<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(Mark One)
[X]ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended October 29, 1995
OR
[_]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from....................... to........................
Commission file number 0-14365
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ALPHA TECHNOLOGIES GROUP, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 76-0079338
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
750 LEXINGTON AVENUE
27TH FLOOR
NEW YORK, NEW YORK 10022-1208
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 446-5258
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SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
None
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
Common Stock, $.03 par value
(TITLE OF EACH CLASS)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year.
$64,116,000 for the fiscal year ended October 29, 1995
State the aggregate market value of the voting stock held by non-affiliates
of the issuer.
$37,118,112 at January 19, 1996
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Common Stock, 6,142,441 shares outstanding at January 19, 1996
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DOCUMENTS INCORPORATED BY REFERENCE
The Company's definitive proxy statement to be filed on or about February 26,
1996 is incorporated by reference into Part III of this report.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Alpha Technologies Group, Inc. ("Alpha" or the "Company"), through its
wholly-owned subsidiary, Wakefield Engineering, Inc. ("Wakefield"), and its
80%-owned subsidiary, Uni-Star Industries, Inc. ("Uni-Star"), designs,
manufactures and sells thermal management products and connectors. The
Company's thermal management products serve the microprocessor, computer,
consumer electronics, transportation and other industries, and its connector
products serve the defense, telecommunications, automotive and aerospace
industries. Thermal management products, principally heat sinks, remove excess
heat generated by electronic components within personal computers, power
supplies, stereo amplifiers and other electronic systems. The Company also
designs, manufactures and sells miniature and micro-miniature connectors to
meet rigid industrial and military specifications. Most of the Company's
connectors are customized products sold to niche markets.
The Company was incorporated under its original corporate name, Synercom
Technology, Inc., in Texas in 1969, as a software company, and was
reincorporated in Delaware in 1983. In 1993, the Company began its
transformation from a software company to its current business. In September of
1994, the Company sold the remaining aspects of its software and related
services business ("Information Solutions Segment" or "ISS"). Since October
1993, the Company has grown through a combination of acquisitions and internal
growth.
Acquisitions
The following table sets forth the significant acquisitions made by the
Company during the last three fiscal years:
<TABLE>
<CAPTION>
MONTH ACQUIRED BUSINESS
-------------- --------
<C> <S>
October 1993........................ Thermal management operations in
Wakefield and Fall River, Massachusetts
("Wakefield")
June 1994........................... Connector and related product operations
in South Pasadena, California,
Montgomeryville, Pennsylvania and
Cincinnati, Ohio ("Uni-Star")
August 1994......................... Thermal management operations in
Temecula, California ("Ahamtor")
June 1995........................... Aluminum extrusion operations in
Fullerton, California ("Specialty")
</TABLE>
Wakefield is a wholly-owned subsidiary of the Company; Ahamtor is a division
of Wakefield and Specialty is a wholly-owned subsidiary of Wakefield. Uni-Star
is an 80%-owned subsidiary of the Company.
Discontinued Operation
In September of 1994, the Company sold the assets and business of ISS for
$4,000,000, of which $2,000,000 was paid at closing, $1,000,000 was paid in
January of 1995 and the final $1,000,000 was paid in March of 1995.
PRODUCTS
Thermal Management
Thermal management products are designed to dissipate heat generated within
electronic components and systems. The Company designs, manufactures and sells
thermal management products which serve a
<PAGE>
variety of industries, including the microprocessor, computer, consumer
electronics, industrial control, medical instrumentation, laser, power supply
and conversion, telecommunication equipment, transportation and welding
equipment industries. Company customers for thermal management products include
leading original equipment manufacturers ("OEMs") of electronic equipment.
The Company's principal thermal management products include:
Penguin(TM) Coolers........ Heat sinks specifically designed for high-
performance micro-processors and personal
computers. These are used to solve thermal
problems of Pentium and certain 486 and PowerPC
products. Other microprocessor-specific products
include fan heat sink assemblies (heat sinks with
electric fans attached to them) and aluminum
impregnated plastic heat sinks.
Extruded Heat Sinks........ Heat sinks and heat sink assemblies designed for
high power industrial applications, including
transportation and stereo amplifiers and bonded
fin heat sinks used by makers of power supplies.
Low Power Heat Sinks....... Heat sinks designed for heat dissipation in power
semiconductors, transistors, rectifiers, diodes
and other electronic components used in
electronic applications. Typically, these are
smaller components used on printed circuit
boards.
Active Cooling Components.. These products use air or liquid to dissipate
heat. Air-to-air heat exchangers use fans to
exchange heat with cooler air and are used in
high-performance telecommunications, military and
aerospace systems. Liquid cooling systems are
used in applications which require the removal of
significantly greater amounts of heat such as
mainframe computers.
Precision Compression
Mounting Clamp Systems..... These products are complete mounting clamp and
heat sink assembly systems for proper
installation, compression and cooling of high-
power compression pack silicon-controlled
rectifiers.
Accessory Products......... The Company's accessories include high-
performance thermal compounds, adhesives,
interface materials, hardware and installation
tools and other accessories.
Connectors
Connectors are electro-mechanical devices which permit electronic components
such as printed circuit boards, power supplies and peripherals to be attached
and separated. The Company designs, manufactures and sells high-reliability
miniature and micro-miniature connectors used in military-specification and
high-performance applications. The Company's connector products are typically
produced in small volumes for niche markets and are highly customized for the
user's specific requirements. Connectors are required in many applications and
are used in a diverse group of industries, including the military, aerospace,
medical instrumentation and telecommunication industries. The Company's
products also include backpanels, headers and automotive switches.
The Company's connector products include:
Micro-Miniature
Rectangular Connectors..... Connectors which are configured in one to four
rows with up to 400 contacts and designed for
high reliability military and commercial
applications.
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Coaxial Connectors......... Coaxial connectors are single contact miniature
and micro-miniature devices used predominantly in
high reliability communications and control
systems.
Circular Connectors........ The Company produces numerous families of
circular connectors, including hermetic
connectors. Hermetic connectors are designed and
produced to be impervious to liquids and gases
and to function in severe environmental areas
such as jet engines and various instrumentation
and manufacturing systems.
Backpanels and Headers..... Backpanels are manufactured either as aluminum or
printed circuit card units for use in control
systems and avionics. The Company also produces
VME (an international specification) backpanels
and systems enclosures containing backpanels. The
Company also provides automatic wire wrapping
services, which permit engineers to test and de-
bug prototype boards before producing printed
circuit cards.
Automotive Switches........ The Company's automotive switches are used for
brake lights, door jams, cruise control, neutral
safety start, junction blocks and other
automotive uses.
Telephone Module Plugs..... Modular plugs are available for telephones and
other applications.
CUSTOMERS
The Company has established a broad base of over three thousand customers,
representing a wide range of industries. Customers for thermal management
products include leading original equipment manufacturers ("OEMs") of
electronic equipment. Customers for connector products are major aerospace and
military system and subsystem suppliers.
No single customer accounted for greater than 10% of the Company's revenues
during its fiscal year 1994 or 1995. The electronics industry, especially the
high-performance microprocessor and personal computer markets, represents the
Company's fastest growing customer group. Sales of the Company's thermal
management products in the microprocessor industry accounted for most of the
growth of such sales in the fiscal year ended October 29, 1995. Generally,
sales of connectors to the defense industry account for approximately 50% of
connector sales.
The Company's products are incorporated into high technology products
manufactured by OEMs and, accordingly, must meet exacting specifications. A
substantial portion of the Company's OEM customers require the Company to
qualify as an approved supplier. In order to so qualify, the Company must
satisfy stringent quality control standards and undergo extensive in-plant
inspections of its manufacturing processes, equipment and quality control
systems.
SALES, MARKETING, AND DISTRIBUTION
The Company designs, manufactures and sells both standard and customized
products. The Company seeks to become a strategic supplier to its customers and
to differentiate itself from its competitors by offering a higher level of
service and technical sales support to its customers. The Company has a team of
trained technical applications engineers and technicians who are dedicated to
providing ongoing technical support. These engineers and technicians develop
application-related literature, provide answers to customers' questions on the
use and application of the Company's products and provide field support to
customers. In addition, the Company has entered into a joint marketing
relationship with Flomerics, the developer of FLOtherm, a software used by
engineers to design new thermal management products, to make joint
presentations at trade shows and for Flomerics to feature products developed by
the Company in its demonstrations. The Company believes the technical services
provided by its engineers and technicians are an important factor in its sales
and product development efforts.
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The Company sells its products through in-house sales personnel and a network
of independent contract manufacturers' representatives and distributors. In
North America, thermal management products are marketed through a seven-person
direct sales force, 21 sales representatives and 51 distributors, and
connectors are marketed through 17 manufacturers' representatives supported by
the Company's seven-person sales force. In international markets, the Company
uses nine manufacturers' representatives and 19 international distributors.
International sales of connector products are supported by two Company
facilities located in England and France, which also assemble and sell micro-
miniature connectors for the European market.
In general, the Company's sales representatives and distributors have entered
into agreements that allow for termination by either party upon 30 to 90 days
notice. Generally, distributors are permitted to return a small portion of
products purchased by them during the term of the agreements and to return all
products (other than obsolete products) purchased by them upon termination by
the Company, historically such returns have been minimal. The Company's
distributors are generally not precluded from marketing competitive products.
RESEARCH AND PRODUCT DEVELOPMENT
The Company's product development strategy is focused on engineering
modifications of existing products in response to customer needs. The Company
does not focus on the development of entirely new products or materials. During
fiscal 1994, the Company spent $674,000 on product research and development,
and during fiscal 1995, it spent $1,109,000, primarily for development of
thermal management products. The Company believes that its technical
capabilities, in conjunction with collaborative efforts with customers, will
allow it to continue to introduce products responsively and quickly.
The Company is currently developing standard and custom heat sink assemblies
for next generation microprocessors, such as the P6 (Pentium Pro) and P7. In
addition, the Company plans to expand product offerings for many types of low
power heat sinks and to expand its collaboration programs with manufacturers of
alternative materials to achieve cost reduction and performance improvements
for thermal management components.
The Company intends to continue developing new connector products by
modifying and enhancing its current products as well as internally developing
new product lines. In keeping with this strategy, the Company is currently
designing and developing its next generation micro-miniature connector family,
which it expects will quadruple connection capacity in a given space. The
Company expects to begin marketing these products in 1996.
COMPETITION
The thermal management market is highly competitive. There are several
companies which compete directly with the Company in the thermal management
business and offer products and services similar to those offered by the
Company. Although no one competitor is dominant, there are four principal
competitors in the thermal management market, including the Company. The
Company's three major competitors are Aavid Thermal Technologies, Inc., IERC, a
division of Dynamics Corporation of America, and Thermalloy, a division of
Bowthorpe, plc. Two of the Company's thermal management product competitors are
divisions of larger corporations and, as such, have significantly greater
financial, marketing and technical resources than the Company. Additional
competition comes from hundreds of small machine shops located throughout the
country.
The connector industry is highly fragmented with competition drawn along very
specific product lines. The larger connector companies, which include AMP,
Molex, ITT and Labinal, are large multi-national companies. These firms have
financial, marketing and technical resources far greater than the Company's.
Typically, these firms manufacture mass market, large volume standardized
products which do not compete directly with the Company's product lines. The
Company's principal competition in its connector operations,
4
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comes from smaller niche-oriented companies which, like the Company, focus on
low volume customized products. Occasionally, the Company competes with smaller
divisions of the larger firms. The Company's direct competitors include HCC and
Deutsch in the hermetic connector market, CTS's Fabritek division and Teradyne
in the backpanel and header market, and ITT's Cannon division and Labinal's
Cinch division in the miniature and micro-miniature connector market.
The Company seeks to offer its customers customized value-added products that
meet their individual needs. By maintaining a strong engineering capability,
the Company is able to provide products that meet customer specifications in a
timely manner.
BACKLOG
The Company's backlog as of October 29, 1995 was approximately $21.1 million
compared with $9.5 million on October 31, 1994. Backlog typically consists of
purchase orders scheduled for shipment within 60 days following the order date
for thermal management products and 90 days for connector products. The
Company's backlog at any time is not indicative of future revenue. The Company
has also entered into buying agreements with several customers for its
connectors, including Lockheed Martin, Raytheon and Rockwell International.
These buying agreements generally provide that, for a term of 18 months to two
years, a customer will purchase all its requirements, if any, for a particular
product from the Company for a fixed price.
PROPRIETARY RIGHTS
The Company applies for patents with respect to its most significant
patentable developments. It owns seven patents related to its thermal
management products which expire from 1997 to 2012, and it has five patents
pending. The Company owns 12 patents related to its connector products.
Management believes that its competitive position is not dependent on patents
and that patent expirations will not materially adversely affect the Company's
competitive position.
RAW MATERIALS
The principal raw material used in thermal management products is aluminum.
The principal raw materials used in connector products are aluminum, copper,
stainless steel and steel alloy. The Company also uses gold, plating chemicals,
plastics, bar metal and wire in its production of connectors. The price of raw
materials represents a significant portion of the cost of the Company's
products. With the exception of a portion of the Company's extruded aluminum
needs supplied under a one-year fixed price contract, these prices are based
upon market prices at the time of purchase. Historically, the price of aluminum
has experienced substantial volatility. Although thermal management products
are generally shipped within 60 days and connectors are generally shipped
within 90 days, of receipt of orders, increases in raw materials prices cannot
always be reflected in product sales price. All raw materials are readily
available from multiple suppliers at competitive prices. In addition, Specialty
supplies a portion of the Company's needs for extruded aluminum.
ENVIRONMENTAL
The Company believes that it conducts its operations in substantial
compliance with applicable environmental requirements.
The Company uses several metal finishing processes in conjunction with
manufacturing its products. Anodizing, a method of electro-charging aluminum
and coating it with chemicals to enhance appearance and improve corrosion
resistance, is used in manufacturing heat sinks and certain other thermal
management products. Anodizing is done by the Company at its Fall River,
Massachusetts facility. A waste-product of the anodizing process is removed
from the Fall River facility by licensed waste haulers. The Company's Temecula,
California thermal management facility utilizes fully licensed third party
vendors to anodize its products. The Company also uses plating in its connector
operations to improve the products' appearance,
5
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provide corrosion protection and, in some cases, enhance conductivity. The
Company's connector facilities in South Pasadena, California and Cincinnati,
Ohio include precious metal plating operations. These operations generate small
amounts of toxic waste, which are removed from the facilities by licensed waste
haulers.
While the Company believes that it has all environmental permits necessary to
conduct its business and that its activities conform to current environmental
regulations, more stringent environmental regulations may be enacted in the
future, and there can be no assurance that the Company will not incur
significant costs in the future in complying with such regulations. Local
environmental agencies monitor the Company's operations for ongoing compliance
with environmental requirements, and the Company is required to correct any
violations revealed by such monitoring. Although the Company is periodically
subject to notices of violations with respect to environmental requirements, it
is not aware of any violations that would require the Company to incur material
cost, nor has the cost of complying with environmental laws represented a
material cost to the Company.
EMPLOYEES
On October 29, 1995, the Company had 693 employees (665 of whom were full
time). Its thermal management operations had 400 employees (388 of whom were
full time), all in domestic operations, and its connector operations had 277
employees in domestic operations (263 of whom were full time) and eight
residents outside the United States (all of whom were full time). In addition,
the Company had 8 corporate employees (6 of whom were full time). Employees are
not represented by a labor union. Management believes that employee relations
are excellent.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company has leases for manufacturing facilities at the following
locations:
<TABLE>
<CAPTION>
APPROXIMATE EXPIRATION
LOCATION SQUARE FEET PRINCIPAL FACILITY USE DATE
-------- ----------- --------------------------- -------------
<S> <C> <C> <C>
South Pasadena,
California.............. 52,696 connectors May 2004
Temecula, California..... 44,200 thermal management products November 2004
Fullerton, California.... 15,000 thermal management products August 1998
Cincinnati, Ohio......... 18,000 connectors November 1999
Wakefield, Massachusetts. 56,500 thermal management products November 2003
Fall River,
Massachusetts........... 60,000 thermal management products April 2000
Colmar, Pennsylvania..... 37,000 connectors March 2000
</TABLE>
Management feels that these facilities are in good condition and suitable for
the purposes for which they are used. The Company has office space for its
corporate staff in Houston, Texas, Santa Monica, California and New York, New
York.
In addition, the Company currently has approximately 67,000 square feet of
leased space in Houston, Texas, substantially all of which is subleased under
subleases which expire concurrently with the Company's overlease in 1998. See
Note 9 to Financial Statements.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings against the Company and, to
the Company's knowledge, no such proceedings are threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of fiscal 1995 to a vote
of the holders of the Company's common stock, through the solicitation of
proxies or otherwise.
6
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET FOR COMMON STOCK
The Company's common stock is traded on The Nasdaq Stock Market, National
Market System (NMS) under the symbol ATGI. Through the facilities of the
NASDAQ/NMS reporting system, actual sales prices of the Company's common stock
are available.
The following table sets forth the high and low sales prices of the Company's
common stock as reported on the NASDAQ National Market System for each full
quarterly period within the Company's two most recent fiscal years:
<TABLE>
<CAPTION>
1994 HIGH LOW
---- ---- ---
<S> <C> <C>
First Quarter................. 3 1/8 2 9/16
Second Quarter................ 4 2 5/8
Third Quarter................. 3 3/4 3
Fourth Quarter................ 5 3/8 3 3/8
<CAPTION>
1995 HIGH LOW
---- ---- ---
<S> <C> <C>
First Quarter................. 6 4 7/8
Second Quarter................ 7 1/8 4 7/8
Third Quarter................. 12 3/8 5 1/4
Fourth Quarter................ 13 3/8 8 3/8
</TABLE>
HOLDERS OF RECORD
On December 29, 1995, there were approximately 227 holders of record of the
Company's common stock.
DIVIDENDS
The Company has paid no cash dividends on its common stock during fiscal
years 1994 and 1995. The Board of Directors of the Company currently intends to
retain earnings for further business development and, therefore, does not
intend to pay cash dividends on its common stock in the foreseeable future.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
CONDITION.
OVERVIEW
The Company entered the electronic components business in October 1993. The
following table sets forth the significant acquisitions made by the Company
during the last three fiscal years:
<TABLE>
<CAPTION>
DATE ACQUIRED BUSINESS
------------- --------
<C> <S>
October 1993........................ Thermal management operations in
Wakefield and Fall River, Massachusetts
("Wakefield")
June 1994........................... Connector and related product operations
in South Pasadena, California,
Montgomeryville, Pennsylvania and
Cincinnati, Ohio ("Uni-Star")
August 1994......................... Thermal management operations in
Temecula, California ("Ahamtor")
June 1995........................... Aluminum extrusion operations in
Fullerton, California ("Specialty")
</TABLE>
The results of operations acquired are included in the Company's consolidated
results of operations only since their respective acquisition dates. In
September 1994, the Company sold the assets and business of its Information
Solutions Segment ("ISS") and is no longer in the software business. The
consolidated financial statements of the Company report separately the net
assets, gain on the sale and results of operations of such discontinued
operation. Such operation is not included in the following discussion.
RESULTS OF OPERATIONS
Sales. Total sales were $64,116,000 in fiscal year 1995 as compared to
$30,145,000 in fiscal 1994, an increase of $33,971,000 or 112.7%. Thermal
management sales increased to $43,865,000 in fiscal 1995 from $20,758,000 in
fiscal 1994. This 111.3% increase in thermal management sales was due to
internal growth of 66.1% and Ahamtor and Specialty sales from the dates of
acquisition. Internal growth was due to higher sales of extruded heat sink
products, primarily Penguin Coolers, related to the rapid growth of the high-
performance microprocessor market. Connector sales were $20,251,000 during
fiscal 1995 compared to $9,387,000 during fiscal 1994. Fiscal year 1994
included only five months of connector sales following the acquisition of Uni-
Star on June 1, 1994; however, connector sales for the 1994 period were above
average because products were shipped under backorders existing at the time of
acquisition.
Gross Profit. The Company's gross profit as a percent of total revenues
("gross profit percentage") for fiscal 1995 was 26.9% compared to 31.6% for
fiscal 1994. This decrease in gross profit percentage was a result of (i) the
inclusion in the 1995 period of Ahamtor and Specialty, which have lower gross
profit percentages than the Company's average, (ii) an increase in the cost of
aluminum, a portion of which could not be reflected in the sales price of the
Company's products, (iii) a significant increase in sales of Penguin Coolers,
which have a lower gross profit percentage than the Company's average, (iv) a
high gross profit contribution during the 1994 period from backorders existing
at the time of the acquisition of Uni-Star and (v) a change in the mix of
products sold from higher margin customized connector products to lower margin
standard connector products.
Research and Development Expense. Research and development expense includes
the cost of enhancing existing products and, to a lesser extent, the cost of
developing new products. Research and development expenses were $1,109,000 in
fiscal 1995 compared to $674,000 in fiscal 1994. The increase was due to an
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increase in engineering staff as well as new licensing costs for engineering
software and the purchase of related workstations.
Selling, General and Administrative Expense. Selling, general and
administrative expenses during fiscal 1995 were $11,941,000, or 18.6% of sales,
compared to $6,572,000, or 21.8% of sales, during the prior fiscal year. This
decrease in selling, general and administrative expenses as a percentage of
sales for fiscal 1995 compared to fiscal 1994 was primarily attributable to
increased sales without a proportionate increase in selling, general and
administrative expenses.
Investment Income. In the past, the Company held marketable securities for
both strategic and investment purposes. Securities held for investment purposes
were reflected at fair market value, and the gain or loss was reflected in
investment income. Securities held for strategic purposes were reflected at
fair market value with the unrealized gain or loss thereon reflected in
stockholders' equity. The gain or loss on such securities was reflected as
investment income only upon sale. Investment income for fiscal 1995 included
$55,000 of investment security gains and $199,000 of gains on sales of
strategic investment securities. In September 1995, the Company adopted a
policy precluding any equity investments other than for strategic purposes. The
Company currently has no investment in marketable securities.
Interest Income (Net). Interest income, which was $263,000 for fiscal 1995
and $168,000 for fiscal 1994, was earned on excess cash. Interest expense was
$775,000 for fiscal 1995 and $131,000 for fiscal 1994.
Income Taxes. The Company's provision for income taxes was impacted
substantially by tax benefits from net operating loss carryforwards ("NOL
Carryforwards"). The Company's tax provision is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL FISCAL
1994 1995
------- -------
<S> <C> <C>
Income before tax...................................... $ 2,456 $ 3,959
======= =======
Tax at Federal statutory rate (34%).................... $ 835 $ 1,346
State taxes, net of federal benefit.................... 305 311
Net reversal of Valuation Allowance.................... (2,846) (1,972)
Effects of discontinued operations and other........... 846 174
------- -------
Income tax (benefit)................................... $ (860) $ (141)
======= =======
</TABLE>
On November 1, 1993, the Company implemented Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement 109").
On that date, the Company had NOL Carryforwards of $23,214,000, which resulted
in a potential future tax benefit of $7,893,000 (34% of the NOL Carryforwards).
In addition to tax benefits related to NOL Carryforwards, the Company had net
tax benefits of $814,000 related to tax credits and $714,000 related to certain
temporary differences. The Company established a net deferred tax asset for the
total of the aforementioned tax benefits of $9,421,000. Due to the lack of
taxable income in several prior years and uncertainty regarding the utilization
of NOL Carryforwards, a valuation allowance equal to the net deferred tax asset
was established (the "Valuation Allowance").
During fiscal 1994, the Company reversed $2,846,000 of the Valuation
Allowance. The reversal represented (a) tax benefits of (i) $1,807,000 (34% of
the $5,314,000 of NOL Carryforwards utilized that year) and (ii) $1,360,000
resulting from Management's estimate of probable future taxable income, offset
by (b) $321,000 related to the tax effects of temporary differences. For fiscal
1995, the Company reversed $1,972,000 of the Valuation Allowance. This reversal
represented (a) tax benefits of (i) $1,232,000 (34% of the $4,647,000 of NOL
Carryforwards utilized, less the portion of the Valuation Allowance previously
allocated to these NOL Carryforwards) and (ii) $924,000 resulting from
Management's estimate of future taxable income, offset by (b) $184,000 related
to the tax effects of temporary differences. These reversals of
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<PAGE>
the Valuation Allowance are reflected as income tax benefits in the respective
periods. The remaining Valuation Allowance of $4,603,000 (primarily relating to
net operating losses of $13,252,000) will be reversed as warranted by future
profitable operations and Management's future estimates of the realization of
the deferred tax asset based on expected taxable income.
On October 29, 1995, the Company had, for tax purposes, remaining NOL
Carryforwards of approximately $13,252,000 available to offset future taxable
income, and approximately $747,000 of unused investment and research and
development tax credits available to offset future Federal income taxes. The
NOL Carryforwards will expire from 2000 to 2008, and the tax credit
carryforwards will expire from 1996 to 2005. All carryforwards are subject to
review and possible adjustment by the Internal Revenue Service. In addition,
Section 382 of the Internal Revenue Code significantly limits the amount of NOL
Carryforwards usable by a corporation following a more than 50% change in
ownership of the corporation during a three-year period. It is possible that
subsequent transactions involving the Company's capital stock could result in
such a limitation.
Minority Interest. The minority interest not acquired by the Company related
to the Uni-Star business was included in income before provision for income
taxes on the consolidated statement of operations and as a separate item on the
consolidated balance sheet and statement of cash flows. The Company owns 80% of
the outstanding stock of Uni-Star.
Discontinued Operation. The Company sold its software product business in
September 1994. The purchase price was $4 million, of which $2 million was paid
at closing, $1 million was paid in January 1995 and the final $1 million was
paid in March 1995. An expense of approximately $800,000 was accrued,
principally representing lease payments and estimated costs that the Company
expected to incur on the space used by the disposed business, less estimated
payments that it expected to receive for subleasing the space. The Company
recognized a gain on the sale of $1,380,000, net of the $800,000 accrual,
income taxes and a reserve to cover contingencies.
LIQUIDITY AND CAPITAL RESOURCES
Funds for operations and purchases of capital equipment, businesses and stock
for the fiscal year ended October 29, 1995 were provided primarily from
existing cash, advances under the Wakefield and Uni-Star loan agreements and
from operating activities. The funds were used as follows:
(i) $2,560,000 were used to purchase Specialty and to retire existing
Specialty debt;
(ii) $5,009,000 were used to purchase equipment, including machines to
add capacity and improve productivity in the manufacturing of extruded heat
sinks, primarily Penguin Coolers, and to upgrade internal computer systems;
and
(iii) approximately $2,118,000 were used to purchase 391,155 shares of
Common Stock pursuant to the Company's Common Stock repurchase plan. This
repurchase program has been completed.
In June 1994, Wakefield entered into a loan agreement which included a
revolving credit facility of up to $4 million, an equipment term loan of
$1,250,000 and an equipment credit facility of $600,000. In May 1995, Wakefield
amended this loan agreement to increase the revolving credit facility to $7
million and the equipment credit facility to $1,050,000, and to extend the term
of the revolving credit facility to April 30, 1997. In addition, Wakefield
borrowed $265,000 as an equipment term loan. Interest on the revolving credit
facility and equipment loans accrues at the bank's corporate base rate plus
.75%. On October 29, 1995, the interest rate on the bank debt was 9 1/2% per
annum. The obligations under the loan agreement are currently secured by a
first lien on and assignment of the assets of Wakefield, excluding Specialty's
assets. The loan agreement includes various financial covenants which the
Company was in compliance with on October 29, 1995. On, October 29, 1995,
$6,104,000 was outstanding under the revolving credit facility. Wakefield is
currently negotiating with its lender to increase the revolving credit
facilities to $9,000,000 (including loans to be made to Specialty).
10
<PAGE>
On August 31, 1995, Uni-Star entered into an accounts receivable loan
agreement which included a revolving credit commitment of up to $2.5 million.
Uni-Star also entered into an equipment term loan in the amount of $750,000
(from which $104,000 of preexisting debt was refinanced) and an equipment
acquisition facility of $300,000. The initial proceeds of $963,000 from the
revolving credit commitment and $646,000 net proceeds from the equipment term
loans were used to repay advances of $1,609,000 from the Company to Uni-Star.
The proceeds from the equipment acquisition facility may be used only for the
purchase of capital equipment. Interest on the funds advanced under the
revolving credit commitment ($1 million on October 29, 1995) accrues at the
bank's prime corporate rate plus .50% (9 1/4% per annum on October 29, 1995)
and interest on the equipment term loan accrues at the bank's prime rate plus
.75% (9 1/2% per annum on October 29, 1995). The principal amount of the
equipment term loan is repayable in 48 equal monthly installments, beginning
October 1, 1995. All Uni-Star credit facilities are secured by a first lien and
assignment of substantially all Uni-Star's assets, including its accounts
receivable, inventory, equipment and general intangibles.
Working capital on October 29, 1995 was $15,696,000. The Company believes
that its currently available cash, anticipated cash flow from operations and
availability under credit facilities should be sufficient to fund its
operations.
ITEM 7. FINANCIAL STATEMENTS.
Financial statements required pursuant to this Item are presented on pages F-
1 through F-16 of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
During the twenty-four month period preceding October 29, 1995, the Company
has neither changed accountants nor had disagreements with its accountants on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope and procedures.
11
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information required by this Item will be contained in the Company's
definitive Proxy Statement, which will be filed on or about February 26, 1996,
and is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item will be contained in the Company's
definitive Proxy Statement, which will be filed on or about February 26, 1996,
and is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item will be contained in the Company's
definitive Proxy Statement, which will be filed on or about February 26, 1996,
and is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item will be contained in the Company's
definitive Proxy Statement, which will be filed on or about February 26, 1996,
and is incorporated herein by reference.
12
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
<TABLE>
<CAPTION>
NO.
---
<C> <S>
3.1 --Certificate of Incorporation of the Company, as amended.(1)(2)
3.1(a) --Amendment to the Certificate of Incorporation of the Company. (Filed
Herewith)
3.2 --By-laws of the Company.(3)
10.1 --Issuer's 1981 Incentive Stock Option Plan, together with amendments
thereto.(2)
10.2 --Issuer's 1983 Incentive Stock Option Plan, together with amendments
thereto.(2)
10.3 --Issuer's 1983A Incentive Stock Option Plan, together with amendments
thereto.(2)
10.4 --Issuer's 1984 Incentive Stock Option Plan, together with amendments
thereto.(2)
10.5 --Issuer's 1985 Stock Option Plan, together with amendments
thereto.(2)(4)(5)(6)(7)
10.6 --Issuer's 401-K Savings/Stock Purchase Plan.(8)
10.7 --Lease Agreement, dated October 7, 1987, between PIC Realty
Corporation and Issuer.(9)
10.8 --Lease dated as of October 29, 1993 by and between The Equitable Life
Assurance Society of the United States and Wakefield Engineering,
Inc.(10)
10.9 --Asset Purchase Agreement dated as of May 24, 1994, between Microdot
Inc. and ETP Acquisition Corp. (now known as Uni-Star Industries,
Inc.)(11)
10.10 --Standard Industrial/Commercial Single-Tenant Lease dated as of June
1, 1994 by and between Pasadena Industrial Associates and Uni-Star
Industries, Inc.(10)
10.11 --Lease dated as of November 29, 1994 by and between The Goldsmith
Properties Company and Uni-Star Industries, Inc.(10)
10.12 --Lease Agreement dated as of January 1995 by and between Robert L.
Byers and Joyce F. Byers and Uni-Star Industries, Inc.(10)
10.13 --Asset Purchase Agreement dated as of August 31, 1994 between
Wakefield Engineering, Inc. and Aham Tor, Inc.(12)
10.14 --Asset Purchase agreement dated as of September 13, 1994 between the
Company and Logica North America Inc.(13)
10.15 --Issuer's 1994 Stock Option Plan as amended and restated. (Subject to
approval of stockholders at the Issuer's next Annual Meeting.) (Filed
Herewith)
10.16 --Loan and Security Agreement dated as of June 22, 1994 entered into
by and between Shawmut Bank, N.A. and Wakefield Engineering, Inc.,
together with amendment thereto. (The exhibits and schedules to the
Loan and Security Agreement are listed on the last page of such
Agreement. Such exhibits and schedules have not been filed by the
Issuer, who hereby undertakes to file such exhibits upon request of
the Commission.)(10)(14)
10.17 --Accounts Receivable Loan Agreement between Uni-Star Industries, Inc.
and City National Bank dated as of August 30, 1995.(15)
</TABLE>
13
<PAGE>
<TABLE>
<C> <S>
10.17(a) --First Amendment to Accounts Receivable Loan Agreement dated as of
October 27, 1995 by and between Uni-Star Industries, Inc. and City
National Bank. (Filed Herewith)
10.18 --Asset Purchase Agreement dated as of June 30, 1995 among Specialty
Extrusions Ltd., Walter Hastie and William Esparza, and Specialty
Acquisition Corp. (now known as Specialty Extrusion Corp.) and
Wakefield Engineering, Inc.(16)
10.19 --Lease dated September 1, 1993 between B&K Investment Corp. and
Specialty Extrusions, Ltd., together with assignment thereof dated
June 30, 1995 from Specialty Extrusions, Ltd. to Specialty
Acquisition Corp. (now known as Specialty Extrusion Corp.) (Filed
Herewith)
10.20 --Employment Agreement with Lawrence Butler dated September 29, 1995.
(Filed Herewith)
10.21 --Indenture of Lease Agreement dated as of December 20, 1994 by and
between Richard J. Tobin, as Trustee of JLN Realty Trust, under
Declaration of Trust dated June 15, 1981 and filed with Bristol
County Fall River District Registry of Deeds Land Court Records as
Document 12977, and Wakefield Engineering, Inc. (Filed Herewith).
10.22 --Industrial Space Lease dated as of September 29, 1995 by and
between Rancon Income Fund I and Wakefield Engineering, Inc. (Filed
Herewith).
11 --Computation of net income per share. (Filed Herewith)
21 --Subsidiaries of Registrant.(10)
23.1(a) --Consent of Arthur Andersen LLP. (Filed Herewith)
23.1(b) --Consent of Arthur Andersen LLP. (Filed Herewith)
27 --Financial Data Schedule. (Filed Herewith)
</TABLE>
- --------
(1) Incorporated herein by reference to the Issuer's Registration Statement on
Form S-1 (Reg. No. 33-2979), which became effective March 7, 1986.
(2) Incorporated herein by reference to the Issuer's Registration Statement on
Form S-8, filed September 28, 1987 (Reg. No. 33-17359).
(3) Incorporated herein by reference to the Company's Annual Report or Form 10-
K for the year ended October 31, 1991.
(4) Incorporated herein by reference to the Issuer's Registration Statement on
Form S-8, filed March 17, 1988 (Reg. No. 33-20706).
(5) Incorporated herein by reference to the Issuer's Registration Statement on
Form S-8, filed June 30, 1989 (Reg. No. 33-29636).
(6) Incorporated herein by reference to the Company's Annual Report on Form 10-
K for the year ended October 31, 1990.
(7) Incorporated herein by reference to the Issuer's Registration Statement on
Form S-8, filed June 23, 1992 (Reg. No. 33-48663).
(8) Incorporated herein by reference to the Issuer's Registration Statement on
Form S-8, filed January 29, 1987 (Reg. No. 33-11627).
(9) Incorporated herein by reference to the Company's Annual Report on Form 10-
K for the year ended October 31, 1987.
(10) Incorporated herein by reference to the Company's Annual Report on Form
10-KSB for the year ended October 31, 1994.
(11) Incorporated herein by reference to the Company's Form 8-K dated June 1,
1994, filed on or about June 13, 1994.
(12) Incorporated herein by reference to the Company's Form 8-K dated August
31, 1994, filed on or about September 13, 1994.
14
<PAGE>
(13) Incorporated herein by reference to the Company's Form 8-K dated September
21, 1994, filed on or about October 4, 1994.
(14) Incorporated herein by reference to the Company's Form 10-QSB for the
quarterly period ended April 30, 1995 filed on June 14, 1995.
(15) Incorporated herein by reference to the Company's Form 10-QSB for the
quarterly period ended July 30, 1995 filed on September 13, 1995.
(16) Incorporated herein by reference to the Company's Form 8-K dated June 30,
1995, filed on or about July 14, 1995.
REPORTS ON FORM 8-K
No report on Form 8-K was filed during the fourth quarter of the year ended
October 29, 1995.
15
<PAGE>
SIGNATURES
IN ACCORDANCE WITH SECTION 13 OR 15(D) OF THE EXCHANGE ACT, THE REGISTRANT
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED.
Alpha Technologies Group, Inc.
Date: January 26, 1996 /s/ Lawrence Butler
By___________________________________
Lawrence Butler
President and
Chief Executive Officer
IN ACCORDANCE WITH THE EXCHANGE ACT, 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/ Marshall D. Butler
- ------------------------------------
(Marshall D. Butler) Chairman of the Board
/s/ Lawrence Butler
- ------------------------------------
(Lawrence Butler) Chief Executive Officer and
Director (Principal
Executive Officer)
/s/ Johnny J. Blanchard
- ------------------------------------
(Johnny J. Blanchard) Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Donald K. Grierson
- ------------------------------------
(Donald K. Grierson) Director January 26, 1996
/s/ Frederic A. Heim
- ------------------------------------
(Frederic A. Heim) Director
/s/ Warren G. Lichtenstein
- ------------------------------------
(Warren G. Lichtenstein) Director
/s/ Kenneth W. Rind
- ------------------------------------
(Kenneth W. Rind) Director
</TABLE>
16
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Financial Statements:
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets--October 31, 1994 and October 29, 1995....... F-3
Consolidated Statements of Income--For the Years Ended October 31, 1993
and 1994
and October 29, 1995.................................................... F-4
Consolidated Statements of Stockholders' Equity--For the Years Ended
October 31, 1993
and 1994 and October 29, 1995........................................... F-5
Consolidated Statements of Cash Flows--For the Years Ended October 31,
1993 and 1994
and October 29, 1995.................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Alpha Technologies Group, Inc.
We have audited the accompanying consolidated balance sheets of Alpha
Technologies Group, Inc., (a Delaware corporation) and subsidiaries as of
October 31, 1994 and October 29, 1995, and the related consolidated statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended October 29, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alpha Technologies Group, Inc.
and subsidiaries as of October 31, 1994 and October 29, 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended October 29, 1995, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Houston, Texas
November 16, 1995
F-2
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--OCTOBER 31, 1994 AND OCTOBER 29, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 29,
ASSETS 1994 1995
------ ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash................................................. $ 7,406 $ 6,058
Marketable securities (Note 4)....................... 937 --
Notes receivable (Note 3)............................ 2,000 --
Accounts receivable, net of reserves of $111 and $277
(Note 8)............................................ 7,392 11,982
Inventories, net (Notes 5 and 8)..................... 5,831 8,191
Prepaid expenses (Note 8)............................ 742 1,119
------- -------
Total current assets............................... 24,308 27,350
PROPERTY AND EQUIPMENT, at cost (Note 8):
Manufacturing equipment, leasehold improvements,
furniture, fixtures and other....................... 4,274 10,930
Less--Accumulated depreciation and amortization...... 315 1,313
------- -------
Property and equipment, net........................ 3,959 9,617
GOODWILL, net (Notes 2 and 8).......................... 1,667 2,813
OTHER ASSETS, net (Notes 8 and 14)..................... 1,755 2,476
------- -------
$31,689 $42,256
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable, trade.............................. 3,421 5,166
Accrued compensation and related benefits (Note 6)... 1,402 2,329
Other accrued liabilities (Note 7)................... 2,222 2,426
Current portion of long-term debt (Note 8)........... 346 850
Current portion of other long-term liabilities (Note
9).................................................. 993 883
------- -------
Total current liabilities.......................... 8,384 11,654
LONG-TERM DEBT (Note 8)................................ 3,556 9,093
OTHER LONG-TERM LIABILITIES (Note 9)................... 1,821 1,010
COMMITMENTS AND CONTINGENCIES (Note 15)
MINORITY INTEREST (Note 2)............................. 1,384 1,736
STOCKHOLDERS' EQUITY (Notes 4, 10, 11 and 12):
Preferred stock, $100 par value; shares authorized
180,000............................................. -- --
Common stock, $.03 par value; shares authorized
17,000,000;
issued 6,727,345 at October 31, 1994 and 6,977,845 at
October 29, 1995.................................... 202 209
Additional paid-in capital........................... 38,670 39,114
Retained deficit..................................... (21,207) (17,459)
Unrealized (loss) on marketable securities, net of
income taxes........................................ (138) --
Treasury stock, at cost (544,249 common shares at
October 31, 1994
and 935,404 common shares at October 29,1995)....... (983) (3,101)
------- -------
Total stockholders' equity......................... 16,544 18,763
------- -------
$31,689 $42,256
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED OCTOBER 31, 1993 AND 1994 AND OCTOBER 29, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------- OCTOBER
1993 1994 29, 1995
--------- --------- ---------
<S> <C> <C> <C>
SALES (Note 2)................................ $ 258 $ 30,145 $ 64,116
COST OF SALES................................. 190 20,627 46,888
--------- --------- ---------
Gross profit................................ 68 9,518 17,228
OPERATING EXPENSES:
Research and development.................... 11 674 1,109
Selling, general and administrative......... 48 6,572 11,941
--------- --------- ---------
Total operating expenses.................. 59 7,246 13,050
--------- --------- ---------
OPERATING INCOME.............................. 9 2,272 4,178
INVESTMENT INCOME (Note 4).................... -- 108 258
INTEREST AND OTHER INCOME (EXPENSE), net (Note
8)........................................... 337 76 (477)
--------- --------- ---------
INCOME BEFORE TAXES........................... 346 2,456 3,959
PROVISION (BENEFIT) FOR INCOME TAXES (Note
14):
Current..................................... 101 500 530
Deferred.................................... 17 (1,360) (671)
--------- --------- ---------
Total provision (benefit) for income
taxes.................................... 118 (860) (141)
--------- --------- ---------
INCOME BEFORE MINORITY INTEREST, DISCONTINUED
OPERATIONS AND EXTRAORDINARY CREDIT.......... 228 3,316 4,100
LESS: MINORITY INTEREST (Note 2).............. -- (384) (352)
GAIN ON SALE OF DISCONTINUED OPERATIONS, net
of income tax effect (Note 3)................ -- 1,380 --
INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
net of income tax effect (Note 3)............ (22) 978 --
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY CREDIT............ 206 5,290 3,748
EXTRAORDINARY CREDIT: Tax benefit of net
operating loss carryforward (Note 14)........ 111 -- --
--------- --------- ---------
NET INCOME.................................... $ 317 $ 5,290 $ 3,748
--------- --------- ---------
PER COMMON AND COMMON EQUIVALENT SHARE
(Note 13):
Income before minority interest,
discontinued operations and extraordinary
credit..................................... $ 0.04 $ 0.52 $ 0.62
Minority interest........................... -- (0.06) (0.05)
Gain on sale of discontinued operations..... -- 0.22 --
Discontinued operations..................... -- 0.15 --
Extraordinary credit........................ 0.01 -- --
--------- --------- ---------
Net income................................ $ 0.05 $ 0.83 $ 0.57
--------- --------- ---------
SHARES USED IN COMPUTING NET INCOME PER
COMMON EQUIVALENT SHARE....................... 6,017,543 6,343,604 6,605,147
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1993 AND 1994 AND OCTOBER 29, 1995
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
UNREALIZED
GAIN
COMMON STOCK ADDITIONAL RETAINED (LOSS) ON TREASURY STOCK
---------------- PAID IN EARNINGS MARKETABLE ---------------
SHARES AMOUNT CAPITAL (DEFICIT) SECURITIES SHARES AMOUNT
--------- ------ ---------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 31,
1992................... 6,211,963 $186 $37,765 $(26,814) $ -- 461,249 $ (609)
Net Income.............. -- -- -- 317 -- -- --
Issuance to employees
pursuant to stock
options plans (Note
12).................... 69,926 2 104 -- -- -- --
--------- ---- ------- -------- ---- ------- -------
BALANCE, OCTOBER 31,
1993................... 6,281,889 188 37,869 (26,497) -- 461,249 (609)
--------- ---- ------- -------- ---- ------- -------
Net Income.............. -- -- -- 5,290 -- -- --
Issuance to employees
pursuant to stock
options plans (Note
12).................... 445,456 14 801 -- -- -- --
Unrealized loss on
marketable securities,
net of income taxes
(Note 4)............... -- -- -- -- (138) -- --
Stock repurchase (Note
11).................... -- -- -- -- -- 83,000 (374)
--------- ---- ------- -------- ---- ------- -------
BALANCE, OCTOBER 31,
1994................... 6,727,345 202 38,670 (21,207) (138) 544,249 (983)
--------- ---- ------- -------- ---- ------- -------
Net Income.............. -- -- -- 3,748 -- -- --
Issuance to employees
pursuant to stock
options plans (Note
12).................... 250,500 7 444 -- -- -- --
Unrealized gain on
marketable securities,
net of income taxes
(Note 4)............... -- -- -- -- 138 -- --
Stock repurchase (Note
11).................... -- -- -- -- -- 391,155 (2,118)
--------- ---- ------- -------- ---- ------- -------
BALANCE, October 29,
1995................... 6,977,845 $209 $39,114 $(17,459) $ -- 935,404 $(3,101)
--------- ---- ------- -------- ---- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1993 AND 1994 AND OCTOBER 29, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 31,
--------------- OCTOBER 29,
1993 1994 1995
------- ------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 317 $5,290 $ 3,748
Adjustments to reconcile net income to net cash
provided by operating activities:
Net (income) loss from discontinued operations
(Note 3)....................................... 22 (978) --
Deferred income taxes (Note 14)................. -- (1,360) (671)
Gain on sale of marketable securities-available-
for-sale (Note 4).............................. -- -- (199)
Depreciation and amortization................... 25 453 1,274
Minority interest (Note 2)...................... -- 384 352
Gain on sale of discontinued operations (Note
3)............................................. -- (1,380) --
Changes in assets and liabilities net of effects
from acquisitions:
(Increase) decrease in marketable securities--
trading securities............................. -- (27) 27
(Increase) decrease in accounts receivable...... (4) 829 (3,085)
(Increase) decrease in notes receivable......... -- (2,000) 2,000
(Increase) in prepaid expenses.................. (34) (55) (377)
(Increase) decrease in inventories.............. 89 (34) (2,245)
(Increase) decrease in goodwill................. -- 22 (952)
Increase (decrease) in accounts payable, trade.. (70) 755 680
Increase in accrued compensation and related
benefits....................................... 276 99 927
Increase (decrease) in other accrued
liabilities.................................... (41) 1,541 204
(Decrease) in other long-term liabilities....... -- -- (921)
------- ------ -------
Total adjustments.............................. 263 (1,751) (2,986)
------- ------ -------
Net cash provided by continuing operations..... 580 3,539 762
Net cash provided by discontinued operations
(Note 3)...................................... 596 1,456 --
------- ------ -------
Net cash provided by operating activities...... 1,176 4,995 762
------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments............... (13,211) -- --
Proceeds from sale and maturity of short-term
investments..................................... 12,595 3,516 --
Payments and expenditures for business
acquisitions (Note 2 and 16).................... (4,966) (6,899) (2,560)
Proceeds from sale of discontinued operations.... -- 2,000 --
Purchase of marketable securities--available-for-
sale (Note 4)................................... -- (1,285) (850)
Proceeds from sale of marketable securities-
available-for-sale (Note 4)..................... -- 237 2,097
Purchase of property and equipment, net.......... (78) (1,427) (5,009)
(Increase) in other assets, net.................. (95) (6) (162)
------- ------ -------
Net cash (used) by investing activities......... (5,755) (3,864) (6,484)
------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock (Note 12). 106 815 451
Payments to repurchase common stock (Note 11).... -- (374) (2,118)
Proceeds from debt (Note 8)...................... -- 13,183 47,409
Payments on debt (Note 8)........................ -- (9,281) (41,368)
------- ------ -------
Net cash provided by financing activities....... 106 4,343 4,374
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... (4,473) 5,474 (1,348)
------- ------ -------
CASH AND CASH EQUIVALENTS, beginning of year...... 6,405 1,932 7,406
------- ------ -------
CASH AND CASH EQUIVALENTS, end of period.......... $ 1,932 $7,406 $ 6,058
======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Alpha
Technologies Group, Inc. ("Alpha" or the "Company") (formerly Synercom
Technology, Inc.) and its wholly- and majority-owned subsidiaries. All material
intercompany transactions and balances have been eliminated. Certain
information in the prior year financial statements has been reclassified to
conform to the current year presentation. As more fully described in Note 3,
the discontinued operation, the Information Solutions Segment ("ISS"), was
deconsolidated and fiscal 1993 financial statements have been restated
accordingly.
The Company designs, manufactures and sells thermal management products and
connectors. Thermal management products serve the microprocessor, computer,
consumer electronics, transportation and other industries. Connector products
serve the defense, telecommunications, automotive and aerospace industries.
Revenue Recognition
Revenue from product sales is generally recognized upon shipment to the
customer.
Marketable Securities
Investments in marketable securities are accounted for in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Of the three categories of
securities prescribed by Statement 115, the Company's security investments are
classified in one of the two following categories:
Available-for-Sale Securities--These securities are stated at cost
adjusted for market value fluctuations. Unrealized gains and losses created
by changes in the market values of these securities are recognized as an
adjustment to and are reported as a separate component of stockholders'
equity, net of tax. The specific identification method is used in
determining realized gains and losses from the sale of securities.
Trading Securities--These securities are carried at market value.
Realized and unrealized gains and losses are recognized currently in
investment income. The specific identification method is used in
determining gains and losses.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
Property and Equipment
The cost of property and equipment is depreciated using the straight-line
method for financial reporting purposes over the estimated useful lives of such
assets, ranging from three to ten years. Leasehold improvements are amortized
on a straight-line basis over the related lease term.
Goodwill
Goodwill represents the excess of cost over fair value of net assets acquired
and is being amortized over 15 years using the straight-line method. The
accumulated amortization on October 31, 1994 and October 29, 1995 was
approximately $6,500 and $163,000, respectively. Amortization expense of
approximately $6,500 and $156,500 was recorded in fiscal 1994 and 1995,
respectively.
F-7
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," ("Statement 109") on November 1, 1993. Under the
asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using current enacted tax rates. Under Statement 109,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the results of operations in the period that includes the
enactment date. Prior to adopting Statement 109, income taxes were accounted
for in compliance with APB Opinion No. 11--Accounting for Income Taxes;
therefore, the tax benefit of net operating loss carryforwards for fiscal 1993
was classified as an extraordinary credit.
Cash Flows
During fiscal 1994 and 1995, taxes amounting to approximately $16,000 and
$996,000, respectively, were paid. Interest payments in fiscal 1994 and 1995
amounted to approximately $116,000 and $693,000, respectively.
Foreign Currency Translation
Assets and liabilities of the Company's foreign operations are translated
into U. S. dollars at the current exchange rate in effect at the balance sheet
date, and revenues and expenses are translated at the average exchange rate for
the period in accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation". Resulting translation adjustments are
reported as a separate component of shareholders' equity.
Fiscal Year
For fiscal 1995, the Company adopted a 52/53 week fiscal calendar ending on
the last Sunday of October, therefore fiscal year 1995 ended on October 29,
1995. Fiscal years 1994 and 1995 both include 52 weeks of operations.
2. ACQUISITIONS
On June 1, 1994, the Company, through Uni-Star Industries, Inc. ("Uni-Star"),
an 80%-owned subsidiary, acquired substantially all of the assets and business
and assumed certain liabilities of the Interconnect Systems Division of
Microdot Inc. The aggregate purchase price of approximately $5,075,000 included
a net cash payment of $4,836,000 and expenses of $239,000. The Company's share
of the purchase price was $3,988,000. The minority interest not acquired by the
Company is included in income before provision for income taxes on the
consolidated statement of operations and as a separate item on the consolidated
balance sheet and statement of cash flows. On August 31, 1994, Wakefield
Engineering, Inc. ("Wakefield"), a wholly-owned subsidiary of the Company,
acquired substantially all of the assets and business of Aham Tor, Inc.
("ATI"). The purchase price of $2,911,000 was paid in cash. Effective June 30,
1995, Wakefield acquired substantially all of the assets and business of
Specialty Extrusion Ltd. ("Specialty"). The purchase price of $2,000,000 was
paid in cash. In addition, the Company paid existing Specialty debt in the
amount of $560,000. The acquisitions have been accounted for as purchase
transactions, and accordingly, the purchase price has been allocated to the
assets acquired and liabilities assumed for each acquisition. Goodwill, which
relates primarily to the ATI and Specialty acquisitions, represents the excess
of cost over the fair value of the net assets acquired and is being amortized
over 15 years using the straight-line method. Adjustments to the purchase price
may be made during the 12 months following the date of acquisition as a
F-8
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
result of resolutions of uncertainties existing at the acquisition date. The
operating results of Uni-Star, ATI and Specialty have been included in the
Company's consolidated results of operations since their respective acquisition
dates of June 1, 1994; August 31, 1994; and June 30, 1995.
The following unaudited pro forma summary is not necessarily indicative
either of results of operations that would have occurred had the purchases been
made on November 1, 1992, or of future results of operations of the combined
companies. Total revenues included in the following unaudited pro forma summary
reflect the effect of accounting for ISS as a discontinued operation. Net
income included in the following unaudited pro forma summary does not reflect
the effect of income from discontinued operations or the gain on sale of
discontinued operations.
For the Periods Ended (Unaudited):
<TABLE>
<CAPTION>
OCTOBER 31,
------------------------- OCTOBER 29,
1993 1994 1995
------------ ------------ -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Total revenues................... $ 47,719 $ 51,420 $ 67,732
Net income....................... 724 3,680 3,747
Net income per common and common
equivalent share................ $ .12 $ .58 $ .57
Number of shares used in
computing earnings per share..... 6,018 6,344 6,605
</TABLE>
3. DISCONTINUED OPERATION
Effective September 21, 1994, the Company sold the assets and business of ISS
to Logica North America, Inc. ("Logica"). Logica purchased the rights to WMIS,
a work management information system product; the intellectual property rights
for the INFORMAP family of products; and the computer equipment, furniture and
fixtures of ISS. The purchase price of $4,000,000 was paid as follows: (1)
$2,000,000 cash at closing and (2) two promissory notes of $1,000,000 each with
the first note paid 120 days after the closing and the second note 180 days
after the closing. The sale resulted in a gain of approximately $1,380,000, net
of income tax expense of $49,000.
Summary operating results of the discontinued operation are as follows for
the fiscal years ended October 31:
<TABLE>
<CAPTION>
1993 1994
------- ------
(IN THOUSANDS)
<S> <C> <C>
Revenues.................................................. $10,594 $8,184
Costs and expenses........................................ 10,617 7,186
------- ------
Income (loss) before taxes................................ (23) 998
Income tax provision (benefit)............................ (1) 20
------- ------
Net income (loss)......................................... $ (22) $ 978
======= ======
</TABLE>
4. MARKETABLE SECURITIES
Marketable securities consist of equity securities classified as available-
for-sale securities and trading securities. During fiscal year 1995, the
Company disposed of all its marketable securities. On October 31, 1994
available-for-sale securities were valued at $910,000 and trading securities
were valued at $27,000. A net unrealized holding loss on available-for-sale
securities of $138,000, which is net of income taxes, was included in
stockholders' equity on October 31, 1994. Proceeds from the sale of available-
for-sale securities totaled approximately $2,097,000 for fiscal year 1995. A
gain of $199,000 was realized on those sales and included in investment income
for the year ended October 29, 1995.
F-9
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INVENTORIES
Inventories consisted of the following on:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 29,
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and components...................... $3,428 $5,260
Work in process................................... 1,488 1,803
Finished goods.................................... 1,059 1,548
------ ------
5,975 8,611
Valuation reserve................................. (144) (420)
------ ------
$5,831 $8,191
====== ======
</TABLE>
6. ACCRUED COMPENSATION AND RELATED BENEFITS
Accrued compensation and related benefits consisted of the following on:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 29,
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Accrued salaries and wages........................ $ 480 $ 742
Accrued vacation pay.............................. 423 499
Other............................................. 499 1,088
------ ------
$1,402 $2,329
====== ======
</TABLE>
7. OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following on:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 29,
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Accrued commissions............................... $ 399 $ 849
Accrued state income taxes........................ 469 156
Other............................................. 1,354 1,421
------ ------
$2,222 $2,426
====== ======
</TABLE>
F-10
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT
Long-term debt consisted of the following on:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 29,
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Variable-rate revolving credit facility........... $2,447 $6,104
(effective interest rate of 9.5% at October 29,
1995), interest payable monthly, principal is
repaid and reborrowed based on cash requirements
Variable-rate revolving credit commitment......... -- 1,000
(effective interest rate of 9.25% at October 29,
1995), interest payable monthly, principal is
repaid and reborrowed based on cash requirements
Variable-rate equipment notes..................... 1,455 2,839
(effective interest rates of 9.5% at October 29,
1995), payable in monthly installments ranging
from $5,521 to $20,833, plus accrued interest,
with maturities ranging from October of 1997
through June of 1999
------ ------
3,902 9,943
Less current portion.............................. 346 850
------ ------
$3,556 $9,093
====== ======
</TABLE>
The revolving credit facility, variable equipment term loan and variable
equipment credit facility relate to a Loan and Security Agreement (the "Loan
Agreement") entered into by Wakefield in June of 1994. The Loan Agreement was
amended in May of 1995 to increase the revolving credit facility from a maximum
aggregate commitment of $4,000,000 to $7,000,000 and to extend the term of such
facility to April 30, 1997. The equipment credit facility was increased from a
maximum aggregate amount of $600,000 to $1,050,000. The proceeds from the
equipment credit facility may be used only for the purchase of capital
equipment. In addition, Wakefield entered into an equipment term note in the
amount of $265,000. Interest accrues at the bank's corporate base rate plus
three-quarters of one percent. The obligations under the Loan Agreement are
secured by a first lien and assignment of all the assets of Wakefield,
exclusive of the assets of Specialty Extrusion Corp., including without
limitation, all accounts receivable, inventory, equipment and general
intangibles which in aggregate totals $20,598,000. The terms of the Loan
Agreement include various covenants which provide for, among other things, the
maintenance of a tangible capital base at various levels throughout the
commitment period. On October 29, 1995, Wakefield was in compliance with these
convenants. On October 29, 1995, $6,104,000 was drawn on the revolving credit
facility.
On August 30, 1995, Uni-Star entered into an Accounts Receivable Loan
Agreement which included a revolving credit commitment in the aggregate
principal amount of $2,500,000 of which $1,000,000 was drawn on at October 29,
1995. Uni-Star also entered into an equipment term loan in the amount of
$750,000 and an equipment acquisition facility of $300,000 which must be
borrowed prior to August 31, 1996. Interest on the revolving credit commitment
accrues at the bank's prime rate plus one half of one percent and interest on
the equipment term loan accrues at the bank's prime rate plus three quarters of
one percent. The equipment term loan is repayable in 48 equal monthly
installments of principal of $15,625 plus accrued interest, payable on the
first day of each month beginning October 1, 1995. All of the Uni-Star credit
facilities are secured by a first lien and assignment of substantially all of
its assets, including without limitation, accounts receivable, inventory,
equipment and general intangibles which in aggregate totals $8,999,000. The
Accounts Receivable Loan Agreement includes various covenants with which Uni-
Star was in compliance on October 29, 1995.
F-11
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest paid on all outstanding debt amounted to approximately $116,000 in
fiscal year 1994 and approximately $693,000 in fiscal year 1995.
Aggregate payments of long-term debt outstanding as of October 29, 1995 for
the next five years are summarized below:
<TABLE>
<CAPTION>
FISCAL YEARS AMOUNT
------------ ----------
<S> <C>
1996.............................. $ 850,000
1997.............................. 7,954,000
1998.............................. 762,000
1999.............................. 377,000
2000.............................. --
----------
$9,943,000
==========
</TABLE>
Management intends to renew or refinance the revolving credit facility and
the revolving credit commitment upon maturity.
9. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following on:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 29,
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Accrued lease
differential....... $1,865 $1,362
Other............... 949 531
------ ------
2,814 1,893
Less current
portion............ (993) (883)
------ ------
$1,821 $1,010
====== ======
</TABLE>
The accrued lease differential primarily represents the lease payments and
estimated costs that the Company expects to incur related to office space in
Houston, Texas less estimated payments that it expects to receive for
subleasing this space. Approximately $800,000 of the accrued lease differential
was expensed in fiscal 1994 in connection with the sale of the discontinued
operation. The remainder of the accrued lease differential was expensed in
fiscal 1992 as restructuring costs related to the office space.
10. PREFERRED STOCK
On October 31, 1994 and October 29, 1995, the Company had authorized 180,000
shares of unissued, preferred stock with a par value of $100 per share. The
Board of Directors has the authority to issue such preferred stock and to set
the terms thereof, including the dividend rate, conversion rights, redemption
rights, voting rights and liquidation preferences.
11. REPURCHASE OF COMMON STOCK
In September of 1994, the Board of Directors of the Company approved a plan
to purchase up to $2,500,000 of the Company's common stock. Pursuant to the
stock repurchase plan, the Company purchased 83,000 shares of common stock
during fiscal year 1994 at an aggregate price of $374,137. During fiscal year
1995, 391,155 shares of common stock were purchased at an aggregate price of
$2,118,173. This repurchase program has been completed.
F-12
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. STOCK OPTION PLANS
The Company has in effect nonqualified and incentive stock option plans under
which shares are available for exercise. As of October 29, 1995, the Board of
Directors has reserved 1,597,000 shares of common stock for issuance under the
plans, of which 600,000 shares are subject to shareholder approval. The prices
at which substantially all stock options outstanding have been granted have
been equal to or in excess of the fair market value of the Company's stock at
the time of the grant. These options vest over periods up to five years. On
October 29, 1995, there were 350,000 shares available for future grants,
subject to the aforementioned shareholder approval. The following table
summarizes activity under the plans:
<TABLE>
<CAPTION>
SHARES
UNDER OPTION PRICE RANGE
------------ -------------
<S> <C> <C>
Outstanding on October 31, 1992...................... 961,530 $1.16--$15.00
Granted............................................. 532,000 1.38-- 3.19
Forfeited........................................... (171,873) 1.47-- 4.50
Exercised........................................... (69,926) 1.47-- 2.69
Expired............................................. (24,734) 4.50-- 15.00
--------- -------------
Outstanding on October 31, 1993...................... 1,226,997 $1.16--$ 7.12
Granted............................................. 363,000 2.93-- 4.53
Forfeited........................................... (48,524) 1.50-- 7.12
Exercised........................................... (445,456) 1.47-- 4.06
Expired............................................. (42,600) 4.50
--------- -------------
Outstanding on October 31, 1994...................... 1,053,417 $1.16--$ 4.53
Granted............................................. 457,000 5.13-- 5.98
Forfeited........................................... (10,000) 2.69
Exercised........................................... (250,500) 1.16-- 3.19
Expired............................................. (2,917) 4.50
--------- -------------
Outstanding on October 29, 1995...................... 1,247,000 $1.16--$ 5.98
========= =============
Exercisable on October 29, 1995...................... 448,053 $1.16--$ 4.53
========= =============
</TABLE>
13. NET INCOME PER SHARE
Net income per common and common equivalent share was computed using the
weighted average number of shares of common stock and common equivalent shares
outstanding during each year. Common equivalent shares included the number of
shares issuable upon exercise of options, less the number of shares that could
have been purchased with the exercise proceeds.
14. INCOME TAXES
On November 1, 1993, the Company adopted Statement 109 through a cumulative
catch-up adjustment. The implementation of this statement did not have a
material effect on the Company's balance sheet or results of operations. The
Company's profitable operations during fiscal 1995 and 1994 resulted in the
utilization of net operating loss carryforwards, the tax benefit of which was
fully reserved upon implementation of Statement 109. Income taxes for fiscal
year 1993 were accounted for in compliance with APB Opinion No. 11; therefore,
the tax benefit of net operating loss carryforwards was classified as an
extraordinary credit which reduced taxes for the year by $111,000.
F-13
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The provisions for income taxes were as follows for the fiscal years 1993
through 1995:
<TABLE>
<CAPTION>
OCTOBER 31,
-------------- OCTOBER 29,
1993 1994 1995
----- ------- -----------
<S> <C> <C> <C>
Federal income tax............................ $ 118 $ 51 $ 1,221
State income tax.............................. -- 449 458
----- ------- -------
118 500 1,679
Benefit of reversal of valuation reserve
(Statement 109).............................. -- (1,360) (1,820)
Benefit of net operating loss carryforwards
(APB 11)..................................... (111) -- --
----- ------- -------
$ 7 $ (860) $ (141)
===== ======= =======
</TABLE>
The differences in the income taxes provided for and the amounts determined
by applying the Federal statutory rate to income before taxes of the Company
are summarized as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
------------- OCTOBER 29,
1993 1994 1995
----- ----- -----------
<S> <C> <C> <C>
Federal income statutory rate................. 34.0 % 34.0 % 34.0 %
State income taxes, net of federal income tax
benefit...................................... -- 18.3 % 7.6 %
Benefit of reversal of valuation reserve
(Statement 109).............................. -- (55.3)% (46.0)%
Other......................................... -- -- .8 %
Benefit of net operating loss carryforwards... (32.0)% (32.0)% --
----- ----- -----
2.0 % (35.0)% (3.6)%
===== ===== =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities and their changes during
the year ended October 29, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
DEFERRED
OCTOBER 31, (PROVISION) OCTOBER 29,
1994 BENEFIT 1995
----------- ----------- -----------
<S> <C> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards..... $ 6,086 $(1,580) $ 4,506
Tax credits.......................... 814 (67) 747
Accrued liabilities.................. 791 27 818
Other................................ 560 549 1,109
------- ------- -------
Total gross deferred tax assets...... 8,251 (1,071) 7,180
Less: Valuation allowance............ (6,575) 1,972 (4,603)
------- ------- -------
Net deferred tax asset............... $ 1,676 $ 901 $ 2,577
======= ======= =======
Deferred Tax Liabilities:
Amortization and depreciation........ (183) (282) (465)
Other................................ (133) 52 (81)
------- ------- -------
Total deferred tax liabilities....... (316) (230) (546)
------- ------- -------
Net deferred tax asset............... $ 1,360 $ 671 $ 2,031
======= ======= =======
</TABLE>
F-14
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Due to the Company's historical results of operations, a valuation allowance
was provided for the deferred tax assets. Because the Company generated taxable
income and was able to utilize net operating loss carryforwards during fiscal
1994 and 1995 and, due to an increase in the likelihood of the future
realization of the net deferred tax asset, the Company reversed $1,360,000 and
$1,820,000, respectively, of the valuation allowance. On October 29, 1995, the
Company had, for tax purposes, net operating loss carryforwards of
approximately $13,252,000 and unused investment and research and development
tax credits of approximately $747,000 available to offset future taxable income
and Federal income taxes. The net operating loss carryforwards will expire from
2000 to 2008, and the tax credit carryforwards will expire from 1996 to 2005.
All carryforwards are subject to review and possible adjustment by the Internal
Revenue Service. In compliance with the Tax Reform Act of 1986, investment tax
credits carried forward were reduced by 35%. The Company's ability to utilize
the net operating loss carryforwards to offset alternative minimum taxable
income is limited to 90% for tax years after fiscal 1987.
Additionally, Section 382 of the Internal Revenue Code limits the amounts of
net operating loss carryforwards usable by a corporation following a more than
50 percentage point change in ownership of the corporation during a three-year
period. It is possible that subsequent transactions involving the Company's
capital stock could result in such a limitation. As of October 29, 1995,
Management believes that such a change in ownership has not occurred.
15. COMMITMENTS AND CONTINGENCIES
The Company has operating lease commitments for certain office equipment and
manufacturing, administrative and support facilities. Minimum lease payments
under noncancellable leases on October 29, 1995 are as follows:
<TABLE>
<CAPTION>
OPERATING
FISCAL YEARS LEASES
------------ --------------
(IN THOUSANDS)
<S> <C>
1996........................ $2,533
1997........................ 2,346
1998........................ 1,412
1999........................ 1,063
2000........................ 822
Thereafter.................. 2,167
-------
Minimum lease payments...... $10,343
=======
</TABLE>
Rent expense (exclusive of operating expenses and net of sublease rents) for
all operating leases was approximately $384,000, $869,000 and $1,339,000 in
fiscal 1993, 1994 and 1995, respectively. Expected sublease payments for each
fiscal year are as follows: 1996 $610,000; 1997 $610,000; 1998 $152,000; and
1999 and thereafter $0. See Note 9.
Through September 30, 1994, the Company, for its Information Solutions
Segment, had a partially self-funded insurance program for its group health
insurance plan. Effective January 1, 1995, Wakefield implemented the same type
of program for its group health insurance plan. Under these plans, the Company
assumed liability for payment of medical claims below a specific dollar amount
related to any one individual. The Company is also insured if claims should
exceed a specific aggregate dollar amount for all covered individuals. Asserted
and unasserted medical/health insurance claims are accrued for based on the
Company's experience and the advice of an independent claims manager.
F-15
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. RELATED-PARTY TRANSACTIONS
For services rendered in connection with the acquisitions made during fiscal
years 1994 and 1993, further described in Note 2-Acquisitions, the Company paid
$57,500 each and $75,000 each, respectively for fiscal 1994 and 1993, to two
corporations, which are general partners of a partnership having a greater than
10% ownership of the Company. The sole stockholder of one of the corporations
is currently an officer and director of the Company and the sole stockholder of
the other corporation is a director of the Company and was previously an
executive officer. In fiscal 1994, the two individuals were each granted five-
year nonincentive stock options to purchase an aggregate of 120,000 shares of
the Company's common stock. In fiscal 1993, the two individuals were each
granted a ten-year nonincentive stock option to purchase 50,000 shares of the
Company's common stock. The options were granted at an exercise price equal to
the fair value of the common stock on the dates of grant. The right to exercise
these options vests in equal installments over three years. At the time of the
payments and option grants, neither individual was a compensated officer or
employee of the Company.
F-16
<PAGE>
EXHIBIT 3.1(a)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SYNERCOM TECHNOLOGY, INC.
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
SYNERCOM TECHNOLOGY, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify as follows;
1. The Certificate of Incorporation of the Corporation is hereby amended to
change the name of the Corporation.
2. To accomplish the foregoing, Article I of the Certificate of
Incorporation of the Corporation, relating to the name of the Corporation, is
hereby amended to read in its entirety as follows:
"ARTICLE I. The name of the Corporation is ALPHA TECHNOLOGIES
GROUP, INC."
3. The foregoing Amendment to the Certificate of Incorporation has been
duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware. The Board of Directors of the
Corporation adopted resolutions setting forth such Amendment, declaring its
advisability and calling for submission of the Amendment to the stockholders of
the Corporation for vote at the Corporation's Annual Meeting of Stockholders.
The stockholders approved such Amendment at the Annual Meeting of Stockholders
on April 19, 1995.
<PAGE>
4. The capital of the Corporation will not be reduced under or by reason of
said Amendment.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
signed on behalf of Synercom Technology, Inc. this 19th day of April, 1995.
/s/ Lawrence Butler
-----------------------------
Lawrence Butler, President
ATTEST:
/s/ Johnny Blanchard
- -----------------------------
Johnny Blanchard, Secretary
<PAGE>
EXHIBIT 10.15
ALPHA TECHNOLOGIES GROUP, INC.
1994 STOCK OPTION PLAN
AS AMENDED AND RESTATED
I. PURPOSE OF THE PLAN
The ALPHA TECHNOLOGIES GROUP, INC. 1994 STOCK OPTION PLAN as amended, (the
"Plan"), is intended to provide a means whereby certain employees, consultants
and directors of ALPHA TECHNOLOGIES GROUP, INC., a Delaware corporation (the
"Company"), and its subsidiaries may develop a sense of proprietorship and
personal involvement in the development and financial success of the Company,
and to encourage them to remain with and devote their best efforts to the
business of the Company, thereby advancing the interests of the Company and its
stockholders. Accordingly, the Company may grant to certain employees and
consultants ("Optionees") the option ("Option") to purchase shares of the common
stock of the Company ("Stock"), as hereinafter set forth. Options granted to
employees under the Plan may be either incentive stock options, within the
meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), ("Incentive Stock Options") or options which do not constitute
Incentive Stock Options. Options granted to consultants under the Plan will be
Options which do not constitute Incentive Stock Options.
II. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of, and
appointed by, the Board of Directors of the Company (the "Board"), and the
Committee shall be (a) comprised solely of two or more outside directors (within
the meaning of Section 162(m) of the Code and applicable interpretive authority
thereunder), and (b) constituted so as to permit the Plan to comply with Rule
16b-3, as currently in effect or as hereinafter modified or amended ("Rule 16b-
3"), promulgated under the Securities Exchange Act of 1934, as amended (the
"1934 Act"). The Committee shall have sole authority to select the Optionees
from among those individuals eligible hereunder and to establish the number of
shares which may be issued under each Option; provided, however, that,
notwithstanding any provision in the Plan to the contrary, the maximum number of
shares that may be subject to Options granted under the Plan to an individual
Optionee during any calendar year may not exceed 100,000 (subject to adjustment
in the same manner as provided in Paragraph VIII hereof with respect to shares
of Stock subject to Options then outstanding). The limitation set forth in the
preceding sentence shall be applied in a manner which will permit compensation
generated under the Plan to constitute "performance-based" compensation for
purposes of Section 162(m) of the Code, including, without limitation, counting
against such maximum number of shares, to the extent required under Section
162(m) of the Code and applicable interpretive authority thereunder, any shares
subject to Options that are cancelled or repriced. In selecting the Optionees
from among individuals
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eligible hereunder and in establishing the number of shares that may be issued
under each Option, the Committee may take into account the nature of the
services rendered by such individuals, their present and potential contributions
to the Company's success and such other factors as the Committee in its
discretion shall deem relevant. The Committee is authorized to interpret the
Plan and may from time to time adopt such rules and regulations, consistent with
the provisions of the Plan, as it may deem advisable to carry out the Plan. All
decisions made by the Committee in selecting the Optionees, in establishing the
number of shares which may be issued under each Option and in construing the
provisions of the Plan shall be final.
III. OPTION AGREEMENTS
(a) Each Option shall be evidenced by a written agreement between the
Company and the Optionee ("Option Agreement") which shall contain such terms and
conditions as may be approved by the Committee. The terms and conditions of the
respective Option Agreements need not be identical. Specifically, an Option
Agreement may provide for the surrender of the right to purchase shares under
the Option in return for a payment in cash or shares of Stock or a combination
of cash and shares of Stock equal in value to the excess of the fair market
value of the shares with respect to which the right to purchase is surrendered
over the option price therefor ("Stock Appreciation Rights"), on such terms and
conditions as the Committee in its sole discretion may prescribe; provided,
that, except as provided in Subparagraph VIII(c) hereof, the Committee shall
retain final authority (i) to determine whether an Optionee shall be permitted,
or (ii) to approve an election by an Optionee, to receive cash in full or
partial settlement of Stock Appreciation Rights. Moreover, an Option Agreement
may provide for the payment of the option price, in whole or in part, by the
delivery of a number of shares of Stock (plus cash if necessary) having a fair
market value equal to such option price.
(b) For all purposes under the Plan, the fair market value of a share of
Stock on a particular date shall be equal to the mean of the high and low sales
prices of the Stock (i) reported by the National Market System of NASDAQ on that
date or (ii) if the Stock is listed on a national stock exchange, reported on
the stock exchange composite tape on that date; or, in either case, if no prices
are reported on that date, on the last preceding date on which such prices of
the Stock are so reported. If the Stock is traded over the counter at the time
a determination of its fair market value is required to be made hereunder, its
fair market value shall be deemed to be equal to the average between the
reported high and low or closing bid and asked prices of Stock on the most
recent date on which Stock was publicly traded. In the event Stock is not
publicly traded at the time a determination of its value is required to be made
hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
(c) Each Option and all rights granted thereunder shall not be transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and shall be
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exercisable during the Optionee's lifetime only by the Optionee or the
Optionee's guardian or legal representative.
IV. ELIGIBILITY OF OPTIONEE
Incentive Stock Options may be granted only to individuals who are
employees (including officers and directors who are also employees) of the
Company or any parent or subsidiary corporation (as defined in Section 424 of
the Code) of the Company at the time the Option is granted; provided, however,
that Options which do not constitute Incentive Stock Options may be granted to
individuals who are consultants or directors (but not also employees) of the
Company or any such parent or subsidiary corporation. Options may be granted to
the same individual on more than one occasion. No Incentive Stock Option shall
be granted to an individual if, at the time the Option is granted, such
individual owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of its parent or subsidiary
corporation, within the meaning of Section 422(b)(6) of the Code, unless (i) at
the time such Option is granted the option price is at least 110% of the fair
market value of the Stock subject to the Option and (ii) such Option by its
terms is not exercisable after the expiration of five years from the date of
grant. To the extent that the aggregate fair market value (determined at the
time the respective Incentive Stock Option is granted) of stock with respect to
which Incentive Stock Options are exercisable for the first time by an
individual during any calendar year under all incentive stock option plans of
the Company and its parent and subsidiary corporations exceeds $100,000, such
excess Incentive Stock Options shall be treated as Options which do not
constitute Incentive Stock Options. The Committee shall determine, in
accordance with applicable provisions of the Code, Treasury Regulations and
other administrative pronouncements, which of an Optionee's Incentive Stock
Options will not constitute Incentive Stock Options because of such limitation
and shall notify the Optionee of such determination as soon as practicable after
such determination.
V. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 1,000,000 shares of Stock. Such shares may
consist of authorized but unissued shares of Stock or previously issued shares
of Stock reacquired by the Company. Any of such shares which remain unissued
and which are not subject to outstanding Options at the termination of the Plan
shall cease to be subject to the Plan, but, until termination of the Plan, the
Company shall at all times make available a sufficient number of shares to meet
the requirements of the Plan. Should any Option hereunder expire or terminate
prior to its exercise in full, the shares theretofore subject to such Option may
again be subject to an Option granted under the Plan to the extent permitted
under Rule 16b-3. The aggregate number of shares which may be issued under the
Plan shall be subject to adjustment in the same manner as provided in Paragraph
VIII hereof with respect to shares of Stock subject to Options then outstanding.
Exercise of an Option in any manner, including an exercise involving a Stock
Appreciation Right, shall result in a decrease in the number of shares of Stock
which may thereafter be available, both for purposes of the Plan and for sale to
any
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one individual, by the number of shares as to which the Option is exercised.
Separate stock certificates shall be issued by the Company for those shares
acquired pursuant to the exercise of an Incentive Stock Option and for those
shares acquired pursuant to the exercise of any Option which does not constitute
an Incentive Stock Option.
VI. OPTION PRICE
The exercise price of Stock issued under each Option shall be determined by
the Committee, but in the case of an Incentive Stock Option, such exercise price
shall not be less than the fair market value of Stock subject to the Option on
the date the Option is granted.
VII. TERM OF PLAN
The Plan shall be effective upon the date of its adoption by the Board,
provided the Plan is approved by the stockholders of the Company within twelve
months thereafter. Notwithstanding any provision in this Plan or in any Option
Agreement, no Option shall be exercisable prior to such stockholder approval.
Except with respect to Options then outstanding, if not sooner terminated under
the provisions of Paragraph IX, the Plan shall terminate upon and no further
Options shall be granted after the expiration of ten years from the date of its
adoption by the Board, which such date is September 12, 2004.
VIII. RECAPITALIZATION OR REORGANIZATION
(a) The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
(b) The shares with respect to which Options may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration of
an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i) in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the exercise price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the exercise price per share shall be
proportionately increased.
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of
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Stock covered by an Option theretofore granted shall be adjusted so that such
Option shall thereafter cover the number and class of shares of stock and
securities to which the Optionee would have been entitled pursuant to the terms
of the recapitalization if, immediately prior to the recapitalization, the
Optionee had been the holder of record of the number of shares of Stock then
covered by such Option. If (i) the Company shall not be the surviving entity in
any merger, consolidation or other reorganization (or survives only as a
subsidiary of an entity other than a previously wholly-owned subsidiary of the
Company), (ii) the Company sells, leases or exchanges all or substantially all
of its assets to any other person or entity (other than a wholly-owned
subsidiary of the Company), (iii) the Company is to be dissolved and liquidated,
(iv) any person or entity, including a "group" as contemplated by Section
13(d)(3) of the 1934 Act, acquires or gains ownership or control (including,
without limitation, power to vote) of more than 50% of the outstanding shares of
the Company's voting stock (based upon voting power), or (v) as a result of or
in connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board (each such event is referred to herein as a "Corporate
Change"), no later than (a) ten days after the approval by the stockholders of
the Company of such merger, consolidation, reorganization, sale, lease or
exchange of assets or dissolution or such election of directors or (b) thirty
days after a change of control of the type described in Clause (iv), the
Committee, acting in its sole discretion without the consent or approval of any
Optionee, shall act to effect one or more of the following alternatives, which
may vary among individual Optionees and which may vary among Options held by any
individual Optionee: (1) accelerate the time at which Options then outstanding
may be exercised so that such Options may be exercised in full for a limited
period of time on or before a specified date (before or after such Corporate
Change) fixed by the Committee, after which specified date all unexercised
Options and all rights of Optionees thereunder shall terminate, (2) require the
mandatory surrender to the Company by selected Optionees of some or all of the
outstanding Options held by such Optionees (irrespective of whether such Options
are then exercisable under the provisions of the Plan) as of a date, before or
after such Corporate Change, specified by the Committee, in which event the
Committee shall thereupon cancel such Options and the Company shall pay to each
Optionee an amount of cash per share equal to the excess, if any, of the amount
calculated in Subparagraph (d) below (the "Change of Control Value") of the
shares subject to such Option over the exercise price(s) under such Options for
such shares, (3) make such adjustments to Options then outstanding as the
Committee deems appropriate to reflect such Corporate Change (provided, however,
that the Committee may determine in its sole discretion that no adjustment is
necessary to Options then outstanding) or (4) provide that the number and class
of shares of Stock covered by an Option theretofore granted shall be adjusted so
that such Option shall thereafter cover the number and class of shares of stock
or other securities or property (including, without limitation, cash) to which
the Optionee would have been entitled pursuant to the terms of the agreement of
merger, consolidation or sale of assets and dissolution if, immediately prior to
such merger, consolidation or sale of assets and dissolution, the Optionee had
been the holder of record of the number of shares of Stock then covered by such
Option.
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(d) For the purposes of clause (2) in Subparagraph (c) above, the "Change
of Control Value" shall equal the amount determined in clause (i), (ii) or
(iii), whichever is applicable, as follows: (i) the per share price offered to
stockholders of the Company in any such merger, consolidation, reorganization,
sale of assets or dissolution transaction, (ii) the price per share offered to
stockholders of the Company in any tender offer or exchange offer whereby a
Corporate Change takes place, or (iii) if such Corporate Change occurs other
than pursuant to a tender or exchange offer, the fair market value per share of
the shares into which such Options being surrendered are exercisable, as
determined by the Committee as of the date determined by the Committee to be the
date of cancellation and surrender of such Options. In the event that the
consideration offered to stockholders of the Company in any transaction
described in this Subparagraph (d) or Subparagraph (c) above consists of
anything other than cash, the Committee shall determine the fair cash equivalent
of the portion of the consideration offered which is other than cash.
(e) Any adjustment provided for in Subparagraphs (b) or (c) above shall be
subject to any required stockholder action.
(f) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the exercise price per
share.
IX. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Options have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time to
time; provided, that no change in any Option theretofore granted may be made
which would impair the rights of the Optionee without the consent of such
Optionee; and provided, further, that (i) the Board may not make any alteration
or amendment which would decrease any authority granted to the Committee
hereunder in contravention of Rule 16b-3 and (ii) the Board may not make any
alteration or amendment which would materially increase the benefits accruing to
participants under the Plan, increase the aggregate number of shares which may
be issued pursuant to the provisions of the Plan, change the class of
individuals eligible to receive Options under the Plan or extend the term of the
Plan, without the approval of the stockholders of the Company.
X. SECURITIES LAWS
(a) The Company shall not be obligated to issue any Stock pursuant to any
Option granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of 1933
and such other
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state and federal laws, rules or regulations as the Company or the Committee
deems applicable and, in the opinion of legal counsel for the Company, there is
no exemption from the registration requirements of such laws, rules or
regulations available for the offering and sale of such shares.
(b) It is intended that the Plan and any grant of an Option made to a
person subject to Section 16 of the 1934 Act meet all of the requirements of
Rule 16b-3. If any provision of the Plan or any such Option would disqualify
the Plan or such Option under, or would otherwise not comply with, Rule 16b-3,
such provision or Option shall be construed or deemed amended to conform to Rule
16b-3.
ALPHA TECHNOLOGIES GROUP, INC.
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EXHIBIT 10.17(a)
FIRST AMENDMENT TO
ACCOUNTS RECEIVABLE LOAN AGREEMENT
This First Amendment to Accounts Receivable Loan Agreement ("Amendment") is
entered into as of October 27, 1995, by and between Uni-Star Industries, Inc., a
Delaware corporation ("Borrower"), and City National Bank, a national banking
association ("CNB").
RECITALS
A. Borrower and CNB are parties to that certain Accounts Receivable Loan
Agreement dated as of August 30, 1995, as herein amended, hereinafter the
"Loan Agreement".
B. Borrower is in violation of Section 7.3 "Loans" with respect to advances to
Subsidiaries exceeding the maximum allowed.
C. Borrower and CNB desire to supplement and amend the Loan Agreement as
hereinafter set forth.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment without definition
shall have the meanings set forth in the Loan Agreement.
2. Amendments. The Loan Agreement is amended as follows:
2.1 Section 6.11.1 of the Loan Agreement shall be amended by deleting the
number "$3,700,000.00" and inserting in its place and stead the number
"$4,000,000.00".
2.2 Section 7.3 of the Loan Agreement shall be amended by deleting the
number "$650,000.00" and inserting in its place and stead the number
"$1,100,000.00".
3. Waiver of Event of Default. CNB hereby waives the Event of Default caused by
Borrower's failure to comply with or observe the provisions of Section 7.3 of
the Loan Agreement prior to giving effect to the amendment contemplated by
Section 2.2 of this Amendment for the period ending September 30, 1995. This
waiver shall be effective solely with respect to the matter described in this
Section 3 of this Amendment and shall not be deemed to be or construed to be or
construed to be a waiver of any other term or condition of the Loan Agreement or
any other term or condition of the instruments or agreements referred to therein
or otherwise executed in connection therewith, or to prejudice any right, power
or remedy that CNB may now have or may have in the future under or in connection
with the Loan Agreement or the instruments referred to therein or otherwise
executed in connection therewith with respect to any other Event of Default or
Potential Event of Default which may exist or arise. Borrower represents and
warrants to CNB that no other Events
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Uni-Star Industries, Inc.
First Amendment to Accounts Receivable Loan Agreement
October 27, 1995
of Default or Potential Events of Default exist under the Loan Agreement.
4. Conditions Precedent. This Amendment shall become effective upon the
fulfillment of all of the following conditions to CNB's satisfaction:
4.1 CNB shall have received this Amendment duly executed by Borrower.
5. Existing Loan Agreement. Except as expressly amended herein, the Loan
Agreement shall remain in full force and effect, and in all other respects
is affirmed.
6. Counterparts. This Amendment may be executed in any number of counterparts,
and all such counterparts taken together shall be deemed to constitute one
and the same instrument.
7. Governing Law. This Amendment and the rights and obligations of the parties
hereto shall be construed in accordance with, and governed by the laws of
the State of California.
IN WITNESS WHEREOF, Borrower and CNB have executed this Amendment as of the
day and year first above written.
"Borrower" Uni-Star Industries, Inc., a Delaware corporation
By: /s/ Neal Castleman
------------------------------------
Neal Castleman, President
"CNB" City National Bank, a national banking association
By: /s/ Phillip Goessler
-------------------------------------
Phillip Goessler, Vice President
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Exhibit 10.19
STANDARD INDUSTRIAL LEASE -- NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Parties. This Lease, dated, for reference purposes only, September 1, 1993,
is made by and between B & K Investment Company (herein called "Lessor") and
Specialty Extrusions Limited (herein called "Lessee").
2. Premises. Lessor hereby leases to Lessee and Lessee leases from Lessor for
the term, at the rental, and upon all of the conditions set forth herein, that
certain real property situated in the County of Orange State of California
commonly known as 801 South Acacia Avenue (Portion of larger) and described as
an approximately 15,000 square foot metal building and adjacent mobile office on
approximately one (1) acre of land as shown on Exhibit A attached hereto and
made a part hereof. Said real property including the land and all improvements
therein, is herein called "the Premises".
3. Term.
3.1 Term. The term of this Lease shall be for five (5) years commencing on
September 1, 1993 and ending on August 31, 1998 unless sooner terminated
pursuant to any provision hereof.
3.2 Delay in Possession. Notwithstanding said commencement date, if for any
reason Lessor cannot deliver possession of the Premises to Lessee on said date,
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
extend the term hereof, but in such case, Lessee shall not be obligated to pay
rent until possession of the Premises is tendered to Lessee; provided, however,
that if Lessor shall not have delivered possession of the Premises within sixty
(60) days from said commencement date, Lessee may, at Lessee's option, by notice
in writing to Lessor within ten (10) days thereafter, cancel this Lease, in
which event the parties shall be discharged from all obligations hereunder;
provided further, however, that if such written notice of Lessee is not received
by Lessor within said ten (10) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect.
3.3 Early Possession. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay rent
for such period at the initial monthly rates set forth below.
4. Rent. Lessee shall pay to Lessor as rent for the Premises, monthly payments
of $7,717.00, in advance, on the first day of each month of the term hereof.
Lessee shall pay Lessor upon the execution hereof $7,717.00 as rent for the
month of September, 1993. Rent for any period during the term hereof which is
for less than one month shall be a pro rata portion of the monthly installment.
Rent shall be payable in lawful money of the United States to Lessor at the
address stated herein or to such other persons or at such other places as Lessor
may designate in writing.
5. Security Deposit. Lessee's $5,000.00 security deposit shall remain as
security for Lessee's faithful performance of Lessee's obligations hereunder. If
Lessee fails to pay rent or other charges due hereunder, or otherwise defaults
with respect to any provision of this Lease, Lessor may use, apply or retain all
or any portion of said deposit for the payment of any rent or other charge in
default or for the payment of any other sum to which Lessor may become obligated
by reason of Lessee's default, or to compensate Lessor for any loss or damage
which Lessor may suffer thereby. If Lessor so uses or applies all or any portion
of said deposit Lessee shall within ten (10) days after written demand therefor
deposit cash with Lessor in an amount sufficient to restore said deposit to the
full amount hereinabove stated and Lessee's failure to do so shall be a
<PAGE>
material breach of this Lease. If the monthly rent shall, from time to time,
increase during the term of this Lease, Lessee shall thereupon deposit with
Lessor additional security deposit so that the amount of security deposit held
by Lessor shall at all times bear the same proportion to current rent as the
original security deposit bears to the original monthly rent set forth in
paragraph 4 hereof. Lessor shall not be required to keep said deposit separate
from its general accounts. If Lessee performs all of Lessee's obligations
hereunder, said deposit, or so much thereof as has not theretofore been applied
by Lessor, shall be returned, without payment of interest or other increment for
its use, to Lessee (or, at Lessor's option, to the last assignee, if any, of
Lessee's interest hereunder) at the expiration of the term hereof, and after
Lessee has vacated the Premises. No trust relationship is created herein between
Lessor and Lessee with respect to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for aluminum
extrusion and related legal activities or any other use which is reasonably
comparable and for no other purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in its state existing on
the date that the Lease term commences, but without regard to the use for which
Lessee will use or has used the Premises, does not violate any covenants or
restrictions of record, or any applicable building code, regulation or ordinance
in effect on such Lease term commencement date. In the event it is determined
that this warranty has been violated, then it shall be the obligation of the
Lessor, after written notice from Lessee, to promptly, at Lessor's sole cost and
expense, rectify any such violation. In the event Lessee does not give to Lessor
written notice of violation of this warranty within six months from the date
that the Lease term commences, the correction of same shall be the obligation of
the Lessee at Lessee's sole cost. The warranty contained in this paragraph 6.2
(a) shall be of no force or effect if, prior to the date of this Lease, Lessee
was the owner or occupant of the Premises, and, in such event, Lessee shall
correct any such violation at Lessee's sole cost.
(b) Except as provided in paragraph 6.2(a), Lessee shall, at Lessee's
expense, comply promptly with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements in
effect during the term or any part of the term hereof, regulating the use by
Lessee of the Premises. Lessee shall not use nor permit the use of the Premises
in any manner that will tend to create waste or a nuisance or, if there shall be
more than one tenant in the building containing the Premises, shall tend to
disturb such other tenants.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee clean and free of debris on
lease commencement date (unless Lessee is already in possession) and Lessor
further warrants to Lessee that the plumbing, lighting, air conditioning,
heating, and loading doors in the Premises shall be in good operating condition
on the Lease commencement date. In the event that it is determined that this
warranty has been violated, then it shall be the obligation of Lessor, after
receipt of written notice from Lessee setting forth with specificity the nature
of the violation, to promptly, at Lessor's sole cost, rectify such violation.
Lessee's failure to give such written notice to Lessor within thirty (30) days
after the Lease commencement date shall cause the conclusive presumption that
Lessor has complied with all of Lessor's obligations hereunder. The warranty
contained in this paragraph 6.3(a) shall be of no force or effect if prior to
the date of this Lease, Lessee was the owner or occupant of the Premises.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts the
Premises in their condition existing as of the Lease commencement date or the
date that Lessee takes possession of the Premises, whichever is earlier, subject
to all applicable
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zoning, municipal, county and state laws, ordinances and regulations governing
and regulating the use of the Premises, and any covenants or restrictions of
record and accepts this Lease subject thereto and to all matters disclosed
thereby and by any exhibits attached hereto. Lessee acknowledges that neither
Lessor nor Lessor's agent has made any representation or warranty as to the
present or future suitability of the Premises for the conduct of Lessee's
business.
7. Maintenance, Repairs and Alterations.
7.1 Lessee's Obligations. Lessee shall keep in good order, condition and
repair the Premises and every part thereof, structural and non structural,
(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 plumbing, heating, air
conditioning, (Lessee shall procure and maintain, at Lessee's expense, an air
conditioning system maintenance contract) ventilating, electrical, lighting
facilities and equipment within the Premises, fixtures, walls (interior and
exterior), foundations, ceilings, roofs (interior and exterior), floors,
windows, doors, plate glass and skylights located within the Premises, and all
landscaping, driveways, parking lots, fences and signs located on the Premises
and sidewalks and parkways adjacent to the Premises.
7.1.1 Toxic Waste Inspection. Lessee at Lessee's expense during the period
between ninety (90) and forty-five (45) days prior to the expiration of the
lease shall cause the premises to be inspected for toxic materials by a licensed
environmental inspection service approved in writing by Lessor and shall provide
Lessor with a written report issued by such a licensed environmental inspection
service showing the results of the inspection and a determination of what
corrective measures should be taken, if any, to eliminate such toxic materials,
if any, to the extent necessary to meet the standards set out in the federal,
state, county or municipal codes as to the presence of such materials. Lessee
agrees that at its own expense, it will have such corrective measures performed
and completed before the expiration of the lease.
7.2 Surrender. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as when received, ordinary wear and tear expected, clean and free of debris.
Lessee shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, furnishings and equipment. Notwithstanding
anything to the contrary otherwise stated in this Lease, Lessee shall leave the
air lines, power panels, electrical distribution systems, lighting fixtures,
space heaters, air conditioning, plumbing and fencing on the premises in good
operating condition.
7.3 Lessor's Rights. If Lease fails to perform Lessee's obligations under
this Paragraph 7, or under any other paragraph of this Lease, Lessor may at its
option (but shall not be required to) enter upon the Premises after ten (10)
days' prior written notice to Lessee (except in the case of any emergency, in
which case no notice shall be required), perform such obligations on Lessee's
behalf and put the same in good order, condition and repair, and the cost
thereof together with interest thereon at the maximum rate then allowable by law
shall become due and payable as additional rental to Lessor together with
Lessee's next rental installment.
7.4 Lessor's Obligations. Except for the obligations of Lessor under
Paragraph 6.2(a) and 6.3(a) (relating to Lessor's warranty), Paragraph 9
(relating to destruction of the Premises) and under Paragraph 14 (relating to
condemnation of the Premises), it is intended by the parties hereto that Lessor
have no obligations, in any manner whatsoever, to repair and maintain the
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Premises nor the building located thereon nor the equipment therein, whether
structural or non structural, all of which obligations are intended to be that
of the Lessee under Paragraph 7.1 hereof. Lessee expressly waives the benefit of
any statute now or hereinafter 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 premises in good order, condition and repair.
7.5 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, or Utility Installations in, on or about
the Premises, except for nonstructural alterations not exceeding $2,500 in
cumulative costs during the term of this Lease. In any event, whether or not in
excess of $2,500 in cumulative cost, Lessee shall make no change or alteration
to the exterior of the Premises nor the exterior of the building(s) on the
Premises without Lessor's prior written consent. As used in this Paragraph 7.5
the term "Utility Installation" shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing, and fencing. Lessor may require that Lessee
remove any or all of said alterations, improvements, additions or Utility
Installations at the expiration of the term, and restore the Premises to their
prior condition. Lessor may require Lessee to provide Lessor, at Lessee's sole
cost and expense, a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such improvements, to insure Lessor against
any liability for mechanic's and materialmen's liens and to insure completion of
the work. Should Lessee make any alterations, improvements, additions or Utility
Installations without the prior approval of Lessor, Lessor may require that
Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility Installations in, or
about the Premises that Lessee shall desire to make and which requires the
consent of the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from appropriate
governmental agencies, the furnishing of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all conditions of said
permit in a prompt and expeditious manner.
(c) 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 in the
Premises, which claims are or may be secured by any mechanics' 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 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 defend itself and Lessor 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, upon the condition that
if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's attorneys fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.
(d) Unless Lessor requires their removal, as set forth in Paragraph 7.5(a),
all alterations, improvements, additions and Utility Installations (whether or
not such Utility Installations constitute trade fixtures of Lessee), which may
be made on the Premises, shall become the property of Lessor and remain upon and
be surrendered with the Premises at the expiration of the term.
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Notwithstanding the provisions of this Paragraph 7.5(d), Lessee's machinery and
equipment, other than that which is affixed to the 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 Paragraph 7.2.
8. Insurance Indemnity.
8.1 Insuring Party. As used in this Paragraph 8, the term "insuring party"
shall mean the party who has the obligation to obtain the Property Insurance
required hereunder. The insuring party shall be designated in Paragraph 46
hereof. In the event Lessor is the insuring party, Lessor shall also maintain
the liability insurance described in paragraph 8.2 hereof, in addition to, and
not in lieu of, the insurance required to be maintained by Lessee under said
paragraph 8.2, but Lessor shall not be required to name Lessee as an additional
insured on such policy. Whether the insuring party is the Lessor or the Lessee,
Lessee shall, as additional rent for the Premises, pay the cost of all insurance
required hereunder, except for that portion of the cost attributable to Lessor's
liability insurance coverage in excess of $1,000,000 per occurrence. If Lessor
is the insuring party Lessee shall, within ten (10) days following demand by
Lessor, reimburse Lessor for the cost of the insurance so obtained.
8.2 Liability Insurance. Lessee shall, at Lessee's expense obtain and keep
in force during the term of this Lease a policy of Combined Single Limit, Bodily
Injury and Property Damage insurance insuring Lessor and Lessee against any
liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be a combined
single limit policy in an amount not less than $500,000 per occurrence. The
policy shall insure performance by Lessee of the indemnity provisions of this
Paragraph 8. The limits of said insurance shall not, however, limit the
liability of Lessee hereunder.
8.3 Property Insurance.
(a) The insuring party shall obtain and keep in force during the term of
this Lease a policy or policies of insurance covering loss or damage to the
Premises, in the amount of the full replacement value thereof, as the same may
exist from time to time, which replacement value is now $1,000,000.00, but in no
event less than the total amount required by lenders having liens on the
Premises, against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, flood (in the event same is
required by a lender having a lien on the Premises), and special extended perils
("all risk" as such term is used in the insurance industry). Said insurance
shall provide for payment of loss thereunder to Lessor or to the holders of
mortgages or deeds of trust on the Premises. The insuring party shall, in
addition, obtain and keep in force during the term of this Lease a policy of
rental value insurance covering a period of one year, with loss payable to
Lessor, which insurance shall also cover all real estate taxes and insurance
costs for said period. A stipulated value or agreed amount endorsement deleting
the coinsurance provision of the policy shall be procured with said insurance as
well as an automatic increase in insurance endorsement causing the increase in
annual property insurance coverage by 2% per quarter. If the insuring party
shall fail to procure and maintain said insurance the other party may, but shall
not be required to, procure and maintain the same, but at the expense of Lessee.
If such insurance coverage has a deductible clause, the deductible amount shall
not exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount.
(b) If the Premises are part of a larger building, or if the Premises are
part of a group of buildings owned by Lessor which are adjacent to the Premises,
then Lessee shall pay for any increase in the property insurance of such other
building or buildings if said increase is caused by Lessee's acts, omissions,
use or occupancy of the Premises.
(c) If the Lessor is the insuring party the Lessor will not
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insure Lessee's fixtures, equipment or tenant improvements unless the tenant
improvements have become a part of the Premises under paragraph 7, hereof. But
if Lessee is the insuring party the Lessee shall insure its fixtures, equipment
and tenant improvements.
8.4 Insurance Policies. Insurance required hereunder shall be in companies
holding a "General Policyholders Rating" of at least B plus, or such other
rating as may be required by a lender having a lien on the Premises, as set
forth in the most current issue of "Best's Insurance Guide". The insuring party
shall deliver to the other party copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses as required by this paragraph 8. No such policy shall be
cancelable or subject to reduction of coverage or other modification except
after thirty (30) days' prior written notice to Lessor. If Lessee is the
insuring party Lessee shall, at least thirty (30) days prior to the expiration
of such policies, furnish Lessor with renewals or "binders" thereof, or Lessor
may order such insurance and charge the cost thereof to Lessee, which amount
shall be payable by Lessee upon demand. Lessee shall not do or permit to be
done anything which shall invalidate the insurance policies referred to in
Paragraph 8.3. If Lessee does or permits to be done anything which shall
increase the cost of the insurance policies referred to in Paragraph 8.3, then
Lessee shall forthwith upon Lessor's demand reimburse Lessor for any additional
premiums attributable to any act or omission or operation of Lessee causing such
increase in the cost of insurance. If Lessor is the insuring party, and if the
insurance policies maintained hereunder cover other improvements in addition to
the Premises, Lessor shall deliver to Lessee a written statement setting forth
the amount of any such insurance cost increase and showing in reasonable detail
the manner in which it has been computed.
8.5 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive the entire right of recovery against the other for
loss or damage arising out of or incident to the perils insured against under
paragraph 8.3, which perils occur in, on or about the Premises, whether due to
the negligence of Lessor or Lessee or their agents, employees, contractors
and/or invitees. Lessee and Lessor shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance carrier or carriers
that the foregoing mutual waiver of subrogation is contained in this Lease.
8.6 Indemnity. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach or default in the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee, or any of Lessee's agents, contractors, or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in case any action proceeding be brought against Lessor be reason
of any such claim, Lessee upon notice from Lessor shall defend the same at
Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material part
of the consideration to Lessor, hereby assume all risk of damage to property or
injury to persons, in, upon or about the Premises arising from any cause and
Lessee hereby waives all claims in respect thereof against Lessor.
8.7 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such
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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, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether the said damage or injury results
from conditions arising upon the Premises or upon other portions of the building
of which the Premises are a part, or from other sources or places and regardless
of whether the cause of such damage or injury or the means of repairing the same
is inaccessible to Lessee. Lessor shall not be liable for any damages arising
from any act or neglect of any other tenant, if any, of the building in which
the Premises are located.
9. Damage of Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall herein mean damage or destruction to the
Premises to the extent that the cost of repair is less than 50% of the then
replacement cost of the Premises. "Premises Building Partial Damage" shall
herein mean damage or destruction to the building of which the Premises are a
part to the extent that the cost of repair is less than 50% of the then
replacement cost of such building as a whole.
(b) "Premises Total Destruction" shall herein mean damage or destruction to
the Premises to the extent that the cost of repair is 50% or more of the then
replacement cost of the Premises. "Premises Building Total Destruction" shall
herein mean damage or destruction to the building of which the Premises are a
part to the extent that the cost of repair is 50% or more of the then
replacement cost of such building as a whole.
(c) "Insured Loss" shall herein mean damage or destruction which was caused
by an event required to be covered by the insurance described in paragraph 8.
9.2 Partial Damage -- Insured Loss. Subject to the provisions of paragraphs
9.4, 9.5, and 9.6, if at anytime during the term of this Lease there is damage
which is an Insured Loss and which fails into the classification of Premises
Partial Damage or Premises Building Partial Damage, then Lessor shall, at
Lessor's expense, repair such damage, but not Lessee's fixtures, equipment or
tenant improvements unless the same become a part of the Premises pursuant to
Paragraph 7.5 hereof as soon as reasonably possible and this Lease shall
continue in full force and effect. Notwithstanding the above, if the Lessee is
the insuring party, and if the insurance proceeds received by Lessor are not
sufficient to effect such repair, Lessor shall give notice to Lessee of the
amount required in addition to the insurance proceeds to effect such repair.
Lessee shall contribute the required amount to Lessor within ten days after
Lessee has received notice from Lessor of the shortage in the insurance. When
Lessee shall contribute such amount to Lessor, Lessor shall make such repairs as
soon as reasonably possible and this Lease shall continue in full force and
effect. Lessee shall in no event have any right to reimbursement for any such
amounts so contributed.
9.3 Partial Damage -- Uninsured Loss. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, at any time during the term of this Lease there is
damage which is not an Insured Loss and which falls within the classification of
Premises Partial Damage or Premises Building Partial Damage, unless caused by a
negligent or willful act of Lessee (in which event Lessee shall make the repairs
at Lessee's expense). Lessor may at Lessor's option either (i) repair such
damage as soon as reasonably possible at Lessor's expense, in which event this
Lease shall continue in full force and effect, or (ii) give written notice to
Lessee within thirty (30) days after the date of the occurrence of such damage
of Lessor's intention to cancel and terminate this Lessee, as of the date of the
occurrence of such damage. In the event Lessor elects to give such notice of
Lessor's intention to cancel and terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give
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written notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period this Lease shall be canceled and terminated as of the date of the
occurrence of such damage.
9.4 Total Destruction. If at any time during the term of this Lease there
is damage, whether or not an Insured Loss (including destruction required by
any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this lease
shall automatically terminate as of the date of such total destruction.
9.5 Damage Near End of Term.
(a) If at any time during the last six months of the term of this Lease
there is damage, whether or not an Insured Loss, which falls within the
classification of Premises Partial Damage, Lessor may at Lessor's option cancel
and terminate this Lease as of the date of occurrence of such damage by giving
written notice to Lessee of Lessor's election to do so within 30 days after the
date of occurrence of such damage.
(b) Notwithstanding paragraph 9.5(a), in the event that Lessee has an option
to extend or renew this Lease, and the time within which said option may be
exercised has not yet expired, Lessee shall exercise such option, if it is to be
exercised at all, no later than 20 days after the occurrence of an Insured Loss
falling within the classification of Premises Partial Damage during the last six
months of the term of this Lease. If Lessee duly exercises such option during
said 20 day period, Lessor shall, at Lessor's expense, repair such damage as
soon as reasonably possible and this Lease shall continue in full force and
effect. If Lessee fails to exercise such option during said 20 day period, then
Lessor may at Lessor's option terminate and cancel this Lease as of the
expiration of said 20 day period by giving written notice to Lessee of Lessor's
election to do so within 10 days after the expiration of said 20 day period,
notwithstanding any term or provision in the grant of option to the contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in paragraphs 9.2 or 9.3, through no
fault of Lessee, and Lessor or Lessee repairs or restores the Premises pursuant
to the provisions of this Paragraph 9, the rent payable hereunder for the period
during which such damage, repair or restoration continues shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired.
Except for abatement of rent, if any, Lessee shall have no claim against Lessor
for any damage suffered by reason of any such damage, destruction, repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the Premises under the
provisions of this Paragraph 9 and shall not commence such repair or restoration
within 90 days after such obligations shall accrue, Lessee may at Lessee's
option cancel and terminate this Lease by giving Lessor written notice of
Lessee's election to do so at any time prior to the commencement of such repair
or restoration. In such event this Lease shall terminate as of the date of such
notice.
9.7 Termination -- Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.8 Waiver. Lessor and Lessee waive the provisions of any statutes which
relate to termination of lease when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessee shall pay the real property tax
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as defined in paragraph 10.2, applicable to the Premises during the term of this
Lease. All such payments shall be made at least ten (10) days prior to the
delinquency date of such payment. Lessee shall promptly furnish Lessor with
satisfactory evidence that such taxes have been paid. If any such taxes paid by
Lessee shall cover any period of time prior to or after the expiration of the
term hereof, Lessee's share of such taxes shall be equitably prorated to cover
only the period of time within the tax fiscal year during which this Lease shall
be in effect and Lessor shall reimburse Lessee to the extent required. If Lessee
shall fail to pay any such taxes, Lessor shall have the right to pay the same,
in which case Lessee shall repay such amount to Lessor with Lessee's next rent
installment together with interest at the maximum rate then allowable by law.
10.2 Definition of "Real Property Tax". As used herein, the term "real
property tax" 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 on the Premises 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, as against any legal or equitable interest of Lessor in the
Premises or in the real property of which the Premises are a part, as against
Lessor's right to rent or other income therefrom, and as against Lessor's
business of leasing the Premises. The term "real property tax" shall also
include any tax, fee, levy, assessment or charge (i) in substitution of,
partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of "real property tax," or (ii) the nature of
which was hereinbefore included within the definition of "real property tax," or
(iii) which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1, 1978, or (iv) which
is imposed as a result of a transfer, either partial or total, of Lessor's
interest in the Premises or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such transfer,
or (v) which is imposed by reason of this transaction, any modifications or
changes hereto, or any transfers hereof.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability 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.
10.4 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee
within 10 days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other Premises.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily
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or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer
or encumber all or any part of Lessee's interest in this Lease or in the
Premises, without Lessor's prior written consent, which Lessor shall not
unreasonably withhold. Lessor shall respond to Lessee's request for consent
hereunder in a timely manner and any attempted assignment, transfer, mortgage,
encumbrance or subletting without such consent shall be void, and shall
constitute a breach of this Lease.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, provided that said assignee assumes, in full, the
obligations of Lessee under this Lease. Any such assignment shall not, in any
way, affect or limit the liability of Lessee under the terms of this Lease even
if after such assignment or subletting the terms of this Lease are materially
changed or altered without the consent of Lessee, the consent of whom shall not
be necessary.
12.3 No Release of Lessee. Regardless of Lessor's consent, no subletting or
assignment shall release Lessee of Lessee's obligation or alter the primary
liability of Lessee to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by any assignee of
Lessee or any successor of Lessee, in the performance of any of the terms
hereof, Lessor may proceed directly against Lessee without the necessity of
exhausting remedies against said assignee. Lessor may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Lessee, without notifying Lessee, or any successor of
Lessee, and without obtaining its or their consent thereto and such action shall
not relieve Lessee of liability under this Lease.
12.4 Attorney's Fees. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys fees incurred in connection
therewith, such attorneys fees not to exceed $350.00 for each such request.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, where such failure
shall continue for a period of three days after written notice thereof from
Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to Pay
Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice to
Pay Rent or Quit shall also constitute the notice required by this subparagraph.
(c) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than described in paragraph (b) above, where such failure shall continue
for a period of 30 days after written notice hereof from Lessor to Lessee;
provided, however, that if the nature of Lessee's default is such that more than
30 days are reasonably required for its cure, then Lessee shall not be deemed to
be in default if Lessee commenced such cure within said 30-day period and
thereafter diligently prosecutes
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such cure to completion.
(d) (i) The making by Lessee of any general arrangement or assignment for
the benefit of creditors; (ii) Lessee becomes a "debtor" as defined in 11 U.S.C.
(S)101 or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within 60 days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's
asset's located at the Premises or of Lessee's interest in this Lease, where
possession is not restored to Lessee within 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 30 days. Provided, however, in the event that
any provision of this paragraph 13.1(d) is contrary to any applicable law, such
provision shall be of no force or effect.
(e) The discovery by Lessor that any financial statement given to Lessor by
lessee, any assignee of Lessee, any subtenant of Lessee, any successor in
interest of Lessee or any guarantor of Lessee's obligation hereunder, and any of
them, was materially false.
13.2 Remedies. In the event of any such material default or breach by
Lessee, Lessor may at any time thereafter, with or without notice or demand and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
surrender possession of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by Lessor by reason of
Lessee's default including, but not limited to, the cost of recovering
possession of the Premises; expenses of reletting, including time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided;
that portion of the leasing commission paid by Lessor pursuant to Paragraph 15
applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease shall
continue in effect whether or not Lessee shall have abandoned the Premises. In
such event Lessor shall be entitled to enforce all of Lessor's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due hereunder.
(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. Unpaid
installments of rent and other unpaid monetary obligations of Lessee under the
terms of this Lease shall bear interest from the date due at the maximum rate
then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Lessee to Lessor and
to the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have theretofore been furnished to Lessee in writing,
specifying wherein Lessor has failed to perform such obligation; provided,
however, that if the nature of Lessor's obligation is such that more than thirty
(30) days are required for performance then Lessor shall not be in default if
Lessor commences performance within such 30-day period and thereafter diligently
prosecutes the same to completion.
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 on Lessor by the
terms of any mortgage or trust deed covering the
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Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten
(10) 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 6% 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 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 rent, then rent shall automatically
become due and payable quarterly in advance, rather than monthly,
notwithstanding paragraph 4 or any other provision of this Lease to the
contrary.
13.5 Impounds. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other payments required
under this Lease, a monthly advance installment, payable at the same time as the
monthly rent, as estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. Such fund shall be established to insure payment when due, before
delinquency, of any or all such real property taxes and insurance premiums. If
the amounts paid to Lessor by Lessee under the provisions of this paragraph are
insufficient to discharge the obligation of Lessee to pay such real property
taxes and insurance premiums as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In an event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph may, at the
option of Lessor, be applied to the payment of any monetary default of Lessee in
lieu of being applied to the payment of real property tax and insurance
premiums.
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 10% of the floor area
of the building on the Premises, or more than 25% of the land area of the
Premises which is not occupied by any building, is taken by condemnation, Lessee
may, at Lessee's option, to be exercised in writing only 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 condemnating authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease 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 rent shall be
reduced in the proportion that the floor area of the building taken bears to the
total floor area of the building situated on the Premises. No reduction of rent
shall occur if the only area taken is that which does not have a building
located thereon. 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 in value of the leasehold or for the
taking of the fee, or as severance damages; provided, however, that Lessee shall
be entitled to any award for loss of or damage to Lessee's trade fixtures and
removable personal property. In the event that this Lease is not terminated
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by reason of such condemnation, Lessor shall to the extent of severance damages
received by Lessor in connection with such condemnation, repair any damage to
the Premises caused by such condemnation except to the extent that Lessee has
been reimbursed therefor by the condemning authority. Lessee shall pay any
amount in excess of such severance damages required to complete such repair.
15. Broker's Fee.
(a) Upon execution of this Lease by both parties, Lessor shall pay to Lee
and Associates Commercial Brokerage Company (John Sullivan) Licensed real estate
broker(s), a fee as set forth in a separate agreement between Lessor and said
broker(s), or in the event there is no separate agreement between Lessor and
said broker(s), the sum as agreed, for brokerage services rendered by said
broker(s) to Lessor in this transaction.
(b) Lessor further agrees that if Lessee exercises any Option as defined in
paragraph 39.1 of this Lease, which is granted to Lessee under this Lease, or
any subsequently granted option which is substantially similar to an option
granted to Lessee under this Lease or if Lessee acquires any rights to the
Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or if Lessee remains in possession of the Premises after
the expiration of the term of this Lease after having failed to exercise an
Option, or if said broker(s) are the procuring cause of any other lease or sale
entered into between the parties pertaining to the Premises and/or any adjacent
property in which Lessor has an interest, then as to any of said transactions,
Lessor shall pay said broker(s) a fee in accordance with the schedule of said
broker(s) in effect at the time of execution of this Lease.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but also on
behalf of any person, corporation, association, or other entity having an
ownership interest in said real property or any part thereof, when such fee is
due hereunder. Any transferee of Lessor's interest in this Lease, whether such
transfer is by agreement or by operation of law, shall be deemed to have assumed
Lessor's obligation under this Paragraph 15. Said broker shall be a third party
beneficiary of the provisions of this Paragraph 15.
16. Estoppel Certificate.
(a) Lessee shall at any time upon not less than ten (10) days prior written
notice from Lessor execute, acknowledge and deliver to Lessor a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, so modified, is in full force and effect) and the date to which
the rent and other charges are paid in advance, if any, and (ii) acknowledging
that there are not, to Lessee's knowledge, any uncured defaults on the part of
Lessor hereunder, or specifying such defaults if any are claimed. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement within
such time shall be a material breach of this lease or shall be conclusive upon
Lessee (i) that this Lease is in full force and effect, without modification
except as may be represented by Lessor, (ii) that there are no uncured defaults
in Lessor's performance, and (iii) that not more than one month's rent has been
paid in advance or such failure may be considered by Lessor as a default by
Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or sell the Premises, or any
part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three years' financial statements of Lessee. All such financial statements
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shall be received by Lessor and such lender or purchaser in confidence and shall
be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners at the time in question of the fee title or a lessee interest in
a ground lease of the Premises, and except as expressly provided in Paragraph
15, in the event of any transfer of such title or interest, Lessor herein named
(and in case of any subsequent transfers then the grantor) shall be relieved
from and after the date of such transfer of all liability as respects Lessor's
obligations thereafter to be performed, provided that any funds in the hands of
Lessor or the then grantor at the time of such transfer, in which Lessee has an
interest, shall be delivered to the grantee. The obligations contained in this
Lease to be performed by Lessor shall, subject as aforesaid, be binding on
Lessor's successors and assigns, only during their respective periods of
ownership.
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. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease, provided, however, that
interest shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid by Lessee.
20. Time of Essence. Time is of the essence.
21. Additional Rent. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification. Except as otherwise stated in this Lease, Lessee
hereby acknowledges that neither the real estate broker listed in Paragraph 15
hereof or any cooperating broker on this transaction nor the Lessor or any
employees or agents of any of said persons has made any oral or written
warranties or representations to Lessee relative to the condition or use by
Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable laws
and regulations in effect during the term of this Lease except as otherwise
specifically stated in this Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified mail, and if given
personally or by mail, shall be deemed sufficiently given if addressed to Lessee
or to Lessor at the address noted below the signature of the respective parties,
as the case may be. Either party may by 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 notice purposes. 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 notice to Lessee.
24. Waivers. No waiver by Lessor or any provison hereof shall be deemed a
waiver of any other provision hereof or of any
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subsequent breach by Lessee of the same or any other provision. Lessor's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to or approval of any subsequent act by Lessee.
The acceptance of rent hereunder by Lessor shall not be a waiver of any
preceding breach by Lessee of any provision hereof, other than the failure of
Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge
of such preceding breach at the time of acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of
the Premises or any pad thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, but all options and rights of
first refusal, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.
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. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of Paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located.
30. Subordination.
(a) This Lease, at Lessor's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the real property of which the Premises are a part and to
any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgage, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make the Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to
execute such documents within 10 days after written demand shall constitute a
material default by Lessee hereunder, or, at Lessor's option, Lessor shall
execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee
does hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this paragraph 30(b).
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31. Attorney's Fees. If either party or the broker named herein brings an
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the court.
The provisions of this paragraph shall inure to the benefit of the broker named
herein who seeks to enforce a right hereunder.
32. Lessor's Access. Lessor and Lessor's agents shall have the right to enter
the Premises at reasonable times for the purpose of inspecting the same, showing
the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or 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 Premises without Lessor's
prior written consent except that Lessee shall have the right, without the prior
permission of Lessor, to place ordinary and usual for rent or sublet signs
thereon.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. Consents. Except for paragraph 33 hereof, wherever in this Lease the
consent of one party is required to an act of the other party such consent shall
not be unreasonably withheld.
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Premises.
39. Options.
39.1 Definition. As used in this paragraph the word "Options" has the
following meaning: (1) the right or option 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; (2) the option or 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; (3) the right or option to purchase the Premises, or
the right of first refusal to purchase the Premises, or the right of first offer
to purchase the
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Premises or the right or option 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.
39.2 Options Personal. Each Option granted to Lessee in this Lease are
personal to Lessee and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee, provided,
however, the Option may be exercised by or assigned to any Lessee Affiliate as
defined in paragraph 12.2 of this Lease. The Options herein granted to Lessee
are not assignable separate and apart from this Lease.
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
option to extend or renew his Lease has been so 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, (i) during the time commencing
from the date Lessor gives to Lessee a notice of default pursuant to paragraph
13.1(b) or 13.1(c) and continuing until the default alleged in said notice of
default is cured or (ii) during the period of time commencing on the day after a
monetary obligation to Lessor is due from Lessee and unpaid (without any
necessity for notice thereof to Lessee) continuing until the obligation is paid,
or (iii) at any time after an event of default described in paragraphs 13.1(a),
13.1(d), or 13.1(e) (without any necessity of Lessor to give notice of such
default to Lessee), or (iv) in the event that Lessor has given to Lessee three
or more notices of default under paragraph 13.1(b), where a late charge has
become payable under paragraph 13.4 for each of such defaults, or paragraph
13.1(c), whether or not the defaults are cured, during the 12 month period prior
to the time that Lessee intends to exercise the subject Option.
(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 30 days after such obligation becomes due (without any necessity of
Lessor to give notice thereof to Lessee), or (ii) Lessee fails to commence to
cure a default specified in paragraph 13.1(c) within 30 days after the date that
Lessor gives notice to Lessee of such default and/or Lessee fails thereafter to
diligently prosecute said cure to completion, or (iii) Lessee commits a default
described in paragraph 13.1(a), 13.1(d) or 13.1(e) (without any necessity of
Lessor to give notice of such default to Lessee), or (iv) Lessor gives to Lessee
three or more notices of default under paragraph 13.1(b), where a late charge
becomes payable under paragraph 13.4 for each such default, or paragraph
13.1(c), whether or not the defaults are cured.
40. Multiple Tenant building. In the event that the Premises are part of a
larger building or group of buildings then Lessee agrees that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care and cleanliness of the building
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building.
The violations of any such rules and regulations shall be deemed a material
breach of this Lease by Lessee..
41. Security Measures. Lessee hereby acknowledges that the rental
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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 Lessee,
its agents and invitees from acts of third parties.
42. Easements. Lessor reserves to itself the right, from time to time, to grant
such easements, rights and dedications that Lessor deems necessary or desirable,
and to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material breach of this Lease.
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 Lessee 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 behalf of said entity. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
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. Insuring Party. The insuring party under this lease shall be the Lessee.
47. Addendum. Attached hereto is an addendum or addenda containing paragraphs
1, 2 and 3 which constitutes a part of this lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY 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 SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO; THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND
TAX CONSEQUENCES OF THIS LEASE.
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The parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.
Executed at Fullerton, CA B & K Investment Company
on March 11, 1994 By /s/ Gordon Bagne
-----------------------------
Gordon Bagne
Address 801 S. Acacia Avenue
Fullerton, CA 92631 By /s/ Robert Klinger
-----------------------------
Robert Klinger
"LESSOR" (Corporate Seal)
Executed at SPECIALTY EXTRUSION, LTD. Speciality Extrusions Limited
on March 11, 1994 By_____________________________
Ronald Safer
Address 801 S. Acacia Avenue
Fullerton, CA 92631 By /s/ Walter M. Hastie
-----------------------------
Walter M. Hastie
By /s/ William Esparza
-----------------------------
William Esparza
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GUARANTY
--------
THIS IS A GUARANTY by each of the undersigned (hereinafter referred to as
"Guarantor") to B & K Investment company (hereinafter referred to as "Lessor").
Negotiations between Specialty Extrusions Limited (hereinafter referred to
as "Lessee"), and Lessor have culminated in the execution concurrently herewith,
of a Lease dated September 1, 1993 by and between Lessor and Lessee (hereinafter
referred to as the "Lease").
In consideration of Lessor entering into the Lease, each Guarantor hereby
unconditionally guarantees to Lessor the full and prompt payment by Lessee of
all sums to be paid, expended and disbursed by Lessee and the full and prompt
performance of any of the other covenants and conditions of the Lease at the
times and in the manner and mode as provided by the Lease.
This is a continuing Guaranty, and shall not be affected by any change,
modification, alteration, assignment, renewal, compromise, extension,
acceleration or supplement of the Lease or any part thereof. This Guaranty shall
be irrevocable throughout the term of the Lease and any extension thereof. No
act or omission on the part of Lessor and no agreement of any kind between
Lessor and Lessee shall in any manner or to any extent releases or change or
modify or affect the obligation and liability of each Guarantor.
This Guaranty shall be an independent obligation of each Guarantor and is
independent of the obligation and liability of each Guarantor.
This Guaranty shall be an independent obligation of each Guarantor and is
independent of the obligation and liabilities of Lessee. A separate action or
actions may be brought against Lessee and whether Lessee be joined in any such
action or actions. Each Guarantor waives all statutes of limitations affecting
his obligations or liabilities hereunder or the enforcement thereof.
Each Guarantor expressly waives any and all demands and notices of every
type, nature, kind and description whatsoever to which such Guarantor might
otherwise be entitled by law, including, but not limited to, notice of
acceptance hereof, protests, presentment, notice of protest, notice of the
incurring by Lessee of obligations or liabilities, defaults, notice of default,
or breach of non-payment.
Each Guarantor agrees to pay reasonable attorneys' fees and costs incurred
by Lessor in enforcing this Guaranty whether or not suit is brought.
This Guaranty shall inure to the benefit of Lessor and shall be binding upon
each Guarantor and their respective heirs, administrators, executors, successors
and assigns.
Dated: March 11, 1994.
Guarantor: ____________________________________
Ronald Safer
/s/ Walter M. Hastie
------------------------------------
Walter M. Hastie
/s/ William Esparza
------------------------------------
William Esparza
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ADDENDUM TO
STANDARD INDUSTRIAL LEASE
Dated September 1, 1993
By and Between B & K Investment Company and
Specialty Extrusions Limited
1 RENT ESCALATIONS
(a) At the commencement of the 7th month, 25th month and 43rd month respectively
of the Lease term, the monthly rent payable under paragraph 4 of the attached
Lease shall be adjusted by the increase, if any, from the date this lease
commenced, in the Consumer Price Index of the Bureau of Labor Statistics of the
U.S. Department of Labor for Urban Wage Earners and Clerical Workers, Los
Angeles-Long Beach-Anaheim, California (1967=100), "All Items", herein referred
to as "C.P.I."
(b) The monthly rent payable in accordance with paragraph (a) of the Addendum
shall be calculated as follows: the rent payable for the first month of the term
of this Lease, as set forth in paragraph 4 of the attached Lease, shall be
multiplied by a fraction, the numerator of which shall be C.P.I. of the month
immediately preceding the effective date of the subject rent escalation and the
denominator of which shall be the C.P.I. for the first month of the Lease term.
The sum so calculated shall constitute the new monthly rent hereunder, but, in
no event, shall such new monthly rent be less than the rent payable for the
month immediately preceding the date for rent adjustment. In no event shall this
increase amount to less than a 7-1/2 percent increase of the base amount, every
eighteen months.
(c) In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the C.P.I. shall be used to
make such calculation. In the event that Lessor and Lessee cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
21
<PAGE>
ADDENDUM TO
STANDARD INDUSTRIAL LEASE
Dated September 1, 1993
By and Between B & K Investment Company
and Specialty Extrusions Limited
2 OPTION TO EXTEND
A. Lessor hereby grants to Lessee the option to extend the term of this Lease
for a 5 year period commencing when the prior term expires upon each and all of
the following terms and conditions:
(i) Lessee gives to Lessor and Lessor receives written
notice of the exercise of the option to extend this Lease for said
additional term no earlier than nine months and no later than six
months prior to the time that the option period would commence if
the option were exercised, time being of the essence. If said
notification of the exercise of said option is not so given and
received, this option shall automatically expire;
(ii) At the time said written notification of exercise of option is given
and received, Lessee shall not be in default under any of the material
obligation of this Lease to be performed by Lessee and this Lease shall not
have previously terminated nor terminated prior to the commencement of the
option term;
(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 in accordance with the preceding Rent Escalation's and renewal term
rental adjustments and shall be made at the commencement of the 61st month,
61st, 79th, 97th and 115th month, respectively.
22
<PAGE>
ADDENDUM TO
STANDARD INDUSTRIAL LEASE
Dated September 1, 1993
By and Between B & K Investment Company
and Specialty Extrusions Limited
3 OPTION FOR NEW OWNER TO TERMINATE
In the event that Lessee sells and transfers the extrusion business being
conducted on the Premises to an unaffiliated third party then the new owner
shall have the option to terminate this lease on the anniversary of the transfer
date of the business by giving notice of the intention to terminate within
thirty days of the transfer date. This option to terminate the lease on the sale
of the business shall apply to Lessee's purchaser only and not to any subsequent
purchaser of the business.
B & K INVESTMENT COMPANY
--------------------------------------
By /s/ Gordon Bagne
------------------------------------
Gordon Bagne
By /s/ Robert Klinger
------------------------------------
Robert Klinger
"LESSOR"
SPECIALTY EXTRUSION, LIMITED
--------------------------------------
By /s/ Walter M. Hastie
------------------------------------
Walter M. Hastie
By /s/ William Esparza
------------------------------------
William Esparza
23
<PAGE>
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of September 29, 1995,
between Alpha Technologies Group, Inc., a Delaware corporation (the "Company"),
and Lawrence Butler (the "Employee").
WHEREAS, Employee has been serving as President and Chief Executive
Officer of the Company since April 18, 1995 and the parties wish to provide for
the continuation of such services.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties hereto agree as follows:
1. Employment, Duties and Acceptance.
1.1. The Company hereby employs the Employee for the Term (as
hereinafter defined) to render services to the Company as its president and
chief executive officer, subject to the direction of the Chairman of the Board
of Directors, and, in connection therewith, to perform such executive and
managerial duties as he shall be directed by the Chairman of the Board of
Directors to perform. Notwithstanding the foregoing, Employee may pursue other
business ventures provided they do not (x) materially interfere with his duties
hereunder or, (y) compete, directly or indirectly, with the Company's
businesses.
1.2. Acceptance of Employment by the Employee. The Employee hereby
accepts such employment and agrees to render the executive and managerial
services described above on the terms and conditions set forth.
<PAGE>
2. Term of Employment. The term of the Employee's employment under
this Agreement (the "Term") shall commence on the date hereof and shall end on
October 31, 1998, unless sooner terminated pursuant to Article 5 of this
Agreement.
3. Compensation.
3.1. Salary. For services to be rendered pursuant to this Agreement,
the Company agrees to pay the Employee a salary of $180,000 per annum (the
"Annual Salary") for the fiscal year ending October 31, 1995, payable in
accordance with the Company's regular payroll practices but no less frequently
than once per month. Employee's annual salary shall be reviewed by the Board of
Directors from time to time.
3.2. Incentive Compensation. For each of the Company's fiscal years
ending during the Term, including the fiscal years ending October 31, 1995 and
1998, the Employee shall be awarded an incentive bonus (the "Bonus") pursuant to
a formula to be determined by the Board of Directors, based upon the Company's
achieving approved targeted earnings from continuing operations, less minority
interest and before provision for income taxes ("Earnings"). For the fiscal year
ending October 31, 1995, Employee shall be entitled to a Bonus calculated in
accordance with Exhibit A hereto. For the purpose of calculating the Bonus, the
Company's Earnings shall be conclusively determined from its statement of income
for each fiscal year as certified by the Company's independent certified public
accountants. Employee's Bonus, if any, shall be paid within ten days after the
filing of
2
<PAGE>
the Company's Form 10-K or Form 10-KSB for each fiscal year ending during the
Term, or February 10, of the year following the end of each fiscal year of the
Term, whichever is earlier.
3.3. Withholdings and Deductions. All Compensation described in this
Article 3 shall be less such deductions as may be required to be withheld by
applicable law and regulation.
4. Expenses and Benefits.
4.1. Expenses. The Company shall pay or reimburse the Employee for all
reasonable expenses actually incurred or paid by him during the Term in the
performance of his services under this Agreement, upon presentation of expense
statements or vouchers or such other supporting information as it may require.
4.2. Benefits. The Employee shall be entitled to all rights and
benefits for which he shall be eligible under any stock option or extra
compensation plan, pension, group insurance or other so-called "fringe" benefits
which the Company may, in its sole discretion, provide for him or for its senior
executive employees generally.
4.3. Vacation. The Employee shall be entitled to such vacation as is
provided from time to time to other senior executives of the Company.
5. Termination.
5.1. Termination upon Death. If the Employee shall die during the
Term, this Agreement shall terminate, except that the Employee's legal
representatives shall be entitled to receive the Annual Salary provided for in
Section 3.1 of this Agreement
3
<PAGE>
through the thirtieth day after the Employee's death, and his Bonus shall be
calculated on a pro rata basis through the end of the fiscal quarter immediately
preceding his death.
5.2. Termination upon Disability. If, during the Term, the Employee
shall become physically or mentally disabled, whether totally or partially, so
that he is unable substantially to perform his services hereunder for (i) a
period of six consecutive months, or (ii) for shorter periods aggregating six
months during any twelve-month period, the Company may at any time after the
last day of the sixth consecutive month of disability or the day on which the
shorter periods of disability shall have equaled an aggregate of six months, by
written notice to the Employee (but before the Employee has recovered from such
disability), terminate the term of the Employee's employment hereunder.
Notwithstanding such disability, the Company shall continue to pay the Employee
the Annual Salary herein provided for in Section 3.1 up to and including the
date of such termination, and his Bonus shall be calculated on a pro rata basis
through the end of the fiscal quarter immediately preceding such termination.
5.3. Termination for Cause. Nothing contained herein shall preclude
the Company from terminating this Agreement for cause. As used herein the term
"for cause" shall be deemed to mean and include with respect to the Employee
chronic alcoholism, drug addiction, conviction of the Employee of any felony, or
of any lesser crime or offense involving the property of the Company or any of
its subsidiaries or affiliates, misappropriation of any
4
<PAGE>
money or other assets or properties of the Company or its subsidiaries, or
willful failure or refusal to substantially perform the services required of the
Employee under this Agreement.
6. Non-Competition.
6.1. During Term. Through and including October 31, 1998 (regardless
of any termination under Section 5 hereof), the Employee will not, directly or
indirectly, as an officer, director, stockholder, partner, associate, employee,
consultant or owner, become or be interested in, or associated with, any other
corporation, firm or business engaged in a business which is the same as,
similar to or competitive with the business of the Company; provided that the
ownership by the Employee, directly or indirectly, of shares of stock of a
corporation, which shares are regularly traded on a national securities exchange
or on the over-the-counter market and which shares do not amount to the lesser
of (a) five per cent of the issued and outstanding shares of such corporation,
or (b) an aggregate market value in excess of $500,000, shall not, in any event,
be deemed to be in violation of the provisions of this Section 6.1.
6.2. Non-Detrimental Conduct. During the Term and for a period of one
year thereafter (regardless of any termination under Section 5 hereof), the
Employee will not engage in any course of conduct anywhere that will diminish
the value of the business of the Company, including, without limitation, the
solicitation or hiring of employees of the Company other than those dismissed by
the Company.
5
<PAGE>
6.3. Specific Performance. The parties recognize that, because of the
nature of the subject matter of this Section 6, it would be impractical and
extremely difficult to determine the Company's actual damages in the event of a
breach of this Section 6 by the Employee. Accordingly, if the Employee commits a
breach, or threatens to commit a breach, of any of the provisions of Section 6.1
or 6.2, the Company shall be entitled to have the provisions of said Sections
specifically enforced by temporary, preliminary and permanent injunctive relief
without the posting of bond or other security by and court of competent
jurisdiction, notwithstanding the provisions of Section 8 hereof.
6.4. Severability. (a) If any of the provisions contained in Section
6.1 or 6.2, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the Employee agrees that
the body making such determination shall have the power to reduce the duration
and/or area of such provision and, in its reduced form, said provisions shall
then be enforceable.
(b) In the event that, under the laws of any state within the
geographical scope of the covenants contained in Sections 6.1 or 6.2, such
covenants would be wholly unenforceable by reason of the breadth of their scope
or otherwise, it is the intention of the parties hereto that such determination
not bar nor in any way affect the Company's right to the relief provided above
under the laws of any other state within the geographical scope of such
covenants, as to breaches of such covenants in such other
6
<PAGE>
respective jurisdictions, the above covenants as they relate to each state
being, for this purpose, severable into diverse and independent covenants.
7. Protection of Confidential Information.
7.1. Confidential Information. In view of the fact that the Employee's
work for the Company will bring him into close contact with many confidential
affairs of the Company not readily available to the public, the Employee agrees:
(a) To keep secret and retain in the strictest confidence all
confidential matters of the Company, including, without limitation, trade "know-
how", secrets, the names of its customers, suppliers and contractors, the
Company's procedures and policies in purchasing and sales, including its pricing
policies, operational methods and technical processes, and other business
affairs of the Company, learned by him heretofore or hereafter, and not to
disclose them to anyone outside of the Company, either during or after his
employment with the Company, except in the course of performing his duties
hereunder or with the Company's express written consent; and
(b) To deliver promptly to the Company on termination of his
employment, all memoranda, notes, records, reports, manuals, drawings and other
documents (and all copies thereof) relating to the Company's business and all
property associated therewith) which he may then possess or have under his
control.
7
<PAGE>
7.2. Survival. The provisions of this Section 7 shall survive any
termination of this Agreement.
7.3. Specific Performance. The parties recognize that, because of the
nature of the subject matter of this Section 7, it would be impractical and
extremely difficult to determine the Company's actual damages in the event of a
breach of this Section 7 by the Employee. Accordingly, if the Employee commits a
breach, or threatens to commit a breach, of any of the provisions of Section
7.1, the Company shall be entitled to have the provisions of said Sections
specifically enforced by temporary, preliminary and permanent injunctive relief
without the posting of bond or other security by and court of competent
jurisdiction, notwithstanding the provisions of Section 8 hereof.
8. Disputes and Arbitration.
In the event that a dispute should arise between the Company and the
Employee under or in connection with this Agreement and such dispute shall not
have been resolved within 30 days after it arose, then such dispute shall be
submitted to arbitration. Such arbitration shall be conducted by a board of
three arbitrators; the Company and the Employee shall each appoint one
arbitrator, with the third to be appointed by the two arbitrators so selected or
if not appointed within 30 days after the selection of the initial two
arbitrators, then by the American Arbitration Association. Such arbitration
shall be conducted in New York, New York, under the rules of the American
Arbitration Association then obtaining. The award rendered by the arbitrators
shall specify the
8
<PAGE>
findings of fact upon which based and the reasons for such award with reference
to and reliance on applicable law of New York. Such award, and the findings and
reasons upon which it is based, shall be final and binding, and judgment upon
such award may be entered in any court having jurisdiction thereof.
9. Notices.
All notices, requests, consents and other communications, required or
permitted to be given hereunder, shall be in writing and shall be deemed to have
been duly given if delivered personally, or mailed first-class, postage prepaid
by registered or certified mail (notices shall be deemed to have been given when
so delivered personally) or, if mailed, two days after the date of mailing, as
follows (or to such other address as either party shall designate by notice so
given to the other in accordance herewith):
If to the Company, to:
Alpha Technologies Group, Inc.
Attention: Marshall Butler
750 Lexington Avenue, 27th Floor
New York, New York 10022
If to the Employee, to:
Lawrence Butler
750 Lexington Avenue, 27th Floor
New York, NY lOO22
9
<PAGE>
10. General.
10.1. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the local laws of the State of New York
applicable to agreements made and to be performed entirely in New York.
10.2. Section Headinqs. The article and section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
10.3. Entire Aqreement. This Agreement sets forth the entire agreement
and understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof. No representation, promise or
inducement has been made by either party that is not embodied in this agreement,
and neither party shall be bound by or liable for any alleged representation,
promise or inducement not so set forth.
10.4. Successors and Assiqns. This Agreement, and the Employee's
rights and obligations hereunder, may not be assigned by the Employee. The
Company may assign its rights, together with its obligations, hereunder in
connection with any sale, transfer or other disposition of all or substantially
all of its business or assets; in any event the obligations of the Company
hereunder shall be binding on its successors or assigns, whether by merger,
consolidation or acquisition of all or substantially all of its business or
assets.
10
<PAGE>
10.5. Amendments, Modifications, etc. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended and the terms or covenants
hereof may be waived, only by a written instrument executed by the party to be
charged therewith. The failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by either party of the breach of any
term or covenant contained in this Agreement, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement. The invalidity or unenforceability
of any term or provision of this Agreement shall in no way impair or affect the
balance thereof, which shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement on
September 29, 1995.
ALLPHA TECHNOLOGIES GROUP, INC.
By: /s/ Marshall D. Butler
-----------------------------
/s/ Lawrence Butler
--------------------------------
LAWRENCE BUTLER
11
<PAGE>
EXHIBIT A
Employee's bonus shall be calculated based upon the Company's earnings
from continuing operations, less minority interest and before provision for
income taxes (the "Earnings") for the Company's fiscal year ending October 31,
1995, as follows:
Employee's
If the Company's Earnings for fiscal year Bonus as a % of his
ending October 31, 1995 are Annual Salary shall be
----------------------------------------- ----------------------
less than $3,100,000 0%
greater than $3,100,000 yet less than $3,300,000 16%
greater than $3,300,000 yet less than $3,500,000 20%
greater than $3,500,000 yet less than $3,600,000 25%
greater than $3,600,000 yet less than $3,700,000 32%
greater than $3,700,000 yet less than $3,800,000 36%
greater than $3,800,000 yet less than $3,900,000 40%
greater than $3,900,000 yet less than $4,000,000 44%
greater than $4,000,000 yet less than $4,100,000 48%
greater than $4,100,000 yet less than $4,200,000 52%
greater than $4,200,000 yet less than $4,300,000 56%
greater than $4,300,000 yet less than $4,400,000 60%
greater than $4,400,000 yet less than $4,500,000 64%
greater than $4,500,000 69%
12
<PAGE>
EXHIBIT 10.21
LEASE
INDENTURE OF Lease made as of this 2Oth day of December, 1994, by and
between Richard J. Tobin, as Trustee of JLN Realty Trust, under Declaration
of Trust, dated June 15, 1981 and filed with Bristol County Fall River District
Registry of Deeds Land Court Records as Document 12977, ("Lessor"), and
Wakefield Engineering, Inc., a Delaware corporation ("Lessee").
W I T N E S S E T H T H A T:
In consideration of the rents, covenants and agreements to be paid, kept and
performed by Lessee, as hereinafter provided, Lessor hereby demises and leases
to Lessee, and Lessee hereby hires and takes from Lessor, the real property
situated at 132 Sykes Road, Fall River, Massachusetts, constituting
approximately 60,000 square feet of building area and associated parking all as
more fully described in Exhibit A attached hereto, and hereby incorporated
herein by reference. (Said demised premises are hereinafter called the "Demised
Premises.")
To HAVE AND TO HOLD the Demised Premises, together with all rights,
privileges, easements and appurtenances thereunto, unto Lessee for a term
(hereinafter called the "Lease Term") commencing as of May 1, 1995, and ending
on the last day of April, 2000. This Lease is made upon the covenants and
agreements hereinafter set
1
<PAGE>
forth which the parties respectively agree to observe and comply with during the
Lease Term.
1. RENTAL
1.1 During the Lease Term, Lessee shall pay to the Lessor a base annual
rent (the "Rent") as set forth below:
<TABLE>
<CAPTION>
Monthly
-----------
For the Year Yearly Installment
- ------------ ------------ -----------
<S> <C> <C>
May 1, 1995 to April 3O, 1996 $ 18O,OOO.OO $ 15,OOO.OO
May 1, 1996 to April 3O, 1997 $ 189,OOO.OO $ 15,75O.OO
May 1, 1997 to April 3O, 1998 $ 2Ol,OOO.OO $ 16,75O.OO
May 1, 1998 to April 3O, 1999 $ 21O,OOO.OO $ 17,5OO.OO
May 1, l99O to April 3O, 2OOO $ 21O,OOO.OO $ 17,5OO.OO
</TABLE>
monthly payments due on or before the first of each month during the Lease Term.
Lessee covenants and agrees with Lessor to pay the Rent to Lessor at Taunton,
Massachusetts, or at such other place as Lessor may direct. Rent shall be pro-
rated if the first or last month of the Lease Term is less than a full calendar
month.
1.2 It is the purpose and intent of Lessor and Lessee that the Rent shall be
absolutely net to Lessor except as set forth herein and that Lessee shall pay,
without notice or demand, and without abatement, deduction or setoff, and shall
hold harmless and indemnify Lessor from and against all costs, charges, duties,
rates, licenses and permit fees, taxes, levies and assessments, insurance
premiums, and expenses and obligations of every kind and nature whatsoever
relating to the Demised Premises which may arise or become due during the Lease
Term, other than (a) expenses
2
<PAGE>
incurred by or at the instance of Lessor which Lessee does not agree to pay or
reimburse Lessor for under the provisions of this Lease, (b) payment of any
amounts secured by liens on the Demised Premises created by Lessor, and (c)
expenses which Lessor expressly agrees to pay under the terms hereof. In the
event of any nonpayment of any of the foregoing, Lessor shall have, in addition
to all other rights and remedies, all of the rights and remedies provided for
herein or by law in the case of nonpayment of net rent.
2. UTILITIES AND OTHER CHARGES.
As additional rent, Lessee will pay directly before the same become
delinquent, all charges, duties, rates, license and permit fees and other
amounts of every description to which the Demised Premises or any part thereof
or any improvement thereon, or Lessor or Lessee in respect thereof, may during
the Lease Term be assessed or become liable for electricity, gas, refuse
collection, telephone, sewage disposal, water or any other utilities or services
or any connection or meters therefor, whether assessed to, or payable by, Lessor
or Lessee. Lessee will, within ten (lO) days after written demand by Lessor,
furnish Lessor with receipts or other evidence indicating that all such amounts
have been paid.
3. TAXES AND ASSESSMENTS.
Subject to the provisions of Section 1 hereof, as additional rent, Lessee
will pay to Lessor, at least ten (lO) days before the same become delinquent,
all taxes, levies, assessments and other governmental charges of every
description, general or special,
3
<PAGE>
ordinary or extraordinary, to which the Demised Premises or any part thereof or
the rents therefrom or Lessor or Lessee in respect thereof, are now or may
during the Lease Term be assessed or become liable, whether assessed to or
payable by Lessor or Lessee; provided, however, that (a) with respect to any
assessment made under any betterment or improvement law which may be payable in
installments, Lessee shall be required to pay only such installments of
principal, together with interest on unpaid balances thereof, as shall become
due and payable during the Lease Term or for any part thereof, and (b) current
real property taxes shall be prorated between Lessor and Lessee as of the date
of commencement and expiration of the Lease Term.
4. COMPLIANCE WITH LAWS AND REGULATIONS.
Lessee will at all times during the Lease Term keep the Demised Premises in
good order and in a sanitary condition and observe and perform all laws,
ordinances, orders, rules and regulation, including but not limited to the
disposal of hazardous waste, now or hereafter made by any governmental authority
for the time being applicable to the Demised Premises or any improvement thereon
or use thereof, and with the orders, rules and regulations of the National Board
of Fire Underwriters or similar organization so far as the same may relate to
the use of the Demised Premises. Lessee will not use, or permit the use of, the
Demised Premises for any purpose which would cause the premiums on any fire and
casualty or other insurance maintained by Lessor to be increased or which would
create a forfeiture or prevent renewal of such insurance.
4
<PAGE>
5. INSPECTION.
Lessee will permit Lessor and its agents at all reasonable times during the
Lease Term to enter the Demised Premises in order to examine the state of repair
and condition thereof and the use being made of the same and to show the
premises to prospective purchasers, lessees and mortgagees. Lessor may also
enter upon the Demised Premises at any time to perform any repairs or
maintenance required to be performed by Lessee which Lessee has failed to
perform.
6. REPAIR AND MAINTENANCE.
Except for structural repairs and maintenance to roofs, walls and floors
(which shall be maintained in good condition), which repairs and maintenance
shall be the sole responsibility of Lessor, Lessee will, at its own expense,
from time to time and at all times during the Lease Term, repair, maintain and
keep the Demised Premises and all buildings and other improvements now or
hereafter built on the Demised Premises, together with all fixtures, equipment
and items of personal property used in connection therewith, in good working
order and condition, reasonable wear and tear and such unavoidable casualty not
caused by Lessee or its employees, agents or invitees against which insurance is
not required hereunder excepted. Lessee agrees to repair all paved surfaces
adjacent to the Demised Premises including potholes in the parking lot and to
arrange for snow removal and landscaping.
5
<PAGE>
7. WASTE AND UNLAWFUL USE.
Lessee will not make or suffer any strip or waste or unlawful, improper or
offensive use of the Demised Premises. Lessee shall not permit the Demised
Premises to be vacant for more than thirty (30) consecutive days and shall
continue to provide insurance coverage as set forth herein during said vacancy.
8. SUBLETTING.
Lessee may, subject to the written approval of Lessor, which approval shall
not be unreasonably withheld or delayed, sublet all or any portion of the
Demised Premises, during the Lease Term.
9. ALTERATIONS, CHANGES AND IMPROVEMENTS.
9.1 Lessee shall have the right, with the prior written consent of Lessor,
which consent shall not be unreasonably withheld, delayed or conditioned to make
alterations, changes or improvements to the Demised Premises, not including the
construction of an addition or additions thereto, and to acquire new machinery
and equipment which Lessee deems necessary or expedient, the same to be made at
Lessee's sole cost and expense. Lessee shall also have the right to make
nonstructural improvements costing no more than $1O,OOO.OO in each case without
the prior written consent of Lessor. Before making any alterations, changes or
improvements requiring Lessor's approval, Lessee shall submit to Lessor for its
approval plans therefor prepared by a licensed engineer or architect reasonably
acceptable to Lessor, and shall receive the written approval of Lessor of such
plans. Lessor shall have the right to require that, before
6
<PAGE>
commencing such work on the Demised Premises, Lessee obtain, or cause to be
obtained, by the contractor performing such work, a bond to protect the Demised
Premises and all such improvements from all mechanic's and materialmen's liens
attributable to such work, and to guarantee the completion thereof.
9.2 All permanent alterations, changes or improvements made shall be and
become the property of Lessor absolutely as soon as made or installed and shall
be subject to this Lease. The Lessee may remove partitions and its furniture and
equipment at the end of the Lease Term, as it may be extended or renewed.
1O. INSURANCE.
1O.1 Lessor will, at its own cost and expense at all times during the Lease
Term, insure the Demised Premises against loss or damage by fire and such other
perils as may be covered by the usual extended coverage endorsement to the
standard fire insurance policy, except earthquake. Lessee shall reimburse for
such insurance within thirty (3O) days of submission of invoice from Lessor
including evidence of the total cost of such insurance.
lO.2 In addition, Lessee will, at its own cost and expense, obtain and
maintain during the Lease Term hereof, a policy or policies of comprehensive
general liability insurance, or its equivalent, with combined total limits of
not less than $1,OOO,OOO for injury to one or more persons in any one
occurrence. Such policy or policies shall be issued by companies approved by
Lessor, shall name Lessor as an additional assured, shall require the
7
<PAGE>
insurer to give Lessor at least thirty days' written notice of its intention to
cancel, terminate or amend the insurance policy or policies in any material
respect, and shall cover the entire Demised Premises, and all parking areas,
sidewalks and driveways included therein.
11. DAMAGE OR DESTRUCTION
11.1 Throughout this Lease the phrase "wholly unfit for use and occupancy
by Lessee" shall mean and is hereby defined as damage to 4O% or more of Demised
Premises.
11.2 In the event of any damage which does not render the Demised Premises
wholly unfit for use and occupancy by Lessee, this Lease shall remain in full
force and effect and Lessee shall pay each month, as rental for such part of the
Demised Premises as shall be reasonably fit for use and occupancy by Lessee
until the damage be repaired, an amount in the same proportion to the rent
reserved herein as the area of the Demised Premises reasonably fit for use and
occupancy by Lessee bears to the total area comprising the Demised Premises.
Lessor, with reasonable diligence, and in any event within not more than sixty
(6o) calendar days after the occurrence giving rise to the damage, shall cause
the Demised Premises to be repaired and restored to the same general conditions
in which they existed immediately prior to the occurrence of said damage.
11.3 In the event of any damage which renders the Demised Premises wholly
unfit for use and occupancy by Lessee, Lessee or Lessor shall have the right to
terminate this Lease as provided
8
<PAGE>
hereafter. In the event Lessee or Lessor fails so to terminate this Lease, this
Lease shall remain in full force and effect and Lessee shall pay each month, as
rent for such part of the Demised Premises as shall be reasonably fit for use
and occupancy by Lessee and until the damage shall be repaired, an amount in the
same proportion to the rent reserved herein as the area of the Demised Premises
reasonably fit for use and occupancy by Lessee bears to the total area
comprising the Demised Premises; and Lessor, with reasonable diligence, and in
any event within not more than one hundred twenty (12O) calendar days after the
occurrence giving rise to the damage, shall cause the Demised Premises to be
repaired and restored to the same general condition in which they existed
immediately prior to the occurrence of said damage.
11.4 In order to exercise the right to terminate the Lease as granted in
Section 11.3, Lessee or Lessor shall give written notice of such exercise to the
other party within thirty (30) calendar days following the event giving rise to
the damage. If either party shall exercise said right, this Lease shall
terminate and the rent and other payments required to be made hereunder shall
abate as of and from the date of occurrence of said damage.
11.5 In the event that Lessor does not complete the repairs and
restoration to the Demised Premises within the time limits described in Sections
11.2 and 11.3, Lessee may terminate this Lease and all its obligations hereunder
forthwith by giving written notice to Lessor; and such termination shall be
effective as of and from the date two (2) days after said notice is given.
9
<PAGE>
12. INDEMNIFICATION.
12.1 Lessee shall indemnify and hold harmless Lessor (regardless of Lessee's
covenant to insure) against and from (a) any and all claims, liabilities and
damages of every nature arisinq form the use, occupancy, conduct or management
of, or from any work or thing whatsoever done in or about, the Demised Premises,
unless done by Lessor, any of its agents, contractors, servants, employees or
licensees, (b) any and all claims, liabilities and damages arising during the
term hereof from any condition of the Demised Premises, or arising from any
breach of default on the part of Lessee under this Lease, or arising from any
act of Lessee or any of its agents, contractors, servants, employees or
licensees, to any person, firm or corporation occurring during the Lease Term in
or about the Demised Premises or upon or under said areas, and (c) all costs,
counsel fees, expenses or liabilities incurred in connection with any claim,
action or proceeding brought thereon; to the extent, however, that any such cost
or claim does not result from the negligence or willful misconduct of the
Lessor, any of its agents, contractors, servants, employees or licensees.
12.2 Lessee shall pay and indemnify Lessor against all legal costs and
charges, including reasonable counsel fees, incurred in obtaining possession of
the Demised Premises after the default of Lessee or upon expiration or earlier
termination of the Lease Term, other than by reason of any default of Lessor, or
in
10
<PAGE>
enforcing any covenant or agreement of Lessee contained herein provided Lessor
is the prevailing party.
13. LIENS
13.1 Lessee will not commit or suffer any act or neglect whereby the Demised
Premises or any improvements thereon or the estate of Lessor therein shall at
any time during the Lease Term become subject to any attachment, judgment, lien,
charge or encumbrance whatsoever, and Lessee will indemnify and hold Lessor
harmless from and against all loss, costs and expenses, including reasonable
attorneys' fees, with respect thereto.
13.2 If any liens shall at any time be filed against the Demised Premises or
any part hereof, with respect to work performed at the request of the Lessee
during the Lease Term, Lessee, within thirty (30) days after notice of the
filing thereof shall cause the same to be discharged of record by payment,
bonding or otherwise. If Lessee shall fail to cause the same to be discharged,
the Lessor may, in addition to any other right or remedy, hereunder, immediately
cause the same to be discharged, either by paying the amount claimed to be due
or by bonding or otherwise, and all amounts so paid by Lessor, together with all
costs and expenses incurred in connection therewith, and together with interest
thereon at the Prime Rate of the Bank of Boston per annum from the respective
dates of payment, shall be paid by Lessee to Lessor, on demand, as additional
rent hereunder.
13.3 Nothing contained in this Lease shall be deemed or construed in any way
as constituting the consent or request of
11
<PAGE>
Lessor, express or implied by inference or otherwise, to any contractor,
subcontractor, laborer, materialman, architect or engineer for the performance
of any labor or the furnishing of any materials or services for or in connection
with the Demised Premises or any part thereof. Notice is hereby given that
Lessor shall not be liable for any labor or materials or services furnished or
to be furnished to Lessee upon credit, and that no mechanic's or other lien for
any such labor, materials or services shall attach or affect the fee or
reversionary or other estate or interest of Lessor in the premises or in this
Lease.
14. DEFAULT.
14.1 The occurrence of any of the following events shall constitute an Event
of Default hereunder;
(a) Default by Lessee in the payment of any installment of Rent when due, if
not paid within five days of notice from Lessor;
(b) Lessee shall (i) apply for or consent to an appointment of a receiver, a
trustee or liquidator of it or all or a substantial part of its assets; (ii) be
unable or admit in writing its inability to pay its debts as they mature; (iii)
make a general assignment for the benefit of creditors; (iv) be adjudicated a
bankrupt or insolvent; (v) file a voluntary petition in bankruptcy or a petition
or an answer seeking reorganization or an arrangement with creditors to take
advantage of any insolvency law or an answer admitting the material allegations
of a petition filed against it in any bankruptcy, reorganization or insolvency
12
<PAGE>
proceeding or corporate action shall be taken by it for the purpose of effecting
any of the foregoing;
(c) An order, judgment or decree shall be entered, without the application,
approval or consent of Lessee by any court of competent jurisdiction, approving
a petition seeking reorganization of Lessee or such assignee or appointing a
receiver, trustee or liquidator of Lessee or of all or a substantial part of its
assets and such order, judgment or decree shall continue unstayed and in effect
for any period of thirty (30) consecutive days;
(d) The dissolution or merger of Lessee, or the sale of all or substantially
all of the assets of Lessee; or
(e) Any other default of Lessee hereunder shall continue uncorrected for
fifteen (15) days after written notice thereof from Lessor; provided, however,
that if the default is of a nature which cannot regularly be cured within such
15 days, then Lessee shall not be deemed to be in default if it shall commence a
cure within such 15 day period and thereafter diligently pursue such cure to
completion.
14.2 Upon the occurrence of an Event of Default or at any time thereafter,
Lessor, at its option, and with or without process of law, shall have the right
to terminate this Lease and to enter upon the Demised Premises and to expel
Lessee and those claiming under Lessee, without being guilty of any manner of
trespass, and thereafter Lessor may peacefully and quietly hold and enjoy the
Demised Premises as if this Lease had not been made; without prejudice, however,
to any right of Lessor to sue for and recover
13
<PAGE>
any Rent, additional rent and other amounts then due under this Lease; or to any
claim for damages for breach of any covenant, agreement or condition herein
contained which Lessor might otherwise have or use.
14.3 In case of entry and termination of this Lease as hereinabove provided,
Lessee will pay to Lessor as damages for the breach by Lessee of this Lease the
amount by which the Rent and additional rent provided for the remainder of the
Lease Term exceeds the fair rental value of the Demised Premises for the
remainder of the Lease Term.
14.4 Upon the occurrence of an Event of Default, Lessor, at its option and
instead of exercising its rights under Section 15.2 hereof, may enter upon the
Demised Premises as the agent of Lessee, and if Lessor desires, expel Lessee and
those claiming under it, without being guilty of any manner of trespass, and may
rent the Demised Premises as such agent, applying the net proceeds of such
rental on account of the Rent, additional rent and other sums due from Lessee,
hereunder, holding Lessee liable for any deficiency, and accounting to the
Lessee for any surplus.
14.5 In event of Default, this Lease will not, except at the option of
Lessor, continue for the benefit of any attaching creditor, assignee for the
benefit of creditors, permanent receiver, or trustee in bankruptcy.
14.6 Lessee hereby expressly waives, so far as permitted by law, the service
of any notice of intention to re-enter or notice to quit provided in any
statute, or of the institution of legal
14
<PAGE>
proceedings to that end. Lessee, for and on behalf of itself and all persons
claiming through or under Lessee also waives any and all right of redemption or
repossession and any right to restore the operation of this Lease in case Lessee
shall be dispossessed by a judgment or by warrant of any court or judge, or by
re-entry or repossession by Lessor, or in case of any termination of this Lease.
Lessor and Lessee also, so far as permitted by law, waive and will waive any and
all right to trial by jury in the event that any action shall be instituted by
Lessor.
14.7 In the event of any breach or threatened breach by Lessee of any of the
covenants, agreements, terms or conditions contained in this Lease, Lessor shall
be entitled, as a matter of right, to enjoin such breach or threatened breach
and shall have the right to invoke any right or remedy allowed by law or equity,
or by statute or otherwise, as though re-entry, summary proceedings or other
remedies were not provided for in this Lease.
14.8 Each right and remedy of Lessor provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided
herein, or not or hereafter existing, at law or in equity, or by statute or
otherwise, and the exercise or beginning of the exercise by Lessor of any of the
rights or remedies provided herein, or now or hereafter existing at law or in
equity, or by statute or otherwise, shall not preclude the simultaneous or later
exercise by Lessor of any or all other rights or remedies provided herein, or
now or hereafter existing at law or in equity, or by statute or otherwise.
15
<PAGE>
15. CONDEMNATION.
15.1 In case at any time or times during the Lease Term all or substantially
all of the Demised Premises shall be taken or condemned by any authority having
the power of eminent domain, then and in every such case, the estate and
interest of Lessee in the premises so taken or condemned shall at once
terminate, Rent and additional rent hereunder shall be adjusted as of the date
of taking, and all compensation and damages payable for or on account of any
land or improvements thereon shall be and become the absolute property of Lessor
and shall be paid over directly to Lessor. Lessee hereby assigns to Lessor any
interest which it might have in any such compensation and damages by virtue of
its leasehold, except for compensation made to Lessee for business interruption,
loss of Lessee's own leasehold improvements and relocation cost.
15.2 In case at any time or times during the Lease Term less than all or
substantially all of the Demised Premises shall be taken or condemned as
aforesaid, then (a) unless Lessor shall elect to terminate and cancel this Lease
by written notice to Lessee or (b) unless Lessee shall elect to terminate and
cancel this Lease by written notice to Lessor solely by reason of such taking or
condemnation resulting in a permanent and material interference with the conduct
of Lessee's business described in Section 7 hereof as then conducted (in either
of which cases, the taking shall be treated as a taking of all or substantially
all of the Demised Premises under subparagraph 15.1 above), this Lease shall
16
<PAGE>
remain in full force and effect and Lessor shall perform any restoration work
required to permit the continued use of the Demised Premises for Lessee's
business described in Section 7 hereof. In the event this Lease is not so
terminated, subject to the rights of the holder of any mortgage, Lessor will
receive all compensation and damages payable on of such taking. In such event,
Rent payable hereunder shall be reduced from and after the date of the taking in
the same proportion as the number of square feet in the Demised Premises lost by
reason of such taking bears to the entire number of square feet in the Demised
Premises prior to the taking.
16. CONDITION OF AND TITLE TO PROPERTY.
Subject to the provisions of Paragraph 6 hereof, Lessee represents that the
Demised Premises, the title thereto, the sidewalks and structures adjoining the
same, and any subsurface condition thereof, and the present uses and nonuses
thereof, have been examined by Lessee, and Lessee agrees that it will accept the
same in the condition or state in which they, or any of them, now are, without
representation or warranty, express or implied in fact or by law, by Lessor, and
without recourse to Lessor as to the title thereto, the nature, condition or
usability thereof, or the use or uses to which the Demised Premises, or any part
thereof, may be put.
17. INDEPENDENT COVENANTS--NO WAIVER.
17.1 Each and every one of the covenants and agreements contained in this
Lease shall be for all purposes construed to be
17
<PAGE>
a separate and independent covenant and the waiver of the breach of any covenant
contained herein by Lessor shall in no way or manner discharge or relieve Lessee
from Lessee's obligation to perform each and every one of the covenants
contained herein.
17.2 If any term or provision of this Lease or the application thereof to
any person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Lease shall
be valid and shall be enforced to the fullest extent permitted by law.
17.3 The failure of Lessor to insist in any one or more cases upon the
strict performance of any of the covenants of this Lease shall not be construed
as a waiver or a relinquishment for the future of such covenant. A receipt by
Lessor of Rent, additional rent or other amount with knowledge of the breach or
any covenant hereof shall not be deemed a waiver of such breach, and no waiver
by Lessor of any provision of this Lease shall be deemed to have been made
unless expressed in writing and signed by Lessor.
18. SUBORDINATION.
This Lease and the rights of Lessee hereunder are subject and subordinate in
all respects to all matters of record, including, without limitation, deeds of
trust and all mortgages which may now or hereafter be placed on or affect the
Demised Premises, or any part thereof, and/or Lessor's interest or estate
therein, and to
18
<PAGE>
each advance made and/or hereafter to be made under any such mortgages, and to
all renewals, modifications, consolidations, replacements and extensions
thereof, and all substitutions therefore; provided, however, that before such
subordination shall be effective as to any future mortgage or other matters,
Lessor shall cause the mortgagee, or other party in interest, as the case may
be, to deliver to Lessee, in proper form for recording, the agreement of such
mortgagee or other party that no foreclosure by such mortgagee or any other
person claiming by or through or under such mortgagee (or other interest) shall
disturb the possession of Lessee under this Lease so long as Lessee is not in
default hereunder, and that the validity and continuance of this Lease will be
recognized. Concurrently with the delivery of such an agreement, Lessee agrees
to execute and deliver an instrument in proper form for recording, in which
Lessee agrees to and does subordinate this Lease to the liens of such mortgagees
and other matters, and to all renewals, modifications, consolidations and
replacements and extensions thereof, and to any persons claiming by, through or
under such mortgagees or other interests. Lessee shall, at the request of
Lessor, execute and deliver to any existing or future mortgagee a certificate
indicating whether any claims, defenses or offsets then exist against Lessor,
certifying that Lessor is not in default hereunder and that this Lease is in
full force and effect and unmodified, except as specified in said certificate,
indicating what rent has been paid and agreeing that
19
<PAGE>
this Lease may not be modified without the consent of such mortgagee.
19. PRIOR NEGOTIATIONS.
This Lease merges and supersedes all prior negotiations, representations and
agreements and constitutes the entire contract between the parties hereto
concerning the leasing of the Demised Premises, the improvements thereon and the
other matters provided for herein.
2O. QUIET ENJOYMENT.
Lessor covenants that Lessee, upon paying the Rent and performing the
covenants hereof on the part of Lessee to be performed shall and may peaceably
and quietly have, hold and enjoy the Demised Premises and all related
appurtenances, rights, privileges and easements throughout the Lease Term
without any hindrance by Lessor and any person claiming by, through or under it.
21. RETURN OF PREMISES.
At the expiration or other termination of the Lease Term, if and as
extended, Lessee will remove from the Demised Premises its property and that of
all claiming under it and will peaceably yield up to Lessor the Demised Premises
in as good condition in all respects as the same were at the commencement of
this Lease, except for ordinary wear and tear, damage by the elements, by any
exercise of the right of eminent domain or by any public or other authority, or
damage not caused by Lessee and with respect to which Lessee is
20
<PAGE>
not required to maintain insurance hereunder or is not required to repair.
22. CONSTRUCTION.
The mention of the parties hereto by name or otherwise shall be construed as
including and referring to their respective successors and permitted assigns as
well as to the parties themselves whenever such construction is required or
permitted by the provisions hereof; and all covenants, agreements, conditions,
rights, powers and privileges hereinbefore contained shall inure to the benefit
of and be binding upon the successors and assigns of such parties, unless
otherwise provided.
23. SHORT FORM NOTICE OF LEASE.
At the request of either party, the other party shall duly execute and
acknowledge for recording purposes a short form Notice of this Lease, which
shall recite the names of the parties, describe the Demised Premises, specify
the Lease Term and provide that this Lease is made upon the rents, terms,
covenants and conditions contained herein.
24. NOTICES.
Whenever notice shall be given under this Lease, the same shall be in
writing and shall be sent by certified or registered mail as follows:
To Lessor: Richard J. Tobin, Trustee
J L N Realty Trust
96 Broadway
Taunton, MA O278O
with copy to:
Thomas J. Wynn, Esquire
21
<PAGE>
Wynn & Wynn, P.C.
90 New State Highway
Raynham, MA 02767
To Lessee: Harry Chase, President
Wakefield Engineering, Inc.
6O Audubon Road
Wakefield, MA O188O
with copy to:
Robert W. Forman, Esq.
Greenberger and Forman
137O Avenue of the Americas
New York, NY lOO19-46O2
or to such other address or addresses as each party may from time to time
designate by like notice to the other.
25. LIMITATION OF LIABILITY.
Lessee shall neither assert nor seek to enforce any claim for breach of this
Lease against any of Lessor's assets other than Lessor's interest in the Demised
Premises and in the rents, issues and profits thereof, and Lessee agrees to look
solely to such interest for the satisfaction of any liability of Lessor under
this Lease, it being specifically agreed that in no event shall Lessor ever be
personally liable for any such liability.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed in duplicate as of the day and year first above written.
Lessor:
/s/ Richard J. Tobin, Trustee
-----------------------------------
Richard J. Tobin,
Trustee as aforesaid
and not individually
Lessee:
Wakefield Engineering, Inc.
BY: /s/ Stephen R. Kent
--------------------------------
Its Vice President and General
Manager
23
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF BRISTOL
In Bristol County on the 28th day of December, 1994, before me personally
appeared Richard J. Tobin, to me known and known by me to be the person
executing the foregoing instrument as Trustee of J L N Realty Trust and
acknowledged said instrument by him executed to be his free act and deed in
said capacity.
/s/ Judith A. Botellio
------------------------------
Notary Public
My Commission expires: 12/11/98
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF MIDDLESEX
In Middlesex County on the 2Oth day of December, 1994, before me personally
appeared Stephen R. Kent, to be known and known by me to be of said Wakefield
Engineering, Inc. as its Vice President and General Manager and acknowledged
said instrument by him executed to be his free act and deed in said capacity and
the free act and deed of said Wakefield Engineering, Inc.
/s/ Maura J. Flynn
------------------------------
Notary Public, Maura J. Flynn
My Commission expires: 6/5/98
24
<PAGE>
EXHIBIT A
Parcel one:
That certain parcel of land situate in Fall River in the County of Bristol and
said Commonwealth, bounded and described as follows:
Westerly ten (lO) feet,
Northerly forty (4O) feet,
Westerly one hundred forty (14O) feet,
Southerly forty (4O) feet, and
Westerly one hundred thirty (13O) feet by Sykes Road;
Northerly by lot #21 as indicated on plan hereinafter
referred to five hundred three and 87/lOO (5O3.87)
feet;
Easterly two hundred eighty (28O) feet, and
Southerly five hundred three and 87/lOO (5O3.87) feet by land
now or formerly of Greater Fall River Development
Corporation.
Said parcel is shown as Lot #35 on Subdivision Plan #32887-1 filed with Original
Certificate of Title #2269, Book 12, Page 333, Fall River District of the Land
Court.
All of the said boundaries are determined by the Court to be located as shown on
the plan above mentioned, filed with said Certificate #2269, the same being
compiled from a plan drawn by Essex Survey Service, Inc., Surveyors, dated May
6, 1981, and additional data on file in the Land Registration Office, all as
modified and approved by the Court.
The parcel is the same described in Certificate of Title No. 3691.
Parcel Two:
That certain parcel of land situate in Fall River in the County of Bristol and
said Commonwealth, bounded and described as follows:
Northerly by lot #22 as indicated on plan hereinafter
referred to three hundred fifty and 81/lOO (35O.81)
feet;
Easterly by land now or formerly of Albano C. Pacheco et al
two hundred eighty and O1/lOO (28O.O1) feet;
Southerly by land now or formerly of Greater Fall River
Development Corporation and portion of lot #39 as
indicated on plan hereinafter referred to three
hundred fifty-three and 47/lOO (353.47) feet; and
Westerly by lot #35 as indicated on plan hereinafter
referred to two hundred eighty (28O) feet.
25
<PAGE>
Said parcel is shown as Lot #44 on Subdivision Plan #32887-7 filed with Original
Certificate of Title #2269, Book 12, Page 333, Fall River District of the Land
Court.
All of said boundaries are determined by the Court to be located as shown on the
plan above mentioned, filed with said Certificate #2269, the same being compiled
from a plan drawn by GHR Engineering Corporation, Surveyors, dated November 5,
1982, and additional data on file in the Land Registration Office, all as
modified and approved by the Court.
The parcel is the same described in Certificate of Title No. 4087.
26
<PAGE>
EXHIBIT 10.22
INDUSTRIAL SPACE LEASE
BETWEEN
RANCON INCOME FUND I
A CALIFORNIA LIMITED PARTNERSHIP
("LANDLORD")
AND
WAKEFIELD ENGINEERING, INC.,
A DELAWARE CORPORATION
("TENANT")
September 29, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. TERM....................................................... 4
2. POSSESSION................................................. 4
3. ANNUAL BASIC RENT.......................................... 4
4. RENTAL ADJUSTMENT.......................................... 5
5. SECURITY DEPOSIT........................................... 5
6. USE........................................................ 6
7. HAZARDOUS MATERIALS........................................ 6
8. NOTICES.................................................... 9
9. BROKERS.................................................... 9
10. HOLDING OVER............................................... 9
11. TAXES ON TENANT'S PROPERTY................................. 9
12. CONDITION OF PREMISES...................................... 10
13. ALTERATIONS................................................ 10
14. REPAIRS.................................................... 10
15. ENTRY BY LANDLORD.......................................... 11
16. UTILITIES AND SERVICES..................................... 11
17. COMMON AREAS............................................... 12
18. BANKRUPTCY................................................. 12
19. INDEMNIFICATION............................................ 12
20. DAMAGE TO TENANT'S PROPERTY................................ 12
21. TENANT INSURANCE........................................... 13
22. DAMAGE OR DESTRUCTION...................................... 14
23. EMINENT DOMAIN............................................. 15
24. DEFAULTS AND REMEDIES...................................... 15
25. GOVERNMENT ENERGY OR UTILITY CONTROLS...................... 17
26. LIMITATION ON LIABILITY.................................... 17
27. TENANT IMPROVEMENTS........................................ 17
28. LANDLORD'S RESERVED RIGHTS................................. 17
29. ASSIGNMENT AND SUBLETTING.................................. 17
30. MISCELLANEOUS.............................................. 18
31. OPTION TO RENEW............................................ 23
32. CONSTRUCTION............................................... 24
33. RENT RETROACTIVE TO DECEMBER 1, 1994....................... 24
34. RULES AND REGULATIONS...................................... 24
(i)
</TABLE>
<PAGE>
TABLE OF EXHIBITS
EXHIBIT ITEM
A-1 Site Plan of the Project
A-2 Legal Description of the Premises
(ii)
<PAGE>
INDUSTRIAL SPACE LEASE
THIS INDUSTRIAL SPACE LEASE is made as of the 29th day of September, 1995
by and between Rancon Income Fund I, a California limited partnership
("Landlord"), and Wakefield Engineering, Inc., a Delaware corporation
("Tenant"), in consideration of the Rent as defined in Sections 3 and 4 herein
and the provisions of this Lease. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the "Premises" described below situated in those
certain buildings located at 28715 Via Montezuma and 27901 Front Street,
Temecula, California (collectively the "Building").
The parties hereto agree that said letting and hiring is upon and subject
to the terms, covenants and conditions herein set forth. Each party covenants,
as a material part of the consideration of this Lease to keep and perform each
and all of said terms, covenants and conditions for which said party is liable
and that this Lease is made upon the condition of such performance.
BASIC LEASE PROVISIONS
The following summary of the basic lease provisions ("Basic Lease
Provisions") is hereby made a part of the ("Lease") for the purpose of setting
forth information referred to in the Lease. In the event of any conflict,
inconsistency or ambiguity created by or between the Basic Lease Provisions and
the body of the Lease, which Landlord and Tenant acknowledge having read in
full, the terms and conditions of the Lease shall govern.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Tenant's Trade Name: Wakefield Engineering, Inc.
2. Address of Premises, including Name of Office 28715 Via Montezuma & 27901 Front Street, Temecula,
Building, Floor and Suite Number California 92590.
3. Use of Premises: Industrial and general office use, and for no other use without
the express written consent of Landlord.
4. Lease Term: Ten (10) years.
Options: Two (2) five (5) year options to renew.
5. Commencement Date: December 1, 1994.
6. Initial Annual Basic Rent: $175,032.00 per year, payable in equal monthly installments of
$14,586.00 during the Term, subject to adjustment pursuant to
Section 3(b).
7. Minimum Annual Increase in Basic Rent: Minimum two percent (2%) with a maximum of six percent
(6%) per annum, subject to adjustment pursuant to Section 3(b).
8. Tenant's Percentage of Building Direct Expense 100%.
(That portion of the Building occupied by Tenant
divided by the total square footage of the Building
available for occupancy):
9. Floor Area of Premises And Building: Agreed to be approximately 44,200 rentable square feet.
10. Security Deposit: $14,586.00 (does not include prepaid rent).
11. Prepaid Rent: N/A.
12. Tenant Improvement Allowance: N/A.
13. Broker(s): N/A.
</TABLE>
-1-
<PAGE>
<TABLE>
<S> <C> <C>
14. Address for Notice: LANDLORD:
Rancon Income Fund I
c/o Glenborough Inland Realtv Corporation
400 South El Camino Real
San Mateo, CA 94402-1708
Attn: Legal Department
TENANT:
Wakefield Engineering
Attention: General Manager
28715 Via Montezuma
Temecula, CA 92590
with copies to: Robert W. Forman
Greenberger & Forman
1370 Avenue of the Americas
New York, NY 10019-4602
15. Address for Rent Payments and Copies of Notices: Rancom Income Fund I
c/o Glenborough Inland Realtv Corporation
2740 South Bristol Street
Suite 118
Santa Ana, CA 92704
16. Guarantor: N/A
</TABLE>
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ADDITIONAL DEFINITIONS
17. ADDITIONAL RENTAL. The term "Additional Rental" as used in this Lease
shall mean each and every payment described in this Lease which is required to
be paid by Tenant to Landlord other than the Annual Basic Rent.
18. ADJUSTMENT DATE. The term "Adjustment Date" as used in this Lease shall
mean each anniversary of the Commencement Date.
19. ALTERATIONS. The term "Alterations" as used in this Lease shall mean
any addition, modification or other alteration of the Premises.
20. COMMON AREA. (Intentionally Omitted).
21. DRIPLINE. The term "Dripline" as used in this Lease shall mean a line
surrounding a building which is defined by the point at which water dripping
from the roof of the building will naturally fall (i.e., a line which is located
directly below and follows the circumference of the outermost extension of the
eaves or other extension of the roof or of covered windows or entryways or other
extensions of the walls of such building).
22. INDEX. The term "Index" as used in this Lease shall mean the United
States Department of Labor, Bureau of Labor Statistics Consumer Price Index for
All Urban Consumers, Los Angeles-Anaheim-Riverside Average Subgroup "All Items,"
(1982-84 = 100). If at any time the Index should not exist in the format recited
herein, Landlord shall substitute any official index published by the Bureau of
Labor Statistics, or successor or similar governmental agency, as may then be in
existence and shall, in Landlord's reasonable opinion, be most nearly equivalent
thereto.
23. LANDLORD'S WORK. (Intentionally Omitted).
24. PREMISES POSSESSION LETTER. The term "Premises Possession Letter" as
used in the Lease shall mean a Tenant's Estoppel Certificate in the form
attached hereto as Exhibit "F" to be delivered by Tenant within ten (10) days
-----------
following the date upon which possession of the Premises is delivered to Tenant.
25. PROJECT. The term "Project" shall mean the development constructed on
real property located in Temecula, California as shown on the site plan attached
hereto as Exhibit "A-1".
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26. RENTAL. The term "Rental" as used in this Lease shall mean the total of
all payments described in this Lease which are required to be paid by Tenant to
Landlord, including but not limited to the Annual Basic Rent and all items
specifically described as Additional Rental Payments.
27. RENTABLE AREA. The term "Rentable Area," as used in this Lease, shall
mean all areas designated by Landlord for the exclusive use of a Tenant of the
Project, measured from the Dripline and from the center of interior demising
walls, and shall include, but not be limited to, restrooms, mezzanines, patios,
warehouse or storage areas, clerical or office areas and employee areas.
28. SUBSTANTIAL COMPLETION. (Intentionally Omitted).
29. TENANT'S WORK. (Intentionally Omitted).
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INDUSTRIAL SPACE LEASE
1. TERM
The term of this Lease shall be for the period shown in Item 4 of the Basic
Lease Provisions.
2. POSSESSION
If for any reason Landlord is unable to deliver possession of the Premises
to Tenant on the date scheduled for commencement of the term of this Lease, this
Lease shall not be void or voidable nor shall Landlord be liable to Tenant for
any loss or damage resulting therefrom, but in such event Tenant shall not be
liable for any Rental until Landlord tenders possession of the Premises to
Tenant ready for occupancy. Within ten (10) days after delivery of the Premises
to Tenant, Tenant shall deliver to Landlord an executed copy of Landlord's
standard form Premises Possession letter, as attached hereto as Exhibit "F". If
Landlord shall give Tenant permission to enter into possession of the Premises
before the Commencement Date, that possession shall be subject to all the
provisions of this Lease, including, without limitation, the payment of Annual
Basic Rent, except to the extent expressly stated to the contrary by Landlord in
writing.
3. ANNUAL BASIC RENT
(a) Tenant agrees to pay Landlord the Annual Basic Rent for the Premises
shown in Item 6 of the Basic Lease Provisions, payable in advance on the first
day of each calendar month during the Term. If the term of this Lease commences
or ends on a day other than the first day of a calendar month, then the Rental
for such period shall be prorated in the proportion that the number of days this
Lease is in effect during such period bears to thirty (30). In addition to the
Annual Basic Rent, Tenant agrees to pay as additional Rental the amount of
Rental adjustments and other charges required by this Lease. All Rental shall be
paid to Landlord, without prior demand and without any deduction or offset, in
lawful money of the United States of America, at the address of Landlord
designated in the Basic Lease Provisions or to such other person or at such
other place as Landlord may from time to time designate in writing. No demand,
notice or invoice shall be required.
(b) The Rental payable by Tenant shall be increased for each year of the
term of this Lease by adjusting the Annual Basic Rent reserved in Section 3(a)
to reflect any increase in the cost of living, which adjustment shall be
determined as follows: On each Adjustment Date the most recently published Index
figure shall be determined (the "Comparison Index"). The monthly Rental payable
for the succeeding year of the Lease Term shall be the Annual Basic Rent
reserved under Section 3(a) increased by the same percentage, if any, by which
the Comparison Index figure shall have increased over the Consumer Price Index
figure for the month which is the most recently published prior to the
Commencement Date; provided, however, that the increase in Annual Basic Rent
shall in no event be less than two percent (2%) per annum nor more than six
percent (6%) per annum (pro-rated as required to account for any partial year
between the Commencement Date and the Adjustment Date).
(c) Tenant hereby acknowledges that the late payment by Tenant to Landlord
of Rental and other sums due hereunder will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs may include, but are not limited to,
administrative, processing and accounting charges, and late charges which may be
imposed on Landlord by the terms of any mortgage or trust deed covering the
Building. Accordingly, if any installment of Rental or any other sum due from
Tenant shall not be received by Landlord or Landlord's designee within five (5)
days after the due date, then the unpaid amounts shall bear interest at the rate
of one and one-half percent (1-1/2%) per month from the date due to the date of
payment (the "Late Charge"). The parties agree that such late charge represents
a fair and reasonable estimate of the cost Landlord will incur by reason of late
payment by Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder.
(d) In the event of any two consecutive late payments of Rental within any
twelve (12) month period, Landlord shall have the option (i) to require that
beginning with the first payment of Rental next due, Rental shall no longer be
paid in monthly installments but shall be payable quarterly three (3) months in
advance, and also to require that Tenant increase the amount, if any, of the
security deposit required under this Lease by: (i) one hundred percent (100%),
or (ii) one full month's Rental, whichever is greater, which additional security
deposit shall be retained by Landlord and may be applied by Landlord in the
manner provided in this Lease.
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<PAGE>
(e) In the event that at any time during the term of this Lease any
governmental law, rule or regulation prohibits or postpones in whole or in part
any increase in the Rental or in the payment of other sums payable by Tenant
hereunder to be made pursuant to this Lease, then, and in either of such events,
such increase or payment shall be made to the maximum extent permissible by law
at the time provided in this Lease, and/or at any time or times thereafter such
increase or payment, or any portion thereof, may lawfully be made and any such
increase in Rental, or any portion thereof, or the sums payable hereunder, or
portions thereof, the payment of which has been so prohibited or postponed,
shall thereafter become due and payable to the maximum extent and at the
earliest time or times permitted by law.
4. RENTAL ADJUSTMENT
(a) For the purpose of this Section 4, the following terms are defined as
follows:
(i) TENANT'S PERCENTAGE: The amount shown in Item 8 of the Basic
Lease Provisions.
(ii) DIRECT EXPENSES: The term "Direct Expenses" shall include:
(1) All real and personal property taxes and assessments imposed
by any governmental authority or agency on the Building and the land on which
the Building is located (including a pro rata portion of any taxes levied on any
common areas); any assessments levied in lieu of taxes; any non-progressive tax
on or measured by gross Rentals received from the Rental of space in the
Building; and other costs levied or assessed by, or at the direction of, any
federal, state, or local government authority or private association in
connection with the use or occupancy of the Premises or the Common Area serving
the Premises; the parking facilities serving the Premises; any tax on this
transaction or any document to which Tenant is a party creating or transferring
an interest in the Premises, and any expenses, including costs of attorneys or
experts, reasonably incurred by Landlord in seeking reduction by the taxing
authority of the above-referenced taxes, less tax refunds obtained as a result
of an application for review thereof; but shall not include any net income,
franchise, capital stock, estate or inheritance taxes.
(2) All property and casualty insurance, including but not
limited to the perils of fire, flood, earthquake, extended coverage, vandalism,
malicious mischief, special extended coverage, ("All Risk") and sprinkler
leakage, insuring full replacement cost on the Building and the land on which
the Building is located in such amounts and against such hazards and
contingencies as necessary to fully insure and protect such interests; provided,
however, Landlord shall not be obligated to insure any furniture, equipment, or
other property placed in the Premises by or at the expense of Tenant. Tenant and
Landlord shall provide certification of insurance to the other party upon
request with thirty (30) days prior written notice.
(3) Amortization of such capital improvements as Landlord may
have installed, which are mutually beneficial to Landlord and Tenant: (a) for
the purpose of reducing operating costs to the extent of savings or (b) to
comply with governmental rules and regulations promulgated after commencement of
construction of the Building.
(b) Within thirty (30) days of receipt of a statement from Landlord
specifying the Direct Expenses to be paid by Tenant, to which shall be attached
a copy of Landlord's receipt therefor, if any, Tenant shall pay such Direct
Expenses as Additional Rental.
(c) Even though the term has expired and Tenant has vacated the Premises,
when the final determination is made of Direct Expenses for the year in which
this Lease terminates, Tenant shall immediately pay to Landlord Tenant's
proportionate share of Direct Expenses not previously assessed for the portion
of the year that Tenant occupied the property.
5. SECURITY DEPOSIT
Tenant has deposited with Landlord the sum shown in Item 10 of the Basic
Lease Provisions to be held by Landlord as security for the faithful performance
by Tenant of all of Tenant's obligations hereunder. If Tenant defaults with
respect to any provision of this Lease, including but not limited to the
provisions relating to the payment of Rental, Landlord may, but shall not be
required to, use, apply or retain all or any part of this security deposit for
the payment of any Rental or any 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 to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default to the full extent permitted
by law. If any portion of the 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 its original amount
so that the amount of security deposit held by Landlord shall be at all times
the sum proportionate to current Rental as the original security deposit was to
the original Rental. Tenant's failure to do so shall be a material breach of
this Lease. Landlord shall not be required to keep this security deposit
separate from its general funds, and Tenant shall not
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<PAGE>
be entitled to interest on such deposit. If Tenant shall fully and faithfully
perform all of its obligations under this Lease, the security deposit of any
balance thereof shall be returned to Tenant (or, at Landlord's option, to the
last transferee of Tenant's interest hereunder) within fourteen (14) days after
expiration of the Lease Term and Tenant's delivery of the Premises to Landlord,
provided that Landlord may retain the security deposit until such time as any
amount due from Tenant in accordance with Sections 4 and 13 hereof has been
determined and paid in full. Should Landlord sell its interest in the Premises
during the term hereof and if Landlord deposits with the purchaser thereof the
then unappropriated funds deposited by Tenant as set forth above, Landlord shall
then be fully and finally discharged from any further liability with respect to
such deposit. Landlord shall pay interest upon said deposit at the rate of 5%
----------------------------------------------------------------
per annum, simple interest; said interest shall be payable by landlord
- ----------------------------------------------------------------------
simultaneously with the payment of the security deposit, as provided herein.
- ----------------------------------------------------------------------------
6. USE
Tenant shall use the Premises for that use shown as Item 3 of the Basic
Lease Provisions and shall not use or permit the Premises to be used solely for
any other purpose without the prior written consent of Landlord which consent
may be withheld in Landlord's sole discretion. Tenant shall not use or occupy
the Premises in violation of law or of the certificate of occupancy issued for
the Building, and shall, upon written notice from Landlord, discontinue any use
of the Premises which is declared by any governmental authority having
jurisdiction to be a violation of law or of said certificate of occupancy.
Tenant shall comply with any direction of any governmental authority having
jurisdiction which shall, by reason of the nature of Tenant's use or occupancy
of the Premises, impose any duty upon Tenant or Landlord with respect to the
Premises or with respect to the use or occupation thereof. A judgment of any
court of competent jurisdiction or the admission by Tenant in any action or
proceeding against Tenant that Tenant has violated any such laws, ordinances,
regulations, rules and/or directions in the use of the Premises shall be deemed
to be a conclusive determination of that fact as between Landlord and Tenant.
Tenant shall not do or permit to be done anything which will invalidate or
increase the cost of any fire, extended coverage or any other insurance policy
covering the Building and/or property located therein and shall comply with all
rules, orders, regulations and requirements of the National Fire Protection
Association or any other organization performing a similar function. Tenant
shall promptly, upon demand, reimburse Landlord for any additional premium
charged for such policy by reason of Tenant's failure to comply with the
provisions of this Section, but such reimbursement shall not be construed as
curing Tenant's default for failing to comply with the provisions of this
Section. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building, or injure or annoy them, or use or allow
the Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises. Tenant shall not commit or suffer to be committed any waste in or
upon the Premises.
7. HAZARDOUS MATERIALS
Tenant shall not engage in any activity on or about the Premises that
violates any Environmental Law, and shall promptly at Tenant's sole cost and
expense, take all investigatory and/or remedial action reasonably required by
Landlord or ordered or required by any governmental agency or Environmental Law
for clean-up and removal of any contamination involving any Hazardous Material
created, caused directly or indirectly or materially contributed to by Tenant.
The term "Environmental Law" shall mean any federal, state or local law,
statute, ordinance or regulation pertaining to health, industrial hygiene or the
environmental conditions on, under or about the Premises, including without
limitation, (i) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), 42 USC Sections 9601 et seq.; (ii) the
------
Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 USC Sections 6901
et seq.; (iii) California Health and Safety Code Sections 25100 et seq.; (iv)
- ------ ------
the Safe Drinking Water and Toxic Enforcement Act of 1986, California Health
and Safety Code Section 25249.5 et seq.; (v) the Federal Water Pollution Control
------
Act, 33 USC Sections 1251 et seq.; (vi) the Porter-Cologne Water Quality Control
------
Act, California Water Code Section 13000 et seq.; and (vii) California Civil
------
Code Section 3479 et seq.; (viii) the Toxic Substance Control Act, 15 USC
------
sections 2601 et seq.; (ix) the California Hazardous Substance Account Act,
------
Health and Safety Code sections 25330 et seq.; (x) the California Health and
------
Safety Code sections 25280 et seq. (Underground Storage of Hazardous
------
Substances); (xi) the California Hazardous Waste Management Act, Health and
Safety Code sections 25170g et seq.; and (xii) the California Health and Safety
------
Code Sections 2550 et seq. (Hazardous Materials Release Response Plans and
------
Inventory), all as amended, or any other federal, state or local statute, law,
ordinance, resolution, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning any
hazardous, toxic, or dangerous waste, substance or material, as now, or at any
time hereafter in effect. The term "Hazardous Material" includes, without
limitation, any material or substance which is (i) defined or listed as a
"hazardous waste," "extremely hazardous waste," "restrictive hazardous waste" or
"hazardous substance" or considered a waste, condition of pollution or nuisance
under the Environmental Laws; (ii) petroleum or a petroleum product or fraction
thereof; (iii) asbestos; (iv) substances known by the State of California to
cause cancer and/or reproductive toxicity; and/or (v) any substance, product,
waste or other material of any nature whatsoever which may give use to liability
under any of the above statutes or under any statutory or common law theory
based on negligence, trespass, intentional tort, nuisance or strict liability or
under any reported decisions of a state or federal court. It is the intent of
the parties hereto to construe the terms "Hazardous Materials" and
"Environmental Laws" in their broadest sense. Tenant shall provide all notices
required pursuant to the Safe Drinking Water and Toxic Enforcement Act of 1986,
California Health and Safety Code Section 25249.5 et seq. Tenant shall not bring
------
onto, create or dispose of, or store in or about the Premises or the Project,
including
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<PAGE>
but not limited to its sewage or storm drain systems, any Hazardous Materials,
in violation of any applicable environmental law, rule or regulation.
Tenant shall promptly give Landlord (i) a copy of any notice, correspondence
or information it receives from any federal, state, or other government
authority regarding Hazardous Materials on, under or about the Premises or
Hazardous Materials which affect or may affect the Premises, or regarding any
action instituted, completed or threatened by any such governmental authority
concerning Hazardous Materials which affect or may affect the Premises, (ii)
written notice of any knowledge or information Tenant obtains regarding
Hazardous Materials on, under or about the Premises or expenses or losses
incurred or expected to be incurred by Tenant, third party or any governmental
agency to study, assess, contain, or remove any Hazardous Materials on, under,
about or near the Premises for which Tenant may be liable or for which a lien
may be imposed on the Premises, (iii) written notice of any knowledge or
information Tenant obtains regarding the release or discovery of Hazardous
Materials on, under or about the Premises of other sites owned, occupied or
operated by Tenant or any person for whose conduct Tenant is or may be
responsible, or whose liability may result in a lien on or otherwise affect the
Premises, (iv) written notice of all claims made or threatened by any third
party against Tenant or the Premises relating to damage, contribution, cost
recovery compensation, loss or injury resulting from any Hazardous Materials,
and (v) written notice of Tenant's discovery of any occurrence or condition on
any real property adjoining or in the vicinity of the Premises that could the
Premises to be classified as "border zone property" under the provisions of
California Health and Safety sections 25220 cl seq. or any regulation adopted
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in accordance therewith, or to be otherwise subject to any restrictions on the
ownership, occupancy, transferability or use of the Premises under any of the
statutes cited above or any regulation adopted pursuant thereto.
Tenant shall at its own expense procure, maintain in effect and comply with
all conditions of any and all permits, licenses and other governmental and
regulatory approvals required for Tenant's use of the Premises including,
without limitation, discharge of (appropriately treated) materials or wastes
into or through any sanitary sewer serving the Premises. Except as discharged
into the sanitary sewer in strict accordance and conformity with all applicable
Hazardous Materials Laws, Tenant shall not store any Hazardous Materials on the
Premises and shall cause any and all Hazardous Materials removed from the
Premises to be removed and transported solely by duly licensed haulers to duly
licensed facilities for final disposal of such materials and wastes. On any
manifest for removal of Hazardous Materials Tenant and not Landlord shall be
identified as the owner of the Hazardous Materials. Tenant shall in all respects
handle, treat, deal with and manage any and all Hazardous Materials in, on,
under or about the Premises in total conformity with all applicable Hazardous
Materials Laws and prudent industry practices regulating management of such
Hazardous Materials. Upon expiration or earlier termination of the term of the
Lease, Tenant shall cause all Hazardous Materials to be removed from the
Premises and transported for use, storage or disposal in accordance and
compliance with all applicable Hazardous Materials Laws. Tenant shall not take
any remedial action in response to the presence of any Hazardous Material in or
about the Premises nor enter into any settlement agreement consent degree or
other compromise in respect to any claims relating to any Hazardous Materials in
any way connected with the Premises without first notifying Landlord of Tenant's
intention to do so and affording Landlord ample opportunity to appear, intervene
or otherwise appropriately assert and protect Landlord's interest with respect
thereto.
Tenant shall deliver to Landlord any and all documents and information
relating to any of the following:
(i) Any regulatory inquiry or non-routine inspection, formal or
informal, and all investigations and potential investigations by any private or
governmental representative, regarding any aspect of the Premises, including,
without limitation, the presence of any Hazardous Materials on the Premises or
the migration thereof from or to other property;
(ii) Any actual spills, releases or discharges of Hazardous Materials
(including, without limitation, any preexisting spills, release or discharges of
which Tenant may become aware): (i) occurring as a result of any activity
relating to the operation of the Premises, whether on or off the Premises, or
(ii) which have occurred on the Premises at any time:
(iii) Any enforcement, cleanup, removal or other governmental or
regulatory action instituted, completed or threatened pursuant to any Hazardous
Materials Laws;
(iv) Any claim made or threatened by any person against Tenant or the
Premises relating to damage, contribution, cost recovery, compensation, loss or
injury resulting from or claimed to result from any Hazardous Materials;
(v) All matters of which Tenant is required to give notice pursuant to
Section 25359.7 of the California Health and Safety Code; and
(vi) Any reports including draft reports made to any environmental
agency arising out of or in connection with any Hazardous Materials in or
removed from the Premises, including any complaints, notices, warnings or
asserted violations in connection therewith. Tenant shall also supply to
Landlord as promptly as possible, and in any event within three (3) business
days after Tenant first receives or sends the same, with copies of all claims,
reports, complaints, notices, warnings, or asserted violations relating in any
way to the Premises or Tenant's use thereof. Tenant shall promptly deliver to
Landlord copies of hazardous waste manifests reflecting the legal and proper
disposal of all Hazardous Materials removed from the Premises.
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Landlord shall have the right to join and participate in, as a party if it
so elects, any legal proceedings or actions affecting the Premises initiated in
connection with breach of any Hazardous Materials Law by Tenant and have its
attorneys' fees in connection therewith paid by Tenant.
Tenant shall indemnify, defend (by counsel reasonably acceptable to
Landlord), protect, and hold Landlord, and each of Landlord's partners,
directors, officers, employees, agents, attorneys, lenders, successors and
assigns free and harmless from and against any and all claims, liabilities,
penalties, forfeitures, losses or expenses (including, without limitation, any
consequential damages), losses, liens, liabilities, penalties, fines, lawsuits,
other proceedings, costs and expenses including, without limitation, costs
incurred in connection with any administrative proceedings fees of environmental
engineers or consultants and attorneys' fees and court costs, or death of or
injury to any person or damage to any property whatsoever, arising from or
caused in whole or in part, directly or indirectly, by:
(i) The presence in, on, under or about the Premises or discharge in or
from the Premises of any Hazardous Materials resulting from Tenant's use,
analysis, storage, transportation, disposal, release, threatened release,
discharge or generation of Hazardous Materials to, in, on, under about or from
the Premises, during the term of the Lease, or any residual discharges
thereafter due to Tenant's use or on behalf of tenant during the lease term;
(ii) Tenant's violation or alleged violation of any Hazardous Materials
Law;
(iii) All foreseeable and unforeseeable consequences including, without
limitation, loss of rents and liabilities arising in connection with third-party
claims and actions, directly or indirectly arising out of the tenant's use,
generation, handling, storage or disposal of Hazardous Materials by Tenant, or
on behalf of tenant, not otherwise reimbursed by insurance.
(iv) Any required or necessary repair, removal, cleanup or detoxification
and the preparation of any closure or other required plans, whether such action
is required or necessary prior to or allowing transfer of title to the Property,
to the full extent that such action is attributable, directly or indirectly, to
the presence or use, generation, storage, handling, release, threatened release
or disposal of Hazardous Materials on or about the Premises, by tenant or on
behalf of tenant;
(v) Any reduction in the realized or realizable value of the Property to
the full extent that any such reduction in the realized or realizable value of
the Property is attributable, directly or indirectly to the presence or use,
generation, storage, release, threatened release or disposal of Hazardous
Materials on the Premises, by tenant or on behalf of tenant; or
Any action taken by Landlord to enforce the duties, liabilities and
obligations of Tenant under this Lease. Tenant's obligations hereunder shall
include, without limitation, and whether foreseeable or unforeseeable, all costs
of any required or necessary repair, cleanup or detoxification or
decontamination of the Premises and the preparation and implementation of any
closure, remedial action or other required plans in connection therewith, and
shall survive the expiration or earlier termination of the term of the Lease.
For purposes of the release and indemnity provisions hereof, any acts or
omissions of Tenant, or by employees, agents, assignees, contractors or
subcontractors of Tenant or others acting for or on behalf of Tenant (whether or
not they are negligent, intentional, willful or unlawful) shall be strictly
attributable to Tenant. This indemnification obligation shall survive the
termination of this Lease.
The foregoing provisions shall not prohibit the ordinary use of Hazardous
Materials normally used in businesses similar to Tenant's, provided the amount
of such Hazardous Materials does not exceed permitted levels or reportable
quantities under applicable Environmental Laws and the use of such Hazardous
Materials strictly complies with all applicable Environmental Laws.
Environmental Audit:
- --------------------
Within 30 days after Landlord delivers a request in writing to Tenant,
Tenant shall cause to be prepared and delivered to Landlord, at Tenant's
expense, a site assessment and report, or an update of any previously prepared
site assessment and report, for the Premises prepared by a qualified, state
registered, professional environmental auditor acceptable to Landlord. Landlord
may request such a report not more often than once in any two year period, or
more frequently in the event of default by Tenant or whatever Landlord knows of
or suspects the presence, release, threat of release, placement on, under or
about the Premises, or the use, manufacture, handling, generation, storage,
treatment, discharge, burial or disposal on, under or about the Premises, or the
transportation to or from the Premises, or any Hazardous Material. Unless the
Landlord waives in writing any particular element, the assessment and report or
update shall include, but not be limited to (i) a description of the presence,
location and amount of Hazardous Materials and underground storage tanks on,
under or about the Premises and any property adjacent to or in the vicinity of
the Premises, (ii) a review and audit of the books, records, permits, notices,
citations, orders and data of Tenant and all occupants of the Premises relating
to Hazardous Materials or underground storage tanks on, under or about the
Premises and any property adjacent to or in the vicinity of the Premises,
including historical data and records if not covered in any prior report
Landlord has received, (iii) a review and report on any records or listings of
any governmental agency concerning Hazardous Materials or underground storage
tanks on, under or about the Premises and any property adjacent to or in the
vicinity of the Premises, (iv) an investigation and report on the history of
ownership and use of the Premises and property adjacent to or in the vicinity of
the Premises, unless covered in any prior report Tenant has received, (v) a
report of interviews with the current tenants and occupants of the Premises
concerning the use of the Premises, (vi) an evaluation of the likelihood of any
soil
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or groundwater contamination of the Premises with Hazardous Materials, (vii)
estimated costs of removing any Hazardous Materials and (viii) any other
information or recommendations Landlord may reasonable require.
Notwithstanding the foregoing, Landlord may request an environmental audit at
any time during the term of this Lease, or any extension thereof, at Landlord's
expense.
8. NOTICES
Any notice, demand, consent, approval or other communication required or
permitted to be given hereunder must be in writing and may be given by personal
delivery or by mail, and if given by mail shall be deemed sufficiently given if
sent by U.S. mail, postage prepaid, or by overnight courier service such as
Federal Express, Express Mail or the like, addressed to Tenant at the Premises,
or to Landlord at its address set forth in the Basic Lease Provisions. Any
notice, request, demand, direction or other communication sent by facsimile
transmission must be confirmed within forty eight (48) hours by letter mailed or
delivered in accordance with the foregoing in order to be deemed effective.
Either party may specify a different address for notice purposes by written
notice to the other except that the Landlord may in any event use the Premises
as Tenant's address for notice purposes.
9. BROKERS
Tenant warrants that it has had no dealings with any real estate broker
or agent in connection with the negotiation of this Lease, except as set forth
as Item 13 of the Basic Lease Provisions, whose commission shall be payable by
Landlord, and that it knows of no other real estate broker or agent who is or
might be entitled to a commission in connection with this Lease. If Tenant has
dealt with any other person or real estate broker with respect to leasing or
renting space in the Building, Tenant shall be solely responsible for the
payment of any fees due said person or firm and tenant shall indemnify and hold
Landlord free and harmless against any liability in respect thereto, including
attorneys' fees and costs.
10. HOLDING OVER
If Tenant holds over after the expiration or earlier termination of the
term hereof without the express written consent of Landlord, Tenant shall become
a Tenant at sufferance only, at a rental rate equal to one hundred fifty percent
(150%) of the Rental in effect upon the date of such expiration (subject to
adjustment as provided in Section 4 hereof and prorated on a daily basis), and
otherwise subject to the terms, covenants and conditions herein specified, so
far as applicable. Acceptance by Landlord of Rental after such expiration or
earlier termination shall not result in a renewal of this Lease. The foregoing
provisions of this Section 10 are in addition to and do not affect Landlord's
right of re-entry or any rights of Landlord hereunder or as otherwise provided
by law. If Tenant fails to surrender the Premises upon the expiration of this
Lease despite demand to do so by Landlord, Tenant shall indemnify and hold
Landlord harmless from all loss or liability, including without limitation, any
claim made by any succeeding tenant founded on or resulting from such failure to
surrender and any attorneys' fees and costs.
11. TAXES ON TENANT'S PROPERTY
(a) Tenant shall be liable for and shall pay, at least ten (10) days
before delinquency, all taxes, assessments, license fees and other similar
charges levied against any personal property or trade fixtures placed by Tenant
or at Tenant's direction in or about the Premises. Within ten days of demand by
Landlord Tenant shall furnish Landlord with satisfactory evidence of these
payments. If any such taxes on Tenant's personal property or trade fixtures are
levied against Landlord or Landlord's property or if the assessed value of the
Premises is increased by the inclusion therein of a value placed upon such
personal property or trade fixtures of Tenant and if Landlord, after written
notice to Tenant, pays the taxes based upon such increased assessment, which
Landlord shall have the right to do regardless of the validity thereof, but
only under proper protest if requested by Tenant. Tenant shall, within ten (10)
days of written demand, reimburse Landlord for the taxes so levied against
Landlord, or the portion of such taxes resulting from such increase in the
assessment.
(b) If the tenant improvements in the Premises, whether installed,
and/or paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which Tenant Improvements
conforming to Landlord's average cost of construction of tenant improvements in
the Building ("Building Standard") in other space in the Building are assessed,
then the real property taxes and assessments levied against Landlord on
Landlord's Property as a result of such excess assessed valuation may, at the
Landlord's option, be deemed to be taxes levied against the
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personal property of Tenant, and shall, under such circumstances, be governed by
the provisions of Section 11(a) above. If the records of the County Assessor are
available and sufficiently detailed to serve as a basis for determining whether
said tenant improvements are assessed at a higher valuation than Landlord's
"Building Standard," such records shall be binding on both the Landlord and the
Tenant. If the records of the County Assessor are not available or sufficiently
detailed to serve as a basis for making said determination, the actual cost of
construction shall be used.
12. CONDITION OF PREMISES
By entry hereunder, Tenant accepts the Premises as being in good and
sanitary order, condition and repair. Tenant's taking of possession of the
Premises shall conclusively establish that as of the date of taking possession,
the Premises and the Building are in good order and satisfactory condition,
except for such matters as to which Tenant gave Landlord notice on or before the
Commencement Date. NO PROMISE OF LANDLORD TO ALTER, REMODEL, REPAIR OR IMPROVE
THE PREMISES, THE BUILDING OR THE PROJECT AND NO REPRESENTATION, EXPRESS OR
IMPLIED, RESPECTING ANY MATTER OR THING RELATED TO THE PREMISES, BUILDING, OR
PROJECT OR THIS LEASE, (INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE
PREMISES, Building OR PROJECT) OR THE SUITABILITY OF EITHER FOR THE CONDUCT OF
TENANTS BUSINESS HAVE BEEN MADE TO TENANT BY LANDLORD OR ITS BROKER OR SALES
AGENT, OTHER THAN AS MAY BE CONTAINED HEREIN OR IN A SEPARATE EXHIBIT OR RIDER
SIGNED BY LANDLORD AND TENANT.
13. ALTERATIONS
(a) Tenant shall make no Alterations, additions or improvements in or to
the Premises without Landlord's prior written consent and subject to such other
conditions which Landlord may reasonable require. Tenant agrees that there shall
be no construction of partitions or other obstructions which might interfere
with Landlord's free access to mechanical installations or service facilities of
the Building or interfere with the moving of Landlord's equipment to or from the
enclosures containing said installations and facilities. All such work shall be
done at such times and in such manner as Landlord may from time to time
designate, and, at the option of Landlord, under Landlord's supervision. Tenant
covenants and agrees that all work done by Tenant shall be performed in full
compliance with all laws, rules, orders, ordinances, regulations and
requirements of all governmental agencies, offices, and boards having
jurisdiction, and in full compliance with the rules, regulations and
requirements of the National Fire Protection Association, and of any similar
body. Before commencing any work, Tenant shall give Landlord at least twenty
(20) days written notice of the proposed commencement of such work and shall, if
required by Landlord, secure at Tenant's own cost and expense, a completion and
lien indemnity bond, satisfactory to Landlord, for said work. Tenant further
covenants and agrees that any mechanic's lien recorded against the Premises or
against the Building for work claimed to have been done for, or materials
claimed to have been furnished to, Tenant will be discharged by Tenant, by bond
or otherwise, within thirty (30) days after the filing thereof, at the cost and
expense of Tenant. All Alterations, additions or improvements upon the Premises
made by either party, including (without limiting the general of the foregoing)
all wall covering, built-in cabinet work, paneling and the like, shall, unless
Landlord elects otherwise, become the property of Landlord, and shall remain
upon, and be surrendered with the Premises, as a part thereof, at the end of the
term hereof, except that Landlord may, by written notice to Tenant, require
Tenant to remove all partitions, counters, railing and the like installed by
Tenant, and Tenant shall repair all damage resulting from such removal or, at
Landlord's option, shall pay to Landlord all costs arising from such removal.
(b) Unless Landlord otherwise agrees in writing, all such Alterations,
additions or improvements affixed or built into the Premises (but excluding
moveable trade fixtures and furniture) shall become the property of Landlord and
shall be surrendered with the Premises, as a part thereof, at the end of the
Lease term, except that Landlord may, by written notice to Tenant given at
least twenty (20) days prior to the end of the Lease term, require Tenant to
remove all or any Alterations, decorations, additions, improvements and the like
installed by Tenant, and to repair the Premises, or at Landlord's option to pay
all costs in relation to any damage to the Premises arising from such removal.
Any fixtures, furnishing or other personal property remaining after possession
of the premises is returned to Landlord shall be the sole and exclusive property
of Landlord and Tenant shall be liable for all costs incurred for removal.
14. REPAIRS
(a) Tenant, at its expense, shall maintain and keep the Premises and each
and every part thereof (except only that portion of the Premises, if any, that
Landlord expressly elects to maintain and so notifies Tenant in writing, in
which case such maintenance shall be done at Tenant's expense), including,
without limitation, all utility pipes and conduit, fixtures, heating,
ventilating and air conditioning equipment exclusively serving the Premises, all
signs, locks, doors, door frames, door checks, windows, window frames,
storefronts, skylights
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and other openings in the roof or exterior walls and floor coverings in a first
class order, condition and repair and shall make replacements necessary to keep
the Premises in this condition. All replacements shall be of quality equal to or
exceeding that of the original. Tenant shall make any and all repairs suggested
at the time of the annual maintenance/inspections. Should Tenant fail to
commence these repairs and replacements or otherwise maintain the Premises
within three (3) days after written demand by Landlord, or shall Tenant commence
but fail to complete any repairs or replacements within a twenty (20) day period
after written demand by Landlord, Landlord may make the repairs or replacements
and shall be promptly reimbursed by Tenant for the cost thereof, together with
interest at the maximum lawful rate from the date of commencement of the work.
Tenant shall repair promptly at its expense any damage to the Premises caused by
Tenant or its agents or employees or caused by installation or removal of
Tenant's personal property. Tenant shall maintain in good condition and repair
the roofs and HVAC system.
(b) Landlord shall maintain in good condition and repair the foundations
and exterior surfaces of the exterior walls of all buildings (exclusive of
doors, door frames, door checks, windows, window frames, store fronts, sky
lights and other openings therein). Tenant waives the provisions of Section 1941
and 1942 of the Civil Code of the State of California, or any superseding
statute, and of any other law permitting Tenant to make repairs at Landlord's
expense.
15. ENTRY BY LANDLORD
Landlord reserves and shall at any and all times have the right to enter
the Premises upon twenty four (24) hours prior notice to Tenant (except in the
case of an emergency, in which case no notice is necessary) to inspect the same,
and any other service to be provided by Landlord to Tenant hereunder, including,
without limitation, to name the Building and Project and to change the name or
street address of the Building or Project to install and maintain all signs on
the exterior and interior of the Building and Project, to enter the Premises for
the purpose of making inspections, repairs, Alterations, additions or
improvements to the Premises or to the Building (including, without limitation,
checking, calibrating, adjusting or balancing controls and other parts of the
HVAC system), and to take all steps as may be necessary or desirable for the
safety, protection maintenance or preservation of the Premises or the Building
or Landlord's interest therein, or as may be necessary or desirable for the
operation or improvement of the Building or in order to comply with laws, orders
or requirements of governmental or other authority and to show the Premises to
prospective purchasers or tenants, to post notices of non-responsibility, all
without being deemed guilty of any eviction of Tenant without abatement of
Rental. Landlord may, in order to carry out such purposes, erect scaffolding and
other necessary structures where reasonably required by the character of the
work to be performed, provided that the business of Tenant shall be interfered
with as little as is reasonably practicable. Tenant hereby waives any claim for
damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss in, upon and about the Premises. Landlord shall at all times have and
retain a key with which to unlock all doors in the Premises, excluding Tenant's
vaults and safes. Landlord shall have the right to use any and all means which
Landlord may deemed proper to open said doors in an emergency in order to obtain
entry to the Premises. Any entry to the Premises obtained by Landlord by any of
said means, or otherwise, shall not be construed or deemed to be a forcible or
the unlawful entry into the Premises, or an eviction of Tenant form the Premises
or any portion thereof, and any damages caused on account thereof, shall by paid
by Tenant.
16. UTILITIES AND SERVICES
Tenant shall make all arrangements for and to pay directly to the
appropriate utility company all charges for utility services supplied to Tenant
for Tenant's use in or about the Premises including, but not limited to, gas,
electricity, water, sewer, trash, waste disposal and telephone, and for all
connection charges, fees or taxes. Landlord may contract with a trash disposal
service serving the entire Project, in which event Tenant shall dispose of all
ordinary and usual trash using containers designated by Landlord, and shall, in
addition, pay to Landlord Tenant's Percentage of the cost of such trash disposal
services. Tenant shall be responsible for all costs and expenses relating to the
disposal of extraordinary types or amounts of trash not included within a trash
disposal contract entered into by Landlord. The failure or interruption of any
utility or service shall neither render Landlord liable in damages or otherwise
entitle Tenant to terminate this Lease or discontinue making payments of Annual
Basic Rent or Additional Rental. If Tenant fails to pay any charges referred to
in this Article when due, Landlord may pay the charge, and Tenant agrees to
reimburse Landlord for any amount paid by Landlord plus interest thereon at the
maximum legal rate allowed under applicable law.
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17. COMMON AREAS
(Intentionally Omitted)
18. BANKRUPTCY
If Tenant shall file a petition for relief under any provision of the
Federal Bankruptcy Code as then in effect, or any involuntary bankruptcy
proceedings are initiated against Tenant and such proceeding shall not have been
dismissed within thirty (30) days from the date thereof, or if a receiver or
trustee shall be appointed of Tenant's property and the order appointing such
receiver or trustee shall not be set aside or vacated within thirty (30) days
after the entry thereof, or if Tenant shall assign Tenant's estate or assets for
the benefit of creditors, or if this Lease shall, by operation of law or
otherwise, pass to any person or person other than Tenant, then in any such
event Landlord may terminate this Lease, if Landlord so elects, with or without
notice of such election and with or without entry or action by Landlord. In such
case, notwithstanding any other provisions of this Lease, Landlord, in addition
to any and all rights and remedies allowed by law or equity, shall, upon such
termination, be entitled to recover damages in the amount provided in Section 24
hereof. Neither Tenant nor any person claiming through or under Tenant or by
virtue of any statute or order of any court shall be entitled to possession of
the Premises but shall surrender the Premises to Landlord. Nothing contained
herein shall limit or prejudice the right of Landlord to recover damages by
reason of any such termination equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the proceedings in which,
such damages are to be provided; whether or not such amount is greater, equal
to, or less than the amount of damages recovered under the provisions of this
Section 18.
19. INDEMNIFICATION
Tenant shall indemnify, defend and hold Landlord, its agents, employees,
and affiliates harmless from all claims arising from Tenant's use of the
Premises or the conduct of its business or from any activity, work, or thing
done, permitted or suffered by Tenant in or about Premises. Tenant shall further
indemnify, defend and hold Landlord, its agents, employees, and affiliates
harmless from all claims arising from any breach or default in the performance
of any obligation to be performed by Tenant under the terms of this Lease, or
arising from any act, neglect, fault or omission of Tenant or of its agents or
employees, and from and against all costs, attorneys' fees, expenses and
liabilities incurred in or about such claim or any action or proceeding brought
thereon. In case any action or proceeding shall be brought against Landlord, its
agents, employees, and affiliates by reason of any such claim, Tenant upon
notice from Landlord shall defend the same at Tenant's expense by counsel
approval in writing by Landlord. Tenant, as a material part of the consideration
to Landlord, hereby assumes all risk of damage to property or injury to person
in, upon or about the Premises caused by the negligence or misconduct of Tenant
or Tenant's employees, agents,and affiliates, except that which is caused by the
failure of Landlord to observe any of the terms and conditions of this Lease
where such failure has persisted for an unreasonable period of time after
written notice of such failure. Notwithstanding the foregoing, Tenant shall not
be required to defend, indemnify, and hold harmless Landlord from any liability
for injury, loss, accident, claims or damage to any person or property resulting
principally from the negligence or willful misconduct of Landlord, its agents,
contractors, servants, employees, or licensees in connection with Landlord's
activities on the Premises. Landlord agrees to defend, indemnify, and hold
harmless Tenant from and against any and all claim arising principally from the
negligence or willful misconduct of Landlord, its agents, contractors, servants,
employees and licensees. Such exclusion from Tenant's indemnity obligation and
such agreement by Landlord to indemnify Tenant are not intended to and shall not
relieve any insurance carrier of its obligations under policies required to be
carried by Tenant pursuant to this Lease to the extent such policies cover the
alleged negligence or willful misconduct of Landlord or its agents, contractors,
servants, employees or licensees; provided, however, that this sentence shall in
no way be construed to imply the availability of any double or duplicate
coverage following the primary liability of such carrier.
20. DAMAGE TO TENANT'S PROPERTY
Notwithstanding anything contained in this Lease to the contrary, Landlord
or its agents shall not be liable for (i) any damage to any property entrusted
to employees of the building, (ii) loss or damage to any property by theft or
otherwise, (iii) any injury or damage to persons or property resulting from
fire, explosion, falling plaster, steam, gas, electricity, water or rain which
may leak from any part of the Building or from pipes, appliances or plumbing
work therein or from the roof, street or sub-surface or from any other place or
resulting from dampness or (iv) any other cause whatsoever except ins ofar as
the same may be caused by the negligence or willful misconduct of Landlord, its
agents, employees or affiliates. Landlord or its agents shall not be liable for
interference with light or other incorporated hereditaments, nor shall Landlord
be liable for any latent defect in the Premises or in the Building or in the
Project. Tenant shall give prompt notice to Landlord in case of fire or
accidents in the Premises or in the Building or of defects therein or in the
fixtures or equipment.
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21. TENANT INSURANCE
(a) Tenant shall, during the term hereof and any other period of
occupancy, at its sole cost and expense, keep in full force and effect the
following insurance, with the Landlord as a named additional insured:
(i) Standard form property insurance insuring against the perils of
fire, extended coverage, vandalism, malicious mischief, special extended
coverage ("All Risk") and sprinkler leakage. This insurance policy shall be upon
all property owned by Tenant, for which Tenant is legally liable or that was
installed at Tenant's expense, and which is located in the Building including,
without limitation, furniture, fittings, installations, fixtures, and any other
personal property, in an amount not less than ninety percent (90%) of the full
replacement cost thereof. In the event that there shall be a dispute as to the
amount which comprises full replacement cost, such dispute shall be submitted by
the parties to arbitration before the American Arbitration Association for
resolution.
(ii) Business Interruption Insurance in amounts acceptable to
Landlord.
(iii) Plate glass insurance covering all plate glass on the Premises at
full replacement value.
(iv) Comprehensive General Liability Insurance insuring Tenant against
any liability arising out of the lease, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be in the
amount of not less than $1,000,000 Combined Single Limit for injury to, or death
of one or more persons in an occurrence, and for damage to tangible property
(including loss of use) in an occurrence, with such liability amount to be
adjusted from year to year to reflect increases in the Index. The policy shall
insure the hazards of premises and operations, independent contractors,
contractual liability (covering the Indemnity contained in Section 18 hereof)
and shall (1) name Landlord as an additional insured, (2) contain a cross
liability provision, and (3) contain a provision that "the insurance provided
the Landlord hereunder shall be primary and non-contributing with any other
insurance available to the Landlord."
(v) Workers' Compensation and Employer's Liability insurance as
required by state law.
(vi) Any other form or forms of insurance as Landlord or any
mortgagees of Landlord may reasonably require from time to time in form, in
amounts and for insurance risks against which a prudent tenant would protect
itself.
(vii) Any insurance policies deemed reasonably necessary by Landlord
with regard to Tenant's or Tenants' contractors' construction of Tenant's Work,
as well as with regard to the construction of Alterations allowed by this Lease,
including, but not limited to, contingent liability and "all risks" builders
risk insurance, in amounts determined by Landlord to be commercially reasonable.
(b) All policies shall be written in a form satisfactory to Landlord and
shall be taken out with insurance companies holding a General Policyholders
Rating of "A" and a Financial Rating of "V" or better, as set forth in the most
current issue of Bests Insurance Guide. Within ten (10) days after the execution
of this Lease, Tenant shall deliver to Landlord copies of policies or
certificates evidencing the existence of the amounts and forms of coverage
satisfactory to landlord. No such policy shall be cancelable or reducible in
coverage except after thirty (30) days prior written notice to Landlord, Tenant
shall, within ten (10) days prior to the expiration of such policies, furnish
Landlord with renewals or "binders" thereof, or Landlord may order such
insurance and charge the cost thereof to Tenant as additional Rental. If
Landlord obtains any insurance that is the responsibility of Tenant under this
section. Landlord shall deliver to Tenant a written statement setting forth the
cost of any such insurance and showing in reasonable detail the manner in which
it has been computed.
(c) Landlord makes no representation that the limits of liability
specified to be carried by Tenant under this Lease are adequate to protect
Tenant against Tenant's undertaking under this Lease, and in the event Tenant
believes that any such insurance coverage called for under this Lease is
insufficient, Tenant shall provide at its own expense such additional insurance
as Tenant deems adequate.
(d) Tenant hereby releases Landlord from any and all liability from or to
Tenant of every kind and nature which may result from the perils of fire,
lightning or extended coverage perils and which may cause damage to any property
of Tenant within the Building or the Project. Insurance carried by Tenant
against loss or damage by fire or other casualty shall contain a clause whereby
the insurer waives its right of subrogation against Landlord. Tenant shall also
obtain and furnish evidence to Landlord of the waiver by Tenant's worker's
compensation carrier of any right of subrogation against Landlord.
Tenant and Landlord each hereby release and relieve the other, and waive
their entire right of recovery against the other for loss or damage arising out
of or incident to the perils insured against under Section 21 which perils occur
in, on or about the Premises, whether due to the negligence of Landlord or
Tenant or their agents, employees, contractors and/or invitees. Tenant and
Landlord shall, upon obtaining the policies of insurance required hereunder,
give notice to the insurance carrier or carriers that the foregoing mutual
waiver of subrogation is contained in this Lease.
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22. DAMAGE OR DESTRUCTION
(a) In the event the Building is damaged by fire or other perils covered
by Landlord's insurance, Landlord shall:
(i) In the event of total destruction, at the Landlord's option, as
soon as reasonably possible thereafter, commence repair, reconstruction and
restoration of the Building and/or the Premises and prosecute the same
diligently to completion, in which event this Lease shall remain in full force
and effect; or within ninety (90) days after such damage, elect not to so
repair, reconstruct or restore the Building and/or the Premises, in which event
this Lease shall terminate. In either event, Landlord shall give Tenant written
notice of its intention within said ninety (90) day period. In the event
Landlord elects not the restore the Building and/or the Premises, this Lease
shall be deemed to have terminated as of the date of such total destruction.
(ii) In the event of a partial destruction of the Building and/or
Premises, to an extent not exceeding twenty five percent (25%) of the full value
thereof, and if the damage thereto is such that the Building and/or the Premises
may be repaired, reconstructed or restored within a period of ninety (90) days
from the date of the happening of such casualty and if Landlord will receive
insurance proceeds sufficient to cover the costs of such repairs, then Landlord
shall commence and proceed diligently with the work of repair, reconstruction
and restoration and this Lease shall continue in full force and effect. If such
work or repair, reconstruction and restoration shall require a period longer
than ninety (90) days or exceeds twenty five percent (25%) of the full insurance
value thereof, or if said insurance proceeds will not be sufficient to cover the
cost of such repairs, then Landlord either may elect to so repair, reconstruct
or restore and the Lease shall continue in full force and effect or Landlord may
elect not to repair, reconstruct or restore and the Lease shall then terminate.
Under any of the conditions of this Subsection 22(a)(ii), Landlord shall give
written notice to Tenant of its intention within said ninety (90) day period. In
the event Landlord elects not to restore the Building and/or the Premises, this
Lease shall be deemed to have terminated as of the date of such partial
destruction.
(b) Upon any termination of this Lease under any of the provisions of
this Section 22, the parties shall be released without further obligation to the
other from the date possession of the Premises is surrendered to Landlord except
for items which have therefore accrued and are then unpaid.
(c) In the event of repair, reconstruction and restoration by Landlord
as herein provided, the Rental payable under this Lease shall be abated
proportionally with the degree to which Tenant's use of the Premises is impaired
during the period of such repair, reconstruction or restoration. Tenant shall
not be entitled to any compensation or damages for loss in the use of the whole
or any part of the Premises and/or any inconvenience or annoyance occasioned by
such damage, repair, reconstruction or restoration.
(d) Tenant shall not be released from any of its obligations under this
Lease except to the extent and upon the conditions expressly stated in this
Section 22. Notwithstanding anything to the contrary contained in this
Section 22, if Landlord is delayed or prevented from repairing or restoring the
damaged Premises within one hundred eighty (180) days after the occurrence of
such damage or destruction by reason of acts of God, war, governmental
restrictions, inability to procure the necessary labor or materials, or other
cause beyond the control of Landlord, Landlord shall be relieved of its
obligation to make such repairs or restoration and Tenant shall be released from
its obligations under this Lease as of the end of said one hundred eighty (180)
day period.
(e) If damage is due to any cause other than fire or other peril covered
by extended coverage insurance, Landlord may elect to terminate this Lease.
(f) If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall be obligated to make repair or restoration only of
those portions of the Building and the Premises which were originally provided
at Landlord's expense, and the repair and restoration of items not provided at
Landlord's expense shall be the obligation of Tenant.
(g) Notwithstanding anything to the contrary contained in this
Section 22, Landlord shall not have any obligation whatsoever to repair,
reconstruct or restore the Premises when the damage resulting from any casualty
covered under this Section 22 occurs during the last twenty four (24) months of
the term of this Lease or any extension hereof.
(h) If the then existing laws do not permit the restoration described
herein, Landlord may terminate this Lease by giving written notice to Tenant, in
which event this Lease shall terminate thirty (30) days following Tenant's
receipt of such notice.
(i) The provisions of Sections 1932(2) and 1933(4) of the California
Civil Code, which permit termination of a lease upon destruction of the Leased
Premises, are hereby waived by Tenant and the provisions of this Section shall
govern in cases of such destruction.
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23. EMINENT DOMAIN
(a) In case all of the Premises, or such part thereof as shall
substantially interfere with Tenant's use and occupancy thereof, shall be taken
for any public or quasi-public purpose by any lawful power or authority by
exercise of the right of appropriation, condemnation or eminent domain, or sold
to prevent such taking, either party shall have the right to terminate this
Lease effective as of the date possession is required to be surrendered to said
authority by giving thirty (30) days written notice to the other party. The
Annual Basic Rent shall be prorated to the termination date. If this Lease
continues in force upon such partial taking, the Annual Basic Rent and Tenant's
Proportionate Share shall be equitably adjusted according to the remaining
Rentable Area of the Premises and Project. Landlord shall restore the Premises
to substantially their same condition prior to such partial taking, (except with
respect to property originally installed at Tenant's sole cost and expense) and
a proportionate allowance shall be made to Tenant for the Rental corresponding
to the time during which, and to the part of the Premises of which, Tenant shall
be so deprived on account of such taking and restoration. In the event of any
taking, partial or whole, all of the proceeds of any award, judgment or
settlement payable by the condemning authority shall be the exclusive property
of Landlord, and Tenant hereby assigns to landlord all of its right, title and
interest in any award, judgment or settlement from such condemning authority.
Tenant, however, shall have the right, to the extent that the right shall not
reduce or prejudice Landlord's award, to claim from the condemning authority,
but not from Landlord, such compensation as may be recoverable by Tenant in its
own right for relocation expenses and damage to Tenant's personal property.
(b) No temporary taking of the Premises and/or of Tenant's rights therein
or under this Lease shall terminate this Lease or give Tenant any right to
abatement of Rental hereunder, any award made to Tenant by reason of any such
temporary taking shall belong entirely to Tenant and Landlord shall not be
entitled to share therein. A temporary taking shall be deemed to be taking of
the use or occupancy of the Premises for a period of not to exceed one hundred
eighty (180) days.
(c) In the event there shall be a taking of the parking area such that
Landlord can no longer comply with the terms of this Lease, Landlord may
substitute therefor reasonably equivalent parking in a location reasonably close
to the Premises; provided that if landlord fails to make such substitution
within one hundred eighty (180) days following such taking. Tenant may, at its
option, terminate this Lease by notice to Landlord. If this Lease is not so
terminated by Tenant, there shall be no reduction, change or abatement of any
Rental or other charge payable by Tenant hereunder and this Lease shall continue
in full force and effect.
24. DEFAULTS AND REMEDIES
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
(i) The vacation or abandonment of the Premises by Tenant.
Abandonment is herein defined to include, but is not limited to, any absence by
Tenant from the Premises for five (5) business days or longer while in default
of any provision of this Lease.
(ii) The failure by Tenant to make any payment of Annual Basic Rent or
Additional Rental or any other payment required to be made by Tenant hereunder,
as and when due, where such failure shall continue for a period of three (3)
business days after receipt of written notice thereof by Tenants; provided
however, that any such notice shall be in lieu of and not in addition to, any
notice required under California Code of Civil Procedure Section 1161 regarding
unlawful detainer actions.
(iii) The failure by Tenant, as may be determined by Landlord, to
observe or perform any of the express or implied non-monetary covenants or
provisions of this Lease to be observed or preformed by Tenant, other than as
specified in Subsection 24(a)(i) or (ii) above, where such failure shall
continue for a period of ten (10) days after written notice thereof from
Landlord to Tenant. Any such notice shall be in lieu of, and not in addition to,
any notice required under California Code of Civil Procedure Section 1161
regarding unlawful detainer actions. If the nature of Tenant's default is such
that more than ten (10) days are reasonably required for its cure, then Tenant
shall not be deemed to be in default if Tenant shall commence such cure within
said ten (10) day period and thereafter diligently prosecute such cure to
completion, which completion shall occur not later than sixty (60) days from the
date of such notice from Landlord.
(iv) (1) The making by Tenant of any general assignment for the
benefit of creditors: (2) the filing by or against Tenant of a petition for
relief under the Federal Bankruptcy Code (unless in the case of a petition filed
against Tenant, the same is dismissed within thirty (30) days): (3) the
appointment of a trustee or receiver to take possession of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where possession is not restored to Tenant within thirty (30) days: or (4) the
attachment, execution or other judicial seizure of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease where such
seizure is not discharged within thirty (30) days.
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(b) In the event of any such default by Tenant, in addition to any other
remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder. In
the event that Landlord shall elect to so terminate this Lease then Landlord may
recover from Tenant:
(i) the worth at the time of award of any unpaid Rental which has
been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid Rental which would have been earned after termination until the time
of award exceeds the amount of such Rental loss that Tenant proves could have
been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the unpaid
Rental for the balance of the term after the time of award exceeds the amount of
such Rental loss that Tenant proves could be reasonably avoided; plus
(iv) if Tenant shall fail to take possession of the Premises or fail
to commence the payment of monthly Rental payments as herein required, or if
Landlord terminates the Lease or terminates Tenant's right to possession of the
Premises by any lawful means, due to Tenant's default or breach of the Lease
or the covenants and obligations of Tenant, Landlord shall have the right,
without affecting any of its other rights under this Lease, to recover from
Tenant all broker commissions and fees, if any, paid by Landlord in connection
with this Lease; plus
(v) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom.
As used in Subsection 24(b)(i) and (ii) above the "worth at the time of
award" is computed by allowing interest at a rate equal to two percent (2%) in
excess of the "prime rate" of the Bank of America N.T. & S.A. as of the time of
award, not to exceed, however, the maximum rate permitted by law. As used in
Subsection 24(b)(iii) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).
(c) In the event of any such default by Tenant, Landlord shall also have
the right, with or without terminating this Lease, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant. No re-entry or taking possession of the Premises by Landlord pursuant
to this Section 24(c) shall be construed as an election to terminate this lease
unless a written notice of such intention is given to Tenant or unless the
termination thereof is decreed by a court of competent jurisdiction; provided,
however, that Landlord may, at any time thereafter, elect to terminate this
Lease for such previous and uncured breach by notifying Tenant in writing that
Tenant's right to possession of the Premises has been terminated.
(d) Landlord shall also have the remedy described in California Civil Code
Section 1951.4 (Landlord may continue Lease in effect after Tenant's breach and
abandonment and recover Rental as it becomes due, if Tenant has right to sublet
or assign, subject only to reasonable limitations).
(e) All rights, options and remedies of Landlord contained in this Lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Landlord shall have the right to pursue any or all
of such remedies or any other remedy or relief which may be provided by law,
whether or not stated in this Lease. No waiver of any default of Tenant
hereunder shall be implied from any acceptance by Landlord or any Rental or
other payments due hereunder or any omission by landlord to take any action on
account of such default if such default persists or is repeated, and no express
waiver shall affect defaults other than as specified in said waiver. The
consent or approval of Landlord to or of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to waive or render unnecessary
Landlord's consent or approval to or of any subsequent similar acts by Tenant.
(f) Nothing in this Section shall be deemed to affect Tenant's indemnity
of Landlord for liability or liabilities based upon occurrences prior to the
termination of this Lease for personal injuries or property damage under the
indemnification clause or clauses contained in this Lease. Such covenants of
indemnification shall survive the termination of this Lease.
25. GOVERNMENT ENERGY OR UTILITY CONTROLS
In the event of imposition of federal, state, or local government controls,
rules, regulations, or restrictions on the use of consumption of energy or
water or other utilities during the Term, both Landlord and Tenant shall be
bound thereby. Landlord shall have the right to enforce compliance therewith
including the right of entry into the Premises to effect compliance. Should any
government agency or subdivision thereof impose a tax or surcharge of any kind
on, against, or with respect to the use or consumption of energy, water or
other utilities or parking areas or the number of parking spaces in the Project,
this tax or surcharge shall be included as a Direct Expense
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under Section 4 (a) (iii). If any governmental agency or subdivision thereof
imposes any restrictions or regulations on the use of vehicles by tenants in the
Project and/or by their employees, contractors and invitees. Tenant shall at no
cost to Landlord cooperate with and abide by those restrictions.
26. LIMITATION ON LIABILITY
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach or default hereunder by Landlord:
(a) The sole and exclusive remedy shall be against the Landlord's interest
in the Building:
(b) No partner of Landlord, either general or limited, shall be sued or
named as a party in any suit or action (except as may be necessary to secure
jurisdiction of the partnership);
(c) No partner of Landlord, either general or limited, shall be required
to answer or otherwise plead to any service of process;
(d) No judgment will be taken against any partner of Landlord, either
general or limited;
(e) Any judgment taken against any partner of Landlord may be vacated and
set aside at any time nune pro tune;
(f) No writ of execution will ever be levied against the assets of any
partner of Landlord, either general or limited; and
(g) These covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
27. TENANT IMPROVEMENTS
(Intentionally Omitted)
See Section 32 hereof.
28. LANDLORD'S RESERVED RIGHTS.
Provided Landlord does not unreasonably interfere with Tenant's use of the
Premises, Landlord reserves the right to use the exterior demising walls of the
Premises and the area between the finished ceiling of the Premises and the slab
of the Building floor or roof thereabove and between the finished floor of the
Premises and the foundation or finished ceiling of the portion of the Building
therebelow together with the right to locate or relocate (both vertically and
horizontally), install, use, maintain, repair, replace pipes, utility lines,
ducts, conduits, flues, refrigerant lines, drains, sprinkler mains and valves,
access panels, wires and apportenant meters and equipment included in the
Premises or outside the Premises; change the boundary lines of the Project.
29. ASSIGNMENT AND SUBLETTING
Except as set forth in this Section 29, Tenant agrees for itself and its
permitted successors and assigns that it will not (a) assign or otherwise
transfer, mortgage or otherwise encumber this Lease or any of its rights
hereunder; (b) sublet the Premises or any part thereof or permit the occupancy
or use of the Premises or any part thereof by any person other than Tenant;
and/or (c) permit the assignment or other transfer of this Lease or any of
Tenant's rights hereunder by operation of law (each of the events referred to in
the foregoing clauses [a], [b] and [c] being hereinafter referred to as a
"Transfer"), without the prior written consent of Landlord in each instance
first obtained, which consent shall not be unreasonably denied, delayed, or
withheld, and any consent given shall not constitute a consent to any subsequent
Transfer. If Tenant is a partnership any change in the makeup of the
partnership, whether voluntary or involuntary, which results in an ownership
interest in the partnership of more than fifty percent (50%) being held by
parties who were not partners as of the commencement of this Lease, or the
dissolution of the partnership, shall be deemed a Transfer. Any attempt to
Transfer without Landlord's
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consent shall not null and void and shall not confer any rights upon any
purported transferee, assignee, mortgagee, sublessee, or occupant. No Transfer,
regardless of whether Landlord's consent has been granted or withheld, shall be
deemed to release Tenant from any of its obligations hereunder or to alter,
impair or release the obligations of any person guaranteeing the obligations of
Tenant hereunder.
Not withstanding the foregoing, Landlord's consent shall not be deemed to
be unreasonably withheld if consent is withheld for failure to satisfy each of
the following conditions: (a) Tenant shall remain fully liable during the
unexpired term of this Lease; (b) any such assignment, sublease or transfer
shall be subject to all of the terms, covenants and conditions of this Lease;
(c) such assignee, sublessee, or transferee shall expressly assume the
obligations of Tenant under the Lease by a document reasonably satisfactory to
Landlord; (d) the assignee, sublessee or transferee shall be at least as credit
worthy as is Tenant as of the date of this Lease; and (e) the assignee,
sublessee or transferee's proposed use of the Premises shall be substantially
equivalent to Tenant's use of the Premises.
Notwithstanding anything contained in this section, in the event that, at
any time during the Term, Tenant desires to transfer this Lease in whole or in
part, by operation of law or otherwise, Tenant shall submit to Landlord in
writing, in the form and content acceptable to Landlord in Landlord's sole
discretion (a) the name and address of the proposed subtenant or assignee; (b) a
reasonably detailed statement of the proposed subtentant's or assignee's
business; (c) reasonably detailed financial references and information
concerning the financial condition of the proposed subtenant or assignee
covering such time periods as requested by Landlord; and (d) a copy of the
proposed sublease or assignment.
Tenant shall deliver to Landlord, within thirty (30) days after Landlord's
written consent has been received, (a) a duplicate original sublease, duly
executed by Tenant and the subtenant, or instrument of assignment duly executed
by Tenant, as the case may be, in form and substance as approved by Landlord and
(b) in case of an assignment, as instrument in form and substance as approved by
Landlord, duly executed by the assignee and the Tenant, in which such assignee
shall agree to assume, observe, perform and to be personally bound by, all of
Tenant's obligations under this Lease.
Any sums or other economic consideration received by Tenant as a result of
subleasing or assignment, however demonstrated under the assignment or sublease
which exceed in the aggregate (i) the total sums which Tenant is obligated to
pay to Landlord is under this Lease (prorated to reflect obligations allowable
to any portion of the Premises subleased) plus (ii) any real estate brokerage
commissions or fees payable in connection with such assignment or subleasing and
provided that Tenant is not in default under any other term or condition of this
Lease shall be paid to Tenant.
MISCELLANEOUS PROVISIONS
30.1 ATTORNEYS' FEES
(a) If Landlord shall bring suit for possession of the Premises, for
the recovery of any sum due under this Lease, or because of the breach of any
provision of this Lease, or for any other relief against Tenant hereunder, or in
the event of any other litigation between the parties with respect to this
Lease, then all costs and expenses, including reasonable attorneys' fees,
incurred by the prevailing party therein shall be paid by the other party, which
obligation on the part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment.
(b) If either party (the "Named Party") is named as a defendant in any
action arising out of a matter with respect to which the other party (the "Other
Party") is obligated to indemnify the Named Party pursuant to the terms of this
Lease, the Other Party shall pay to the Named Party its costs and expenses
incurred in such suit, including reasonable attorneys' fees.
30.2 CONFIDENTIALITY
Tenant acknowledges and agrees that the terms of this Lease are
confidential and constitute proprietary information of Landlord. Tenant agrees
that it, and its partners, directors, employees and attorneys shall not disclose
the terms and conditions of this Lease to any other person (except disclosures
as required by regulations) without the prior written consent of Landlord;
provided, however, that Tenant may disclose the terms hereof to the independent
accountants who audit its financial statements, or as otherwise required in the
ordinary course of Tenant's business. It is understood and agreed that damages
would be an inadequate remedy for the breach of this provision by Tenant, and
Landlord shall have the right to specific performance of this provision and to
injunctive relief to prevent its breach or continued breach.
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30.3 DEFINITION OF LANDLORD
The term "Landlord," as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean
and include only the owner or owners, at the time in question, of the fee title
of the Premises or the lessees under any ground lease, if any. In the event of
any transfer, assignment or other conveyance or transfers of any such title.
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall be automatically freed and relieved from and after the
date of such transfer, assignment or conveyance of all liability as respects the
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed. Without further agreement, the transferee
of such titles shall be deemed to have assumed and agreed to observe and perform
any and all obligations of Landlord hereunder, during its ownership of the
Premises. Landlord may transfer its interest in the Premises without the consent
of Tenant and such transfer or subsequent transfer shall not be deemed a
violation on Landlord's part of any of the terms and conditions of this Lease.
30.4 ESTOPPEL CERTIFICATE
(a) Within ten (10) days following any written request which Landlord may
make from time to time, Tenant shall execute and deliver to Landlord its most
recent quarterly financial statement of Tenant in a form acceptable to Landlord
(including both a balance sheet and an income statement), together with a
written statement certifying:
(i) The date of commencement of this Lease;
(ii) The fact that this Lease is unmodified and in full force and
effect (or, if there have been modifications hereto, that this Lease is in full
force and effect, and stating the date and nature of such modifications);
(iii) The date to which the Rental and other sums payable under this
Lease have been paid;
(iv) That there are no current defaults under this Lease by either
Landlord or Tenant except as specified in Tenant's statement;
(v) That Tenant has accepted possession of the Premises; and
(vi) Such other matters reasonably requested by Landlord.
Landlord and Tenant intend that any statement delivered pursuant to
this Section 30.4 may be relied upon by any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building of any interest therein.
(b) Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant:
(i) That this Lease is in full force and effect, without
modification except as may be represented by Landlord;
(ii) That there are no uncured defaults in Landlord's performance
and that Tenant has no rights of offset against Landlord; and
(iii) That no more than one (1) month's Rental has been paid in
advance.
(iv) That Tenant has accepted possession of the Premises.
30.5 EXAMINATION OF LEASE
Submission of this instrument for examination or signature by Tenant does
not constitute a reservation of or option for lease, and it is not effective as
a lease or otherwise until approved by the General Partner of Landlord and
execution by and delivery to both Landlord and Tenant.
30.6 FORCE MAJEURE
Any prevention, delay or stoppage of work to be performed by Landlord or
Tenant which is due to strikes, labor disputes, inability to obtain labor,
materials, equipment or reasonable substitutes therefor, acts of God,
governmental restrictions or regulations or controls, judicial orders, enemy or
hostile government actions, civil commotion, fire or other casualty, or other
causes beyond the reasonable
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control of the party obligated to perform hereunder, shall excuse performance of
the work by that party for a period equal to the duration of that prevention,
delay or stoppage, except where such performance is the payment of Basic Rent or
other charges to be paid by Tenant pursuant to the provisions of this Lease.
30.7 FUTURE PLANNING
Landlord may adopt any name it may select for the Building and/or the
Project, and Landlord reserves the right to change the name and/or address of
the Building and/or Project at any time. Tenant shall not use the name of the
Building, the Project or such development for any purpose other than as the
address of the business to be conducted by Tenant in the Premises, and Tenant
shall not acquire any property right in or to any name which contains said word
combination as a part thereof.
30.8 GOVERNING LAW
This Lease shall be construed and enforced in accordance with the laws of
the State of California. The language in all parts of this Lease shall in all
cases be construed as a whole according to its fair meaning and not strictly for
or against either Landlord or Tenant.
30.9 GUARANTY
(Intentionally Omitted).
30.10 IDENTIFICATION OF TENANT
If Tenant is a corporation or partnership, each individual executing this
Lease on behalf of the corporation or partnership represents and warrants that
he or she is duly authorized to execute and deliver this Lease on behalf of the
corporation or partnership, and that this Lease is binding upon the corporation
or partnership. If Tenant is a corporation, the person executing this Lease on
behalf of Tenant hereby covenants and warrants that (a) Tenant is a duly
qualified corporation and all steps have been taken prior to the date hereof to
qualify Tenant to do business in the State where the Project is situated, (b)
all franchise and corporate taxes have been paid to date.
30.11 MODIFICATION FOR LENDER
If, in connection with obtaining construction, interim or permanent
financing for the Building or the Building, the lender shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
30.12 MORTGAGE PROTECTION
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgage covering the Premises whose address shall have been furnished to
Tenant, and shall offer such beneficiary, or mortgagee a reasonable opportunity
to cure the default, including time to obtain possession of the Premises by
power of sale or a judicial foreclosure, if such should prove necessary to
effect a cure.
30.13 PARKING
The use by Tenant, its employees and invitees, of the parking facilities of
the Building shall be subject to such other agreement between Landlord and
Tenant as may hereinafter be established.
Nothing contained herein shall be deemed to create liability upon Landlord
for any damage to motor vehicles of customers or employees or from loss of
property from within such motor vehicles.
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30.14 PERFORMANCE BY TENANT
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rental. If Tenant shall fail to perform any
other act on its part to be performed hereunder, and such failure shall continue
for ten (10) days after notice thereof by Landlord, Landlord may, without
waiving or releasing Tenant from obligations of Tenant, but shall not be
obligated to, make any such payment or perform any such other act to be made or
performed by Tenant (unless there is a reasonable likelihood of imminent harm to
person or property as a result of Tenant's failure, in which event Landlord may
act immediately). All sums so paid by Landlord and all necessary incidental
costs together with interest thereon at the maximum rate permissible by law,
from the date of such payment by Landlord, shall be payable to Landlord on
demand. Tenant covenants to pay any such sums, and Landlord shall have (in
addition to any other right or remedy of Landlord) all rights and remedies in
the event of the non-payment thereby Tenant as are set forth in Section 24
hereof.
30.15 PRIOR AGREEMENT/AMENDMENTS
This Lease contains all of the Agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No provisions of this Lease may be amended or added in except by an
agreement in writing signed by the parties hereto or their respective successors
in interest.
30.16 QUIET ENJOYMENT
Upon Tenant paying the Rental required to be paid under this Lease, and
paying all other charges and performing and/or complying with all terms and
conditions contained herein to be performed or complied with by Tenant, Tenant
shall be entitled to the peaceful and quiet enjoyment of the Premises during the
term of this Lease subject to the terms of this Lease and to any mortgage, lease
or other agreement to which this Lease may subordinate.
30.17 RECORDING
Neither Landlord not Tenant shall record this Lease nor a short form
memorandum thereof without the consent of the other.
30.18 RIDERS
Clauses, plats and riders, if any signed by Landlord and Tenant and affixed
in this Lease are a part hereof.
30.19 RIGHT TO SHOW PREMISES
During the last one hundred twenty (120) days of the Term, Landlord shall
have the right to enter upon the Premises to show same to prospective tenants
and to post appropriate "for rent" signs. Landlord shall have the right to enter
upon the Premises at any time during the term to show the same to prospective
purchasers of all or any portion of the Project.
30.20 RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the "Rules and
Regulations," identified in Section 34 hereof, and all reasonable and
nondiscriminatory modifications thereof and additions thereto from time to time
put into effect by Landlord.
30.21 SEVERABILITY
Any provision of this Lease which shall prove to be invalid, void or
illegal in no way affects, impairs or invalidates any other provision hereof,
and such other provisions shall remain in full force and effect.
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30.22 SIGNS
Landlord may affix a sign (restricted solely to Tenant's name as set
forth in Item 1 of the Basic Lease Provisions or such other name as may be
consented to in advance in writing, by Landlord), to the exterior surface
entryway of the Premises. Except with the prior written approval of Landlord,
which approval may be withheld in Landlord's sole discretion. Tenant shall not
place or allow to be placed, erected or maintained any sign, decal, placard
name, insignia, trade name, description, flashing, moving or hanging lettering,
or any other descriptive words or advertising matter of any kind or description
(herein collectively, "sign" or "signs") on any exterior door, wall, window or
roof of the Premises or of the Building, or on the glass of any window or door
of the Building, or on any sidewalk or other location outside the Building, or
within any entrance to the Premises. If Tenant places or causes to be placed or
maintained any of the foregoing, the same may be removed by Landlord at Tenant's
expense without notice and without such removal constituting a breach of this
Lease or entitling Tenant to claim damages on account thereof.
30.23 SUBORDINATION
Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, and at the election of
Landlord or any mortgagee with a lien on the Building, or any ground Lessor with
respect to the Building, this Lease shall be subject and subordinate at all
times to:
(a) All ground Leases or underlying leases which may now exist or
hereafter be executed affecting the Building or the land upon which the Building
is situated or both, and
(b) The lien of any mortgage or deed of trust which may now exist or
hereafter be executed in any amount for which the Building, land, ground leases,
or Landlord's interest or estate in any of said items is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to
subordinate or cause to be subordinated any such ground leases or underlying
leases or any such liens to this Lease. In the event that any ground lease or
underlying lease terminates for any reason or any mortgage or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant
shall, notwithstanding any subordination, attorn and become the Tenant of the
successor in interest to Landlord. Tenant covenants and agrees to execute and
deliver, upon demand by Landlord, and in the form reasonably requested by
Landlord, any additional documents evidencing the priority or subordination of
this Lease with respect to any such ground leases or underlying leases or the
lien of any such mortgage or deed of trust. Any subordination or atornement by
Tenant hereunder shall entitle Tenant to receive a non-disturbance agreement
from the Landlord's successor in interest, which terms and provisions shall
comply with the provisions of this Lease.
30.24 SUCCESSORS AND ASSIGNS
Except as otherwise provided in this Lease, all of the covenants,
conditions and provisions of this Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
30.25 SURRENDER OF PREMISES
The voluntary or other surrender of the Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of the
Landlord, operate as an assignment to it of any or all subleases or subtenancies
and all fixtures located within the Premises.
Tenant, on the expiration date, shall peaceably surrender the Premises
to Landlord in broom clean condition and in as good condition as when Tenant
took possession, except for (a) reasonable wear and tear, (b) loss by fire or
other casualty, and (c) loss by condemnation. Tenant shall, on Landlord's
request, remove Tenant's property on or before the expiration date and promptly
repair all damage to the Premises or Building caused by such removal.
If Tenant shall abandon or surrender the Premises, or be dispossessed
by process of law, or otherwise, after notice to Tenant in accordance with
California Law, any of Tenant's property left on the Premises shall be deemed to
be abandoned and, at Landlord's option, Landlord may treat such property in
accordance with law. If Landlord elects to remove all or any part of Tenant's
property, the cost of removal, including repairing any damage to the Premises or
Building caused by that removal, shall be paid by Tenant. On the Expiration
Date Tenant shall surrender all keys to the Premises.
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30.26 TERMS AND HEADINGS
The words "Landlord" and "Tenant" as used herein shall include the plural
as well as the singular. Words used in any gender include other genders. The
Section headings of this Lease are not a part of this Lease and shall have no
effect upon the construction or interpretation of any part hereof.
30.27 TIME
Time is of the essence with respect to the performance of every provision
of this Lease in which time or performance is a factor, provided, however,
either party shall be excused for any delays or defaults by that party in the
performance of this Lease unavoidably caused by the act of the other, the act of
any agent of the other, the act of any governmental authority, the act of any
public enemy, acts of God, the elements, war, war defense conditions,
litigation, strikes, walkouts, or other causes beyond that party's control
(other than financial inability). Each party shall use reasonable diligence to
avoid any such delay or default and to resume performance under this Lease as
promptly as possible after any such delay or default.
30.28 WAIVER
The waiver by either party of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of any subsequent breach of
the same or any other term, covenant or condition herein contained, nor shall
any custom or practice which may grow up between the parties in the
administration of the term hereby be deemed a waiver of or in any way affect
the right of either party to insist upon the performance by the other party in
strict accordance with said terms. The subsequent acceptance of Rental hereunder
by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant
of any term, covenant or condition of this Lease, other than the failure of
Tenant to pay the particular Rental so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such Rental.
31. OPTION TO RENEW
Tenant is hereby granted the option to extend the term of this Lease for
two (2) five (5) year periods, hereinafter referred to a the "First Extended
Term" and the "Second Extended Term", respectively, by giving notice of exercise
of the option ("Option Notice") to Landlord at least six (6) months, but not
more than one (1) year, before the expiration of the Basic Term or the First
Extended Term, as the case may be; provided, however, that if Tenant is in
default on the date of giving any such Option Notice, or if any event has
occurred that but for the passage of time or the giving of notice, or both,
would constitute a material default, the Option Notice shall be totally
ineffective, and provided further, that if Tenant is in default or if any event
has occurred that but for the passage of time or the giving of notice, or both,
would constitute a default, on the date that the First Extended Term or the
Second Extended Term (collectively the "Extended Terms") would otherwise
commence, at Landlord's option, such Extended Term shall not commence and this
Lease shall expire at the end of the Basic Term, or at the end of the First
Extended Term, as the case may be. In the event Tenant gives notice of exercise
of option, which notice is ineffective for any reason stated herein, Landlord
shall provide Tenant with prompt written notice of rejection of such notice of
exercise of option. Tenant shall have no other right to extend the term beyond
the Second Extended Term described herein. During the Extended Terms all of the
terms and provisions contained herein shall apply except that commencing at the
beginning of each Extended Term, the Annual Basic Rent shall be increased to an
amount equal to ninety-five percent (95%) of the fair market Rental ("FMR") for
the Premises unless Tenant elects to arbitrate the fair market rental, as set
forth herein. Landlord shall notify Tenant of the FMR within sixty (60) days
after receipt of Tenant's Option Notice. Tenant shall then have sixty (60) days
following Tenant's receipt of Landlord's determination of the FMR within which
to confirm or to revoke its election to renew the Lease. If Tenant fails to
revoke its election, Tenant's consent to FMR shall be deemed given and the Lease
shall be deemed extended. If Tenant elects arbitrate the issue of FMR, such
dispute shall be resolved by means of banding arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association.
Arbitration shall be conducted by a sole M.A.I. appraiser appointed by the
American Arbitration Association. Landlord and Tenant shall split the cost of
arbitration. Thereafter, Rental shall be increased annually (the "Extended Term
Adjustment Date") based upon increases (if any) in the Index, but in no event
shall the increase be less than two percent (2%) or greater than six percent
(6%). The most recent Index in publication prior to the Extended Term, shall be
the Base Index. On each Extended Term Adjustment Date, the Annual Rental shall
be increased by a percentage equal to the percentage increase, if any, in the
most recent Index in publication prior to the Extended Term Adjustment Date (the
"Comparison Index") over the Base Index ("Adjusted Annual Rental"). When the
Adjusted Annual Rental payable as of each Extended Term Adjustment Date is
determined, Landlord shall give Tenant written notice of such Adjusted Annual
Rental and the manner in which it was computed.
-23-
<PAGE>
32. CONSTRUCTION
(a) Tenant shall submit plans and specifications for the installation of a
new roof and HVAC system at the premises and shall select the contractors to
perform such work, which will be subject to Landlord's approval. Landlord shall
contract with the contractors and will pay for the roof and HVAC installation up
to a combined total expenditure of $150,000. Any cost in excess of $150,000
shall be borne by Tenant.
(b) Landlord and Tenant agree that Tenant shall have the right to expand
the existing premises by approximately 20,000 feet. If Tenant makes such
election, Landlord and Tenant shall confer and negotiate with respect to the
terms and conditions of such expansion.
33. RENT RETROACTIVE TO DECEMBER 1, 1994
Tenant has been paying rent at the rate of $17,061.20 from 1/1/94 to
12/31/94 and $18,397.10 from 1/1/95 to 10/31/95 per month, which is in excess of
the rent provided for this Lease, which is to be effective December 1, 1994.
Tenant shall receive credit for the full amount of the excess rent paid from
December 1, 1994 through the present, and such credit shall be applied against
the next rent payments that become due.
34. RULES AND REGULATIONS
Neither Tenant nor any of Tenant's Employees shall at any time bring or
keep within the Premises or the Building any flammable, combustible or explosive
fluid, chemical substance, or material, except to the extent that the same may
be required for the use expressly permitted in the Lease for the Premises. To
the extent that flammable, combustible or explosive fluids, chemical substances
or materials are maintained by Tenant within the Premises, the quantities
maintained shall be reasonably limited and the manner of storage shall be that
which is appropriate under the circumstances to maintain the safety and well
being of the Premises, the Building and any individuals occupying either the
Premises or the Building. The manner of storage shall be subject to Landlord's
reasonable approval. Electric space heaters shall not be used at any time by
Tenant.
Tenant shall faithfully observe and comply with the terms of any and all
covenants, conditions and restrictions recorded against the Property.
The term Tenant shall be defined to include and encompass Tenant's
Employees and Tenant's contractors.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
By execution hereof, each signatory certifies that this document has been
approved by the party for which he is signing, and that he is duly authorized to
execute this document on behalf of such party.
LANDLORD: RANCON INCOME FUND I,
a California limited partnership
Rancon Income Partners I, L.P.
----------------------------------------------------
Rancon Income Partners I, L.P.,
General Partner
By: Glenborough Inland Realty Corporation
a California Corporation,
Its Attorney in Fact
By: /s/ Sandra L. Boyle
------------------------------
Its: Senior Vice President
-----------------------------
-24-
<PAGE>
TENANT: WAKEFIELD ENGINEERING, INC.
a Delaware corporation
By: /s/ Harry Chase
------------------------------------------
President
Its:
-----------------------------------------
[Title]
By:
------------------------------------------
[Type Name]
Its:
-----------------------------------------
[Title]
PLEASE NOTE: If Tenant is a corporation, the authorized officers must
sign on behalf of the corporation and indicate the capacity in which they are
signing. The Lease must be executed by the president or vice-president and the
secretary or assistant secretary, unless the bylaws or a resolution of the board
of directors shall otherwise provide, in which event the bylaws or a certified
copy of the resolution, as the case may be, must be attached to this Lease.
-25-
<PAGE>
[PLOT PLAN APPEARS HERE]
27901 FRONT STREET
TEMECULA, CALIFORNIA
Exhibit A-1
<PAGE>
EXHIBIT "A"
27901 Front Street, Temecula, California, and adjacent vacant lot and described
as Lots 4 and 5 of Tract 3841 as shown by Map on file in Book 61, pages 75-76,
official records of Riverside County, California. Lot 4 consists of
approximately 67,518 square feet of land improved with a one-story concrete
tilt-up building containing approximately 25,000 square feet. Lot 5 is an
unimproved parcel consisting of approximately 54,014 square feet which provides
parking for and access to the loading dock of the building on lot 4.
Exhibit A-2
<PAGE>
EXHIBIT 11
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Year Ended
-------------------------------------
October 31,
----------------------- October 29,
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Shares:
Weighted average common shares outstanding 5,773,885 5,914,254 5,984,584
Net common shares issuable on exercise of
stock options 243,658 429,350 620,563
---------- ---------- ----------
Weighted average common and common equivalent
shares outstanding 6,017,543 6,343,604 6,605,147
========== ========== ==========
Net income $ 317,000 $5,290,000 $3,748,000
========== ========== ==========
Per share amount $ 0.05 $ 0.83 $ 0.57
========== ========== ==========
</TABLE>
- --------------------------
(1) See Note 13 to the consolidated financial statements for further information
regarding the calculation of weighted average common and common equivalent
shares outstanding.
<PAGE>
EXHIBIT 23.1(A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this Form 10-
KSB.
/s/ Arthur Andersen LLP
Houston, Texas
November 16, 1995
<PAGE>
EXHIBIT 23.1(B)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report included in this Form 10-KSB, into the Company's Form
S-8 Registration Statements filed on January 29, 1987 (Reg. No. 33-11627);
September 28, 1987 (Reg. No. 33-17359); March 17, 1988 (Reg. No. 33-20706);
June 30, 1989 (Reg. No. 33-29636); and June 23, 1992 (Reg. No. 33-48663).
/s/ Arthur Andersen LLP
Houston, Texas
November 16, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS-OCTOBER 31, 1994 AND OCTOBER 29, 1995 AND CONSOLIDATED STATEMENTS
OF INCOME FOR THE YEARS ENDED OCTOBER 31, 1993 AND 1994 AND OCTOBER 29, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> OCT-31-1993 OCT-31-1994 OCT-29-1995
<PERIOD-START> NOV-01-1992 NOV-01-1993 NOV-01-1994
<PERIOD-END> OCT-31-1993 OCT-31-1994 OCT-29-1995
<CASH> 0 7,406 6,058
<SECURITIES> 0 937 0
<RECEIVABLES> 0 9,392 11,982
<ALLOWANCES> 0 111 277
<INVENTORY> 0 5,831 8,191
<CURRENT-ASSETS> 0 24,308 27,350
<PP&E> 0 4,274 10,930
<DEPRECIATION> 0 315 1,313
<TOTAL-ASSETS> 0 31,689 42,256
<CURRENT-LIABILITIES> 0 8,384 11,654
<BONDS> 0 3,556 9,093
0 0 0
0 0 0
<COMMON> 0 202 209
<OTHER-SE> 0 16,342 18,554
<TOTAL-LIABILITY-AND-EQUITY> 0 31,689 42,256
<SALES> 258 30,145 64,116
<TOTAL-REVENUES> 258 30,145 64,116
<CGS> 190 20,627 46,888
<TOTAL-COSTS> 190 20,627 46,888
<OTHER-EXPENSES> 59 7,246 13,050
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> 346 2,456 3,959
<INCOME-TAX> 118 (860) (141)
<INCOME-CONTINUING> 228 3,316 4,100
<DISCONTINUED> (22) 978 0
<EXTRAORDINARY> 111 0 0
<CHANGES> 0 0 0
<NET-INCOME> 317 5,290 3,748
<EPS-PRIMARY> .05 .83 .57
<EPS-DILUTED> 0 0 0
</TABLE>
