SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required) OR
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the fiscal year ended Commission File Number 0-19013
December 31, 1995
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
(Exact name of registrant as specified in charter)
New York 84-1059226
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
730 17th Street, Suite 712
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
(303) 571-5564
(Registrant's telephone number, including area code)
Stock registered pursuant to Section 12 (g):
Common Stock, $.0001 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $645,593. This calculation is based upon the
average bid and asked prices of the stock on March 15, 1996 of $.0035.
The number of shares of the registrant's $.0001 par value common stock
outstanding as of March 18, 1996 was 531,667,515.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
It is anticipated that Item 10, 11, 12 and 13 will be incorporated by
reference from either a definitive proxy statement on an amendment filed
under cover of Form 10-K/A filed within 120 days of December 31, 1995.
PART I
Items 1 and 2. Business and Properties
(a) General Development of Business.
Advanced Environmental Systems, Inc. ("AES") was incorporated in New York
under the name Northwest Passages of North America, Inc. in 1986. In 1988,
AES acquired Advanced Energy Corporation ("AEC"). International Catalyst,
Inc. ("Incat") is a wholly-owned subsidiary of AEC. Incat provides catalyst
handling services to the oil refinery and petrochemical industry.
Unless the context requires otherwise, the term "Company" includes AES and
its subsidiaries, AEC and Incat. All the Company's revenues from operations
are derived from the operations of Incat.
In April 1990, certain shareholders of the Company exchanged their shares of
the Company's common stock for shares of common stock of Industrial Services
Technologies, Inc. ("IST"). As a result, the Company became an approximately
62% owned subsidiary of IST. IST also owns 100% of the outstanding shares of
the voting preferred stock of the Company. See Items 1 and 2; Loans from
IST, Recapitalization and Preferred Stock.
(b) Financial Information about Industry Segments.
For the fiscal year ended December 31, 1995 the Company had revenues in one
industry segment only, and, therefore, this subitem is inapplicable.
(c) Narrative Description of Business.
General.
Incat is primarily engaged in the industrial service business of providing
catalyst handling services to petroleum refineries and petrochemical plants.
Incat also leases bins for catalyst storage; however, revenues from leases
are less than 5% of the Company's revenues. Catalyst materials are generally
small, solid particles composed of a porous clay base, impregnated with an
active ingredient. This active ingredient is usually a metal such as nickel
or one of the platinum family of metals. The catalysts are used to promote
a chemical reaction during the manaufacturing process. The goal may be to
remove impurities from a product, to change the molecular structure of a
product, to enhance octane rating or to accomplish some other task.
Periodically, due to the build up of impurities, the catalysts cease to
function properly. When this occurs, the catalysts must be removed from the
reactor vessel. The removed material might be cleaned and reinstalled or it
may be discarded and new material loaded into the reactor, Incat's task is to
perform this catalyst change. Incat's customers are responsible for providing
the new, and disposing of the spent, catalysts.
The life of a catalyst ranges from a few months to several years, depending
upon the chemical process involved. The contract price for services
performed by Incat are typically in the range of $50,000 to $60,000; however,
Incat has worked on projects having a contract price exceeding $600,000.
Incat's customer base consists predominantly of Fortune 500 companies.
Catalysts play a critical role in both petroleum refining and petrochemical
processing. A wide range of catalysts are used to stimulate a variety of
chemical processes (i.e., removing impurities and accelerating production
processes). The four basic solid catalyst process categories in the
petroleum refining market are catalytic cracking, catalytic reforming,
hydrotreating and hydrocracking. Catalytic cracking accounts for nearly
one-half of the catalysts consumed by petroleum refineries.
Typically, Incat begins working on a project by consulting with a customer to
plan and coordinate a shutdown of the customer's facility. Incat's service
and product capabilities include the following: (a) life support services -
inert or hazardous atmosphere entry for catalyst handling, inspection, repair
and cleaning and continuous environmental analyzers; (b) vacuum and catalyst
unloading services - vacuum removal of catalyst and support material, inert
or atmospheric, wet or dry, various vacuuming removal and cleanup of residues,
filters and process units, dust control and collection and recovery of
catalysts and catalyst residue having precious metal content; (c) catalyst
and support media loading - under inert or atmospheric conditions, by sock
or dense loading methods, tubular reactor and reformer furnace loading,
pressure differential testing and prebagging and weighing material for
loading; (d) prescreening and screening services, respectively, of catalysts
and support materials; (e) inspection service using closed circuit video
inspection under inert or hazardous conditions; (f) mechanical services
involving removal and replacement of reactor heads, quench lines and
temperature indicators, cleaning removal and replacement of vessel
internals, vessel blinding and welding under inert conditions;
(g) refrigeration and recirculation services including inert gas
refrigeration and recirculation during catalyst vacuum operations, forced
cooling of process vessels and furnaces, and forced ventilation of vessels,
tanks and furnaces.
Texas and California constitute the two highest ranking states in the nation
in the consumption of petroleum products. Incat's operations in California
and Texas and sales to refineries in these states still constitute a large
percentage of its sales.
Marketing.
A significant percentage of Incat's sales are generated through reputation
and referrals. Incat has four regional sales managers and from time to time
has received referrals from other subsidiaries of IST. Incat sends
representatives to attend domestic and international trade shows and is
considering additional promotional techniques.
Incat enjoys a high level of repeat business and will continue to attract new
customers based on its ability to perform work quickly, thus minimizing the
customer's down-time, the quality of its work, and its emphasis on safety.
Although many projects are awarded on a bid basis, Incat has won many
projects as sole bidder. Incat's management believes that although Incat's
prices are considered medium to high for the industry, the quality of Incat's
work combined with its safety record over the years and rapid rate of
installation allow it to charge higher than average prices for its services.
Management is currently reviewing its pricing strategies and may elect to
deviate from current pricing policies in certain areas.
Competition and Significant Customers.
Although the catalyst handling industry is highly competitive, with both
smaller and larger concerns competing with Incat, Incat's management believes
that opportunities exist for the corporation to expand within and expand
beyond its present market territory. Additional opportunities may exist for
Incat to expand its foreign operations and Incat intends to review these
opportunities. Because future sales are contingent upon Incat's ability to
providing top quality service, Incat's management has a philosophy of planned
growth. Incat is committed to not expanding services until it has the
trained manpower to maintain its standards of service and has turned down
work in the past where it has not had the required manpower.
Although Management believes opportunities for growth for Incat exist, there
can be no assurances that Incat will experience growth or meet its marketing
goals. The catalyst handling business is subject to a variety of economic,
socio-economic and political forces that might thwart expected growth. The
catalyst handling industry is highly competitive. There are many other
companies that provide catalyst handling services which have more resources
than Incat and there can be no assurance that addition catalyst handling
companies will not be established.
For the years ended December 31, 1995 and 1994, Koch was responsible for
11% and 12%, respectively, of Incat's sales. Foreign sales have been
concentrated among a few major customers; however, none of these customers
accounted for 10% or more of Incat's sales for the years ended December 31,
1995 and 1994.
Foreign Sales.
During the year ended December 31, 1995 approximately 4% of Incat's sales
were outside the United States, as contrasted with approximately 8% and 19%
in the year ended December 31, 1994 and in the nine months ended December 31,
1993 respectively. The primary overseas markets for the Company's services
during these periods, were Asia, Central America, and Mexico. Incat's
revenues derived from Mexican customers have be negatively affected by the
recent political and economic events in Mexico. Revenues from customers
in Mexico exceeded $400,000 and $900,000 for the years ended December 31,
1994 and for the nine months ended December 31, 1993, respectively. However,
the Company derived no revenue from Mexican customers in 1995.
The Company is continuing to pursue international expansion strategies;
however, at this time, the Company is unable to determine whether foreign
sales will represent a significant portion of its revenues. Typically, the
Company's foreign sales have been to a few large customers and, therefore,
the loss of any of these customers could have an adverse effect on foreign
sales.
All foreign sales are payable in U.S. dollars and, accordingly, there are no
currency risks associated with such revenues. Foreign customers typically
pay the amounts due Incat more slowly than U.S. customers, and foreign taxes
are sometimes withheld at the time of payment by some foreign customers.
Except for the delay in the receipt of some payments, Incat has not
experienced any special risks associated with its foreign operations. The
Company currently has no assets permanently located outside the U.S., but may
in the future keep catalyst-handling units in strategic foreign locations if
sales in these regions warrant the relocation of the units.
Backlog.
Typically, Incat's customers do not sign contracts until work commences on a
project. As of March 1, 1996, Incat had no material backlog supported by
signed contracts. Incat projects revenues on the basis of information from
customers regarding proposed refineries shut downs and scheduled maintenance,
and Incat's history of providing services to these refineries.
Environmental Matters.
Expenditures incurred in compliance with environmental regulations have not
had a material effect on Incat's earnings or competitive position. Incat
does not anticipate making any material capital expenditures for
environmental control facilities in its current fiscal year.
Employees and Property.
Incat has approximately 120 full-time employees. Incat owns no real
property. It conducts its operations from leased facilities located in Los
Angeles, Baton Rouge, Corpus Christi and Houston Metropolitan areas. Incat's
headquarters are located in a 20,000 square foot facility in Houston for
which Incat pays a monthly rental of $7,194 pursuant to a lease expiring in
August 1999. California operations are located in a 17,000 square foot
facility in Carson, California. The lease for this facility will expire in
June 30, 1998. The current monthly rental of $5,728 will be increased in
November 1996 for a cost of living adjustment, if any. The Louisiana
facility consists of approximately 10,000 square feet and is leased at a
monthly rental of approximately $3,000 plus taxes and insurance pursuant to a
lease with a one year term expiring in January 1997, subject to Incat's
option to extend the term for three successive one-year periods with the rent
increased by a percentage based on the cost of living index. The owners of
the Louisiana property include certain officers and directors of Incat, AEC
and AES; however, Incat believes that this lease is as favorable as could have
been obtained in an arms' length transaction. The Corpus Christi facility
consists of approximately 7,500 square feet and is leased at a monthly rental
of approximately $2,500 plus taxes and insurance pursuant to a lease with a
one year term expiring in December 1996, subject to Incat's option to extend
the term for a one year period with any rent increase to be negotiated upon
exercise of the renewal option.
The Company believes its facilities will be adequate for its operations for
the year. Because the Company does not require specialized facilities to
provide service to its customers or to maintain and store its equipment, the
non renewal of any of its leases would not have a significant impact on the
Company.
FINOVA Loans and Refinancing: AEC Notes.
The acquisition of Incat was financed primarily by loans from FINOVA Capital
Corporation ("FINOVA"), which was formerly known as Greyhound Financial
Corporation (the "Original Greyhound Loan"), and Notes issued by AEC
(the "AEC Notes") to the former owners of Incat (the "Holders"). The
Original Greyhound Loan was amended in December 1992 to refinance the then
outstanding balance of the Original Greyhound Loan of $534,000 and provide
new financing to Incat primarily for capital expenditures (the "FINOVA
Refinancing") for an aggregate amount of up to $2,100,000 (inclusive of the
$534,000). The AEC notes were paid off in full during 1994. See Item 7.
Loans From IST, Recapitalization and Preferred Stock.
In April 1990, AES borrowed $500,000 from IST. The $500,000 amount loaned by
IST to AES was borrowed by IST from FINOVA. AES satisfied all its
obligations to IST for the $500,000 by issuing to IST in August 1990,
61,538,550 shares of preferred stock (the "Series A Preferred Shares"). The
proceeds of the IST loan were paid by AES to AEC as additional capital. AEC
in turn loaned the proceeds to Incat. Pursuant to the Original Greyhound
Loan, FINOVA required that Incat (a) issue its promissory note for $500,000
(the "Incat Note") to AEC and (b) grant to AEC a security interest in all its
assets, and that AEC then assign to FINOVA its interests in the Incat Note
and under the security agreement.
The principal amount of the $500,000 loan would be repaid in 55 equal monthly
installments of principal and interest of $12,424 each with the first such
installment commencing May 1, 1993 and ending on November 1, 1997. The Incat
Note also provides that it is repaid in 55 monthly installments of principal
and interest of $12,424 each. The principal amounts received by AEC pursuant
to the Incat Note are being used to redeem a portion of the Series A
Preferred Shares at a redemption price of $.008133 per share. Pursuant to
this arrangement $105,475 and $91,690 were used to redeem 12,968,786 and
11,264,969 Series A Preferred Shares during the year ended December 31, 1995
and 1994, respectively. See Item 7.
The Series A Preferred Shares pay cumulative cash dividends at the rate of
$.0011368 per share per annum, payable in 12 monthly installments of
$.000094733 each, have a liquidation preference of $.008133 per share and
are convertible into shares of common stock of the Company on a one-for-one
basis. IST as the holder of the Series A Preferred Shares is entitled to one
vote per share and is not entitled to vote as a class unless class voting is
required by the corporation laws of the State of New York.
During 1991 and 1992, the Company issued 24,591,170 shares of its Series B
Preferred Stock to IST in exchange for a note previously issued for $100,000
and additional cash received of $100,000. The Series B shares pay the same
dividends and have substantially the same conversion, liquidation preferences
and voting rights as the Series A Preferred Shares. At December 31, 1995,
the Company owed IST approximately $122,000 in cumulative and unpaid
dividends on the Series B Preferred Stock.
Item 3. Legal Proceedings.
The Company previously reported that a complaint was filed in March 1994 with
the Equal Employment Opportunity Commission in San Antonio, Texas by a
temporary employee of Incat for claims of sexual harassment (Claim No.
360940776). There have been no new developments in this matter, and as of
the date of this report, it is not possible to make any determination of the
probable outcome of this matter or the likelihood of a material adverse
judgment against Incat.
Also, as the Company previously reported during 1995, Chevron USA, Inc.
("Chevron[MAL1]") filed a third-party petition against Incat for indemnity
(including for attorneys' fees) and breach of contract for not providing
Chevron insurance in connection with certain litigation commenced in 1994 by
a former Incat employee in the District Court of Jefferson County, Texas
(Mendenhall v. Chevron USA, Inc. Case No. B-0148686). The Plaintiff employee
claims he was injured in 1992 by toxic fumes while providing cleaning services
at the Chevron facility in Port Arthur, Texas. Incat's insurer has been
notified of the third-party petition and is reviewing Chevron's demands.
Based on the present status of this matter, Incat does not believe that the
outcome of this litigation will have a material adverse effect and further
believes that the proceedings are routine litigation incidental to its
business.
During 1995, an individual who allegedly sustained injuries while providing
services to Incat at the Stirlington, Louisiana facility of Koch Nitrogen
Company ("Koch") commenced litigation against Incat, Koch and others (Joseph
Rock et al. V. Koch Nitrogen Company et al, Civil Suit No. 95-2082, Ouachita
Parish, Louisiana), seeking amounts for compensatory and punitive damages.
The plaintiff's minor daughter has also asserted claims for a loss of
consortium and support. Koch has demanded that is be defended and indemnified
by Incat and its insurer. Additionally, in 1995, an Incat employee initiated
litigation in the Superior Court for the State of California, County of Los
Angeles (Espinoza v. Unocal Corporation, et al., Case No. 017067) for damages
in respect of injuries claimed to have occurred while performing catalyst
services at Unocal's Wilmington, California facilities. Incat has not been
named a party in the proceedings as Unocal Corporation ("Unocal") is being
defended by Incat's general liability insurer pursuant to Unocal's demand for
coverage as an additional insured on a contractual indemnity. Demand has also
been made on Incat and its general liability insurer for indemnification by
Koch Refining Company, L.P. ("KRC") regarding a total of $219,000 paid by
KRC to three Incat employees for alleged injuries sustained in October 1995
at KRC's Corpus Christi, Texas facility. Incat's general liability insurer
has not responded to the demand. An OSHA investigation of this incident is
pending and it is unknown what, if any, action will be undertaken as a result
of the outcome of the OSHA investigation.
The Company believes that, to the extent it may have any liability with
respect to the claims described on the paragraph immediately above (other
than the OSHA investigation), Incat would be covered by its workers'
compensation and general liability insurance carriers. The initial premium
paid by Incat with respect to these policies is subject to adjustment based
on certain insurance components plus losses during the applicable policy
periods. Based on current estimates prepared by Incat's insurers, the
Company has accrued a retrospective insurance premium of $300,000. This
amount represents a general reserve pending the resolution of the Koch, KRC
and Unocal claims, and various other open routine claims incidental to the
Company's business which affect the same policy years and, therefore, the
retrospective premium adjustments. However, due to the uncertainty of
various factual and legal issues which may affect these claims, there can be
no assurance as to the outcome of these claims or the adequacy of the amount
reserved.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year covered
by this Report to a vote of security holders, and, therefore, this Item is
inapplicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders.
The Company's Common Stock is quoted in the over-the-counter market through
the "pink sheets" and is not quoted on any established stock exchange or
NASDAQ. Trading in the Company's securities is limited and sporadic and
prices are highly volatile. Quotations provided below are the high and low
bid for the quarters indicated based on inter-dealer quotations, without
retail mark-up, mark-down or commission, and do not necessarily represent
actual transactions.
Common Stock
Quarter Ended High Low
March 31, 1994 .007 .002
June 30, 1994 .005 .002
September 30, 1994 .0045 .002
December 31, 1994 .004 .002
March 31, 1995 .005 .002
June 30, 1995 .005 .002
September 30, 1995 .004 .002
December 30, 1995 .006 .002
The Company had 2,021 shareholders of record as of March 18, 1996. The
Company has not declared or paid any cash dividends on its common stock and
it is not anticipated that any such dividends will be paid on the common
stock in the near future. AEC and Incat are restricted in their ability to
pay dividends pursuant to their respective loan agreements with FINOVA and
First Interstate and, accordingly, as a practical matter, the Company also is
restricted in its ability to pay cash dividends on its common stock without
the consent of the lenders.
Item 6. Selected Financial Data
The following summarizes certain financial information concerning the
Company and is based upon the audited consolidated financial statements of
the Company. The information presented for the nine months ended
December 31, 1992, and for the year ended December 31, 1993 is unaudited.
All information presented below should be read in conjunction with the
Company's consolidated financial statements and the notes thereto.
<TABLE>
HISTORICAL AS OF:
(In Thousands)
<CAPTION>
DEC 31 DEC 31 DEC 31 DEC 31 March 31 March 31
Balance Sheet: 1995 1994 1993 1992 1993 1992
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Working Capital
(Deficiency) $ (115) $ 651 $ 118 $ 365 $ 629 $ (296)
Total Assets 4,996 5,716 4,467 5,247 5,997 6,204
Total Liabilities 3,918 3,765 2,877 3,522 3,921 4,320
Long Term
Obligations
and Series A
Redeemable
Convertible
Preferred Stock 1,586 1,657 2,013 2,116 2,112 1,326
Common and other
Stockholders'
Equity 841 1,609 1,156 1,243 1,588 1,396
</TABLE>
<TABLE>
For The For The For The For The For The For The For The
Year Year Year Nine Months Nine Months Year Year
Ended Ended Ended Ended Ended Ended Ended
DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 March 31 March 31
1995 1994 1993 1993 1992 1993 1992
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Service Revenues $10,448 $12,756 $12,004 $8,062 $6,927 $10,869 $10,368
Costs & Expenses
Service Costs 7,359 8,313 8,270 5,873 4,589 6,986 6,121
SG&A 2,751 2,453 2,235 1,705 1,808 2,338 2,206
Retospective
insurance
adjustment(1) 300 - - - - - -
Management Fees,
(Related Party) 112 96 97 72 63 88 171
Service and
Guarantee fees,
(Related Party) - - 50 50 - - -
Interest Expense 255 211 270 206 196 260 325
Deprec. & Amort. 480 622 686 491 396 591 443
Income(Loss)
Before Taxes (809) 1,061 396 (335) (125) 606 1,102
Net Income(Loss) (696) 535 (38) (407) (77) 292 611
Net Income(Loss)
attributable
to Common
shareholders (768) 453 (138) (482) (152) 192 515
Net income(Loss)
per Common share (.0013) .0009 (.0002) (.0009) .0002) .0004 .0009
(1) See footnote 4 (Commitments and Contingencies) To the audited financial
statements, and Item 3 and Item 7 for further discussions.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations.
General.
The oil refinery, petrochemical and chemical processing industries continue
to rely on outside contractors for the performance of critical services.
These factors, as well as the reputation of Incat, are continuing to provide
the opportunity for growth and stability of the Company.
Periods ended December 31, 1995 and 1994.
The Company experienced a decrease in 1995 revenues of 18% or $2,308,000. The
decrease in revenue was primarily attributable to shifts in timing of refinery
shutdowns and rescheduling of work which totaled approximately $4,240,000.
Approximately $3,190,000 of the $4,240,000 has either been completed or will
be completed during the first quarter of 1996. During 1995, the Company added
13 new customers with revenues of approximately $728,000.
The decline in revenues was also impacted by the uncertain economic conditions
in Mexico which contributed to a decline in foreign revenues of approximately
$400,000
Cost of services as a percentage of service revenues was 70.4% and 65.2%,
respectively, for the 1995 and 1994 fiscal years. The increase in COGS (cost
of goods sold) for the fiscal year 1995 is primarily attributable to a 4%
increase in indirect service costs as a percentage of service revenues. 1995
indirect service costs remained indirect service costs remained approximately
the same as 1994 while service revenues decreased 18% causing the indirect
service costs as a percentage of service revenues to increase 4%. The
Company's direct costs as a percentage of service revenues for the years ended
December 31, 1995 and 1994 are comparable.
Selling, general and administrative expenses have increased from $2,453,000
for the year ended December 31, 1994 to $2,751,000 for the corresponding 1995
period. The expenses have also increased as a percentage of sales from 19.2%
in 1994 to 26.3% in 1995. The largest factor in this increase was the
opening of the Gulf Coast regional office in December 1994 which resulted in
additional SG&A cost of approximately $270,000 for the year ended December 31,
1995. The additional overhead generated by the Gulf Coast regional office
had a greater impact than planned due to weaker than expected sales for the
region. The Gulf Coast regional office has been downsized, and the Company
currently plans to maintain an office in this area as the Company has developed
good customer contacts in this area.
Interest expense increased $44,000 from $211,000 for the year ended
December 31, 1994 to $255,000 for the corresponding 1995 period. The
increase is due to an increase in the financial institution debt by
approximately $400,000 to finance equipment purchases. Depreciation and
amortization decreased $142,000 from $622,000 for the year ended December 31,
1994 to $480,000 for the year ended December 31, 1995 due to older equipment
being fully depreciated.
For the fiscal year ended December 31, 1995, the Company had a pretax loss of
$809,000 as compared to a pretax income of $1,061,000 for the same period
in 1994. This is primarily due to the Company having a decrease in net
service revenues. While net service revenues decreased 18% or $2,307,000,
service cost and expenses decreased by only 7% or $954,000. In addition, the
Company had an increase in selling, general & administrative expenses of
$298,000 of which $270,000 was associated with the opening of the Gulf Coast
regional office and incurred a restrospective insurance premium adjustment of
$300,000. (See Item 3 for more information on the $300,000 retrospective
insurance premium adjustment.) These additional costs in conjunction with
the shortfall in revenues significantly contributed to the pretax loss of
$809,000.
Periods ended December 31, 1994 and 1993
(Unaudited and Recasted to a Calendar year end)
Revenues increased 6.3% or $752,000 from $12,004,000 to $12,756,000 for the year
ended December 31, 1994 as compared to the 12 months ended December 31, 1993.
The Company added 13 new customers which contributed approximately $1,099,000
in new revenues. Revenue increases were impacted by approximately
$1,000,000 resulting from work originally scheduled for the fourth quarter of
1994 being rescheduled for 1995.
Cost of services as percentage of service revenues was 65.2% and 68.9%,
respectively, for the year ended December 31, 1994 and the 12 months ended
December 31, 1993. Improvement in gross margin percentages from 31.1% to
34.8% for 1994 as compared to 1993 is partially attributable to certain non-
recurring costs incurred in 1993 not repeating in fiscal year 1994. These
costs included equipment maintenance costs of a one-time nature and the costs
of idle personnel who were not reassigned when service contracts were re-
scheduled from the fourth quarter of 1994 to fiscal year 1995. Additionally,
subcontract revenues totaling were approximately $971,000 for the 12 month
period ended December 31, 1993 as compared to $851,000 in fiscal year 1994
which had the effect of reducing gross margins during both periods but with
greater impact for 1993 because of its larger relationships to total
revenues.
Selling, general and administrative expenses increased from $2,235,000 for
the 12 month period ended December 31, 1993 to $2,453,000 for the cor-
responding 1994 period. The expenses increased as a percentage of sales
from 18.6% to 19.2% in 1994. The primary factors of the increase in 1994
were (1) an approximate $128,000 increase in the Company's health insurance
premiums from 1993 to 1994, and (2) a reduction of workers compensation
expense totaling $248,000 during the year ended December 31, 1993 due to a
retroactive experience rated premium adjustment in California which did not
reoccur during 1994.
Interest expense decreased $59,000 from $270,000 for the 12 month period
ended December 31, 1993 to $211,000 for the fiscal year 1994 due to the
payoff of notes totaling $207,000 and continued amortization of
financial institution debt totaling $258,000 during fiscal year 1994 without
any additional borrowings during the year. Depreciation and amortization
decreased from $686,000 for the year ended December 31, 1993 to $622,000 for
the corresponding 1994 period.
The Company's pretax income increased $665,000 to $1,061,000 for the
fiscal year 1994 as compared to $396,000 for the corresponding period of the
prior year is primarily due to the increase in revenue volume and gross margins.
The provision for income taxes differed from the Federal statutory rate
primarily due to the effect of state income taxes, amortization of the excess
of purchase price over fair value of net assets acquired, meals and
entertainment expenses not deductible for income tax purposes and foreign
income taxes.
Nine Months Ended December 31, 1993 and 1992.
On February 11, 1994, the Company changed its fiscal year end from March 31
to December 31, effective as of December 31, 1993. In this discussion, the
nine months ended December 31, 1993 are compared to the nine months ended
December 31, 1992.
Revenues for the nine month period ended December 31, 1993, were $8,062,000,
an increase of $1,135,000 for the same period in 1992, of which approximately
$800,000 represented nonrecurring subcontractor billings. The remaining
increase was largely attributable to the Company's development of new
markets, primarily in the Louisiana area, where the Company established an
operational center in January 1993, and in Central America and Southeast
Asia. During the nine months ended December 31, 1993, the Company provided
services to 20 new customers, for a total of approximately $1,300,000 in
revenue.
Revenues were affected by the timing of refinery shutdowns. Approximately
$1,100,000 of revenue scheduled during the nine months ended December 31,
1993, was deferred to the first quarter of 1994 due to
rescheduling of refinery shutdowns by customers.
The cost of services as a percentage of revenues increased to approximately
73% for the nine months ended December 31, 1993, as compared to 66% for the
same period in 1992. Excluding the effects of certain unusually large
subcontractor revenues required to be billed through the Company, costs of
services as a percentage of service revenues was approximately 70% for the
period ended December 31, 1993. Factors which contributed to the increase
in the cost of services included costs associated with increases in
personnel in anticipation of work which was subsequently delayed as a result
of rescheduling of shutdowns by customers, increased personnel training
requirements imposed by customers, and general equipment maintenance costs
not incurred during the comparable period in the prior year. Cost increases
were largely offset by a reduction of approximately $248,000 in worker's
compensation premiums compared to the nine months ended December 31, 1992,
in which a retroactive adjustment in the Company's experience rating in
California occurred.
Selling, general and administrative costs decreased by approximately $103,000
for the nine months ended December 31, 1993, compared to the same period in
1992. This reduction was largely attributable to reductions in sales and
marketing expenses and personnel. Net losses were also increased by (a) a
one-time fee paid to two affiliates of the Company of $40,000, as
compensation for their personal guaranties of the First Interstate Loan, and
officer/director fees aggregating $10,000, all of which were paid in the
form of common stock of the Company, and (b) increase in depreciation and
amortization expense due to the addition of two catalyst handling units.
The Company's pre-tax losses resulted in a net deferred tax benefit of
$94,000 for the nine months ended December 31, 1993. This benefit was offset
by foreign income tax expense of $166,000 which resulted in a net income tax
expense of $72,000. In addition, the tax expense differed from the expected
income tax benefit computed by applying the U.S. Federal Corporate Income Tax
rate of 34% due to expenses not deductible for tax purposes relating to
goodwill amortization, meals and entertainment, and foreign income taxes.
Net losses before taxes for the nine months ended December 31, 1993 were
$407,000 as compared to losses of $77,000 for the comparable period in the
preceding year. As indicated above, the principal causes for the increase
in the net losses were (i) increased costs incurred in connection with
work which was rescheduled to the first quarter of the next fiscal year,
(ii) increased training and equipment costs, and (iii) increased depreciation
expense due to additions of additional capital equipment.
Liquidity and Capital Resources.
The Company had working capital deficit of $(115,000) at December 31, 1995 as
compared to working capital of $651,000 at December 31, 1994. The decrease
in working capital is primarily due to losses from operations.
The Company has financed capital expenditures primarily its five year loan
facility with FINOVA Capital Corp. As of December 31, 1995, no additional
amounts can be drawn against this facility. $403,000 of the loan facility was
drawn during January and February 1995 to finance the purchase of an
additional unit plus other equipment needed to support projected service
activities. The Company has budgeted approximately $250,000 in fiscal 1996
to purchase capital equipment.
The agreements with FINOVA Capital Corp. (the "Loan Agreements") provide that
within the 15 day period following its receipt of the annual financial
statements of AEC and Incat, FINOVA may require that the principal amounts
payable to FINOVA be prepaid in an amount not to exceed 50% of AEC's Excess
Cash Flow during the preceding fiscal year. Excess Cash Flow is defined as
the operating income of AEC and its subsidiaries, determined on a
consolidated basis, before depreciation, amortization, interest, income taxes
and management fees, reduced by capital expenditures (other than those made
from the proceeds of the FINOVA facility) and further reduced by (a) any
payments of principal and/or interest to (i) the Holders of the AEC Notes and
(ii) FINOVA other than payments in respect of the Incat Note described below
in this Item in "Loan from IST, Recapitalization and Preferred Stock", and
(b) interest on the First Interstate Loan. 50% of Excess Cash Flow was
approximately $341,000 for the year ended December 31, 1994. FINOVA waived
its right to prepayment for the year ended December 31, 1994. There was no
excess cash flow for the year ended December 31, 1995. The FINOVA note is
guaranteed by the Company and Incat and secured by a security interest in all
assets of AEC and Incat.
The principal amount of the FINOVA financing is to be repaid in 59 monthly
installments, calculated on a seven year amortization, with a final balloon
payment due on December 23, 1997. The principal amount was subject to change
based on the principal amounts drawn by the Company. The amount of the
monthly payment is approximately $46,000 including the effect of drawing the
additional $403,000 in 1995. See Items 1 and 2 Business and Properties;
FINOVA Loans and Refinancing.
The FINOVA Loan Agreements require AEC to maintain, on a consolidated basis
with its subsidiaries, a ratio of current assets to current liabilities of
not less than 8/10ths-to-1 and a ratio of total debt to shareholders' equity
of not more than 4-to-1 and a ratio Operating Cash Flow to Annual Debt
Service (as defined in the Loan Agreements) of at least 1.7-to-1. AEC was
not in compliance with these covenants at December 31, 1995. However, FINOVA
waived these requirements for the year ended December 31, 1995 and modified the
ratio of Operating Cash Flow to Annual Debt Service to 1.40-to-1 for 1996 .
The Company believes it will remain in compliance with the covenants, as
modified during the year 1996.
Incat has had an annual revolving working capital credit facility with First
Interstate Bank N.A. ("First Interstate") since 1988. The maximum amount
which may be outstanding from time to time under the line is currently
$1,400,000. Interest is payable monthly at a rate of .5 of 1% over the prime
rate quoted from time to time by First Interstate. Principal is payable on
demand, or if no demand is made, on July 31, 1996. Security for the loan
includes accounts receivable and other intangible property of Incat. The
loan agreement does not allow borrowning against foreign accounts receivable.
The line is guaranteed by AEC.
First Interstate requires Incat to comply with a variety of financial
covenants including covenants which require that it have (a) a minimum
tangible net worth of $1,500,000 from and after March 31, 1992, (b) current
assets equal to or greater than 125% of current liabilities, and (c)
indebtedness equal to or less than 150% of tangible net worth. Incat was in
violation of covenants a, b and c above at December 31, 1995. First
Interstate has waived all rights and remedies available pursuant to the
working capital agreement through April 30, 1996. At December 31, 1995 Incat
owed $725,000 on this facility and the Company expects the revolving credit
facility to be renewed in July, 1996.
Net worth decreased from $1,609,000 at December 31, 1994 to $841,000 at
December 31, 1995. The decrease is due to losses from operations of $696,000
plus dividends declared on preferred stock totalling $72,000. At December
31, 1995, the Company owed IST approximately $122,000 in cumulative and
unpaid dividends. Amounts to be paid in respect of dividends on and
redemption of the Series A and B Preferred Shares will be approximately
$177,000 for the year ending December 31, 1996. The loan agreements with
First Interstate and FINOVA restrict the Company's ability to pay dividends
on its capital stock; however, these financial institutions do permit
payments for redemption and dividends on Series A Preferred Shares. See
Item 5.
Operating activities in 1996 are expected to generate sufficient cash to provide
for the Company's working capital needs during the coming yeartogether with
funds available from the First Interstate working capital facility.
Cash Flows for the Year Ended December 31, 1995.
The Company generated approximately $614,000 in cash flow from operations up
from $104,000 in 1994. The Company's reduction in trade and unbilled
receivables was the major factor impacting the cash provided from operating
activities during the year ended December 31, 1995. Financing activities
resulted in an outflow of cash of approximately $66,000 primarily due to
preferred stock redemptions and dividends of $177,000 and proceeds and payments
of $425,000 and $313,000 from/on notes payable, respectively. Investing
activities used cash of $488,000 to purchase equipment. The Company continued
it commitment to investing in equipment.
Cash Flows for the Year Ended December 31, 1994.
The Company generated approximately $104,000 in cash flow from operations
during the year ended December 31, 1994. Net positive cash flow from
financing activities was approximately $146,000. This was accomplished by
an increase in drawings on Incat's line of credit of $789,000 less reductions
of debt and preferred stock redemptions and dividends totaling $643,000. A
primary use of cash flow from investing activities was the Company self-
funding of equipment purchases totaling approximately $244,000.
The Company's fixed debt services and other requirements include debt service
of approximately $46,000 per month and monthly preferred stock redemption and
dividend payments totaling approximately $14,500 for the year ending December
31, 1994.
Cash Flows for the Nine Months Ended December 31, 1993.
The Company generated $874,000 in cash flow from operations during the nine
months ended December 31, 1993. Cash flow from financing activities included
net payments of $60,000 on the revolving line of credit, proceeds and
payments of $372,000 and $585,000 from/on notes payable, respectively and
payments for dividends and redemption of preferred stock totaling $129,000.
Cash flow from investing activities consists primarily of purchases of
equipment totaling $452,000.
Impact of Recently Issued Accounting Standards.
In March 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Impairment of Long-Lived Assets." This new
standard is effective for years beginning after December 15, 1995 and would
change the Company's method of determining impairment of long-lived assets.
Although the Company has not performed a detailed analysis of the impact of
this new standard on the Company's financial statements, the Company does not
believe that adoption of the new standard will have a material effect on the
financial statements.
In October 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation" (FAS 123). The
new statement is effective for fiscal years beginning after December 15,
1995. FAS 123 encourages, but does not require, companies to recognize
compensation expense for grants of stock, stock options, and other equity
instruments to employees based on fair value. Companies that due not adopt
the fair value accounting rules must disclose the impact of adopting the new
method in the notes to the financial statements. Transactions in equity
instruments with non-employees for goods or services must be accounted for
on the fair value method. The Company currently does not intend to adopt
the fair value accounting prescribed by FAS 123. However, the Company
intends to continue its analysis of FAS 123 and may elect to adopt its
provisions in the future.
Effects of inflation
The effect of inflation has been minimal over the past three years and
inflation is not expected to have a significant impact on the Company's
operations in 1996.
Item 8. Financial Statements and Supplementary Data
(See attached following pages)
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
REPORT ON AUDIT OF
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994, 1993
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets - December 31, 1995 and 1994 . . . . . . . . . F-3
Consolidated Statements of Operations - For the Years Ended
December 31, 1995 and 1994 and for the Nine Months Ended
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statement of Changes in Common and Other
Stockholders' Equity - For the Period from April 1, 1993
through December 31, 1995 . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows - For the Years Ended
December 31, 1995 and 1994 and for the Nine Months Ended
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . F-7
Independent Auditor's Report on Supplementary Information. . . . . . . . . S-1
Schedule I - Financial Information of Registrant . . . . . . . . . . . . . S-2
Schedule II - Valuation and Qualifying Accounts. . . . . . . . . . . . . . S-5
INDEPENDENT AUDITOR'S REPORT
The Stockholders and Directors
Advanced Environmental Systems, Inc.
We have audited the accompanying consolidated balance sheets of Advanced
Environmental Systems, Inc. and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of operations, changes
in common and other stockholders' equity and cash flows for the years ended
December 31, 1995 and 1994, and for the nine months ended December 31, 1993.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatements. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Advanced Environmental Systems, Inc. and subsidiaries as of December 31,
1995 and 1994, and the results of their operations and their cash flows for
the years ended December 31, 1995 and 1994, and for the nine months ended
December 31, 1993, in conformity with generally accepted accounting
principles.
/s/Hein + Associates LLP
Hein + Associates LLP
Denver, Colorado
February 7, 1996
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1995 1994
ASSETS
Current Assets:
Cash and cash equivalents $ 186,000 $ 126,000
Trade accounts receivable, net of
allowance for doubtful
accounts of $40,000:
Related companies 154,000 -
Other 1,468,000 2,497,000
Unbilled trade receivables 17,000 189,000
Deferred tax asset 260,000 50,000
Income tax receivable, net 201,000 92,000
Prepaid and other current assets 168,000 147,000
Total current assets 2,454,000 3,101,000
Property and Equipment, net 1,538,000 1,552,000
Intangibles and Other Assets:
Intangibles, net of accumulated
amortization of $549,000 and
$483,000, respectively 1,001,000 1,058,000
Other 3,000 5,000
Total other assets 1,004,000 1,063,000
Total Assets $4,996,000 $5,716,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, including payables
to related companies of
$407,000 and $137,000, respectively $ 904,000 $ 928,000
Revolving loans 725,000 789,000
Current portion of long-term debt:
Financial institutions 348,000 248,000
Related parties 1,000 26,000
Accrued expenses (Note 4) 591,000 459,000
Total current liabilities 2,569,000 2,450,000
Long-term Debt 1,171,000 1,134,000
Deferred Income Taxes 178,000 181,000
Commitments and Contingencies (Note 4)
Redeemable Convertible Preferred Stock -
Series A, 43,616,000 shares authorized;
30,648,000 and 43,616,000 shares
issued and outstanding, respectively;
liquidation preference of $249,000
at December 31, 1995 237,000 342,000
Common and Other Stockholders' Equity:
Preferred stock, $.0001 par value;
750,000,000 shares authorized:
Series B, 100,000,000 shares
authorized; 24,592,000 shares
issued and outstanding;
liquidation preference of $200,000 2,000 2,000
Common stock, $.0001 par value; 2,250,000,000
shares
authorized; 531,668,000 shares
issued and outstanding 53,000 53,000
Additional paid-in capital 548,000 548,000
Retained earnings 238,000 1,006,000
Total stockholders' equity 841,000 1,609,000
Total Liabilities and Stockholders' Equity $4,996,000 $5,716,000
See accompanying notes to these consolidated financial statements.
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the
Nine Months
For the Years Ended Ended
December 31, December 31,
1995 1994 1993
Net Service Revenues $10,448,000 $12,756,000 $8,062,000
Cost and Expenses:
Service costs and
expenses 7,359,000 8,313,000 5,873,000
Selling, general
and administrative 2,751,000 2,453,000 1,705,000
Management fees,
related party 112,000 96,000 72,000
Service and guarantee
fees, related parties - - 50,000
Interest, including
interest paid to
related parties of
$45,000, $10,000,
and $38,000,
respectively 255,000 211,000 206,000
Depreciation and
amortization 480,000 622,000 491,000
Retrospective insurance
adjustment 300,000 - -
Total expenses 11,257,000 11,695,000 8,397,000
Income (Loss) Before
Income Taxes (809,000) 1,061,000 (335,000)
Income Tax Expense
(Benefit) (113,000) 526,000 72,000
Net Income (Loss) (696,000) 535,000 (407,000)
Dividends on Preferred
Stock (72,000) (82,000) (75,000)
Net Income (Loss)
Attributable to Common
Stockholders $(768,000) $ 453,000 $(482,000)
Net Income (Loss) Per
Common Share and
Common Share
Equivalent $ (.001) $.001 $ (.001)
Weighted Average Shares
Outstanding 531,668,000 531,668,000 524,304,000
See accompanying notes to these consolidated financial statements.
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN COMMON AND OTHER STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 1, 1993 THROUGH DECEMBER 31, 1995
Series B
Preferred Stock Common Stock
Shares Amount Shares Amount
Balances, April 1, 1993 24,592,000 $ 2,000 519,168,000 $ 52,000
Dividends on
preferred stock - - - -
Common stock issued
for director fees - - 2,500,000 -
Common stock issued
for guarantee fees - - 10,000,000 1,000
Net loss - - - -
Balances, Dec. 31, 1993 24,592,000 2,000 531,668,000 53,000
Dividends on
preferred stock - - - -
Net income - - - -
Balances, Dec. 31, 1994 24,592,000 2,000 531,668,000 53,000
Dividends on
preferred stock - - - -
Net loss - - - -
Balances, Dec. 31, 1995 24,592,000 $ 2,000 531,668,000 53,000
Additional Total
Paid-in Retained Stockholders'
Balances, April 1, 1993 $ 499,000 $1,035,000 $1,588,000
Dividends on
preferred stock - (75,000) (75,000)
Common stock issued
for director fees 10,000 - 10,000
Common stock issued
for guarantee fees 39,000 - 40,000
Net loss - (407,000) (407,000)
Balances, Dec. 31, 1993 548,000 553,000 1,156,000
Dividends on
preferred stock - (82,000) (82,000)
Net income - 535,000 535,000
Balances, Dec. 31, 1994 548,000 1,006,000 1,609,000
Dividends on
preferred stock - (72,000) (72,000)
Net income - (696,000) (696,000)
Balances, Dec. 31, 1995 548,000 238,000 841,000
See accompanying notes to these consolidated financial statements.
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the
Nine Months
For the Years Ended Ended
December 31, December 31,
1995 1994 1993
Cash Flows from Operating Activities:
Net income (loss) $(696,000) $ 535,000 $(407,000)
Adjustments to reconcile net
income (loss) to net cash
from operating activities:
Stock for services and
guarantee fees - - 50,000
Depreciation and amortization 480,000 622,000 491,000
Loss (gain) on sale of
equipment - 6,000 -
Deferred income tax expense
(benefit) (213,000) 66,000 (94,000)
Changes in operating assets
and liabilities (net of
operating assets and
liabilities acquired):
Decrease (increase) in:
Trade accounts receivable 875,000 (1,403,000) 1,620,000
Unbilled trade receivables 172,000 (189,000) 9,000
Prepaid expenses and other (3,000) (27,000) (38,000)
Income tax receivables (109,000) (92,000) -
Increase (decrease) in:
Accounts payable (24,000) 640,000 (653,000)
Accrued expenses 132,000 (42,000) 123,000
Income taxes payables - (12,000) (227,000)
Net cash provided by operating
activities 614,000 104,000 874,000
Cash Flows from Investing Activities:
Purchase of property and equipment (488,000) (244,000) (452,000)
Other - - 15,000
Net cash used in investing
activities (488,000) (244,000) (437,000)
Cash Flows from Financing Activities:
Proceeds from revolving
line-of-credit 4,910,000 8,982,000 555,000
Repayments on revolving
line-of-credit (4,911,000) (8,193,000) (615,000)
Proceeds from notes payable 425,000 - 372,000
Repayments of notes payable (313,000) (469,000) (585,000)
Redemption of Series A
preferred stock (105,000) (92,000) (54,000)
Dividends declared (72,000) (82,000) (75,000)
Net cash provided by (used in)
financing activities (66,000) 146,000 (402,000)
Increase in Cash and Cash Equivalents 60,000 6,000 35,000
Cash and Cash Equivalents,
beginning of year 126,000 120,000 85,000
Cash and Cash Equivalents,
end of year $ 186,000 $ 126,000 $ 120,000
Supplemental Disclosures of Cash Flow
Information:
Cash paid for income taxes $ 203,000 $ 283,000 $ 258,000
Cash paid for interest $ 327,000 $ 219,000 $ 200,000
Equipment purchased through
capital leases $ 63,000 $ - $ -
See accompanying notes to these consolidated financial statements.
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations and Summary of Significant Accounting Policies:
Nature of Operations - Advanced Environmental Systems, Inc. (AES)
was incorporated in New York. AES and its subsidiaries are
collectively referred to as the Company. The Company changed its
year-end from March 31 to December 31, effective December 31, 1993.
The Company performs catalyst handling services for the
petrochemical industry and leases bins for catalyst storage on a
short-term basis. Divisions of the Company operate or market
services in primarily southwest and western United States, South and
Central America, and Asia. Industrial Services Technologies (IST)
owns approximately 62% of the common stock of the Company.
Principles of Consolidation - The consolidated financial statements
of the Company include the accounts of AES and its subsidiaries,
which include Advanced Energy Company (AEC), which is principally a
corporate vehicle through which AES acquired International Catalyst,
Inc. (Incat), the operating company. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents - The Company considers all highly liquid
monetary instruments purchased with an original maturity of three
months or less to be cash equivalents.
Property and Equipment - Property and equipment are stated at cost,
less accumulated depreciation. Depreciation is computed using
straight-line and accelerated methods over estimated useful lives of
three to seven years. Maintenance and repairs are charged to expense
as incurred, and expenditures for major improvements are capitalized.
When assets are retired, or otherwise disposed of, the property
accounts are relieved of costs and accumulated depreciation and any
resulting gain or loss is credited or charged to income.
Intangibles - Intangibles consist primarily of the excess of
purchase price over fair value of net assets acquired (goodwill) in
connection with the acquisition of Incat. This goodwill is being
amortized over 30 years on a straight-line basis. The Company
periodically reviews the recoverability of goodwill based on
expected future income. Due to operation losses in the past year,
if such losses were to continue, it is reasonably possible the
Company's estimate in connection with the recovery of goodwill
and/or its remaining life would materially change within the
forthcoming year. If the results of such an assessment indicates
that goodwill is impaired, or its life is less than its remaining
term, the amount of the impairment will be charged to income, or the
remaining amortization period will be decreased.
Revenue Recognition - Unbilled receivables represent contracts which
are in progress for which billings were prepared subsequent to the
balance sheet date. The Company's contracts are based either on time
and materials or fixed fees. For time and material contracts,
revenue is recognized at agreed upon rates as incurred. For fixed
fee contracts, the Company follows the percentage of completion
method of reporting income which takes into account the cost,
estimated earnings, and revenue to date on contracts not yet
completed.
Income Taxes - The Company accounts for income taxes under the
liability method, which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events
that have been included in the financial statements. Under this
method, deferred tax assets and liabilities are determined based on
the difference between the financial statements and tax bases of
assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
Net Income (Loss) per Common Share - Net income (loss) per common
share is computed by dividing net income, less dividends on
preferred stock, by the weighted average number of common and common
equivalent shares outstanding during each period. Common stock
options outstanding and common stock which would be issued upon
conversion of preferred stock are not included in the computations
because their effect be antidilutive or would not be material.
Use of Estimates - The preparation of the Company's consolidated
financial statements in conformity with generally accepted
accounting principles requires the Company's management to make
estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Actual results could
differ from those estimates. The Company makes various significant
estimates which are discussed within the notes to the consolidated
financial statement.
Fair Value of Financial Instruments - The estimated fair values for
financial instruments under SFAS No. 107, Disclosures about Fair
value of Financial Instruments, are determined at discrete points in
time based on relevant market information. These estimates involve
uncertainties and cannot be determined with precision. The estimated
fair values of the Company's financial instruments, which includes
cash and cash equivalents, trade receivables, unbilled trade
receivables, accounts payable, revolving loans, and other debt,
approximates the carrying value in the financial statements at
December 31, 1995.
Impact of Recently Issued Accounting Standards - In March 1995, the
Financial Accounting Standards Board issued a new statement titled
"Accounting for Impairment of Long-Lived Assets." This new standard
is effective for years beginning after December 15, 1995 and would
change the Company's method of determining impairment of long-lived
assets. Although the Company has not performed a detailed analysis
of the impact of this new standard on the Company's financial
statements, the Company does not believe that adoption of the new
standard will have a material effect on the financial statements.
In October 1995, the Financial Accounting Standards Board issued a
new statement titled "Accounting for Stock-Based Compensation"
(FAS 123). The new statement is effective for fiscal years
beginning after December 15, 1995. FAS 123 encourages, but does not
require, companies to recognize compensation expense for grants of
stock, stock options, and other equity instruments to employees based
on fair value. Companies that do not adopt the fair value accounting
rules must disclose the impact of adopting the new method in the notes
to the financial statements. Transactions in equity instruments
with non-employees for goods or services must be accounted for on
the fair value method. The Company currently does not intend to
adopt the fair value accounting prescribed by FAS 123, and will be
subject only to the disclosure requirements prescribed by FAS 123.
However, the Company intends to continue its analysis of FAS 123 and
may elect to adopt its provisions in the future.
Reclassifications - Amounts in prior years are reclassified as
necessary to conform with the current year's presentation. Such
reclassifications had no effect on net income (loss).
2. Property and Equipment:
Property and equipment is summarized by major classifications as
follows:
December 31, December 31,
1995 1994
Equipment $3,453,000 $3,084,000
Furniture and fixtures 352,000 346,000
Transportation equipment 391,000 360,000
4,196,000 3,790,000
Accumulated depreciation (2,658,000) (2,238,000)
$1,538,000 $1,552,000
Depreciation expense charged to operations was $439,000, $524,000, and
$375,000 for the years ended December 31, 1995 and 1994, and for the nine
months ended December 31, 1993, respectively.
3. Related Party Transactions:
The Company paid IST management fees of $112,000, $96,000, and $72,000
during the years ended December 31, 1995 and 1994, and the nine months
ended December 31, 1993, respectively. Pursuant to the Company's loan
agreement with a financial institution, future management fees to IST are
limited to $180,000 annually.
The Company has retained a stock transfer agent of which a major
stockholder is also a stockholder of IST. Fees paid to the stock transfer
agent were not significant. A director of the stock transfer agent is
also a director of the Company.
The Company has an annual lease for a regional facility with a company
controlled by certain officers and directors of the Company and/or IST.
The Company has paid lease costs of approximately $39,000, $39,000, and
$27,000 during the years ended December 31, 1995 and 1994, and the nine
months ended December 31, 1993, respectively. The lease can be extended,
subject to certain escalations for each of the succeeding three years.
See Notes 5 and 6 for additional related party transactions.
4. Commitments and Contingencies:
Operating Leases - Incat has entered into operating leases for operating
facilities and vehicles for various periods through 1996. Total rent
expense on these leases for the year ended December 31, 1995 and 1994, for
the nine months ended December 31, 1993 was approximately $382,000,
$364,000, and $255,000, respectively. Non-cancelable future minimum lease
commitments under these leases are as follows:
Years Ended
December 31,
1996 $218,000
1997 129,000
1998 90,000
1999 58,000
$495,000
Subsequent to year-end, the Company extended an office lease, which was
previously set to expire in August 1996 and has included the future
commitment in the above schedule.
Contingencies - Various claims arising in the ordinary course of business
are pending against the Company. To the extent any liability may exist
with respect to these claims, the Company believes that resolution of
these matters would be covered by its workers' compensation and general
liability insurance carriers. The initial premiums paid with respect to
these policies are subject to adjustment based on certain components plus
losses during the applicable policy periods. Based on current estimates
prepared by the Company's insurers, the Company has accrued a
retrospective insurance premium of $300,000 at December 31, 1995. This
amount is reflected in accrued expenses at December 31, 1995 and
represents a general reserve pending the resolution of these claims
incidental to the Company's business. However, due to the uncertainty of
various factual and legal issues which may affect these matters, there can
be no assurance as to the ultimate outcome of these matters or the
adequacy of the amount reserved.
A former independent contractor has filed a sexual harassment claim with
the equal Employment Opportunity Commission against the Company. There
has been little development on the factual background of this claim.
Management does not believe the outcome of this matter will have a material
adverse effect on the financial condition of the Company. The
accompanying financial statements do not include any adjustments that
might result from the outcome of the above matter.
5. Stockholders' Equity:
During the nine months ended December 31, 1993, certain directors of the
Company received 2,500,000 shares of common stock of the Company, valued
at $10,000, for director fees and an officer/director of the Company and
an IST stockholder received 10,000,000 shares of common stock of the
Company, valued at $40,000, for their guarantees on certain debt of the
Company. Both of these individuals were also directors of IST.
During fiscal 1991, AES received $500,000 from IST in the form of a
convertible debenture. These funds were invested by AES as equity into
AEC and then loaned to Incat, which executed a $500,000 note (Incat Note)
in favor of AEC and pledged certain assets (The Pledged Assets) to AEC as
collateral. Under the then existing loan agreements with a financial
institution, AEC assigned the Incat Note and The Pledged Assets to the
same financial institution. AES subsequently converted the debentures
into Series A preferred stock. In conjunction with this transaction IST
has a note for $500,000 with the financial institution payable in 55
monthly installments of interest and principal totalling approximately
$12,000. Debt service with respect to this note commenced in May 1993.
The Company reclassified the Series A preferred stock out of common and
other stockholders' equity in 1993 due to AES redeeming preferred stock
and IST applying those funds to repay the IST note. At December 31, 1995,
the outstanding balances of the IST and Incat notes were approximately
$235,000.
The holder of Series A preferred stock is entitled to receive cumulative
cash dividends of 14% per annum, payable in monthly installments. The
Company declared and paid $44,000, $54,000, and $54,000, of such dividends
during the years ended December 31, 1995 and 1994, and during the nine
months ended December 31, 1993, respectively. The holder of Series B
preferred stock is entitled to receive cumulative cash dividends of 14%
per annum, payable in quarterly installments. The Company declared
$28,000, $28,000, and $21,000 of such dividends during the years ended
December 31, 1995 and 1994, and during the nine months ended December 31,
1993, respectively. At December 31, 1995, the Company owed IST
approximately $122,000 in cumulative and unpaid dividends on the Series B
preferred stock, which is included in accounts payable, related party.
Both Series A and Series B preferred stock have a liquidation preference
of $.008133 per share plus any unpaid accrued dividends. Each share of
the Series A and Series B preferred stock is convertible into one share of
common stock at the option of the holder. The Company may redeem all or
any part of the Series A and Series B preferred stock at $.008133 per
share. During the years ended December 31, 1995 and 1994, 12,969,000 and
11,265,000 shares of Series A preferred stock were redeemed.
The remaining 694,760,000 shares of authorized preferred stock may be
issued in such series and preferences as determined by the Board of
Directors.
Stock Option Plan - The Company has a Stock Option Plan under which
25,000,000 shares of common stock have been reserved for issuance. During
fiscal 1991, the Company granted options to purchase 18,261,013 shares of
common stock at $.015 per share. As of December 31, 1995, 7,028,594
options were forfeited by employees no longer employed by the Company, and
163,129 options have been exercised, leaving 11,069,290 options
outstanding. Options are exercisable for a seven-year period from the
date of the grant. As of December 31, 1995, all outstanding options were
exercisable.
In 1995, the Board of Directors changed the exercise price of all
outstanding options from $.015 to $.008. All other option terms remained
unchanged.
6. Notes Payable and Long-Term Debt:
Notes payable and long-term debt consisted of the following:
December 31,
1995 1994
Related Parties
Notes to affiliated entities. The notes
bear interest at 10% to 13% and are due
on demand. $ 1,000 $26,000
$ 1,000 $26,000
Financial Institutions
Notes payable to a financial institution
with interest at prime plus 3.5%
(12% at December 31, 1995). The loan is
collateralized by substantially all
assets of the Company. $1,458,000 $1,343,000
Other 61,000 39,000
1,519,000 1,382,000
Less current portion (348,000) (248,000)
$1,171,000 $1,134,000
Long-term debt maturities excluding prepayment rights and redemptions of
Series A preferred stock are as follows:
Years Ended
December 31,
1996 $247,000
1997 887,000
$1,134,000
The notes payable with the financial institution are to be repaid in
monthly principal and interest installments (currently approximating
$46,000) with all unpaid interest and principal due December 31, 1997.
Monthly installments vary with changes in interest rates. The financial
institution may require AEC to prepay the outstanding balance based upon
50% of annual excess cash flows as defined in the agreement. In 1995,
there were no excess cash flows.
Incat has a $1,400,000 line-of-credit with a financial institution,
renewable annually in July, with interest at prime plus .5% (9% at
December 31, 1995) collateralized by Incat's accounts receivable and
guaranteed by AEC, of which $725,000 has been drawn at December 31, 1995.
The Company's notes payable and the line-of-credit with financial
institutions have various financial and operational covenants, including
certain working capital and debt-to-equity ratios, operating cash flow
to annual debt service ratios, net worth requirements, a limitation on
capital expenditures, a minimum cash flow requirement and restrictions as
to AEC's and Incat's ability to pay dividends. The Company was not in
compliance with certain covenants as of year-end on its notes with a
financial institution and its line-of-credit. The line-of-credit
covenants that the Company was not in compliance with as of December 31,
1995 have been waived by the financial institution through April 30, 1996.
The covenants that pertain to the other notes payable were modified
subsequent to year-end and as such, management believes the Company will
remain in compliance with the covenants, as modified, at least through
December 31, 1996.
7. Income Taxes:
The provision for income taxes consists of the following:
Nine Months
Year Ended Year Ended Ended
December 31, December 31, December 31,
1995 1994 1993
Current:
Federal $ - $265,000 $ -
State - 83,000 -
Foreign 100,000 112,000 166,000
100,000 460,000 166,000
Deferred - Federal (213,000) 66,000 (94,000)
Income tax expense
(benefit) $(113,000) $526,000 $72,000
The actual income tax expense differs from the "expected" income tax
expense (benefit) (computed by applying the U.S. Federal corporate
income tax rate of 35% for the year ended December 31, 1995, and 34% for
all previous periods) as follows:
Nine Months
Year Ended Year Ended Ended
December 31, December 31, December 31,
1995 1994 1993
Computed "expected" tax
expense (benefit) $(275,000) $361,000 $(114,000)
State income taxes, net of
Federal income tax
benefit (27,000) 55,000 (15,000)
Foreign income taxes 100,000 112,000 166,000
Non-deductible expenses 85,000 98,000 39,000
Other 4,000 (100,000) (4,000)
$(113,000) $526,000 $72,000
The components of the Company's deferred tax assets and liability at
December 31, 1995 are as follows:
Current deferred tax asset (liabilities):
Net operating loss $215,000
Prepaid expenses (50,000)
Insurance reserve 40,000
Vacation accrual reserve 39,000
Bad debt reserve 16,000
Net current deferred tax asset $260,000
Long-term deferred tax liability -
depreciation and capital
lease treatments $(178,000)
As of December 31, 1995, the Company has income tax loss carryforwards of
approximately $530,000, which will expire in the year 2010. The Company
has estimated that loss will be utilized to offset future income.
Therefore, it has been recorded as a deferred asset.
8. 401(k) Plan:
Effective October 1, 1990, several affiliates including the Company,
adopted a 401(k) plan. All active, full-time, non-union employees are
eligible to participate in the plan after 1,000 hours of service.
Employees may make before-tax contributions from 1% to 15% of total
compensation with a maximum contribution of $9,240. Employer matching
contributions are made at the discretion of the board of directors, and
not may exceed 3% of the employee's compensation. Employees are fully
vested in their individual contributions and vest in company matching
contributions at a rate of 20% per year (fully vested after 5 years). The
Company made matching contributions to the plan totaling approximately
$-0-, $34,000, and $29,000 during the years ended December 31, 1995 and
1994, and during the nine months ended December 31, 1993.
9. Concentrations of Credit Risk:
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as
contracted. Concentrations of credit risk (whether on or off balance
sheet) that arise from financial instruments exist for groups of customers
or counterparties when they have similar economic characteristics that
would cause their ability to meet contractual obligations to be similarly
effected by changes in economic or other conditions.
At December 31, 1995, the Company's cash balance at a financial
institution was in excess of FDIC insured limits by approximately $185,000.
The Company's receivables are concentrated from customers in the
petrochemical industry. To reduce this risk, the Company has a policy to
examine the credit worthiness of its customers prior to performing
services on their behalf. The Company's concentrations of credit risk
also arise from the Corporation's receivables in relation to the location
of customers as presented in the following table.
1995 1994
Asia $339,000 $333,000
North America 1,335,000 2,074,000
Central America - 130,000
$1,674,000 $2,537,000
As of December 31, 1995, the Company had receivable balances due from
customers which represented 12%, 13%, 13%, and 20% of the total accounts
receivable balance. For the years ended December 31, 1995 and 1994 and
for the nine months ended December 31, 1993, the Company had sales with a
customer of 11%, 12%, and 16%, respectively, of total revenues for each
year.
Information about the Company's sales in the United States and
international markets is presented below:
Nine Months
Year Ended Year Ended Ended
Customer December 31, December 31, December 31,
1995 1994 1993
United States $9,992,000 $11,784,000 $6,498,000
Central America - 413,000 916,000
Asia 335,000 381,000 394,000
South America 121,000 178,000 254,000
$10,448,000 $12,756,000 $8,062,000
In accordance with FASB Statement No. 105, Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk, the credit risk amounts
shown do not take into account the value of any collateral or security.
The amounts of credit risk shown do not represent expected losses.
INDEPENDENT AUDITOR'S REPORT
ON SUPPLEMENTARY INFORMATION
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules to the
consolidated financial statements referred to in the accompanying index are
presented for the purposes of additional analysis and are not a required part
of the basic consolidated financial statements. Such information for the
year ended December 31, 1995 and 1994, for the nine months ended December 31,
1993 has been subjected to the auditing procedures applied in the audit of
the basic consolidated financial statements. In our opinion, such
information is fairly stated in all material respects in relation to the
basic consolidated financial statements taken as a whole.
/s/Hein + Associates
Hein + Associates LLP
February 7, 1996
Denver, Colorado
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE I - FINANCIAL INFORMATION OF REGISTRANT -
CONDENSED BALANCE SHEETS
December 31, December 31,
1995 1994
ASSETS
Current Assets:
Due from subsidiaries $76,000 $122,000
Prepaid and other current assets 3,000 3,000
Total current assets 79,000 125,000
Other Assets:
Deferred loan costs - 1,000
Investment in subsidiaries 1,202,000 2,038,000
1,202,000 2,039,000
Total Assets $1,281,000 $2,164,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $ - $ 1,000
Related party 114,000 86,000
Related party notes payable 1,000 26,000
Related party accrued expenses
and other current liabilities 88,000 100,000
Total current liabilities 203,000 213,000
Redeemable Convertible Preferred Stock:
Series A $.0001 par value; 43,616,000
shares authorized; 30,648,000 and
43,616,000 shares issued and
outstanding, respectively;
liquidation preference of
$249,000 237,000 342,000
Common and Other Stockholders' Equity:
Preferred stock, $.0001 par value,
750,000,000 shares authorized
Series B convertible preferred stock,
$.0001 par value; 100,000,000
shares authorized; 24,592,000
shares issued and outstanding;
liquidation preference of
$200,000 2,000 2,000
Common stock, $.0001 par value;
2,250,000,000 shares authorized;
531,668,000 shares issued and
outstanding, respectively 53,000 53,000
Additional paid-in capital 548,000 548,000
Retained earnings 238,000 1,006,000
Total stockholders' equity 841,000 1,609,000
Total Liabilities and Stockholders'
Equity $1,281,000 $2,164,000
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE I - FINANCIAL INFORMATION OF REGISTRANT -
CONDENSED STATEMENTS OF OPERATIONS
For the Nine
For the Year Ended Months Ended
December 31, December 31,
1995 1994 1993
Equity in undistributed earnings
(loss) of subsidiaries $(836,000) $409,000 $(496,000)
Dividend income 142,000 146,000 105,000
General, selling and administrative (3,000) (15,000) (27,000)
Income tax (expense) benefit 1,000 (5,000) 11,000
Net income (loss) $(696,000) $535,000 $(407,000)
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE I - FINANCIAL INFORMATION OF REGISTRANT -
CONDENSED STATEMENTS OF CASH FLOWS
For the Nine
For the Year Ended Months Ended
December 31, December 31,
1995 1994 1993
Cash Flows from Operating Activities:
Net income (loss) $(696,000) $ 535,000 $(407,000)
Adjustments to reconcile net
income (loss) to net cash
from operating activities:
Equity in undistributed
(earnings)losses of
subsidiaries 836,000 (409,000) 496,000
Common stock issued for
directors fees - - 50,000
Amortization 2,000 2,000 2,000
Decrease (increase) in:
Due from subsidiaries 46,000 (25,000) (12,000)
Prepaid and other current
assets - - 1,000
Increase (decrease) in:
Accounts payable:
Trade (1,000) (34,000) 1,000
Related party 28,000 86,000 -
Related party accrued
expenses and liabilities (12,000) 23,000 (7,000)
Net cash provided by operating
activities 203,000 178,000 124,000
Cash Flows from Financing Activities:
Proceeds from related party debt - - 5,000
Repayment of related party debt (26,000) (4,000) -
Redemption of preferred stock (105,000) (92,000) (54,000)
Dividends declared (72,000) (82,000) (75,000)
Net cash used in financing
activities (203,000) (178,000) (124,000)
Decrease in Cash and Cash Equivalents - - -
Cash and Cash Equivalents,
beginning of period - - -
Cash and Cash Equivalents,
end of period $ - $ - $ -
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1995 and 1994 AND FOR THE NINE MONTHS
ENDED DECEMBER 31, 1993
Balance at Charge to Charge to Balance at
Beginning Costs and Other End of
Classification of Period Expenses Accounts Deductions Period
Year Ended
Dec 31, 1995:
Excess of
purchase price
over the value
of assets
acquired $ 162,000 $ 42,000 $ - $ - $ 204,000
Deferred loan
fees 146,000 11,000 - - 157,000
License rights 145,000 13,000 - - 158,000
Other 30,000 - - - 30,000
Year Ended
Dec 31, 1994:
Excess of
purchase price
over the value
of assets
acquired $ 120,000 $ 42,000 $ - $ - $ 162,000
Deferred loan
fees 135,000 11,000 - - 146,000
License rights 97,000 48,000 - - 145,000
Other 25,000 5,000 - - 30,000
Nine Months Ended
Dec 31, 1993:
Excess of
purchase price
over the value
of assets
acquired $ 89,000 $ 31,000 $ - $ - $ 120,000
Deferred loan
fees 126,000 9,000 - - 135,000
License rights 61,000 36,000 - - 97,000
Other 17,000 8,000 - - 25,000
Item 9. Disagreements on Accounting and Financial Disclosure.
None of the events specified in this Item has occurred and, therefore,
it is inapplicable.
PART IV
Item 14 Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a)(1)(2) See Item 8.
(b) Reports on Form 8-K.
No reports on form 8-K have been filed during the last quarter of the period
covered by this report.
(c) See the Exhibit Index.
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.
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
By: /s/J. Daniel Bell
J. Daniel Bell, President
Date: April 15, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: April 15, 1996 /s/J. Daniel Bell
J. Daniel Bell, President and
Director
Date: April 15, 1996 /s/Alfred O. Brehmer
Alfred O. Brehmer, Secretary,
Treasurer and
Director
EXHIBIT INDEX
Number Exhibit Name
3 Certificate of Incorporation, as amended, and Bylaws, filed as
Exhibits to the Company's Annual Report on Form 10-K for the year
ended March 31, 1992, which Exhibits are incorporated herein by
reference.
4(a) Form of Common Stock Certificate and forms of Class A, Class B,
Class C and Class D Warrant Certificates, filed as Exhibits to the
Company's Registration Statement on Form S-18 (No. 33-7107-NY),
which Exhibits are incorporated herein by reference.
10(c) Stock Purchase Agreement among Craig E. Bowman, Victor L. Kearns,
B.V. Corwin, Charles L. Bowman, Jan T. Kouri, Darryl F. Kouri,
G. L. Walker and Robert W. Dobbs, as Sellers, and Advanced Energy
Corporation ("AEC"), as Buyer, dated August 16, 1988, filed as an
Exhibit to the Company's Registration Statement on Form S-18
(No. 33-7107-NY), which Exhibit is incorporated herein by
reference.
10(d) Employment Agreements between International Catalyst, Inc.("Incat")
and Victor L. Kearns and Craig E. Bowman, filed as Exhibits to the
Company's Registration Statement on Form S-18 (No. 33-7107-NY),
which Exhibits are incorporated herein by reference.
10(f) Stock Option Plan of the Company, filed as an Exhibit to the
Company's Registration Statement on Form S-18 (No. 33-7107-NY),
which Exhibit is incorporated herein by reference.
10(g)(i) Plan of Reorganization and Agreement of Merger among the Company,
NWP Acquisition Corporation ("NWP") and AEC filed as an Exhibit to
the Company's Report on Form 10-Q for the quarter ended July 31,
1988, which Exhibit is incorporated herein by reference.
10(g)(ii) Amendment to Plan of Reorganization and Agreement of Merger among
Northwest, NWP and AEC filed as part of the Report on Form 8-K
of the Company for an event occurring December 30, 1988, which
Exhibit is incorporated herein by reference.
Company was borrowed by IST from Greyhound. The Company had
Company's Registration Statement on Form S-18 (No. 33-7107-NY), which
Exhibit is incorporated herein by reference.
10(o) Management Agreement dated November 15, 1988 between Incat and
Teton Group, Inc., filed as an Exhibit to the Company's
Registration Statement on Form S-18 (No. 33-7107-NY).
10(p) Stock Purchase Agreement among AEC, Teton Leasing, Inc.,
Craig Bowman, Victor L. Kearns and B.V. Corwin, filed as Exhibit
to the Company's Registration Statement on Form S-18
(No. 33-7107-NY), which Exhibit is incorporated herein by
reference.
10(r) First Amended Loan and Security Agreement between Greyhound
and AEC dated March 30, 1989, filed as an Exhibit to the Company's
Registration Statement on Form S-18 (No. 33-7107-NY), which
Exhibit is incorporated herein by reference.
10(s) First Amendment to Corporate Guarantee and Subordination Agreement
between Incat and Greyhound dated March 31, 1989, filed as an
Exhibit to the Company's Registration Statement on Form S-18
(No. 33-7107-NY), which Exhibit is incorporated herein by
reference.
10(t) First Amendment to Security Agreement between Greyhound and Incat
dated March 31, 1989, filed as an Exhibit to the Company's
Registration Statement on Form S-18 (No. 33-7107-NY), which
Exhibit is incorporated herein by reference.
10(u) First Amendment to Corporate Guarantee and Subordination Agreement
between the Company and Greyhound dated March 30, 1989, filed as
an Exhibit to the Company's Registration Statement on Form S-18
(No. 33-7107-NY), which Exhibit is incorporated herein by
reference.
10(v) Corporate Guarantee and Subordination Agreement between Teton
Leasing, Inc. ("Teton") and Greyhound dated March 31, 1989, filed
as an Exhibit to the Company's Registration Statement on Form S-18
(No. 33-7107-NY).
10(w) Security Agreement between Greyhound and Teton dated March 31,
1989, filed as an Exhibit to the Company's Registration Statement
on Form S-18 (No. 33-7107-NY).
10(a)(a) Convertible Note for $500,000 of the Company payable to Industrial
Services Technologies, Inc. filed as an Exhibit to the Company's
Annual Report on Form 10-K for the year ended March 31, 1990 which
Exhibit is incorporated herein by reference.
10(b)(b) AEC Assignment of Incat Security Interest to Greyhound dated
April 23, 1990 filed as an Exhibit to the Company's Annual Report
on Form 10-K for the year ended March 31, 1990 which Exhibit is
incorporated herein by reference.
10(c)(c) Promissory Note of Incat for $500,000 payable to AEC dated
April 23, 1990 filed as an Exhibit to the Company's Annual Report
on Form 10-K for the year ended March 31, 1990.
10(d)(d) Security Agreement between AEC and Incat dated April 23, 1990
filed as an Exhibit to the Company's Annual Report on Form 10-K
for the year ended March 31, 1990, which Exhibit is incorporated
herein by reference.
10(e)(e) Convertible Note for $100,000 of the Company payable to Industrial
Services Technologies, Inc., IST filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended March 3,
1991, which Exhibit is incorporated herein by reference.
10(f)(f) Promissory Notes of Reduction Technology, Inc. issued to the
Company, AEC or Incat filed as an Exhibit to the Company's Annual
Report on Form 10-K for the year ended March 3, 1991, which
Exhibit is incorporated herein by reference.
10(g)(g)(i)Industrial Real Estate Lease dated February 26, 1992 between Incat
and JMB Pennsylvania Advisors, filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended March 31,
1992, which Exhibit is incorporated herein by reference.
10(g)(g)(ii)First Amendment to Industrial Real Estate Lease dated July 29,
1994 between Incat and JMB Pennsylvania Advisors.
10(h)(h) Loan Agreement, Master Credit Note and Commercial Security
Agreement dated February 24, 1992 between Incat and First
Interstate Bank of Texas, N.A., filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended March 31,
1992, which Exhibit is incorporated herein by reference.
10(i)(i) Amendment to Loan and Loan Documents between AEC and Greyhound
dated December 23, 1992 filed as an Exhibit to the Company's
Annual Report on Form 10-K for the year ended March 31, 1993, which
Exhibit is incorporated herein by reference.
10(j)(j) Note of AEC payable to Greyhound in the principal amount of
$2,100,000, dated December 23, 1992 filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended March 31,
1993, which Exhibit is incorporated herein by reference.
10(k)(k) Amendment to Security Agreement between Incat and Greyhound dated
December 23, 1992 filed as an Exhibit to the Company's Annual
Report on Form 10-K for the year ended March 31, 1993, which
Exhibit is incorporated herein by reference.
10(l)(l) Amendment to Guarantee between Incat and Greyhound and Amendment
to Guarantee between AES and Greyhound, both dated December 23,
1992 filed as an Exhibit to the Company's Annual Report on Form
10-K for the year ended March 31, 1993, which Exhibit is
incorporated herein by reference.
10(m)(m) Amendment to Instruments among IST, AEC, Incat and Greyhound
dated as of March 31, 1993, with form of Promissory Note of Incat
to AEC dated as of March 31, 1993, which replaced Exhibit 10(c)(c)
filed as an Exhibit to the Company's Annual Report on Form 10-K
for the year ended March 31, 1993, which Exhibit is incorporated
herein by reference.
10(n)(n)(i)Lease between Incat and Teton Properties, Inc. dated February 1,
1993 filed as an Exhibit to the Company's Annual Report on Form
10-K for the year ended March 31, 1993, which Exhibit is
incorporated herein by reference.
10(n)(n)(ii)Lease dated February 1, 1995 between Incat and Teton Properties,
Inc.
10(o)(o) Agreement between IST, The Argentum Group and various Purchasers
dated January 11, 1991 and April 8, 1991 filed as an Exhibit to
the Company's Annual Report on Form 10-K for the nine months
ended December 31, 1993 which Exhibit is incorporated herein by
reference.
10(p)(p) Loan Agreement and Promissory Note dated July 31, 1995 between
Incat and First Interstate Bank of Texas.
10(q)(q) Lease dated January 1, 1996 between Incat and Allen & Cameron.
10(r)(r) Lease dated January 1996 between Larry W. Eubanks and Incat.
22 Subsidiaries of the registrant.
DESCRIPTION: EXHIBIT 22
Advanced Environmental Systems, Inc.
Exhibit 22 to
Annual Report on Form 10K
Subsidiaries of Registrant
State of
Corporation Incorporation Percent Owned
Advanced Energy Corporation Delaware 100%
International Catalyst, Inc. Nevada 100%
DESCRIPTION: FIRST INTERSTATE BANK PROMISSORY NOTE
EXHIBIT 10(P)(P)
FIRST INTERSTATE BANK
PROMISSORY NOTE
BORROWER:
INTERNATIONAL CATALYST, INC. LENDER:
73-0940971 FIRST INTERSTATE BANK OF TEXAS, NA
4313 FM 2351 POST OAK COMMERCIAL LENDING
Friendswood, TX 77546 1300 Post Oak Blvd.
P.O. Box 4401
Houston, TX 77210-4401
Principal Amount: $1,400,000.00
Initial Rate: 9.250%
Date of Note: July 31, 1995
Loan No. 0011376126
Call: 599
Account: 4395786406
Officer 1061
PROMISE TO PAY. INTERNATIONAL CATALYST, INC. ("Borrower") promis pay to First
Interstate Bank of Texas, N.A. ("Lender"), or order, In lawful money of the
United States of America, the principal amount of One Million Four Hundred
Thousand & 00/100 Dollars ($1,400,000.00), together with Interest on the
unpaid principal balance from July 31,1995, until maturity.
PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan in accordance with the following payment schedule:
Unpaid accrued interest shall be due and payable monthly commencing on August
31, 1995 and continuing on the same date of each month thereafter until
July 31, 1996 at which time all unpaid principal, accrued interest and any
other amount owed in connection with the loan shall be fully due and payable.
In addition, Borrower agrees to repay any advances made under this Note
relating to Letters of Credit Immediately after each such advance is made.
Any amounts not paid when due shall remain due and owing; Lender may defer
collection such sums without waiving any of its rights, and/or may require
repayments of sums at any time.
Interest on this Note is computed on a 365/360 simple interest basics; that
is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding, unless such
calculation would result in a usurious rate, in which case interest shall be
calculated on a per diem basis of a year of 365 or 366 days, as the case may
be. Borrower will pay Lender at Lender's address shown above or
ble law, payments will be applied in any order at Lender's sole discretion.
Notwithstanding any other provision of this Note, Lender will not charge
interest on any undisbursed loan proceeds. No scheduled installment, whether
of principal or interest or both, will be due unless sufficient loan funds
have been disbursed by the scheduled installment date to justify the payment.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the First Interstate
Bank of Texas, N.A., Prime, which is an index rate Lender announces form time
to time for pricing of certain loans (the "Index"). The Index is not
necessarily the lowest rate charged by Lender on its loans and is set by
Lender in its sole discretion. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after notifying
Borrower. Lender will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based on other rates
as well. The interest rate change will not occur more often than each day.
The Index currently is 8.750% per annum. The interest rate to be applied
prior to maturity to the unpaid principal balance of this Note will be at a
rate of 0.500 percentage points over the Index, resulting in a current rate
of 9.250% per annum. NOTICE: Under no circumstances will the interest rate
on this Note be more than the maximum rate allowed by applicable law. For
purposes of this Note, the "maximum rate allowed by applicable law" means the
greater of (a) the maximum rate of interest permitted under federal or other
law applicable to the indebtedness evidenced by this Note, or (b) the
"Indicated Rate Ceiling" as referred to in Article 5069-1.04 (a)(1) V.T.C.S.
Whenever increases occur in the interest rate, Lender, at its option, may do
one or more of the following: (a) increase Borrower's payments to ensure
Borrower's loan will pay off by its original final maturity date, (b)
increase Borrower's payments to cover accruing interest, (c ) increase the
number of Borrower's payments, and (d) continue Borrower's payments at the
same amount and increase Borrower's final payment.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments under the payment schedule.
POST MATURITY RATE. The Post Maturity Rate on this Note is the lesser of the
maximum rate allowed by applicable law or 8.500 percentage points over the
Index. Borrower will pay interest on all sums due after final maturity,
whether by acceleration or otherwise, at that rate, with the exception of any
amounts added to the principal balance of this Note based on Lender's payment
of insurance premiums, which will continue to accrue interest at the
pre-maturity rate.
DEFAULT. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition contained
in this Note or any agreement related to this Note, or in any other agreement
or loan Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or misleading
in any material respect either now or at the time made or furnished.
(d) Borrower becomes insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the benefit of
creditor's, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency law. (e) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (f) Any of the events described in this default section occurs with
respect to any guarantor of this Note. (g) A material adverse change occurs
in Borrower's financial condition, or Lender believes the prospect of payment
or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire indebtness,
including the unpaid principal balance on this Note, all accrued unpaid
interest, and all other amounts, costs and expenses for which Borrower is
responsible under this Note or any other agreement with Lender pertaining to
this loan, immediately due, without notice, and then Borrower will pay that
amount. Lender may hire an attorney to help collect this Note if Borrower
does not pay, and Borrower will pay Lender's reasonable attorneys' fees.
Borrower also will pay Lender all other amounts actually incurred by Lender
as court costs, lawful fees for filing, recording, or releasing to any public
office any instrument securing this loan; the reasonable cost actually
expended for repossessing, storing, preparing for sale, and selling any
security; and fees for noting a lien on or transferring a certificate of
title to any motor vehicle offered as security for this loan, or premiums or
identifiable charges received in connection with the sale of authorized
insurance. This Note has been delivered to Lender and accepted by Lender in
the State of Texas. If there is a lawsuit, and if the transaction evidenced
by this Note occurred in Harris County, Borrower agrees upon Lender's request
to submit to the jurisdiction of the courts of Harris County, the State of
Texas. Subject to the provisions on arbitration, this Note shall be governed
by and construed in accordance with the laws of the State of Texas and
applicable Federal laws.
f the parties including any agency, independent contractor or employment
relationship but excluding claims for workers' compensation and unemployment
benefits ("Relationship"). Any party to this Arbitration Program may by
summary proceedings bring any action in court to compel arbitration of any
Dispute. Any party who fails or refuses to submit to binding arbitration
following a lawful demand by the opposing party shall bear all costs and
expenses incurred by the opposing party in compelling arbitration of any
Dispute. The parties agree that by engaging in activities with or involving
each other as described above, they are participating in transactions
involving interstate commerce. THE PARTIES UNDERSTAND THAT PURSUANT TO THIS
ARBITRATION PROGRAM, DISPUTES SUBMITTED TO ARBITRATION WILL NOT BE DECIDED
THROUGH LITIGATION IN FEDERAL OR STATE COURTS BEFORE A JUDGE OR JURY.
Governing Rules. All Disputes between the parties submitted to arbitration
shall be resolved by binding arbitration administered by the American
Arbitration Association (the "AAA") in accordance with the Commercial
Arbitration Rules of the AAA, the Federal Arbitration Act (Title 9 of the
United States Code) and to the extent the foregoing are inapplicable,
unenforceable or invalid, the laws of the State of Texas. In the event of
any inconsistency between the Arbitration Program and such rules and statutes,
this Arbitration Program shall control. Judgement upon any award rendered
hereunder may be entered in any court having jurisdiction; provided, however,
that nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. Section 91
or Texas Banking Code art. 342-609.
No. Waiver; Preservation of Remedies; Multiple Parties. No provision of, nor
the exercise of any rights under, this Arbitration Program shall limit the
right of any party, during any Dispute, to seek, use, and employ ancillary or
preliminary remedies, judicial or otherwise, for the purposes of realizing
upon, preserving, protecting, foreclosing or proceeding under forcible entry
and detainer for possession of any real or personal property, and any such
action shall not be deemed an election of remedies. Such rights shall
include, without limitation, rights and remedies relating to (a) foreclosing
against any real or personal property collateral or other security, (b)
exercising self-help remedies including setoff rights or (c ) obtaining
provisional or ancillary remedies such as injunctive relief, sequestration,
attachment, garnishment, or the appointment of a receiver from a court having
jurisdiction. Such rights can be exercised at any time except to the extent
such action is contrary to a final award or decision in any arbitration
proceeding. The institution and maintenance of an action for judicial relief
or pursuit of provisional or ancillary remedies or exercise of self-help
remedies shall not constitute a waiver of the right of any party, including
the plaintiff, to submit the Dispute to arbitration, nor renders inapplicable
the compulsory arbitration provisions hereof. In Disputes involving
indebtedness or other monetary obligations, each party agrees that the other
party may proceed against all liable persons, jointly or severally, or
against one or more of them, less than all, without impairing rights against
other liable persons. Nor shall a party be required to join the principal
obligator or any other liable persons, such as sureties or guarantors, in any
proceeding against a particular person. A party may release or settle with
one or more liable persons without releasing or impairing rights to proceed
against any persons not so released.
Arbitrator Powers and Qualifications; Awards. Arbitrators are empowered to
resolve Disputes by summary rulings. Arbitrators shall resolve all Disputes
in accordance with the applicable substantive law. Any arbitrator selected
shall be required to be a practicing attorney licensed to practice law in the
State of Texas and shall be required to be experienced and knowledgeable in
the substantive laws applicable to the subject matter of the Dispute in
which the claims or amounts in controversy do not exceed $1,000,000, a single
arbitrator shall be chosen and shall resolve the Dispute by rendering an
award not to exceed $1,000,000, including all damages of any kind whatsoever,
including costs, fees and expenses. A Dispute involving claims or amounts in
controversy exceeding $1,000,000, shall be decided by a majority vote of a
panel of three arbitrators (an "Arbitration Panel"), the determination of any
two of the three arbitrators constituting the determination of the Arbitration
Panel, provided, however, that all three Aritrators on the Aritration Panel
must actively participate in all hearings and deliberations. Arbitrators,
including any Arbitration Panel, may grant any remedy or relief deemed just
and equitable and within the scope of this Arbitration Program and may also
grant such ancillary relief as is necessary to make effective any award.
Arbitrators shall be empowered to impose sanctions and to take such other
actions as they deem necessary to the same extent a judge could pursuant to
the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure and
applicable law. Arbitrators and Arbitration Panels shall be required to
make specific, written findings of fact and conclusions of law. The
determination of an Arbitrator or Arbitration Panel shall be binding on all
parties and shall not be subject to further review or appeal except as
otherwise allowed by applicable law.
DEFAULT RATE OF INTEREST. Lender may at its option and without notice charge
interest at a rate (the "Default Rate") equivalent to the Post Maturity Rate
(not to exceed the maximum lawful rate) on any past due amounts of the
Indebtedness for the number of days said amounts are past due. Amounts shall
be considered past due when not paid on the date due whether said amounts
become due pursuant to the payment schedule or as a result of acceleration,
or otherwise. Further, if Lender gives written notice to Borrower of any one
or more defaults under the Note or any related Loan Documents and such
defaults are not cured completely and strictly in accordance with the terms
of the notice of default within the period of time allowed by Lender for
cure of same, Lender may charge interest at the Default Rate on the entire
amount of the Indebtedness until two business days after such defaults are
cured and that fact is communicated to and confirmed by Lender. Lender's use
of the remedies available to Lender upon the occurrence of an event of
default shall not constitute an election of remedies or otherwise limit
Lender's rights concerning other remedies available to Lender upon the
occurrence of an event of default.
ADVANCES. This Line of Credit shall evidence cash advances to Borrower made
hereunder plus amounts advanced under Letters of Credit issued on behalf of
Borrower. Borrower irrevocably authorizes Lender to make advances hereunder
from time to time equal to the amount of each draft presented to Lender under
various Letters of Credit issued by Lender on behalf of Borrower. Lender is
not obligated to advance funds or issued Letters of Credit hereunder if the
resulting total outstanding amount of the cash advances made hereunder and the
amount of all Letters of Credit issued hereunder (whether or not such Letters
of Credit have been drawn under and funded) would exceed the above stated
Principal Amount of this Note. However, in the event Lender advances funds
and/or issues Letters of Credit in a total amount exceeding the amount of
this Note, (i) such advances shall be deemed validly advanced and such
Letters of Credit shall be deemed validly issued under this Note, as if the
Principal Amount of this Note had been increased to accommodate such amounts,
and all advances shall be considered to be a part of the Indebtedness
evidenced by this Note for all purposes and shall be secured by all applicable
security instruments and guaranties as if such instruments had been amended to
accommodate and include such amounts (without waiver of any rights of Lender
under the Note or related loan documents), and (ii) Lender reserves the right
to require immediate repayment of amounts advanced to the extent necessary to
cause the total of advances plus unadvanced amounts of Letters of Credit to
equal the Principal Amount of this Note. Notwithstanding anything to the
contrary, no interest will be charged or accrued on any amount(s) of this
Note prior to the actual advance of such amounts. Provisions of this Note
relating to Letters of Credit shall not be construed to obligate Lender to
issue Letters of Credit for Borrower. Unless otherwise agreed in writing,
Lender reserves the right to approve or deny any Application for Letter of
Credit in its sole discretion. In the event any draft for any advance under
a Letter of Credit issued by Lender is funded subsequent to the final payment
date of this Note, Lender may pay any such amount by means of an advance
under this Note, and Borrower agrees to repay any and all such advances
immediately after each such advance occurs, with interest accruing on the
amount of such advance until paid at the Default Rate. If for any reason the
amount of any such advance plus accrued interest is not promptly repaid when
due, Lender may defer collecting said sum without waiving any of its rights,
and may require repayment of said sum plus accrued interest at any subsequent
time at Lender's discretion.
RENEWAL AND EXTENSION. This Note is given in renewal and extension and not in
novation of the following described indebtedness: That certain Promissory
Note dated July 31,1994 in the amount of $1,400,000.00 executed by Borrower
payable to First Interstate Bank of Texas, N.A. It is further agreed that all
liens and security interests securing said indebtedness are hereby renewed
and extended to secure the Note and all renewals, extensions and
modifications thereof.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact
will not affect the rest of the Note. In particular, this section means
(among other things) that Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take,
reserve or receive (collectively referred to herein as "charge or collect"),
any amount in the nature of interest or in the nature of a fee for this loan,
which would in any way or event (including demand, prepayment, or
acceleration) cause Lender to charge or collect more for this loan than the
maximum Lender would be permitted to charge or collect by federal law or the
law of the State of Texas (as applicable). Any such excess interest or
unauthorized fee shall, instead of anything stated to the contrary, be
applied first to reduce the principal balance of this loan, and when the
principal has been paid in full, be refunded to Borrower. The right to
accelerate maturity of sums due under this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to charge or collect any unearned
interest in the event of acceleration. All sums paid or agreed to be paid
to Lender for the use, forbearance or detention of sums due hereunder shall,
to the extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of the loan evidenced by this Note until
payment in full so that the rate or amount of interest on account of the loan
evidenced hereby does not exceed the applicable usury ceiling. Lender may
delay or forgo enforcing any of its rights or remedies under this Note
without losing them. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive presentment, demand
for payment, protest, notice of dishonor, notice of intent to accelerate the
maturity of this Note, and notice of acceleration of the maturity of this
Note. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for
any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in collateral without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
INTERNATIONAL CAYALYST, INC.
BY: /s/ Craig Bowman
Craig Bowman, President
FIRST INTERSTATE BANK
NOTICE OF FINAL AGREEMENT
BORROWER: INTERNATIONAL CATALYST, INC. LENDER:
73-0940971 FIRST INTERSTATE BANK OF TEXAS, NA
4313 FM 2351 POST OAK COMMERCIAL LENDING
1300 Post Oak Blvd.
Friendswood, TX 77546 P.O. Box 4401
Houston, TX 77210
Principal Amount: $1,400,000.00
Initial Rate: 9.250%
Date of Note: July 31, 1995
Loan No. 0011376126
Call: 599
Collateral: 002
Account: 4395786406
Officer 1061
This agreement (this "Agreement") is made and entered into by and among the
undersigned effective the 31st day of July, 1995.
Definitions:
As used in this Agreement, the following terms shall have the following
meanings:
Parties - The undersigned persons and entities.
Note - That certain promissory note, credit agreement or change in terms
agreement dated 07-31-1995 in the amount of $1,400,000.00 executed by
INTERNATIONAL CATALYST, INC..
Loan Documents This Agreement and any and all promissory notes (including,
without limitation, the Note), loan agreements, deeds of trust, builder's and
mechanic's lien contracts, security agreements, assignments, pledges, owner's
consent to pledges, letters of credit, guarantees, and all other loan
documents executed in connection with or otherwise relating to This Loan.
This Loan - The transaction comprised of the extension of credit and all
related agreements and accommodations by or among any of the Parties
evidenced by or contained in any of the Loan Documents.
Agreements:
In consideration of the extension of This Loan, and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged
by each of the Parties, the Parties (i) agree that each Party's execution of
this Agreement constitutes acknowledgment that such Party has read and
understands this Agreement, and that it is intended to be a part of and is
incorporated by reference into each of the Loan Documents; (ii) acknowledge
receipt of the following Notice; and (iii) to the extent allowed
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THIS LOAN
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS
LOAN.
Arbitration.
Binding Arbitration. Upon the demand of any party, whether made before or
after the institution of any judicial proceeding, any Dispute (as defined
below) shall be resolved by binding arbitration in accordance with the terms
of this Arbitration Program. A "Dispute" shall include any action, dispute,
claim, or controversy of any kind, whether in contract or in tort, statutory
or common law, legal or equitable, or otherwise, now existing or hereafter
arising between the parties in any way arising out of, pertaining to or in
connection with (a) any agreement , document or instrument to which this
Arbitration Program is attached or in which it is referred to or any related
agreements, documents, or instruments (the "Documents"), (b) all past,
present, or future loans, notes, instruments, drafts, credits, accounts,
deposit accounts, safe deposit boxes, safekeeping agreements, guarantees,
letters of credit, goods or services, or other transactions, contracts or
agreements of any kind whatsoever, (c) any past, present or future incidents,
omissions, acts, errors, practices, or occurrences causing injury to either
party whereby the other party or its agents, employees or representatives
may be liable, in whole or in part, or (d) any other aspect of the past,
present, or future relationships of the parties including any agency,
independent contractor or employment relationship but excluding claims for
workers' compensation and unemployment benefits ("Relationship"). Any party
to this Arbitration Program may by summary proceedings bring any action in
court to compel arbitration of any Dispute. Any party who fails or refuses to
submit to binding arbitration following a lawful demand by the opposing party
shall bear all costs and expenses incurred by the opposing party in
compelling arbitration of any Dispute. The parties agree that by engaging in
activities with or involving each other as described above, they are
participating in transactions involving interstate commerce. THE PARTIES
UNDERSTAND THAT PURSUANT TO THIS ARBITRATION PROGRAM, DISPUTES SUBMITTED TO
ARBITRATION WILL NOT BE DECIDED THROUGH LITIGATION IN FEDERAL OR STATE COURTS
BEFORE A JUDGE OR JURY.
Governing Rules. All Disputes between the parties submitted to arbitration
shall be resolved by binding arbitration administered by the American
Arbitration Association (the "AAA") in accordance with the Commercial
Arbitration Rules of the AAA, the Federal Arbitration Act (Title 9 of the
United States Code) and to the extent the foregoing are inapplicable,
unenforceable or invalid, the laws of the State of Texas. In the event of
any inconsistency between this Arbitration Program and such rules and
statutes, this Arbitration Program shall control. Judgment upon any award
rendered hereunder may be entered in any court having jurisdiction; provided,
however, that nothing contained herein shall be deemed to be a waiver by any
party that is a bank of the protections afforded to it under 12 U.S.C.
Section 91 or Texas Banking Code art. 342.609.
No Waiver; Preservation of Remedies; Multiple Parties. No provision of, nor
the exercise of any rights under, this Arbitration Program shall limit the
right of any party, during any Dispute, to seek, use, and employ ancillary or
preliminary remedies, judicial or otherwise, for the purposes of realizing
upon, preserving, protecting, foreclosing or proceeding under forcible entry
and detainer for possession of any real or personal property, and any such
action shall not be deemed an election of remedies. Such rights shall include,
without limitation, rights and remedies relating to (a) foreclosing against
any real or personal property collateral or other security, (b) exercising
self-help remedies including setoff rights or (c) obtaining provisional or
ancillary remedies such as injunctive relief, sequestration, attachment,
garnishment, or the appointment of a receiver from a court having
jurisdiction. Such rights can be exercised at any time except to the extent
such action is contrary to a final award or decision in any arbitration
proceeding. The institution and maintenance of an action for judicial relief
or pursuit of provisional or ancillary remedies or exercise of self-help
remedies shall not constitute a waiver of the right of any party, including
the plaintiff, to submit the Dispute to arbitration, nor render inapplicable
the compulsory arbitration provisions hereof. In Disputes involving
indebtedness or other monetary obligations, each party agrees that the other
party may proceed against all liable persons, jointly or severally, or
against one or more of them, less than all, without impairing rights against
other liable persons. Nor shall a party be required to join the principal
obligator or any other liable persons, such as sureties or guarantors, in
any proceeding against a particular person. A party may release or settle
with one or more liable persons without releasing or impairing rights to
proceed against any persons not so released.
Arbitrator Powers and Qualifications; Awards. Arbitrators are empowered to
resolve Disputes by summary rulings. Arbitrators shall resolve all Disputes
in accordance with the applicable substantive law. Any arbitrator selected
shall be required to be a practicing attorney licensed to practice law in the
State of Texas and shall be required to be experienced and knowledgeable in
the substantive laws applicable to the subject matter of the Dispute. All
statutes of limitation applicable to any Dispute shall apply to any proceeding
in accordance with this Arbitration Program. With respect to a Dispute in
which the claims or amounts in controversy do not exceed $1,000,000, a single
arbitrator shall be chosen and shall resolve the Dispute by rendering an
award not to exceed $1,000,000, including all damages of any kind whatsoever,
including costs, fees and expenses. A Dispute involving claims or amounts in
controversy exceeding $1,000,000, shall be decided by a majority vote of a
panel of three arbitrators (an "Arbitration Panel"), the determination of any
two of the three arbitrators constituting the determination of the Arbitration
Panel, provided, however, that all three Arbitrators on the Arbitration Panel
must actively participate in all hearings and deliberations. Arbitrators,
including any Arbitration Panel, may grant any remedy or relief deemed just
and equitable and within the scope of this Arbitration Program and may also
grant such ancillary relief as is necessary to make effective any award.
Arbitrators shall be empowered to impose sanctions and to take such other
actions as they deem necessary to the same extent a judge could pursuant to
the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure and
applicable law. Arbitrators and Arbitration Panels shall be required to
make specific, written findings of fact and conclusions of law. The
determination of an Arbitrator or Arbitration Panel shall be binding on all
parties and shall not be subject to further review or appeal except as
otherwise allowed by applicable law.
Miscellaneous. To the maximum extent practicable, the AAA, the Arbitrator
(or the Arbitration Panel, as appropriate) and the parties shall take any
action necessary to require that an arbitration proceeding hereunder shall be
concluded within 180 days of the filing of the Dispute with the AAA.
Arbitration proceedings hereunder shall be conducted in the State of Texas at
a location selected by the Administrator. With respect to any Dispute, each
party agrees that all discovery activities shall be expressly limited to
matters directly relevant to the Dispute and any Arbitrator, Arbitration
Panel and the AAA shall be required to fully enforce this requirement. This
Arbitration Program constitutes the entire agreement of the parties with
respect to its subject matter and supersedes all prior discussions,
arrangements, negotiations, and other communications on dispute resolution.
The provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents or the Relationship, unless the
parties otherwise expressly agree in writing. To the extent permitted by
applicable law, Arbitrators, including any Arbitration Panel, shall have the
power to award recovery of all costs and fees (including attorneys' fees,
administrative fees, and arbitrators' fees) to the prevailing party. This
Arbitration Program may be amended, changed, or modified only by the express
provisions of a writing which specifically refers to this Arbitration Program
and which is signed by all the parties hereto. If any term, covenant,
condition or provision of this Arbitration Program is found to be unlawful,
invalid or unenforceable, such defect shall not affect the legality, validity
or enforceability of the remaining parts of this Arbitration Program, and
such remaining parts hereof shall be valid and enforceable and have full
force and effect as if the illegal, invalid or unenforceable part had not
been included. Each party agrees to keep all Disputes subject to arbitration
proceedings strictly confidential, except for disclosures of information
required in the ordinary course of business of the parties or by applicable
law or regulation.
EXECUTED as of the date first above stated.
BORROWER:
INTERNATIONAL CATALYST, INC.
BY: /s/ Craig Bowman
Craig Bowman, President
LENDER:
First Interstate Bank of Texas, N.A.
By:__________________________________________
Authorized Officer
CORPORATE ACKNOWLEDGMENT
STATE OF Texas
) ss
COUNTY OF Harris
On this 26th day of July, 1995 before me, the undersigned Notary Public,
personally appeared Craig Bowman, President of INTERNATIONAL CATALYST, INC.,
and known to me to be an authorized agent of the corporation that executed
the and acknowledged the to be the free and voluntary act and deed of the
corporation, by authority of its Bylaws or by resolution of its board of
directors, for the uses and purposes therein mentioned, and on oath stated
that he or she is authorized to execute this and in fact executed the on
behalf of the corporation.
BY: /s/ Betty Cassell Residing at Harris County
Notary Public in and for the State of Texas My commission expires 9/9/96
FIRST INTERSTATE BANK
July 21, 1995
International Catalyst, Inc.
4313 FM 2351
Friendswood, TX 77546
Gentlemen:
In conjunction with the renewal and extension of a $1,400,000.00 revolving
line of credit from First Interstate Bank of Texas, N.A. ("Bank") to
International Catalyst, Inc.("Borrower") evidenced by a Loan Agreement
("Agreement") dated July 31, 1994 between the Bank and Borrower, the Bank and
Borrower agree to the following:
Section V(e)(3) of the Agreement will be amended to read as follows:
(3) declare or pay any dividends, including, but not limited to, preferred
dividends, (whether payable in cash, other property or otherwise) or
purchase, redeem or otherwise acquire directly or indirectly, any shares of
Borrower's capital stock; notwithstanding the above, Borrower may pay up to
$150,000 per quarter in dividends to Advanced Energy Corporation.
Sincerely,
FIRST INTERSTATE BANK OF TEXAS. N.A.
By: /s/ Theodore M. Nowak
Name: Theodore M. Nowak
Title: Vice President
AGREED TO AND ACCEPTED this 26th day of July, 1995.
INTERNATIONAL CATALYST,INC.
By: /s/ Craig Bowman
Name: Craig Bowman
Title: President
The undersigned Guarantor hereby consents and agrees to the amendment set out
above.
ADVANCED ENERGY CORPORATION
By: /s/ Gary L. Schmitt
Name: Gary L. Schmitt
Title: Vice President
DESCRIPTION: LEASE
EXHIBIT 10 (q) (q)
ALLEN & CAMERON, INC.
P.O. Box 4261
Corpus Christi, Texas 78469
LEASE AGREEMENT
This lease agreement is entered into as of the date set forth below, by and
between ALLEN & CAMERON, INC., 6730 Leopard, Corpus Christi, Texas
78409 (herein "Landlord") and INTERNATIONAL CATALYST, INC.
(herein "Tenant"). Tenant's address: 6772 LEOPARD STREET
WITNESSETH:
Section 1. Leased Premises:
The term Leased Premises shall mean the tract of land together with all
improvements located thereon located fronting on: __________________________
6772 LEOPARD STREET ,more fully described as:
Lot 12 , Block _____ of ALLEN & CAMERON INDUSTRIAL PARK
situated in CORPUS CHRISTI , NUECES
County, Texas.
In consideration of the conditions, covenants and agreements to be kept and
performed by Tenant, Landlord does hereby lease and let unto Tenant, and
Tenant does hereby lease from Landlord, the Leased Premises, subject to all
valid easements, restrictions, zoning and governmental regulatory ordinances
and encumbrances.
Section 2. Term of Lease:
This lease shall be for a term of 1 years ______ months commencing on
JANUARY 1, 1996 ,and terminating at midnight on DECEMBER 31, 1996
(herein "Term").
Section 3. Rental:
The total rental for this lease is the sum of THIRTY THOUSAND _______________
dollars ($ 3O,OOO.OO ), which Tenant agrees to pay to Landlord in Corpus
Christi, Nueces County, Texas at the monthly rate of ____
TWENTY FIVE HUNDRED dollars($ 2500.00 ),per
month. The sum of N/A ($ ) dollars_________________ cash being the
rental for the first and last months of this lease term, being due and
payable by Tenant on this execution of this lease. Each monthly payment shall
be due monthly in advance on or before the first day of each month commencing
on the date this lease commences.
Section 4. Security Deposit:
At the inception of this lease, Tenant shall pay to Landlord a security
deposit in the amount of _____________N/A____dollars _($_______)________ as
security for performance by Tenant of Tenant's obligations under this lease.
At the termination of this lease, Landlord shall have the right to collect
from the security deposit any outstanding rent or other amounts due under the
lease, and shall, within ten (10) days, return the balance of such security
deposit to Tenant.
Section 5. Lease Renewal and Notice of Non Renewal:
a. Tenant shall have the option to extend the term of this lease for one
additional term of______ years commencing upon the termination of the
original Term hereof. Such option shall be exercised by notice in writing
from Tenant to Landlord delivered not less than sixty (60) days prior to the
expiration of the original term of this lease. Any extension term hereunder
shall be upon the same terms and conditions, except that Tenant shall have no
additional rights to extend the term of this lease and the monthly rental
shall be increased by ____%.
b. In the event Tenant shall elect not to renew this lease pursuant to the
provisions of Section 5a above, Tenant shall be obligated to notify Landlord
in writing at least sixty (60) days prior to the expiration of the original
term of this lease, that Tenant shall not be renewing the lease. In the
event Tenant provides Landlord with less than sixty (60) days notice of non
renewal, Tenant shall be liable to Landlord for additional rent in a sum
equal to the prorated daily rent under this lease times the number of days
less than sixty (60) days in advance that such notice was provided. (Such
additional rent is an agreed amount, which shall be intended to compensate
Landlord for the potential lost rental revenues resulting from an inadequate
amount of time to initiate the showing and leasing of the Leased Premises to
a new tenant.) For example, it a Tenant provided notice fifteen (15) days
prior to the end of the term of this lease that Tenant was not renewing the
lease and was moving out at the end of the term of the lease, Tenant would
owe Landlord as additional rent (in addition to any rent due under Section 3
hereof, and any other sums due under this lease), an additional sum equal to
one and one-half (1-1/2) months rent.
c. In the event by mutual written agreement this lease is extended beyond the
original term, for an indefinite term rather than specific agreed terms of
years, this lease shall continue thereafter until terminated by either party
on sixty (60) days prior written notice (except for any termination by
Landlord for an event of default by Tenant which shall not require prior
notice). In the event of such an extension of the lease for an indefinite
term, any failure of Tenant to give at least sixty (60) days notice of
termination thereafter shall result in Tenant being liable for the additional
rental described (and as calculated) in Section 5b above.
Section 6. Use of Premises:
Tenant shall use the Leased Premises only for the purposes of: ________
and for no other business without Landlord's prior written consent.
Section 7. Operation of Business:
a. Tenant shall not perform any act or carry on any practice within the
Leased Premises which may damage the Leased Premises or which shall cause or
create offensive odors or constitute a nuisance. Tenant accepts the Leased
Premises in their present condition "as is," the premises being currently
suitable for Tenant's intended use.
b. Tenant, at its own expense, shall comply with all rules, regulations,
ordinances and laws of public authorities applicable to its operations and
obligations in connection with the Leased Premises including, but not limited
to, the Americans With Disabilities Act of 1990.
c. Tenant shall not install additional signs or other advertising devices on
the Leased Premises without Landlord's prior written approval. The expense of
installation, operation or removal of all signs shall be paid by Tenant.
Tenant shall not cause or allow any painting of letters, signs or other
figures or pictures on any walls or roof of the Leased Premises without
Landlord's prior written approval.
Section 8. Care of Leased Premises:
Tenant shall make no alterations, renovation or additions to the Leased
Premises without the prior written consent of Landlord, and any such
additions, changes and alterations made by Tenant shall become and remain the
property of Landlord at the termination of this lease, except to the extent
that Landlord agrees otherwise in the above required written consent. At the
termination of this lease, whether occurring by normal expiration or as
otherwise herein provided, Tenant shall yield up the Leased Premises to
Landlord in good and tenantable condition and repair, except for ordinary wear
and tear. In regard to any such alterations, renovations or additions, Tenant
at its expense must comply with the Architectural Barriers Act Texas Statute
Article 9102), and in regard to any applicable construction Tenant shall
provide Landlord with a copy of the filed plan review registration form and
all notices received from the Texas Department of Licensing and Regulation.
Section 9. Fixtures:
Tenant shall be permitted to install trade fixtures and equipment, and all
such fixtures and equipment owned by Tenant and not permanently attached to
the Leased Premises may be removed by Tenant at the end of the term of this
lease, provided Tenant is not in default under the terms of this lease and
provided that any damage to the Leased Premises caused by such removal shall
be repaired by and at the expense of Tenant at or prior to the expiration of
the term of this lease.
Section 10. Maintenance of the Leased Premises:
a. Tenant covenants and agrees, subject to the limitations provided below, to
maintain the Leased Premises in good condition, repair, appearance and free
from waste during the term of this lease.
b. During the term of this lease, Landlord will make all necessary repairs to
sidewalks and curbs; the foundation, the exterior walls and load-beating
walls of any improvements; exterior water, sewage, gas and electrical
services up to the point of entry to improvements; and the roof of any
improvements. Tenant shall make all repairs and replacements made necessary
as a result of negligence or omission or misuse by Tenant, its employees or
invitees and shall make all interior nonstructural repairs and replacements
and ordinary maintenance (including maintenance to the heating system, air
conditioning system, electrical system, plumbing and plate glass) and any
other maintenance and repairs not required to be made by Landlord.
Specifically, and not in limitation of the provisions of Section 8 or this
Section 10, Tenant shall maintain all stabilized pads or ground cover on the
Leased Premises, including concrete, caliche or other stabilizing materials,
and upon termination of this lease shall yield up such areas in the same
condition as received.
Section 11. Insurance:
a. At all times during the term of this lease, Tenant, at its sole cost and
expense, shall effect and maintain a policy or policies of comprehensive
general liability insurance providing personal injury and property damage
liability coverages with respect to the Leased Premises and the business
conducted thereon, with a combined single limit of not less than $500,000 for
bodily injury and property damage liability per occurrence and $1,000,000 for
aggregate limits of liability. The policy shall be written on a standard
Texas Commercial Package Policy form or such other policy form and shall
include such coverages as approved by Landlord. Such insurance policy or
policies shall name both Tenant and Landlord as named insureds and shall
provide that the insurer will not cancel or change such insurance without
first giving Landlord and Tenant not less than twenty (20) days prior written
notice. Upon request, Landlord shall be furnished certificates or a duplicate
original of all such insurance policies. In the alternative, Landlord may
provide this insurance and Tenant shall be required to promptly reimburse
Landlord for the cost of this insurance.
b. Tenant, unless Tenant agrees to provide such insurance pursuant to an
addendum to this lease, shall reimburse Landlord (within twenty (20) days of
receipt of invoice) for the cost incurred by Landlord in maintaining "all
risk" casualty insurance with respect to the Leased Premises, including but
not limited to, fire and extended coverage insurance under Texas Standard
Form, together with such other endorsements as may reasonably be required by
Landlord.
Section 12. Indemnification:
Tenant covenants and agrees to protect, indemnify and save Landlord and
Landlord's successors and assigns harmless from all claims for damages and/or
injuries to persons or property arising from injury to persons or property on
or adjacent to the Leased Premises, including all costs, attorney's fees,
expenses and liabilities incurred in connection with any such claim or action.
Section 13. Mutual Waiver of Subrogation:
Landlord hereby waives any right of recovery that Landlord may have against
Tenant for the loss of or damage to any of Landlord's property resulting from
any cause whatsoever to the extent that collection for such loss or damage is
made by Landlord under any insurance policy or policies in effect at the time
such loss or damage occurs; and Tenant hereby waives any right of recovery
that Tenant may have against Landlord for the loss of or damage to any of
Tenant's property resulting from any cause whatsoever to the extent that
collection for such loss or damage is made by Tenant under any insurance
policy or policies in effect at the time of such loss or damage. Landlord
and Tenant agree to give to each insurance company which has issued policies
or insurance covering risk of direct physical loss, written notice of the
terms of the mutual waivers contained in this section, and to have the
insurance policy properly endorsed, if necessary, to prevent the invalidation
of the insurance coverages by reason of the mutual waivers contained in this
section.
Section 14. Assignment and Subleasing:
Tenant shall not, whether by operation of law or otherwise, assign this
lease, or any part thereof, or sublease or mortgage all or any part of the
Leased Premises, without the prior written approval of Landlord in each
instance. Any such approval shall not relieve Tenant or Tenant's authorized
assignees or subtenants from liability hereunder.
Section 15. Destruction of Leased Premises:
a. If the Leased Premises are damaged by fire, windstorm or other casualty
during the term of this lease, Landlord, upon receipt of written notice of
such damage from Tenant, may, at Landlord's option, proceed to repair such
damage and restore the Leased Premises, or so much thereof as was originally
constructed by Landlord, to substantially the same condition as it existed at
the time of such damage and Tenant's obligation to pay rent shall be
equitably abated or reduced unless such damage was caused by the negligence
of Tenant or Tenant's invitees, agents or employees. Landlord shall not be
responsible for any delay which may result from causes beyond Landlord's
reasonable control.
b. If Landlord elects not to repair and restore the Leased Premises, Landlord
shall notify Tenant within thirty (30) days of Landlord's receipt of written
notice of damage from Tenant that Landlord will not repair and restore the
Leased Premises and thereafter either party shall have the option to
terminate this lease. Such option to terminate shall be exercised by written
notice within thirty (30) days after Landlord has given written notice of
election not to repair.
c. In the event of termination of this lease pursuant to this section, such
termination shall be effective as of the date upon which such damage or
destruction occurred if business has not been conducted in the Leased
Premises after such date. If business has been so conducted, the termination
shall be effective as of the date of the receipt by Landlord of Tenant's
notice of termination.
Section 16. Total or Partial Condemnation:
a. If all or a portion of the Leased Premises shall be taken by condemnation
or right of eminent domain or conveyed by Landlord under the threat of
condemnation so as to render the balance of the Leased Premises unsuitable
for the use of Tenant, either party to this lease shall be entitled to
terminate this lease by giving written notice of such election within thirty
(30) days after Tenant has been deprived of possession. If this lease is
terminated, then the rent shall be apportioned and determined as of the date
of such termination.
b. Should any part of the Leased Premises be so taken or condemned, Landlord
shall be entitled to receive and retain all sums awarded for the taking of
all or any portion of the Leased Premises. Landlord shall not be entitled to
any portion of the award made to Tenant for Tenant's loss if a separate award
is made for Tenant's loss.
c. If the lease is not terminated, then a portion of the rent, determined on
the basis of the nature and extent of the damages sustained, shall be
equitably abated.
Section 17. Default of Tenant:
a. Events of Default: The following events shall be deemed to be events of
default by Tenant under this lease:
1. If Tenant shall fail to pay any installment of the rent or other sum of
money payable hereunder when due and such failure. continues for ten (10)
days following written notice thereof from Landlord to Tenant.
2. If Tenant shall abandon or vacate the Leased Premises or any significant
portion thereof.
3. If Tenant shall fail to comply with any other terms, provision, obligation
or covenant of this lease, and shall not cure or correct such failure within
twenty (20) days after written notice thereof from Landlord to Tenant.
4. If any proceedings shall be commenced to declare Tenant a bankrupt or
insolvent, reduce or modify its debts or obligations or to delay the payment
thereof, or if any assignment of its property be made for the benefit of
creditors, or if a receiver or trustee be appointed for it or its property or
business, then, to the extent permitted by applicable law, Landlord may treat
the occurrence of any one or more of the foregoing events as an event of
default by Tenant.
b. Remedies If an event of default shall have occurred, Landlord shall have
the right, without further notice or demand of any kind to Tenant or any
other party, to pursue any rights or remedies provided at law or in equity,
including without limitation, the right to terminate this lease and
forthwith repossess the Leased Premises and to recover as damages a sum of
money equal to the total of (i) the reasonable cost of recovering the Leased
Premises, (ii) the unpaid rent and other sums due at the time of termination
plus interest thereon from the due date at the rate herein provided, and (iii)
an amount equal to the then present value of the balance of the rent for the
remainder of the term, less the then present value of the fair rental value
of the Leased Premises for the remainder of the term. Notwithstanding any
termination or repossession, Tenant's obligation to pay the rental provided
in this lease shall survive any such termination or repossession.
Section 18. Landlord's Default:
In the event Landlord should be in default hereunder, Tenant agrees to give
Landlord written notice of such default and a reasonable time in which to
cure it, not to be less than thirty (30) days after receipt of such notice by
Landlord, before taking further action to enforce this lease against
Landlord. If, after notice Landlord does not cure within the time and manner
specified, the Tenant may, at its option, cancel and terminate this lease at
the end of said 30-day period and be relieved of any further obligation
hereunder.
Section 19. Taxes and Assessments:
a. Tenant shall pay to Landlord, as additional rent, within ten (10) days
after receipt of a statement, the amount of all taxes and assessments levied
and assessed by any lawful authority against the Leased Premises during the
term of this lease. The amount of additional rent to be paid to Landlord by
Tenant because of such taxes shall be prorated between Landlord and Tenant
for any partial years of the term of this lease based upon the number of days
in such years that this lease was in force.
b. Tenant shall pay when due all sales taxes, excise taxes, ad valorem taxes
or other taxes levied or assessed on the conduct of Tenant's business or the
value of its personal property prior to their becoming delinquent.
Section 20. Loss and Damage to Tenant's property:
Tenant agrees that its use and occupancy of the Leased Premises as authorized
under the terms of this lease shall be wholly and solely at its risk, and
Landlord shall have no liability whatsoever for loss or damage to the
fixtures or other personal property of Tenant or the property of those so
claiming under Tenant, whether occurring by reason of theft, vandalism, fire
or other casualty, or the bursting, stopping or leaking of water, gas, sewer
or steam pipes, or otherwise, nor for personal injury or death of any person.
Section 21. Other Remedies of Landlord:
If default' is made in the performance of any covenant required by this lease
to be performed by Tenant, Landlord may, at Landlord's election, perform the
same for the account of and at the expense of Tenant, after giving notice to
Tenant of its intention to do so. If Landlord at any time is compelled to
pay, or elects to pay, any sum of money, or do any act which will require the
payment of any sum of money, by reason of the failure of Tenant to comply
with any provision hereof, or if Landlord is compelled to incur any expense,
including reasonable attorney's fees, in instituting, prosecuting or defending
any action or proceeding occasioned by reason of any default of Tenant
hereunder, the sum or sums so paid by Landlord shall be due from Tenant to
Landlord as additional rent on the next day following the incurring of such
expenses upon which a regular monthly rental payment is due.
Section 22. Mechanic's Lien:
Tenant shall not permit any mechanic's, materialman's or similar liens to
remain upon the Leased Premises for labor or material furnished to Tenant or
claimed to have been furnished to Tenant in connection with work of any
character performed or claimed to have been performed on the Leased Premises
or at the direction of or with the consent of Tenant.
Section 23. Utility Charges:
Tenant shall make and pay all necessary deposits for all utilities and shall
be wholly responsible for all utility charges servicing the Leased Premises.
In addition to the other indemnification set forth in this lease, Tenant
shall indemnify and hold Landlord harmless from any charges or claims for
utility charges or deposits.
Section 24. Contractual Lien:
Landlord shall have, and Tenant hereby grants to Landlord, a lien and
security interest in all of the fixtures, trade fixtures, and furniture,
equipment, stock, goods, merchandise and other property placed on the Leased
Premises during the term of this Lease to secure the payment of rentals and
other sums due hereunder for the entire term of this Lease. The lien and
security interest is given in addition to the Landlord's statutory lien and
cumulative thereto. Landlord shall have, and may exercise with respect to
such property, all the rights, remedies and powers of a secured party under
the Uniform Commercial Code of Texas. This lease is a security agreement
under the Uniform Commercial Code. Landlord may file a copy of this lease as
a financing statement.
Section 25. Miscellaneous:
a. Successors: All rights and liabilities herein given or imposed upon the
respective parties shall extend to and bind the respective successors and
assigns of such parties.
b. Right of Entry by Landlord: Landlord, for any purpose authorized herein,
shall have the right to enter upon the Leased Premises at all reasonable
hours for the purpose of inspecting the Leased Premises or for any other
lawful purpose. Such entrance by Landlord shall never be deemed or held to be
an ejectment or disposition of Tenant, and Landlord shall incur no liability
by reason thereof. In addition, Landlord may show the Leased Premises at
reasonable times to prospective purchasers or mortgagees and may show the
Leased Premises at reasonable times to prospective tenants during the last
four (4) months of the term of this lease.
c. Construction of Lease. In the event any provision of this lease shall be
held to be invalid or unenforceable, such holding shall not be deemed to
affect the validity and enforceability of the remainder of this lease, nor of
the same provision as applied to other persons or circumstances. This lease
shall be construed with the express intention of the parties to it that it
shall be valid and enforceable in every respect to the extent permitted by
law.
d. Waiver: The waiver by any party hereto of any breach or default under this
lease shall not be deemed to be a waiver of any such provision or of any
subsequent breach or default thereof. No provision of this lease shall be
deemed to have been waived by any party hereto unless such waiver be in
writing and signed by the party charged with any such waiver.
e. Amendments: No subsequent alteration, amendment, change, deletion, or
addition to this lease shall be binding upon Landlord or Tenant unless in
writing and signed by both Landlord and Tenant.
f. Attorneys' Fees: If it becomes necessary for either Landlord or Tenant to
employ an attorney to enforce, whether by original action, the other party,
counterclaim or otherwise, Its rights, titles, and interests under this lease
against the other party, then the prevailing party as determined by the final
order of judgment of a court of competent jurisdiction shall be entitled to
recover its reasonable attorneys' fees and court costs in connection
therewith.
g. Quiet Enjoyment: Landlord shall defend the Tenant in the quiet enjoyment
and peaceful possession of the Leased Premises during the term of this lease
so long as Tenant is not in default under the terms of this lease.
h. Excuse of Landlord's Performances: Anything in this lease to the contrary
notwithstanding, Landlord shall not be deemed in default with respect to the
performance of any of Landlord's terms, covenants and conditions contained in
this lease if same shall be due to any strike, lockout, civil commotion,
war-like operation, invasion, rebellion, hostilities, military or usurped
power, sabotage, terrorism, governmental regulations or controls, inability
to obtain any material or service, through any act of God or other casualty
or event beyond the reasonable control of Landlord.
i. Time of Essence: Time is of the essence in this agreement.
j. Holdover: If Tenant does not vacate the Leased Premises following
termination of this lease, Tenant shall be a tenant at will and shall vacate
the Leased Premises on receipt of notice from Landlord. No holding over by
Tenant, whether with or without the consent of Landlord, will extend the term
unless the Landlord consents in writing to a lease extension.
k. Notices: Any notices required by this lease shall be deemed to be
delivered (whether or not actually received) when deposited with the United
States Postal Service, postage prepaid, certified mail, return receipt
requested, and addressed to Landlord or Tenant, as applicable, at their
address set forth herein.
Section 26. Environmental Provisions:
Tenant agrees to comply with all environmental laws and regulations
pertaining to Tenant's use of the Leased Premises, including but not limited
to the performance of corrective action measures, if necessary. Tenant agrees
to indemnify and hold Landlord and Landlord's officers, directors,
shareholders, employees and agents harmless against any and all liabilities,
fines; lawsuits, proceedings, actions, settlements, consent decrees and
expenses (including reasonable attorneys fees), which may be asserted against
any such party, arising out of the environmental condition, contamination or
remediation of the Leased Premises. This indemnification provision applies
to, among other things, all matters brought pursuant to any state or federal
environmental law, including but not limited to the Comprehensive
Environmental Response Compensation and Liability Act, as amended. The
provisions of this paragraph shall survive any termination or expiration of
this lease.
Section 27. Entire Agreement and Limitation of Warranties:
IT IS EXPRESSLY AGREED BY TENANT, AS A MATERIAL
CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE
IS THE ENTIRE AGREEMENT OF THE PARTIES; THAT THERE ARE, AND
WERE, NO VERBAL REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS,
STIPULATIONS, AGREEMENTS OR PROMISES PERTAING TO THIS LEASE
EXCEPT AS SET FORTH IN THIS LEASE. LANDLORD AND TENANT EXPRESSLY AGREE THAT
THERE ARE AND SHALL BE NO IMPLIED WARRANTIES OF MERCHANTABILITY.
HABITABILITY. FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND
ARISING OUT OF THIS LEASE. AND THERE ARE NO WARRANTIES WHICH
EXTEND BEYOND THOSE EXPRESSLY SET FORTH IN THIS LEASE.
Dated:_______________________
LANDLORD: TENANT:
ALLEN & CAMERON, INC. INTERNATIONAL CATALYST
/s/ /s/Greg Broderick- 3/19/96
3/19/96
DESCRIPTION: LEASE
EXHIBIT 10 (r ) (r )
LEASE
This Lease is executed at Houston, Texas, this 30th day of January, 1996 by
and between Larry W. Eubanks (the "Landlord"), and International Catalyst,
Inc. (the "Tenant").
I. Description of Premises.
1.01 Landlord hereby leases to Tenant, and Tenant hires from Landlord on the
terms, covenants and conditions set forth herein, those premises described in
Exhibit "A", pages l&2, attached hereto (the "Leased Premises"). The Leased
Premises, containing approximately twenty thousand (20,000) square feet, is
located at 4313 & 4315 FM2351, Friendswood9 Texas 77546.
2. Term.
2.01 The term of this Lease shall be for three (3) years commencing on
September 1, 1996, and ending August 31,1999.
3. Rent.
3.01 Tenant agrees to pay Landlord, at such place as Landlord may designate
without deduction, offset, prior notice or demand, and Landlord agrees to
accept as rent for the Leased Premises, the total sum of Two Hundred
Fifty-Eight Thousand, Nine Hundred Eighty-Four and No/100 Dollars
($258,984.00) in lawful money of the United States, payable in monthly
installments of Seven Thousand, One Hundred Ninety-Four and No/1O0 Dollars
($7,194.00) payable in advance on the first day of each month during the term
of this Lease. The amount of Seven Thousand, One Hundred Ninety-Four and
No/100 Dollars ($7,194.00) is paid herewith to Landlord upon the execution of
this Lease, receipt of which is hereby acknowledged, which shall represent
the first month's rental.
If the term of this Agreement as heretofore established commences on other
than the first day of a month or terminates on other than the last day of a
month, then the rental shall be prorated and the installments so prorated
shall be paid in advance.
3.02 Tenant has further deposited with Landlord' the sum of Seven Thousand.
and No/100 Dollars ($7,000.00) as security for the full performance of all
the provisions of this Lease. If at any time during the term hereof as it may
be extended, Tenant shall be in default in payment of rent or any other sum
due Landlord as additional rent, Landlord may apply all or a part of the
security deposit for such payment. Landlord may also apply all or a part of
the deposit to repair damages to the Leased Premises during or upon the
termination of the tenancy created by this Lease. In such event Tenant shall,
on demand, pay to Landlord a like sum as additional security. If Tenant is
not in default at the termination of this Lease, Landlord shall return the
deposit to Tenant. Landlord shall not be required to keep this security
deposit separate from its general funds, and Tenant shall not be entitled to
interest on such deposit.
3.03 Tenant acknowledges that late payment by Tenant to Landlord of rent or
other sums due hereunder will cause Landlord to incur costs not contemplated
by this Lease, the exact amount of which would be extremely difficult and
impractical to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the Leased
Premises. Therefore, in the event Tenant should fail to pay any installment
of rent or any sum due hereunder after such amount is due, Tenant shall pay
to Landlord, as additional rent, a late charge equal to five percent (5%) of
each such installment or other sum for any rental payment made and accepted
more than ten (10) days late. A Fifty and No/1OO Dollars ($50.00) charge will
be paid by Tenant to Landlord for each returned check.
4. Use of Premises.
4.01 The Leased Premises may be used and occupied only for the purpose of
industrial servicing of the petro-chemical industry and for no other purpose
or purposes, without Landlord's prior written consent. Tenant shall promptly
comply with all laws, ordinances, orders and regulations affecting the Leased
Premises and their cleanliness, safety, occupation and use. Tenant shall not
do or permit anything to be done in or about the Leased Premises, or bring or
keep anything in the Leased Premises that will in any way increase the fire
or hazard insurance upon the Leased Premises. Tenant will not perform any
act or carry on any practices that may injure the Leased Premises or be a
nuisance or menace to tenants of adjoining premises. Tenant shall not cause,
maintain or permit any outside storage on or about the Leased Premises except
within the confines of fenced areas or outside storage areas as provided by
the Landlord, if any.
5. Utlilities
5.01 Tenant shall pay for all water, gas, heat, light, power, sewer and all
other service metered or chargeable to the Leased Premises. Tenant shall pay
for all telephone and other such services for the Leased Premises as Tenant
shall contract for.
6. Acceptance of Premises
6.01 By entry into possession of the Leased Premises, Tenant will acknowledge
that it has examined the Leased Premises and accepts the same as being in the
condition called for by this Agreement. In the event the building should not
be completed or ready for occupancy by the commencement date for any reason,
Landlord shall not be liable or responsible for any claims, demands or
liabilities in connection therewith or by reason thereof. This Agreement
shall be effective only from the time the Leased Premises are ready for
occupancy, which date shall be the revised commencement date of the Lease.
In such event, rental under this Agreement shall not commence until said
revised commencement date, and the stated term in this Agreement shall
commence and the expiration date extended so as to give effect to the full
stated term.
r picket lines.
7. Alterations, Mechanic's Liens.
7.01 Alterations may not be made to the Leased Premises without prior written
consent of Landlord, which consent shall not be unreasonably withheld, and
any alterations of the Leased Premises excepting movable furniture and trade
fixtures shall become part of the realty and belong to the Landlord.
7.02 Should Tenant desire to alter the Leased Premises and Landlord gives
written consent to such alterations, at Tenant's option, Tenant shall contract
with a contractor approved by Landlord for the construction of such
alterations, or Landlord will make the required alterations and the rental
increased at a mutually agreeable rate.
7.03 Notwithstanding anything in Paragraph 7.02 above, Tenant may, upon
written consent of Landlord, install trade fixtures, machinery or other trade
equipment in conformance with the ordinances of the applicable city and
county, and the same may be removed upon the termination of this Lease
provided Tenant shall not be in default under any of the terms and conditions
of this Lease, and the Leased Premises are not damaged by such removal.
Tenant shall return to Tenant, reasonable wear and tear excepted. Tenant
shall keep the Leased Premises and property surrounding the Leased Premises
free from any liens arising out of any work performed for, materials furnished
to, or obligations incurred by Tenant. All such work, provided for above,
shall be done at such times and in such manner as Landlord may from time to
time designate. Tenant shall give Landlord written notice five (5) days
prior to employing any laborer or contractor to perform work resulting in an
alteration of the Leased Premises so that Landlord may post a notice of non-
responsibility.
8. Waste and Quiet Conduct.
8.01 Tenant shall not commit or suffer any waste upon the Leased Premises or
any nuisance or other act or thing which may disturb the quiet enjoyment
of any other tenant in the building.
9. Insurance Hazards.
9.01 No use shall be made or permitted to be made of the Leased Premises or
any part thereof, nor acts done, which will increase the existing rate of
insurance upon the building or cause the cancellation of any insurance policy
covering the building, or any part thereof, nor shall Tenant sell or permit
to be kept, used, or sold, in or about the Leased Premises any articles which
may be prohibited by the standard form of fire insurance policies. Tenant
shall, at its sole cost and expense, comply with any and all requirements
pertaining to the Leased Premises, of any insurance organization or company,
necessary for the maintenance of reasonable fire and public liability
insurance, covering the Leased Premises and appurtenances. Tenant agrees to
pay to Landlord as additional rent, any increase in premiums on policies which
may be carried by Landlord on the Leased Premises covering damages to the
Leased Premises and loss of rent caused by fire and the perils normally
included in extended coverage above the rates for the least hazardous type of
occupancy for industrial, warehousing, office and distribution operations.
9.02
All personal property in the Leased Premises, fixtures and equipment
installed by Tenant shall be at the sole risk of Tenant. Tenant shall
maintain in full force and effect on all of its fixtures and equipment in the
Leased Premises, including, without limitation, its mechanical equipment,
such as computer hardware and building air conditioning and heating equipment,
and office furnishings, such as computer software, office furniture,
typewriter and word processing equipment, a policy or policies of fire and
extended coverage insurance, including insurance covering, without limitation,
loss by theft, with standard coverage endorsement to the extent of at least
Eighty percent (80%) of their insurable value. During the term of this Lease
the proceeds from any such policy or policies shall be used for the repairing
or replacement of the fixtures and equipment so insured. Landlord shall have
no interest in the insurance upon Tenant's equipment and trade fixtures and
will sign all documents necessary or proper in connection with the settlement
of any claim or loss by Tenant. It is agreed and understood that Landlord
will not carry insurance on Tenant's possessions. Tenant shall furnish
Landlord with a certificate of such policy and whenever required shall satisfy
Landlord that such policy is in full force and effect within thirty (30) days
of the commencement of this Lease. All fire and extended coverage insurance,
theft insurance, boiler insurance, and other insurance carried by Landlord
or Tenant covering losses arising out of destruction or damage to the Leased
Premises or its contents shall provide for a waiver of rights of subrogation
against Landlord and Tenant on the part of the insurance carrier.
9.03 Tenant shall pay to Landlord upon demand as additional rent, that portion
of insurance premiums in excess of insurance premiums for the fiscal year in
which the Lease term commences. Tenant's liability shall be an equitable
proportion of the insurance premiums for all of the land and improvements
included within the parcel containing the Leased Premises, such proportion to
be determined based upon the percentage which the square footage of the Leased
Premises bears to the total square footage of buildings located on the land.
The base year of this Lease is Calendar Year 1992. Such additional rental
shall be payable to Landlord on or before sixty (60) days from the date of
Tenant's receipt of Landlord's request for such payment.
10. Liability Insurance.
10.1 Tenant, at its own expense, shall provide and keep in force with
companies acceptable to Landlord, public liability insurance for the benefit
of the Landlord and Tenant jointly against liability for bodily injury and
property damage in the amount of not less than Five Hundred Thousand and
No/100 Dollars ($500,000.00) in respect to injuries to or death of more than
one person in any one occurrence, and in the amount of not less than One
Hundred Thousand and No/100 Dollars ($100,000.00) per occurrence in respect
to damage to property, such limits to be for any greater amounts as may be
reasonably indicated by circumstances from time to time existing. Tenant
shall furnish Landlord with a certificate of such policy within thirty (30)
days of the commencement date of this Lease and whenever required shall
satisfy Landlord that such policy is in full force and effect. Such policy
shall name Landlord as an additional insured and shall be primary and non-
contributing with any insurance carried by Landlord. The policy shall further
provide that it shall not be cancelled or altered without twenty (20) days
prior written notice to Landlord. If Tenant should fail to comply with the
foregoing requirements relating to insurance, Landlord may obtain such
insurance and Tenant shall pay Landlord, on demand, as additional rent
hereunder, the premium cost thereof plus interest at the highest rate allowed
by applicable law of the State of Texas or the United States of America from
the date of payment by Landlord until repaid by Tenant.
11. Indemnification by Tenant.
11.01 Tenant shall indemnify, defend and hold harmless Landlord against and
from any and all claims arising from Tenant's use of the Leased Premises or
the conduct of its business or from any activity, work, or thing done,
permitted or suffered by the Tenant in or about the Leased Premises and shall
further indemnify, defend and hold harmless Landlord against and from any and
all claims arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under the terms of this Lease, or
arising from any act, neglect, fault, or omission of the Tenant, or its agents
or employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in or about such claims or any action or proceeding
brought thereof and in case any action or proceeding be brought against
Landlord by reason of any such claim, Tenant, upon notice from Landlord, shall
defend same at Tenant's expense and retain counsel reasonably satisfactory
to Landlord. Provided that the liability hereafter described does not result
from acts or omissions of Landlord or its agents or employees, Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons in or about the Leased Premises from
any cause whatsoever except that which is caused by the failure of Landlord
to observe any of the terms and conditions of this Lease and such failure has
persisted for an unreasonable period of time after written notice to Landlord
by Tenant of such failure, and Tenant hereby waives all claims in respect
thereof against Landlord. The obligations of Tenant under this section
arising by reason of any occurrence taking place during the term of this
Lease shall survive any termination of this Lease.
12. Waiver of Claims.
12.01 Except when gross and/or criminal negligence can be proven on the part
of the Landlord, Tenant, as a material part of the consideration to be
rendered to Landlord, hereby waives all claims against Landlord for damages
to goods, wares and merchandise in, upon or about the Leased Premises and for
injury to Tenant, its agents, employees, invites, or third persons in or
about the Leased Premises from any cause arising at any time. Landlord and
Landlord's agents and employees shall not be liable to Tenant for any injury
to person or damage to property sustained by Tenant or any person claiming
through Tenant resulting from any accident or occurrence in the Leased
Premises or other portions of the business park, including but not limited
to injury or damage caused by the Leased Premises or any other portions of
the business park growing out of repair or by defect in or failure of
equipment, pipes or wiring, or by broken glass, or by the backing up of
drains, or by gas, water, steam, electricity, or oil leaking, escaping or
flowing into the Leased Premises (except where due to Landlord's failure to
make repairs required to be made hereunder, after the expiration of a
reasonable time after written notice to Landlord of the need for such
repairs), nor shall Landlord be liable to Tenant for any loss or damage that
may be occasioned by or through the acts or omissions of other tenants of the
business park or of any other person whatsoever, nor shall Landlord be liable
to Tenant or other persons due to damage or injury caused by fire, wind,
storm, hail, explosion, theft, burglary, riot, civil commotion, war, or act
of public enemy, aircraft, land vehicles, sabotage, strikes or picket lines.
13. Repairs.
13.01 Tenant shall, at its sole cost, keep and maintain the Leased Premises,
appurtenances, equipment, facilities and amenities, and every part of the
Leased Premises (excepting exterior walls and roofs which Landlord agrees to
repair), including windows and skylights, doors, alarm systems, elevators,
and the interior of the Leased Premises, in good and sanitary order,
condition and repair. Tenant shall, at its sole cost, keep and maintain all
utilities, fixtures and mechanical equipment used by Tenant in good order,
condition and repair and furnish all expendables (light bulbs, paper goods,
soap, etc.) used in the Leased Premises during the term or extended term of
the Lease. Tenant shall provide its own maintenance, inspection and
servicing personnel at its sole cost and expense. If any repairs required to
be made by the Tenant hereunder are not made within sixty (60) days after
written notice delivered to Tenant by Landlord, Landlord may, at its option,
make such repairs, and Tenant shall pay to Landlord upon demand as additional
rental hereunder the cost of such repairs plus interest at the highest rate
allowed by applicable laws of the State of Texas and the United States of
America from the date of payment by Landlord until repaid by Tenant. At the
expiration of this Lease, Tenant shall surrender the premises, including all
improvements located thereon (except as otherwise provided in Section 7.03)
in good condition, reasonable wear and tear and loss by fire or other
casualty covered by Landlord's insurance excepted. Landlord agrees to afford
Tenant the benefit of any guaranties and warranties of third parties, if any,
which may be applicable to heating and air conditioning equipment and other
machinery and equipment, if any, installed by Landlord in the Leased Premises.
14. Auctions Signs Landscaping.
14.01 Tenant shall not conduct or permit to be conducted any sale by auction
on the Leased Premises. Landlord shall have the right to control landscaping
and approve the placing of signs and the size and quality of the same.
Tenant shall make no alterations or additions to the Leased Premises of
landscaping and shall place no exterior signs on the Leased Premises without
the prior written consent of Landlord. Any signs not in conformity with this
Lease may be immediately removed and destroyed by Landlord.
15. Entry by Landlord.
15.01 Tenant shall permit Landlord and Landlord's agents to enter the
Leased Premises at all reasonable times for the purpose of inspecting the
same or for the purpose of maintaining the building, or for the purpose of
making repairs, alterations, or additions to any portion of the building,
including the erection and maintenance of such scaffolding, canopies, fences,
and props as may be required, or for the purpose of posting notices of
non-responsibility for alterations, additions, or repairs, or for the purpose
of showing the premises to prospective tenants during the last six (6) months
of this Lease, or placing upon the building any usual or ordinary "for sale"
signs, without any rebate or without any liability to Tenant for any loss of
occupation or quiet enjoyment of the Leased Premises thereby occasioned; and
shall permit Landlord at any time within thirty (30) days prior to the
expiration of this Lease, to place upon the Leased Premises any usual or
ordinary "to let" or "to lease" signs.
16. Taxes.
16.01 Tenant shall pay, before delinquency, any and all taxes, assessments,
license fees, and public charges levied, assessed or imposed and which become
payable during the Lease upon Tenant's fixtures, furniture, appliances and
personal property installed or located in the Leased Premises.
16.02 Tenant shall pay to Landlord, upon demand, as additional rent, that
portion of all real estate taxes assessed during the term of this Lease in
excess of the real estate taxes assessed for the Calendar Years following the
base year as stated in Section 9.03 of this Lease.
Tenant's liability shall be an equitable proportion to be determined by
Landland from the valuations assigned by the Assessor based upon the
percentage which the square footage of the Leased Premises bears to the total
square footage of buildings located on the land. Such additional rental
shall be payable to Landlord on or before sixty (60) days from the date
Tenant's receipt of Landlord's request for such payment.
17. Abandonment.
17.01 Tenant shall not vacate nor abandon the Leased Premises at any time
during the term of this Lease, nor permit the Leased Premises to remain
unoccupied for a period longer than fifteen (15) consecutive days during the
term of this Lease; and if Tenant shall abandon, vacate or surrender the
Leased Premises, or be dispossessed by process of law, or otherwise, any
personal property belonging to Tenant and left on the Leased Premises shall,
at the option of Landlord, be deemed abandoned.
18. Destruction
18.01 In the event of (a) a partial destruction of the Leased Premises or the
building during the Leased term which requires repairs to the Leased Premises
not caused by the fault of Tenant, its agents, representatives or employees,
or (b) the Leased Premises being declared unsafe or unfit for occupancy by
any authorized public authority for any reason other than Tenant's act or an
act of Tenant's agents, representatives or employees, use or occupation which
declaration requires repairs to either the Leased Premises, Landlord shall
forthwith make repairs, provided repairs can be made within sixty (60) days
under the laws and regulations of authorized public authorities, but partial
destruction (including any destruction necessary in order to make repairs
requires by any declaration) shall in no wise annul or void this Lease, except
that Tenant shall be entitled to a proportionate reduction of rent while such
repairs are being made. The proportionate reduction is to be based upon the
extent to which the making of repairs shall interfere with the business
carried on by Tenant in the Leased Premises. In making repairs Landlord shall
be obligated to replace only such glazed as shall have been damaged by fire
and other damaged glazed shall be replaced by Tenant. If repairs cannot be
made within sixty (60) days, Landlord may, at its option, make same within
reasonable time, this Lease continuing in full force and effect and the rent
to be proportionately abated, as in this Paragraph provided. In the event
that Landlord does not so elect to make repairs which cannot be made within
sixty (60) days, or repairs cannot be made under current laws and regulations,
this Lease may be terminated at the option of either party. A total
destruction (including any destruction required by any authorized public
authority) of the Leased Premises shall bear the cost of such arbitrator and
the three arbitrators so selected shall hear and determine the controversy
and their decision thereon shall be final and binding on both Landlord and
Tenant who shall be borne equally by Landlord and Tenant. Tenant waives any
right under applicable laws inconsistent with the terms of this Paragraph
and in the event of a destruction agrees to accept any offer by Landlord to
provide Tenant with comparable space within the project in which the Leased
Premises are located on the same terms as this Lease.
19. Assignment and Subletting.
19.01 Without Landlord's consent, Tenant shall not assign, mortgage or
hypothecate this Lease, or any interest in this Lease, or permit the use of
the Leased Premises by any person or persons other than Tenant, or sublet the
Leased Premises, or any part of the Leased Premises. Landlord shall not
unreasonably withold such consent. Any transfer of this Lease from Tenant by
merger, consolidation, or liquidation shall constitute an assignment for
purposes of this Lease. Any attempted assignment or subletting without
Landlord's consent shall void and shall, at the option of the Landlord,
terminate this Lease. Consent by Landlord to any assignment or subletting
shall not release Tenant from its primary liability under this Lease, and
Landlord's consent to one assignment, subletting or occupation or use by
other parties shall not be deemed a consent to other, subsequent subleases or
assignments or occupation or use by other parties.
19.02 Landlord shall have the right to transfer and assign, either in whole
or in part, all its rights and obligations under this Agreement and in the
Leased Premises. Such assignments may be made either to a corporation, trust
company, partnership, limited partnership, individual or group of
individuals, and howsoever made are recognized or will be recognized by
Tenant and are or will be fully binding upon it. In the event of the transfer
and assignment by Landlord of his interest in this Lease and in the Leased
Premises to a person assuming the Landlord's obligations under this Lease,
Landlord shall thereby be released from any further responsibility hereunder,
and Tenant agrees to look soley to such successor in the interest of the
Landlord for performance of such obligations. Any security given by Tenant
to Landlord to secure performance of Tenant's obligations hereunder may be
assigned and transferred by Landlord to such successor in interest of
Landlord; and, upon acknowledgment by such successor of receipt of such
security and its express assumption of the obligation to account to Tenant
for such security in accordance with the terms of this Lease, Landlord shall
thereby be discharged of any further obligations relating thereto.
19.03 Tenant shall not mortgage, pledge or otherwise encumber its interest
in this Lease or in the Leased Premises nor may such interest be transferred
by operation of law.
20. Insolvency of Tenant.
20.01 Either (a) the appointment of a receiver to take possession of all or
substantially all of the assets of Tenant, or (b) a general assignment by
Tenant for the benefit of creditors, or (c) any action taken or suffered by
Tenant under any insolvency or bankruptcy act, constitutes a breach of this
Lease by Tenant, and Landlord may at its election without notice, terminate
this Lease and in that event be entitled to immediate possession of the
Leased Premises and damages as provided below.
21. Breach by Tenant.
21.01 In the event of a default, Landlord, besides other rights or remedies
that it may have, shall have the right, but not the obligation, to either
terminate this Lease or from time to time, without terminating this Lease,
relet the Leased Premises or any part thereof for the account and in the name
of Tenant or otherwise, for any such term or terms and conditions as Landlord
in its sole discretion may deem advisable with the right to make alterations
and repairs to the Leased Premises. Tenant shall pay to Landlord as soon as
ascertained, the costs and expenses incurred by Landlord in such reletting or
in making such alterations and repairs. Rentals received by Landlord from
such reletting shall be applied: First, to the payment of any indebtedness,
other than rent, due hereunder from Tenant to Landlord; Second, to the payment
of the cost of any alterations and repairs to the Leased Premises necessary
to return the Leased Premises to good condition, normal wear and tear
excepted, for uses permitted by this Leased and the cost of storing any of
Tenant's property left on the Leased Premises at the time of reletting; Third,
to the payment of rent due and unpaid hereunder and the residue, if any, shall
be held by Landlord and applied in payment of future rent or damages in the
event of termination as the same may become due and payable hereunder and the
balance, if any, at the end of the term of this Lease shall be paid to Tenant.
Should such rentals received from time to time from such reletting during any
month be less than that agreed to be paid during that month by Tenant
hereunder, the Tenant shall pay such deficiency to Landlord. Such deficiency
shall be calculated and paid monthly. The following events shall be deemed
to be the events of default by Tenant under this Lease:
(1) Tenant shall fail to pay any installment of rent hereby reserved and such
failure shall continue for a period of ten (10) days following notification
of such delinquency.
(2) Tenant shall fail to comply with any term, provision, or covenant of this
Lease, other than the payment of rent, and shall not cure failure within
fifteen (15) days after written notice thereof to Tenant.
(3) Tenant or any guarantor of Tenant's obligations under this Lease shall
file a petition under any section or chapter of the National Bankruptcy Act,
as amended, or under any similar law or statue of the United States or any
state thereof, or Tenant or such guarantor shall be adjudged bankrupt or
insolvent in proceedings filed against Tenant or such guarantor thereunder.
(4) Tenant or any guarantor of Tenant's obligations under this Lease shall
become insolvent, or shall make a transfer in fraud of creditors, or shall
make an assignment for the benefit of creditors.
(5) A receiver or trustee shall be appointed for the Leased Premises or for
all or substantially all of the assets of Tenant or any guarantor of Tenant's
obligations under this Lease.
(6) Tenant shall desert or vacate any substantial portion of the Leased
Premises.
(7) Tenant shall do or permit to be done anything which creates a lien upon
the Leased Premises.
21.02 No such reletting of the Leased Premises by Landlord shall be construed
as an election on its part to terminate this Lease unless a notice of such
intention be given to Tenant or unless the termination thereof be decreed by
a court of competent jurisdiction. Notwithstanding any such reletting without
termination, Landlord may, at any time thereafter, elect to terminate this
Lease for such previous breach, provided it has not been cured. Should
Landlord at any time, terminate this Lease for any breach, provided it has not
been cured. Should Landlord at any time, terminate this Lease for any breach,
in addition to any other remedy it may have, it may recover from Tenant all
damages it may incur by reason of such breach, including the cost of
recovering the Leases Premises, including (1) all amounts that would have
fallen due as rent between the time of termination of this Lease and the time
of the judgment, or other award less the proceeds of all reletting and
attornments, plus interest on the balance at the maximum rate allowed by
applicable law of the State of Texas and the United States of America; and
(2) the amount by which the unpaid rent for the balance of the term exceeds
the amount of such rental loss that Tenant proves could be reasonably
avoided; (3) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform his obligations
under this Lease or which in the ordinary course of things would likely result
therefrom, including, without limitation, the cost of altering, renovating
decorating the Leased Premises for a new occupant. Nothing in this Lease shall
be construed as denying to Landlord the right, in case of breach of this
Agreement by Tenant, to treat same as a complete breach and, at its option,
immediately sue for the entire breach of the Agreement.
22. Surrender of Lease Not Merger.
22.01 The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, terminate all or any existing subleases, and/or subtenancies, or
may, at the option of Landlord, operate as an assignment to it of any or all
such subleases or subtenancies.
23. Attorney's Fees/Cancellation Charges.
23.01 In the event of any legal action or proceeding between the parties
hereto, reasonable attorney's fees and expenses of the prevailing party in
any action or proceeding may be added to the judgment therein. Unless gross
and/or criminal negligence can be proven on the part of the Landlord, should
Landlord be named as a defendant in any suit brought against Tenant in
connection with or arising out of Tenant's occupancy hereunder, Tenant shall
pay to Landlord its cost and expenses incurred in such suit, including a
reasonable attorney's fee. In addition to the charges provided for in
Section 3 above, Tenant shall pay a charge of Seventy-Five and No/100 Dollars
($75.00) to Landlord for preparation of a demand for delinquent rent.
24. Condemnation
24.01 If any part of the Leased Premises shall be taken or condemned for a
public, quasi-public use, and a part thereof remains which is susceptible of
occupation hereunder, this Lease shall, as to the part so taken, terminate as
of the date title shall vest in the condemnor, and the rent payable hereunder
shall be adjusted so that the Tenant shall be required to pay for the
remainder of the term only such portion of such rent as the number of square
feet in the part remaining after the condemnation bears to the number of
square feet in the entire Leased Premises at the date of condemnation; but
in such event Landlord shall have the option to terminate this Lease as of the
date when title to the part so condemned vests in the condemnor. If all the
Leased Premises, or such part thereof be taken or condemned so that there
does not remain a portion satisfactory for Tenant's occupancy hereunder, this
Lease shall thereupon terminate. If a part or all of the Leased Premises be
taken or condemned, all compensation awarded upon such condemnation or taking
shall go to the Landlord and the Tenant shall have no claim thereto, and the
Tenant hereby irrevocably assigns and transfers to the Landlord any right to
compensation or damages to which the Tenant may be entitled during the term
hereof by reason of the condemnation of all, or a part of the Leased
Premises. Any dispute between Lessor and Lessee concerning the provisions of
this Paragraph may be submitted to arbitration in accordance with the
procedures set forth in Paragraph 18.01.
25. Notices.
25.01 All notices, statements, demands, requests, consents, approvals,
authorizations, offers, agreements, appointments, or designations under this
Lease by either party to the other shall be in writing and shall be
sufficiently given and served upon the other party, if sent by certified
mail, return receipt requested, postage prepaid, and addressed as follows:
To Tenant, addressed to the last known post office address of Tenant or to
the Leased Premises.
To Landlord, addressed to Landlord at P. 0 Box 1246 Friendswood, Texas 77549
or to such other place as Landlord may from time to time designate by notice
to Tenant.
26. Waiver.
26.01 The waiver by Landlord of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition or any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant
of any term, covenant or condition of this Lease, other than the failure of
Tenant to pay the particular rental so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such rent.
27. Effect of Holding Over.
27.01 Tenant agrees to yield up and surrender to Landlord immediate
possession of the Leased Premises and all keys thereto as well as provide
Landlord with an explanation of the combination and operation of all non-key
locks in the Leased Premises at the expiration of this Agreement by lapse of
time or otherwise. The Leased Premises shall be in as good a condition as
when received by Tenant, ordinary wear and tear excepted. In the event
Tenant remains in possession of the Leased Premises after the expiration of
this Lease and without the execution of a new Lease, it shall be deemed to be
occupying and premises as a tenant from month-to-month at double rental and
otherwise subject to all the conditions, provisions and obligations of this
Lease insofar as the same are applicable to a month-to-month tenancy. Tenant
shall be liable to Landlord for all loss or damage on account of any such
holding over against Landlord's will after the termination of this Lease,
whether such loss or damage may be contemplated at this time or not.
28. Expansion Clause.
28.01 If during the term of this Lease, Tenant executes a lease for space of
a size larger than the present Leased Premises within any development owned
by Landlord, this Lease shall be terminated upon execution of the lease for
substitute space.
29. Subordination.
29.01 This Lease, at Landlord's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation for security now
or hereafter placed upon the real property of which the premises are a part
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof. In the
event of enforcement by the trustee or beneficiary under a mortgage of deed
of trust to which the Leased Premises are subject of the remedies provided
by law or in such mortgage or deed of trust, Tenant will, upon request of any
person or party succeeding to the interest of Landlord as a result of such
enforcement, automatically become the Tenant of such successor-in-interest
without change in the terms or other provisions of the Lease.
29.02 Tenant agrees to execute any and all documents required to effectuate
such subordination or to make this Lease prior to the lien of any ground
lease, mortgage or deed of trust, as the case may be, and failing to do so
within ten (10) days after written demand, does hereby make, constitute and
irrevocably appoint Landlord as Tenant's attorney-in-fact and in Tenant's
name, place and stead, to do so, without subjecting the Landlord to any
liability of any kind.
29.03 Tenant shall, and may peacefully have, hold and enjoy the Leased
Premises, subject to the other terms hereof, provided that Tenant pays the
rental herein recited and performs all of Tenant's covenants and agreements
herein contained. It is understood and agreed that this covenant and any and
all other covenants of Landlord contained in this Lease shall be binding upon
Landlord and its successors only with respect to breaches occurring during
its and their respective ownerships of the Landlord's interest hereunder. In
addition, excepting in any case where gross and/or criminal negligance can be
proven, Tenant specifically agrees to look solely to Landlord's interest in
the Leased Premises and business park for the recovery of any judgment from
Landlord it being agreed that Landlord or its successors shall never be
liable for any such judgment from any of its assets or funds other than those
set forth herein. The provision contained in the foregoing sentence is not
intended to, and shall not, limit any right that Tenant might otherwise have
to obtain injunctive relief against Landlord or Landlord's successors-in-
interest, or any other action not involving the liability of Landlord to
respond in monetary damages from assets other than Landlord's interest in the
Leased Premises or business park, or any suit or action in connection with
enforcement or collection of amounts which may become owing or payable
under or on account of insurance maintained by Landlord.
30. Landlord's Lien.
30.01 In addition to the statutory landlord's lien, Landlord shall have, at
all times, and Tenant hereby grants to Landlord, a security interest under
the Uniform Commercial Code as adopted in Texas as now set forth or as
hereafter amended, to secure payment of all rentals and other sums of money
becoming due hereunder from Tenant, and to secure payment of any damages or
loss which Landlord may suffer by reason of the breach by Tenant of any
covenant, agreement or condition contained herein. Said security interest
shall be in all goods, wares, equipment, fixtures, furniture, improvements
and other personal property of Tenant presently, or which may hereafter be
situated on the Leased Premises, and all proceeds therefrom and such property
shall not be removed therefrom without the consent of Landlord until all
arrearages in rent as well as any and all sums of money then due to Landlord
hereunder shall first have been paid and discharged and all the covenants,
agreements and conditions hereof have been fully complied with and performed
by Tenant. Upon the occurrence of an event of default by Tenant, Landlord may,
in addition to any other remedies provided herein or by law, enter upon the
Leased Premises and take possession of any and all goods, wares, equipment,
fixtures, furniture, improvements and other personal property of Tenant
situated on the premises, without liability for trespass or conversion, and
sell the same at private or public sale, with or without having such property
at the sale, after giving Tenant reasonable notice of the time and place of
any public sale or of the time after which any private sale is to be made.
Unless otherwise required by law, and without intending to exclude any other
manner of giving Tenant reasonable notice, the requirement of reasonable
notice to Tenant of a private sale shall be met if such notice is given in
the manner prescribed in Article 25 of this Lease at least ten (10) days
before the time of sale, Tenant agreeing that such notice affords Tenant
sufficient opportunity prior to sale to obtain a hearing if desired by
Tenant. Any public sale made under this Article shall be deemed to have been
conducted in a commercially reasonable manner if held in the Leased Premises
or where the property is located, after the time, place and method of sale
and a general description of the type of property to be sold have been
advertised in a daily newspaper published in Houston, Texas, for five (5)
consecutive days before the date of the sale. Landlord or his assigns may
purchase at a public sale, and unless prohibited by law, at a private sale.
The proceeds from any disposition dealt with in this Article, less any and
all expenses connected with the taking of possession, holding and selling of
the property (including reasonable attorney's fees and legal expenses) shall
be applied as a credit against the indebtedness secured by the security
interest granted in this Section. Any surplus shall be paid to Tenant or as
otherwise required by law; Tenant shall pay any deficiencies forthwith. Upon
request by Landlord, Tenant agrees to execute and deliver to Landlord a
financing statement in form sufficient to perfect the security interest of
Landlord in the aforementioned property and proceeds thereof under the
provisions of the Uniform Commercial Code in force in the State of Texas. The
statutory lien for rent is not hereby waived, the security interest herein
granted being in addition and supplementary thereto.
31. Miscellaneous Provisions.
31.01 Nothing herein contained shall be deemed or construed by the parties
hereto nor by any third party, as creating the relationship of principal and
agent or of partnership or joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of rent, nor any
other provision contained herein, nor any acts of the parties hereto, shall
be deemed to create any relationship between the parties hereto other than
the relationship of Landlord and Tenant.
31.02 The captions used in this Lease are for the convenience only and do
not in any way limit or amplify the terms and provisions hereof.
31.03 One or more waivers of any covenant, term or condition of this Lease
by either party shall not be construed as a waiver of subsequent breach of
same covenant, term or condition. The consent or approval by either party to
or of any act by the other party requiring such consent or approval shall not
be deemed to waive or render unnecessary consent to or approval of any
subsequent act.
31.04 Whenever a period of time is herein prescribed for action to be taken
by Landlord, Landlord shall not be liable or responsible for, and there shall
be excluded from the computation of any such period of time, any delays due
to strikes, riots, acts of God, shortages of labor or materials, war,
governmental laws, regulations, or restrictions or any other causes of any
kind whatsoever which are beyond the reasonable control of Landlord.
31.05 All obligations of Landlord and Tenant under the terms of this Lease
shall be payable and performed in Harris County, Texas.
31.06 Words of any gender used in this Lease shall be held and construed to
include any gender and words in the singular number shall be held to include
the plural, unless the context otherwise requires.
31.07 This Lease contains the entire agreement between the parties, and no
agreement shall be effective to change, modify or terminate this Lease in
whole or in part unless such agreement is in writing and duly signed by the
party against whom enforcement of such change, modification or termination is
sought.
31.08 Tenant agrees that it will, from time to time, upon request by
Landlord, execute and deliver to Landlord a statement in form certifying that
this Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as so modified),
further stating the dates to which rent and other charges payable under this
Lease have been paid, and also stating what defenses there are, if any, for
any non-payment of rent. Tenant further agrees to execute such documents or
agreements as may be required by Seller's mortgage in connecition with
Seller's financing.
31.09 The laws of the State of Texas shall govern the interpretation,
validity, performance, and enforcement of this Lease. If any provision of
this Lease should be held to be invalid or unenforceable, the validity and
enforceability of the remaining provisions of this Lease shall not be
affected thereby.
31.10 The terms, provisions and covenants contained in this Lease shall
apply to, inure to the benefit of and be binding upon the parties hereto and
their respective heirs, successors-in-interest and legal representatives
except as otherwise herein expressly provided. All rights, powers,
privileges, immunities and duties of Landlord under this Lease, including but
not limited to, any notices required or permitted to be delivered by Landlord
to Tenant hereunder, may, at Landlord's option to be exercised or performed
by Landlord's agent or attorney.
31.11 In the event that the Landlord shall make any expenditures for which
the Tenant is responsible, or which the Tenant should make, then the amount
thereof, together with the maximum interest rate allowed by applicable laws
of the State of Texas and the United States of America, and costs, may at the
Landlord's election, be added to and be deemed a part of the installment of
rent next falling due.
31.12 Tenant agrees that all employees employed by it and associated with
its business shall use the area for parking to be designated by Landlord.
31.13 Tenant's right of possession under this Lease is expressly contingent
upon the continued timely payment of rent hereunder.
31.14 All rights and remedies expressly provided for in this Agreement for
Landlord's protection shall be cumulative of any other rights and remedies
provided by law.
32. Special Provisions.
32.01 Special provisions of this Lease numbered ---- through ---- are
attached hereto and made a part hereof If none, so state in the following
space: none.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
day and year first above written. Individuals signing on behalf of a
principal warrant that they have the authority to bind their principals.
THIS LEASE IS SUBJECT TO ACCEPTANCE BY LANDLORD.
LANDLORD TENANT
/s/Larry W. Eubanks /s/Jan Kouri
Larry W. Eubanks International Catalyst, Inc.
Jan Kouri, Vice President
General Manager
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
DECEMBER 31, 1995 AUDITED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 186,000
<SECURITIES> 0
<RECEIVABLES> 1,662,000
<ALLOWANCES> 40,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,454,000
<PP&E> 4,196,000
<DEPRECIATION> 2,658,000
<TOTAL-ASSETS> 4,996,000
<CURRENT-LIABILITIES> 2,569,000
<BONDS> 1,519,000
<COMMON> 53,000
239,000
0
<OTHER-SE> 786,000
<TOTAL-LIABILITY-AND-EQUITY> 4,996,000
<SALES> 10,448,000
<TOTAL-REVENUES> 10,448,000
<CGS> 7,359,000
<TOTAL-COSTS> 11,257,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 255,000
<INCOME-PRETAX> (809,000)
<INCOME-TAX> (113,000)
<INCOME-CONTINUING> (696,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (696,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
