation is 4203 Earth City Expressway,
Earth City, Missouri 63045.
SIXTH: A copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without
<PAGE>
- 3 -
cost, to any stockholder of either of the Constituent Corporations.
IN WITNESS WHEREOF, this Certificate of Merger has been executed by
Bevil J. Hogg, President & Chief Executive Officer of Everest & Jennings
International Ltd., as of this 27th day of November, 1996.
EVEREST & JENNINGS INTERNATIONAL
LTD.
By: /s/ Bevil J. Hogg
----------------------------
Bevil J. Hogg
President & Chief Executive
Officer
EXHIBIT 10(a)
Supply Agreement dated as of October 15, 1996, between Healthtech Products,
Inc., Invacare Corporation and Everest & Jennings, Inc.
<PAGE>
AMENDED AND RESTATED
SUPPLY AGREEMENT
Dated as of October 15, 1996
Between
HEALTHTECH PRODUCTS, INC.,
INVACARE CORPORATION
and
EVEREST & JENNINGS, INC.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. MANUFACTURE AND SUPPLY............................................... 1
2. DELIVERY, CLAIMS, DELAYS, RETURNS.................................... 3
3. PRICES AND PAYMENT................................................... 4
4. TAXES AND OTHER GOVERNMENTAL CHARGES................................. 6
5. TERM AND TERMINATION................................................. 6
6. WARRANTIES........................................................... 6
7. RELATIONSHIP OF THE PARTIES.......................................... 7
8. TOOLING.............................................................. 7
9. OPERATIONS AT THE FACILITY........................................... 8
10. INSPECTION AND REPORTS CONCERNING THE FACILITY....................... 8
11. SUBMISSIONS TO REGULATORY AGENCIES................................... 9
12. EVENTS OF CUSTOMER DEFAULT........................................... 10
13. EVENTS OF MANUFACTURER DEFAULT....................................... 11
14. PATENT INFRINGEMENT.................................................. 12
15. FORCE MAJEURE........................................................ 13
16. NONDISCLOSURE OF INFORMATION......................................... 13
17. HEADINGS............................................................. 14
18. FAILURE TO ENFORCE................................................... 14
19. SEVERABILITY......................................................... 14
20. ENTIRE AGREEMENT..................................................... 15
i
<PAGE>
21. NOTICES.............................................................. 15
22. CHOICE OF LAW........................................................ 16
23. RESOLUTION BY NEGOTIATION; ARBITRATION............................... 16
24. BINDING AGREEMENT.................................................... 18
Appendix A - Products and Specifications
Appendix B - Standard Costs
Appendix C - Warranty Terms
Appendix D - List of Tooling
Appendix E - Manufacturer's Insurance Coverages
Appendix F - Customer's Insurance Coverages
DEFINED TERMS
The meanings of the following terms as used in this Exclusive Supply Agreement
can be found in the Paragraph, Recital and Sections referenced below:
Affiliate.................................................. Section 7
Answer..................................................... Section 23.3(i)
Assignment................................................. Section 24
Customer................................................... First Paragraph
Demand..................................................... Section 23.3(i)
E&J....................................................... First Paragraph
Events of Customer Default................................. Section 12.1
Events of Manufacturer Default............................. Section 13.1
Existing Supply Agreement.................................. Recital A
Facility................................................... Section 9.1
FDA........................................................ Section 2.5
Instituting Party.......................................... Section 23.3(i)
Invacare................................................... First Paragraph
Manufacturer............................................... First Paragraph
Other Party................................................ Section 23.3(i)
Products................................................... Section 1.1
Specifications............................................. Section 1.1
Tooling.................................................... Section 8.1
UL......................................................... Section 2.5
Wright City Facility....................................... Section 2.1
ii
<PAGE>
AMENDED AND RESTATED SUPPLY AGREEMENT
THIS AMENDED AND RESTATED SUPPLY AGREEMENT is made and entered into
as of October 15, 1996 ("Agreement") by and between HEALTHTECH PRODUCTS, INC., a
Missouri corporation ("Manufacturer"), a wholly-owned subsidiary of Invacare
Corp., a Delaware Corporation ("Invacare"), Invacare and EVEREST & JENNINGS,
INC., a California corporation ("Customer"), a wholly-owned subsidiary of
Everest & Jennings International, Ltd., a Delaware corporation ("E&J").
RECITALS
A. Smith & Davis Manufacturing Company, a wholly-owned Missouri
subsidiary of E&J ("Smith & Davis"), and Manufacturer entered into a Supply
Agreement dated as of April 3, 1995, which was amended and restated as of March
15, 1996 (the "Existing Supply Agreement") and assigned as of March 15, 1996 by
Smith & Davis to Customer, pursuant to which Manufacturer has agreed to
manufacture and supply to Customer, utilizing tooling provided by Customer, and
Customer has agreed to purchase from Manufacturer, home healthcare beds and
replacement parts for home healthcare beds, on the terms and conditions set
forth therein.
B. Customer and Manufacturer have agreed that, notwithstanding the
provisions of the Existing Supply Agreement, it will terminate on October 15,
1997 and the parties have agreed to the revisions to the Existing Supply
Agreement embodied in this Agreement.
C. This Agreement, amends and restates the Existing Supply Agreement
in its entirety.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereinafter expressed, it is hereby agreed as follows:
1. MANUFACTURE AND SUPPLY.
1.1. Manufacturer shall, subject to the terms and conditions of this
Agreement, manufacture and sell exclusively to Customer certain products
comprising Customer's home healthcare bed product line and parts and accessories
related thereto, as described more fully in Appendix "A" hereto (the "Products")
conforming in all material respects to the specifications referenced in Appendix
"A" hereto, as the same may be revised from time to time as provided herein (the
"Specifications").
1.2. On or prior to the last day of each calendar month of the term
of this Agreement, Customer will place firm orders for beds it desires to
purchase during the next two (2) calendar months of the term of this Agreement
and Customer will provide an
1
<PAGE>
estimate of its purchase requirements for beds during the next three (3)
calendar months of the term of this Agreement. Except with the Manufacturer's
consent, which shall not be unreasonably withheld, firm orders for beds for any
calendar month will not differ from the estimate for that month by more than
twenty percent (20%). Customer's firm orders will specify a mix of bed Products
reasonably acceptable to Manufacturer.
1.3. If Manufacturer fails to supply beds in quantities ordered by
Customer up to 22,000 beds during the twelve month period ending October 15,
1997, Manufacturer shall pay Customer, as liquidated damages, an amount equal to
the product of (i) $40.00 and (ii) the difference between 44,000 beds and the
number of beds supplied by Manufacturer during such applicable period. If
Manufacturer supplies at least 5,500 beds, or the number of beds ordered by
Customer pursuant to Section 1.2, whichever is less, to Customer during each
three month period ending January 15, April 15, July 15, and October 15 during
the term of this Agreement, Manufacturer will have no obligation under this
Section 1.3 to pay Customer liquidated damages for any failure to supply any
quantity of beds in excess of 5,500 beds during such three month period which
may be ordered by Customer, provided Manufacturer uses its best efforts to
supply Customer's requirements for such excess quantity of beds ordered in
accordance with the provisions of Section 1.2. Any amount payable under this
Section 1.3 shall be payable quarterly on or prior to the 25th day of January,
April and July following any three month period in which Manufacturer falls to
supply beds in quantities ordered by Customer up to 5,500 beds, and the balance,
if any, shall be paid on October 25, 1997.
1.4. New Products may be added to Appendix A from time to time upon
such terms, including pricing and quantities, as Manufacturer and Customer shall
agree in writing. Customer shall supply Manufacturer with specifications for any
new Products. After a new bed Product is added to Appendix "A" orders therefor
shall be used to satisfy the minimum purchase requirements for all subsequent
periods.
1.5. Manufacturer represents that it has filed all required
documentation, and obtained all required authorizations, approvals and consents
under any and all applicable laws, regulations, directives and/or requirements
in order for Manufacturer to be able to manufacture and sell the Products to
Customer pursuant to the terms of this Agreement. Manufacturer further covenants
that it will at all times during the term of this Agreement continue to obtain
and maintain in full force and effect any and all such required filings,
authorizations, approvals and consents, and will comply in all material respects
with any and all such applicable laws, regulations, directives and/or
requirements in connection with the manufacture and sale of the Products to
Customer pursuant to this Agreement.
1.6. Manufacturer may not unreasonably decline any purchase order for
Products from Customer under and in accordance with the terms of this Agreement
and it will be deemed accepted unless declined within fifteen (I 5) days of
receipt.
1.7. Manufacturer agrees to procure and maintain the product
liability insurance coverages described on Appendix E to this Agreement, and
Customer agrees to maintain the product liability insurance coverages described
on Appendix F to this
2
<PAGE>
Agreement, or, in each case substantially similar coverages, covering all
Products manufactured and sold under this Agreement, and each party shall cause
the other party to be named as loss payee and an additional insured under each
of its policies. Each party shall furnish to the other party a copy of each of
its policies or a certificate from the insurance company or companies attesting
such coverage. Each such policy shall contain provisions that the issuing
company will not cancel or change such policy except upon thirty (30) days'
prior written notice to the party so named as loss payee and additional insured.
2. DELIVERY, CLAIMS, DELAYS, RETURNS.
2.1. All Products will be sold and delivered F.O.B. Manufacturer's
plant and facilities in Wright City, Missouri (the "Wright City Facility") or
other location reasonably specified by Manufacturer upon prior written notice to
Customer. Manufacturer shall be responsible for all costs of shipment in excess
of those that would have been incurred if the Products were delivered F.O.B. the
Wright City Facility. Customer shall be responsible for all other costs of
shipping Products. Partial shipments are allowed under this Agreement, provided
that no shipment of beds (other than a shipment out of warehouse storage) shall
be in less than a truckload quantity without Customer's prior approval.
2.2. Delivery of any order for Products shall be in accordance with
the agreed upon schedule for the period in question. Manufacturer will make all
reasonable efforts to accommodate schedule changes when requested by Customer.
2.3. Upon Customer's request, Manufacturer will warehouse at the
Wright City Facility or any other location specified pursuant to Section 2.1
which provides the same level of service, reasonable quantities of beds,
replacement parts, accessory Products and Customer owned inventories of
mattresses and side rails, to be shipped to designated accounts of Customer from
time to time at Customer's direction. Customer shall be responsible for
obtaining liability and casualty insurance on all such items so warehoused
(Customer shall furnish Manufacturer a copy of each such policy or a certificate
from the insurance company or companies attesting such coverage and each such
policy shall contain provisions that the issuing company will not cancel or
change such policy except upon thirty (30) days' prior written notice to
Manufacturer). Beds shall be deemed intended for warehouse storage when
requested by Customer or three (3) business days after delivery by Manufacturer
to Customer in the event Customer has not given Manufacturer other shipment
instructions with respect to such delivered beds. The fee for such warehousing
shall be Six Thousand Two Hundred Fifty Dollars ($6,250) per month for up to
four thousand (4,000) square feet of storage space and the personnel necessary
to move items in and out of warehouse space as requested by Customer.
2.4. The parties hereby acknowledge that time is of the essence with
respect to the delivery dates specified in individual orders. Customer reserves
the right to cancel, without liability, part or all of any order not shipped
within fifteen (15) days from the period specified in the order (or twenty (20)
days in the case of replacement shipments for previously shipped nonconforming
goods), provided that Customer shall have given Manufacturer written notice, in
accordance with the terms of this Agreement for giving
3
<PAGE>
notice, of Customer's intent to cancel and Manufacturer has not shipped the
Products within five (5) days after the date of such notice; notwithstanding the
foregoing, Customer shall not be obligated to give Manufacturer such opportunity
to cure prior to cancellation more than three (3) times in any calendar quarter.
2.5. All Products shall conform to the Specifications, all applicable
generally recognized industry standards (including Underwriters' Laboratories
("UL") requirements and standards) and all applicable U.S. Food and Drug
Administration ("FDA") requirements. Manufacturer acknowledges that Customer
will acquire Products for resale to Customer's customers and, accordingly, the
ultimate purchaser will not be in a position to inspect the same for any
nonconformance, defect, damage or shortage until delivery thereof to said
purchaser; Customer will notify Manufacturer within two (2) business days
following receipt by Customer of any notice from the ultimate purchaser of any
Product of any claim that the Product does not conform with the Specifications
or any defect, damage or shortage therein (and will promptly notify Manufacturer
of any such nonconformance, defect, damage or shortage observed by Customer).
Any disputes that arise regarding the nature or existence of any nonconformance,
defect, damage or shortage shall be resolved pursuant to Section 23 hereof.
3. PRICES AND PAYMENT.
3.1. The unit prices to be paid for the beds listed on Appendix "A"
hereto ordered pursuant to this Agreement in quantities up to the first 22,000
beds ordered during the twelve months ending October 15, 1997 shall be the
prices specified on Appendix "B" hereto; the addition of new bed Products to
Appendix "A" shall be subject to agreement by Customer and Manufacturer on
appropriate pricing for such new bed Products, which will be specified in an
addendum to Appendix "B". The unit price to be paid for quantities of beds in
excess of the first 22,000 beds ordered during the twelve months ending October
15, 1997 shall be as agreed upon by the parties when the firm order for any such
excess quantity of beds is placed by Customer and accepted by Manufacturer. The
unit prices to be paid for replacement parts and accessories ordered pursuant to
this Agreement shall be an amount determined as specified on Appendix "B"
hereto. In no event shall the unit prices on Appendix A and B be increased.
3.2. Payment terms for bed Products shall be net thirty (30) days
from delivery by Manufacturer to Customer and issuance of Manufacturer's weekly
invoice confirming such delivery; invoices shall be issued on Friday of each
week (or on the following business day if Friday is a holiday) for all
uninvoiced deliveries through the close of business on the previous business
day. Each weekly invoice for bed Products issued under this Agreement shall
identify, at a minimum, the dates of delivery, Customer's applicable purchase
order numbers, a full description of the bed Products included, and the purchase
prices. Manufacturer reserves the right to cease shipments of part or all of any
order(s) for bed Products, without liability, in the event Customer falls to pay
any weekly invoice within five (5) business days after Manufacturer has given
written notice to Customer, in accordance with the terms of this Agreement for
giving notice, that such payment is five (5) or more days past due, provided
that Manufacturer shall not be obligated
4
<PAGE>
to give Customer such opportunity to cure prior to ceasing shipment more than
three (3) times in any calendar quarter. Manufacturer shall resume shipments of
bed Products following any such cessation upon payment by Customer of all past
due invoices. During the term of this Agreement, Customer shall provide and
maintain for the benefit of Manufacturer a $500,000 letter of credit in form
reasonably satisfactory to Manufacturer to secure payment of Manufacturer's
outstanding invoices hereunder. Notwithstanding the foregoing, Manufacturer
shall have no obligation to ship Products hereunder to Customer at any time when
(1) such letter of credit is not so provided and maintained or (2) the aggregate
amount of Manufacturer's outstanding unpaid weekly invoices hereunder are more
than $500,000 unless Customer provides Manufacturer with an additional letter of
credit in the amount of the excess over $500,000 in form reasonably satisfactory
to Manufacturer, to secure payment for such Products.
3.3. Replacement parts and accessories will be shipped directly to
Customer's purchaser pursuant to Customer's directions. Upon each such shipment,
Manufacturer will issue a shipment conformation to Customer. For replacement
parts and accessories shipped pursuant to this Agreement, Manufacturer shall
issue weekly invoices to Customer on Friday of each week (or on the following
business day if Friday is a holiday) which shall cover Manufacturer's costs for
all replacement parts and accessories shipped during the previous week. Within
five (5) business days after the end of each month, Manufacturer shall invoice
Customer for the excess of (i) the unit prices of all replacement parts and
accessories shipped by Manufacturer pursuant to Customer's directions during the
previous month over (ii) the aggregate amount of the weekly invoices issued
during the previous month for said replacement parts and accessories. Payment
terms for all invoices for replacement parts and accessories shall be net thirty
(30) days from issuance of Manufacturer's shipment confirmation and delivery of
Manufacturer's invoice to Customer.
4. TAXES AND OTHER GOVERNMENTAL CHARGES.
Any and all use, sales and other taxes, fees or charges of any nature
whatsoever imposed by any governmental authority on or with respect to the sale
of the Products to Customer shall be paid by and invoiced to Customer as an
addition to the purchase price of Products (unless a sale for resale or other
exemption is available which is supported by documentation reasonably
satisfactory to Manufacturer).
5. TERM AND TERMINATION.
5.1. This Agreement shall become effective upon execution by both
parties and its term shall expire on October 15, 1997 unless sooner terminated
(i) by Customer, in its sole discretion, upon at least six (6) months prior
written notice from Customer to Manufacturer at any time, (ii) by Customer upon
written notice to Manufacturer at any time following the occurrence and during
the continuance of an Event of Manufacturer Default (as hereinafter defined) or
(ill) by Manufacturer upon written notice to Customer at any time following the
occurrence and during the continuance of an Event of Customer Default (as
hereinafter defined).
5
<PAGE>
5.2. All payment obligations of Customer for Products theretofore
ordered and delivered prior to termination and all obligations of Manufacturer
and rights of Customer in Sections 6, 8, 14, 15, 16, 22 and 23 shall survive the
termination or expiration of this Agreement.
6. WARRANTIES.
All Products delivered by Manufacturer to Customer pursuant to this
Agreement shall be warranted by Manufacturer to be free from defects in
materials and workmanship and to be manufactured in accordance with the
Specifications, all applicable generally recognized industry standards
(including UL requirements and standards, if applicable) and all applicable FDA
requirements in accordance with the terms specified in Appendix "C" hereto;
provided, however, it is understood and agreed that Manufacturer may not affix
the Listing Mark of any industry standards group to any Product until the
standards group has satisfied itself that such Product meets its requirements
and has authorized Manufacturer to affix 'is Listing Mark to such Product; as of
the date hereof, UL has not completed its engineering investigation of the
following bed Products and has not authorized Manufacturer to affix the UL
Listing Mark thereto: 5522; 5523; 5622; and 5623. Any claim for breach of such
warranty must be submitted within the specified warranty period. During said
warranty period, Manufacturer shall, at Manufacturer's option, either replace or
repair, at no charge to Customer, any Products (or parts of Products) that are
found to be defective by Manufacturer. Customer shall return such defective
Products or parts or dispose of them as Manufacturer requests. In no event shall
Manufacturer's liability under this warranty provision exceed the replacement
cost of any defective Product.
7. RELATIONSHIP OF THE PARTIES.
This Agreement shall not be construed to make either party (or its
Affiliates, principals, officers, employees or agents) an Affiliate, agent,
partner or joint venturer with the other party. Neither party shall have any
right or authority whatsoever to incur any liability, obligation (express or
implied), or to otherwise act in any manner in the name or on behalf of the
other, or to make any promise, warranty or representation binding on the other.
For purposes of this Agreement, the term "Affiliate" means any entity in which
Manufacturer or Customer, as the case may be, controls at least twenty percent
(20%) of the indicia of ownership or control, or which controls or is under
common control by a third party controlling such indicia of ownership or control
with Manufacturer or Customer, as the case may be.
8. TOOLING.
8.1. Manufacturer shall have the right to use Customer's tooling
described on Appendix "D" hereto (the "Tooling"), free of charge, exclusively
for purpose of manufacturing the Products for Customer hereunder. As part of the
Standard Cost of Products, Manufacturer shall provide normal maintenance to the
Tooling provided, however, that, in the event Manufacturer reasonably determines
that any major repair or replacement of any Tooling is required to manufacture
Products hereunder (other than as a result of
6
<PAGE>
Manufacturer's failure to provide normal maintenance or operator negligence),
Manufacturer shall advise Customer of such requirement and Manufacturer shall be
responsible for effecting such repair or replacement and Customer shall
reimburse Manufacturer for the reasonable costs of such major repair or
replacement. Customer shall be responsible for the cost of all additional
Tooling purchased by Manufacturer at the request of Customer. All Tooling
provided to Manufacturer under this Agreement shall be returned to or for the
account of Customer upon the earlier to occur of (1) the Customer's request and
direction for the return of such Tooling or (ii) within fifteen (I 5) days
following the termination or expiration of this Agreement.
8.2. Manufacturer agrees to procure and maintain in full force and
effect throughout the term of this Agreement a policy of general insurance in
favor of Customer (as loss payee and additional insured) covering the
replacement value of the Tooling against loss or damage and any claims,
liabilities or expenses asserted by any person arising o ut of the use of such
Tooling. Manufacturer shall furnish to Customer a copy of such policy or
policies or a certificate from the insurance company or companies attesting to
such coverage. Such policy or policies shall contain provisions that the issuing
companies will not cancel or change such policy or policies except upon thirty
(3 0) days' prior written notice to Customer.
8.3. Manufacturer agrees that the Tooling provided by Customer will
be used solely for the production of the Products sold to Customer and that
neither Manufacturer nor any of its Affiliates will use the Tooling to produce
products of any kind for Invacare or any other party.
9. OPERATIONS AT THE FACILITY.
9.1. Manufacturer shall manufacture, package and test the Products at
the Wright City Facility or other location which complies with the requirements
of Sections 1.5 and 11.3 hereof (the "Facility"). During the course of this
Agreement, Manufacturer and Customer will closely cooperate with each other in
order to assure satisfactory compliance by Manufacturer with Customer's
manufacturing, packaging and testing standards and requirements. Each party
shall share with the other such party's manufacturing, packaging and testing
know-how relating to the procedures used for the manufacture of Products subject
to the confidentiality provisions set forth herein.
9.2. Prior to full scale manufacturing, packaging and testing by
Manufacturer of any Product that it has not previously manufactured (upon
agreement by Manufacturer and Customer to engage in such activities as
contemplated by Section 1.4), Customer's employees shall be permitted to
instruct, advise and inform the employees of Manufacturer with respect to such
of Customer's manufacturing, packaging, testing and other production processes
as may be necessary for Manufacturer to perform its obligations hereunder (and
shall do so at Manufacturer's request).
9.3. Customer's employees and representatives shall at all times
adhere to the safety regulations and practices and work schedules established by
Manufacturer.
7
<PAGE>
10. INSPECTION AND REPORTS CONCERNING THE FACILITY.
10.1. Manufacturer shall keep appropriate records regarding its
manufacture of the Products at the Facility, in such form as Customer may
reasonably request, including monthly inventory and production reports
indicating quantities of raw materials, work-in-process and finished Products
(1) on hand at the beginning of each month, (ii) produced during the month, and
(iii) on hand at the end the month. All such records shall be made available to
Customer for inspection at any time during regular business hours upon
reasonable prior notice.
10.2. Upon prior request, Manufacturer shall provide Customer or its
designees access at all reasonable times to the Facility to observe and inspect
all phases of the work performed by Manufacturer under this Agreement. Without
limiting the generality of the foregoing, Manufacturer shall permit Customer or
its designees:
(i) to inspect the Facility; and
(ii) to review the compliance of Manufacturer with applicable
regulations and good manufacturing practices and procedures.
10.3. Manufacturer shall permit Customer or its designees to meet and
confer with the General Manager (or equivalent) of the Facility and such other
executives of Manufacturer or key managerial personnel employed at the Facility
as Customer may reasonably request. Manufacturer shall also cause such personnel
to provide Customer and its designees such regular and special reports and other
information as may be reasonably requested by Customer to protect the interests
of Customer under this Agreement.
11. SUBMISSIONS TO REGULATORY AGENCIES.
11.1. Customer shall prepare and submit all documents required by the
FDA, UL and any other applicable regulatory agencies for approval to market the
Products, except as set forth herein. Manufacturer shall cooperate fully with
Customer and such regulatory agencies in the effort to obtain approval to market
the Products, including without limitation providing a right of reference to any
plant files of Manufacturer as may be required or providing such information and
other cooperation as may be necessary for approval. The parties recognize that
approval may be delayed or postponed by a regulatory agency through no fault of
the parties, and it is agreed that any such delay or postponement shall not
constitute a default under this Agreement. Subject to the confidentiality
provisions set forth herein, Customer shall allow Manufacturer access to such
parts of the documents submitted by it to regulatory authorities as may be
necessary for Manufacturer to satisfy its obligations under this Agreement.
11.2. Customer shall advise Manufacturer from time to time of the
status of regulatory review of the submitted documents and any consequential
revision of any expected approval date. Customer shall notify Manufacturer of
any submission to any regulatory agency of any supplement, amendment or revision
to submitted documents which has an
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<PAGE>
impact on manufacturing, packaging or testing procedures used by Manufacturer,
or on Customer's estimates of the quantity of Products that Manufacturer will be
required to manufacture, package and test hereunder.
11.3. Manufacturer shall prepare and submit all documents required by
the FDA, UL and any other applicable regulatory agencies for approval of any
Facility utilized for manufacturing, packaging and testing the Products,
including without limitation any master file and any "Standard Operating
Procedures" required to comply with applicable good manufacturing practices
(GMP). Manufacturer shall not make any amendment to such file or other documents
without notification to, and prior approval by, Customer. Manufacturer and
Customer shall jointly perform all process and equipment validation required by
the FDA, UL and other applicable regulatory agencies for approval. Customer
hereby represents that, as of April 3, 1995 and prior to the transfer of title
to the Wright City Facility to Manufacturer, the Wright City Facility was in
compliance with such requirements.
11.4. Each party shall maintain all appropriate regulatory documents
and records relating to its responsibilities with respect to the Products. Each
party shall promptly forward to the other party all notices of adverse findings
with respect to Products that it receives, and shall cooperate fully with the
other party in investigating each such incident.
12. EVENTS OF CUSTOMER DEFAULT.
12.1. Each of the following shall constitute an "Event of Customer
Default":
(i) the failure by Customer to make any payment due to
Manufacturer hereunder within ten (10) business days after Manufacturer has
given written notice to Customer, in accordance with the terms of this Agreement
for giving notice, that such payment is ninety (90)or more days past due;
(ii) the commencement by Customer of a voluntary proceeding
under the federal bankruptcy laws or any similar state bankruptcy or insolvency
law; or the consent by Customer to the institution of such proceedings against
it or to the appointment of or the taking possession by a receiver, liquidator,
assignee, trustee, custodian or sequestrator (or similar official) of Customer
or of all or substantially all of its properties; or the making by Customer of a
general assignment for the benefit of creditors;
(iii) the entry of a decree or order for relief by a court
having jurisdiction in respect of Customer: adjudging Customer a bankrupt or
insolvent; or approving as properly filed a petition seeking a reorganization,
arrangement, adjustment or composition of or in respect of Customer in any
involuntary proceeding or case under the federal bankruptcy laws or any similar
state bankruptcy or insolvency law; or appointing a receiver, liquidator,
assignee, custodian, trustee or sequestrator (or similar official) of Customer
or of all or substantially all of its properties; or ordering the winding-up or
liquidation of its affairs; and the continuation of such decree or order
unstayed and in effect for a period of thirty (30) days; or
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<PAGE>
(iv) the dissolution or liquidation of Customer, other than in
connection with a merger, consolidation or reorganization under the terms of
which the surviving corporation remains liable for all obligations of Customer
to Manufacturer hereunder.
12.2. Upon the occurrence of an Event of Customer Default,
Manufacturer shall have the right by written notice to Customer, in accordance
with the terms hereof for giving notice, to (i) terminate this Agreement, (ii)
retain possession of the Tooling for purposes of manufacturing and selling any
products to any person and (iii) pursue any and all other legal and equitable
remedies available to Manufacturer as a result thereof
13. EVENTS OF MANUFACTURER DEFAULT.
13.1. Each of the following shall constitute an "Event of
Manufacturer Default":
(i) following the cancellations by Customer in any calendar
year of more than three (3) orders, in whole or in part, pursuant to Section
2.4, the failure by Manufacturer to deliver the required quantities of Products
timely, or any delivery of any significant quantity of nonconforming Products,
which failure is not remedied within five (5) business days (twenty (20)
business days in the case of non-conforming Products) after Customer has given
written notice to Manufacturer, in accordance with the terms of this Agreement
for giving notice, of such failure;
(ii) the commencement by Manufacturer of a voluntary
proceeding under the federal bankruptcy laws or any similar state bankruptcy or
insolvency law; or the consent by Manufacturer to the institution of such
proceedings against it or to the appointment of or the taking possession by a
receiver, liquidator, assignee, trustee, custodian or sequestrator (or similar
official) of Manufacturer or of all or substantially all of its properties; or
the making by Manufacturer of a general assignment for the benefit of creditors;
(iii) the entry of a decree or order for relief by a court
having jurisdiction in respect of Manufacturer: adjudging Manufacturer a
bankrupt or insolvent; or approving as properly filed a petition seeking a
reorganization, arrangement, adjustment or composition of or in respect of
Manufacturer in any involuntary proceeding or case under the federal bankruptcy
laws or any similar state bankruptcy or insolvency law; or appointing a
receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar
official) of Manufacturer, or of all or substantially all of its properties; or
ordering the winding-up or liquidation of its affairs; and the continuation of
such decree or order unstayed and in effect for a period of thirty (30) days; or
(iv) the dissolution or liquidation of Manufacturer, other
than in connection with a merger, consolidation or reorganization under the
terms of which the surviving corporation remains liable for all obligations of
Manufacturer to Customer hereunder.
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13.2. Upon the occurrence of an Event of Manufacturer Default,
Customer shall have the right by written notice to Manufacturer, in accordance
with the terms hereof for the giving of notice, to (i) terminate this Agreement,
(ii) repossess the Tooling, (iii) obtain liquidated damages equal to the product
of (A) $40.00 and (B) the difference between 44,000 beds and the number of beds
supplied by Manufacturer between October 15, 1996 and the date of the occurrence
of such Event of Manufacturer Default and (iv) pursue any and all other legal
and equitable remedies available to Customer as a result thereof. Manufacturer
hereby acknowledges that Customer and its Affiliates will suffer irreparable and
continuing harm upon the occurrence of an Event of Manufacturer Default and that
legal remedies would be inadequate in the event of such occurrence. Accordingly,
Manufacturer agrees that, upon the occurrence of an Event of Manufacturer
Default, Customer and its Affiliates shall, in addition to any other rights and
remedies available under law and in equity, have the right and remedy to obtain
an injunction and to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction. Manufacturer and Customer hereby confer
non-exclusive jurisdiction to enforce the provisions of this Agreement upon the
federal courts located in the City of St. Louis or the state courts in St. Louis
County, Missouri, and each consents to service of process by means of delivery
in the same manner required for notices under this Agreement as provided in
Section 21 of this Agreement.
14. PATENT INFRINGEMENT.
14.1. Customer agrees, at its own expense, to defend any action or
suit brought against Manufacturer alleging that any Product or any part thereof
manufactured in accordance with the Specifications infringes any enforceable
patent issued to any other person or any valid trade secret, proprietary
information or other intellectual property right of any other person. Customer
will pay all costs and damages, including any judgment awarded against
Manufacturer in any such suit, provided, however, that Customer is promptly
notified in writing of such action or suit and is given full authority and full
and proper information and assistance available to Manufacturer for the defense
of said action or suit. Customer shall not be responsible for any compromise or
settlement of such suit or action made by Manufacturer without Customer's
consent.
14.2. If the use or sale of any Product becomes (or in the opinion
of Customer is likely to become) the subject of an infringement claim, Customer
may, at its option and expense, secure a right to use or sell the Product or
(ii) make modifications to the Specifications that would render the use or sale
of the Product non-infringing.
14.3. The foregoing indemnification shall not apply if the
infringement arises from Products not manufactured by Manufacturer pursuant to
this Agreement in accordance with the Specifications.
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15. FORCE MAJEURE.
Neither party shall be liable for any loss, damage or penalty as a
result of any delay in or failure to manufacture, deliver or otherwise perform
hereunder due to any cause demonstrably beyond that party's reasonable control,
including without limitation: embargo; governmental act, order, ruling,
regulation or request; fire; explosion; accident; theft; vandalism; riot;
shortages; strike or other work stoppage; lightning, flood, windstorm or other
act of God; delay in transportation; equipment or tooling failure; or inability
to obtain necessary fuel, materials, supplies or power. The party suspending
performance in whole or in part as a result of any such delay or failure shall
give prompt written notice thereof to the other party, stating therein the
nature thereof, the specific reasons therefor, and the expected duration thereof
and any alternatives thereto which such party believes may reasonably be
pursued, and shall resume performance as soon as reasonably possible. Following
any occurrence that causes any party to suspend performance in whole or in part,
such party shall promptly initiate such reasonable measures as will, if
reasonably possible, remove or relieve such suspension so as to enable it to
resume performance of its obligations as soon as reasonably possible. During the
continuance of such delay or failure which prevents the delivery or ordering of
Products hereunder for a period of twenty (20) or more business days, the
quantities of beds for which liquidated damages would otherwise be payable under
Section 1.3 of this Agreement shall be reduced by the quantity of beds affected
by such delay or failure (i.e. if Manufacturer fails to supply beds in
quantities ordered by Customer up to 22,000 beds during the twelve month period
ending October 15, 1997 solely as a result of such delay or failure, no
liquidated damages would be payable).
16. NONDISCLOSURE OF INFORMATION.
16.1. Each party hereby agrees that all information relating to this
Agreement disclosed to it by the other party, which information is in fact
confidential or proprietary when disclosed to the other party or is then claimed
and marked by the disclosing party to be confidential or proprietary, will be
held and safeguarded by the receiving party as confidential information of the
disclosing party, and the receiving party shall exert reasonable efforts in a
manner consistent with the efforts which the receiving party uses to protect its
own information to prevent any publication or other disclosure of such
confidential information received from the disclosing party without the express
authorization of the disclosing party. Customer's Specifications and designs are
trade secrets of Customer and shall be treated as confidential and proprietary
under this clause. Manufacturer agrees that only employees at the Wright City
Facility with a need to know for purposes of performance of this Agreement may
have access to Customer's Specifications and designs and other confidential and
proprietary data. The restrictions of this Section 16 shall not apply to
information which becomes generally available to the public through no fault of
the receiving party.
16.2. Neither Invacare nor any Affiliate of Invacare (other than
Manufacturer in accordance with and pursuant to the terms of this Agreement)
shall manufacture or sell any home healthcare bed products, parts or accessories
utilizing any of Customer's Specifications and designs. To Customer's knowledge
as of the date hereof, none of the
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home healthcare bed products, parts and accessories currently manufactured by
Invacare utilize Customer's Specifications or designs.
17. HEADINGS.
The section headings herein are for convenience only and shall not
be deemed to affect in any way the language of the provisions to which they
refer.
18. FAILURE TO ENFORCE.
The failure of either party to enforce any of the terms of this
Agreement shall not be construed as a waiver of rights hereunder preventing the
subsequent enforcement of such provisions or the recovery of damages for breach
thereof.
19. SEVERABILITY.
In the event that any one or more provisions contained in this
Agreement or any application thereof shall be held to be invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions of this Agreement and any other application thereof shall
not in any way be affected or impaired thereby; provided, however, that to the
extent permitted by applicable law, any invalid, illegal or unenforceable
provision may be considered for the purpose of determining the intent of the
parties in connection with the other provisions of this Agreement.
20. ENTIRE AGREEMENT.
20.1. This Agreement constitutes the entire Agreement between
Manufacturer and Invacare, on the one hand, and Customer, on the other hand,
superseding any prior agreement between the parties. No modification of this
Agreement shall be binding unless in writing and signed by authorized
representatives of both parties.
20.2. This Agreement is intended to cover all sales of Products by
Manufacturer to Customer hereunder. Except as agreed to herein and unless
otherwise expressly agreed to in writing, no written or printed terms or
conditions in any purchase order, order confirmation, invoice or other document
forwarded by either party to the other shall have the effect of varying any of
the tentis hereof, and the provisions of this Agreement shall be controlling.
21. NOTICES.
All notices, communications and demands under this Agreement shall
be in English and shall be made in writing by hand delivery, telefax, courier,
registered or certified mail, return receipt requested, or by any other means of
delivery which enables the sending party to verify receipt thereof. Such notice
shall conclusively be presumed to be given or made: (1) at the time it is
personally given or made in the case of personal delivery or transmission by
telefax (with receipt confirmed); (ii) on the next business day after being
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sent by reputable overnight courier; or (iii) five (5) business days after
mailing with sufficient postage or cost prepaid in the case of mail. All notices
sent by means other than those made by hand delivery or registered or certified
mail, return receipt requested, shall be promptly confirmed by registered or
certified 'I, return receipt requested. Any notices shall be addressed as
follows:
If to Manufacturer
and Invacare: Healthtech Products, Inc.
South Outer Road
Wright City, Missouri 63390-0544
Attn: General Manager
Fax: 314/530-5461
If to Customer: Everest & Jennings, Inc.
Earth City Expressway
Earth City, MO 63045
Attn: President and
Chief Executive Officer
Fax: 314/512-7225
or to such other person or address as either party may, by like notice, specify
to the other.
22. CHOICE OF LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Missouri, without regard to its
principles of conflicts of laws.
23. RESOLUTION BY NEGOTIATION; ARBITRATION.
23.1. Except in the event of any litigation or proceeding commenced
by any third party against either Manufacturer or Customer in which the other
party is an indispensable party or potential third party defendant, and except
for any action seeking enforcement of this Agreement pursuant to Section 13.2 of
this Agreement, any dispute or controversy between the parties involving the
interpretation, construction or application of any terms, covenants or
conditions of this Agreement, or transactions under it, or any claim arising out
of or relating to this Agreement, or transactions under it, shall, on the
request of one party served on the other, be submitted for resolution by senior
executives designated by each party, who shall attempt to resolve such dispute
or controversy in good faith and, in the event such resolution is not achieved
within fifteen (I 5) business days of such request, shall be submitted to
binding arbitration in accordance with provisions of this Section 23.
23.2. Any such dispute, controversy or claim shall be resolved by
binding arbitration conducted in St. Louis, Missouri (except as otherwise may be
agreed by the parties in their discretion) in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect, except
as herein specifically otherwise stated
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<PAGE>
or amplified, and judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction over the party against whom the award
is sought to be entered.
23.3. Notwithstanding anything to the contrary which may now or
hereafter be contained in the Commercial Arbitration Rules of the American
Arbitration Association, the procedures set out in this Section 23.3 shall
apply.
(i) A notice of arbitration shall set out a clear and plain
statement of the matter that the party sending the notice (the "Instituting
Party") believes to be a breach or is in dispute. The demand (the "Demand")
shall reference principal provisions of this Agreement that the Instituting
Party views as controlling or out of the interpretation of which the dispute
arises, and shall attach, if practicable, or, if not practicable, shall make
available, copies of all pertinent documents and other things then in its
possession which the Instituting Party views as having direct bearing on the
relief sought under the Demand. The receiving party (the "Other Party") shall,
within twenty (20) days of receipt of the Demand, provide to the Instituting
Party and to the arbitrators a response (the "Answer"), referencing provisions
of this Agreement that the Other Party views as controlling, and shall attach,
if practicable, or, if not practicable, shall make available, copies of all
pertinent documents and other things (other than those attached to the Demand)
then in its possession which it views as having direct bearing to support the
contentions of the Answer. Each party shall appoint one person to hear and
determine the dispute within ten (10) days after the Other Party's receipt of
the Demand. If a party fails to so designate its arbitrator within said ten (10)
days, then the arbitrator designated by the party designating an arbitrator
shall act as the sole arbitrator and shall be deemed to be the single,
mutually-approved arbitrator to resolve the controversy. If two persons are
chosen, they shall, within twenty (20) days, select an additional, impartial
arbitrator. If they fall to do so within said twenty (20) days, either party may
petition any court of competent jurisdiction to appoint the third arbitrator.
The majority decision of the arbitrator panel (or the decision of the single
arbitrator) shall be final.
(ii) If two persons are chosen, each party shall pay the
arbitrator it designates and the parties shall share the cost of the third
arbitrator; the parties shall share the costs of a sole arbitrator. In the event
that the parties are unable to agree upon a rate of compensation for the third
(or sole) arbitrator, such arbitrator shall be compensated for his or her
services at a rate to be determined by the American Arbitration Association.
(iii) Discovery shall be liberally allowed by the arbitrators
as contemplated by the U.S. Federal Rules of Civil Procedure, subject, however,
to such limitations as the arbitrators determine to be appropriate under the
circumstances, it being the parties mutual desire to have a prompt and efficient
arbitration.
(iv) The arbitrators shall endeavor to promptly schedule and
hold hearings (on consecutive days if practicable), and shall have authority to
award relief under legal or equitable principles, including interim or
preliminary relief. Nothing in this Section 23.3 shall impair the right of a
party to seek interim or preliminary relief in a court of competent Jurisdiction
before the arbitration panel is constituted and convened.
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(v) Other than attorneys' fees and expenses (which shall be
home by the party incurring the same), the costs of the arbitration shall be
home by the losing party or shall be allocated between the parties in such
proportions as the arbitrators decide.
(vi) The arbitrators shall, upon the request of either party,
promptly (and in all events within thirty (30) days of the conclusion of the
hearing) issue a proposed written opinion of their findings of fact and
conclusions of law which shall become final and binding in accordance with the
terms thereof unless either or both parties seek reconsideration in accordance
with Subsection 23.3(vii). In making their decision, the arbitrators shall be
bound by the terms of this Agreement.
(vii) Either party shall have the right, within twenty (20)
days of receipt of the arbitrators' proposed opinion, to file with the
arbitrators a motion to reconsider (accompanied by a reasoned memorandum), and
the other party shall have twenty (20) days to respond to that memorandum. After
receipt of such memorandum and response, if any, the arbitrators thereupon shall
reconsider the issues raised by said motion and, promptly, either confirm or
change their majority decision which shall then be final and conclusive upon
both parties. The costs of such a motion for reconsideration and written opinion
of the arbitrators shall be home by the moving party, or shared equally by both
parties if both parties request such reconsideration.
24. BINDING AGREEMENT.
This Agreement shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns. This Agreement
shall be assignable by either party only with the written consent of the other
party, which shall not be unreasonably withheld, except that Customer may assign
this Agreement without Manufacturer's consent (1) to E&J or any of its
Affiliates and (ii) to a purchaser of Customer's home healthcare bed Product
line who agrees in writing to assume Customer's obligations to Manufacturer
hereunder (provided, however, that Customer shall not be released from any such
obligations arising after assignment to any such purchaser unless the assignee
has a Standard & Poor's credit rating of BB for long-term debt or B for
commercial paper, or the equivalent thereto). Any assignee of Customer or
Manufacturer must agree by written instrument to be bound by and to perform and
discharge the obligations hereunder of Customer or Manufacturer, as the case may
be. Upon any such assignment, the assigning party shall be released from all
accrued and unaccrued obligations thereafter arising hereunder of Customer or
Manufacturer, as the case may be, but shall remain liable for all accrued and
unaccrued obligations hereunder of Customer or Manufacturer, as the case may be,
arising prior to such assignment.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
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IN WITNESS WHEREOF, an authorized representative of each party has
signed this Agreement below.
"MANUFACTURER":
HEALTHTECH PRODUCTS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
INVACARE CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
"CUSTOMER":
EVEREST & JENNINGS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
17
EXHIBIT 10(b)
Supply Agreement, by and between Everest & Jennings, Inc. and P.T. Dharma
Polimetal.
<PAGE>
SUPPLY AGREEMENT
THIS AGREEMENT is made and entered into as of the date last below
written by and between EVEREST & JENNINGS, INC., a corporation organized and
existing under the laws of the State of California, U.S.A., with its principal
offices at 1100 Corporate Square Drive, St. Louis, MO 63132 (hereinafter "E&J")
and P.T. DHARMA POLIMETAL, a company organized and existing under the laws of
Indonesia, with offices at JL. RAYA SERANG KM., 24 Balaraja Tangerang, Indonesia
(hereinafter "P.T. Dharma")
RECITALS
WHEREAS, E&J is a manufacturer and seller of wheel chairs in the
United States, Canada, Mexico, and Europe;
WHEREAS, P.T. Dharma manufactures and sells for export wheel chairs
and wheel chair components;
WHEREAS, E&j is willing to provide design specifications to P.T.
Dharma to be used in the manufacture of wheel chairs and wheel chair components;
WHEREAS, the Parties agree that P.T. Dharma shall manufacture the
wheel chairs and wheel chair components at high quality in accordance with the
designs exclusively for E&J and its designees, as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereinafter expressed, it is hereby agreed as follows:
1. MANUFACTURE AND SUPPLY: EXCLUSIVE SUPPLY CONTRACT.
1.1 P.T. Dharma shall, subject to the terms and conditions of this
Agreement, manufacture and sell exclusively to E&J or its designees certain
wheel chairs and wheel chair components described in Appendix "A" hereto (the
"Product") conforming in all-material respects to the specifications referenced
in Appendix "A" hereto (the "Specifications").
1.2 E&J agrees to order sufficient quantities of the Products, at the unit
prices set out in Appendix "B" hereto, which prices shall be competitive with
prevailing market prices, period of the Term of this Agreement beginning on I
during the January 1995 and ending on 31 December 1995 to total a minimum
aggregate gross purchase amount of U.S. $5,000,000. The minimum aggregate gross
purchase amount will increase to U.S. $5,500,000 for the period of the Term of
this Agreement beginning on 1 January 1996 and ending on 31 December 1996. The
minimum aggregate gross purchase amount will increase to U.S. $6,050,000 for the
period of the Term of this Agreement beginning on 1 January 1997 and ending on
31 December 1997. Should E&J fail to order sufficient quantities in any of the
one year periods, as set out above, during the Term of this Agreement to meet
the minimum aggregate gross purchase amount set
<PAGE>
forth herein for that year, E&J agrees to pay to P.T. Dharma for that year an
amount equal to ten (10) percent of the difference between the aggregate gross
dollar purchase amount of the Products ordered in that contract year, regardless
of when shipped and the minimum aggregate gross purchase amount set forth herein
for that contract year as liquidated damages. In the event that a failure by E&J
to order sufficient quantities to meet the minimum aggregate gross purchase
amount in any of the one year periods is due to an occurrence demonstrably
beyond their control in accordance with Article 10, Force Majeure, the minimum
aggregate gross purchase amount set forth herein for that contract year and each
successive contract year that performance is suspended in whole in part due to
such occurrence shall be reduced by an amount proportionate to the amount of
time performance is suspended during that contract year and any liquidated
damages due P.T. Dharma shall be calculated using the aggregate gross purchase
amount so reduced.
1.3 Products ordered under this Agreement between the effective date of
this Agreement and 31 December 1994 shall not be counted toward meeting the
minimum aggregate gross purchase amount for any period specified herein.
Products ordered and cancelled pursuant to Section 2.3 of this Agreement shall
count toward meeting the minimum aggregate gross purchase amount for the period
in which they were ordered.
1.4 The Parties hereby agree that new products and unit prices will be
added to Appendix A and Appendix B, respectively, by mutual agreement from time
to time. E&J shall supply P.T. Dharma with specifications for the new products.
P.T. Dharma shall propose unit prices for the manufacture of the new products,
which E&J may accept or reject. After a new product is added to Appendix A and a
unit price therefor is added to Appendix B, orders therefor shall be used to
satisfy the minimum aggregate gross purchase amount for the year in which they
are ordered.
1.5 For purposes of this Agreement, P.T. Dharma's Affiliates means any
company in which P.T. Dharma controls a majority of the indicia of ownership or
control, or is under the common control of a third party controlling such
indicia of ownership or control of another company and P.T. Dharma, as well as
their respective agents, employees, successors and assigns (hereinafter referred
to collectively an "Affiliates").
1.6 Neither P.T. Dharma nor its Affiliates, shall manufacture or sell the
Products, finished wheel chairs, or any other products comparable, competitive
with, equivalent to, intended to be used with or that are a part of Products, to
any person or entity other than E&J for sale in North America, Central America
or South America. P.T. Dharma may manufacture and sell comparable products to
resellers and distributors for sale in locations other than those specified
above with prior written notice to E&J provided such manufacture and sale does
not involve the use of E&J owned Special Tooling, as described herein, or the
use of E&J proprietary trade secrets. P.T. Dharma agrees to use their best
efforts to prevent the sale or distribution of any like or comparable products
manufactured or sold by P.T Dharma or its Affiliates, other than those sold
under this agreement, in North America, Central America, or South America. E&J
agrees that once P.T. Dharma is fully tooled and in production it will not
purchase the Products from any other supplier provided P.T. Dharma is not in
breach of this Agreement and is able to meet E&J's requirements in price,
quantity,
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<PAGE>
and quality. This provision notwithstanding, E&J and its affiliates shall have
the right to produce the Products themselves throughout the term of this
Agreement.
1.7 P.T. Dharma represents that it has filed all required documentation,
and obtained all authorizations, approvals and consents required by any and all
applicable laws, regulations, directives and/or requirements of any jurisdiction
in which the Products are to be manufactured, to produce the Products, sell the
Products to E&J, and export them to E&J from the jurisdiction of their
manufacture, pursuant to the terms of this Agreement. P.T. Dharma further
covenants that it will at all times during the Term of this Agreement continue
to obtain and maintain in full force and effect any and all such filings,
authorizations, approvals and consents required by, and will comply with, any
and all such applicable laws, regulations, directives and/or requirements in
connection with the manufacture and sale of the Products.
1.8 Upon the effective date of this agreement, E&J will deliver to P.T.
Dharma firm orders for the first two (2) months of the Term of this Agreement
and an estimate of its purchase requirements for the following three (3) months
of the Term of this Agreement. At the end of each month, E&j will place firm
orders for the next two months of the Term of this Agreement and provide an
estimate for the next three months of the Term of this Agreement. In no event
will firm orders for any one month differ from the estimate for that month by
more than twenty (20) percent.
1.9 P.T. Dharma may not unreasonably decline any purchase order under this
Agreement and it will be deemed accepted unless declined within 15 days of
receipt. A copy of E&J's form of Purchase Order is attached as Appendix "C"
hereto, which E&J may revise from time to time upon notice to P.T. Dharma.
2. DELIVERY, CLAIMS, DELAYS, RETURNS.
2.1 All Products sold by P.T. Dharma shall be packaged in seaworthy
packing and delivered FOB (Incoterms 1990) Jakarta, Indonesia. P.T. Dharma shall
undertake, at its risk and expense, to deliver or cause to be delivered the
Products to the vessels named by E&J. at the named ports of shipment in the
manner customary at the port, at the date or within the period stipulated, and
notify E&J. without delay, that the goods have been delivered to said vessels.
2.2 Delivery of any order of the Products shall be according to the agreed
upon schedule for the period in question. P.T. Dharma will make all reasonable
efforts to accommodate schedule changes when requested by E&J. Partial shipments
are allowed under this agreement.
2.3 The Parties hereby acknowledge that time is of the essence with
respect to the delivery dates specified in individual orders. E&J reserves the
right to cancel, without liability, part or all of any order not shipped within
thirty (30) days from the period specified in the order. In the case of a
cancellation pursuant to this Section 2.3. E&J shall be. entitled to receive tan
(10) percent of the value of the cancelled order or part thereof as liquidated
damages. Such amount shall be setoff against any and all amounts then owed to
P.T. Dharma
3
<PAGE>
under this Agreement, with the prior written approval of P.T. Dharma, which
approval shall not be unreasonably withheld.
2.4 All Products shall conform to the Specifications and quality assurance
procedures and guidelines, including First Article Inspection Qualifications,
set forth in Appendix A. E&J will inspect the Products prior to shipment and
will arrange to have inspectors present at a time and location as the Parties
may agree to. P.T. Dharma shall pay U.S. $5,000 per month toward the cost of
pre-shipment inspections. Arrangements for such payment shall be agreed to
between the Parties. E&J shall promptly notify in writing the on-site
representative of P.T. Dharma of any claims for shortage, nonconformance, defect
or damage that is observed in such inspection. E&J shall not, by such
inspection, relinquish any rights of inspection or rejection normally afforded a
seller under the law governing this Agreement consistent with the delivery terms
herein. Any disputes that arise-regarding the nature or existence of any
shortage, nonconformance, defect or damage shall be settled through the use of a
third party inspection service that is mutually agreeable to the Parties.
2.5 P.T. Dharma will pursue ISO 9000 Certification following the effective
date of this Agreement and use its best efforts to obtain certification by a
recognized certification organization by the first anniversary of the effective
date of this Agreement. Once certification is obtained, P.T. Dharma shall
maintain certification throughout the Term of this Agreement. Should P.T. Dharma
fail to obtain such certification by the date specified herein or lose such
certification once achieved during the Term of this Agreement, E&J shall have
the right to terminate this Agreement in accordance with Section 5.2.
3. PRICES AM PAYMENT.
3.1 The unit prices to be paid for the Products ordered during the first
twelve (12) month period of the Term of this Agreement are and shall be set
forth in Appendix "B", attached hereto and made apart hereof. Prices include and
P.T. Dharma shall bear and pay for all export charges including: but not limited
to, export packing and packaging charges, warehousing, demurrage, lighterage,
inland insurance, consular fees, and export license fees.
3.2 Upon three (3) months written notice, P.T. Dharma may propose a change
in the unit price of any Products listed in Appendix "B". Such proposal must be
justified by an increase in the cost of manufacturing the Products to P.T.
Dharma. The parties will enter into good faith negotiations to reach an
agreement on revised pricing within ninety (90) days after receipt of such
proposal by E&J. In no event will the price of any Product increase more than
five (5) percent in any one (1) year of the Term of this Agreement over the
price at the end of the prior year.
3.3 P.T. Dharma shall use its best efforts to contain and reduce its cost
of production and to meet E&J's specified cost goals during the Term of this
Agreement. P.T. Dharma shall consider and implement, if feasible, any production
improvement or cost saving suggestion by E&J. Any reductions in the cost of
production realized through suggestions made in part or in whole by E&J shall be
passed on to E&J through an immediate reduction in the unit prices specified in
Appendix B for the products affected.
4
<PAGE>
3.4 Payment for each order issued in the first year of the Term of this
Agreement shall be by bank wire transfer in U.S. currency to accounts in such
banks as P.T. Dharma shall direct from time to time. Payments made by bank wire
transfer shall be made within thirty (30) calendar days from the receipt of P.T.
Dharma's invoice or date of delivery to the vessel whichever is later. Late
payments shall be subject to a late payment penalty on amounts past due
calculated at an annual rate of sixteen (16) percent. E&J shall receive a prompt
payment discount calculated at an annual rate of nine (9) percent for payments
made within fifteen (15) days of the receipt of the invoice or date of delivery
to the vessel whichever is later. After the first year of the Term of this
Agreement, payment shall be by documentary letter of credit issued in P.T.
Dharma's favor, the terms and conditions of which shall be as mutually agreed
upon by the parties, by a bank of E&J's choosing. Once a suitable letter of
credit is established by the parties, the late payment penalty provision of this
Section 3.4 shall no longer apply. Each invoice issued under this Agreement
shall identify, at a minimum, any later date of delivery to the vessel, E&J's
applicable purchase order number, a full description of the Products included,
and the purchase price.
4. TAXES AND OTHER CHARGES.
Any and all use taxes, sales taxes, excise duties, customs
inspection or testing fees, or any other taxes, fees or charges of any nature
whatsoever imposed by any governmental authority in the country of manufacture
on or with respect to the manufacture and delivery of the Products or measured
by the transactions between the parties shall be paid by P.T. Dharma in addition
to the prices quoted and invoiced.
5. TERM AND TERMINATION.
5.1 This Agreement shall become effective upon execution by both Parties
and its initial Term shall expire on December 31, 1997, provided, however, that
on January 1, 1997 and each January 1 thereafter, the Term shall be
automatically extended one (1) additional year unless prior to December 31 of
any year E&J shall give written notice to P.T. Dharma that it has elected not to
have the Term extended for any further period. The minimum aggregate gross
purchase amount of Products for any year of the Term commencing after December
31, 1997 shall be U.S. $6,050,000 unless otherwise agreed to by E&J and P.T.
Dharma. P.T. Dharma shall have the right to terminate or refuse any extension or
renewal of this Agreement if E&J has failed to order fifty (50) percent of the
aggregate gross purchase amount specified herein for the twelve (12) month
period immediately preceding the giving of such notice.
5.2 Either party may terminate this Agreement for any material breach of
this Agreement by the other party by giving he other party 90 days' written
notice if such breach shall, at the expiration of, said [90] day period, remain
uncured to the satisfaction of the notifying party. Without limiting the
foregoing, any breach by P.T. Dharma of Section 1.5, 1.6, or 2.4 hereof shall be
deemed a material breach of this Agreement.
5.3 Either party may terminate this Agreement, effective immediately upon
the giving of notice to the other, if the other party files a petition in
bankruptcy or is adjudicated as bankrupt or takes advantage of the insolvency
laws of any state, territory, or country, or is
5
<PAGE>
voluntary or involuntarily dissolved, or has receiver, trustee, or other court
officer appointed for its property.
5.4 All payment obligations of E&J for Products theretofore ordered,
delivered, and accepted, and all obligations of P.T. Dharma and rights of E&J in
Sections 6, 7, 8, 9, 12, 17, 18 and 19 shall survive termination or expiration
of this Agreement.
6. WARRANTIES.
P.T. Dharma represents and warrants that each Product delivered to E&J
shall be free from defects in materials and workmanship and shall conform to
each Specification and will be suitable for its intended use. Any claim for
breach of such warranty shall be accepted only if the breach occurred within 12]
months of the date the Product was first delivered to a customer of E&J (or (24]
months after the Product was delivered to E&J, whichever expires first). During
said warranty period, P.T. Dharma shall replace, at no charge to E&J or its
Customer, any Products (or parts of Products) that are found to be defective by
E&J or its customer. E&J shall, at P.T. Dharma's risk and expense, return such
defective Products or parts or dispose of them as P.T. Dharma requests. Any
disputes that arise regarding the nature or existence of a defect shall be
settled through the use of a third party inspection service that is mutually
agreeable to the Parties. In no event shall P.T. Dharma's liability under this
warranty provision exceed the replacement cost of the defective Products.
7. RELATIONSHIP OF THE PARTIES.
This Agreement shall not be construed to make either party (or its
Affiliates, principals, officers, employees or agents) an Affiliate, agent,
partner, or joint venturer with the other party. Neither party shall have any
right or authority whatsoever to incur any liability, obligation (express or
implied), or to otherwise act in any manner in the name or on behalf of the
other, or to make any promise, warranty or representation binding on the other.
8. SPECIAL TOOLING.
8.1 E&J has previously provided to P.T. Dharma, free of charge, certain
Special Tooling necessary to fabricate the Products as specified in Appendix
"A". Both parties to this Agreement acknowledge that the Special Tooling
provided to P.T. Dharma prior to and during the Term of this Agreement shall
remain the property of E&J. E&J may from time to time, as the parties may agree,
provide additional or replacement tooling to P.T. Dharma free of charge. All
tooling provided to P.T. Dharma prior to or during the Term of this Agreement
shall be returned to or for the account of E&J (within 90 days) upon the
termination or expiration of this Agreement. P.T. Dharma shall# at its own risk
and expense, keep all tooling provided by E&J in good working order and conduct
such maintenance as may be necessary to keep said tooling in good working order.
8.2 P.T. Dharma agrees to procure and maintain in full force and effect
throughout the Term of this Agreement a policy of general insurance in favor of
E&J (as loss payee and additional insured) covering the value of the Special
Tooling against loss or damage and any
6
<PAGE>
claims, liabilities or expenses asserted by any person arising out of the use of
such Special Tooling.
8.3 P.T. Dharma agrees that the Special Tooling provided by E&J will be
used solely for the production of the Products sold to E&J and that neither P.T.
Dharma nor any of its Affiliates will use the Special Tooling to produce
products of any kind for any other party.
9. PATENT INFRINGEMENT.
9.1 E&J agrees, at its own expense, to defend any action or suit brought
against P.T. Dharma alleging that the Product or any part thereof manufactured
according to the Specifications and obtained hereunder infringes enforceable
letters patent issued to other persons or valid trade secrets, proprietary
information, trademark, copyright, patent or other intellectual property rights
of other persons. E&J will pay all costs and damages, including any judgment of
a court of last resort finally awarded against P.T. Dharma in such suit;
provided, however, that E&J is promptly notified in writing of such action or
suit and is given full authority and full and proper information and assistance
for defense of said action or suit. E&J shall not be responsible for any
compromise or settlement of such suit or action made without its consent.
9.2 If the use of such Products pursuant to this Agreement becomes (or in
the opinion of E&J is likely to become) the subject of an infringement claim,
E&J may, at its option, (i) secure a right to use pursuant to this Agreement or
(ii) make modifications to the Specifications that would render the use
hereunder non-infringing.
9.3 The foregoing indemnification shall not apply if the infringement arises
from Products not manufactured per the Specifications or ordered under this
Agreement.
10. FORCE MAJEURE
Neither party shall be liable for any loss, damage or penalty as a result
of any delay in delivery or failure to manufacture, deliver or otherwise perform
hereunder due to any cause demonstrably beyond that party's reasonable control,
including without limitation: embargo; governmental act, order, ruling,
regulation or request; fire; explosion; accident; theft; vandalism; riot;
shortages; act of arson; strike; other labor difficulties; lighting; flood;
windstorm or other acts of god; causes attributable to common carriers; delay in
transportation# or inability to obtain necessary labor, fuel, materials,
supplies or power. The party suspending performance in whole or in part as a
result of any such delay or failure shall give prompt written notice thereof to
the other party, stating therein the nature thereof, the specific reasons
therefor, and the expected duration thereof and any alternatives thereto which
such party believes may reasonably be pursued, and shall resume performance as
soon as reasonably possible. Following any occurrence that causes any party to
suspend performance in whole or in part, such party shall promptly initiate such
reasonable measures as will, if reasonably possible, remove or relieve such
suspension so as to enable it to resume performance of its obligations as soon
an reasonably possible.
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<PAGE>
11. TECHNICAL ASSISTANCE.
Unless otherwise agreed in writing, any technical assistance and
information provided by E&J to P.T. Dharma will be provided without charge at
E&J's sole discretion and P.T. Dharma assumes sole responsibility for results
obtained in reliance therein. E&J makes no warranty of any kind or nature with
respect to any technical assistance or information provided by it.
12. NONDISCLOSURE OF INFORMATION.
Each party hereby agrees that all information relating to this Agreement
disclosed to it by the other party, which information is in fact confidential or
proprietary when disclosed to the other party or is then claimed and marked by
the disclosing party to be confidential or proprietary, will be hold and
safeguarded by the receiving party as confidential information of the disclosing
party, and the receiving party exert all reasonable efforts to prevent any
publication or other disclosure of all confidential information received from
the other party without the express written consent of the disclosing party. The
Specifications attached hereto as Appendix A are trade secrets of E&J and shall
be treated as confidential and proprietary under this clause.
13. HEADING.
The section headings herein are for convenience only and shall not be
deemed to affect in any way the language of the provisions to which they refer.
14. FAILURE TO ENFORCE.
Failure of either Party to enforce any of the terms of this Agreement
shall not be construed as a waiver of rights thereunder preventing the
subsequent enforcement of such provisions or the recovery of damages for breach
thereof.
15. SEVERABILITY.
If any portion of this Agreement is held to violate, or to be invalid or
unenforceable under, the laws of any government or subdivision thereof, this
Agreement may, at the option of E&J be terminated immediately upon written
notice, or the portion declared to be in violation of or invalid or
unenforceable under any such law shall be treated as being of no force or
effect, and this Agreement shall be construed as though such portion had not
been inserted herein, and the remainder of this Agreement shall remain in full
force and effect.
16. EMPIRE AGREEMENT.
16.1 This Agreement constitutes the entire Agreement between E&J and P.T.
Dharma superseding any prior agreement between the parties or their predecessors
or Affiliates. No modification of this Agreement shall be binding unless in
writing and signed by authorized representatives of both parties.
8
<PAGE>
16.2 This Agreement is intended to cover all transactions related hereto.
Except as agreed to herein and unless otherwise expressly agreed to in writing,
no written or printed terms and conditions in any purchase order, order
confirmation, or other document forwarded by either party shall have any effect,
and the provisions of this Agreement shall be controlling.
17. NOTICES.
All notices, communications, demands, and payments under this Agreement
shall be in English and shall be made in writing by hand delivery, telefax,
telex, courier, cable, registered airmail or by any other means of delivery
which enables the sending party to verify receipt thereof. Such notice shall
conclusively be presumed to be given or made: (i) at the time it is personally
given or made in the case of personal delivery or transmission by telefax (with
receipt confirmed); (ii) at the time of receipt of the addressees answerback an
the sender's machine in the case of transmission by telex; or (iii) ten (10)
days after mailing sufficient postage or cost prepaid in the case of registered
airmail, delivery by courier or cable. All notices sent by means other than
those made by hand delivery or registered airmail shall be promptly confirmed by
registered airmail. Any notices shall be addressed as follows:
If to E&J: Everest and Jennings, Inc.
1100 Corporate Square Drive
St. Louis, MO 63132
USA
Attn: Tim Evans, VP Finance
Fax: 314/995-7225
Telex:
If to P.T. Dharma: P.T. Dharma Polimetal
JL. RAYA SERANG KM.
24 Balaraja Tangerang
Indonesia
Attn: Joppy K. Negara
Fax: 62-21-756-0628
Telex:
or to such other person or address as either party may, by like notice, specify
to the other.
18. CHOICE OF LAW.
18.1 Except as set forth below, this Agreement, all transactions executed
hereunder and the relationship of the parties shall be construed, governed and
enforced in accordance with the United Nations convention on Contracts for the
International Sale of Goods.
18.2 Notwithstanding the provisions of section 18.1 above, matters
pertaining to the bankruptcy or insolvency of P.T. Dharma, or the rights of
creditors against P.T. Dharma or in and to P.T. Dharma's estate, shall be
determined pursuant to the laws of P.T. Dharma's domicile or principal place of
business.
9
<PAGE>
19. RESOLUTION BY NEGOTIATION: ARBITRATION.
19.1 Except in the event of any litigation or proceeding commenced by any
third party against either E&J or P.T. Dharma in which the other party is an
indispensable party or potential third party defendant, and except for
enforcement of any interim or preliminary remedy (to the extent such remedy is
sought before an arbitration panel is duly appointed and convened), any dispute
or controversy between the parties involving the interpretation, construction or
application of any terms, covenants or conditions of this Agreement, or
transactions under it, or any claim arising out of or relating to this
Agreement, or transactions under it, shall, on the request of one party served
on the other, be submitted for resolution by senior executives designated by
each party, who shall attempt to resolve such dispute or controversy in good
faith and, in the event such resolution is not achieved within fifteen (15) U.S.
working days of such request, shall be submitted to arbitration in accordance
with provisions of this Section 19.
19.2 Any such dispute, controversy or claim will be settled by arbitration
conducted in the English language in Hong Kong (except as otherwise may be
agreed by the parties in their discretion) in accordance with the International
Commercial Arbitration Rules of the American Arbitration Association then in
effect, except as herein specifically otherwise stated or amplified, and
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction over the party against whom the award is sought to be
entered.
19.3 Notwithstanding anything to the contrary which may now or hereafter
be contained in the International Commercial Arbitration Rules of the American
Arbitration Association, the procedures set out in this Section 19.3 shall
apply.
(a) A notice of arbitration shall set out a clear and plain
statement of the matter that the party sending the notice (the "Instituting
Party") believes to be a breach or is in dispute. The demand (the "Demand")
shall reference principal provisions of this Agreement that the Instituting
Party views as controlling or out of the interpretation of which the dispute
arises, and shall attach copies of all pertinent documents and other things then
in its possession which the Instituting Party views as having direct bearing on
the relief sought under the Demand. The receiving party (the "Other Party")
shall, within 20 days of receipt of the Demand, provide to the Instituting Party
and to the arbitrators a response (the "Answer"), referencing provisions of this
Agreement that the Other Party views as controlling, and shall attach copies of
all pertinent documents and other things (other than those attached to the
Demand) then in its possession which it views as having direct bearing to
support the contentions of the Answer. Each party shall appoint one person,
conversant in English, to hear and determine the dispute within ten days after
the Other Party's receipt of the Demand. If a party fails to so designate its
arbitrator within said ten days, then the arbitrator designated by the party
designating an arbitrator shall act as the sole arbitrator and shall be deemed
to be the single, mutually-approved arbitrator to resolve the controversy. The
person(s) so chosen shall, within 20 days, select an additional, impartial
arbitrator conversant in English. If they fail to do so within said 20 days,
either party may petition any court of competent jurisdiction in any
jurisdiction to which both parties may, in their discretion, agree to appoint
the third arbitrator. The majority decision of e arbitrator) the arbitrator
panel (or the decision of the single shall, be final.
10
<PAGE>
(b) Each party shall pay the arbitrator it designated and shall
share the cost of the third (or, if applicable, the sole) arbitrator. In the
event that the parties are unable to agree upon a rate of compensation for the
third (or sole) arbitrator, the arbitrator shall be compensated for his or her
services at a rate to be determined by the American Arbitration Association.
(c) Discovery shall be liberally allowed by the arbitrators as
contemplated by the U.S. Federal Rules of civil Procedure, subject, however, to
such limitations as the arbitrators determine to be appropriate under the
circumstances, it being the parties mutual desire to have a prompt and efficient
arbitration.
(d) The arbitrators shall endeavor to promptly schedule the
hearings, and to hold the hearings (on consecutive days if practicable), and
shall have authority to award relief under legal or equitable principles,
including interim or preliminary relief. Nothing in this section 19.3(d) shall
impair the right of a party to seek interim or preliminary relief in a court of
competent jurisdiction in any jurisdiction to which both parties may, in their
discretion, agree before the arbitration panel is constituted and convened.
(e) Other than attorneys' fees and expenses (which shall be borne by
the party incurring the same), the costs of the arbitration shall be borne by
the losing party or shall be allocated between the parties in such proportions
as the arbitrators decide.
(f) The arbitrators shall, upon the request of either party,
promptly (and in all events within 30 days of the conclusion of the hearing)
issue a proposed written opinion of their findings of fact and conclusions of
law which shall become final and binding in accordance with the terms thereof
unless either or both parties seek reconsideration in accordance with section
19.3(g). In making their decision, the arbitrators shall be bound by the terms
of this Agreement.
(g) Either party shall have the right, within 20 days of receipt of
the arbitrators' proposed opinion to file with the arbitrators a motion to
reconsider (accompanied by a reasoned memorandum), and the other party shall
have 20 days to respond to that memorandum. After receipt of such-memorandum and
response, if any, the arbitrators thereupon shall reconsider the issues raised
by said motion and, promptly, either confirm or change their majority decision
which shall then be final and conclusive upon both parties. The costs of such a
motion for reconsideration and written opinion of the arbitrators shall be borne
by the moving party, or shared equally by both parties if both parties request
such reconsideration.
20. BINDING AGREEMENT.
This Agreement shall be binding upon, and inure to the benefit of, the
parties hereto, their successors and assigns. This Agreement shall be assignable
by either party only with the written consent of the other, which consent shall
not be unreasonably withheld, except that either party may assign this Agreement
without consent to the purchaser of all its stock or assets, or a substantial
part of all the assets of its business to which this Agreement relates.
11
<PAGE>
IN WITNESS WHEREOF, an authorized representative of each party has
signed this Agreement below.
EVEREST AND JENNINGS, INC.
By:________________________________
(Signature)
Name:______________________________
Title:_____________________________
Date:______________________________
P.T. DHARMA POLIMETAL
By:________________________________
(Signature)
Name:______________________________
Title:_____________________________
Date:______________________________
12
<PAGE>
PART NUMBER DESCRIPTION REVISION LEVEL
90761001 VTA200
90761002 VTN200
90761003 VTA260
90761004 VTN260
90761005 TRA260
90761006 TRN260
90761007 TRA200
90761008 TRN200
WILL ADVISE VTA2000
90062335 Slide A
90247547 Sfrm Rt Rec H
90247548 Sfrm Lf Rec H
90249391 Sfrm Rt PD D
90249392 Sfrm Lf PD D
90249393 Sfrm Rt PD C
90249394 Sfrm LF PO C
90250115 Sfrm Rt EZ A
90250116 Sfrm Lf EZ A
90257AO7 Arm Rt B
90257AO8 Arm Lf B
90420379 Extension D
9046OG25 Hngr Assy Rt D
9046OG26 Hngr Assy Lf D
90385409 Footplate B
9006AOO2 Slide A
9006AOO3 Slide A
90188CO3 Sfrm 200 Rt A
90188CO4 Sfrm 300 Lf A
90232301 Arm Rt C
90232302 Arm Lt C
90250MO3 Sfrm Det Rt A
90250MO4 Sfrm Det Lf A
90862MO2 Arm D
90865NO1 Frt Sdfrm P2 Rt B
90865NO2 Frt Sdfrm P2 Lf B
90385510 Footplate C
13
<PAGE>
Parent 90761001 CHAIR SUB, VTA2OOXX
Component Revision Description Quantity Required
90188CO3 A SF-P8A200-77X 1
90188CO4 A SF-P8A200-77X 1
90273100 L RAIL INBTM 30 202 2
90543901 R XB-8AU-2X- 1816-SD II 1
90543902 R XB-8AU-2X- 1816-SD II 1
90280080 A SCREW P 30 821 4
90532560 A NUT ST 10 32 90 900 4
90440880 A NUT ST TN 74 906 1
90331686 B BOLT HH.31-24X3.25L 1
90525300 E GUIDE SEAT 90 336 4
90188BOt A AS-200-16-VISTA 2
90073220 C RIVET POP5/32 DIA 4
Parent 90761002 CHAIR SUB, VTN20OXX
Component Revision Description Quantity Required
90188CO3 A SF-P8A200-77X 1
90188CO4 A SF-P8A200-77X 1
90273100 L RAIL FNBTM 30 202 2
90280080 A SCREW PRHM 30 821 4
90532560 A NUT ST 10 32 90 900 4
90440880 A NUT ST TN 74 906 1
90531686 B BOLT HH.31-24X3.25L 1
90525300 E GUIDE SEAT 90 336 4
90188BOI A AS-200-16-VISTA 2
90073220 C RIVET POP5/32 DIA 4
90541251 M XB-8NU-2X- 1616-SD 12 1
90541252 M XB-8NU-2X- 1616-SD 12 1
14
<PAGE>
Parent 90761004 CHAIR SUB, VTN26OXX
Component Revision Description Quantity Required
90250MO3 A SF-P8A250-77X 1
90250MO4 A SF-P8A250-77X 1
90273100 L PALL INBTM 30 202 2
90232890 D AX-OCK-ADJ 2
90280080 A SCR-EW PRHM 30 821 4
90532-160 A NUT ST 10 32 90 900 4
90440880 A NUT ST TN 74 906 1
90531686 B BOLT HH.31-24X3.25L 1
90800213 G BUSHING FRONT POST 2
90062330 E SLIDE ASM FRONT EZLIT 2
90541251 M XB-8NU-2X- 1616-SD 12 1
90541252 M XB-8NU-2X- 1616-SD I) 1
9025OB09 C A260-VIA-FOS-H RT 1
9025OB19 C A.260-VIA-FOS-H LF 1
Parent 90761005 CHAIR SUB, TRA26OXX
Component Revision Description Quantity Required
90250MO3 A SF-P8A250-77X 1
90250MO4 A SF-P8A250-77X 1
90273100 L RAIL INBTM 30 202 2
90543901 R XB-8AU-2X-1816-SDII 1
90543902 R XB-8AU-2X- 1816-SD II 1
90232890 D AX-ARMLOCK-ADJ 2
90280080 A SCREW P 30 821 4
90532560 A NUT ST 10 3 2 90 900 4
90440880 A NUT ST TN 74 906 1
90531686 B BOLT HH.31-24X3.25L 1
90800213 G BUSIENG FRONT POST 2
9006AOO2 A SLIDE ASM-FRNT POST.1 2
90516321 D RAIL INTOP 90-204FL 2
90508724 L BUTTON PLG .87X12GA 2
90257AO7 B ARM 263SW-VISTA 1
90257A08 B ARM 263 8W-UBTA 1
15
<PAGE>
Parent 90761006 CHAIR SUB, TRN260XX
Component Revision Description Quantity Required
90250MO3 A SF-P8A250-77X 1
90250MO4 A SF-P8A250-77X 1
90273100 L RAIL INBTM 30 202 2
90232890 D AX-ARMLOCK-ADJ 2
90280080 A SCREW PRHM 30 821 4
90532560 A NUT ST 10 32 90 900 4
90440880 A NUT ST TN 74 906 1
90531686 B BOLT HH.31X24X3.25L 1
90800213 G BUSHING FRONT POST 2
90541251 M XB-8NU-2X-1616-SD 12 1
90541252 M XB-8NU-2X-1616-SD 12 1
9006AOO2 A SLIDE ASM-FRNT POST.1 2
90516321 D RAIL INTOP 90-204FL 2
90508724 L BUTTON PLG.87Xl2GA 2
90257AO7 B ARM 263SW-VISTA 1
Parent 90761006 CHAIR SUB, TRN26OXX
Component Revision Description Quantity Required
90257AO8 B ARM 263SWIVISTA 1
Parent 90761007 CHAIR SUB, TRA200XX
Component Revision Description Quantity Required
90188CO3 A SF-P8A200-77X 1
90188CO4 A SF-P8A200-77X 1
90273100 L RAIL INBTM 30 202 2
9054390t R XB-8AU-2X-1816-SDII 1
90543902 R XB-8AU-2X-1816-SDII 1
90280080 A SCREW PRHM 30 821 4
90532560 A NUT ST 10 32 90 900 4
90440880 A NUT ST TN 74 906 1
90531686 B BOLT HH.31-24X3.25L 1
90525300 E GUIDE SEAT 90 336 4
90516410 E RAIL INNER TOP U20 2
16
<PAGE>
Parent 90761003 CHAIR SUB, VTA26OXX
Component Revision Description Quantity Required
90250MO3 A SF-P8A250-77X 1
90250MO4 A SF-PSA250-77X 1
90273100 L RAIL INBTM 30 202 2
90543901 R XB-8AU-2X-1816-SDII 1
90543902 R XB-8AU-2X-1816-SDII 1
90232890 D AX-ARMLOCK-ADJ 2
90280080 A SCREW PRHM 30 821 4
90532560 A NTJT ST 10 32 90 900 4
90440880 A NUT ST TN 74 906 1
90531686 B BOLT HHJ.31-24X3.25L 1
90800213 G BUSHING FRONT POST 2
90062330 E SLIDE ASM FJRONT EZLIT 2
9025OB09 C A260-VIA-FOS-H RT 1
9025OB19 C A260-VIA-FOS-H LF 1
Parent 90761008 CHAIR SUB, TRN20OXX
Component Revision Description Quantity Required
90188CO3 A SF-PSA200-77X 1
90188CO4 A SF-P8A200-77X 1
90273100 L RAIL INBTM 30 202 2
90280080 A SCREW PRHM 30 821 4
90532560 A NUT ST 10 32 90 900 4
90440880 A NUT ST TN 74 906 1
9053t686 B BOLT HH.31-24X3.25L 1
90525300 E GUIDE SEAT 90 336 4
90541251 M XB-8NU-2X-1616-SD12 1
90541252 M XB-8NU-2X-1616-SDI2 1
90516410 E RAIL INNER TOP U20 2
17
<PAGE>
Parent P/N VA20000
Component Revision Description Quantity Required
90189801 H SF 20000 RT 1
90189802 H SF 1
90273100 L RAIL INBTM 2
90543901 R XB-8AU-2X SD11 1
90543902 R XB-8AU-2X SD11 1
90525300 E SEAT GUIDEE FWD 2
00001002 A PLUG 2
90531686 B BOLT 1
90440880 A NUT 1
90280080 A INNER BOLT 4
90232560 A INNER NUT 4
90416755 F BOLT 2
90532720 A NUT 2
90188801 A SIDEPANEL 2
90073220 C RIVET 8
18
<PAGE>
APPENDIX A
continued
General Specifications
WELDMENTS:
Must exhibit smooth and uniform distribution with 100% coverage at junctions.
Must be free of voids, pin holes and discontinuities.
When fatigued to breakage, weldments must remain intact and not sever from the
base metal. A metal perimeter around the welded area must be evident after
fatigue breakage.
CHROME PLATING AND ADHERENCE:
Refer to specification P3001 "Electrodeposited Chrome Finishes"
Refer to ASTM B 571-91 para. 3, 10 or 13.
CHROME APPEARANCE:
Finish appearance shall be bright, reflective and uniform, free from blisters,
stains, pits, nodules, cracks, roughness discontinuities and discoloration when
viewed at a minimum distance of one foot under soft white florescent light of
100 ft-c.
Coverage of part must be 100% as noted in P3001 and uniform so that heavier
areas of the assemblies and parts do not exhibit goldish tones that results from
thin chrome layering.
PURCHASE ORDER REQUIREMENTS:
All materials and processed used in the fabrication of E & J parts shall not be
changed or altered without the prior written consent of Everest & Jennings
management.
All shipping containers shall be clearly marked with:
a. part number
b. quantity
c. lot number, if applicable
d. part name
e. container number
APPENDIX "A"
19
<PAGE>
Standard Test Methods for
ADHESION OF METALLIC COATINGS(1)
This standard is issued under the fixed designation B571; the number immediately
following the designation indicates that year of original adoption or, in the
case of revision, the year of last revision. A number in parentheses indicates
the year of last reapproval. A superscript epislon ( ) indicates an editorial
change since the last revision or reapproval.
1. Scope
1.1 This document describes methods for evaluating the adhesion of
metallic coatings on various substrates. The methods are qualitative and require
only simple tools or instruments and moderate skill.
2. Significance and Use
2.1 Ten methods are useful for production control and for acceptance
testing of products.
2.2 Interpreting the results of qualitative methods for determining the
adhesion of metallic coatings is often a controversial subject. If more than one
test is used, failure to pass any one test is considered unsatisfactory. In many
instances, the end use of the coated article or its method of fabrication will
suggest the technique that best represents functional requirements. For example,
an article that is to be subsequently formed would suggest a draw or a bend
test; an article that is to be soldered or otherwise exposed to heat would
suggest a heat quench test. If a part requires baking or heat treating after
plating, adhesion tests should be carried out after such posttreatment as well.
2.3 Several of the tests are limited to specific types of coatings,
thickness ranges, ductilities, or compositions of the substrate. These
limitations are noted generally in the test descriptions and are summarized in
Table 2 for certain metallic coatings.
2.4 "Perfect" adhesion exists if the bonding between the coating and the
substrate is greater than the cohesive strength of either. Such adhesion is
usually obtained if good electroplating practices are followed.
2.5 For many purposes, the adhesion test has the objective of detecting
any adhesion less than "perfect." For such a test, one uses any means available
to attempt to separate the coating from the substrate. This may be prying,
hammering, bending, beating, heating, sawing, grinding, pulling, scribing,
chiseling, or a combination of such treatments. If the coating peels, flakes, or
lifts from the substrate, the adhesion is less than perfect.
- ----------
(1) These methods are under the jurisdiction of ASTM Committee B-8 on Metallic
and Inorganic Coatings. Current edition approved March 30, 1979. Published
May 1979.
APPENDIX "A"
20
<PAGE>
2.6 If evaluation of adhesion is required, it may be desirable to use one
or more of the following tests. These tests have varying degrees of severity;
and one might serve to distinguish between satisfactory and unsatisfactory
adhesion in a specific application. The choice for each situation must be
determined.
2.7 When guideline is for used for acceptance inspection, the method or
methods to used must be specified. Because the results of tests in cases of
marginal adhesion are subject to interpretation, agreement shall be reached on
what is acceptable.
2.8 If the size and shape of the item to be tested precludes use of the
designated test method, equivalent test panels may be appropriate. If permitted,
test panels shall be of the same material and have the same surface furnish as
the item to be tested and shall be processed through the same prelating,
electroplating, and postplating cycle with the parts they represent.
3. Bend Tests
3.1 Bend the part with the coated surface away, over a mandrel until its
two legs are parallel. The mandrel diameter should be four times the thickness
of the sample. Examine the deformed area visually under low magnification, for
example, 4x, for peeling or flaking of the coating from the substrate, which is
evidence of poor adhesion. If the coating fractures or blisters, a sharp blade
may be used to attempt to lift off the coating. With hard or brittle coatings,
cracking usually occurs in the bend area. Such cracks may or may not propagate
into the substrate. In either case, cracks are not indicative of poor adhesion
unless the coating can be peeled back with a sharp instrument.
3.2 Bend the part repeatedly, back and forth, through an angle of 180 deg
until failure of the basis metal occurs. Examine the region at low
magnification, for example 10X, for separation or peeling of the coating. Prying
with a sharp blade will indicate unsatisfactory adhesion by lift-off of the
coating.
4. Burnishing Test
4.1 Rub a coated area of about 5 cm2 with a smooth-ended tool for
approximately 15 s. A suitable tool is a steel rod 6 mm in diameter with a
smooth hemispherical end. The pressure shall be sufficient to burnish the
coating at each stroke but not so great as to dig into it. Blisters, lifting, or
peeling should not develop. Generally, thick deposits cannot be evaluated
satisfactorily.
5. Chisel-Knife Test
5.1 Use a sharp cold chisel to penetrate the coating on the article being
evaluated. Alternatively the chisel may be placed in back of an overhang area of
the coating or at a coating-substrate interface exposed by sectioning the
article with a saw. A knife may be substituted for the chisel with or without
hammering or light tapping. If it is possible to
APPENDIX "A"
21
<PAGE>
remove the deposit, the adhesion is not satisfactory. Soft or thin coatings
cannot be evaluated for adhesion by mod.
6. Draw Test
6.1 Form a suitable sample about 60 mm in diameter into a flanged cap
approximately 38 mm in diameter, to a depth up to 18 mm, through the use of a
set of adjustable dies in an ordinary punch press.(2) Penetration of the male
die may be continued until the cap fractures. The adhesion of the coating may be
observed directly or evaluated further by techniques described in Section 5 for
detachment from the substrate. If there is peeling or flaking of the coating or
if it can be detached, the adhesion is not satisfactory.
6.2 Results from this technique must be interpreted cautiously, because
the ductilities of both the coating and substrate are involved.
7. File Test
7.1 Saw off a piece of the coated specimen and inspect it for detachment
at the deposit/substrate interface. Apply coarse mill file across the sawed edge
from the substrate toward the coating so is to raise it, using an approach angle
of approximately 45 deg to the coating surface. Lifting or peeling is evidence
of unsatisfactory adhesion.
7.2 This technique is not suitable for thin or soft coatings.
8. Grind-Saw Test
8.1 Hold the coated article against a rough emery wheel so that the wheel
cuts from substrate toward the deposit in a jerky or bumpy fashion. A hack saw
may be substituted for the wheel making sure to saw in the direction that tends
to separate the coating from the substrate. Lifting or peeling is evidence of
unsatisfactory adhesion.
8.2 This technique is especially effective on hard or brittle coatings but
is not suitable for thin or soft coatings.
9. Heat-Quench Test
9.1 Heat the coated article in an oven for a sufficient time for it to
reach the temperature shown in Table 1. Maintain the temperature of the oven
within 10'C of the nominal. Coatings and substrates that are sensitive to
oxidation should be heated in an inert or reducing atmosphere or a suitable
liquid. Then quench the part in water or other suitable liquid at room
temperature.
- ----------
(2) Romanoff, F. P. Transactions. Electrochem. Soc. TESOA, Vol. 65, 1934, p.
385; Proceedings. Amer. Electroplaters Soc. AEPPB, Vol. 22, 1934, p. 155;
Monthly Review, Amer. Electroplaters Soc., MRAEA. Vol. 22, April 1935, p. 8.
APPENDIX "A"
22
<PAGE>
9.2 Flaking or peeling of the deposit is evidence of unsatisfactory
adhesion. Blisters may erupt during the beat and quench test when plating
solution is entrapped in substrate surface pits or pores which are bridged by
the deposit. If the deposited coating cannot be peeled or lifted from the
substrate in an area adjacent to the blister(s), the appearance of blisters
should not be interpreted as evidence of inferior adhesion.
9.3 Diffusion and subsequent alloying of metals may improve the bond
strength of electrodeposits. In some cases, a brittle layer may be created by
the material involved causing peeling due to fracture rather than poor adhesion.
This would not give a correct indication of as-plated bond strength.
9.4 This test is nondestructive if the procedure does not create unwanted
effects on parts.
10. Impact Test
10.1 Use a hammer or impact device coupled with a suitable backing block
to support the article to be tested to deform the sample. Reproducible results
am more easily obtained by the use of a suitably modified impact tester where
the force is reproducible and the impact head contour is in the form of a 5-mm
diameter ball, shock loaded by a failing weight or swinging pendulum weight. The
severity of the test may be altered by changing the load and diameter of the
ball. Exfoliation or blisters in and around indentations are evidence of
inadequate adhesion.
10.2 This test is sometimes difficult to interpret. Soft and ductile
coatings are generally not suited for evaluation.
11. Peel Test
11.1 Bond a strip of steel or brass about 1.5 mm thick and 20 mm wide by
solder or suitable adhesive to a properly flat area of the coated surface of the
article. Adhesive-backed tape may be considered as a possible alternative. Heat
curing of the adhesive may be employed keeping in mind considerations noted in
3.7. The angle of pull shall be 90 deg to the surface. For reproducible results,
the rate of pull, the thickness and width of the strip, and deposit thickness
must be standardized. Failure in the coating/substrate is evidence of inadequate
adhesion.
11.2 The tensile and shear strengths of adhesives and solders limit the
range of adhesion strengths that can be evaluated. A quantitative analysis of
the factors involved has been published.(3)
- ----------
(3) Saubestre, E.B., Durney, E.B. Hajdu, J., and Bastenbeck, E. Plating, PLATA,
Vol. 52, October 1965, pp. 982-1000.
APPENDIX "A"
23
<PAGE>
12. Push Test
12.1 Drill a blind hole 0.75 cm in diameter from the underside until the
point of the drill tip comes within approximately 1.5 mm of the
deposit/substrate interface on the opposite side. Supporting the material on a
ring about 2.5 cm in diameter, apply steady pressure over the blind hole using a
hardened steel punch 0.6 cm, in diameter until a button sample is pushed out.
Exfoliation or peeling of the coating in the button or crater areas is evidence
of inadequate adhesion.
12.2 Soft, very ductile, and thin deposits are generally not suited for
this technique.
13. Scribe-Grid Test
13.1 Scribe two or more parallel lines or rectangular grid pattern on the
article using a hardened steel tool ground to a sharp (30-deg) point with a
distance between the scribed lines of approximately ten times the nominal
coating thickness, with a minimum distance of 0.4 mm. In scribing the lines, use
sufficient pressure to cut through the coating to the substrate in a single
stroke. If any portion of coating between the lines breaks away from the
substrate, the adhesion is inadequate.
13.2 Generally, thick deposits are not suitable for evaluation unless a
chisel or other sharp instrument is used to pry the exposed coating/substrate
interface, in which case this technique becomes a variant of Section 5.
14. Test-Coating Systems
14.1 Recommended adhesion tests for a variety of coating are given in
Table 2.(4)
- ----------
(4) Chessin, H., and Poor, J.G., Plating, PLATA, Vol. 46, 1954, p. 1037.
APPENDIX "A"
24
<PAGE>
TABLE 1 Temperature Test Guide
- ---------------------------------------------------------------
Coating Material
-----------------------------------------------
Chromium,
Nickel,
Nickel Lead.
+ Tin. Tin./ Zinc, Gold and
Substrate Chromium, Tempera- Lead, Tempera- Silver,
Cooper, ture, Tempera- ture, Tempera-
Tempera- (degrees) C ture, (degrees) C ture,
ture, (degrees) C
(degrees) C
- --------------------------------------------------------------------------------
Steel 250 150 150 150 250
Zinc alloys 150 150 150 150 150
Copper and cooper 250 150 150 150 250
alloys
Aluminum and 220 150 150 150 220
aluminum alloys
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 2 Adhesion Tests Appropriate for Various Coastings
- ---------------------------------------------------------------------------------------------------
Coating Material
---------------------------------------------------------------------------------------
Nickel
Cad- Chro- Cooper Lead and Nickel and Silver Tin and Zinc Gold
Adhesion Test mium mium Lead/Tin Chro- Tin/Lead
Alloy mium TAlloy
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bend o o o o
Burnish o o o o o o o o
Chisel o o o o
Draw o o o o o o o o o o
File o o o
Grind and saw o o o
Heat/quench o o o o o o o o
Impact o o o o o
Peel o o o o o o o o
Push o o o
Scribe o o o o o o o
- ----------------------------------------------------------------------------------------------------
</TABLE>
The American Society for Testing and Materials takes no position
respecting the validity of any patent rights asserted in connection with any
item mentioned in this standard. User of this standard are expressly advised
that determination of the validity of any such patent rights, and the risk of
infringement of such rights, are entirely their own responsibility.
This standard is subject to revision at any time by the responsible
technical committee and must be reviewed every five years and if not revised,
either reapproved or withdrawn. Your comments are invited either for revision of
this standard or for additional standards and should be addressed to ASTM
Headquarters. Your comments will receive careful consideration at a meeting of
the responsible technical committee, which you may attend. If you feel that your
comments have not received a fair hearing you should make your views know to the
ASTM Committee on Standards, 1916 Race St., Philadelphia, PA 19103.
APPENDIX "A"
25
<PAGE>
ELECTRODEPOSITED CHROME FINISHES
1.0 PURPOSE
This specification defines the metal finish requirements, terminology and
test techniques for additive inorganic (electrodeposited) nickel and
chrome finishes.
2.0 SCOPE
This specification covers decorative chrome finishes over nickel
underplating on carbon steels, ASTM B456 type Fe/Ni 13 Crr. The attached
figures 1,2,3,4, illustrate common areas for surface buffing.
3.0 DEFINITIONS
Terminology used is consistent with 8-374, B-456, and B-571.
4.0 RELATED DOCUMENTS
4.1 ASTM B-374 - Standard Definitions of Terms Relating to
Electroplating.
4.2 ASTM B-380 - Standard Method of Corrosion Testing of Decorative
Chromium Electroplating by the Corrodkote Procedure.
4.3 ASTM B-287 - Standard Method of Corrosion Testing . . . by the
Acetic Salt Spray Method.
4.4 ASTM B-242 - Standard Practice for Preparation of High Carbon Steel
for Electroplating.
4.5 ASTM B-456 - Standard Specification for Electrodeposited Coatings of
Copper Plus Nickel Chromium and Nickel Plus Chromium.
4.6 ASTM B-571 - Standard Test Methods for Adhesion of Metallic
Coatings.
4.7 Procedure Q - 1019 Nonconformances and Material Review Board.
4.8 Procedure Q - 1023 Attributes Sampling.
5.0 REQUIREMENTS
5.1 Base Metal Mechanical Prefinish - Shall be per the applicable
Everest and Jennings polishing specification as designated on the
product drawing/manufacturing order.
APPENDIX "A"
26
<PAGE>
5.1.1 Polish requirements defined by figures 1 through 4 shall be
specified as (P3001-01) in the material finish block of the
drawing.
5.1.2 Polish requirements not covered by figures 1 through 4 shall
be Specified as (P3001-02) the unprocessed raw material "as
received" from the vendor.
5.2 Underplating
5.3 NICKEL UNDERPLATE:
1. Semi-bright layer should be 60 percent of total Nickel
thickness.
2. Bright Nickel should be 40 percent of total Nickel thickness.
Total Nickels and chrome thickness should average 0.6 MIL.
5.3.1 Decorative Chrome
5.3.1.1 Decorative chrome plating shall comply with
requirements of ASTM B-456 suffix 1, para
4.5. The designation for the chromium
deposit applied at Everest and Jennings is
"mp" for microporous chromium containing a
minimum of 100 pores/mm2.
5.3.1.2 Decorative chrome plating shall have a
minimum average thickness of 10 millionths
of an incn (1.0(10-5) inches). When tested
in accordance with requirements of ASTM
B-456. Which specifies the use of the Kocair
Electronic Thickness tester.
5.3.1.3 Decorative chrome plating shall be
sufficiently adherent to product surfaces to
meet requirements of ASTM B- 471, para 9
with a baking temperature of 250o C or to
withstand a bend around a mandrel with the
radius specified.
5.3.1.4 Decorative chrome plating shall meet
corrosion requirements of ASTM B-456 Service
Condition SC- per para's 3.2 and 6.1, Table
4 and appendix X1 when tested in accordance
with requirements of ASTM B-287 or
B-380.
5.3.1.5 Finish appearance shall be bright and
uniform, free of stains, pits, roughness,
cracks, discontinuities or discoloration on
all exterior surfaces accessible to a 1/2"
APPENDIX "A"
27
<PAGE>
diameter ball when viewed at a maximum
distance of 1' under soft white fluorescent
lights (or equivalent) providing 100
candlepower as measured at the part surface.
5.3.1.6 Finish shall be free of blisters as viewed
under conditions described in para 5.3.1.5,
above.
5.4 Stress Relief Annealing
5.4.1 Steels containing 0.35% of carbon, or higher and case hardened
low carbon steels shall be stress relief annealed.
5.4.1.1 Sample units shall show no evidence of
cracking under 7x magnification when, after
finishing, they are subjected to the impact
of a two pound hammer free falling from a
height of one foot on a part surface
bridging a span of 3", minimum.
5.4.2 After stress relief and surface preparation (as required) the
product surface shall be clean and dry, free of oil, grease,
flux, buffing compounds, smut, scale and surface oxidation
when viewed without magnification from a distance of 1',
maximum, under lighting (or equivalent) providing 100
candlepower minimum measured at the product surface.
5.5 Refinishing
5.5.1 Arms, Handrims, 200-Arm Sideframes and Custom Products.
5.5.1.1 Prior to refinishing and/or mechanical
rework of product, all residue of metallic
electrodeposits shall be chemically stripped
from basis metal surfaces.
5.5.1.2 Product shall be washed, pickled and
repolished, as necessary, to render chemical
stripping agents inert and to remove any
residual stripping materials from the
product.
5.5.1.3 After stripping but prior to replating,
product shall be visually inspected using 7X
magnification under soft white fluorescent
lighting (or equivalent) providing 100
footcandles minimum illumination, measured
at the product surface, for evidence of
deterioration of brazed
joints.
APPENDIX "A"
28
<PAGE>
5.5.1.4 After stripping but prior to replating,
product shall be marked in an inconspicuous
area by a stamped indent.
5.5.1.5 Refinished product shall meet all
requirements of paras 5.1 through 5.4 of
this specification.
5.5.2 Other Plated Product
5.5.2.1 Prior to refinishing and/or mechanical
rework of product, all residue of decorative
chrome electrodeposits shall be chemically
stripped from basis metal surfaces.
5.5.2.2 Product shall be washed, pickled and
repolished, as necessary, to render chemical
stripping agents inert and to remove any
residual stripping materials from the
product.
5.5.2.3 After stripping, but prior to replating,
product shall be visually inspected, using
7X magnification under soft white
fluorescent lighting (or equivalent)
providing 100 footcandles minimum
illumination, measured at product surface,
for evidence of deterioration of the brazed
joints.
5.5.2.4 After stripping but prior to replating,
product shall be marked in an inconspicuous
area with a stamped indent.
5.5.2.5 Refinished product shall meet all
requirements of paras 5.1 through 5.4 of
this specification.
5.5.2.6 Minor indents resulting from polishing
through nickel underplate ("cut through")
will be acceptable.
5.5.2.6.1 "Cut through" shall not
exceed 1/4" diameter.
5.5.2.6.2 No more than at "cut through"
shall be permitted in a given
3" diameter.
5.5.2.6.3 Plating at "cut through"
shall be clean, bright,
adherent and corrosion
resistant.
5.5.3 Plating thickness of refinished product shall at no point
exceed 300% of specified average minimum thickness requirement
of O.5mils for Nickel Plating.
APPENDIX "A"
29
<PAGE>
5.5.4 Refinished product noncompliance after the third refinishing
cycle shall not be refinished further. Product shall be
referred to the Material Review Board for further disposition
per Quality Department Procedure Q-1019.
APPENDIX "A"
30
<PAGE>
- -------------------------------------------------------------------
PART NUMBER DESCRIPTION CURRENT PRICE
- -------------------------------------------------------------------
90761001 VTA200 35.08
- -------------------------------------------------------------------
90761002 VTA200 35.18
- -------------------------------------------------------------------
90761003 VTA260 43.25
- -------------------------------------------------------------------
90761004 VTA260 43.35
- -------------------------------------------------------------------
90761005 TRA260 40.27
- -------------------------------------------------------------------
90761006 TRA260 40.37
- -------------------------------------------------------------------
90761007 TRA200 33.36
- -------------------------------------------------------------------
90761008 TRA200 33.46
- -------------------------------------------------------------------
WILL ADVISE VTA2000 35.70
- -------------------------------------------------------------------
90062335 Slide 1.28
- -------------------------------------------------------------------
90247547 Sfrm Rt Rec 10.50
- -------------------------------------------------------------------
90247548 Sfrm Lf Rec 10.50
- -------------------------------------------------------------------
90249391 Sfrm Rt PD 11.00
- -------------------------------------------------------------------
90249392 Sfrm Lf PD 11.00
- -------------------------------------------------------------------
90249393 Sfrm Rt PD 12.50
- -------------------------------------------------------------------
90249394 Sfrm Lf PD 12.50
- -------------------------------------------------------------------
90250115 Sfrm Rt EZ 10.20
- -------------------------------------------------------------------
90250116 Sfrm Lf EZ 10.20
- -------------------------------------------------------------------
90257A07 Arm Rt 3.10
- -------------------------------------------------------------------
90257A08 Arm Lf 3.10
- -------------------------------------------------------------------
90420379 Extension 1.30
- -------------------------------------------------------------------
90460G25 Hngr Assy Rt 2.90
- -------------------------------------------------------------------
90460G26 Hngr Assy Lf 2.90
- -------------------------------------------------------------------
90385409 Footplate 1.78
- -------------------------------------------------------------------
9006A002 Slide 1.20
- -------------------------------------------------------------------
9006A003 Slide 1.24
- -------------------------------------------------------------------
90188C03 Sfrm 200 Rt 10.25
- -------------------------------------------------------------------
90188C04 Sfrm 300 Lf 10.25
- -------------------------------------------------------------------
90232301 Arm Rt 3.25
- -------------------------------------------------------------------
90232302 Arm Lf 3.25
- -------------------------------------------------------------------
90250M03 Sfrm Det Rt 9.95
- -------------------------------------------------------------------
90250M04 Sfrm Det Lf 9.95
- -------------------------------------------------------------------
90862M02 Arm 3.79
- -------------------------------------------------------------------
90865N01 Frt Sdfrm P2 Rt 4.50
- -------------------------------------------------------------------
90865N02 Frt Sdfrm P2 Lf 4.50
- -------------------------------------------------------------------
90385510 Footplate 1.78
- -------------------------------------------------------------------
APPENDIX "B"
31
<PAGE>
APPENDIX "C"
32
<PAGE>
ADDENDUM
SUPPLY AGREEMENT
This document is to amend Section 3.4 of the Supply Agreement between Everest &
Jennings, Inc. and P.T. Dharma Polimetal as follows:
Payment for each order issued in the first year of the Term of this
Agreement shall be by bank wire transfer in U.S. currency to accounts in
such banks as P.T. Dharma shall direct from time to time. Payment made
by bank wire transfer shall be made within thirty (30) calendar days
from receipt of P.T. Dharma's invoice or date of delivery to the vessel,
whichever is later. Late payments shall be subject to a late payment
penalty on amounts past due calculated at an annual rate of sixteen (16)
percent. E&J shall receive a prompt payment discount calculated at an
annual rate of nine (9) percent for payments made within Fifteen days of
the receipt of the invoice of the date of delivery o the vessel,
whichever is later. After the First year of the Term of the Agreement,
payment shall be guaranteed in part by a stand-by Letter of Credit
issued in P.T. Dharma's favor, the terms and conditions of which shall
be mutually agreed upon by the parties, by a bank if E&J',s choosing.
Once a suitable letter of credit is established by the parties, the late
payment penalty provision of this Section 3.4 shall no longer apply.
Each invoice issued under this agreement shall identify, at a minimum,
any later date of delivery to vessel, E&J's applicable purchase order
number, a full description of the Products included, and the purchase
price.
Everest & Jennings, Inc. P.T. Dharma Polimetal
__________________________________ By:_______________________________
(Signature) (Signature)
Name:_____________________________
Name:_____________________________
Title:____________________________
Title:____________________________
Date:_____________________________
Date:_____________________________
APPENDIX "C"
33
<PAGE>
Parent 90761008 CHAIR SUB, TRN200XX
Component Revision Description Quantity Required
90188C03 A SP-P8A200-77X 1
90188C04 A SP-P8A200-77X 1
90237100 L RAIL INBTM 30 202 2
90280080 A SCREW PRHM 30 821 4
90532560 A NUT ST 10 32 90 900 4
90440880 A NUT ST TN 74 906 1
90531686 B BOLT HH.31-24X3.25L 1
90525300 E GUIDE SEAT 90 336 4
90541251 M XB-8NU-2X-1616-SD12 1
90541252 M XB-8NU-2X-1616-SD12 1
90516410 E RAIL INNER TOP U20 2
Parent P/N VA20000
Component Revision Description Quantity Required
90189801 H SF 20000 RT 1
90189802 H SF 1
90273100 L RAIL INBTM 2
90543901 R XB-8AU-2X SD11 1
90543902 R XB-8AU-2X SD11 1
90525300 E SEAT GUIDE FWD 2
00001D02 A PLUG 2
90531686 B BOLT 1
90440880 A NUT 1
90280080 A INNER BOLT 4
90232560 A INNER NUT 4
90416755 F BOLT 2
90532720 A NUT 2
90188801 A SIDEPANEL 2
90073220 C RIVET 8
APPENDIX "C"
34
EXHIBIT 10(e)
Amendment to the Selinger Agreement dated as of May 3, 1996.
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
BETWEEN
GRAHAM-FIELD HEALTH PRODUCTS, INC.
AND
IRWIN SELINGER
AMENDMENT, dated as of May 3, 1996 (the "Amendment") , to the Employment
Agreement dated as of July 8, 1981, as amended on June 19, 1991, by and between
Graham-Field Health Products, Inc., a Delaware corporation (the "Corporation") ,
and Irwin Selinger ("Selinger").
W I T N E S S E T H:
WHEREAS, the Corporation and Selinger are parties to an Employment
Agreement dated as of July 8, 1981, as amended on June 19, 1991 (the "Employment
Agreement");
WHEREAS, the Corporation and Selinger have agreed to amend and modify
certain terms and provisions of the Employment Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto hereby agree to amend and modify the
Employment Agreement as follows:
1. The term of the Employment Agreement, which is due to expire on
July 8, 1996, shall be extended for an additional five (5) year period ending
July 8, 2001 (the "New Term").
2. Effective as of January 1, 1997 (the "Effective Date") the
Corporation shall pay Selinger an annual salary during the 1997 calendar year
(the "Base Year") of $300, 000 (the "New Base Salary"). The annual salary during
each year of the New Term following the Base Year shall be such amount as the
Corporation and Selinger shall agree upon and shall not be less than the New
Base Salary increased in each subsequent year of the
2
<PAGE>
New Term by an amount which is determined by multiplying the New Base Salary by
the percentage increase, if any, of the Consumer Price Index for all Urban
Workers (New York - Northeastern New Jersey) (1967=100), issued by the Bureau of
Labor Statistics of the United States Department of Labor (the "Index") for such
subsequent year over the Index for the Base Year. The New Base Salary shall be
payable in equal, or as nearly equal as may be practicable, installments not
less frequently than semimonthly. The Employment Agreement, as amended, shall
not be deemed abrogated or terminated if the Corporation, in its discretion
shall determine to increase the compensation of Selinger for any period of time,
or if Selinger shall accept such increase, but nothing shall be deemed to
obligate the Corporation to make such increase.
3. In all other respects, all of the terms and provisions of the
Employment Agreement shall remain in full force and effect during the New Term.
3
<PAGE>
IN WITNESS WHEREOF, parties hereto have executed this Amendment this
3rd day of May 1996.
GRAHAM-FIELD HEALTH
PRODUCTS, INC.
By: s/ Richard S. Kolodny
----------------------
Richard S. Kolodny Vice
President, General Counsel
s/Irwin Selinger
----------------
Irwin Selinger
4
EXHIBIT 10(j)
Lease Agreement dated as of March 19, 1992, by and between NET 2,
L.P. and Everest & Jennings, Inc.
<PAGE>
LEASE
THIS LEASE, made and entered into this 19th day of March, 1992, by
and between NET 2, L.P., a Delaware limited partnership (hereinafter called
"Landlord"), and EVEREST & JENNINGS, INC., a California corporation,
(hereinafter called "Tenant").
WITNESSETH, THAT:
Landlord, for and in consideration of the rents, covenants, and
agreements hereinafter mentioned and agree to e paid, kept, and performed by
Tenant, its successors and assigns, has leased and by these presents does lease
to Tenant the property situated in the County of St. Louis, State of Missouri,
described in Exhibit A, attached hereto and incorporated herein by reference,
together with the buildings and improvements constructed thereon, which property
is known and numbered as 3601 Rider Trail South, Earth City, Missouri 63045, and
consists of an approximately 147,000 square foot single level industrial
building situated on approximately 9.8 acres of lan t e "Demised Premises").
I
PURPOSE
To HAVE AND TO HOLD the Demised Premises, to be used and occupied
for light manufacturing and assembling of a health care product, and other
related uses and functions, which uses
<PAGE>
may involve punching, welding, powder coating, and any and all other lawful
uses.
Tenant will comply in all material respects with all applicable
laws, ordinances, governmental regulations and lawful requirements of the local
Board of Health, police and fire departments, and governmental authorities
pertaining to the manner in which it uses the Demised Premises.
II
TERM
The term of this Lease shall commence on the forty sixth (46th) day
following the Environmental Marking Date (as defined on Article XXIX hereof) and
shall end ten (10) years and three (3) months from such date. In the event that
the existing tenant does not vacate the Demised Premises prior to April 15,
1992, Tenant shall have the right at any time after such date and prior to the
date Tenant has been notified that said tenant actually vacates, to terminate
this Lease by delivering written notice of termination to Landlord which notice
must be delivered to Landlord after April 15, 1992 and prior to the date on
which Tenant has been notified of the vacation of the Demised Premises by the
existing tenant, time being of the essence.
III
RENTAL
Tenant shall pay to Landlord a yearly fixed rental as follows,
payable in advance in equal monthly installments, on the first day of each month
during said term, said rental to be
-2-
<PAGE>
payable at the office of Landlord at 355 Lexington Avenue, New York, New York
10017, or at such other place as Landlord may from time to time, in writing,
designate:
(a) During the first three (3) months of the term, or until such
later time as the Landlord shall have fulfilled its obligations to Tenant
under Article IV hereof (other than Landlord's obligation to reimburse
Tenant for finish work performed and paid for by Tenant), there shall be
no rent or other sums payable under this Lease. Notwithstanding the
foregoing, however, the date on which rent and other sums first accrue and
Tenant is obligated to begin the payment of rent and other sums shall be
postponed by that number of days which Landlord has failed to meet the
time deadlines for the completion of those items identified as Landlord's
responsibilities under Article IV below. Such date is herein referred to
as the "Rent Accrual Date."
(b) During the month in which the Rent Accrual Date occurs and
through and including the next sixty (60) months of the term, a yearly
fixed rental equal to Two Hundred Seventy-nine Thousand Three Hundred
Dollars ($279,300.00) payable, as aforesaid, in equal monthly installments
of Twenty-three Thousand Two Hundred Seventy-five Dollars ($23,275.00)
each.
(c) During the sixty-first (61st) month following the Rent Accrual
Date and through and including the balance of the initial term of the
Lease, a yearly fixed rental equal to Three Hundred Twenty-three Thousand
Four Hundred Dollars
-3-
<PAGE>
($323,400.00) payable, as aforesaid, in equal monthly installments of
Twenty-six Thousand Nine Hundred Fifty Dollars ($26,950.00) each.
In the event this Lease commences on any date other than the first
of the month, rental for the first and last months of the term hereof shall be
prorated.
IV
TENANT-FINISH
During the first three (3) months (or as specified below) of the
term of this Lease, Landlord shall, at Landlord's cost and expense, complete the
following, free of all liens for labor and materials and in compliance with all
governmental and building code requirements:
(a) Removal of the corrugator and starch system, both inside and
outside the improvements.
(b) Removal of catwalk.
(c) Remove boiler in boiler room. (The parties to this Lease hereby
acknowledge that the boiler is encumbered and/or owned by MDPC Equipment
Leasing Corporation and such boiler therefore does not constitute real or
personal property under this Lease. In the course of removing the boiler,
it will be necessary for Landlord to remove a cinder block wall. Landlord
shall coordinate the reconstruction of this cinder block wall in a manner
so as to reasonably accommodate the installation of Tenant's equipment
within the cinder block structure. Provided that Landlord has removed the
boiler, the time necessary for Landlord to
-4-
<PAGE>
coordinate the reconstruction of such structure with Tenant shall not
extend the period during which no rent or other sums are payable under the
Lease described in Article III(A) hereof if Landlord shall have fulfilled
its remaining obligations to Tenant under this Article IV.)
(d) Installation of lighting (Halogen or Mercury Vapor) in low bay
manufacturing area of 100 foot candle with a minimum clearance of sixteen
(16) feet below each fixture.
(e) Installation of overhead gas heaters (OHGH) in high bay area and
along eastern wall.
(f) Removal of all existing equipment from the Demised Premises
other than the equipment specified in items (a) and (c) above within the
first fourteen (14) days of the term of this Lease.
(g) Repair and leveling of concrete floor where needed within the
first fourteen (14) days of the term of this Lease.
(h) Repair roof in southwest corner of building.
(i) Repair damaged exterior wall panels.
(j) Removal of underground storage tanks during the first three (3)
months of the term of this Lease, and remediation of the site in
accordance with applicable law within a reasonable period of time
following the removal of the tanks, provided such remediation is commenced
within the first three (3) months of the term of this Lease and proceeds
with due diligence.
-5-
<PAGE>
(k) Reconstruction and/or repair of those scheduled items identified
on a punch list to be prepared and agreed to by Landlord and Tenant during
Tenant's inspection of the Demised Premises (such punch list, if any, to
be attached to this Lease as Exhibit B.
Landlord shall be responsible to repair and restore any portion of the Demised
Premises damaged in performing the finish work described in clauses (a) through
(k) above.
During the first fifteen (15) months of the term of this Lease,
Tenant shall, at Tenant's cost and expense, complete the following, to the
extent Tenant deems appropriate, free of all liens for labor and materials and
in compliance with all governmental and building code requirements and subject
to the provisions of Article VIII hereof:
(a) Removal of existing plant restroom facilities and reinstallation
of restroom facilities to handle a plant personnel capacity of three
hundred fifty (350) employees.
(b) Expansion or restriping of the parking areas to handle plant
personnel of three hundred fifty (350) employees.
(c) Construction of seven thousand to ten thousand square feet of
permanent offices with restrooms for plant office personnel.
(d) Installation of other plant amenities to handle a work force of
three hundred fifty (350) employees, i.e., cafeteria, breakroom, vending
area, entrances & exits, etc.
-6-
<PAGE>
(e) Permanent removal of rail spur and rail spur well from inside of
the improvements and reconstruction and leveling of the area.
Upon completion of the foregoing work by Tenant at Tenant's sole
cost and expense, free of all liens for labor and materials and in compliance
with all governmental and building code requirements, and upon Landlord being
furnished by Tenant with evidence reasonably satisfactory to Landlord of the
amount and cost of said work and of payment in full of said costs by Tenant,
Landlord shall reimburse Tenant for the amount of said costs not in excess of
One Hundred Thousand Dollars ($100,000.00).
V
SUBLETTING AND ASSIGNING
The Tenant may not, without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed, assign this Lease
or sublease all or part of the Demised Premises. Upon an assignment of this
Lease or subletting to which Landlord shall consent:
(a) Tenant shall remain primarily liable on this Lease for the term
thereof, and shall in no wise be released from the payment of rent or any
terms or conditions hereof.
(b) Tenant shall furnish Landlord with a copy of any sublease or
assignment which it may make immediately after the execution of such
instrument.
Anything to the contrary notwithstanding, Tenant shall have the
right to assign this Lease to or enter into a sublease
-7-
<PAGE>
with, one or more parent, subsidiary or affiliated corporations or with any
other person or entity related to or affiliated with Tenant without any prior
approval of Landlord; provided, however, that Tenant shall promptly furnish to
Landlord a copy of any such assignment or sublease; and provided further, that
no such assignment or sublease shall operate to relieve Tenant of any of its
obligations hereunder.
VI
ADDITIONAL PAYMENTS
As additional rent under this Lease, Tenant shall pay for all gas,
electricity, water, and heat used in and upon the Demised Premises and all sewer
charges made with respect to the Demised Premises.
VII
INDEMNIFICATION OF LANDLORD
Tenant agrees that Tenant will protect, defend, indemnify and save
Landlord harmless against or from any penalty, damage, or charge imposed for any
violation of any laws or ordinances by Tenant, its agents, employees, or anyone
acting at the direction or authorization of Tenant. Tenant further agrees that
Tenant will protect, defend, indemnify, and save Landlord harmless from and
against any and all loss, damage, claims, suits, demands, and causes of action
of any nature whatsoever, (with the exception of (a) those involving conditions
or events existing prior to the date of this Lease or (b) those involving the
acts or omissions of Landlord, its agents, employees
-8-
<PAGE>
invitees, independent contractors or any other person or entity acting at the
direction or authorization of Landlord), judgments and any reasonable out of
pocket expense incidental to the defense thereof, including interest costs
imposed by the court or statute, attorney fees and actual and punitive damages
for personal injury, loss of life, or damage to property sustained or alleged to
have been sustained in or on the Demised Premises or upon the immediately
adjoining sidewalks, streets, or alleyways arising from acts or actionable
omissions of Tenant, its agents, employees, invitees, independent contractors,
or any other person or entity acting at the direction or authorization of
Tenant.
VIII
REPAIRS AND ALTERATIONS
Landlord shall, at Landlord's cost and expense, maintain the
structural components of the building located on the Demised Premises.
Structural components shall include, by illustration and not limitation,
footings, foundations, columns, beams and bar joists. Landlord shall make sure
that the HVAC, electrical and plumbing components are delivered to Tenant in
operable condition. Tenant agrees that it will, at its sole cost and expense
maintain the improvements (except the structural components of the building),
including the parking areas on the Demised Premises and sidewalks located on or
abutting the Demised Premises, in the same condition as on the commencement of
this Lease, ordinary wear and tear excepted. Tenant shall promptly make or cause
to be made all necessary repairs, replacements and alterations, interior and
exterior, including those to the roof,
-9-
<PAGE>
and all necessary decorating or redecorating, repairing or replacing (as
necessary) all plumbing, electrical, heating, ventilating and air conditioning
fixtures and equipment and all other fixtures, appliances and equipment of every
kind and description when necessary to so maintain the improvements pursuant to
the preceding sentence and to take such other action as is necessary in order to
comply with applicable laws and ordinances and the requirements of insurance
carriers. Tenant shall keep the parking area and all sidewalks located on or
immediately abutting the Demised Premises free from ice and snow.
Anything herein to the contrary notwithstanding, Tenant shall have
no responsibility to make Major Modifications (i.e. expenditures during the term
of this Lease in excess of Fifty Thousand Dollars ($50,000.00)) to the Demised
Premised if such Major Modifications are required by new legislation or
governmental regulations becoming effective after the date of this Lease. In the
event that any Major Modifications to the Demised Premises are required by new
legislation or governmental regulations becoming effective after the date of
this Lease, and in the further event that Landlord declines to make such Major
Modifications to the Demised Premises at Landlord's sole cost and expense,
Tenant may, at Tenant's sole option, terminate this Lease by written notice to
Landlord within the thirty (30) day period occurring after Landlord declines to
agree to make said Major Modifications at Landlord's sole cost and expense. Such
termination shall be effective six (6) months after the delivery of such notice
of termination to Landlord. After the expiration
-10-
<PAGE>
of such six (6) month period, if Tenant retains possession of the Demised
Premises, Tenant shall become a tenant from month to month at the Holdover Rate,
as such term is defined in Article XXX of this Lease unless the parties
otherwise agree in writing.
Tenant may, at any time or times during the term hereof, and at its
own cost and expense, make any alterations, replacements, changes and/or
additions to improvements upon the Demised Premises provided:
(a) That the same shall be performed in a first-class workmanlike
manner and shall not weaken or impair the structural strength or lessen
the value or usefulness of the existing improvements on the Demised
Premises.
(b) That before the commencement of any such work, plans and
specifications of the work shall be filed with and approved by Landlord
and by all municipal or other governmental departments or authorities
having jurisdiction thereof, and all work shall be done subject and in
accordance with the requirements of law and local regulations applicable
thereto. Copies of such plans and specifications shall be delivered to the
Landlord for written approval prior to the commencement of such
construction, and if such plans and specifications are materially changed
during the course of construction, copies of such changes shall be
furnished to the Landlord for written approval so that at the completion
of the work the Landlord shall have a full set of the plans and
specifications showing such alterations. Landlord's
-11-
<PAGE>
approval of such plans and specifications shall not be unreasonably
withheld or delayed.
(c) That Tenant shall pay the increased premiums, if any, charged by
the insurance companies carrying insurance policies on said improvements
to cover the additional risk during the course of such work.
(d) Any building, addition or improvement that hereafter may be
affixed, erected, or installed by Tenant upon the premises, or any part
thereof, shall upon expiration hereof become the sole and absolute
property of Landlord, except trade and removable fixtures, equipment, and
furnishings installed by Tenant or any sublessees or assignees that may be
removed so long as any damage to the Demised Premises is repaired upon any
such removal. Tenant, however, shall not be required to pay any additional
rental for use of any such additions or improvements.
Tenant shall defend, indemnify and save and hold harmless Landlord
from all mechanics' and materialmen's liens arising from any work performed or
authorized by Tenant. The foregoing indemnification shall apply to all work in
or on the Demised Premises performed or authorized by Tenant, including the
tenant finish to be performed by Tenant and described in Article IV hereof, but
shall not apply to any work for which Landlord is responsible under the
provisions of this Lease. In the event any such mechanics' or materialmen's lien
is filed and not released within thirty (30) days from the date of filing,
Tenant may contest such lien, but shall, in the event it does contest such
-12-
<PAGE>
lien, deposit with the Landlord or the first mortgagee of the Demised Premises,
as Escrow Agent, security reasonably satisfactory to Landlord.
IX
CARE OF PREMISES
Tenant shall take good care of the Demised Premises, not commit
waste thereon, and shall surrender the Demised Premises at the termination of
this Lease, or any extended term hereof, in as good condition as received,
ordinary wear and tear and damage by casualty excepted. Tenant shall keep the
Demised Premises in good order and repair and free from any nuisance or filth,
and shall keep all boxes, paper, trash, and rubbish in sanitary containers at
all times, and shall not use or permit the use of the same or any part thereof
for any purpose forbidden by law or ordinance now in force or hereafter enacted,
in respect to the use and occupancy of the Demised Premises. Landlord, or its
legal representatives, may at all reasonable business hours, and upon reasonable
advance notice to Tenant, enter upon the.Demised Premises for the purpose of
examining the condition thereof and shall notify Tenant if there are repairs
which are reasonably necessary for the protection and maintenance of the Demised
Premises. If Tenant shall fail to commence any repairs which are reasonably
necessary for the protection or maintenance of the Demised Premises within
ninety (90) days after becoming aware of the need for such repairs (unless
emergency conditions require immediate commencement after notice), Landlord may
make such
-13-
<PAGE>
repairs, and any reasonable expenditures for such work shall be considered
additional rent and shall be payable by Tenant.
In the event that Landlord is not otherwise aware of repairs which
are reasonably necessary to the maintenance of the structural components of the
building, Tenant shall notify Landlord of the structural component in need of
repair. If Landlord shall fail to commence such reasonably necessary repairs
within ninety (90) days after such notice (unless emergency conditions require
immediate commencement after notice), Tenant shall notify any mortgagees of
record of the Demised Premises of the structural component in need of repair. If
such mortgagee(s) (if any) shall fail to commence such reasonably necessary
repairs within thirty (30) days after such notice (unless emergency conditions
require immediate commencement after notice), or if there is no such mortgagee,
Tenant may make such repairs, in compliance with all governmental and building
code requirements, and any reasonable expenditures for such work may be applied
by Tenant as an offset against rents or other sums owed by Tenant to Landlord.
X
DESTRUCTION OF IMPROVEMENTS
Should the Demised Premises be destroyed by fire, the elements, or
otherwise in whole or in part, Tenant shall repair and restore said damage with
all reasonable speed and promptness, and insurance proceeds shall be applied
toward said repair and restoration. The Tenant's obligation to repair and
restore said damage shall not exceed the aggregate amount of insurance
-14-
<PAGE>
proceeds distributed to Tenant and resulting from said damage. Tenant shall have
the right to cancel this Lease in the event that proceeds of insurance actually
distributed to Tenant for rebuilding are insufficient to restore the Demised
Premises to a condition which is substantially the same as that prior to the
casualty, unless said insufficiency is the result of Tenant's failure to
maintain insurance required hereunder or the failure of Tenant to comply with
the terms of said insurance. In the event that the repairs or restoration cannot
be completed within one year or delay is caused in such repair or restoration
because of fire, flood, strikes, unavailability of equipment, or other acts
beyond the control of Tenant or its contractors or subcontractors, then the time
to make such repairs or restorations shall be extended, provided, however, that
with such extension the total time for such repairs or restorations shall not
exceed two years. Rental payments hereunder shall not abate during the period
when the Demised Premises are untenantable, except to the extent Landlord shall
receive payments under the rent insurance provided for herein.
XI
DEFAULTS BY TENANT
In the event of the failure on the part of the Tenant to pay any
installments of rent as above set out, or to pay real estate taxes as herein
requested, as and when same become due and payable, or to provide liability
insurance or fire and extended coverage insurance, as herein required, or
failure of Tenant promptly, faithfully and materially to keep and perform each
and
-15-
<PAGE>
every covenant, agreement, and stipulation herein contained on the part of the
Tenant to be kept and performed, this Lease or Tenant's right to possession,
shall be terminated, at the option of the Landlord.
Any termination of Tenant's right to possession as herein provided,
shall not relieve Tenant from its obligations to make the monthly payments of
rent.herein reserved, at the times and in the manner provided. In such event,
Landlord may relet the Demised Premises, as agent for and in the name of Tenant,
at any rental and any term or terms readily obtainable, applying the proceeds
thereof, first, to the payment of such reasonable expenses as Landlord may incur
in reletting, including alterations, commissions and fees payable to third
parties, additions, etc., second, to the payment of said rent as the same may
from time to time become due, and third, towards the fulfillment of the other
covenants and agreements of the Tenant herein contained, and the remainder, if
any, shall be held by Landlord and applied to the payment of future rent or
future sums payable under the Lease as the same may become due and payable
hereunder. Should Landlord recover or take possession of the Demised Premises
and be unable to relet the same so as to realize a sum equal to the rent hereby
reserved, Tenant shall pay to Landlord any and all loss or differences for the
residue of the term, the same to be calculated and paid monthly as such sum
shall become due and payable under the Lease. Or in the event of any termination
of this Lease, Landlord shall be entitled to recover the then present value of
the difference between the
-16-
<PAGE>
rental agreed to be paid herein and the then fair rental value of the premises,
together with other damages provided for by law, said present value to be
determined by reference to the rate of interest publicly announced by The
Boatmen's National Bank of St. Louis from time to time as its Corporate Base
Rate. Landlord is hereby given the right to show the Demised Premises to persons
who may wish to lease or buy during the last six months of the term or extended
term hereof unless a renewal option has been duly exercised by Tenant. Nothing
mentioned in this paragraph shall be construed to waive Landlord's right to
cancel this Lease in the event of any breach on the part of Tenant, all of which
rights of cancellation are herein specifically reserved by Landlord.
The parties to this Lease agree that the Landlord shall have an
affirmative duty to mitigate any damages claimed.pursuant to the provisions of
this Lease, which duty shall be fulfilled in the manner provided by the laws of
the State of Missouri.
Prior to the termination, Landlord shall give to Tenant a notice in
writing thirty (30) days, or such longer period as provided in this Lease, prior
thereto in the manner provided by Article XIII hereof, during which time Tenant
may cure such default by satisfying the stated grounds of termination. In the
event, however, that the notice given by the Landlord is because of a failure of
Tenant to pay rent, real estate taxes, insurance premiums, or other additional
rent under this Lease, then in such event the notice in writing to be given to
Tenant by Landlord shall be ten (10) days instead of thirty (30) days.
-17-
<PAGE>
In the event said default or defaults (except for defaults which can
be cured by the payment of money or except for bankruptcy or insolvency of
Tenant) are of such a nature that said default or defaults cannot be cured
within thirty (30) days, Tenant shall have a reasonable time to cure such
default or defaults, provided that Tenant commences within thirty (30) days to
cure said default or defaults and continues with due and reasonable diligence to
completion whatever may be necessary to cure said default or defaults.
XII
WAIVER
No waiver of any breach, by acceptance of rent or otherwise, shall
waive any subsequent cause of breach or breach of any condition of this Lease,
nor shall any consent by Landlord to any assignment or subletting of the Demised
Premises, or any part thereof, be held to waive or release any assignee or
sublessee from any of the conditions or covenants herein contained, but every
such assignee and sublessee shall be expressly subject thereto.
XIII
NOTICE
Any notice required to be given by Landlord to Tenant for any breach
of covenant of this Lease, or otherwise, shall be served upon Tenant, by United
States certified or registered mail postage prepaid or by Federal Express or
similar messenger service addressed to Tenant at 1100 Corporate Square Drive,
St.
-18-
<PAGE>
Louis, Missouri 63132, or at such other address as Tenant may furnish to
Landlord in writing from time to time. All notices required to be given by
Tenant to Landlord shall be mailed by United States registered or certified mail
postage prepaid or by Federal Express or similar messenger service addressed to
Landlord at 355 Lexington Avenue, New York, New York 10017, or at such other
address as Landlord may furnish to Tenant in writing from time to time.
XIV
DEFINITIONS
Whenever the words "Landlord" and "Tenant" are used herein, they
shall be construed to include their successors, assigns, or legal
representatives; the words "Landlord" -and "Tenant" shall include singular and
plural, individual or corporation, subject always to the restrictions herein
contained as to subletting or assignment of this Lease.
XV
CONDEMNATION
(a) In the event the whole of the Demised Premises shall be
condemned for public use, this Lease shall terminate on the date title vests in
the condemnor.
(b) In the event that a portion of the Demised Premises shall be
condemned for public use, and (i) no part of the buildings on the Demised
Premises shall be included in the portion condemned, and (ii) an amount less
than or equal to 5% of the parking areas on the Demised Premises shall be
included in
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<PAGE>
the portion condemned, then in such case this Lease shall remain in full force
and effect.
(c) In the event that a portion of the Demised Premises shall be
condemned for public use, and (i) any part of the buildings on the Demised
Premises shall be included in the portion condemned, or (ii) more than 5% of the
parking area on the Demised Premises shall be included in the portion condemned;
then in any such event the Tenant shall have the option of either terminating
this Lease by giving the Landlord thirty (30) days written notice of such
termination within fifteen (15) days after title to the part of the Demised
Premises condemned vests in the condemnor, or (ii) exercising an option to
purchase the Demised Premises by giving Landlord thirty (30) days written notice
of such election within (15) days after title to the part of the Demised
Premises condemned vests in the condemnor. Tenant's option to purchase the
Demised Premises in the event that a portion of the Demised Premises shall be
condemned for public use shall be exercisable for a cash purchase price of: (i)
during the first three years of the term of the Lease, Three Million Seven
Hundred Thousand Dollars ($3,700,000.00) less (u) any claims Tenant has against
Landlord pursuant to the terms of this Lease and (v) amounts awarded pursuant to
the condemnation of the Demised Premises or portion thereof; or (ii) during the
remaining term or extended term of the Lease, the sum of (w) Three Million Seven
Hundred Thousand Dollars plus (x) Three Million Seven Hundred Thousand Dollars
($3,700,000.00) multiplied by 90% of the percentage increase, if any, in the
Cost of Living in the United
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States as reflected in the Consumer Price Index occurring after the third
anniversary of the commencement of the term of this Lease and prior to the date
of the taking minus (y) any claims Tenant has against Landlord pursuant to the
terms of this Lease and (z) amounts awarded to Landlord pursuant to the
condemnation of the Demised Premises or portion thereof. The Consumer Price
Index shall be measured as described in Article XVIII(B) hereof. The notice
delivered to Landlord by Tenant with regard to the exercise of such option must
contain a stipulated closing date no earlier than thirty (30 days from said
notice nor later than ninety (90) days from said notice, time being of the
essence. other than as expressly modified in this Article XV, the terms and
conditions of the exercise of such option to purchase shall be in accordance
with the provisions of Article XXI hereof.
(d) If a portion of the Demised Premises shall be condemned for
public use, and this Lease shall not terminate, the Landlord shall, at
Landlord's cost and expense, restore the remaining portion of the parking lot
and building as nearly as possible to the condition in which the parking lot and
building were prior to such condemnation.
(e) In the event all or part of the Demised Premises shall be
condemned for public use, Tenant shall first be entitled to receive the
unamortized portion of its leasehold improvements, which leasehold improvements
shall be amortized on a straight line basis over twenty (20) years, and Landlord
shall next be entitled to receive the sum of (a) Three Million Seven Hundred
Thousand Dollars plus (b) Three Million Seven Hundred Thousand
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Dollars ($3,700,000.00) multiplied by 90% of the percentage of increase, if any,
in the Cost of Living in the United States as reflected in the Consumer Price
Index occurring after the third anniversary of the commencement of the term of
this Lease and the date of the taking. The Consumer Price Index shall be
measured as described in Article XVIII(B) hereof. After Tenant has received the
unamortized value of its leasehold improvements and Landlord has received in
full its aforesaid sums, Tenant shall receive the value, if any, of its
leasehold estate. If a portion of the Demised Premises shall be so taken and
Tenant shall not exercise its option to terminate this Lease or if such taking
shall not give rise to such an option to terminate, as aforesaid, then this
Lease shall terminate on the taking date only as to that portion of the Demised
Premises so taken, and shall remain in force and effect with respect to that
portion of the Demised Premises not so taken and the rent and other charges
payable by Tenant to Landlord hereunder shall be abated and reduced in
proportion to the value of the Demised Premises before and after the
condemnation. Tenant shall also be permitted to make a separate claim for its
trade fixtures, inventory, moving expenses, and business interruption, if such a
claim is permitted by law.
XVI
INSURANCE
Tenant at its cost during the term hereof shall keep the aforesaid
building insured against loss by fire and all standard extended coverage,
including, without limitation,
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earthquake in companies reasonably acceptable to Landlord in an amount
reasonably acceptable to the parties hereto, but in no event less than the
purchase price under the Tenant's option to purchase the Demised Premises
described in Article XV hereof, with rent loss insurance coverage for one year's
fixed rental and additional rental, said policies to be in the name of Landlord
and with a loss payable clause in favor of any first fee mortgagee, with loss
thereunder payable to Landlord, Tenant and the first fee mortgagee as their
respective interests may appear. The original policy of insurance shall be
delivered to Landlord or the first fee mortgagee.
Tenant shall provide liability insurance coverage protection with
Landlord and Tenant named therein as insured parties with limits of at least
$2,000,000.00 combined single limit for bodily injury and property damage and
$5,000,000.00 per occurrence for personal injury.
All of the insurance to be furnished and provided in this paragraph
shall contain riders or endorsements if available providing that such policies
may not be canceled or terminated without first giving thirty (30) days notice
to Landlord and its first mortgagee if the first mortgagee is covered by such
insurance.
XVII
TAXES
After the Rental Accrual Date, Tenant shall pay all real property
taxes and assessments (general and special), and subdivision trustee fees levied
during the term hereof by the
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state, county, and municipality upon the leased land, building, and other
improvements constituting the Demised Premises, and Tenant shall pay all such
taxes, assessments and subdivision trustee fees before same become delinquent
and to the proper authorities. Tenant shall have the right to contest the amount
of any such taxes, assessments or subdivision trustee fees (and Landlord shall
use all reasonable efforts to cooperate with Tenant in such contest, provided,
however, that such cooperation will be at no cost to Landlord) upon (i) Tenant's
deposit of such amounts in an escrow account for the benefit of the Landlord,
(ii) Tenant's payment of such amounts to the proper authorities under protest,
or (iii) furnishing a bank letter of credit or other form of security reasonably
satisfactory to Landlord.
If this Lease shall begin on a date other than January 1 or
terminate on a day other than the last day of a calendar year, the amount of
real property taxes, assessments and subdivision trustee fees to be paid by and
Tenant and applicable to the calendar year in which such commencement or
termination shall occur shall be prorated on the basis which the number of days
from the commencement of such calendar year to and including such termination
date bears to three hundred sixty five (365).
XVIII
OPTIONS OF TENANT TO RENEW LEASE
Provided that this Lease is in full force and effect and the Tenant
is not in default under this Lease, the Tenant shall have four (4) successive
options to extend this Lease. Each such renewal option shall be for a renewal
term of five (5)
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years, and shall be subject to all terms and conditions of this Lease and at the
rental as hereinafter specified. In order to exercise each such renewal option,
the Tenant must give the Landlord written notice of the Tenant's election to
extend the term of this Lease, said notice to be given at least six (6) months
prior to the expiration of the existing term or existing renewal term, as the
case may be. In the event that for any reason this Lease is terminated during
the original term or any renewal term, all remaining renewal options shall
thereby lapse. The annual yearly rental (i.e., all rental payable hereunder
other than additional rental payable pursuant to the provisions of this Lease)
for the renewal periods shall be the sum of (a) and (b) below:
(a) The annual yearly rental then payable hereunder for the existing
term or existing renewal term, as the case may be, and
(b) The amount determined in (a) above multiplied by ninety percent
(90%) of the percentage of increase, if any, in the Cost of Living in the
United States as reflected in the Consumer Price Index of the United
States Department of Labor's Bureau of Labor Statistics for Urban
Consumers (U.S. City Average Base 1982-1984 = 100) (i) in the case of the
first renewal option, from the first month of the sixth year of the Lease
to the last month of the tenth year of the Lease, and (ii) in the case of
the second, third and fourth renewal options, from the first month of the
renewal term then expiring to the last month of the term then expiring.
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If said Consumer Price Index shall no longer be published, then another
index generally recognized as authoritative shall be substituted by
agreement, and if the parties shall not agree, such substituted index
shall be selected by the Chief Judge of the United States District Court
for the Eastern District of Missouri upon,application of either party. In
any event, the base used by any new index or any new base year employed in
the Consumer Price Index shall be reconciled to the base year employed in
the Consumer Price Index (1982-1984).
In no event shall the annual yearly rental for any renewal period be
less than the annual yearly rental payable under this Lease for the last year of
the initial term of this Lease, nor, for the purposes of the calculation
described in (b) above, shall such increase, if any, in said Consumer Price
Index be more than twenty percent (20%). Also, there shall be additional rent
payable by reason of the provisions of this Lease.
XIX
ENVIRONMENTAL PROVISIONS
Compliance with Laws. Subject to the provisions of Article VIII
hereof, Tenant represents and warrants that during the term of this Lease, it
will comply with all federal, state, and local environmental, safety and health
laws, statutes, ordinances, regulations, rules, guidances, and orders (the
"Environmental Laws") and will maintain all necessary permits, approvals, and
licenses and has made all necessary registrations
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and notifications in connection with the operation of the leased property.
Notwithstanding anything to the contrary herein, Tenant shall have no obligation
to correct, or to insure the compliance with said Environmental Laws of,
conditions existing on the Demised Premises as of the date of this Lease which
have become violations of said Environmental Laws during the term of this Lease
without any action or culpable omission by Tenant, its agents, employees,
contractors, invitees or any other person or entity acting at the direction or
authorization of Tenant.
Restriction on Certain Uses. Tenant shall not cause or permit the
Demised Premises to be used for any business or activity involving the
generation, storage, use, treatment, transportation, disposal or distribution of
any pollutant, contaminant, hazardous substance or material, hazardous chemical,
toxic substance, hazardous waste, infectious or medical waste (including but not
limited to those types of medical wastes identified in 42 U.S.C. 6992a(a)(1)
through (11)), solid waste, radioactive material, hazardous chemical, toxic
chemical, extremely hazardous substance, petroleum, including crude oil or any
fraction thereof, or asbestos-containing material (the "Hazardous Materials")
without the prior written consent of the Landlord. Landlord hereby consents to
Tenant's use of the Demised Premises for the purposes and processes currently
conducted by Tenant in accordance with applicable Environmental Law at Tenant's
facility presently located in Camarillo, California, which purposes and
processes are more fully set forth on Exhibit C to this Lease.
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Notification. Tenant shall give Landlord immediate notice of any
release of Hazardous Materials on, under or from the Demised Premises which is
in violation of, or is required to be reported under any Environmental Law, and
shall give Landlord written notice within a reasonable time, but no later than
ten (10) days after Tenant learns or first has reason to believe that any
report, notice, action, claim, or complaint has been made or threatened by any
person, entity, or agency concerning the presence, use, release, or disposal of
any Hazardous Materials on, under or from the Demised Premises.
Inspection of Demised Premises. Landlord may from time to time, upon
reasonable prior notice to Tenant, conduct or engage an independent contractor
to conduct an "Environmental Audit" of the Demised Premises. The Environmental
Audit may include: (a) a physical inspection of the Demised Premises; (b)
sampling and analysis of soil, groundwater, surface waters, or any Hazardous
Materials; and (c) a review of Tenant's compliance with all Environmental Laws
including all documents related thereto. All costs and expenses incurred by
Landlord in connection with the Environmental Audit shall be paid by Landlord,
except where such Environmental Audit reveals that the Demised Premises or any
surrounding property has become contaminated due to operations or activities
attributable to Tenant, then all of the costs and expense of such audit shall be
paid by Tenant. Landlord shall provide Tenant with the opportunity to verify the
presence of any contamination discovered by Landlord's Environmental Audit prior
to the time
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(i) Tenant is required to reimburse Landlord as provided above and (ii) that any
disclosure of such contamination is made to third parties (other than such
disclosures as may be required by law).
Remediation. Upon identification of environmental contamination or
the unpermitted release of Hazardous Materials on, under or from the Demised
Premises which was caused by the Tenant, its agents, employees, contractors,
subcontractors, or invitees, and not attributable to an event or condition
existing prior to the commencement of this Lease, Tenant will undertake, at its
own expense, any and all repair or remediation necessary to comply with all
Environmental Laws and to satisfy all appropriate governmental agencies. Should
Tenant fail to implement such repair or remediation, then Landlord shall have
the right, but not the obligation, to undertake such repair or remediation, and
to recover all associated costs and expenses properly attributable to Tenant,
and not to other potentially responsible parties, from Tenant.
Return of Property in uncontaminated State. Upon the expiration or
earlier termination of the Lease, Tenant shall (with respect to matters (i)
which are attributable to acts or omissions of Tenant, its agents, employees,
invitees, independent contractors, or any other person or entity acting at the
direction or authorization of Tenant, and (ii) which occurred after the
commencement of the term of this Lease, and (iii) which are not attributable to
events or conditions existing or occurring prior to the execution of this
Lease): (a) cause all
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Hazardous Materials owned, stored, or existing on the Demised Premises to be
removed and disposed of in accordance with all applicable Environmental Laws;
and b) remove any underground storage tanks or other containers installed or
used by Tenant to store any Hazardous Materials on the Demised Premises, and
repair any damage to the Demised Premises caused by such a removal.
Indemnification. Tenant agrees to indemnify, defend, and hold
harmless Landlord and its agents, from and against any claims, demands,
penalties, fines, liabilities, settlements, losses, damages, interest,
penalties, costs, response costs or expenses (including, but not limited to,
fees for attorneys, consultants, and other experts) of whatever kind or nature
(the "Losses"), arising out of or in any way related to a breach of any or all
of the foregoing covenants. This indemnification shall not apply where the
Losses are caused by the negligence or acts or omissions of Landlord, its
agents, employees, contractors, or invitees or where the Losses are attributable
to events or conditions existing prior to the commencement of the term of this
Lease. This provision shall be in addition to any other obligations and
liabilities Tenant may have to Landlord at law or equity and shall survive the
termination of this Lease. The foregoing indemnification shall apply regardless
of the basis of liability or legal principle involved including, but not limited
to claims based upon strict liability. Anything to the contrary herein
notwithstanding, Tenant shall have no liability under this Lease for Losses
arising from the condition of the
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Demised Premises as of or prior to the date of the commencement of the Lease.
Preexisting Conditions. To the best knowledge and belief of Landlord
and in reliance on a Phase I environmental assessment of the Demised Premises as
presently being updated, a copy of which will be provided to Tenant promptly
upon receipt, Landlord is not and has not ever been in violation of any
Environmental Laws affecting the Demised Premises. Landlord agrees to indemnify,
defend and hold harmless Tenant and its agents, employees, invitees, and
independent contractors from and against any Losses incurred by Tenant relative
to the condition of the Demised Premises which are caused by events or
conditions existing prior to the date of this Lease. This provision shall be in
addition to any other obligations and liabilities Landlord may have to Tenant at
law or equity and shall survive the termination of this Lease. The foregoing
indemnification shall apply regardless of the basis of liability or legal
principle involved including, but not limited to claims based upon strict
liability.
XX
INSOLVENCY
Tenant agrees that if at any time a petition under the federal
Bankruptcy Code, as may be amended from time to time (hereinafter referred to as
the "Bankruptcy Code"), or any state bankruptcy or insolvency laws, be filed by
or on behalf of Tenant or against Tenant and remain undismissed for a period of
sixty (60) days after service thereof, such event shall constitute a
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default under this Lease and Landlord shall be entitled to immediately exercise
such rights and remedies it may elect under this Lease (without regard to the
cure periods provided thereunder) or applicable law. Tenant further agrees, that
in the event Tenant's trustee or Tenant, as debtor-in-possession, rejects or
otherwise terminates this Lease pursuant to the Bankruptcy Code, Landlord shall
be entitled to possession of the Demised Premises immediately without further
obligation to Tenant or Tenant's trustee, and this Lease shall terminate, but
Landlord's right to be compensated for damages (including, without limitation,
liquidated damages pursuant to the terms of this Lease) in any such proceeding
shall survive.
In addition to the occurrence of the filing of a petition under the
Bankruptcy Code or state bankruptcy or insolvency laws by or on behalf of Tenant
or against Tenant, the occurrence of any of the following shall constitute a
default under this Lease and Landlord shall be entitled to exercise such rights
and remedies it may elect under this Lease (after expiration of applicable cure
periods, if any, provided thereunder) or other applicable law: (a) a general
assignment for the benefit of creditors; (b) the appointment under applicable
state law of a trustee or receiver to take possession of substantially all of
Tenant's assets or of Tenant's interest in this Lease; (c) the attachment, or
other judicial seizure of substantially all of Tenant's assets or of Tenant's
interest in this Lease; or (d) insolvency of the Tenant. Anything to the
contrary herein notwithstanding, Tenant shall not be deemed to be
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in default under the foregoing provision with respect to any actions against or
involving Tenant of an involuntary nature until the expiration of sixty (60)
days after the commencement of such action and Tenant's failure to cause the
same to be dismissed within such period.
As used in this Article IX, the term "Tenant" shall include the
Tenant named herein, as well as any assignee or subtenant, and any surety or
other guarantor of this Lease.
Tenant hereby acknowledges and agrees that if Tenant obtains an
order from a Court authorizing the assumption of this Lease pursuant to Section
365 of the Bankruptcy Code, such assumption shall be of the Lease in its
entirety and Tenant's rights to assign the Lease shall be governed solely by
this Lease. Accordingly, Tenant hereby irrevocably waives any right to assign
the Lease, subsequent to assumption of the Lease, pursuant to Section 365(f) of
the Bankruptcy Code as it presently exists (as may be amended from time to time)
or any similar provision under federal or state law.
XXI
TENANT'S OPTION TO PURCHASE
Tenant shall have the right, at Tenant's option, to elect to
purchase the Demised Premises, during the thirty (30) day period following the
third anniversary date of this Lease, for a cash purchase price of Three Million
Seven Hundred Thousand Dollars ($3,700,000.00) less (i) any claims Tenant has
against Landlord pursuant to the terms of this Lease and (ii) any awards
received by Landlord resulting from the condemnation of part of
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the Demised Premises. In order to exercise said option, Tenant must give to
Landlord written notice of said exercise within said thirty (30) day period and
said notice must contain a stipulated closing date no earlier than thirty (30)
days from said notice nor later than ninety (90) days from said notice, time
being of the essence. Payment of the purchase price shall be by Bank Cashier's
Check drawn on a St. Louis, Missouri area bank or by Federal Reserve wire
transfer. Adjustments for rent, additional rent, and taxes shall be made in
accordance with closing practices of the Real Estate Board of Metropolitan St.
Louis. Title shall be conveyed by Special Warranty Deed free and clear of all
mortgage encumbrances, and subject only to (i) the exceptions listed on Exhibit
D hereto, (ii) normal utility easements not interfering with the reasonable use
or value of the Demised Premises, and (iii) other exceptions to which Tenant
contributed or consented affecting the title to the Demised Premises. This Lease
shall be automatically terminated upon closing of said sale. In the event Tenant
fails to exercise said option, said option shall lapse and terminate and be of
no further force and effect. In the event that Tenant exercises said option and
fails to close, this Lease shall remain in full force and effect, and Tenant
shall be liable for specific performance and damages for breach of its
obligation to purchase.
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XXII
TENANT'S RIGHT OF FIRST REFUSAL
During the term of this Lease, in the event that Landlord should
from time to time receive any bona fide offer to purchase the Demised Premises
which Landlord desires to accept, Landlord shall advise Tenant in writing
(within ten (10) days of Landlord's intent to accept such offer) of the price,
terms and conditions embodied in said offer. Within thirty (30) days from date
of said notice, Tenant shall have the right to elect to purchase the Demised
Premises at the same price and upon the same terms and conditions as those
embodied in said offer, and Tenant may exercise said right by giving to Landlord
a written notice of exercise within said thirty (30) day period. Said acceptance
must be accompanied by a Bank Cashier's Check drawn on a St. Louis, Missouri
area bank for any earnest money deposit applicable to said offer. Upon any such
acceptance, Tenant shall be bound to complete said purchase upon the terms and
conditions of said offer except those specifically applicable only to the
identity of the original offeror.
In the event Tenant does not exercise Tenant's aforesaid right of
first refusal, Landlord shall be free to accept the offer and complete the sale
at the price and upon the terms and conditions set forth in Landlord's aforesaid
notice to Tenant, and Tenant's right of first refusal shall be terminated and
extinguished, and shall not apply to any subsequent sales of the Demised
Premises. In the event that Tenant does not exercise Tenant's right of first
refusal with respect to any offer, and,
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for any reason, the sale at the same price and on the same terms and conditions
is not consummated, Tenant shall have the same right of first refusal with
respect to subsequent offers to Landlord.
This right of first refusal shall not prohibit any financing secured
by mortgage or deed of trust nor shall it apply to any judicial or nonjudicial
sale conducted under any mortgages or deeds of trust, but said right of first
refusal shall survive any judicial or nonjudicial sale conducted under any
mortgages or deeds of trust to which this Lease is prior and therefore said
right of first refusal shall be applicable to transactions following such
judicial or nonjudicial foreclosure of any such mortgage or deed of trust to
which this Lease is prior.
Conveyance upon exercise of said right of first refusal shall be by
Special Warranty Deed, subject only to items of record to which a deed would be
subject pursuant to the terms of Article XXI of this Lease. This Lease shall
terminate upon closing of any sale to Tenant pursuant to said first right of
refusal. In the event Tenant exercises said right of first refusal and Tenant
fails to close, Tenant shall be subject to specific performance and damages for
breach of its purchase obligation, and this Lease shall remain in full force and
effect. In the event Tenant exercises said right of first refusal and Landlord
fails to close, Landlord shall be subject to specific performance and damages
for breach of its sale obligation.
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XXIII
NET LEASE
Except for Landlord's obligations to maintain the structural
components of the building on the Demised Premises and to make sure that the
HVAC, electrical and plumbing components are delivered to Tenant in operable
condition, all as provided in Article VIII hereof and except for the initial
work to be done by Landlord pursuant to Article IV hereof, this is a net Lease
and except as set forth in this Lease, Tenant, during the term of this Lease, is
to do all things and make all payments connected with or arising out of any
occupation of the Demised Premises and its appurtenances, and, except as herein
stated, under no condition is Landlord to be required to do or perform any act
or acts or be subject to any liabilities with respect to the Demised Premises or
any part thereof or its appurtenances. Landlord shall have the right to (but
shall not be obligated to) pay any taxes on the Demised Premises or any utility
or other charges against the Demised Premises and any other debts incurred by
Tenant with respect to the Demised Premises or the use or occupation of the
Demised Premises which Tenant shall fail to pay when due, and to obtain
appropriate insurance coverage if Tenant shall fail to provide Landlord with
evidence that such insurance is in effect as required by this lease, and to make
repairs, if Tenant shall fail to do so as required by this Lease, and the amount
of any payment by Landlord with respect to items which are the responsibility of
Tenant under this Lease shall be due
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immediately by Tenant to Landlord as additional rental payments under this
Lease.
XXIV
NOTICES TO MORTGAGEES
Tenant agrees to give any Mortgagees and/or Deed of Trust Holders,
by United States Registered Mail postage prepaid, a copy of any notice of
default served upon the Landlord, provided that prior to such notice Tenant has
been notified, in writing (by way of Notice of Assignment of Rents and Leases,
or otherwise) of the address of such Mortgagees and/or Deed of Trust Holders.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided for in this Lease, or if no such period is provided,
then within thirty (30) days, then the Mortgagees and/or Deed of Trust Holders
shall have an additional thirty (30) days within which to cure such default or
if such default cannot be cured within that time, then such additional time as
may be necessary if within such thirty (30) days, any Mortgagee and/or Deed of
Trust Holder has commenced and is diligently pursuing the remedies necessary to
cure such default (including but not limited to commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this Lease shall
not be terminated while such remedies are being so diligently pursued. In no
event shall more than sixty (60) days be permitted for said cure.
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XXV
BROKERAGE
The parties acknowledge and represent and warrant to each other that
the only brokers involved in this transaction are Nooney Krombach acting on
behalf of the Landlord and Midland Group acting on behalf of Tenant. Landlord
hereby agrees to pay the leasing commission of Nooney Krombach (and the sales
commission, if the Demised Premises are sold to Tenant pursuant to the options
to purchase or right of first refusal contained herein) in accordance with the
Listing Contract dated January 13, 1992, and Nooney Krombach shall share said
commissions) with Midland Group in accordance with the practices of the Real
Estate Board of Metropolitan St. Louis. Each party hereto hereby agrees to
indemnify and hold harmless the other for all claims for real estate commissions
and finders' fees (other than those of Nooney Krombach and Midland Group)
arising from this transaction and the conduct of the indemnifying party.
XXVI
INDEMNIFICATION OF TENANT
Landlord agrees that Landlord will protect, defend, indemnify and
save Tenant harmless against any and all loss or damage of any nature
whatsoever, including attorneys fees, arising in connection with the financing
statements or mechanics liens listed on Exhibit E to this Lease. In the event
that Tenant shall be subject to any loss or damage of any nature whatsoever,
including attorneys fees, arising in connection with such financing statements
or mechanics liens, Tenant shall notify
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Landlord of the amount of such loss or damage, including attorneys fees. If
Landlord shall fail to pay such amounts to Tenant within ninety (90) days after
such notice, Tenant shall notify any mortgagees of record of the Demised
Premises of the amount of such loss or damage, including attorneys fees. If such
mortgagee(s), if any, shall fail to pay such amounts to Tenant within thirty
(30) days after such notice, Tenant may apply such amounts as an offset against
rents or other sums owed by Tenant to Landlord under this Lease.
Landlord agrees that Landlord will protect, defend, indemnify and
save Tenant, its agents, employees, invitees and independent contractors
harmless against any and all loss, damage, claims, suits, demands, and causes of
action of any nature whatsoever, judgments and any expense incidental to the
defense thereof, including attorney fees, arising in connection with the action
or suit of Landlord's partners or any other person or entity and relative to the
actions or omissions of Landlord or involving Landlord, other than litigation by
Landlord or to which Landlord is a party relating to a breach or breaches of any
provisions of this Lease by Tenant and other than claims for personal injury or
property damage by third parties occurring in or about the Demised Premises
after the date hereof.
XXVII
QUIET ENJOYMENT
Provided that and for so long as Tenant pays all rent and additional
payments as and when due hereunder, materially complies with and observes all of
the terms, conditions and
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provisions of this Lease, and fulfills all of Tenant's obligations of
performance hereunder, Landlord covenants that Tenant shall have peaceable and
quiet enjoyment of the Demised Premised during the term of this Lease. Landlord
agrees to notify Tenant within thirty (30) days of assignment if Landlord
assigns its interest under this Lease.
XXVIII
RECORDATION OF MEMORANDUM OF LEASE
Tenant shall have the right to record in the real property records
of St. Louis County, Missouri, a memorandum of lease regarding this Lease and
the related options to purchase, which memorandum shall be prepared by Tenant at
Tenant's sole cost and expense and shall be in form and substance reasonably
satisfactory to Landlord.
XXIX
INSPECTION OF PROPERTY AND FINANCIAL INFORMATION
The effectiveness of this Lease is expressly conditioned upon the
following, time being of the essence with respect to the performance and/or
satisfaction of such conditions:
(a) Within fifteen (15) days of the last to occur of (i) the
delivery of the updated Phase I environmental assessment regarding the
Demised Premises described in Article XIX hereof and (ii) the delivery to
Tenant of possession of the Demised Premises, (which date is referred to
herein as the "Environmental Marking Date"), Tenant or
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<PAGE>
Tenant's agent shall perform a physical inspection of the Demised
Premises, including a review of a Phase I environmental assessment
provided to Tenant by Landlord, the results of which shall be reasonably
satisfactory to the Tenant.
(b) Within forty five (45) days of the Environmental Marking Date,
Tenant or Tenant's agent shall complete a Phase II environmental
assessment of the Demised Premises, the results of which shall be
reasonably satisfactory to Tenant. The costs of such Phase II
environmental assessment shall be the sole responsibility of Tenant unless
the results of such Phase II environmental assessment cause Tenant to
terminate the transactions contemplated in this Lease, in which case the
reasonable costs of such Phase II environmental assessment, which costs
shall not exceed Twenty Five Thousand Dollars ($25,000.00) in the
aggregate, shall be paid by Landlord.
(c) Within fifteen (15) days of the date of this Lease, review by
the Landlord of the Tenant's balance sheet and income statement for the
most recent two (2) fiscal years, prepared in accordance with generally
accepted accounting principles, and such other financial information as
Landlord shall reasonably request in writing, the results of which review
shall be reasonably satisfactory to Landlord.
(d) Within fifteen (15) days of the date of this Lease, review by
the Tenant of the Landlord's balance sheet
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<PAGE>
and income statement for the Landlord's most recent two (2) fiscal years,,
prepared in accordance with generally accepted accounting principles, and
such other financial information as Tenant shall reasonably request in
writing, the results of which review shall be reasonably satisfactory to
Tenant.
Failure by either party hereto to satisfy any or all of the
conditions described above within the time allocated by the terms of this Lease
shall be deemed a waiver of such conditions.
XXX
HOLDING OVER
If, without objection by Landlord, and absent contrary agreement
between the parties, Tenant holds possession of the Demised Premises after
expiration of the term of this Lease, Tenant shall become a tenant from month to
month upon the terms specified herein but at a monthly rental equivalent to one
hundred fifty percent (150%) of the then prevailing monthly rental paid by
Tenant at the expiration of the term of this Lease,, payable in advance on or
before the first day of each month. Each party shall give the other notice at
least one month prior to the date of termination of such monthly tenancy of its
intention to terminate such tenancy.
-43-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered
to each other this Lease as of the day and year first above written.
NET 2 L.P.
(a Delaware Limited Partnership)
By: LEPERCQ NET 2 L.P.
(a Delaware Limited
Partnership)
general partner
By: LEPERCQ NET 2, Inc.
(a Delaware corporation)
general partner
By: _________________________
Title:
Landlord
EVEREST & JENNINGS, INC., a
California
corporation
By: _____________________________
Title
Tenant
-44-
<PAGE>
EXHIBIT A
Lot 2450 of Earth City Plat 21, a Subdivision in St. Louis County, Missouri,
according to the plat thereof recorded in Plat Book 221 pages 19 and 20, being
more particularly described as follows: Beginning at a point in the North line
of Rider Trail (formerly Riverglen Drive), 44 feet wide, said point being the
Southwest corner of said Lot 2450; thence North 24 degrees 30 minutes 37 seconds
East 891.24 feet along the West line of said Lot 2450 to the Northwest corner
thereof; thence South 58 degrees 32 minutes 30 seconds East, 503.91 feet along
the Northeast line of said Lot 2450 to the Northeast corner thereof; thence
South 24 degrees 31 minutes 28 seconds West 830.37 feet along the East line of
said Lot 2450 to a point in said North line of Rider Trail (formerly Riverglen
Drive); thence North 65 degrees 28 minutes 50 seconds West 500.00 feet along
said North line of Rider Trail (formerly Riverglen Drive) to the point of
beginning.
<PAGE>
EXHIBIT C
Tenant plans to utilize the Demised Premises for the manufacturing,
assembling and maintenance of durable hospital equipment. Tenant's operation
shall include the cutting, stamping, polishing, bending, welding and assembly of
steel. Any chrome and paint work relative to the steel equipment shall not be
done on the Demised Premises. Tenant's operation shall also include the
utilization of materials incidental to the processes described above.
<PAGE>
EXHIBIT D
1. Building lines and easements established by the recorded plat, and
covenants and restrictions, including a provision for Subdivision
Assessments, contained in the instrument recorded in Book 6597 page 1631
and Book 6994 pages 59 and 86 and amended by instrument recorded in Book
7170 page 1579 and page 1582.
2. Flood Control of Indenture, according to instrument recorded in Book 6597
page 1685 and amended by instrument recorded in Book 7143 page 35.
3. Development Plan of Earth City, according to plat recorded in Plat Book
140 page 32 and as amended by Plats recorded in Plat Book 141 page 90,
Plat Book 145 page 16 and Plat Book 221 page 63, together with Ordinance
of St. Louis County, Missouri according to instrument recorded in Book
6543 page 1567.
4. Rights of the Railroad Company servicing the railroad siding located on
insured premises in and to the ties, rails and other properties
constituting said railroad siding or in and to the use thereof.
5. Easement Grant executed by and between Earle M. Jorgensen Company and
Bennett Packing Company, together with agreements, covenants,
restrictions, maintenance and repair agreements by instrument recorded in
Book 7531 page 95.
<PAGE>
EXHIBIT E
1. Financing Statement executed by Bennett Packaging Company to MDPC
Equipment Leasing Corporation recorded in Book 7684 page 1779.
2. Financing Statement executed by Consolidated Packaging Corporation to MNC
Credit Corp recorded in Book 8750 page 1622. (affects leasehold)
3. Financing Statement executed by Consolidated Packaging Corporation to MNC
Credit Corp. recorded in Book 9000 page 495.
4. Mechanics Lien No. 30762 filed October 9, 1990 by Granite Sheet Metal
Works, Inc. in the amount or $14,129.91.
5. Mechanics Lien No. 30900 filed October 26, 1990 by Clayco Construction
Company, Inc. in the amount of $75,803.00.
Suit to enforce the above lien is pending in Cause No. 619132 of the St.
Louis County Circuit Court, styled Clayco Construction Co., Inc. VS.
Consolidated Packaging Corp., et al.
6. Mechanics Lien No. 31242 filed December 6, 1990 by The Henderson Group,
Incorporated in the amount of $32,295.61.
LEASE AGREEMENT
THIS LEASE, made this 10th day of April, 1996, by and between Stone
Mountain Industrial Park, Inc., a Georgia Corporation, hereinafter referred to
as "Lessor"; and Graham-Field Health Products, Inc., a Delaware Corporation,
hereinafter referred to as "Lessee";
WITNESSETH:
1. The Lessor, for and in consideration of the rents, covenants,
agreements, and stipulations hereinafter mentioned, reserved, and contained, to
be paid, kept and performed by the Lessee, has leased and rented, hereby agrees
to lease and take upon the terms and conditions which hereinafter appear, the
following described property (hereinafter called "Premises"):
A 28,255 square foot portion of Building No. 31 (a 15b, 206 square foot
building) known as 8291 Forshee Drive, Westside Industrial Park, Jacksonville,
Florida, said building being a part of Section 27, Township 1 South, Range 25
east, Duval County Florida, consisting of a portion of Pickett Land Company's
Farms Subdivision as recorded in Plat Book 5, page 93 of the current Public
Records of Duval County, Florida, and being more particularly described on
Exhibit "A" Legal Description and Exhibit "B" Building 31 Site Plan attached
hereto by this reference and incorporated herein.
This Lease is subject to all encumbrances, easements, covenants and restrictions
of record and to the Declaration of Covenants, Restrictions, and Easements for
West side Industrial Park. Lessor represents that none of such encumbrances,
easements, covenants and restrictions shall interfere with the use of the
Premises for warehouse purposes.
2. To have and to hold for a term of 38 months, said term to begin on the
1st day of July, 1996 and to end at midnight on the 31st day of August, 1999.
3. Lessee shall pay to Lessor monthly "Base Rent" of $*See "Schedule of
Rents" Paragraph 34 of the Addendum to Lease herewith attached and incorporated
herein due on the first day of each month, in advance, without offset or demand,
commencing on July 1, 1996. Upon execution of this Lease, Lessee has paid to
Lessor $ N/A, representing the first month's rent due hereunder. In the event
Lessee fails to pay the rent or any other payment called for under this Lease
within ten (10) days of the time period specified, Lessee shall pay a late
charge equal to five percent (5%) of the unpaid amount, which late charge shall
be paid with the required payment.
<PAGE>
Utility Bills 4. Lessee shall place utility bills of all types in
its name and shall pay same, along with all assessments
pertaining to the Premises, including, but not limited
to, water and sewer, natural gas, electricity, fire
protection and sanitary pick up bills for the Premises,
or used by Lessee in connection therewith. If Lessee
does not pay same, Lessor may pay the same and such
payment shall be added to and treated as additional
rental of the Premises. If this Lease is for a
multi-tenant building, water and sewer charges shall be
accounted for as provided in Paragraph 33 herein below.
Mortgagee's Rights 5. Lessee's rights shall be subject to any bona fide
mortgage or deed to secure debt which is now, or may
hereafter be, placed upon the Premises by Lessor, and
Lessee agrees to execute and deliver such documentation
as may be required by any such mortgagee to effect any
subordination within ten (10) days of receipt of a
request for such execution; provided, however, that any
such subordination by Lessee shall be conditioned
upon execution and delivery of non-disturbance
agreement reasonably acceptable to Lessee, Lessor
hereby warrants and represents that no mortgage
currently encumbers the Premises.
Maintenance and 6. Lessee shall not allow the Premises to fall out of
Repairs by Lessee repair or deteriorate, and at Lessee's own expense,
"except as provided in Paragraph 37 below," Lessee
shall keep and maintain all interior portions of the
Premises, in good order and repair, except portions of
Premises to be repaired by Lessor under terms of
Paragraph 7 below. Lessee also agrees to keep all
systems exclusively serving or located within the
Premises pertaining to water, fire protection,
drainage, sewer, electrical, heating, ventilation, air
conditioning and lighting in good order and repair, and
agrees to return same to Lessor at the expiration of
this Lease or renewal hereof in good operating
condition, "ordinary wear and tear excepted". The
Lessee covenants and agrees that during the term of
this Lease and for such further time as the Lessee, or
any person claiming under it, shall hold the Premises
or any part thereof, it shall not cause the estate of
the Lessor in said Premises to become subject to any
lien, charge or encumbrance whatsoever, it being
agreed that the Lessee shall have no authority, express
or implied, to create any lien, charge or encumbrance
upon the estate of the Lessor in the Premises."
Repairs by Lessor 7. Lessor agrees to keep in good repair the
"structure and all structural elements of the Building",
the roof and the exterior walls, all building systems
not exclusively serving or located within the Premises
exclusive of painting, exclusive of all glass and
exclusive of all exterior doors. Lessor gives to Lessee
exclusive control of Premises and shall be under no
obligation to inspect said Premises. Lessee shall
promptly notify Lessor of any damage covered under this
paragraph, and Lessor shall be under no duty to repair
unless it receives notice of such damage.
Modifications and 8. No modifications or alterations to the building
Alterations to the on the Premises or openings cut through the roof are
Premises allowed without prior written consent of Lessor, which
consent shall not be unreasonably withheld. In the
event any such modifications or alterations are
performed, same shall be completed in accordance with
all applicable codes and regulations.
Return of Premises 9. Lessee agrees to return the Premises to Lessor, at
the expiration or prior termination of this Lease,
broom clean and in as good condition and repair as when
first received, natural wear and tear, damage by storm,
fire, lightning, earthquake or other casualty alone
excepted. Lessee agrees to remove its personal property
from the Premises at the expiration or prior
termination of this Lease.
Destruction of or 10. If Premises are totally destroyed by storm, fire,
Damage to Premises lightning, earthquake or other casualty, this Lease
shall terminate as of the date of such destruction, and
rental shall be accounted for as between Lessor and
Lessee as of that date. If Premises are damaged, but
not wholly destroyed by any of such casualties, rental
shall abate in such proportion as use of Premises has
been destroyed, and Lessor shall restore Premises to
substantially the same conditions as before damage as
speedily as practicable, whereupon full rental shall
recommence; provided further, however, that if the
damage shall be so extensive that the same cannot be
reasonably repaired and restored within six (6) months
from date of the casualty, then either Lessor or Lessee
may cancel this Lease by giving written notice to the
other party within thirty (30) days from the date of
such casualty. In the event of such cancellation,
rental shall be apportioned and paid up to the date of
such casualty.
Indemnity 11. Lessee agrees to indemnify and save harmless the
Lessor against all claims for injuries to persons or
damages to property by reason of the use or occupancy
of the Premises, the improvements on the Premises or
the failure or cessation of services to the Premises,
and all expenses incurred by Lessor because of such
injuries or occupancy, including attorneys' fees and
court costs.
Governmental 12. Lessee agrees, as its own expense, to promptly
Orders comply with all requirements of any legally constituted
public authority made necessary by reason of Lessee's
manner of use or occupancy of Premises or operation of
its business. Lessor agrees to promptly comply with any
such requirements if not made necessary by reason of
Lessee's manner of occupancy or operation of the
Premises. Notwithstanding any provisions or limitations
in this paragraph to the contrary, Lessee shall be
responsible for any and all costs and expenses arising
from any violations of environmental laws or
regulations caused by Lessee's activities or occupancy
of the Premises.
Condemnation 13. If the whole of the Premises, or such portion
thereof as will make Premises unusable for the purpose
herein leased, shall be condemned by any legally
constituted authority for any public use or purpose,
or sold under threat of condemnation, then, in any of
said events the term hereby granted shall cease from
the time when possession or ownership thereof is taken
by public authorities and rental shall be accounted for
as between Lessor and Lessee as of that date. Such
termination, however, shall be without prejudice to the
rights of either Lessor or Lessee to recover
compensation and damage caused by condemnation from the
condemnor. It is further understood and agreed that
neither the Lessee, nor Lessor, shall have any rights
in any award made to the other by any condemnation.
Assignment 14. Lessee may not assign this Lease, or any interest
thereunder, or sublet the Premises in whole or in part
without the prior express written consent of Lessor
(which consent shall not be unreasonably withheld) and
without giving prior written notice to Lessor of intent
to assign or sublease. Subtenants or assignees shall
become liable directly to Lessor for all obligations of
Lessee hereunder, without relieving Lessee's liability.
Lessee agrees not to assign or sublease Premises to any
one who will create a nuisance or trespass, nor use the
Premises for any illegal purpose; nor in violation of
any valid regulations of any governmental body; nor in
any manner to vitiate the insurance. Lessee further
agrees that if such subtenant or assignee is required
to pay a rental amount greater than the rental amount
required to be paid by Lessee hereunder, then Lessor
shall be entitled to receive and shall be paid such
increased amount. Upon any such sublease or assignment,
Lessee shall provide Lessor with copies of any and all
documents pertaining to such sublease or assignment.
Hazardous 15. Lessee will not use or suffer the use (by
Lessee Substances or other person or entity), of the
premises as a landfill or as a dump for garbage or
refuse, or as a site for storage, treatment, or
disposal of hazardous wastes, hazardous substances, or
toxic substances (defined as "hazardous waste"
or hazardous substance" under Section 1004 of the
Federal Conservation and Recovery Act, 42 U.S.C.
ss.6801 et seq., or Section 101 of the Comprehensive
Environmental Responses, Compensation, and Liability
Act, 42 U.S.C. ss.9601 et seq. or under any other
applicable laws); Lessee shall not permit hazardous or
toxic waste, contaminants, asbestos, oil, radioactive
or other material, the removal of which is required or
the maintenance or storage of which is prohibited,
regulated, or penalized by any local, state, or federal
agency, authority, or governmental unit, to be brought
onto the Premises or if so brought or found located
thereon, shall cause the same to be immediately
removed, unless same complies with all applicable laws,
and Lessee's obligation to so remove shall survive the
termination of this Lease; Lessee will not use or
suffer the use of the Premises in any manner other than
in full compliance with all applicable federal, state
and local environmental laws and regulations; Lessee
warrants and represents that it has not received any
notice from a governmental agency for violation of any
environmental laws and regulations and, if such notice
is received, Lessee immediately shall notify Lessor
orally and in writing; Lessee shall indemnify, defend,
and hold Lessor harmless from and against any and all
costs, damages, and expenses (including, without
limitation, environmental compliance or response costs,
costs for all remedial action and/or damage to third
parties, attorneys' fees and court costs at both trial
and appellate levels,
2
(Fla-MT)
<PAGE>
and damages for business interruption and any lost
profits) resulting, directly or indirectly, from any
environmental contamination of the Premises or any
misstatement or misrepresentation of facts concerning
the matters recited in this paragraph.
Removal of Fixtures 16. Lessee may (if not in default hereunder) prior to
the expiration of this Lease, or any extension hereof,
remove all fixtures which Lessee has placed in
Premises, provided Lessee repairs all damages to
Premises caused by such removal. Provided, however,
Lessee shall not remove, under any circumstances, the
following: heating, ventilating, air conditioning,
plumbing, electrical and lighting systems and fixtures
or dock levelers. In the event this Lease is terminated
for any reason, any property remaining in or upon the
Premises may be deemed to become property of the Lessor
and Lessor may dispose of same as it deems proper with
no liability to Lessor and no obligation to Lessee.
Default; Remedies 17. It is mutually agreed that in the event: (A) the
rent herein reserved is not paid at the time and place
when and where due and Lessee fails to pay said rent
within ten (10) days after written demand from Lessor;
(B) the Premises shall be deserted or vacated; (C) the
Lessee shall fail to comply with any term, provision,
condition, or covenant of this Lease, other than the
payment of rent, and shall not cure such failure within
twenty (20) days after notice to the Lessee of such
failure to comply (or, if such default is of a nature
which cannot be cured within said twenty (20) days,
then in the event Lessee shall fail to commence to cure
such default and thereafter diligently prosecute such
cure to completion); (D) Lessee causes any lien to be
placed against the Premises and does not cure same
within twenty (20) days after notice from Lessor to
Lessee demanding cure, in any of such events, Lessor
shall have the option at once, or during continuance of
such default or condition to do any of the following, in
addition to, and not in limitation of any other remedy
permitted by law or by this Lease:
(1) Terminate this Lease, in which event Lessee shall
immediately surrender the Premises to Lessor. Lessee
agrees to indemnify Lessor for all loss, damage and
expense which Lessor may suffer by reason of such
termination, whether through inability to relet the
Premises, through decrease in rent, through incurring
court costs, actual attorneys' fees or other costs in
enforcing this provision or otherwise;
(2) Lessor, as Lessee's agent, without terminating this
Lease, may terminate Lessee's right of possession, and,
at Lessor's option, enter upon and rent Premises at the
best price obtainable by reasonable effort, without
advertisement and by private negotiations and for any
term Lessor deems proper. Lessee shall be liable to
Lessor for the deficiency, if any, between Lessee's
rent hereunder and the price obtained by Lessor on
reletting and for any damage, actual attorneys' fees or
expenses incurred by Lessor in enforcing its rights
under this provision.
(3) Lessor also retains the right to apply for and
obtain a dispossessory action against Lessee and to
hold Lessee liable for all costs incident to seeking
such dispossessory action, including actual attorneys'
fees and court costs.
Pursuit of any of the foregoing remedies shall not
preclude pursuit of any other remedies herein provided
or any other remedies provided by law. Lessor shall
have the duty to mitigate any possible damages which
may be incurred pursuant to any such default by Lessee
except in the event Lessee deserts or vacates the
Premises without prior notification to Lessor. Any
notice in this provision may be given by Lessor or its
attorney.
Entry for Carding, 18. Lessor may card Premises "For Lease" or "For
Etc. Sale" ninety (90) day before the termination of this
Lease. Lessor may enter the Premises at reasonable
hours during the term of this Lease to exhibit same to
prospective purchasers or tenants and to make repairs
required of Lessor under the terms hereof, or to make
repairs to Lessor's adjoining property, if any.
Effects of 19. No termination of this Lease prior to the normal
Termination of ending thereof, by lapse of time or otherwise, shall
Lease affect Lessor's right to collect rent for the period
prior to termination thereof.
No Estate in Land 20. This contract shall create the relationship of
landlord and tenant between Lessor and Lessee; no
estate shall pass out of Lessor; Lessee has only a
possessory interest, not subject to levy and sale, and
not assignable by Lessee except as provided in
Paragraph 14 above.
Holding Over 21. If Lessee remains in possession of Premises after
expiration of the term hereof, with Lessor's
acquiescence and without any express agreement of
parties, Lessee shall be month-to-month tenant upon all
the same terms and conditions as contained in this
Lease, except that the rental shall become one and
one-half times the amount in effect at the end of said
term of this Lease; and there shall be no renewal of
this Lease by operation of law. Such month-to-month
tenancy shall only require thirty (30) days notice by
either party to the other to terminate such tenancy
and Lessee's right of possession.
Rights Cumulative 22. All rights, powers and privileges conferred
hereunder upon parties hereto shall be cumulative but
not restrictive to those given by law.
Notices 23. Any notice given pursuant to this Lease shall be
in writing and sent by certified mail, return receipt
requested, or by reputable overnight courier to:
(a) Lessor in care of Stone Mountain Industrial Park,
Inc., 5830 E. Ponce DeLeon Avenue, Stone Mountain,
Georgia 30083, or such other address as Lessor may
hereafter designate in writing to Lessee.
(b) Lessee in care of Attn: Ralph Liguori, Executive
Vice President Operations, Graham-Field, 400 Rabro Dr.
E., Hauppauge, New York 11788, or such other address as
Lessee may hereafter designate in writing to Lessor.
Any notice sent in the manner set forth above shall be
deemed sufficiently given for all purposes hereunder on
the day said notice is deposited in the mail or with
the courier.
Waiver of Rights 24. No failure of Lessor to exercise
any power given Lessor hereunder, or to insist upon
strict compliance by Lessee with its obligations
hereunder, and no custom or practice of the parties at
variance with the terms hereof shall constitute a
waiver of Lessor's right to demand exact compliance
with the terms hereof.
Time of Essence 25. Time is of the essence in this Lease.
Definitions 26. "Lessor" as used in this Lease shall include
Lessor, its heirs, representatives, assigns, and
successors in title to the Premises. "Lessee" shall
include Lessee, its heirs and representatives,
successors, and if this Lease shall be validly assigned
or sublet, shall include also Lessee's assignees or
sub-lessees, as to Premises covered by such assignment
or sublease. "Lessor" and "Lessee" include male and
female, singular and plural, corporation, partnership
or individual, as may fit the particular parties.
3
<PAGE>
Exterior Signs 27. Lessee is given permission to erect its customary
sign used to identify itself on the front entrance
glass of the Premises provided any such sign by Lessee
shall be subject to and in conformity with all
applicable laws, zoning ordinances and building
restrictions or covenants of record and must be
approved by Lessor, based on the scaled drawing
provided by Lessee, before installation. In the event a
sign is erected by Lessee without Lessor's consent,
Lessor shall have the right to remove
said sign and charge the cost of such removal to Lease
as additional rent hereunder. Except upon prior written
consent from Lessor, in no event shall Lessee utilize
any portable or vehicular signs at the Premises. On or
before termination of this Lease Lessee shall remove
any sign this erected, and shall repair any damage or
disfurement, and close any holes, cause by such
removal.
Ad Valorem Taxes 28. Lessee herein is leasing 28,255 square feet of a
156,206 square foot building. Lessor will pay all ad
valorem taxes levied against the full 156,206 square
foot building each year of the Lease term or any
renewal hereof. Commencing in the year 1997 and during
each remaining year of the Lease term herein granted,
or any renewal hereof, Lessee, as additional rent,
shall reimburse Lessor for all sums paid by Lessor for
the above ad valorem taxes, pro rata, based on the
square footage occupied by the Lessee, in the 156,206
square foot building in excess of $12,714.75 (which
amount represents a good faith estimate of the fully
assessed tax bill on the Premises based on current tax
bills on similar buildings). Upon being notified by
Lessor of said pro rata amount of ad valorem taxes,
Lessee will remit same to Lessor within thirty (30)
days in the same manner as rent.
Use of Premises and 29. (A) Premises shall be used for storage and
Insurance distribution of medical products and related office
purposes. Premises shall not be used for any illegal
purposes, nor in any manner to create any nuisance or
trespass, nor in any manner to vitiate the insurance,
based on the above purposes for which the Premises are
leased.
(B) Lessee herein is leasing 28,255 square feet of
a 156,206 square foot building. Lessor will carry, at
Lessor's expense, "All Risk" Insurance Coverage on the
full 156,206 square foot building in an amount not less
than $3,000,000 or the full insurable value, whichever
is greater. The term "full insurable value" shall mean
the actual replacement cost, excluding foundation and
excavation costs, as determined by Lessor. Commencing
in the year 1997 and during each remaining year of the
Lease term herein granted, or any renewal hereof,
Lessee, as additional rent, shall reimburse Lessor for
all sums paid by Lessor the above coverage, pro rata,
based on the square footage occupied by the Lessee in
the 156,206 square foot building in excess of the
annual premium for said coverage for the year 1996,
unless such increases shall result of the
occupancy or use by any other tenant in
the building, in which case Lessee shall have no
obligation to pay any portion of such increase.
However, if such increases are the result of the
occupancy or use of Lessee or of the occupancy or use
by any sub-tenant or assignee of Lessee, Lessee shall
be responsible for the increase on the entire building.
Upon being notified by Lessor of said increased sums,
Lessee will remit to Lessor said amount within thirty
(30) days.
(C) Lessee will carry, at Lessee's own expense,
insurance coverage on all equipment, inventory,
fixtures, furniture, appliances and other personal
property on the Premises.
(D) Lessee shall procure, maintain and keep in
full force and effect at all times during the term of
this Lease and any renewal hereof, comprehensive public
liability insurance indemnifying Lessor and Lessee
against all claims and demands for injury to, or death
of, persons, or damage to property which may be claimed
to have occurred upon the Premises in an amount not
less than $2,000,000.00, per occurrence of coverage for
injury (including death) to one or more persons
attributable to a single occurrence and for property
damage.
To the full extent permitted by law, Lessor and
Lessee each waives all right of recovery against the
other for, and agrees to release the other from
liability for, loss or damage to the extent such loss
or damage is covered by valid and collectible insurance
in effect at the time of such loss or damage; provided
however, that the foregoing release by each party is
conditioned upon the other party's carrying insurance
with the above described waiver of subrogation, and if
such coverage is not obtained or maintained by either
party, then the other party's foregoing release shall
be deemed to be rescinded until such waiver is either
obtained or reinstated.
All insurance provided for in this Lease shall be
effected under enforceable policies issued by insurers
of recognized responsibility licensed to do business in
the state where the Premises are located. At least 15
days prior to the expiration date of any policy
procured by Lessee, the original renewal policy for
such insurance shall be delivered by the Lessee to the
Lessor. Within fifteen (15) days after the premium on
any such policy shall become due and payable, the
Lessor shall be furnished with satisfactory evidence of
its payment. The original policy or policies shall be
delivered to Lessor at the commencement of this Lease.
If the Lessee provides any insurance required by
this Lease in the form of a blanket policy, the Lessee
shall furnish satisfactory proof that such blanket
policy complies in all respects with the provisions of
this Lease, and that the coverage thereunder is at lest
equal to the coverage which would be provided under a
separate policy covering only the Premises.
If the Lessor so requires, the policies of
insurance provided for shall be payable to the holder
of any mortgage, as the interest of such holder may
appear, pursuant to a standard mortgage clause. All
such policies shall, to the extent obtainable provide
that any loss shall be payable to the Lessor or to the
holder of any mortgage notwithstanding any act or
negligence of the Lessee which might otherwise result
in forfeiture of such insurance. All such policies
shall, to the extent obtainable, contain an agreement
by the insurers that such policies shall not be
cancelled without a least thirty (30) days prior
written notice to the Lessor and to the holder of any
mortgage to whom loss hereunder may be payable.
Additional Charges 30. In addition to rent, Lessee shall pay monthly in
advance concurrent with rental payments, all applicable
State and Local Sales Tax on all sums due under this
Lease.
Radon Gas 31. Radon is a naturally occurring radioactive gas
that, when it has accumulated in a building in
sufficient quantities, may present health risks to
persons who are exposed to it over time.
Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida.
Additional information regarding radon and radon
testing may be obtained from your county public
health unit.
Grounds and
Common Area
Maintenance 32. Notwithstanding the provisions of Paragraph 6
herein above, Lessor shall provide all material,
equipment and labor for exterior landscape and grounds
maintenance for the Premises including mowing,
mulching, weeding, fertilizing, insecticiding, pruning,
routine replacement of trees and shrubbery, and other
landscaping, drainage, and irrigation system
maintenance. Lessor will also provide landscaping and
maintenance for right-of-way areas, and the common
irrigation and storm water management systems which
serve the Premises and Westside Industrial Park
("common area maintenance").
Commencing in the year 1997 and during each
remaining year of the Lease term herein granted, or any
renewal hereof. Lessee, as additional rent, shall
reimburse Lessor for all sums paid by Lessor for the
above grounds and common area maintenance, pro rata
based on the square footage occupied by the Lessee, in
the 156,206 square foot building in excess of the total
amount of grounds and common area maintenance payable
for the year 1996. Upon being notified by Lessor of
said pro rata amount of grounds and common area
maintenance, Lessee will remit same to Lessor within
thirty (30) days in the same manner as rent.
4
(Fla-MTN)
<PAGE>
33. The building of which the Premises are a part
is served by one water meter. Lessor shall be billed by
the utility for all water consumed in building along
with related sewer charges, and Lessor shall promptly
pay said bills. Lessor shall, however, invoice Lessee
monthly for Lessee's share of such water and sewer
charges based on Lessee's portion of the leased space
in building, and Lessee shall promptly pay said bills.
If Lessee's consumption of water is increased by
"non-domestic" manufacturing, processing, or other
uses, exclusive of "domestic" uses such as office,
restroom, drinking fountain, or is increased by
"domestic" uses arising from occupancy by more than one
person per 2000 sq. ft. of leased floor area, Lessee's
share of water billed shall take such extra uses into
account. Conversely, if water use by any other occupant
of the building is increased by such "non-domestic" use
or "domestic" uses arising from occupancy exceeding one
person per 2000 sq. ft. of leased floor area, such
other occupant's billing shall take such extra use into
account. All other utilities will be separately
metered.
Attached hereto and incorporated herein by reference
are the following:
Addendum to Lease
Exhibit A - Legal Description
Exhibit B - Site Plan
Exhibit C - Building Specifications
THIS LEASE contains the entire agreement of the
parties hereto, and no representations, inducements,
promises or agreements, oral or otherwise, between the
parties, not embodied herein, shall be of any force or
effect.
If any term, covenant or condition of this Lease
or the application thereof to any person, entity or
circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the
application of such term, covenant or condition to
persons, entities or circumstances other than those
which or to which used may be held invalid or
unenforceable, shall not be affected thereby, and each
term, covenant or condition of this Lease shall be
valid and enforceable to the fullest extent permitted
by law.
IN WITNESS WHEREOF, the parties have hereunto set
their hands and seals, the day and year first above
written.
Signed, sealed and delivered Stone Mountain Industrial Park, Inc.
in the presence of: A Georgia Corporation
/s/ Linda G Lawson By: /s/ [ILLEGIBLE]
- ---------------------------------- ------------------------------------
Witness Title: Vice President
LESSOR (Corp. Seal)
Signed, sealed and delivered Graham-Field Health Products, Inc.
in the presence of: A Delaware Corporation
/s/ [ILLEGIBLE] By: /s/ Irwin Selinger
- ---------------------------------- ------------------------------------
Witness Vice President, General Title: Chairman of the Board
Counsel Lessee
5
(Fla-MT)
<PAGE>
ADDENDUM TO LEASE DATED APRIL 10, 1996
BETWEEN STONE MOUNTAIN INDUSTRIAL PARK, INC.
AND
GRAHAM-FIELD HEALTH PRODUCTS, INC.
34. SCHEDULE OF RENTS: Lessee shall pay to Lessor promptly on the first day of
each month during the term of this Lease, in advance and without demand or
offset:
$9,348.81 per month July 1, 1996 through August 31, 1999.
35. Provided that Lessee is not in default hereunder beyond applicable cure
periods and that Lessee has not sublet the entire Premises or assigned
this Lease or its rights hereunder, Lessee shall have the option to expand
into a larger available facility owned by Stone Mountain Industrial Park,
Inc. at any time during this Lease Term, and this Lease shall terminate
upon the commencement date of the lease for such larger facility.
36. Provided that Lessee is not in default hereunder beyond applicable cure
periods and that Lessee has not sublet the entire Premises or assigned
this Lease or its rights hereunder, Lessee shall not be responsible for
any increases in ad valorem taxes above a total of $0.65 per square foot
(so that Lessee's total responsibility will not exceed $0.20 per square
foot); or increases in insurance expense above a total of $0.07 per square
foot (so that Lessee's total responsibility will not exceed $0.02 per
square foot); or increases in CAM charges above a total of $0.14 per
square foot (so that Lessees total responsibility will not exceed $0.04
per square foot), during the original term of this Lease, provided such
increases are not due to Lessee's manner of use of the Premises or
improvements to the Premises.
37. Lessor warrants to Lessee that at the time of delivery of the Premises to
Lessee, the Premises shall be in compliance with all laws, ordinances and
codes generally applicable to the building of which the Premises are a
part, but excluding any such laws, ordinances and codes which may be
applicable to Lessee's manner of use of occupancy of the Premises. The
certificate of occupancy for the Premises shall permit use of the Premises
for warehouse purposes.
38. Provided that Lessee is not in default hereunder beyond applicable cure
periods and provided that Lessee has not sublet the entire Premises or
assigned this Lease or its rights hereunder, during the first twelve (12)
months of the term, Lessee shall have a "right of first offer" for all or
a portion of the expansion space adjacent to the Premises, consisting of
approximately 20,000 square feet, as more particularly shown on Exhibit B
(the "Additional Space"), on the terms and conditions of this paragraph.
If Lessor desires to offer all or any portion of the Additional Space for
lease, Lessor will deliver to Lessee a written notice specifying the terms
of the offer. Lessee will then have five (5) business days from the
delivery of such notice to accept the offer in writing to lease the
identical space as contained in the offer in accordance with terms of the
offer. Lessor and Lessee shall promptly enter into an amendment to this
Lease on all the same terms as this Lease, incorporating the rental terms
contained in Lessor's notice with respect to the Additional Space, and
adjusting other matters dependent upon the size of the new premises, such
as Lessee's share of the common area expenses, ad valorem taxes and
insurance premium payments. If Lessee fails to accept or rejects the offer
within the 5-day period, Lessor will be entitled to lease the space on the
same terms stated in the notice to Lessee; provided, however, that if
Lessor proposes to lease the Additional Space on more favorable terms to a
third-party, Lessor will again re-offer the Additional Space to Lessee on
such terms and Lessee shall respond to such offer in the time period
provided above. If Lessor does lease the space, the right granted Lessee
under this paragraph will automatically terminate. However, if Lessor does
not lease the space, the space will not subsequently be leased without
Lessors compliance with this paragraph. Time is of the essence of this
Lease.
39. Lessor warrants to Lessee that all materials and equipment incorporated
into the Premises will be new, and that the Premises will be of good
quality, free from faults and defects, and constructed substantially in
accordance with the Building Specifications attached hereto as Exhibit C
and hereby incorporated herein. Lessor hereby warrants all workmanship and
equipment installed by Lessor for a period of one (1) year from the
commencement of the term. To the extent the buildout of the Premises are
not totally completed at the time of delivery of the Premises to Lessee or
at commencement of the term, Lessor shall promptly complete such buildout
and repair or correct any "punchlist" items.
<PAGE>
40. Lessor warrants to Lessee that, to the best of its knowledge, no hazardous
or toxic waste, contaminants, asbestos, oil, radioactive or other material
is located in, on or under the Premises, and the Premises, the building in
which the Premises is located, and the property on which the building is
constructed are in compliance with all applicable federal, state, and
local environmental laws, ordinances, rules and regulations.
41. Provided that Lessee is not in default hereunder beyond applicable cure
periods and that Lessee has not sublet the entire Premises or assigned
this Lease or its rights hereunder, Lessee shall have the one time option
to renew this Lease for an additional two (2) year Lease Term under the
same terms and conditions as herein set forth except that the monthly
rental rate shall be $9,652. Lessee shall provide Lessor with not less
than 180 days advance written notice of its intent to renew the Lease.
42. Should Lessee not renew this Lease as provided for in Paragraph 40 above
then Lessee shall pay to Lessor a one time payment of $27,000 for the cost
of improvements made by Lessor. Said payment shall be made not less than
180 days prior to the expiration of this Lease.
<PAGE>
LEGAL DESCRIPTION
BLDG. 31
WESTSIDE INDUSTRIAL PARK
A part of Section 27, Township 1 South, Range 25 East, Duval County
Florida, together with a portion of Pickett Land Company's Farms Subdivision as
recorded in Plat Book 5, page 93 of the current Public Records of Duval County,
Florida, together with a portion of Unit 1, Westside Industrial Park Subdivision
as recorded in Plat Book 46, page 84A-E of the current Public Records of Duval
County, Florida, and being more particularly described as follows:
Begin at the point of intersection of the northern right of way of Forshee
Drive (80 ft. r/w) and the eastern right of way of Bulls Bay Hwy. (var. r/w);
running thence along the eastern right of way of Bulls Bay Hwy. (var. r/w) N0
(degrees) 00'00" E a distance of 56.40 feet to a point; running thence along
said right of way N 08 (degrees) 05'34" W a distance of 437.96 feet to a point;
running thence and leaving said right of way S 90 (degrees) 00'00" E a distance
of 970.35 feet to a point; running thence S 0 (degrees) 00'00" E a distance of
473.62 feet to a point lying on the northern right of way of Forshee Drive (80
ft/ r/w); running thence along said right of way and a curve to the right (said
curve having a chord bearing of S 84 (degrees) 42'02" W, a chord distance of
177.33 feet, and a radius of 960.00 feet) an arc distance of 286.0l feet to a
point; running thence along said right of way N 90 (degrees) 00'00" W a distance
of 732.12 feet to a point and the TRUE POINT OF BEGINNING.
Said tract or parcel contains 10.5 acres and is more fully shown on that
Site Plan of Building 31 for Pattillo Construction Co., prepared by Jason R.
Houston, dated 12/01/94, last revised 12/27/94.
<PAGE>
EXHIBIT "B"
[Site Plan]
<PAGE>
Graham-Field
March 22, 1996
WESTSIDE INDUSTRIAL PARK
BUILDING SPECIFICATIONS - BUILDING NO. 31
GRAHAM-FIELD
GENERAL FACILITY DESCRIPTION
(a) Location: Building No. 31, 8291 Forshee Drive, Westside
Industrial Park, Jacksonville, Florida.
(b) Size & Overall
Dimensions: Approximately 28,255 sq. ft. including 1000 +/-
sq. ft. of office area with 24' minimum ceiling
clearance and 50' x 40' interior column spacing.
(c) Office: Approximately 1,000 +/- sq. ft. of centrally
heated and air conditioned office area at the
front of the premises. Offices will be built
according to a Floor Plan to be prepared by
Pattillo and mutually approved by Graham-Field and
Pattillo. (See Office Area Design & Finishes
section for additional detail)
(d) General
Conditions: Cost of design, supervision, permits, fees,
meters, temporary utilities, and other expenses
related to construction are included. All work
shall be being performed in a professional manner
by Pattillo Construction Corporation in accordance
with the applicable laws and regulations in effect
in Duval County and the State of Florida. Special
water, sewer, environmental or other permits
related to Lessee's particular processes,
operations, or emissions are not included.
SITE WORK
(a) Landscape, Drainage,
& Irrigation: All surface water drains away from the building. A
landscape architect has designed landscaping for
the premises, which is being installed in
accordance with overall standards for Westside
Industrial Park.
(b) Automobile
Parking: Twenty (20) parking spaces paved with asphalt
along with required curb and gutter will be
provided.
(c) Truck Areas &
Access Drives: The 120' deep truck court area and all drives are
paved with 6" of concrete rated at 3,000.
(d) Curb & Gutter: Poured with 3,000 PSI concrete 18" x 6".
(e) Signs & Striping: Parking areas will receive single line painted
striping and handicap signs.
CONCRETE
(a) Foundations: All footings have been designed for 3,000 PSF soil
bearing pressure and will poured with 3,000 PSI
concrete.
(b) Slab on Grade:
(1) Five (5") inch thick 3,000 PSI concrete reinforced with synthetic
fibers. The surface will be steel trowel finished and floors will be
chemically cured and hardened with "Lapidolith". Subgrade will be
chemically treated for termite protection. Caulking of floor joints
is excluded.
(2) Column isolation joint will be non-keyed, diamond or round formed
with asphalt impregnated felt.
<PAGE>
Graham-Field
Westside Industrial Park - Building No. 31
March 22, 1996
Page Four
(d) Floors:
(1) Offices: Carpeting with a $12.50/sq. yd. allowance or 12" x
12" x 1/8" vinyl composition tile as required.
(2) Restrooms: 4" x 4" ceramic tile.
(3) Production: Sealed concrete floor.
(e) Ceilings: Spaces scheduled to receive acoustical tile
ceiling system shall have exposed grid system, 24
inches by 48 inches, non-directional fissured
mineral board, 5/8 inch thickness, square edges,
exposed steel "T" runners, white painted finish.
Ceiling shall be insulated with 3-1/2" inch
fiberglass batts.
(f) Warehouse Finishes:
(1) The personnel doors and frames will be painted - two coats.
(2) Warehouse walls and structural steel columns and beams will be
painted white.
(g) Millwork: Breakroom area shall be provided with base and/or
wall cabinets per office design.
(h) Exclusion: No provision has been made for raised computer
floor.
SPECIALTIES
(a) Toilet Partitions: Plastic laminate (wood particle board core) with
standard polish non-corrosive metal hardware.
(b) Toilet Room Accessories:
(1) Brushed stainless steel toilet room accessories manufactured by
Bobrick or equal shall be provided as follows:
(2) Combination semi-recessed paper towel dispenser and waste
receptacle: one each toilet room.
(3) Framed mirrors: one each lavatory except where unframed mirrors are
provided, sloped, handicapped type where required by Southern
Building Code.
(4) Handicapped grab bars: one pair each toilet.
(5) Soap dispenser: one (1) each toilet room.
(c) Fire Extinguishers:
(1) Fire extinguishers shall be provided as required by Southern
Building Code in both the warehouse and office.
(2) All fire extinguishers in finished office areas are to be located in
semi-recessed enameled steel cabinets with signage.
<PAGE>
Graham-Field
Westside Industrial Park - Building No. 31
March 22, 1996
Page Five
EQUIPMENT
Dock Levelers: Two (2) 6' X 8' mechanical dock levelers with 16"
lips and rated for 20,000 pounds will be
installed.
PLUMBING
(a) Service Lines: A 2" water line with standard 2" meter connection
and 6" Schedule 40 PVC sewer line serve the
building. All systems and fixtures will be
designed in accordance with applicable Florida
codes. Domestic water piping above grade will be
copper. Restrooms will be provided as described
under Office Area Design and Finishes and will be
designed for handicapped accessibility as required
by code. Surcharges or tap on fees based on water
or sewage effluent quality or quantity are
excluded.
(b) Restrooms: Flush valve wall hung urinals and flush valve
floor mounted toilets will be provided.
(c) Water Coolers: One (1) wall mounted electric stainless steel, top
barrier free electric water cooler is included in
the office area.
(d) Sinks:
(1) Bathroom lavatories to be provided per plan.
(2) Breakroom - single compartment, stainless steel sink shall be
provided in breakroom vending area.
(e) Water
Closets: Standard floor mounted, low consumption, flush
valve, open front, elongated bowl, 17" rim height,
white, vitreous china (handicap per code).
(f) Urinals: Wall mounted, low consumption, flush valve, white,
vitreous china.
(g) Water Heater: Electric, 25 gallon (typical) hot water will be
provided to restrooms and sinks.
(h) Hose Bib: Bronze or brass, integral mounting flange.
FIRE PROTECTION
(a) Sprinkler A complete wet ESFR sprinkler system in accordance
System: with N.F.P.A. standards for a system. System shall
include yard mains, hose hydrants, interior hose
stations, sprinkler heads, and chrome pendant
heads will be used in the finished office area.
Office area to have 0.10 gpm per sq. ft. over most
remote 3,000 sq. ft. to Code.
(b) Fire Hydrants: Fire hydrants - will be provided per building
code.
(c) Exclusion: In-rack sprinkler, foam, etc. have not been
provided for.
HVAC/MECHANICAL
(a) Natural Gas: Natural gas supply will be provided to the
building with 2" - 2 psi entrance piping by the
gas utility company.
<PAGE>
Graham-Field
Westside Industrial Park - Building No. 31
March 22, 1996
Page Six
(b) Office Area Heat and Cooling:
(1) A complete independent HVAC system shall be provided for the office
areas.
(2) The HVAC system shall be packaged units and mounted on the roof or
split systems with the condensers ground mounted. The units shall be
York, Trane, Carrier or equal.
(3) Air distribution will be by ceiling diffusers and controls with be
electric thermostats.
(4) An exhaust fan will be provided for each restroom.
(c) Warehouse Area
Heat: Suspended gas fired unit heaters will be provided.
Design will maintain 70 degrees fahrenheit at
outside temperature of 29 degrees fahrenheit.
ELECTRICAL
(a) Main
Service: 400 amp, 277/480 volt, three phase 4 wire main
service with dry type transformers serving 120/208
volt loads. Secondary distribution to panels for
lights, office outlets, office HVAC and other
building circuitry equipment is included.
Circuitry for and connection of Purchaser supplied
equipment is not included except as provided
below.
(b) Emergency
Lighting: Facility exits will be clearly marked and the
warehouse and office will have emergency light
fixtures, all according to State and local codes.
Approximately 10% of all fixtures will be quartz
restrike.
(c) Warehouse
Lighting: All warehouse lighting to be metal halide fixtures
suspended between the bar joists. Lighting levels
will be to 30' candles.
(d) Forklift
Disconnect: Two (2) 480 volt, 30 amp disconnects for
forklifts.
(e) Exterior
Lighting: Building mounted exterior flood lights will be
installed at the corners of the building and above
truck loading doors. Soffit lighting will
highlight the front entrance. Lighting to provide
1/2 - 1 f.c. and to be high pressure sodium.
(f) Offices:
(1) Lighting will be 2' x 4' lay in four tube 277 volt fixtures T8 lamps
with electronic ballast. Lighting to be controlled by motion
detector.
(2) Telephone wire ways include empty outlet boxes and conduit to above
finished ceiling. Telephone and data systems wiring and equipment
are excluded.
(3) 110 Volt convenience outlets per standard.
(g) Excluded: Tenant supplied security and monitoring system.
<PAGE>
Graham-Field
Westside Industrial Park - Building No. 31
March 22, 1996
Page Three
(c) Aluminium Entrance Doors and Fixed Glass Frames:
(1) Entrance door frames shall be narrow style, extruded aluminum, with
electrostatically applied enamel finish in color selected by
Architect/Engineer.
(2) Fixed glass storefront framing system shall be extruded aluminum
sections with electrostatically applied enamel finish in color
selected by Architect/Engineer. Members shall be installed with
concealed fasteners.
(d) Glass and Glazing:
(1) All exterior glass shall be reflective, 1/4 inch minimum thickness,
double glazed, solar bronze, insulated. Installation shall be in
accordance with the recommendations of the manufacturers of the
glass and glazing materials.
(2) Interior sidelight glass shall be 1/4 inch clear glazing.
(e) Finish hardware:
(1) Locks and latch sets shall be heavy duty cylindrical case, brushed
aluminum finish as manufactured by Ruswin or equal. Lever handle
sets shall be installed as required by code.
(2) Door closures shall be surface mounted.
(3) Push, kick, and mop plates shall be stainless or brushed aluminum.
(4) Hinges shall be heavy duty, ball bearing at doors with closures, oil
bearing elsewhere. On exterior hardware provide non-removable hinge
pins.
(5) Office area to be keyed separate from warehouse.
FINISIIES
(a) General:
1,000+/- sq. ft. of office area will be provided per office plan and will
include 2 private offices, a reception area, a breakroom, and 2 single
stall bathrooms.
(b) Furring: The 8" concrete block office/warehouse demising wall will be
furred and finished with 5/8" gypsum board.
(c) Drywall: Interior office walls and the temporary expansion wall shall
be constructed as follows:
(1) Sheetrock shall be 5/8 inch thickness, tapered edges, fire rated,
where required. Corner beads to be metal and edge molding J type.
Finished height 9' - 0" and shall be screw applied and finished with
a ready mixed, all purpose joint compound. Fixture walls of toilet
rooms shall receive moisture resistant gypsum board.
(2) Standard metal studs shall be 3-5/8", 26 gauge electro-galvanized
steel, cold rolled C shaped, screw type, gauge as recommended by the
manufacturer for partition framing. Studs to be 24" on center.
(3) Restrooms to have 4" x 4" quarry tile floor to 9' - 0" ceiling
height.
<PAGE>
Graham-Field
Westside Industrial Park - Building No. 31
March 22, 1996
Page Two
(3) Expansion joints at slab perimeter with asphalt impregnated
fiberboard, 5/8" thick.
(4) Control joints saw cut, 114 of slab depth, 1/8" wide, bisect bays.
(5) Construction joints will have smooth dowels every 18" on center.
(c) Dock Canopies: Seven (7) poured in place concrete canopies, one
over each dock door opening.
(d) Exterior
Stairways: Concrete stairways lead from warehouse area to
truck court.
(e) Excluded: Striping, caulking, granular fill.
MASONRY
(a) Exterior Walls: Exterior walls will be four inch brick backed with
eight inch (8") concrete masonry unit.
(b) Interior Walls: Interior warehouse/office and demising walls will
be constructed with concrete masonry unit (12" x
8" x 16"). Control joints will be filled with one
layer 5/8" thick asphalt impregnated felt.
STRUCTURAL SYSTEM/METALS
(a) Structural Steel: Structural steel beams, columns and joists (column
spacing 40' x 40') including perimeter beams at
the eave line and wind columns as required. The
structural steel frame will be designed dead load
of 25 lbs. per square foot and a live load of 20
lbs. per square foot.
(b) Steel Joists: Designed for dead load of 25 lbs. per square foot
and live load of 20 lbs. per square foot and
Seismic Zone 1. Bridging will be 1" x 1" x 7/67".
MOISTURE PROTECTION
(a) The roof deck is galvanized steel deck (0.5" deep) covered with a flood
coat of lightweight insulating aggregate concrete with 1" polystyrene
board embedded in the flood coat along with two inches of additional
insulating concrete above the polystyrene board. The insulating concrete
will be covered with a 4 ply, smooth surface, fiberglass built-up roof
membrane topped with light tan pea gravel. The roof system is designed to
provide an "U" Factor of approximately 10 as calculated in accordance with
the Energy Efficiency Code. Gutters and downspouts are shop cooled
galvanized steel, 24 gauge.
DOORS AND WINDOWS
(a) Overhead Dock
Height Truck
Doors: Seven (7) each 10' (w) x 10' (h) doors are to be
provided at each truck door. Each truck door is a
24 gauge steel, high lift truck door with 13 gauge
angle mounted track.
(b) Wood Doors: Flush, solid core, 36" x 84", 1-3/4" thickness,
birch veneer face, stain grade doors shall be
provided for all interior office spaces.
Commercial Lease Agreement - OMO - 1996
COMMERCIAL LEASE AGREEMENT
THIS Lease AGREEMENT is entered into by:
1. LANDLORD: OWEN BROS. ENTERPRISES. ("Landlord").
2. TENANT: BOBECK MEDICAL DISTRIBUTION ("Tenant").
3. LEASED PREMISES: In consideration of the rents, terms and covenants of
this Lease Agreement (the "Lease"), Landlord hereby leases to Tenant certain
premises (the "Leased Premises") containing approximately 10,151 square feet
within the building or project known as Falcon Centre, and located at 1707
Falcon Drive, Suite #104 on a certain tract of land in DeSoto, Dallas County,
Texas. Such land (which is described in the attached Exhibit A), together with
the building(s), landscaping, parking and driveway areas, sidewalks, and other
improvements thereon shall be referred to in this Lease as the "Project". In the
case of a multi-building Project, the work "Building" shall refer to the
particular building in which the leased Premises are located and the tract of
land upon which such building is located. In the case of a single building
Project the term "Building" as used herein shall be synonymous with the term
"Project". If the Leased Premises encompass an entire building, then the term
"Leased Premises" shall by synonymous with "Building". A fuller description of
the Leased Premises, including a floor plan thereof, is contained in Exhibit B
to be attached.
4. TERM:
(a) The term of this Lease shall be sixty (60) months commencing on
August 1, 1996 (the "Commencement Date") and terminating on the last day of
July, 2001, (the "Termination Date"). The Commencement date may be subject to
change, however, pursuant to Subparagraphs (b) and (c) below.
(b) Tenant acknowledges that it has inspected and accepts the Leased
Premises in their present condition as suitable for Tenant's purposes. If this
Lease is executed before the Leased Premises become vacant or otherwise
available for occupancy, or if any present tenant or occupant of the Leased
Premises holds over and Landlord cannot acquire possession of the Leased
Premises prior to the Commencement Date stated above, Tenant agrees to accept
possession of the Leased Premises at such time as Landlord is able to tender the
same, which date shall then be the Commencement Date of the Lease term.
(c) Tenant acknowledges that no representations or promises
regarding repairs, alterations, remodeling, or improvements to the Leased
Premises have been made by Landlord, its agents, employees, or other
representatives, unless such are expressly set forth in this Lease, and that
Tenant is solely responsible for applying for and obtaining a certificate of
occupancy for the Leased Premises. Tenant agrees that if its occupancy of the
Leased Premises is delayed under the circumstances described in Subparagraph (b)
or (c) above, this Lease shall nonetheless continue in full force and effect.
However, any rental amounts applicable to such period of delay shall be abated
and such abatement shall constitute full settlement of all claims by Tenant
against Landlord by reason of any such delay in possession of the Leased
Premises. Tenant's taking possession of the Leased Premises shall conclusively
establish that the improvements, if any, to be made by Landlord under the terms
of this Lease, have been completed in accordance with the plans and
specifications therefor and that the Leased Premises are in good and
satisfactory condition as of the date of Tenant's possession, unless Tenant
notifies Landlord in writing specifying any defects within ten (10) days after
taking possession. Landlord shall use reasonable diligence to repair promptly
such items but Tenant shall have no claim for damages or rebate or abatement of
rent by reason thereof. After the Commencement Date and upon completion of any
necessary repairs as provided above. Tenant shall, upon demand, execute and
deliver to Landlord a letter of acceptance of the Leased Premises and
acknowledgment of the date of the Commencement Date.
5. BASE RENT AND SECURITY DEPOSIT:
(a) Tenant agrees to pay to Landlord as rent the sum of $184,680
(One Hundred Eighty Four Thousand, Six Hundred Eighty and no/100 Dollars)
subject to adjustment for early or delayed occupancy under the terms hereof.
Such rent shall be payable in monthly amounts per the payment schedule below:
Months Base Rent
------ ---------
1 thru 36 $2.960.00 Per Month
37 thru 48 $3,170.00 Per Month
49 thru 60 $3,340.00 Per Month
each, in advance, without demand deduction or offset (sometimes referred to in
this Lease as the "Base Rent" or "Base Rental"). Such rental amounts shall be
due and payable to Landlord in lawful money of the United States Of America at
the address shown below. An amount equal to one monthly Base Rental payment
shall be due and payable on the date Tenant executes this Lease and such amount
shall be applied to the rent due for the first complete calendar month occurring
after the Commencement Date, provided that if the Commencement Date should be a
date other than the first day of a calendar month the rent for such partial
month shall be prorated. All succeeding installments of rent shall be due and
payable on or before the first day of each succeeding calendar month during the
Lease term. The amount of the Base Rent shall be adjusted as provided in
Paragraph 6 below.
(b) On the date Tenant executes this Lease there shall be due and
payable by Tenant a security deposit in an amount equal to $3,170.00 (Three
Thousand One Hundred Seventy and no/100 Dollars). Such deposit shall be held by
Landlord (without any obligation to pay interest thereon or segregate such
monies from Landlord's general funds) as security for the performance of
Tenant's obligations under this Lease. Tenant agrees to increase such security
deposit from time to time so that it is at all times equal to one monthly Base
Rental installment, as adjusted pursuant to Paragraph 6(a) below. Tenant shall
deposit cash with Landlord in an amount
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sufficient so to increase the security deposit within five (5) days after
written demand by Landlord. It is expressly understood that the security deposit
is not an advance payment of rental or a measure of Landlord's damages in the
event of Tenant's default under this Lease. Upon the occurrence of any event of
default by Tenant or breach by Tenant of its covenants under this lease,
Landlord may, from time to time, without prejudice to any other remedy provided
herein or provided by law, use, apply, or retain all or part of the security
deposit for the payment of any rent or other sum in default, or for the payment
of any other amount which Landlord may spend or become obligated to spend by
reason of Tenant's default, or for payment of any other amount which Landlord
may spend or become obligated to spend by reason of Tenant default or breach, or
to compensate Landlord for any damage, injury, expense or liability caused to
Landlord by such default or breach. If any portion of the security deposit is so
used or applied, Tenant shall, within five (5) days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
security deposit to the amount required by this Paragraph. Tenant's failure to
do so shall be a default under this Lease. The balance of the security deposit
shall be returned by Landlord to Tenant at such time after termination of this
Lease that all of Tenant's obligations have been fulfilled.
(c) Other remedies for nonpayment of Rent notwithstanding, if the
monthly Base Rental payment is not received by Landlord on or before the tenth
(10 th) day of the month for which such rent is due, or if any other payment due
Landlord by Tenant hereunder (such sums being deemed to be additional Rent) is
not received by Landlord on or before the tenth (10 th) day of the month next
following the month in which Tenant was invoiced, a service charge of five
percent (5%) of such past due amount shall be additionally due and payable by
Tenant. Such service charge shall be cumulative of any other remedies Landlord
may have for nonpayment of Rent and other sums payable under this Lease.
(d) If three (3) consecutive monthly Rental payments or any five (5)
monthly Rental payments during the Lease term (or any renewal or extension
thereof) are not received by Landlord on or before the tenth (10 th) day of the
month for which Rent was due, the Base Rent hereunder shall automatically become
due and payable by Tenant in advance in quarterly installments equal to three
(3) months' Base Rent each. The first of such quarterly Base Rent payments shall
be due and payable on the first day of the next succeeding calendar month and on
the first day of every third (3 rd) calendar month thereafter. This remedy shall
be cumulative of any other remedies of Landlord under this Lease for nonpayment
of Rent.
6. ADDITIONAL RENT:
(a) Taxes, Insurance and Common Area Maintenance
(1) In the event the "Tax, Insurance and Common Area Maintenance
Expenses" (as defined below) of the Building shall in any calendar year during
the term of this Lease exceed the sum of Base Year 1996 per square foot, then
with respect to such excess (the "Tax, Insurance and Common Area Maintenance
Differential"), Tenant agrees to pay as additional rental Tenant's pro rata
share of the Tax, Insurance and Common Area Maintenance Differential within ten
(10) days following receipt of an invoice from Landlord stating the amount due.
The pro rata share to be paid by Tenant is fifteen percent (15%) subject,
however, to adjustment for any expansion of the Leased Premises. In the case of
a multi-building Project, if such Tax, Insurance and Common Area Maintenance
Expenses are not separately assessed to the building but are assessed against
the Project as a whole, Landlord shall determine the portion of such Tax,
Insurance and Common Area Maintenance Expenses allocable to the Building in
which the Leased Premises are located.
(2) At or prior to the commencement of this Lease and at any time
during the Lease term, Landlord may deliver to Tenant a written estimate of any
additional rent applicable to the Leased Premiss (based on the pro rata share
stated above) which may be anticipated for excess Tax, Insurance and Common Area
Maintenance Expenses during the calendar year in which this Lease commences or
for any succeeding calendar year, as the case may be. Based upon such written
estimate, the monthly Base Rental shall be increased by one-twelfth (1/12) of
the estimated additional rent.
(3) Statements showing the actual Tax and Insurance Expenses (as
well as the actual Common Area Maintenance Expenses, as defined in Paragraph 6
(b) below) and Tenant's proportionate share thereof (hereinafter referred to as
the "Statement of Actual Adjustment") shall be delivered by Landlord to Tenant
after any calendar year in which additional rental was paid or due by Tenant.
Within ten (10) days after the delivery by Landlord to Tenant of such statement
of Actual Adjustment, Tenant shall pay Landlord the amount of any additional
rental shown on such statement as being due and unpaid. If such Statement of
Actual Adjustment shows that Tenant has paid more than the amount of additional
rental actually due from Tenant for the preceding calendar year and if Tenant is
not then in default under this Lease, Landlord shall credit the amount of such
excess to the next base Rental installment due from Tenant.
(4) "Tax and Insurance Expenses" shall mean: (i) all ad valorem,
rental, sales, use and other taxes (other than Landlord's income taxes), special
assessments, and other governmental charges, and all assessments due to deed
restrictions and/or owner's associations which accrue against the Building
during the term of this Lease; and (ii) all insurance premiums paid by Landlord
with respect to the Building including, without limitation, public liability,
casualty, rental, and property damage insurance.
(b) Common Area Maintenance
(1) "Common Area Maintenance Expenses" shall mean all expenses
(other than the Tax and Insurance Expenses described above) incurred by Landlord
for the maintenance, repair, and operation of the Building, (excluding only
structural soundness of the roof, foundation and exterior walls) including, but
not limited to, management fees, utility expenses (if not separately metered),
maintenance and repair costs, sewer, landscaping trash and security costs (if
furnished by Landlord), wages and fringe benefits payable to employees of
Landlord whose duties are connected with the operation and maintenance of the
Building, amounts paid to contractors of subcontractors for work or services
performed in connection with the operation and maintenance of the Building, all
services, supplies, repairs, replacements or other expenses for maintaining,
repairing, and operating the
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Building, including without limitation common areas and parking areas and roof,
exterior wall and foundation work that is not related to structural soundness.
(2) The term "Common Area Maintenance Expenses" does not include the
cost of any capital improvement to the Building other than the reasonably
amortized cost of capital improvements which result in the reduction of
Insurance Expenses or Common Area Maintenance Expenses. Further, the term
"Common Area Maintenance Expenses" shall not include repair, restoration or
other work occasioned by fire, windstorm or other casualty with respect to which
Landlord actually receives insurance proceeds, income and franchise taxes of
Landlord, expenses incurred in leasing to or procuring of tenants, leasing
commissions, advertising expenses, expenses for the renovating of space for new
tenants, interest or principal payments on any mortgage or other indebtedness of
Landlord, compensation paid to any employee of Landlord above the grade of
building superintendent, or depreciation allowance or expense.
(c) If the Commencement Date of this Lease is a day other than the
first day of a month, or if the Terminating Date is a day other than the last
day of a month, the amount shown as due by Tenant on the statement of Actual
Adjustment shall reflect a proration based on the ratio that the number of days
this Lease was in effect during such month bears to the actual number of days in
said month.
(d) The failure of Landlord to exercise its rights hereunder to
estimate expenses and require payment of same as additional rental shall not
constitute a waiver of such rights which rights may be exercised from time to
time at Landlord's discretion.
(e) If the nature of Tenant's business or use of the Leased Premises
is such that additional costs are incurred by Landlord for cleaning, sanitation,
trash collection or disposal services, Tenant agrees to pay as additional rental
to Landlord the amount of such additional costs upon demand.
7. TENANT REPAIRS AND MAINTENANCE:
(a) Tenant shall maintain all parts of the Leased Premises and their
appurtenances (except those for which Landlord is expressly responsible under
this Lease) in good, clean and sanitary condition at its own expense. Tenant
shall promptly make all necessary repairs and replacements to the Leased
Premises, including but not limited to, electric light lamps or tubes, windows,
glass and plate glass, interior and exterior doors, any special office entry,
interior walls and finish work, floors and floor coverings, downspouts, gutters,
heating and air conditioning systems, dock boars, truck doors, dock bumpers,
plumbing work and fixtures other than common building sewage lines. Tenant shall
be obligated to repair wind damage to glass caused by events other than
hurricanes or tornadoes. Otherwise, however, Tenant shall not be obligated to
repair any damage caused by fire, hurricane, tornado or other casualty covered
by the insurance maintained by Landlord.
(b) Tenant shall not damage or disturb the integrity, structural
soundness, or support of any wall, roof, or foundation of the Leased Premises.
Any damage to these walls caused by Tenant or its employees, agents or invitees
shall be promptly repaired by Tenant at its sole cost and expense.
(c) Tenant shall, at its own cost and expense, enter into a
regularly scheduled preventive maintenance/service contract with a maintenance
contractor for servicing all heating and air conditioning systems and equipment
within the Leased Premises. The maintenance contractor and the contract must be
approved by Landlord. The service contract must include all services suggested
by the equipment manufacturer within the operation/maintenance manual and must
become effective (and a copy delivered to Landlord) within thirty (30) days of
the date Tenant takes possession of the Leased Premises. If Tenant fails to
enter into such service contract as required, Landlord shall have the right to
do so on Tenant's behalf and Tenant agrees to pay Landlord the cost and expense
of same upon demand.
(d) Tenant shall pay all charges for pest control and extermination
with in the leased Premises.
(e) At the termination of this Lease, Tenant shall deliver the
Leased Premises "broom clean" to Landlord in the same good order and condition
as existed at the Commencement Date of this Lease, ordinary wear, natural
deterioration beyond the control of Tenant, damage by fire, tornado or other
casualty excepted.
(f) Not in limitation on the foregoing, it is expressly understood
that Tenant shall repair and pay for all damage caused by the negligence of
Tenant, Tenant's employees, agents or invitees, or caused by Tenant's default
hereunder. All requests for repairs or maintenance that are the responsibility
of Landlord under this Lease must be made in writing to Landlord at the address
set forth below.
8. LANDLORD'S REPAIRS: Landlord shall be responsible, at its expense, only
for the structural soundness of the roof, foundation and exterior walls of the
Building. Any repair to the roof, foundation or exterior walls occasioned by the
act or omission of Tenant, or its agents, employees, guests or invitees shallobe
bility ofnsibility of Tenant. The term "walls" as used in this Paragraph 8 shall
not include windows, glass or plate glass, interior doors, special store fronts,
office entries or exterior doors. Landlord's liability with respect to any
defects, repairs or maintenance for which Landlord is responsible at its expense
under this Lease shall be limited to the cost of such repairs or maintenance or
the curing of such defect. As expenses included in Common Area Maintenance
Expenses, Landlord will be responsible for landscaping and maintenance of common
areas and parking areas, exterior painting, and common sewage line plumbing.
Tenant shall immediately give Landlord written notice of defects or need for
repairs, after which Landlord shall have a reasonable opportunity to repair same
or cure such defect. Landlord shall not be required to perform any covenant or
obligation of this Lease, or be liable in damages to Tenant, so long as the
performance or non-performance of the covenant or obligation is delayed, caused
by, or prevented by an act of God or force majeure. An "act of God" or "force
majeure" is defined for purposes of this Lease as strikes, lockouts, sit-downs,
material or labor restrictions by any governmental authority, riots, floods,
washouts, explosions, earthquakes, fire, storms, acts of the public enemy, wars,
insurrections and other similar
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cause not reasonably within the control of Landlord, and which by the exercise
of due diligence Landlord is unable, wholly or in part, to prevent or overcome.
9. UTILITY SERVICE: Tenant shall pay the cost of all utility services,
including, but not limited to, initial connection charges and all charges for
gas, water, and electricity used on the Leased Premises. If the Leased Premises
are separately metered, Tenant shall pay such costs directly to the appropriate
utility company. Otherwise, Tenant shall pay such costs pursuant to Paragraph
6(b) above. Tenant shall pay all costs caused by Tenant introducing excessive
pollutants into the sanitary sewer system, including permits, fees and charges
levied by any governmental subdivision for any pollutants or solids other than
ordinary human waste. If Tenant can be clearly identified as being responsible
for obstructions or stoppage of the common sanitary sewage line, the Tenant
shall pay the entire cost thereof, upon demand, as additional rent. Tenant shall
be responsible for the installation and maintenance of any dilution tanks,
holding tanks, settling tanks, sewer sampling devices, sand traps, grease traps
or similar devices which may be required by the appropriate governmental
subdivision for Tenant's use of the sanitary sewer system. Tenant shall also pay
all surcharges (i.e. charges in excess of normal charges) levied due to Tenant's
abnormal use of sanitary sewer or waste removal services so that no such
surcharges shall affect Landlord or other tenants in the Project under Paragraph
6(b) above.
10. SIGNS: No sign, door plaques, advertisement, or notice shall be
displayed, painted or affixed by Tenant on any part of the Project or Building,
parking facilities, or Leased Premises without prior written consent of
Landlord. The color, size, character, style, material, and placement shall be
approved by landlord, and subject to any applicable governmental laws,
ordinances, regulations, project specifications, and other requirements. Sign on
doors and entrances to the Leased Premises, if approved by Landlord, shall be
placed thereon by a contractor approved by Landlord and paid for by Tenant.
Tenant shall remove all such signs at the termination of this lease. Such
installations and removals shall be made in such manner as to avoid injury or
defacement of the Project and other improvements, and Tenant, at its sole
expense, shall repair any injury or defacement, including, without limitation,
any discoloration caused by such installation and/or removal.
11. USAGE: Tenant warrants and represents to Landlord that the Leased
Premises shall be sued and occupied only for the purpose of office, sale,
warehouse and distribution of medical equipment and supplies. Any change in the
stated usage purposes or in the scope or extent of such usage as previously
described to Landlord by Tenant shall be subject to the prior written approval
of Landlord. Tenant shall occupy the Leased Premises, conduct its business and
control its agents, employees, invitees and visitors in a lawful and reputable
way and as not to create any nuisance or otherwise interfere with, annoy or
disturb any other tenant in its normal business operations or Landlord in its
management of the project. Tenant shall not commit, or allow to be committed,
any waste on the Leased Premises.
12. INSURANCE:
(a) Tenant shall not permit the Leased Premises to be used in any
way which would, in the opinion of Landlord, be hazardous or which would in any
way increase the cost of or render void the fire insurance on improvements or
contents in the Project belonging to Landlord or other tenants. If any time
during the term of this Lease the State Board of Insurance or other insurance
authority disallows any of Landlord's sprinkler credits or imposes an additional
penalty or surcharge in landlord's insurance premiums because of Tenant's
original or subsequent placement or use of storage racks or bins, method of
storage, or nature of Tenant's inventory or any other act of Tenant, Tenant
agrees to pay as additional rental the increase in Landlord's insurance
premiums. If an increase in the fire and extended coverage premiums paid by
landlord for the Building in which Tenant occupies space is caused by Tenant's
use or occupancy of the Leased Premises; or if Tenant vacates the Leased
Premises and caused an increase, then Tenant shall pay as additional rental the
amount of such increase to Landlord.
(b) Tenant shall procure and maintain throughout the term of this
Lease a policy or policies of insurance, at its sole cost and expense, insuring
both Landlord and Tenant against all claims, demands or actions arising out of
or in connection with: (1) the Lease Premises; (ii) the condition of the Leased
Premises; (iii) Tenant's operations in and maintenance and use of the Leased
Premises; and (iv) Tenant's liability assumed under this Lease. The limits of
such policy or policies shall be not less than one million dollars ($1,000,000)
combined single limit coverage per occurrence for injury to persons (including
death) and/or property damage or destruction, including loss of use. All such
policies shall be procured by Tenant from responsible insurance companies
satisfactory to Landlord. Certified copies of such policies, together with
receipts for payment of premiums, shall be delivered to Landlord prior to the
commencement Date of this Lease. Not less than fifteen (15) days prior to the
expiration date of any such policies, certified copies of renewal policies and
evidence of the payment of renewal premiums shall be delivered to Landlord. All
such original renewal policies shall provide for at least thirty (30) days
written notice to landlord before such policy may be canceled or changed to
reduce insurance coverage provided thereby. Upon request of Landlord, Tenant
further agrees to complete and return to Landlord an insurance questionnaire
(such form to be provided by Landlord) regarding Tenant's insurance coverage and
intended use of the Leased Premises. Tenant warrants and represents that all
information contained in such questionnaire shall be true and correct as of the
date thereof and shall be updated by Tenant from time to time upon Landlord's
request.
13. RELOCATION: Upon request by Landlord during the term of this Lease,
Tenant agrees to relocate to other space in the Building and/or Project
designated by Landlord, provided such other space is as large or larger than the
Leased Premises and has at least the same number of windows. Landlord shall pay
all out-of-pocket expenses of any such relocation, including the expenses of
moving and reconstructing all Tenant furnished and Landlord furnished
improvements. In the event of such relocation, this Lease shall continue in full
force and effect without any change in its terms other than substitution of the
new description of the Leased Premises for the original description set forth in
Paragraph 3 of this Lease.
14. COMPLIANCE WITH LAWS, RULES AND REGULATIONS: Tenant shall comply with
all applicable laws, ordinances, orders, rules and regulations of state, federal
municipal, or other agencies or bodies relating to the use, condition and
occupancy of, and business conducted on, the Leased Premises including without
limitation, the Resource Conservation and Recovery Act, the comprehensive
Environmental Response Act, and the
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rules of the Project which may hereafter be adopted by Landlord. Landlord shall
have the right at all times to change the rules and regulations of the Project
or to amend them in any reasonable manner as may be deemed advisable for the
safety, care, cleanliness, and good order of the Project and Leased Premises.
All rules and regulations of the Project and any changes or amendments thereto
will be sent by Landlord to Tenant in writing and shall thereafter be carried
out and observed by Tenant.
15. ASSIGNMENT AND SUBLETTING: The Tenant agrees not to assign, transfer,
or mortgage this Lease or any right or interest therein, or sublet the Leased
Premises or any part thereof, without the prior written consent of Landlord. No
Assignment or subletting made with the consent of Landlord shall relieve Tenant
of its obligations hereunder, and Tenant shall continue to be liable as a
principal (and not as a guarantor or surety) to the same extent as though no
assignment or sublease had been made. Consent by landlord to an assignment or
sublease shall not be construed to be consent to any additional assignment or
subletting. Each such successive act shall require similar consent of Landlord.
Landlord shall be reimbursed by Tenant for any costs or expenses incurred as a
result of Tenant's request for consent to any such assignment or subletting. In
the event Tenant subleases the Leased Premises, or any portion thereof, or
assigns this Lease with the consent of the Landlord at an annual Base Rental
exceeding that stated herein, such excess shall be paid by Tenant to Landlord as
additional rental hereunder within ten (10) days after receipt by Tenant. Upon
the occurrence of an "event of default" as defined below, if all or any part of
the Leased Premises are then assigned or sublet, Landlord may, in addition to
any other remedies provided by this Lease or provided by law, collect directly
from the assignee or subtenant all rents due to Tenant. Landlord shall have a
security interest in all properties on the Leased Premises to secure payment of
such sums. Any collection directly by Landlord from the assignee or subtenant
shall not be construed, however, to constitute a novation or release of Tenant
from the further performance of its obligations under this Lease.
Notwithstanding the foregoing, it is expressly agreed that if this Lease is
assigned to any person or entity pursuant to the provisions of the Bankruptcy
Code, 11 U.S.C. ss. 101 et esp. (The "Bankruptcy Code"), any and all monies or
other considerations payable or otherwise to be delivered in connection with
such assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenants or
of the estate of Tenant within the meaning of the Bankruptcy Code. Any and all
monies or other considerations constituting Landlord's property under the
preceding sentence not paid or delivered to Landlord shall be held in trust for
the benefit of Landlord and be promptly paid or delivered to Landlord. Any
person or entity to which this Lease is assigned pursuant to the provisions of
the Bankruptcy Code shall be deemed without further act or deed to have assumed
all of the obligations arising under this Lease on and after the date of such
assignment. Any such assignee shall upon demand execute and deliver to Landlord
an instrument confirming such assumption.
16. ALTERATIONS AND IMPROVEMENTS:
(a) Tenant shall not make or perform, or permit the making or
performance of, any initial or subsequent tenant finish work or any alterations,
installations, decorations, improvements, additions or other physical changes in
or about the Leased Premises (referred to collectively as "Alterations") without
Landlord's prior consent. Landlord agrees not to withhold its consent
unreasonably to any nonstructural Alterations proposed to be made by Tenant to
adapt the Leased Premises for Tenant's business purposes. Notwithstanding the
foregoing provisions or Landlord's consent to any Alterations, all Alterations
shall be made and performed in conformity with and subject to the following
provisions: All Alterations shall be made and performed at Tenant's sole cost
and expense and at such time and in such manner as Landlord may from time to
time reasonably designate. Alterations shall be made only by contractors or
mechanics approved by Landlord, such approval not to be unreasonably withheld.
No Alteration shall affect any part of the Building other than the Leased
Premises or adversely affect any service required to be furnished by Landlord to
Tenant or to any other tenant or occupant of the Building or reduce the value of
the Building. No alteration shall affect the outside appearance of the Building.
Tenant shall submit to Landlord detailed plans and specifications (including
layout, architectural, mechanical and structural drawings) from each proposed
Alterations and shall not commence any such Alteration without first obtaining
Landlord's written approval of such plans and specifications. Prior to the
commencement of each proposed Alteration, Tenant shall furnish to Landlord
duplicate original policies of worker's compensation insurance covering all
persons to be employed in connection with such Alterations, including those to
be employed by all contractors and subcontractors and comprehensive Public
liability insurance (including property damage coverage) in which Landlord, its
agents, and any lessor under any ground or underlying lease, and any mortgagee
of the Building shall be named as parties insured, which policies shall be
issued by companies, and shall be in form and amounts, satisfactory to Landlord
and shall be maintained by Tenant until the completion of such Alteration. If
Landlord shall require to assure payment of all costs of such alterations, prior
to commencement or any approved Alteration, Tenant shall cause to be issued and
delivered to Landlord an irrevocable documentary letter of credit or payment
bond in the full amount of the cost of the said approved Alterations issued by a
substantial banking institution reasonably acceptable to Landlord payable in
whole or in part, from time to time to the order of Landlord upon written demand
accompanied by Landlord's certification that Tenant has defaulted with respect
to the obligation secured thereby. The term of the letter of credit shall be
from date of issuance through ninety (90) days after completion of construction
of the approved Alterations. Tenant shall cause its contractor to provide
Landlord with a certificate of completion of the Alterations and a bills paid
affidavit and full lien waiver, and upon receipt of same, and no fewer than
thirty-one (31) days following completion if Tenant is not in default hereunder,
Landlord shall return the letter of credit to Tenant unused and endorsed for
cancellation. Tenant shall, if requested by Landlord at the time of Landlord's
consent to the Alterations, agree to restore the Leased Premises at the
termination of this Lease to their condition prior to making such alterations.
All permits, approvals and certificates required by all governmental authorities
shall be timely obtained by Tenant and submitted to Landlord. Notwithstanding
Landlord's approval of plans and specifications for any Alterations, all
Alterations shall be made and performed in full compliance with applicable laws,
orders and regulations of Federal, State, County, and Municipal authorities and
with all directions pursuant to law, of all public officers, and with all
applicable rules, orders, regulations and requirements of the Dallas Board of
Fire Underwriters or any similar body. All alterations shall be made and
performed in accordance with the Building rules. All materials and equipment to
be incorporated in the Leased Premises as a result of all Alterations shall be
new and first quality. No such materials or equipment shall be subject to any
lien, encumbrance, chattel mortgage or title retention or security agreement. If
such Alterations are being performed by Tenant in connection with Tenant's
initial occupancy of the Leased Premises, Tenant agrees to make proper
application for, and obtain, a certificate of occupancy from the city in
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which the Leased Premises are located. Tenant shall furnish such certificate to
Landlord promptly after issuance of same.
(b) Tenant shall not at any time prior to or during the term of this
Lease, directly or indirectly employed or permit the employment of, any
contractor, mechanic, or laborer in the Leased Premises, whether in connection
with any Alteration or otherwise, if such employment will interfere or cause any
conflict with other contractors, mechanics, or laborers engaged in the
construction, maintenance or operation of the Building by Landlord, Tenant, or
other. In the event of any such interference or conflict. Tenant, upon demand of
Landlord, shall cause all contractors, mechanics, or laborers causing such
interference or conflict and leave the Building immediately.
(c) All appurtenances, fixtures, improvements, and other property
attached to or installed in the Leased Premises, whether by Landlord or Tenant
or others, and whether at Landlord's expense or Tenant's expense or the joint
expense of Landlord and Tenant, shall be and remain the property of Landlord,
except that any such fixtures, improvements, additions, and other property which
have been installed at the sole expense of Tenant and which are removable
without material damage to he Leased Premises shall be and remain the property
of Tenant. At Landlord's option, Tenant shall remove any property belonging to
Tenant at the end of the term hereof, and tenant shall repair or, at Landlord's
option, shall pay to Landlord the cost of repairing any damage arising from such
removal. Any replacements of any property of Landlord, whether made at tenant's
expense or otherwise, shall be and remain the property of Landlord.
17. CONDEMNATION:
(a) If, during the term (or any extension or renewal) of this Lease,
all or a substantial part of the Leased Premises are taken for any public or
quasi-public use under any governmental law, ordinance or regulation or by right
of eminent domain or by private purchase in lieu thereof, and the taking would
prevent or materially interfere with the then current use of the Leased
Premises, this Lease shall terminate and the Rent shall be abated during the
unexpired portion of this Lease effective on the date physical possession is
taken by the condemning authority.
(b) If a portion of the Leased Premises is taken as described above and
this Lease is not terminated as provided is subparagraph (a) above, the Rent
payable under this Lease during the unexpired portion of the term shall be
adjusted to such an extent as may be fair and reasonable under the
circumstances.
(c) In the event of such taking or private purchase in lieu thereof,
Landlord and tenant shall each be entitled to receive any sums separately
awarded to each party by the condemning authority. In the event separate awards
to Landlord and Tenant are not made, Landlord shall be entitled to receive any
and all sums by the condemning authority.
18. FIRE AND CASUALTY:
(a) If the Building should be damaged or destroyed by fire, tornado, or
other casualty, Tenant shall give immediate written notice thereof to landlord.
(b) If the Building should be totally destroyed by fire, tornado, or
other casualty, or if it should be so damaged thereby that rebuilding or repairs
cannot in Landlord's estimation be completed within one hundred eighty (180)
days after the date on which Landlord is notified by Tenant of such damage, this
Lease shall terminate and the Rent shall be abated during the unexpired portion
of this Lease, effective upon the date of occurrence of such damage.
(c) If the Building should be damaged by any peril covered by the
insurance maintained by Landlord, but only to such extent that rebuilding or
repairs can in Landlord's estimation be completed within one hundred eighty
(180) days after the date on which Landlord is notified by Tenant of such
damage, this Lease shall not terminate and Landlord shall, to the extent of
insurance proceeds received, then proceed with reasonable diligence to rebuild
and repair, or replace any part of the partitions, fixtures, additions, and
other improvements which may have been placed in, on, or about the Lease
Premises by Tenant. If the Leased Premises are untenantable in whole or in part
following such damage, the Rent payable hereunder during the period in which
they are tenantable shall be reduced to such extent as may be fair and
reasonable under all of the circumstances. If Landlord should fail to complete
such repairs and rebuilding within one hundred eighty (180) days after the date
on which Landlord is notified by Tenant of such damage, Tenant may terminate
this Lease by delivering written notice of termination to Landlord. Such
termination shall be Tenant's exclusive remedy and all rights and obligations of
the parties under this Lease shall then cease. Notwithstanding the foregoing
provisions of this subparagraph (c), Tenant agrees that if the Leased Premises,
the Building and/or Project are damaged by fire or other casualty caused by the
fault or negligence of Tenant or Tenant's agents, employees or invitees, Tenant
shall have not option to terminate this Lease, even if the damage cannot be
repaired within one hundred eighty (180 days), and the Rent shall not be abated
or reduced before or during the repair period.
(d) Notwithstanding anything herein to the contrary, if the holder of
any indebtedness secured by a mortgage or deed of trust covering the Building
and/or Project requires that the insurance proceeds by applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is made. All rights and obligations under this Lease
shall then cease.
19. CASUALTY INSURANCE: Landlord shall at all times during the term of
this Lease maintain a policy or policies of insurance with the premiums paid in
advance, issued by and bind upon some solvent insurance company, insuring the
Building against loss or damage by fire, explosion, or other hazards and
contingencies. Landlord shall not be obligated, however, to insure any personal
property (including, but not limited to any furniture machinery goods or
supplies) of Tenant or which Tenant may have in the Leased Premises or any
fixtures installed by or paid for by Tenant upon or within the Leased Premises
or any improvements which Tenant may construct or install on the Leased Premises
or any signs identifying Tenant's business on the exterior of the Building.
6
<PAGE>
20. WAIVER OF SUBROGATION: To the extent that Landlord or Tenant receives
casualty insurance proceeds, such recipient hereby waives and releases any and
all rights, claims, demands and causes of action such recipient may have against
the other on account of any loss or damage occasioned to such recipient or its
businesses real and personal properties, the Leased Premises, the Building, the
Project, or its contents arising from any risk or peril covered by any insurance
policy carried by either party. Inasmuch as the above mutual waivers will
preclude the assignment of any such claim by way of subrogation (or otherwise)
to any insurance company (or any other person), each party hereto hereby agrees
immediately to give to its respective insurance companies written notice of the
terms of such mutual waivers and to have their respective insurance policies
property endorsed, if necessary, to prevent the invalidation of such insurance
coverages by reason of such waivers. This provision shall be cumulative of
Paragraph 21 below.
21. HOLD HARMLESS: Landlord shall not be liable to Tenant, Tenant's
employees, agents, invitees, licensees or visitors, or to any other person, for
any injury to person or damage to property on or about the Leased Premises or
the Project caused by the negligence or misconduct of Tenant, its agents,
employees, invitees, or of any other persons entering upon the Leased Premises
or the Project under express or implied invitation by Tenant. Tenant agrees to
indemnify and hold Landlord harmless from any and all loss, attorney's fees,
expenses, or claims arising out of any such damage or injury.
22. QUIET ENJOYMENT: Landlord warrants that it has full right to execute
and to perform this Lease and to grant the estate demised and that Tenant, upon
payment of the required Rent and performing the covenants and agreements
contained in this Lease, shall peaceably and quietly have, hold, and enjoy the
Leased Premises during the full term of this Lease, including any extensions or
renewals thereof.
23. LANDLORD'S RIGHT OF ENTRY: Landlord shall have the right, at all
reasonable hours, to enter the Leased Premises for the following reasons:
inspection, cleaning or making repairs, making such alterations or additions as
Landlord may deem necessary or desirable; installation of utility lines
servicing the Leased Premises or any other space in the building; determining
Tenant's use of the Leased Premises, or for determining if any act of default
under this Lease has occurred. Landlord shall give twenty-four (24) hours
written notice to Tenant prior to such entry, except in cases of emergency when
Landlord may enter the Leased Premises at any time and without prior notice.
During the period that is six (6) months prior to the end of the Lease term,
Landlord and Landlord's agents and representatives shall have the right t enter
the Leased Premises at any reasonable time during business hours, without
notice, for the purpose of showing the Leased Premises and shall have the right
to erect on the Leased Premises a suitable sign indicating the Leased Premises
are available for lease. Tenant shall give written notice to Landlord at least
thirty (30) days prior to vacating the Leased Premises and shall arrange to meet
with Landlord for a joint inspection of the leased Premises prior to vacating.
In the event of Tenant's failure to give such notice or arrange such joint
inspection, Landlord's inspection at or after Tenant's vacating the Leased
Premises shall be conclusively deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
24. ASSIGNMENT OF LANDLORD'S INTEREST IN LEASE: Landlord shall have the
right to transfer and assign, in whole or in part, its rights and obligations
with respect to the Project and premises that are the subject of this Lease,
including Tenant's security deposit. In such event, Landlord shall be released
from any further obligation under this Lease and Tenant agrees to look solely to
Landlord's successor for the performance of such obligations.
25. LANDLORD'S LIEN: In addition to any statutory lien for Rent in
Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a
continuing security interest for all Rentals and other sums of money becoming
due under this Lease from Tenant, upon all goods, wares, equipment, fixtures,
furniture inventory, accounts, contract rights, and other personal property of
Tenant situated on or arising from the leased Premises. Such property shall not
be removed without the consent of Landlord, which consent may be withheld by
landlord without cause so long as any of Tenant's duties or obligations
hereunder have not ben fully performed. In the event of a default under this
Lease, Landlord shall have, in addition to any other remedies provided in this
Lease or by law, all rights and remedies under the Texas Uniform Commercial
Code, including without limitation the right to sell the property described in
the Paragraph at public service or private sale upon five (5) days notice to
Tenant. Tenant hereby agrees to execute such financing statements and other
instruments necessary or desirable in Landlord's discretion to perfect the
security interest hereby created. The express contractual lien herein granted,
is in addition and supplementary to any statutory lien for Rent.
26. DEFAULT BY TENANT: The following shall be events of default by Tenant
under this Lease:
(a) Tenant shall fail to pay when due any installment of Rent or other
payment required pursuant to this Lease.
(b) Tenant shall abandon or vacate any substantial portion of the
Leased Premises, whether or not Tenant is in default of the Rental payments due
under this Lease;
(c) Tenant shall fail to comply with any term, provision or covenant of
this Lease, other than the defaults listed in this paragraph 16, and the failure
is not cured within ten (10) days after written notice thereof to Tenant;
(d) Tenant shall file a petition or be adjudged a debtor or bankrupt or
insolvent under the National Bankruptcy Code, as amended, or any similar law or
statute of the United States or any state; or a receiver or trustee shall be
appointed for all or substantially all of the assets of Tenant; or Tenant shall
make a transfer in fraud of creditors or shall make an assignment for the
benefit of creditors;
(e) Tenant shall do or permit to be done any act which results in a
lien being filed against the Leased Premises.
7
<PAGE>
27. REMEDIES FOR TENANT'S DEFAULT: Upon the occurrence of any event of
default set forth in this Lease, Landlord shall have the option to pursue anyone
or more of the following remedies without any prior notice or demand;
(a) Landlord may terminate this Lease, in which event Tenant shall
immediately surrender the Leased Premises to landlord, and if Tenant fails to do
so, Landlord may, without prejudice to any other remedy which it may have, enter
upon and take possession of the Leased Premises, and expel or remove Tenant and
any other person who may be occupying all or any part of the Leased Premises.
Landlord shall not be liable for prosecution or any claim for damages as a
result of such actions. Tenant agrees to pay on demand the amount of all losses,
costs, expenses, deficiencies, and damages, including, without limitation,
reconfiguration expenses, rental concessions and other inducements to new
tenants, advertising expenses and broker's commissions, which Landlord may incur
or suffer by reason of Tenant's default or the terminating o the Lease under
this subparagraph, whether through inability to relet the Leased Premiss on
satisfactory terms or otherwise. Tenant acknowledges that its obligation to pay
Base Rent and all additional Rent hereunder is not only compensation for use of
the Leased Premises but also compensation for sums already expended and/or being
expended by Landlord with respect to its obligations hereunder and with respect
to the Leased Premises, and Tenant acknowledges that Tenant's default in timely
payment of all sums due hereunder shall constitute significant financial loss to
Landlord. Tenant further acknowledges that any failure to pay any sum due
hereunder shall evidence Tenant's inability to meet its debts as they become
due. In such event, in addition to Landlord's other remedies hereunder, Landlord
shall be entitled to accelerate all Base Rental remaining unpaid hereunder, the
entirety of which all, at the option of Landlord be immediately due and payable.
(b) Landlord may enter upon and take possession of the Leased Premises
and expel or remove Tenant and any other person who may be occupying all or any
part of the Leased Premises (without being liable for prosecution or any claim
for damages therefor) and relet the Leased Premises on behalf of Tenant and
receive directly the rent of the reletting. Tenant agrees to pay Landlord on
demand any deficiency that may arise by reason of any reletting of the Leased
Premises and to reimburse Landlord on demand for any losses, costs and expenses,
including without limitation, reconfiguration expenses, rental concessions and
other inducements t new tenants, advertising costs or broker's commissions,
which Landlord may incur or suffer as a result of Tenant' default or in
reletting the Leased Premises. Tenant further agrees to reimburse Landlord for
any expenditures made by it for remodeling or repair necessary in order to relet
the Leased Premises. In the event Landlord is successful in reletting the Leased
Premises at a rental in excess of that agreed to be paid by Tenant pursuant to
this Lease, Landlord and Tenant agree that Tenant shall not be entitled, under
any circumstances, to such excess rental, and Tenant does hereby specifically
waive any claim to such excess rental.
(c) Landlord may enter upon the Leased Premises (without being liable
for prosecution or any claim for damages therefor) and do whatever Tenant is
obligated to do under the terms of this Lease. Tenant agrees to reimburse
Landlord on demand for any losses, costs and expenses which Landlord may incur
in effecting compliance with Tenant's obligations under this Lease. Tenant
further agrees that Landlord shall not be liable for any damages resulting to
Tenant from effecting compliance with Tenant's obligations under this
subparagraph, whether caused by the negligence of Landlord or otherwise.
(d) Landlord may pursue any remedy provided at law or in equity.
(e) Landlord shall have no duty to relet the Premises, and the failure
of Landlord to do so shall not release or affect Tenant's liability for Rentals
and other charges due hereunder or for damages.
(f) No re-entry or reletting of the Premises or any filing or service
of an unlawful detainer action or similar action shall be construed as an
election by Landlord to terminate Tenant's right to possession under this Lease
unless a written notice of such intention is given by Landlord to Tenant.
Notwithstanding any such reletting without terminating. Landlord may at any time
thereafter elect to terminate this Lease and Tenant's right to possession
hereunder.
28. TERMINATION OF OPTIONS: In there exist any options or special rights
which landlord may have granted Tenant under this Lease including, but not
limited to, options or rights regarding extensions of the Lease term, expansion
of the Leased Premises, or acquisition of any other interest in the Leased
Premises or the Building, then all such options and rights are independent of
the leasehold estate hereby granted to Tenant by Landlord. Landlord and Tenant
agree and acknowledge that the negotiated consideration for any such options or
special rights is Tenant's entry into this Lease and that no portion of any sums
due and payable by Tenant to Landlord hereunder is attributable thereto. In
addition to, and not in lieu of, the above remedies of Landlord for Tenant's
default, any and all such options or special rights shall be automatically
terminated upon the occurrence of the following events:
(a) Tenant shall have failed to pay when due any installment of Rent or
other sums payable under this Lease for any three (3) consecutive months during
the Lease term or any renewal or extension thereof, or for any five (5) months
during the Lease term or any renewal or extension thereof, whether or not said
defaults are cured by Tenant; or
(b) Tenant shall have received two (2) or more notices of default under
paragraph 26(C) above with respect to any other covenant of this Lease, whether
or not such default(s) is/are cured; or
(c) Tenant shall have committed or suffered to exist any other event of
default described under Paragraph 26 above, whether or not such default is cured
by Tenant.
29. WAIVER OF DEFAULT OR REMEDY: Failure of Landlord to declare a default
immediately upon its occurrence, or delay in taking any action in connection
with an event of default, shall not be waiver of the default. Landlord shall
have the right to declare the default at any time and take such action as is
lawful or
8
<PAGE>
authorized under this Lease. Pursuit of any one or more of the remedies set
forth in Paragraph [ILLEGIBLE] shall not preclude pursuit of any one or more of
the other remedies provided therein or elsewhere in this Lease provided by law,
nor shall pursuit of any remedy by a forfeiture or waiver of any Rent or damages
accruing to Landlord by reason of the violation of any of the terms of this
Lease. Failure by Landlord to enforce one or more of its remedies upon an event
of default shall not be construed as a waiver of the default or of any other
violation or breach of any of the terms contained in this Lease.
30. ATTORNEY'S FEES: In the event any litigation arises hereunder, it is
specifically stipulated that this Lease shall be interpreted and construed
according to the laws of the State in which the Leased Premises are located.
Further, the prevailing party in any such litigation between the parties shall
be entitled to recover, as a part of its judgment, reasonable attorney's fees.
31. HOLDING OVER: Tenant will, at the termination of this Lease by lapse
of time or otherwise, surrender immediate possession to Landlord. If Landlord
agrees in writing that Tenant may hold over after the expiration or terminating
of this Lease and if the parties do not otherwise agree, the hold over tenancy
shall be subject to terminating by Landlord at any time upon not less than five
(5) days advance written notice, or by Tenant at any time upon not less than
thirty (30) days advance written notice. Further, all of the terms and
provisions of this Lease shall be applicable during the hold over period, except
that Tenant shall pay Landlord form time to time upon demand, as Base Rent for
the period of any hold over, an amount equal to one and one-half times (1-1/2)
the Base Rent in effect on the terminating date, computed on a daily basis for
each day of the hold over period, plus all additional rental and other sums due
hereunder. If Tenant shall fail immediately to surrender possession of the
Leased Premises to Landlord upon terminating of the Lease, by lapse of time or
otherwise, and Landlord has not agreed to such continued possession as above
provided, then, until Landlord can dispossess Tenant under the terms hereof or
otherwise, Tenant shall pay Landlord from time to time upon demand, as Base rent
for the period of any such holdover, an amount equal to twice the Base Rent in
effect on the termination date, computed on a daily basis for each day of the
hold over period, plus all additional rental and other sums due hereunder. No
holding over by Tenant, whether with or without consent of Landlord shall
operate to extend this Lease except as otherwise expressly agreed by the
parties. The preceding provisions of this Paragraph shall not be construed as
Landlord's consent for Tenant to hold over.
32. RIGHTS OF MORTGAGE: Tenant accepts this Lease subject and subordinate
to any recorded mortgage, deed of trust or other lien presently existing or
hereafter to exist with respect to the Leased Premises. Landlord is hereby
irrevocably vested with full power and authority to subordinate Tenant's
interest under this Lease to any mortgage, deed of trust or other lien hereafter
placed on the Leased Premises, and Tenant agrees upon demand to execute such
additional instruments subordinating this Lease as Landlord or the holder of any
such mortgage, deed of trust, or lien may require. If the interests of Landlord
under this Lease shall be transferred by reason of foreclosure or other
proceedings for enforcement of any mortgage on the Leased Premises. Tenant shall
be bound to the transferee (sometimes called the "Purchaser") under the terms
and conditions of this Lease for the balance of the remaining lease term,
including any extensions or renewals, with the same force and effect as if the
Purchaser were Landlord under this Lease. Tenant further agrees to attorn to the
Purchaser, including the mortgagee under any such mortgage if it be the
Purchaser, as its Landlord. Such attornment shall be effective without the
execution of any further instruments upon the Purchaser succeeding to the
interest of Landlord under this Lease. The respective rights and obligations of
Tenant and the Purchaser upon the attornment, to the extent of the then
remaining balance of the term of this Lease, and any extensions and renewals,
shall be and are the same as those set forth in this Lease. Each such holder of
any mortgage, deed of trust, or lien, and each such Purchaser, shall be a
third-party beneficiary of the provisions of this Paragraph.
33. ESTOPPEL CERTIFICATES: Tenant agrees to furnish with ten (10) days,
from time to time, upon request of Landlord or Landlord's mortgagee, a statement
certifying that Tenant is in possession of the Leased Premises; the Leased
Premises are acceptable, the Lease is in full force and effect; the Lease is
unmodified; Tenant claims no present charge, lien, or claim of offset against
Rant' the Rent is paid for the current month, but is not paid and will not b
paid for more than one month in advance; there is no existing default by reason
of some act or omission by Landlord; and such other matters as may be reasonably
required by Landlord or Landlord's mortgagee.
34. SUCCESSORS: This Lease shall be binding upon and inure to the benefit
of Landlord and Tenant and their respective heirs, personal representatives,
successors and assigns. It is hereby covenanted and agreed that should
Landlord's interest in the Leases Premises cease to exist for any reason during
the term of the Lease, then notwithstanding the happening of such event this
Lease shall nevertheless remain unimpaired and in full force and effect and
Tenant hereunder agrees to attorn to the then owner of the Leased Premises.
35. REAL ESTATE COMMISSION: Tenant represents and warrants that it has
dealt with no broker, agent, or other person in connection with this
transaction and that no other broker, agent, or other person brought about this
transaction other than 4-Way Development, Inc. and Security Commercial
Management, Inc. and Tenant agrees to indemnify and hold Landlord harmless from
and against any claims by any other broker, agent, or other person claiming a
commission or other form of compensation by virtue of having dealt with Tenant
with regard to this leasing transaction. The provisions of this paragraph shall
survive the terminating of this Lease.
36. EXPANSION: If during the term of this Lease, Tenant occupies, under a
new written Lease with Landlord, space of a size substantially larger than the
present Leased Premises within any development owned by Landlord, this Lease
shall be terminated upon execution of the Lease for such substitute space.
Notwithstanding the above-stated, Tenant shall remain obligated to pay for any
Rents or other sums due Landlord as a result of Tenant's tenancy hereunder, and
such obligation shall survive the termination of this Lease pursuant to this
Paragraph 36.
37. MECHANIC'S LIENS: Tenant shall have no authority, express or implied,
to create or place any lien or encumbrance of any kind or nature whatsoever
upon, or in any manner to bind, the interest of Landlord
9
<PAGE>
with Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Each such claim shall affect and each such lien shall
attach to, if at all, only the leasehold interest granted to Tenant by this
Lease. Tenant covenants and agrees that it will pay or cause to be paid all sums
legally due and payable by it on account of any labor performed or materials
furnished in connection with any work performed on the Leased Premises on which
any lien is or can be validly and legally asserted against its leasehold
interest in the Leased Premises or the improvements thereon. Tenant further
agrees to save and hold Landlord harmless from any and all loss, cost, or
expense based on or arising out of asserted claims or liens against the terms of
this Lease. Under no circumstances shall Tenant be or hold itself out to be the
agent or representative of Landlord with respect o any alteration of the Leased
premises whether or to consented to or approved by Landlord hereunder.
38. MISCELLANEOUS:
(a) Words of any gender used in this Lease shall be held and
construed to include any other gender; and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
(b) Each party agrees to furnish to the other, promptly upon demand,
a corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization and power of such
party to enter into this Lease.
(c) The captions inserted in this Lese are for convenience only and
in no way define, limit, or otherwise describe the scope or intent of this Lease
or any provision hereof, or in any way affect the interpretation of this Lease.
(d) If any clause or provision of this Lease is illegal, invalid, or
unenforceable under present or future laws effective during the term of this
Lease, then an d in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby; and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid, or unenforceable there be added as a
part of this lease a clause as similar in terms to such illegal, invalid, or
unenforceable clause or provision as may be possible and be legal, valid, and
enforceable.
(e) Because the Leased Premises are on the open market and are
presently being shown, this Lease shall be treated as an offer to the Lease
only. Unless and until this Lease is accepted by Landlord and Tenant in writing
and a fully executed copy delivered to both parties, this offer is subject to
withdrawal or non-acceptance by Landlord and the Leased Premises may be leased
to another party or used for another purpose by Landlord without notice.
(f) All references in this Lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this Lease.
(g) If the Commencement Date shall be determined under Paragraphs
4(b) or (c) of this Lease, Landlord and Tenant shall enter into an agreement in
recordable form setting forth the commencement Date and termination Date of the
Lease term.
(h) In the event that Tenant shall fail to perform any duty or
obligation hereunder, whether maintenance, repair or replacement of the Lease
Premises, maintenance of insurance, or otherwise, then Landlord may, but shall
in no event be obligated to, without notice of any kind, take such actions as
Landlord deems necessary or appropriate to remedy such Tenant failure, and any
sums expended by Landlord and fair and just compensation for the time and effort
of Landlord shall be deemed additional Rental hereunder due and payable by
Tenant on demand.
(i) If Tenant shall fail to pay, when the same is due and payable,
any Rent, any additional Rent, or any other sum due hereunder, such unpaid
amount shall bear interest from the due date thereof to the date of payment at
the highest non-usurious s rate permitted by applicable law.
(j) Landlord does not in any way or for any purpose become a partner
of Tenant in the conduct of its business or otherwise, nor a member of a joint
venture with Tenant.
(k) Tenant shall not record this Lease without the prior written
consent of Landlord. However, upon the request of either party thereto, the
other party shall join in the execution of a memorandum or so-called "short
form" of this Lease for the purposes or recordation.
(l) Time is of the essence in the performance of all the covenants,
conditions, and agreements contained in this Lease.
(m) Any duty, obligation, or debt and any right or remedy arising
hereunder and not otherwise consummated and/or extinguished by the express terms
hereof at or as of the time of termination of this Lease, whether at the end of
the term hereof or otherwise, shall survive such termination as continuing
duties, obligations, and debts of the obligated party to the other or continuing
rights and remedies of the benefitted party against the other.
(n) This Agreement may be executed in one or more counterparts, each
of which counterparts shall for all purposes be deemed to be an original; but
all such counterparts together shall constitute but one instrument.
(o) Attached hereto, marked Exhibit "A" through Exhibit "D", are
certain exhibits to this Lease all of which are hereby incorporated herein by
reference.
40. NOTICE:
(a) All Rent and other payments required to be made by Tenant shall
be payable to Landlord at the address set forth below or any other address
Landlord may specify from time to time by written notice delivered to Tenant.
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(b) All payments, if any, required to be made by landlord to Tenant
shall be payable to Tenant at the address set forth below or at other address
within the United States as Tenant may specify from time to time by written
notice.
(c) Any notice or document required or permitted to be delivered by
this Lease shall be deemed to be delivered (whether or not actually received)
when deposited in the United States Mail, postage prepaid, certified mail, or
return receipt requested, addressed to the parties at the respective addresses
set out below or such other address as hereinafter specified by notice given in
accordance with this paragraph.
LANDLORD: TENANT:
OWEN BROS. ENTERPRISES BOBECK MEDICAL DISTRIBUTION
4275 N. Baldwin Avenue 1227 Ranch Valley
El Monte, CA 91731 DeSoto, TX 75115
COPY TO:
SECURITY COMMERCIAL MANAGEMENT, INC.
101 W. Randol Mill Rd. Suite 120
Arlington, Texas 76011
LANDLORD: TENANT:
OWEN BROS. ENTERPRISES BOBECK MEDICAL DISTRIBUTION
By: /s/ John A. Owen By: /s/ [ILLEGIBLE]
----------------------- -----------------------
Its: Partner Its: Owner
--------------------- ---------------------
Date: 6-25-96 Date: 6-19-96
--------------------- ---------------------
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EXHIBIT "A"
LEGAL DESCRIPTION
FALCON CENTRE
A SPACE CONTAINING APPROXIMATELY 10,151 SQUARE FEET OUT OF AN
APPROXIMATELY 68,098 SQUARE FOOT BUILDING.
SITUATED ON TRACT 2, BLOCK 6 OF EAGLE INDUSTRIAL PARK, DALLAS COUNTY,
TEXAS.
MORE COMMONLY KNOWN AS 1707 FALCON DRIVE, SUITE #104, DESOTO, TEXAS,
75115.
<PAGE>
EXHIBIT "B"
SPACE PLAN
[MAP]
<PAGE>
EXHIBIT "C"
Tenant agrees to accept space "as is" with the exception that the Landlord and
at Landlord's cost, will make the following changes:
Carpet shall be shampooed, office suite will be painted, overhead doors
will be repaired to the best of contractor's ability, and the suite shall
be demised from adjacent suite #101-#103.
FALCON CENTRE
1707 Falcon Drive DeSoto, Texas
[MAP]
All dimensions are approximate.
Suite 101
- --------------------------------
Office Sq. Ft. 5,153
Warehouse Sq. Ft. 28,681
Total Sq. Ft. 33,834
24+/- Clear Height
Fully Sprinkled
(7) Dock Ht. Doors
Trash Compactor Area
Suite 104
- --------------------------------
Office Sq. Ft. 1,264
Warehouse Sq. Ft. 8,887
Total Sq. Ft. 10,151
19+/- Clear Height
Fully Sprinkled
(1) Dock Ht. Doors
(1) Drive-In Door
[LOGO] SECURITY
COMMERCIAL
MANAGEMENT
Real Estate Services
101 West Randol Road, Suite 120
Arlington, Texas 76011
Metro 817-226-000[ILLEGIBLE]
Fax 817-860-4180
<PAGE>
RULES AND REGULATIONS
The following Rules and Regulations are prescribed by Landlord in order to
provide and maintain, to the best of Landlord's ability, orderly, clean and
desirable Leased Premises, the building and parking facilities for the tenants
therein and to regulate conduct in and use of Leased Premises, the building and
parking facilities in such a manner as to minimize interference by others in the
proper use of Leased Premises by Tenant. In the following Rules and Regulations,
all references to Tenant include not only the Tenant, but, also, Tenant's
agents, servants, employees, invitees, licensees, visitors, assignees, and/or
sublessees:
1. Tenant shall not block or obstruct any of the entries, passages, doors,
hallways, or stairways of building or parking area, or place, empty, or throw
any rubbish, litter, trash, or material of any nature into such areas, or permit
such areas to be used at any time except for ingress or egress of Tenants.
2. Landlord will not be responsible for lost or stolen personal property,
equipment, money, or any article taken from the Leased Premises, building, or
parking facilities regardless of how or when loss occurs.
3. The plumbing facilities shall not be used for any other purpose than that for
which they are constructed, and no foreign substance of any kind shall be placed
therein, and the expense of any breakage, stoppage, or damage resulting from a
violation of this provision shall be borne by Tenant.
4. Tenant shall permit Landlord, during the six (6) months prior to the
termination of this lease to show Leased Premises during business or
non-business hours to prospective lessees and to advertise Leased Premises for
rent.
5. Any additional keys required by Tenant during the term of this lease shall be
requested from Landlord and shall be paid for by Tenant upon delivery of keys to
premises. In the event new locks are requested by Tenant, then all costs
associated with such request (including hardware, installation and keys) shall
be paid by Tenant.
6. The common parking facilities are available for use by any and all Tenants.
Landlord reserves the right to assign or allocate parking in the event of
conflicts, abuse or improper use of these common parking facilities. It is
generally understood that any Tenant should utilize only those parking spaces
immediately adjacent to that Tenant's specific Leased Premises.
Proper use of the common parking facilities is deemed to be that use which
is occasioned by the normal in and out traffic required by the Tenant, in the
normal course of the Tenant's business operations.
Vehicles that are abandoned, disabled, have expired registration stickers,
obstructing any means in ingress or egress to any Leased Premises, or in any way
a general nuisance or hazard are subject to removal, without notice by
Landlord's designated wrecker and towing service. All costs associated with such
removal shall be at the Tenant's/Vehicle Owner's expense.
7. Tenant shall not use the building, Leased Premises, or parking facilities for
housing, lodging, or sleeping purposes without express consent of Landlord in
writing.
8. No birds or animals shall be brought into or kept in or about the Premises or
any other part of the Building.
9. No sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed or printed or affixed on or to any part of the outside of the Building
without the written consent of Landlord. Landlord shall have the right to remove
any such sign, placard, picture, advertisement, name or notice without notice
to, and at the expense of Tenant.
Tenant shall not place anything, or allow anything to be placed, near the
glass of any window, door,, partition, or wall which may appear unsightly from
outside the Leased Premises; Tenant shall not, without prior written consent of
Landlord, cause or otherwise sunscreen any window.
10. Tenant shall not use or keep in the Leased Premises or in the Building, any
kerosene, gasoline or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Landlord.
11. Tenant shall not use, keep or permit to be used or kept, any foul or noxious
gas or substance in the Leased Premises, or permit or suffer the Leased Premises
to be occupied or used in a manner offensive or objectionable to the Landlord or
other occupant of the Building by reason of notice, odors, and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds brought in or kept in or about the Leased Premises or
the Building.
12. The following acts shall not be allowed or suffered to be done or conditions
to exist upon the Leased Premises or any part thereof:
a. Any violation of any federal, state, or municipal statute or
ordinance or any regulation, order, or directive, of a governmental
agency, as such statutes, ordinances, regulation, orders, or
directives now exist or may hereafter provide, concerning the use
and safety of the Leased Premises.
b. Any violation of any certificate of occupancy covering of
affecting the use of the Leased Premises or any part hereof.
c. Any public or private nuisance.
d. The display or distribution of drug paraphernalia,, or sexual
paraphernalia,, except as the same may be legally dispensed by
a physician or surgeon, dentist or pharmacist, duly licensed
to practice such profession.
e. The sale or dispensing of alcoholic beverages, except as the
same may be incidental to the permitted use of the Leased
Premises, as provided in the Lease Agreement.
f. The sale or dispensing of alcoholic beverages on all other
portions of the real property conveyed hereunder, except as
the same shall be only incidental to any business, including
restaurants, hotels or delicatessens which may be hereafter
located on said other portions of the real property hereby
conveyed.
g. The showing, displaying, viewing, renting or selling of movie
films which would be classified rated as "X-rated" under
present standards or criteria for such classification and
rating; and provided, that insofar as movie films, whether
present or future are shown, displayed, viewed, rented, or
sold upon the said real property, preference shall be given to
those films which meet the standards and criteria presently
existing for classification and rating as "G rated" or "PG
rated".
h. Gambling.
i. The establishment or maintenance of a bawdy house, bar,
nightclub or tavern.
j. Any other act or condition which shall be lewd, obscene or
licentious.
EXHIBIT 10(s)
Assignment, Assumption and Consent Agreement dated as of January 27, 1997 by and
among Bobeck Medical Distribution, Owen Bros.
Enterprises and the Company.
<PAGE>
ASSIG14MENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of January 27, 1997, by and
among Graham-Field Express (Dallas), Inc., a Delaware corporation ("Buyer"), and
Bob Crabtree, an individual doing business as a sole proprietor under the name
"Bobeck Medical Distributors" ("Seller").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Asset Purchase Agreement, dated as of
January __, 1997 (the "Purchase Agreement") by and between Buyer and Seller,
Buyer has acquired the business of the Seller;
WHEREAS, in partial consideration for the transactions contemplated by the
Purchase Agreement, Buyer has agreed to assume, pay, perform, and discharge
certain liabilities and obligations of Seller under and pursuant to the Purchase
Agreement; and
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the meanings ascribed to such terms in the Purchase Agreement.
2. Assignment and Transfer. Seller hereby grants, transfers, sells,
conveys, assigns and delivers to Buyer all of its right, title and interest in
and to all of the Assets, TO HAVE AND TO HOLD the same unto its successors and
assigns forever. The assets include each of the assets, properties, rights and
claims described in Section 1.01 of the Purchase Agreement. Seller warrants that
it has conveyed title to the Assets as set forth in the Purchase Agreement. It
is expressly understood that this instrument is intended solely to restate, and
not in any manner to amend, modify, enlarge or limit any warranties or
agreements contained in, the Purchase Agreement.
3. Power of Attorney. Seller hereby irrevocably constitutes and
appoints Buyer, its successors and assigns, its true and lawful attorney, with
full power of substitution, in its name or otherwise, and on behalf of Seller,
or for its own use, to claim, demand, collect and receive at any time and from
time to time any and all assets, properties, claims, accounts and other rights,
tangible or intangible, hereby sold, transferred, conveyed, assigned or
delivered, or intended so to be sold, transferred, conveyed, assigned or
delivered and to prosecute any claim relating to any thereof, whether at law or
in equity and, upon discharge thereof, to complete, execute and deliver any and
all necessary instruments of satisfaction and release.
2
<PAGE>
4. Assumptigm. Buyer hereby assumes and undertakes to pay, perform
and otherwise discharge, as the same become due in accordance with their
respective terms, the Assumed Liabilities as set f orth in Schedule 1. 02 (a) of
the Purchase Agreement, and Buyer hereby indemnities and holds Seller harmless
from payment, performance or other liability related to the Assumed Liabilities
as set forth in Section 1.02(a) of the Purchase Agreement.
5. Effect of Instrument. Except for the Assumed Liabilities
expressly assumed by Buyer under the terms of Section 4 above, Buyer is not
assuming nor shall in any way be liable, directly or indirectly, for any other
obligation or liability of, or any litigation or claim against, Seller of any
nature whatsoever. Buyer and Seller acknowledge that this instrument is intended
solely to restate, and not in any manner to modify, amend, enlarge, or limit the
liabilities and obligations being assumed by Buyer under the terms of the
Purchase Agreement.
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed on its behalf by a duly authorized officer all as of the date
first written:
GRAHAM-FIELD EXPRESS
(DALLAS), INC.
By:_______________________
Name:__________________
Title:_________________
3
LEASE AGREEMENT
1. PARTIES:
- ---THIS AGREEMENT entered on this 19 day of September, 1996, by and between J &
M, S.E., a special partnership duly organized and existing under the Laws of the
Commonwealth of Puerto Rico (hereinafter referred to as "LESSOR"), represented
in this act by its ADMINISTRATIVE PARTNER, Mr. Juan Leizan, of legal age,
married, and resident of Puerto Rico, and Graham-Field Express (Puerto Rico),
Inc., hereinafter referred to as "LESSEE"), a corporation duly organized and
existing under the Laws of Delaware and authorized to do business in the
Commonwealth of Puerto Rico, represented in this act by its VICE-PRESIDENT OF
FINANCE, Mr. Gary Jacobs of legal age, married, and resident of New
York----------------------------------------------------------------------------
2. PREMISES:
- ---LESSOR represents and warrants that it is the sole owner in fee simple
("pleno dominio") of a real property having 2 1 ,600 square feet approximately
of a building located on Puerto Rico Highway # 1, Rio Canas Ward, Caguas, Puerto
Rico. The "Premises" have an area of 10,800 square feet in the first level
(approximately 3,600 square feet for office, and approximately 7,200 square feet
for store, laboratory and production area); and an area of 10,800 square feet
approximately in the second level, for office and store. The Premises Leased
hereunder include not less than twenty (20) exclusive parking spaces in front
and adjacent to the Premises.---------------------------------------------------
- ---The 10,800 square feet area in the first level consists of reception, office,
store, restroom, laboratory and production area. The second level has store
area, rest-room and office.-----------------------------------------------------
- ---Exhibit 1 is a correct drawing of the Premises and Exhibit 2 is a correct
drawing of the floor plan for both levels of the Premises.----------------------
3. PURPOSE OF LEASE:
- ---The Premises demised under this lease agreement are to be used by LESSEE for
LESEE's Corporate offices and facilities, store, sale and distribution of
medical equipment. Any change in the proposed use of the Premises will require
the prior written consent of LESSOR, which consent shall not be unreasonably
withheld, denied or delayed.----------------------------------------------------
- ---LESSEE shall not use the Premises for any illegal, immoral, or
ultra-hazardous activity, whether within of outside the scope of the business of
LESSEE.-------------------------------------------------------------------------
4. OCCUPANCY OF THE PREMISES, COMMENCEMENT OF LEASE TERM AND EXTENSION
OPTION:
- ---The LESSEE may use and occupy the Premises as of the date hereof. The
commencement of the lease term shall be October 8, 1996 (the "Lease
Commencements Date") and shall extend for a period of three (3) years from such
date (the "Term").--------------------------------------------------------------
- ---LESSEE shall have the two options to extend the Term of this Lease for (i) a
first option term of three (3) years and (ii) a second option term of four (4)
years (both the "Extended Terms") upon giving LESSOR written notice of its
intention to extend the Lease not later than six (6) months prior to the
expiration of the Term or the first
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Extended Term. In the event LESSEE exercises it option to extend the Lease, all
covenants, terms and conditions of the Lease shall remain unaltered and in full
force and effect, except as otherwise provided under Section 7 hereof.----------
- ---The LESSEE must pay the rent provided under Section 7 hereof from October 8,
1996 and thereon during the Term and Extended Term of this Lease Agreement,
subject to the terms and conditions contained herein.---------------------------
5. ASSIGNMENT AND SUBLETTING:
- ---LESSEE may assign this Lease in whole or in part, or sublet the Premises, or
any part thereof, or any right or privilege appurtenant thereto, to its parent
company, affiliates, subsidiaries, or to any entity surviving from a merger,
consolidation or other similar activity, or by operation of law, provided
however, that LESSEE may not assign this Lease or sublet the Premises to any
other third party without LESSOR's prior written consent, which consent shall
not be unreasonably withheld or delayed. Any unauthorized assignment or
subletting of the Premises shall be null and void and shall operate as a
termination of this Lease.------------------------------------------------------
- ---LESSEE shall not allow any person other than LESSEE, its employees, agents,
clients or invitees to occupy or use the Premises or any part thereof.----------
6. (INTENTIONALLY OMITTED)
7. RENT:
- ---LESSEE shall pay to LESSOR without notice, demand, or abatement, deduction or
set off, in lawful money of the United States of America, at the office of the
LESSOR, or at such other place in Puerto Rico as LESSOR may designate, fixed
monthly rent of NINE THOUSAND FIVE HUNDRED DOLLARS ($9,500.00) per month,
payable monthly in advance within the first (1st) five (5) days of each month,
during the Term and the first Extended Term of the Lease, commencing on October
8, 1996. The rent for the month of October 1996 shall be $ 7,125.--------------
- ---The monthly rent payment by LESSEE to LESSOR during the second Extended Term
of the Lease shall be ELEVEN THOUSAND DOLLARS ($11,000) per month, payable as
provided in the above stated paragraph.-----------------------------------------
The rent payment of $9,500 during the Term and first Extended Term, and $11,000
during the second Extended Term, is all the rent payable to LESSOR under this
Lease Agreement, and such rent payment includes any and all taxes and fees
related to the Premises. No additional fees or rent shall be paid by LESSEE
under this Lease Agreement.-----------------------------------------------------
8. ALTERATIONS AND ADDITIONS:
- ---LESSEE shall not, without LESSOR's prior written consent, which consent shall
not be unreasonably denied or delayed, make any structural alterations,
improvements, additional or utility installations in, on or about the Premises.
The terms "utility installations" shall include bus ducting, power panels,
fluorescent fixtures, conducts and wiring. As a condition to giving such
consent, LESSEE shall provide to LESSOR copies of the drawings or plans of the
proposed structural alterations, improvements, additions or utility
installations to be done; also, LESSOR may require that LESSEE agree to remove
any such alterations, improvements, additions or utility installations at the
expiration of the Term or Extended Terms and to restore the Premises to their
prior conditions and furthermore, may require or prescribe any other reasonable
condition or requirement which shall be set forth in the notice granting the
consent.------------------------------------------------------------------------
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<PAGE>
- ---All alterations, improvements, additions and utility installations, which may
be made to or on Premises, to the extent that such alterations, improvements,
additions or utility installations are not removable by LESSEE, without damaging
the Premises, shall become the property of LESSOR and remain upon and be
surrendered with the Premises at the expiration of the Term. Notwithstanding the
provisions of this Paragraph, LESSEE's machinery and equipment, other than that
which is affixed to the Leased premises so that it cannot be removed without
material damage to the Premises, shall remain the property of LESSEE and may be
removed by LESSEE subject to the provisions of this paragraph.------------------
- ---Notwithstanding the "as is" nature of the Lease, LESSOR shall remain liable
and responsible for the maintenance and repair of the structure, systems, walls
and roof of the Premises and remedy and repair such defects as arise of become
known during the Term and Extended Term of this Lease.--------------------------
- ---LESSOR represents and warrants that the Premises are in good order and
condition and ready for their intended use by LESSEE. LESSOR also represents and
warrants that the Premises and all accessory parts thereof are in working
conditions and subject to receive from the appropriate utility company all
necessary utilities, such as water, telephone and electricity. LESSOR also
represents that the air-conditioning unit unit currently installed at the
Premises is in good order and condition; shall be LESSEE's responsibility to
maintain and repair, from time to time, said air-conditioning unit, including
the replacement of the machinery parts of such air-conditioning unit, if
necessary.----------------------------------------------------------------------
- ---LESSEE shall remain liable and responsible for the maintenance and repair of
the interior walls, ceilings, floors, lights, power, doors, windows, bus
ducting, power panels, fluorescent fixtures, conducts and wiring, machinery and
equipment, and remedy and repair such defects as arise or become known during
the Term of this Lease.---------------------------------------------------------
- ---LESSEE may install a sign with the name of LESSEE's business name, other
references and logo, in compliance with applicable laws and regulations.--------
- ---Notwithstanding the above stated LESSEE's responsibilities, LESSOR shall
remain liable and responsible for the structural soundness of all walls, ceiling
and floor of the Premises. Also LESSOR shall paint the exterior walls of the
Premises every two years, in coordination with LESSEE to avoid undue
interruptions on LESSEE's business operations.----------------------------------
9. SECURITY AND SAFETY:
- ---The security and guard service to the Premises will be provided exclusively
by LESSEE, at its cost. The LESSOR is not obligated to give guard service. The
LESSEE may install an alarm system and close circuit TV cameras in or out the
Premises, at LESSEE expense.----------------------------------------------------
10. UTILITIES:
- ---LESSEE shall be responsible to request, obtain and pay for all utilities
needed for its operation in the Premises, such as water, telephone and
electricity. The Premises are equipped to receive installation by utilities
companies of such utility services. LESSOR shall have no obligation, nor be
liable, as to the utilities needed by LESSEE, nor in the event of any
interruption in the supply of any of them. If equipment or machinery installed
or used by LESSEE shall require utilities facilities not available at the
Premises, the same shall be installed at LESSEE's cost, expense and risk in
accordance with plans and specifications to be approved in writing by LESSOR.---
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<PAGE>
11. CONDITION OF PREMISES:
- ---LESSEE represents and warrants that it has examined and inspected the
Prcmises and hereby accepts the same in their existing condition, subject to the
previsions of Section 8 hereof, to all applicable zoning, municipal, and
commonwealth laws, ordinances and regulations, governing and regulating the use
of the Premises, and accepts this Lease subject thereto and to all matters
disclosed thereby. LESSEE acknowledges that neither LESSOR nor LESSOR'S agents
have made any representation or warranty as to the suitability of the Leased
premises for the conduct of LESSEE's business.----------------------------------
- ---The foregoing notwithstanding, LESSOR represents and warrants that the
Premises have a validly issued Use Permit and are in a condition to obtain the
issuance of a valid Use Permit. LESSEE must obtain a Use Permit validly issued
by A.R.P.E. (ADMINISTRACION DE REGLAMENTOS Y PERMISOS).-------------------------
12. LESSEE'S OBLIGATIONS:
- ---LESSEE shall, during the Term of this LEASE, keep the Premises in good order,
clean condition, free and clear of any and all debris, garbage, or similar
material, subject to normal wear and tear. LESSEE shall repair the Premises and
every non-structural part thereof. Except as otherwise stated in Section 8 of
this Lease, LESSOR shall incur in no expense nor have any obligations of any
kind whatsoever in connection with said maintenance of the Premises.------------
13. SURRENDER:
- ---On the last day of the Term hereof, or any sooner termination, LESSEE shall
surrender the Leased premises to LESSOR in the same conditions as when received,
broom clean, ordinary wear and tear excepted. LESSEE shall repair any damage to
the leased Premises occasioned by the removal of LESSEE's trade fixtures,
furnishings and equipment, which repair shall include the patching and filling
of holes and repair of structural damage.---------------------------------------
14. INSURANCE AND INDEMNITY:
14:1 INSURANCE
- ---LESSEE shall, during the entire term of this Lease, keep full force and
effect the following insurance policies with insurers approved by LESSOR and
authorized to do business in the Commonwealth of Puerto Rico:-------------------
- ---(a) General Public Liability Insurance Policy for an amount of not less than
$300,000.00 per person and for an amount of not less than $1,000,000.00 per
accident, in order to protect, defend and hold harmless the LESSOR from and
against any and all claims or liabilities for death or injury to persons,
including employees, officers and agents of LESSEE.-----------------------------
- ---(b) Property damage insurance against damages to the Premises. LESSOR must be
included as an additional insured under said insurance policy.------------------
- ---The Policies shall contain a clause that insurer will not cancel or change
the insurance policy without first giving the LESSOR thirty (30) days prior
written notice. Copies of the policies or certificates of Insurance shall be
delivered to LESSOR at the time this Agreement is signed by the herein appearing
parties. LESSOR may request LESSEE to increase LESSEE's insurance coverage based
on experience, Insurance Companies requirements and or Industry standards.------
14.2 INDEMNITY:
- ---The parties hereto shall indemnify and hold each other harmless from and
against any an all claims and demands arising from the other's use of the
property or the Premises,
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<PAGE>
or from the conduct of their businesses, or from any activity, work or things to
be done, permitted or suffered in or about the Premises or the property, and
shall further indemnify and hold each other harmless from and against any and
all claims arising from any breach or default in the performance of any
obligations to be performed under the terms of this Lease, or arising from any
negligence of the other party, or any of its agents, employees, officers and
invitees and from any and all costs, expenses fees and other liabilities
incurred in the defense of any such claim or of any action or proceeding brought
against the indemnitee by reason of any such claim or demand. The indemnitor
shall, upon notice from the indemnitee, defend against any such claim at its
expense and engage counsel reasonably acceptable to the indemnitee. LESSEE
hereby assumes all risks of damage to property or injury to persons, in, upon or
about the Premises and waives any claim against the LESSOR, except with respect
to such damage, injury or claim arising from LESSOR's negligent acts or those of
its officers, agents, contractors, employees and invitees.----------------------
14.3 ENVIRONMENTAL INDEMNITY FOR PRIOR USES:
- ---LESSOR shall indemnify, defend, and hold harmless LESSEE and its officers,
directors, constituent owners, agents, employees, and representatives from all
fines, suits, proceedings, claims and actions of every kind, and all losses,
cost and expenses associated therewith, including any and all sums paid for
settlement of claims, attorney's fees, consultant's fees and personal injuries
arising from any violation to federal, local or Commonwealth of Puerto Rico
environmental law or regulation or environmentally related claim, that may have
accrued or occurred on or before the execution of this Lease Agreement.---------
15. RELEASE OF LESSOR FROM LIABILITY:
- ---LESSEE hereby agrees that LESSOR, except for act or omission of LESSOR or its
agents, contractors or employees, shall not be liable for injury to LESSEE's
business or any loss of income therefrom or for damages to the goods, wares,
merchandise or other property of LESSEE, LESSEE's employees, invites, customers,
or any other person in or about the Premises, nor shall LESSOR be liable for
injury to the person of LESSEE, LESSEE's employer, agents or customers, whether
such damage or injury is caused by or results from fire, steam, electricity,
gas, water or rain, or from breakage, leaking, obstructions of sprinklers,
wires, appliances, air conditioning or fixture or from any other cause whether
said damage or injury results from conditions arising upon the Premises or from
other portions of the building of which the Premises are a part not occupied or
controlled by LESSOR.-----------------------------------------------------------
16. SECURITY AND DEPOSIT.
- ---LESSEE has deposited with LESSOR as security for the performance by LESSEE of
the terms of this Lease a LEASE BOND for the sum of TWENTY EIGHT THOUSAND FIVE
HUNDRED DOLLARS ($28,500), which has been issued by an Insurance Company,
approved by LESSOR, with offices in Puerto Rico. LESSOR may use or apply that
LEASE BOND for the payment of any rent or other sums as to which LESSOR may be
entitled by reason of LESSEE's default in respect of any of the terms of this
Lease.--------------------------------------------------------------------------
- ---Under no circumstances shall the amount of the LEASE BOND limit the amount to
which LESSOR may be entitled under this Lease by way of damages or otherwise,
nor is such amount intended to be or represent a liquidated damage amount, but
is merely an amount which may be applied on account towards any amount due
LESSOR and unpaid under this Lease.---------------------------------------------
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<PAGE>
- ---LESSEE access and use to Premises is contingent upon the delivery to LESSOR,
from time to time, of this valid LEASE BOND. Non compliance with this
obligation, will terminate this Lease.------------------------------------------
17. BANKRUPTCY:
- ---In the event LESSEE shall become insolvent, or admit in writing its inability
to pay its debts as they mature, or make an assignment for the benefit of
creditors, or shall apply for or consent to the appointment of any receiver,
trustee, or similar officer for all or a substantial portion of its assets, or
LESSEE shall apply for or institute any bankruptcy, arrangement for the benefit
of creditors, dissolution, liquidation, or similar proceeding, and such
proceeding remains undischarged for a period of thirty (30) days, LESSOR may, at
its sole option, terminate this lease.------------------------------------------
18. RECORDATION:
- ---The parties agree that this Lease may be recorded at the request of LESSEE.
The parties hereto agree to execute and deliver such private or public
documents, instruments and deeds as may be reasonably required to achieve
recordation of the Lease. LESSEE shall select the notary and pay corresponding
notarial fees and cost of such recordation.-------------------------------------
19. SUBORDINATION:
- ---LESSOR represents and warrants to LESSEE that the real property where the
Premises are located is free and clear of all liens and encumbrances. LESSOR
further represents and warrants to LESSEE that there are no unpaid taxes,
assessments or levies against such real property.-------------------------------
- ---LESSOR acknowledges and agrees that this Lease is and shall remain for the
Term of Extended Term of this Lease, a senior preferred interest in and to the
real property.------------------------------------------------------------------
20. NOTICES:
- ---All notices to be given under this Lease may be delivered personally or by
certified mail, postage prepaid to the following addresses:---------------------
- ---To LESSOR: Mr. Juan Leizan, J & M, S.E., P.O. Box 177, Caguas, Puerto Rico,
00726.--------------------------------------------------------------------------
- ---To LESSEE: Richard S. Kolodny, Esq., Vice President & General Counsel,
Graham-Field Express (Puerto Rico), Inc., Executive Offices, 400 Rabro Drive
East, Hauppauge, N.Y. 11788.----------------------------------------------------
21. GOVERNING LAW:
- ---This Lease shall be governed; interpreted and construed pursuant to the laws
of the Commonwealth of Puerto Rico.---------------------------------------------
22. MUTUAL REPRESENTATIONS:
22.01 Partnership, corporation standing, etc:
- ---It is: (i) in the case of LESSOR, a special partnership, duly organized,
validly existing, and in good standing under the laws of the Commonwealth of
Puerto Rico; (ii) in the case of the LESSEE, a corporation duly organized and
validly existing under the laws of Delaware and authorized to do business in
Puerto Rico; and (iii) they are and will be, as to each Party, at all times
fully qualified and capable of performing every obligation and responsibility to
be performed and completed by it in accordance with the terms of this Lease
Agreement.----------------------------------------------------------------------
22.02 NO VIOLATION OF LAW; LITIGATION:
- ---The Parties are not in violation of any applicable law, which violations
would adversely affect their performance of any obligations under this
Agreement. There are
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no legal or arbitration proceedings or any proceeding by or before any
governmental agency, whether federal, local or Commonwealth, now pending or (to
its best knowledge) threatened against them which, if adversely determined,
could have a material adverse effect upon their ability to perform their
obligations under this Lease Agreement.-----------------------------------------
22.03 NO CONFLICT OR BREACH:
- ---None of the execution, delivery, and performance by each Party of this Lease
Agreement, the compliance with the terms and provisions hereof, and the carrying
out of the transactions contemplated hereby, conflicts or will conflict with or
will result in a breach or violation of any of the terms, conditions or
provisions of any law, or the charter documents, as amended, or other
organizational documents, as amended, of such Party or any order, writ,
injunction, judgment, or decree of any court or other governmental agency
entered against such Party or by which it or any of its properties are bound, or
any loan agreement, indenture, mortgage, note, resolution, bond, or contract or
other agreement or instrument to which such Party is a party or by which it or
any of its properties are bound, or constitutes or will constitute a default
thereunder or will result in the imposition of any lien upon any of its
properties.---------------------------------------------------------------------
22.04 AUTHORITY, ETC:
- ---The Parties have all necessary power and authority to execute, deliver, and
perform this Lease Agreement and its obligations hereunder; the execution,
delivery and performance of this Lease Agreement has been duly authorized by all
necessary actions on its part by its governing body; it has duly and validly
executed and delivered this Lease Agreement; and this Lease Agreement
constitutes a legal, valid, and binding obligation of such Party enforceable
against such Party in accordance with the terms hereof.-------------------------
23. MISCELLANEOUS PROVISIONS:
23.01 QUIET ENJOYMENT:
- ---LESSOR covenants and agrees that LESSEE shall and may peaceably and quietly
have, hold, occupy, use, and enjoy the Premises during the Term and the Extended
Terms, subject to the provisions of this Lease Agreement. The LESSOR agrees to
warrant and forever defend LESSEE's right to occupy, use, and enjoy the Premises
against the claims of any and all Persons whomsoever lawfully claiming the same
or any part thereof, and subject in all respects to the provisions of this Lease
Agreement.----------------------------------------------------------------------
23.02 EXCULPATION OF PARTNERS AND SHAREHOLDERS OF PARTNERS:
- ---Notwithstanding any other provision in this Lease Agreement to the contrary,
the obligations of the Parties hereunder are recourse only to the assets of each
Party, and neither the partners of LESSOR nor any shareholder, officer,
director, employee, agent or any affiliate of LESSEE thereof shall have any
personal liability for any breach of the performance or observance of any of the
covenants, representations, warranties or obligations of either Party contained
in this Lease Agreement.--------------------------------------------------------
23.03 NO ASSOCIATION, JOINT VENTURE, ETC:
- ---This Lease Agreement shall not be interpreted or construed to create an
association, joint venture or partnership between the Parties or any other
similar legal relationship. Neither Party shall have any right, power or
authority to enter into any agreement or undertaking for, or act on behalf of,
or to act as or be, an agent or representative of, or to otherwise bind, the
other Party without that Party's written consent.-------------------------------
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23.04 COUNTERPARTS:
- ---This Lease Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.----------------------------------------------------
23.05 CONSENTS, APPROVALS, AND ACKNOWLEDGMENTS:
- ---Whenever in this Lease Agreement consents, approvals, or acknowledgments are
called for from a Party it shall be understood that the same will not be
unreasonably denied or delayed; provided, that such consent shall be deemed to
be granted by a Party if the Party fails to respond to any written request for
such consent within thirty (30) days or receipt thereof and; provided, further,
that any denial by such Party of its consent shall set forth in reasonable
detail the basis for such denial.-----------------------------------------------
23.06 AMENDMENTS:
- ---This Lease Agreement can be amended during its Term and Extended Terms by
mutual written consent of the Parties. No waiver, alteration, or modification of
this Lease Agreement or any agreements entered into in connection with the Lease
Agreement shall be valid unless in writing duly executed by both Parties.-------
23.07 CAPTIONS:
- ---The captions contained in this Lease Agreement are for convenience and
reference only and in no way define, describe, extend, or limit the scope or
intent of this Lease Agreement or the intent of any provision contained herein.-
23.08 SEVERABILITY:
- ---The invalidity of one or more phrases, sentences, clauses, Sections, or
Articles contained in this Lease Agreement shall not affect the validity of the
remaining portions of the Lease Agreement so long as the material purposes of
this Lease Agreement can be determined and effectuated.-------------------------
23.09 NO WAIVER:
- ---Any failure of either Party to enforce any of the provisions of this Lease
Agreement or to require compliance with any of its terms at any time during the
pendency of this Lease Agreement shall in no way affect the validity of this
Lease Agreement, or any part hereof, and shall not be deemed a waiver of the
right of such Party thereafter to enforce any and each of such provisions.------
23.10 FURTHER ASSURANCES:
- ---Each Party agrees to execute and deliver all further instruments and
documents and to take all further action not inconsistent with the provisions of
this Lease Agreement that may be reasonably necessary to effectuate the purposes
and intent of this Lease Agreement.---------------------------------------------
23.11. THIRD PARTIES:
- ---Except as otherwise expressly provided in this Lease Agreement, nothing in
this Lease Agreement shall be construed to create any duty to, standard of care
with respect to, or any liability to any person who is not a party to this Lease
Agreement.----------------------------------------------------------------------
[Illegible] /s/ Gary M. Jacobs VP Finance
- ------------------------------------- ------------------------------------
LESSOR LESSEE
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<PAGE>
Affidavit # 059
- ---On the 19th day of September 1996, before me personally appeared Mr. Juan
Leizan, to me known to me to be a partner of the firm of "J & M, S.E.", executed
the foregoing instrument, and he thereupon acknowledged to me that he executed
the same as and for the act and deed of the said partnership, "J & M, S.E.".
[SEAL]
[Illegible]
------------------------------------
NOTARY PUBLIC
Affidavit #
- ---On the 19th day of September 1996, before me personally appeared Mr. Gary
Jacobs, to me known and known to me to be the Vice-President of Finance of
"Graham-Field Express (Puerto Rico), Inc.", executed the foregoing instrument,
and he thereupon acknowledged to me that he executed the same as and for the act
and deed of the said "Graham-Field Express (Puerto Rico),
Inc.".
THERESA C. DUFFY
Notary Public, Slate of New York
No 5017870 Suffolk county
commission Expires September 13, 97
/s/ Theresa C. Duffy
------------------------------------
NOTARY PUBLIC
#57171.01
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AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-MODIFIED NET
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes
only, December 27, 1996, is made by and between ADAYA ASSET WASHINGTON, L.P., a
California limited partnership ("Lessor"). and GRAHAM-FIELD, INC., a New York
corporation ("Lessee") (collectively the "Parties," or individually a "Party").
1.2(a) Premises: That certain portion of the Building, including
all improvements therein or to be provided by Lessor under the terms of this
Lease, containing approximately 52,810 square feet of floor area, as outlined on
Exhibit A attached hereto ("Premises"). The "Building" is that certain building
containing the Premises and located at 11954 East Washington Boulevard, Santa Fe
Springs, California 90606.
In addition to Lessee's rights to use and occupy the Premises as
hereinafter specified, Lessee shall have non-exclusive rights to the Common
Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall
not have any rights to the roof, exterior walls or utility raceways of the
Building or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with all
other buildings and improvements thereon, are herein collectively referred to as
the "Industrial Center." (Also see Paragraph 2.)
1.2(b) Parking: One hundred three (103) unreserved vehicle parking
spaces ("Unreserved Parking Spaces"); and two (2) reserved vehicle parking
spaces for Lessee's exclusive use ("Reserved Parking Spaces"). (Also see
Paragraph 2.6.)
1.3 Term: Five (5) years ("Original Term") commencing on the date
specified as the "Commencement Date" in Exhibit B, and ending on the last day of
the calendar month in which the fifth (5th) anniversary of the Commencement Date
occurs ("Expiration Date"). (Also see Paragraph 3 and Exhibit B and Paragraph 57
of the Addendum)
1.4 Early Possession: See Exhibit B.
1.5 Base Rent: $19,012.00 per month ("Base Rent"), payable on the
first (1st) day of each month commencing on the Commencement Date. (Also see
Paragraph 4.)
|X| If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum Paragraph 49, attached hereto.
1.6(a) Base Rent Paid Upon Execution: $19,012.00 as Base Rent for
the first (1st) month of the Original Term.
1.6(b) Lessee's Share of Common Area Operating Expenses: 37.45%
("Lessee's Share") as determined by prorata square footage of the Premises as
compared to the total square footage of the Building.
1.7 Security Deposit: $19,012.00 ("Security Deposit"). (Also see
Paragraph 5.)
1.8 Permitted Use: Warehousing, distribution and assembly of
medical equipment and offices and other related uses incidental thereto
("Permitted Use"). (Also see Paragraph 6.)
1.9 Insuring Party. Lessor is the "Insuring Party." (Also see
Paragraph 8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
|X| Investment Development Services, Inc., and CB Commercial represent Lessor
exclusively ("Lessor's Broker");
|X| Grubb & Ellis Company represents Lessee exclusively ("Lessee's Broker").
(Also see Paragraph 15.)
1.10(b) Payment to Brokers. Lessor shall pay to said Brokers a fee
as set forth in a separate written agreement between Lessor and said Brokers for
brokerage services rendered by said Brokers in connection with this transaction.
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<PAGE>
1.11 Addenda and Exhibits. Attached hereto is an Addendum or
Addenda consisting of Paragraphs 49 through 57, and Exhibits A and B, all of
which constitute a part of this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean
and free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, electrical systems, fire sprinkler system. lighting, air
conditioning and heating systems and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in operating condition on the
Commencement Date. If a non-compliance with said warranty exists as of the
Commencement Date, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within ninety (90) days after the Commencement
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense. Lessor shall assign to Lessee (with reservation
of rights in favor of Lessor) any manufacturer and contractor warranties (which
shall be minimum 1-year warranties from the date of completion) which Lessor may
have against defects in or to any such systems and loading docks.
2.3 Compliance with Laws. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4); however, Lessor represents to Lessee that
Lessor has not received any written notice from any governmental agency that the
Permitted Use is prohibited for the Premises.
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that
it has been advised by the Broker(s) to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical and fire
sprinkler systems, security, environmental aspects, seismic and earthquake
requirements, and compliance with the Americans with Disabilities Act and
applicable zoning, municipal, county, state and federal laws, ordinances and
regulations and any covenants or restrictions of record (collectively,
"Applicable Laws") and the present and future suitability of the Premises for
Lessee's intended use; (b) that Lessee has made such investigation as it deems
necessary with reference to such matters, is satisfied with reference thereto,
and except as expressly provided in Exhibit B attached hereto, assumes all
responsibility therefor as the same relate to Lessee's occupancy of the Premises
and/or the terms of this Lease; and (c) that neither Lessor, nor any of Lessor's
agents, has made any oral or written representations or warranties with respect
to said matters other than as set forth in this Lease. (See Exhibit B.)
2.5 Intentionally Deleted.
2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking, except that Lessee's Reserved Parking Spaces shall be
located at or near the main entrance of the Premises. Lessee shall not use more
parking spaces than said number. Said parking spaces shall be used for parking
by vehicles no larger than full-size passenger automobiles or pick-up trucks,
herein called "Permitted Size Vehicles." Vehicles other than Permitted Size
Vehicles shall be parked and loaded or unloaded as directed by Lessor in the
Rules and Regulations (as defined in Paragraph 40) issued by Lessor. (Also see
Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that
belong to or are controlled by Lessee or Lessee's employees, suppliers,
shippers, customers, contractors or invitees to be loaded, unloaded, or parked
in areas other than those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited
activities described in this Paragraph 2.6, then Lessor shall have the right,
upon reasonable notice to Lessee, in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and charge the cost
to Lessee, which cost shall be immediately payable upon demand by Lessor. Lessor
will not enforce this provision in a manner which discriminates against Lessee
in relation to other tenants of the Project.
(c) Lessor shall at the Commencement Date of this Lease,
provide the parking facilities required by Applicable Law.
2.7 Common Areas - Definition. The term "Common Areas" is defined
as all areas and facilities outside the Premises and within the exterior
boundary line of the Industrial Center and interior utility raceways within the
Premises that are provided and designated by the Lessor from time to time for
the general non-exclusive use of Lessor, Lessee and other Leases of the
Industrial Center and their respective employees, suppliers, shippers,
customers, contractors and invitees, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways
and landscaped areas.
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<PAGE>
2.8 Common Areas - Lessee's Rights. Lessor hereby grants to
Lessee, for the benefit of Lessee and its employees, suppliers, shippers,
contractors, customers and invitees, during the term of this Lease, the
non-exclusive right to use, in common with others entitled to such use, the
Common Areas as they exist from time to time, subject to any rights, powers, and
privileges reserved by Lessor under the terms hereof or under the terms of any
rules and regulations or restrictions governing the use of the Industrial
Center. Under no circumstances shall the right herein granted to use the Common
Areas be deemed to include the right to store any property, temporarily or
permanently, in the Common Areas. Any such storage shall be permitted only by
the prior written consent of Lessor or Lessor's designated agent, which consent
may be revoked at any time. In the event that any unauthorized storage shall
occur then Lessor shall have the right, without notice, in addition to such
other rights and remedies that it may have, to remove the property and charge
the cost to Lessee, which cost shall be immediately payable upon demand by
Lessor.
2.9 Common Areas - Rules and Regulations. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable, non-discriminatory Rules and Regulations
with respect thereto in accordance with Paragraph 40. Lessee agrees to abide by
and conform to all such Rules and Regulations, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform. Lessor shall not be responsible to Lessee for the non-compliance with
said rules and regulations by other lessees of the Industrial Center. Lessor
shall enforce the Rules and Regulations in a non-discriminatory manner.
2.10 Common Areas - Changes. Lessor shall have the right, in
Lessor's sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available;
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas (but Common Area Operating
Expenses shall not be increased as a result of any such designation);
(d) To add additional buildings and improvements to the
Common Areas (and Lessee's Share shall thereupon be decreased to take into
account the rentable area of any such additional buildings or improvements);
(e) To use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Industrial Center, or any
portion thereof; and
(f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Industrial Center as
Lessor may, in the exercise of sound business judgment, deem to be appropriate.
In exercising its rights under this Paragraph 2.10, Lessor shall not
unreasonably interfere with Lessee's access to the Premises or to the number of
parking spaces provided to Lessee in Paragraph 1.2(b).
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original
Term of this Lease are as specified in Paragraph 1.3.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or
charges, as the same may be adjusted from time to time, to Lessor in lawful
money of the United States, without offset or deduction, on or before the day on
which it is due under the terms of this Lease. Base Rent and all other rent and
charges for any period during the term hereof which is for less than one full
month shall be prorated based upon the actual number of days of the month
involved. Payment of Base Rent and other charges shall be made to Lessor at its
address stated herein or to such other persons or at such other addresses as
Lessor may from time to time designate in writing to Lessee.
4.2 Common Area Operating Expenses. Lessee shall pay to Lessor
during the term hereof in addition to the Base Rent, Lessee's Share (as
specified in Paragraph 1.6(b) of all Common Area Operating Expenses, as
hereinafter defined, during each calendar year of the term of this Lease, in
accordance with the following provisions:
(a) "Common Area Operating Expenses" are defined, for
purposes of this Lease, as all costs incurred by Lessor relating to the
ownership and operation of the Industrial Center, including, but not limited
to, the following:
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(i) The operation, repair and maintenance, in neat,
clean, good order and condition, of the following:
(aa) The Common Areas, including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways, landscaped areas, striping, bumpers, irrigation systems,
Common Area lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems,
including, without limitation, the ESFR.
(dd) Those portions of the Building which Lessor
is required to repair pursuant to Paragraph 7.2 below.
(ii) The cost of water, gas, electricity and telephone
to service the Common Areas.
(iii) Trash disposal, property management and security
services and the costs of any environmental inspections.
(iv) Real Property Taxes (as defined in Paragraph 10.2)
to be paid by Lessor for the Building and the Common Areas under Paragraph 10
hereof.
(v) The costs of the premiums for the insurance
policies maintained by Lessor under Paragraph 8 hereof.
(vi) Any deductible portion of an insured loss
concerning the Building or the Common Areas (subject, however, to the exclusions
regarding capital expenditures in Paragraph 50(b) of the Addendum).
(vii) Any other services to be provided by Lessor that
are stated elsewhere in this Lease to be a Common Area Operating Expense. (See
Paragraph 50 of Addendum.)
(b) Any Common Area Operating Expenses and Real Property
Taxes that are specifically attributable to the Building or to any other
building in the Industrial Center or to the operation, repair and maintenance
thereof shall be allocated entirely to the Building or to such other building.
However, any Common Area Operating Expenses and Real Property Taxes that are not
specifically attributable to the Building or to any other building or to the
operation, repair and maintenance thereof shall be equitably allocated by Lessor
to all buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and
services set forth in Subparagraph 4.2(a) shall not be deemed to impose an
obligation upon Lessor to either have said improvements or facilities or to
provide those services unless the Industrial Center already has the same, Lessor
already provides the services, or Lessor has agreed elsewhere in this Lease to
provide the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall
be payable by Lessee within twenty (20) days after a reasonably detailed
statement of actual expenses is presented to Lessee by Lessor. At Lessor's
option, however, an amount may be reasonably estimated by Lessor from time to
time of Lessee's Share of annual Common Area Operating Expenses and the same
shall be payable monthly or quarterly, as Lessor shall designate, during each
12-month period of the Lease term, on the same day as the Base Rent is due
hereunder. Lessor shall deliver to Lessee within sixty (60) days after the
expiration of each calendar year a reasonably detailed statement showing
Lessee's Share of the actual Common Area Operating Expenses incurred during the
preceding year. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year exceed Lessee's Share as indicated on said statement, Lessor
shall credit the amount of such over-payment against Lessee's Share of Common
Area Operating Expenses next becoming due, except that if such overpayment
pertains to the last year of the Lease Term, Lessor shall pay to Lessee the
amount of such overpayment within ten (10) days after Lessor's delivery of said
statement. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicated on said statement,
Lessee shall pay to Lessor the amount of the deficiency within ten (10) days
after delivery by Lessor to Lessee of said statement. (See Paragraph 50 of
Addendum.)
5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's
execution hereof the Security Deposit set forth in Paragraph 1.7 as security for
Lessee's faithful performance of Lessee's obligations under this Lease. If
Lessee fails to pay Base Rent or other rent or charges due hereunder and such
failure continues after expiration of any applicable notice and cure period, or
if Lessee otherwise commits a Breach under this Lease (as defined in Paragraph
13.1), Lessor may use, apply or retain all or any portion of said Security
Deposit for the payment of any amount due Lessor or to reimburse or compensate
Lessor for any liability, cost, expense, loss or damage (including attorneys
fees) which Lessor may suffer or incur by reason thereof. If Lessor uses or
applies all or any portion of said Security Deposit, Lessee shall within ten
(10) days after written request therefore deposit monies with Lessor sufficient
to restore said Security Deposit to the full amount required by this Lease. Any
time the Base Rent increases during the term of this Lease (including Paragraph
49 of the Addendum), Lessee shall,
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<PAGE>
upon written request from Lessor, deposit additional monies with Lessor as an
addition to the Security Deposit so that the total amount of the Security
Deposit shall at all times bear the same proportion to the then current Base
Rent as the initial Security Deposit bears to the initial Base Rent set forth in
Paragraph 1.5. Lessor shall not be required to keep all or any part of the
Security Deposit separate from its general accounts. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the Premises, return to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the Security Deposit shall be considered to be
held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee shall not use or
permit the use of the Premises in a manner that is unlawful, creates waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage to the
Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or
delay its consent to any written request by Lessee, Lessee's assignees or
subtenants, and by prospective assignees and subtenants of Lessee, its assignees
and subtenants, for a modification of said Permitted Use, so long as the same
will not impair the structural integrity of the improvements on the Premises or
in the Building or the mechanical or electrical systems therein, does not
conflict with uses by other lessees, is not significantly more burdensome to the
Premises or the Building and the improvements thereon, and is otherwise
permissible pursuant to this Paragraph 6. If Lessor elects to withhold such
consent, Lessor shall within five (5) business days after such request give a
written notification of same, which notice shall include an explanation of
Lessor's reasonable objections to the change in use.
6.2 Hazardous Substances. (See Paragraph 1 of Exhibit B.)
(a) Reportable Uses Require Consent. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or
welfare, the environment, or the Premises; (ii) regulated or monitored by any
governmental authority; or (iii) a basis for potential liability of Lessor to
any governmental agency or third party under any applicable statute or common
law theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products or by-products
thereof. Lessee shall not engage in any activity in or about the Premises which
constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances
without the express prior written consent of Lessor and compliance in a timely
manner (at Lessee's sole cost and expense) with all Applicable Requirements (as
defined in Paragraph 6.3). "Reportable Use" shall mean (i) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and
(iii) the presence in, on or about the Premises of a Hazardous Substance with
respect to which any Applicable Laws require that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may, without Lessor's prior consent, but upon notice to
Lessor and in compliance with all Applicable Requirements, use any ordinary and
customary materials reasonably required to be used by Lessee in the normal
course of the Permitted Use, so long as such use is not a Reportable Use and
does not expose the Premises or neighboring properties to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may (but without any obligation to do so) condition its consent to any
Reportable Use of Hazardous Substance by Lessee upon Lessee's giving Lessor such
additional assurances as Lessor, in its reasonable discretion, deems necessary
to protect itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor, including but not limited to
the installation (and, at Lessor's option, removal on or before Lease expiration
or earlier termination) or reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has
reasonable cause to believe, that a Hazardous Substance has come to be located
in, on, under or about the Premises, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill.
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).
(c) Indemnification by Lessee. Lessee shall indemnify,
protect, defend and hold Lessor, its agents, employees, lenders and ground
lessor, if any, and the Premises, harmless from and against any and all
damages, liabilities, judgments, costs, claims, liens, expenses, penalties, loss
of permits and attorneys' and
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consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or permitted by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.
(d) Indemnification by Lessor. Lessor shall indemnify,
protect, defend and hold Lessee, its agents and employees harmless from and
against any and all damages, liabilities, judgments, costs, claims, liens,
expenses, penalties, loss of permits and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance brought onto the Premises or
Industrial Center by Lessor or Lessor's agents, employees or contractors in
violation of applicable laws at the time of such introduction. Lessee's
obligations under this Paragraph 6.2(d) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or permitted by Lessor, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessor from its obligations under this Paragraph 6.2(d), unless
specifically so agreed by Lessor in writing at the time of such agreement.
6.3 Lessee's Compliance with Requirements. Lessee shall, at
Lessee's sole cost and expense, fully, diligently and in a timely manner, comply
with all "Applicable Requirements," which term is used in this Lease to mean all
laws, rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau relating in any manner to the Premises
(including but not limited to matters pertaining to (a) industrial hygiene, (b)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, (c) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance, and (d) the systems and equipment, including the
HVAC Systems, as defined below, within or specifically serving the Premises),
now in effect or which may hereafter come into effect; provided, however, Lessee
shall not be required under this Paragraph 6.3 to: (i) remedy any currently
existing violations pertaining to the condition of the Building or existing
improvements in the Premises which are specifically made Lessor's responsibility
in Paragraph 1 of Exhibit B; (ii) remedy any violation of Applicable
Requirements to the extent specifically caused by the acts of Lessor or Lessor's
employees or agents; (iii) make any alterations to the structural components of
the Building to comply with such Applicable Requirements, except to the extent
such alterations are triggered by or are required as a result of (A) any
Alterations or Utility Installations made to the Premises by or for Lessee
(other than Lessor's Work), or (B) Lessee's specific manner of use of the
Premises; or (iv) make any capital improvement to the warehouse portion of the
Premises which has a useful life, in accordance with sound real estate
accounting principles, that extends beyond the then current Term of this Lease
(the "Excluded Capital Improvements"), except to the extent such Excluded
Capital Improvements are triggered by or are required as a result of (A) any
Alterations or Utility Installations made to the Premises by or for Lessee
(other than Lessor's Work) or (B) Lessee's specific manner of use of the
Premises; provided further, however, that Lessee shall pay for the amortized
cost of such Excluded Capital Improvements based upon the ratio of the number of
years remaining in the Term of the Lease (including any exercised Option to
extend) as of the date of installation of such Excluded Capital Improvements to
the number of years of the useful life of such Excluded Capital Improvements.
Lessor shall be responsible for the balance of such costs of the Excluded
Capital Improvements. To Lessor's actual, present knowledge, there are no
covenants, easements or restrictions currently recorded against the Industrial
Center which pertain to the Premises, except those specifically identified in
that certain Preliminary Report dated November 25, 1996, as supplemented, Order
No.775890-46, issued by Old Republic Title Company, a copy of which has been
received by Lessee. The foregoing representation does not relate to zoning laws
or other Applicable Laws. Lessee shall, within fifteen (15) days after receipt
of Lessor's written request, provide Lessor with copies of all documents and
information, including but not limited to permits, registrations, manifests,
applications, reports and certificates, evidencing Lessee's compliance with any
Applicable Requirements specified by Lessor; provided, however, such 15-day
period shall be extended to such longer period of time as is reasonably
practicable under the circumstances if Lessee is unable, despite due diligence
efforts, to obtain such materials within such 15-day period, so long as Lessee
commences to obtain such materials within such 15-day period and thereafter
diligently proceeds to obtain same. In addition, Lessee shall promptly upon
receipt, notify Lessor in writing (with copies of any documents involved) of any
threatened or actual claim, notice, citation, warning, complaint or report
pertaining to or involving failure by Lessee or the Premises to comply with any
Applicable Requirements.
6.4 Inspection; Compliance with Law. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, upon reasonable advance notice to Lessee, and
in the presence of a representative of Lessee, for the purpose of inspecting the
condition of the Premises and for verifying compliance by Lessee with this Lease
and all Applicable Requirements (as defined in Paragraph 6.3), and Lessor shall
be entitled to employ experts and/or consultants in connection therewith to
advise Lessor with respect to Lessee's activities, including but not limited to
Lessee's installation, operation, use, monitoring, maintenance, or removal of
any Hazardous Substance on or from the Premises. In exercising its entry rights
under this Section 6.4, Lessor shall not (except as may be necessary in an
emergency) unreasonably interfere with Lessee's access to the Premises or
Lessee's ordinary business operations in the Premises. The costs and expenses of
any such inspections shall be paid by the party requesting same, unless
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a violation of Applicable Requirements or a contamination, caused or materially
contributed to by Lessee, is found to exist, or unless the inspection is
requested or ordered by a governmental authority as the result of any such
existing violation or contamination. In such case, Lessee shall, within twenty
(20) days after receipt of invoice, reimburse Lessor or Lessor's Lender, as the
case may be, for the costs and expenses of such inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Condition),
2.3 (Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment, systems and facilities specifically serving the
Premises, such as fire/life safety, plumbing, electrical and lighting facilities
and equipment, heating, ventilation and air conditioning equipment, including
the HVAC equipment on the roof of the Building specifically serving the
Premises and all connections and conduits thereto (collectively, the "HVAC
Systems"), boilers, fired or unfired pressure vessels, fixtures, interior walls,
interior surfaces of exterior walls, ceilings, floors windows, doors, plate
glass, and skylights, but excluding those items of Lessor's Property which are
the responsibility of Lessor pursuant to, and as defined in, Paragraph 7.2
below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof, and the equipment,
systems and facilities specifically serving the Premises, in good order,
condition and state of repair, subject to normal wear and tear.
(b) Lessee shall, at Lessee's sole cost and expense, procure
and maintain a contract, with copies to Lessor, in customary form and substance
for and with a contractor reasonably approved in advance by Lessor and
specializing and experienced in the inspection, maintenance and service of the
HVAC Systems for the Premises. However, Lessor reserves the right, upon notice
to Lessee, to procure and maintain the contract for the HVAC Systems, and if
Lessor so elects, Lessee shall reimburse Lessor within twenty (20) days after
demand, for the cost thereof, but only to the extent such costs are reasonably
price competitive.
(c) If Lessee fails to perform Lessee's obligations under
this Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days'
prior written notice to Lessee (except in the case of an emergency, in which
case no notice shall be required), perform such obligations on Lessee's behalf,
and put the Premises in good order, condition and repair, in accordance with
Paragraph 13.2 below.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building
Code), 4.2 (Common Area Operating Expenses). 6 (Use), 7.1 (Lessee's
Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject
to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition
and repair the following items (collectively, the "Lessor's Property"): the
foundations, exterior walls and structural condition of interior bearing walls
of the Building and Premises, the structural (non-surface) portion of the floor
slabs of the Premises, all of the systems and equipment which commonly serve
the Premises and the premises of other tenants within the Building to the
extent not located within the Premises (such as the ESFR pump located outside
the Building), the roof of the Building (excluding, however, the HVAC Systems
located thereon which are Lessee's responsibility to maintain pursuant to
Paragraph 7.1 above), the Common Areas, fire hydrants, parking lots, walkways,
parkways, driveways, landscaping, fences, signs and utility and fire/and life
safety systems serving the Common Areas and all parts thereof, as well as
providing the services for which there is a Common Area Operating Expense
pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior
or interior surfaces of exterior walls nor shall Lessor be obligated to
maintain, repair or replace windows, doors or plate glass of the Premises.
Lessee expressly waives the benefit of any statute now or hereafter in effect
which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessor's failure to keep the
Building, Industrial Center or Common Areas in good order, condition and repair.
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility
Installations" is used in this Lease to refer to all air lines, power panels,
electrical distribution, security, fire protection systems. communications
systems, lighting fixtures, HVAC Systems and, plumbing in the Premises. The term
"Trade Fixtures" shall mean Lessee's machinery and equipment which can be
removed without doing material damage to the Premises. The term "Alterations"
shall mean any modification or addition to the Premises, other than Lessor's
Work, Utility Installations or Trade Fixtures. "Lessee-Owned Alterations and/or
Utility Installations" are defined as all existing improvements and Utility
Installations in the Premises (other than the Lessor's Property, as defined in
Paragraph 7.2) and all Alterations and/or Utility Installations in or to the
Premises subsequently made by or for Lessee (including any Lessor's Work in the
Premises after completion thereof). Lessee shall not make nor cause to be made
any Alterations or Utility Installations in, on, under or about the Premises
without Lessor's prior written consent, which consent shall not be unreasonably
withheld or delayed, although Lessor may withhold its consent, in its sole and
absolute discretion, with respect to any Alterations or Utility Installations
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which may adversely affect the Building's or Premises' systems and equipment or
structural components, or which can be seen (except when the loading doors are
opened) from outside the Premises. Lessee may, however, make non-structural
Utility Installations or Alterations to the interior of the Premises (excluding
the roof) without Lessor's consent but upon notice to Lessor, so long as they
are not visible from the outside of the Premises (except when the loading doors
are opened), do not involve puncturing, relocating or removing the roof or any
existing walls, or changing or interfering with the fire sprinkler or fire
detection systems and the cost thereof does not exceed $50,000.00.
(b) Consent. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $25,000.00 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation; provided, however,
that no such bond will be required to be posted by the original Lessee executing
this Lease.
(c) Lien Protection. Lessee shall pay when due all claims
for labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on, or about the Premises, and Lessor shall have
the right to post notices of non-responsibility in or on the Premises as
provided by law. If Lessee shall, in good faith, contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole expense, indemnify,
defend and protect itself, Lessor and the Premises against the same and shall
pay and satisfy any such adverse judgment that may be rendered thereon before
the enforcement thereof against the Lessor or the Premises. If Lessor shall
require in connection with any sale or refinancing of all or any portion of the
Building or Industrial Center, Lessee shall cause the lien to be released of
record, by payment, statutory bond or other legal means, within thirty (30) days
after notice thereof from Lessor. In the event that such lien is not released
and removed within such thirty (30) day period, Lessor, at its sole option, may
immediately take all action necessary to release and remove such lien, without
any duty to investigate the validity thereof, and all sums, costs and expenses,
including reasonable attorneys' fees and costs, incurred by Lessor in connection
with such lien shall be deemed additional rent under this Lease and shall be due
and payable by Lessee within thirty (30) days alter Lessee's receipt of invoice
therefor.
7.4 Ownership, Removal, Surrender, and Restoration. All Utility
Installations and Alterations made to the Premises by Lessee shall be considered
a part of the Premises, but Lessee may remove such items installed by Lessee at
the end of the Lease term or prior thereto provided that Lessee repairs any
damage to the Premises as a result of such removal. In addition, Lessor may
require that any Alterations or Utility Installations hereafter made to the
Premises (other than Alterations and Utility Installations made in connection
with Tenant's initial occupancy of the Premises) shall be removed by Lessee by
the expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor, provided that Lessor notifies
Lessee of such removal requirement at the time Lessor consents to Lessee's
installation thereof. Any Alterations for which Lessor's consent is not required
may, at Lessee's option, remain in the Premises at the expiration or earlier
termination of this Lease. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee by the expiration or earlier termination
of this Lease, subject to Lessee's obligation to repair any damage to the
Premises resulting from such removal. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, clean and
free of debris, with all of Lessee's Trade Fixtures (and any Alterations and
Utility Installations which Lessor has properly and timely notified be removed
by Lessee) removed and all damage resulting from such removal repaired as
described above in this Paragraph 7.4, and in operating order, condition and
state of repair, ordinary wear and tear (and damage by fire or other casualty
which is not Lessee's obligation to repair) excepted. Ordinary wear and tear
shall not include any damage or deterioration that would have been prevented by
good maintenance practice or by Lessee substantially performing all of its
obligations under this Lease.
8. Insurance; Indemnity.
8.1 Payment of Premiums. The cost of premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be
prorated to coincide with the corresponding Commencement Date or Expiration
Date.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force
during the period commencing upon the earlier of the Commencement Date or
Lessee's entry into the Premises to perform Lessee's
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fixturization work pursuant to Paragraph 4 of Exhibit B ("Early Possession
Date") and continuing throughout the term of this Lease, a Commercial General
Liability policy of insurance protecting Lessee, Lessor and any Lender(s) whose
names have been provided to Lessee in writing (as additional insureds) against
claims for bodily injury, personal injury and property damage based upon,
involving or arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be on an
occurrence basis providing single limit coverage in an amount not less than
$1,000,000 per occurrence with an "Additional Insured-Managers or Lessors of
Premises" endorsement. The policy shall not contain any intra-insured exclusions
as between insured persons or organizations, but shall include coverage for
liability assumed under this Lease as an "insured contract" for the performance
of Lessee's indemnity obligations under this Lease. The limits of said insurance
required by this Lease or as carried by Lessee shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance to be carried by Lessee shall be primary to and not contribution with
any similar insurance carried by Lessor, whose insurance shall be considered
excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, in addition to and not in lieu
of, the insurance required to be maintained by Lessee. Lessee shall not be named
as an additional insured therein.
8.3 Property Insurance-Building, Improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep
in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and to any Lender(s), insuring against loss
or damage to the Premises; however, Lessor shall not be required to insure the
Lessee-Owned Alterations and Utility Installations, Trade Fixtures and Lessee's
personal property, which shall be insured by Lessee pursuant to Paragraph 8.4.
Such insurance shall be for full replacement cost, as the same shall exist from
time to time, or the amount required by any Lender(s), but in no event more than
the commercially reasonable and available insurable value thereof if, by reason
of the unique nature or age of the improvements involved, such latter amount is
less than full replacement cost. If the coverage is available and commercially
appropriate, Lessor's policy or policies shall insure against all risks of
direct physical loss or damage (except the perils of flood and/or earthquake
unless required by a Lender or elected by Lessor), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Building required
to be demolished or removed by reason of the enforcement of any building,
zoning, safety or land use laws as the result of a covered loss, but not
including plate glass insurance. Said policy or policies shall also contain an
agreed valuation provision in lieu of any co-insurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and any Lender(s), insuring the loss of the full rental
and other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that in
the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide for one full year's loss
of rental revenues from the date of any such loss. Said insurance shall contain
an agreed valuation provision in lieu of any co-insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected rental income,
Real Property Taxes, insurance premium costs and other expenses, if any,
otherwise payable, for the next 12-month period. Common Area Operating Expenses
shall include any deductible amount in the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in
the premiums for the property insurance of the Building and for the Common Areas
or other buildings in the Industrial Center if said increase is caused by
Lessee's acts, omissions, use or occupancy of the Premises.
8.4 Lessee's Property Insurance. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures and Lessee-Owned
Alterations and Utility Installations in, on, or about the Premises similar in
coverage to that carried by Lessor as the Insuring Party under Paragraph 8.3(a).
Such insurance shall be full replacement cost coverage with a deductible not to
exceed $1,000 per occurrence. The proceeds from any such insurance shall be used
by Lessee for the replacement of personal property and the restoration of Trade
Fixtures and Lessee-Owned Alterations and Utility Installations. Upon request
from Lessor, Lessee shall provide Lessor with written evidence that such
insurance is in force. (See Paragraph 52 of Addendum.)
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not
do or permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to
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Lessor. Lessee shall at least thirty (30) days prior to the expiration of such
policies, furnish Lessor with evidence of renewals or "insurance binders"
evidencing renewal thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable be Lessee to Lessor upon
demand.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
the perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 Indemnity. Lessee shall indemnity, defend, protect, and hold
harmless Lessor and Lessor's partners, and their respective officers, directors,
agents and employees (collectively, the "Lessor Parties") from and against any
and all loss, cost, damage, expense, liability and claims, including, without
limitation, court costs and reasonable attorneys' fees (collectively "Claims")
incurred in connection with or arising from any cause in, on or about the
Premises, or any Default by Lessee under this Lease, or any acts, omissions or
negligence of Lessee or of any person claiming by, through or under Lessee, its
partners, and their respective partners, officers, directors, agents and
employees, (collectively, the "Lessee Parties"), in, on or about the Industrial
Center, except to the extent any such Claims are covered (or required to be
covered) by insurance maintained (or required to be maintained) by Lessor as
part of the Common Area Operating Expenses; provided, however, that the terms of
the foregoing indemnity shall not apply to the negligence or misconduct of
Lessor or the Lessor Parties or any default by Lessor of its obligations under
this Lease, and Lessor shall indemnify, defend, protect and hold harmless Lessee
and the Lessee Parties from and against any Claims to the extent resulting from
any such negligence or misconduct of Lessor or the Lessor Parties and/or any
such breach by Lessor, except to the extent such Claims are covered (or required
to be covered) by insurance maintained (or required to be maintained) by Lessee
under this Lease. Should the indemnified party be named as a defendant in any
suit brought against the indemnifying party in connection with or arising out of
an event covered by the foregoing indemnity of the indemnifying party, the
indemnifying party shall pay to the indemnified party its costs and expenses
incurred in such suit, including without limitation, its actual professional
fees such as appraisers', accountants' and attorneys' fees. Further, each
party's agreement to indemnify the other party pursuant to this Paragraph 8.7 is
not intended and shall not relieve any insurance carrier of its obligations
under policies required to be carried by Lessee or Lessor pursuant to the
provisions of this Lease, to the extent such policies cover the matters subject
to the indemnifying party's indemnification obligations; nor shall they
supersede any inconsistent agreement of the parties set forth in any other
provision of this Lease. The provisions of this Paragraph 8.7 shall survive the
expiration or sooner termination of this Lease with respect to any claims or
liability occurring prior to such expiration or termination. Notwithstanding
anything to the contrary contained in this Lease, nothing in this Lease shall
impose any obligations on Lessee or Lessor to be responsible or liable for, and
each hereby releases the other from, all liability for consequential damages
other than those consequential damages incurred by Lessor in connection with a
holdover of the Premises by Lessee after the expiration or earlier termination
of this Lease.
8.8 Exemption of Lessor from Liability. Subject to Lessor's
indemnity of Lessee in Paragraph 8.7 above, Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee's employees, contractors, invitees, customers, or any other person in or
about the Premises, whether such damage or injury is caused by or results from
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether said injury or damage results from conditions arising upon the Premises
or upon other portions of the Building of which the Premises are a part, from
other sources or places, and regardless of whether the cause of such damage or
injury or the means of repairing the same is accessible or not. Lessor shall not
be liable for any damages arising from any act or neglect of any other lessee of
Lessor nor from the failure by Lessor to enforce the provisions of any other
lease in the Industrial Center. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. Damage or Destruction.
9.1 Repair of Damage to Premises by Lessor. Lessee shall promptly
notify Lessor of any damage to the Premises or Building of which Lessee is aware
resulting from fire or any other casualty. If the Premises or any Common Areas
serving or providing access to the Premises shall be damaged by fire or other
casualty, Lessor shall promptly and diligently, subject to reasonable delays for
insurance adjustment or other matters beyond Lessor's reasonable control, and
subject to all other terms of this Paragraph 9, restore Lessor's Property and
such Common Areas to substantially the same condition as existed prior to the
casualty, except for modifications required by zoning and building codes and
other laws or by the holder of a mortgage on the Building or Industrial Center
or any other modifications to the Common Areas deemed desirable by Lessor,
provided that access to the Premises and the number of Lessee's parking spaces
shall not be materially impaired. Notwithstanding any other provision of this
Lease, upon the occurrence of any damage to the Premises, Lessee shall assign to
Lessor (or to any party designated by Lessor) all insurance proceeds payable
(and/or paid to Lessee) under physical damage and property damage insurance
policies maintained by Lessee with respect to damage to the Lessee-Owned
Alterations and Utility Installations of the Premises, and Lessor shall repair
any injury or damage to the Lessee-Owned Alterations and Utility Installations
of the Premises; provided that if the cost to repair the
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Lessee-Owned Alterations and Utility Installations exceeds the amount of
insurance proceeds actually received by Lessor from Lessee's insurance carrier,
as assigned by Lessee, plus the amount of insurance proceeds received by Lessor
from Lessor's insurance carrier to the extent allocable to the Lessee-Owned
Alterations and Utility Installations, Lessee shall provide to Lessor the
remaining costs to repair the Lessee-Owned Alterations and Utility Installations
on a progress-payment basis during Lessor's repair of the damage.
Notwithstanding the foregoing, Lessee shall be solely responsible, at Lessee's
sole cost and expense, for repairing and restoring Lessee's Trade Fixtures and
personal property in the Premises. In connection with such repairs and
replacements of the Lessee-Owned Alterations and Utility Installations, Lessee
shall, prior to the commencement of construction, submit to Lessor, for Lessor's
review and approval, all plans, specifications and working drawings relating
thereto, and Lessor shall select the contractors to perform such improvement
work. Lessor shall not be liable for any inconvenience or annoyance to Lessee or
its visitors, or injury to Lessee's business resulting in any way from such
damage or the repair thereof; provided however, that if such fire or other
casualty shall have damaged the Premises or Common Areas necessary to Lessee's
occupancy, and if such damage is not the result of the reckless acts or willful
misconduct of Lessee or Lessee's employees, contractors, licensees or invitees,
Lessor shall allow Lessee a proportionate abatement of Base Rent and Lessee's
Share of Common Area Operating Expenses, during the time and to the extent the
Premises are unfit for occupancy for the purposes permitted under this Lease,
and not occupied by Lessee as a result thereof; provided, further, if the
Premises is damaged such that the remaining portion thereof is not sufficient to
allow Lessee to conduct its business operations from such remaining portion and
Lessee does not conduct its business operations therefrom, and if such damage is
not the result of the reckless acts or willful misconduct of Lessee or any of
Lessee's employees, contractors, licensees or invitees, Lessor shall allow
Lessee a total abatement of Base Rent and Lessee's Share of Common Area
Operating Expenses during the time and to the extent the Premises are unfit for
occupancy for the purposes permitted under this Lease, and not occupied by
Lessee as a result of the subject damage.
9.2 Lessor's Option to Repair. Notwithstanding the terms of
Paragraph 9.1 of this Lease, Lessor may elect not to rebuild and/or restore the
Premises and/or Building and instead terminate this Lease by notifying Lessee in
writing of such termination within sixty (60) days after the date of damage,
such notice to include a termination date giving Lessee ninety (90) days to
vacate the Premises, but Lessor may so elect only if the Premises, or the Common
Areas providing access to or parking for the Premises, or any substantial
portion of the Building which is other than the Premises shall be damaged by
fire or other casualty and one or more of the following conditions is present:
(i) repairs cannot substantially be completed within one hundred eighty (180)
days of the date of damage (when such repairs are made without the payment of
overtime or other premiums), as determined by an independent contractor selected
by Lessor (the "Damage Consultant") pursuant to a notice delivered by Lessor to
Lessee within forty five (45) days alter the damage ("Lessor's Damage Notice");
or (ii) the damage or condition arising as a result of such damage is not fully
covered, except for deductible amounts, by Lessor's insurance policies required
to be maintained pursuant to Paragraph 8.3(a) of this Lease, plus the sum of any
insurance proceeds or costs pertaining to the Lessee-Owned Alterations and
Utility Installations assigned to Lessor as provided above (and such lack of
coverage is not due to Lessor's failure to maintain any insurance required to be
maintained by Lessor pursuant to Paragraph 8.3 of this Lease); provided,
however, that (A) if Lessor does not elect to terminate this Lease pursuant to
Lessor's termination right as provided above, (B) the damage constitutes a
"Lessee Damage Event" (as defined below), and (C) repair of such damage cannot,
in the reasonable judgment of the Damage Consultant, be substantially completed
within one hundred eighty (180) days after the date of the damage, then Lessee
may elect, no earlier than sixty (60) days alter the date of the damage and not
later than thirty (30) days after the date of Lessee's receipt of Lessor's
Damage Notice, to terminate this Lease by written notice to Lessor effective as
of the date specified in the notice, which date shall not be less than thirty
(30) days nor more than sixty (60) days after the date such notice is given by
Lessee. Furthermore, if neither Lessor nor Lessee have terminated this Lease,
the damage constitutes a Lessee Damage Event, and repairs of such damage are not
substantially completed within the later of (1) such 180-day period, or (2)
thirty (30) days alter the date estimated by Lessor in Lessor's Damage Notice
for substantial completion of such repairs (as such time period in items (1) and
(2) above shall be extended by Lessee-caused delays and any other delays beyond
Lessor's reasonable control described in Paragraph 51 of the Addendum), Lessee
shall have the right to terminate this Lease within ten (10) business days after
the end of such period and thereafter during the first five (5) business days of
each calendar month following the end of such period until such time as the
repairs are substantially complete, by notice to Lessor (the "Damage Termination
Notice"), effective as of a date set forth in the Damage Termination Notice (the
"Damage Termination Date"), which Damage Termination Date shall not be less than
ten (10) business days following the end of such period or each such month, as
applicable. Notwithstanding the foregoing, if Lessee delivers a Damage
Termination Notice to Lessor, then Lessor shall have the right to suspend the
occurrence of the Damage Termination Date for a period ending thirty (30) days
after the Damage Termination Date set forth in the Damage Termination Notice by
delivering to Lessee, within five (5) business days of Lessor's receipt of the
Damage Termination Notice, a certificate of Lessor's contractor responsible for
the repair of the damage certifying that it is such contractor's good faith
judgment that the repairs shall be substantially completed within thirty (30)
days after the Damage Termination Date. If the repairs shall be substantially
completed prior to the expiration of such thirty (30) day period, then the
Damage Termination Notice shall be of no force or effect, but if the repairs
shall not be substantially completed within such thirty (30) day period, then
this Lease shall terminate upon the expiration of such thirty (30) day period.
At any time, from time to time, after the date occurring sixty (60) days after
the date of the damage, Lessee may request that Lessor inform Lessee of Lessor's
reasonable opinion of the date of completion of the repairs and Lessor shall
respond to such request within five (5) business days. As used herein, a "Lessee
Damage Event" shall mean damage to all or any part of the Premises or any Common
Areas providing access to or parking for the Premises by fire or other casualty,
which damage is not the result of the reckless acts or willful misconduct of
Lessee or any of Lessee's employees, agents. contractors, licensees or invitees,
and which damage substantially interferes with Lessee's use of or access to the
Premises and would entitle Lessee
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to an abatement of Base Rent and Lessee's Share of Common Area Operating
Expenses pursuant to Paragraph 9.1 above.
9.3 Waiver of Statutory Provisions. The provisions of this Lease,
including this Paragraph 9, constitute an express agreement between Lessor and
Lessee with respect to any and all damage to, or destruction of, all or any
part of the Premises, the Building or any other portion of the Industrial
Center, and any statute or regulation of the State of California, including,
without limitation, Sections 1932(2) and 1933(4) of the California Civil Code,
with respect to any rights or obligations concerning damage or destruction in
the absence of an express agreement between the parties, and any other statute
or regulation, now or hereafter in effect, shall have no application to this
Lease or any damage or destruction to all or any part of the Premises, the
Building or any other portion of the Industrial Center.
9.4 Damage Near End of Term. In the event that the Premises or the
Building is destroyed or damaged to any substantial extent during the last
twelve (12) months of the Term of this Lease and, in the reasonable judgment of
the Damage Consultant as set forth herein Lessor's Damage Notice delivered to
Lessee within thirty (30) days after the date of the damage or destruction, the
repair of such damage or destruction to the Premises or Building cannot be
substantially completed within sixty (60) days after the date Lessor becomes
aware of such damage or destruction, then notwithstanding anything contained in
this Paragraph 9, Lessor shall have the option, and to the extent such damage or
destruction is to the Premises or any Common Areas providing access to or
parking for the Premises, Lessee shall have the option, to terminate this Lease
by giving written notice to the other party of the exercise of such option
within forty five (45) days after such damage or destruction.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes,
as defined in Paragraph 10.2, applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 Real Property Tax Definition. As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Industrial Center by any
authority having the direct or indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, fire, street,
drainage, or other improvement district thereof, levied against any legal or
equitable interest of Lessor in the Industrial Center or any portion thereof,
Lessor's right to rent or other income therefrom, and/or Lessor's business of
leasing the Premises. The term "Real Property Taxes" shall also include any tax,
fee, levy, assessment or charge, or any increase therein, imposed by reason of
events occurring, or changes in Applicable Law taking effect, during the term of
this Lease, including but not limited to a change in the ownership of the
Industrial Center or in the improvements thereon, the execution of this Lease,
or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties. In calculating Real Property Taxes for any calendar
year, the Real Property Taxes for any real estate tax year shall be included in
the calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
Notwithstanding the foregoing, Real Property Taxes shall not include state,
local and federal personal or corporate income taxes measured by the net income
of Lessor, estate and inheritance taxes, or documentary transfer taxes.
Following Lessee's reasonable request, Lessor, in its reasonable discretion,
shall at no cost to Lessor, attempt to reduce the amount of Real Property Taxes
assessed against the Industrial Center and/or Building.
10.3 Additional Improvements. Common Area Operating Expenses shall
not include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 Joint Assessment. If the Building is not separately assessed,
Real Property Taxes allocated to the Building shall be an equitable proportion
of the Real Property Taxes for all of the land and improvements included within
the tax parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable determination
thereof, in good faith, shall be conclusive.
10.5 Lessee's Property Taxes. Lessee shall pay prior to
delinquency all taxes assessed against and levied upon Alterations and Utility
Installations placed upon this Premises by Lessee, and all, Trade Fixtures,
furnishings, equipment and all personal property of Lessee contained in the
Premises or stored within the Industrial Center. When possible, Lessee and
Lessor shall cooperate with each other to cause such items to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
property shall be assessed with Lessor's real property, Lessee shall pay Lessor
the taxes attributable to Lessee's property within ten (10) days after receipt
of a written statement and other appropriate documentation reasonably evidencing
(a) that such taxes are applicable to Lessee's property and/or the Alterations
and Utility Installations placed by Lessee, and (b) the amounts thereof.
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11. Utilities. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon.
Electricity (and if hooked up, gas) shall be separately metered. If any such
utilities or services are not separately metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined by Lessor of all such charges jointly metered or billed with other
premises in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage or otherwise transfer or encumber
(collectively, "assign") or sublet all or any part of Lessee's interest in this
Lease or in the Premises without Lessor's prior written consent, which consent
shall not be unreasonably withheld as provided in, and shall be subject to the
terms of, Paragraph 36. An assignment or subletting of Lessee's interest in this
Lease without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1, or a non-curable Breach
without the necessity of any notice and grace period.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(See Paragraph 53 of Addendum.)
(a) Regardless of Lessor's consent, any assignment or
subletting shall not (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
assignee or sublessee. However, Lessor may consent to subsequent sublettings and
assignments of the sublease or any amendments or modifications thereto without
notifying Lessee or anyone else liable under this Lease or the sublease and
without obtaining their consent, and such action shall not relieve such persons
from liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's
obligation under this Lease, Lessor may proceed directly against Lessee or
anyone else responsible for the performance of the Lessee's obligations under
this Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not limited
to the intended use and/or required modification of the Premises, if any.
Lessee agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall,
by reason of accepting such assignment or entering into such sublease, be
deemed, for the benefit of Lessor, to have assumed and agreed to conform and
comply with each and every term, covenant, condition and obligation herein to be
observed or performed by Lessee during the term of said assignment or sublease,
other than such obligations as are contrary to or inconsistent with provisions
of an assignment or sublease to which Lessor has specifically consented in
writing.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all
or any part of the Prernises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease of all or
a portion of the Premises heretofore or hereafter made by Lessee, and Lessor may
collect such rent and income and subject to the provisions of Paragraph 53(a) of
the Addendum, apply same toward Lessee's obligations under this Lease; provided,
however, that until a Breach (as defined in Paragraph 13.1) shall occur in the
performance of Lessee's obligations under this Lease, and subject to the
provisions of Paragraph 53(a) of the Addendum, Lessee may, except as otherwise
provided in this Lease, receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of the foregoing provision or any other
assignment of such sublease to Lessor, nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such sublessee
under such Sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's
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obligations under this Lease, to pay to Lessor the rents and other charges due
and to become due under the sublease. Sublessee shall rely upon any such
statement and request from Lessor and shall pay such rents and other charges to
Lessor without any obligation or right to inquire as to whether such Breach
exists and notwithstanding any notice from or claim from Lessee to the contrary.
Lessee shall have no right or claim against such sublessee, or, until the Breach
has been cured, against Lessor, for any such rents and other charges so paid by
said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of
its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of such
sublease; provided, however, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublessee to such sublessor or for any other prior
defaults or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the
sublessor under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall
further assign or sublet all or any part of the Premises without Lessor's prior
written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. A "Default" by Lessee is defined as a
failure by Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "Breach"
by Lessee is defined as the occurrence of any one or more of the following
Defaults, and, where a grace period for cure after notice is specified herein,
the failure by Lessee to cure such Default prior to the expiration of the
applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs l3.2 and/or 13.3:
(a) Intentionally Deleted.
(b) The failure by Lessee to make any payment of Base Rent,
Lessee's Share of Common Area Operating Expenses, or any other monetary payment
required to be made by Lessee hereunder as and when due, or the failure of
Lessee to fulfill any obligation under this Lease which endangers or threatens
life or property, where such failure to make such payment or fulfill any such
obligation continues for a period of five (5) business days following written
notice thereof by or on behalf of Lessor to Lessee.
(c) The failure by Lessee to provide Lessor with reasonable
written evidence (in duly executed original form, if applicable) of (i)
compliance with Applicable Requirements per Paragraph 6.3. (ii) the inspection,
maintenance and service contracts required under Paragraph 7.1(b), (iii) the
rescission of an unauthorized assignment or subletting per Paragraph 12.1, (iv)
a Tenancy Statement per Paragraphs 16 or 37. (v) the subordination or
non-subordination of this Lease per Paragraph 30, or (vi) any documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee; provided, however,
that if the nature of Lessee's Default with respect to items (i), (ii) and (vi)
hereinabove is such that more than ten (10) days are reasonably required for its
cure, then it shall not be deemed a Breach of this Lease by Lessee if Lessee
commences such cure within said ten (10) day period and thereafter diligently
prosecutes such cure to completion.
(d) A Default by Lessee as to the term, covenants,
conditions or provisions of this Lease, or of the rules adopted under Paragraph
40 hereof that are to be observed, complied with or performed by Lessee, other
than those described in Subparagraphs 13.1(a), (b) or (c), above, where such
Default continues for a period of thirty (30) days after written notice thereof
by or on behalf of Lessor to Lessee; provided. however. that if the nature of
Lessee's Default is such that more than thirty (30) days are reasonably required
for its cure. then it shall not be deemed to be a Breach of this Lease by Lessee
if Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the
making by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section
101 or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within sixty (60) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
where possession is not restored to Lessee within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided. however, in the
event that any provision of this
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Subparagraph 13.1(e) is contrary to any applicable law, such provision shall be
of no force or effect, and shall not affect the validity of the remaining
provisions.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, which failure continues beyond any
applicable notice and cure period set forth in this Lease, Lessor may at its
option (but without obligation to do so), perform such duty or obligation on
Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee to Lessor within twenty (20) days after invoice therefor.
If any check given to Lessor by Lessee shall not be honored by the bank upon
which it is drawn, Lessor at its own option, may require all future payments to
be made under this Lease by Lessee to be made only by cashier's check. In the
event of a Breach of this Lease by Lessee (as defined in Paragraph 13.1), with
or without further notice or demand, and without limiting Lessor in the exercise
of any right or remedy which Lessor may have by reason of such Breach, Lessor
may:
(a) Terminate Lessee's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of the Premises to
Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the
worth at the time of the award of the unpaid rent which had been earned at the
time of termination; (ii) the worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all or any part thereof in a separate suit for such
rent and/or damages. If a notice and grace period required under Subparagraph
13.1(b), (c) or (d) was not previously given, a notice to pay rent or quit, or
to perform or quit, as the case may be, given to Lessee under any statute
authorizing the forfeiture of leases for unlawful detainer shall also constitute
the applicable notice for grace period purposes required by Subparagraph
13.1(b), (c) or (d). In such case, the applicable grace period under the
unlawful detainer statute shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of the
two (2) such grace periods shall constitute both an unlawful detainer and a
Breach of this Lease entitling Lessor to the remedies provided for in this Lease
and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in
effect (in California under California Civil Code Section 1951.4) after Lessee's
Breach and recover the rent as it becomes due, provided Lessee has the right to
sublet or assign, subject only to reasonable limitations. Lessor and Lessee
agree that the limitations on assignment and subletting this Lease are
reasonable. Acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver to protect the Lessor's interest under this
Lease, shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 Inducement Recapture in Event of Breach. Any agreement by
Lessor for free or abated rent or other charges applicable to the Premises, or
for the giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
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13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering the
Premises. Accordingly, if any installment of rent or other sum due from Lessee
shall not be received by Lessor or Lessor's designee within fifteen (15) days
after such amount shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to three percent (3%)
of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of such late charge by Lessor shall
in no event constitute a waiver of Lessee's Default or Breach with respect to
such overdue amount, nor prevent Lessor from exercising any of the other rights
and remedies granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) consecutive installments of
Base Rent, then notwithstanding Paragraph 4.1 or any other provision of this
Lease to the contrary, Base Rent shall, at Lessor's option, become due and
payable quarterly in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of
this Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by any Lender(s) whose name and address shall have been furnished to
Lessee in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion. (See Paragraph 54 of
Addendum.)
14. Condemnation. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation", this Lease shall terminate
as to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than twenty-five percent (25%) of
the floor area of the Premises, or more than twenty-five percent (25%) of the
portion of the Common Areas designated for Lessee's parking, is taken by
condemnation, either Lessor or Lessee may, at its option, to be exercised in
writing within ten (10) days after Lessor shall have given Lessee written notice
of such taking (or in the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession) terminate this Lease as of the
date the condemning authority takes such possession. If this Lease is not
terminated in accordance with the foregoing, this Lease shall remain in full
force and effect as to the portion of the Premises remaining, except that the
Base Rent and Lessee's Share of Common Area Operating Expenses shall be reduced
in the same proportion as the rentable floor area of the Premises taken (plus
the area of the Premises which Lessee is not able to use, and does not use, as a
result of any taking of the Common Area which provides access to the Premises
and/or any taking of Lessee's parking spaces) bears to the total rentable floor
area of the Premises. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution of value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation, separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall repair
any damage to the Premises other than Lessee's Trade Fixtures or personal
property caused by such condemnation authority.
15. Brokers. Lessee and Lessor each represent and warrant to the other
that it has had no dealings with any person, firm, broker or finder other than
as named in Paragraph 1.10(a) in connection with the negotiation of this Lease
and/or the consummation of the transaction contemplated hereby, and that no
broker or other person, firm or entity other than said named Brokers is entitled
to any commission or finder's fee in connection with said transaction. Lessee
and Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, and/or attorneys' fees reasonably incurred with respect thereto.
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "Responding Party") shall
within ten (10) days after written notice from the other Party (the "Requesting
Party") execute, acknowledge and deliver to the Requesting Party a statement in
writing in a form similar to the then most current "Tenancy Statement" form
published by the American Industrial Real Estate Association, plus such
additional information, confirmation and/or statements as may be reasonably
requested by the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance,
or sell the Premises or the Building, or any part thereof, Lessee shall deliver
to any potential lender or purchaser designated by Lessor such financial
statements of Lessee as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. Such statements shall be prepared internally by Lessee and certified
to be correct by an appropriate officer of Lessee, and shall not be audited
statements; provided however, upon request, Lessee shall cause such audited
statements to be prepared by an independent certified public accountant so long
as Lessor pays for the costs of such audited statements. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes
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herein set forth. Lessor shall not, however, request any such financial
statements more often than once per calendar year.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises. In the
vent of a transfer of Lessor's title or interest in the Premises or in this
Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit)
any unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined. (See
Paragraph 55 of Addendum.)
18. Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within fifteen (15)
days following the date on which it was due, shall bear interest from the date
due at the prime rate charged by the largest state chartered bank in the state
in which the Premises are located plus four percent (4%) per annum, but not
exceeding the maximum rate allowed by law, in addition to the potential late
charge provided for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that it
has made, and is relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the other Party to this Lease
and as to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party
beneficiary of the provisions of this Paragraph 22.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by
this Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours, and shall be deemed sufficiently
given if served in a manner specified in this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notice purposes. Either Party may by written notice to
the other specify a different address for notice purposes, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for the purpose of mailing or delivering notices to Lessee. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon. If sent by regular mail, the notice shall be deemed given forty-eight
(48) hours after the same is addressed as required herein and mailed with
postage prepaid. Notices delivered by United States Express Mail or overnight
courier that guarantees next day delivery shall be deemed given twenty-four (24)
hours after delivery of the same to the United States Postal Service or courier.
If any notice is transmitted by facsimile transmission or similar means, the
same shall be deemed served or delivered upon telephone or facsimile
confirmation of receipt of the transmission thereof, provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday or a Sunday
or a legal holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee (and no waiver by Lessee of any breach by
Lessor of any term, covenant or condition hereof by Lessor), shall be deemed a
waiver of any other term, covenant or condition hereof, or of any subsequent
Default or Breach by Lessee (or breach by Lessor, as the case may be), of the
same or any other term, covenant or condition hereof. A party's consent to, or
approval of, any such act shall not be deemed to render unnecessary the
obtaining of such party's consent to, or approval of, any subsequent or similar
act by the other party, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given by either party to the other
may be accepted by the payee on account of moneys or damages due the payee,
notwithstanding any qualifying statements or conditions made by the payor in
connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by the payee
at or before the time of deposit of such payment.
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25. Intentionally Deleted.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to one hundred fifty
percent (150%) of the Base Rent applicable during the month immediately
preceding such expiration or earlier termination. Nothing contained herein shall
be construed as a consent by Lessor to any holding over by lessee.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event or Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the vent of such foreclosure, such new owner shall not: (i)
be liable for any act or omission or any prior lessor or with respect to events
occurring prior to acquisition of ownership, (ii) be subject to any offsets or
defenses which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered
into by Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receipt of assurance in the form of a commercially
reasonable subordination, non-disturbance and attornment agreement (a
"non-disturbance agreement") from the Lender that Lessee's possession and this
Lease, including any options to extend the term hereof, will not be disturbed so
long as Lessee is not in Breach hereof and attorns to the record owner of the
Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
30.5 Lessor's Representation. Lessor hereby represents to Lessee
that there are no current mortgages or deeds of trust encumbering Lessor's
interest in the Building or Industrial Center as of the date of execution of
this Lease.
31. Attorneys' Fees. If any Party or Broker brings an action or
proceeding to enforce the terms hereof or declare rights hereunder, the
Prevailing Party (as hereafter defined) in any such proceeding, action, or
appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may
be awarded in the same suit or recovered in a separate suit, whether or not such
action or proceeding is pursued to decision or judgment. The term "Prevailing
Party" shall include, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorneys' fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorneys' fees reasonably incurred. Lessor shall be entitled to attorneys'
fees, costs and expenses incurred in preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such Default or resulting Breach.
Broker(s) shall be intended third party beneficiaries of this Paragraph 31.
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32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's
agents shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement or rent of liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Premises without first
having obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the exterior of the
Premises or the Building, except that Lessee may, with Lessor's prior written
consent, install (but not on the roof) one (1) exterior sign on the Building as
reasonably required to advertise Lessee's own business so long as such sign is
in a location designated by Lessor and comply with Applicable Requirements and
the signage criteria established for the Industrial Center by Lessor. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 maintenance, Repairs, Utility Installations, Trade
Fixtures and Alterations). Unless otherwise expressly agreed herein, Lessor
reserves all rights to the use of the roof of the Building, and the right to
install advertising signs on the Building, including the roof which do not
unreasonably interfere with the conduct of Lessee's business; Lessor shall be
entitled to all revenues from such advertising signs. (See Paragraph 56 of
Addendum.)
35. Termination; Merger. Unless specifically stated otherwise in writing
by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to reasonable architects', attorneys', engineers' and other consultants'
fees) incurred in the consideration of, or response to, a request by Lessee for
any Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting (provided, however, Lessor's
attorneys' fees for any such consent to an assignment or subletting shall not
exceed $1,500.00) or the presence or use of a Hazardous Substance, shall be paid
by Lessee to Lessor upon receipt of an invoice and supporting documentation
therefor. Lessor may. as a condition to considering any such request by Lessee,
require that Lessee deposit with Lessor an amount of money (in addition to the
Security Deposit held under Paragraph 5) reasonably calculated by Lessor to
represent the cost Lessor will incur in considering and responding to Lessee's
request. Any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor's consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default or Breach, except as may be otherwise specifically
stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease
are acknowledged by Lessee as being reasonable. The failure to specify herein
any particular condition to Lessor's consent shall not preclude the impositions
by Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Intentionally Deleted.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises
and the performance of all of the covenants, conditions and provisions on
Lessee's part to be observed and performed under this Lease, Lessee shall have
quiet possession of the Premises for the entire term hereof subject to all of
the provisions of this Lease.
39. Options
39.1 Definition. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (1) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
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Initials: ______
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[1993 FORM]
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39.2 Intentionally Deleted.
39.3 Multiple Options. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, during the
time Lessee is in Breach of this Lease.
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessor gives to Lessee three (3) or more notices of separate Defaults under
Paragraph 13.1 during any twelve (12) month period, whether or not the Defaults
are cured, or (iii) if Lessee commits a Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide by, and keep
and observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
41. Security Measures. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
44. Authority. If either Party hereto is a corporation, trust, or general
or limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or
Lessor's agent or Lessee's agent and submission of same to Lessee or Lessor
shall not be deemed an offer to lease. This Lease is not intended to be binding
until executed and delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by Lessor's Lender in connection with the obtaining of normal financing
or refinancing of the property of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
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LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH
TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW
THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT
THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL
ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS,
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE
PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE
LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS
LOCATED IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE
WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at LA CALIF
on 12-31-96
by LESSOR:
ADAYA ASSET WASHINGTON, L.P., a
California limited partnership
By: /s/ M M Siam
--------------------------------------
Name Printed: M M SIAM
Title: Vice President
By: ______________________________________
Name Printed: ____________________________
Title: ___________________________________
Address: c/o Investment Development Services
888 West Sixth Street, 9th Floor
Los Angeles, California 90017
Telephone: (213) 362-9300
Facsimile: (213) 627-9937
Executed at Haupauge, New York
on 12/27/96
by LESSEE:
GRAHAM-FIELD, INC. a New York corporation
By: /s/ Richard Kolodny
--------------------------------------
Name Printed: Richard Kolodny
Title: Vice President, General Counsel
By: /s/ Gary M. Jacobs
--------------------------------------
Name Printed: GARY M. JACOBS
Title: V P Finance
Address: 400 Rabro Drive
Hauppauge, New York 11788
Telephone: (516) 582-5900
Facsimile: (516) 582-5608
NOTICE: These forms are often modified to meet changing requirements
of law and needs of the industry. Always write or call to
make sure you are utilizing the most current form: AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION, 345 South Figueroa Street,
Suite M-l, Los Angeles, California 90071 (213) 687-8777.
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EXHIBIT A
SITE PLAN OF PREMISES
WASHINGTON DISTRIBUTION CENTER
11954 E. WASHINGTON BOULEVARD o SANTA FE SPRINGS
[Site Plan]
<PAGE>
EXHIBIT B
CONDITION OF PREMISES/LESSOR'S WORK
1. Condition of Premises and Building. Except as expressly provided in
Paragraph 2.2 of the Lease and except for "Lessor's Work" set forth in Paragraph
2 below in this Exhibit B, Lessee hereby acknowledges and agrees that (a) Lessee
shall accept the Premises and Building in their "AS-IS" condition as of the
Commencement Date, and (b) Lessor shall not be obligated to construct or pay for
any improvements, additions or refurbishment in, to or of the Premises;
provided, however, that notwithstanding the foregoing, to the extent that as of
the date Lessor substantially completes Lessor's Work, the Building or the
existing improvements in the Premises do not then comply with Applicable Laws in
their form existing as of such date and/or the Building or Industrial Center
contain Hazardous Substances which are in violation of Applicable Laws as of
such date, then Lessor shall be solely responsible, at its cost (which shall not
be included in Common Area Operating Expenses), to remedy any such
non-compliance or violation to the extent and as when required by Applicable
Laws following receipt by Lessor of written notice of such non-compliance or
violation from the applicable governmental authority. In the event that Lessor
consents to Lessee's construction and completion of any improvements in the
Premises (including, but not limited to, any alterations, improvements,
additions, or Utility Installations, as set forth in Paragraph 7.3 of the
Lease), such construction shall be subject to the terms of Paragraph 7.3 of the
Lease and all other relevant provisions of the Lease and Lessee hereby agrees to
indemnify and defend Lessor and hold Lessor harmless from and against any and
all claims, costs, expenses or liability, arising from Lessee's design,
construction and operation of any improvements in, on or about the Premises
(including, without limitation, Lessee's failure to obtain any necessary
permits, approvals or certificates from the applicable governmental authorities
and/or actual attorneys' costs and fees, and court costs).
2. Lessor's Work. Lessor shall, at Lessor's sole expense, cause a
contractor selected by Lessor ("Contractor") to perform the following additions
and improvements in the Premises ("Lessor's Work") prior to Lessor's delivery of
the Premises to Lessee, using Building standard materials unless otherwise
specified in the Working Drawings (as defined below):
(a) Provide an ESFR fire sprinkler to the Premises.
(b) Provide four (4) additional loading doors with load
levelers.
(c) Provide one (1) grade level ramp, with one (1) door
pursuant to specifications determined by Lessor.
(d) Provide approximately 2,400 sq. ft. of office as
follows:
(i) Reception/Bull pen area - 18' x 24'
(ii) Three (3) private offices -
- Two (2) 12' x 12'
- One (1) 14' x 12'
(iii) Conference Room - 13' x 14'
(iv) Kitchen/Breakroom - 16' x 16'
- Warehouse: Men's restroom with two (2)
urinals and two (2) commodes
- Office: Single commodes men's and
women's restrooms may be back to back
A detailed plan for the Lessor's Work described in Paragraph 2(d) has been
approved by Lessee and Lessor and is attached hereto as Schedule 1. A
preliminary plan showing the Lessor's Work described in Paragraphs 2 (b) and (c)
has been approved by Lessee and Lessor and is attached hereto as Schedule 2.
Such plans, and any more detailed plans, specifications and dimensions that are
required for the Lessor's Work to be prepared by architects and engineers
selected by Lessor, shall be referred to herein collectively as the "Working
Drawings". Lessor shall submit any such additional Working Drawings to Lessee
for Lessee's approval, which approval shall not be unreasonably withheld. Lessee
shall notify Lessor of its approval or reasonable disapproval (with reasons
specified) within one (1) business day after Lessee's receipt of the Working
Drawings; provided, however, Lessee shall not be permitted to propose revisions
which would expand the scope of Lessor's Work described in Subparagraphs 2(a)
through 2(d) above or would be inconsistent with the the applicable plans
attached hereto as Schedule 1 and Schedule 2. Failure of Lessee to notify Lessor
of its approval or reasonable disapproval within such one (1) business day
period shall be deemed Lessee's approval of the Working Drawings. After the
Working Drawings are initially approved, Lessee shall not make any changes
thereto. Lessor shall cause the Contractor to perform the Lessor's Work in a
good and workman-like manner and in compliance with all applicable laws in
effect at the time of construction, including, without limitation, the Americans
with Disabilities Act.
3. Commencement Date. The "Commencement Date" of this Lease shall be the
earlier of (a) the date Lessee commences business operations in the Premises, or
(b) the date Lessor delivers possession of the Premises to Lessee with Lessor's
Work substantially completed. For purposes hereof Lessor's Work shall be
EXHIBIT B
<PAGE>
deemed "substantially completed" when the Contractor completes the Lessor's Work
pursuant to the Working Drawings, minor punch-list and decorative items
excepted, and Lessor receives a temporary certificate of occupancy (or its
equivalent) issued by the City of Santa Fe Springs permitting occupancy of the
Premises. The parties estimate that Lessor's Work will be substantially
completed and the Commencement Date will occur on or about February 15, 1997;
provided, however, if for any reason Lessor cannot deliver possession of the
Premises to Lessee with Lessor's Work substantially completed by such date, then
Lessor shall not be subject to any liability therefor, nor shall such failure
affect the validity of this Lease or the obligations of Lessee hereunder or
provide Lessee with a right to terminate this Lease (subject, however, to
Lessee's termination right in Paragraph 5 below), but in such case, Lessee's
sole remedy (subject to Paragraph 5 below) shall be the extension of the
Commencement Date until the earlier of the two dates set forth in Paragraphs
3(a) and (b) above. Notwithstanding the foregoing provisions of this Paragraph 3
to the contrary, to the extent Lessor is delayed in delivering possession of the
Premises to Lessee with Lessor's Work substantially completed as a result of any
delays caused by the acts, changes or omissions of Lessee or Lessee's agents,
architects, engineers, contractors or employees or any improvements, fixtures,
furniture or equipment constructed or installed by Lessee (collectively "Tenant
Delays"), then the Commencement Date shall be accelerated to the date the
Commencement Date would have occurred but for such Tenant Delays; provided,
however, that no Tenant Delay shall be deemed to occur unless and until Lessor
has provided notice to Lessee (the "Delay Notice") specifying the action or
inaction by Lessee which Lessor contends constitutes the Tenant Delay. If such
action or inaction is not cured by Lessee within one (1) business day of receipt
of such Delay Notice (the "Grace Period"), then a Tenant Delay, as set forth in
such Delay Notice, shall be deemed to have occurred commencing as of the
expiration of the Grace Period; provided that Lessee shall only be permitted an
aggregate of three (3) days of Grace Period and, thereafter, a Tenant Delay
shall commence upon delivery of the Delay Notice to Lessee.
4. Lessee's Entry into the Premises Prior to Commencement Date. Provided
that Lessee and its agents do not interfere with the Lessor's Work and any other
work to be performed in the Building by Lessor or Lessor's contractors, Lessor
shall allow Lessee access to the Premises prior to substantial completion of
Lessor's Work for the purpose of the Lessee installing equipment, furniture and
fixtures (including any Utility Installations) in the Premises. Prior to
Lessee's entry into the Premises as permitted by the terms of this Paragraph 4,
Lessee shall (a) provide to Lessor certificates or other evidence that Lessee
has obtained insurance required pursuant to this Lease, and (b) submit a
schedule to Lessor and Contractor, for their reasonable approval, which schedule
shall detail the timing and purpose of Lessee's entry. Lessee shall hold Lessor
harmless from and indemnify, protect and defend Lessor against any loss or
damage to the Building or Premises and against any injury to any persons caused
by Lessee's actions pursuant to this Paragraph 4. Lessee's entering the Premises
for the purposes of installing Lessee's equipment, furniture and fixtures
pursuant to this Paragraph 4 shall not, in and of itself, constitute Lessee's
commencement of business operations in the Premises for purposes of determining
the Commencement Date in accordance with the provisions of Paragraph 3(a) above,
although Lessee shall be bound by all the terms, covenants and conditions of
this Lease during Lessee's entry, although Lessee shall not be obligated to pay
Base Rent or Common Area Operating Expenses until the Commencement Date occurs
as set forth in Paragraph 3 above.
5. Outside Date; Lessee's Termination Right. In the event that the
Commencement Date has not occurred by the "Outside Date", which shall be March
31, 1997, as such date shall be extended by the number of days that the
Commencement Date is delayed due to (a) Tenant Delays, or (b) for up to an
additional thirty (30) days due to any other delays beyond Lessor's reasonable
control (as described in Paragraph 51 of the Addendum), then Lessee shall, at
its sole and exclusive remedy therefor, have the right to terminate this Lease
by delivering a written notice thereof to Lessor (the "Termination Notice")
electing to terminate this Lease effective upon Lessor's receipt of the
Termination Notice (the "Effective Date"); provided, however, that Lessor shall
have the right to extend the Outside Date for an additional thirty (30) days
alter the first thirty (30) day period described in clause (b) hereinabove due
to any delays described in Paragraph 51 of the Addendum which are other than
Tenant Delays, subject to Lessor's agreement to reimburse Lessee for any
holdover rental paid by Lessee to Lessee's existing Lessor for Lessee's current
existing premises in excess of the current rental rate payable by Lessee for
such space during such 30-day extension period (but in no event shall Lessor'
reimbursement obligation exceed one (1) month's excess holdover rental for such
existing premises). The Termination Notice must be delivered by Lessee to
Lessor, if at all, not earlier than the Outside Date and not later than thirty
(30) days after the Outside Date. Within twenty (20) days after termination of
this Lease pursuant to this Paragraph 5, Lessor shall return to Lessee (i) any
advance Rent paid by Lessee to Lessor hereunder, and (ii) the Security Deposit,
or balance thereof, pursuant to Paragraph 1.7 of the Lease.
EXHIBIT B
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<PAGE>
SCHEDULE 1 TO
EXHIBIT B
[Office Plans]
<PAGE>
SCHEDULE 2 TO
EXHIBIT B
[Site Plan]
<PAGE>
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
MULTI-TENANT LEASE
THIS ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE
("Addendum") is made and entered into by and between ADAYA ASSET WASHINGTON,
L.P., a California limited partnership ("Lessor"), and GRAHAM-FIELD, INC., a New
York corporation ("Lessee"), as of the date set forth on the first page of that
certain Standard Industrial/Commercial Multi-Tenant Lease (the "Lease") between
Lessor and Lessee to which this Addendum is attached and incorporated. The
terms, covenants and conditions set forth herein are intended to and shall have
the same force and effect as if set forth at length in the body of the Lease. To
the extent that the provisions of this Addendum are inconsistent with any
provisions of the Lease, the provisions of this Addendum shall supersede and
control.
49. Base Rent. The Base Rent payable by Lessee for the Premises during
the last thirty (30) months of the Original Term shall be increased to
$20,913.00 per month:
50. Common Area Operating Expenses.
(a) Cap on Common Area Operating Expenses. Notwithstanding the
provisions of Paragraph 4.2 of the Lease to the contrary, in no event shall
Lessee's Share of Common Area Operating Expenses during the first three (3)
years of the Original Term exceed $31,686.00 per year (i.e., $0.05 per square
foot of floor area of the Premises per year). During the fourth (4th) year of
the Original Term, Lessee's Share of Common Area Operating Expenses shall not
exceed an amount equal to Lessee's Share of Common Area Operating Expenses
payable during the third year of the Original Term, as such amount shall be
increased by the percentage increase, if any, between the "Index" (as defined
below), published for the month which is four (4) months prior to the
Commencement Date (the "Base Index"), as compared to the Index published for the
month which is four (4) months prior to the first day of the fourth (4th) year
of the Original Term (the "First Comparison Index"). During the fifth (5th) year
of the Original Term, Lessee's Share of Common Area Operating Expenses shall not
exceed an amount equal to Lessee's Share of Common Area Operating Expenses
payable during the fourth (4th) year of the Original Term, as such amount shall
be increased by the percentage increase, if any, between the First Comparison
Index, as compared to the Index published for the month which is four (4) months
prior to the first day of the fifth (5th) year of the Original Term. As used
herein, the "Index" shall mean Department of Labor, Bureau of Labor Statistics
Consumer Price Index For All Urban Consumers, Los Angeles-Anaheim-Riverside, CA,
All Items (1982-1984 = 100). Notwithstanding anything to the contrary contained
herein, if the Index for any applicable comparison month shall be less than the
Base Index, Lessee's Share of Common Area Operating Expenses shall not be
reduced as a result of such decrease. Should the Bureau of Labor Statistics
discontinue the publication of the above Index, or publish the same less
frequently, or alter the same in some other manner, then Lessor shall adopt a
substitute procedure which reasonably reflects and monitors consumer prices
and/or shall substitute any official index published by the Bureau of Labor
Statistics or by such successor or similar governmental agency as then may be in
existence and shall be most nearly equivalent thereto. There shall be no cap on
the amount of Common Area Operating Expenses payable by Lessee during the Option
period if Lessee exercises its Option to extend the Original Term pursuant to
Paragraph 58.
(b) Exclusions from Common Area Operating Expenses.
Notwithstanding the provisions of Paragraph 4.2 of the Lease. Common Area
Operating Expenses shall not include the following:
(i) the cost of providing any service or utilities
directly to and paid directly by any tenant;
(ii) costs, including permit, license and
inspection costs, incurred with respect to the installation of other tenants' or
occupants' improvements or alterations made for tenants or other occupants in
the Building or incurred in renovating or otherwise improving, decorating,
painting or redecorating vacant space for tenants or other occupants in the
Building;
(iii) costs incurred by Lessor for alterations
(including structural additions), additions and improvements which are
considered capital improvements or replacements under sound real estate
accounting practices, except that Common Area Operating Expenses may include the
cost of any capital alterations, capital additions or capital improvements made
to the Building or Industrial Center which (A) are intended as a labor-saving or
energy-saving device or to reduce Common Area Operating Expenses, but only to
the extent of the cost savings reasonably anticipated by Lessor as a result
thereof, (B) are required under any governmental law or regulation which was not
enacted or applicable to the Building or Industrial Center as of the
Commencement Date, or (C) relate to the operation, repair, maintenance or
replacement of any systems and equipment of the Building or Industrial Center;
provided, however, that each such permitted capital expenditure shall be
amortized (including interest on the unamortized cost with the interest rate
fixed at the time such expenditure is placed in service) over its useful life as
Lessor shall determine in accordance with sound real estate accounting
practices.
(iv) expenses in connection with services or other
benefits which are not offered to Lessee or for which Lessee is charged for
directly but which are provided to another tenant or occupant of the Building,
without charge;
ADDENDUM
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<PAGE>
(v) costs paid to Lessor or to subsidiaries or
affiliates of Lessor for goods and/or services in the Building or Industrial
Center to the extent the same exceeds the costs of such goods and/or services if
provided by unaffiliated third parties on a competitive basis;
(vi) costs of correcting defects in or inadequacy
of the initial design or construction of the Building or the Industrial Center;
and
(vii) expenses resulting from the negligence
and/or intentional misconduct of Lessor or Lessor's agents or employees, and/or
the breach by Lessor of any of its obligations under this Lease or the lease of
any other space in the Industrial Center.
(c) Lessor's Records. In the event Lessee disputes any amount of
Common Area Operating Expenses payable by Lessee pursuant to any statement of
actual Common Area Operating Expenses delivered to Lessee pursuant to Paragraph
4.2(d) of this Lease, Lessee may reasonably review Lessor's records relating to
such amount; provided, however, Lessee may not review Lessor's records more
often than once in any calendar year. Such review shall be performed during
Lessor's normal business hours and subject to reasonable scheduling with Lessor
and/or Lessor's property manager. Lessee's right to review shall not permit
Lessee to withhold payment of any amount in dispute.
51. Unavoidable Delays. If the performance of Lessor or Lessee of any act
required to be performed by such party (other than the payment of Rent or other
monetary obligations) is directly prevented or delayed by reason of strikes,
lockouts, labor disputes, governmental delays, acts of God, fire, floods,
epidemics, freight embargoes, unavailability of materials and supplies,
development moratoriums imposed by any governmental authority, or other causes
beyond such party's reasonable control, such party shall be excused from
performing that act for the period equal to the period of the prevention or
delay.
52. Lessee's Insurance. In addition to the insurance required in
Paragraph 8.4 of the Lease, Lessee agrees to maintain in full force and effect
at all times during the term of this Lease, as it may be extended, at its own
expense, policies of insurance affording the following additional coverages: (a)
Worker's compensation: statutory limits; (b) Employer's liability: as required
by law; and (c) Business interruption insurance for a period of not less than
twelve (12) months. Notwithstanding the foregoing, or the provisions of
Paragraph 8.4 of the Lease, Lessee may elect to self-insure the business
interruption insurance described in subclause (c) above and the property
insurance described in Paragraph 8.4 of the Lease (although Lessee may only be
permitted to self-insure the property damage insurance in Paragraph 8.4 with
respect to the Lessee-Owned Alterations and Utility Installations only during
the time that Lessee maintains a net worth equal to $10,000,000); if Lessee so
self-insures, such self-insurance shall be deemed to include a full waiver of
subrogation, and Lessee hereby waives any right it may have against Lessor with
respect to any damage or loss which would otherwise would have been covered by
the insurance described in this sentence. In the event that Lessee fails to
obtain and maintain any insurance required under the Lease for any reason
whatsoever, Lessee shall be conclusively deemed to have self-insured such
insurance obligations with the full waiver of subrogation set forth in the
Lease.
53. Assignment and Subletting.
(a) Transfer Premiums. Fifty percent (50%) of any "Transfer
Premiums" (as defined below) received by Lessee as a result of any assignment or
subletting entered into pursuant to Paragraph 12 of the Lease shall be paid by
Lessee to Lessor as additional rent under this Lease without affecting or
reducing any other obligations of Lessee hereunder; provided, however, no such
Transfer Premium shall be payable in connection with an assignment or sublease
to a Permitted Affiliate pursuant to Paragraph 53(b) below. As used herein,
"Transfer Premiums" shall mean all sums or other economic consideration received
by Lessee as a result of an assignment or sublease which exceed, in the
aggregate (i) the total sums which Lessee is obligated to pay Lessor under this
Lease (prorated to reflect obligations allocable to any portion of the Premises
subleased), plus (ii) reasonable real estate brokerage commissions, attorneys'
fees and advertising expenses payable by Lessee in connection with such
assignment or subletting, plus (iii) reasonable costs of tenant improvements or
tenant improvement allowances required to be constructed or paid for by Lessee
for any such assignee or subtenant, plus (iv) the unamortized costs of any
Alterations paid for by Lessee out of Lessee's own funds which are required to
be removed in connection with the assignment or sublease. Lessee understands,
acknowledges and agrees that Lessor's right to receive 50% of the Transfer
Premiums in connection with an approved assignment or subletting is a material
inducement for Lessor's agreement to lease the Premises to Lessee upon the terms
and conditions set forth herein.
(b) Permitted Affiliates. Notwithstanding anything to the contrary
contained in Paragraph 12 of this Lease, neither (i) an assignment of this Lease
in connection with a transfer by Lessee of all or substantially all of the
assets of Lessee or Lessee's parent corporation, (ii) an assignment of this
Lease to a transferee which is the resulting entity of a merger or consolidation
of Lessee or Lessee's parent corporation with another entity, nor (iii) an
assignment or subletting of all or a portion of the Premises to Lessee's parent
corporation, any corporation which is a wholly owned subsidiary of Lessee's
parent corporation, and/or any corporation or other entity which is controlled
by, controls, or is under common control with, Lessee's parent corporation,
shall be deemed an assignment or sublease which requires Lessor's prior consent
under Paragraph 12, provided that (A) Lessee notifies Lessor of any such
assignment or sublease or other such transaction and promptly supplies Lessor
with any documents or information reasonably requested by Lessor regarding such
transaction, (B) such assignment, sublease or other transaction is not a
subterfuge by Lessee to avoid its obligations under this
ADDENDUM
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<PAGE>
Lease, and (C) such assignee, sublessee or other transferee, or the resulting
entity of any merger, consolidation or sale of assets which becomes the lessee
hereunder (referred to in this Lease as the "Permitted Affiliate") shall have a
net worth computed in accordance with generally accepted accounting principles
(the "Net Worth") at least equal to the Net Worth on the date of execution of
this Lease of the original named Lessee. "Control," as used in this Paragraph
53(b), shall mean the ownership, directly or indirectly, of at least fifty-one
percent (51%) of the voting securities of, or possession of the right to vote,
in the ordinary direction of its affairs, of at least fifty-one percent (51%) of
the voting interest in, any person or entity.
54. Mortgagee Protection. Lessee agrees to send by certified or
registered mail to any mortgagee or deed of trust beneficiary of the Premises
whose address has been furnished to Lessee, a copy of any notice of default
served by Lessee on Lessor. If Lessor fails to cure such default within the time
provided for in this Lease, such mortgagee or beneficiary shall have an
additional thirty (30) days to cure such default; provided, however, that if
such default cannot reasonably be cured within that thirty (30) day period, then
such mortgagee or beneficiary shall have such additional time to cure the
default as is reasonably necessary under the circumstances provided such
mortgagee or beneficiary commences the cure of such default within said thirty
(30) day period and diligently pursues the same to completion.
55. Limitation on Liability. In consideration of the benefits accruing
hereunder, Lessee on behalf of itself and all successors and assigns of Lessee
covenants and agrees that, notwithstanding anything in this Lease to the
contrary and notwithstanding any applicable law to the contrary:
(a) the liability of Lessor under this Lease (including any
liability for any actual or alleged failure, breach or default by Lessor under
this Lease and/or negligence by Lessor hereunder) and any recourse by Lessee
against Lessor shall be limited solely to Lessor's interest in the Industrial
Center (and not any other assets of Lessor); and
(b) the obligations of Lessor under this Lease do not constitute
personal obligations of the partners or subpartners of Lessor, or any of the
directors, officers or shareholders of Lessor or Lessor's partners or
subpartners, and Lessee shall not seek recourse against any such partners or
subpartners, or any of the directors, officers or shareholders of Lessor or
Lessor's partners or subpartners or any of their personal assets for
satisfaction of any liability with respect to this Lease.
56. Signage. As set forth in Paragraph 34 of the Lease, Lessee will have
the right at Lessee's option. to place one (1) sign on the exterior portion of
the Building contiguous to the Premises, provided that such sign conforms and
complies with all applicable governmental laws, rules and ordinances and the
signage criteria of the Industrial Center, is consistent with existing exterior
signage on the Building, and is approved by Lessor (which approval shall not be
unreasonably withheld) and all applicable governmental authorities. The cost of
such sign and the installation of such sign shall be paid for by Lessee. Upon
expiration or termination of this Lease, Lessee shall cause such sign to be
removed at Lessee's cost and Lessee shall repair and restore the facia of the
Building to its condition prior to installation of Lessee's sign. In the event
Lessee fails or refuses to remove such signage or perform such restoration work,
Lessor may cause such sign to be removed and such restoration work to be
performed and charge the cost of such work to Lessee as additional rent
hereunder, payable within ten (10) days of written demand by Lessor. Lessee's
signage rights under this Paragraph 56 are personal to the original Lessee
executing this Lease and may not be transferred or assigned to, or utilized by,
any other person or entity.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Addendum
concurrently with the Lease of even date herewith.
"LESSOR" ADAYA ASSET WASHINGTON, L.P., a California limited
partnership
By:_________________________________
Name:_______________________________
Title:______________________________
By: /s/ M M Siam
--------------------------------
Name Printed: M M SIAM
Title: VP
"LESSEE" GRAHAM-FIELD, INC.
a New York Corporation
By: /s/ Richard Kolodny
--------------------------------------
Name: Richard Kolodny
Title: Vice President, General Counsel
By: /s/ Gary M. Jacobs
--------------------------------------
Name Printed: GARY M. JACOBS
Title: V P Finance
ADDENDUM
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<PAGE>
OPTION TO EXTEND
ADDENDUM TO STANDARD LEASE
Dated:
December 27, 1996
By and Between (Lessor) ADAYA ASSET WASHINGTON. L.P.,
a California limited partnership
(Lessee) GRAHAM-FIELD, INC.,
a New York corporation
Property Address: 11954 E. Washington Blvd.,
Santa Fe Springs, California
Paragraph 57
A. Option to Extend. Lessor hereby grants to Lessee the option to
extend the term of this Lease for one (1) additional sixty (60) month period
commencing when the prior term expires upon each and all of the following terms
and conditions:
(i) Lessee gives to Lessor, and Lessor actually receives on
a date which is prior to the date that the option period would commence (if
exercised) by at least nine (9) and not more than twelve (12) months, a written
notice of the exercise of the option to extend this Lease for said additional
term, time being of essence. If said notification of the exercise of said option
is not so given and received, the option shall automatically expire;
(ii) The provisions of paragraph 39, including the provision
relating to default of Lessee set forth in Paragraph 39.4 of this Lease are
conditions of this Option;
(iii) All of the terms and conditions of this Lease except
where specifically modified by this option shall apply;
(iv) The monthly rent for each month of the option period
shall be calculated as follows, using the method indicated below:
I. Market Rental Value Adjustment(s) (MRV)
(a) On the first (1st) day of the option period, the monthly rent
payable under Paragraph 1.5 ("Base Rent") of the attached Lease shall be
adjusted to the "Market Rental Value" (as defined below) of the Premises as
follows:
(1) Four (4) months prior to the Market Rental Value (MRV)
Adjustment Date described above, Lessor and Lessee shall meet to establish an
agreed upon new MRV for the specified term. If agreement cannot be reached,
then:
(i) Lessor and Lessee shall immediately appoint a
mutually acceptable appraiser or broker to establish the new MRV within the next
30 days. Any associated costs will be split equally between the parties, or
(ii) Both Lessor and Lessee shall each immediately
select and pay the appraiser or broker of their choice to establish a MRV within
the next 30 days. If for any reason, either one of the appraisals is not
completed within the next 30 days, as stipulated, then the appraisal that is
completed at that time shall automatically become the new MRV. If both
appraisals are completed and the two appraisers/brokers cannot agree on a
reasonable average MRV then they shall immediately select a third mutually
acceptable appraiser/broker to establish a third MRV within the next 30 days.
The average of the two appraisals closest in value shall then become the new
MRV. The costs of the third appraisal will be split equally between the parties.
(2) In any event the new MRV shall not be less than the rent
payable for the month immediately preceding the date for rent adjustment.
(b) As used herein, the "Market Rental Value" or "MRV" for the
Premises during the Option term shall mean the annual amount per rentable square
foot being charged as of the first day of the Option term for unencumbered,
non-sublease, non-equity space comparable to the Premises and located in
comparable industrial buildings in the vicinity of the Building, giving
appropriate consideration to all economic terms, such as annual rental rates per
rentable square foot, abatement provisions reflecting free rent, if any, length
of the lease term, size and location of premises being leased and other
generally acceptable terms and conditions and concessions for the tenancy of the
space in question except that (i) no concessions shall be provided for tenant
improvements or allowances provided to such tenants since Lessor shall have no
obligation to construct or pay for any improvements for or in the Premises for
the Option term, and (ii) no consideration shall be given to the fact that any
rental abatement is or is not given such tenants in connection with the
construction of improvements in such comparable space.
OPTION TO EXTEND
[Net Lease with Stops
for Taxes and Insurance]
LEASE AGREEMENT
THIS LEASE AGREEMENT is made this 24th day of February, 1997, between
Security Capital Industrial Trust ("Landlord"), and the Tenant named below.
Tenant: Graham-Field Health Products, Inc.
Tenant's representative, 400 Rabro Drive East
address, and phone no.: Hauppauge, New York 11788
516-582-5900
Premises: That portion of the Building, containing
approximately 20,147 rentable square feet, as
determined by Landlord, as shown on Exhibit
Project: Airport Commons Distribution Center II
Building: Airport Commons Distribution Center II, 7447
New Ridge Road, Suite #A, Hanover, Maryland
21076
Tenant's Proportionate Share
of Project: 6.53%
Tenant's Proportionate Share
of Building: 27.98%
Lease Term: Beginning on the Commencement Date and ending
on the last day of the 61st full calendar
month thereafter.
Commencement Date: The later to occur of March 15, 1997; or the
substantial completion of Tenant Improvements
as defined in Addendum 2
Initial Monthly Base Rent: See Addendum #1
Initial Estimated Monthly 1. Utilities: $N/A
Operating Expense Payments:
(estimates only and subject 2. Common Area Charges: $419.73
to adjustment to actual
costs and expenses according 3. Others: $0.00
to the provisions of this
Lease)
Initial Estimated Monthly
Operating Expense Payments: $419.73
Initial Monthly Base Rent and
Estimated Operating Expense Payments: $7,974.86
Base Year: 1997
Security Deposit: $0.00
Broker: Preston Partners/Grubb & Ellis
Addenda: Addendum 1 (Base Rent), Addendum 2 (Construction),
Addendum 3 (Cap of Controllable Operating Expenses),
Addendum 4 (Right of First Offer), Addendum 5 (Renewal
Option), Addendum 6 (Indemnification), Addendum 7
(Cancellation Option), Addendum 8 (Environmental
Remediation)
1. Granting Clause. In consideration of the obligation of Tenant to pay
rent as herein provided and in consideration of the other terms, covenants, and
conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord,
the Premises, to have and to hold for the Lease Term, subject to the terms,
covenants and conditions of this Lease.
<PAGE>
2. Acceptance of Premises. Tenant shall accept the Premises, subject to
all applicable laws, ordinances, regulations, covenants and restrictions.
Landlord represents and warrants that, as of the Commencement Date, the Premises
will be in compliance with all applicable laws, ordinances, regulations,
covenants and restrictions, there will be in effect a certificate of substantial
completion for the Building and that the plumbing, electrical and HVAC Systems
will be in good working order. Landlord has made no representation or warranty
as to the suitability of the Premises for the conduct of Tenant's business, and
Tenant waives any implied warranty that the Premises are suitable for Tenant's
intended purposes. Except as provided in Paragraph 10, in no event shall
Landlord have any obligation for any defects in the Premises or any limitation
on its use.
3. Use. The Premises shall be used only for the purpose of receiving,
storing, shipping and selling (but limited to wholesale sales) products,
materials and merchandise made and/or distributed by Tenant and for such other
lawful purposes as may be incidental thereto; provided, however, with Landlord's
prior written consent, Tenant may also use the Premises for light manufacturing
and light assembly. Tenant shall not conduct or give notice of any auction,
liquidation, or going out of business sale on the Premises. Tenant will use the
Premises in a careful, safe and proper manner and will not commit waste,
overload the floor or structure of the Premises or subject the Premises to use
that would damage the Premises. Tenant shall not permit any objectionable or
unpleasant odors, smoke, dust, gas, noise, or vibrations to emanate from the
Premises, or take any other action that would constitute a nuisance or would
disturb, unreasonably interfere with, or endanger Landlord or any tenants of the
Project. Outside storage, including without limitation, storage of trucks and
other vehicles, is prohibited without Landlord's prior written consent, except
as otherwise set forth in this Lease. Tenant, at its sole expense, shall use and
occupy the Premises in compliance with all laws, including, without limitation,
the Americans With Disabilities Act, orders, judgments, ordinances, regulations,
codes, directives, permits, licenses, covenants and restrictions now or
hereafter applicable to the Premises (collectively, "Legal Requirements"). The
Premises shall not be used as a place of public accommodation under the
Americans With Disabilities Act or similar state statutes or local ordinances or
any regulations promulgated thereunder, all as may be amended from time to time.
Tenant shall, at its expense, make any non-structural alterations or
modifications, within or without the Premises, that are required by Legal
Requirements related solely to Tenant's manner of use or occupation of the
Premises. Landlord shall, at its expense, make any structural alterations or
modifications, within or without the Premises, in addition to any non-structural
exterior alterations or modification which are not related to Tenant's sole
manner of use or occupation of the Premises, that are required by Legal
Requirements. Tenant will not use or permit the Premises to be used for any
purpose or in any manner that would void Tenant's or Landlord's insurance,
increase the insurance risk, or cause the disallowance of any sprinkler credits.
If any increase in the cost of any insurance on the Premises or the Project is
caused by Tenant's manner of use or occupation of the Premises, then Tenant
shall pay the amount of such increase to Landlord. Any occupation of the
Premises by Tenant prior to the Commencement Date shall be subject to all
obligations of Tenant under this Lease.
4. Base Rent. Tenant shall pay Base Rent in the amount set forth above.
The first month's Base Rent, and the first monthly installment of estimated
Operating Expenses (as hereafter defined) shall be due and payable on the date
hereof, and Tenant promises to pay to Landlord in advance, without demand,
deduction or set-off (except as otherwise set forth in the Lease), monthly
installments of Base Rent on or before the first day of each calendar month
succeeding the Commencement Date. Payments of Base Rent for any fractional
calendar month shall be prorated. All payments required to be made by Tenant to
Landlord hereunder shall be payable at such address as Landlord may specify from
time to time by written notice delivered in accordance herewith. The obligation
of Tenant to pay Base Rent and other sums to Landlord and the obligations of
Landlord under this Lease are independent obligations. Tenant shall have no
right at any time to abate, reduce, or set-off any rent due hereunder except
where expressly provided in this Lease. If Tenant is delinquent in any monthly
installment of Base Rent beyond 10 days after the due date thereof, and after
notice as provided below, Tenant shall pay to Landlord on demand a late charge
equal to 5 percent of such delinquent sum. Tenant shall not be obligated to pay
the late charge until Landlord has given Tenant 10 days written notice of the
delinquent payment (which may be given at any time during the delinquency);
provided, however, that such notice shall not be required more than twice in any
12-month period or four times over the term of the Lease. The provision for such
late charge shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as a penalty or as limiting
Landlord's remedies in any manner.
5. Security Deposit. Intentionally deleted.
6. Operating Expense Payments. During each month of the Lease Term, on the
same date that Base Rent is due, Tenant shall pay Landlord an amount equal to
1/12 of the annual cost, as estimated by Landlord from time to time, of Tenant's
Proportionate Share (hereinafter defined) of Operating Expenses for the Project.
Payments thereof for any fractional calendar month shall be prorated. The term
"Operating Expenses" means all costs and expenses incurred by Landlord with
respect to the ownership, maintenance, and operation of the Project including,
but not limited to costs of: utilities; maintenance, repair and replacement of
all portions of the Project, including without limitation, paving and parking
areas, roads, roofs, alleys, and driveways, mowing, landscaping, exterior
painting, utility lines, heating, ventilation and air conditioning systems,
lighting, electrical systems and mechanical and building systems; amounts paid
to contractors and subcontractors for work or services performed in connection
with any of the foregoing; charges or assessments of any association to which
the Project is subject; fees payable to tax consultants and attorneys for
consultation and contesting taxes; property management fees payable to a
property manager, including any affiliate of Landlord, or if there is no
property manager, an administration fee of 15 percent of Operating Expenses
payable to Landlord; security services, if any; trash collection, sweeping and
removal; and additions or alterations made by Landlord to the Project or the
Building in order to comply with Legal Requirements
-2-
<PAGE>
(other than those expressly required herein to be made by Tenant) or that are
appropriate to the continued operation of the Project or the Building as a bulk
warehouse facility in the market area, provided that the cost of such additions
or alterations that are required to be capitalized for federal income tax
purposes shall be amortized on a straight line basis over a period equal to the
lesser of the useful life thereof for federal income tax purposes or 10 years.
In addition, Operating Expenses shall include (i) the amount by which Taxes
(hereinafter defined) for each calendar year during the Lease term exceeds Taxes
for the Base Year, and (ii) the amount by which the cost of insurance maintained
by Landlord for the Project for each calendar year during the Lease term exceeds
the cost of such insurance for the Base Year. Operating Expenses do not include
costs, expenses, depreciation or amortization for capital repairs and capital
replacements required to be made by Landlord under Paragraph 10 of this Lease;
costs for capital repairs and capital replacements which do not benefit Tenant;
debt service under mortgages or ground rent under ground leases; costs of
restoration to the extent of net insurance proceeds received by Landlord with
respect thereto; leasing commissions; costs for which Landlord is reimbursed by
individual tenants of the Project; any amount payable to any person or entity
controlling, controlled by or under common control with Landlord to the extent
such amount is in excess of amounts which would have been paid absent such
relationship and in excess of current market rates; advertising and promotional
expenses; to the extent that any employee of Landlord performs work or services
other than for the Project, the reasonably allocable portion of his compensation
with respect to work not performed in connection with the Project; professional
fees incurred by Landlord in the preparation of leases or in disputes with
tenants of the Project; or the costs of renovating space for tenants.
If Tenant's total payments of Operating Expenses for any year are
less than Tenant's Proportionate Share of actual Operating Expenses for such
year, then Tenant shall pay the difference to Landlord within 30 days after
demand, and if more, then Landlord shall retain such excess and credit it
against Tenant's next payments. For purposes of calculating Tenant's
Proportionate Share of Operating Expenses, a year shall mean a calendar year
except the first year, which shall begin on the Commencement Date, and the last
year, which shall end on the expiration of this Lease. With respect to Operating
Expenses which Landlord allocates to the entire Project, Tenant's "Proportionate
Share" shall be the percentage set forth on the first page of this Lease as
Tenant's Proportionate Share of the Project as reasonably adjusted by Landlord
in the future for changes in the physical size of the Premises or the Project;
and, with respect to Operating Expenses which Landlord allocates only to the
Building, Tenant's "Proportionate Share" shall be the percentage set forth on
the first page of this Lease as Tenant's Proportionate Share of the Building as
reasonably adjusted by Landlord in the future for changes in the physical size
of the Premises or the Building. Landlord may equitably increase Tenant's
Proportionate Share for any item of expense or cost reimbursable by Tenant that
relates to a repair, replacement, or service that benefits only the Premises or
only a portion of the Project or Building that includes the Premises or that
varies with occupancy or use. The estimated Operating Expenses for the Premises
set forth on the first page of this Lease are only estimates, and Landlord makes
no guaranty or warranty that such estimates will be accurate. Landlord shall
provide to Tenant within 120 days following the last day of the calendar year
Landlord's year-end common area maintenance reconciliation report.
At any time within 6 months after Landlord has issued a statement of
Operating Expenses payable by Tenant, but in no event more than once in a
calendar year, and after at least 2 days prior written notice to Landlord,
Tenant will have the right to review and audit the books and records of Landlord
relating to such Operating Expenses during normal business hours and at the
office of Landlord as indicated on the Lease. The audit will be conducted at
Tenant's expense by a certified public accountant licensed in the state in which
the Premises are situated. If Tenant's audit reveals that the Operating Expenses
charged to Tenant exceed or were less than Tenant's Proportionate Share of the
actual Operating Expenses, and such variance is confirmed by Landlord's
certified public accountant, then Landlord will reimburse Tenant for any
overcharge, or Tenant will pay to Landlord any undercharge, as applicable,
promptly after such final determination. In the event of a confirmed overcharge
of Operating Expenses to Tenant in excess of 10% of Tenant's Proportionate Share
of actual Operating Expenses in such year, Landlord also shall reimburse Tenant
for the reasonable cost of Tenant's audit, but not in excess of an amount equal
to 100% of the overcharge.
7. Utilities. Tenant shall pay for all water, gas, electricity, heat,
light, power, telephone, sewer, sprinkler services, refuse and trash collection,
and other utilities and services used on the Premises, all maintenance charges
for utilities, and any storm sewer charges or other similar charges for
utilities imposed by any governmental entity or utility provider, together with
any taxes imposed on utility charges, penalties, surcharges or the like
pertaining to Tenant's use of the Premises. Landlord agrees that, at Landlord's
expense, all utilities will be separately metered, except for water, and charged
directly to Tenant by the provider. Tenant shall pay its share of all charges
for jointly metered utilities based upon consumption, as reasonably determined
by Landlord. No interruption or failure of utilities shall result in the
termination of this Lease or the abatement of rent. Tenant agrees to limit use
of water and sewer for normal restroom use.
Notwithstanding anything to the contrary contained in this Paragraph
7 of the Lease, if an interruption or cessation of utilities results from a
cause within the Landlord's reasonable control and the Premises are not usable
by Tenant for the conduct of Tenant's business as a result thereof, Base Rent
and applicable Operating Expenses not actually incurred by Tenant shall be
abated for the period which commences five (5) business days after the date
Tenant gives to Landlord notice of such interruption until such utilities are
restored.
8. Taxes. Landlord shall pay on or before the due date the same are due
and payable all taxes, assessments and governmental charges (collectively
referred to as "Taxes") that accrue against the Project during the Lease Term.
Landlord may contest by appropriate legal proceedings the amount, validity, or
application of any Taxes or liens thereof. All capital levies or other taxes
assessed or imposed on Landlord upon the rents payable to Landlord
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<PAGE>
9. Insurance. Landlord shall maintain all risk property insurance covering
the full replacement cost of the Building and commercial liability insurance.
Landlord shall maintain commercial liability insurance, and may obtain such
other insurance and additional coverages as it may deem necessary, including,
but not limited to, rent loss insurance. All such insurance shall be in forms
and amounts customary for properties substantially similar to the Project,
subject to customary deductibles. The Project or Building may be included in a
blanket policy (in which case the cost of such insurance allocable to the
Project or Building will be determined by Landlord based upon the insurer's cost
calculations).
Tenant, at its expense, shall maintain during the Lease Term: all
risk property insurance covering the full replacement cost of all property and
improvements installed or placed in the Premises by Tenant at Tenant's expense;
worker's compensation insurance with no less than the minimum limits required by
law; employer's liability insurance with such limits as required by law; and
commercial liability insurance, with a minimum limit of $1,000,000 per
occurrence and a minimum umbrella limit of $1,000,000, for a total minimum
combined general liability and umbrella limit of $2,000,000 for property damage,
personal injuries, or deaths of persons occurring in or about the Premises. The
commercial liability policies shall name Landlord as an additional insured,
insure on an occurrence and not a claims-made basis, be issued by insurance
companies which are reasonably acceptable to Landlord, not be cancelable unless
30 days prior written notice shall have been given to Landlord, contain a
hostile fire endorsement and a contractual liability endorsement and provide
primary coverage to Landlord (any policy issued to Landlord providing duplicate
or similar coverage shall be deemed excess over Tenant's policies). Such
policies or certificates thereof shall be delivered to Landlord by Tenant upon
commencement of the Lease Term and upon each renewal of said insurance.
The all risk property insurance obtained by Landlord and Tenant
shall include a waiver of subrogation by the insurers and all rights based upon
an assignment from its insured, against Landlord or Tenant, their officers,
directors, employees, managers, agents, invitees and contractors, in connection
with any loss or damage thereby insured against. Neither party nor its officers,
directors, employees, managers, agents, invitees or contractors shall be liable
to the other for loss or damage caused by any risk coverable by all risk
property insurance, and each party waives any claims against the other party,
and its officers, directors, employees, managers, agents, invitees and
contractors for such loss or damage. The failure of a party to insure its
property shall not void this waiver. Landlord and its agents, employees and
contractors shall not be liable for, and Tenant hereby waives all claims against
such parties for, business interruption and losses occasioned thereby sustained
by Tenant or any person claiming through Tenant resulting from any accident or
occurrence in or upon the Premises or the Project from any cause whatsoever,
including without limitation, damage caused in whole or in part, directly or
indirectly, by the negligence of Landlord or its agents, employees or
contractors.
10. Landlord's Repairs. Landlord shall maintain, at its expense, the
structural soundness of the roof, foundation, and exterior walls of the Building
in good repair, reasonable wear and tear and uninsured losses and damages caused
by Tenant excluded. The term "walls" as used in this Paragraph 10 shall not
include windows, glass or plate glass, doors or overhead doors, special store
fronts, dock bumpers, dock plates or levelers, or office entries. Tenant shall
promptly give Landlord written notice of any repair required by Landlord
pursuant to this Paragraph 10, after which Landlord shall have a reasonable
opportunity to repair.
11. Tenant's Repairs. Landlord, at Tenant's expense as provided in
Paragraph 6, shall maintain in good repair and condition the parking areas and
other common areas of the Building, including, but not limited to driveways,
alleys, landscape and grounds surrounding the Premises. Subject to Landlord's
obligation in Paragraph 10 and subject to Paragraphs 9 and 15, Tenant, at its
expense, shall repair, replace and maintain in good condition all interior
portions and dock areas of the Premises and all areas, improvements and systems
exclusively serving the Premises including, without limitation, dock and loading
areas, truck doors, plumbing, water, and sewer lines up to points of common
connection, fire sprinklers and fire protection systems, entries, doors,
ceilings and roof membrane, windows, interior walls, and the interior side of
demising walls, and heating, ventilation and air conditioning systems. Such
repair and replacements include capital expenditures and repairs whose benefit
may extend beyond the Term. Heating, ventilation and air conditioning systems
and other mechanical and building systems serving the Premises shall be
maintained at Tenant's expense pursuant to maintenance service contracts entered
into by Tenant or maintained by equivalent maintenance personnel under the
employment of Tenant provided that Tenant provides Landlord, upon Landlord's
request, documentation of such maintenance performed by such maintenance
personnel, or, at Landlord's election, by Landlord. The scope of services and
contractors under such maintenance contracts shall be reasonably approved by
Landlord. If Tenant fails to perform any repair or replacement for which it is
responsible, Landlord may perform such work and be reimbursed by Tenant within
10 days after demand therefor. Subject to Paragraphs 9 and 15, Tenant shall bear
the full cost of any repair or replacement to any part of the Building or
Project that results from damage caused by Tenant, its agents, contractors, or
invitees and any repair that benefits only the Premises.
12. Tenant-Made Alterations and Trade Fixtures. Any alterations,
additions, or improvements made by or on behalf of Tenant to the Premises
("Tenant-Made Alterations") which exceed $15,000 or which effect the roof,
structure, utility systems or mechanical components of the Building shall be
subject to Landlord's prior written consent. Tenant shall cause, at its expense,
all Tenant-Made Alterations to comply with insurance requirements and with Legal
Requirements and shall construct at its expense any alteration or modification
required by Legal Requirements as a result of any Tenant-Made Alterations. All
Tenant-Made Alterations shall be constructed in a good and workmanlike manner by
contractors reasonably acceptable to Landlord and only good grades of materials
shall be used. All plans and specifications for any Tenant-Made Alterations
shall be submitted to Landlord for its approval. Landlord may monitor
construction of the Tenant-Made Alterations. Tenant shall reimburse Landlord for
its costs up to $500.00 in reviewing plans and specifications and in monitoring
construction, subject to Landlord giving prior written notice. Landlord's right
to review plans and specifications and to monitor construction shall be solely
for its own benefit, and Landlord shall have no duty to see that such plans and
specifications or construction comply with applicable laws, codes, rules and
regulations. Tenant shall provide Landlord with the identities and mailing
addresses of all persons performing work or supplying
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<PAGE>
12. Tenant-Made Alterations and Trade Fixtures. Any alterations,
additions, or improvements made by or on behalf of Tenant to the Premises
("Tenant-Made Alterations") which exceed $15,000 or which effect the roof,
structure, utility systems or mechanical components of the Building shall be
subject to Landlord's prior written consent. Tenant shall cause, at its expense,
all Tenant-Made Alterations to comply with insurance requirements and with Legal
Requirements and shall construct at its expense any alteration or modification
required by Legal Requirements as a result of any Tenant-Made Alterations. All
Tenant-Made Alterations shall be constructed in a good and workmanlike manner by
contractors reasonably acceptable to Landlord and only good grades of materials
shall be used. All plans and specifications for any Tenant-Made Alterations
shall be submitted to Landlord for its approval. Landlord may monitor
construction of the Tenant-Made Alterations. Tenant shall reimburse Landlord for
its costs up to $500.00 in reviewing plans and specifications and in monitoring
construction, subject to Landlord giving prior written notice. Landlord's right
to review plans and specifications and to monitor construction shall be solely
for its own benefit, and Landlord shall have no duty to see that such plans and
specifications or construction comply with applicable laws, codes, rules and
regulations. Tenant shall provide Landlord with the identities and mailing
addresses of all persons performing work or supplying materials, prior to
beginning such construction, and Landlord may post on and about the Premises
notices of non-responsibility pursuant to applicable law. Tenant shall furnish
security or make other arrangements satisfactory to Landlord to assure payment
for the completion of all work free and clear of liens and shall provide
certificates of insurance for worker's compensation and other coverage in
amounts and from an insurance company reasonably satisfactory to Landlord
protecting Landlord against liability for personal injury or property damage
during construction. Upon completion of any Tenant-Made Alterations, Tenant
shall deliver to Landlord sworn statements setting forth the names of all
contractors and subcontractors who did work on the Tenant-Made Alterations and
final lien waivers from all such contractors and subcontractors. Upon surrender
of the Premises, all Tenant-Made Alterations and any leasehold improvements
constructed by Landlord or Tenant shall remain on the Premises as Landlord's
property, except to the extent Landlord's requires removal at Tenant's expense
of any such items or Landlord and Tenant have otherwise agreed in writing in
connection with Landlord's consent to any Tenant-Made Alterations. Tenant shall
repair any damage caused by such removal.
Tenant, at its own cost and expense and without Landlord's prior
approval, may erect such shelves, bins, machinery and trade fixtures
(collectively "Trade Fixtures") in the ordinary course of its business provided
that such items do not alter the basic character of the Premises, do not
overload or damage the Premises, and the construction, erection, and
installation thereof complies with all Legal Requirements and with Landlord's
requirements set forth above. Tenant shall remove its Trade Fixtures and shall
repair any damage caused by such removal.
13. Signs. Tenant shall not make any changes to the exterior of the
Premises, install any exterior lights, decorations, balloons, flags, pennants,
banners, or painting, or erect or install any signs, windows or door lettering,
placards, decorations, or advertising media of any type which can be viewed from
the exterior of the Premises, without Landlord's prior written consent. Upon
surrender or vacation of the Premises, Tenant shall have removed all signs and
repair, paint, and/or replace the building facia surface to which its signs are
attached. Tenant shall obtain all applicable governmental permits and approvals
for sign and exterior treatments. All signs, decorations, advertising media,
blinds, draperies and other window treatment or bars or other security
installations visible from outside the Premises shall be subject to Landlord's
approval and conform in all respects to Landlord's requirements as outlined in
Exhibit B.
14. Parking. Tenant shall be entitled to park in common with other tenants
of the Project in those areas designated for nonreserved parking. Landlord may
allocate parking spaces among Tenant and other tenants in the Project if
Landlord determines that such parking facilities are becoming crowded. Landlord
shall not be responsible for enforcing Tenant's parking rights against any third
parties. Landlord acknowledges and agrees that Tenant shall be permitted to park
up to 15 cars, vans, straight bed trucks, tractor trailers, tractor cabs or
combination thereof on the Premises with the straight trucks, tractor trailers
and tractor cabs to be parked only in the front and side of the Building in
alignment with and immediately adjacent to the Premises, so long as they do not
interfere with other tenants, in which case the number shall be reduced to 14.
In no event whatsoever shall Tenant's parking of vehicles, trucks, vans or
automobiles encroach on the Project's Fire Lane.
15. Restoration. If at any time during the Lease Term the Premises are
damaged by a fire or other casualty, Landlord shall notify Tenant within 60 days
after such damage as to the amount of time Landlord reasonably estimates it will
take to restore the Premises. If the restoration time is estimated to exceed 6
months, either Landlord or Tenant may elect to terminate this Lease upon notice
to the other party given no later than 30 days after Landlord's notice. If
neither party elects to terminate this Lease or if Landlord estimates that
restoration will take 6 months or less, then, subject to receipt of sufficient
insurance proceeds, Landlord shall promptly restore the Premises excluding the
improvements installed by Tenant or by Landlord and paid by Tenant, subject to
delays arising from the collection of insurance proceeds or from Force Majeure
events. Tenant at Tenant's expense shall promptly perform, subject to delays
arising from the collection of insurance proceeds, or from Force Majeure events,
all repairs or restoration not required to be done by Landlord and shall
promptly re-enter the Premises and commence doing business in accordance with
this Lease. Notwithstanding the foregoing, either party may terminate this Lease
if the Premises are damaged during the last year of the Lease Term and Landlord
reasonably estimates that it will take more than one month to repair such
damage. Tenant shall pay to Landlord with respect to any damage to the Premises
the amount of the commercially reasonably deductible under Landlord's insurance
policy (up to $10,000) within 10 days after presentment of Landlord's invoice.
If the damage involves the premises of other tenants, Tenant shall pay the
portion of the deductible that the cost of the restoration of the Premises bears
to the total cost of restoration, as determined by Landlord. Base Rent and
Operating Expenses shall be abated for the period of repair and restoration in
the proportion which the area of the Premises, if any, which is not usable by
Tenant bears to the total area of the
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<PAGE>
Premises. Such abatement shall be the sole remedy of Tenant, and except as
provided herein, Tenant waives any right to terminate the Lease by reason of
damage or casualty loss.
16. Condemnation. If any part of the Premises or the Project should be
taken for any public or quasi-public use under governmental law, ordinance, or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof (a "Taking" or "Taken"), and the Taking would prevent or materially
interfere with Tenant's use of the Premises or in Landlord's judgment would
materially interfere with or impair its ownership or operation of the Project,
then upon written notice by either party this Lease shall terminate and Base
Rent and Operating Expenses shall be apportioned as of said date.
Notwithstanding the foregoing, either party may terminate this Lease if any part
of the Premises are taken during the last year of the Lease Term. If part of the
Premises shall be Taken, and this Lease is not terminated as provided above, the
Base Rent and Operating Expenses payable hereunder during the unexpired Lease
Term shall be reduced to such extent as may be fair and reasonable under the
circumstances. In the event of any such Taking, Landlord shall be entitled to
receive the entire price or award from any such Taking without any payment to
Tenant, and Tenant hereby assigns to Landlord Tenant's interest, if any, in such
award. Tenant shall have the right, to the extent that same shall not diminish
Landlord's award, to make a separate claim against the condemning authority (but
not Landlord) for such compensation as may be separately awarded or recoverable
by Tenant for moving expenses and damage to Tenant's Trade Fixtures, if a
separate award for such items is made to Tenant.
17. Assignment and Subletting. Without Landlord's prior written consent,
Tenant shall not assign this Lease or sublease the Premises or any part thereof
or mortgage, pledge, or hypothecate its leasehold interest or grant any
concession or license within the Premises and any attempt to do any of the
foregoing shall be void and of no effect. For purposes of this paragraph, a
transfer of the ownership interests controlling Tenant shall be deemed an
assignment of this Lease unless such ownership interests are publicly traded.
Notwithstanding the above, Tenant may assign or sublet the Premises, or any part
thereof, to any entity controlling Tenant, controlled by Tenant or under common
control with Tenant (a "Tenant Affiliate"), without the prior written consent of
Landlord. Tenant shall reimburse Landlord for all of Landlord's reasonable
out-of-pocket expenses in connection with any assignment or sublease. Upon
Landlord's receipt of Tenant's written notice of a desire to assign or sublet
the Premises, or any part thereof (other than to a Tenant Affiliate), Landlord
may, by giving written notice to Tenant within 30 days after receipt of Tenant's
notice, terminate this Lease with respect to the space described in Tenant's
notice, as of the date specified in Tenant's notice for the commencement of the
proposed assignment or sublease.
Notwithstanding any assignment or subletting, Tenant and any
guarantor or surety of Tenant's obligations under this Lease shall at all times
remain fully responsible and liable for the payment of the rent and for
compliance with all of Tenant's other obligations under this Lease (regardless
of whether Landlord's approval has been obtained for any such assignments or
sublettings). In the event that the rent due and payable by a sublessee or
assignee (or a combination of the rental payable under such sublease or
assignment plus any bonus or other consideration therefor or incident thereto)
exceeds the rental payable under this Lease, then Tenant shall be bound and
obligated to pay Landlord as additional rent hereunder all such excess rental
and other excess consideration within 10 days following receipt thereof by
Tenant.
If this Lease be assigned or if the Premises be subleased (whether
in whole or in part) or in the event of the mortgage, pledge, or hypothecation
of Tenant's leasehold interest or grant of any concession or license within the
Premises or if the Premises be occupied in whole or in part by anyone other than
Tenant, then upon a default by Tenant hereunder beyond any applicable notice and
grace period as set forth in this Lease Landlord may collect rent from the
assignee, sublessee, mortgagee, pledgee, party to whom the leasehold interest
was hypothecated, concessionee or licensee or other occupant and, except to the
extent set forth in the preceding paragraph, apply the amount collected to the
next rent payable hereunder; and all such rentals collected by Tenant shall be
held in trust for Landlord and immediately forwarded to Landlord. No such
transaction or collection of rent or application thereof by Landlord, however,
shall be deemed a waiver of these provisions or a release of Tenant from the
further performance by Tenant of its covenants, duties, or obligations
hereunder.
Notwithstanding anything to the contrary in this Paragraph 17,
provided no default has occurred and is continuing under this Lease, upon 10
days prior written notice to Landlord, Tenant may, without Landlord's prior
written consent, assign this Lease to an entity into which Tenant is merged or
consolidated or to an entity to which substantially all of Tenant's assets are
transferred, provided such merger, consolidation, or transfer of assets is for a
good business purpose and not principally for the purpose of transferring
Tenant's leasehold estate.
18. Indemnification. Except for the negligence of Landlord, its agents,
employees or contractors, and to the extent permitted by law, Tenant agrees to
indemnify, defend and hold harmless Landlord, and Landlord's agents, employees
and contractors, from and against any and all losses, liabilities, damages,
costs and expenses (including attorneys' fees) resulting from claims by third
parties for injuries to any person and damage to or theft or misappropriation or
loss of property occurring in or about the Project and arising from the use and
occupancy of the Premises or from any activity, work, or thing done, permitted
or suffered by Tenant in or about the Premises or due to any other act or
omission of Tenant, its subtenants, assignees, invitees, employees, contractors
and agents. The furnishing of insurance required hereunder shall not be deemed
to limit Tenant's obligations under this Paragraph 18.
19. Inspection and Access. Landlord and its agents, representatives, and
contractors may enter the Premises at any reasonable time and upon reasonable
prior notice (except for emergency situations) to inspect the Premises and to
make such repairs as may be required or permitted pursuant to this Lease and for
any other business
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purpose. Landlord and Landlord's representatives may enter the Premises during
business hours upon reasonable prior notice for the purpose of showing the
Premises to prospective purchasers and, during the last year of the Lease Term,
to prospective tenants. Landlord may not erect a suitable sign on the Premises
stating the Premises are available to let or that the Project is available for
sale. Landlord may grant easements, make public dedications, designate common
areas and create restrictions on or about the Premises, provided that no such
easement, dedication, designation or restriction materially interferes with
Tenant's use or occupancy of the Premises. At Landlord's request, Tenant shall
execute such instruments as may be necessary for such easements, dedications or
restrictions.
20. Quiet Enjoyment. If Tenant shall perform all of the covenants and
agreements herein required to be performed by Tenant, Tenant shall, subject to
the terms of this Lease, at all times during the Lease Term, have peaceful and
quiet enjoyment of the Premises against any person claiming by, through or under
Landlord.
21. Surrender. Upon termination of the Lease Term or earlier termination
of Tenant's right of possession, Tenant shall surrender the Premises to Landlord
in the same condition as received, broom clean, ordinary wear and tear and
casualty loss and condemnation covered by Paragraphs 15 and 16 excepted. Any
Trade Fixtures, Tenant-Made Alterations and property not so removed by Tenant as
permitted or required herein shall be deemed abandoned and may be stored,
removed, and disposed of by Landlord at Tenant's expense, and Tenant waives all
claims against Landlord for any damages resulting from Landlord's retention and
disposition of such property. All obligations of Tenant hereunder not fully
performed as of the termination of the Lease Term shall survive the termination
of the Lease Term, including without limitation, indemnity obligations, payment
obligations with respect to Operating Expenses and obligations concerning the
condition and repair of the Premises, provided, however, that any claim therefor
must be made within 12 months after the termination of this Lease, with the
exception of environmental claims or issues.
22. Holding Over. If Tenant retains possession of the Premises after the
termination of the Lease Term, unless otherwise agreed in writing, such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease (excluding any expansion
or renewal option or other similar right or option) shall be applicable during
such holdover period, except that Tenant shall pay Landlord from time to time,
upon demand, as Base Rent for the holdover period, an amount equal to 150% of
the Base Rent in effect on the termination date, computed on a monthly basis for
each month or part thereof during such holding over. All other payments shall
continue under the terms of this Lease. In addition, Tenant shall be liable for
all damages incurred by Landlord as a result of such holding over, except to the
extent such damages are a result of Force Majeure. No holding over by Tenant,
whether with or without consent of Landlord, shall operate to extend this Lease
except as otherwise expressly provided, and this Paragraph 22 shall not be
construed as consent for Tenant to retain possession of the Premises.
23. Events of Default. Each of the following events shall be an event of
default ("Event of Default") by Tenant under this Lease:
(i) Tenant shall fail to pay any installment of Base Rent or any
other payment required herein when due, and such failure shall continue
for a period of 10 days after notice from Landlord to Tenant that such
payment was due; provided, however, that Landlord shall not be obligated
to provide written notice of such failure more than 2 times in any
consecutive 12-month period, and the failure of Tenant to pay any fourth
or subsequent installment of Base Rent or any other payment required
herein when due in any consecutive 12-month period shall constitute an
Event of Default by Tenant under this Lease without the requirement of
notice or opportunity to cure.
(ii) Tenant shall (A) make a general assignment for the benefit of
creditors; (B) commence any case, proceeding or other action seeking to
have an order for relief entered on its behalf as a debtor or to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or
its debts or seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or of any substantial part of its
property (collectively a "proceeding for relief"); (C) become the subject
of any proceeding for relief which is not dismissed within 60 days of its
filing or entry; or (D) the or suffer a legal disability (if Tenant,
guarantor, or surety is an individual) or be dissolved or otherwise fail
to maintain its legal existence (if Tenant, guarantor or surety is a
corporation, partnership or other entity).
(iii) Any insurance required to be maintained by Tenant pursuant to
this Lease shall be cancelled or terminated or shall expire or shall be
reduced or materially changed, except, in each case, as permitted in this
Lease.
(iv) Tenant shall not occupy or shall vacate the Premises or shall
fail to continuously operate its business at the Premises for the
permitted use set forth herein, whether or not Tenant is in monetary or
other default under this Lease. Tenant's vacating of the Premises shall
not constitute an Event of Default if, prior to vacating the Premises,
Tenant has made arrangements reasonably acceptable to Landlord to (a)
insure that Tenant's insurance for the Premises will not be voided or
cancelled with respect to the Premises as a result of such vacancy, (b)
insure that the Premises are secured and not subject to vandalism, and (c)
insure that the Premises will be properly maintained after such vacation.
Tenant shall inspect the Premises at least once each month and report
monthly in writing to Landlord on the condition of the Premises.
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(v) There shall occur any assignment, subleasing or other transfer
of Tenant's interest in or with respect to this Lease except as otherwise
permitted in this Lease.
(vi) Tenant shall fail to discharge or post security against any
lien placed upon the Premises in violation of this Lease within 30 days
after notice to Tenant of any such lien or encumbrance is filed against
the Premises.
(vii) Tenant shall fail to comply with any provision of this Lease
other than those specifically referred to in this Paragraph 23, and except
as otherwise expressly provided therein, such default shall continue for
more than 30 days after Landlord shall have given Tenant written notice of
such default, unless such default cannot be cured within 30 days provided
Tenant commences and diligently pursues said cure and completes the cure
within 90 days, except that with respect to any default under Paragraph
30, the time for completion of the cure shall be within the time set forth
by the applicable regulatory agency..
24. Landlord's Remedies. Upon each occurrence of an Event of Default and
so long as such Event of Default shall be continuing, Landlord may at any time
thereafter at its election: terminate this Lease or Tenant's right of
possession, (but Tenant shall remain liable as hereinafter provided) and/or
pursue any other remedies at law or in equity. Upon the termination of this
Lease or termination of Tenant's right of possession, it shall be lawful for
Landlord, without formal demand or notice of any kind, to re-enter the Premises
by summary dispossession proceedings or any other action or proceeding
authorized by law and to remove Tenant and all persons and property therefrom.
If Landlord re-enters the Premises, Landlord shall have the right to remove and
store all of the furniture, fixtures and equipment at the Premises.
If Landlord terminates this Lease, Landlord may recover from Tenant
the sum of: (i) all Base Rent and all other amounts accrued hereunder to the
date of such termination; (ii) the cost of reletting the whole or any part of
the Premises, including without limitation brokerage fees and/or leasing
commissions incurred by Landlord, and costs of removing and storing Tenant's or
any other occupant's property, repairing, altering, remodeling, or otherwise
putting the Premises into condition acceptable to a new tenant or tenants, and
all reasonable expenses incurred by Landlord in pursuing its remedies, including
reasonable attorneys' fees and court costs; and (iii) the excess of the then
present value of the Base Rent and other amounts payable by Tenant under this
Lease as would otherwise have been required to be paid by Tenant to Landlord
during the period following the termination of this Lease measured from the date
of such termination to the expiration date stated in this Lease, over the
present value of any net amounts which Tenant establishes Landlord can
reasonably expect to recover by reletting the Premises for such period, taking
into consideration the availability of acceptable tenants and other market
conditions affecting leasing; provided, however, in no event shall Tenant be
liable under the computation provided for in this subparagraph (iii) for an
amount greater than the amount equal to the sum of the Base Rent and Operating
Expenses payable for 12 months by Tenant under the terms of this Lease. Such
present values shall be calculated at a discount rate equal to the 90-day U.S.
Treasury bill rate at the date of such termination.
If Landlord terminates Tenant's right of possession (but not this
Lease), Landlord shall use commercially reasonable efforts to relet the Premises
for the account of Tenant for such rent and upon such terms as shall be
satisfactory to Landlord without thereby releasing Tenant from any liability
hereunder and without demand or notice of any kind to Tenant; provided, however,
(a) Landlord shall not be obligated to accept any tenant proposed by Tenant, (b)
Landlord shall have the right to lease any other space controlled by Landlord
first, and (c) any proposed tenant shall meet all of Landlord's leasing
criteria. For the purpose of such reletting Landlord is authorized to make any
repairs, changes, alterations, or additions in or to the Premises as Landlord
deems reasonably necessary or desirable. If the Premises are not relet, then
Tenant shall pay to Landlord as damages a sum equal to the amount of the rental
reserved in this Lease for such period or periods, plus the cost of recovering
possession of the Premises (including attorneys' fees and costs of suit), the
unpaid Base Rent and other amounts accrued hereunder at the time of
repossession, and the costs incurred in any attempt by Landlord to relet the
Premises. If the Premises are relet and a sufficient sum shall not be realized
from such reletting [after first deducting therefrom, for retention by Landlord,
the unpaid Base Rent and other amounts accrued hereunder at the time of
reletting, the cost of recovering possession (including attorneys' fees and
costs of suit), all of the costs and expense of repairs, changes, alterations,
and additions, the expense of such reletting (including without limitation
brokerage fees and leasing commissions) and the cost of collection of the rent
accruing therefrom] to satisfy the rent provided for in this Lease to be paid,
then Tenant shall immediately satisfy and pay any such deficiency. Any such
payments due Landlord shall be made upon demand therefor from time to time and
Tenant agrees that Landlord may file suit to recover any sums falling due from
time to time. Notwithstanding any such reletting without termination, Landlord
may at any time thereafter elect in writing to terminate this Lease for such
previous breach.
Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance of surrender of
the Premises and/or a termination of this Lease by Landlord, whether by
agreement or by operation of law, it being understood that such surrender and/or
termination can be effected only by the written agreement of Landlord and
Tenant. Any law, usage, or custom to the contrary notwithstanding, Landlord
shall have the right at all times to enforce the provisions of this Lease in
strict accordance with the terms hereof; and the failure of Landlord at any time
to enforce its rights under this Lease strictly in accordance with same shall
not be construed as having created a custom in any way or manner contrary to the
specific terms, provisions, and covenants of this Lease or as having modified
the same. Tenant and Landlord further agree that forbearance or waiver by
Landlord to enforce its rights pursuant to this Lease or at law or in equity,
shall not be a waiver of Landlord's right to enforce one or more of its rights
in connection with any subsequent default. A receipt
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by Landlord of rent or other payment with knowledge of the breach of any
covenant hereof shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision of this Lease shall be deemed to have been made unless
expressed in writing and signed by Landlord. To the greatest extent permitted by
law, Tenant waives the service of notice of Landlord's intention to re-enter as
provided for in any statute, or to institute legal proceedings to that end, and
also waives all right of redemption in case Tenant shall be dispossessed by a
judgment or by warrant of any court or judge. The terms "enter," "re-enter,"
"entry" or "re-entry," as used in this Lease, are not restricted to their
technical legal meanings. Any reletting of the Premises shall be on such terms
and conditions as Landlord in its sole discretion may determine (including
without limitation a term different than the remaining Lease Term, rental
concessions, alterations and repair of the Premises, lease of less than the
entire Premises to any tenant and leasing any or all other portions of the
Project before reletting the Premises). Landlord shall not be liable, nor shall
Tenant's obligations hereunder be diminished because of, Landlord's failure to
relet the Premises or collect rent due in respect of such reletting, provided
Landlord uses commercially reasonable efforts to relet the Premises.
25. Tenant's Remedies/Limitation of Liability. Landlord shall not be in
default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after written notice from Tenant specifying such
failure (unless such performance will, due to the nature of the obligation,
require a period of time in excess of 30 days, then after such period of time as
is reasonably necessary, provided that Landlord commences and diligently pursues
the cure of such default). All obligations of Landlord hereunder shall be
construed as covenants, not conditions; and, except as may be otherwise provided
in this Lease, Tenant may not terminate this Lease for breach of Landlord's
obligations hereunder. All such obligations of Landlord under this Lease will be
binding upon Landlord only during the period of its ownership of the Premises
and not thereafter, provided that Landlord's transferee assumes all obligations
of Landlord under this Lease, including those accruing prior to such transfer.
The term "Landlord" in this Lease shall mean only the owner, for the time being
of the Premises, and in the event of the transfer by such owner of its interest
in the Premises, such owner shall thereupon be released and discharged from all
obligations of Landlord thereafter accruing, but such obligations shall be
binding during the Lease Term upon each new owner for the duration of such
owner's ownership. Any liability of Landlord under this Lease shall be limited
solely to its interest in the Project, and in no event shall any personal
liability be asserted against Landlord in connection with this Lease nor shall
any recourse be had to any other property or assets of Landlord.
If Landlord is in default under the Lease as hereinabove described,
Tenant also shall have the right to take such commercially reasonable actions as
Tenant deems necessary to cure Landlord's default and, if Landlord fails to
reimburse Tenant for the reasonable costs, fees and expenses incurred by Tenant
in taking such curative actions within 30 days after demand therefor,
accompanied by supporting evidence of the expenses incurred by Tenant, bring an
action for damages against Landlord to recover such costs, fees and expenses,
together with interest thereon at the rate provided for in Paragraph 37(1) of
the Lease, and reasonable attorney's fees incurred by Tenant in bringing such
action for damages. In no event, however, shall Tenant have a right to terminate
the Lease.
26. Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY
JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS
LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
27. Subordination. Provided that Tenant receives a non-disturbance
agreement, this Lease and Tenant's interest and rights hereunder are and shall
be subject and subordinate at all times to the lien of any first mortgage, now
existing or hereafter created on or against the Project or the Premises, and all
amendments, restatements, renewals, modifications, consolidations, refinancing,
assignments and extensions thereof, without the necessity of any further
instrument or act on the part of Tenant. Tenant agrees, at the election of the
holder of any such mortgage, to attorn to any such holder, provided that Tenant
receives a non-disturbance agreement. Tenant agrees upon demand to execute,
acknowledge and deliver such instruments, confirming such subordination and such
instruments of attornment as shall be requested by any such holder, provided
that Tenant receives a non-disturbance agreement. Notwithstanding the foregoing,
any such holder may at any time subordinate its mortgage to this Lease, without
Tenant's consent, by notice in writing to Tenant, and thereupon this Lease shall
be deemed prior to such mortgage without regard to their respective dates of
execution, delivery or recording and in that event such holder shall have the
same rights with respect to this Lease as though this Lease had been executed
prior to the execution, delivery and recording of such mortgage and had been
assigned to such holder. The term "mortgage" whenever used in this Lease shall
be deemed to include deeds of trust, security assignments and any other
encumbrances, and any reference to the "holder" of a mortgage shall be deemed to
include the beneficiary under a deed of trust.
Tenant shall not be obligated to subordinate the Lease or its
interest therein to any future mortgage, deed of trust or ground lease on the
Project unless concurrently with such subordination the holder of such mortgage
or deed of trust or the ground lessor under such ground lease agrees not to
disturb Tenant's possession of the Premises under the terms of the Lease in the
event such holder or ground lessor acquires title to the Premises through
foreclosure, deed in lieu of foreclosure or otherwise. Tenant shall be solely
responsible for any fees or expenses charged by the holder of such mortgage or
deed of trust in connection with the granting of such non-disturbance agreement.
28. Mechanic's Liens. Tenant has no express or implied authority to create
or place any lien or encumbrance of any kind upon, or in any manner to bind the
interest of Landlord or Tenant in, the Premises or to charge the rentals payable
hereunder for any claim in favor of any person dealing with Tenant, including
those who
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may furnish materials or perform labor for any construction or repairs. Tenant
covenants and agrees that it will pay or cause to be paid all sums legally due
and payable by it on account of any labor performed or materials furnished in
connection with any work performed at Tenant's request on the Premises and that
it will save and hold Landlord harmless from all loss, cost or expense based on
or arising out of asserted claims or liens against the leasehold estate or
against the interest of Landlord in the Premises or under this Lease. Tenant
shall give Landlord immediate written notice of the placing of any lien or
encumbrance against the Premises as a result of work performed by Tenant,
Tenant's employees or contractors, or Tenant's agent, and cause such lien or
encumbrance to be discharged within 30 days of the notice of filing or recording
thereof; provided, however, Tenant may contest such liens or encumbrances as
long as such contest prevents foreclosure of the lien or encumbrance and Tenant
causes such lien or encumbrance to be bonded or insured over in a manner
satisfactory to Landlord within such 30 day period.
29. Estoppel Certificates. Landlord and Tenant agree, from tune to time,
within 10 days after request of the other, to execute and deliver to the
requesting party, or its designee, any estoppel certificate requested by the
other, stating that this Lease is in full force and effect, the date to which
rent has been paid, that the requesting party is not in default hereunder (or
specifying in detail the nature of the requesting party's default), the
termination date of this Lease and such other matters pertaining to this Lease
as may be requested by the requesting party. The obligation to furnish each
estoppel certificate in a timely fashion is a material inducement for the
parties execution of this Lease. No cure or grace period provided in this Lease
shall apply to obligations to timely deliver an estoppel certificate.
30. Environmental Requirements. Except for Hazardous Material contained in
products used by Tenant in de minimis quantities for ordinary cleaning, office
purposes, and distributing products in their original and unopened packaging,
Tenant shall not permit or cause any party to bring any Hazardous Material upon
the Premises or transport, store, use, generate, manufacture or release any
Hazardous Material in or about the Premises without Landlord's prior written
consent. Tenant, at its sole cost and expense, shall operate its business in the
Premises in strict compliance with all Environmental Requirements, and shall
remediate in a manner satisfactory to Landlord any Hazardous Materials released
on or from the Project by Tenant, its agents, employees, contractors, subtenants
or invitees. Tenant shall complete and certify to disclosure statements as
requested by Landlord from time to time relating to Tenant's transportation,
storage, use, generation, manufacture, or release of Hazardous Materials on the
Premises. The term "Environmental Requirements" means all applicable present and
future statutes, regulations, ordinances, rules, codes, judgments, orders or
other similar enactments of any governmental authority or agency regulating or
relating to health, safety, or environmental conditions on, under, or about the
Premises or the environment, including without limitation, the following: the
Comprehensive Environmental Response, Compensation and Liability Act; the
Resource Conservation and Recovery Act; and all state and local counterparts
thereto, and any regulations or policies promulgated or issued thereunder. The
term "Hazardous Materials" means and includes any substance, material, waste,
pollutant, or contaminant listed or defined as hazardous or toxic, under any
Environmental Requirements, asbestos and petroleum, including crude oil or any
fraction thereof, natural gas, or synthetic gas usable for fuel (or mixtures of
natural gas and such synthetic gas). As defined in Environmental Requirements,
Tenant is and shall be deemed to be the "operator" of Tenant's "facility" and
the "owner" of all Hazardous Materials brought on the Premises by Tenant, its
agents, employees, contractors or invitees, and the wastes, by-products, or
residues generated, resulting, or produced therefrom.
Tenant shall indemnify, defend, and hold Landlord harmless from and
against any and all losses (including, without limitation, diminution in value
of the Premises or the Project and loss of rental income from the Project),
claims, demands, actions, suits, damages (including, without limitation,
punitive damages), expenses (including, without limitation, remediation,
removal, repair, corrective action, or cleanup expenses), and costs (including,
without limitation, actual attorneys' fees, consultant fees or expert fees and
including, without limitation, removal or management of any asbestos brought
into the Premises in breach of the requirements of this Paragraph 30, regardless
of whether such removal or management is required by law) which are brought or
recoverable against, or suffered or incurred by Landlord as a result of any
release of Hazardous Materials for which Tenant is obligated to remediate as
provided above or any other breach of the requirements under this Paragraph 30
by Tenant, its agents, employees, contractors, subtenants, assignees or
invitees, regardless of whether Tenant had knowledge of such noncompliance. The
obligations of Tenant under this Paragraph 30 shall survive any termination of
this Lease.
Landlord shall have access to, and a right to perform inspections
and tests of, the Premises to determine Tenant's compliance with Environmental
Requirements, its obligations under this Paragraph 30, or the environmental
condition of the Premises. Access shall be granted to Landlord upon Landlord's
prior notice to Tenant and at such times so as to minimize, so far as may be
reasonable under the circumstances, any disturbance to Tenant's operations. Such
inspections and tests shall be conducted at Landlord's expense, unless such
inspections or tests reveal that Tenant has not complied with any Environmental
Requirement, in which case Tenant shall reimburse Landlord for the reasonable
cost of such inspection and tests. Landlord's receipt of or satisfaction with
any environmental assessment in no way waives any rights that Landlord holds
against Tenant.
Tenant shall have no liability of any kind to Landlord as to
Hazardous Materials on the Premises caused or permitted by: (i) Landlord, its
agents, employees, contractors or invitees; or (ii) any other tenants in the
Project or their agents, employees, contractors, subtenants, assignees or
invitees; or (iii) any other person or entity located outside of the Premises or
the Project.
31. Rules and Regulations. Tenant shall, at all times during the Lease
Term and any extension thereof, comply with all reasonable rules and regulations
at any time or from time to time established by Landlord covering
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use of the Premises and the Project. The current rules and regulations are
attached hereto. In the event of any conflict between said rules and regulations
and other provisions of this Lease, the other terms and provisions of this Lease
shall control. Landlord shall not have any liability or obligation for the
breach of any rules or regulations by other tenants in the Project, but shall
enforce such rules and regulations uniformly throughout the Project.
32. Security Service. Tenant acknowledges and agrees that, while Landlord
may patrol the Project, Landlord is not providing any security services with
respect to the Premises and that Landlord shall not be liable to Tenant for, and
Tenant waives any claim against Landlord with respect to, any loss by theft or
any other damage suffered or incurred by Tenant in connection with any
unauthorized entry into the Premises or any other breach of security with
respect to the Premises, except caused by the negligence of Landlord, or its
employees, agents or contractors.
33. Force Majeure. Except for monetary obligations, Landlord and Tenant
shall not be held responsible for delays in the performance of its obligations
hereunder when caused by strikes, lockouts, labor disputes, acts of God,
inability to obtain labor or materials or reasonable substitutes therefor,
governmental restrictions, governmental regulations, governmental controls,
delay in issuance of permits, enemy or hostile governmental action, civil
commotion, fire or other casualty, and other causes beyond the reasonable
control of Landlord or Tenant ("Force Majeure").
34. Entire Agreement. This Lease constitutes the complete agreement of
Landlord and Tenant with respect to the subject matter hereof. No
representations, inducements, promises or agreements, oral or written, have been
made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant,
which are not contained herein, and any prior agreements, promises,
negotiations, or representations are superseded by this Lease. This Lease may
not be amended except by an instrument in writing signed by both parties hereto.
35. Severability. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this Lease shall
not be affected thereby. It is also the intention of the parties to this Lease
that in lieu of each clause or provision of this Lease that is illegal, invalid
or unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in terms to such illegal, invalid or unenforceable clause or
provision as may be possible and be legal, valid and enforceable.
36. Brokers. Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction and that no
broker, agent or other person brought about this transaction, other than the
broker, if any, set forth on the first page of this Lease, and Tenant agrees to
indemnify and hold Landlord harmless from and against any claims by any other
broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this leasing
transaction. Landlord agrees to pay the brokers set forth on the first page of
this Lease and agrees to indemnify and hold Tenant harmless from and against any
monetary claims by the brokers set forth on the first page of this Lease, such
indemnity to include attorney's fees.
37. Miscellaneous. (a) Any payments or charges due from Tenant to Landlord
hereunder shall be considered rent for all purposes of this Lease.
(b) If and when included within the term "Tenant," as used in this
instrument, there is more than one person, firm or corporation, each shall be
jointly and severally liable for the obligations of Tenant.
(c) All notices required or permitted to be given under this Lease shall
be in writing and shall be sent by registered or certified mail, return receipt
requested, or by a reputable national overnight courier service, postage
prepaid, or by hand delivery addressed to the parties at their addresses below,
and with a copy sent to Landlord at 14100 East 35th Place, Aurora, Colorado
80011 and to Tenant at 400 Rabro Drive East, Hauppauge, New York 11788,
Attention: Legal Department. Either party may by notice given aforesaid change
its address for all subsequent notices. Except where otherwise expressly
provided to the contrary, notice shall be deemed given upon delivery.
(d) Except as otherwise expressly provided in this Lease or as otherwise
required by law, Landlord retains the absolute right to withhold any consent or
approval.
(e) Intentionally deleted.
(f) Neither this Lease nor a memorandum of lease shall be filed by or on
behalf of Tenant in any public record. Landlord may prepare and file, and upon
request by Landlord Tenant will execute, a memorandum of lease.
(g) The normal rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any exhibits or amendments hereto.
(h) The submission by Landlord to Tenant of this Lease shall have no
binding force or effect, shall not constitute an option for the leasing of the
Premises, nor confer any right or impose any obligations upon either party until
execution of this Lease by both parties.
-11-
<PAGE>
(i) Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provision hereof, or in any
way affect the interpretation of this Lease.
(j) Any amount not paid by Tenant within 10 days after notice from
Landlord to Tenant that such payment was due (except that Landlord shall not be
obligated to provide written notice of such failure more than 2 times in any
consecutive 12-month period or four times over the term of the Lease) and in
accordance with the terms of this Lease shall bear interest from such due date
until paid in full at the lesser of the highest rate permitted by applicable law
or 15 percent per year. It is expressly the intent of Landlord and Tenant at all
times to comply with applicable law governing the maximum rate or amount of any
interest payable on or in connection with this Lease. If applicable law is ever
judicially interpreted so as to render usurious any interest called for under
this Lease, or contracted for, charged, taken , reserved, or received with
respect to this Lease, then it is Landlord's and Tenant's express intent that
all excess amounts theretofore collected by Landlord be credited on the
applicable obligation (or, if the obligation has been or would thereby be paid
in full, refunded to Tenant), and the provisions of this Lease immediately shall
be deemed reformed and the amounts thereafter collectible hereunder reduced,
without the necessity of the execution of any new document, so as to comply with
the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder.
(k) Construction and interpretation of this Lease shall be governed by the
laws of the state in which the Project is located, excluding any principles of
conflicts of laws.
(l) Time is of the essence as to the performance of Tenant's and
Landlord's obligations under this Lease.
(m) All exhibits and addenda attached hereto are hereby incorporated into
this Lease and made a part hereof. In the event of any conflict between such
exhibits or addenda and the terms of this Lease, such exhibits or addenda shall
control.
38. Landlord's Lien/Security Interest. Intentionally deleted.
39. Limitation of Liability of Trustees, Shareholders, and Officers of
Security Capital Industrial Trust. Any obligation or liability whatsoever of
Security Capital Industrial Trust, a Maryland real estate investment trust,
which may arise at any time under this Lease or any obligation or liability
which may be incurred by it pursuant to any other instrument, transaction, or
undertaking contemplated hereby shall not be personally binding upon, nor shall
resort for the enforcement thereof be had to the property of, its trustees,
directors, shareholders, officers, employees or agents, regardless of whether
such obligation or liability is in the nature of contract, tort, or otherwise.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
day and year first above written.
TENANT: LANDLORD:
Graham-Field Health Products, Inc. Security Capital Industrial Trust
By: [Illegible] By: /s/ Walter C. Rahowich
- ---------------------------------- -------------------------------------
Title: Vice President, General Title: Senior Vice President
Counsel
Address: Address:
400 Rabro Drive East 5200 Eisenhower Avenue
2nd Floor
Hauppauge, New York 11788 Alexandria, Virginia 22304
-12-
<PAGE>
Rules and Regulations
1. The sidewalk, entries, and driveways of the Project shall not be
obstructed by Tenant, or its agents, or used by them for any Purpose other
than ingress and egress to and from the Premises.
2. Tenant shall not place any objects, including antennas, outdoor furniture,
etc., in the parking areas, landscaped areas or other areas outside of its
Premises, or on the roof of the Project.
3. Except for seeing-eye dogs, no animals shall be allowed in the offices,
halls, or corridors in the Project.
4. Tenant shall not disturb the occupants of the Project or adjoining
buildings by the use of any radio or musical instrument or by the making
of loud or improper noises.
5. If Tenant desires telegraphic, telephonic or other electric connections in
the Premises, Landlord or its agent will direct the electrician as to
where and how the wires may be introduced; and, without such direction,
no boring or cutting of wires will be permitted. Any such installation or
connection shall be made at Tenant's expense.
6. Tenant shall not install or operate any steam or gas engine or boiler, or
other mechanical apparatus in the Premises, except as specifically
approved in the lease. The use of oil, gas or inflammable liquids for
heating, lighting or any other purpose is expressly prohibited. Explosives
or other articles deemed extra hazardous shall not be brought into the
Project.
7. Parking any type of recreational vehicles is specifically prohibited on or
about the Project. Except for the overnight parking of operative vehicles,
no vehicle of any type shall be stored in the parking areas at any time.
In the event that a vehicle is disabled, it shall be removed within 48
hours. There shall be no "For Sale" or other advertising signs on or about
any parked vehicle. All vehicles shall be parked in the designated parking
areas in conformity with all signs and other markings. All parking will be
open parking, and no reserved parking, numbering or lettering of
individual spaces will be permitted except as specified by Landlord and as
set forth in this Lease.
8. Tenant shall maintain the Premises free from rodents, insects and other
pests.
9. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs or who shall in any manner do any act in
violation of the Rules and Regulations of the Project.
10. Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and
cleanliness. Landlord shall not be responsible to Tenant for any loss of
property on the Premises, however occurring, or for any damage done to the
effects of Tenant by the janitors or any other employee or person.
11. Tenant shall give Landlord prompt notice of any defects in the water, lawn
sprinkler, sewage, gas pipes, electrical lights and fixtures, heating
apparatus, or any other service equipment affecting the Premises.
12. Tenant shall not permit storage outside the Premises, including without
limitation, outside storage of trucks and other vehicles, or dumping of
waste or refuse or permit any harmful materials to be placed in any
drainage system or sanitary system in or about the Premises.
13. All moveable trash receptacles provided by the trash disposal firm for the
Premises must be kept in the trash enclosure areas, if any, provided for
that purpose.
14. No auction, public or private, will be permitted on the Premises or the
Project.
15. No awnings shall be placed over the windows in the Premises except with
the prior written consent of Landlord.
16. The Premises shall not be used for lodging, sleeping or cooking or for any
immoral or illegal purposes or for any purpose other than that specified
in the Lease. No gaming devices shall be operated in the Premises.
17. Tenant shall ascertain from Landlord the maximum amount of electrical
current which can safely be used in the Premises, taking into account the
capacity of the electrical wiring in the Project and the Premises and the
needs of other tenants, and shall not use more than such safe capacity.
Landlord's consent to the installation of electric equipment shall not
relieve Tenant from the obligation not to use more electricity than such
safe capacity.
18. Tenant assumes full responsibility for protecting the Premises from theft,
robbery and pilferage.
19. Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not directly related to Tenant's ordinary
use of the Premises and shall keep all such machinery free of vibration,
noise and air waves which may be transmitted beyond the Premises.
-13-
<PAGE>
EXHIBIT A
AIRPORT COMMONS DISTRIBUTION CENTER
7445 NEW RIDGE ROAD o HANOVER, MARYLAND
[Site Plan]
<PAGE>
EXHIBIT B
SECURITY CAPITAL INDUSTRIAL TRUST
("LANDLORD")
SIGN CRITERIA
I. INTRODUCTION
The intent of this sign criteria is to establish and maintain guidelines
consistent with the signage policies of the Landlord and the City or
County as appropriate. Further, the purpose is to assure a standard
conformance for the design, size, fabrication techniques, and materials
for signage for the project and for tenant identification.
II. GENERAL REQUIREMENTS
A. Each Tenant sign shall be designed, fabricated and installed in
accordance with this sign criteria and consistent with the Sign Code
of the City or County as amended from time to time by the governing
authority.
B. Landlord's written approval of Design Drawings, and Working Shop
Drawings is required prior to the commencement of Tenant sign
construction.
C. Sign permits must be obtained from the City or County prior to
installation of signage.
D. Signs installed without written approval of the Landlord or the
appropriate city permit may be subject to removal and proper
reinstallation at Tenant's expense. Damage may be assessed to cover
costs of repairs to sign band or removal of signage resulting from
unapproved installations.
E. Tenant and his sign contractor shall repair any damage caused during
installation of signage.
F. No labels shall be permitted on the exposed surface of signs, except
those required by local ordinance. Those required must be installed
in an inconspicuous location, as approved by Landlord.
G. Flashing, strobing, moving or audible signs are not permitted.
H. No window signs with the exception of suit numbers are permitted
without the express approval of Landlord.
I. No portable signs are to be displayed on site.
J. No secondary exterior signs are to be placed on building wall
elevations.
K. No freestanding and/or pylon type exterior signs will be permitted
without Landlord's prior approval.
III. TENANT RESPONSIBILITIES
Each Tenant shall, at its own expense, provide and maintain its own
identification sign in accordance with specifications noted herein.
IV. FASCIA-MOUNTED EXTERIOR SIGN
A. A sign fascia area will be provided for each Tenant at the panels
above the storefront lease line. Each Tenant sign and/or logo sign
shall be mounted in this space in conformance with the attached sign
exhibits. Refer to Exhibits "A-l", "B-l" and "C".
<PAGE>
B. Each Tenant will be allowed to have only one wall-mounted sign. Any
variance to the quantity, size, mounting method will be allowed only
upon Landlord's written approval.
C. The sign panel shall be .080 aluminum pan type sign with an acrylic
urethane finish. The specified size of the sign shall be:
(1) 4' x 14' or length denoted in Exhibit "A-1" & "B-1".
The Tenant I.D. sign cannot exceed 80% of the building wall panel
space available.
D. The sign panel shall have 90 degree corners and 1" flanges. The sign
background color will be painted to match the accent color on the
building, as provided by the Landlord. The background color of the
sign will be visible on at least one-half of the sign or as approved
by SCI.
E. The program allows for the use of a corporate logo and letter styles
at the discretion of the Tenant. Final approval of logo and letter
style will be by the Landlord. The logo colors are optional, however
care must be taken to select colors and images that will be
comparable and legible on the specified background. The color of the
lettering identifying the Tenant will be PMS 342 (green) or
corporate colors as approved by the Landlord.
F. Sign layouts and colors must have written approval by the Landlord
prior to fabrication. The logo, when applicable, will not exceed
more than 50% of the sign face.
G. There are two approved methods for applying the copy to the sign
background:
(1) Acrylic Urethane
(2) Vinyl (high performance - seven year grade)
H. A margin equal to at least one-half of the height of the type should
appear to the left, right, top and bottom of the Tenant name. Margin
parameters will not apply to the logo area of the sign. Neutral
space between a two line sign shall be a minimum of one-third the
height of the letter type The sign panel will be mounted on the
building face in conformance with Landlord standards; mounting clips
(minimum 1/8" x 1" x 1" x 2" long aluminum angle wired head anchors
- no Kwick bolts allowed), no exposed fasteners through the face of
the sign panel. The correct design, construction and mounting of the
sign is the responsibility of the Tenant and the sign contractor.
Any signage that is constructed/installed improperly shall be
removed and corrected and reinstalled by the Tenant/Contractor at
their expense.
I. All signs erected within the City or County and the extra
territorial jurisdiction that describe the location of a business
may require a sign permit. Sign permits may require payment for:
(1) Site Inspection
(2) Construction Permit
(3) Application Fee
These costs are the responsibility of the Tenant. Licensed sign
contractors/companies are required to acquire these permits prior to
installation of the sign. Failure to acquire permits will not
release the Tenant from responsibility to acquire a permit for the
sign.
V. MONUMENT SIGN
Monument sign will be provided by the Landlord. Tenant shall pay to
provide Tenant sign letters to match Landlord standards. Refer to Exhibit
"E".
<PAGE>
VI. MISCELLANEOUS SIGNAGE
A. Front Door Signage: Business name, address and operating hours shall
be white vinyl Helvetica Regular letter style. Landlord to approve
all front door signage prior to installation.
B. Dock Door Numbers: Provided by Landlord. Refer to Exhibit "D".
C. Suite Number Signs: Provided by Landlord. Refer to Exhibit "F".
D. Building Address: Provided by Landlord. Refer to Exhibit "A".
VII. TENANT SIGN SUBMISSIONS
A. Tenant sign contractors shall submit all Working Shop Drawings and
samples to the Landlord or his appointed representative for
approval. Allow a minimum of ten working days, or two weeks, for
Landlord review and approval.
B. All submissions to include two (2) blueline prints, (1) reproducible
and (2) samples of colors and materials. An approved copy will be
returned provided all sign criteria has been met.
C. Shop Drawings must include:
(1) Full and complete dimensions
(2) Letter style, face (color, material and thickness), returns
(color, material and thickness).
VIII. APPROVALS
No sign shall be installed without first securing the necessary permits
from the appropriate governing jurisdiction. Artwork and sign location are
to be approved in writing by the Landlord or their appointed
representative prior to installation. Landlord reserves the right to
reject any sign that does not comply with the intent and spirit of this
sign criteria.
<PAGE>
BUILDING CORNER ENTRY ELEVATION
-------------------------------
SCALE: 1/8" = 1' -0"
SIGNAGE CRITERIA
EXHIBIT A
<PAGE>
BUILDING MIDDLE ENTRY ELEVATION
-------------------------------
SCALE: 1/8" = 1' -0"
SIGNAGE CRITERIA
EXHIBIT B
<PAGE>
ELEVATION
1/2" = 1' -0"
SECTION DETAIL
--------------
HALF SCALE
SIGNAGE CRITERIA
EXHIBIT C
<PAGE>
ADDENDUM 1
BASE RENT ADJUSTMENTS
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY __, 1997, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
GRAHAM-FIELD HEALTH PRODUCTS, INC.
Base Rent shall equal the following amounts for the respective periods set forth
below:
Amount per
Period Monthly Base Rent Square Foot
------ ----------------- -----------
03/15/97 to 04/14/97 $0.00 $0.00
04/15/97 to 04/30/97 $3,777.57 $4.50
05/01/97 to 04/30/99 $7,555.13 $4.50
05/01/99 to 04/30/02 $7,974.85 $4.75
* Tenant shall not be obligated to pay Operating Expenses for the first 30
days following the Commencement Date.
- 14 -
<PAGE>
ADDENDUM 2
CONSTRUCTION
(TURNKEY)
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY __, 1997, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
GRAHAM-FIELD HEALTH PRODUCTS, INC.
(a) Landlord agrees to furnish or perform at Landlord's sole cost
and expense those items of construction and those improvements (the "Tenant
Improvements") specified below:
See Exhibit A-1 for detailed specifications.
(b) If Tenant shall desire any changes, Tenant shall so advise
Landlord in writing and Landlord shall determine whether such changes can be
made in a reasonable and feasible manner. Any and all costs of reviewing any
requested changes, and any and all costs of making any changes to the Tenant
Improvements which Tenant may request and which Landlord may agree to shall be
at Tenant's sole cost and expense and shall be paid to Landlord upon demand and
before execution of the change order.
(c) Landlord shall proceed with and complete the construction of the
Tenant Improvements in accordance with Exhibit A-1 within 60 days following the
lease execution date. In the event Landlord does not complete the Tenant
Improvements in accordance with Exhibit A-1 within 60 days following the lease
execution date, Tenant may terminate the Lease by providing Landlord written
notice, unless caused by Force Majeure, or the completion of the Tenant
improvements was delayed by Tenant as specified below. As soon as such
improvements have been Substantially Completed, Landlord shall notify Tenant in
writing of the date that the Tenant Improvements were Substantially Completed.
Such date, unless as otherwise specified on the first page of the Lease as the
Commencement Date in this Lease or otherwise agreed to in writing between
Landlord and Tenant, shall be the "Commencement Date," unless the completion of
such improvements was delayed due to any act or omission of, or delay caused by,
Tenant including, without limitation, Tenant's failure to approve plans,
complete submittals or obtain permits within the time periods agreed to by the
parties or as reasonably required by Landlord, in which case the Commencement
Date shall be the date such improvements would have been completed but for the
delays caused by Tenant. The Tenant Improvements shall be deemed substantially
completed ("Substantially Completed") when, in the opinion of the construction
manager (whether an employee or agent of Landlord or a third party construction
manager), the Premises are substantially completed except for punch list items
which do not prevent in any material way the use of the Premises for the
purposes for which they were intended, and a final inspection has been performed
by the county inspector and allows Tenant to legally occupy the Premises for
Tenant's intended use as defined in Paragraph 3 of the Lease. After the
Commencement Date Tenant shall, upon demand, execute and deliver to Landlord a
letter of acceptance of delivery of the Premises.
(d) The failure of Tenant to take possession of or to occupy the
Premises shall not serve to relieve Tenant of obligations arising on the
Commencement Date or delay the payment of rent by Tenant. Subject to applicable
ordinances and building codes governing Tenant's right to occupy or perform in
the Premises, Tenant shall be allowed to install its tenant improvements,
machinery, equipment, fixtures, or other property on the Premises during the
final stages of completion of construction provided that Tenant does not thereby
interfere with the completion of construction or cause any labor dispute as a
result of such installations, and provided further that Tenant does hereby agree
to indemnify, defend, and hold Landlord harmless from any loss or damage to such
property, and all liability, loss, or damage arising from any injury to the
Project or the property of Landlord, its contractors, subcontractors, or
materialmen, and any death or personal injury to any person or persons arising
out of such installations, whether or not any such loss, damage, liability,
death, or personal injury was caused by Landlord's negligence. Any such
occupancy or performance in the Premises shall be in accordance with the
provisions governing Tenant-Made Alterations and Trade Fixtures in the Lease,
and shall be subject to Tenant providing to Landlord satisfactory evidence of
insurance for personal injury and property damage related to such installations
and satisfactory payment arrangements with respect to installations permitted
hereunder. Delay in putting Tenant in possession of the Premises shall not serve
to extend the term of this Lease or to make Landlord liable for any damages
arising therefrom.
(e) Except for incomplete punch list items, Tenant upon the
Commencement Date shall have and hold the Premises as the same shall then be
without any liability or obligation on the part of Landlord for making any
further alterations or improvements of any kind in or about the Premises.
(f) Landlord may receive from contractors and suppliers warranties
covering portions of Landlord's work. Landlord agrees to assign to Tenant any
warranties received by Landlord which are assignable to Tenant.
(g) An occupancy certificate, which shall be based upon Tenant's use
as defined in Paragraph 3 of the Lease, shall be obtained within 90 days
following final inspection certification by the county inspector. In the event
such occupancy certificate is not obtained within 90 days following final
inspection by the county inspector, Tenant may terminate the Lease by providing
Landlord written notice.
-15-
<PAGE>
ADDENDUM 3
CAP ON CONTROLLABLE OPERATING EXPENSES
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY __, 1997, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
GRAHAM-FIELD HEALTH PRODUCTS, INC.
Tenant shall not be obligated to pay for Controllable Operating Expenses
in any year to the extent they have increased by more than Eight percent (8%)
per annum, compounded annually on a cumulative basis from the first calendar
year during the Lease term.
Taxes, insurance premiums, unanticipated repairs, extreme weather
situations, and utility costs shall not be deemed Controllable Operating
Expenses. Controllable Operating Expenses shall be determined on an aggregate
basis and not on an individual basis, and the cap on Controllable Operating
Expenses shall be determined on Operating Expenses as they have been adjusted
for vacancy or usage pursuant to the terms of the Lease.
<PAGE>
ADDENDUM 4
RIGHT OF FIRST OFFER
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY __, 1997 BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
GRAHAM-FIELD HEALTH PRODUCTS, INC.
(a) "Offered Space" shall mean immediately adjacent, contiguous bays
(b) Provided that as of the date of the giving of Landlord's Notice, (x)
Tenant is the Tenant originally named herein, (y) Tenant actually occupies all
of the Premises originally demised under this Lease and any premises added to
the Premises, and (z) no Event of Default beyond any applicable notice and cure
period is continuing as set forth in this Lease, if at any time during the Lease
Term any lease for any portion of the Offered Space shall expire, then Landlord,
before offering such Offered Space to anyone, other than the tenant then
occupying such space (or its affiliates), shall offer to Tenant the right to
include the Offered Space within the Premises on the same terms and conditions
upon which Landlord intends to offer the Offered Space for lease.
(c) Such offer shall be made by Landlord to Tenant in a written notice
(hereinafter called the "First Offer Notice") which offer shall designate the
space being offered and shall specify the terms which Landlord intends to offer
with respect to any such Offered Space. Tenant may accept the offer set forth in
the First Offer Notice by delivering to Landlord an unconditional acceptance
(hereinafter called "Tenant's Notice") of such offer within 10 business days
after delivery by Landlord of the First Offer Notice to Tenant. Time shall be of
the essence with respect to the giving of Tenant's Notice. If Tenant does not
accept (or fails to timely accept) an offer made by Landlord pursuant to the
provisions of this Addendum with respect to the Offered Space designated in the
First Offer Notice, Landlord shall be under no further obligation with respect
to such space by reason of this Addendum.
(d) Tenant must accept all Offered Space offered by Landlord at any one
time if it desires to accept any of such Offered Space and may not exercise its
right with respect to only part of such space. In addition, if Landlord desires
to lease more than just the Offered Space to one tenant, Landlord may offer to
Tenant pursuant to the terms hereof all such space which Landlord desires to
lease, and Tenant must exercise its rights hereunder with respect to all such
space and may not insist on receiving an offer for just the Offered Space.
(e) If Tenant at any time declines any Offered Space offered by Landlord,
Tenant shall be deemed to have irrevocably waived all further rights under this
Addendum, and Landlord shall be free to lease the Offered Space to third parties
including on terms which may be less favorable to Landlord than those offered to
Tenant.
-1-
<PAGE>
ADDENDUM 5
ONE RENEWAL OPTION AT MARKET
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY __, 1997, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
GRAHAM-FIELD HEALTH PRODUCTS, INC.
(f) Provided that as of the time of the giving of the Extension Notice and
the Commencement Date of the Extension Term, (x) Tenant is the Tenant originally
named herein, (y) Tenant actually occupies all of the Premises initially demised
under this Lease and any space added to the Premises, and (z) no Event of
Default exists beyond any applicable grace period as set forth in the Lease;
then Tenant shall have the right to extend the Lease Term for an additional term
of 3 years (such additional term is hereinafter called the "Extension Term")
commencing on the day following the expiration of the Lease Term (hereinafter
referred to as the "Commencement Date of the Extension Term"). Tenant shall give
Landlord notice (hereinafter called the "Extension Notice") of its election to
extend the term of the Lease Term at least 6 months, but not more than 12
months, prior to the scheduled expiration date of the Lease Term.
(g) The Base Rent payable by Tenant to Landlord during the Extension Term
shall be as follows.
04/01/02 - 03/31/03 $8,478.53/month $5.05/s.f.
04/01/03 - 03/31/04 $8,478.53/month $5.05/s.f.
04/01/04 - 03/31/05 $8,987.26/month $5.30/s.f.
(h) The Base Rent does not reduce the Tenant's obligation to pay or
reimburse Landlord for Operating Expenses and other reimbursable items as set
forth in the Lease, and Tenant shall reimburse and pay Landlord as set forth in
the Lease with respect to such Operating Expenses and other items with respect
to the Premises during the Extension Term without regard to any cap on such
expenses set forth in the Lease.
(i) Except for the Base Rent as determined above, Tenant's occupancy of
the Premises during the Extension Term shall be on the same terms and conditions
as are in effect immediately prior to the expiration of the initial Lease Term;
provided, however, Tenant shall have no further right to any allowances, credits
or abatements or any options to expand, contract, renew or extend the Lease.
(j) If Tenant does not give the Extension Notice within the period set
forth in paragraph (a) above, Tenant's right to extend the Lease Term shall
automatically terminate. Time is of the essence as to the giving of the
Extension Notice.
(k) Landlord shall have no obligation to refurbish or otherwise improve
the Premises for the Extension Term. The Premises shall be tendered on the
Commencement Date of the Extension Term in as-is condition.
(l) If the Lease is extended for the Extension Term, then Landlord shall
prepare and Tenant shall execute an amendment to the Lease confirming the
extension of the Lease Term and the other provisions applicable thereto (the
"Amendment").
(m) If Tenant exercises its right to extend the term of the Lease for the
Extension Term pursuant to this Addendum, the term "Lease Term" as used in the
Lease, shall be construed to include, when practicable, the Extension Term
except as provided in (d) above.
-2-
<PAGE>
ADDENDUM 6
INDEMNIFICATION BY LANDLORD
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY __, 1997, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
GRAHAM-FIELD HEALTH PRODUCTS, INC.
Except for the negligence of Tenant, its employees, contractors,
assignees or subtenants or their respective employees, agents, or contractors,
and to the extent permitted by law, Landlord agrees to indemnify, defend and
hold harmless Tenant, its employees, contractors and agents from and against any
and all losses, damages, claims, costs, expenses and liabilities, including,
without limitation, attorneys' fees, arising on account of or by reason of
claims by third parties for injuries or death to persons or damages to or theft,
misappropriation or loss of property resulting from any activity, work or thing
done, permitted or suffered by Landlord in or about the Project or due to any
other act or omission of Landlord, its employees, contractors and agents. The
furnishing of insurance required hereunder shall not be deemed to limit
Landlord's obligations under this Addendum 6. If a claim under the foregoing
indemnity or under the indemnity contained in Paragraph 18 of the Lease is made
against the indemnitee which the indemnitee believes to be covered by an
indemnitor's indemnification obligations hereunder or under Paragraph 18, the
indemnitee shall promptly notify the indemnitor of the claim and, in such notice
shall offer to the indemnitor the opportunity to assume the defense of the claim
within 10 business days after receipt of the notice (with counsel reasonably
acceptable to the indemnitee). If the indemnitor timely elects to assume the
defense of the claim, the indemnitor shall have the right to settle the claim on
any terms it considers reasonable and without the indemnitee's prior written
consent, as long as the settlement shall not require the indemnitee to render
any performance or pay any consideration, and the indemnitee shall not have the
right to settle any such claim. If the indemnitor fails timely to elect to
assume the defense of the claim or fails to defend the claim with diligence,
then the indemnitee shall have the right to take over the defense of the claim
and to settle the claim on any terms the indemnitee considers reasonable. Any
such settlement shall be valid as against the indemnitor. If the indemnitor
assumes the defense of a claim, the indemnitee may employ its own counsel but
such employment shall be at the sole expense of the indemnitee. If any such
claim arises out of the negligence of both Landlord and Tenant, responsibility
for such claim shall be allocated between Landlord and Tenant based on their
respective degrees of negligence. This indemnity and the indemnity under
Paragraph 18 does not cover claims arising from the presence or release of
Hazardous Materials.
-3-
<PAGE>
ADDENDUM 7
CANCELLATION OPTION
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY __, 1997, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
GRAHAM-FIELD HEALTH PRODUCTS, INC
Provided no Event of Default shall then exist and no condition shall then
exist which with the passage of time or giving of notice, or both, would
constitute an Event of Default, Tenant shall have the right at any time on or
before 9 months prior to the end of the third year of the Lease Term, to send
Landlord written notice (the "Termination Notice") that Tenant has elected to
terminate this Lease effective on the last day at the end of the third year of
the Lease Term.
If Tenant elects to terminate this Lease pursuant to the immediately
preceding sentence, the effectiveness of such termination shall be conditioned
upon Tenant paying to Landlord the amount equal to 6 months' Base Rent
contemporaneously with Tenant's delivery of the Termination Notice to Landlord.
Such amount is consideration for Tenant's option to terminate and shall not be
applied to rent or any other obligation of Tenant. Landlord and Tenant shall be
relieved of all obligations accruing under this Lease after the effective date
of such termination but not any obligations accruing under the Lease prior to
the effective date of such termination.
-4-
<PAGE>
ADDENDUM 8
LANDLORD'S ENVIRONMENTAL REMEDIATION
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEBRUARY __, 1997, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
GRAHAM-FIELD HEALTH PRODUCTS, INC.
If Hazardous Materials are hereafter discovered on the Premises or the
Project, and the presence of such Hazardous Materials is not the result of
Tenant's use of the Premises or any act or omission of Tenant or its agents,
employees, contractors, subtenants or invitees, and the presence of such
Hazardous Materials results in any contamination, damages, or injury to the
Premises or the Project that materially and adversely affects Tenant's occupancy
or use of the Premises, Landlord shall promptly take all actions at its sole
expense as are necessary to remediate such Hazardous Materials and as may be
required by the Environmental Requirements. Actual or threatened action or
litigation by any governmental authority is not a condition prerequisite to
landlord's obligations under this paragraph. Within 30 days after notification
from Tenant supported by reasonable documentation setting forth such presence or
release of Hazardous Materials, and after Landlord has been given a reasonable
period of time after such 30-day period to conduct its own investigation to
confirm such presence or release of Hazardous Materials, Landlord shall either
terminate this Lease or commence to remediate such Hazardous Materials within
180 days after the completion of Landlord's investigation and thereafter
diligently prosecute such remediation to completion. If Landlord fails to
commence such remediation or if Landlord commences such remediation and fails to
diligently prosecute same until completion, then Tenant as its sole remedy may
terminate this Lease by written notice to Landlord after expiration of 30 days
following a notice to Landlord that Tenant intends to terminate this Lease if
Landlord does not promptly commence or diligently prosecute the remediation
within such 30-day period. In addition, if, due solely to such environmental
contamination, Tenant is unable, in the reasonable judgment of Landlord and
Tenant, to materially and substantially operate its business at the Premises,
rent and all other sums due from Tenant to Landlord shall abate commencing on
the date that Tenant was unable to materially and substantially operate its
business at the Premises. In addition, if Tenant is not able to materially and
substantially operate its business at the Premises for a period of 180 days from
the date of the environmental contamination, Tenant may, upon 30 days prior
written notice to Landlord, terminate this Lease. Notwithstanding anything
herein to the contrary, if Landlord obtains a letter from the appropriate
governmental authority that no further remediation is required prior to the
effective date of any such termination, such termination shall be null and void
and this Lease shall remain in full force and effect.
-5-
EXHIBIT 10(w)
Union Contract dated April 16, 1996, between Graham-Field and Local 966 of
International Brotherhood of Teamsters with respect to the collective bargaining
agreement at the Hauppauge, New York facility.
<PAGE>
THIS AGREEMENT made and entered into this 16th day of April, 1996,
by and between GRAHAM-FIELD, INC., currently located at 400 Rabro Drive East,
Hauppauge, New York 11788, its successors or assigns (hereinafter referred to as
the "Employer") and LOCAL 966, affiliated with the INTERNATIONAL BROTHERHOOD OF
TEAMSTERS, 321 West 44th Street, New York, New York, its successors or assigns
(hereinafter referred to as the "Union")
W I T N E S S E T H
WHEREAS, the parties have carried on collective bargaining
negotiations for the purpose of developing a general agreement on wages, hours
of work and other conditions of employment.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree with each other with respect to the
employees of the Employer recognized as one being represented by the Union as
follows:
ARTICLE I - RECOGNITION
Section 1 - The Employer hereby recognizes the Union as the
exclusive representative of all employees, excluding guards, supervisors,
clerical, (and part-time employees who work less than 20 hours per week), the
number is not to exceed 15 part-time employees, 19 hours is the maximum to be
worked by part-time employees in any one (1) week.
ARTICLE II - NON-DISCRIMINATION
Section 1 - The Employer and the Union agree not to discriminate
against any individual with respect to hiring, compensation, or terms and
conditions of employment because of such individuals race, color, religion, sex
pregnancy, handicap, national origin, marital status, disability, or age
(between the years of 18 and 70), nor will it limit, segregate or classify
employees in any way to deprive any individual employee of employment
opportunities because of race, color, religion sex, pregnancy, handicap,
national origin, marital status, disability, or age (between the years of 18 and
70).
Section 2 - The Employer and the Union agree that there will be no
discrimination by the Employer or the Union against any employee because of his
or her membership in the Union or because of any employee's lawful activity
and/or support of the Union.
ARTICLE III - UNION SECURITY
Section 1 - The Employer agrees that all employees covered by this
Agreement shall, as a condition of employment, be
<PAGE>
required to become and remain members of the Union on the thirty-first (31st)
day following the actual beginning of work pursuant to such employment, the
effective date of this Agreement or its execution date, whichever is later. All
employees who are members of the Union at the time of execution of this
Agreement or become members of the Union at any time subsequent thereto, shall
remain members of the Union during the term oz this Agreement. The Union agrees
that all such employees will be accepted into membership on the same terms and
conditions generally acceptable to other members, and further, that the Employer
will not be requested to discharge an employee for reasons other than such
employee's failure to tender the periodic dues and initiation fees uniformly
required as a condition of accumulation or retaining membership in the Union.
Section 2 - The Employer shall furnish the Union with the name of
any new employee together with the date of hiring of aid employee immediately
upon submitting the Union's check-off form.
ARTICLE IV - CHECK-OFF
Section 1 - The Employer, upon receipt of a written authorization
signed by the employee, which authorization shall not be irrevocable for a
period of more than one (1) year, or beyond the termination date of this
Agreement, whichever occurs sooner, shall deduct membership dues and initiation
fees from said employee's wages on the first pay day of every month and remit
same to the Union no later than the twelfth day of the month in which they are
deducted.
Section 2 - The Employer will notify the Union immediately upon
receipt of any revocation of any authorization submitted to it pursuant to this
Article.
ARTICLE V - SENIORITY
Section 1 - Seniority shall be based upon length of service, subject
to the completion of an initial sixty (60) working day probationary period.
Employees shall be entitled to seniority rights dating from the employee's date
of hire.
Section 2 - Seniority shall be broken by an employee's voluntary
separation from the Employer or by discharge for just cause. Seniority shall
accrue during layoffs of less than one (1) year or during authorized leaves of
absence.
Section 3 - The Employer shall submit a current and up- to-date
seniority list to the Union every six (6) months during the term of this
Agreement.
Section 4 - In the event of a layoff, the least senior employee
(based on total service seniority) shall be the first employee to be laid-off.
In the event of a recall, the most
<PAGE>
senior employee (based on total service seniority) shall be the first employee
to be recalled.
Section 5 - In the case of a promotion, applicants applying for
posted positions will be interviewed in the order of seniority, however,
seniority shall not be the sole determinative factor in filling such position.
The decision to fill such position shall also be based upon the required skills
needed for the training of such position. In the event the Employer needs to
transfer an employee or alter a work shift, and more than one employee with
similar job classifications applies for such transfer, the most senior employee
will be selected for such position. If no employee applies for the transfer,
employees having the same job classification required to fill such transfer
position or alternate work shift will be assigned the position based upon least
seniority (based on total service seniority).
ARTICLE VI - SHOP STEWARD
Section 1 - The Employer recognizes the right of the Union to
designate a Shop Steward who shall be recognized as the representative of the
Union for all matters arising under this Agreement to the extent permitted
herein. The Union shall advise the Employer as to the identity of the Steward
and the Employer agrees that the Steward shall be free to conduct this duty as
such, with the understanding that such duty will not unduly interfere with
normal production or the conduct of the business and the Steward shall be
expected to do his usual work. However, reasonable time spent in carrying out
the grievance procedure agreed upon herein will be considered as being on the
employer's time.
Section 2 - Shop Stewards shall be accorded super seniority and
shall be the last persons laid-off and the first ones rehired upon resumption of
work.
ARTICLE VII - HOURS AND OVERTIME
Section 1 - The basic work week for all employees shall be five
consecutive days of eight (8) consecutive hours per day (except for one half
hour lunch period), Monday through Friday (the "Basic Work Week"). The Basic
Work Week shall not serve as a guarantee that employees will be employed for at
least five (5) days during any Basic Work Week or for at least eight (8) hours
during Any day of such Basic Work Week.
Section 2 - The regular working hours shall commence no earlier than
7:00 a.m. (Eastern Standard Time) for maintenance employees. All other
departments shall have, at the sole discretion of the Employer, either an 8:30
a.m. (Eastern Standard Time) or 10:00 a.m. (Eastern Standard Time) start time
and end shift time shall be no later than 10:00 p.m. (Eastern Standard Time)
(unless employees are scheduled to work overtime). Two (2) picker positions only
will start at 9:00 a.m. in the event the
<PAGE>
Employer shall have business requirements which would necessitate a change in
the established work hours, the Employer shall provide not less than thirty (30)
days' prior notice to the Union and the shop steward of such required change,
meet with the Union to discuss the proposed change and post such notice on the
bulletin board, as well as distribute to each affected employee a letter of
notification of such change.
Section 3 - Employees reporting for work at the direction of the
Employer shall be paid for the hours the business is open or four (4) hours
whichever is longer.
Section 4 - Should any employee work more than eight (8) hours in
any one (1) day, he shall be paid for such overtime at the rate of time and
one-half (1-1/2), providing the employee works the Monday and Friday of the same
work week that the overtime occurred. Employees who work on Saturday shall be
paid time and one-half for the 6th day. Employees who work on Sunday shall be
paid at double time for the 7th day. Employees who work on the 6th and 7th day
shall be guaranteed a minimum of four (4) hours of work.
Section 5 - Any employee shall have the right to refuse to work
overtime, unless provided not less than twenty four (24) hours' prior notice of
the request for overtime work. Overtime will first be offered to all bargaining
unit employees in the applicable department. Employees with conflicting
obligations will be excused from performing overtime work. If sufficient
staffing is not arranged using this method, the Employer will then offer such
overtime to bargaining unit employees in other departments, and only then to
part time employees. In the event insufficient staffing occurs using such
method, the Employer may assign overtime to employees in the reverse order of
seniority. In the event the Employer is unable to meet the needs of its
customers and overtime is available, the Employer will use reasonable efforts to
arrange overtime before the beginning of the employee's shift when, in the
judgment of management, the flow of work allows.
Section 6 - Any employee shall not be required to take time off in
lieu of overtime previously worked.
Section 7 - Overtime shall be distributed on an equal basis among
employees normally assigned to do the performance of the work in which the
overtime is required.
Section 8 - Overtime worked on a holiday shall be paid at the rate
of time and one-half plus the holiday pay.
Section 9 - Failure to resort for properly scheduled overtime will
be treated in the same manner as any other attendance problem.
<PAGE>
Section 10 - PART-TIME HOURS - Part-time employees may be used only
after the hour of 6:00 p.m. One (1) part-time employee (name attached as
Schedule "A") will be grandfathered for the purposes of this section and will be
allowed to continue working his current hours.
ARTICLE VIII - HOLIDAYS
Section 1 - The Employer agrees to pay the employees full salary for
the following holidays as if they worked thereon:
New Year's Day Labor Day
Washington's Birthday Thanksgiving Day
Independence Day Day after Thanksgiving Day
Floating Holiday Christmas Day
Good Friday Day before Christmas Day
Health Day*
One (1) Personal Day**
HEALTH DAY* - In order to receive pay from the Employer, it shall be
the employee's responsibility to notify the Employer at least two (2) weeks
prior to each anniversary of his or her employment date and further to submit
proof that he/she is scheduled to take an annual physical examination. It shall
be the employer's responsibility, upon proper notice, to grant the employee's
anniversary date of hire as a day off, or if the particular date is
inconvenient, then another day may be agreed to, by both parties, and upon
receipts of proof to pay for such day as if it were a regularly scheduled
holiday in the week it occurs.
PERSONAL DAY** - An employee may use this personal day anytime
during the contract year (i.e., Martin Luther King's Birthday, or etc.). If not
used during the year, the day shall be paid by check at the end of the year.
Section 2 - The Employer shall have the option of substituting the
dry after Christmas for the day before Christmas providing the employees are
given a sixty (60) day advance notice.
Section 3 - The compensation for holidays shall be based upon the
employee's base daily earnings.
Section 4 - No employee shall be required to work on a holiday,
except as provided herein. In the event that an employee does work on a holiday
he shall be paid at the rate of time and one-half plus the holiday pay. Overtime
staffing for (i) Washington's Birthday, and (ii) the day after Thanksgiving Day
will be first met by volunteers to work overtime, however, with respect to said
holidays, in the event management is unable to obtain adequate staffing to meet
the business requirements of
<PAGE>
the Employer, overtime will be mandatory and will be first assigned, to the
employee with the least seniority accrued.
Section 5 - In the event a holiday falls on Saturday or Sunday, then
it shall be celebrated either on Friday or Monday, at the option of the
Employer.
Section 6 - Employees must report to work within one hour of their
assigned starting time and remain at work until at least one hour prior to their
assigned end of shift time on both the day before and the day after the holiday
in order to receive pay from the Employer for the holiday.
Section 7 - Employees must work the day before and the day after the
ho today, in order to be paid for the holiday.
ARTICLE IX - VACATIONS & BONUS
Section 1 - Vacations shall be requested in writing on not less than
thirty (30) days' prior notification, and vacations shall be taken, subject to
management's approval, which shall not be unreasonably withheld.
Section 2 - Should a holiday occur during the vacation period of any
employee, said employee shall be entitled to one (1) additional day of vacation
in lieu of payment for the said holiday. This additional day. may not be taken
consecutively with the approved vacation unless authorized by management.
Section 3 - All employees shall receive vacations with pay in
accordance with the following schedule:
LENGTH OF SERVICE VACATION
One (1) year One (1) week
Two (2) years Two (2) weeks
Four (4) years Three (3) weeks
Ten (10) years Four (4) weeks
Section 4 - Length of service does not include unreasonable leaves
of absence, disability, and any other unreasonable leaves. Vacation will be
pro-rated for the time off.
Section 5 - Length of service will be strongly considered by
management with regard to approval of first choice of vacation requests.
Section 6 - Employees eligible for three (3) or more weeks vacation
shall have the option of requesting to take three weeks of vacation on a
consecutive basis, subject to management's approval. It being expressly
understood that authorization for three (3) consecutive weeks of vacation shall
not be granted two consecutive years in a row, nor during the end of any
calendar
<PAGE>
quarter of any year (i.e., last weeks in March, June, September or December).
Section 7 - The Employer will institute a bonus plan.
ARTICLE X - LEAVE OF ABSENCE
Section 1 - A reasonable leave of absence shall be given to
employees without pay for any of the following reasons. An employee will be
considered for a leave of absence only after completing six (6) months of
employment.
(a) Personal illness - substantiated by a physicians note.
(b) Military duty.
(c) Maternity leave.
(d) Mutual consent of the parties.
Section 2 - A reasonable leave of absence shall not exceed four (4)
months and is not to be repeated in two (2) consecutive years.
ARTICLE XI - REST PERIODS
Section 1 - All employees shall be entitled to two (2) ten minute
rest periods with pay during each work shift, one during the first four (4)
hours and one during the second four (4) hours.
Section 2 - Employees scheduled to work two (2) hours overtime will
receive a fifteen (15) minute rest period after their regular shift. Employees
scheduled to work four (4) hours overtime will receive a thirty (30) minute
non-paid lunch break after their regular shift and a ten (10) minute rest period
during such overtime.
ARTICLE XII - SICK LEAVE & DEATH-IN-FAMILY
Section 1 - Sick days shall accrue to each employee who has
completed three (3) months of continuous service as follows:
January 1st of each year - 3 sick days
Employees not having met the required three (3) months of continuous
service by January 1st or July 1st of any such year shall not accrue the three
(3) sick days, but will upon completion of three (3) months of service, accrue
1/2 sick day for each month of continuous service, until the earlier to occur of
January 1st or July 1st, as the case may be.
PAY FOR UNUSED SICK TIME
<PAGE>
Section 2 - Any sick time accrued at December 31st shall be paid as
of the first pay week in January of the following year in which such sick time
was accrued. Employees will not be paid for unused accrued sick time if the
employee resigns or is terminated, voluntarily or involuntarily, for any reason
from employment.
Section 3 - In order to be eligible for sick leave, an employee must
call his supervisor thirty (30) minutes before start of shift. A doctor's
certificate will be required to substantiate time off in excess of three (3)
days. Any employee failing to call their supervisor to report absence from work
for three (3) consecutive working days shall be discharged.
Section 4 - An employee with ten (10) years or more of service with
the Employer shall receive one (1) additional paid sick leave day, however, if
this day is not used, it shall be paid by check at the end of the year.
Section 5 - Should an employee require hospitalization, his sick
leave shall be extended one (1) day for each day of hospitalization up to a
maximum of five (5) days in each calendar year. However, failure to utilize
these five (5) days shall not be made up in cash at the end of each calendar
year.
Section 6 - An employee shall be given three (3) consecutive days
off with pay in the event of death in his immediate family. The immediate family
shall be deemed to include spouse, child, parent, brother or sister,
father-in-law, or mother-in-law and grandparents.
ARTICLE XIII - BULLETIN BOARDS
Section 1 - The Employer shall furnish a bulletin board for Union
news.
ARTICLE XIV - PROBATIONARY PERIOD
Section 1 - Seniority shall be based upon length of service or an
employee subject to the completion of a sixty (60) day probationary period.
During the probationary period, an employee may be terminated for any reason
without recourse by the Union. Employees shall be entitled to seniority rights
dating from the employee's date of hire.
Section 2 - The probationary period may be extended for a similar
period by mutual agreement of the parties.
ARTICLE XV - DISCIPLINE AND DISCHARGE
Section 1 - Suspensions and or terminations are subject to a hearing
with the Union and any disputes that can not be
mutually agreed to by both parties shall be subject to arbitration. The Employer
shall have the right to discharge or
<PAGE>
discipline employees for just cause including, but not limited to, acts of gross
misconduct or behavior such as physical violence, possession of illegal weapons,
theft, insubordination, use of alcohol and/or drugs on Employer property. It is
understood that this shall not be an all inclusive list for purposes of
establishing discipline and/or discharge.
Section 2 - In the event of discipline and/or discharge of an
employee by the Employer, the employee, the shop steward and the Union shall be
promptly notified. The discharge of an employee during his/her probationary
period shall not be subject to any grievance or arbitration procedure. It being
expressly understood that the Employer may terminate an employee during the
probationary period for any reason whatsoever.
Section 3 - Discipline, including verbal or written warnings shall
not be used for the purpose of progressive discipline for a period greater than
one year from the date of an incident.
ARTICLE XVI - UNION VISITATION
Section 1 - Non-employee representatives of the Union shall be
permitted to visit the plant for a reasonable period of time for the purpose of
meeting with the shop steward and employees. When the non-employee
representative of the Union arrives at the company, the representative will
notify the Director of Human Resources. In the absence of the Director of Human
Resources, the representative will notify the plant manager.
ARTICLE XVII - WORK BY SUPERVISORS
Section 1 - Supervisors shall continue to perform bargaining unit
work when business needs cannot be met because of staffing problems (i.e.,
coverage for employee absences and employees out on vacation within the
department) Supervisors may also perform bargaining unit - work in order to
train employees as well as satisfy exceptional business needs.
ARTICLE XVIII - WELFARE BENEFITS
Section 1 - Employee will be placed in Employer's Oxford Health
Plan, as currently in effect (the "Health Plan"). Effective as of June 1, 1996,
there will be no employee contribution required for participation in the basic
coverage under the Health Plan. The Employer will pay for single dental coverage
of employees electing to participate in the dental coverage of Health Plan.
However, those employees electing family dental coverage will be required to
contribute the incremental cost of family dental coverage over and above single
dental coverage.
<PAGE>
Section 2 - Each employee choosing not to participate in the Health
Plan will receive a cash payment of $200.00 per month. Each employee deciding
not to participate in the Health Plan, must demonstrate and provide reasonable
evidence of health coverage under an alternate health plan.
ARTICLE XIX - SAFETY AND HEALTH
Section 1 - The Employer shall keep all working areas in a safe and
sanitary condition.
Section 2 - Precautions to secure the health and safety of employees
shall at all times be taken by the Employer including a supply of First-Aid
cabinets at convenient locations containing bandages, medicines and related
supplies as may be required in an emergency situation.
Section 3 - It shall be the responsibility of the Employer to
maintain all machinery and equipment in a safe and sanitary operating condition.
Section 4 - The Employer shall not require its employees to operate
or use machines or equipment at a time or in a manner which would endanger the
health or well-being of its employees.
Section 5 - One (1) member of the bargaining unit, to be selected by
the union, shall become a member of the Employers Safety Committee. The Safety
Committee has been established for the purpose of calling the Employer's
attention to unsafe, unsanitary or otherwise unhealthy conditions which may
exist.
Section 6 - The Safety Committee shall be permitted to make such
reasonable inspection of the Employer's premises as may be necessary, on
Employer time.
ARTICLE XX - ASSEMBLY DEPARTMENT INVENTORY PROCEDURE
Section 1 - When scheduling inventory, the Employer will provide
assembly department employees with at least thirty (30) days' prior notice, as
well as post a written notice stating the scheduled dates for the proposed
inventory. Employees wishing to take vacation time, floating holidays or sick
leave rather than work during the scheduled inventory can make appropriate
arrangements with their supervisor.
Section 2 - The Employee will exercise reasonable efforts to prevent
the layoff of assembly department employees. Said employees will be offered
inventory related work by seniority with the understanding that such employees
are capable of performing the assigned duties. In the event of a layoff,
employees with the least accrued seniority will be laid-off first.
<PAGE>
ARTICLE XXI - 401K PLAN
Section 1 - Each employee will be permitted to participate in the
Employer's 401K Plan, as currently in effect on the date hereof. It being
expressly understood that the Employer does not currently contribute to its 401K
Plan. In the event the Employer contributes to its 401K Plan for its non-union
employees, the Employer agrees that it will also contribute in the same manner
or union employees.
ARTICLE XXII - STRIKES AND LOCKOUTS
Section 1 - There shall be no strikes or lockouts during the term f
this Agreement (subject to the exception in Article XVIII).
Section 2 - The employees shall have the right to refuse to cross
any picket line established by a trade Union.
ARTICLE XXIII - PRIOR BETTER BENEFITS
Section 1 - This Agreement shall not be construed to deprive any
employee presently employed by the Employer of any better ben at said employee
might have had prior to the Signing of this Agreement.
Section 2 - The Employer shall not enter into any individual
agreements which would have the effect of diminishing any of the rights,
privileges or benefits of the employees under this Agreement.
ARTICLE XXIV - MODIFICATION
Section 1 - Neither the Employer, any employee or group of employees
shall have the right to waive or modify any provisions Of this Agreement without
the written authorization of the Union.
ARTICLE XXV - GRIEVANCE PROCEDURE
Section 1 - All complaints, disputes or questions as to the
interpretation, application or performance of this Agreement shall be adjusted
by direct negotiations between the Union and the Employer, or their
representatives. Should any dispute or difference arise, both parties shall
endeavor to settle these in the simplest and most direct manner. The procedure
shall be as follows (unless step or steps thereof are waived, combined or
extended by mutual consent) :
Step 1 - The grievance shall be submitted to the aggrieved
employee's Shop Foreman by the employee's Shop Steward. If the
Steward and the Shop Foreman fail to settle the grievance within
three (3) days
<PAGE>
(exclusive of Saturday, Sunday or Holiday), it may be submitted to
Step 2.
Step 2 - The grievance shall then be referred to the President of
the Union or his designated representative and the Employer or their
authorized representative. If no settlement is reached within five
(5) days (exclusive of Saturday, Sunday or Holiday), the grievance
may be submitted to arbitration as set forth in Step 3.
Step 3 - If the dispute or difference is not settled in the second
step above, either party may request that the matter be referred to
arbitration if this request is made within ten (10) days after the
reply was given in the second step.
(A) The Arbitration Board shall consist of one (1) member to be
designated by the New York State Employment Relations Board. The
parties shall jointly pay the cost of the Arbitrator's services.
(B) The decision of the Arbitration Board shall be final and binding
upon the parties.
ARTICLE XXVI - SEPARABILITY
Section 1 - In the event that any provisions, or compliance by the
Employer or the Union with any provision, in this Agreement, shall constitute a
violation of any law, then and in such event, such provision, to the extent only
that is so in violation, shall be deemed ineffective and unenforceable and shall
be deemed separable from the remaining provisions of this Agreement, which
remaining provisions shall be binding on the parties and shall not be affected.
ARTICLE XXVII - WORK CLOTHING ALLOWANCE
Section 1 - Effective April 1, 1996, all employees shall receive a
Twenty Dollars ($20.00) work clothing allowance per month upon the completion of
a thirty (30) day probationary period.
ARTICLE XXVIII - SUCCESSORS AND ASSIGNS
Section 1 - This Agreement shall be binding upon the parties hereto,
their successors, administrators, executors, and assigns. In the event the
entire operation or any part thereof is sold, leased, transferred or taken over
by sale, transfer, lease, assignment receivership or bankruptcy proceeding,
(said purchaser, lessee, transferee, assignee, administrator, executor,
receiver) hereinafter referred to as the successor, the employees of the
Employer affected shall be employed by the successor and
<PAGE>
such operation or part thereof shall continue to be subject to the terms and
conditions of the Agreement for the life thereof.
ARTICLE XXIX - STOCK OPTIONS
Section 1 - The Employer shall continue its present practice with
regard to Stock Options.
ARTICLE XXX - SALARY INCREASES - PROMOTIONAL OPPORTUNITIES
Section 1 - Merit increases will reflect the individual's
performance over an evaluation period. Primary consideration is given to
proficiency, value to the organization, quality of performance and the
employee's interpersonal skills, as evaluated by the immediate Supervisor. The
intent of the merit system is to promote improved performance and to afford a
means for rewarding that improvement.
Section 2 - Promotional opportunity - The Company believes in
promotion from within whenever possible. Employees who meet the qualifications
for position openings will be given preference over outside applicants with the
knowledge that the Company has the right of decision based on the needs of the
Company.
ARTICLE XXXI - DRUG TESTING
Section 1 - Employees are prohibited from the use, sale, dispensing,
distribution, possession, or manufacture of illegal drugs and narcotics or
alcoholic beverages an Company property or work sites (including Company
vehicles and any private vehicles parked on Company premises or work sites). In
addition, employees are prohibited from the off-premises possession, use, or
sale of illegal drugs when such activities adversely affect job performance, job
safety, or the Company's reputation in the community.
Section 2 - At the discretion of the Employer, employees may be
required to submit to a drug test, to determine if the employee is using, under
the influence of, or is otherwise impaired by (illegal) drugs or alcohol. In the
interest of fairness to current employees, Employer agrees that no current
employee will be requested to undergo any drug testing for a period of one month
from the date of the agreement to these testing provisions.
Section 3 - Failure to submit to such examination or any attempt to
tamper with specimens or falsify or alter test results shall constitute just
cause for discharge. The Employer may elect to have a supervisor accompany the
employee to the testing site. All urine/blood specimens shall be subject to an
initial screen using an EMIT-type analysis. All positive results from an initial
screen shall be confirmed via gas chromatography-mass spectrometry techniques.
No specimen shall be identified as
<PAGE>
"positive" except upon receipt of the results of the confirmation test.
Section 4 - Any employee involved in the use, sale, dispensing,
distribution, possession or manufacture of illegal drugs and narcotics or
alcoholic beverages on Company property. or work sites will be dismissed
immediately. Any employee testing positive for illegal drugs or alcohol shall be
subject to disciplinary action, up to and including immediate dismissal. This
employee shall be granted reemployment on a one-time basis, if the employee
successfully completes a mutually agreed upon program and s certified by that
program to report back to work duties. Should an employee test positive for
illegal drugs or alcohol a second time, they will be dismissed and there will be
no offer of assistance.
ARTICLE XXXII - TEMPORARY JOB ASSIGNMENTS
Section 1 - On occasion, should an employee be assigned temporarily
(i.e. 1 day, 2 days) to a higher grade position, such employee will receive the
higher rate of pay as classified for that labor grade for the day or days that
such employee has performed the higher grade duties. In the event an employee
works a minimum of four (4) hours in a higher grade position, and thereafter
resumes the regular grade work, such employee shall receive the higher rate of
pay for the full eight (8) hours of such day.
Employees working less than four (4) hours in a higher grade will be
paid in accordance with the rate of pay for such higher grade job for the number
of hours worked in hourly segments in such higher grade.
ARTICLE XXXIII - MANAGEMENT'S RIGHTS CLAUSE
Section 1 - The Union recognizes that the Employer shall have the
sole and exclusive jurisdiction of the management and operation of its business,
the direction of its working force including the assignment of tasks and
machines to employees, the right to maintain discipline and efficiency in its
plant, the right to promulgate and enforce reasonable working rules, the right
to hire, discipline and discharge employees subject to the provisions of this
Agreement and the right to relocate its plant or any portion thereof, to
transfer the bargaining unit to any other employer. It being expressly
understood that the Employer may continue to contract out work it has done in
the past, and may contract out additional work where the business needs cannot
be met by the existing workforce. It is agreed that the rights enumerated above
shall not be deemed to exclude other pre-existing rights of management not
herein listed.
ARTICLE XXXIV - RESPECT AND DIGNITY
<PAGE>
Section 1 - The Employer and the Union agree, apart from and in
addition to the substantive provisions of the Agreement and the rights and
privileges of the Employer, the Union and Employees thereunder, that the
Employer, the Union, and all Employees shall treat and address each other with
dignity and respect.
ARTICLE XXXV - WAGES INCREASES AND MINIMUM WAGE RATES
Section 1 - Wage Increases:
Effective as of April 1, 1996, each employee will receive a
.30(cent) per hour wage increase.
Effective as of January 1, 1997, each employee will receive an
additional .40(cent) per hour wage increase.
Section 2 - Minimum Wage Rates - New Hires
Established Hire Rates for Union Positions, with the understanding
the increments outlined in this Agreement will not affect this hire rate.
1 - Picker, Packer, and Returns $6.25
2 - Picker, Packer and Returns w/hilo $6.75
Receiving/Inventory
3 - UPS Operator/Export Person $7.25
4 - General Assembly $5.75
5 - General Assembly/Material Handler $6.25
if use/classified hilo $6.75
6 - Survalent Assembly $6.00
7 - Repair Technicians $7.50
8 - Porter (Maintenance) $6.25
9 - QC $7.50
Should there be a need for and additional classification, management has the
right to establish the classification. When a new job classification is
established, the employer and the union will meet to negotiate a rate of pay for
the new classification within the existing pay structure.
Section 3 - Differentials
Heavy equipment operators shall be paid Fifty Cents (5016)per hour
more over the regular starting rate.
<PAGE>
If an employee in the Repair Department has a Technical Degree
he/she shall be paid an additional Twenty-Five Cents (25(cent)) per hour more in
wage differential effective 4-1-96.
ARTICLE XXXV - TERM OF AGREEMENT
The Agreement shall become effective as of April 16, 1996, and shall
continue thereafter for a period of eighteen (18) months, until and including
through October 15, 1997; provided, however, any changes, amendments or
modifications to renew or otherwise extend this Agreement shall be effective as
of October 15, 1997; and shall continue from year to year thereafter unless
either party shall give the other notice of intention to terminate or modify
this Agreement by written notice given not less than sixty (60) days prior to
such expiration date.
IN WITNESS WHEREOF, the parties hereto have set their hands this day
and year first above written.
LOCAL 966, affiliated with the
INTERNATIONAL BROTHERHOOD OF
TEAMSTERS
BY:_______________________________
GRAHAM-FIELD, INC.
BY:_______________________________
DATE SIGNED:______________________
COMMITTEE:
________________________________
________________________________
________________________________
________________________________
________________________________
________________________________
<PAGE>
SCHEDULE "A"
Part-time Employee - Grandfathered
Pursuant to Article VII - Hours & Overtime, Section 10, the following employee
is grandfathered for purposes of this section:
Jamie Lopez
EXHIBIT 10(x)
Union contract dated September 10, 1996, between Graham-Field and Local 945 of
International Brotherhood of Teamsters with respect to the collective bargaining
agreement at the Temco, New Jersey facility.
<PAGE>
COLLECTIVE BARGAINING
AGREEMENT
GRAHAM-FIELD. INC., TEMCO
and
LOCAL 945 TEAMSTERS
(July 28, 1996 - July 27, 1999)
<PAGE>
CONTRACT PROVISIONS
-------------------
PAGE
----
ARTICLE
- -------
I RECOGNITION.............................................. 1
II NON-DISCRIMINATION....................................... 1
III UNION SECURITY........................................... 2
IV DUES, CHECK-OFF.......................................... 2
V UNION REPRESENTATION..................................... 3
VI GRIEVANCE PROCEDURE -ARBITRATION......................... 4
VII HOURS OF WORK............................................ 5
VIII CALL-IN-PAY.............................................. 6
IX HOLIDAYS................................................. 6
X VACATIONS................................................ 7
XI HEALTH INSURANCE 401-K Plan........................ 9
XII DISCHARGE............................................... 10
XIII JOB CLASSIFICATION, PROMOTIONS AND TRANSFERS............ 10
XIV SENIORITY AND LAYOFF PROCEDURE.......................... 12
XV RATES OF PAY............................................ 13
XVI LEAVES-OF ABSENCE....................................... 14
XVII ABSENCE AND SICK LEAVE.................................. 14
XVIII GENERAL PROVISIONS...................................... 14
XIX NO STRIKE - NO LOCKOUT.................................. 15
XX MANAGEMENT RIGHTS CLAUSE................................ 15
XXI APPLICABLE LAWS......................................... 15
i
<PAGE>
ARTICLE PAGE
- ------- ----
XXII REST PERIODS............................................ 16
XXIII EQUAL PAY FOR EQUAL WORK................................ 16
XXIV EX-SERVICE PERSONNEL.................................... 16
XXV PROTECTION OF RIGHTS.................................... 16
XXVI DRUG TESTING............................................ 16
XXVII PART-TIME EMPLOYEES..................................... 17
XXVIII DURATION OF AGREEMENT................................... 18
SIGN OFF ON CONTRACT.....................................19
ii
<PAGE>
THIS AGREEMENT, made and entered into this day of
__________________, Nineteen Hundred and Ninety Six by and between GRAHAM-
FIELD, INC., TEMCO, hereinafter called the "COMPANY" and LOCAL 945 TEAMSTERS,
hereinafter called the "UNION".
W I T N E S S E T H
WHEREAS, the parties desire to facilitate orderly collective
bargaining relations between them; to secure a prompt and equitable disposition
of grievances; to establish fair wages, hours and working conditions; to insure
industrial peace, enabling all employees to enjoy, insofar as possible, security
and continuity of employment.
NOW, THEREFORE, in consideration of the mutual promises and
agreements herein contained, the parties agree as follows:
ARTICLE I RECOGNITION
A. The Company recognizes the Union as the sole and exclusive bargaining
representative for the purpose of collective bargaining in respect to settling
grievances and negotiations, rates of pay, wages, hours of employment and other
conditions of employment for all full-time and part-time production and
maintenance employees, shipping and receiving employees and truck drivers, but
excluding office clerical employees, professional employees, engineers, quality
controllers and other management personnel, guards, watchmen and supervisors as
defined in the National Labor Relations Act employed by the Company at its 125
South Street, Passaic, New Jersey facility.
ARTICLE II NON-DISCRIMINATION
A. The Union and Company agree that there shall be no discrimination in
the hiring of new employees or in the promotion of employees because of sex,
color, race, creed, national origin, religion, age, veteran's status, ancestry,
marital status or any other status protected by New Jersey or Federal Law.
Union:_______________________
Company:_____________________
- 1 -
<PAGE>
ARTICLE III UNION SECURITY
A. All present employees who are members of the Local Union on the effective
date of this Agreement or on the date of execution of this Agreement, whichever
is the later, shall remain members of the Local Union in good standing as a
condition of employment. All present employees who are not members of the Local
Union and all employees who are hired hereafter shall become and remain members
in good standing of the Local Union as a condition of employment on and after
the thirtieth (30) working day following the beginning of their employment or on
the thirtieth (30) working day following the effective date of this subsection
or the date of this Agreement, whichever is the later. This provision shall be
made and become effective as of such time as it may be made and become effective
under the provisions of the National Labor Relations Act, but not retroactively.
B. The failure of any person to become a member of the Union at the required
time shall obligate the Employer, upon written notice from the Union to such
effect and to the further effect that Union membership was available to such
person on the same terms and conditions generally available to other members, to
forthwith discharge such person. Further the failure of any person to maintain
his Union membership in good standing as required herein shall, upon notice to
the Employer by the Union to such effect, obligate the Employer to discharge
such person.
C. In the event of any change in the law during the term of this Agreement, the
Employer agrees that the Union will be entitled to receive the maximum Union
security which may be lawfully permissible.
ARTICLE IV DUES, CHECK-OFF
A. The Employer will accept a signed authorization from any employee covered by
this Agreement directing the Employer to deduct from the wages of said employee
the regular monthly membership dues and initiation fee of each new member.
Written notice must be sent by the Union Secretary Treasurer to the Employer
advising the Employer of the amount of the monthly Union dues and initiation
fees.
B. The said deductions shall be made on the first day of each and every month.
All monies, so deducted, shall be remitted to the Union, together with a
duplicate list of the employees whose dues and initiation fees have been
deducted the tenth (loth) day and not later than the fifteenth (15th) day of the
current month.
Union:_______________________
Company:_____________________
- 2 -
<PAGE>
C. The aforesaid check-off authorization shall remain in effect
until revoked by the employee, however, it shall be irrevocable for a period of
one (1) year from date thereof, or until the termination date of this Agreement,
whichever occurs sooner. Said written authorization shall automatically renew
itself for successive annual irrevocable periods unless the employee notified
the Employer by registered mail within ten (10) calendar days prior to the
expiration of each one (1) year period.
ARTICLE V UNION REPRESENTATION
A. The Union shall be represented in the Company's plant by a Shop Steward and
alternate Shop Steward who shall serve as Shop Steward in the absence from the
plant of the Shop Steward.
B. No employee, including the Shop Steward and the alternate shall stop their
assigned work for any purpose related to investigation or settlement of
grievances without first notifying the Foreman. Upon notifying the Foreman of a
desire to talk to the Shop Steward, Business Agent or the Local, or the Foreman,
as the case may be, an employee shall be permitted to leave their work and be
afforded a reasonable amount of time for that purpose as long as, in the
discretion of the Foreman, the employee can be spared from the employee's work
at that time. In the event a relief is necessary, the employee shall remain at
work and the Foreman shall obtain a relief for the employee as soon as possible.
C. The Company agrees that the Shop Steward shall be afforded a reasonable
amount of time, to investigate and settle grievances during regular working
hours. All time spent in the investigation or processing of a grievance, other
than time spent preparing for arbitration or in arbitration, shall be paid for
by the Company provided it occurs during the Shop Steward's scheduled work time.
D. Designated representatives of the Union, including the Business Agent, may
enter the plant of the Company, after first reporting to a duly authorized
Company representative, for the purpose of investigating working condition,
handling grievances (but not soliciting grievances) or other Union business,
pertaining to this contract, provided that production is not interfered with.
E. The Company shall provide space for bulletin boards in reasonably accessible
places for the exclusive use of the Union. All posting shall be with the utmost
respect and dignity for the Company and the Union.
Union:_______________________
Company:_____________________
- 3 -
<PAGE>
ARTICLE VI GRIEVANCE PROCEDURE -ARBITRATION
A. Should a grievance, dispute or controversy arise between the Company and the
Union, or any of the employees covered by this Agreement, as to the meaning and
application of the provisions of this Agreement, an earnest effort shall be made
to settle such differences immediately. To that end, all grievances, disputes or
controversies shall be presented in writing and signed by the employee grieving
within five (5) working days after they arise, or they shall be deemed to have
been waived.
B. In order to carry out the intent of the foregoing item "A", any differences
that arise will be resolved in the order and manner as hereinafter set forth:
1. Any employee may present a complaint directly to the Foreman and
have such complaint adjusted, provided such adjustment is not
inconsistent with the terms of this Agreement, and provided further
that the Shop Steward has been given the opportunity to be present
at such adjustment of the complaint. If no satisfactory adjustment
is reached, then
2. The Shop Steward and the aggrieved member shall meet with the
supervisor, making every effort to negotiate a satisfactory
agreement. If no satisfactory agreement is reached, then
3. The grievance committee and the Union Representative shall meet with
the Employer and shall make every effort to negotiate a satisfactory
settlement.
4. ARBITRATION: If the grievance, dispute or controversy is not settled
in accordance with the foregoing procedures, either the Union or the
Company may refer the matter to arbitration; for the Union, the
right to institute -arbitration shall be solely vested in the
Executive Board of the Union. The arbitrator shall be chosen and the
arbitration shall be held in accordance with the rules and
regulations of the New Jersey State Board of Mediation. The
arbitrator shall be bound by this Agreement and he shall have no
power to alter, amend, modify, add anything to, or take anything
away from its provision. The arbitrator's decision shall be final
and binding on both parties and the expenses of the arbitrator shall
be borne equally by the parties. The arbitrator shall have no power
to award retroactive pay to a date earlier than the date of the
grievance.
Union:_______________________
Company:_____________________
- 4 -
<PAGE>
5. SOLE REMEDY:
The grievance and arbitration procedure above set forth shall be the
sole and exclusive means for the determination of all disputes,
complaints, controversies, claims or grievances whatsoever,
including a claim based upon an alleged breach of this Agreement.
Neither party nor any individual employee shall institute any action
or proceeding in a court of law or equity, State or Federal, or
before an administrative tribunal, other than to compel arbitration,
as provided in this Agreement, or with respect to the award of an
arbitrator. This provision shall be a complete defense to, and also
ground for a stay of any action or proceeding instituted contrary to
this Agreement.
ARTICLE VII HOURS OF WORK
A. The basic work week for all employees shall be five (5) consecutive days of
eight (8) hours each, MondAy through Friday inclusive, but this shall not serve
as any guarantee that employees will be employed for at least five (5) days
during such work week or at least eight (8) hours during such work day.
B. All work performed in excess of eight (8) hours during a day or in excess of
forty (40) hours during the work week or on Saturday shall be paid for at the
rate of one and one-half times the employee's straight time hourly rate,
provided however, that the employee shall have worked a full forty (40) hours
during the week in which the claimed overtime is worked except if the employee
has not worked the full forty (40) hours because work was not made available to
him by the Company. All work on Saturday will be paid at the rate of time and
one-half.
C. All work performed on Sunday shall be paid for at the rate of two (2) times
the employee's regular rate.
D. Employees who are requested to work overtime shall work a reasonable amount
of daily overtime and Saturday work unless the employee has a justifiable excuse
acceptable to the Company for not performing such work.
Overtime shall be requested according to seniority and ability and if all
positions are not filled, they will be filled in reverse order of seniority.
Union:_______________________
Company:_____________________
- 5 -
<PAGE>
Reasonable overtime shall be two (2) hours per day unless special
circumstances occur requiring more. Prior notice required by the Company for
overtime work shall be four (4) hours for daily overtime and forty eight (48)
hours for continuous overtime (three (3)days or more) . Saturday overtime will
be requested at the start of Friday's work.
E. A shift differential of fifteen ($0.15) cents per hour shall be paid to
employees on all shifts other than the daytime shift.
ARTICLE VIII CALL-IN-PAY
A. Any employee reporting for work on his regular shift without having been
previously notified not to report shall receive a minimum of four (4) hours work
during the course of the day, or, if no work is available, four (4) hours pay at
his applicable rate of pay, except where work is not available because of an act
of GOD or if the employee fails to provide the Company with a current address
and telephone number, or other cause beyond the Company's control and the
Company was unable to notify employees, accordingly'. This provision, however,
shall not apply to overtime work performed directly after the conclusion of the
employee's regular shift.
ARTICLE IX HOLIDAYS
A. The Company shall pay to eligible employees eight (8) hours of regular pay
for the following holidays:
New Year's Eve Day Labor Day
New Year's Day Thanksgiving Day
Washington's Birthday Day after Thanksgiving
Good Friday Christmas Eve
Memorial Day Christmas Day
Independence Day Employee's Birthday
Employees shall be entitled to use their birthday as a floating holiday. Such
holiday shall be taken within the contract year or be lost.
Union:_______________________
Company:_____________________
- 6 -
<PAGE>
B. In order to be eligible for such holiday pay, an employee must have worked
his full scheduled work day before and his full scheduled work day after the
holiday. Probationary employees shall not be eligible for pay for holidays
occurring during their probationary period. If an employee scheduled to work the
day before and the day after in order to receive holiday pay, but does not due
to illness documented by his/her Primary Care Physician, as listed on the
Company's Health Care Plan shall not lose holiday pay.
C. In the event an employee is assigned to work on a holiday, payment shall be
at one 1) times the straight time pay plus the straight time pay for the
holiday. Total pay to be equivalent of two (2) times the straight time pay for
all hours worked, with a maximum of eight (8) hours for the applicable holiday
pay.
D. If a holiday falls on a Saturday or Sunday, eligible employees shall be
entitled to an additional day off on the preceding Friday or the following
Monday or an extra day' s pay at the option of the Company.
E. A holiday shall be considered as time worked for overtime purposes.
F. An employee on leave of absence shall not be paid for a holiday which occurs
while the employee is on such a leave.
ARTICLE X VACATIONS
A. The Company shall grant to all employees eligible for the same during each
calendar year paid vacations at straight time rate as follows:
LENGTH OF SERVICE VACATION PERIOD
----------------- ---------------
1 year 1 week (5 working days)
2, 3 and 4 years 1 week, 2 days (7 working days)
5 years 2 weeks (10 working days)
6 years 2 weeks, 1 day (11 working days)
7 years 2 weeks, 2 days (12 working days)
8 years 2 weeks, 3 days (13 working days)
9 years 2 weeks, 4 days (14 working days)
10 years or more 3 weeks, (15 working days)
Union:_______________________
Company:_____________________
- 7 -
<PAGE>
B. Eligibility for paid vacations shall be determined by the full time employees
date of hire. Only full time employees in the employ of the Company at such time
shall be eligible for paid vacations. For purposes of computing vacations, the
vacation year shall be considered to be from March 1st to February 28th.
Vacation time shall be paid before leaving on vacation. Vacation requests must
be in the Payroll Department in Hauppauge two (2) weeks prior to vacation.
Payment shall be for full weeks only and will only be for time taken.
C. Employees who have worked at least six (6) months during the vacation year
and who otherwise would be eligible for vacation pay but who are laid off prior
to the vacation period shall receive pro-rated vacations, the vacation year
shall be computed from the previous June 1st and there shall be no vacation
credit for periods of lay-off, leaves of absence or time not worked, Employees
who resign from their employment or are discharged for cause shall not be
entitled to such pro-ration in excess of thirty (30) days.
D. Effective January 1, 1997 the Company in cooperation with the Union shall
implement the following vacation plan for full time employees:
1. The vacation period for each year of this Agreement shall be from
March 1 to the last day of February.
2. On or about January 2nd of each year, the Company shall distribute a
vacation request form to each member of the full time bargaining
unit. The employees shall be required to return the completed
request to their foreman/floor lady not later than February 1st. if
employees are not notified as to their request by March 1, the
vacation time request shall be granted as submitted.
3. Vacation will be approved and scheduled by seniority and in
accordance with the limitations illustrated in Exhibit C attached.
Union:_______________________
Company:_____________________
- 8 -
<PAGE>
4. The Company will post vacation schedules by March 15 once posted,
changes throughout the year will be in accordance with Exhibit C but
the rules of seniority will no longer apply. This vacation plan
shall evaluated in December 1997. If either party determines that
the plan has been unsuccessful, the parties will return to the
conditions set forth in Section D of the recently expired contract
(i.e. plant shut down, etc.) The terms and condition set forth in
this Section do not preclude the Company's right to shut down at any
other time (e.g. inventory shut down) provided thirty (30) days
notice is given to the Union.
E. Employees who voluntarily work with the consent of the Company during their
vacation periods shall receive pay as aforesaid in addition to regular earned
pay for such periods.
However, at the Company's option, and if mutually agreed by the employee
and the employer, an alternative day off may be given in lieu of vacation pay.
If no such agreement is made the employee will be paid with the provision of the
paragraph. This is exclusive of plant shut downs.
F. In the event a paid holiday falls during an employee's vacation, he shall be
given an additional day of vacation or pay in lieu thereof at the option of the
Company.
ARTICLE XI HEALTH INSURANCE
401-K Plan
A. The Company shall provide hospitalization, medical-surgical and other related
benefits at a level which shall be as comparable as reasonably possible to the
benefits provided under the previous contract between the parties. The Company
has the exclusive authority in selecting the providers) of said coverage.
Employees shall share in the premium cost for Company-provided health
insurance to the following extent:
Employees selecting individual coverage - $ 5.00 per month
Employees selecting family coverage - $10.00 per month
Union:_______________________
Company:_____________________
- 9 -
<PAGE>
B. Any employee covered by the provisions of this Article and upon proof of
duplicate coverage on a medical plan may elect to withdraw from companies
Medical Plan and will receive an additional payment of $150./month for family
coverage and $75./month for single coverage.
This provision will be offered to employees covered under this Article on
January 1, 1997.
C. The Company will provide to each full-time employee covered by this Agreement
the Company's 401-K Plan to any employee who selects to participate under the
same provisions afforded company wide.
ARTICLE XII DISCHARGE
A. The Company shall have the right to discharge or discipline employees for
just cause. In the event of a discharge, the employee, the Shop Steward and the
Union shall be promptly notified. The discharge of an employee during his
probationary period shall not be subject to the grievance and arbitration
procedure since the Company shall have the right to terminate a probationary
employee for any reason whatsoever.
ARTICLE XIII JOB CLASSIFICATION, PROMOTIONS AND TRANSFERS
A. Employees shall be classified in accordance with the following
classifications:
LABOR GRADE CLASSIFICATION
I General production assembler, machine operator,
porter, wood working, heat sealer operator
II Inspector of finished goods
III Warehouse and shipping
IV Forklift operator
V Sewing Machine operating, upholstery/cutter
VI Brazer, welder, mechanic's helper, cushion maker
VII Leadman
Union:_______________________
Company:_____________________
- 10 -
<PAGE>
B. Employees who have been previously employed in this plant in more than one
job classification for sixty (GO) days or more and are in addition, qualified to
perform the work in such other job classification shall have a secondary
classification in such other job or jobs in addition to their primary job
classification.
C. The Company retains the right to eliminate old or establish new job
classifications during the terms of this Agreement, as the needs of the business
may require.
D. A vacancy in a job classification shall be posted by the Company on the plant
bulletin board for a period of forty-eight (48) hours, during which time any
interested employees in lower paid classifications only can file with the
Company written bids for such vacancy and shall, after a sixty (60) working day
trial period, be considered permanent in such higher paying job classification.
Thirty (30) working days after receiving the promotion the employee's pay shall
be increased to the starting rate for such job. Should the employee be found
unsuitable for the higher job classification or should the employee during such
period elect to return to his previous position, he shall be transferred back
and assume the prevailing rate of pay at such time.
Nothing in this provision shall be considered to require the Company to
continue such employee in the higher job classification for a full sixty (GO)
working day trial period if the Company finds him unsuitable at any time before
the period has elapsed. In the event no qualified bidder is available, the
Company may select an employee for promotion to the higher job classification or
hire such employee from outside the plant and the above provisions shall apply
to the employee promoted from inside. In an emergency, the Company may
temporarily fill such job without regard to this provision.
E. Employees promoted or transferred to an other position in the Company outside
of the bargaining unit can, if they so elect or if they are found not suitable
for such other positions by the Company, transfer back to their old position at
the prevailing rate of pay with the seniority status held at the time of such
promotion.
Union:_______________________
Company:_____________________
- 11 -
<PAGE>
F. The Company shall have the right after giving the consideration to the
seniority right of employees as set forth herein to effect transfer of employees
from one job classification to another as the operational needs of the Company
may require. If the transfer is for three (3) days or less to a lower paid
classification, the employee shall continue to receive his old rate of pay.
otherwise he shall be paid at such time the rate of pay of the job
classification to which he has been transferred, but if the employee objects to
any decrease in his pay as a result of such transfer, he may elect to invoke the
layoff procedure set forth herein.
ARTICLE XIV SENIORITY AND LAYOFF PROCEDURE
A. During the first sixty (60) working days of employment, an employee shall be
considered a probationary employee and shall not be entitled to any seniority
rights. Upon the completion of this period, employees shall be entitled to
seniority rights dating from the date of last continuous hiring.
B. Seniority shall be based upon length of service and shall only be operative
in the employee's department or such other departments as an employee may have
been previously employed in for sixty (60) continuous working days or more in
this plant, provided the employee is qualified to perform the work in such other
department.
C. When in the sole judgment of the Company, a lay-off becomes necessary it
shall be made in reverse order of seniority among employees with five (5) years
or more in the department or departments in which the lay-off is to take place,
provided that the senior employees remaining are qualified to perform the
remaining work. Employees who hold seniority in more than one department as set
forth above shall, in the event of such lay-off have the right to displace less
senior employees in such other departments, provided they are able to do such
work. The Company shall have the right to make temporary lay-offs of three (3)
days or less in duration without regard to the seniority provisions of this
Agreement. In instances of lay-off affecting more than lo-. of the employees,
three (3) days notice will be given.
D. In the event an employee displaces another employee in a lower paying
classification as a result of a layoff, in accordance with paragraph C, above,
such employee shall at such time assume the rate of pay for such lower paying
job and maintain it as long as the employee is working in that job
classification.
Union:_______________________
Company:_____________________
- 12 -
<PAGE>
E. The Shop Steward and alternate Shop Steward, regardless of their actual
seniority date, shall be afforded the highest seniority in their department or
departments.
F. In the event additional employees shall be needed in any job classification
or classifications in which a layoff has occurred, a laid-off employee shall be
recalled in the order of seniority before any new employees are hired for such
jobs. Seniority shall terminate after six (6) months of continuous
non-employment or layoff.
G. When the Company wishes to call back an employee after a layoff, it shall
send a notice to that effect by registered mail or telegram to the last know
address of the concerned employee. The Employee shall report to work within
twenty-four (24) hours (or later if so directed by the Company) after receipt of
such notice, and failure to do so shall forthwith result in the loss of all
seniority and other rights under this Agreement.
H. Employees recalled after a layoff shall be entitled to the same pay received
at the time of layoff and shall be credited with seniority accrued during the
layoff period. Longevity for pay or vacation purposes, however, shall not
accumulate during a layoff.
ARTICLE XV RATES OF PAY
A. The Company shall grant wage increases to all employees employed on the
following dates as indicated:
Effective July 28, 1996 $0.15 per hour
Effective July 28, 1997 $0.20 per hour
Effective July 28, 1998 $0.25 per hour
The minimum and maximum rates of pay shall be in accordance with the
attached schedules marked Exhibit A and said schedules shall be a part of this
Agreement.
B. Progression from the minimum to the maximum rates of pay shall be by
increases according to schedule until the maximum is reached. All employees
shall receive progression increases starting from the date of hire on a
quarterly basis, rather than a monthly basis. The progression shall be
administered by the company in a manner that employees subject to the wage
progression shall not lose pay as a result of the change in pay administration.
Union:_______________________
Company:_____________________
- 13 -
<PAGE>
ARTICLE XVI LEAVES-OF ABSENCE
A. A leave of absence of not more than six (6) months may be granted by the
Company for justifiable or reasonable cause.
B. Seniority shall accumulate during a leave of absence but longevity for pay or
a vacation purposes under this Agreement shall not accumulate.
ARTICLE XVII ABSENCE AND SICK LEAVE
A. An employee shall not be absent from duty without prior permission in writing
from the Company except for sickness, injury or other justifiable cause beyond
the control of the employee.
B. Employees prevented from reporting for duty by reason of sickness, injury or
just cause beyond the employees control, shall make every effort to notify his
supervisor at least thirty (30) minutes before the start of the shift of the
employees inability to report for work giving the reason for such absence.
Should the employee not be able to do so for good reason, the employee must
notify the supervisor as soon as possible. Any employee failing to so notify the
Company within three (3) working days shall be summarily discharged without
recourse to the grievance and arbitration procedures. Longevity for pay or
vacation purposes shall not accumulate during any such absence from duty.
C. Employees shall be entitled to five (5) sick days per year. Employees must
notify the Company as required by Paragraph B above in order to be considered an
approved sick day absence. Sick days may not be accumulated from year to year.
Employees will not be compensated for unused sick days. The fact that employees
use authorized sick leave days as provided for in this article, shall not be
used as a basis for discipline.
ARTICLE XVIII GENERAL PROVISIONS
A. The Company shall at six (6) month internals supply the Union with an
up-to-date seniority list.
B. The Company, to the extent that it is within its jurisdiction, will comply
with all applicable state laws and regulations concerning the safety and health
of its employees, and employees shall be afforded necessary relief time from
their work stations.
Union:_______________________
Company:_____________________
- 14 -
<PAGE>
C. Supervisory employees shall be permitted to perform work of hourly-rated
employees when deemed necessary by the Company for emergency reasons only.
D. Work rules and production standards have been promulgated as set forth on
Exhibit B attached. Said work rules and production standards may be amended by
the Company from time to time at the discretion of the Company.
ARTICLE XIX NO STRIKE - NO LOCKOUT
A. The company shall not cause or permit a lockout during the life of this
Agreement and the Union and the employees covered hereunder, shall not engage in
a strike, sit-down, walkout, slowdown, stoppage or any other work curtailment
for any reason whatsoever during the life of this Agreement. Any employee
violating this provision shall be subject to summary discharge.
ARTICLE XX MANAGEMENT RIGHTS CLAUSE
A. The Union recognized that the Company shall have the sole and exclusive
jurisdiction of the management and operation of its business, the direction of
its working force including the assignment of tasks and machines to employees,
the right to maintain discipline and efficiency in its plant, the right to
promulgate and enforce reasonable working rules, the right to hire, discipline
and discharge employees subject to the provisions of this Agreement and the
right to relocate its plant or any portion thereof or subcontract any operation.
It is agreed that the rights enumerated above shall not be deemed to exclude
other pre-existing rights of management not herein listed nor any right
conferred by law upon the Union or any employee provided they do not conflict
with other provisions of this Agreement.
ARTICLE XXI APPLICABLE LAWS
A. In the event that any provision of this contract is invalid or hereafter
becomes invalid by reason of any Federal or State law, it is agreed that the
parties will comply with any and all obligations imposed on them by such law. It
is further. agreed that any provision of this contract which is invalid or may
hereafter become invalid by reason of any Federal or State law shall not affect
the validity of all the other provisions of this contract, and all such other
provisions shall continue to remain in full force and effect and binding upon
the parties until the termination hereof.
Union:_______________________
Company:_____________________
- 15 -
<PAGE>
ARTICLE XXII REST PERIODS
A. on each shift of the day there shall be a ten (10) minute rest period for
each four (4) hours worked with out a deduction in pay.
ARTICLE XXIII EQUAL PAY FOR EQUAL WORK
A. In classifying employees and in setting wage rates for males and females, the
principle of equal pay for equal work shall be followed with due regard for
differences in wage based on job duties as permitted under the Labor Grade
schedule.
ARTICLE XXIV EX-SERVICE PERSONNEL
A. Protection shall be granted ex-servicemen, in accordance with the G.I. Bill
of Rights.
ARTICLE XXV PROTECTION OF RIGHTS
A. PICKET LINES:
It shall not be a violation of this Agreement, and it shall not be cause
for discharge or disciplinary action in the event an employee refuses to enter
upon any property involved in a primary labor dispute, or refuses to go through
or work behind any primary picket line, including the primary picket line of
Unions party to this Agreement, and including primary picket lines at the
Employer's places of business.
ARTICLE XXVI DRUG TESTING
Section 1:
Employees are prohibited from the use, sale, dispensing, distribution,
possession, or manufacturing of illegal drugs and narcotics or alcoholic
beverages on company property or work sites. In addition, employees are
prohibited from the off-premises possession, use, or sale of illegal drugs when
such activities adversely affect job performance, job safety, or the company's
reputation in the community.
Union:_______________________
Company:_____________________
- 16 -
<PAGE>
Section 2:
At the discretion of Employer, employees may be required to submit to a drug
test, to determine if the employee is using, under the influence of, or is
otherwise impaired by (illegal) drugs or alcohol. Employees are warned of the
lingering effects of certain drugs in their system. Employees may be selected to
submit to a drug test where either: the Employer has reasonable suspicion to
believe that an individual employee or group of employees is in violation of
this Article, or by being selected randomly if the employee is in a
safety-sensitive position.
Section 3:
Failure to submit to any examination allowed under this section, or any attempt
to tamper with specimens or falsify or alter test results shall constitute just
cause for discharge. The Employer may elect to have a supervisor accompany the
employee to the testing site. All urine specimens shall be subject to an initial
screen using an EMIT-type analysis. All positive results from an initial screen
shall be confirmed via gas chromatography-mass spectrometry techniques. No
specimen shall be identified as "positive" except upon receipt of the results of
the confirmation test.
Section 4:
While employees may be subject to disciplinary action up to and including
immediate dismissal, for violations of the policy expressed in this Article, the
Employer shall offer a reasonable accommodation as required by law, to employees
who request such accommodation.
ARTICLE XXVII PART-TIME EMPLOYEES
Part-time employees shall become members of the Union on the 30th day of
employment. Part-time employees are to be included in the bargaining unit as
long as all of the full-time bargaining workers are employed.
Part-time employees shall not be used to displace full-time employees at current
levels as of July 27, 1996, ninety six (96), and cannot exceed 50% of the
full-time work force at any time.
Part-time employees dues and initiation fee will be set forth in the By-Laws of
Local 945 and the Constitution of the International Brotherhood of Teamsters.
Union:_______________________
Company:_____________________
- 17 -
<PAGE>
Part-time employees shall not be entitled to any of the provisions of the
Agreement other than the Dues Check-Off. The Part-time employee will start at
$5.05 per hour (or as affected by New Jersey State Minimum Wage) and shall
receive a $0.25/hour increase after completion of the sixty (60) day
probationary period. Part-time employees will not exceed twenty (20) hours per
week and work Grade Level #1 jobs only.
Part-time employees shall have a separate seniority list apart from full-time
employees and will be the first to be laid off should there be a curtailment of
the work force.
Part-time employees may bid for full-time positions should they become available
provided they have the skill and ability to perform the work. When one or more
have equal ability seniority "of part-time workers" shall prevail. If a
part-time employees becomes a full-time employee, he/she will start as the least
senior on the full-time seniority list.
ARTICLE XXVIII DURATION OF AGREEMENT
A. This Agreement shall become effective as of July 28, 1996 and shall continue
in full force and effect through July 27, 1999 and shall renew itself without
change for additional periods of one year each unless either party notifies the
other in writing at least sixty (60) days before the expiration of the Agreement
of its desire to terminate or modify said Agreement on its expiration date.
B. This Agreement contains the entire understanding between the parties and
there are no oral representation made or intended which may vary or modify the
terms of this Agreement. The parties hereto have had full opportunity to bargain
collectively. Accordingly, neither party shall seek any change, modification or
addition to the terms of this Agreement during the term hereof, nor shall any
such desired change, modification or addition be subject to the grievance and
arbitration procedure established in this Agreement
Union:_______________________
Company:_____________________
- 18 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their respective hands and
seals the day and year first above written.
TEMCO HOME HEALTH CARE LOCAL 945 TEAMSTERS
By:________________________ By:________________________
SHOP COMMITTEE:
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
Union:_______________________
Company:_____________________
18
<PAGE>
GRAHAM-FIELD, TEMCO HOME HEALTH CARE PRODUCTS, INC.
MINIMUM RATES OF PAY FOR THE FIRST YEAR OF THE CURRENT CONTRACT COMMENCING
JULY 28, 1996
Labor Grade Minimum Wage* Union Rate
- ----------- ------------- -----------
($0.25 upon
joining union)
I. General production assembler,
machine operator, 5.05 5.30
porter, wood working, heat
sealer operator, part time
employees
II. Inspector of finished goods 5.15 5.40
III.Warehouse and shipping 5.45 5.70
IV. Forklift operator 5.65 5.90
V. Sewing machine operator,
upholstery/cutter 5.05 5.30
VI. Brazer, mechanic's helper
welder, cushion maker 5.05 5.30
VII. Leadman 5.05 5.30
- ----------
* = or as may be affected by New Jersey State Minimum Wage
EXHIBIT A
<PAGE>
GRAHAM-FIELD, TEMCO HOME HEALTH CARE PRODUCTS, INC.
MAXIMUM RATES OF PAY OF FULL TIME EMPLOYEES
EFFECTIVE JULY 28, 1996 THROUGH JULY 27, 1999
Labor Grade July 28, 1996 July 28, 1997 July 28, 1998
- ----------- ------------- ------------- -------------
I. General production assembler,
machine operator, 8.63 8.83 9.08
porter, wood working,
heat sealer
operator
II. Inspector of finished goods 8.73 8.93 9.18
III. Warehouse and shipping 8.88 9.08 9.33
IV. Forklift operator 9.03 9.23 9.48
V. Sewing machine operator,
upholstery/cutter 9.28 9.48 9.73
VI. Brazer, mechanic's helper
welder, cushion 9.52 9.72 9.97
maker
VII. Leadman 8.88 9.08 9.33
EXHIBIT A
<PAGE>
PROCEDURE FOR WORK PERFORMANCE PROGRAM
Employees will make standard if they perform at 85% or better of a predetermined
work measurement standard established by the industrial engineer. The Minimum
acceptable performance level will be 77%.
The first time the employees perform below the acceptable level, they will be
given the 1st written warning and the union steward will be notified. The
employee, supervisor and union steward will be required to sign off on this
warning. The supervisor, with the help of the industrial engineer, will retrain
this worker.
At the end of 15 days, if employees do not improve their performance, they will
be required to observe an average worker performing the job at standard rate.
The employee, supervisor and union steward will be required to sign off on this.
Employees will be trained additionally or transferred to another department,
where they will be trained for another job.
If after 15 days the employee does not improve he or she will be given a third
warning and trained some more. The employee, supervisor and union steward will
be required to sign off on this again. At the end of 15 days if the employee
does not improve performance, the employee will be terminated.
If at any ,time when employees are being reviewed, they perform at standard,
they will be required to maintain such performance for 2 weeks, at the end of
which time the employee will be reinstated to normal status.
EXHIBIT B
<PAGE>
ITEM STD MIN PCS/DAY PCS/HR # OF
85% 85% EMPL
1903/1 16.90 596 75 15
1905/1 14.25 554 70 15
1905/2 13.97 554 70 15
1906/2 14.51 554 70
1908/1 20.71 554 70 15
1908/2 20.31 554 70 15
1909/1 16.74 596 75 15
1909/2 16.34 596 75 15
1910/1 15.68 646 81 15
1910/2 15.28 646 81 15
1911/1 12.37 703 88 7
1911/4 11.77 703 88 7
1912/1 15.37 646 81 15
1912/2 14.97 646 81 15
191611 19.36 510 64 14
1916/2 18.96 510 64 14
1925/1 6.98 742 93 10
1925/4 6.38 742 93 10
1926/4 7.47
1930/1 7.43 742 93 9
1930/4 6.83 742 93 9
1936/1 33.25
1939/1 8.13 742 93 7
1939/2 7.73 742 93 7
1941/1 12.02 680 86 10
1941/2 11.62 680 86 10
1971/1 13.88
1971/2 13.88
1972/1 20.75
1972/2 13.99
1972/4 13.49
1973/1 13.22
1973/2 12.70
1973/4 12.70
1974/1 13.88
1974/2 13.88
1975/1 17.11
1979/2 17.11
1976/1 29.16
1977/1 29.16
1980/1 12.50
1981/1 20.00
1981/2 20.00
EXHIBIT B
<PAGE>
ITEM STD MIN PCS/DAY PCS/HR # OF
85% 85% EMPL
1982/1 20.00
1982/2 20.00
1984/1 19.52
1985/1 28.88
1986/1 46.60
1992/1 5.00 1,010 127 8
1992/2 4.80 1,010 127 8
1992/KA1 5.54 971 122 9
1992/KNl 3.63 816 103 8
1993/1 7.32 1,010 127 11
1993/2 7.12 1,010 127 11
1993/KA1 6.98 971 122 10
1993/KNl 5.06 816 103 9
1995/1 15.33
1997/1 15.33
2000/1 56.87
2001/1 56.87
2002/1 21.69
2003/1 40.70
2004/1 17.52
2005/1 .50
2009/6 0.73
2011/1 3.00
2011/6 0.75
2013/1 3.00
2013/6 0.75
2015/1 5.00
2015/6 1.25
2025/1 4.23
2026/1 4.23
2027/1 4.23
2028/1 4.23
2029/1 4.23
203OL/I 4.23
203OR/1 4.23
2032-A/1 3.00
2032-A/6 1.00
2032-B/1 3.00
2032-B/6 1.00
2032-C/1 3.00
2032-C/6 1.00
2033/1 3.00
2033/14 1.30
2035/1 3.00
EXHIBIT B
<PAGE>
ITEM STD MIN PCS/DAY PCS/HR # OF
85% 85% EMPL
2035/12 1.30
2044/1 17.52
2051-A/1 3.00
2051-3/1 3.00
2051-C/l 3.00
2095/1 8.07 703 88 8
2095/2 7.67 703 88 8
2100/1 8.75 703 88 8
2100/2 8.35 703 88 8
2110/1 9.72 703 88 9
2110/2 9.32 703 88 9
2115/1 11.69 703 88 11
2130/1 8.71 742 93 12
2130/2 8.49 742 93 12
2135/1 8.44 742 93 12
3003Kl 0.50
3375/1 6.62
4401/1 3.00
4605/1 72.27
4607/1 111.75
4665/1 85.75
4667/1 78.22
4675/1 60.48
4800-X/1 115.50
4810/1 57.96
4820/1 57.96
5000/1 272.32
5001/1 13.00
5006/1 20.15
5007/1 20.15
5008/1 20.15
5010/1 260.00
5040/1 279.02
5050/1 334.36
5791/2 8.49
5796/2 8.49
5800/1 5.00
5810 5.00
5820/X1 5.00
5820/Y1 5.00
5830/1 5.00
5925/6 2.71
5940/1 3.16
5940/6 2.66
EXHIBIT B
<PAGE>
ITEM STD MIN PCS/DAY PCS/HR # OF
85% 85% EMPL
5941/1 3.16
5941/6 2.66
5942/1 3.16
5942/6 2.66
5943/1 3.16
5943/6 2.66
5945/2 14.15
5991/I 9.40
5991/2 8.49
5996/1 9.10
5996/2 8.49
6004/1 6.80 1,166 146 9
6004/2 6.40 1,166 146 9
6005/1 13.50
6408/1 32.08
6470/1 24.48
6670/1 31.16
6672/1 43.41
6677/1 43.75
6770/1 31.16
6772/1 43.41
6777/1 43.75
6902/1 3
6902/6 0.50
6905/1 1.50
6907/1 2.00
6909/1 3.00
6909/6 1.00
6910/1 6.96
6910/2 6.56
6980/1 7.71
6980/2 7.31
6985/1 7.65
6985/2 7.25
6990/1 15.51
6995/1 14.23
7010/1 14.00
7012/1 14.54
7012/2 13.64
7013/1 12.25
7015/1 11.02
7110/1 3.00
7111/1 3.00
7712/1 13.09
EXHIBIT B
<PAGE>
ITEM STD MIN PCS/DAY PCS/HR # OF
85% 85% EMPL
7712/2 12.19
9000/3 5.52
9009/1 0.86
9018/1 3.00
9024/1 3.00
9025/1 1.27
9027/1 1.50
9032-A/1 1.42
9032-3/1 1.42
9032-C/1 1.42
9033/1 1.17
9051-A/1 0.98
9051-B/l 0.98
9051-C/1 0.98
9100/1 78.75
9200/1 45.50
9900/1 1.45
9900/6 1.45
9907/1 1.45
9925/1 7.92
9992KA1 5.54
9993KAI 6.98
RP1907/1 5.61
RP1923/1 2.18
RP1924/1 2.18
RP1932/1 2.76
RP1956/1 1.00
RP1957/1 2.97
RP1987/1 14.60
RP1988/6 1.00
RP1998/1 3.93
RP2078/6 0.64
RP2079/6 0.29
RP6413/1 5.17
RP6671 16.53
<PAGE>
EXHIBIT C
Vacation/Schedule
-----------------
Limitations Five (5) employees per Week
---------------------------------------
Weekly Department
Limitation
----------
Shipping 1
Receiving 1
Injection Molding 1
Press Room 2
Welding 1
Sewing 1
Assembly Line 1 & 3 2
Assembly Line 2 2
lamp 1
Assembly Line 4 1
Assembly - Seating 5 1
Assembly - Seating 6 1
Woodshop 1
Whenever possible the Company will attempt to accommodate employee's request for
vacations who may have exceeded the allotted vacation limitation in their
respective department.
EXHIBIT 10(y)
Union contract dated July 24, 1996, between Everest & Jennings Canadian Limited
and the United Steelworkers, of America on behalf of its Local 5338.
<PAGE>
1996-1998
COLLECTIVE AGREEMENT
BETWEEN
EVEREST & JENNINGS
CANADIAN LIMITED
and
UNITED STEELWORKERS OF AMERICA
LOCAL 5338
<PAGE>
COLLECTIVE LABOUR AGREEMENT
This Agreement made on 24TH of JULY 1996 between Everest and Jennings Canadian
Limited hereinafter called "the Company" and the United Steelworkers' of America
on behalf of its Local 5338 hereinafter called "the Union".
Wherever the masculine gender appears in this Agreement, it shall also mean the
feminine gender, and vise versa, unless the context requires otherwise.
3
<PAGE>
INDEX
Article Description Page
Number Number
1 UNION RECOGNITION 5
2 MANAGEMENT RIGHTS 5,6
3 UNION SECURITY 6
4 UNION REPRESENTATION 6,7
5 PROBATIONARY EMPLOYEES 7
6 GRIEVANCE PROCEDURE 8,9
7 ARBITRATION 10
8 SENIORITY 10,11
9 LAYOFF AND RECALL 11,12
10 JOB POSTING 12,13
11 HOURS OF WORK 13,14
12 PAID HOLIDAYS 15,16
13 VACATION WITH PAY 16,17
14 LEAVE OF ABSENCE 17
15 CALL-IN PAY 18
16 PAYMENT FOR INJURED EMPLOYEES 18
17 BULLETIN BOARDS 18
18 BEREAVEMENT PAY 18
19 JURY AND WITNESS DUTY 18
20 HEALTH AND SAFETY 18,19
21 EMPLOYEE BENEFITS 19
22 SHIFT PREMIUMS 19
23 SUPPER ALLOWANCE 19
24 WAGES 19
25 DURATION OF AGREEMENT 20
SCHEDULE A JOB CLASSIFICATIONS 21,22
4
<PAGE>
ARTICLE 1 UNION RECOGNITION
1:01 The Company recognizes the Union as the sole and exclusive bargaining
representative for all hourly employees of the Company in the Township of
Vaughan save and except office staff, clerical, engineering, and sales,
staff, forepeople, supervisors and all those ranked above supervisors and
those excluded by the Labour Relations Act of the Province of Ontario.
1:02 Employees not in the bargaining unit shall not perform work ordinarily
performed by bargaining, unit employees, except in the event of testing,
experimental work, training, and emergency situations including unexpected
absenteeism equipment breakdown and/or resources not available. (An
emergency situation would be a condition that could not reasonably have
been anticipated to occur during the course of normal operations or that
threatens serious consequences to the employer's operations.)
1:03 Should any of the present operations be moved to a location within fifty
(50) miles, this Agreement shall be extended to cover such operations.
1:04 The Company agrees to introduce all new employees to the Plant Chairperson
within two (2) days either individually or as a group during the work day.
The Company will provide a list to the Plant Chairperson or his designate
of all new hires weekly, with their classifications, shift, rate of pay,
and date of hire.
1:05 The existing practice of subcontracting or outsourcing of such work as
deemed necessary shall continue. However, the Company will not subcontract
or outsource work for the sole purpose of eroding the bargaining unit.
ARTICLE 2 MANAGEMENT RIGHTS
2:01 There shall be no strike, stoppage of work, picketing, boycott or willful
interference with production, transportation or distribution, by the union
nor its members, and no lockout by the Company during the term of this
Agreement.
2:02 The Company retains and shall maintain and exercise all managerial
authority and prerogatives. Without limiting the generality of the
foregoing, such functions shall include, but not be limited to the right
to: locate, alter, extend, curtail or cease operations; determine the
number and classification of employees; hire, direct, retire, promote,
demote, transfer, lay-off, suspend, discharge or discipline employees for
just cause; assign work, determine job content and qualifications of
employees; determine schedules, methods, processes and means of production
and supply; make, alter and enforce reasonable rules and regulations. The
foregoing is limited only by the express terms and provisions of this
Agreement.
2:03 The Company Will not hire any part-time employees without prior
notification to the Union.
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2:04 The Company retains the right to hire temporary, part-time assistance for
the physical inventory. Opportunity for overtime will first be offered to
full time bargaining unit employees provided they have the skill and
ability to perform said tasks.
2:05 Failure by the Company to exercise any of its management rights at any
time shall not be considered to be an abandonment of such rights.
ARTICLE 3 UNION SECURITY
3:01 The Company agrees that all employees shall become and remain members of
the Union as a condition of employment, Membership, for this purpose, will
be deemed to mean the payment of Union dues in accordance with article
3:02 unless the employee is on lay-off and therefore not in a position to
pay union dues.
3:02 The Company shall deduct from the weekly pay of each employee an amount
equivalent to the Union dues set out in the Union Constitution. The total
sum so deducted will be forwarded to the Financial Secretary of the Local
Union on or before the 15th day of the month following, payable to the
United Steelworkers of America-International Treasurer.
3:03 The Union agrees to indemnify and save the Company harmless against all
claims or other forms of liability that may arise out of, or by reason of,
deductions made or payments made in accordance with this Article.
3:04 The Company agrees to record total union dues deductions paid by each
employee on his/her T-4 Income Tax Receipt.
ARTICLE 4 UNION REPRESENTATION
4:01 No person shall engage in any Union activity during working hours or on
Company property except as specifically authorized by this Agreement.
4:02 The Union will continue to support the Company in its efforts to eliminate
waste; to improve workmanship, to prevent accidents and promote goodwill
amongst the Company and its employees.
4:03 The Company acknowledges the right of the Union to appoint or otherwise
select Union Stewards for the purpose of representing employees in the
handling of complaints and grievances.
4:04 The Company agrees to recognize one (1) Union Steward for each fifteen
(15) employees, plus one steward on each shift other than regular day
shift. The Company will recognize a Union Steward at any location that is
covered by this Collective Agreement.
4:05 The Company shall be notified by the Union of the names of the Stewards
and the areas they are representing and any changes made thereto.
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4:06 The Company agrees to recognize and deal with a Union Grievance Committee
of not more then two (2) employees plus the Local Chairperson,
4:07 A Grievance Committee person or Steward shall be required to receive
permission from his\her supervisor before leaving their work station
and\or department. Permission will not be unreasonably withheld for
attendance at grievance meetings and permission may be given for other
Union business provided it can be accommodated with operations and is for
a brief period.
4:08 (a) The Company agrees to recognize and deal with a negotiating committee
of not more than three employees plus the Plant Chairperson, who shall be
regular employees of the Company, along with the representative of the
International Union,
(b) The Negotiating Committee is a separate entity from all other
committees and will deal only with matters related to negotiations,
including proposals for the modification and/or renewal of this
Collective Agreement.
ARTICLE 5 PROBATIONARY EMPLOYEES
5:01 An employee shall be classed as a probationary employee until he\she
has completed ninety (90) calendar days. If an employee is absent
from work, the employee's probationary period shall be extended by
the period of such absence. Upon successful completion of the
probationary period, the employee will receive seniority backdated
to their original date of hire and will become eligible for benefits
in Article 21. Until an employee has acquired seniority, the Company
may terminate, discipline, layoff or failure to recall after layoff
a probationary employee and such action shall not be subject to the
Grievance or Arbitration Procedure.
ARTICLE 6 GRIEVANCE PROCEDURE
6:01 (a) The Company acknowledges the right of the Union to appoint or
otherwise select a grievance committee of up to two (2) employees
and the Local Chairperson. Only members of the grievance committee
and the employee or employees concerned may appear to process a
grievance, except in the case of the dispute involving a question of
the general application or the interpretation of the Agreement when
only the grievance committee shall process the grievance.
(b) The Company will not be required to consider any grievance which is
not presented within (10) working days after the griever or the
Union first became aware of the alleged violation of the Agreement.
(c) If final settlement of the grievance is not reached at Step three,
then the grievance may be referred in writing by either party to
Arbitration as provided in Article 7- Arbitration within fifteen
(15) days after the receipt of the response to the Step three
procedure.
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(d) When two or more employees wish to file a grievance rising from the
same alleged violation. of this Agreement, such grievance may be
handled as a group grievance and presented to the Company beginning
at Step two of the grievance procedure.
(e) The Union and the Company shall have the right to initiate a policy
grievance at Step three of the grievance procedure, and all
provisions of the grievance and arbitration procedures shall apply
to such grievances.
(f) The time allowances provided in this Article may be extended by
mutual agreement between the parties in writing.
If the time allowance or any extension therefore, is not observed by
the party who it has alleged has violated the Agreement, the
grievance will be considered as advanced to the next step of the
grievance procedure including arbitration,
(g) A claim by an employee that he\she has been discharged or suspended
without just cause shall be a proper subject for a grievance, if a
written statement of such grievance is lodged at Step three (3) of
the grievance procedure within ten (10) working days after the
employee receives notice that he\she has ceased to work for the
Company or returns to work after a suspension as the case may be,
(h) When an employee has been suspended or dismissed, the Union will be
notified concurrently with any disciplinary action being taken.
(i) Disciplinary notices which form part of the employee's record shall
be withdrawn from the employee's file after eighteen (18) months
from date of issue except in cases of innocent absenteeism.
(j) The Company agrees that persons who are required to take part in
grievance meetings shall not suffer loss of pay for time spent in
such meetings.
6:02 (a) it is the mutual desire of the parties hereto that any
alleged violation of this Agreement, including its application and
interpretation, shall be settled as quickly and reasonably as
possible, using the following procedure:
(b) Step 1:
The aggrieved employee shall, within ten (10) working days after the
grievance first arises, discuss the problem with his\her supervisor,
and failing a resolution, submit the grievance in writing with
assistance from his/her Union Steward, should the employee so
request, to the Chairperson of the Union Grievance Committee, and
shall affix his\her signature. If the supervisor fails to respond
within forty eight (48) hours the grievance will automatically move
to Step 2 of the grievance procedure,
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(c) Step 2:
If the Grievance Committee of the Union considers the grievance to
be justified, the griever(s) concerned, together with Grievance
Committee (or part thereof) submit the grievance in writing to the
Superintendent or Manager within three (3) working days of the
response to Step 1.
The Superintendent or Manager shall respond to the grievance within
three (3) working days of receiving it.
(d) Step 3:
If necessary, the grievance will be submitted to the Manager of
Manufacturing or the Sales\Marketing Manager within a further three
(3) working days and a meeting shall be convened with the griever(s)
and the Union Grievance Committee, the Field Staff Representative
and the appropriate members of management in a further attempt to
resolve the grievance. The Manager will respond within three (3)
working days in writing to the Union.
ARTICLE 7 ARBITRATION
7:01 Where a grievance has not been resolved at Step 3 of the grievance
procedure, it may be referred to arbitration by either party within
fifteen (15) days of the receipt of the response to Step three procedure.
7:02 The arbitration procedure incorporated in this agreement shall be based on
the use of a single arbitrator, selected on a rotating basis from the
following panel of the four (4) arbitrators.
(1) R.D. Joyce
(2) P. Barton
(3) D. Stanley
(4) B. Keller
These arbitrators shall act singly, and in rotation with respect to each
successive grievance that is referred to arbitration. Should any
arbitrator be unable to hear a grievance within sixty (60) calendar days
after the grievance has been referred to him or her, then that arbitrator
will be passed over to the next in line,
7:03 Each of the parties will bear its own expenses with respect to any
arbitration proceedings. The parties will bear an equal share of the
expenses of the arbitrator.
7:04 The arbitrator shall not be authorized nor shall the arbitrator assume
authority to alter, modify or amend any part of this Agreement, nor make
any decision inconsistent with the provisions thereof, or deal with any
matter not covered by this Agreement.
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ARTICLE 8 SENIORITY
8:01 Seniority shall mean the length of continuous employment within the
bargaining unit since the last date of hire.
8:02 Seniority shall be completely lost and an employee shall cease to be
employed by the Company if an employee:
(a) quits, retired, or;
(b) is discharged and the discharge is upheld,or;
(c) is laid off work for a period of time equal to or greater
than the employees accumulated seniority since the last
date of hire to a maximum of eighteen (18) months , and a
maximum of twenty four (24) months with less than two (2)
years seniority, two (2) or more years of seniority, or;
(d) is recalled to work and fails to report within three (3)
working days from receipt Of notice to return to work has
been issued to their last known address, or; (0) is absent
without authorization for a period of three (3) working
days.
8:03 Seniority shall be maintained and accumulated during: (a) absence due to
occupational accident to a maximum cumulative total of twenty- four (24)
months, and extensions may be granted on a case by case basis. employees
seniority, (b) Non-occupational accident or illness causing absence equal
to the but not exceeding eighteen (I 9) months.
8:04 Persons on lay-off will be considered to have status only by reason of
their right to recall and their rights under this Article and Article I 1
and 12. No other rights under Article 9 will flow to a laid off person
under this Agreement unless otherwise specifically stated.
8:05 The Company will post the seniority list every six (6) months.
8:06 An employee with seniority rights who is promoted to a non bargaining unit
position shall retain bargaining unit seniority which was accumulated at
the time he/she was promoted to any non-bargaining unit position. However,
all time spent working in such a non-bargaining unit position will not
accumulate bargaining unit seniority.
During tel initial six (6) months immediately following the date of such
promotion, the promoted employee shall retain a one-time right of re-entry
into the bargaining unit in tel event of demotion or should the employee
change his/her mind and wish to return to an hourly bargaining unit job.
The one-time right of return with prior seniority rights expires after six
(6) months from tel date of the promotion. This policy will not be
deviated from except where there is mutual agreement between the Union and
the Company.
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8:07 The Plant Chairperson and Chief Steward will be retained in employment
without regard to seniority, provided there is work available in which
they are qualified and willing to perform.
ARTICLE 9 LAYOFF AND RECALL
PREAMBLE: In recognition of the responsibility of management for the
efficient operation of the plant, it is understood and agreed that
management shall have the right to pass over any employee who does not
have the skill and ability to perform tel work available.
9:01 In the case of a reduction in the workforce, the Company shall give
consideration to the following factors:
1) Seniority
2) Skill and Ability
3) Efficiency of Operations
Seniority will be the determining factor when, in the judgement of the
Company, two (2) candidates are equally qualified.
9:02 Employees on layoff will be called back in inverse order, provided they
can perform the available work efficiently. Recalled employees will be
notified by registered mail or telegram sent to their last address
available on Company's records.
In the event an individual is unable to report to work as directed because
of illness, and provides satisfactory medical evidence of such illness,
the affected person will not lose his\her recall rights.
9:03 Whenever it becomes necessary to reduce the work force, the Company shall
use its best efforts to provide the employee affected with two (2) working
days notice in writing in advance of the date of layoff. Layoffs shall
occur following a normal work week of forty (40) hours.
ARTICLE 10 JOB POSTING
PREAMBLE: In recognition of the responsibility of management for the
efficient operation of the plant, it is understood and agreed that
management shall have the right to pass over any employee who does not
have the skill and ability to perform the work available.
10:01 (a) Permanent job vacancies in new or existing jobs shall be posted on the
main bulletin board for a period of three (3) working days prior to
filling the job vacancy. Employees desiring consideration must sign the
job posting, once the Posting is removed a copy will be given to the Plant
Chairperson. The Company shall use its best efforts to respond within
three (3) work days after the posting has been removed.
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(b) Awardees will be given appropriate training.
10:02 Job vacancies will be filled considering the following factors:
1) Seniority
2) Skill and Ability
3) Efficiency of Operations
Seniority will be the determining factor when, in the judgement of the
Company, two (2) candidates are equally qualified.
10:03 A successful applicant shall not be allowed to bid for a posted vacancy
for a period of six (6) months after he/she has been accepted for a job
vacancy except where there is mutual agreement between the Union and the
Company.
10:04 A position in Group 1 or Group 2 in schedule A which is available and is
filled by a person transferred from within the group, will not be a posted
vacancy.
10:05 An employee who is temporarily transferred to meet the Company's
convenience to another job for which the regular rate is less than that
which the employee is receiving, shall retain hider former rate. If such
transfer is to a job with a higher rate, the employee will receive the
higher rate. Temporary transfers shall not exceed thirty (30) work days
without mutual agreement between the Union and the Company. Temporary
transfers due to leave of absence are not bound by the thirty (30) day
restriction. The Plant Chairperson shall be informed of all temporary
transfers,
10:06 An employee who is temporarily transferred from his\her regular job due to
lack of work shall be paid the rate of pay for the job to which he\she is
transferred provided the time
spent on the job exceeds two (2) shifts.
ARTICLE 11 HOURS OF WORK
11:01 The normal work week for all employees shall be forty (40) hours made up
of five (5) days of eight (8) hours each, Monday through Friday. The weeks
shall began at 12:01 A.M. Monday.
Normal scheduled shifts will be: For the day shift: from 7:30 A.M. to 4:00
P.M. For the afternoon shift: from 4:00 P.M. to 12:00 A. M. Midnight.
Other shifts may be established according to the requirements of the
operation. In such cases the Company will discuss said changes with the
Union prior to the implementation of such schedule.
11:02 Lunch periods shall be one-half (1/2) hour unpaid,
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11:03 All authorized work performed by an employee prior to or beyond the normal
eight (8) daily scheduled hours, shall be paid at the rate of time and one
half (1 1\2) the employees basic hourly rate.
11:04 Any authorized work performed in excess of forty (40) hours per week,
shall be paid at the rate of time and one-half hour(I 1\2) the employee's
basic hourly rate, Any authorized work performed on a Saturday or Sunday
will be paid at the rate of one and a half (1 1/2) times the employees
regular rate of pay.
11:05 Nothing in this Article shall be construed to mean a guarantee of hours of
work per day or days per week.
11:06 Employees shall be allow a five (5) minute wash up prior to the end of
each shift. There will be no penalty for early punch out within the five
(5) minute period.
11:07 There shall be no pyramiding of overtime rates. It is also agreed that
overtime and other premiums shall not be paid more than once for any hour
worked.
11:08 Employees shall be permitted a fifteen (I 5) minute rest period
approximately midway through each half shift, Employees who work two (2)
hours overtime or more will be allowed a fifteen (15) minute rest period
at the beginning of each two (2) hour period worked.
11:09 Overtime work shall be on voluntary basis, and it is mutually agreed that
overtime shall be distributed as equitably as possible among the employees
who normally perform the work in the department. Should the Company not be
able to get the required numbers of volunteers, they shall then schedule
the most junior employee within the department who is able to perform the
work. The Company and the Union agree that overtime is not the desire of
both parties, therefore it is agreed that when there are bargaining unit
members on layoff the Company will make every effort to keep overtime to a
minimum,
11:10 Hours of overtime worked by each employee will be available to the Union
monthly.
11:11 The Company will agree to give twenty-four (24) hours notice for overtime
work where possible.
11:12 The Company agrees to give affected employees and the Union thirty (30)
calendar days notice of any change in the starting and stopping times of
employees work schedules, unless business requirements preclude the
Company from so doing,
ARTICLE 12 PAID HOLIDAYS
12:01 Employees shall receive eight (8) hours pay at the basic straight time
rate of pay for each of the following holidays, subject to the provisions
set out below:
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NEW YEARS DAY LABOUR DAY
GOOD FRIDAY THANKSGIVING DAY
VICTORIA DAY CHRISTMAS DAY
CANADA DAY BOXING DAY
CIVIC DAY FLOATING HOLIDAY
12:02 In order to qualify for Statutory Holiday pay, an employee must have
worked the last scheduled shift prior to, and the next scheduled shift
after such holiday, except for reasons acceptable to the Company.
12:03 To qualify for statutory holiday pay, a new employee must have been on the
company's payroll continuously for a period of ninety (90) calendar days
prior to the holiday.
12:04 An employee who is scheduled to work on a Statutory Holiday and does not
work, shall receive no pay unless the employee gives a reason for not
working which is satisfactory to the Company.
12:05 Statutory holidays falling on a Saturday or Sunday, and July I st. holiday
will be recognized on the nearest Monday unless otherwise agreed.
Regarding the designated Floating Holiday, each December the Company will
provide a list of potential Floating Holiday alternatives for the next
year time frame which do not conflict with key production or shipping days
of the Company. Such list will then be voted on by all employees. The
alternative day receiving the most votes will become the designated
Floating Holiday to be celebrated during the next year.
12:06 When any Statutory holiday are observed during an employee's scheduled
vacation period, he\she shall receive holiday pay as per Article 12:01
above, and will receive an additional day off at a mutually convenient
time.
12:07 An employee will not be able to receive holiday pay if the employee has
not earned wages during the four (4) weeks immediately preceding the
holiday.
ARTICLE 13 VACATIONS WITH PAY
13:01 All earned vacations must be taken at a mutually agreeable time except
during the annual shut down when employees not required during the
shutdown will take this as vacation time.
13:02 Vacations must be taken during the calendar year in which they become due
and cannot be postponed or carried over from year to year.
13:03 The vacation period commences from the I st of July to the 30th of June
and is granted as follows.
An hourly employee who has completed one (1) year of service as of June
30th of vacation year shall be entitled to two (2) week's vacation with
pay; 5 years or more of
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service as of June 30th of the vacation year shall be entitled to three
(3) week's vacation with pay; 12 years or more of service as of June 30th
of vacation year shall be entitled to four (4) week's vacation with pay;
25 years or more of service as of June 30th of the vacation year shall be
entitled to five (5) week's vacation with pay.
Vacation pay shall be four percent (4%) for those entitled to two (2)
weeks vacation; six percent (6%) for those entitled to three (3) weeks
vacation; eight percent (S%) for those entitled to four (4) weeks
vacation; ten percent (10%) for those entitled to five (5) weeks vacation:
of the employee's gross earning for the prior year.
13:04 Vacation scheduling will take place during the month of March.
Opportunities for vacation times will be given in the following order. (1)
Those required to take the vacation shut down period, (2) Employees who
have remaining vacation, by seniority, and in accordance with Article
13-101 above.
13:05 Pay for earned vacation will be given to the employee at the time of the
scheduled vacation.
13.06 An employee who is hospitalized because of sickness or accident while on
scheduled vacation will be considered as being on sick leave during the
period of such illness, Vacation time lost while in the hospital may be
rescheduled at a future date to be mutually agreed upon, The Company has
the right to ask for medical evidence of hospitalization,
ARTICLE 14 LEAVE OF ABSENCE
14:01 An employee may apply in writing for leave of absence without pay if
submitted at least (10) working days in advance of the date of the
requested leave. Such leave of absence may be granted at the discretion of
the Company and will be confirmed in writing, Such leaves will not be
unreasonably withheld. Such leaves will not be longer than three (3)
months and seniority will continue to accrue during this period. The
Company may also grant an employee continuation of his/her benefits if the
employee bears the total cost.
14:02 The Plant Chairperson of the Union will be notified of all leaves granted
under this section.
14:03 The Company agrees to pay any employee who has been granted a leave for
Union business which is not paid for by the Company and the Union shall
reimburse the Company for such wage payment upon receipt of a monthly
statement. Such leave of absence shall be authorized by the Union in
advance of the leaves.
14:04 The Company shall follow the Employment Standards Act and any other
relevant legislation with respect to Maternity and Parental Leaves.
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14:05 The Company agrees to allow leave of absence without loss of pay or
benefits of up to eight (8) hours to employees who wish to become a
Canadian Citizen. Such time off work shall be paid after verification is
received by the Company that such person did apply and receive his\her
Canadian Citizenship,
14:06 The Company agrees to grant an employee leave of absence without pay for
up to one year to work in an official capacity for the Union, provided
such request is made by an authorized representative of the Union.
14:07 The authorized Negotiating Committee will be given leaves to attend
negotiating sessions. Such leaves will not be unreasonably withheld.
14:08 Employees to a maximum of three (3), provided production is not. adversely
affected, who have been elected or appointed by the Union to attend Union
Conventions and Conferences or other Union Business may be granted a leave
of absence Without pay by the Company. The Union shall notify the Company
in writing as early as possible prior to the start of the leave, but. not
less then fourteen (14) days, of the names of the members requiring the
leave.
ARTICLE 15 CALL-IN-PAY
15:01 An employee called for work outside of his\her regular working hours shall
be paced: 1) Four (4) hours appropriate overtime rating. 2) The provisions
above shall not apply when an employee is called to work immediately prior
to the start or immediately following the end of his\her scheduled shift.
In all such cases, the employee shall receive his\her appropriate overtime
rate.
ARTICLE 16 PAYMENT FOR INJURED EMPLOYEES
16:01 In the event that an employee is injured in the performance of his\her
duties, he\she shall, to the extent that he\she is required to stop work
and receive treatment, be paid for wages the remainder of his\her shift.
If it is necessary, the Company will provide, or arrange for, suitable
transportation for employee to the doctor or hospital and back to plant
and\or to his\her home as necessary.
ARTICLE 17 BULLETIN BOARDS
17:01 The Company agrees to provide Bulletin Boards in areas accessible to
employees for the purpose of posting meeting notices and official Union
information. All notices so posted will be authorized in advance by the
Manufacturing Manager or his\her designate.
ARTICLE 18 BEREAVEMENT PAY
18:01 The Company agrees that when an employee is absent from work due to death
in the immediate family, he\she will be granted three (3) days leave with
pay. In the event that travel is required beyond a distance of 500
kilometers, the Company will grant two (2)
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extra days leave with pay, Immediate family is deemed to mean: spouse,
son, daughter, mother, father, adoptive parents, sister, brother, brother
or sister-in law, mother or father-in-law, grandparents, or grandchildren.
ARTICLE 19 JURY AND WITNESS DUTY
19:01 An employee shall be granted leave of absence with pay at his\her regular
hourly rate, for the normally scheduled number of hours the employee would
have other-wise worked for the purpose of serving jury duty, or as a
material witness subpoenaed by the Crown. Provided that the employee shall
reimburse the Company to the full amount of jury pay or witness fees
excluding the expense allowance received.
ARTICLE 20 HEALTH AND SAFETY
20:01 The Company and the Union agree that they mutually desire to maintain high
standards of health and safety in the plant in order to prevent injury and
illness. The Company, the Union and the employees agree that the
Occupational Health and Safety Act is binding on them and any allegation
of breach will be processed in accordance with the Act.
20:02 The Company will recognize a Safety Committee composed of four (4) Company
and four (4) Union appointees. This committee will meet monthly, and
inspect the operations to determine any unsafe practices or conditions.
20:03 The Company will provide a safety footwear allowance of $60.00 effective I
Jan 1997 and $65.00 effective I Jan 1998. The safety footwear must be
purchased by the vendor chosen by the Company. Safety footwear will be
worn by all employees while at work.
20:04 The Union Co-Chairperson of the Occupational Health and Safety Committee
will accompany the Department of Labour Inspectors on his\her regular
tours of the premises and shall receive copies of any reports sent to the
Company pertaining to these inspections,
ARTICLE 21 EMPLOYEE BENEFITS
21:01 Life insurance, AD&D, Dental Plan, and Supplementary Health Plan will be
continued as they were before this Agreement. The Company will pay the
premiums.
The Sick Days Programme and the Pension Plan will also continue to operate
as they were before this Agreement.
ARTICLE 22 SHIFT PREMIUMS
22:01 Employees assigned to shifts beginning after 3:00 P.M. will be paid a
shift premium of forty-five cents ($.45) per hour for each hour worked on
that shift.
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ARTICLE 23 SUPPER ALLOWANCE
23:01 Employees who work more two (2) hours overtime shall be entitled to six
dollars ($6.00) supper allowance.
ARTICLE 24 WAGES
24:01 Wages will be paid as per Schedule A with the exception of the thirty-one
(31) red circled employees who are above the job rate as of the date of
ratification.
Effective July 24, 1996 $.20 cents
Effective July 24, 1997 $.22 cents
ARTICLE 25 DURATION OF AGREEMENT
25:01 This agreement shall become effective 24 July, 1996 and shall remain in
effect until 24 July 1998 and shall thereafter continue for a period of
one (1) year unless either party notices, in writing, to the other party
within ninety (90) days prior to its expiration date that is desires
revisions, modifications, or terminations of this agreement at its
expiration date.
FOR THE COMPANY FOR THE UNION
______________ ___________________
WIM VAN VOORST JAMES CAIRNS
PRESIDENT, CEO UNION COMMITTEE PERSON
_________________ ___________________
CHERIE L. ANTONIAZZI DOLTON FRAISER
EXEC. DIR. HUMAN UNION COMMITTEE PERSON
RESOURCES
______________ ___________________
DUANE WEBSTER DARSHAN SHAH
LOGISTICS MANAGER UNION COMMITTEE PERSON
____________________
TONY DE PAULO
USWA STAFF REPRESENTATIVE
DATED 2ND DAY OF AUGUST, 1996,
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SCHEDULE A
Effective Effective
July 24, 1996 July 24, 1997
------------- -------------
Prob. Rate Job Rate Prob. Rate Job Rate
Group 1
Custodian 9.20 10.20 9.42 10.42
Entry Level 9.20 10.20 9.42 10.42
Machine Operator 9.20 10.20 9.42 10.42
Material Handler 9.20 10.20 9.42 10.42
Sub Assembler 9.20 10.20 9.42 10.42
Group 2
Electrical Assembler 10.20 11.20 10.42 11.42
Final Assembler 10.20 11.20 10.42 11.42
Packer 10.20 11.20 10.42 11.42
Punch Press Operator 10.20 11.20 10.42 11.42
Upholstery Assembler 10.20 11.20 10.42 11.42
Wheel Assembler 10.20 11.20 10.42 11.42
Whse. Order Picker 10.20 11.20 10.42 11.42
Group 3
Assistant Shipper 10.95 11.95 11.17 12.17
Auto Brazer 10.95 11.95 11.17 12.17
Fork Lift Driver 10.95 11.95 11.17 12.17
Powder Painter 10.95 11.95 11.17 12.17
Power Assembler 10.95 11.95 11.17 12.17
Quality Control Inspector 10.95 11.95 11.17 12.17
Ram Bender/Set Up Operator 10.95 11.95 11.17 12.17
Receiver 10.95 11.95 11.17 12.17
Service Parts 10.95 11.95 11.17 12.17
Sewing Machine Operator 10.95 11.95 11.17 12.17
19
<PAGE>
LETTER OF AGREEMENT
August 2, 1996
BENEFIT PROGRAMS
This "Letter of Agreement" confirms mutual understanding between the Company and
the Union that upon consummation of the acquisition of all of the shares of the
Company by Graham-Field Health Products, Inc., a review of the benefit programs
will be undertaken. The Company agrees that the benefits offered to the
employees will be, in the aggregate, equal to the value of the benefits
currently provided. The Company will discuss any proposed changes to the
benefits structure with the Union.
Notwithstanding anything to the contrary contained in this agreement, the
benefits and plans of insurance referred to above are qualified in their
entirety by reference to the underlying policies and contracts of insurance or
statutes or regulations. The terms of any contract, statute or regulation in
respect thereof by any insurance agency or governmental agency shall be
controlling in all matters pertaining to the existence of and extent of benefits
and conditions.
The undersigned agree with the terms of the above letter.
FOR THE COMPANY FOR THE UNION
WIM VAN VOORST JAMES CAIRNS
PRESIDENT AND CEO UNION COMMITTEE PERSON
CHERIE L. ANTONIAZZI DOLTON FRAISER
EXEC. DIR. HUMAN UNION COMMITTEE PERSON
RESOURCES
DUANE WEBSTER DARSHAN SHAH
LOGISTICS MANAGER UNION COMMITTEE PERSON
TONY DE PAULO
USWA STAFF REPRESENTATIVE
20
<PAGE>
LETTER OF AGREEMENT
August 2, 1996
UNION REPRESENTATION
This "Letter of Agreement" confirms mutual understanding between the Company and
the Union that the Company will provide the Union with access to a filing
cabinet and a telephone for local calls at the Company's facility covered by the
current Collective Agreement.
The undersigned agree with the terms of the above letter.
FOR THE COMPANY FOR THE UNION
WIM VAN VOORST JAMES CAIRNS
PRESIDENT AND CEO UNION COMMITTEE PERSON
CHERIE L. ANTONIAZZI DOLTON FRAISER
EXEC. DIR. HUMAN UNION COMMITTEE PERSON
RESOURCES
DUANE WEBSTER DARSHAN SHAH
LOGISTICS MANAGER UNION COMMITTEE PERSON
TONY DE PAULO
USWA STAFF REPRESENTATIVE
21
EXHIBIT 10(z)
Union contract dated September 13, 1996, between Everest & Jennings Inc. and
District No. 9, International Association of Machinists and Aerospace Workers.
<PAGE>
================================================================================
INDEX
1996-1999
COLLECTIVE AGREEMENT
BETWEEN
EVEREST & JENNINGS
AND
THE MACHINIST AND AEROSPACE WORKERS
IAMAW DISTRICT #9
================================================================================
<PAGE>
ARTICLE PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
Preamble.................................................... 1
Article I Purpose of Agreement........................................ 2
Article II Recognition................................................. 2
Article III Union Security.............................................. 3
Article IV Non-Discrimination.......................................... 7
Article V Non-Interruption of Work.................................... 7
Article VI Seniority................................................... 7
Article VII Hours of Work............................................... 11
Article VIII Overtime.................................................... 12
Article X Holidays.................................................... 14
Article XI Vacation.................................................... 15
Article XII Perfect Attendance Recognition.............................. 17
Article XIII Insurance and 401(K) Savings Program........................ 17
Article XIV Bereavement................................................. 19
Article XV Leave of Absence............................................ 19
Article XVI Jury Duty................................................... 21
Article XVII Grievance and Arbitration Procedure......................... 22
Article XVIII Disciplinary Action......................................... 23
Article XX Drug Testing................................................ 24
Article XXI Management Rights........................................... 25
Article XXII Alteration of Agreement..................................... 26
Article XXIII Separability................................................ 26
Article XXIV Notices..................................................... 26
Article XXV General..................................................... 27
Article XXVI Duration.................................................... 27
<PAGE>
Letter of Agreement "Benefit Programs" 29
Letter of Agreement "Severance" 30
Amendment A 31,32,33
Amendment B 34,35
Amendment C 36,37
Amendment D 38
Schedule A 39,40
<PAGE>
Preamble
This Agreement made and entered into by and between Everest & Jennings
Inc. and or its successors and assigns, hereinafter referred to as the "Company"
and District No. 9, International Association Of Machinists and Aerospace
Workers, hereinafter referred to as the "Union" is for the joint use and benefit
of the contracting parties as defined and set forth herein.
1
<PAGE>
Article I Purpose of Agreement
It is the intention of the parties that this Agreement will establish
sound and meaningful relations between the Employer and the Union on behalf of
its employees, which will promote harmony and genuine cooperation to the end
that the Employer and the employees may mutually benefit.
Article II Recognition
Section 1.0
The Employer hereby recognizes District No. 9, International Association
of Machinists and Aerospace Workers, its designated agents and representatives
and/or assigns pursuant to the Labor-Management Relations Act, as amended, as
the sole and exclusive collective bargaining agent on behalf of all of the
employees of the Company within the bargaining unit as herein defined with
respect to wages, hours, and working conditions.
The term "employee" as used in this Agreement shall mean and include the
following:
All production, maintenance, and distribution employees employed by the
Employer at its 3601 Rider Trail South, Earth City, Missouri 63045
facility. EXCLUDING Customer Service, Engineering, Sales and Marketing,
office clerical and professional employees, temporary employees, guards,
and supervisors as defined in the Act.
The employees represented by the Union and covered by this Agreement are
sometimes hereinafter collectively referred to as the "employees" or
individually as the "employee".
This Agreement shall be applied in the same manner to all employees.
Whenever reference is made to the male gender, the word "his" etc. refers to
both genders and is used only for expediency.
Section 2.0 Bargaining Unit Work
Persons not in the bargaining unit shall not perform work ordinarily
performed by bargaining unit employees except in the event of
testing/experimental work, training, and emergency situations including
unexpected absenteeism and equipment breakdown. Notice of the emergency
situation will be given to the Chief Steward or his/her delegate. (An emergency
situation would be a condition that could not reasonably have been anticipated
to occur during the course of normal operations or that threatens serious
consequences to the Employer's operations.)
2
<PAGE>
Article III Union Security
Section 1.0
It shall be a condition of continued employment that all employees of the
Employer covered by this Agreement who are members of the Union on the effective
(execution) date of the Agreement shall remain members and those who are not
members on the effective (execution) date of this Agreement shall, not later
than the sixty-first (61st) day (or such longer periods as the parties may
specify) following the effective (execution) date of this Agreement, become and
remain members in the Union. It shall also be a condition of continued
employment that all employees covered by this Agreement and hired on or after
its effective (execution) date shall, not later than the sixty-first (61st) day
following the beginning of such employment, become and remain members in the
Union.
The Company will within three (3) working days after receipt of notice
from the Union, via certified mail to the Director of Human Resources at the
address of record, discharge any employee who is not in the Union as required by
the preceding paragraph.
The Union shall indemnify and save the Employer harmless against any and
all claims, demands and suits, or other forms of liability that shall arise out
of or by reason of action taken by the Employer for the purpose of complying
with any of the provisions of this article.
Section 2.0 Dues Check-off
Upon receipt of signed authorization from the employee involved, the
Employer shall deduct from the employee's pay the initiation and/or
reinstatement fees and dues payable by him/her to the Union during the period
provided for in said authorization. The amount will be certified by the
Financial Secretary of the Local Lodge.
Deductions shall be made on account of initiation and/or reinstatement
fees and dues payable from the first pay of the employee after receipt of the
authorization. Deductions shall be made on account of Union dues from the first
pay check of the employee after receipt of the authorization and monthly
thereafter from the first pay of the employee in each month.
Deductions provided in the first paragraph of this article shall be
remitted to the Financial Secretary of the Union no later than the tenth (10th)
day of the month following the month in which the deduction was made and shall
include all deductions made in the previous month. The Employer shall furnish
the Financial Secretary of the Union, monthly, with a record of those for whom
deductions have been made and the amounts of the deductions, and the names of
those employees for whom deductions were not made and the reason they were not
made.
3
<PAGE>
The parties agree that check-off authorization shall be in the following form:
Name of Employee___________________________________________
(Please Print)
Dept. No. ____________ Clock No.________________________
Social Security No._________________
Date_____________________
I hereby authorize and direct ________________ to deduct from my pay
beginning with the current month, initiation and reinstatement fees and my
regular monthly Union dues, as certified to the Company by the Financial
Secretary of the Union, on account of membership dues in Lodge No. of the
International Association of Machinists and Aerospace Workers.
I submit this authorization and assignment with the understanding that it
will be effective and irrevocable for a period of one (1) year from this date,
or up to the termination date (if any) of the current collective bargaining
agreement between and Lodge No.____________ of the International Association of
Machinists and Aerospace Workers, whichever occurs sooner.
This authorization and assignment shall continue in full force and effect
for yearly periods beyond the irrevocable period set forth above, and each
subsequent yearly period shall be similarly irrevocable unless revoked by me
within five (5) calendar days prior to the date of termination of any
irrevocable period hereof Such revocation shall be effected by written notice,
sent by Registered Mail, Return Receipt Requested, to the Employer and the Union
within such five (5) work day period.
Signature____________________________________
If, due to illness or being on vacation, an employee's dues are not
checked off, such deduction will be made no later than the tenth (10th) day of
the month following his return to work.
Section 3.0 Union Committee
The Company recognizes and will deal with all accredited members of the
Shop Committee, Stewards, and all other Business Representatives in all matters
relating to grievances, interpretations of the Agreement or in any other matters
which affect, or may affect, the relationship between the Company and the Union.
A written list of the Shop Committee members and Union Stewards shall be
shed to the Company immediately after their designation, and the Union shall
notify the Company promptly of any changes.
4
<PAGE>
There shall be one (1) Shop Steward or Committee Person over the employees
in the bargaining, unit. The number and location of Stewards may be adjusted by
mutual agreement of the Company and Union. A Committeeman or Steward will be
permitted to leave his work station to attend grievance meetings provided such
Committeeman or Steward obtains permission from his Supervisor prior to leaving
his workstation and obtains permission from the Supervisor of the area into
which he is going. Such permission shall not be unreasonably withheld. All other
grievance meetings, investigations, and Union business will be conducted during
non-working hours, unless permission is granted by the Company; provided,
however, if any such meeting is called by the Company during working hours, the
Committeeman or Steward will be compensated for the time lost during working
hours.
Section 4.0 New Employees-Notification
The Employer shall notify the Union in writing within seven (7) days from
date of hiring new employees. The following information will be given:
1. Name and home address.
2. Social Security number.
3. Classification and rate of pay.
4. Date of hire.
Copy of the above information will be transmitted to the Local Union.
Section 5.0 Visitation
A designated Business Representative of the Union may be permitted on the
Company premises for the purpose of conducting his/her duties provided prior
approval is obtained from the Director of Human Resources. It is further
understood every effort will be made to minimize and/or avoid any interference
or disruption with normal production activity. Such designated Business
Representative shall comply with the security regulations as required of all
other facility visitors.
Article IV Non-Discrimination
The provisions of this Agreement shall apply to all employees covered by
this Agreement, without discrimination on account of race, color, national
origin, sex, creed, marital status, veteran status, handicap status, or age
contrary to the Age Discrimination Act of 1967, as amended. The Company will not
interfere with, restrain, or coerce the employees covered by this Agreement
because of membership in or activity on behalf of the Union.
5
<PAGE>
Article V Non-Interruption of Work
Section 1.0
During the term of this Agreement, there shall be no lockouts by the
Company and the Union agrees that neither it nor any of the employees covered by
this Agreement will call, cause, instigate, engage in, promote, foment, or
ratify a strike, stoppage, slowdown, or any interference with normal production
of any kind whatsoever.
Section 2.0
It is agreed that violation of this Article by any employee shall be
considered grounds for disciplinary action up to and including discharge of such
employee for cause.
Article VI Seniority
Section 1.0 Probationary Period
A new employee will be a probationary employee for a period of sixty (60)
days after the employee's date of hire. The Company shall have the right, upon
agreement of the Union to extend the probationary period for an additional
thirty (30) days whenever deemed necessary. If an employee is absent from work
due to a Worker's Compensation injury or on Worker's Compensation light or
limited duty, the employee's probationary period shall be extended by the period
of such absence or light duty assignment. During the probationary period, the
Company may discharge a probationary employee, with or without cause, and such
action shall not be the subject matter of any grievance thereunder. Upon
successful completion of the probationary period, the employee's seniority shall
date from the date of hire.
Section 2.0 Definition of Seniority
Seniority is deemed as an employee's length of service with the Company.
The department that an employee is assigned to at the time of hire is the
employee's "home department". An employee continues to accrue seniority in the
employee's home department. An employee temporarily transferred to another
department remains assigned to the employee's "current department." If an
employee is permanently transferred (via job bid) to another department, then
the employee will thereafter accrue seniority in the reassigned department. An
employee retains all seniority accrued in each department that the employee has
been permanently assigned to during the employee's continuous employment by the
Company.
6
<PAGE>
Section 3.0
An employee with seniority rights who is promoted to a non-bargaining unit
position shall retain bargaining unit seniority which was accumulated at the
time he/she was promoted to any non-bargaining unit position. However, all time
spent working in such a non-bargaining unit position will not accumulate
bargaining unit seniority.
During the initial twelve (12) months immediately following the date of
such promotion, the promoted employee shall retain the right of re-entry into
the bargaining unit in the event of demotion, layoff resulting from lack of work
or should the employee change his/her mind and wish to return to an hourly
bargaining unit job. This right of return with prior seniority rights expires
after twelve (12) months from the date of promotion.
Section 4.0 Termination of Seniority
The seniority and employment status of an employee shall terminate for any
of the following reasons:
(a) Voluntary quit by the employee.
(b) Discharge for cause.
(c) Three (3) consecutive work days of unreported absence without a bona
fide reason, acceptable to the Company, for not reporting such
absence.
(d) Failure to report for work within three (3) working days after
release by the attending doctor when an employee is on a compensable
injury or illness leave of absence.
(e) Failure to report for work when recalled from lay off within five
(5) working days after the date of notice from the Company.
(f) Failure to return to work at the end of any leave of absence.
(g) If the employee has performed no work for the Company
for a period of one year.
Section 5.0 Layoff
If there is a layoff in a department, an employee that is affected shall
be transferred in inverse order of previous assignments to a department in which
an employee has departmental seniority greater than another employee in that
department. The employee being transferred must be able to demonstrate that the
employee's skill and ability is relatively equal to the incumbent employee to be
displaced by the employee being transferred. If the employee is unable to
displace a less senior employee, m a previously held department the employee
will use their plant seniority to displace the least senior employee in their
home department. If the employee cannot displace the least senior employee in
their home department; then the employee will be
7
<PAGE>
placed into an entry level position that their plant seniority will allow them
to hold.
Section 6.0 Recall
The recall of employees from layoff will be in reverse order of the
layoff. An employee recalled to work shall be notified by certified mail, return
receipt requested, addressed to the employee at the employee's last known
address on the Company's records, or the employee may be recalled by telegram or
telephone. Upon receipt of notice to return to work, an employee shall contact
the Company within two (2) working days, indicating the employee's intent to
return to work and shall report for work within five (5) working days after the
date of notice from the Company.
Recall Preference Election Form
In connection with your layoff which was effective __________________, below
indicate your choice for recall.
Please check one.
________ I wish to be recalled to perform any entry level position when my
seniority would allow me to return.
________ I wish to be recalled to perform in a previously permanently
assigned position I've held when my seniority would allow me to
return to such a position.
________ I wish to be recalled to perform my current position 2& when my
seniority would allow me to return to it.
My signature below acknowledges my understanding of the following recall
conditions:
1. My recall will be subject to the choice I elected above along with my
eligibility for recall at such time.
2. Regardless of my above election I understand I will be recalled to work
before any new employees are hired into positions for which I am qualified
to perform.
3. If I later wish to change my above choice, I must do so in writing in
person at the Human Resources Department. Any change of my choice will not
become effective until after five (5) working days following such change.
Employee Signature:___________________
Date:___________________
Section 7.0 Job Bids
Job bids will be posted for all new or vacant hourly positions.
8
<PAGE>
*Bids will be posted on the employee bulletin board for
three (3) working days.
*Bids will be awarded by seniority under the following
criteria:
-The senior employee will be awarded the bid if he/she
has the skills and ability to perform the job or has
successfully completed a company training program.
-If the employee has not been awarded another job bid
in the last six (6) months.
-Certification for forklifts must be completed prior to
the bid coming down.
*Once a job bid has been taken down and awarded, the awardee cannot
withdraw from the bid (employee has three (3) days while the bid is on the
board to investigate the open position), *Once transferred if an employee
cannot perform the job, he/she will be returned to their previously held
position if open or any open position for which they are qualified.
Lead positions are chosen by criteria other than seniority. Seniority will be
the determining factor if two (2) candidates are equally qualified in all job
requirements.
Example: Leads/Trainers
Employee's entire employment record is considered: * Absenteeism
* Team effort
* Communication skills
* Follows company policies
* Skill (written and/or oral test may be given)
Highly skilled operations are awarded based on skill and ability demonstrated
via performance test. Seniority will be the determining factor if two (2)
candidates are equally qualified in all job requirements.
Job Bids. If a job classification within a department on any shift becomes open,
the senior employee in the same classification will be given the opportunity to
fill the shift opening, provided such a transfer does not adversely affect
normal operations.
Section 8.0 Training
The Company encourages employees to enhance their skills through job relatedness
training programs offered by Everest & Jennings.
Time spent in training programs not offered during the employees normal work
hours Will not be paid by the Company. At no time will overtime premium be paid
for employee attendance in training initiated by the employee.
9
<PAGE>
Section 9.0
Management reserves the right to temporarily transfer employees to any job
deemed necessary. The Company will make every attempt to select employees based
on seniority, provided they have the skill and ability to perform the work
available.
Temporary transfers shall not exceed thirty (30) work days without mutual
agreement between the Union and the Company. Temporary transfers due to leave of
absence are not bound by the thirty (30) day restriction. The Chief Steward or
designate shall be informed of all temporary transfers.
Article VII Hours of Work
Section 1.0
Forty (40) hours per week, Monday through Friday, eight (8) consecutive
hours per day exclusive of an unpaid lunch period, shall constitute a normal
work week. It is understood, however, that the Company does not guarantee to
provide forty (40) hours of work weekly or eight (8) hours of work daily to any
employee. At the execution date of this Agreement, the shift starting times are
as follows: 1st shift 6:00 A.M.; 2nd shift 3:00 P.M. The Company may change
these starting times during the term of this Agreement and may vary such
starting times for different individuals, groups or departments, but the Union
will be advised in advance.
Section 2.0 Break/Lunch Periods
Two (2) rest periods will be given to the employees, one (1) in the first
half of the shift consisting of fifteen (15) minutes, and one in the second half
of the shift consisting of ten (10) minutes. A thirty (30) minute unpaid lunch
period shall be provided as near as practical to the middle of the shift.
Article VIII Overtime
Section 1.0
All work performed in excess of eight (8) hours during a day or in excess
of forty (40) hours during the work week shall be paid for at the rate of time
and one half (1-1/2). All work performed on Sunday shall be paid for at the rate
of double time, provided such employee worked a minimum of forty (40) hours in
that work week and all scheduled hours on Saturday. Holiday and vacation time
will be considered as a day worked for computation of overtime pay.
10
<PAGE>
Section 2.0
There shall be no pyramiding of overtime rates. It is also agreed that
overtime and other premiums shall not be paid more than once for any hour
worked.
Section 3.0 Overtime Notice
The Company recognizes that it is in the best interest of the employees
and the Company to have as much notice of overtime as possible. The parties also
recognize, however, that because of customer demands, it is not always possible
to give advance notice of overtime. Whenever possible the Company agrees to post
a notice of Saturday or Sunday overtime by 11:00 A.M. on the preceding Thursday;
provided that if conditions change the Company may cancel such overtime on
Friday. Notice of week day overtime will be given at least one full shift in
advance; provided, however, because of customer demands, employee absenteeism,
or other such emergencies, overtime can be scheduled without such notice upon
notification to the Chief Steward or other union official of the reason
therefore. (Second shift employees working a full shift on Friday will not be
required to report until eight (8) hours have elapsed since the end of the shift
on Friday. It must be understood, however, such employees win work the full
scheduled number of hours, as posted, on Saturday).
Section 4.0 Overtime Assignment
Preference for overtime work shall be given to employees (excluding
probationary employees) regularly employed on such job or operation and where
less than all the employees regularly employed on such job or operation are
needed for overtime work. Preference for such work shall be in the first
instance given to employees in order of seniority. In the event an insufficient
number of employees choose to work the overtime, then the least senior employee
shall be required to work. Nothing in this paragraph shall be construed to
require the Company to pay twice for the same work done; if the parties agree
that a qualified employee has been neglected as to the offer of overtime,
his/her remedy shall be the offer of additional future overtime. Where practical
overtime will be distributed equally on a rotational basis. It is agreed that in
order to equally distribute overtime, the principle of availability for work
must prevail. In view of the above, if an employee is offered overtime, he/she
will be charged with overtime credit as though he/she had actually worked.
Nothing in this Section shall affect the right of the Company to require the
entire plant and/or an entire department or classification to work overtime, in
which case the entire department or classification will be required to work.
11
<PAGE>
Article IX Wages
Section 1.0
Wages will be paid as per Schedule A with the exception of the eleven (11)
red circled employees who are above the job rate as of the date of ratification.
Effective September 13, 1996 $.15
Effective September 13, 1997 $.25
Effective September 13, 1998 $.25
Section 2.0 Reporting Pay
If an employee reports for work at his/her regularly scheduled starting
time without having been previously notified not to report, he/she shall be
given four (4) hours work at the employees regular rate of pay. If no work is
available the employee shall receive four (4) hours pay; provided, however, that
all of the foregoing shall not be applicable in the case of labor disputes or
contingencies such as an "act of God," fire, power failure, riots, civil
disturbances, or other causes beyond the Company's reasonable control. An
employee who does not elect to do the work assigned to him/her will not receive
any pay under this section.
Section 3.0 Night Shift Premium
Employees assigned to the second shift will be paid a shift premium of
twenty-five ($.25) per hour for each hour worked on that shift. The third shift
pay differential shall be thirty-five ($.35) per hour.
Article X Holidays
Section 1.0
All employees who have completed their probationary period shall be
eligible to receive the following holidays with pay irrespective of the day of
the week on which the holiday falls:
New Year's Day Day After Thanksgiving
Good Friday Christmas Eve Day
Memorial Day Christmas Day
July 4th Floating Holiday
Labor Day Employee's Birthday
Thanksgiving Day
Section 2.0
Should any of the holidays fall on Saturday or Sunday, the day celebrated
as such shall be either Friday or Monday. Regarding the designated Floating
Holiday, each December the
12
<PAGE>
Company will provide a list of potential Floating Holiday alternatives for the
next year time frame which do not conflict with key production or shipping days
of the Company. Such fists will then be voted on by all Company employees. The
alternative day receiving the most votes will become the designated Floating
Holiday to be celebrated during the next year. Employees shall be entitled to
use their birthday as a holiday. Such holiday shall be taken within the contract
year or be lost.
Section 3.0
The pay for each holiday shall be eight (8) times the individual
employee's current hourly base rate.
Section 4.0
An employee who is absent from work without reasonable cause on the
workday before or the workday after a holiday shall not be entitled to holiday
pay. For the purpose of determining eligibility for holiday pay, Saturday work
shall not be considered "the workday before or the workday after" a holiday.
Section 5.0
Employees on an authorized leave of absence for any reason shall be
entitled to holiday pay unless such employees are absent from work as follows:
a. The entire week immediately preceding the week in which
such paid holiday occurs; and
b. The entire week during which such paid holiday occurs;
and
c. The entire week immediately following the week in which
such paid holiday occurs.
Section 6.0
In the event an employee works on one (1) of the above mentioned legal holidays,
then such employee shall be compensated at the rate of time and one-half (1-1/2)
for those hours worked in addition to all holiday pay to which the employee is
entitled.
Article XI Vacation
Section 1.0
Within any calendar year, an employee shall be eligible for vacation as
follows:
a. Employees who have completed one (1) year through four (4) years of
continuous service shall receive two (2) weeks paid vacation.
13
<PAGE>
b. Employees who have completed five (5) years through fourteen (14)
years of employment shall receive three (3) weeks paid vacation.
c. Employees who have completed fifteen (15) through twenty-four (24)
years of employment shall receive four (4) weeks paid vacation.
d. Employees who have completed twenty-five (25) or more
years of employment shall receive five (5) weeks paid
vacation.
Section 2.0
Every effort shall be made by the Employer to provide the opportunity for
employees to take vacations at times desired by them, giving due consideration
to the operating needs of the Employer if requests for vacation periods are
submitted at least s (60) days prior to the first day of the vacation period
request. In the event of a conflict in dates requested, vacation periods shall
be granted on the basis of seniority.
Section 3.0
In the event that a paid holiday falls within a vacation period, employees
entitled to holiday pay shall be entitled to either receive such holiday pay in
addition to the vacation pay herein provided, or the employee may upon request
add to the vacation the day or days covered by the holiday.
Section 4.0
Vacation pay shall be paid on the payday immediately preceding the
vacation period. Provided one week's notice is given. Vacation pay for forty
(40) hours or more will be paid via a separate check.
Section 5.0
Employees who are absent from work due to a leave of absence for any
reason prior to the commencement of a vacation period shall receive pro rata
vacation pay (but not length of vacation) as follows:
Percentage of workdays absent Percentage of
in last twelve (12) month period vacation
or since last vacation period, pay to which
whichever period of time is shorter the employee is
entitled.
- ----------------------------------------------- -------------------
16% or less 100%
17%-25% 90%
26%-33% 80%
34%-42% 70%
43%-50% 60%
14
<PAGE>
51%-60% 50%
61%-70% 40%
71%-75% 30%
76%-80% 20%
81%-90% 10%
91%-100% 0%
Section 6.0
Employees who have completed one (1) year or more of continuous service
with the Company will be granted pro rata vacation pay, if they resign with two
(2) weeks prior notice.
Employees discharged for cause will not receive pro rata vacation pay.
Section 7.0
When unforeseen circumstances arise during the normal work week which
cause an employee to miss work, such time away can be used as vacation time
provided a minimum of 48 hours advance notice is given, (this may be modified if
the Company believes that extenuating circumstances justify an exception), and
such time off is limited to four (4) hour or eight (8) hour increments per
instance.
A maximum of five (5) vacation days can be utilized in this fashion per year.
Such circumstances shall include medical, legal, or financial appointments which
cannot be scheduled around normal working hours.
Section 8.0
Vacation must be taken in the year earned. Unused vacation hours will not be
carried over to the next anniversary year.
Section 9.0
Employees who voluntarily work with the consent of the Company during their
vacation periods shall receive pay as aforesaid in addition to regular earned
pay for such periods. Vacation not used prior to the employee's anniversary date
will be paid in a lump sum payment to the employee.
Article XII Perfect Attendance Recognition
Employees may earn a bonus of two (2) hours of base earnings for each
quarter year (3 months) of perfect attendance. Missing time one quarter will not
jeopardize earnings for any other quarter, but the bonus hours will be forfeited
for that quarter. Quarters of the year are: 1) January, February, March; 2)
April,
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May, June; 3) July, August, September; 4) October, November, and December.
To earn bonus hours, employees must work an entire quarter without any
lost time. In checking attendance for this program, an absence is defined as any
scheduled work day missed for reasons other than death in the family, jury duty,
or approved leave of absence. A scheduled day includes properly notified
mandatory overtime, and voluntary overtime (when an employee volunteers to work
overtime the time becomes a scheduled work day).
The Company may pay off at each employee's current hourly rate after each
quarter if requested by the employee. The maximum accumulation of eight hours
per year will be paid out at the end of the fourth quarter reconciliation.
Employees who have worked an entire year (January I through December 3 1)
without any absence under program rules will be awarded a fifty dollar ($50)
U.S. Savings Bond at a designated time after the year has ended.
Article XIII Insurance and 401(K) Savings Program
Section 1.0 Group Insurance
Eligibility: First of month following successful completion of
probationary period.
o Life Insurance/Accidental Death & Dismemberment insurance benefit:
One (1) times base salary.
o Medical Insurance: Point of Service Plan that includes indemnity
plan benefits, and Preferred Provider Organization (PPO). Current
Medical Plan includes vision coverage if Preferred Provider is
utilized.
o Dental Insurance: Indemnity coverage up to $1,500 coverage per
person per year, or Dental Maintenance Organization benefits for
using preferred providers.
Employee Co-Pay Medical & Dental
Base Annual Earnings Base Annual Earnings
of $20,000 or less over $20,000
Medical
Employee $1.28/week $2.57/week
Employee + 1 $3.78/week $6.3 1 /week
Employee + Family $7.54/week $11.96/week
Dental
Employee $.58/week
Employee + 1 $1.83/week
Employee + Family $2.67/week
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o Short Term Disability Insurance: 60% regular weekly base salary to a
maximum of $250 per week for up to 26 weeks beginning 8th day of
disability.
o Voluntary Supplemental Accidental Death & Dismemberment Program:
Coverage available from $25,000 to $500,000 at Employee cost.
Section 2.0 401 (k) Savings Plan
Eligibility: The first quarter after reaching age 21 with one (1) year of
service.
Benefits:
o Variety of investment options.
o Voluntary employee pre-tax contributions from 1%-15% of annual
salary.
o Each employee will be permitted to participate in the Employer's
401(k) Plan, as currently in effect on the date hereof It being
expressly understood that the Employer does not currently contribute
to its 401(k) plan. In the event the Employer contributes to its
401(k) plan for its non-union employees, the Employer agrees that it
will also contribute in the same manner for Union employees.
Article XIV Bereavement
If a regular, full-time employee on the active payroll is absent from work for
the sole purpose of arranging for or attending the funeral of a member of his
immediate family, as defined below, the Company shall pay him for eight (8)
hours at his straight time hourly rate for each day of such absence up to a
maximum of three (3) days, provided: (a) The employee notifies the Company of
the purpose of his absence, (b) the days of the absence are the day before, the
day of and the day after the funeral; (c) the day of absence is a day during
which the employee was scheduled to work and would have actually worked but for
the absence, and (d) the employee, upon request furnished proof satisfactory to
the Company of the death, his relationship to the deceased, the date of the
funeral and the employee's actual attendance at the funeral. For purpose of his
Section, a member of the immediate family means the employee's spouse, children,
parents/or legal guardian, brothers, sisters, grandparents, mother in-law or
father in-law.
Article XV Leave of Absence
Section 1.0
Leave of absence may be granted to an employee, who has completed his/her
probationary period for good cause subject to
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reasonable extension; provided, the employee requests such extensions prior to
the expiration of his leave of absence.
Section 2.0
An employee desiring a leave of absence shall make application at least
five (5) working days prior to the desired effective date. This requirement is
waived in cases of actual emergencies.
Section 3.0
Good cause for granting leaves of absence shall include personal illness
or accident, death or serious illness in the immediate family, Union business,
and other reasons acceptable to the Company. Written substantiation satisfactory
to the Company must be submitted.
The Company and the Union agree to abide by the Family Medical Leave Act
A). Duration of the leave shall not exceed the Act.
Section 4.0
Any employee who may require off to attend Union conventions, meetings, or
other official Union functions shall be granted such leave without pay, but with
continued accumulation of seniority; provided:
a. The employee gives the Company two (2) weeks advance notification.
b. There will only be two (2) employees per one hundred (100) employees
in the bargaining unit allowed at any one time.
c. There will only be one (1) employee from any one (1) department
allowed at any one time.
d. Such leave shall not last longer than two (2) weeks.
Section 5.0
An employee certified by the Union to be a full time Union official shall,
at the request of the Union, receive a leave of absence to engage in work
pertaining to the business of the Union. Such an employee shall accumulate
seniority throughout the period of leave of absence. However, only one (1)
employee will be allowed such leave at any one (1) time which will be limited to
six (6) months, and may be extended for an additional six (6) months upon mutual
agreement between the Company and the Union.
Section 6.0
Leaves of absence shall not be granted for the purpose of allowing an
employee to take another position, to seek or try out new work, or to enter
business for himself, and similar reasons.
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Section 7.0
Leaves of absence will be granted only when the manning requirements of
the Company permit, except in cases of actual emergencies.
Section 8.0
If application for leave of absence is denied and the employee leaves, or
if the employee fails to return to work at the expiration of a granted leave of
absence, then such employee shall be considered to have voluntarily quit.
Section 9.0
Upon return to work from a medical leave of absence, not in excess of six
(6) months, the employee shall be reinstated to their regular assigned job if
the employee returns to work with a written physician's statement within three
(3) working days after their release. For approved personal leaves of up to
thirty (30) days, the employee shall be reinstated to their regular assigned
job.
In the case the job has been abolished during an employee's leave of
absence, such decisions shall apply to re-employment as would have applied had
such employee been at work at the time the job was abolished.
Section 10.0
The Chief Shop Steward shall be notified of all leaves of absence granted.
Section 11.0 Military Service
A. An employee, who is drafted, volunteers, or is recalled to active duty
in the United States Military Service, upon completion of his first
service period, having served no more than four years (five if required to
serve a fifth year due to war or other emergency) shall if application is
made within ninety (90) days after he is honorably discharged from active
duty, be reinstated to his last held job classification with full
seniority rights as if he had been actively employed by the Company during
the period of his military service. Provided, the employee is still
qualified to perform the duties of his last held job classification and
provided, further, the Company's circumstances have not so changed to make
it impossible or unreasonable to employ him.
B. An employee reinstated, as provided in Section I above, shall receive
an hourly rate of pay equal to his rate of pay at time of entering
military service together with any adjustments having been made in the
rate of pay of his job classification, during his absence. Time spent in
the
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military service shall not be considered as employment for the purpose of
calculating any periodic increases which he would have received had he
been actively employed by the Company.
C. An employee required to serve Military Reserve or National Guard Duty
will be granted an unpaid leave of absence without break in continuous
service, provided military orders are presented in advance of such leave
or upon return when reporting in advance was not possible. Employees on
approved military leave may use vacation pay during this period.
Article XVI Jury Duty
An employee who has completed Its probationary period, who is summoned for
jury service and who presents to the Company proper evidence as to jury service
and the amount of compensation received for such service, shall be paid the
difference between his compensation as a juror and an amount equal to eight (8)
times his hourly base rate of pay for each day of jury service performed during
the regular workweek on which the employee otherwise would have been scheduled
to work but not to exceed (20) days in any one calendar year. (Mileage
reimbursement received for jury service shall not be considered as jury
compensation for the purpose of calculating differential pay.) The provisions of
this Article are not applicable to an employee, who, without being summoned,
volunteers for Duty. Employees who are released from Jury Duty during the first
half of their regular shift, when reasonable, are to report to work to complete
the remaining hours of work on that shift.
Article XVII Grievance and Arbitration Procedure
Section 1.0
The Company and the Union agree to meet and deal with each other through
their duly accredited officers, committees and representatives on all matters
relating to hours, wages, and other conditions of employment relating to the
employees of the Company covered by this Agreement. Should any employee feel
that he has been aggrieved, there shall be no suspension of work on account of
such differences, but an earnest effort shall be made to settle such differences
in the following manner:
Step 1. The grievance shall be taken up with the employee's supervisor by
the employee, or by the employee and his/her shop steward, within two (2)
regular working days after the event causing the grievance. No action or
matter shall be considered the subject of a grievance unless a complaint
is made within two (2) regular working days of its occurrence. The
supervisor shall give his answer to the grievance within two (2) regular
working days after receipt of the grievance.
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If the grievance is not resolved at this Step, it shall be referred to
Step 2 within two (2) regular working days after receipt of the reply of
the supervisor.
Step 2. If settlement is not reached in Step 1, the Chief Shop Steward
shall present to the foreman for his forwarding to the designated Company
Representative, a written statement of the grievance by the aggrieved
employee, giving all pertinent information relative to the grievance and
indicating the relief requested. The designated Company Representative
shall give his written reply to the grievance within three (3) regular
working days. If the grievance is not resolved at this Step, it shall be
referred to Step 3 within three (3) regular working days after receipt of
the reply from the designated Company Representative.
Step 3. If a settlement is not reached at Step 2, the grievance shall be
referred to the designated Company Representative within three (3) regular
working days who will arrange a meeting with the Business Representative
of the Union on a mutually satisfactory date. At this meeting, the final
decision of the Company will be given unless otherwise agreed upon. It is
agreed that upon request the employee filing the grievance, and the Chief
Shop Steward shall be allowed to be present at the meeting described in
this Step.
Step 4. In the event the grievance is not resolved in the preceding steps,
the grievance may be appealed to arbitration, by the Union, by submitting
a letter of intent to arbitrate within thirty (30) days of the Company's
final decision sent to the Director of Human Resources at the address of
record. At which time the parties will request from Federal Mediation and
Conciliation Service a fist of seven (7) names, one of who will act as
arbitrator. The arbitrator will be selected by the parties by first
flipping a coin as to who will strike the first name and then will
alternately strike until one is left who will be the arbitrator.
The arbitrator shall have no authority to modify or subtract from or
change any of the terms or conditions of this Agreement. The decision of the
arbitrator shall be final and binding upon the employee, the Union and the
Employer. The expense of the arbitrator and the conduct of the hearing,
excluding any expenses incidental to the production of witnesses, shall be
shared equally by the parties.
Section 2.0
Failure of the Employer to answer in any of the steps above within the
time limits will permit the Union to move the grievance to the next step.
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Section 3.0
Should the Union fail to move the grievance to the next step within the
time limits specified, the grievance is settled in that step based on the
Employers answer, unless the Union notifies the Employer of its intent to
proceed to the next step.
Section 4.0
Employees may be disciplined for violation thereof under the terms of this
Agreement, but only for just cause and in a fair and impartial manner. A
grievance concerning the discharge or suspension of an employee may be filed by
the Chief Shop Steward or his alternate, within five (5) regular working days
and shall be initially referred to the Third Step.
Section 5.0
The time limits set forth in this Article may be extended by mutual
agreement.
Article XVIII Disciplinary Action
It is the policy of Everest & Jennings, Inc. to develop and encourage a
just and equitable system of administering discipline. Plant rules and
procedures will be distributed to all employees at the time of hire and be
posted on the Company bulletin board. Violations of such rules, other than those
identified as dischargeable offenses, will be addressed utilizing progressive
discipline, however, rule infractions will be handled separately. Rule
infractions, other than those rules identified as dischargeable disciplinary
action will include a verbal warning, written warning, suspension and discharge
for repeated offenses. However, the Company reserves the right to consider all
factors involved including the type of conduct and whether it was injurious to
security, personal safety, employee welfare or Company operations in dispensing
disciplinary action.
With the exception of discharge, disciplinary warnings shall become
ineffective as soon as twelve (12) months have passed without the employee
receiving any further warnings or disciplinary action.
It is understood by the parties the Absentee Control Program is
administered separately.
Article XIX Safety
Section 1.0
The Company shall make reasonable provisions for the safety and health of its
employees at the plant and warehouse during the
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hours of employment. There shall be a Joint Safety Committee which will meet
monthly to:
1. Establish and maintain an accident prevention program;
2. Investigate accidents and recommend actions to help prevent
recurrence;
3. Establish, review, and maintain safety rules and regulations as
necessary;
4. Make safety tours for the purpose of accident prevention and to
promote good housekeeping throughout the facility;
5. Assist Company to comply with all applicable municipal, state, and
federal safety regulations.
Article XX Drug Testing
Section 1.0
Employees are prohibited from the use, sale, dispensing, distribution,
possession, or manufacturing of illegal drugs and narcotics or alcoholic
beverages on Company property or work sites. In addition, employees are
prohibited from the off-premises possession, use, or sale of illegal drugs
when such activities adversely affect job performance, job safety, or the
Company's reputation in the community.
Section 2.0
At the discretion of Employer, employees may be required to submit to a
drug test, to determine if the employee is using, under the influence of,
or is otherwise impaired by (illegal) drugs or alcohol. Employees are
warned of the lingering effects of certain drugs in their system.
Employees may be selected to submit to a drug test where either: the
Employer has reasonable suspicion to believe that an individual employee
or group of employees is in violation of this Article and/or violation of
Company policy; or by being selected randomly if the employee is in a
safety-sensitive position.
Section 3.0
Failure to submit to any examination allowed under this section, or any
attempt to tamper with specimens or falsify or alter test results shall
constitute just cause for discharge. The Employer may elect to have a
supervisor accompany the employee to the testing site. All urine specimens
shall be subject to an initial screen using an EMIT-type analysis. All
positive results from an initial screen shall be confirmed via gas
chromatography-mass
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spectrometry techniques. No specimen shall be identified as "positive"
except upon receipt of the results of the confirmation test.
Section 4.0
While employees may be subject to disciplinary action up to and including
immediate dismissal, for violations of the policy expressed in this
Article, the Employer shall offer a reasonable accommodation as required
by law, to employees who request such accommodation.
Article XXI Management Rights
Section 1.0
Except as limited by a specific provision of this Agreement, the Employer
retains the exclusive right to manage its business and direct the working force
including, but not limited to, the rights hereinafter enumerated: to decide on
the products to be manufactured, the methods of manufacture, the materials to be
used, and the discontinuance of any product, material, or method of production;
to introduce new equipment, machinery, or processes; and to change or eliminate
existing equipment, machinery, or processes; to decide on the nature of
materials, supplies, equipment, or machinery to be used, and the price to be
paid; to select the working force in accordance with requirements determined by
management; to establish reasonable rules governing employment and working
conditions; and to determine the size of the work force. The existing practice
of subcontracting or outsourcing of such work as deemed necessary shall win not
subcontract work for the sole purpose of continue. However, the Company will not
subcontract work for the sole purpose of eroding the bargaining unit.
Section 2.0
The above rights of management are not all inclusive, but indicate the
type of matters or rights witch belong to and are inherent to management. Any of
the rights, powers, and authority the Company had prior to entering into
collective bargaining are retained by the Company except as expressly and
specifically abridged, deleted, granted, or modified by this Agreement.
Section 3.0
Failure by the Company to exercise any of its management rights at any time
shall not be considered to be an abandonment of such rights.
Article XXII Alteration of Agreement
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No agreement, alteration, understanding, variation, waiver, or
modification of any of the terms, conditions, or covenants contained herein
shall be made by employee or group of employees with the Company and in no case
shall it be binding upon the parties hereto unless such agreement is made and
executed in writing between the parties hereto.
The waiver of any breach or condition of this Agreement by either party
shall not constitute a precedent in the future enforcement of all the terms and
conditions herein.
Article XXIII Separability
If any section or part thereof of this Agreement is in conflict with any
applicable Federal or State law or regulation, such section shall be amended or
deleted from this Agreement or shall be deemed to be in effect only to the
extent permitted by such law or regulation. In the event that any provision of
this Agreement is thus tendered inoperative, the remaining sections shall
nevertheless remain in full force and effect.
Article XXIV Notices
Section 1.0
Any notices required under the terms of this Agreement shall be given in
writing to the following addresses of record:
a) To the Company - addressed to:
Everest & Jennings Inc.
3601 Rider Trail South
Earth City, MO 63045
b) To the Union - addressed to:
International Association of Machinist and Aerospace
Workers
12365 St. Charles Rock Road
Bridgeton, MO 63044
Section 2.0
Either party desiring to change the identity of the person to be addressed
as set forth in Section 1.0 may do so at any time by giving notice thereof to
the other party in writing by certified mail.
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Article XXV General
Section 1.0
Temporary agency employees brought into the factory or warehouse will be
hired or released after thirty days consistent with the Union security and
seniority sections of the labor agreement.
Section 2.0
The Company will provide a designated area of the lunch room's bulletin
board to the Union for the purpose of posting notices relating to Union
business. All notices so posted will be authorized in advance by Human
Resources.
Section 3.0
Plant Rules and Procedures; Safety Rules; Attendance Policy and the DRUG
AND ALCOHOL FREE WORKPLACE ACT OF 1988 have been promulgated as set forth in
Amendments A through D attached. Said work and safety rules may be amended by
the Company from time to time at the discretion of the Company. The Union will
be
notified prior to implementation.
Article XXVI Duration
This Agreement shall remain in full force and effect from September 13,
1996, and shall expire at midnight September 13, 1999. If either party desires
to cancel or amend this Agreement as of said expiration date, such party shall
give written notice to the other party at least sixty (60) days prior to said
date. In the absence of such notice, this Agreement shall become automatically
renewed for an additional year, and from year to year thereafter, subject to
sixty (60) days' written notice of termination prior to any anniversary of such
expiration date.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties the
12th day of November, 1996.
EVEREST & JENNINGS, INC. District No. 9,
INTERNATIONAL ASSOCIATION
OF MACHINISTS AND
________________________________ AEROSPACE WORKERS
Cherie L. Antoniazzi
Executive Director Human
Resources ________________________________
Phil Gruber
Union Business Representative
________________________________
Melenie Broyles
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Manager, Human Resources ________________________________
Everday Wilkins
Chief Steward
________________________________
Catarino Velazquez
Union Negotiating Committee
________________________________
Scott Grohs
Union Negotiating Committee
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LETTER OF AGREEMENT
November 12, 1996
BENEFIT PROGRAMS
This "Letter of Agreement" confirms mutual understanding between the Company and
the Union that upon consummation of the acquisition of all of the shares of the
Company by Graham-Field Health Products, Inc., a review of the benefit programs
will be undertaken. The Company agrees that the benefits offered to the
employees will be, in the aggregate, equal to the value of the benefits
currently provided. The Company will discuss any proposed changes to the
benefits structure with the Union.
Notwithstanding anything to the contrary contained in this Agreement, the
benefits and plans of insurance referred to above are qualified in their
entirety by reference to the underlying policies and contracts of insurance or
statues or regulations. The terms of any contract, statute or regulation in
respect thereof by any insurance agency or governmental agency shall be
controlling in all matters pertaining to the existence of and extent of benefits
and conditions.
The undersigned agree with the terms of the above letter.
FOR THE COMPANY FOR THE UNION
________________________________ ________________________________
Cherie L. Antoniazzi Phil Gruber
Executive Director Human Union Business Representative
Resources
________________________________
________________________________ Everday Wilkins
Melenie Broyles Chief Steward
Manager, Human Resources
________________________________
Catarino Velazquez
Union Negotiating Committee
________________________________
Scott Grohs Union Negotiating
Committee
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<PAGE>
LETTER OF AGREEMENT
November 12, 1996
SEVERANCE
Everest & Jennings will make severance payments to employees with
seniority, whose employment is terminated by the Company as a result of the
closing of the operations covered by this Agreement as follows:
$750 or $100 per year of service, whichever is
greater to a maximum amount of $1,500.
For purposes of calculating severance benefits, partial years of service,
as of the date of termination of employment, will be rounded off to the next
full year. Severance benefits will be paid to employees in full at the time of
termination, as the result of the plant closing.
It is understood by the parties that employees whose service with the
Company is terminated as a result of the cessation of operations covered by this
Agreement, waive any and all rights accruing under the current Labor Agreement,
and that paid severance benefits are full and final settlement of any and all
claims by employees and the Union.
This agreement shall remain in effect through the term of the Collective
Bargaining Agreement.
FOR THE COMPANY FOR THE UNION
________________________________ ________________________________
Cherie L. Antoniazzi Phil Gruber
Executive Director Human Union Business Representative
Resources
________________________________
________________________________ Everday Wilkins
Melenie Broyles Chief Steward
Manager, Human Resources
________________________________
Catarino Velazquez
Union Negotiating Committee
________________________________
Scott Grohs Union Negotiating
Committee
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<PAGE>
Amendment
Everest & Jennings, Inc.
Plant Rules and Procedures
The following conduct is prohibited and will not be tolerated by the Company.
Examples of disciplinary infractions which may lead to discharge as a result of
the progressive disciplinary system are:
1. Disorderly, immoral, or questionable conduct on Company property.
2. Disregard of safety and health regulations.
3. Repeated negligence resulting in inferior or poor work, or wastage of
materials.
4. Using threatening, abusive, or profane language to an employee or visitor
on Company premises.
5. Performing work of a personal nature, visiting other departments, or
deliberately loitering on the job, or idling in restrooms or elsewhere
during working hours.
6. Engaging in or encouraging horseplay of any kind such as g, scuffling,
throwing things, distracting, or startling others, creating confusion, or
acting in a disorderly manner.
7. Failure to perform work in accordance with blueprints, operation sheets,
actions, or established standard, both as to quality and quantity.
8. Failure to be in place and ready to start work at the beginning of the s
after breaks, and lunch.
9. Failure to attain goals satisfactorily as established by management both
verbally and in writing.
10. Failure to comply with all traffic, speed, and parking regulations while
on Company premises, as well as other Company policies.
11. Creating or contributing to unsanitary or disorderly housekeeping
conditions.
12. Leaving your work station without permission from your supervisor, or
proper relief during absence.
13. Gambling or any illegal form of lottery on Company premises.
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14. Unauthorized overtime.
15. Unauthorized use of Company equipment, time, materials, or facilities.
These lists of prohibited conduct are illustrative only; other types of conduct
injurious to security, personal s, employee welfare and the Company's operation
also may be prohibited.
The above stated policies supersede any previous written or verbal policies in
accordance with the standards of conduct of Everest & Jennings, Inc.
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Everest & Jennings, Inc.
Plant Rules and Procedures
It is the policy of Everest & Jennings, Inc. to develop and encourage a just and
equitable system of administering discipline in the workforce. A disciplinary
system is required to protect the majority of employees against the action of a
few who do not conform to recognized standards of business conduct.
Employees at Everest & Jennings, Inc. must cooperate in observing all rules
established for their protection and guidance. Therefore, without prejudice, the
following are considered cause for discharge in accordance with the Company's
procedure for disciplinary action:
1. Possession of firearms or unauthorized weapons on Company premises.
2. Fighting, provoking a fight, unlawful harassment or attempted bodily
injury.
3. Destruction or misuse of property; deliberate abuse of tools, machines, or
materials; damaging or defacing Company or another employee's property.
4. Posting or removal of notices, signs, or written material of any form on
bulletin boards or Company property at any time without specific written
authorization from the Human Resources Department.
5. A general attitude of insolence or disrespect, or inability to work
harmoniously and cooperatively with one's fellow workers.
6. Theft or borrowing an employee's or Company property without prior
authorization.
7. Punching another's timesheet, falsifying any Company document, including
time records, or giving false information in connection with your own
work, the work of any other employee, or any job related or Company
activity.
8. Making or publishing of false, vicious, or malicious statements concerning
any employee, manager, the Company, its products or its reputation.
9. Reporting to work or on the Company premises while under the influence of
intoxicants (liquor or drugs), or use or possession of the same on Company
property. (Use of prescription drugs on Company premises is permitted with
advanced approval of the Human Resources Department).
10. Selling, buying, or furnishing alcoholic beverages, drugs, or controlled
substances to others on Company property.
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11. Tardiness or excessive absences from work, including no report/no call
absences as defined in the Absentee policy.
12. Insubordination - refusal to carry out instructions, work assignments, or
orders given by management.
13. False reporting of an on-the-job accident, injury, or occupational
illness.
14. Walking off the job.
15. Sleeping on duty.
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Amendment B
Everest & Jennings, Inc.
Plant Rules and Procedures
1. Report all accidents to your supervisor immediately, no matter how minor.
2. No running or jumping in the plant at any time.
3. Throwing materials of any kind is prohibited.
4. Pallets must not be placed or stored on end. Pallets must be stored flat.
The pallet stack cannot exceed five feet. Stacked, broken down boxes
cannot exceed five feet unless shrink wrapped.
5. No horseplay is allowed at any time.
6. Work areas must be kept clean and orderly at all times.
7. Sliding down hand rails on stairs or ladders is prohibited.
8. Employees must walk on the outside of aisles, never in the center, and be
alert for forklift traffic at all times.
9. Equipment and machinery (including forklifts) are to be operated by
trained and authorized personnel only.
10. The trash compactor is operated by authorized personnel only.
11. Passengers are not allowed on forklifts or handjacks.
12. Use or being under the influence of, or possession, sale or consumption of
any intoxicants, drugs, illegal substances or narcotics of any nature is
prohibited and is cause for immediate discharge.
13. Tools and equipment are to be used for their designed purpose only.
14. Do not converse with forklift operators while forklift is in motion.
15. Proper equipment guards must be in place at all times while equipment is
operating. If guards are removed, they must be replaced before equipment
is restarted. If guards are misadjusted, they must be properly adjusted
before the equipment is restarted.
16. Safe work procedures must be used at all times, short cutting safety
devices is prohibited.
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17. Proper safety protective equipment must be worn on all jobs requiring this
equipment. When in doubt, ask your supervisor.
18. Air hoses are not allowed to be used to blow off clothing or exposed areas
of the body. An air bubble in the blood stream can be fatal!
19. Safety cages or safety harness must be used when lifting employees off the
floor with forklifts.
20. Shoes must be of sturdy leather or leather-like construction. Heavy
leather-like athletic shoes will be permitted. No open-toed, open-back
canvas type, nylon, or suede shoes are permitted. All shoes must have a
heavy sole; moccasins are not permitted. The only exception are drivers
and visitors who are not employees of Everest & Jennings who are walking
in designated aisles to a designated job site or area.
21. The wearing of halter tops, half shirts, sleeveless shirts, shorts, or
culottes are prohibited.
22. Smoking is restricted to designated areas only. Note: You must be 50 feet
away from any site that has a warning "FLAMMABLE" posted.
23. Drawers on desks, file cabinets, etc. should be closed when not in use. Do
not have more than one drawer open on a file cabinet at a time to prevent
tipping.
24. All four legs of chairs should be on the ground while in use. NO TIPPING
BACKWARDS.
25. Electrical outlets should be used only as intended and not overloaded.
26. Never use chairs or tables as ladders or platforms.
27. Wearing of radio headphones in the facility is prohibited. Portable
battery operated radios may be used, if the volume is kept to a minimum.
Abuse will result in the ban of all radios.
28. Machinery must be turned off when leaving your work area for an extended
time period, breaks, lunch, and at the end of your shift.
29. No open food containers or beverages are allowed in the work areas.
35
<PAGE>
Amendment C
Everest & Jennings, Inc.
Policy
================================================================================
SUBJECT: Absenteeism Page 1 of 2
================================================================================
This policy supersedes any prior absenteeism policy.
General:
Your attendance at work is very important to the Company as well as to your
fellow employees. Absenteeism and tardiness interrupt the flow of work which
causes imbalances in the availability of work. Therefore, employees who miss
work penalize those who do not. Your record of attendance is an important part
of your personnel file and may affect your ability to secure a promotion or
future employment. Excessive and habitual absenteeism or tardiness, regardless
of cause, cannot be tolerated.
Definition:
An absence is defined as any scheduled work day missed for reasons other than
death in the family, jury duty, or approved leave of absence. A scheduled day
includes properly notified mandatory overtime, and voluntary overtime (when an
employee volunteers to work overtime the time becomes a scheduled work day).
An illness of two (2) or more days will be counted as one (1) absence, ONLY if
the employee produces a doctor's excuse. A one (1) day's absence with a doctor's
excuse counts as one absence. In no case may an employee return to work without
a doctor's excuse after three (3) days or more of illness or injury.
Section I:
A tardy will be counted on your record as follows:
a. If you clock in one minute after your scheduled starting time, but less
than 61 minutes, you will be marked with one tardy on your attendance
record. Three tardies will equal one absence.
b. If you are tardy more than 60 minutes, but less than 240 minutes, this
will count as a half-day absence. Two half-day absences will be counted as
one absence.
c. Tardiness of 240 minutes or more, will count as one whole day absent.
36
<PAGE>
When an employee knows that he/she will be absent or late, the department
supervisor must be contacted or a message must be left on the attendance phone
(314) 770-5051, no later than one (1) hour after starting time, or it will be
considered a no-report absence. Any notification of an absence later than one
(1) hour after starting time, will be considered a no-report absence, unless
extenuating circumstances justify an exception.
Section II:
Each employee's daily attendance record will be kept by the department
supervisor and will be monitored by the Human Resources Department, so the
policy is applied consistently. Disciplinary action will be administered in the
following manner.
Step 1 - Verbal Warning:
If an employee is absent three (3) times (any combination of the
aforementioned definitions) within a 6-month period, that employee will be
given a verbal warning. This is recorded on a standard warning form and
filed in his/her personnel file.
Step 2 - Written Warning:
If an employee is absent four (4) times within a 6-month period, (any
combination of the definitions), the employee will receive a written
warning. At this time a discussion between the employee and supervisor
will be held to review the employee's attendance record.
Step 3 - Suspensions:
If an employee is absent five (5) times within a 6-month period, the
employee win receive a three (3) day suspension without pay. Two (2)
suspensions within one year will result in termination. At s time, a
discussion between the employee, supervisor, and Director of Human
Resources will be held to review the employee's attendance record and
possible avenues of correction.
Step 4 - Termination:
If an employee is absent six (6) times within a 6-month period, or has had
one suspension and eligible to receive a second suspension within a one
year period, the employee will be subject to termination.
Section III - No Report Absences:
An employee who does not call in to report his/her absence will be given an
immediate written warning (Step 2). Re-occurrences of not calling in (whether
consecutive or not) will result in progressive disciplinary action (Step 3 and
4) as outlined in
37
<PAGE>
Section II. Three no calls during length of employment will constitute
discharge. "Any notification of an absence later than one (1) hour after
starting time will be considered a no-call."
Exceptions:
The action described above may be modified if the Company believes that
extenuating circumstances justify an exception.
38
<PAGE>
Amendment
DRUG AND ALCOHOL-FREE WORKPLACE ACT OF 1988
The Everest & Jennings Company is committed to providing a drug and alcohol-free
workplace. Drug and alcohol abuse in the workplace is a threat to the safety and
health of our employees, and it jeopardizes the efficiency of our operations and
the quality of our products.
For these reasons, coming to work under the influence of drugs or alcohol, or
the unlawful manufacture, distribution, dispensation, possession or use of a
controlled substance in the workplace is prohibited. Further, employees must
notify the Human Resources Department of any criminal drug statute conviction
for a violation occurring on Company premises not later than five (5) days after
the conviction.
Pursuant to the Drug-Free Workplace Act of 1988, compliance with this policy is
specifically made a condition of employment at Everest & Jennings. An employee
who violates this policy will be subject to disciplinary action, up to and
including discharge.
Employees who believe they may have a drug or alcohol abuse problem are urged to
voluntarily and confidential come forward, so the company can assist them in
finding appropriate counseling and rehabilitation services. An employee who
voluntarily comes forward to seek such assistance before becoming involved in a
work related instance of policy violation will not be discharged.
39
<PAGE>
Schedule A
<TABLE>
<CAPTION>
Effective Effective Effective
September 13, 1996 September 13, 1997 September 13, 1998
Prob. Rate Job Rate Prob. Rate Job Rate Prob. Rate Job Rate
<S> <C> <C> <C> <C> <C> <C>
Group 1
Prod. Fab. 1 7.18 7.48 7.43 7.73 7.68 7.98
Warehouse Worker B 7.18 7.48 7.43 7.73 7.68 7.98
Group 2
Warehouse Worker A 7.93 8.23 8.18 8.48 8.43 8.73
Prod. Fab. 3 7.93 8.23 8.18 8.48 8.43 8.73
Inline Inspector 7.93 8.23 8.18 8.48 8.43 8.73
Parts Picker 7.93 8.23 8.18 8.48 8.43 8.73
Polisher 7.93 8.23 8.18 8.48 8.43 8.73
Group 3
Custom Upholstery 8.33 8.63 8.58 8.88 8.83 9.13
Hand Brazer 8.33 8.63 8.58 8.88 8.83 9.13
Lathe Mill/CNC Operator 8.33 8.63 8.58 8.88 8.83 9.13
Parts Coordinator 8.33 8.63 8.58 8.88 8.83 9.13
Group 4
Custom Assembler 8.78 9.08 9.03 9.33 9.28 9.58
Tig Welder 8.78 9.08 9.03 9.33 9.28 9.58
Utility Warehouser 8.78 9.08 9.03 9.33 9.28 9.58
Group 5
Machine Set Up/Operator 9.23 9.53 9.48 9.78 9.73 10.03
Receiving Inspector 9.23 9.53 9.48 9.78 9.73 10.03
</TABLE>
40
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Group 6
Custom Brazer 9.73 10.03 9.98 10.28 10.23 10.53
Group Lead Assembly 9.73 10.03 9.98 10.28 10.23 10.53
Custom Fabricator 9.73 10.03 9.98 10.28 10.23 10.53
Custom/Fab./Welding 9.73 10.03 9.98 10.28 10.23 10.53
Inspector
Group 7
CNC Programmer 10.33 10.63 10.58 10.88 10.83 11.13
Group Lead Brazing 10.33 10.63 10.58 10.88 10.83 11.13
Group Lead Custom 10.33 10.63 10.58 10.88 10.83 11.13
Group Lead Shipping 10.33 10.63 10.58 10.88 10.83 11.13
Group Lead Warehouse 10.33 10.63 10.58 10.88 10.83 11.13
Sr. Quality Auditor 10.33 10.63 10.58 10.88 10.83 11.13
Sr. Custom Brazer 10.33 10.63 10.58 10.88 10.83 11.13
Group 8
Truck Driver/CDL 10.88 11.18 11.13 11.43 11.38 11.68
Group 8
Maintenance Technical 13.35 13.65 13.60 13.90 13.85 14.15
</TABLE>
41
EXHIBIT 10 (vv)
Promissory Note dated as of December 10, 1996, in the principal amount of $4
million made by the Company and payable to BIL Securities (Offshore) Limited.
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THIS NOTE MAY NOT BE SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED
OF AND NO TRANSFER OF THIS NOTE TO A NON-AFFILIATE OF PAYEE
MAY BE MADE ON THE BOOKS OF THE COMPANY (I) WITHOUT THE
PRIOR WRITTEN CONSENT OF MAKER, (II) IN THE ABSENCE OF
REGISTRATION UNDER SAID ACT AND THE RULES AND REGULATIONS
THEREUNDER OR AN EXEMPTION THEREFROM AND (III) UNLESS
ACCOMPANIED BY AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY, THAT SUCH TRANSFER MAY BE EFFECTED WITHOUT
REGISTRATION UNDER SAID ACT OR THAT THIS NOTE HAS BEEN SO
REGISTERED UNDER A REGISTRATION STATEMENT WHICH IS IN
EFFECT AT THE DATE OF SUCH TRANSFER. THIS NOTE IS SUBJECT
TO THE SUBORDINATION AGREEMENT, DATED DECEMBER 10, 1996,
AMONG THE MAKER, THE PAYEE AND IBJ SCHRODER BANK & TRUST
COMPANY, AS AGENT, UNDER WHICH THIS NOTE AND THE MAKER'S
OBLIGATIONS HEREUNDER ARE SUBORDINATED IN THE MANNER SET
FORTH THEREIN TO THE PRIOR PAYMENT OF CERTAIN OBLIGATIONS
TO THE HOLDERS OF SENIOR INDEBTEDNESS AS DEFINED THEREIN.
$4,000,000 December 10, 1996
GRAHAM-FIELD HEALTH PRODUCTS, INC.
7.7% Note due April 1, 2001
FOR VALUE RECEIVED, GRAHAM-FIELD HEALTH PRODUCTS, INC., a Delaware
corporation (together with its successors and permitted assigns, the "Maker"),
hereby promises to pay to BIL SECURITIES (OFFSHORE) LIMITED, a company
incorporated in New Zealand with its principal office at 22-24 Victoria Street,
Wellington, New Zealand, or its registered assigns (the "Payee"), the principal
sum of four million Dollars ($4,000,000), in the manner described below and to
pay to the Payee interest on the unpaid principal amount of this Note (as
modified and supplemented and in effect from time to time, the "Note") in the
manner described below. The principal amount of this Note shall be payable on
April 1, 2001 (the "Principal Payment Date"). Interest shall accrue on the
unpaid principal amount of this Note at a rate per annum equal to seven and
seven tenths percent (7.7%). Maker shall pay interest on principal which is
overdue by 10 days at a rate equal to 2% per annum in excess of the then
applicable interest rate on this Note to the extent lawful and shall pay
interest (including post-petition interest in any proceeding under applicable
bankruptcy law) on installments of interest overdue by ten days at the same rate
to the extent
<PAGE>
lawful. Accrued interest shall be payable in arrears on each Quarterly Payment
Date and on the Principal Payment Date. "Quarterly Payment Date" means the last
Business Day of March, June, September and December in each year, commencing
with the first such day after the date hereof and ending with the last such day
prior to the Principal Payment Date. Interest on this Note shall be computed on
the basis of a year of 365 or 366 days (as the case may be) and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable. Capitalized terms used but not otherwise defined
herein have the respective meanings given to such terms in the Revolving Credit
and Security Agreement dated as of December 10, 1996 among the Maker,
Graham-Field, Inc., Graham-Field Express, Inc., Graham-Field Temco, Inc., Graham
Field Distribution Inc., Graham-Field Bandage, Inc., Graham-Field Express
(Puerto Rico), Inc., Everest & Jennings, Inc., the financial institutions party
thereto (collectively, the "Lenders") and IBJ Schroder Bank & Trust Company, as
agent for the Lenders (in such capacity, "Agent"), as the same shall be amended,
modified or supplemented and in effect from time to time (the "Revolving Credit
and Security Agreement"). Maker has on the date of delivery hereof delivered to
Payee a true and complete copy of the Revolving Credit and Security Agreement
containing such incorporated defined terms and shall provide Payee with a true
and complete copy of any amendment, modification or supplement thereto within
five (5) Business Days after the same shall come into effect. If the Revolving
Credit and Security Agreement is not in effect at any time, the incorporated
defined terms not otherwise defined herein shall have the respective meanings
given to such terms in the Revolving Credit and Security Agreement as last in
effect.
This is the Subordinated Note issued pursuant to Section 2.02(b)(v)
of the Amended and Restated Agreement and Plan of Merger dated as of September
3, 1996 and amended as of October 1, 1996 by and among the Maker, Payee, E&J
Acquisition Corp. and Everest & Jennings International Ltd. (the "Merger
Agreement"). By its acceptance hereto, the Payee agrees to its terms.
ARTICLE 1
PAYMENTS AND PREPAYMENTS
Section 1.1 Payments Generally. All payments of principal and
interest to be made by the Maker under this Note shall be made in Dollars, in
immediately available funds, by wire transfer to the account specified below the
Payee's name on the signature page hereof, or to such other account at a
commercial bank located in the United States of America identified in a notice
to the Maker not later than two Business Days prior to the date of such payment,
not later than 11:00 a.m. New York time on the date on which such payment shall
become due (each such payment made after such time on such due date to be deemed
to have been made on the next succeeding Business Day). If the due
2
<PAGE>
date of any payment under this Note would otherwise fall on a day that is not a
Business Day, such due date shall be extended to the next succeeding Business
Day, and interest shall be payable on any principal so extended for the period
of such extension. All amounts payable under this Note shall be paid free and
clear of, and without reduction by reason of, any deduction, set-off or
counterclaim.
Section 1.2 Reduction of Principal. In the event punitive damages
are awarded against Maker or any of its Subsidiaries which relate to any of the
existing product liability claims of Everest and Jennings International Ltd.
and/or its Subsidiaries as set forth on Exhibit I hereto involving a death prior
to September 3, 1996 and Maker or any of its Subsidiaries are required to make
any payment with respect to the award of punitive damages (a "Punitive Damage
Payment"), after giving effect to any insurance coverage, if any, then the
principal amount of this Note shall be reduced by such Punitive Damage Payment.
Section 1.3 Prepayments. The Maker may at any time and from time to
time, at its option, prepay this Note without penalty or premium (in an amount
up to but not exceeding the unpaid principal amount hereof and any accrued
interest hereon) in whole or in part. Any prepayment of this Note shall be
applied first to the accrued and unpaid interest hereon and then to the unpaid
principal hereof.
ARTICLE 2
SUBORDINATION
This Note is subject to the Subordination Agreement, dated December
10, 1996, among the Maker, the Payee and Agent, under which this Note and the
Maker's obligations hereunder are subordinated in the manner set forth therein
to the prior payment of certain obligations to the holders of Senior
Indebtedness as defined therein.
ARTICLE 3
COVENANTS
The Maker shall, until payment in full of and termination of this
Note:
Section 3.1 Cash Flow Coverage Ratio. Cause to be maintained a Cash
Flow Coverage Ratio for the Maker:
3
<PAGE>
(a) of not less than .86 to 1.00 at the end of the fiscal quarter
ending June 30, 1997 for the immediately preceding three
months;
(b) of not less than .90 to 1.00 at the end of the fiscal quarter
ending September 30, 1997 for the immediately preceding six
(6) month period:
(c) of not less than .93 to 1.00 at the end of the fiscal quarter
ending December 31, 1997 for the immediately preceding nine
(9) month period; and
(d) of not less than .93 to 1.00 at the end of the fiscal quarter
ending March 31, 1998, and at the end of each fiscal quarter
thereafter, with respect to the four (4) fiscal quarters then
ended.
Section 3.2 Leverage Ratio. Maintain a Leverage Ratio of not greater
than 1.87 to 1.00 at the end of any fiscal quarter commencing with the fiscal
quarter ending June 30, 1997.
Section 3.3 Notices. Provide to the Payee copies of any notices of
default, requests for waivers and waivers under the Revolving Credit and
Security Agreement (within three (3) Business Days of receipt thereof by the
Maker) and all compliance certificates and other information from time to time
delivered thereunder by the Maker.
ARTICLE 4
EVENTS OF DEFAULT
Section 4.1 Events of Defaults. The occurrence of one or more of the
following events shall constitute an "Event of Default" for the purposes of this
Note:
(a) the Maker fails to pay any amount owing under this Note when
due (whether at stated maturity, by acceleration, upon
mandatory prepayment or otherwise) and such default (other
than a failure to pay principal when due) continues for a
period of five (5) consecutive Business Days;
(b) the Maker fails to (i) pay any amount owing under the
Revolving Credit and Security Agreement when due (whether at
stated maturity, by acceleration, upon mandatory prepayment or
otherwise) or (ii) perform, observe or discharge any other
material covenant, condition or obligation in the Revolving
Credit and Security Agreement, if following such failure the
Senior Lender has caused the Senior Indebtedness or any part
thereof to become due and payable prior to the
4
<PAGE>
date on which it would otherwise have become due and payable
by its terms;
(c) the Maker shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian,
trustee, examiner or liquidator of itself or of all or a
substantial part of its assets or property, (ii) make a
general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the Federal Bankruptcy Code,
(iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert
in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under
the Federal Bankruptcy Code, (vi) generally fail to pay its
debts as they become due or (vii) take any corporate action
for the purpose of effecting any of the foregoing; or
(d) a proceeding or case shall be commenced, without the
application or consent of the Maker, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of the
Maker or of all or any substantial part of its property, or
(iii) similar relief in respect of the Maker under any law
relating to bankruptcy, insolvency, reorganization or
winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a
period of sixty (60) or more days; or an order for relief
against the Maker shall be entered in an involuntary case
under the Federal Bankruptcy Code;
(e) the Maker shall fail to comply with any of its material
agreements or covenants in, or provisions of, this Note or the
Stockholder Agreement or the Registration Rights Agreement (as
such terms are defined in the Merger Agreement) and such
failure continues for the period of thirty (30) days after the
Maker's receipt of written notice of such default; provided,
however, such non- compliance shall not constitute an Event of
Default if and so long as the Maker is attempting in good
faith to cure such non-compliance within a reasonable period
after such 30 day period.
Section 4.2 Acceleration of Maturity; Rescission and Annulment. If
any Event of Default specified in paragraphs (a),
5
<PAGE>
(b) or (e) of Section 4.1 hereof occurs and is continuing, then and in every
such case the Payee may declare the principal of this Note and accrued interest
thereon to be due and payable immediately, by a notice in writing to the Maker,
and upon any such declaration such principal shall become due and payable
immediately without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Maker. If any Event of
Default specified in paragraphs (c) or (d) of Section 4.1 hereof occurs, the
principal of this Note and accrued interest thereon shall automatically become
due and payable immediately without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the Maker.
Notwithstanding any of the foregoing, at any time after such a
declaration of acceleration has been made and before a judgment or decree for
payment of the money due has been obtained, the Payee may rescind and annul such
declaration and its consequences if it so notifies the Maker of its desire to do
so. No such rescission and annulment shall affect any subsequent default or
impair any right consequent thereon.
ARTICLE 5
WAIVER AND AMENDMENT
Section 5.1 Amendment. No amendment of this Note shall be effective
unless in writing and signed by the Payee and the Maker.
Section 5.2 Waiver. No waiver of any provision of this Note shall be
effective unless in writing and signed by the Payee.
Section 5.3 Waiver of Past Defaults. The Payee may waive any past
default hereunder and its consequences. Upon and to the extent of any such
waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Note, but
no such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Notices. All notices and other communications in respect
of this Note (including, without limitation, any modifications of, or requests,
waivers or consents under, this Note) shall be given or made in writing
(including, without limitation, by telecopy) to the Maker or the Payee, as the
case may be, at the applicable "Address for
6
<PAGE>
Notices" specified on the signature page hereof; or at such other address as
shall be designated by any such party in a notice to the other party. Except as
otherwise provided in this Note, all such communications shall be deemed to have
been duly given when transmitted by telecopier or personally delivered or, in
the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
Section 6.2 Governing Law. This Note shall be governed by, and
construed in accordance with, the law of the State of New York without regard to
the conflicts of laws provisions thereof.
Section 6.3 No Adverse Interpretation of Other Agreements. No other
indenture, loan or debt agreement of the Maker may be used to interpret this
Note.
Section 6.4 Assignment. The Payee may not sell, assign, pledge,
hypothecate or otherwise transfer or dispose of this Note or any of its rights
or obligations hereunder without the prior written consent of the Maker;
provided, however the Payee may sell, assign, pledge, hypothecate or otherwise
transfer or dispose of this Note to an Affiliate of the Payee without the prior
written consent of the Maker. This Note and all agreements of the Maker in this
Note are binding upon the Maker and its successors and assigns.
Section 6.5 Severability. In case any provision in this Note shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 6.6 Headings, etc. The headings of the Articles and Sections
of this Note have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
7
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this Note to be executed by
its duly authorized officer.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By:_____________________________
Name:
Title:
Address for Notices:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Facsimile No.: (516) 582-5608
Attention: Richard S. Kolodny
ACCEPTED BY PAYEE:
BIL SECURITIES (OFFSHORE) LIMITED
By:_____________________________
Name:
Title:
Address for Notices:
BIL SECURITIES (OFFSHORE) LIMITED
c/o Brierley Investments Limited
P.O. Box 5018
Level 6 Colonial Building
22-24 Victoria Street
Wellington, New Zealand
Facsimile No.: 011-64-4-473-1631
Attention: Company Secretary
Wire Transfer Instructions:
National Australia Bank New York
Wall Street
A/c Bank of New Zealand Head Office
Favour: Brierley Investments
Limited
A/c No.: 422 500
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Forms S-8, No. 33-37179, No. 33-38656, No. 33-48860, No. 033-60679, No.
333-16993, and Post-Effective Amendment No. 1 to Registration Statements on Form
S-8 (No. 33-37179 and No. 33-38656)) pertaining to the Incentive Program, as
amended, of Graham-Field Health Products, Inc. and the Registration Statement on
Form S-3 (No. 3-57066) of our report dated March 10, 1997, with respect to the
consolidated financial statements and schedule of Graham-Field Health Products,
Inc. included in the Annual Report (Form 10-K) for the year ended December 31,
1996.
/s/ Ernst & Young LLP
Melville, New York
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1996 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AS INCLUDED IN THE FORM 10K
FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,552
<SECURITIES> 0
<RECEIVABLES> 43,651
<ALLOWANCES> 0
<INVENTORY> 45,810
<CURRENT-ASSETS> 94,270
<PP&E> 10,771
<DEPRECIATION> 0
<TOTAL-ASSETS> 202,476
<CURRENT-LIABILITIES> 81,865
<BONDS> 6,057
0
31,600
<COMMON> 467
<OTHER-SE> 80,735
<TOTAL-LIABILITY-AND-EQUITY> 202,476
<SALES> 126,715
<TOTAL-REVENUES> 127,245
<CGS> 86,315
<TOTAL-COSTS> 86,315
<OTHER-EXPENSES> 57,980
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,492
<INCOME-PRETAX> (9,542)
<INCOME-TAX> 2,673
<INCOME-CONTINUING> (12,215)
<DISCONTINUED> 0
<EXTRAORDINARY> (736)
<CHANGES> 0
<NET-INCOME> (12,951)
<EPS-PRIMARY> (.89)
<EPS-DILUTED> (.89)
</TABLE>
