FORM 10-KSB/A
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For the Fiscal Year Ended March 31, 1998
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-15967
EFI ELECTRONICS CORPORATION .
(Exact name of small business issuer as specified in its charter)
_____Delaware
75-2072203 .
(State or other jurisdiction
of (I.R.S. Employer
incorporation or
organization) Identification Number)
1751 South 4800 West, Salt Lake City, Utah 84104
(Address of principal executive offices)
Registrant's telephone number, including area code: (801) 977-9009
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
None
n/a
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.0001 PAR VALUE
[X] Check 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 past twelve 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.
[X] Check if there is no disclosure of delinquent filers pursuant
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
Issuer's revenues for its most recent fiscal year: $ 16,372,366
Aggregate market value of the voting stock (which consists solely
of shares of $.0001 par value common stock) held by non-affiliates
of the registrant as of June 10, 1998, computed by reference to the
closing sale price of the registrant's common stock as reported by
the NASDAQ Small Cap Market on such date: $ 4,255,996
Number of shares of the registrant's common stock outstanding at
June 10, 1998: 5,554,644
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement relating to the Annual
Meeting of Shareholders scheduled for July 29, 1998 are
incorporated by reference in Part III of this report.
This Amendment No. 1 to Form 10-KSB dated March 31, 1998 is being
file by EFI Electronics Corporation at the request of the
Securities and Exchange Commission to update Part III, Item 13 to
include certain references to contracts inadvertently omitted in
the original filing. Also included are copies of these contracts.
Table of Contents
Part III, Item 13.............................................................3
Signature Page................................................................4
Exhibit 21....................................................................5
Lease Agreement............................................................6-29
Supply Agreement..........................................................30-38
Employment Contract.......................................................39-46
PART III
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
S-B Incorporated Filed
Number Exhibit by Reference Herewith
3.1 Certificate of Incorporation as Restated and Amended
(1)
3.2 Amended and Restated Bylaws (2)
10.1 Non-Qualified Stock Option Plan and Incentive
Stock Option Plan As Amended (May 1991) (3)
10.2 Lease Agreement for Company Headquarters
in Salt Lake City, Utah X
10.3 Hubbell Stock Purchase Agreement X
10.4 Employment Contract with Richard D. Clasen X
23.1 Independent Accountant's Consent - Grant Thornton LLP
X
21 List of subsidiaries X
27 Financial Data Schedule X
(1) Incorporated by reference to Exhibit Nos. 1 and 2 to Annual
Report on Form 10-K (File No. 0-15967) for fiscal year ended April
1, 1988,
and as Exhibit Nos. 4.3 and 4.4 to Registration Statement on Form
S-8 (Reg. No. 33-40279) filed on May 1, 1991.
(2) Incorporated by reference to Exhibit No. 1 to Annual Report on
Form 10-K for fiscal year ended March 31, 1989.
(3) Incorporated by reference to Exhibit No. 1 to Annual Report on
Form 10-K for fiscal year ended March 29, 1991.
(b) Reports on Form 8-K:
On January 12, 1998, form 8-K was filed stating that the Company
acquired all of the outstanding shares of EFI Electronics Europe,
S.L. on January 1, 1998. In addition to $125,000 of cash, the
Company issued notes payable of $275,000 and 220,000 shares of the
Company's common stock.
On June 1, 1998 Form 8-K/A was filed by the Company as an Amendment
to the 8-K filed on January 12, 1998 to provide the financial
statements and pro forma statements not filed with the 8-K report.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized on January 22, 1998.
EFI ELECTRONICS CORPORATION
By: /s/
Richard D. Clasen
Chief Executive Officer
and President
Exhibit 21
EFI Electronics Corporation Subsidiaries
Company Name Venue of Incorporation
EFI Electronics Europe S.L. Barcelona, Spain
LEASE AGREEMENT
FOR
NINIGRET VIII
BETWEEN
NINIGRET PARK DEVELOPMENT, L.C., AS LANDLORD
AND
EFI ELECTRONICS CORPORATION, AS TENANT
DATED
JULY 21, 1997
LEASE AGREEMENT
FOR
NINIGRET VIII
THIS AGREEMENT TO LEASE (the "Lease") dated this 21st day of
July, 1997, by and between NINIGRET PARK DEVELOPMENT, L.C., a Utah
limited liability company, hereinafter called "Landlord," and EFI
ELECTRONICS CORPORATION, a Delaware corporation, hereinafter called
"Tenant".
WITNESSETH:
Whereas, Tenant desires to lease from Landlord, for the term set
forth below, for Tenants use, the Leased Premises, as hereinafter
defined, to be constructed on a portion of that certain real
property consisting of approximately 9.5 acres known by Landlord as
"Ninigret VIII", consisting of approximately 212,000 square feet of
building, and located at approximately 4800 West 1825 South, Salt
Lake City, Utah (herein the "Property").
NOW, THEREFORE, in consideration of the covenants and premises
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is
agreed by the parties hereto as follows:
ARTICLE I
LEASED PREMISES
Landlord hereby demises and leases to Tenant, and Tenant hereby
leases and takes from Landlord, approximately 56,466 gross square
feet of warehouse space located in that certain building (the
"Building") constructed upon the Property, a site plan of which
space is attached hereto as Exhibit A (the "Site Plan"), together
with (a) the items set forth in the Building Standards as are
listed on Exhibit B hereto (to the extent not inconsistent with
Exhibits C-1 through 3 below), (b) such Landlord improvements
("Landlord's Improvements") as are listed on Exhibits C-1 through 3
hereto, and (c) the nonexclusive right to use and enjoy all
improvements, ingresses and egresses located on the Property
outside of the Building, including without limitation the
driveways, sidewalks, Tenant's pro rate share of the car parking
spaces (plus such additional car parking spaces that Landlord will
construct or otherwise make available for Tenant's exclusive use,
either on the Property or in reasonable proximity thereto, so that
Tenant will have for its use approximately 110 car parking spaces
in total) and landscaping (all of which are designated herein, the
"Leased Premises"), for the term and upon the rental herein set
forth.
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ARTICLE 11
TERM
2.1 TERM: This Lease shall be for a term of twelve years (the
"Term") commencing on the Commencement Date, as hereinafter
defined, and the date which is twelve (12) years after the
Commencement Date plus such number of additional days so as to
cause the expiration date to end on the last day of a month (the
"Fixed Expiration Date"), or on such earlier or later date upon
which the Term shall sooner or later end pursuant to any of the
terms, conditions or covenants of this Lease or pursuant to law
(the "Expiration Date'). Tenant shall have no option or other
right to renew this Lease beyond such Term.
2.2 POSSESSION: Landlord shall cause to be constructed the
Tenant Improvements and shall use reasonable efforts to complete
such Improvements by October 1, 1997, at which time Tenant may
fully occupy the Leased Premises and payment of rent shall begin
(the "Commencement Date"). If Landlord is unable to provide Tenant
with full possession of the Leased Premises on or before November
15, 1997, Tenant at its option upon written notice to Landlord, on
or before December 1, 1997, may terminate this Lease and neither
party shall thereupon have any liability to the other under the
terms of this Lease.
ARTICLE III
RENT
3.1 RENT: (a) Tenant shall pay to Landlord in monthly
installments payable in advance on the first day of each month base
rent at the following monthly rates (the "Base Rent"):
First 60 Months of Lease Term $ 22,586.40
Second 60 Months of Lease Term $ 25,296.77
Last 24 Months of Lease Term $ 28,332.38
Base rent shall be payable from the Commencement Date until the
Expiration Date, together with the additional rent and other
charges provided for in this Lease. Rent for any period during the
term of this Lease that is for less than one month shall be a
prorata portion of the monthly installment.
(b) All rent and additional rent payable under this
Lease shall be paid at the office of Landlord stated herein, or at
such other place as Landlord may hereafter designate by notice to
Tenant, without any offset or deduction whatsoever. Should any
rental payment by Tenant to Landlord hereunder not be made within
ten (1 0) days after the date when due, Tenant shall pay Landlord a
late payment charge equal to five percent (5%) of the unpaid
payment; provided that Landlord shall waive such late payment
penalty
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on such first occurrence provided such delay is cured immediately
after notice thereof. This late payment charge shall be deemed
additional rent and at Landlord's election shall be added to the
rent for the month in which the rent shall be due and Landlord
shall have all right with respect to additional rent as for
non-payment of any and all other rents due under the terms of this
Lease. The demand for and collection of the aforesaid late payment
charge shall in no way be deemed a waiver of any and all other
remedies that Landlord may have under the Lease by way of summary
proceeding or otherwise in the event of a default in payment of
rent.
3.2 NO SET-OFF: The Base Rent shall be paid to Landlord
without notice, demand, abatement, deduction or set-off, except as
provided in this Lease. Tenant will also pay without notice,
except as may be required in this Lease, and without abatement,
deduction or set-off, except as otherwise provided in this Lease,
as additional rent, all other payments that Tenant in any of the
provisions of this Lease assumes and agrees to pay and/or deposit
(which, together with the Base Rent are hereinafter referred to as
"Rental") and, in the event of any non-payment or non-deposit
thereof, Landlord shall have (in addition to all other rights and
remedies) all the rights and remedies provided for herein or by law
in the case of non-payment of the Rental.
3.3 PAYMENT OF TAXES: (a) Beginning on and after the
Commencement Date, Tenant shall pay when due its "Pro Rata Share"
(as determined under Section 5.6(b)(iii) below) of all real or
personal property taxes, license fees and assessments levied or
imposed against, or measured by, the land and improvements of which
the Leased Premises are a part or measured by the rent payable
hereunder during the term of the Lease or any extension thereof, by
state, municipal or other governmental authority (but excluding
Federal, state or municipal income or corporate franchise taxes) or
by private body pursuant to applicable covenants, conditions and
restrictions that relate to the terms of this Lease, regardless of
whether payment of such tax is due during the Term of the Lease or
may be postponed until a time after the lease Term (herein
"Taxes"). Payment of such Taxes relating to a particular taxable
year, prorated in the event that the Taxes are payable for a
partial lease year, shall be paid at the time and in the manner as
provided in Section 5.6(a). If Tenant fails to pay when due any of
such Taxes as set forth herein, Landlord may pay the same under the
provisions of Article XIII, set forth below. Tenant's obligations
to pay Taxes hereunder, with respect to the period covered by the
Lease, shall survive the Expiration Date.
(b) Tenant shall also pay to Landlord, as additional Taxes,
Tenants share (based on Tenant's Pro Rata Share) of the reasonable
costs and expenses paid or incurred by Landlord during each
calendar year of the Lease Term for professional and other services
(including, but not limited to, reasonable fees and expenses of
consultants, attorneys, appraisers and experts) in connection with
efforts which successfully lowered Taxes or successfully resisted
increased Taxes. Such costs and expenses shall be determined in
accordance with generally accepted accounting principles and
allocated to any particular calendar year on the accrual method of
accounting. Tenant shall pay its share of such costs and expenses
annually within thirty (30) days following receipt by
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Tenant of a statement therefor, and Tenant's share shall be
prorated in the event Tenant is required to make such payment for a
partial lease year. If Tenant shall request Landlord to contest
any increase in Taxes, and provided in Landlord's reasonable
judgment the requested contest has a reasonable prospect for
success, Landlord shall undertake such contest and Tenant shall pay
its share of the costs thereof as provided hereinabove.
3.4 SECURITY DEPOSIT: Tenant shall not be required to pay any
security deposit to Landlord.
ARTICLE IV
INSURANCE
4.1 BUILDING INSURANCE: Landlord shall cause to be issued, and
Tenant shall pay Men due its Pro Rata Share (as determined under
Section 5.6(b)(iii) below) of the cost of, building insurance for
the Property insuring against the perils of fire, the extended
coverages "all risk' property insurance, vandalism and malicious
mischief, and all risks to the Building improvements constituting
the Leased Premises (subject to customary insurance policy
exclusions) in an amount substantially equal to one hundred (1 00%)
percent of its full replacement cost (including demolition and
debris removal costs and compliance costs at the time of
construction) without regard to depreciation (herein, the "Building
Insurance"), or such lesser or greater coverage (including without
limitation earthquake coverage) as Landlord in its reasonable
discretion may determine.
4.2 LIABILITY AND OTHER INSURANCE: (a) Tenant shall at all
times during the Term, at Tenant's sole cost and expense, with
Landlord named as an additional insured, maintain with a
financially responsible insurance company, commercial general
liability insurance, including without limitation contractual and
legal liability, to afford protection on an "occurrence basis"
against claims for personal injury (including without limitation
bodily injury or death) or property damage and machinery insurance,
occurring on, in or about the Leased Premises, the Property and any
elevators, or any adjoining properties, with coverage limits of at
least the following amounts (which amounts may be increased from
time to time as Landlord in its reasonable discretion may
determine):
Bodily Injury, $2,000,000.00 each occurrence; Property Damage,
$2,000,000.00; or in lieu thereof, a combined limit of bodily
injury and property damage liability of not less than
$5,000,000.00
per occurrence.
(b) Tenant shall also maintain such insurance covering
Tenant's property as Tenant shall reasonably determine,
certificates of which upon reasonable request of Landlord shall be
furnished to Landlord.
(c) Tenant shall also maintain workers' compensation
and disability benefits insurance covering Tenant's employees at
the Leased Premises, and such other and additional insurance, and
in such amounts, as may from time to time reasonably be required by
law, against such other hazards as are commonly insured against in
the case
4
of similarly situated premises or with respect to persons engaged
in businesses similar to Tenants business conducted from the Leased
Premises.
(d) Each policy of insurance required to be obtained by
Tenant as herein provided and each certificate therefor issued by
the insurer shall provide that: (1) no act or omission of Tenant
shall affect or limit the obligation of the insurance company to
pay to Landlord the amount of any loss sustained, and (ii) such
policy (or if such policy is an umbrella or blanket policy, such
policy as it relates to the Leased Premises) shall not be canceled
or modified without at least thirty (30) days' prior written notice
to Landlord. All general liability policies shall name Landlord
and, if requested by Landlord, any mortgagee of the Property as an
additional insured, as their interests may appear.
4.3 SUBROGATION: Neither Landlord nor Tenant shall be liable
to the other or anyone claiming by, through or under the other,
including an insurance carrier or carriers, for any loss or damage
actually covered by insurance earned by the other to the extent of
such coverage, and no such carriers shall have the right to
subrogate against Landlord or Tenant.
ARTICLE V
CONDITION AND MAINTENANCE OF THE PROPERTY
5.1 CONDITION OF THE PREMISES: (a) Landlord agrees that the
Leased Premises shall be, at the Commencement Date, subject to
normal "punch list" items requiring correction, which Landlord will
be obligated to correct, and that the Leased Premises shall be
constructed, substantially in accordance with the list of Landlord
Improvements summarized on Exhibits C-1 through 3 hereto, and upon
completion of the office and other improvements shall contain all
of the elements of Building Standards as are set forth on Exhibit B
hereto (but only to the extent not inconsistent with Exhibits C-1
through 3 hereto); (b) the Leased Premises shall, at the
Commencement Date, be in all material respects in compliance with
the Hazardous Materials Laws (as defined in Section 6.3(b)) and
applicable provisions of the Americans with Disabilities Act and
all other applicable laws, ordinances, rules and regulations; (c)
Landlord shall, at its sole cost and expense, be solely responsible
for the replacement of the roof as and when needed and the
"Structural Portions" (as defined in Section 5.3) of the Leased
Premises; (d) Landlord hereby represents and warrants that the
Building and all improvements that will comprise the Leased
Premises and all mechanical systems, including without limitation
heating, ventilation and air conditioning systems ("HVAC") and
water sprinkling systems, shall comply with subsections 5.1 (a) and
(b) hereof and be in good working condition for the first twenty
four (24) months of the Term of this Lease and shall, upon notice
from Tenant, and at Landlord's sole cost and expense, immediately
correct any such item that is not in good working condition during
such period of time; and (e) Landlord shall enforce, for the
benefit of Landlord and Tenant, any service or product warranty
provided to Landlord with respect to the Leased Premises by any
third party workman or vendor, in cases where such warranty periods
extend beyond 24 months from the Commencement Date of this Lease.
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5.2 MAINTENANCE OF LEASED PREMISES BY TENANT: Except as set
forth in Section 5.1 or 5.3, Tenant agrees to maintain and to take
good care of that portion of the Leased Premises to which the
Tenant has exclusive possession, and to keep the same in a clean,
attractive and sanitary condition, all at the sole cost and expense
of Tenant, reasonable wear and tear and damage excepted. Tenant
shall not commit or suffer, and shall use all reasonable precaution
to prevent, waste, damage or injury to the Leased Premises.
Further, Tenant agrees to pay when due all charges for water, heat,
gas, electricity and other public utilities used on the Leased
Premises including the replacement of light bulbs, tubes, ballasts
and starters within a reasonable time after they fail to operate
properly. In the event any of the foregoing utilities are not
separately metered to the Leased Premises, but rather are metered
to the Building, Tenant shall pay its Pro Rata Share of such costs
when billed for the same by Landlord.
5.3 REPAIRANDMAINTENANCEOFPROPERTYBYLANDLORD: Landlord shall
be responsible for, and keep in good order, repair and condition,
at Landlord's sole expense, and without reimbursement from Tenant,
the roof and "Structural Portions" (as hereinafter defined) of the
Building; provided that Tenant shall be responsible for all repairs
and maintenance resulting from its use of the floor slabs and any
uses of any Structural Portions that are inconsistent with the
design intent of the particular elements. (By way of illustration,
those situations for which Tenant would be responsible for the
repairs and maintenance of the Structural Portions would include
the puncturing of the roof with mechanical equipment, hitting or
damaging columns, floors or walls with products, fork lifts or
other matters or burdening the floors, roof, columns or wall with
excessive stress or weight.) As used in this Lease, the term
'Structural Portions" shall mean the foundations, floor slabs (but
only to the extent that such floor slabs evidence cracking or
settlement resulting from their original construction, as opposed
to Tenant activities thereon or uses therewith), weight bearing
elements and other structural elements of the Building. Further,
Landlord shall be responsible for and shall perform the Applicable
Maintenance and Repairs, as hereinafter defined, with respect to
the Leased Premises and all of the Property (including that portion
of the Property, if any, leased by Landlord to another tenant), and
subject to Section 5.6(a) below Tenant shall reimburse Landlord for
Tenant's Pro Rate Share of all Operating Costs, as hereinafter
defined, incurred by Landlord in performing the Applicable
Maintenance and Repairs.
5.4 ERECTION AND REMOVAL OF SIGNS: Tenant shall have the
right, subject to all applicable municipal ordinances and
regulations and Covenants, Conditions and Restrictions applicable
to the Property, to affix or display on the Building such signs
identifying the Tenant and/or its business as Tenant may consider
necessary or desirable, and as may be reasonably approved by
Landlord. All of Tenant's signs shall be removed by Tenant at or
prior to the expiration or termination of this Lease.
5.5 ALTERATIONS BY TENANT: Tenant may, with the written
consent of Landlord, whose consent shall not be unreasonably
withheld, but in any event at Tenant's sole cost and expense, make
alterations to the Leased Premises, in a good and workmanlike
manner, for Tenant's reasonable use of the Leased Premises. Any
6
alterations or improvements to the Leased Premises, including
partitions, all electrical fixtures, lights and wiring, and other
fixtures, equipment and improvements installed by Tenant, shall
become the property of the Landlord at the expiration of the Term
or sooner termination of the Lease, unless (a) such alterations or
improvements may reasonably be removed by Tenant without damage to
the Leased Premises, or (b) upon removal, Tenant repairs any and
all damage to the Leased Premises caused by such removal; provided,
however, that in Landlord's discretion, Landlord may require
Tenant, at Tenant's sole expense and in a good and workmanlike
manner, to remove such alterations, fixtures, or equipment as are
particularly suited to or for Tenant's use and return the Leased
Premises to its condition at inception of the Term. Any
alterations or improvements made by Tenant shall be done in a good
and workmanlike manner in accordance with design plans prepared by
or under the direction of Tenant that were first submitted to
Landlord for its reasonable approval. Tenant shall be solely
responsible for providing that all such alterations and
improvements comply in all respects with all applicable Federal,
state and local statutes, including without limitation, local
building and zoning ordinances and all disability laws, and Tenant
shall provide such protections to Landlord in connection with the
construction of such improvements, including without limitation,
adequate insurance, mechanics lien waivers, architect and engineer
certifications, as Landlord may reasonably request.
5.6 ADDITIONAL RENT: (a) Tenant agrees to pay or reimburse
Landlord, as additional rental, for Tenant's Pro Rata Share of all
Operating Costs paid or incurred by Landlord for Applicable
Maintenance and Repairs, and for Building Insurance and Taxes
attributable to the Building and the Property (all such items of
expense, together, referred to herein as the "CAM's"), all in
accordance with the provisions of this Section 5.6.
Landlord shall estimate each year the estimated CAM's
(including Taxes and Building Insurance) and charge Tenant monthly
one-twelfth of such estimated CAM'S, and shortly after the end of
the calendar year in question, Landlord shall furnish to Tenant an
itemized statement ("Landlord's CAM Statement') in reasonable
detail of the CAM's for the immediately preceding year and
thereupon there shall be an adjustment between Landlord and Tenant,
with payment to or repayment by Landlord, as the case may be, and
Tenant's CAM contribution for the next ensuing year shall be
adjusted upward or downward based upon Landlords CAM Statement.
Within ninety (90) days of Tenant's receipt of a Landlord's CAM
Statement, Tenant may question or contest any aspect of the
Statement by providing written notice to Landlord specifying in
reasonable detail the basis for such question or contest. In such
case, Landlord shall provide such additional back-up to Landlord's
CAM Statement as may be reasonably necessary to provide proof of
the payment in question.
(b) Definitions. (i) The term "Applicable
Maintenance and Repairs" shall mean, subject to Sections 5.1 and
5.3, all necessary, reasonable or customary operation, maintenance,
replacement and repairs of any kind on or with respect to the (A)
exterior
7
entrances, doors, wells, ceilings, glass, windows, moldings, to the
extent the same are not part of the structural portions or the roof
of the Building, sidewalks, driveways, parking lots, landscaping,
fences, and water, sewer and gas connections, pipes, mains, and all
other fixtures, machinery and equipment, and the servicing of and
general repairs to the electrical wiring, plumbing and HVAC systems
(including spring and fall servicing, and replacement of filters as
recommended by the manufacturers); (B) the mowing of grass, care of
shrubs, general landscaping, snow removal, sweeping of parking lot
and truck dock areas, and the cleaning and painting of the exterior
of the Building as the same may or might be necessary or
appropriate in order to maintain the Property in a clean,
attractive and sanitary condition; and (C) the cost of periodic
maintenance and restoration of Building surfaces, including floors
and walls, and other surfaces both on the interior and exterior of
the Building and in exterior areas of the Property, as well as
repaving and restriping of the parking areas. To the extent that
any part of the Property or Building is or becomes irreparable or
worn out or exhausted by ordinary use or otherwise or is inadequate
for the general use by the Tenant thereof, including without
limitation the HVAC, the water sprinkling system or the electrical
or plumbing systems, Applicable Maintenance and Repairs shall
include the repair, replacement or improvement of such item, as the
case may be. When used in this Article V, the term "repairs" shall
include all necessary replacements, renewals, alterations and
additions. All repairs made shall be equal in quality and class to
the original work and shall be made in compliance with all
applicable legal requirements and under the building code then in
effect.
(ii) The term "Operating Costs" shall mean the sum of all
reasonable expenses and costs paid or incurred by Landlord in
performing and accomplishing the Applicable Maintenance and
Repairs, including all costs and expenses for labor, materials and
other costs or expenses, plus an administrative fee payable to
Landlord of 5% of the amount of the total CAM's for such year. By
way of example, Operating Costs shall include without limitation:
the cost of all building and cleaning supplies and materials; the
cost of all charges for cleaning, maintenance, and service
contracts and other services, the cost of all professional
services, and the cost of any replacement equipment. Any expenses
for maintenance incurred by Landlord that pertain to both the
Property and other properties contiguous to or in the vicinity of
the Property shall be reasonably and equitably allocated between
the relevant properties.
(iii) The term "Pro Rata Share" shall mean the percentage
set forth in Exhibit D hereof.
(iv) To the extent they do not interfere materially with
Tenant's use of the Leased Premises, there shall be no allowance to
Tenant for diminution of rental value and no liability on the part
of Landlord by reason of inconvenience, annoyance or injury to
business or person arising from Landlord or others making repairs,
alterations, additions or improvements in or to any portion of the
Building or the Leased Premises or in and to the fixtures,
appurtenances or equipment thereof. Tenant shall not be entitled
to any set off or reduction of rent by reason of any failure of
Landlord to comply with the covenants of this or any other article
of this Lease. Tenant agrees that Tenant's sole
8
remedy at law in such instance will be by way of an action for
damages for breach of contract or specific performance. The
provisions of this Article V shall not apply in the case of fire or
other casualty, which are dealt with in Article IX hereof.
Anything herein contained to the contrary notwithstanding, in no
event shall Landlord be liable to Tenant in connection with the
undertakings of Landlord pursuant to this Section 5.6 except in the
case of Landlord's gross negligence or willful misconduct.
ARTICLE VI
AUTHORIZED USE; COMPLIANCE WITH LAWS
6.1 AUTHORIZED USE: Tenant may use the Leased Premises for the
manufacture, distribution and sale of electronic products and all
lawful activities associated therewith; provided that Tenant shall
not (i) store or do anything on or in the Leased Premises that
would cause the existing fire protection system to be deemed or
declared inadequate or illegal under any existing law or under
existing and customary insurance rating guidelines or policies,
unless Tenant upgrades, at Tenants expense, the system to comply
with such @ or guidelines; (ii) do, bring or keep anything in or
about the Leased Premises that will cause a cancellation of any
insurance policies covering the Leased Premises, (iii) use the
Leased Premises in any manner that will constitute waste, nuisance
or cause unreasonable annoyance to owners or occupants of
neighboring properties, or (iv) create or permit to be created any
lien, encumbrance or charge upon the Building or Property or any
part thereof or the income therefrom, or any assets of Landlord, or
suffer any other matter or thing whereby the estate, rights and
interest of Landlord in the Property or any part thereof, or any
assets of Landlord, might be impaired or (v) do anything on the
Leased Premises or the Property that will cause damage to the
Leased Premises or the Property or any part thereof, ordinary
v,/ear and tear excepted. The Leased Premises shall not be used
for any dangerous, noxious or offensive trade or business, and
Tenant will at all times use and operate the Leased Premises in
such a manner as to minimize the risk of indoor air quality
problems or any diagnosable illness that can be identified and
attributed to contaminants in the Leased Premises attributable to
Tenant. Tenant shall take all steps necessary to prevent
inadequate ventilation and emission of chemical or other
contaminants from indoor and outdoor sources under or within
Tenant's control.
6.2 COMPLIANCE WITH LAWS: (a) Throughout the term of this
Lease, Tenant, at its sole cost and expense, shall promptly comply
with all present and future safety, health, environmental or other
laws, ordinances, orders, rules, regulations and requirements of
all federal, state, county and municipal governments, departments,
commissions, boards and officers, and all orders, rules and
regulations of the National Board of Fire Underwriters or any other
body exercising similar functions, which may be applicable to
Tenants use of the Leased Premises.
(b) Tenant shall be responsible for obtaining all
permits, licenses and approvals of all Governmental Authorities
that are necessary for the operation of its business at the Leased
Premises.
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(c) Tenant shall not at any time use or occupy the
Leased Premises in violation of the certificate of occupancy issued
for the Building.
(d) No abatement or reduction of the Rental or other
charges required to be paid by Tenant pursuant to the terms of this
Lease shall be claimed by or allowed to the Tenant for any
inconvenience, interruption or loss of business caused directly or
indirectly by any such present or future laws, ordinances, orders,
rules, regulations or requirements, or as a result of any
diminution of the amount of space used by Tenant caused by legally
required changes in the operation or use of the Leased Premises.
6.3 ENVIRONMENTAL MATTERS: (a) Tenant shall not allow the use,
generation, handling, storage, transportation, treatment or
disposal of "Hazardous Materials" (as defined in Paragraph (b) of
this Section 6.3) at the Leased Premises or allow Hazardous
Materials to be released or discharged upon or from the Leased
Premises or to be located at the Leased Premises without the prior
written consent of Landlord; provided that Tenant shall be allowed
to use, store, handle or otherwise use any cleaning materials or
any other Hazardous Materials if used in the ordinary course of
Tenant's operations at the Leased Premises in compliance with all
applicable laws and regulations regarding the use of same.
(b) Tenant shall not cause or permit the Leased Premises
to be in violation of any Federal, State or local laws,
regulations, guidelines, codes, permits, rules, administrative and
judicial orders and ordinances relating to industrial hygiene,
indoor air quality laws, regulations and industry standards or to
the environmental conditions on, under or about the Leased Premises
or the Property including, but not limited to, soil and ground
water conditions; provided, however, that Tenant shall not be
obligated to Landlord for any Hazardous Material Claims (i)
attributable to any pre-existing conditions of the Leased Premises
or the Property as of the Commencement Date or (ii) caused by any
person other than Tenant or its employees, agents, guests or
invitees. Tenant agrees at all times to comply fully and in a
timely manner with, and to cause all its employees, agents,
invitees, licensees, contractors and any other persons occupying or
present on the Leased Premises to comply with, all such laws and
all applicable Federal, State and local laws, regulations,
guidelines, codes, permits, rules, executive, administrative and
judicial orders and ordinances and all provisions and requirements
of any casualty, liability or other insurance policy required to be
carried by Tenant under the provisions of this Lease (collectively,
"Hazardous Materials Laws") applicable to the use, generation,
manufacture, handling, storage, treatment, transport and disposal
of any flammable materials, explosives, radioactive materials,
hazardous wastes, toxic substances or similar materials, including,
without limitation, any substances now or hereafter defined as or
included in the definition of "hazardous substance," "hazardous
waste," "hazardous material," "pollutant or contaminant," or "toxic
substance" under any applicable Federal, State or local laws or
regulations (including but not limited to _ 101 (1 4) of the
Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA), 42 U.S.C. _ 9601(14); 101 (33) of CERCLA, 42 U.S.C. _
9601(33); _ 104(5) of the Resource Conservation and Recovery Act,
42 U.S.C. 6903(5)), (collectively, "Hazardous Materials").
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(c) Tenant shall immediately advise Landlord in writing
of (1) any and all enforcement, cleanup, removal or other
governmental or regulatory actions, of which Tenant is aware or has
received notice, instituted, contemplated or threatened against the
Leased Premises pursuant to any applicable Hazardous Materials
Laws; (ii) all claims made or threatened in writing by any third
party against Tenant or the Leased Premises relating to damage,
contribution, cost recovery, compensation, loss or injury resulting
from any Hazardous Materials (the matters set forth in clauses (1)
and (ii) above are hereinafter referred to as "Hazardous Materials
Claims"); and (iii) Tenant's discovery of any occurrence or
conditions on the Leased Premises, the Property or any real
property adjoining or in the vicinity of the Property that could
cause the Property or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use of
the Property or any part thereof under any Hazardous Materials Laws.
(d) Landlord shall have the right at its expense to
join and participate in, as a party if it so elects, any legal
proceedings or actions initiated in connection with any Hazardous
Materials Claims caused by Tenant or Tenant's Agents. Tenant shall
be solely responsible for, and shall indemnify and hold harmless
Landlord, its directors, officers, employees, agents, successors
and assigns from and against, any loss, damage, cost, expense and
liability directly or indirectly arising out of or attributable to
the use, generation, handling, storage, transportation, release,
threatened release, discharge, disposal, or presence of Hazardous
Materials on, under or about the Leased Premises or the Property;
provided, however, that Tenant shall not be obligated to Landlord
for any Hazardous Material Claims (or the payment of attorney's
fees or disbursements) (i) attributable to any pre-existing
conditions of the Leased Premises or the Property as of the
Commencement Date, or (ii) caused by any person other than Tenant
or its employees, agents, guests or invitees. The indemnity
hereunder shall include, without limitation, the costs of any
required or necessary repair, cleanup or detoxification, and the
preparation and implementation of any closure, remedial or other
required plans (including without limitation, the costs arising
from the imposition of any lien, governmental or otherwise, for the
recovery of environmental cleanup costs expended in connection with
any such Hazardous Materials Claims) and all costs and expenses
incurred by Landlord in connection therewith, including but not
limited to reasonable attorneys' fees and disbursements. The
foregoing indemnity shall apply regardless of whether the
generation, use, handling, storage, transport, release, disposal,
discharge of presence of any such Hazardous Materials was or will
be undertaken in accordance with applicable laws, regulations,
codes, or ordinances. The provisions of this Section 6.3 shall
survive the expiration or termination of this Lease.
ARTICLE VII
RIGHT OF ENTRY BY LANDLORD
So long as such action does not materially interfere with
Tenant's use of the Leased Premises, upon receipt of at least 3
hours notice from Landlord, Tenant shall permit reasonable
inspections of the Leased Premises during reasonable business hours
by Landlord or Landlord's agents or representatives for the
purposes of (a) ascertaining the
11
condition of the Leased Premises, (b) making such repairs or
maintenance as may be required or permitted to be made by Landlord
under the terms of this Lease, including without limitation
Applicable Maintenance and Repairs, (c) making any repairs and
performing any work therein that may be necessary by reason of
Tenant's failure to make any repairs or perform any work required
to be made or performed by Tenant under this Lease, and (d)
exhibiting the Leased Premises to prospective tenants, lenders or
purchasers.
ARTICLE VIII
ASSIGNMENT AND SUBLETTING
This Lease may not be assigned, transferred, mortgaged, disposed
of, or pledged by Tenant, nor may the Leased Premises be sublet by
Tenant, without the prior written consent of Landlord, whose
consent shall not be unreasonably withheld if the proposed
assignee, sublessee or other transferee is financially and
otherwise responsible, Landlord is furnished a copy of the proposed
agreement between Tenant and the transferee, the proposed
assignee's or sublessee's use is compatible with the structure and
general construction of the Leased Premises, as well as the use and
occupancy of the Building by other tenants, if any, of Landlord;
provided, that, at Landlord's sole and absolute discretion, it may
upon presentment by Tenant of the proposed assignment or sublease
elect to recapture the Lease by terminating Tenant's leasehold
interest in the Leased Premises as of the date that Tenant
otherwise would have commenced the assignment or sublease, with the
effect that the Lease shall be terminated and thereafter be of no
further force or effect. Any such assignment, transfer, mortgage,
disposal, pledge or sublet done without Landlord's consent shall be
considered a default by Tenant that shall allow Landlord to use all
of its remedies applicable to a default, including a termination of
the Lease. For this purpose, a transfer of this lease to an entity
under the control of, controlled by or under common control with
Tenant shall not be deemed to be an assignment or sublet of the
lease so long as Tenant remains obligated fully under the terms of
this Lease and provided further that Landlord receives written
notice of such transfer within thirty (30) days of such transfer.
ARTICLE IX
DAMAGE OR DESTRUCTION
9.1 FIRE OR OTHER CASUALTY: (a) If the Leased Premises or any
part thereof shall be damaged by fire or other casualty, Tenant
shall give immediate notice thereof to Landlord and this Lease
shall continue in full force and effect except as hereinafter set
forth.
(b) If the Leased Premises are partially damaged or
rendered partially unusable by fire or other casualty, the damages
thereto shall be repaired by and at the expense of Landlord, but
only to the extent of any insurance proceeds thereto, and the
Rental, until such repair shall be substantially completed, shall
be apportioned from the day following the casualty according to the
part of the Leased Premises that is usable.
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(c) If the Leased Premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the rent
shall be proportionately paid up to the time of the casualty and
thenceforth shall cease until the date when the Leased Premises
shall have been repaired and restored by Landlord, subject to
Landlord's right to elect not to restore the same as hereinafter
provided.
(d) If the Leased Premises are rendered wholly unusable
or (whether or not the Leased Premises are damaged in whole or in
part) if the Building shall be so damaged that Landlord shall
decide to demolish it or to rebuild it or if the Building shall be
partially damaged and such partial damage is not otherwise covered
under section 9.1 (b) above, then, in any of such events, Landlord
may elect to terminate this Lease by written notice to Tenant,
given within 30 days after such fire or casualty, specifying a date
for the expiration of the Lease, which date shall not be more than
30 days after the giving of such notice, and upon the date
specified in such notice the term of this Lease shall expire as
fully and completely as if such date were the date set forth above
for the termination of this Lease and Tenant shall forthwith quit,
surrender and vacate the Leased Premises without prejudice however,
to Landlord's rights and remedies against Tenant under the
provisions of the Lease in effect prior to such termination, and
any Rental owing shall be paid up to the date of such fire or
casualty and any payments of Rental made by Tenant which were on
account of any period subsequent to such date shall be returned to
Tenant. If Landlord does not serve a termination notice as
provided for herein, and provided the repairs can reasonably be
made within ninety (90) days and provided Landlord commits to
Tenant to make such repairs within said 90 days of damage, Landlord
shall make the repairs and restorations under the conditions of (b)
and (c) hereof, but only to the extent of any insurance proceeds
thereof, with all reasonable expedition, subject to delays due to
adjustment of insurance claims, labor troubles and causes beyond
Landlord's control. If Landlord cannot reasonably accomplish such
repairs within said 90 days, or does not commit to so accomplish
such repairs within 90 days, then Tenant may terminate this Lease.
After any such casualty, Tenant shall cooperate with any
restoration by removing from the premises as promptly as reasonably
possible, all of Tenants salvageable inventory and movable
equipment, furniture, and other property. Tenants liability for
Rental shall resume five (5) days after written notice from
Landlord that the Leased Premises are substantially ready for
Tenant's occupancy.
9.2 NO WAIVER OF UABILITY: Except as specifically set forth in
Section 9.1 hereinabove or in Section 4.3, nothing contained in
this Lease shall be construed to relieve Landlord or Tenant from
liability that may exist as a result of damage from fire or other
casualty. Tenant acknowledges that Landlord will not carry
insurance on Tenant's inventory, furniture and/or furnishings or
any fixtures or equipment, improvements, or appurtenances removable
by Tenant.
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ARTICLE X
INJURIES AND PROPERTY DAMAGE
10.1 INDEMNIFICATION:(a)Tenant shall not do or permit any act
or thing to be done upon the Leased Premises or any other part of
the Property that may subject Landlord to any liability or
responsibility for injury, damages to persons or property or to any
liability by reason of any violation of law or any other
requirement of a governmental authority and shall exercise such
control over the Leased Premises as to fully protect Landlord
against any such liability. Tenant shall indemnify and save
Landlord, its officers, employees, partners, agents, contractors,
successors, heirs and assigns, harmless from and against (a) all
claims of whatever nature by third parties arising from Tenant's
use of the Leased Premises or any act, omission or negligence of
Tenant, its contractors, agents, employees, invitees or visitors,
(b) all claims by third parties arising from any accident, injury
or damage whatsoever caused to any person or to the property of any
person and occurring during the Term in or about the Leased
Premises, and (c) any claim by any third party arising from any
breach, violation or non-performance of any covenant, condition or
agreement in this Lease set forth and contained on the part of
Tenant to be fulfilled, kept, observed and performed. This
indemnity and hold harmless agreement shall include indemnity from
and against any and all liability, fines, suits, demands, costs and
expenses of any kind or nature (including, without limitation,
attorneys' fees and disbursements) incurred in or in connection
with any such claim or proceeding brought by third parties thereon,
and the defense thereof, except to the extent such liability,
fines, claims or costs are occasioned by the willful misconduct or
gross negligence of Landlord by third parties, in which case
Tenants liability to Landlord under this indemnity provision shall
be reduced only by the percentage of the loss, damage or liability
resulting from or attributable to Landlord's or its agent's willful
misconduct, gross negligence or negligence. The obligations of
Tenant under this Section 10.1(a) shall not in any way be affected
by the absence in any case of covering insurance or by the failure
or refusal of any insurance carrier to perform any obligation on
its part to be performed under insurance policies required to be
maintained by this Lease. Tenant's obligations under this Article
shall survive the expiration of this Lease.
(b) Landlord shall not do or permit any act or thing to
be done upon the Leased Premises or any other part of the Property
that may subject Tenant to any liability or responsibility for
injury, damages to persons or property or to any liability by
reason of any violation of law or any other requirement of a
governmental authority. Landlord shall indemnify and save Tenant,
its officers, employees, partners, agents, contractors, successors,
heirs and assigns, harmless from and against (a) all claims of
whatever nature by third parties arising from Landlord's material
omission or gross negligence of Landlord, its contractors, agents,
employees, invitees or visitors resulting from Landlord's
performance of Applicable Maintenance and Repairs, (b) all claims
by third parties arising from any accident, injury or damage
whatsoever caused by Landlord, its contractors, agents, employees,
invitees or visitors to any person or to the property of any person
and occurring during the Term in or about the Leased Premises from
Landlord's performance of Applicable Maintenance and Repairs, and
(c) any claim by any third party arising from
14
any breach, violation or non-performance of any covenant, condition
or agreement in this Lease set forth and contained on the part of
Landlord to be fulfilled, kept, observed and performed. This
indemnity and hold harmless agreement shall include indemnity from
and against any and all liability, fines, suits, demands, costs and
expenses of any kind or nature (including, without limitation,
attorneys' fees and disbursements) incurred in or in connection
with any such claim or proceeding brought by third parties thereon,
and the defense thereof, except to the extent such liability,
fines, claims or costs are occasioned by the willful misconduct or
negligence of Tenant by third parties, in which case Landlord's
liability to Tenant under this indemnity provision shall be reduced
only by the percentage of the loss, damage or liability resulting
from or attributable to Tenant's or its agent's willful misconduct
or negligence. The obligations of Landlord under this Section 1 0.
I (b) shall not in any way be affected by the absence in any case
of covering insurance or by the failure or refusal of any insurance
carrier to perform any obligation on its part to be performed under
insurance policies required to be maintained by this Lease.
Landlord's obligations under this Article shall survive the
expiration of this Lease.
10.2 WAIVER OF LIABILITY: (a) To the extent permitted by law,
Tenant releases Landlord, and Landlord's agents from, and waives
all claims for, damage to person or property sustained by Tenant
resulting from the Building or the Leased Premises or any part of
either or any equipment or appurtenance becoming out of repair or
resulting from any accident in or about the Building or resulting
directly or indirectly from any act or omission of any other Tenant
or occupant of the Building, or of any other person other than
Landlord or its agents. This section shall apply especially, but
not exclusively, to 1) fire, steam, electricity, water, gas, snow
or rain, ii) leakage, obstruction or other defects of pipes,
sprinklers, wires, plumbing, air conditioning, boilers, snow
removal or lighting fixtures; or iii) condition of the Leased
Premises; provided that the provisions of this Section shall not
exempt Landlord from liability in the event of Landlord's gross
negligence or willful misconduct. This Section shall apply equally
whether such damage be caused or result from any thing or
circumstance above mentioned or referred to, or any other thing or
circumstances whether of a like nature or of a wholly different
nature.
(b) Notwithstanding the foregoing, the Landlord shall
not be liable for any loss or damage to the Building even if due to
the negligence, gross negligence or intentional misconduct of
Landlord to the extent of the recovery by Tenant under any property
damage insurance carried by it. Tenant shall make reasonably
diligent efforts to recover from its insurers the full amount of
any insured claim.
(c) Tenant shall not be liable to Landlord for any loss
or damage to property even if due to the negligence, gross
negligence or intentional misconduct of Tenant to the extent of the
recovery of Landlord under any property damage or rent loss
insurance carried by it (@ether or not required to be carried by
the terms of this Lease) or such amount as would have been
recovered if Landlord had carried the insurance required under this
Lease. Landlord shall make reasonably diligent efforts to recover
from its insurers the full amount of any insured claim.
15
ARTICLE XI
SURRENDER OF PREMISES
11.1 SURRENDER: Tenant agrees to surrender the Leased Premises
at the expiration, or sooner termination, of the term of this
Lease, or any extension thereof, in the same condition as v4hen
said premises were delivered to Tenant, except as otherwise
permitted by Landlord, or as altered, pursuant to the provisions of
this Lease, ordinary wear, tear and damage by natural casualty or
the elements excepted, and Tenant shall remove all of its
furniture, equipment and other personal property and surrender the
Leased Premises in broom clean condition.
11.2 HOLDOVER: If the Leased Premises be not surrendered by
Tenant as and when required, Tenant shall indemnify Landlord
against any charges, loss or liability resulting therefrom,
including, without limitation, any claims made by any succeeding
occupant founded on such delay. Should the Landlord permit Tenant
to holdover the Leased Premises or any part thereof after the
expiration of the term of this Lease, such holdover shall
constitute a tenancy from month-to-month only, and shall in no
event be construed as a renewal of this Lease and all provisions of
this Lease not inconsistent with a tenancy from month-to-month
shall remain in full force and effect. During the month-to- month
tenancy, Tenant agrees to give Landlord thirty (30) days prior
written notice of its intent to vacate premises. Tenant agrees to
vacate the premises upon thirty (30) days prior written notice from
Landlord. The rental for the month-to-month tenancy shall be at a
rate that is fifteen (15%) percent greater than the Base Rent that
is then being paid by Tenant. Tenants obligations under this
Section 11.2 shall survive the expiration or sooner termination of
this Lease.
11.3 EMINENT DOMAIN: If at any time during the term of this
Lease the entire premises or any part thereof shall be taken as a
result of the exercise of the power of eminent domain or by an
agreement in lieu thereof, this Lease shall terminate as to the
part so taken as of the date possession is taken by the condemning
authority. If all or any substantial portion of the Leased
Premises shall be taken, Landlord may terminate this Lease at its
option, by giving Tenant at least ninety (90) days written notice
of such termination within thirty (30) days of such taking. If a
portion of the Leased Premises taken are so substantial that
Tenant's use of the premises is substantially impaired and the
remaining portion is not suitable for the operation of Tenants
business, Tenant may terminate this Lease at its option by giving
Landlord written notice of such termination within thirty (30) days
of such taking. Otherwise, this Lease shall remain in full force
and effect, except that the Basic Rent payable by Tenant hereunder
shall be reduced in the proportion that the area of the Building so
taken bears to the total area of the Building immediately prior to
such taking and the Tenants Pro Rata Share shall be so adjusted.
Landlord shall be entitled to and Tenant hereby assigns to Landlord
the entire amount of any award in connection with such taking
without deduction therefrom for any leasehold estate vested in
Tenant by reason of this Lease; provided, however, that nothing in
this Article shall give Landlord any interest in or preclude Tenant
from seeking, on its own
16
account, any award attributable to the taking of personal property
or trade fixtures belonging to Tenant, or for loss of its leasehold
estate or the interruption of Tenant's business and any moving
expenses incurred in connection with the relocation of its business.
ARTICLE XII
QUIET ENJOYMENT
If and so long as Tenant pays the rent required by this Lease
and performs and observes all the covenants and provisions hereof,
Tenant shall quietly enjoy the Leased Premises, subject, however,
to the terms of this Lease, and Landlord will warrant and defend
Tenant in the enjoyment and peaceful possession of the Leased
Premises throughout the term of this Lease.
ARTICLE XIII
DEFAULT AND BANKRUPTCY
13.1 DEFAULT: (a) If Tenant shall make default in the
fulfillment of any of the covenants and conditions hereof except
default in payment of Rental, Landlord may, at its option, after
fifteen (15) days prior written notice to Tenant, and Tenant's
failure to cure such default within such fifteen (15) days, make
performance for Tenant and for the purpose advance such amounts as
may be necessary. Any reasonable amounts so advanced, or any
expense incurred, or sum of money paid by Landlord by reason of the
failure of Tenant to comply with any covenant, agreement,
obligation or provision of this Lease, or in defending any action
to which Landlord may be subjected by reason of any such failure
for any reason of this Lease, shall be deemed to be additional rent
for the Leased Premises and shall be due and payable to Landlord on
demand. The acceptance by Landlord of any installment of fixed
rent, or of any additional rent due under this or any other
paragraph of this Lease, shall not be a waiver of any other rent
then due nor of the right to demand the performance of any other
obligation of the Tenant under this Lease. Interest shall be paid
to Landlord on all sums advanced by Landlord at a monthly interest
rate of 1 114% per month.
(b) If Tenant shall make default in fulfillment of any
of the covenants or conditions of this Lease (other than the
covenants for the payment of Rental or other amounts) or if the
Leased Premises are abandoned or become vacant; or if any execution
or attachment shall be issued against Tenant or any of Tenant's
property whereupon the Leased Premises shall be taken or occupied
by someone other than Tenant; or if this Lease be rejected under
applicable provisions of the U.S. bankruptcy code; or if Tenant
shall fail to move into or take possession of the premises within
fifteen (15) days after the commencement of the Term of this Lease,
then, in any one or more of such events, upon Landlord serving a
written seven (7) days notice upon Tenant specifying the nature of
said default and upon the expiration of said seven (7) days, if
Tenant shall have failed to comply with or remedy such default, or
if the said failure or omission complained of shall be of a nature
that the same cannot be completely cured or remedied within said
seven
17
(7) day period, and if Tenant shall not have diligently commenced
curing such default within such seven (7) day period, and shall not
thereafter with reasonable diligence and in good faith, proceed to
remedy or cure such default, then Landlord may serve a written five
(5) days' notice of cancellation of this Lease upon Tenant, and
upon the expiration of said five (5) days this Lease and the Term
thereof shall end and expire as fully and completely as if the
expiration of such five (5) day period were the day herein
definitely fixed for the end and expiration of this Lease and the
Term thereof, and Tenant shall then quit and surrender the Leased
Premises to Landlord but Tenant shall remain liable as hereinafter
provided.
(c) If Tenant shall make default in the payment of the
Rental required hereunder, or any part thereof, including without
limitation any Basic Rent or CAM's payable at any time, or in
making any other payment herein provided for, then Landlord may
serve a written ten (10) days' notice of cancellation of this Lease
upon Tenant, and unless during such ten (10) day period Tenant
shall cure said default in payment upon the expiration of said ten
(10) days this Lease and the Term thereof shall end and expire as
fully and completely as if the expiration of such ten (10) day
period were the day herein definitely fixed for the end and
expiration of this Lease and the Term thereof and Tenant shall then
quit and surrender the Leased Premises to Landlord but Tenant shall
remain liable as hereinafter provided.
(d) In the event of any default by Tenant under this
Lease, then Landlord, in addition to any other rights or remedies
it may have under this Lease or pursuant to applicable law, may,
after attempting to mitigate its damages to the extent reasonable
as may be required under then existing law, accelerate its right to
receive from Tenant all Rentals, and any other sums due under this
Lease, less any amounts actually received by Landlord or which
could have been received had Landlord properly mitigated its
damages to the extent reasonably required under then existing law,
that are otherwise payable for the remainder of the term of the
lease and declare all such sums to be immediately due and payable
along with reasonable attorneys fees and costs associated with the
collection of such sums from Tenant. In addition, without limiting
its rights hereunder or by operation of law, Landlord may take
possession pursuant to this Lease and relet the Leased Premises or
any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rental or
rentals and upon such other terms and conditions as Landlord may
deem reasonably advisable with the right to make alterations and
repairs to the Leased Premises. Upon each subletting, Tenant shall
be immediately liable for and shall pay to Landlord, in addition to
any indebtedness due hereunder, the cost and expenses of such
reletting including advertising costs, brokerages fees, any
reasonable attorney's fees incurred and the amount, if any, by
which the rent reserved in this Lease for the period of such
reletting (up to but not beyond the Term of this Lease) exceeds the
amount agreed to be paid as rent for the premises for said period
by such reletting. No such re-entry or taking possession of the
Leased Premises by Landlord shall be construed as an election by
Landlord to terminate this Lease unless the termination thereof be
decreed by a court of competent jurisdiction or stated specifically
by the Landlord in writing addressed to Tenant. Landlord shall in
no event be liable in any
18
way whatsoever for failure to relet the Leased Premises, or in the
event that the Leased Premises are relet, for failure to collect
the rent thereof under such reletting, except to the extent of
Landlord's obligation under then existing law to mitigate damages,
and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to
Landlord hereunder.
13.2 REMEDIES NOT EXCLUSIVE: Mention in this Lease of any
particular remedy shall not preclude Landlord from any other
remedy, in law or in equity.
13.3 ENFORCEMENT: In the event that either party hereto seeks
to enforce the terms of this Lease against the other party by suit
or otherwise, the prevailing party shall pay the costs and expenses
incident thereto, including reasonable attorneys' fees and costs.
13.4 BANKRUPTCY: (a) Anything elsewhere in this Lease to the
contrary notwithstanding, this Lease may be canceled by Landlord by
the sending of a written notice to Tenant within a reasonable time
after the happening of any one or more of the following events: (1)
the commencement of a case in bankruptcy or under the laws of any
state naming Tenant as a debtor; or (2) the making by Tenant of an
assignment or any other arrangement for the benefit of creditors
under any state statute. Neither Tenant nor any person claiming
through or under Tenant, or by reason of any statute or order of
court, shall thereafter be entitled to possession of the Leased
Premises but shall forthwith quit and surrender the Leased
Premises. If this Lease shall be assigned in accordance with its
terms, the provisions of this Section 13.4 shall be applicable only
to the party then owning Tenant's interest in this Lease.
(b) It is stipulated and agreed that in the event of the
termination of this Lease pursuant to (a) hereof, Landlord shall
forthwith, notwithstanding any other provisions of this Lease to
the contrary, be entitled to recover from Tenant as and for
liquidated damages an amount equal to the difference between the
rent reserved hereunder for the unexpired portion of the Term and
the fair and reasonable rental value of the Leased Premises for the
same period. In the computation of such damages the difference
between any installment of Rental becoming due hereunder after the
date of termination and the fair and reasonable rental value of the
Leased Premises for the period for which such installment was
payable shall be discounted to the date of termination at the rate
of four percent (4%) per annum. If the Leased Premises or any part
thereof be relet by the Landlord for the unexpired portion of the
Term, or any part thereof, before presentation of proof of such
liquidated damages to any court, commission or tribunal, the amount
of Rental reserved upon such reletting shall be deemed to be the
fair and reasonable rental value for the part or the whole of the
Leased Premises so relet during the term of the reletting. Nothing
herein contained shall limit or prejudice the right of the Landlord
to prove for and obtain as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by any statute
or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not
such amount be greater, equal to, or less than the amount of the
difference referred
19
to above. The foregoing Section 13.4 is subject to Landlord's
obligation to mitigate damages pursuant to applicable laws then in
effect.
ARTICLE XIV
MISCELLANEOUS
14.1 RIGHTS OF SUCCESSORS AND ASSIGNS: The covenants and
agreements contained in this Lease will apply to, inure to the
benefit of, and be binding upon the parties hereto, their heirs,
distributees, executors, administrators, legal representatives,
assigns, and upon their respective successors in interest except as
expressly otherwise hereinabove provided.
14.2 ESTOPPEL STATEMENT: Upon Landlord's request, Tenant shall,
without charge, execute, acknowledge and deliver to Landlord a
written statement certifying: (1) the commencement date of this
Lease; (ii) the expiration date of this Lease; (iii) as to the
existence of any default under this Lease of which Tenant is aware,
(iv) as to the existence of any offsets, counterclaims or defenses
to this Lease on the part of Tenant; (v) as to the dates to which
Rental payments have been made; and (vi) such other matters as may
be reasonably requested by Landlord, by any prospective purchaser
of Landlord or the Property or by any mortgagee of Landlord.
14.3 SUBORDINATION AND ATTORNMENT: Landlord shall obtain a
nondisturbance agreement from any existing mortgagee in favor of
Tenant, consistent with the terms of any mortgage loan agreement
between Landlord and such mortgagee, and deliver the same to Tenant
on or prior to the Lease Commencement Date. This Lease is subject
and subordinate to any mortgage which may now or hereafter encumber
the Leased Premises, and any renewals, modifications,
consolidations, replacements or extensions thereof. If Landlord's
interest in the Leased Premises is acquired by any mortgagee, or
purchaser at a foreclosure sale, provided this Lease Agreement
remains in force, Tenants occupancy of the Leased Premises is not
interrupted and Tenant receives from the holder of such mortgage or
purchaser a commercially reasonable nondisturbance agreement,
Tenant shall attorn to the transferee of or successor to Landlord's
interest in the Leased Premises and recognize such transferee or
successor as landlord under this Lease, and so long as Tenant is
not in default under this Lease Agreement, this Lease shall, with
regard to the Leased Premises, continue in full force and effect as
a direct lease between the lender or its successors and assigns and
Tenant. Tenant shall execute promptly any certificate or
instrument of subordination that Landlord may request, provided
that Tenant also obtains the nondisturbance agreement referred to
above. In the event that Landlord sells the Leased Premises to any
other person or entity, Tenant upon notice of same shall thereafter
look only to such other person or entity for enforcement of any
provisions of this Lease Agreement for the period following such
sale.
14.4 INFORMATION FOR MORTGAGEE: Upon request from Landlord,
Tenant shall furnish to Landlord a financial statement of Tenant
(including a balance sheet, income statement, statement of cash
flows and accompanying notes and other
20
documentation) for the immediately preceding fiscal year of Tenant
and unaudited quarterly statements through the period of time in
question; provided that in connection with the use of such
statements by Landlord by itself or for the use of its lender(s) or
potential purchasers, any such persons shall agree to use such
information only for lease/financing credit evaluation and not to
disclose such information to others except as may be required by
law.
14.5 EFFECT OF UNAVOIDABLE DELAYS: If either party to this
Lease, as the result of any (1) strikes, lockouts or labor
disputes, (ii) inability to obtain labor or materials or reasonable
substitutes therefor, (iii) acts of God, governmental action,
condemnation, civil commotion, fire or other casualty, or (iv)
other conditions similar to those enumerated in this Section beyond
the reasonable control of the party obligated to perform, fails
punctually to perform any obligation on its part to be performed
under this Lease, then such failure shall be excused and not be a
breach of this Lease by the party in question, but only to the
extent occasioned by such event.
14.6 BROKERAGE: Tenant hereby represents to Landlord that it
has not dealt with any broker in connection with this Lease other
than Commerce Properties, Inc. Landlord agrees that it shall pay a
brokerage commission to its broker, Commerce Properties, Inc.
14.7 CONSTRUCTION OF LEASE: (a) This Lease shall be construed
without regard to any presumption or other rule requiring
construction against the party causing this Lease or any party
thereof to be drafted.
(b) The Article, Section and Paragraph headings of this
instrument are for convenience only, and are not intended to be
part of this Lease, or to be used in determining the intent of the
parties or interpreting this Lease. All cross-references in this
Lease, unless specifically directed to another agreement or
document, refer to provisions in this Lease, and shall not be
deemed to be references to any other transaction or to any other
agreement or document.
(c) With respect to the use of pronouns in this Lease,
the singular shall include the plural and the masculine shall
include the feminine or the neuter and vice versa, as the context
and the identity of the parties require.
14.8 NOTICES: It is agreed that all notices required or
permitted to be given hereunder, or for purposes of billing process
(other than payment of rent, which may be sent by ordinary mail or
by wire transfer), correspondence, and any other legal purposes
whatsoever, shall be deemed sufficient if given by a communication
in writing by United States mail, postage prepaid and certified, or
by overnight delivery service that provides acknowledgment of
receipt, and addressed as follows:
21
If to Landlord, at the following address:
The Ninigret Group, Manager
Ninigret Park Development, L.C.
1700 South 4650 West
Salt Lake City, Utah 84101
Attention: Randolph G. Abood, Manager
With a copy to:
Randolph G. Abood, Manager
The Ninigret Group, L.C.
Suite 1120
10 Rockefeller Plaza
New York, NY 10020
If to Tenant, at the following address:
EFI Electronics Corporation
4800 West 1515 South
Salt Lake City, Utah 84104
Attention: Mr. Richard D. Clasen,
President and Chief Executive Officer
14.9 SURVIVAL OF OBLIGATIONS: Any obligation of Landlord or
Tenant which can only be, or which, by the provisions of this
Lease, may be, performed after the expiration or earlier
termination of this Lease, and Landlord's or Tenants liability to
make any payment which is allocable to any period during the term
of this Lease, shall, unless expressly otherwise provided in this
Lease, survive the expiration or termination of this Lease.
14.10 GOVERNING LAW: The terms of this Agreement shall be
governed by and construed in accordance with Utah law without
regard to its conflicts of law principles.
14.11 DOCUMENTATION: The parties hereto agree to execute such
additional documentation as may be necessary or desirable to carry
out the intent of this Agreement.
14.12 REPRESENTATION REGARDING AUTHORITY: The persons who have
executed this Lease represent and warrant that they are duly
authorized to execute this Lease in their individual or
representative capacity as indicated.
14.13 ENTIRE AGREEMENT: This Lease constitutes the entire
agreement and understanding between the parties hereto and
supersedes all prior discussions, understandings and agreements.
This Lease may not be altered or amended except by
22
a subsequent written agreement signed by the party against which
enforcement of such alteration or amendment is sought.
14.14 SEVERABILITY: If any provision of this Lease or the
application thereof to any person or circumstances shall be
determined to be invalid or unenforceable, the remaining provisions
of this Lease or the application of such provision to persons or
circumstances other than those to which it is held invalid or
unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
14.15 WAIVER: Except as otherwise herein expressly provided to
the contrary, no delay on the party of either party hereto in
exercising any power or right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any power or
right hereunder preclude other or further exercise thereof or the
exercise of any other power or right. No waiver shall be
enforceable against either party hereto unless in writing, signed
by the party against whom such waiver is claimed, and shall be
limited solely to the one event.
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be executed as of the day and year first above written.
LANDLORD:
NINIGRET PARK DEVELOPMENT, L.C.
BY: THE NINIGRET GROUP, L.C.
Its Manager
By: <signature here-Randolph G. Abood, Manager>
TENANT:
EFI ELECTRONICS CORPORATION
By: <signature here-Richard D. Clasen>
Attest: <signature here-David G. Bevan>
SUPPLY AGREEMENT
THIS AGREEMENT made and entered into this 26 day of August,
1997, by and between EFI Electronics Corporation, having its
principal place of business at 2415 South 2300 West, Salt lake
City, Utah 84119 (hereinafter referred to as "EFI"); and Hubbell
Incorporated (Delaware), a Delaware Corporation, having its
principal place of business at 185 Plains Road, Milford,
Connecticut 06460 (hereinafter referred to as "Hubbell").
WITNESSETH:
WHEREAS, EFI is engaged in the business of the manufacture and sale
of transient voltage surge suppression ("TVSS") devices
(hereinafter referred to as "Products") used in the manufacture of
a variety of applications; and
WHEREAS, Hubbell is also engaged in the business of the manufacture
and sale of various types of wiring devices including TVSS devices;
and
WHEREAS, Hubbell is desirous of purchasing from EFI for sale under
the trademarks) of Hubbell or its affiliated entities the Products
which are manufactured by EFI.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto agree
as follows:
Article I - Definition
1.1 As used herein, "Products" means all the Products currently
manufactured by EFI and set forth on Schedule A attached hereto and
made a part hereof (together with any enhancements or modifications
thereto), and all new Products developed by EFI in accordance with
the specifications confirmed and agreed upon by EFI and Hubbell.
Such specifications are set forth in Schedule B attached hereto and
made a part hereof.
Article 2 - Supply and Purchase.
2.1 Subject to the terms and conditions of this Agreement, EFI
agrees to manufacture and supply the Products to Hubbell and
Hubbell agrees to purchase, promote and sell such Products to its
customers as follows:
(a) EFI grants to Hubbell the right to sell the Products on
an exclusive basis in the United States and Canada to all
electrical distributors, industrial distributors, electronics
distributors, and data/com distributors (collectively "Electrical
Industry") as set forth by example on Schedule C attached hereto
and made a part hereof, beginning on January 1, 1998.
(b) EFI grants to Hubbell the right to sell the Products to
any other customers on a non-exclusive, worldwide basis.
(c) During the term of this agreement or any renewal period
thereof, EFI will not enter into any OEM or private label
agreements relating to any of the Products for sales to the
Electrical Industry in the United States and Canada with any of the
entities listed on Schedule D attached hereto and made a part
hereof EFI may, however, manufacture such products if (i) such
products are substantially specified or designed by the OEM or
private label customer and are not intended for resale in the
Electrical Industry markets or (ii) the product supplied to the OEM
or private label customer becomes a part of that customer's product
which function is not primarily TVSS.
(d) EFI shall retain existing business at (i) Worldspan
plugstrip sales through GE Supply, (ii) Lucent iAR sales through
Graybar (the Lucent business may be transferred to Hubbell if a
mutual agreement can be met on pricing and sales coverage); and
(iii) the State of Utah contract business thru Codale Electric
(provided each party uses its reasonable best efforts to have this
business transferred to Hubbell).
2.2 Subject to the terms and conditions of this Agreement,
Hubbell agrees to purchase the Products from EFT by issuing
Purchase Orders ("P.O. ") from time to time to EFI, the terms and
conditions of which will control if there is a conflict with the
terms and conditions of EFI's order acknowledgment.
2.3 Hubbell agrees to purchase from EFI the minimum amounts of
its TVSS requirements per calendar year as set forth on Schedule E
attached hereto and made a part hereof, commencing on January 1,
1998. If Hubbell does not commence purchase of those minimum
requirements and announce the launch of the Product @ to the
Electrical Industry with the logistics support to provide immediate
availability by January 1, 1998, then the exclusivity set forth in
Section 2. I (a) above will be postponed on a day-to-day basis
until Hubbell commences its purchases.
Hubbell shall place minimum stocking orders with EFI, and EFI shall
meet the delivery schedule as follows:
Delivery by December 31, 1997 ------ Company confidential
Delivery by March 31, 1998 ------ Company confidential
Delivery by June 30, 1998 ------ Company confidential
In order for Hubbell to meet its inventory requirements for launch,
additional inventory will be shipped by EFI on January 2, 1998, as
required by Hubbell. Consequently, EFI will begin building
stocking orders for Hubbell by November 1, 1997.
2
If any of these commitments as set forth in this paragraph are
delayed for longer than three (3) months, then the party not
responsible for the delay may invoke the provisions of paragraph
8.1 hereinafter.
2.4 If this Agreement is renewed in accordance with Paragraph 7.2
hereof, the annual quantity of the Products to be purchased by
Hubbell during the renewal period shall be mutually agreed upon by
Hubbell and EFI on a one (1) year basis at least one hundred
eighty (180) days prior to the beginning of each renewal period.
2.5 Hubbell will provide to EFI a unit forecast on a twelve (12)
month rolling basis with a three (3) month commitment, and EFI will
provide to Hubbell a three (3) month advance written notification
of any capacity restraints.
2.6 In the event Hubbell requires a change in a delivery schedule
on any order placed by Hubbell and accepted by EFI, Hubbell shall
inform EFI of such change not later than ninety (90) days prior to
the originally scheduled delivery date. If such advance notice is
given, EFI will be bound by such revised date, subject to the
written consent of EFI which consent shall not be unreasonably
withheld. If such notice is not given on a timely basis, EFI may
reject or accept such delivery schedule change, at its option.
2.7 EFI will place, at Hubbell's request, the brand name or
trademark(s) of Hubbell or any of its affiliates on all Products,
and EFI will cease such use immediately upon termination of this
Agreement.
2.8 Hubbell will require from EFI technical support including
test data, specifications, and competitive evaluations. Hubbell
will also require assistance from EFI relating to user
demonstrations and collateral materials. EFI, in support of
Hubbell, will provide, at no cost to Hubbell, up to two (2) man
days per month of technical support for the duration of this
Agreement.
2.9 To the extent EFI cannot supply any one of the Products in
sufficient quantities to meet the forecasted demands of Hubbell as
described in paragraph 2.5 herein, EFI will cooperate fully with
Hubbell so as to enable Hubbell to meet Hubbell's supply
requirements of such Product(s) to its customers, including, but
not limited to, granting Hubbell a non-exclusive license to any
patents, patent applications or other intellectual property rights
covering the Products in accordance with Schedule D. In addition,
EFI will allow Hubbell use of the molds, tools, dies, technical
information, documentation, 'LJL listings, etc. necessary to allow
the manufacture and production of the Product(s) by Hubbell. The
consideration for this assignment will be the payment by Hubbell to
EFI of a five percent (5 %) royalty.
2.10 Hubbell and EFI intend to increase the channels, markets and
Products to which Hubbell has exclusive rights over the term of
this Agreement. Such channels may include, but are not limited to,
utility distribution and Do-It-Yourself markets and will be
determined after
3
a mutually agreed upon business plan for new channels and markets
is developed and volume commitments are made. Accordingly, Hubbell
and EFI agree as follows:
(a) Hubbell will use its reasonable best efforts to work
with EFI to identify all opportunities that now exist or may exist
in the future for promotion and sales of TVSS devices in every
platform, group or division of Hubbell.
(b) Any current or future TVSS requirements identified by
Hubbell will be brought to the attention of EFI for the opportunity
to quote, develop, design, manufacture and fulfill such
requirements under substantially equal or similar terms as any
other competitor, excluding Hubbell affiliated operations. If
agreeable to both parties, terms covering these requirements will
be added to this Supply Agreement.
(c) In the event that additional opportunities are
identified and Hubbell and EFI agree to terms and annual commitment
amounts, such opportunities will be incorporated into this
Agreement by amending Schedules A, B, C, E, F of this Agreement.
Article 3 -- Order, Price and Payment
3.1 All P.O.'s for the Products placed by Hubbell shall be
acknowledged by EFI in writing within seventy-two (72) hours of
receipt of the P.O.
3.2 Prices for the Product to be purchased by Hubbell shall be F.
O.B. EFI, Salt Lake City, Utah and shall be in accordance with the
price lists set forth in Schedule F attached hereto and made a part
hereof These prices shall not be changed during the one year period
following the initial shipment of the initial Products.
Thereafter, EFI may change prices once a year, but only upon six
(6) months prior written notice to Hubbell and in accordance with
the pricing formula for each Product as set forth on Schedule G
attached hereto and made a part hereof. It is the intention that
the prices will allow Hubbell to be competitive in its distribution
channels, and notwithstanding anything herein to the contrary,
Hubbell will receive "most favored nations" pricing with similar
quantity commitments and terms and conditions.
In the event of a price increase, the total minimum quantity of the
Product(s) effected by the price increase, to be supplied under
this Agreement shall not be binding, but may be changed as mutually
agreed upon between the parties.
3.3 Hubbell shall make the payment to EFI for each shipment of
the Products by check in U.S. currency at I % 10 Net 30 unless the
Products covered by such invoice have been rejected under the terms
of paragraph 5.3 hereof.
In the event of any conflict between the terms and conditions of
any P.O. or order acknowledgment of EFI and those of this
Agreement, the terms and conditions of this Agreement shall control.
4
Article 4 -- Patents and Other-Industrial Property Rights
4.1 All intellectual property rights, including patent, patent
applications and trademarks related to the Products are and shall
remain the property of EFI. In the event any claim of infringement
or alleged infringement of patents or any other intellectual
property rights is brought to the attention of Hubbell by a third
party with respect to the manufacture, use, sale or distribution of
the Products under this Agreement, Hubbell shall promptly notify
EFI of such claim, and Hubbell shall use its reasonable best
efforts to assist EFI, at EFI's request, in taking steps to defend
such rights, all at EFI's expense. Hubbell shall also use its
reasonable best efforts to assist EFI in connection with any
prosecution by EFI with claims of infringement against third
parties, all at EFI's costs and expense.
EFI shall be liable for and shall indemnify and hold Hubbell, its
customers and end users harmless against any claim or risk of
patents or design infringement or other intellectual property
rights by reason of the manufacture, use, sale or distribution of
the Products under this Agreement.
Article 5 - Inspection and Warranty
5.1 EFI warrants the Products at the time of shipment thereof by
EFI to Hubbell to be free from any defect in material or
workmanship and further warrants the Products to be in conformity
with the specifications and/or any applicable warranty set forth in
Schedule B.
5.2 EFI shall inspect each shipment lot of Products before the
shipment from EFI's factory in accordance with EFI's Shipment
Quality Inspection Standard. EFI shall only ship Products which
have satisfied the Acceptance Quality Level which is confirmed and
agreed upon by the parties hereto and is specified in Schedule H
attached hereto and made a part hereof (hereinafter refer-red to as
" A. Q. L. ").
5.3 Hubbell shall perform an acceptance inspection of the
Products in accordance with the A. Q. L. at its inspection facility
within thirty (30) days after receipt of the Products. EFI shall
have the right to be present at such inspection. In the event that
the Products fail to meet the A. Q. L. , Hubbell shall notify EFI
to that effect with supporting documents, not later than fourteen
(14) working days after the inspection. EFI shall dispose of the
Products which fail to meet the A. Q. L. in the following manner at
the option of EFI: (a) to request Hubbell to re- inspect the total
quantities of the shipment lot of the Products at the expense of
EFI, or (b) to request Hubbell to return to EFI for scrapping or
other disposition the total quantities of the shipment lot of the
Products, at the expense of EFI.
5.4 Except as set forth in paragraph 5.7 hereof, in the event
that EFI elects to request Hubbell to re-inspect the total
quantities of the shipment lot of the Products, EFI's liability for
all the defective Products discovered in such re-inspection shall
be limited to paying the direct
5
cost and expense incurred in such re-inspection and to supplying
Hubbell with replacement Products equal to the number of defective
Products free of charge.
5.5 Except as set forth in paragraph 5.7 hereof, in the event
that FFI elects to request Hubbell to return to EFI for scrapping
or other disposition the total quantities of the shipment lot of
the Products, EFI's liability for such defective Products shall be
limited to paying direct cost and expense arising from such
scrapping, other disposition or returning and to supplying Hubbell
with the replacement Products equal to the number of defective
Products free of charge.
5.6 In the event that Hubbell does not make any claim against EFI
within the time period specified in paragraph 5.3 hereof, Hubbell
shall be deemed to have completed the inspection, accepted the
Product and, except for Warranty(ies) Claim(s) and Latent Defects,
waived any claim arising out of the Products delivered.
5.7 Notwithstanding the foregoing, EFI shall supply and adhere to
any and all applicable Product warranty, and be responsible for any
defect in the Products of such nature as would not be reasonably
found upon the acceptance inspection made under Paragraphs 5.2 and
5.3 above (hereinafter referred to as a "Latent Defect"), for a
period of twenty-four months after receipt of the Products by
Hubbell or for the applicable warranty period as set forth in EFI's
warranty, whichever is longer. In the event such Latent Defect is
found, Hubbell may submit claims for such defective Products in
writing to EFI with supporting documents after the discovery of the
Latent Defect. Furthermore, EFI agrees to protect, defend,
indemnify and save harmless Hubbell from and against any and all
liability, loss, damage, expense, claims and demands of every kind
and character including, reasonable attomey's fees, (hereinafter
referred to as "damage claims"), for damages, based on or arising
out of personal injury or property damage to any person or entity
whomsoever or whatsoever arising out of claims made by customers or
users of the Product. Hubbell shall, in cooperation with EFI
investigate all damage claims. EFI shall defend any and all such
actions based thereon and shall reimburse Hubbell, from the date of
notification to EFI, for all costs, damages, awards and expenses of
whatever nature, including attomey's fees, in connection therewith
or resulting therefrom. Hubbell shall notify EFI within thirty (30)
days of any claim under the provisions of paragraph 5.7 and EFI
shall assume the defense of any and all actions and shall reimburse
Hubbell, from the date of notification to EFI, for costs or
expenses of defense of the specific claim. For any Latent Defect,
EFI will provide a plan for correction within 30 days of
notification of such claim. Failure to provide the corrective plan
within the 30 days or failure of the corrective plan to cure the
Latent Defect shall constitute a material breach of EFI's
obligations under this Agreement.
Article 6 - Changes in Design and Specification
6.1 EFI shall not make any modifications to the form, fit or
function of the designs or specifications of the Products unless
and until such modifications are agreed to by Hubbell in
6
writing. In the event of such modification, Schedule B attached
hereto, shall be revised accordingly or replaced with a new
Schedule.
6.2 In the event any Product malfunction occurs in the usual and
intended use of the Product, EFI will consult with Hubbell in an
attempt to remedy the malfunction, as soon as EFI is made aware of
the malfunction and, with the consent and technical support of
Hubbell, EFI shall endeavor to correct the cause of such
malfunction.
Article 7 - Term
7.1 This Agreement shall become effective on August 26, 1997, and
shall continue in full force and effect until August 26, 2002,
unless earlier terminated pursuant to any of the provisions set
forth herein.
7.2 This Agreement shall be automatically extended for successive
one (1) year periods unless either party gives at least six (6)
months' written notice to the other party prior to the expiration
date of the term of this Agreement or any extended term thereof.
7.3 Except with respect to the provisions of Paragraph 5.7
hereof, upon expiration of this Agreement in accordance with this
Article, neither party shall have the right to demand compensation
from the other party for any damage incurred, directly or
indirectly, by the expiration of this Agreement.
Article 8 - Termination
8.1 If either party breaches any of the provisions of this
Agreement, the other party may give written notice of such breach
to the party in breach. If such breach is not cured within three
(3) months after the dispatch of such notice, the complaining party
shall be at liberty, by notice in writing to the party in breach,
to terminate this Agreement forthwith without prejudice to any
other remedies which the terminating party may have against the
breaching party.
8.2 If either party hereto shall be dissolved, liquidated,
declared bankrupt or become insolvent or has commenced proceedings
relating to bankruptcy or creditor composition, either voluntary or
otherwise, or because of adverse change in its structure or
financial situation shall become unable to continue to fully or
effectively perform its obligations hereunder, or become a
non-surviving party to a merger or amalgamation, or be
substantially acquired, the other party hereto may, at its option
and without prejudice to any other remedies the terminating party
may have, terminate this Agreement immediately upon giving written
notice to the other party hereto stating the cause of such
termination.
8.3 The termination or expiration of this Agreement shall not
affect in any way the rights and obligations of either party under
any other contract between the parties regarding the
7
Products, nor relieve any party of any obligation or liability
accrued hereunder prior to such termination or expiration.
Article 9 - Notices
Any notice required or permitted to be given under this Agreement
shall be in writing and shall be valid and sufficient if dispatched
by certified mail, return receipt requested to the address of the
party herein first above written or by an acknowledged, facsimile
at the following fax numbers: if to Hubbell (203) 799-4333,
Attention: R. W. Davies or if to EFI (801) 977-3467, Attention: R.
Clasen. Any notice so given shall be deemed as having been
properly given on the date of mailing or date of the facsimile.
Article 10 - Assignment
Neither this Agreement nor any of the rights or interests of either
party hereunder may be assigned, transferred or conveyed without
prior written consent of the other party hereto.
Article 11 - Observance of Laws
Anything to the contrary in this Agreement notwithstanding, the
parties agree to abide by the laws of the United States of America
and any other law or laws applicable to this Agreement and the
transactions contemplated herein. This Agreement shall be
governed, construed, and enforced by, and in accordance with, the
Laws of the State of Delaware, U.S.A.
Article 12 - Non-Waiver
No waiver of any provision, default or breach of this Agreement by
either party hereto shall constitute a continuing waiver or a
waiver of any subsequent breach of default whether or not similar,
unless expressly so stated in writing by the waiving party.
Article 13 - Force Majeure
Neither EFI or Hubbell shall be liable for delay or failure in the
performance of this Agreement arising from any of the following
matters:
(a) acts of God, public enemy or war (declared or undeclared);
(b) acts of governmental authorities of the U.S.A., or any
political subdivision thereof, or of any department or agency
thereof, or regulations or restrictions imposed by law or by court
action;
(c) acts of persons engaged in subversive activities or sabotage;
(d) fires, floods, expositions or other catastrophes;
8
(e) epidemics or quarantine restriction;
(f) strikes, slowdowns, lockouts or labor stoppages or disputes of
any similar kind;
(g) freight embargoes, or interruption of transportation;
(h) unusually severe weather; or
(i) any other causes, similar or dissimilar, beyond the control of
the party concerned; and the time for performance by such party
shall be extended for the period of any such delay as caused by any
of the circumstances mentioned above, except if such delay was
foreseen and could have been negated.
Article 14 - Arbitration of Dispute
A. All claims or disputes between the parties arising out of or
related to the Agreement or the breach thereof, shall be decided by
arbitration in accordance with the rules of the American
Arbitration Association. Notice of the demand for arbitration
shall be filed in writing with the other party and with the
American Arbitration Association. The award rendered by the
arbitrator or arbitrators shall be final, and judgment may be
entered upon it in accordance with applicable law in any court
having jurisdiction. Any arbitration proceeding shall be held in
Chicago, Illinois.
B. If the award is reduced to a judgment, then, in that event,
EFI hereby irrevocably and unconditionally:
(i) submits in any legal action or proceeding relating to this
Agreement and the Schedules hereto to the non-exclusive general
jurisdiction of the Courts of the State of Delaware, the courts of
the United States of America for the District of Delaware, and
appellate courts from any thereof; and
(ii) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same.
Article 15 - Entire Agreement and Amendment
15.1 This Agreement and its Schedules set forth the entire
understanding and agreement between the parties hereto with respect
to the subject matter hereof and all prior agreements,
understandings, discussions and writings concerning the subject
matter hereof are superseded hereby and merged herein.
9
15.2 Any modification or amendment of this Agreement shall be valid
and take effect only if reduced to writing and signed by a duly
authorized officer of each of the parties hereto.
Article 16 - Severability
Should any part or provision of this Agreement be held
unenforceable or in conflict with the law of any jurisdiction, the
validity of the remaining parts or provisions shall not be affected
by such holding. The parties hereto undertake to replace such
invalidated part, if necessary, by a replacement and
non-conflicting term in the same spirit as the original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in triplicate by their duly authorized
representatives.
HUBBELL INCORPORATED
(DELAWARE)
By: <signature here-James H.
Biggart>
Title: Treasure
On: August 22, 1997
EFI ELECTRONICS CORPORATION
By: <signature here-R. D.
Clasen>
Title: President and CEO
On: August 25, 1997
10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement') is made and entered
into effective as of the 12th day of September, 1994, by and
between EFI Electronics Corporation, a corporation existing under
the laws of the State of Delaware (hereinafter referred to as
"EFI") and Richard B. Clasen (hereinafter referred to as
"Executive").
RECITALS:
A. EFI desires to employ Executive as the President of EFI and
as its Chief Executive Officer on the terms and conditions set
forth herein;
B. EFI provided a letter to Executive dated September 9, 1994,
summarizing the proposed terms of Executive's employment with EFI;
and
C. Executive desires to be employed with EFI on the terms and
conditions set forth therein and herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants set forth below, EFI and Executive hereby
agree as follows:
1. Term and Duties. EFI hereby offers and Executive hereby
accepts employment with EFI for a term of one (1) year beginning
September 12, 1994 and ending September 11, 1995 as President and
Chief Executive Officer of EFI or such other comparable
positions(s) with such other comparable duties as may be
specifically designated for him from time to time by the Board of
Directors of EFI in the exercise of its discretion; provided,
however, at no time during the term of this Agreement shall
Executive's title be less than that hereinbefore described.
Executive shall also be appointed to the Board of Directors
and the Executive Committee of the Board as of September 12, 1994.
Executive shall at all times during his employment under this
Agreement, to the best of his ability, energy and skill, faithfully
perform all of the duties that may be required of him from time to
time by the Board of Directors of EFI. During the period of his
employment by EFI, Executive shall not, directly or indirectly,
further the affairs of any other corporation, partnership or of any
business enterprise by employment of any kind, investment therein,
counseling or otherwise. Provided, however, that nothing contained
in this Agreement or any extension hereof shall prohibit Executive
from (i) holding investments in companies which do not compete with
EFI and which are fully disclosed to the Board of Directors of EFI
(in the case of such investments existing prior to employment of
Executive) or which are disclosed by Executive in advance of making
such investments (in the case of investments proposed to be made
hereafter) or, (ii) serving as a member of the board of directors
of other companies which do not compete with EFI, provided that the
written consent of the Board of Directors of EFI must be obtained
with respect to the holding of existing or proposed investments
and/or with respect to service by a Executive as a member of the
board of directors of a noncompeting company. Provided, further,
that nothing herein shall be construed to prohibit Executive from
acquiring, in open market transactions, investments in equity stock
or evidences of indebtedness of a corporation if such stock or such
evidence of indebtedness is traded on a national securities
exchange or NASDAQ and the investment therein represents no more
than five percent (5%) of the outstanding securities of the issue
being acquired.
2. Renewal. This Agreement shall automatically renew on
September 12, 1995 for a one (1) year period and on September 12 of
every year thereafter ("Renewal Date") for a one (1) year period,
unless either party hereto provides written notice of intent not to
renew this Agreement on or before ninety (90) days prior to the
next Renewal Date.
3. Compensation.
A. Base Salary. As compensation during the term
of this Agreement, Executive shall receive a base salary of
$12,500 per month to be paid consistent with EFI's payroll schedule
and procedures. Executive's base salary shall be reviewed annually
by the Compensation Committee to EFI's Board of Directors. The
Compensation Committee shall make annual recommendations to EFI's
Board of Directors regarding Executive's compensation package.
B. Bonus and Incentive Plans. Executive shall
have the opportunity to participate in all bonus, stock and option
award programs which are available to other officers of EFI. Such
participation is subject to the terms and conditions of such
programs. During fiscal 1995, Executive will participate in the
Executive Bonus Incentive Program and the Incentive Stock Option
Plan and any other bonus or incentive plans approved by the Board.
C. Automobile Allowance. During the term of this
Agreement, EFI will pay Executive $700 per month as an automobile
allowance.
D. Stock Options. EFI will grant to Executive
options to purchase 100,000 shares under the Incentive Stock Option
provision of EFI's Nonqualified Stock Option Plan and Incentive
Stock Option Plan. These options will be granted as of September
12, 1994 and will be exercisable at $1.50 per share, the closing
price of EFI's stock on that date. The options are subject to the
terms of the Plan, a copy of which has been provided to Executive.
E. Stock Purchase/Loan. EFI will make
Executive a loan in the amount of $150,000 which Executive shall
use to purchase 100,000 shares of the Common Stock of EFI. The
loan shall bear interest at the prime rate quoted on September 12,
1994, by Key Bank, Salt Lake City, Utah, plus one percent (I %),
and shall be due and payable on the earlier of, sixty (60) days
after termination of Executive's employment for any reason or,
September 12, 2000. Executive's obligation to repay the loan will
be secured solely by the shares purchased plus a right to offset
any amounts then due to Executive pursuant to any payments for
Performance Units described in subparagraph F below. Executive
shall deliver to EFI the certificate evidencing the shares endorsed
or accompanied by an executed stock power to perfect EFI's security
interest in the shares. In the event of default by Executive of
payment of the obligation when due, Executive shall not be liable
for any deficiency remaining after disposition of the shares and
application of the proceeds. In addition to any remedies upon
default which EFI may have as a secured creditor under the Utah
Uniform Commercial Code, Executive hereby grants to EFI a right of
offset with respect to the shares pledged as security for repayment
of the obligation.
F. Performance Units. Effective as of September
12, 1994, Executive is hereby awarded 100,000 Performance Units
having a base value of $1.50 per unit. If Executive is employed by
EFI on September 12, 1996, EFI will pay to Executive in cash or in
not more than four annual installments with interest at 8% per
annum, the difference between the base value of a Performance Unit
and the value of a share of Common Stock of EFI which shall be the
average closing sale price per share reported on the NASDAQ/NMS
Stock Market for the twenty (20) trading days preceding September
12, 1996. If the Common Stock of EFI is not traded on the
NASDAQ/NMS Stock Market, then the value shall be determined by
reference to the average closing sale price or the average median
of the bid and asked price for EFI Common Stock on the exchange or
quotation service where such common stock is listed or quoted for
the twenty (20) trading days prior to September 12, 1996. If EFI
Common Stock is not then listed or quoted on any exchange or
quotation service, the Board of Directors of EFI shall make a good
faith valuation of such shares which shall be binding on
Executive. If Executive is not employed by EFI on September 12,
1996, Executive shall not be entitled to any payment for
Performance Units; provided, however, if Executive's employment is
involuntarily terminated prior to September 12, 1996 by reason of a
change in control (as hereinafter defined), Executive shall be
entitled to payment for Performance Units calculated as hereinabove
set forth as of the date of such termination. Executive shall be
responsible for all federal and state taxes due in connection with
payments for Performance Units.
G. Moving and Transition Expenses. EFI will
reimburse Executive for the expenses of airfare for two (2) trips
per month from Dallas to Salt Lake City and the reasonable cost of
an apartment during the time required to relocate Executive's
family to Salt Lake City.
EFI will pay all reasonable and customary moving
expenses actually incurred by Executive for office, household and
family relocation from Dallas to Salt Lake City. Additionally, EFI
will issue shares of EFI Common Stock valued at $1.50 per share in
an amount equal to the brokerage commission payable by Executive in
connection with sale of Executive's Dallas home. The expenses
shall be paid upon receipt by EFI of appropriate documentation of
such expenses. Executive shall be responsible for any federal and
state income taxes resulting from reimbursement of such expenses.
In the event Executive voluntarily terminates employment with EFI
prior to September 12, 1995, Executive shall repay all expenses
reimbursed and return all shares of EFI Common Stock issued for
reimbursement of brokerage commissions.
H. Business Expenses. During the term of this
Agreement, Executive shall be reimbursed for his reasonable
business-related expenses incurred for the benefit of EFI in
accordance with EFI's policies governing such reimbursement in
effect from time to time. With respect to any expense which are
reimbursed by EFI to Executive, Executive shall account to EFI in
sufficient detail to entitle EFI to a federal income tax deduction
for such reimbursed item.
4. Employment Benefits. Executive shall be entitled to
participate in any plans maintained by EFI relating to retirement,
health, disability, life insurance and other employee benefits in
accordance with their terms; provided, however, that this provision
shall not be construed to require EFI to establish or maintain any
such plans. Vacation time shall be granted to Executive in
accordance with EFI's established policies in effect from time to
time with respect to its executives and shall be taken by Executive
at such time or times as are mutually satisfactory to the parties.
Pursuant to such policies, Executive will be eligible for seven (7)
vacation days during the 1994 calendar year, 15 days during
calendar 1995 and one (1) additional day in each calendar year
thereafter to a maximum of 20 days per calendar year. Executive
shall not receive additional compensation for vacation time.
Executive acknowledges that unused vacation time in any calendar
year shall be forfeited.
5. Termination. This Agreement shall terminate upon the
happening of any of the following events:
(a) Executive's disability as determined under EFI's
disability insurance plan;
(b) Executive's death;
(c) notice of non-renewal given pursuant to Section 2
hereof in which event the Agreement will terminate on the September
11th following the notice of non-renewal;
(d) at EFI's option, in the event of any act by Executive
as defined in Section 6 hereof as "discharge for cause;"
(e) at EFI's option other than under Items (a)-(d) above;
or
(f) at Executive's option, other than under Items (a)-(d)
above.
Upon termination pursuant to Items (a), (b), (d) or (f),
Executive shall be entitled to receive only the compensation
accrued but unpaid and accrued vacation days of the date of
termination, and he shall not be entitled to additional
compensation or benefits hereunder, except as expressly provided in
this Agreement.
6. Severance. If this Agreement is terminated by EFI
pursuant to Item (c) or (e) of Section 5 hereof, EFI shall pay to
Executive (i) if termination occurs during the initial one (1) year
of Executive's employment, an amount equal to Executive's base
salary for one (1) year, or (ii) if termination occurs at any time
after one (1) year of employment, an amount equal to six (6) months
of Executive's base salary immediately following his termination
plus one-half (1h) of the amount of any bonus earned during the
twelve-month period prior to such termination, under the Executive
Bonus Incentive Program or under any other applicable bonus
program. Such payments will be made in installments pursuant to
EFI's regular payroll schedule and procedures. EFI will make the
payments under this section regardless of Executive's re-employment
with another entity. Executive's compliance with the terms of this
Agreement, including but not limited to the confidentiality
provision and noncompetition provision, is a condition precedent to
EFI's obligation to make any payments provided under this Section.
Discharge "For Cause" shall be construed to have occurred
whenever occasioned by reason of:
(1) unlawful acts on the part of Executive;
(2) actions by Executive involving serious moral
turpitude;
(3) Executive's material violation of Company policy;
(4) Executive's misconduct that brings substantial
and
material discredit or harm upon EFI;
(5) Executive's material breach of this Agreement; or
(6) Executive's gross negligence in the performance
of his duties.
In establishing whether a discharge For Cause shall have
occurred, the standard for judgment shall be the level of conduct
by other comparably situated executive officers of EFI prior to the
alleged improper activity of Executive.
7. Confidentiality . From and after the date of
execution of this Agreement, and continuing after the expiration or
termination of this Agreement for any reason whatsoever, Executive
shall keep secret and inviolate all knowledge or information of
confidential nature, including all unpublished matter
relating to, without limitation thereof, business, properties,
accounts, books and records, processes, procedures, products,
market plans, research and development matters, know-how, trade
secrets, memoranda, devices, suppliers and customers of EFI which
he may now know or hereafter come to know as a result of
affiliation in business with EFI. Any violation of this covenant
may be enforced by specific performance and injunctive relief in
any court of competent jurisdiction.
8. Restrictive Covenants.
(a) From the date hereof until the date that
Executive's employment with EFI is terminated and for two (2)
years thereafter if Executive is terminated For Cause and for one
year thereafter if the Executive is terminated for any other
reason, Executive will not knowingly, directly or indirectly,
individually or as an employee, partner, officer, director or
stockholder or in any other capacity whatsoever of any person,
firm, partnership or corporation: (i) recruit, hire, assist others
in recruiting or hiring, discuss employment with or refer to others
any person who is, or within the preceding 12 months was, an
employee of EFI or any subsidiary thereof or of any present,
prospective or former customer of EFI or any subsidiary thereof,
(ii) compete with EFI or any subsidiary thereof, (iii) call upon,
solicit, sell or endeavor to sell to, any customer, prospective
customer or former customer of EFI or any subsidiary thereof; or
(iv) engage in or participate in, directly or indirectly, any
business conducted under any name that shall be the same or as or
similar to the name of EFT or any trade name used by it.
(b) Executive will promptly disclose to EFI all
processes, trademarks, inventions, improvements, discoveries and
other information related to the business of EFI (collectively,
"developments") conceived, developed or acquired by him alone or
with others during Executive's employment with EFI hereunder,
whether or not during regular working hours or through the use of
material or facilities of EFI. All such developments shall be the
sole and exclusive property of EFI, and, upon request, Executive
shall deliver to EFI all drawings, sketches, models and other data
and records relating to such developments. In any event any such
development shall be deemed by EFI to be patentable, Executive
shall, at the expense of EFI, assist EFI in obtaining a patent or
patents thereto and executive all documents and all other things
necessary or proper to obtain letters patent and invest EFI with
full title thereto; provided, however, that no such assistance
shall be required after Executive has been terminated for any
reason other than For Cause.
(c) Executive will not at any time after the date
hereof knowingly divulge, furnish or make accessible to anyone
(otherwise than in the regular course of business of EFI) any
knowledge or information with respect to confidential or secret
processes, inventions, discoveries, improvements, formulae, plans,
material devices or ideas or other know-how, whether patentable or
not, with respect to any confidential or secret engineering,
development or research work or with respect to any other
confidential or secret engineering, development or research work or
with respect to any other confidential or secret aspects of EFI's
business (including, without limitation, customer lists,
instruction manuals, supplier lists and pricing arrangements with
customers or suppliers).
(d) If any provision of this Section 8 should be
found by any court of competent jurisdiction to be unreasonable by
reason of its being too broad as to the period of time, territory,
aspects of business or customers covered or otherwise, then, and in
that event, such provision shall nevertheless remain valid and
fully effective, but shall be considered to be amended so that the
period of time, territory, aspects of business or customers covered
or otherwise set forth shall be changed to be the maximum period of
time, the largest territory, the most aspects of business and
customers covered and/or the broadest other limitations, as the
case may be, which would be found reasonable and enforceable by
such court and similarly, if any remedy is found to be
unenforceable in whole or in part, or to any extent, such provision
shall remain in effect only to the extent the remedy or remedies
would be enforceable by
such court. The provisions of this Section 8 shall not limit or
restrict in any manner any rights or remedies which EFI may have
under any separate agreement with Executive or otherwise with
respect to competition by Executive.
(e) The parties to this Agreement hereby
acknowledge that the failure of Executive to perform any of his
obligations under this Section 8 will cause irreparable damage to
EFI and that in the event of such failure to perform EFI shall
have, in addition to any and all remedies of law, the right to an
injunction, specific performance or other equitable relief to
prevent the violation of the Executive's obligations under this
Section 8.
(f) Notwithstanding anything to the contrary in
this Section 8, the parties agree that any activity, other than
actions taken in bad faith or that constitute gross negligence,
undertaken in connection with Executive's efforts to carry out the
responsibilities of his employment with EFI, including but not
limited to Executive's dealings with past, present, or potential
future customers, shall not constitute a breach of Sections 8(a)(i)
or 8(a)(iii).
9. Unfunded Agreement. EFI's obligations under this
Agreement are unfunded, but EFI reserves the right to provide for
its liability under this Agreement in any manner it deems
advisable, including the purchasing of such assets as it may deem
necessary or proper. Any asset so purchased by EFI shall be the
sole property of EFI and shall not be deemed to provide funding of
EFI's obligations under this Agreement. In the event EFI
determines to purchase any insurance policy or policies with
respect to Executive, Executive agrees to submit to such
examination and to supply such information as may be required by
the insurer. Any policy so purchased by EFI shall be issued so
that EFI is the sole, full and complete owner of policy or
policies, with the right and power to exercise any and all
privileges and options thereof or available under the rules of the
issuing insurer without the consent of any persons. Executive and
his designated beneficiaries shall be only unsecured general
creditors of EFI with respect to all payments to be made under the
terms of this Agreement and shall have no claim, equity, interest,
or right in or to any specific assets or funds of EFI as security
for said payments.
10. Non-Assignable Rights. Executive and his designated
beneficiaries shall not have the right to anticipate or commute
with any third party, or to sell, assign, transfer, or otherwise
alienate or convey the right to receive any payments hereunder,
whether by his or her voluntary or involuntary act, or by operation
of law and, in particular, that any payments due hereunder shall
not be subject to attachment to garnishment or any other legal
proceedings by any creditor, or be in any way responsible for the
debts or liabilities of Executive or his designated beneficiaries.
Should Executive, or his designated beneficiaries, voluntarily
attempt to breach this Section of this Agreement, EFI's liability
to make payment hereunder from and after the date of said attempt
shall be extinguished; and should any attempt be made to reach the
payments by other than Executive or his designated beneficiaries,
EFI shall make each payment as it becomes due to such person or
persons, for the sole benefit of Executive or his designated
beneficiaries, as the case may be, as EFI may deem expedient.
11. Change of Control. In the event Executive's employment
with EFI is terminated by reason of a Change in Control, EFI shall
pay to Executive, in lieu of the termination payments provided for
in Section 6 of this Agreement, an amount equal to Executive's base
salary which shall be equal to Executive's annual base salary at
the time of the occurrence of the Change in Control plus the amount
of any bonuses earned during the twelve-month period prior to the
Change of Control, but shall exclude any other items of
compensation not expressly provided for herein. For purposes of
this Section II, Change in Control shall mean (i) any merger or
consolidation of EFI with or into any other corporation, or any
merger, consolidation, sale of securities or other transaction that
results in any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) (other
than EFI, an underwriter that has temporary ownership pursuant to
an offering of EFI's Common Stock or any trustee or other fiduciary
holding securities under an employee benefit plan of EFI), owning
more than 50 percent (50%) of EFI's Common Stock (on a
fully-diluted basis) and (ii) any sale or transfer of all or
substantially all of the assets of EFI (or a series of sales or
transfers with such effect) to any "person" (as defined above).
Notwithstanding anything to the contrary in this Section I 1, in
the event Executive shall violate Section 8(a) of this Agreement
during a period in which Executive is no longer employed by EFI,
Executive shall pay to EFI fifty percent (50%) of the cash
compensation that accrued to Executive, and was paid by EFI to
Executive, pursuant to this Section I 1. In the event of a
termination which results from a Change in Control, EFI and
Executive agree to cooperate with each other to prevent the
application of Section 28OG and Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), it being understood
that Executive shall be liable for the full amount of any excise
tax imposed under Code Section 4999 or any successor thereto on any
payments or other compensation paid to Executive in the case of a
Change in Control. Executive agrees to indemnify and hold EFI
harmless against the application of Code Section 4999 on any
payment or other compensation paid to Executive in the case of a
Change in Control.
12. Entire Agreement. This Agreement constitutes the
entire agreement and supersedes all prior agreements and
understandings, oral and written, between the parties hereto with
respect to the subject matter hereof.
13. Representations from Executive. Executive
represents that the execution of this Agreement will not violate
any provision of law or order of any court or governmental agency,
and will not result in the violation of any agreement to which he
is a party or by which he is bound. Executive represents that he
is not subject to any restrictions with respect to rendering
service to EFI hereunder as a result of or by virtue of any prior
employment or any prior or present agreement. Executive represents
that he will not otherwise reveal to EFI, in performing services
for EFI, any confidential information of another person which
Executive is prohibited by contract or otherwise from divulging to
EFI.
14. Facility of Payment. Nothing herein contained shall
preclude Executive from receiving his base salary and bonus, if
any, in a manner which is advantageous to him for tax planning,
provided however, that he first obtains EFI's consent, which
consent shall not be unreasonably withheld.
15. Responsibility for Legal Effect; Tax Withholding.
Neither party hereto makes any representations or warranties,
express or implied, or assumes any responsibility concerning the
legal, tax, or other implications or effects of this Agreement.
EFI may take all actions required by law with respect to any
payments due hereunder or other compensation or benefits due
hereunder, including, but not limited to, withholding of tax from
such payments compensation or benefits.
16. Action to Enforce. In any action for enforcement or
any other remedy arising out of breach of this Agreement, the
prevailing party shall be entitled to all costs, expenses and fees
of such actions, including attorneys' fees. In an action to
enforce this Agreement either party may pursue money damages,
injunctive relief, specific performance, and/or any other relief
available under the applicable law.
17. Section Headings. The Section headings used in this
Agreement are for convenience of reference only and shall not be
considered in construing this Agreement.
18. Notices. Any notices required or permitted to be given
under this Agreement shall be sufficient if in writing and if
personally delivered or sent by certified or registered or
overnight mail to his residence as last shown on the employment
records of EFI, in the case of Executive, or to the corporate
headquarters, in the care of EFI, to the attention of the Board of
Directors with a copy to the attention of the Secretary.
19. Integration. This Agreement constitutes the entire
understanding between the parties hereto with respect to the
subject matter hereof and supersedes all negotiations,
representations, prior discussion and preliminary agreements
between the parties hereto relating to the subject matter hereof.
20. Non-Waiver. The waiver by EFI or Executive of a breach
of any provision of this Agreement by Executive or EFI shall not
operate or be construed as a waiver of any subsequent breach by
Executive or EFI of the same or any other provision hereof.
21. Binding Effect. This Agreement shall be binding upon
Executive and his designated beneficiaries and upon his or their
heirs, executors, administrators, and upon anyone claiming under
him or his designated beneficiaries, and upon EFI and its
successors and assigns.
22. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah.
23. Effective Date. The obligations of the parties under
this Agreement are effective as of September 12, 1994.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
respective hands and seals the year and date first hereinabove
written.
EFI ELECTRONICS CORPORATION
By:<signature here-Scott H.
Nelson>
Its: Chairman
EXECUTIVE
By:<signature here-Richard
D.
Clasen>
Richard D. Clasen
EFI Electronics
2
