<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended July 31, 1996
---------------------------------------
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number: 0-13011
- -------------------------------
TNR TECHNICAL, INC.
---------------------------------------
(Exact name of Registrant as specified in its charter)
New York 11-2565202
------------------------------ ----------------------
(State of jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
301 Central Park Drive
Sanford, Florida 32771
- -------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (407) 321-3011
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
- -------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.02 Par Value
- -------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X. No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in part
III of this Form 10-K or any amendment to this Form 10-K [x].
As of September 16, 1996, the number of shares held by non-affiliates
was approximately 155,000 shares. Due to the limited market for the Company's
Common Stock, no value has been attributed to the shares held by
non-affiliates.
The number of shares outstanding of the issuer's Common Stock, as of
September 16, 1996 was 262,437.
<PAGE> 2
PART I
Item 1. Business
General
TNR Technical, Inc. (the "Company") was incorporated on October 4,
1979 under the laws of the State of New York. The Company designs, assembles
and markets high technology batteries, multi-cell battery packs and
rechargeable power supplies to a variety of industrial markets. The Company is
an authorized distributor for several major battery manufacturers, which
products are distributed nationally by Company and are sold at its retail
store. The Company's business is carried out at its facility in Sanford,
Florida.
Industrial and Distribution Programs
The Company is an authorized distributor of (1) nickel-cadmium and
sealed lead-acid batteries and (ii) lithium cells and batteries manufactured by
Saft America, Powersonic Battery, Varta Battery, Yuasa, Duracell, Renata, GP
Battery, Eveready Battery, Sony and Sanyo Energy. As an authorized distributor,
the Company purchases cells, assembles them into battery packs and maintains an
inventory for resale. The Company sells its battery cells and/or battery packs
to the industrial users and wholesalers without geographical limitation and on a
non-exclusive basis. The Company also designs and assembles battery packs to
customers' specifications. The Company's batteries supply portable power for
tools, instruments, medical equipment, communications equipment, photography,
radios and remote control airplanes, video recorders, lighting, toys and
cellular telephones. The Company's batteries supply standby power for electronic
equipment, computer memories, emergency lighting, fire and burglar alarms,
electronic cash registers, logic systems, medical instruments and communications
systems.
Sales under industrial and distribution programs accounted for
substantially all of the Company's total revenues during the Company's past
three fiscal years and no one customer accounted for 10% or more of the
Company's total revenues during these years except during fiscal 1994, one
customer accounted for approximately 13% of total revenues. At July 31, 1996
and 1995, the Company had no significant backlog.
Retail Program
The Company has a retail store consisting of approximately 300 square
feet in Sanford, Florida where the Company sells (i) nickel-cadmium and sealed
lead-acid batteries and (ii) lithium cells and batteries under the name "Your
Battery Store." In its retail store, the Company offers to consumers the same
products that it sells directly to the industrial users and wholesalers. The
Company promotes its retail store by advertising in the local yellow pages and
newspapers.
2
<PAGE> 3
Competition
There are numerous companies producing and marketing batteries which
compete with those sold by the Company, including larger companies, battery
manufacturers and companies with a wider range of products and greater
financial and technical resources than the Company.
It should be noted that the Company's products and proposed products
are technological in nature and that modern technology often progresses
rapidly. Accordingly, the Company's present and proposed products are subject
to the risk of obsolescence because of technological innovation by competitors.
Employees
At September 16, 1996, the Company had twenty employees which include
seven salespersons (including two executive officers), five clerical persons,
two warehouse and shipping personnel and six factory workers.
Item 2. Properties
The Company's executive office, sales, distribution assembly facility
and retail store is located at 301 Central Park Drive, Sanford, Florida 32771.
These facilities which consist of approximately 8,000 square feet of space, are
leased from RKW Holdings Ltd., a Florida Limited Partnership, controlled by
Wayne Thaw, an executive officer and director of the Company. The lease provides
for a term of ten years with a base annual rent of $59,800 in year one of the
term with annual increases of five percent over the preceding year's base rent.
The Company is also responsible for the payment of all sales, use and other
taxes related to the leased facilities. The Company owns production equipment,
primarily welding, soldering, testing, pneumatic and material handling
equipment, and inspection equipment which has been sufficient for its needs to
date.
Item 3. Legal Proceedings
There are no material legal proceedings to which the Company is a
party.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1996.
3
<PAGE> 4
PART II
Item 5. Market for Registrant's Securities and Related Stockholder
Matters.
(a) Principal Market and Stock Prices.
The Company's Common Stock may be quoted in the over-the-counter
market. The high and low bid prices of the Common Stock, as reported by
National Quotation Bureau, Incorporated are shown below for the Company's last
two fiscal years.
<TABLE>
<CAPTION>
High Low
-------- -------
<S> <C> <C>
Fiscal 1995
First Quarter $ 4.00 $ 1.50
Second Quarter $ 4.00 $ 3.75
Third Quarter $ 3.75 $ 3.25
Fourth Quarter $ 3.50 $ 3.00
Fiscal 1996
First Quarter $ 3.50 $ 3.25
Second Quarter $ 3.50 $ 3.25
Third Quarter $ 3.50 $ 3.00
Fourth Quarter $ 3.25 $ 3.00
</TABLE>
The foregoing quotations represent approximately inter-dealers
prices, without retail markup, markdown or commission and do not represent
actual transactions. Such quotations should not be viewed as necessarily
indicative of the price that could have been obtained on that date for a
substantial number of securities due to the limited market for the Company's
securities. On September 16, 1996, the last sale was 4-5/8.
The approximate number of holders of record of the Company's Common
Stock, as of September 16, 1996 was 1,575 as supplied by the Company's transfer
agent, American Stock Transfer Company, 40 Wall Street, New York, NY 10005.
No cash dividends have been paid by the Company on its Common Stock
and no such payment is anticipated in the foreseeable future.
4
<PAGE> 5
Item 6. SELECTED FINANCIAL DATA
The following selected financial data has been derived from the Company's
financial statements which have been examined by independent certified public
accountants, as indicated in their reports included elsewhere herein. Such
financial statements should be read in conjunction with the following financial
data.
STATEMENT OF OPERATIONS SUMMARY:
<TABLE>
<Options>
=============================================================================================================================
Year Ended Year Ended Year Ended Year Ended Year Ended
July 31, 1996 July 31, 1995 July 31, 1994 July 31, 1993 July 31, 1992
------------- ------------- ------------- ------------- -------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $3,792,537 $3,710,805 $3,585,872 $2,804,053 $2,385,209
- -----------------------------------------------------------------------------------------------------------------------------
Net income 132,398(1) 437,982(1) 148,238 129,963 101,069
- -----------------------------------------------------------------------------------------------------------------------------
Net income
per share .52 1.67 .56 .50 .39
- -----------------------------------------------------------------------------------------------------------------------------
Cash dividends -0- -0- -0- -0- -0-
=============================================================================================================================
BALANCE SHEET DATA:
=============================================================================================================================
July 31, 1996 July 31, 1995 July 31, 1994 July 31, 1993 July 31, 1992
------------- ------------- ------------- ------------- -------------
- -----------------------------------------------------------------------------------------------------------------------------
Working capital $1,569,635 $1,456,548 $1,272,929 $1,129,220 $ 993,387
- -----------------------------------------------------------------------------------------------------------------------------
Total Assets $1,997,399 $2,022,611 $1,532,215 $1,364,331 $1,226,389
- -----------------------------------------------------------------------------------------------------------------------------
Long-term debt (including
capital leases) -0- -0- -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------------------------
Total Shareholders' equity $1,889,814 $1,754,416 $1,316,434 $1,168,196 $1,038,233
=============================================================================================================================
</TABLE>
(1) Includes a credit for income taxes of $239,000. See "Note 6 in Notes to
Financial Statements."
5
<PAGE> 6
Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
Working capital amounted to $1,569,635 at July 31, 1996 as compared to
$1,456,548 at July 31, 1995 as compared to $1,272,929 at July 31, 1994. Cash and
short-term investments amounted to $774,570 at July 31, 1996 as compared to
$608,161 at July 31, 1995 as compared to $727,573 at July 31, 1994. As more
fully described in the "Statements of Cash Flows" included in the Company's
Financial Statements elsewhere herein, net cash provided by (used in) operating
activities for the fiscal years ended July 31, 1996, July 31, 1995 and July 31,
1994 were $242,858, ($83,021) and $51,533, respectively. During 1996, 1995 and
1994, the Company's net income contributed to cash flows from operating
activities. In 1996, cash flow from operating activities were increased
substantially by decreases in inventories partially offset by increases in
accounts receivable. In 1995 and 1994, cash flows from operating activities were
substantially reduced by increases in accounts receivable and inventories.
During 1996 net cash was provided by investing activities as a result of
reduction in short term investments partially offset by purchase of property and
equipment. During 1995 and 1994, net cash was used in investing activities to
increase short term investments and purchase property and equipment. During the
past three years, the Company did not have any external sources of financing.
During the past three years, the Company's liquidity needs has been
satisfied from internal sources including cash from operations and amounts
available from the Company's working capital. During fiscal 1997, Management
expects this trend to continue. There are no material commitments for capital
expenditures or any long-term credit arrangements as of July 31, 1996.
Results of Operations
Sales for 1996 increased by approximately $82,000 or 2% as compared to
fiscal 1995. Sales for fiscal 1995 increased by approximately $125,000 or 3% as
compared to fiscal 1994. The sales increases were due to increased demand for
the Company's products from the Company's existing client base and from new
customers. During fiscal 1994, one customer accounted for 13% of the Company's
revenues. The Company's gross margin fluctuated slightly over the past three
years primarily due to changes in product mix.
Operating (selling, general and administrative) expenses increased
during fiscal 1996 as compared to fiscal 1995 and for fiscal 1995 as compared
to fiscal 1994, substantially due to increases in administrative salaries and
bad debt expense. Operating expenses when expressed as a percentage of net
sales was 22.7%, 21.5%, and 21.2%, for fiscal 1996, fiscal 1995 and fiscal 1994,
respectively.
6
<PAGE> 7
During the past three years, the Company did not charge its operations
with any research and development costs.
Net income for fiscal 1996 was $135,398 as compared to $437,982, for
fiscal 1995 as compared to a net income for fiscal 1994 of $148,238. Net income
per share for fiscal 1996, fiscal 1995 and 1994 were $.52, $1.67 and $.56,
respectively. The substantial increase in net income for fiscal 1995 over fiscal
1994 was due to a $250,000 credit to income tax expense as a result of the
elimination of a valuation allowance with respect to existing deferred tax
assets as of July 31, 1995. See Note 6 to the financial statements included
elsewhere herein.
Management of TNR Technical, Inc. has received a number of comments
from its odd lot stockholders regarding the costs associated with any sale of
their odd lots. Further, Management would like to reduce TNR's expense of
maintaining mailings to odd lot holders. Accordingly, TNR will from time-to-time
privately purchase from odd lot holders of its common stock, such odd lots (i.e.
99 shares or less) from its stockholders of record on December 15, 1995 so long
as such purchases would not have the effect of reducing TNR's record holders to
500 or less. The purchase price to be paid will be based upon the closing asked
price on the NASD electronic bulletin board of TNR's Common Stock for the
preceding trading day. Stockholders will not be permitted to breakup their
stockholdings into odd lots and stockholders or their legal representatives must
affirm to TNR that the odd lot shares submitted for payment represent the
stockholder's entire holdings and that such holdings do not exceed 99 shares.
(This offer shall be open to all odd lot beneficial holders even those held in
street or nominee name so long as the proper representations can be obtained
satisfactory to TNR that the shares are odd lot shares, were owned by the
beneficial stockholder as of December 15, 1995 and represent such stockholder's
entire holdings of TNR). This offer will not be valid in those states or
jurisdictions where such offer or sale would be unlawful.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8, and an index thereto, appears at
pages F-1 through F-12 (inclusive) of this Report, which pages follow Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
In November 1995, the Company reported the death of Burton R. Abrams
CPA, 22 Julliard Drive, Plainview, New York 11803, the Company's certifying
accountant. Mr. Abrams was a sole practitioner. The Burton R. Abrams' firm was
terminated as a result of the death of Mr. Abrams. Burton R. Abrams' report on
the financial statements of the Company for the past two fiscal years ended July
31, 1995 and July 31, 1994 did not contain an adverse opinion or a disclaimer of
opinion, nor was it qualified or
7
<PAGE> 8
modified as to uncertainty, audit scope, or accounting principles.
During the Company's fiscal years ended July 31, 1995 and July 31, 1994
and during the period August 1, 1995 through November 20, 1995, there were no
disagreements between the Company and its former accountant on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure that if not resolved to the satisfaction of the former
accountant would have caused the former accountant to refer to the subject
matter of the disagreement in connection with the report. During the Company's
fiscal years ended July 31, 1995 and July 31, 1994 and during the period August
1, 1995 through November 20, 1995: (i) the accountant did not advise the Company
of the lack of internal controls necessary to develop reliable financial
statements; (ii) the accountant did not advise the Company that it could no
longer rely on representations of the Company's management or that it was
unwilling to be associated with the financial statements prepared by the
Company's management; (iii) the accountant did not advise the Company of the
need to significantly expand the scope of its audit or of the existence of
information that if further investigated could materially impact the fairness or
reliability of audited reports or financial statements or cause the accountant
to be unable to rely on management's representation; and (iv) the accountant did
not advise the Company of information that, in the opinion of the accountant,
materially impacted the fairness or reliability or a previously issued audit
report or underlying financial statement.
James, Parks, Tschopp & Whitcomb, P.A., was engaged by the Company on
November 20, 1995 as the Company's new certifying accountants to perform an
audit of the Company for its fiscal year ended July 31, 1996. During the fiscal
years ended July 31, 1995 and 1994 and during the period August 1, 1995 to the
date of engagement of James, Parks, Tschopp & Whitcomb, P.A., the Company did
not consult the firm of James, Parks, Tschopp & Whitcomb, P.A., regarding (i)
the application of accounting principles to a specified transaction, either
completed or proposed; (ii) the type of audit opinion that might be rendered on
the Company's financial statements; or (iii) any matter that was the subject of
a disagreement with the Company's former accountant or any other matter as
required under the Securities Act of 1933 as amended.
The financial statements of TNR Technical, Inc. as of July 31, 1996
and for the year then ended as listed in Item 8 were audited by James, Parks,
Tschopp and Whitcomb P.A. and include their report thereon dated August 30,
1996. The financial statements as of July 31, 1995 and for the two years then
ended also listed in Item 8 were audited by Burton R. Abrams, CPA, a sole
practitioner who died in November 1995. The Company's Form 10-K for the fiscal
year ended July 31, 1995 includes his report dated August 25, 1995 wherein Mr.
Abrams expressed an unqualified opinion on the financial statements of TNR
Technical, Inc. as of July 31, 1995 and for the two years then ended which he
manually executed. However, this report cannot be included herein without his
consent, and as a result of his death has not been included. Based upon the
audit of the financial statements of TNR Technical, Inc. as of July 31, 1996 and
the year then ended the firm of James, Parks, Tschopp and Whitcomb P.A. has
indicated that no matters have come to their attention which might have a
material effect on, or require disclosure in the financial statements reported
on previously by Mr. Abrams.
8
<PAGE> 9
TNR TECHNICAL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report -- July 31, 1996 1
Report of Independent Certified Public Accountant -- July 31, 1995 2
Balance Sheets -- July 31, 1996 and 1995 3
Statements of Operations -- Three years ended July 31, 1996 4
Statements of Stockholders' Equity -- Three years ended July 31, 1996 5
Statements of Cash Flows -- Three years ended July 31, 1996 6
Notes to Financial Statements 7
</TABLE>
<PAGE> 10
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
TNR Technical, Inc.:
We have audited the accompanying balance sheet of TNR Technical, Inc. as of
July 31, 1996, and the related statements of operations, shareholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides 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 TNR Technical, Inc. as of
July 31, 1996 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
August 30, 1996
F-1
<PAGE> 11
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The financial statements of TNR Technical, Inc. as of July 31, 1995 and for the
two years then ended were audited by Burton R. Abrams, CPA, a sole practitioner
who died in November 1995. The Company's Form 10-K for the fiscal year ended
July 31, 1995 includes his report dated August 25, 1995 wherein Mr. Abrams
expressed an unqualified opinion on the financial statements of TNR Technical,
Inc. as of July 31, 1995 and for the two years then ended which he manually
executed. However, his report cannot be included herein without his consent,
and as a result of his death has not been included. Based upon the audit of the
financial statements of TNR Technical, Inc. as of July 31, 1996 and the year
then ended, the firm of James, Parks, Tschopp and Whitcomb, P.A. has indicated
that no matters have come to their attention which might have a material effect
on, or require disclosure in, the financial statements reported on previously
by Mr. Abrams.
F-2
<PAGE> 12
TNR TECHNICAL, INC.
BALANCE SHEETS
July 31, 1996 and 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 426,320 100,298
Short-term investments (note 2) 348,250 507,863
Accounts receivable - trade, less allowance for doubtful
accounts of $20,000 in 1996 and $18,000 in 1995 442,181 380,302
Income taxes receivable 1,685 -
Inventories (note 3) 440,586 715,438
Prepaid expenses and other current assets 5,198 5,842
Deferred income taxes (note 6) 13,000 15,000
----------- ----------
Total current assets 1,677,220 1,724,743
Deferred income taxes (note 6) 197,000 235,000
Property and equipment, at cost, net of accumulated depreciation
and amortization (note 4) 109,796 56,877
Other assets:
Deposits 13,383 5,991
----------- -----------
Total assets $ 1,997,399 2,022,611
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 61,077 220,038
Accrued expenses 46,508 42,657
Income taxes payable - 5,500
----------- -----------
Total current liabilities 107,585 268,195
----------- -----------
Shareholders' equity:
Common stock - $.02 par value, authorized 500,000 shares;
issued and outstanding 301,581 shares (note 5) 6,032 6,032
Additional paid in capital 2,640,001 2,640,001
Accumulated deficit (561,949) (697,347)
----------- -----------
2,084,084 1,948,686
Less cost of treasury stock - 39,159 shares 194,270 194,270
----------- -----------
Total shareholders' equity 1,889,814 1,754,416
----------- -----------
Commitment (note 7) $ 1,997,399 2,022,611
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 13
TNR TECHNICAL, INC.
STATEMENTS OF OPERATIONS
Years ended July 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Net sales $3,792,537 3,710,805 3,585,872
Interest 30,538 34,483 19,340
---------- ---------- -----------
3,823,075 3,745,288 3,605,212
---------- ---------- -----------
Costs and expenses:
Cost of goods sold 2,779,595 2,746,734 2,690,768
Selling, general and administrative 859,047 799,572 758,706
---------- ---------- -----------
3,638,642 3,546,306 3,449,474
---------- ---------- -----------
Income before income taxes 184,433 198,982 155,738
Income tax expense (benefit) (note 6) 49,035 (239,000) 7,500
---------- ---------- -----------
Net income $ 135,398 437,982 148,238
========== ========== ===========
Income per share $ .52 1.67 .56
========== ========== ===========
Weighted average number of shares 262,422 262,422 262,422
========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 14
TNR TECHNICAL, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended July 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED TREASURY
SHARES AMOUNT CAPITAL DEFICIT STOCK
------ ------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Balance, July 31, 1993 301,581 $ 6,032 2,640,001 (1,283,567) (194,270)
Net income - - - 148,238 -
---------- ---------- ------------- -------------- ----------
Balance, July 31, 1994 301,581 6,032 2,640,001 (1,135,329) (194,270)
Net income - - - 437,982 -
---------- ---------- ------------- -------------- ----------
Balance, July 31, 1995 301,581 6,032 2,640,001 (697,347) (194,270)
Net income - - - 135,398 -
---------- ---------- ------------- -------------- ----------
Balance, July 31, 1996 301,581 $ 6,032 2,640,001 (561,949) (194,270)
========== ========== ============= ============== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 15
TNR TECHNICAL, INC.
STATEMENTS OF CASH FLOWS
Years ended July 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income 135,398 437,982 148,238
Adjustments to reconcile net income to net cash
provided by operations:
Deferred income taxes 40,000 (250,000) -
Depreciation and amortization 23,530 17,028 14,730
Gain on sale of transportation equipment - (2,728)
Provision for doubtful accounts 2,000 6,000 -
Changes in operating assets and liabilities:
Accounts receivable (63,879) (91,912) (3,056)
Inventories 274,852 (270,260) (118,170)
Prepaid expenses and other assets 644 15,727 (7,127)
Accounts payable and accrued expenses (155,110) 52,414 19,646
Deposits (7,392) - -
Income taxes (7,185) - -
---------- ---------- -----------
Net cash provided by (used in) operating
activities 242,858 (83,021) 51,533
---------- ---------- -----------
Cash flows from investing activities :
Reduction (increase) in short-term investments 159,613 (134,094) (43,769)
Purchase of property and equipment (76,449) (36,391) (16,531)
---------- ----------- -----------
Net cash provided by (used in) investing
activities 83,164 (170,485) (60,300)
---------- ----------- -----------
Increase (decrease) in cash and cash equivalents 326,022 (253,506) (8,767)
Cash and cash equivalents - beginning of year 100,298 353,804 362,571
---------- ----------- -----------
Cash and cash equivalents - end of year $ 426,320 100,298 353,804
========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ - - 461
========== ============ ===========
Cash paid during the year for income taxes $ 10,860 13,000 -
========== ============ ===========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 16
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF OPERATIONS
TNR Technical, Inc. (TNR or the Company) designs, assembles and
markets batteries and multi-cell battery packs to a wide variety of
industrial markets. The Company is a distributor for a number of major
U.S. battery manufacturers and markets its products nationally.
(b) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
(c) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. The Company provides
depreciation for machinery and equipment using the straight-line
method over the estimated useful lives of the respective assets which
range from five to ten years. Amortization of leasehold improvements
is computed using the straight-line method over the lesser of the
lease term or estimated useful lives of the improvements.
(d) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged against income in the year
incurred.
(e) USE OF ESTIMATES
Management of the Company has made certain estimates and assumptions
relating to the reporting of assets and liabilities and disclosure of
contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(Continued)
F-7
<PAGE> 17
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 1996 and 1995
(1), CONTINUED
(f) FINANCIAL INSTRUMENTS FAIR VALUE, CONCENTRATION OF BUSINESS AND CREDIT
RISKS
The carrying amount reported in the balance sheet for cash, short-term
investments, accounts receivable, accounts payable and accrued
expenses approximates fair value because of the immediate or
short-term maturity of these financial instruments. Financial
instruments which potentially subject the Company to concentrations of
credit risk consist principally of trade accounts receivable which
amount to approximately $450,000. The Company performs periodic credit
evaluations of its trade customers and generally does not require
collateral.
(g) INCOME TAXES
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 enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(h) CASH FLOWS
For purposes of cash flows, the Company considers all highly liquid
investments with a maturity of three months or less to be cash
equivalents.
(i) EARNINGS PER COMMON SHARE
Earnings per common share has been computed based upon the weighted
average number of common shares outstanding during the years
presented. The inclusion of common stock issuable upon the exercise of
stock options are not included in these calculations as their impact
would be anti-dilutive.
(j) RECLASSIFICATIONS
Certain amounts from 1995 and 1994 have been reclassified to conform
with the 1996 presentation.
(Continued)
F-8
<PAGE> 18
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 1996 and 1995
(2) SHORT-TERM INVESTMENTS
Short-term investments in 1996 and 1995 consist of United States
Treasury Bills.
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Finished goods $430,061 706,430
Work-in-process - -
Purchased parts and material 10,525 9,008
-------- --------
$440,586 715,438
======== ========
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Machinery and equipment $ 164,450 114,605
Leasehold improvements 23,467 3,701
--------- --------
187,917 118,306
Less: Accumulated depreciation and amortization
78,121 61,429
--------- --------
$ 109,796 56,877
========= ========
</TABLE>
(5) STOCK OPTION PLAN
In November 1992, the Board of Directors approved an Incentive and
Non-Qualified Stock Option Plan which was ratified by the stockholders
in January 1993. The plan covers 60,000 shares of Common Stock,
subject to adjustment of shares under the anti-dilution provisions of
the Plan. The plan authorizes the issuance of the options covered
thereby as either "Incentive Stock Options" within the meaning of the
Internal Revenue Code of 1986, as amended, or as "Non-Statutory Stock
Options." No options may be granted after November 16, 2002.
(Continued)
F-9
<PAGE> 19
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 1996 and 1995
(5), CONTINUED
Under the Plan, the aggregate fair market value (determined at the
time the option is granted) of the optioned stock for which Incentive
Stock Options are exercisable for the first time by any employee
during any calendar year shall not exceed $100,000.
No options have been granted under the Plan as of July 31, 1996.
(6) INCOME TAXES
The income tax provision (benefit) for the years ended December 31,
1996, 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ - - -
State 9,035 11,000 7,500
----------- ---------- --------
9,035 11,000 7,500
----------- ---------- --------
Deferred:
Federal 40,000 (250,000)
-
State - - -
----------- ---------- --------
40,000 (250,000) -
----------- ---------- --------
Total $ 49,035 (239,000) 7,500
=========== ========== ========
</TABLE>
Income tax expense (benefit) attributable to income before income tax differed
from the amount computed by applying the U.S. Federal income tax rate of 34% to
income (loss) from operations before income taxes as a result of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense $ 62,700 67,700 53,000
Increase (reduction) in income tax expense (benefit)
resulting from:
State income taxes, net of federal income tax
benefit 6,000 7,000 5,500
Utilization of net operating loss carryforwards - (52,500) (39,000)
Rate differences (19,965) (11,200) (12,000)
Reduction in valuation allowance - (250,000) -
----------- ---------- ---------
$ 49,035 (239,000) 7,500
=========== ========== =========
</TABLE>
F-10
<PAGE> 20
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 1996 and 1995
(6), CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at July 31, 1996 and 1995 are
presented below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Inventories, principally due to additional costs
inventoried for tax purposes $ 8,000 11,000
Accounts receivable, due to allowance for uncollectible
accounts 5,000 4,000
Net operating losses 197,000 235,000
---------- ---------
210,000 250,000
Less valuation allowance - -
---------- ---------
Total $ 210,000 250,000
========== =========
</TABLE>
Deferred taxes are presented in the accompanying balance sheets as:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current deferred tax assets $ 13,000 15,000
Noncurrent deferred tax assets 197,000 235,000
------------ ----------
$ 210,000 250,000
============ ==========
</TABLE>
In the year ended July 31, 1994, the Company adopted the Financial
Accounting Board Statement No. 109, "Accounting for Income Taxes" and
recorded a gross deferred tax asset of $250,000 which was offset by a
valuation allowance in the same amount as of July 31, 1994. During
fiscal 1995, the Company reversed the entire valuation allowance and,
accordingly, credited $250,000 to income tax expense.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will be realized. Management considers the
projected future taxable income and tax planning strategies in making
this assessment. The Company believes that future earnings in addition
to the amount of taxable differences which will reverse in future
periods, will be sufficient to offset recorded deferred tax assets
and, accordingly, a valuation allowance is not considered necessary at
July 31, 1996 and 1995.
(Continued)
F-11
<PAGE> 21
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 1996 and 1995
(6), CONTINUED
At July 31, 1996, the Company has net operating loss carryforwards of
approximately $950,000 which will expire at various dates through 2004.
(7) LEASE COMMITMENT
Commencing in June 1996, the Company entered into an agreement to lease
its office, warehouse and distribution facilities from a partnership
controlled by an executive officer, shareholder and director of TNR.
The lease agreement provides for a term of ten years including the
payments as indicated below:
<TABLE>
<CAPTION>
YEAR ENDING JULY 31,
--------------------
<S> <C>
1997 $ 60,298
1998 63,313
1999 66,480
2000 69,804
2001 73,293
Thereafter 409,007
------------
$ 742,195
============
</TABLE>
(8) SALES TO MAJOR CUSTOMERS
During the years ended July 31, 1996 and 1995, no customer accounted
for more than 10% of total revenues. During the year ended July 31,
1994, one customer accounted for approximately 13% of total revenues.
(9) SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Advertising costs $37,244 56,810 78,249
</TABLE>
Advertising costs are included in selling, general and administrative costs in
the accompanying statements of operations.
F-12
<PAGE> 22
PART III
Item 10. Directors and Executive Officers of the Registrant.
The names, ages and principal occupations of the Company's
present directors, and the date on which their term of office commenced and
expires, are listed below.
<TABLE>
<CAPTION>
Term First
of Became Principal
Name Age Office Director Occupation
- ---- --- ------ -------- ----------
<S> <C> <C> <C> <C>
Jerrold Lazarus 64 (1) 1987 Chairman of the
Board and Chief
Executive Officer
Norman L. Thaw 63 (1) 1979 President of
Stride Rite
Stables, Inc.,
Private Investor
Wayne Thaw 39 (1) 1983 President and
Chief Operating Officer
</TABLE>
- -------------------------
(1) Directors are elected at the annual meeting of stockholders and hold
office to the following annual meeting.
Jerrold Lazarus is Chairman of the Board, Chief Executive Officer,
Chief Financial Officer, Secretary and Treasurer of the Company. Wayne Thaw is
President and Chief Operating Officer of the Company. The terms of all officers
expire at the annual meeting of directors following the annual stockholders
meeting. Subject to their contract rights to compensation, if any, officers may
be removed, either with or without cause, by the Board of Directors, and a
successor elected by a majority vote of the Board of Directors, at any time.
Jerrold Lazarus has been a full time employee of the Company since
October 1987 and has served as an Executive Officer of the Company since 1987.
Norman L. Thaw is one of the founders of the Company and served as
its Chairman and Chief Executive Officer between March 1987 and April 1988. For
more than the past five years, Mr. Thaw's principal occupation is the President
of Stride Rite Stables, Inc., a thoroughbred racing and breeding farm in South
Florida. Norman L. Thaw is the father of Wayne Thaw.
Wayne Thaw has been a full time employee of the Company since 1980 and
has served as an Executive Officer of the Company since 1981. Wayne Thaw is the
son of Norman L. Thaw.
9
<PAGE> 23
ITEM 11. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS.
The following table provides a summary compensation table with respect
to the compensation of the Company's two executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
===================================================================================================================================
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
- ------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted Other
and Compen- Stock Number LTIP Compen-
Principal sation Award(s) of Payouts sation
Position Year Salary ($) Bonus ($) ($)(1) ($) Options ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jerrold Lazarus 1996 79,627 7,500 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------
CEO, 1995 81,200 7,500 4,900 0 0 0 0
-----------------------------------------------------------------------------------------------------------
Chairman of the Board 1994 79,750 7,500 4,900 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Wayne Thaw, 1996 106,308 7,500 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------
President 1995 95,200 7,500 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------
1994 95,200 7,500 0 0 0 0 0
- ------------------------===========================================================================================================
- ----------
</TABLE>
(1) Does not include the value of a leased automobile at the monthly
lease rate of $480 which is provided to each officer for business purposes.
During the past three fiscal years, the Company has not granted
restricted stock awards, stock options or stock appreciation rights. In
addition, the Company does not have a defined benefit or actuarial plan.
10
<PAGE> 24
The Company has no employment contracts with its executive officers.
Jerrold Lazarus and Wayne Thaw are currently receiving a weekly salary of
approximately $1,400 and $2,000, respectively. Directors do not presently
receive compensation for serving on the Board or on its committees. Depending on
the number of meetings and the time required for the Company's operations, the
Company may decide to compensate its directors in the future.
The Company provides each of its two executive officers with a leased
automobile. The Company has no annuity, pension, or retirement benefits for its
employees. The Company has not afforded any of its officers or directors any
other personal benefits, the value of which exceeds 10% of his cash
compensation, which is not directly related to job performance or provided
generally to all salaried employees.
Stock Option Plans
The 1992 Plan
The 1992 Incentive and Non-Qualified Stock Option Plan, (the "1992
Plan"), was approved by the Board of Directors on November 17, 1992 and
ratified by stockholders on January 29, 1993. The 1992 Plan covers 60,000
shares of Common Stock, subject to adjustment of shares under the anti-dilution
provisions of the 1992 Plan. The 1992 Plan authorizes the issuance of the
options covered thereby as either "Incentive Stock Options" within the meaning
of the Internal Revenue Code of 1986, as amended, or as "Non-Statutory Stock
Options." Persons eligible to receive options under the 1992 Plan includes
employees, directors, officers, consultants or advisors, provided that bona
fide services shall be rendered by consultants or advisors and such services
must not be in connection with the offer or sale of securities in a capital
raising transaction; however, only employees (who may also be officers and/or
directors) are eligible to receive an Incentive Stock Option. The 1992 Plan
also provides that no options may be granted after November 16, 2002. As of
September 16, 1996, no options have been granted under the 1992 Plan.
The 1992 Plan is administered by the Company's Board of Directors or a
stock option committee consisting of three members of the Board which has the
authority to determine the persons to whom options shall be granted, whether
any particular option shall be an Incentive Option or a Non-Statutory Option,
the number of shares to be covered by each option, the time or times at which
options will be granted or may be exercised and the other terms and provisions
of the Options.
Under the 1992 Plan, the aggregate fair market value (determined at
the time the option is granted) of the optioned stock for which Incentive Stock
Options are exercisable for the first time by any employee during any calendar
year (under all such Plans of the individual's Employer Corporation and its
parent and subsidiary corporation) shall not exceed $100,000.
11
<PAGE> 25
The 1992 Plan also provides that the Board of directors shall determine
the exercise price of the Common Stock under each option. The 1992 Plan also
provides that: (i) the exercise price of Incentive Stock Options granted
thereunder shall not be less than 100% (110% if the optionee owns 10% or more of
the outstanding voting securities of the Company) of the fair market value of
such shares on the date of grant, as determined by the Board or Committee, and
(ii) no option by its terms may be exercised more than ten years (five years in
the case of an Incentive Stock Option, where the optionee owns 10% or more of
the outstanding voting securities of the Company) after the date of grant. Any
options which are canceled or not exercised within the option period become
available for future grants. All Stock Options are non-transferable except by
will or the laws of descent and distribution.
Report of the Board of Directors on Executive Compensation
During fiscal 1996, the entire Board which consists of Norman Thaw,
Jerrold Lazarus and Wayne Thaw held primary responsibility for determining
executive compensation levels. The goals of the Company's compensation program
is to align compensation with business objectives and performance and to enable
the Company to attract, retain and reward executive officers and other key
employees who contribute to the long-term success of the Company. The Company
has provided on a prospective basis annual incentive opportunity to several of
its key employees sufficient to provide motivation to achieve specific operating
goals.
Compensation Committee Interlocks and Insider Participation
During fiscal 1996, Jerrold Lazarus and Wayne Thaw, executive officers
of the Company, were involved in determining executive officer compensation
levels as members of the Board of Directors.
12
<PAGE> 26
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
As of September 16, 1996, the Company had outstanding 262,437 shares of
Common Stock. The only persons of record who presently hold or are known to own
(or believed by the Company to own) beneficially more than 5% of the outstanding
shares of such class of stock is listed below. The following table also sets
forth certain information as to holdings of the Company's Common Stock of all
officers and directors individually, and all officers and directors as a group.
(The shares shown in the table below for Norman Thaw and his sons, Wayne Thaw
and Mitchell Thaw are not beneficially owned by each other and are listed
separately).
<TABLE>
<CAPTION>
======================================================================
Name and Amount and
Address of Nature of
Beneficial Beneficial Approximate
Title of Class Owner Ownership (1) Percent
----------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Wayne Thaw (3) 48,592 18.5
----------------------------------------------------------------------
Common Stock Norman L. Thaw 58,228 22.2
(2)(3)
----------------------------------------------------------------------
Common Stock Jerrold Lazarus 441 *
(3)
----------------------------------------------------------------------
Common Stock All Directors 107,624 41.0
and Officers as
a group (three
persons)
----------------------------------------------------------------------
Common Stock Mitchel A. Thaw 21,525 8.2
(3)
======================================================================
</TABLE>
* Owns less than 1% of the issued and outstanding shares of the Company's
Common Stock.
- ------------------------
(1) All shares are directly owned, and the sole investment and voting power
is held, by the persons named.
(2) May be deemed to be a parent and/or founder of the Company under the
Securities Act of 1933, as amended and may be deemed to be a "control
person" of the Company within the meaning of the Securities Exchange
Act of 1934.
13
<PAGE> 27
(3) Address: 301 Central Park Drive, Sanford, Florida 32771.
The Company does not know of any arrangement or pledge of its
securities by persons now considered in control of the Company that might
result in a change of control of the Company.
Item 13. Certain Relationships and Related Transactions.
See Item 2 regarding the description of lease between the Company and
a RKW Holding Ltd., a Florida Limited Partnership, controlled by Wayne Thaw.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1)(2) Financial Statements and Financial Statement Schedules.
A list of the Financial Statements and Financial Statement
Schedules filed as a part of this Report is set forth in Item 8, and appears at
Page F-1 of this Report, which list is incorporated herein by reference.
(a)(3) Exhibits
3 Certificate of Incorporation and Amendments thereto. (1)
3(A) By-Laws. (1)
3(B) February 1992 Certificate of Amendment to Certificate of
Incorporation (2)
10 Lease Agreement dated January 17, 1996 by and between RKW
Holding Ltd. and the Registrant
11 Earnings per share. See Financial Statements
27 Selected Financial Data (for SEC use only).
- ----------------------------
(1) Exhibits 3 and 3(A) are incorporated by reference from Registration
No. 2-85110 which were filed in a Registration Statement on Form S-18.
(2) Incorporated by reference to Form 10-K for the fiscal year ended July
31, 1992.
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed or required to be filed
during the quarter ended July 31, 1996.
14
<PAGE> 28
SIGNATURES
Pursuant to the requirements Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TNR TECHNICAL, INC.
By /s/ Jerrold Lazarus
----------------------------------------
Jerrold Lazarus, Chief Executive Officer
Dated: Sanford, Florida
October 1, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Norman L. Thaw Director October 1, 1996
- ------------------------
Norman L. Thaw
/s/ Wayne Thaw President, October 1, 1996
- ------------------------ Chief
Wayne Thaw Operating
Officer and
Director
/s/ Jerrold Lazarus Chairman of the October 1, 1996
- ------------------------ Board, Chief
Jerrold Lazarus Executive
Officer, Chief
Financial and
Accounting
Officer,
Treasurer,
and Secretary
</TABLE>
Norman Thaw, Wayne Thaw and Jerrold Lazarus represent all the members of the
Board of Directors.
15
<PAGE> 1
EXHIBIT 10
LEASE AGREEMENT
This LEASE AGREEMENT (this "Lease") is made the 17th day of January, 1996,
by and between RKW HOLDINGS, LTD., a Florida limited partnership, whose address
is 279 Douglas Avenue, Suite 1112, Altamonte Springs, Florida 32714
("Landlord"), and TNR TECHNICAL, INC., a New York corporation, whose address is
279 Douglas Avenue, Suite 1112, Altamonte Springs, Florida 32714 ("Tenant").
W I T N E S S E T H:
Subject to the terms and conditions set forth herein, Landlord hereby
leases and rents to the Tenant, and Tenant hereby hires and takes from the
Landlord, that certain parcel of land legally described in EXHIBIT "A" attached
hereto and made a part hereof (the "Land"), and all improvements now or
hereafter located thereon (the "Building") (the Building and the Land are
hereinafter referred to as the "Premises"). The Building is known or is to be
known as and by street number 301 Central Park Drive, Sanford, Florida 32771.
The parties hereto acknowledge that, for the purposes hereof, the Building, upon
completion, will consist of approximately 2,361 square feet of rentable office
space and approximately 5,638 square feet of rentable warehouse space.
1. LEASE TERM: The term ("Term") of this Lease shall be for a period
of ten (10) years, commencing on the date that a certificate of occupancy or its
equivalent is issued by the applicable governmental authorities for the Building
to be constructed on the Land (the "Commencement Date"), and terminating on that
date which is ten (10) years after the Commencement Date. Upon the expiration of
the Term, Tenant shall deliver up the Premises in good repair and condition,
ordinary wear and tear not caused by Tenant's negligence or willful acts
excepted, together with all keys to and combinations for all locks on the
Premises.
2. RENT: The term "Rent" as used in this Lease shall mean and refer
to Base Rent (as hereinafter defined), Taxes (as hereinafter defined),
Additional Rent (as hereinafter defined), and all other sums to be paid by
Tenant to or on behalf of Landlord hereunder, whether or not said sums are so
designated. All amounts to be paid by Tenant to Landlord under this Lease shall
be paid without deduction, set-off, counterclaim, abatement, suspension or
defense, except as expressly provided in this Lease, in lawful money of the
United States of America. All amounts shall be paid without the necessity of
prior demand, except where express reference is made to an invoice to be
presented by Landlord, in which case the specified invoice shall be the only
demand necessary to be made by Landlord. All payments of Rent shall be made to
Landlord at the address set forth in the heading of this Lease or at such other
location designated in writing by Landlord from time to time.
Any sales, use or other taxes (excluding Landlord's state and/or federal
income taxes), now or hereafter imposed by the United States of America, the
State of Florida, or any other governmental authority on this Lease, the Rent
reserved herein, the revenues generated
<PAGE> 2
hereby, and/or the privilege of renting the Premises shall be paid by Tenant
together with the payment of Base Rent, notwithstanding the fact that such
statute, ordinance, or enactment imposing the same may endeavor to impose the
tax on Landlord.
(a) BASE RENT: During the Term, Tenant covenants and agrees to
pay to Landlord as and for a base minimum rent ("Base Rent") the sum of Eleven
Dollars ($11.00) per square foot of office space leased at the Premises and Six
Dollars ($6.00) per square foot of warehouse space leased at the Premises, per
year of the Term, the Base Rent to increase by five percent (5%) over the
preceding year's Base Rent for each year of the Term after Year 1, in accordance
with the following schedule:
<TABLE>
<S> <C>
(i) $59,800.00 during Year 1 of the Term;
(ii) $62,790.00 during Year 2 of the Term;
(iii) $65,930.00 during Year 3 of the Term;
(iv) $69,227.00 during Year 4 of the Term;
(v) $72,688.00 during Year 5 of the Term;
(vi) $76,322.00 during Year 6 of the Term;
(vii) $80,138.00 during Year 7 of the Term;
(viii) $84,145.00 during Year 8 of the Term;
(ix) $88,352.00 during Year 9 of the Term; and
(x) $92,770.00 during Year 10 of the Term.
</TABLE>
Base Rent shall be payable in equal monthly installments,
in advance, on the first day of each month during the Term. Concurrently with
the execution of this Lease, Tenant has prepaid Base Rent for the first calendar
month of the Lease, plus the sales tax thereon, the receipt of which is hereby
acknowledged.
(b) TAXES: For the purpose of this Lease, the term "Taxes"
shall mean all impositions, taxes, assessments (special or otherwise), and other
governmental liens or charges of any and every kind, nature and sort whatsoever,
ordinary and extraordinary, foreseen and unforeseen, and substitutes therefor,
attributable in any manner to the Building, Land or Premises, or any part
thereof, or any use thereof, or any equipment, fixtures or other facilities
located thereon or used in conjunction therewith (excluding only Landlord's
inheritance, estate, succession, transfer or gift taxes and income taxes
specifically payable by Landlord based upon
2
<PAGE> 3
or measured by Landlord's income), and including all costs incurred by Landlord
in contesting same and/or negotiating with public authorities as to same.
On or before the Commencement Date, Landlord shall submit to
Tenant a statement of estimated Taxes for the calendar year in which the
Commencement Date occurs, and Tenant shall pay same to Landlord on a monthly
basis in advance together with payments of Base Rent. Tenant shall continue to
make said monthly payments of Taxes until notified by Landlord of a change
thereof. The estimated monthly Taxes billed to Tenant may be changed from time
to time by Landlord based upon the amounts of the bills for the prior year and
Landlord's reasonable estimate as to any anticipated increase. In the event the
total of the monthly payments of estimated Taxes which Tenant has made for the
subject calendar or other tax year shall be less than the Tenant's actual
liability for Taxes for said year, then Tenant shall pay the difference in a
lump sum within five (5) days after receipt of Landlord's invoice. Any
overpayment by Tenant shall be credited towards Taxes for the next succeeding
year. Even though the Term has expired and Tenant has vacated the Premises when
the final determination is made of Taxes for the year in which this Lease
expires, Tenant shall, within five (5) days following receipt of the copy of a
statement from Landlord, pay any amount necessary based on actual amounts for
the last year, and conversely, any overpayment made shall, together with the
transmittal of the statement, be rebated by Landlord to Tenant. Tenant
expressly agrees that Landlord, at Landlord's sole discretion, may apply the
Security Deposit (as defined below) in full or partial satisfaction of Taxes due
for any part of the Term, including the final months, which application may
follow the termination of this Lease. If said Security Deposit is greater than
the amount of any such Taxes, and there are no other sums or amounts owed
Landlord by Tenant by reason of any other terms, provisions, covenants or
conditions of this Lease, then Landlord shall refund the balance of said
Security Deposit to Tenant as provided in Paragraph 4 below. Landlord shall not
be required to first apply said Security Deposit to Taxes if there are any other
sums or amounts owed Landlord by Tenant by reason of any other terms,
provisions, covenants or conditions of this Lease.
3. USE: The Premises shall be used for office and warehouse purposes
in the ordinary course of Tenant's business, and for no other purpose without
the prior written consent of Landlord, which consent may be granted or withheld
in Landlord's sole and arbitrary discretion. Tenant shall not use the Premises
for any unlawful purpose nor in any manner which would constitute a nuisance.
4. SECURITY DEPOSIT: Concurrently with the Commencement Date of this
Lease, Tenant shall deposit with Landlord Nine Thousand Nine Hundred Sixty Seven
and No/100 Dollars ($9967.00), which shall be held by Landlord as security for
the faithful performance by Tenant of all the terms, covenants, and conditions
of this Lease (the "Security Deposit"). If Tenant defaults with respect to any
provision of this Lease, including, but not limited to the provisions relating
to the payment of Rent, Landlord may (but shall not be required to) use, apply
or retain all or any part of the Security Deposit for the payment of any Rent or
any
3
<PAGE> 4
other sum in default, or for the payment of any 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. If any portion of said Security Deposit is so used or
applied, Tenant shall, within five (5) days after written demand therefor,
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to its original amount, and Tenant's failure to do so shall be a default
under this Lease without the necessity of any further notice to Tenant. Landlord
shall not be required to keep the Security Deposit separate from its general
funds, and Tenant shall not be entitled to interest on the Security Deposit. If
Tenant fully and faithfully performs every provision of this Lease to be
performed by it and timely delivers the Premises to Landlord in the condition
required by this Lease, then the Security Deposit, or any remaining balance
thereof, shall be returned to Tenant within thirty (30) days following
satisfaction of the foregoing conditions precedent to the return of the Security
Deposit, subject to the provisions of Paragraph 2 above. Landlord shall have
the right, from time to time, to transfer the Security Deposit to any subsequent
owner of the Premises, and Landlord shall, following such transfer, be released
by Tenant from all liability for the return of the Security Deposit. In such
event, Tenant agrees to look solely to the new owner of the Premises for the
return of the Security Deposit.
5. COMPLIANCE WITH LAWS: Tenant shall not use the Premises, nor
permit anything to be done in or about the Premises, which will in any way
conflict with or violate any federal, state, county or municipal law, statute,
ordinance or governmental rule or regulation now in force or which may hereafter
be enacted or promulgated, as the same may be amended from time to time. Tenant
shall, at its sole cost and expense, promptly comply with all such laws,
statutes, ordinances and governmental rules, regulations or requirements now in
force or which may hereafter be in force, with any direction made pursuant to
law by any public officer which shall impose any violation, order or duty upon
Landlord or Tenant arising from the condition of the Premises or the occupancy,
use or manner of use thereof, and with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted relating to or
affecting the condition, use or occupancy of the Premises. Copies of any
notices received by Tenant with respect to the foregoing shall be promptly
delivered to Landlord. Tenant will obtain and strictly comply with, at its sole
cost and expense, all federal, state and local permits and other governmental
approvals in connection with Tenant's use and occupancy of the Premises. Tenant
acknowledges that Landlord makes no representations, express or implied,
concerning the availability or likelihood of obtaining any required permits or
approvals for Tenant to conduct its business operation on the Premises.
6. SIGNS: Tenant may, at its own cost and expense, erect those signs
on the Premises which Tenant deems necessary or desirable, provided that all
signs erected on the Premises and visible on the exterior of the Premises shall
be aesthetically compatible with the Premises and shall have received the prior
written approval of Landlord as to design and content, which consent Landlord
shall not unreasonably withheld. All signs must comply with all applicable
laws, codes and ordinances and the conditions, if any, imposed by any sign
permits. Each and every sign erected by Tenant shall be maintained by Tenant, at
Tenant's own cost and expense, in first-class condition and shall be removed
from the Premises by Tenant, at Tenant's own cost and expense, upon or prior to
the expiration or earlier termination of the
4
<PAGE> 5
Term. Tenant shall repair and restore the Premises to as good condition as
existed prior to the installation of the sign, reasonable wear and tear
excepted.
7. MAINTENANCE AND REPAIRS: The Premises are leased to Tenant in
"as-is" condition as of the date hereof. Landlord makes no representation as to
the fitness of the Premises for any purpose or as to the condition of the
Premises, and Landlord disclaims any implied warranties with respect thereto.
Tenant hereby accepts the Premises in "as-is" condition and waives the benefit
of any implied warranty of fitness for purpose or condition, Tenant having
previously inspected the Premises. Tenant shall, at its own cost and expense,
throughout the Term, maintain the Premises in a first-class, safe, clean and
sanitary condition, free from infestation and any unreasonable accumulation of
trash or refuse. Tenant shall, at its own cost and expense, commence and
thereafter diligently prosecute to completion, all necessary maintenance and
repairs to the Premises, including, but not limited to, repairs to the roof and
all structural components of the improvements on the Premises, all electrical,
plumbing, mechanical, HVAC and other systems and units, doors, windows, and
glass, landscaping, and paving. All repairs shall be accomplished by Tenant at
its sole cost and expense. All of the aforesaid repairs, restorations and/or
replacements shall be in quality and class equal to the original work or
installation and shall be done in a good and workmanlike manner. Landlord may,
but shall not have the obligation to, notify Tenant of any needed repairs of
which Landlord becomes aware. In addition, Tenant shall, at its own cost and
expense, obtain a service contract for the maintenance and repair of the HVAC
system servicing the Premises and shall supply the Landlord with a copy of same.
If Tenant refuses or neglects to make any repair or perform any maintenance as
required under this Paragraph 7 to the reasonable satisfaction of Landlord
within ten (10) days after written demand that such be done (or after the
expiration of such shorter reasonable period in the event of any emergency),
Landlord may make such repairs without liability to Tenant for any loss or
damage that may occur to Tenant's property in or upon the Premises or to
Tenant's business as a result thereof. Upon Landlord's completion of said work
and within five (5) days following written demand therefor, Tenant shall
reimburse Landlord for the cost of said repairs and/or maintenance, plus fifteen
percent (15%) for overhead, plus interest on all sums advanced but not yet
reimbursed by Tenant and on the overhead at the maximum rate permitted by law.
Any costs incurred by Landlord as a result hereof shall be deemed to be
Additional Rent and, in the event of non-payment, Landlord shall have all the
rights and remedies as herein provided for the non-payment of Base Rent.
8. ALTERATIONS; MECHANICS' LIENS
(a) Tenant shall not make or allow to be made any alterations,
additions or improvements to the Premises or any part thereof without first
obtaining the written consent of Landlord, which consent shall not be
unreasonably withheld, except that Landlord's consent may be granted or withheld
by Landlord in its sole, absolute and arbitrary discretion as to alterations,
additions, or improvements which affect the structural components or integrity
of the Premises or are visible on the exterior of the Premises. Any
alterations, additions or improvements to said Premises, except movable
furniture and trade fixtures, shall at once become a part of the realty and
belong to the Landlord and shall be surrendered to the Landlord with the
Premises;
5
<PAGE> 6
provided, however, that Tenant shall, at Tenant's own cost and expense, remove
any such alterations, additions or improvements made by Tenant upon the
expiration or sooner termination of the Term if requested to do so by Landlord
and, at such time, repair any damage to the Premises caused by such removal.
Together with its request for consent for any additions, alterations or
improvements, Tenant shall submit to Landlord plans for the proposed work
prepared and sealed by an architect or engineer licensed by the State of
Florida. No work shall commence until Landlord has approved the plans for the
work, and there shall be no variation from the plans once approved by Landlord.
Tenant shall reimburse Landlord for all reasonable costs incurred by Landlord in
connection with the review and approval of the plans for such work. Landlord
agrees to act with reasonable promptness with respect to such plans. In the
event Landlord consents to the making of any alterations, additions or
improvements to the Premises by Tenant, the same shall be made by Tenant at
Tenant's own cost and expense. Landlord shall have the right to require that
any such work be fully bonded. All such alterations, additions and improvements
shall be constructed in a good and workmanlike manner, in accordance with the
approved plans and a construction schedule approved by Landlord.
(b) Prior to commencing any work pursuant to the provisions
of the foregoing paragraph, Tenant shall furnish to Landlord:
(i) Copies of all governmental permits and
authorizations which may be required in connection with such work;
(ii) A certificate evidencing that Tenant (or Tenant's
contractors) has (have) procured workmen's compensation insurance covering all
persons employed in connection with the work who might assert claims for death
or bodily injury against Landlord or Tenant;
(iii) Such additional personal injury and property damage
insurance (over and above insurance required to be carried by Tenant pursuant to
the provisions of Paragraph 12 hereof) as Landlord may reasonably require
because of the nature of the work to be done by Tenant.
(c) Tenant shall keep the Premises and all parts thereof at all
times free of mechanic's liens and any other lien for labor, services, supplies,
equipment or material purchased or procured, directly or indirectly, by or for
Tenant. Tenant further agrees that Tenant will promptly pay and satisfy all
liens of contractors, subcontractors, mechanics, laborers, materialmen, and
other items of like character, and will indemnify Landlord against all expenses,
costs and charges, including bond premiums, for release of liens and attorneys
fees and costs reasonably incurred in and about the defense of any suit in
discharging the Premises, from any liens, judgments, or encumbrances caused or
suffered by Tenant. In the event any such lien shall be made or filed, Tenant
shall bond against or discharge the same within ten (10) days after the same has
been made or filed. It is understood and agreed between the parties hereto that
the expenses, costs and charges above referred to shall be considered as
Additional Rent, and in the event of non-payment, Landlord shall have all of the
rights and remedies as herein provided for the non-payment of Base Rent. The
Tenant herein shall not have any
6
<PAGE> 7
authority to create any liens for labor or material on the Landlord's
interest in the Premises and all persons contracting with the Tenant for the
construction or removal of any facilities or other improvements on or about the
Premises, and all materialmen, contractors, mechanics, and laborers are hereby
charged with notice that they must look only to the Tenant and to the Tenant's
interests in the Premises to secure the payment of any bill for work done or
material furnished at the request or instruction of Tenant. Landlord may, at
Landlord's option, record a notice of this provision in the public records of
the county in which the Premises are located and Tenant agrees to execute such
notice at the request of Landlord.
9. QUIET ENJOYMENT: Landlord covenants and agrees that, upon paying
all Rent and performing the covenants herein, Tenant shall and may peaceably and
quietly hold and enjoy the Premises for the Term, subject to the terms and
conditions of this Lease.
10. NET LEASE: It is the intention of the parties that this Lease is
what is commonly called a "net lease." In addition to the Rent payable by Tenant
under the express provisions of this Lease, Tenant shall be liable to pay all
expenses whatsoever attributable to the Premises during the Term, including,
without limitation, insurance, taxes, maintenance, lawn care, garbage disposal
and all utilities. It is the express intention of the parties that, except as
expressly provided in this Lease, all Rent payable to Landlord and all sums
payable by Tenant on behalf of Landlord pursuant to this Lease shall continue to
be payable without abatement or reduction, and all obligations of Tenant
hereunder shall be unaffected, for the specified duration of the Term.
11. UTILITIES AND OTHER EXPENSES: Tenant shall pay before
delinquency, at its own cost and expense, all charges for water, gas, heat,
electricity, telephone service, and sewer connection and service charges charged
or attributable to the Premises, and all other charges for services or utilities
of whatsoever kind or nature used in, upon or about the Premises by Tenant or
any of its subtenants, licensees or concessionaires during the Term, including
the cost of installing meters therefor. All utilities and other services to the
Premises shall be in the name of Tenant, and Tenant shall be responsible for any
deposits and connection fees. Landlord shall not be liable to Tenant for the
unavailability of utilities at the Premises as a result of repairs or
improvements to the Premises or any equipment or systems serving the Premises,
any matter beyond Landlord's control, governmental regulations, or any other
reason whatsoever. Additionally, during the Term, Tenant shall pay all costs and
expenses associated with lawn care and landscaping of the Land, and trash and
garbage disposal at the Premises, so that the same is maintained in a neat and
clean condition throughout the Term.
12. INSURANCE
(a) PROHIBITED ACTIONS: Tenant shall not do or permit to be
done any act or thing in or upon the Premises which will invalidate or be in
conflict with any permit, building permit, certificate of occupancy or similar
approval or permit issued by any applicable authority, or the terms of the fire,
boiler, sprinkler, water damage or other insurance policies covering the
Building and the fixtures and property therein; and Tenant shall, at its own
cost and expense,
7
<PAGE> 8
comply with all rules, orders, regulations, requirements or recommendations of
the Southeastern Underwriters Association or any other similar body having
jurisdiction and of the insurance companies that have issued policies with
respect to the Premises, the Building or its contents, and Tenant shall not
knowingly do or permit anything to be done in or upon the Premises, or bring or
keep anything therein, or use the Premises in a manner which increases the rate
of insurance upon the Building or any property or equipment located therein,
over the rate in effect at the commencement of the Term.
(b) COVERAGE: Tenant shall maintain at its own cost and
expense throughout the Term, for the benefit of Landlord and Landlord's
Mortgagee(s) (as defined in Paragraph 18(b), below), the following insurance
coverages:
(i) liability insurance for bodily injury and property
damage to protect both Landlord and Tenant against damage, costs and attorneys'
fees arising out of accidents of any kind occurring on or about the Premises
with combined single limit liability coverage of not less than Five Million
Dollars ($5,000,000) and property damage coverage of not less than One Million
Dollars ($1,000,000);
(ii) insurance covering the Premises, and all Tenant's
fixtures, equipment and inventory located therein, against all risks of physical
loss or damage, including the expense of the removal of debris from the Premises
as a result of damage and insured peril. Coverage shall be written on as broad
an all risk form as is available from time to time, in an amount not less than
one hundred percent (100%) of the full replacement cost of all improvements and
buildings on the Premises and all Tenant's property located therein, without
reduction for depreciation, and with no deductible;
(iii) plate glass insurance to protect both Landlord and
Tenant covering the replacement value of all plate glass in or about the
Premises;
(iv) appropriate workmen's compensation and any and all
other insurance required by law; and
(v) rental value insurance against loss of rental income
from the Premises by any named or additional insured during the period required
to rebuild, repair, or replace property damaged as a result of perils to be
insured by the property insurance to be maintained by Tenant pursuant to
Subparagraphs 12(b)(i) and (ii) immediately above. Said rental value policy
shall expressly provide by endorsement thereto that the interest of Landlord as
lessor under this Lease shall be covered, to the extent earned, in an amount
equal to all Rent payable for the period of reconstruction, repair and/or
replacement, inclusive of taxes and insurance premiums payable by Tenant under
this Lease, until such time as Tenant resumes the conduct of its business at the
Premises.
(c) ADDITIONAL INSUREDS: All insurance required by
Subparagraph 12(b) above shall name Landlord and Landlord's Mortgagees, if any,
as additional insureds and shall be
8
<PAGE> 9
written by a company or companies qualified to do business in Florida and
reasonably acceptable to Landlord. A certificate showing such insurance in
force and naming Landlord and Landlord's Mortgagees as additional insureds shall
be delivered to Landlord prior to the Commencement Date, and such insurance and
updated certificates or renewal policies shall be delivered to Landlord no fewer
than thirty (30) days prior to the expiration of the then existing policies. No
policy shall be cancelled or subject to reduction in coverage or other change
without at least thirty (30) days' prior written notice to Landlord. All
policies shall be written as primary policies not contributing with and not in
excess of coverage Landlord may carry. If Tenant shall fail to comply with the
requirements of this Subparagraph 12(c) or the immediately preceding
Subparagraph 12(b), Landlord shall have the right, but not the obligation, in
addition to all other rights and remedies available to Landlord at law, in
equity, and under this Lease, to procure, at Tenant's own cost and expense, the
insurance required by said Subparagraphs 12(b) and 12(c). Tenant shall
reimburse Landlord for all costs and expenses incurred by Landlord in connection
with the procurement of said insurance within five (5) days following Landlord's
submission of a statement therefor to Tenant, plus interest on the amounts
expended by Landlord until repayment by Tenant at the maximum rate permitted by
law. No acceptance or approval of any insurance by Landlord shall relieve or
release Tenant from any liability, duty or obligation under this Lease. Whenever
any part of the Premises shall have been damaged or destroyed by fire or other
casualty or any other incident or accident has occurred which gives rise to a
potential claim under an insurance policy to be maintained by Tenant under this
Paragraph 12, Tenant shall promptly file proof of loss in accordance with the
terms of the applicable insurance policies and shall promptly prosecute all
valid claims which have arisen against the insurers based upon any such
casualty, incident or accident. Tenant shall give Landlord written notice of
any potential claim within five (5) days following the date Tenant acquires
actual notice thereof.
(d) WAIVER OF SUBROGATION: Landlord and Tenant each waive
any right of recovery against the other for any loss to the extent that such
claim is covered by valid and collectible insurance carried for the benefit of
the party entitled to make such claim and provided the insurer pays such claim.
The foregoing waiver shall not apply if the policy of insurance covering such
loss would be invalidated by the operation of said waiver.
13. LANDLORD'S RIGHT OF ENTRY: Landlord and its agents shall have the
right to enter the Premises during all reasonable hours to examine, maintain,
repair or alter the Premises; to exhibit the Premises to prospective tenants,
mortgagees, or purchasers; and to remove placards, signs, fixtures, alterations,
or additions which are not permitted by this Lease. Landlord's entry onto the
Premises pursuant to this Paragraph 13 shall not under any circumstances be
deemed a forcible or unlawful entry into, or a detainer of, the Premises, or a
constructive eviction of Tenant, Tenant shall not be entitled to any abatement
of Rent therefor, and Landlord shall not be liable to Tenant for any damages or
losses suffered by Tenant as a result of Landlord's entry except to the extent
the damages or losses are caused by Landlord's willful acts or gross negligence.
For each of the aforesaid purposes, Landlord shall, at all times, have and
retain a key (and alarm information) with which to unlock all of the doors in,
upon and about the Premises. Tenant shall not cause the keys to or combinations
of any locks on the Premises to be changed, nor shall Tenant add additional
locks to the Premises, without first
9
<PAGE> 10
obtaining the Landlord's written consent to such change or addition. Tenant
shall immediately furnish Landlord with all new keys and combinations. In
connection with any proposed repair or alteration, Landlord shall be allowed to
take all material into and upon the Premises that may be required for such
repair or alteration without the same constituting an eviction of Tenant, in
whole or in part.
14. CASUALTY DAMAGE: If any part of the Premises is damaged or
destroyed during the Term, Tenant shall cause the Premises to be restored to
their condition existing immediately prior to the damage or destruction in
accordance with plans and specifications and a budget for completion which have
been approved in writing by Landlord. Tenant shall commence the restoration of
the Premises within thirty (30) days following the date of the occurrence and
shall thereafter diligently and without interruption prosecute the restoration
to completion. All insurance proceeds payable in respect to said damage shall
be paid to Landlord, who shall disburse the same to Tenant upon presentation to
Landlord of invoices and appropriate certifications indicating completion of
stages of said restoration, with Landlord retaining sufficient proceeds to
assure completion of the work and payment of all potential lienors. Anything to
the contrary notwithstanding, Tenant's failure to complete the restoration of
the Premises as required by this Paragraph 14 by the ninetieth (90th) day
following the date of the damage or destruction (unless said restoration could
not reasonably be accomplished until a later date, in which case said later date
shall apply as long as Tenant diligently and continuously pursues said
restoration), shall be deemed to be a default by Tenant without the necessity of
notice by Landlord. There shall be no abatement of Rent or alleviation or
mitigation of any other obligation of Tenant under this Lease in the event any
part of the Premises is damaged by fire or other casualty, regardless of the
degree of damage. The foregoing notwithstanding, either party shall have the
right to terminate this Lease upon ten (10) days' written notice to the other
given not later than the thirtieth (30th) day following the date of the damage
or destruction if: (i) any improvements to or upon the Premises are damaged to
the extent of fifty percent (50%) or more of the replacement value of all
improvements to and upon the Premises as of the date immediately prior to the
damage or destruction; and (ii) if such damage or destruction occurs at any time
during the Term when twelve (12) calendar months or fewer remain until the
scheduled expiration of the Term. If this Lease is terminated by either party
pursuant to the foregoing sentence, Tenant shall deliver to Landlord all
insurance proceeds received in connection with the loss and any additional
amounts necessary to restore the Premises to their condition existing
immediately prior to the occurrence in accordance with plans and specifications
for the restoration acceptable to Landlord. Landlord shall refund all prepaid,
unearned Rent to Tenant, or Tenant shall pay Landlord all Rent earned up to the
termination date, as the case may be, such payment or refund to be made by the
appropriate party within thirty (30) days following the termination of this
Lease. The parties shall thereupon be relieved of all further obligations under
this Lease. Tenant's obligations pursuant to this Paragraph 14 shall survive
the termination of this Lease.
15. CONDEMNATION: In the event the Premises, or any part thereof,
shall be taken or appropriated by any public or quasi-public authority under the
power of eminent domain, or in the event Landlord conveys title to the Premises
to any public or quasi-public
10
<PAGE> 11
authority in lieu or settlement of a condemnation or right of eminent domain
proceeding, the following provisions shall govern:
(a) If the taking or conveyance is a taking of the entire
Premises, this Lease shall automatically terminate on the date possession is
delivered to the condemning authority. Landlord shall refund all prepaid,
unearned Rent to Tenant or Tenant shall pay Landlord all Rent earned up to the
termination date, as the case may be, such payment or refund to be made by the
appropriate party within thirty (30) days following the termination of this
Lease; and the parties shall thereupon be relieved of all further obligations
under this Lease;
(b) If, as a result of such taking or conveyance, the Premises
are rendered unsuitable for the business of Tenant, either party may terminate
this Lease upon ten (10) days' written notice to the other given on the later
of: (i) the thirtieth (30th) day following the date of the final, non-appealable
notice of taking; or (ii) the date possession of the Premises is delivered to
the condemning authority. Landlord shall refund all prepaid, unearned Rent to
Tenant or Tenant shall pay Landlord all Rent earned up to the termination date,
as the case may be, such payment or refund to be made by the appropriate party
within thirty (30) days following the termination of this Lease; and the parties
shall thereupon be relieved of all further obligations under this Lease;
(c) If the Term is not terminated pursuant to Subparagraph
15(a) or 15(b) immediately above, Landlord shall cause the building and other
improvements on the Premises to be restored to complete architectural units to
the degree practical considering the taking, and a fair and just proportion of
Rent shall abate as of the date possession is delivered to the condemning
authority.
(d) All sums awarded (or agreed upon between Landlord and the
condemning authority) for the taking of the interests of Landlord and Tenant in
the Premises, whether as damages or as compensation, shall be the property of
Landlord, provided that Tenant shall be entitled to retain any separate award
for moving expenses or Tenant's personal property which Tenant separately
obtains, provided said separate award does not in any way affect or reduce the
amount to which Landlord is otherwise entitled pursuant to this Subparagraph
15(d).
16. ASSIGNMENT AND SUBLETTING: Without the written consent of
Landlord first obtained in each case, Tenant shall not assign, transfer,
mortgage, pledge, or otherwise encumber or dispose of this Lease. Landlord's
exercise of its consent shall be in its sole discretion and may be arbitrary. In
furtherance and not by way of limitation of the foregoing, in the case of an
assignment, Landlord's consent may be predicated, among other things, upon
Landlord's becoming entitled to collect and retain any economic consideration
for said assignment paid or payable by the prospective assignee to the Tenant.
If this Lease be assigned, the Landlord may, after default by the Tenant,
collect or accept Rent from the assignee and apply the net amount collected or
accepted to the Rent herein reserved, but no such collection or acceptance shall
be deemed a waiver of this covenant or the acceptance of the assignee, as
Tenant, nor shall it be construed as, or implied to be, a release of the Tenant
or any guarantor
11
<PAGE> 12
of the Lease from the further observance and performance by the Tenant of the
terms, provisions, covenants and conditions herein contained.
The consent by Landlord to any assignment hereunder shall not be
construed as releasing the Tenant from any liability hereunder or as
constituting the consent by Landlord to any subsequent assignment, which
subsequent assignment shall require the prior written approval of Landlord as
provided herein in each instance. Any assignment, hypothecation, pledging or
other disposition of Tenant's interest hereunder, in violation of the terms
hereof, shall be deemed null and void, and shall constitute an act of default
hereunder.
Any direct or indirect change in the ownership (legal or
equitable) of a controlling and/or a majority interest of Tenant, whether such
change in ownership occurs at one time or as a result of sequential incremental
changes, and whether said change is by sale, assignment, hypothecation, bequest,
inheritance, operation of law, merger or consolidation, or otherwise, shall be
deemed an assignment of this Lease subject to the consent of Landlord, the
failure of which shall be deemed a default hereunder.
Each permitted assignee shall assume, and be deemed to have
assumed, this Lease and shall remain liable, jointly and severally, with Tenant
for the payment of the Base Rent, Additional Rent and Taxes and all other sums
payable hereunder and for the due performance of the terms, covenants,
conditions and agreements herein contained on Tenant's part to be performed
during the Term. No assignment shall be binding upon Landlord unless such
assignee or Tenant shall deliver to Landlord a duplicate original of the
instrument of assignment which contains a covenant of assumption by the assignee
of all of the obligations aforesaid and shall obtain from Landlord the aforesaid
written consent prior thereto.
17. CONDITION OF PREMISES ON TERMINATION OF LEASE AND HOLDING OVER:
Tenant agrees to surrender to Landlord, upon the scheduled expiration of the
Term or upon any sooner termination thereof, the Premises in as good condition
as said Premises were on the Commencement Date, ordinary wear and tear excepted.
Tenant agrees that if Tenant does not surrender the Premises to Landlord at the
expiration or earlier termination of the Term, then Tenant will pay to Landlord,
to the extent permitted by law, double the amount of the Rent paid by Tenant for
the last month of the Term for each month or portion thereof that Tenant holds
over, plus all damages that Landlord may suffer on account of Tenant's failure
to so surrender to Landlord possession of the Premises, and Tenant will
indemnify and save Landlord harmless from and against all claims made by any
succeeding tenant of the Premises against Landlord on account of delay of
Landlord in delivering possession of said Premises to said succeeding tenant so
far as such delay is occasioned by failure of Tenant to so surrender said
Premises in accordance herewith or otherwise.
No receipt of money by Landlord from Tenant after termination of
this Lease or the service of any notice of commencement of any suit or final
judgment for possession shall reinstate, continue or extend the Term or affect
any such notice, demand, suit or judgment, or otherwise limit or affect any
other remedies available to Landlord hereunder.
12
<PAGE> 13
No act or thing done by Landlord or its agents during the Term
shall be deemed an acceptance of a surrender of the Premises, and no agreement
to accept a surrender of the Premises shall be valid unless it be made in
writing by a duly authorized officer or agent of Landlord.
The provisions of this Paragraph shall survive the expiration or
other termination of this Lease.
18. SUBORDINATION AND ATTORNMENT:
(a) This Lease shall be subject and subordinate to any ground
lease(s), underlying lease(s), or mortgage(s) (including any extensions,
renewals, replacements, modifications or consolidations thereof) now or
hereafter encumbering the Premises. This provision shall be self-operative
without the execution of any further instruments. Notwithstanding the
foregoing, however, Tenant hereby agrees to execute and deliver, within seven
(7) days following request therefor, any instrument(s) which Landlord or
Landlord's Mortgagee may deem desirable to evidence the subordination of this
Lease pursuant to this Paragraph 18. Tenant hereby appoints Landlord the
attorney-in-fact for Tenant to execute and deliver any document to be executed
and delivered by Tenant pursuant to this Paragraph 18. The foregoing
power-of-attorney, being coupled with an interest, is irrevocable. Further,
Tenant's failure to execute or deliver any document to be executed and delivered
by Tenant pursuant to this Paragraph 18 shall be deemed a default by Tenant
without the necessity of notice to Tenant.
(b) If the Premises are at any time subject to any ground
lease, underlying lease, or mortgage, and Tenant has received written notice of
same from the landlord thereunder, or the holder thereof, as the case may be
(each of said landlords and mortgage holders being referred to hereinafter as a
"Landlord's Mortgagee"), in any instance in which Tenant gives notice to
Landlord alleging default by Landlord hereunder, Tenant will also simultaneously
give a copy of such notice to each Landlord's Mortgagee and each Landlord's
Mortgagee shall have the right (but not the obligation) to cure or remedy such
default during the period that is permitted to Landlord hereunder, plus an
additional period of sixty (60) days (or such longer period as is reasonable
under the circumstances), and Tenant will accept such curative or remedial
action (if any) taken by Landlord's Mortgagee with the same effect as if such
action had been taken by Landlord.
(c) If the interests of Landlord under this Lease shall be
transferred voluntarily or by reason of foreclosure or other proceedings, Tenant
shall, at the election of such transferee, be bound to such transferee (herein
sometimes called the "Purchaser") for the balance of the Term remaining, and any
extensions or renewals thereof which may be effected in accordance with the
terms and provisions hereof, with the same force and effect as if the Purchaser
were the Landlord under this Lease, and Tenant does hereby agree to attorn to
the Purchaser, including the mortgagee under any such mortgage if it is the
Purchaser, as its landlord. Said attornment shall be effective and
self-operative without the execution of any further instruments
13
<PAGE> 14
upon the Purchaser succeeding to the interest of the Landlord under this Lease.
Notwithstanding the foregoing, however, Tenant hereby agrees to execute any
instrument(s) which Landlord may deem desirable to evidence said attornment by
Tenant. The respective rights and obligations of Tenant and the Purchaser upon
such attornment, to the extent of the then remaining balance of the Term and any
such extensions and renewals, shall be and are the same as those set forth
herein. In the event of such transfer of Landlord's interests, Landlord shall be
released and relieved from all liability and responsibility thereafter accruing
to Tenant under this Lease or otherwise and Landlord's successor by acceptance
of Rent from Tenant hereunder shall become liable and responsible to Tenant in
respect to all obligations of the Landlord under this Lease accruing from and
after the date of such transfer.
19. INDEMNIFICATION: Tenant indemnifies and holds Landlord harmless
from all losses, damages, liabilities and expenses (including reasonable legal
fees and court costs at trial, all appellate levels, in any bankruptcy
proceedings, and in any mediation or arbitration) whatsoever, which may arise or
be claimed against Landlord and be in favor of any persons, firms or
corporations, for any injuries or damages to the persons or property of any
persons, firms or corporations, consequent upon or arising from the use or
occupancy of the Premises by Tenant or consequent upon or arising from any acts,
omissions, neglect or fault of Tenant, Tenant's agents, employees, customers, or
invitees, or consequent upon or arising from Tenant's failure to comply with the
terms and provisions of this Lease and/or any laws, statutes, ordinances, codes
or regulations as herein provided. Landlord shall not be liable to Tenant for
any damages, losses or injuries to the persons or property of Tenant which may
be caused by the acts, neglect, omissions or faults of any persons, firms or
corporations, except when such injury, loss or damage results from the gross
negligence or willful acts of Landlord, its agents or employees, and Tenant
hereby indemnifies and holds Landlord harmless from all damages, liabilities,
losses, injuries, or expenses which may arise or be claimed against Landlord and
be in favor of any persons, firms or corporations, for any injuries or damages
to the person or property of any persons, firms, or corporations, where said
injuries or damages arose about or upon said Premises as a result of the
negligence or willful acts of Tenant, Tenant's agents, employees, or invitees.
All personal property placed or moved into the Premises shall be at the sole
risk of Tenant or the owner thereof, and Landlord shall not be liable to Tenant
for any damage to said personal property.
In case Landlord shall be made a party to any litigation commenced
against Tenant, then Tenant shall protect and hold Landlord harmless and shall
pay all costs, expenses and reasonable attorneys fees incurred or paid by
Landlord in connection with such litigation, all appeals thereof and any
arbitration or mediation associated therewith. This provision shall survive the
termination of this Lease.
20. SECURITY; LOSS; DAMAGE
(a) DAMAGE; SECURITY: Landlord shall not be responsible or
liable for the theft, loss or damage to person or property in, on or about the
Premises including, without limitation, any property of Tenant, Tenant's
employees, agents, customers and invitees. Tenant
14
<PAGE> 15
acknowledges and agrees that Landlord is not responsible for the security of the
Premises in general.
(b) RISK OF LOSS: Landlord shall not be liable for any
injury or damage to persons or property resulting from fire, explosion,
falling plaster, gas, electricity, water, rain or leaks from any part of the
Building or from the pipes, appliances or plumbing works or from the roof,
street or sub-surface or from any other place or by dampness, humidity or by
any other cause of whatever nature, unless caused by or due to the gross
negligence or willful acts of Landlord, its agents, or employees, nor shall
Landlord or its agents be liable for any such damage caused by third parties
or caused by construction of any private, public or quasi-public work; nor
shall Landlord be liable for any latent defects in the Premises.
(c) NOTICE TO LANDLORD: Tenant shall give notice to
Landlord in case of fire or accidents in the Premises, or of defect(s) therein
or in any fixtures or equipment located therein immediately upon Tenant's
becoming aware of the existence thereof.
21. BANKRUPTCY. Tenant covenants and agrees that it will remain
obligated under this Lease in accordance with its terms, and that Tenant will
not take any action to terminate, rescind, or avoid this Lease, notwithstanding
the bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding-up or other proceeding affecting Landlord or
any assignee of Landlord in any such proceeding and notwithstanding any action
with respect to this Lease which may be taken by any trustee or receiver of
Landlord or any such assignee in any such proceeding by any court in any such
proceeding.
(a) In the event that Tenant shall file a petition, or an order
for relief is entered against the Tenant, under Chapter 7, 9, 11 or 13 of the
Bankruptcy Code 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"), as same
may be amended from time to time, and the trustee of Tenant shall elect to
assume this Lease for the purpose of assigning the same, such assumption and/or
assignment may only be made if all of the terms and conditions of subsections
(b)(i)(1) and (b)(i)(2) hereof are satisfied. If such trustee or
debtor-in-possession, as the case may require, shall fail to elect to assume
this Lease within sixty (60) days after such Trustee of Tenant shall have been
appointed, or the date of filing of the petition, as the case may be, at
Landlord's election (and in Landlord's sole and absolute discretion) this Lease
shall be deemed to have been rejected and, in such event, Landlord shall
thereupon immediately be entitled to possession of the Premises without further
obligation to the Tenant or Tenant's trustee in bankruptcy, and this Lease shall
be cancelled, but Landlord's right to be compensated for damages in such
bankruptcy proceeding shall survive such cancellation.
(b) No election to assume this Lease shall be effective unless
in writing and addressed to Landlord and unless, in the Landlord's business
judgment, all of the following conditions, which Landlord and Tenant acknowledge
to be commercially reasonable, have been satisfied.
15
<PAGE> 16
(i) The trustee or the debtor-in-possession has cured or
has provided Landlord "adequate assurance" (as defined hereunder) that:
(1) within ten (10) days from the date of such
assumption, the trustee (or debtor-in-possession) will cure all monetary
defaults under this Lease; and
(2) within thirty (30) days from the date of such
assumption, the trustee (or debtor-in-possession) will cure all nonmonetary
defaults under this Lease.
(ii) The trustee or the debtor-in-possession has
compensated, or has provided to Landlord adequate assurance that, within ten
(10) days from the date of assumption, Landlord will be compensated for any
pecuniary loss incurred by Landlord arising from the default of the Tenant, the
trustee, or the debtor-in-possession, as recited in Landlord's written statement
of pecuniary loss sent to the trustee or debtor-in-possession;
(iii) The trustee or the debtor-in-possession has provided
Landlord with adequate assurance of the future performance of each of Tenant's
obligations under the Lease; provided, however, that:
(1) the trustee or debtor-in-possession shall
also deposit with Landlord, as security for the timely payment of Rent, an
amount equal to three (3) months' of the then current Base Rent and other
monetary charges accruing under this Lease; and
(2) the obligations imposed upon the trustee or
debtor-in-possession shall continue with respect to Tenant after the completion
of bankruptcy proceedings.
(iv) Landlord has determined that the assumption of the
Lease will not:
(1) breach any provision in any agreement by
which Landlord is bound relating to the Premises; or
(2) disrupt, in Landlord's judgment, the
reputation and profitability of the Premises.
(c) For purposes of this subsection, "adequate assurance" shall
mean:
(i) Landlord shall determine that the trustee or the
debtor-in-possession has and will continue to have sufficient unencumbered
assets after the payment of all secured obligations and administrative expenses
to assure Landlord that the trustee or debtor-in-possession will have sufficient
funds to fulfill the obligations of Tenant under this Lease; and
16
<PAGE> 17
(ii) an order shall have been entered segregating
sufficient cash payable to Landlord and/or there shall have been granted a valid
and perfected first lien and security interest in property of the Tenant,
trustee or debtor-in-possession, acceptable as to value and kind to Landlord, to
secure to Landlord the obligation of the Trustee or debtor-in-possession to cure
the monetary and/or nonmonetary defaults under this Lease within the time
periods set forth above.
(d) If the trustee or debtor-in-possession has assumed the
Lease pursuant to the terms and provisions of this Paragraph 21, for the purpose
of assigning (or election to assign) the Tenant's interest under this Lease or
the estate created thereby, to any other person, such interest or estate may be
so assigned only if Landlord shall acknowledge in writing that the intended
assignee has provided "adequate assurance" (as defined in this subsection (c))
of future performance of all of the terms, covenants and conditions of this
Lease to be performed by Tenant. For purposes of this Section, adequate
assurance of future performance shall mean that Landlord shall have ascertained
that each of the following conditions has been satisfied:
(i) The assignee has submitted a current financial
statement audited by a Certified Public Accountant which shows a net worth and
working capital in amounts determined to be sufficient by Landlord to assure the
future performance by such assignee of the Tenant's obligations under this
Lease;
(ii) If requested by Landlord, the assignee shall have
obtained guarantees in form and substance satisfactory to Landlord from one or
more persons who satisfy Landlord's standards of creditworthiness;
(iii) Landlord has obtained all consents to waivers from
any third parties required under any lease, mortgage, financing arrangement or
other agreement by which Landlord is bound to enable Landlord to permit such
assignment;
(iv) The assignee has deposited an adequate security
deposit with Landlord; and
(v) The assignee has demonstrated that its intended use
of the Premises is consistent with the terms of this Lease and will not diminish
the reputation of the Building, or violate any "exclusive" which has been
granted to another tenant in the Building, if applicable.
(e) When, pursuant to the Bankruptcy Code, the trustee or
debtor-in-possession shall be obligated to pay reasonable use and occupancy
charges for the use of the Premises or any portion thereof, such charges shall
not be less than the then current Base Rent, Additional Rent and other monetary
obligations of Tenant hereunder.
(f) Neither Tenant's interest in the Lease, nor any lesser
interest of Tenant herein, nor any estate of Tenant hereby created, shall pass
to any trustee, receiver, assignee for
17
<PAGE> 18
the benefit of creditors, or any other person or entity, or otherwise by
operation of law under the laws of any state having jurisdiction of the person
or property of the Tenant ("state law") unless Landlord shall consent to such
transfer in writing. No acceptance by Landlord of rent or any other payments
from any such trustee, receiver, assignee, person or other entity shall be
deemed to have waived, nor shall it waive the need to obtain Landlord's consent
or Landlord's right to terminate this Lease for any transfer of Tenant's
interest under this Lease without such consent.
(g) Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed without
further act or deed to have assumed all of the obligations arising under this
Lease on or after the date of such assignment. Any such assignee shall, upon
demand, execute and deliver to Landlord an instrument confirming such
assumption.
22. DEFAULT
(a) DEFAULT: The occurrence of any one or more of the
following events shall constitute a default and breach of this Lease by Tenant:
(i) The failure by Tenant to take possession of the
Premises within thirty (30) days after the Commencement Date; or
(ii) The vacating or abandonment of the Premises by
Tenant for a period of fifteen (15) or more consecutive days, or the removal of,
or attempt to remove all, or substantially all of Tenant's goods, furniture,
fixtures or other personal property from the Premises; or
(iii) The failure by Tenant to make any payment, including
Rent, to be made by Tenant hereunder as and when due; or
(iv) The making by Tenant of any general assignment or
general arrangement for the benefit of creditors; or the filing by or against
Tenant of any petition to have Tenant adjudged a bankrupt, or any petition for
reorganization or arrangement under any law relating to bankruptcy or insolvency
or debtor relief (unless, in the case of a petition filed against Tenant, the
same is dismissed within sixty (60) days), subject, however, to the right of the
trustee, with the court's approval, to timely assume the unexpired Lease,
provided, however, such trustee faithfully complies with the provisions of
subsection (b), (c) and (d) of Section 365 of the Bankruptcy Reform Act of 1978,
as same has been or may hereafter be amended; or the appointment of a trustee or
a 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 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; or
18
<PAGE> 19
(v) The failure by Tenant to observe or perform any of
the covenants, conditions or provisions of this Lease to be observed or
performed by the Tenant.
(b) REMEDIES IN DEFAULT: In the event of any default or breach
by Tenant, Landlord may at any time thereafter, in its sole discretion, with or
without notice or demand and without limiting Landlord in the exercise of a
right or remedy which Landlord may have by reason of such default or breach:
(i) Terminate Tenant's right to possession of the
Premises by any lawful means, in which case this Lease shall terminate and
Tenant shall immediately surrender possession of the Premises to Landlord. In
such event, Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default including, but not limited
to, the cost of recovering possession of the Premises; expenses of reletting,
including the renovation and alteration of the Premises as deemed reasonably
necessary by Landlord; past due Rent; reasonable attorney's fees and court costs
at trial, all appellate levels, and in any bankruptcy, mediation or arbitration
proceeding; that portion of any leasing commission paid by Landlord applicable
to the unexpired Term; and all Rent reserved herein for the balance of the Term;
or
(ii) Maintain Tenant's right to possession, in which case
this Lease shall continue in effect whether or not Tenant shall have abandoned
the Premises; and, in such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
the Rent as may become due hereunder or to obtain specific performance,
injunctive relief or other equitable relief necessary to require Tenant to
fulfill all of its obligations and duties set forth herein; or
(iii) Pursue any other remedy now or hereafter available
to Landlord at law or in equity.
(c) RIGHTS AND REMEDIES: Nothing herein contained shall be
construed as precluding the Landlord from having such remedy as may be and
become necessary in order to preserve the Landlord's right or the interest of
the Landlord in the Premises and in this Lease, even before the expiration of
the grace or notice periods provided for in this Lease, if under particular
circumstances then existing, the allowance of such grace or the giving of such
notice will prejudice or will endanger the rights and estate of the Landlord in
this Lease or in the Premises. All rights and remedies granted in this Lease to
Landlord or available at law or in equity shall be cumulative and not mutually
exclusive. Tenant hereby waives any right Tenant may have to interpose any
counterclaim in any summary or other proceeding brought by Landlord for
non-payment of Rent; however, the foregoing waiver shall not apply to a
counterclaim which Tenant would be forever barred from asserting if not raised
by Tenant in the proceeding for nonpayment of Rent.
(d) LANDLORD SELF HELP: Tenant agrees that if Tenant defaults
in the performance or observance of any covenant or agreement in this Lease
contained on the part of
19
<PAGE> 20
Tenant to be performed or observed, then Landlord may, in addition to all other
rights available at law, in equity, or under this Lease (but shall not be
obligated to), cure such defaults on behalf of and at the expense of Tenant. As
a part of said cure, Landlord may do all necessary work and make all necessary
payments in connection therewith, including, without limitation, the payment of
any attorney's fees, costs and charges, including appeals, arbitration and
mediation, in connection with any legal action which may have been brought.
Tenant agrees to reimburse Landlord within five (5) days following demand for
all amounts so paid by Landlord, together with interest thereon at the highest
rate permitted by law accruing from the date expended until the date repaid. Any
such costs shall be deemed Additional Rent and, in the event of non-payment,
Landlord shall have all rights and remedies as herein provided for the
non-payment of Base Rent.
(e) LIEN ON TENANT'S PROPERTY: Tenant hereby pledges and
assigns to Landlord as security for the payment of any and all Rent or other
sums or amounts provided for herein, all of the furniture, fixtures, equipment,
goods and chattels of Tenant which shall or may be brought or put on or into the
Premises, and Tenant agrees that said lien may be enforced by distress,
foreclosure or otherwise, at the election of the Landlord. Tenant agrees, upon
request of Landlord, to execute a financing statement (UCC-1) covering the
foregoing in the form requested by Landlord. The foregoing notwithstanding, so
long as Tenant is not in default under this Lease, Tenant is hereby authorized
to sell or dispose of any inventory in the ordinary course of business or to
sell and replace any equipment, fixtures or furniture when such replacement is
made necessary by normal wear and tear or by theft, damage or destruction.
Tenant is strictly prohibited from liquidating its inventory or disposing of all
or substantially all of its personal property without the prior written consent
of Landlord.
(f) REMEDIES CUMULATIVE: In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions of this Lease,
Landlord shall have the right of injunction and the right to invoke any remedy
allowed at law or in equity as if re-entry, summary proceedings and other
remedies were not herein provided for. Mention in this Lease of any particular
remedy shall not preclude Landlord from any other remedy, in law or in equity.
The foregoing remedies and rights of Landlord are cumulative.
23. SUCCESSORS AND ASSIGNS:
(a) This Lease shall bind and inure to the benefit of the
successors, heirs, and assigns of the parties hereto, subject to the
limitations, restrictions and prohibitions of Paragraph 16 above.
(b) The term "Landlord" wherever used in this Lease shall be
limited to mean and include only the owner or owners at the time in question of
the Premises or a mortgagee in possession, so that in the event of any sale,
assignment or transfer of the Premises, such owner or mortgagee in possession
shall thereupon be released and discharged from all covenants, conditions and
agreements of Landlord hereunder; but such covenants, conditions and
20
<PAGE> 21
agreements shall be binding upon each new owner and mortgagee in possession for
the time being of the Premises, until sold, assigned or transferred.
24. ESTOPPEL CERTIFICATES: Upon Landlord's written request therefor,
Tenant shall execute, acknowledge and deliver to Landlord, within seven (7) days
after Landlord's request, a written statement certifying: (i) whether any of the
terms or provisions of the Lease have been changed; (ii) whether this Lease has
been cancelled or terminated; (iii) the last date of payment of the Rent and the
time period covered by such payment; (iv) whether Landlord is in default under
this Lease and, if so, the exact nature of said default; and (v) such other
matters as may be reasonably required by Landlord. Any such statement by Tenant
may be relied upon as true and correct by Landlord and by any person or entity
to whom it is furnished by Landlord. Tenant's failure to timely deliver any
certificate required by this Paragraph 24 shall be deemed to be a default by
Tenant without the necessity of prior notice to Tenant. In addition, if Tenant
does not timely deliver such statement to Landlord within the specified
seven-day period, Landlord, and any prospective purchaser or encumbrancer, may,
in addition to all other rights and remedies available to Landlord, conclusively
presume that the status of the Lease is as is set forth in Landlord's request.
Tenant shall be estopped from denying the truth of such matters.
25. NOTICES: All notices to be given by either party to the other,
whether required or optional, shall be hand delivered or sent by Federal Express
or other similar carrier or by certified United States mail, return receipt
requested, postage prepaid. Notices given to Tenant shall be addressed to the
Tenant at the Premises (except that prior to the Commencement Date, notices
shall be sent to the address set forth in the heading of this Lease). Notices
given to Landlord shall be addressed to Landlord at the address set forth in the
heading of this Lease, with a copy addressed to Landlord's attorney, Robert T.
Rosen, P.A., Broad and Cassel, 390 North Orange Avenue, Suite 1100, Orlando,
Florida 32801. Notices shall be deemed given if hand delivered or sent by
Federal Express or similar carrier on the date accepted or refused and, if
mailed, on the third (3rd) day after posting as required above.
26. CONSTRUCTION OF LANGUAGE: Words of any gender used in this Lease
shall be held to include any other gender, and words in the singular number
shall be held to include the plural, when the sentence requires. The section
headings and titles are not a part of this Lease and shall have no effect upon
the construction or interpretation hereof.
27. PERSONAL PROPERTY TAXES: Tenant shall pay all personal property
taxes levied on Tenant's property within the Premises before the same become
delinquent.
28. CORPORATE AUTHORITY: Each of the persons executing this Lease on
behalf of Tenant hereby represents to Landlord that Tenant is a duly authorized
and existing corporation qualified to do business in the State of Florida, that
Tenant has full right and authority to enter into this Lease, and that each of
the persons signing on Tenant's behalf are authorized to so do.
21
<PAGE> 22
29. RADON GAS: Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
your county public health unit.
30. INTEREST ON PAST DUE AMOUNTS: All Rent payable hereunder shall
bear interest at the highest rate permitted by law from the due date until the
date actually paid.
31. ATTORNEYS' FEES: If either party defaults in the performance of
any of the terms, provisions, covenants and conditions of this Lease and by
reason thereof the other party employs the services of an attorney to enforce
performance of the covenants, or to perform any service based upon such
defaults, the prevailing party shall be entitled to receive from the
non-prevailing party reasonable attorneys' fees and costs, and related fees and
costs, and all expenses and costs incurred by the prevailing party in connection
therewith (including costs and fees relating to appeals at all appellate levels,
bankruptcy, any arbitration or mediation, and any other costs of collection),
and in enforcement of any remedy.
32. EXCULPATION: Neither Landlord nor any general or limited partner
of Landlord (nor any direct or indirect partner, incorporator, shareholder,
trustee, officer or director, disclosed or undisclosed, past, present or future
of a partner of Landlord) shall be personally liable for any liability or
obligation of Landlord to Tenant in connection with this Lease. Tenant will
look solely to the interest of Landlord in the Premises to satisfy any claims
which Tenant may have against Landlord with respect to such liabilities and
obligations.
33. FORCE MAJEURE: In each and every instance where a period of time
is prescribed in this Lease for the taking of any action by Landlord, Landlord
shall not be liable or responsible for, and there shall be excluded from the
computation of such period of time, and any deadline set herein shall be
extended by, the length of any delays due to strikes, riots, acts of God,
shortages of labor or materials, war, governmental laws, regulations or
restrictions, or any other cause whatsoever beyond the control of Landlord.
34. JOINT AND SEVERAL LIABILITY OF TENANT: If the Tenant is comprised
of more than one (1) person or entity, each person and entity shall be jointly
and severally liable hereunder.
35. NO IMPLIED WAIVER: The failure of Landlord to insist at any time
upon the strict performance of any covenant or agreement contained herein or to
exercise any option, right, power or remedy reserved herein shall not be
construed as a waiver or a relinquishment thereof; and no waiver of any term,
provision, condition or covenant of this Lease by Landlord shall ever be deemed
to imply or constitute a further waiver by Landlord of such default or a waiver
of any other term, provision, condition or covenant of this Lease. No payment
by Tenant or receipt by Landlord of a lesser amount than the Rent actually due
under this Lease shall be deemed to be other than on account of the earliest
Rent due hereunder. The
22
<PAGE> 23
endorsement or statement on any check or any letter accompanying any check or
payment that such payment shall be deemed an accord and satisfaction shall not
be effective, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of Rent due or to pursue any other
remedy available to Landlord.
36. TIME OF PERFORMANCE: Time is of the essence with respect to all
required acts of Tenant by this Lease.
37. DEFAULT BY LANDLORD: Landlord shall not be in default under this
Lease until and unless Landlord fails to perform obligations required of
Landlord hereunder within a reasonable time, which shall in any event be no less
than thirty (30) days after written notice thereof by Tenant to Landlord (or
such longer time as may be reasonably necessary), and further subject to the
right of the holder of any mortgage covering the Premises whose name and address
shall have theretofore been furnished to Tenant, in writing, to an additional
sixty (60) days notice and curative period. In no event shall Tenant have the
right to terminate this Lease as a result of Landlord's default, and Tenant's
remedies shall be limited to an award for actual damages, but not special or
consequential damages and/or an injunctive relief or specific performance.
38. BROKERAGE: Tenant represents and warrants that it has dealt with
no broker, agent or other person in connection with this transaction, and that
no broker, agent or other person brought about this transaction, and Tenant
agrees to indemnify and hold Landlord harmless from and against any claims by
any broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to the
transaction contemplated under this Lease. The provisions of this Paragraph
shall survive the termination of this Lease.
39. GOVERNING LAW: This Lease and the rights and obligations of the
parties shall be interpreted, construed, and enforced in accordance with the
laws of the State of Florida. Venue for any actions brought to enforce or
interpret this Lease shall be in Orange or Seminole County, Florida.
40. SEVERABILITY: 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 held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be otherwise valid and enforced to the
fullest extent permitted by law.
41. RECORDATION: Tenant shall not record this Lease or any memorandum
or notice hereof. A violation of the foregoing provision shall, at Landlord's
option, be deemed a default hereunder. At Landlord's request, Tenant agrees to
promptly execute a memorandum of this Lease in recordable form, and Landlord may
at its option, record said memorandum in the Public Records of the County in
which the Premises are located.
23
<PAGE> 24
42. HAZARDOUS AND TOXIC SUBSTANCES: In addition to and not by way of
limitation of the provisions of Paragraph 5 above, Tenant hereby covenants with
Landlord and represents and warrants to Landlord as follows:
(a) Tenant, at its sole cost and expense, will strictly comply
with any and all applicable federal, state and local environmental laws, rules,
regulations, permits and orders affecting the Premises and/or the business
operation of Tenant conducted on the Premises, relating to the generation,
recycling, reuse, sale, storage, handling, transport, disposal, or presence of
any "Hazardous Materials" (as defined below) on the Premises, whether now in
effect or as may be promulgated or amended from time to time (collectively, the
"Environmental Laws"). Tenant will not permit or allow the generation,
manufacture, recycling, reuse, sale, storage, handling, transport, or presence
of any Hazardous Materials on the Premises without Landlord's express prior
written consent, which consent Landlord may exercise in its sole and arbitrary
discretion. As used in this Paragraph 42, the term "Hazardous Material(s)"
shall mean any substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "toxic substances,"
"contaminants" or other pollution under any applicable Environmental Laws.
Notwithstanding anything to the contrary contained herein, Landlord's consent to
any action by Tenant shall not operate to relieve Tenant of the obligation to
comply with all of the provisions of this Paragraph 42. Tenant will not permit
or allow, and will take all actions necessary to avoid, the occurrence of any
spills of Hazardous Materials on or off the Premises as a result of any
construction on or use of the Premises. Tenant shall promptly advise Landlord
in writing immediately upon becoming aware of: (i) the existence of any spills,
releases or discharges of Hazardous Materials that occur on or onto the Premises
or off the Premises as the result of any construction on or use of the Premises,
and of any existing or threatened violation of this Paragraph 42; (ii) any and
all enforcement, cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened by any governmental authority with respect
to the Premises from time to time under any applicable Environmental Laws; (iii)
any and all claims made or threatened by any nongovernmental party against
Tenant or the Premises relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials or any
violation of applicable Environmental Laws; and (iv) Tenant's discovery of any
occurrence or condition on any real property adjoining or in the immediate
vicinity of the Premises that could cause the Premises or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
of the Premises under any Environmental Laws. Tenant acknowledges that it has
inspected the Premises and has undertaken all appropriate inquiry into the
present and past uses of the Premises consistent with good commercial practice
to minimize potential liability for violations of any and all Environmental
Laws.
(b) Without Landlord's prior written consent, Tenant shall
not enter into any settlement, consent or compromise with respect to any
"Environmental Claim(s)", as hereinafter defined, provided, however, that
Landlord's prior consent shall not be necessary for Tenant to take any
remedial action if ordered by a court of competent jurisdiction or if the
presence of Hazardous Materials at the Premises poses an immediate,
significant threat to the health, safety or welfare of any individual or
otherwise requires an immediate remedial response. As used in
24
<PAGE> 25
this Paragraph, "Environmental Claim(s)," shall mean any claim(s) or cause(s) of
action resulting from the failure of Tenant or the Premises to comply with any
Environmental Law relating to Hazardous Materials, industrial hygiene or
environmental conditions. In any event, Tenant shall promptly notify Landlord
of any action so taken.
(c) At all times during the Term, and any renewals or
extensions thereof, Tenant, at its own cost and expense, shall comply with any
and all applicable laws, regulations, ordinances, permits and orders regulating
the type and quantity of waste that may be discharged into the sanitary sewer
system serving the Premises. Tenant agrees to limit its discharges of waste
into the sanitary sewer system to "Domestic Waste Water", as such term is
defined by Rule 17-6.030(22) of the Florida Administrative Code, as amended from
time to time, or as the term may be defined by other laws, regulations,
ordinances, permits or orders presently in effect or hereafter enacted, as such
laws, regulations, ordinances, permits or orders may be amended from time to
time. In no event, however, shall Domestic Waste Water be construed to mean or
include any "Non-Domestic Waste Water" that has undergone "Pre-treatment" as the
latter term is defined in Rule 17-6.030(63) of the Florida Administrative Code
or as defined by other laws, regulations, ordinances, orders or permits
presently in effect or hereafter enacted, as such laws, regulations, ordinances,
orders or permits may be amended from time to time.
(d) Tenant agrees that Landlord and Landlord's agents and
independent contractors may enter and inspect the Premises at any time, and from
time to time, to verify that Tenant's operations on the Premises do not violate
any of the provisions of this Paragraph 42 and that they comply with any and all
applicable Environmental Laws. At Landlord's option, Landlord may obtain, from
time to time, reports from licensed professional engineers or other
environmental scientists with experience in environmental investigations and may
require Tenant to permit such licensed professional engineers or other
environmental scientists to conduct complete and thorough on-site inspections of
the Premises, including without limitation, sampling and analysis of the soil,
surface water, groundwater and air, to determine whether Tenant is in compliance
with the provisions of this Paragraph 42, and all Environmental Laws. Tenant
and its agents shall cooperate with Landlord and its agents in connection with
the conduct of such investigations. In the event such investigations disclose
that Tenant is in default under this Paragraph 42, Tenant shall, immediately
upon demand, reimburse Landlord for all costs and expenses of such
investigations; moreover, Landlord may, at its option, undertake such steps as
it deems necessary to cure such default and to bring the Premises into
compliance with the terms of this Paragraph 42, and Tenant shall, immediately
upon demand, reimburse Landlord for all costs and expenses incurred in curing
such default and bringing the Premises into compliance with the terms of this
Paragraph 42.
(e) Tenant hereby indemnifies and holds Landlord harmless from
and against any and all claims, demands, damages, losses, liens, liabilities,
penalties, fines, lawsuits and other proceedings, costs, and expenses (including
without limitation reasonable attorneys' fees and costs at trial, all appellate
levels, and in arbitration and mediation), arising directly or indirectly from,
or in any way connected with: (i) the presence, use, generation, treatment or
storage on, under or about the Premises of any Hazardous Substance, or the
disposal or release
25
<PAGE> 26
of Hazardous Substances on the Premises, whether or not expressly approved by
Landlord in writing; (ii) the presence of any Hazardous Substances off the
Premises as the result of any use of the Premises; (iii) any violation or
alleged violation of any Environmental Law, including but not limited to
violations of the Federal Comprehensive Environmental Response Compensation and
Liability Act of 1980 and regulations promulgated thereunder, as the same may be
amended from time to time; (iv) the costs of any necessary inspection, audit,
cleanup or detoxification of the Premises under any Environmental Laws, and the
preparation and implementation of any closure, remedial or other required plans,
consent orders, license applications or the like; or (v) any default by Tenant
under this Paragraph 42. All sums paid and costs incurred by Landlord with
respect to any Environmental Claim or any other matter indemnified against
hereunder shall be due and payable by Tenant immediately upon demand. If after
demand Tenant fails to pay any sums due pursuant to this indemnification, such
sums shall bear interest at the highest rate then permitted by applicable law,
from the date so paid or incurred by Landlord until Landlord is reimbursed by
Tenant. The indemnification contained herein shall survive the termination of
the leasehold estate created hereby and any assignment by Landlord of its rights
under this Lease.
(f) Any provision of this Lease to the contrary
notwithstanding, any breach of the covenants, representations or warranties
contained in this Paragraph 42 shall constitute a default under this Lease, and
shall entitle Landlord, in addition to Landlord's other rights and remedies
available at law, in equity, or under this Lease, to immediately terminate this
Lease.
43. NO REPRESENTATIONS BY LANDLORD: Landlord or Landlord's agents
have made no representations or promises with respect to the Land, Building or
the Premises, except as herein expressly set forth in this Lease, and no rights,
easements or licenses are acquired by Tenant, by implication or otherwise,
except as expressly set forth in the provisions of this Lease.
44. ENTIRE AGREEMENT: This Lease contains the entire agreement
between the parties hereto and supersedes all previous negotiations leading
thereto, and it may be modified only by an agreement in writing signed and
sealed by Landlord and Tenant. No surrender of the Premises shall be valid
unless accepted in writing by a duly authorized officer or agent of Landlord.
Tenant acknowledges and agrees that Tenant has not relied upon any statement,
representation, prior written or prior or contemporaneous oral promises,
agreements or warranties except such as are expressed herein.
26
<PAGE> 27
45. WAIVER OF TRIAL BY JURY: LANDLORD AND TENANT HEREBY KNOWINGLY,
IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS
LEASE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE OR ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS LEASE, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH
PARTY ENTERING INTO THIS LEASE.
IN WITNESS WHEREOF, Tenant and Landlord have caused this Lease to be duly
executed on the date first set forth above.
Witnesses: "LANDLORD"
RKW HOLDINGS, LTD., a Florida limited
partnership
By: RKW of Central Florida Corporation, a
Florida corporation, its general
partner
/s/ Robert T. Rosden By: /s/ Wayne Thaw Pres
- --------------------------------- -----------------------------
Print Name: Robert T. Roden Wayne Thaw, President
/s/ William G. Boltin, III
- ---------------------------------
Print Name: William G. Boltin, III
----------------------
"TENANT"
TNR TECHNICAL, INC.,
a New York corporation
/s/ Ben L. Butler
- ------------------------------- By: /s/ Jerrold Lazarus, C.E.O.
---------------------------
Print Name: Ben L. Butler Jerrold Lazarus, Chief Operating
-------------------- Officer
/s/ Ethan Greenberg
- -------------------------------
Print Name: Ethan Greenberg
-------------------
27
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 774,570
<SECURITIES> 0
<RECEIVABLES> 462,181
<ALLOWANCES> 20,000
<INVENTORY> 440,586
<CURRENT-ASSETS> 1,677,220
<PP&E> 187,917
<DEPRECIATION> 78,121
<TOTAL-ASSETS> 1,997,399
<CURRENT-LIABILITIES> 107,585
<BONDS> 0
0
0
<COMMON> 6,032
<OTHER-SE> 1,883,782
<TOTAL-LIABILITY-AND-EQUITY> 1,889,814
<SALES> 3,792,537
<TOTAL-REVENUES> 3,823,075
<CGS> 2,779,595
<TOTAL-COSTS> 3,613,822
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24,820
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 184,433
<INCOME-TAX> 49,035
<INCOME-CONTINUING> 135,398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135,398
<EPS-PRIMARY> $.52
<EPS-DILUTED> $.52
</TABLE>
